CHATURBHAI K. THUMAR, NAVI MUMBAI v. D.C.I.T. CEN.CIR.39, MUMBAI

ITA 7/MUM/2012 | 2006-2007
Pronouncement Date: 16-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 719914 RSA 2012
Assessee PAN ABAPT6557A
Bench Mumbai
Appeal Number ITA 7/MUM/2012
Duration Of Justice 2 year(s) 3 month(s) 14 day(s)
Appellant CHATURBHAI K. THUMAR, NAVI MUMBAI
Respondent D.C.I.T. CEN.CIR.39, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 16-04-2014
Date Of Final Hearing 26-12-2013
Next Hearing Date 26-12-2013
Assessment Year 2006-2007
Appeal Filed On 02-01-2012
Judgment Text
C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI .. . . . . BEFORE SHRI P.M. JAGTAP AM AND DR. S.T.M. PAVALAN JM ./ I.T.A. NO.07 /MUM/2012 ( / ASSESSMENT YEAR : 2006-2007 ./ I.T.A. NO.08 /MUM/2012 ( / ASSESSMENT YEAR : 2007-2008 SHRI CHATURBHAI K. THUMAR PATHIK PLOT NO. 72 RING ROAD NO. 3 SECTOR 21 NERUL NAVI MUMBAI400 614. / VS. DY . COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 39 ROOM NO. 32(1) GROUND FLOOR AAYAKAR BHAVAN MUMBAI- 20. ./ PAN :ABAPT6557A ( % / APPELLANT ) .. ( &'% / RESPONDENT ) A PPEL LANT BY MS. HIRAL SEJPAL RESPONDENT BY : SHRI A.C. TEJPAL * / DATE OF HEARING : 10-04-2014 * / DATE OF PRONOUNCEMENT : 16-04-2014 [ / O R D E R PER P.M. JAGTAP A.M . : .. THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A)- 36 MUMBAI BOTH DTD. 13-1 0-2011 FOR ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY INVOLVE A CO MMON ISSUE AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIEN CE. ITA 07/M/12 & 09/M/12 2 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESS EE FOR A.Y 2006-07 WHEREIN THE FOLLOWING GROUNDS ARE RAISED BY THE ASS ESSEE:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE ID. CIT(A) ERRED IN CONFIRMING THE ADDITION OF THE AMOUNT OF 2 86 740 ON ACCOUNT OF INTEREST EXPENSES ON UNSECURED LOANS IN SPITE OF THE FACT THAT SAID PAYMENT IS FOR BUSINESS PURPOSE AND ALSO IN SPITE OF THE DIRECTION (STILL PENDING WITH THE AC) GIVEN BY THE HON. ITAT IN APPEAL NO. ITA/5475/M/2006 FOR AY 2003-04 IN THE APPELLANT S OWN CASE ON SIMILAR ISSUE OF INTEREST DISALLOWANCE IT IS SUBMI TTED THAT THE AC MUST HAVE FIRST DECIDED THE ISSUE OF INTEREST DISALLOWAN CE AS PER THE DIRECTION GIVEN IN THE HON. ITATS ABOVE SAID ORDER. THE APPE LLANT THEREFORE PRAYS THAT THE ADDITION OF 2 86 740 ON ACCOUNT OF INTERE ST EXPENSES BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ID. CIT(A) ERRED IN CONFIRMING ADDITION OF 13 507 O N ACCOUNT OF BANK CHARGES AND 2 500 ON ACCOUNT OF PROFESSIONAL FEES I N SPITE OF THE APPELLANTS VALID SUBMISSIONS TO THE EFFECT THAT TH E EXPENSES WERE INCURRED FOR EARNING THE INCOME AND THE EXPENSES GO T DIRECT NEXUS WITH THE INCOME DECLARED. THE APPELLANT THEREFORE PRAYS THAT THE ADDITIONS OF 13 507 ON ACCOUNT OF BANK CHARGES AND 2 500 ON AC COUNT OF PROFESSIONAL FEES BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE ABOVE DISALLOWANC E ALSO U/S 14A R.W.R 8D. THE APPELLANT THEREFORE PRAYS THAT THE ADDITION BE NOT CONFIRMED U/S 14A ALSO. