MAHESH VRAJLAL BABARIA,MUMBAI vs. ADDL CIT 14(3), MUMBAI

The present appeal has been preferred by the assessee against the order dated 27.12.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The short facts of the case are that the assessee has filed the return for A.Y. 2009-10 declaring income of Rs.1,04,15,780/-. The assessee is an individual derived the income under the head business, house property, capital gain and income from other sources. During the assessment proceeding, the assessee derived the dividend income of Rs.23,39,461/- which was claimed exempt under section 10(34). The Assessing Officer (hereinafter referred to as the AO) relied upon the assessment order passed in A.Y. 2008-09 and following that order he has calculated the disallowance under section 14A which reads as under:

Matter carried to Ld. CIT(A) and the Ld. CIT(A) has upheld the order of the AO. Hence, the assessee is in appeal before us.

During the course of hearing before us, the Ld. A.R. submitted that the issue in controversy is covered by the decision of Tribunal in the own case of the assessee in for assessment year 2008-09 wherein the similar disallowance under section 14A read with rule 8D was made and it was restored to AO, therefore, this matter also may be restored to AO.

On the other hand, the Ld. D.R., relied upon the order of Revenue authorities.

We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that this issue in controversy is covered by the decision of Tribunal in the own case of the assessee in for assessment year 2008-09 wherein the Tribunal has set aside the order with a direction which was given in ITA No.7421/M/2011 which reads as under: “12. Vide ground No.2, the assessee has agitated the disallowance of Rs.70,01,260/- u/s 14A r.w.r.8D. The assessee in this case is engaged in the car rental business. The 3 Shri Mahesh Vrajlal Babaria contention of ld. AR has been that loan was taken for the car rental business, whereas the assessee had invested his own money for investment for earning exempt income. The facts as well as contention raised by the assessee are identical to that of the facts raised in ITA No.7422/Mum/2011 in assessee’s family member’s case as discussed above and has been restored to the file of AO for a fresh decision after giving opportunity of being heard to the assessee as per law. On the same footing, and following the above finding, we restore this issue to the file of AO for fresh application of mind and adjudication accordingly. The ground No.2 is allowed for statistical purpose.”

We find that the direction given in para 7.4 of has been followed by the Tribunal in assessee’s own case in ITA No.7421/M/2011 for A.Y. 2008-09 is relevant to the present case and is reproduced as under: “7.4 In view of our above observation, we set aside the disallowance made by the lower authorities and restore the issue to the file of the AO with a direction to find out as to whether sufficient own funds/interest free funds were available with the assessee for investment purposes so far disallowance relating to interest expenditure is concerned. The AO will also consider the issue relating to disallowance of administrative expenses, if any, incurred including the allocation out of indirect common expenses for earning of exempt income and to decide the issue accordingly following the above guidelines/observations. Needless to say that the A.O. will provide proper opportunity to the assessee to file the necessary documents and accounts etc. including fund flow statement, if any as per law. The AO thereafter, will duly examine the explanation/ documents so produced by the assessee in this respect and give a specific finding in this respect by way of a speaking order. The ground taken by assessee is allowed for statistical purposes.”

Respectfully following the order of the Tribunal in the own case of the assessee, we restore this matter to the file of AO.

In the result, appeal is allowed.