NEETA MALHOTRA,MUMBAI vs. ASST CIT (OSD-I) CEN RG 7, MUMBAI

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ITA 1912/MUM/2013Status: DisposedITAT Mumbai09 November 2017AY 2009-103 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) directed the AO to recompute the disallowance under Section 14A read with Rule 8D. The Tribunal found no merit in the assessee's grounds of appeal due to lack of submissions and dismissed the appeal.

What were the facts?

The assessee filed her return of income, and the AO made a disallowance of expenses. The CIT(A) partially sustained the disallowance and also issued a notice for enhancement of income under Section 14A.

What were the issues?

Whether disallowance under Section 14A r.w. Rule 8D is applicable when dividend income is earned on shares held as stock-in-trade and incidental to trading activity.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, B Bench, Mumbai

Before: Shri G.S. Pannu & Shri Pawan Singh

For Respondent: Shri Suman Kumar
Hearing: 09.11.2017Pronounced: 09.11.2017

This appeal by the assessee under Section 253 of the Income Tax Act is directed against the order of the CIT(A)-40, Mumbai dated 20.12.2012 for A.Y. 2009-10.

2.

The assessee has raised the following grounds of appeal: - “1. The CIT(A) erred in enhancing the assessed income of the appellant by directing the AO to compute the amount disallowable under section 14A of the Income-tax Act, 1961 (the Act) read with rule 8D of the Income-tax Rules, 1962 (the Rules).

2. The CIT(A) erred in failing to appreciate that the appellant had not incurred any expenditure to earn tax free income during the relevant previous year.

3. The CIT(A) erred in failing to appreciate that the appellant is engaged in share and derivatives trading activity without any intention of earning dividend income, and dividend earned is on incidental to the said trading activity and no expenditure is incurred to earned dividend income, and hence no disallowance under section 14A of the Act read with rule 8D of the Rules is called for.”

Ms. Neeta Malhora 3. The brief facts of the case are that the assessee, an individual, filed her return of income for the relevant assessment year on 19.02.2010 declaring total income of `56,74,947/-. The assessment was completed on 14th December, 2011 under Section 143(3). The AO while passing the assessment order made disallowance of `24,21,434/- holding that the expenses are not directly related to the business activities of the assessee. On appeal before the CIT(A) the disallowance on account of expenses was partially sustained. However, the learned CIT(A) issued a notice for enhancement of income holding that the AO has not invoked provisions of Section 14. After giving opportunity to the assessee the CIT(A) held that the assessee is holding shares as stock in trade and earned dividend income relating to unsold stock of shares. The major investment of the assessee is in mutual funds. Hence the AO was directed to recomputed the disallowance under Section 14A r.w. Rule 8D. Thus further aggrieved by the order of the CIT(A) the assessee has filed this appeal before us.

4.

None appeared on behalf of the assessee despite giving sufficient time. The assessee is not appearing since beginning despite service of notice through RPAD. A perusal of records reveals that authority letter of Shri M. Rushabh H. Vyas, CA is on record. When neither the assessee nor her representative appeared we have left with no option except to hear the learned D.R. for Revenue and to proceed to decide the appeal on the basis of the material available on record.

5.

The learned D.R. for the Revenue supported the order of the Authorities below. The learned D.R. further argued that the learned CIT(A) has given a direction to the AO to compute the disallowance under Section 14A. The order passed by the learned CIT(A) is not prejudicial to the assessee as the assessee would have opportunity to raise her grievances and arguments before the AO.

6.

We have considered the submissions of the learned D.R. for Revenue and perused the material available on record. We noted that during the appellate proceedings the learned CIT(A) given notice dated 10.12.2012 for Ms. Neeta Malhora enhancement of income. The assessee filed her reply dated 19.12.2012. After considering the contention of the assessee the learned CIT(A) directed the AO to compute the disallowance under Section 14A r.w. Rule 8D. Before us the assessee has not filed any documentary evidence or any written submission to substantiate the ground of appeal as to why the disallowance under Section 14A be not computed by the AO. In the absence of any explanation or submission from the assessee we do not find any merit in the grounds of appeal raised by the assessee. Grounds raised by the assessee are dismissed.

7.

In the result, the appeal filed by the assessee is dismissed.

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