MADHUKAR C. SHETH,MUMBAI vs. ACIT 12(1), MUMBAI
What did the Tribunal hold?
The Tribunal found that the Assessing Officer and CIT(A) did not properly consider the assessee's submissions and failed to provide an effective opportunity of being heard. Therefore, the matter was set aside for reassessment.
What were the facts?
The assessee claimed dividend income from Mutual Funds and Equity Shares as exempt. The Assessing Officer disallowed expenditure incurred towards this exempt income under Rule 8D. The CIT(A) upheld this disallowance.
What were the issues?
Whether the disallowance of expenditure towards exempt income was made without proper consideration of the assessee's submissions and without granting an adequate opportunity of being heard.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM
Assessee by: None Department by: Shri M. Rajan सुनवाईकीतारीख / Date of Hearing:28.09.2016 घोषणाकीतारीख /Date of Pronouncement: 29.12.2016 आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 30.08.2012 passed by the Commissioner of Income Tax (Appeals)23, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2008-09.
The assessee has raised the following grounds:-
ITA No.6202/M/12 A.Y. 2008-09 “1. The learned CIT(A) has erred in law and in facts in passing the order and in determining the total income of the appellant at Rs.(2,89,87,305/-) as against returned income of Rs.(4,38,20,978/-).
2. The learned CIT(A) has erred in passing the assessment order and making addition therein without giving effective opportunity of hearing to the appellant. The assessment order has been passed in gross violations of principles of natural justice.
3. The learned CIT(A) has erred in law and in facts wrongly disallowing the expenditure Rs.1,48,33,673/- being expenditure towards interest worked out under Rule 8D while actual interest is Rs.1,22,72,874/-.”
The brief facts of the case are that the assessee filed his return of income on 30.09.2008 declaring total income to the tune of Rs. Nil. The return was processed u/s. 143(1) of the Income Tax Act, 1961( in short “the Act”). The case was selected for scrutiny and notice u/s.143(2) of the Act was issued which was duly served upon the assessee. Thereafter, the notice u/s.142(1) of the Act dated 22.07.2010, 27.08.2010, 25.11.2010 and 07.12.2010 along with questionnaire were issued and served upon the assessee. The assessee was earning the income from business / profession, capital gains and income from other sources. During the time of the assessment, the Assessing Officer found that the assessee received the dividend income from Mutual Funds and Equity Shares to the tune of Rs.1,15,69,136/- and claimed as exempt u/s.10(35) of the Act. Thereafter, the notice was given to the assessee and after the ITA No.6202/M/12 A.Y. 2008-09 submission of reply dated 05.12.2010, the Assessing Officer disallowed the expenditure incurred towards the exempt income in view of the rule 8D(i), 8D(ii) and 8D(iii) of the Act total to the tune of Rs.1,48,33,673/-. The total income of the assessee was earned as Nil. Feeling aggrieved the assessee filed an appeal before the CIT(A) and the CIT(A) has also dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us.
All the issues are in connection with the disallowance of expenditure incurred to earn the exempt income. However the assessee did not argue the case on merit but requested to consider the submission made before the authorities below. The learned representative of the assessee has argued that the Assessing Officer as well as CIT(A) did not grant an opportunity of being heard to the assessee before disallowance of expenditure to earn the exempt income to the tune of Rs.1,48,33,673/-, therefore, in the said circumstances, an opportunity of being heard is required to be given to the assessee in the interest of natural justice and in accordance with law. However, on the other hand, the learned representative of the department has placed reliance upon the order passed by the CIT(A) in question. By giving a careful thoughts to the contention raised by the learned representative of the parties and perusing the record carefully, it came into the notice that the Assessing Officer nowhere discussed the details which has been submitted by the assessee on ITA No.6202/M/12 A.Y. 2008-09 dated 05.12.2010. Further, the CIT(A), was of the view that an opportunity of being heard was given to the assessee as the reply filed the assessee on 05.12.2010 find place in the order dated 14.12.2010. On appraisal of the both the orders, we nowhere found that the authority below considered the assertion of the assessee raised in view of the submission dated 05.12.2010. Since, there is nothing about the rejection of the account book and submission of the assessee dated 05.12.2010, therefore, we are of the view that the Assessing Officer has assessed the expenditure to incur the exempt income without giving an opportunity of being heard to the assessee. The CIT(A) has also wrongly confirmed the same because no discussion of any kind was made on account of submission of the assessee dated 05.12.2010. In view of the said circumstances, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to reassess the expenditure incurred to earn the exempt income, after due consideration of the submission of the assessee and by giving him an opportunity of being heard in accordance with law.
ITA No.6202/M/12 A.Y. 2008-09
In the result appeal filed by the assessee is hereby Allowed for statistical purpose.
Order pronounced in the open court on 29th December, 2016
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