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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
O R D E R PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee directing against the order dated 22.2.2016 passed by ld.CIT(A)-45, Mumbai for the assessment year 2011-12 in which the ld.CIT(A) has upheld the action of AO in treating the “Long Term Capital Gains” of Rs.14,77,250/- under the head “Income from Business or profession”.
At the time of hearing, the ld.AR of the assessee drew our attention to the application dated 16.12.2016 whereby the ld.AR requested for 2 admission of additional evidences which were neither before the AO nor before the FAA. The ld. AR prayed before us that the additional evidences may kindly be admitted as it goes to the root to the matter raised by the assessee in the grounds of appeal
3. On the other hand, the ld. DR objected to the plea put forth by the ld.AR on the ground that the assessee has neither filed before the AO nor before the ld.CIT(A) any of these evidences and thus it could not be admitted and entertained at this stage.
4. We have considered the rival submissions and perused the application dated 16.12.2016 for admission of additional evidences. Upon perusing the additional evidences we find that these evidences to be relevant and in our view the ends of justice would be met, if the assessee is heard on the additional evidences as no prejudice would be caused to the revenue if the issue involved is decided on merit after considering these evidences. Accordingly, we allow the application for admission of additional evidences and set aside the order of the ld.CIT(A) and direct the AO decide the issue on the basis of additional evidences as filed before him with reasonable opportunity to the assessee of being heard accordingly to the principle of natural justice.
5. The ground no.1 taken by the assessee is allowed for statistical purposes.
3 6. The second issue raised in the ground no.2 pertains to the confirmation of addition of Rs.3,15,715/- u/s 14A of the Act read with rule 8D of the Income Tax Rules, 1962.
Facts in brief are that the AO has made disallowance under section 14A r.w.s.8D qua expenses pertaining to the earning of exempt income during the year. The assessee earned exempt income of Rs.22,816/- on total investment of Rs.49,000/-.
The FAA also upheld the action of the AO by observing and holding as under : “9. I have considered the assessment order as well as the submission of the appellant. As per section 14A of the IT Act if the AO is not satisfied with the correctness of the claim of assessee in respect of such expenditure in relation to income which does not form part of the total income he shall determine the amount of such expenditure. During the course of assessment proceedings the AO has calculated the expenditure as per the working of the AR of the appellant vide his letter dated 23.2.2013. I do not find any reason to intervene in the same and the disallowance made is confirmed. Thus the ground of appeal is dismissed.”
9. Heard both the parties on the issue, perused the material placed before us including the orders of authorities below. We find that during the year under consideration, the assessee earned dividend income of Rs.22,816/-. The ld. AR vehemently submitted before us that the assessee incurred no expenses to earn income. In the alternative the ld.AR submitted that this disallowance cannot be more than the exempt income earned during the year and therefore requested before the Bench that the disallowance may be deleted or alternatively a reasonable disallowance 4 under rule 8D be made in view the quantum of exempt income. After considering the facts on records and submission of the parties , we find that the disallowance as made by the AO and sustained by the FAA is not reasonable one and cannot be sustained and justified . We, therefore, consider it fit and reasonable to restrict the disallowance to Rs.10,000/- as expenses relating to the exempt income. This ground is partly allowed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.