K.VINOTH KUMAR,VELLORE vs. DCIT, VELLORE

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ITA 1200/CHNY/2016Status: DisposedITAT Chennai18 August 2016AY 2009-104 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(Appeals) failed to consider the conflict between a High Court judgment and CBDT circulars. The High Court's judgment should prevail over administrative instructions.

What were the facts?

The assessee's appeal concerned the disallowance of expenses under Section 14A. The Assessing Officer disallowed a portion of expenses based on Rule 8D, which was confirmed by the CIT(Appeals).

What were the issues?

Whether the CIT(Appeals) correctly confirmed the disallowance under Section 14A without considering the precedence of High Court judgments over CBDT circulars.

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’ SMC BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN

For Respondent: Shri Supriyo Pal, JCIT
Hearing: 17.06.2016Pronounced: 18.08.2016

आदेश /O R D E R

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 13, Chennai, dated 28.01.2016 and pertains to assessment year 2009-10.

2.

No one appeared for the assessee inspite of service of notice.

Therefore, I heard the Ld. Departmental Representative and proceed to dispose of the appeal on merit.

2 I.T.A.No.1200/Mds/16

3.

Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the only issue raised by the assessee is with regard to disallowance under Section 14A of the Income-tax Act, 1961 (in short "the Act"). Referring to the order of the Assessing Officer, the Ld. D.R. submitted that the assessee incurred interest expenditure of `9,46,084/- during the year under consideration. The assessee has invested a sum of `1,05,24,839/-, which generated income which does not form part of total income. Therefore, the Assessing Officer by applying Rule 8D(2)(iii) and 8D(2)(ii) of the Income-tax Rules, 1962 `6,23,526/-. computed the disallowance at Therefore, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

4.

I have considered the submission of the Ld. Departmental Representative and perused the relevant material available on record. Admittedly, the assessee paid interest to the extent of `9,46,084/-.

The assessee made investments in shares, gold jewellery, mutual funds, immovable properties and lands. No material is available on record to suggest that borrowed funds were invested in agricultural lands and shares. The total value of investment as on 01,04,2008 is `92,95,135/-. The availability of assessee’s own funds and borrowed

3 I.T.A.No.1200/Mds/16 funds are not available on record. The Assessing Officer computed the disallowance under Rule 8D(2) of the Income-tax Rules, 1962 to the extent of `6,23,526/-. The CIT(Appeals) confirmed the order of the Assessing Officer on the ground that the circular of CBDT was not brought to the notice of the High Court. This Tribunal is of the considered opinion that when there was conflict between the judgement of High Court and notification issued by the CBDT, the judgement of High Court, being the constitutional forum, has to be prevalent. The opinion expressed by the High Court in a judicial proceeding cannot be overturned by the administrative instruction issued by the CBDT. These aspects were not considered by the CIT(Appeals). Hence, this Tribunal is of the considered opinion that that the matter needs to be reconsidered. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall bring on record the availability of funds on the date of investment and borrowed funds and the nexus between the borrowed funds and investment and thereafter decide the issue in accordance with law after giving a reasonable opportunity to the assessee.

4 I.T.A.No.1200/Mds/16

5.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced on 18th August, 2016 at Chennai.

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