2016 (11) TMI 1152 - AT - Income Tax

Disallowance u/s.14A - Held that - On appraisal of the order passed by the Assessing Officer we found nothing ambiguity for the application of the Rule 8D of the Act for calculation of the expenses to earn the exempt income. The Assessing Officer has assessed the expenditure in view of the facts and circumstances of the case wherein no specific expenditure has been shown to be explained to earn exempt income. Therefore, in the said circumstances the CIT(A) has rightly confirmed the order of the Assessing Officer on this issue which does not require to be interfere with at this appellate stage. Addition of income from other sources - Held that - CIT(A) has raised the issue with regard to the ownership of the property and held that the property was owned by the firm therefore, on account of the sale of the said property the CIT(A) has treated the sale proceed as income from other sources. Anyhow, this issue has not been properly adjudicated on the basis of the ownership of the property. Utilization of land and sale of land is quite different. Accordingly the income of assessee is required to be assessed. It is not a case of double taxation when the income of the assessee was assessed on the basis of utilization and sale of land. Since the matter of controversy has not been adjudicated by the CIT(A) on the basis title, therefore, we set aside the finding of the CIT(A) in this regard and direct the Assessing Officer to decide this issue afresh in view of the said observations after giving an opportunity of being heard to the assessee in accordance with law. Accordingly, these issues are decided in favour of the assessee .

Summary

Issues involved:
1. Disallowance of expenditure under section 14A
2. Addition of income from other sources
3. Levy of interest under section 234A, 234B, and 234C

Analysis:

Issue 1 - Disallowance of expenditure under section 14A:
The assessee challenged the disallowance of expenditure amounting to Rs. 1,32,944 under section 14A. The Assessing Officer assessed the expenditure based on the exempt income earned by the assessee. The CIT(A) upheld the disallowance, stating that Rule 8D of the Income Tax Rules, 1962 applied as the assessee had not provided a bifurcation of expenses. The CIT(A) found no ambiguity in applying Rule 8D and confirmed the Assessing Officer's order. The ITAT found no reason to interfere with this decision at the appellate stage.

Issue 2 - Addition of income from other sources:
The assessee contested the addition of Rs. 49,71,900 as income from other sources. The CIT(A) rejected the claim that the property belonged to the assessee, stating that it was owned by the partnership firm. The CIT(A) reasoned that since the firm consistently showed the asset in its balance sheet and claimed depreciation, the capital gain could not be assessed in the hands of the assessee. The ITAT found that the ownership of the property was not properly adjudicated by the CIT(A) based on the partnership agreement. The ITAT directed the Assessing Officer to reexamine the issue after providing the assessee with an opportunity to be heard.

Issue 3 - Levy of interest under section 234A, 234B, and 234C:
As this issue is consequential, it was not decided separately in the judgment.

In conclusion, the ITAT partly allowed the appeal filed by the assessee, directing a fresh examination of the ownership issue regarding the property and disallowance of expenditure under section 14A.