2012 (11) TMI 1289 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 2,93,50,000/- in respect of Mutual Fund investments.
2. Non-reconciliation of professional fees.
3. Disallowance u/s 14A of the I.T. Act.

Summary:

1. Addition of Rs. 2,93,50,000/- in respect of Mutual Fund investments:
The assessee challenged the addition of Rs. 2,93,50,000/- made by the AO concerning Mutual Fund investments. The AO, based on AIR information, stated that the assessee made total investments amounting to Rs. 23,83,43,112/- and asked for reconciliation. The assessee provided bifurcation but failed to substantiate the investments with mutual fund statements. The AO added the entire amount as unexplained, but the CIT(A) reduced this to Rs. 2,93,50,000/- after partial reconciliation.

The Tribunal noted that investments where the assessee was the second holder and his mother the first holder should not be added to the assessee's income. Consequently, the Tribunal deleted the addition of Rs. 1,43,50,000/- but upheld the addition of Rs. 1,50,00,000/- due to lack of evidence.

2. Non-reconciliation of professional fees:
The AO added Rs. 59,28,900/- based on AIR information, stating that the assessee did not reconcile professional fees with bank statements. The CIT(A) confirmed part of this addition amounting to Rs. 22,47,900/-. The Tribunal observed that the professional fees declared by the assessee were significantly higher than the AIR information and that similar issues in previous years were resolved in favor of the assessee. Therefore, the Tribunal deleted the addition of Rs. 22,47,900/-.

3. Disallowance u/s 14A of the I.T. Act:
The AO disallowed Rs. 18,81,658/- u/s 14A r.w. Rule 8D, which was confirmed by the CIT(A). The Tribunal noted that Rule 8D was not applicable for the assessment year under consideration, as per the Bombay High Court's decision in Godrej & Boyce Mfg Co Ltd Vs DCIT (328 ITR 81). The Tribunal followed its earlier decision and restricted the disallowance to Rs. 50,000/-.

Conclusion:
The appeal was allowed in part, with the Tribunal deleting the addition related to Mutual Fund investments where the assessee was the second holder, deleting the non-reconciled professional fees addition, and restricting the disallowance u/s 14A to Rs. 50,000/-.