K.S. KARTIKEYAN, MUMBAI v. ITO 22(2)(1), NAVI MUMBAI

ITA 3604/MUM/2015 | 2009-2010
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 360419914 RSA 2015
Assessee PAN ABOPK0556A
Bench Mumbai
Appeal Number ITA 3604/MUM/2015
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant K.S. KARTIKEYAN, MUMBAI
Respondent ITO 22(2)(1), NAVI MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 30-09-2016
Assessment Year 2009-2010
Appeal Filed On 11-06-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH MUMBAI BEFORE SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ITA NO.3604/M/2015 (AY 2009 - 2010) MR. K.S. KARTIKEYAN FLAT NO.6/106 VAIBHAV CHEDDA NAGAR CHEMBUR MUMBAI 400 089. / VS. INCOME TAX OFFICER 22(2)(1) 4 TH FLOOR TOWER NO.6 VASHI RLY. STN. BLDG VASHI NAVI MUMBAI 400 703. ./ PAN : ABOPK0556A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BHARAT PATEL / RESPONDENT BY : SHRI O.P. MEENA CIT - DR / DATE OF HEARING : 10 .08.2016 / DATE OF PRONOUNCEMENT : 30 .09.2016 / O R D E R PER D. KARUNAKARA RAO AM: THIS APPEAL FILED BY THE ASSESSEE ON 11.6.2015 IS AGAINST THE ORDER OF THE CIT (A) - 25 MUMBAI DATED 4.3.2015 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN PARTLY CONFIRMING THE ADDITIONS AND / OR DISALLOWANCES MADE BY THE AO IN THE ORDER UNDER SECTION 143(3) OF THE ACT. 2.(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION O F RS. 3 45 439/ - MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN STOCK AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. (B) WITHOUT PREJUDICE TO THE ABOVE IF THE ADDITION OF AFORESAID DIFFERENCE IN VALUE OF STOCK IS UPHELD THEN CONSEQUENT INCOME ON AC COUNT INCREASE IN VALUE OF CLOSING STOCK AS 31.3.2008 IF ANY CANNOT BE CONSIDERED FOR TAXABILITY IN AY 2009 - 2010 AND MAY BE CONSIDERED IN ASSESSMENT YEAR 2008 - 2009. 3. (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN CON FIRMING THE DISALLOWANCE OF RS. 1 20 551/ - U/S 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES 1962. (B) WITHOUT PREJUDICE TO THE ABOVE DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES CANNOT EXCEED THE EXPENDITURE AC TUALLY INCURRED BY THE APPELLANT LIMITED TO RS. 337/ - . 4. WITHOUT PREJUDICE TO THE ABOVE ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD AO ERRED IN NOT SETTING OFF THE UNDISPUTED BROUGHT FORWARD BUSINESS LOSS OF RS. 5 98 223/ - OF AY 2006 - 07 AS PER SECTION 72 OF THE ACT AGAINST AFORESAID ALLEGED ADDITIONS / DISALLOWANCES. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AO ERRED IN CALCULATING THE LEVY OF INTEREST OF RS. 1 28 688/ - U/S 234B OF THE ACT. 2 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 20 34 260/ - . ASSESSEE IS ENGAGED IN SHARE TRADING ACTIVITY. IN THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE ASSESSED INC OME WAS DETERMINED AT RS. 30 71 370/ - . AO MADE VARIOUS ADDITIONS AND DISALLOWANCES. ON APPEAL CIT (A) CONFIRMED THE SAME. AGGRIEVED WITH THE SAME ASSESSEE FILED THE PRESENT APPEAL. 