IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI Before Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member ITA NO.6049/Mum/2011 Assessment Year: 2008-09 Mr. Subhash Ghai, ACIT-11(1), 6, Bashiron, 28th Road, Aayakar Bhavan, Bandra (West), M.K. Road, Mumbai-400050 Vs. Mumbai-400020 (Assessee) (Revenue) PAN. No.AAFPG8264K ITA NO.400/Mum/2013 Assessment Year: 2009-10 Mr. Subhash Ghai, ACIT-11(1), 6, Bashiron, 28th Road, Aayakar Bhavan, Bandra (West), M.K. Road, Mumbai-400050 Vs. Mumbai-400020 ( Assessee) (Revenue) PAN. No.AAFPG8264K 2 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai Assessee by Dr. K. Shivram Revenue by Shri J.Saravanan Date of Hearing : 10/10/2016 Date of Order: 14/10/2016 O R D E R Per Joginder Singh (Judicial Member) assessee is aggrieved by impugned orders dated 22/06/2011 for Assessment year 2008-09 and 01/11/2012 for Assessment year 2009-10 of ld. First Appellate Authority, Mumbai. 2. First, we shall take up appeal for Assessment year 2008-09 (ITA No.6049/Mum/2011), wherein, only ground raised by assessee pertains to confirmation of addition of property held and used for professional activities and further confirming estimation of income and method adopted for arriving at income from house property amounting to Rs.27,96,298/-. 2.1. During hearing, ld. counsel for assessee, Dr. K. Shivaram, contended that municipal rateable value may be adopted. It was contended that necessary evidence could not be filed before authorities as same was obtained on later date, by filing RTI application. assessee filed additional evidence before this Tribunal. Reliance was placed upon decision from jurisdictional High Court in 3 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai case of CIT vs Tip Top Typography (2014) 368 ITR 330 (Bom.), Om Shakthy Agencies (Mad.)(P) Ltd. vs DCIT (2016) 157 ITD 1062 ; 66 taxman.com 287 (Chennai Trib.) and another decision in Smt. Smitaben N. Ambani vs CIT (2010) 323 ITR 104 (Bom.). ld. DR defended addition. 2.2. We have considered rival submissions and perused material available on record. facts, in brief, are that assessee is director, writer and editor in field of feature films and also CMD Mukta Arts Ltd. whole issue before us with respect to determination of rateable value. assessee was having certain properties. assessee was asked as to why residential properties should not be considered as deemed to be let out property. claim of assessee is that properties/premises in question are use for story setting. ld. Assessing Officer was of view that properties are used as office premises and after giving benefit of one house property as residential premises, remaining premises/properties were brought to tax under head Income from house property treating same deemed to be let out properties and thus he considered 10% of book value of properties as ALV and after allowing standard deduction computed income from house property in respect of 4 properties listed at Sl. No.2 to 5 (mentioned at page-1, para 1.1 of impugned order). 2.3. On appeal, before Ld. Commissioner of Income Tax (Appeal), factual matrix was considered and 4 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai stand taken in assessment order was affirmed. assessee is in further appeal before this Tribunal. 2.4. Considering totality of facts, since assessee has filed additional evidence before this Tribunal, for first time which was not filed during assessment proceedings/first appellate stage. This evidence was obtained from municipal authorities through RTI and goes to root of matter. assessee is directed to file this additional evidence before ld. Assessing Officer. ld. Assessing Officer is directed to examine evidence filed by assessee and decide afresh in accordance with law. assessee be given opportunity of being heard. Thus, this appeal of assessee is allowed for statistical purposes only. 3. So far as, ITA No.400/Mum/2013 (Assessment year 2009-10) is concerned, first ground raised pertains to confirming addition of Rs.34,66,503/-, crux of argument on behalf of assessee is that addition was made by Assessing Officer without appreciating full facts and also method adopted for computation of income. It was pleaded that this ground may also be sent to file of Assessing Officer, being identical to above ground. ld. DR had no objection in setting aside issue to file of Assessing Officer. 3.1. Considering totality of facts and since identically while disposing of appeal of assessee for 5 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai Assessment year 2008-09 (supra), we have remanded issue back to file of Assessing Officer for fresh adjudication, therefore, this ground is also remanded back to file of ld. Assessing Officer for fresh adjudication. assessee be given opportunity of being heard with further liberty to furnish evidence, if any, in support of its claim, thus, this ground is allowed for statistical purposes. 4. Ground no. 2 & 3 pertains to settlement amount to Rs.7,50,000/- reached with original seller in court proceedings is additional evidence. Our attention was invited to para 2.2, page-3 of impugned order. ld. DR defended addition. 4.1. We have considered rival submissions and perused material available on record. facts, in brief, are that assessee sold land for total consideration of rupees One crore, situated at Nebsarai, on 11/06/2008, against purchase price of Rs.4,02,750/- dated 08/02/1995. assessee showed indexed cost at Rs.16,36,381/- and computed long term capital gain at Rs.83,63,639/-. assessee thus took indexed cost on land value of Rs.4,02,750/- and also considered value of Rs.7,50,000/- as expenditure incurred for transfer. Assessing Officer in his order has mentioned that assessee did not produce proof of expenses of Rs.1987/- and amount of Rs.85,560/- spent for fencing land. It was also contended by ld. DR that assessee did not 6 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai produce supporting evidence for expenditure of Rs.7,50,000/- incurred on improvement of property. stand of assessee is that cost of purchase of property to amount of Rs.4,02,750/- was accepted in Wealth Tax assessment u/s 16(3) for Assessment year 2008-09, thus, there should be no dispute with regard to purchase cost of property. With respect to payment of Rs.7,50,000/-, it was explained that as per sale deed, assessee had to pay Rs. 9 lakh to defendant in addition to payment made as per four receipts dated 11/04/1987 out of which Rs.7,50,000/- was payable by assessee. Considering totality of facts and observation made in para 2.3 (page-4 of impugned order) that assessee did not produce any evidence in support of any such expenditure and details of expenditure furnished before Ld. Commissioner of Income Tax (Appeal) is additional evidence and thus cannot be considered at appellate stage. We are of view that mandate of Article-265 of Constitution of India is to levy and collect due taxes. If additional evidence goes to root of matter, therefore, it has to be considered, consequently, we remand this issue to file of ld. Assessing Officer to examine claim of assessee and after considering factual matrix/additional evidence, decide in accordance with law, thus, ground no. 2 & 3 are allowed for statistical purposes only. 5. last ground raised by assessee pertains to disallowance of Rs.3,99,603/- u/s 14A of Act read with 7 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai rule 8D of Rules. crux of argument on behalf of assessee is that no expenditure was incurred/claimed by assessee for earning exempt income, therefore, no disallowance can be made. Our attention was invited to page-8 & 9 of paper book. On other hand, ld. DR, defended disallowance by inviting our attention to para- 3.3 (page-5 of impugned order). 5.1. We have considered rival submissions and perused material available on record. facts, in brief, are that assessee showed dividend income of Rs.3,73 crores and same was claimed as exempt. ld. Assessing Officer asked assessee as to why disallowance should not be made u/s 14A of Act. assessee replied vide letter dated 19/12/2011 (para 5.1 of assessment order). ld. Assessing Officer worked out disallowance under Rule-8D amounting to Rs.3,99,603/-, being 0.5%, of average investment amounting to Rs.7,99,20,519/-. On appeal, before Ld. Commissioner of Income Tax (Appeal), addition made by ld. Assessing Officer was affirmed. assessee is in appeal before this Tribunal. 5.1. If observation made in assessment order, leading to addition made to total income, conclusion drawn in impugned order, material available on record, assertions made by ld. respective counsel, if kept in juxtaposition and analyzed, there is no dispute to fact that assessee earned dividend income of Rs.3,73 crores. 8 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai stand of assessee is that no expenditure was incurred for earning tax free dividend and mutual fund. assessee has debited D-Mat charges of Rs.26,213/-, bank interest, bank charges of Rs.14,563/- electricity expenses in profit & loss account. stand of Revenue is that at least some management/administrative expenses might have been incurred. It is noted that Mumbai Tribunal in Reliance Capital Asset Management Ltd. vs DCIT (ITA No.8625/Mum/2010, 4459 & 4795/Mum/2012) order dated 17/10/2014 held that there was no necessity to apply formula prescribed in Rule-8D(2)(iii). We find that disallowance was mechanically made because as per provisions of section 14A, Assessing Officer is expected to re-compute amount of disallowance u/s 14A of Act only in situation where he is not satisfied with correctness of accounts/claim of assessee. Our view find support from decision in CIT vs Hero Cycles Ltd. 323 ITR 158 (P & H), Reliance Utilities and Power Ltd. 313 ITR 340 (Bom.), DCIT vs Jindal Photo Ltd. (Del. Trib.) and Shiva Industries & Holdings Ltd. vs ACIT (2011) 59 DTR 182. Hon'ble jurisdictional High Court in Reliance Utilities & Power Ltd. categorically held that if interest free funds are available with assessee, which are sufficient to meet investment and at same time assessee raised loan, it can be presumed that investment was made from available interest free funds. In present case, dividends are directly credited to bank account and 9 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai salaries also directly credited balance transactions are recorded once in year. assessee has also paid D-mat account and other small expenses, therefore, no specific expenditure was incurred by assessee. There is no mention in assessment order or in impugned order that borrowed funds were invested by assessee for earning exempt income or any interest was paid. At same time, no evidence was produced by assessee that professional staff was paid salary from household withdrawals, (as claimed by assessee). Considering totality of circumstances, written submissions, filed before us, we are of view that only statement which yielded tax free income should be taken for computing average investment and thus disallowance comes to Rs.2,45,815/-, (as admitted by counsel of assessee) and not Rs.3,99,603/-, computed by ld. Assessing Officer, thus, this ground is partly allowed. This appeal is partly allowed for statistical purposes. This Order was pronounced in open court in presence of ld. representatives from both sides at conclusion of hearing on 10/10/2016 Sd/- Sd/- (Ashwani Taneja) (Joginder Singh) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated : 14/10/2016 10 ITA No.6049/Mum/2011 & 400/Mum/2013 Shri Subhash Ghai f{x {t ? P.S/. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT, Mumbai. 4. CIT(A)- Mumbai 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Subhash Ghai v. ACIT-11(1), mumbai