ACIT-3, Mathura v. Sshri Mahesh Chand Gupta, Mathura

ITA 325/AGR/2009 | 2005-2006
Pronouncement Date: 18-03-2011 | Result: Dismissed

Appeal Details

RSA Number 32520314 RSA 2009
Assessee PAN ABCPG3955H
Bench Agra
Appeal Number ITA 325/AGR/2009
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant ACIT-3, Mathura
Respondent Sshri Mahesh Chand Gupta, Mathura
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-03-2011
Date Of Final Hearing 10-03-2011
Next Hearing Date 10-03-2011
Assessment Year 2005-2006
Appeal Filed On 20-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO.325/AGR/2009 ASST. YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME TAX-3 VS. SHRI MAHE SH CHAND GUPTA MATHURA. NO.1 ANAND VIHAR (RAMAN RETI) VRINDABAN MATHURA. (PAN : ABCPG 3955 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HOMI RAJ VANSH CIT D.R. RESPONDENT BY : SHRI J.L. VERMA & SHRI ANIL VERMA ADVOCATES ORDER PER H.S. SIDHU J.M. : THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E ORDER DATED 12.06.2009 PASSED BY THE LD. CIT(A) ON THE FOLLOWING GROUNDS :- 1. THAT THE CIT(APPEALS)-1 AGRA HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` 872702/- MADE AS NO EXPENDITURE WAS MADE BY THE ASS ESSEE TO EARN THE DIVIDEND INCOME OF ` 2352000/- AND INTEREST INCOME OF ` 1820000/- AND ASSESSEE HAS FAILED TO GIVE SATISFACTORY REPLY TO SHOW CAUSE AS TO WHY OPERATING EXPENDITURE DEBITED BE NOT PROPORTIONATE DISALLOWED IN THE RATIO OF EXEMPT INCOME TO THE TOTAL INCOME. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR ALTER OR MODIFY ANY ONE OR MORE GROUND(S) OF APPEAL DURING THE APPELLATE PR OCEEDINGS. 3. THAT THE ORDER OF THE CIT(APPEALS)-1 AGRA BEING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AND THAT THE ORDER OF THE ASSESS ING OFFICER BE RESTORED. 2 2. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME OF ` 1 99 33 200/- ACCOMPANIED BY THE AUDITORS REPORT AL ONG WITH AUDITED BALANCE SHEET P&L ACCOUNT WITH ANNEXURE ON 31.10.2 005 WHICH WAS PROCESSED ON 09.01.2006. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 1 43(2) ON 03.03.2006 AND NOTICE UNDER SECTION 142(1) ALONG WITH THE DETAILED QUESTIONNAIRE ON 08. 06.2006 AND 01.10.20007. IN RESPONSE TO THE SAME THE LD. AUTHORISED REPRESENTATIVE (A.R.) OF T HE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER FROM TIME TO TIME AND PRODUCED BOOKS OF ACC OUNTS WHICH WERE EXAMINED BY THE ASSESSING OFFICER. ON PERUSAL OF P&L ACCOUNT AND S TATEMENT OF TOTAL INCOME FILED BY THE ASSESSEE SHOWN THAT THE ASSESSEE RECEIVED DIVIDEND INCOME OF ` 23 52 000/- FROM KHANDELWAL CABLES ON ACCOUNT OF DIVIDEND ON SHARES AND INTERES T INCOME OF ` 18 20 000/- FROM GOVERNMENT OF INDIA(GOI) SAVINGS BONDS TOTALING TO ` 41 72 000/- WHICH WAS CLAIMED EXEMPT UNDER SECTION 10(34) OF THE INCOME TAX ACT 1961 (THE ACT HEREI NAFTER). TOTAL RECEIPTS ON ACCOUNT OF DIVIDEND WAS TREATED AS INCOME AND NO EXPENDITURE I NCURRED FOR EARNING THE EXEMPT INCOME CONSIDERED FOR ARRIVING AT THE INCOME FOR DIVIDEND. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY OPERATING EXPENDIT URE DEBITED BE NOT PROPORTIONATELY DISALLOWED IN THE RATIO OF EXEMPT INCOME TO THE TOTAL INCOME. IN RESPONSE TO THE SAME THE ASSESSEE FILED ITS REPLY STATING THAT THERE IS NO EXPENDITURE INURED I N RELATION TO THE EXEMPTED DIVIDEND INCOME AND TAX FREE INTEREST ON GOI BONDS. HENCE SECTION 14A IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE THE ASSESSING OFFICER DISAGREED WITH THE SAME AND DISALLOWED THE PROPORTIONATE EXPE NDITURE OF ` 8 72 782/- AND ADDED TOWARDS THE INCOME OF THE ASSESSEE ON THE GROUND THAT THE A SSESSEE HAS NOT FILED SEPARATE ACCOUNTS AND HE LEFT WITH NO ALTERNATIVE BUT TO DISALLOW THE EXPEND ITURE IN THE RATIO EXEMPT INCOME TO THE TOTAL INCOME AND HE DISALLOWED THE EXPENDITURE IN DISPUTE BY COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 28.12.2007. AGGRIEVED BY THE SAME THE ASSESSEE WENT IN APPEAL BEFORE THE 3 LD. FIRST APPELLATE AUTHORITY WHO VIDE ORDER DATED 12.06.2009 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 3. AT THE TIME OF HEARING THE LD. DEPARTMENTAL REP RESENTATIVE (D.R.) RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND STATED THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY DELETED THE ADDITION IN DISPUTE WHICH IS CONTRARY T O THE LAW AND FACTS ON THE FILE AND FINALLY HE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON T HE CONTRARY THE LD. COUNSEL FOR THE ASSESSEE CONTROVERTED THE ARGUMENTS ADVANCED BY THE LD. D.R. STATING THAT THE ASSESSEE IS A MANUFACTURER OF ELECTRIC WIRES AND CABLES AND ALSO HAS INCOME FR OM DIVIDEND AND INTEREST FROM GOI TAX FREE SAVINGS BONDS. HE FURTHER STATED THAT THE ASSESSEE HAS NEITHER INCURRED ANY EXPENDITURE ON DIVIDEND INCOME NOR ON INTEREST INCOME FROM GOI SAV ING BONDS NOR HAS CLAIMED THE SAME. THE ASSESSEE IS MAINTAINING TWO SEPARATE SETS OF ACCOUN TS ONE FOR THE BUSINESS INCOME AND OTHER SET FOR PERSONAL INCOME. THE DIVIDEND INCOME ON SHARES AND INTEREST INCOME ON GOI TAX FREE SAVINGS BONDS HAS BEEN CREDITED IN THE PERSONAL SET ON WHICH NO EXPENDITURE HAS BEEN INCURRED OR CLAIMED. HE ALSO DRAWN OUR ATTENTION TOWARDS SECTI ON 14A OF THE ACT AND STATED THAT THE SAME IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND THE ASSESSING OFFICER HAS WRONGLY INVOKED THE PROVISIONS OF SUB-SECTIONS (2) AND (3) AS THESE SUB -SECTIONS HAVE BEEN BROUGHT ON THE STATUTE BY THE FINANCE ACT 2006 W.E.F. 01.04.2007 WHEREIN THE ASSESSMENT YEAR IN DISPUTE IS 2005-06. FINALLY HE RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY AND TO SUPPORT THE SAME HE ALSO RELIED UPON THE DECISION OF I.T.A.T. DELHI BENCH IN THE CASE OF WIMCO SEEDLING LIMITED VS. DY. CIT REPORTED IN (2007) 293 ITR (80) 216 (DEL.). HE HAS ALSO FILED COPY OF THE SAID DECISION ALONG WITH HIS BRIEF SUBMISSIONS DATE D 10.03.2011 AND REQUESTED THAT THE APPEAL FILED BY THE DEPARTMENT MAY BE DISMISSED. 