K.S. KARTIKEYAN,MUMBAI vs. ITO 22(2)(1), NAVI MUMBAI

This appeal filed by the assessee on 11.6.2015 is against the order of the CIT (A)-25, Mumbai dated 4.3.2015 for the assessment year 2009-2010. In this appeal, assessee raised the following grounds which read as under:- “1. On the facts and circumstances of the case and in law, the Ld CIT (A) erred in partly confirming the additions and / or disallowances made by the AO in the order under section 143(3) of the Act. 2.(a) On the facts and circumstances of the case and in law, the Ld CIT (A) erred in confirming the addition of Rs. 3,45,439/- made by the AO on account of difference in stock as unexplained investment under section 69 of the Act. (b) Without prejudice to the above, if the addition of aforesaid difference in value of stock is upheld, then consequent income on account increase in value of closing stock as 31.3.2008, if any, cannot be considered for taxability in AY 2009-2010 and may be considered in assessment year 2008-2009.

Briefly stated relevant facts of the case are that the assessee filed the return of income declaring the total income of Rs. 20,34,260/-. Assessee is engaged in share trading activity. In the assessment proceedings u/s 143(3) of the Act, the assessed income was determined at Rs. 30,71,370/-. AO made various additions and disallowances. On appeal, CIT (A) confirmed the same. Aggrieved with the same, assessee filed the present appeal.

In this appeal, assessee raised three issues in the grounds. In this regard, Ld AR submitted that the issues relating to grant of credit of taxes paid was already met by the AO vide the rectification proceedings. Accordingly, this issue is dismissed as such. Rest of the issues for adjudication are as under:-

During the proceedings before Tribunal, it is the submission of the Ld Counsel for the assessee that the said addition is bad in law. He further submitted that AO ignored the fact that books of account for the year under consideration is proper. The figures given in the return of income for earlier year are erroneous, which are now corrected. Ld AR also mentioned that the addition, if any, is required to be made in earlier AY 2008-2009 and not in this AY 2009-2010 as the mistake is in the closing stock account of earlier year and not in this year.

On perusal of the relevant facts and figures and after considered the arguments and written submission of the assessee, I find, mistake in closing stock account is relevant for the AY 2008-2009 and not in the AY under consideration. On this reasoning itself, assessee is entitled to relief. I order accordingly and direct the AO to delete this addition. Thus, the 1st issue is allowed as well as the relevant grounds are allowed. 2nd issue relates to loss of Rs. 80,143/-. In the return of income assessee 7. claimed the set off of loss from other sources against the income of Rs. 6,66,228/- received from LIC. For want of details, AO denied this claim of set off. Matter travelled to the first appellate authority. After considering the submissions of the assessee, CIT (A) confirmed the same. Aggrieved, assessee is in appeal before the Tribunal. 8. During the proceedings before the Tribunal, assessee filed a written submission and stated that the AO never call for such details at any time during the assessment proceedings. Contents at page 49 / 50 of his submissions are relevant in this regard and the same read as under:- “The observation of the AO is factually incorrect. During the course of assessment proceedings, the AO had never raised the requirement to furnish the details of the loss of Rs. 80,143/-. However, we would like to submit before your honour the details of the aforesaid loss claimed. The appellant had contributed Rs. 10,00,000/- as venture capital fund in TVS Shriram Growth Fund (a trust formed under the Indian Trust Act, 1882 and registered as Venture Capital Fund under SEBI Regulations. The share of beneficial interest of the appellant in the TVS Shriram Growth Fund is 0.05%. The fund had computed the income under the heads „dividend‟ and „income from other sources‟. Further, the fund had incurred direct expenses ad also proportion of common expenses. Thus, the firm had a net loss from other sources during the Financial Year 2008-2009. The proportionate loss of beneficiary (appellant) at 0.05% comes to Rs. 80,143/- and that loss of Rs. 80,143/- had been adjusted against the other income (LIC income) of Rs. 6,66,228/- (the copy of the TVS Shriram Growth Fund statement is submitted as additional evidence before your honour).” 9. After considering the above, I find it relevant to remand the above issue to the file of AO for fresh adjudication after granting a reasonable opportunity of being heard to the assessee. I order accordingly. Thus, 2nd issue as well as the relevant grounds are allowed for statistical purposes. 3rd issue relates to the disallowance u/s 14A of the Act. Brief facts in this 10. regard are that the assessee earned exempt income of Rs. 2,33,730/- and deleted indirect expenses of Rs. 21,182/-. Page 38 of the paper book is relevant in this regard. In the assessment proceedings, AO computed the disallowance at Rs. 1,20,551/- under Rule 8D(2)(iii) of the IT Rules, 1962 @ 0.5 of the average investments. Aggrieved, assessee carried the matter in appeal before the first appellate authority. After considering the submissions of the assessee, CIT (A) confirmed the same. Therefore, assessee is in appeal before the Tribunal. 11. During the proceedings before the Tribunal, Ld Counsel for the assessee raised various arguments ie absence of AO‟s satisfaction; disallowance of Rs. 1,20,551/- exceeded to tax debit of Rs. 21,182/- (Rs. 20,845/- out of Rs. 21,182/- was paid for professional fees, an unrelated expenditure to exempt income) etc. Before the Tribunal, Ld Counsel for the assessee relied on various decisions in support of the above arguments. 12. After hearing all the arguments of the Ld Representatives of both the parties, I find that the decisions of the AO / CIT (A) are not in sync with the latest judicial pronouncements on the issue under consideration. Therefore, I find it fit to set aside this issue to the file of the AO for fresh adjudication and decision in the matter. I order accordingly. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Thus, 3rd issue as well as the relevant grounds are allowed for statistical purposes. 13. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 30th September, 2016. (D. KARUNAKARA RAO) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 30.09.2016 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. 3. आमकय आमुक्त(अऩीर) / The CIT(A)- 4. आमकय आमुक्त / CIT ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, 5. ITAT, Mumbai