Income Tax Appellate Tribunal - Chennai
S.Ramamirtham, Chennai vs Department Of Income Tax on 14 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
BEFORE Dr. O.K.NARAYANAN, VICE-PRESIDENT
AND SHRI HARI OM MARATHA, JUDICIAL MEMBER
ITA No.998(Mds)/2011
Assessment Year: 2006-07
The Assistant Commissioner Shri S.Ramamirtham,
of Income-tax, Vs. 19/13, P.S.Sivasamy Salai,
Company Circle V(3), Mylapore, Chennai-600004.
Chennai. PAN AADPR3069J.
(Appellant) (Respondent)
Appellant by : Shri Sanjay V.R.Deshmukh, JCIT
Respondent by : Shri Y.Sridhar, C.A.
Date of Hearing : 14th September, 2011
Date of Pronouncement : 15th September, 2011
ORDER
PER Dr.O.K.NARAYANAN, VICE-PRESIDENT:
This appeal is filed by the Revenue. The relevant assessment year is 2006-07. The appeal arises out of the assessment completed under section 143(3) of the Income-tax Act, 1961.-2- ITA No.998 of 2011
2. The first ground raised by the Revenue in this appeal is that the Commissioner of Income-tax(Appeals) has erred in restricting the disallowance made by the Assessing Officer under section 14A invoking the provisions of Rule 8D and in holding that the provisions are not applicable to the relevant assessment year. The Commissioner of Income-tax(Appeals) is justified in holding that Rule 8D is not retrospective in operation. Therefore, he has rightly held that disallowance cannot be made on the basis of Rule 8D. The said decision of the Commissioner of Income-tax(Appeals) is upheld.
3. But, alternatively, the quantum of disallowance was determined by the Commissioner of Income-tax(Appeals) at 2% of the exempted income. In our considered view, the quantum determined by the Commissioner of Income-tax(Appeals) is very low. To be fair and reasonable, we increase the disallowance to 5% of the exempted income.
4. The next ground raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in deleting the addition made by the Assessing Officer on account of undisclosed value of stock. The Assessing Officer has observed -3- ITA No.998 of 2011 that the assessee has shown increase in stock value in the relevant previous year on the ground that the assessing authority had converted the investments made by the assessee to closing stock for the assessment year 2003-04. On the basis of the details of the unsold stock called for by the assessing authority, he held that the difference of ` 26,07,238/- between the book figure and the details furnished by the assessee is to be added back. The same was added. This addition has been deleted by the Commissioner of Income-tax(Appeals).
5. We examined the case. It is a fact that in the course of the assessment for the assessment year 2003-04, the Assessing Officer had converted the shares held by the assessee and disclosed as investments, to stock in trade on a particular date. On that ground the assessing authority made an addition of ` 2,04,60,300/- to the stock value, being the difference between the cost price and market value on conversion date. Once the investment figure has been converted into trading stock figure, it is not proper to make another addition for the impugned assessment year on the same set of shares. This is because of the reason that the Assessing -4- ITA No.998 of 2011 Officer has not made any adverse finding against the valuation adopted in the case of the shares. Therefore the Commissioner of Income-tax(Appeals) has rightly deleted the said addition.
6. In result the appeal filed by the Revenue is partly allowed.
Order pronounced in the open Court at the time of hearing on Thursday, the 15th of September, 2011 at Chennai.
Sd/- Sd/-
(Hari Om Maratha) (Dr. O.K.Narayanan)
Judicial Member Vice-President
Chennai,
Dated the 15th September, 2011.
V.A.P.
Copy to: (1) Appellant
(2) Respondent
(3) CIT
(4) CIT(A)
(5) D.R.
(6) G.F.