Dr. Ashok Seth vs ACIT

This appeal filed by the assessee for the assessment year 2011-12 is directed against the Order of Ld. CIT(A)-20, New Delhi dated 08.06.2015.The assessee has raised the following effective grounds :-

On the facts and circumstances of the case, the Ld. ACIT has erred:-

1(a) In confirming the disallowance of Rs. 5,26,256/- u/s. 14A of the Income Tax Act, 1961 r.w. Rule 8D of the Income Tax Rules, 1962 in respect of investment made in securities when no direct or indirect expenditure in relation to investment in securities has been claimed or debited in the Profit and Loss Account by the appellant.

(b) In disallowing Rs. 5,26,256/- u/s. 14A of the Income Tax Act, 1961 r.w. Rule 8D of the Income Tax Rules, 1962 when no proximate nexus has been established between the expenditure claimed and exempt income by the AO.

(c) In ignoring the fact that the expenditure incurred and claimed by the appellant has direct nexus with the professional income of the appellant and none of the expenditure claimed by the assessee is in relation to the exempt income.”

Briefly stated facts are that the assessee is a Doctor by profession and derived income from Business or Profession, income from Salary, income from House Property, income from Capital Gain and Income from other sources and filed its return of income on 30.9.2011 declaring at Rs. 5,25,90,560/- and further filed revised return on 31.3.2023 at an income of RS. 5,81,67,790/-which was processed u/s. 143(1) of the Income tax Act, 1961 (“the Act”). The case of the assessee was selected for scrutiny and notice u/s. 143(2) of the Act was issued and served upon the assessee. In response to notice, the AR of the asessee attended from time to time and filed the necessary details information / documents etc. as required. Books of accounts and vouchers were produced during the course of assessment proceedings which were examined on test check basis. During the assessment proceedings, the AO noted that assessee has earned exempt income as dividend of Rs. 34,89,727/- and as Long Term Capital of Rs. 97,46,225/-. AO invoked the provisions of Section 14A to disallow the direct and indirect expenditure incurred in relation to income which does not form part of total income. AO held that assessee did not provide a separate account for earning of exempt income. AO further noted that assessee had maintained a large portfolio and for this purpose had to entail expenses right from deviation of Man Power to indulging in various activities like visiting banks, use of vehicle and telephone, use of internet, use of computer and thus the depreciation, need of a Computer Operator electricity expenses, Office premises, fees charged by Mutual Fund Agents, Portfolio record management etc. Hence, AO disallowed Rs. 5,25,256/- under rule 8D(2)(iii).

Aggrieved with the above, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, upheld the disallowance made by the AO.

Now, the assessee is in appeal before us.

We have heard the rival contentions and perused the material available on record and also gone through the orders of the authorities below.

5.1 At the time of hearing, Ld. AR submitted that Hon’ble ITAT, Delhi Tribunal in assessee’s own case for AYrs 2009-10 and 2010-11 in ITA Nos. 554 & 5298/Del/2013 vide common order dated 13.03.2015 has dealt the exactly similar and identical issues and decided the same in favour of the assessee, hence, the effective Grounds No. 1(a) to 1(c) raised in the instant appeal are squarely covered by the decision of the aforesaid order dated 13.03.2015. He further submitted that as the materials facts are identical in all the assessment years and the findings of the Coordinate Bench ‘A’ of the Tribunal vide para no. 9 to 16 of the aforesaid common order dated 13.3.2015 has attained finality, since the aforesaid common order has not been challenged in further appeal to the best of the assessee’s knowledge. He further submitted that the materials facts are identical as the finding of the AO vide para no. 5.3 to 5.7 of the impugned scrutiny assessment order dated 29.3.2014 passed u/s. 143(3) of the Act for subject assessment year in support of the impugned disallowance is cut-copy of the previous findings made vide para 3.3 to 3.7 of the impugned scrutiny assessment order dated 31.1.2023 passed u/s. 143(3) for immediately preceding AY 2010-11, which has been found to be legally unsustainable vide common order (supra), making the impugned disallowance also contrary to the binding ratio of the Hon’ble Supreme Court in Radhasoami Satsang vs. CIT 193 ITR 321 (SC.). Therefore, he requested to follow the ratio of the aforesaid Tribunal’s order dated 13.3.2015 and accordingly allow the Grounds No. Grounds No. 1(a) to 1(c) raised by the assessee in the present appeal.

5.2 Ld. Sr. DR did not controvert the aforesaid proposition made by the Ld. AR, but he supported the orders of the authorities below.

5.3 At the time of hearing, it was a common point between the parties that the Grounds No. 1(a) to 1(c) involved in the captioned appeal of the Assessee are squarely covered by the common decision dated 13.3.2015 of the Coordinate Bench in assessee’s own case for AYrs. 2009-10 & 2010-11 For this purpose, reliance has been placed on the decision of the Tribunal Delhi Tribunal in assessee’s own case for AYrs. 2009-10 & 2010-11 passed in ITA in ITA Nos. 554 and 5298/Del/2013 vide common order dated 13.03.2015, a copy of which has been placed on record. In order to impart completeness, we may hereinafter, refer to the relevant discussions in Tribunal order for AYrs. 2009-10 with respect to the instant issue.

“9. In the ground no. 3, the issue involved is confirming the disallowance of Rs. 3,54,086/- u/s. 14A r/w Rule 8D of the Income Tax Rules, 1962.

Ld. AR submitted that no direct and proximate nexus between the exempted income and the expenditure claimed was established. He relied on the decision of ITAT, Mumbai Bench in the case of Justice Sam P. Bharucha vs. Addl. CIT – (2012) 53 SOT 192 (Mumbai). Ld. AR submitted that the assesee has earned only Rs. 76,660/- as exempted income. Further, the assessee is having personal drawings of Rs. 27,97,024/- which is evident from the capital account of the assessee placed at page 23 of the paper book. The STT charge brokerages have also been paid by the assessee from his personal account. The revenue has failed to pinpoint any expenditure debited in the Income & Expenditure account for the profession of the assessee. He also pleaded that since the assessee has not incurred any expenditure and revenue has failed to pinpoint any specific instance, therefore, the conditions invoking the provisions of section 14A r/w rule 8D are not fulfilled. These provisions can be invoked only when the Assessing Officer has satisfied himself that the correctness of the claim of the assessee with regard to the expenditure that no expenditure has been debited in the Income and expenditure account relating to exempted income.

Ld. DR relied on the orders of the authorities below.

We have heard both the sides on the issue. We find that the expenditure related to the earning of exempted income like STT and brokerage were shown in the withdrawals. The assessee is also having personal drawings of Rs. 27,97,024/-for the year under consideration. All these facts show that the assessee is not debiting the expenditure related to the exempted income in its Income & Expenditure account and the revenue has failed to pinpoint any specific instance in this regard. Therefore, we allow this ground of assessee’s appeal.”

We find that the facts and circumstances are identical in the instant year as well. The Revenue has not pointed any change into facts and circumstances of the present case. We therefore, respectfully following binding precedent (Supra), hereby direct the AO to delete the disallowance of Rs. 5,26,256/- made u/s. 14A of the Act, Accordingly, the Grounds No. 1(a) to 1(c) are allowed in terms of the aforesaid decision of the Coordinate Bench dated 13.3.2015 passed in assessee’s own case in assessment years 2009-10 & 2010-11.

In the result, appeal of the assessee is allowed.