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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)- XXVIII, New Delhi dated 12.11.2014 for the Assessment Year 2011-12. 2. The assessee has raised the following grounds of appeal:- “1. That the Id. CIT(Appeals) has erred on facts and in law in dismissing the appeal before her and upholding the assessment order of the Id. AO, disallowing a sum of Rs. 3,00,912/- by invoking Sec. 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962 and adding back the said amount to the total income of the appellant.
2. That the findings of the Id. CIT(Appeals) and the Id. AO before her are without any cogent material basis and is contrary to the facts of the appellant’s case.
3. That the findings of the Id. CIT(Appeals) and the Id. AO before her is without taking into cognisance the facts:- i) That expenditure relatable to income not forming part of the total income from investments amounting to Rs. 4,79,805/- had been charged by the Citi Bank as transaction charges during the year and have been accounted for in the capital account as personal withdrawals and has not been debited to the profit & loss account which relates only to professional Page | 1 Pavani Parameshwara Rao Vs. Addl. CIT, (Assessment Year: 2011-12) income receipts and expenditure incurred in connection therewith. ii) That the learned AO applied the provision of section 14A of the Act and rule 8D of the Rules without giving any finding on why was he not satisfied with the appellant’s books of accounts or that any expenditure debited to the profit & loss account had any nexus with any income not forming part of the total income.
4. That the impugned order of the CIT(Appeals) is influenced by misconceived facts and erroneous appreciation of evidence and misplaced notions of obligations of the assessee and revenue.”
3. The only grievance raised by the assessee is against the disallowance of Rs. 300912/- u/s 14A of the Income Tax Act, 1961 confirmed by the ld CIT(A) which was made by the ld AO in his order u/s 143(3) of the Act on 29.01.2014.
4. The brief issue is that the assessee was a Senior Advocate now deceased who filed his return of income on 24.09.2011 for Rs. 8.90 crores and assessment u/s 143(3) of the Act was made at Rs. 8.93 crores on 29.01.2014, wherein, disallowance u/s 14A was made of Rs. 300912/-. During the year the assessee has shown exempt income from mutual fund of Rs. 29.75 lacs and dividend from the shares of Rs. 27.4 lacs. The assessee has not disallowed any sum u/s 14A of the Act. The claim of the assessee is that he has not incurred any expenditure for earning of such exempt income. The ld AO on the basis of the scrutiny of the books of account of the assessee, expenditure claimed in the profit and loss account including establishment and personal expenditure stated that he is not satisfied with the claim of the assessee that no expenses have been incurred for earning tax-free income after that he applied the provisions of Rule 8D of the Income Tax Rules and disallowed half percentage of average investment amounting to Rs. 300912/-. The ld CIT(A) confirmed the disallowance. 5. The ld AR submitted that in before ITAT in assessee’s own case for earlier years for Assessment Year 2009-10, on identical issue arose and the Page | 2 Pavani Parameshwara Rao Vs. Addl. CIT, (Assessment Year: 2011-12) addition was deleted. He referred to the order of the coordinate bench in assessee’s own case dated 27.02.2015. He further referred to the submission made before the ld AO stating that there are no expenditure incurred for exempt income by the assessee at all. He further stated that there is no satisfaction recorded by the ld AO that any expenditure has been incurred by the assessee. He extensively referred to the income and expenditure account placed at page No. 58 of the paper book to show that there are no such expenditure. He therefore, submitted that no disallowance u/s 14A of the Act is called for.
The ld DR relied upon the orders of the lower authorities.
We have carefully considered the rival contentions and also perused the orders of the lower authorities. The assessee has earned income from mutual fund of Rs. 29.75 lacs and dividend of Rs. 27.34 lacs. He has claimed that no expenditure is incurred for earning of the exempt income. The ld AO rejected his contention stating that he has examined the books of account and looked at the expenses claimed in the profit and loss account. From that he was satisfied that the explanation of the assessee is incorrect. He has not stated any instances in the assessment order that these are the expenditure which has been incurred by the assessee which could be for the purposes of earning of the exempt income. We have looked at the income and expenditure account of the assessee which is placed at page 58 of the paper book. We could not find any expenditure which could be said to have been incurred for earning of exempt income. The assessee has shown gross receipt of Rs. 7.64 crores as allocate and has shown the excess of income over expenditure of Rs. 7.36 crores. He has debited other expenditure of Rs. 67.52 lacs in his capital account. In the profit and loss account the major expenditure has been incurred is car maintenance, depreciation, travelling, assistant fees paid to advocate, stipend and salaries. Therefore, on looking at the profit and loss account we could not find any expenditure which even remotely suggests to have been incurred for the purpose of earning exempt income. The ld DR also Page | 3