PANKAJ JAYANTILAL PATEL,MUMBAI vs. DY CIT CIRCLE -32(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No.8973/Mum/2025 (Assessment year: 2011-12)

Pankaj Jayantilal Patel vs DCIT Circle-32(1), Mumbai 6th& 7th Floor, Divya Darshan Room No.702, Kautilya Bhavan, G Vallabhnagar CHS, JVPD Block, Bandra Kurla Complex, Scheme, N S Road No.5, Vile Bandra (E), Mumbai-400051 Parle (W), Mumbai-400056 PAN:AABPP2157L APPELLANT RESPONDENT Assessee by : Shri Kumar Kale Revenue by : Shri R.A. Dhyani CIT DR & Shri V.S. Mahajan (Sr.DR) Date of hearing : 04/05/2026 Date of pronouncement : 06/05/2026 O R D E R Per:Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2011-12, date of order 30.10.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax Officer-21(1), Mumbai (for brevity the ‘Ld. AO’) order passed under section 143(3) of the Act date of order 31.03.2014.

2 ITA No.8973/Mum/2025 Pankaj Jayantilal Patel 2. The brief facts of the case are that the assessee is an individual capacity filed the return by declaring total income Rs.1,69,18,240/-, comprising mainly of business income amount to Rs.1,42,94,623/- in respect of Trading and F&O activities in share and interest and short term capital gain of Rs.1,82,672/- on sale of shares. The assessee also declares long term capital gain amount to Rs.1,79,818/-. The assessee also reported long term capital gain Rs.10,20,97,931/- on sale of shares which was claimed exempt u/sec. 10(38) of the Act. In the return of Income, the assessee disallowed the expenses related to dividend income under the head “expenses related to dividend” amount to Rs.18,44,964/- which was claimed that the said expenses are disallowed related to dividend income in nature of disallowance of Section 14A of the Act. During the assessment proceeding the Ld. AO had separately calculated the expenses related exempted income u/sec. 14A read with Rule 8D of the Income Tax Rule, 1962 and determined 0.5% of average investment of Rs.37,33,18,980/- which comes to Rs.18,66,595/-. The aggrieved assessee filed an appeal before the Ld. CIT(A). the Ld. CIT(A) uphold the impugned assessment order. Being aggrieved assessee filed an appeal before us. 3. The Ld. AR submitted a paper book comprising pages 1 to 92, which has been placed on record. The Ld. AR contended that, in the computation of income, the assessee had already disallowed expenditure relatable to dividend income amounting to Rs. 18,44,964/-, and the relevant computation is annexed at APB pages 2 to 5. Accordingly, it was argued that any further disallowance of expenditure under section 14A r.w. Rule 8D by the Ld. AO would result in double disallowance. The Ld. AR further submitted that the identical issue has already been adjudicated by the Coordinate Bench of the ITAT in the assessee’s own case

3 ITA No.8973/Mum/2025 Pankaj Jayantilal Patel in ITA No. 6006/Mum/2012, order dated 28.03.2014, and the relevant extract from paragraph 6 is reproduced here in below: “6. After considering the entire material placed on record we are of the considered view that disallowance under Section 14A can be made only if the assessee has incurred expenditure against the exempt Income. If no expenditure has been claimed, no disallowance can be made even as per Rule BD. In the instant case we found that total expenditure debited by the assessee in the P&L account is Rs. 16,28,355/- As per the working given by the assessee before Bench the assessee himself has made disallowance of 15% of expenditure in respect of depreciation, car expenses, interest on car loan and car insurance. Thus, 15% of expenditure works out to be Rs.2,20,575/- As per the assessee there is actual claim of expenditure of Rs 14,07,780/- However as per the audited P&L account placed on record, we found that assessee has actually claimed expenditure of Rs.16,28,355/- and not Rs 14,07,780/- Therefore, it is not clear as together the assessee himself has made a disallowance of Rs.2,20,575/- as the same is not coming out of the order of the AO nor in the documents placed on record. In the interest of justice and fair play we restore this ground to the file of the AO with a limited extent of finding out if assessee himself has disallowed a sum of Rs 2,20,575 If the AO finds that assessee has made disallowance of Rs 2,20,575/--and actually claimed expenditure of Rs 14,07,780/- no further disallowance is warranted under Section 14A. However, we confirm the action of the CIT(A) for deleting the disallowance of interest of Rs.3,69,033/-as taken by the AO while computing total disallowance under Section 14A read with Rule 8D.” 4. The Ld. DR argued and stated that the claim of the assessee in return of income was factual incorrect. No separate claim was made u/sec. 14A of the Act. The Ld. CIT(A) had adjudicated & decided the issue in the impugned appellate order. The observations of the Ld. CIT(A) is reproduced as below:

“Decision: I have considered the submission of the appellant and gone through the AO's observation & decision in assessment order and find from the statement of total income filed by the appellant that the appellant has already disallowed a sum of Rs. 18,44,964/- u/s. 14A. But

4 ITA No.8973/Mum/2025 Pankaj Jayantilal Patel from the computation of income as filed by the appellant I find no such disallowance under section 14A of the Act for which the appellant's contention is found to be factually incorrect for which the computation of income is reproduced as under. xxxxxxxxxxxxxxxxxxxxxx In view of above I find no infirmity in the assessment order of the AO making computation of income after addition of Rs. 18,66,595/-in as much as the same being made in accordance with law since the same not being double disallowance. Therefore, I have no hesitation in holding that the impugned addition invoking section 14A of the Act is based on apropos consideration of facts and law and justified for which the addition of Rs. 18,66,595/- made by the AO vide order dated 31-03-2014 stand confirmed. Since the appellant has not claimed the disallowance of Rs. 5,067/- by filing any revised return, their claim of restriction of disallowance to the amount of Rs. 5,067/- stand not sustainable. The grounds relating to this issues are dismissed.”

5 ITA No.8973/Mum/2025 Pankaj Jayantilal Patel return of income. Accordingly, we set aside the impugned appellate order and direct deletion of the addition made by the Ld. AO. 6. In the result, the appeal of the assessee bearing ITA No.8973/Mum/2025 is allowed. Order pronounced in the open court on 6th day of May 2026. Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 06/05/2026 SAUMYASr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI