TMI Blog2016 (9) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural land''. We are also fully aware that principles of res-judicata is not applicable to the income tax proceedings but principle of consistency is to be followed. In our considered view keeping in view the facts and circumstances of the case, this issue needs to be set aside and restored back to the file of the A.O. for denovo determination of the issue on merits Disallowance u/s. 14A - Held that:- Keeping in view the peculiar facts and circumstances of the case, a reasonable disallowance is to be made as the assessee has explained and jsutify the expenses having regard to the accounts of the assessee as per mandate of Section 14A(2) of the Act and in our considered view, keeping in view totality of the circumstances surrounding the assessee case and explanation submitted by the assessee , interest of justice will be best served if disallowance u/s 14A of the Act with respect to indirect expenditure incurred by the assessee with regard to earning of exempt income is restricted to ₹ 2,500/- which in our considered view is reasonable disallowance in the instant case. We order accordingly. - I .T.A. No. 2808/Mum/2014 - - - Dated:- 28-7-2016 - SHRI SAKTIJIT DEY, JUDICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also Director in M/s Jamanadas Kishandas Samarth Pvt. Ltd.. The AO observed that in the P L account, the assessee has disclosed a sum of ₹ 1,40,600/- as agricultural income. The A.O. asked the assessee to furnish details and proof of agricultural income. The assessee only filed copies of extract of land records 7/12. However, the assessee did not filed any details or proof for sale of agricultural products and/or any expenditure incurred for earning agricultural income. Thus, the A.O. treated the same as income from other sources . Without prejudice to the above , the AO observed that since the assessee has claimed the agricultural income as exempt u/s 10(1) of the Act and hence the same was also taken into account for the purpose of computing disallowance u/s 14A r.w.r. 8D of the Income Tax Rules, 1962. The A.O. observed that the assessee has earned dividend of ₹ 28,089/- and interest of ₹ 9263/- on 8% tax free RBI bond. The assessee did not furnish any explanation in this regard. It was also observed from the balance sheet of the assessee that the assessee has creditors to the tune of ₹ 70,50,000/-for unsecured loans on which the assessee incurred int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the year under consideration the Revenue asked the details of agricultural income and proof of the same. The assessee submitted that he had filed copies of 7/12 extracts of land records to show that the assessee is owning agricultural land. The assessee submitted that the said 7/12 extract of land records also showed that the agricultural land were tilled and utilized for rice produce. Since no other details were asked for during the earlier years, the assessee had not maintained any details of the sale proceeds of agricultural produce and the expenses incurred. The A.O. has added agricultural income of ₹ 1,40,600/- as income from other sources. The assessee contended that the assessee is the owner of agricultural land , which is evidenced by 7/12 extracts of land records and the Revenue has accepted the income as agricultural income from year to year in the preceding years even in the assessment framed u/s 143(3) of the Act, hence, no adverse inference was called for on account of agricultural income. The assessee relied on the decision of Hon ble Supreme Court in the case of K.P. Varghese v. ITO, 131 ITR 597 (SC), in the case of Umarchand Shah Bros v. CIT 37 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustaining the additions made by the AO in his assessment order dated 19-10-2011 passed u/s. 143(3) of the Act. 6. Aggrieved by the appellate order dated 03-01-2014 passed by the ld. CIT(A), the assessee filed second appeal before the Tribunal. 7. The ld. Counsel for the assessee submitted that the assessee has earned agriculture income to the tune of ₹ 1,40,600/- during the relevant previous year which has been assessed to tax by Revenue under the head Income from other sources . It was submitted that the assessee has duly submitted 7/12 extract of land records to show that agriculture was carried on in the said land and rice was sown therein which led to earning of agriculture income of ₹ 1,40,600/- during the relevant previous year, which are placed at paper book page 11-14 filed with the Tribunal. The learned counsel for the assessee submitted that the assessee owns 119.02 gunthas equivalent to 3 acres of agricultural land. The learned counsel for the assessee submitted that the assessee has been consistently showing agricultural income every year , which has been accepted by the Revenue even in assessments framed u/s 143(3) of the Act. However, during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee. The assessee drew our attention to paper book page1-10 where financial statement of the assessee for financial year 2008-09 are placed It was submitted that the total investments made by the assessee yielding taxable and exempt income amounted to ₹ 40,32,648.08 as at 31-03-2009. The assessee has own capital of ₹ 2,28,63,468/- as at 31-03-2009 which is sufficient to cover the investment of ₹ 40,32,648.08 held as at 31-03-2009 and the presumption will lie that the investments are made out of own funds. Since the assessee has sufficient own funds, the investment in assets yielding exempt income has been made out of own funds and not borrowed funds. In support, the assessee relied upon the decision of Hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) and decision of HDFC Bank Limited v. DCIT reported in (2016) 67 taxmann.com 42(Bombay). The assessee submitted that since the assessee has sufficient own funds, no disallowance can be made out of interest expenses paid by the asssessee. The learned counsel for the assessee submitted that with respect to other expenses claimed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts for the year 2006-07 which is placed in paper book page 11-14 whereby it cannot be said that agriculture was carried on by the assessee in the relevant previous year 2008-09 which is presently under appeal. He submitted that the Revenue has accepted the agricultural income in the past but the assessee has to show with cogent evidences that agricultural activity was actually carried on by the assessee in this previous year also as provided u/s 2(1A) of the Act to fall within definition of agricultural income being earned out of the said agricultural activity been carried on the said land. It is for the assessee to give cogent evidences with respect thereof as to actual carrying out of the agricultural activity during the relevant previous year as the primary onus lay on the assessee . It was submitted that principle of resjudicata is not applicable to income tax proceedings and every year is an independent assessment year . The assessee in the instant previous year is not able to prove that the agricultural operations were actually carried on by the assessee on the said land. The ld. DR relied upon the orders of the learned CIT(A) with respect to both the issues under appeal i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view keeping in view the facts and circumstances of the case, this issue needs to be set aside and restored back to the file of the A.O. for denovo determination of the issue on merits after considering the contentions, explanations and evidences of the assessee in his defense whereby the assessee will be entitled to produce the relevant evidences and explanations in his defense which shall be admitted by the AO. Needless to say that proper and adequate opportunity of being heard shall be provided to the assessee by the AO in accordance with the principles of natural justice in accordance with law. We order accordingly. With respect to issue of application of section 14A of the Act read with Rule 8D of Income Tax Rules, 1962 , an amount of ₹ 3,13,334.00 was disallowed by the AO whereby interest expenditure of ₹ 2,93,929/- was disallowed u/s 14A of the Act read with Rule 8D(2)(ii) of Income Tax Rules, 1962 and disallowance of ₹ 19,406/- have been made by the AO being 0.5% of average investment u/s 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962. The assessee submitted that the total investment made in the assets yielding taxable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - towards Godown Repair expenses and ₹ 12,870/- out of Rent, Rates and Taxes. It is submitted by the assessee that these are the amounts of expenditure which are attributable to earning of income from house property and the assessee voluntarily disallowed the same while computing income chargeable to tax. If the interest expenses, godown repair expenses, rent, rates and taxes were removed from the total expenses of ₹ 16,21,585.41, there remains balance expenditure of ₹ 2,55,844.20 out of which a sum of ₹ 2,03,903.75 pertains to depreciation on trucks which was stated to be used for transportation business and has nothing to do with the investment activities was the contentions of the assessee before us. No part of ₹ 2,03,903.73 could be allocated towards the earning of exempt dividend income and if these expenses are also removed, the balance amount comes to ₹ 51,940.20 which consisted of bank commission and charges of ₹ 7,227.60, electricity charges of ₹ 22,446/-, interest on service tax of ₹ 99, discount of ₹ 106.85, professional tax of ₹ 2,000/- and professional fees of ₹ 21,680/- , out of which discount and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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