SHRI SWAPNALI VISHWAJIT KADAM,PUNE vs. DY CIT-CC-2(3), MUMBAI

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ITA 857/MUM/2021Status: DisposedITAT Mumbai17 December 2021AY 2016-174 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that for disallowance under Section 14A, only investments yielding exempt income should be considered, restoring the issue to the Assessing Officer for recomputation. Regarding the protective addition, the Tribunal restored the issue to the Assessing Officer for verification of the settlement under the Vivad Se Vishwas Scheme by the individual who accepted the substantive addition.

What were the facts?

The assessee challenged the disallowance of Rs. 2,76,797/- under Section 14A read with Rule 8D and an addition of Rs. 11,00,000/- on a protective basis. The disallowance under Section 14A was contested on the grounds that only investments yielding exempt income should be considered. The addition on a protective basis was challenged as the substantive addition was settled by another individual under the Vivad Se Vishwas Scheme.

What were the issues?

Whether disallowance under Section 14A should consider only exempt income-yielding investments, and whether a protective addition survives when the substantive addition is settled by another party.

Which sections of the Income-tax Act were involved?

Section 14A,Section 69B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “ B”, MUMBAI

Hearing: 02/12/2021

ORDER

PER VIKAS AWASTHY, JM:

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-48, Mumbai [in short ‘the CIT(A)] dated 27/10/2020 for the assessment year 2016-17.

2.

The assessee in appeal has raised primarily two issues:

(i) disallowance of Rs.2,76,797/- u/s. 14A r.w.r. 8D(2) of Income Tax Act, 1961 ( in short ‘the Act’), and (ii) addition of Rs.11,00,000/- u/s. 69B of the Act on protective basis.

3.

Shri Anuj Kisnadwala appearing on behalf of the assessee submitted that in ground No.1 & 2 of appeal the assessee has assailed disallowance made under section 14A r.w.r.8D of the Act. The short prayer is that while computing average value of investments under section 14A r.w.r. 8D only exempt income yielding investments should be considered. To support his submissions he placed reliance on the decision of Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd. 58 ITR(T) 313(Del).

In respect of issue No.2 raised in grounds No. 3 to 5, the ld.Authorized Representative of the assessee submitted that substantive addition was made in the hands of Shri Amit Avinash Bhosale. He has accepted the addition and has settled the issue under 'Vivad Se Vishwas Scheme, 2020'( in short 'VSVS'). The ld.Authorized Representative of the assessee furnished copy of Form-3 and made statement at Bar that the taxes has been paid by Shri Amit Avinash Bhosale in accordance with Form -3 issued under VSVS. Once the addition has been accepted by the assessee in whose hands substantive addition has been made, addition on protective basis does not survive in the hands of assessee.

4.

Per contra, Shri Mahesh Akhade representing the Department vehemently supported the impugned order and prayed for dismissing appeal of the assessee.

5.

Both sides heard, orders of authorities below examined. In grounds of appeal No.1 & 2, the assessee has assailed disallowance made under section 14A r.w.r. 8D. The Assessing Officer while computing disallowance has considered all the investments made by the assessee irrespective of the fact whether the investments has earned exempt income or not. The Special Bench in the case of ACIT vs.Vireet Investments Pvt. Ltd.(supra) has held that while computing average value of investments, only investments yielding exempt income should be considered for making disallowance under section 14A r.w.r. 8D(2)(iii). The short contention raised by the assessee is accepted. The issue is restored back to the file of Assessing Officer for recomputation of disallowance under section 14A r.w.r. 8D in accordance with the decision of Special Bench (supra). Consequently, ground No.1 & 2 of the appeal are allowed in the terms aforesaid.

6.

In grounds of appeal No.3 to 5 the assessee has assailed addition of Rs.11,00,000/- under section 69B of the Act. The issue relates to purchase of jewellery in cash from Nirav Modi Store. The contention of assessee is that the addition has been made in the hands of assessee on protective basis. Substantive addition has been made in the hands of Amit Avinash Bhosale. This fact is evident from the assessment order passed in the case of Amit Avinash Bhosale dated 22/05/2019 for the assessment year 2016-17. The assessee has furnished Form-3 issued under VSVS alongwith the copy of challan to show that Amit Avinash Bhosale has accepted the addition and has settled the issue under VSVS. After examining the documents furnished by the assessee we deem it appropriate to restore this issue to the Assessing Officer for the limited purpose of verification of the fact whether Amit Avinash Bhosale has accepted the addition of Rs.11,00,000/- and has settled the dispute under VSVS. Subject to above verification ground No.3 to 5 of the appeal are allowed.

7.

In the result, appeal by the assessee is allowed in the terms aforesaid. Order pronounced in the open court on Friday the 17th day of December, 2021.

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