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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-5, Chennai, dated 03.08.2017 and pertains to assessment year 2014-15.
The first issue arises for consideration is with regard to addition of ₹69,42,446/- under Section 41(1) of the Income-tax Act, 1961 (in short 'the Act').
Shri K. Meenatchi Sundaram, the Ld. representative for the assessee, submitted that the Assessing Officer made addition of ₹69,42,446/- considering it a trading liability which ceased to exist. According to the Ld. representative, it is not a trading liability. It was a gift received from the assessee’s brother. According to the Ld. representative, the assessee filed all the documentary evidences before the Assessing Officer as well as the CIT(Appeals). The CIT(Appeals) without calling for any remand report from the Assessing Officer, has confirmed the order of the Assessing Officer. According to the Ld. representative, the assessee also filed written submission. Placing reliance on the order of Cochin Bench of this Tribunal in Rajesh Kumar v. ACIT (2012) 24 taxmann.com 133, the Ld. representative submitted that when on identical circumstances, a gift was received, it was held that it is not taxable.
Shri K. Meenatchi Sundaram, the Ld. representative for the assessee, submitted that the next ground of appeal is with regard to addition made by the Assessing Officer. According to the Ld. representative, the Assessing Officer disallowed a sum of ₹85,795/- under Rule 8D of the Income-tax Rules, 1962. According to the Ld. representative, the assessee made investment in a partnership firm in which he is also one of the partners in trading business. Therefore, according to the Ld. representative, the investment is not for earning any exempted income. It is for doing business. Moreover, no exempted income was earned by the assessee. Therefore, according to the Ld. representative, in view of the judgment of Madras High Court in Redington (India) Ltd. v. Addl. CIT (2017) 77 taxmann.com 257, there cannot be any disallowance when the assessee has not earned any exempted income.
5. On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the assessee was all along claiming the liability of ₹69,42,446/- as a trading liability. Subsequently, the assessee changed his stand and claimed that it was a gift. According to the Ld. D.R., when it was a trading liability, it cannot be a gift at all. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.
6. Referring to the disallowance made under Rule 8D of the Income-tax Rules, 1962, the Ld. Departmental Representative submitted that he is placing reliance on the observation made by the CIT(Appeals).
7. We have considered the rival submissions on either side and perused the relevant material available on record. With regard to addition of ₹69,42,446/-, the assessee claims that it was a gift from his brother. However, the Assessing Officer found that it was a trading liability and subsequently, the assessee changed his stand claiming it was a gift. The Assessing Officer has not examined all the documentary evidences filed by the assessee. In view of this factual aspect, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the addition of ₹69,42,446/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in the light of the material that may be filed by the assessee. Thereafter decide the issue after recording his finding whether it is a trading liability or gift, in accordance with law, after giving a reasonable opportunity to the assessee.
Now coming to next issue of disallowance of ₹85,795/- under 8. Rule 8D of Income-tax Rules, 1962. The assessee claims that the investment was made in the partnership firm in which he was also a partner. Copy of partnership deed is not available before this Tribunal. Therefore, this Tribunal is unable to find out whether the investment is for business purpose or for earning exempted income. Moreover, the assessee also claims that no exempted income was earned by him. This was also not considered by both the authorities below. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the disallowance of ₹85,795/- under Rule 8D is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter afresh in the light of the copy of partnership deed that may be filed by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 16th February, 2018 at Chennai.