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2 RAISED IN THE APPEAL OF TH E ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 4. AS REGARDS THE COMMON AND INTERLINKED ISSUE INVO LVED IN GROUND NO. 1 & 3 RELATING TO THE DISALLOWANCE OF INTEREST EXPEND ITURE THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR A.Y. 2006-07 ORIGINALLY ON 29-12-2006 DECLARING TOTAL INCOME OF RS. 2 49 941/-. A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT 1961 WAS CONDUCTED ON 18-02-2009 IN THE CASES BELONGING TO M/S PATHIK CONSTRUCTIONS GROUP INCLUDING THAT OF THE ASSESSEE. CONSEQUENT TO THE ITA 07/M/12 & 09/M/12 3 SEARCH AND SEIZURE ACTION NOTICE U/S 153A OF THE A CT WAS ISSUED BY THE A.O. ON 31-08-2009 IN RESPONSE TO WHICH THE ASSESSEE FIL ED HIS RETURN OF INCOME ON 9-10-2009 DECLARING HIS UNDISCLOSED INCOME AT N IL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED INTER ALIA INTEREST EXPENDITURE OF RS. 2 86 740/- UNDER THE HEAD INCOME FROM OTHER SOURCES AS PER THE PROVISIONS O F SECTION 57(III) OF THE ACT. SINCE THE ASSESSEE COULD NOT EXPLAIN TO THE SATISFA CTION OF THE A.O. AS TO HOW THE INTEREST EXPENDITURE COULD BE SAID TO BE LAID O UT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OTHER INCOME AS REQUIRED BY THE PROVISIONS OF SECTION 57(III) OF THE ACT THE INTER EST EXPENDITURE CLAIMED BY HIM WAS DISALLOWED BY THE A.O. THE A.O. ALSO NOTICED T HAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD EARNED EXEMPT INCO ME IN THE FORM OF AGRICULTURAL INCOME OF RS. 1 63 020/- DIVIDEND INC OME OF RS. 13 849/- AND LONG TERM CAPITAL GAIN OF RS. 5 79 337/-. NO DISALL OWANCE ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EARNING OF THE SAID INCOME WAS MADE BY THE SSESSEE AS REQUIRED BY THE PROVISIONS OF SECTIO N 14A OF THE ACT. THE A.O. THEREFORE WORKED OUT SUCH EXPENSES BY APPLYING RUL E 8-D OF THE INCOME TAX RULES 1962 AT RS. 52 911/- AND HELD THAT THE EXPEN SES CLAIMED BY THE ASSESSEE TO THIS EXTENT WAS LIABLE TO BE DISALLOWED U/S 14A OF THE ACT. HOWEVER KEEPING IN VIEW THAT THE ENTIRE EXPENSES C LAIMED BY THE ASSESSEE WERE ALREADY DISALLOWED BY HIM HE DID NOT MAKE ANY SEPARATE DISALLOWANCE U/S 14A OF THE ACT. 5. THE MATTER WAS CARRIED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LD. CIT(A) CONFIRMED THE DISALLOWANC E MADE BY THE A.O. ON ACCOUNT OF INTEREST FOR THE SAME REASONS AS GIVEN B Y THE A.O. AS REGARDS THE DISALLOWANCE U/S 14A OF THE ACT THE LD. CIT(A) HEL D RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MANUFACTURING P. LTD. THAT RULE 8D IS NOT APPLICABLE TO THE YEAR UN DER CONSIDERATION AND THE ITA 07/M/12 & 09/M/12 4 DISALLOWANCE U/S 14A OF THE ACT THIS IS REQUIRED TO BE WORKED OUT ON SOME REASONABLE BASIS. ACCORDINGLY HE DIRECTED THE A.O. TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IN COMPLIANCE WITH THE DIRECTIONS GIVEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING P. LTD. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS POINTED O UT BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE ORDER OF THE TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR A.Y. 2003-04 ORDER DATED 29-10-2008 PASSED IN ITA 5 475/MUM/2006 A SIMILAR ISSUE RELATING TO THE DISALLOWANCE OF INTER EST EXPENDITURE WAS SENT BACK BY THE TRIBUNAL TO THE FILE OF THE A.O. FOR DE CIDING THE SAME AFRESH AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIA TE HIS CLAIM FOR DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE. IT IS OBSERVED THAT THE SAID ORDER OF THE TRIBUNAL FOR A.Y. 2003-04 HAS BEEN SUBSEQUENTLY FOL LOWED BY THE TRIBUNAL IN ITS ORDER DATED 12-12-2012 PASSED IN ITA NO. 09/MUM /2012 FOR A.Y. 2009-10 TO RESTORE THE SIMILAR ISSUE TO THE FILE OF THE A.O . TO CONSIDER THE SAME AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD. KEEPING IN VIEW THE ORDERS OF THE TRIBUNAL PASSED IN ASSESSEES OWN CAS E FOR A.YS. 2003-04 AND 2009-10 AND HAVING REGARD TO THE FACTS OF THE CASE WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE T HE MATTER TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE ONE MORE OPPORTUNITY TO SUPPORT AND SUBSTANTIATE HIS CLAIM F OR DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE. GROUND NO. 1 OF THE ASSESSEE S APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7. AS REGARDS THE ISSUE RELATING TO DISALLOWANCE U/ S 14A OF THE ACT RAISED IN GROUND NO. 3 WE FIND NO INFIRMITY IN THE IMPUGN ED ORDER OF THE LD. CIT(A) DIRECTING THE A.O. TO RECOMPUTE THE DISALLOWANCE U/ S 14A BY FOLLOWING SOME METHOD AS RULE 8D APPLIED BY THE A.O. TO MAKE SUCH DISALLOWANCE WAS NOT ITA 07/M/12 & 09/M/12 5 APPLICABLE TO THE YEAR UNDER CONSIDERATION IE. 2006 -07 AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MAN UFACTURING P. LTD. (SUPRA). GROUND NO. 3 OF THE ASSESSEES APPEAL IS A CCORDINGLY DISMISSED. 8. IN HIS APPEAL FOR A.Y. 2007-08 THE ASSESSEE HAS RAISED THREE GROUNDS WHICH ARE IDENTICAL TO A.Y. 2006-07. OUT OF THESE T HREE GROUNDS THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 9. AS REGARDS GROUND NO. 1 & 3 IT IS OBSERVED THAT THE COMMON AND INTERLINKED ISSUE RAISED THEREIN RELATING TO DISALL OWANCE ON ACCOUNT OF INTEREST EXPENDITURE IS SIMILAR TO THE ONE INVOLVED IN A.Y. 2006-07. AS THE MATERIAL FACTS RELEVANT TO THIS ISSUE AS INVOLVED IN A.Y. 20 07-08 ARE SIMILAR TO A.Y. 2006-07 WE FOLLOW OUR CONCLUSION DRAWN IN 2006-07 A ND WE RESTORE THE ISSUE INVOLVED IN GROUND NO. 1 TO THE FILE OF THE A.O. FO R DECIDING THE SAME AFRESH AS PER THE SAME DIRECTIONS AS GIVEN IN A.Y. 2006-07. G ROUND NO. 1 OF ASSESSEES APPEAL FOR A.Y. 2007-08 IS ACCORDINGLY TREATED AS A LLOWED FOR STATISTICAL PURPOSE. 10. AS REGARDS THE DISALLOWANCE U/S 14A OF THE ACT WE FOLLOW OUR CONCLUSION DRAWN IN A.Y. 2006-07 ON A SIMILAR ISSUE AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DIRECTING THE A.O. TO RECOMPUTE THE DISALLOWANCE TO BE MADE US/ 14A BY ADOPTING SOME RE ASONABLE BASIS AS RULE 8D APPLIED BY HIM TO COMPUTE THE SAID DISALLOWANCE IS NOT APPLICABLE TO A.Y. 2007-08 AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING P. LTD. (SUPRA). GROUND NO. 3 OF ASSESSEES APPEAL FOR A.Y. 2007-08 IS ACCORDINGLY DISMISSED. ITA 07/M/12 & 09/M/12 6 11. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL 2014. . * 0 1 16-04-2014 * SD/- SD/- (DR. S.T.M. PAVLAN) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 16-04-2014 [ .../ RK SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &'% / THE RESPONDENT. 3. 4 () / THE CIT(A)36 MUMBAI. 4. 4 / CIT -1 MUMBAI 5. 7 &9 9 / DR ITAT MUMBAI CBENCH 6. ; / GUARD FILE. / BY ORDER '7 & //TRUE COPY// / ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI