SHRI. CHANDRAKANT M. SHAH, MUMBAI v. DY.C.I.T. 13(2), MUMBAI

ITA 6369/MUM/2008 | 2005-2006
Pronouncement Date: 09-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 636919914 RSA 2008
Assessee PAN AAGPS1059K
Bench Mumbai
Appeal Number ITA 6369/MUM/2008
Duration Of Justice 1 year(s) 10 month(s) 8 day(s)
Appellant SHRI. CHANDRAKANT M. SHAH, MUMBAI
Respondent DY.C.I.T. 13(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 09-09-2010
Date Of Final Hearing 31-08-2010
Next Hearing Date 31-08-2010
Assessment Year 2005-2006
Appeal Filed On 31-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.6369/MUM/2008 ASSESSMENT YEAR : 2005-06 SHRI CHANDRAKANT M. SHAH PROP. MULTILINE CORPORATION OFFICE NO.66 1 ST FLOOR AMBICA TERRACE DANA BUNDER MUMBAI-400 009. ..( APPELLANT ) P.A. NO. (AAGPS 1059 K) VS. DY. COMMISSIONER OF INCOME TAX -13(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : SHRI RAHUL K. HAKANI RESPONDENT BY : SHRI R .S. SRIVASTAVA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 18.8.2008 PASSED BY THE LD. CIT(A) FOR THE AS SESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SE CURITIES AND FINANCING FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS .47 16 536/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT AS PER LAST YEARS BALANCE SHEET THE A SSESSEE WAS HAVING PROPERTY AT PUNE. THE ASSESSEE WAS ASKED TO EXPLAI N THE SAME WITH NOTIONAL ALV. IN REPLY THE ASSESSEE INTERALIA STATED THAT THE PROPERTY AT PUNE DOES NOT APPEAR IN HIS BALANCE SHEET FOR THE CURRENT YEA R SINCE THE SAME HAS BEEN GIFTED BY HIM IN DECEMBER 2004 TO HIS SON AND DAUGH TER-IN-LAW. HENCE ITA NO.6369/M/08 A.Y:05-06 2 NOTIONAL RENT IF ANY IS TO BE ADDED FOR A PERIOD O F NINE MONTHS ONLY DURING WHICH THE ASSESSEE WAS OWNER OF THE PROPERTY. AS P ER THE ADDITION MADE IN RESPECT OF THIS PROPERTY THE ASSESSEE STATED THAT THE SAME WAS MADE ARBITRARILY AND THAT THE ANNUAL LETTING VALUE OF TH E PROPERTY CANNOT EXCEED THE STANDARD RENT. HOWEVER THE ASSESSING OFFICER O BSERVED THAT THE ADDITIONS MADE LAST YEAR HAVE BEEN SUSTAINED BY THE LD. CIT(A). HE FURTHER OBSERVED THAT IT IS GATHERED THAT THE PROPERTY AT P UNE FETCHES NOT LESS THAN RS.10 000/- P.M. IF LET OUT IN VIEW OF THE LARGE N UMBER OF SOFTWARE ENGINEERS WORKING IN PUNE AND STAYING AROUND THE PLACE WHERE THE FLAT OF THE ASSESSEE IS LOCATED. CONSIDERING THE ABOVE AND ALSO ACCOUNTI NG FOR THE RISE IN REALTY RATES AND PROPORTIONATE INCREASE IN RENTAL VALUES THE ASSESSING OFFICER DEEMED APPROPRIATE TO AN INCREASE IN 15% OVER THE R ENT RECEIVABLE LAST YEAR AND HENCE HE ESTIMATED THE MONTHLY RENTAL VALUE OF THE PROPERTY AT PUNE AT RS.11 500/- P.M. SINCE THE PROPERTY WAS OWNED BY T HE ASSESSEE FOR ONLY NINE MONTHS DURING THE YEAR THE TOTAL AMOUNT OF REN T RECEIVABLE WOULD BE RS.11 500 X 9= RS.1 03 500/- AND ACCORDINGLY HE AD DED THE SAME TO THE INCOME OF THE ASSESSEE. APART FROM THIS ON VERIF ICATION OF THE RETURN IT WAS FURTHER FOUND THAT THE ASSESSEE HAS SHOWN RS.10 04 521/- AS EXEMPT INCOME EARNED FROM VARIOUS INVESTMENTS SUCH AS BONDS PPF MUTUAL FUNDS DIVIDENDS ETC. THE ASSESSEE WAS ASKED TO STATE AS T O WHY PROPORTIONATE PART OF INTEREST PAID ON THE LOANS TAKEN FOR INVESTMENT SHOULD NOT BE DISALLOWED AS PER SEC.14A OF THE ACT. IN RESPONSE IT WAS SUBMIT TED BY THE ASSESSEE THAT THE INVESTMENTS YIELDING EXEMPT INCOME HAVE NOT BEE N MADE OUT OF BORROWED FUNDS ON WHICH INTEREST HAS BEEN PAID. SU CH BORROWED FUNDS EXIST ONLY IN MULTILINE CORPORATION AND THE SAME HAVE B EEN UTILISED ONLY FOR THE BUSINESS PURPOSE OF THE SAID PROPRIETARY CONCERN. THE AFORESAID INVESTMENTS HAVE BEEN MADE OUT OF OWN FUNDS AND NOT OUT OF BORR OWED FUNDS. THE ASSESSEE ALSO FILED STATEMENT GIVING THE SOURCE OF INVESTMENTS MADE TO SHOW THAT NO PART OF INTEREST BEARING BORROWED FUNDS HAV E BEEN UTILISED FOR MAKING THE INVESTMENTS YIELDING EXEMPT INCOME. HOWEVER TH E ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION. ACCORDING T O THE ASSESSING OFFICER THE INTEREST BEARING FUNDS WERE UTILISED FOR THE PURPOS E OF EARNING EXEMPTED ITA NO.6369/M/08 A.Y:05-06 3 INCOME IN THE FORM OF DIVIDENDS AND BONDS ETC. FUR THER THE SAME ISSUE WAS RAISED DURING ASSESSMENT YEAR 2004-05 AND IT HAS BE EN HELD THAT THE ASSESSEE HAS TAKEN LOAN AND RECEIVED DIVIDEND INCOM E FOR THE SAME. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE FACTS O F THE IMPUGNED ASSESSMENT YEAR 2005-06 ARE IDENTICAL TO THE FACTS FOR ASSESSMENT YEAR 2004-05 AND HENCE HE MADE A DISALLOWANCE OF RS.6 1 2 420/- U/S.14A AS PER CALCULATION APPEARING AT PAGE-3 OF THE ASSESSME NT ORDER AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.54 72 980/- VIDE ORDER DATED 28.11.2007 PASSED U/S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) WHILE FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YE AR 2004-05 CONFIRMED BOTH THE ADDITION/DISALLOWANCE MADE BY THE ASSESSIN G OFFICER AND DISMISSED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US . 4. GROUND NO.1 AND 2 ARE AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.6 12 420/- U/S.14A OF THE ACT. 5. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED THAT THIS ISSUE STANDS COVERED BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HI GH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT THEREFORE THE ISSUE MAYBE DECIDED ACCORDINGLY. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIV AL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE TRIBUNAL IN ASSESSEE'S OWN CASE IN CHANDRAKANT M. SHAH VS. DCIT IN ITA NO.4856/MUM/07 FOR ASSESSMENT YEAR 2004-05 VIDE ORD ER DATED 29.4.2009 FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. REPORTED IN 117 ITD 16 9 (BOM.) HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER. R ECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO . LTD. VS. DCIT IN INCOME TAX APPEAL NO.626 OF 2010 AND WRIT PETITION NO.758 OF 2010 DATED ITA NO.6369/M/08 A.Y:05-06 4 12.8.2010 AFTER CONSIDERING THE DECISION OF THE TR IBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. SUPRA WHILE HOLDING THAT THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONA LLY VALID HAS HELD VIDE PARA-74 (VI) OF THE JUDGMENT AS UNDER : 74(VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE ASSESSING OFFICER H AS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE ASSESSING OFFICER IS DUTY BOUND TO DET ERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET AS IDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND SEND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME IN THE LIGHT OF T HE DIRECTIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE A ND ACCORDINGLY THE GROUNDS TAKEN BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 7. GROUND NO.3 AND 4 ARE AGAINST THE ADOPTION OF AL V OF RS.1 03 500/- IN RESPECT OF PUNE PROPERTY. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE IN THE EARLIER YEAR I.E. FOR THE ASSESSMENT YEAR 2004-05 HAS SET ASIDE THIS ISSUE TO THE FILE O F THE ASSESSING OFFICER THEREFORE THE ISSUE MAY BE SET ASIDE TO THE FILE O F THE ASSESSING OFFICER WHICH WAS NOT OBJECTED TO BY THE LD. DR . 9. AFTER CAREFULLY HEARING THE RIVAL PARTIES AND PE RUSING THE MATERIAL AVAILABLE ON RECORD WE FIND MERIT IN THE PLEA OF T HE LD. COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE S UPRA FOLLOWING THE DECISION OF THE TRIBUNAL IN DELITE ENTERPRISES PVT . LTD. VS. ITO REPORTED IN 22 SOT 245(MUM.) HAS SET ASIDE THE SIMILAR ISSUE TO TH E FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO ASCERTAIN THE MUNICIP AL RATEABLE VALUE OF THE ITA NO.6369/M/08 A.Y:05-06 5 PROPERTY AND DETERMINE THE ALV ON THE BASIS OF SUCH MUNICIPAL RATEABLE VALUE. RESPECTFULLY FOLLOWING THE SAME WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK T HE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFR ESH IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL SUPRA AND ACCORDING TO L AW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT ASSESSEE'S APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9.9.2010. SD/- SD/- ( B. RAMAKOTAIAH ) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 9.9.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.