4 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US. AFTER GOING THROUGH THE SAME WE ARE OF THE CONSIDERED OP INION THAT THE ASSESSING OFFICER HAS NOT MENTIONED ANY INSTANCE OF USING FACILITIES AND MAN POWER OF THE INDUSTRIAL UNDERTAKING IN ANY MANNER IN FETCHING THE NON-TABLE INCOME I.E. DIVIDE ND AND INTEREST FOR GOI TAX FREE BONDS. WE HAVE ALSO PERUSED THE PROVISIONS OF SUB SECTIONS (2 ) &(3) OF SECTION 14A OF THE ACT WHICH CAME INTO FORCE W.E.F. 01.04.2007 I.E. APPLICABLE FOR TH E ASSESSMENT YEAR 2008-09. BUT BEFORE US THE ASSESSMENT YEAR IS 2005-06. KEEPING IN VIEW OF THE AFORESAID PROVISIONS WHICH IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE ADDITION IN DISPUTE BY EXAMINING THE INVESTMENT IN SHARES OF KHANDELWAL CABLES LIMITED AND FOUND THAT NO EXPENDITURE IS ATTRIBUTABLE TO THE DI VIDEND RECEIVED FROM THE SAID COMPANY. THEREFORE THERE IS NO OCCASION TO DISALLOW THE EXP ENDITURE IN DISPUTE BECAUSE NO EXPENDITURE IS CLAIMED OR IS ATTRIBUTABLE TO THE INTEREST OF ` 18 20 000/- RECEIVED BY THE ASSESSEE ON GOI BONDS. THE LD. FIRST APPELLATE AUTHORITY HAS ALSO RIGHTLY HELD THAT THE ASSESSEE HAS INVESTED OUT OF SURPLUS FUNDS WITHDRAWN FROM KHANDELWAL ELECTRICALS AND NO EXPENDITURE BY WAY OF INTEREST ETC. HAS BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT OF KH ANDELWAL ELECTRICALS AS A RESULT OF THE WITHDRAWAL OF THE SAID FUNDS FOR INVESTMENT IN GOI BONDS WHICH COULD BE ASCRIBED TO THE SAID INVESTMENT RESULTING IN EXEMPT INCOME TO THE ASSESS EE THEREBY ATTRACTING THE PROVISIONS OF SECTION 40A OF THE ACT. THE ASSESSEE HAS ALSO NOT CLAIMED ANY EXPENDITURE IN RESPECT OF BALANCE INVESTMENT OF ` 80 00 000/- IN GOI BONDS OUT OF REPAYMENT OF LOAN OF ` 80 00 000/- BY KHANDELWAL CABLES LIMITED. THE LD. FIRST APPELLATE AUTHORITY HAS EXAMINED ALL RELEVANT RECORDS PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFIC ER AND FINALLY DELETED THE ADDITION IN DISPUTE. WE HAVE ALSO PERUSED THE DECISION CITED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE ISSUE IN DISPUTE SUPPORTING THE IMPUGNED ORDER AND WE ARE OF THE CONSIDERED OPINION THAT NO PART OF EXPENDITURE COULD BE DISALLOWED IN THE CASE OF THE ASSESSEE AND THERE IS NO NEXUS HAS BEEN 5 ESTABLISHED BY THE ASSESSING OFFICER BETWEEN THE EX PENDITURE DISALLOWED AND NON-TAXABLE RECEIPTS. EVEN OTHERWISE SECTION 14A WHICH HAS BE EN BROUGHT INTO STATUTE BY FINANCE ACT 2001 W.E.F. 01.04.1962 AND THE ASSESSING OFFICER DISALLO WED THE PROPORTIONATE EXPENDITURE ON ESTIMATE BASIS BEING ATTRIBUTABLE TO EARNING OF EXE MPTED INCOME. IN OUR CONSIDERED OPINION NO PART OF EXPENDITURE COULD BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT IN THE CASE OF THE ASSESSEE. THUS WE UPHOLD THE ORDE R OF LD. FIRST APPELLATE AUTHORITY BY DISMISSING THE APPEAL OF THE DEPARTMENT. 5. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18.03.2011). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 18 TH MARCH 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY