KRISHIRAJ TRADING LTD,MUMBAI vs. ASST CIT 6(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य लेखा राजे�� केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dated 06.03.2013 of CIT(A)-12,Mumbai,the assessee had filed the present appeal.Assessee-company,engaged in the business of Trading and Investment,filed its return of income on 24.09.2009,declaring total income at Rs.1.47 Crores.Later on a revised return was filed.The Assessing Officer (AO) completed the assessment ,u/s.143(3) of the Act, on 30.11.2011,determining the income of the assessee at Rs.4,59,08,300/-.The matter was fixed on 02.09.2015,but no one appeared on behalf of the assessee.Registry was directed to issue the hearing notice through registered post (AD).Accordingly,a notice was issued and matter was fixed for hearing for 29.02.2016.But,today none appeared to represent the case or to seek an adjournment.considering these facts we are adjudicating the appeal on the basis of available material. 2.Effective Ground of appeal is about disallowance made u/s.14A of the Act.During the course of assessment proceedings,the AO found that the assessee had received dividend income of Rs.3.75 Crores,that it had not apportioned any expenditure related to the above mentioned exempt income.He held that at least a part of the administrative expenses had to be attributable to earning of the exempt income.Invoking the provisions of section 14A r.w.Rule 8D of the Income tax Rules,1962(Rules),he made a disallowance of Rs.3.12 Crores. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that it was also engaged in the business of investment in shares,that investment made by it as on 31.03.2009 stood at Rs.646.46 Crores, that it had not incurred any expenditure in relation to the exempt income except STT of Rs. 1.41 lakhs,that investment was made by the assessee in acquiring the controlling interest in the group companies,that dividend income was incidental to holding of shares,that there was no live nexus between the exempt income and expenditure incurred,that the AO had not given any finding that any other expenditure was incurred for earning the exempt income, that the assessee had relied upon a number of cases but the AO had not offered any

4014/13krishirajTrdg. comments on that, that during the year under appeal it had incurred expenses-other than the finance and STT expenses- only of Rs.4.14 lakhs, that the disallowance made by the AO was more than the actual expenditure incurred by it. 4.After considering the submission of the assessee and the assessment order the FAA held that the provisions of section 14A were applicable to the case under consideration, that assessee was not able to prove that it had maintained separate accounts for earning taxable and the non-taxable income, that it could not be accepted that to earn exempt income of Rs.3.75 crores, the assessee had not incurred any expenditure, that some part of the administrative and management expenses must have been incurred for earning exempt income, that the provisions of Rule 8D were applicable for the year under consideration, that the provisions of the said Rule were mandatory and the AO had no discretion in that regard.Finally, he upheld the orders of the AO. 5.The Departmental Representative (DR) supported the order of the FAA. As stated earlier, none appeared on behalf of the assessee. We find that the AO made a disallowance of Rs.3.12 crores as against the total expenses of Rs.4.14 lakhs incurred by the assessee, that the AO had not given any reason or basis for disallowing the said amount, that the AO and the FAA had mechanically applied provisions of Rule 8D.Disallowance u/s.14A could be made if the assessee claimed some expenditure against the exempt income. The reason behind the section 14A and Rule 8D is to deny double benefit to the assessee i.e. claiming exemption on one hand and claiming expenditure on the other.But it was never intended by the legislature that disallowance should be made in a routine manner without considering the basic fact i.e. amount of expenditure incurred by the assessee.The assessee had advanced certain arguments that are listed at para 4.2 at pg No.3 of the order of the FAA.We find that the FAA has not dealt with the submissions made by the assessee. In these circumstances, we are of the opinion that the matter needs further verification and investigation.Therefore, in the interest of justice we are rendering back the issue to the file of AO for fresh adjudication who would decide the issue after considering the latest judicial pronouncement of the Hon'ble Jurisdictional High Court and the Hon’ble Delhi High Court.First effective ground is decided in favour of the assessee,in part. 6.Next effective ground deals with charging of interest u/s.234 of the Act.As the issue is consequential in nature, so, the same is not adjudicated.

As a result, appeal filed by the assessee stands partly allowed . फलतः िनधा�रती �ारा दािखल क� गई अपील अंशतः मंजूर क� जाती है. Order pronounced in the open court on 2nd March , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांक 2 माच�, 2016 को क� गई । Sd/- Sd/- (अिमत शु�ल/ Amit Shukla) (राजे�� / RAJENDRA) �याियक सद�य / JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य / ACCOUNTANT MEMBER सद�य सद�य मुंबई Mumbai; �दनांकDated : 02. 03.2016. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ� 2. Respondent /��यथ� 3.The concerned CIT(A)/संब� अपीलीय आयकर आयु�, 4.The concerned CIT /संब� आयकर आयु� 5.DR “A ” Bench, ITAT, Mumbai /िवभागीय �ितिनिध, ए खंडपीठ,आ.अ.�याया.मुंबई 2