3. IN THIS APPEAL ASSESSEE RAISED THREE ISSUES IN THE GROUNDS. IN THIS REGARD LD AR SUBMITTED THAT THE ISSUES RELATING TO GRANT OF CREDIT OF TAXES PAID WAS ALREADY MET BY THE AO VIDE THE RECTIFICATION PROCEEDINGS. ACCORDINGLY THIS ISSUE IS DISMISSED AS SUCH. REST OF THE ISSUES FOR ADJUDICATION ARE AS UNDER: - (1) ADDITION OF RS. 3 45 434/ - ON ACCOUNT OF CLOSING STOCK; (2) DENYING THE SET OFF OF LOSS OF RS. 80 143/ - AND (3) DISALLOWANCE OF U/S 14A R.W. RULE 8D(2)(III) OF THE IT RULES 1962. 3.1. THE ISSUE WISE ADJUDICATION IS UNDERTAKEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 4. 1 ST ISSUE RELATES TO ADDITION OF RS. 3 45 434/ - . ON THIS ISSUE ON FACTS I FIND CLOSING STOCK AS ON 31.3.2008 IS RS. 29 52 514/ - AND OPENING STOCK AS ON 1.4.2008 IS RS. 32 97 953/ - . OBVIOUSLY THE F IGURE FOR THE L AST YEAR IS LESS . ASSESSEE EXPLAINED T HIS DISCREPANCY STATING THAT SOME SHARES WERE NOT ENTERED IN CLOSING STOCK MISTAKENLY. IGNORING THE ASSESSEES SUBMISSION WHICH REVOLVES AROUND INADVERTENT MISTAKE AO MADE ADDITION OF THE SAME IN THIS YEAR AND NOT IN THE EARLIER AY 2007 - 2008. ASSESSEE RECTIFIED THE SAID CLOSING STOCK ACCOUNT OF THE LAST YEAR AND FILED THE SAME BEFORE THE AO. BUT THE SAME WAS NOT ACCEPTED. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) CONFIRMED THE SAME. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE TRIBUNAL IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE SAID ADDITION IS BAD IN LAW. HE FURTHER SUBMITTED THAT AO IGNORED THE FACT THAT BOOKS OF ACC OUNT FOR THE YEAR UNDER CONSIDERATION IS PROPER . THE FIGURES GIVEN IN THE RETURN OF INCOME FOR EARLIER YEAR ARE ERRONEOUS WHICH ARE NOW CORRECTED. LD AR ALSO MENTIONED THAT THE ADDITION IF ANY IS REQUIRED TO BE MADE IN EARLIER AY 2008 - 2009 AND NOT IN THIS AY 2009 - 2010 AS THE MISTAKE IS IN THE CLOSING STOCK ACCOUNT OF EARLIER YEAR AND NOT IN THIS YEAR. 3 6. ON PERUSAL OF THE RELEVANT FACTS AND FIGURES AND AFTER CONSIDERED THE ARGUMENTS AND WRITTEN SUBMISSION OF THE ASSESSEE I FIND MISTAKE IN CLOSING STO CK ACCOUNT IS RELEVANT FOR THE AY 2008 - 2009 AND NOT IN THE AY UNDER CONSIDERATION. ON THIS REASONING ITSELF ASSESSEE IS ENTITLED TO RELIEF. I ORDER ACCORDINGLY AND DIRECT THE AO TO DELETE THIS ADDITION. THUS THE 1 ST ISSUE IS ALLOWED AS WELL AS THE REL EVANT GROUNDS ARE ALLOWED. 7. 2 ND ISSUE RELATES TO LOSS OF RS. 80 143/ - . IN THE RETURN OF INCOME ASSESSEE CLAIMED THE SET OFF OF LOSS FROM OTHER SOURCES AGAINST THE INCOME OF RS. 6 66 228/ - RECEIVED FROM LIC. FOR WANT OF DETAILS AO DENIED THIS CLAIM OF SET OFF. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) CONFIRMED THE SAME. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL ASSESSEE FILED A WRITTEN SUBMISSION AND STATED THAT THE AO NEVER CALL FOR SUCH DETAILS AT ANY TIME DURING THE ASSESSMENT PROCEEDINGS. CONTENTS AT PAGE 49 / 50 OF HIS SUBMISSIONS ARE RELEVANT IN THIS REGARD AND THE SAME READ AS UNDER: - THE OBSERVATION OF THE AO IS FACTUALLY INCORRECT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD NEVER RAISED THE REQUIREMENT TO FURNISH THE DETAILS OF THE LOSS OF RS. 80 143/ - . HOWEVER WE WOULD LIKE TO SUBMIT BEFORE YOUR HONOUR THE DETAILS OF THE AFORESAID LOSS CLAIMED. THE APPELLANT HAD CONTRIBUTED RS. 10 00 000/ - AS VENTURE CAPITAL FUND IN TVS SHRIRAM GROWTH FUND (A TRUST FORMED UNDER THE INDIAN TRUST ACT 1882 AND REGISTERED AS VENTURE CAPITAL FUND UNDER SEBI REGULATIONS. THE SHARE OF BENEFICIAL INTEREST OF THE APPEL LANT IN THE TVS SHRIRAM GROWTH FUND IS 0.05%. THE FUND HAD COMPUTED THE INCOME UNDER THE HEADS DIVIDEND AND INCOME FROM OTHER SOURCES. FURTHER THE FUND HAD INCURRED DIRECT EXPENSES AD ALSO PROPORTION OF COMMON EXPENSES. THUS THE FIRM HAD A NET LOS S FROM OTHER SOURCES DURING THE FINANCIAL YEAR 2008 - 2009. THE PROPORTIONATE LOSS OF BENEFICIARY (APPELLANT) AT 0.05% COMES TO RS. 80 143/ - AND THAT LOSS OF RS. 80 143/ - HAD BEEN ADJUSTED AGAINST THE OTHER INCOME (LIC INCOME) OF RS. 6 66 228/ - (THE COPY OF THE TVS SHRIRAM GROWTH FUND STATEMENT IS SUBMITTED AS ADDITIONAL EVIDENCE BEFORE YOUR HONOUR). 9. AFTER CONS IDERING THE ABOVE I FIND IT RELEVANT TO REMAND THE ABOVE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I ORDER ACCORDINGLY. THUS 2 ND ISSUE AS WELL AS THE RELEVANT GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES . 10. 3 RD ISSUE RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT. BRIEF FACTS IN THIS REGARD ARE THAT THE ASSESSEE EARNED EXEMPT INCOME OF RS. 2 33 730/ - AND D ELETED INDIRECT EXPENSES OF RS. 21 182/ - . PAGE 38 OF THE PAPER BOOK IS RELEVANT IN THIS 4 R EGARD. IN THE ASSESSMENT PROCEEDINGS AO COMPUTED THE DISALLOWANCE AT RS. 1 20 551/ - UNDER RULE 8D(2)(III) OF THE IT RULES 1962 @ 0.5 OF THE AVERAGE INVESTMENTS. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) CONFIRMED THE SAME. THEREFORE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL LD COUNSEL FOR THE ASSESSEE RAISED VARIOUS ARGUMENTS IE ABSENCE OF AOS SATIS FACTION; DISALLOWANCE OF RS. 1 20 551/ - EXCEEDED TO TAX DEBIT OF RS. 21 182/ - (RS. 20 845/ - OUT OF RS. 21 182/ - WAS PAID FOR PROFESSIONAL FEES AN UNRELATED EXPENDITURE TO EXEMPT INCOME) ETC. BEFORE THE TRIBUNAL LD COUNSEL FOR THE ASSESSEE RELIED ON VARI OUS DECISIONS IN SUPPORT OF THE ABOVE ARGUMENTS. 12. AFTER HEARING ALL THE ARGUMENTS OF THE LD REPRESENTATIVES OF BOTH THE PARTIES I FIND THAT THE DECISIONS OF THE AO / CIT (A) ARE N OT IN SYNC WITH THE LATEST JUDICIAL PRONOUNCEMENTS ON THE ISSUE UNDER C ONSIDERATION. THEREFORE I FIND IT FIT TO SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND DECISION IN THE MATTER. I ORDER ACCORDINGLY. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. THUS 3 RD ISSUE AS WELL AS THE RELEVANT GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES . 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 3 0 T H SEPTEMBER 2016. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 3 0 .09.2016 . . ./ OKK SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. / DR ITAT MUMBAI 5 6. / GUARD FILE . //TRUE COPY// / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI