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Facts
The appellant, an individual engaged in banking/finance, was assessed with an addition of Rs. 2,63,51,717/- under Section 14A for investments in shares. While the shares were registered in the appellant's name, he contended that beneficial ownership lay with partnership firms in which he was a partner, and dividend income was accounted for by these firms. The AO and CIT(A) upheld the addition, finding that funds for purchase flowed from the appellant and shares were in his name. In appeal, the appellant conceded being the registered owner but alternatively argued that his own funds far exceeded the cost of investments, making Section 14A inapplicable, and sought a remand based on the South Indian Bank case.
Held
The Tribunal dismissed the appeals, affirming the addition under Section 14A. It held that the appellant failed to discharge the onus of proving that the partnership firm was the real owner of the shares. The Tribunal also rejected the plea for remand to examine the 'own funds' argument, noting that this contention was never raised or supported by evidence before the lower authorities, and remanding the matter would amount to granting a 'second innings' without valid reason, contrary to established legal principles.
Key Issues
Whether the disallowance under Section 14A was justified despite the appellant's claim of beneficial ownership by a partnership firm; and whether the matter should be remanded to verify if own funds exceeded the investment for Section 14A applicability, given that this plea was not raised before lower authorities.
Sections Cited
143(3), 153A, 14A
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessees are directed against different orders of the Commissioner of Income Tax (Appeals)-3, Kochi [CIT(A)], for Assessment Year (AY) 2011-12 to 2017-18.
Since identical issues are involved in these appeals, they are heard together and disposed of by this common order. For the sake of convenience and clarity the facts relevant to the appeal bearing for AY 2011-12 are stated herein.
Brief facts of the case are that the appellant is an individual deriving income from the business of banking/finance. The return of income for AY 2011-12 was filed on 06.06.2012 declaring income of Rs. 1,21,66,397/-. Against the said return of income, the assessment was completed by the DCIT, Central Circle, Thiruvananthapuram (hereinafter called "the AO") vide order dated 28.12.2018 passed u/s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (the Act) at a total income of Rs. 3,85,87,980/-. While doing so, the AO made addition of Rs. 2,63,51,717/- u/s. 14A of the Act.
The factual background leading to the above addition is that during the course of assessment proceedings, the appellant was called upon by the AO to furnish details of investments in shares to 903/Coch/2023 Thomas Muthoot & Others and dividend income received on such investments. The appellant had clarified that although the shares were held in the name of the appellant, the beneficial owner of the shares is the partnership firms, in which the appellant and his family members are partners, since the partnership firms cannot be registered shareholder of a corporate entity. It was further submitted that the cost of investments as well dividend received on such shares were accounted in the firm. However, the AO having regard to the information/explanation filed before him had come to the conclusion that since the shares were held by the appellant and deriving dividend income, provisions of section 14A of the Act should be applied. Accordingly applying the provisions of section 14A, the AO made addition of Rs. 2,63,51,717/- .
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal by returning the following finding of facts: -
i) It is found that the funds were flown out of the books of accounts of the appellant for purchase. ii) The shares were issued in the name of the appellant. iii) The mere fact that the appellant merely transferred the shares to the partnership firm and accounted the dividend income in the hands of the firm does not alter the position of accrual of income in the hands of the appellant. Accordingly the learned counsel for the assessee confirmed the addition.
The learned counsel for the assessee, Shri R. Krishnan, fairly conceded before us that the appellant is not the real owner of the shares is not borne out of the material on record, accordingly he gave up this contention. However, he submits that that the AO cannot resort to provisions of section 14A, as the own funds far exceed the cost of investments. In view of the decision of the Hon'ble Supreme Court in the case of South Indian Bank 438 ITR 1 the matter may be restored to the file of the AO to decide the applicability of provisions of section 14A of the Act.
On the other hand, the CIT-DR vehemently opposed the above contentions and submits that the appellant never took this plea before the lower authorities.
We have heard the rival contentions and perused the material available on record. The issue that arises for our determination is whether the AO as well as he CIT(A) were justified in applying the provisions of section 14A having regard to the facts of the case. Admittedly the appellant is the registered shareholder of the companies and deriving dividend income on such shares. It is the contention of the appellant that the shares were merely held in the name of the appellant as the partnership firm cannot be registered shareholder of a company. However, the appellant could not to 903/Coch/2023 Thomas Muthoot & Others discharge the onus of proving that it is not the real owner of the shares but the partnership firm of which he is a partner. If the appellant is not the real shares which yields dividend income, appellant is required to file a prescribed form to the company showing that the real owner is the partnership firm and the appellant also failed to rebut the findings returned by the CIT(A) that the funds are flown out of the hands of the appellant to invest in the equity shares of the companies. Thus, the submission that the appellant is not the real owner is devoid of any merit. The learned counsel for the assessee fairly conceded this position before us.
The alternative submission of the learned counsel for the assessee is that the AO ought not to have resorted to the provisions of section 14A in view of the fact that the own funds far exceed the cost of investment in view of the decision of the Hon'ble Supreme Court in the case of South Indian Bank (supra) this cannot be accepted in view of the fact that on a mere perusal of the assessment order as well as the order of the CIT(A), the appellant never took this plea, all along he was arguing on the issue that the appellant is not in receipt of exempt income and, therefore, provisions of section 14A has no application. No factual evidence was filed either before the lower authorities or before us in support of this proposition. Further the submission of the learned counsel for the assessee to remand the matter to examine applicability of provisions of section 14A in view of the decision of the Hon'ble Supreme Court in the to 903/Coch/2023 Thomas Muthoot & Others case of South Indian Bank (supra) cannot be acceded in view of salutary principal of law that order of the order of remand cannot be made to patch up the weak points in the case to either party to the litigation. Reliance can be placed on the following decision of the ITAT: i. Asst. CIT v. Anima Investment Ltd. (2000) 73 ITD 125 (Delhi); ii. Asst. CIT v. Arunodoi Apartments (P.) Ltd. (2002) 123 Taxman 48 (Gau.)
The Courts have held that appeals are not to be decided for giving 'one more innings' to the lower authorities in the appellate jurisdiction. i. Rajesh Babubhai Damania v. CIT ((2001) 251 ITR 541) (Guj.) ii. CIT v. Harikishan Jethalal Patel (1987) 168 ITR 472 (Gui.) Remand not for the benefit as held by Hon'ble Gujarat High Court in the case of CIT v. Harikishan Jethalal Patel [1987] 169 ITR 472, the relevant portion of the same is extracted as under: “Even the Hon'ble Karnataka High Court in the case of Karnataka Wakf Board v. State of Karnataka, reported in AIR 1996 Kar.55 at pages 63 & 64 held as under: "Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retrieved. In a recent decision their Lordships of the Supreme Court laid down that power to order retrial after remand, where there had already been a trial on evidence before the court of first instance, cannot be exercised merely because the Appellate to 903/Coch/2023 Thomas Muthoot & Others Court is of the view that the parties who could lead better evidence in the Courts of first instance have failed to do so. The Hon'ble Tribunal, Delhi bench in the case of Zuari Leasing & Finance Corporation Ltd. v. ITO (2008) 112 ITD 205(Delhi) (TM), following the case-laws referred to above held that the Tribunal should not remand back to the file of the AO in order to give a second innings to the litigant. Therefore, following the principles enunciated in the above decision, we are unable to remand the present assessment order to the file of the AO for de novo examination as no case was made out by the assessee- firm that it was prevented by sufficient reasonable cause from filing necessary evidence in support of receipt of actual services from the AE. Simply because in earlier years the issue was remanded back to lower authorities, remand cannot be ordered in the present year without valid reason in the light of the decisions cited supra. Needless to mention that each year is an independent and separate assessment year and the principle of res-judicata is not applicable."
In the result, the appeal filed by the assessee stands dismissed.
Since identical issued are involved in all other appeals, the above findings are mutatis mutandis apply to all these appeals also, hence, the same are dismissed.
Order pronounced in the open court on 23rd May, 2025.