Shri. Suresh Linganagouda Patil, Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 1008/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5447 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RENUGADEVI JT
• Assessee Lawyers: JYOTI MARADI
• Keywords: Opportunity of being heard
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.1008/BANG/2016 ASSESSMENT YEAR : 2011-12 SHRI SURESH LINGANAGOUDA PATIL, NO.428, 16 TH MAIN, 3 RD CROSS, 3 RD BLOCK, KORAMANGALA, BANGALORE 560 034. PAN: ACVPP 9147Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : MS. JYOTI MARADI, ADVOCATE RESPONDENT BY : MS. P. RENUGADEVI, JT.CIT(DR) DATE OF HEARING : 26.04.2017 DATE OF PRONOUNCEMENT : 28.04.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- ITA NO.1008/BANG/2016 PAGE 2 OF 5 1. THE LEARNED CIT (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, OUGHT TO HAVE ALLOWED THE INTEREST OF RS. 38,86,780/- PAID TO ICICI BANK AS CLAIMED BY THE APPELLANT IN F ULL. 2. ON THE FACTS, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ACCEPTED THE EVIDENCE PRODUCED BY THE APPELLANT WHE RE THE APPELLANT WAS RESTRICTED TO GIVE LOAN TO THE FIRM A T CONCESSIONAL RATE ON BUSINESS COMPULSION, WHEREAS THE LOAN BORRO WED WAS FOR BUSINESS PURPOSES AND ACCORDINGLY HE OUGHT TO HAVE REFRAINED FROM DISALLOWING THE CLAIM OF THE APPELLANT. 3. WITHOUT PREJUDICE, THE DISALLOWANCE AS SUSTAINE D BY THE LEARNED CIT (APPEALS) IS ARBITRARY, EXCESSIVE AND O UGHT TO BE DELETED IN FULL. 4. THE LEARNED CIT (A) ERRED CONFIRMING THE LEVY O F INTEREST U/S. 234B AND 234C OF THE ACT. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEA L MAY BE ALLOWED. 2. THE MAIN GROUND INVOLVED IN THIS APPEAL RELATES TO THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS.38,86, 780 PAID TO ICICI BANK. 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAS FILED THE RETURN OF INCOME DE CLARING INCOME OF RS.48,96,370 WHICH WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 [HEREINAFTER CALLED AS THE ACT]. THE CASE WAS T AKEN UP FOR SCRUTINY AND NOTICE U/S. 143(2) AND 143(1) WAS ISSUED. THE AO E XAMINED THE NATURE OF PAYMENT OF INTEREST BY THE ASSESSEE TO ICICI BANK, BUT WAS NOT CONVINCED WITH THE ISSUE OF PAYMENT OF INTEREST AND DISALLOWE D THE INTEREST OF ITA NO.1008/BANG/2016 PAGE 3 OF 5 RS.38,86,780 PAID ON LOAN TAKEN FROM ICICI BANK ON THE GROUND THAT FUNDS HAVE BEEN DIVERTED TO A FIRM AT CONCESSIONAL RATE. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( APPEALS) WITH THE EXPLANATION THAT ASSESSEE HAS BORROWED FUNDS FROM I CICI BANK AND THE SAME WAS INVESTED IN BASANT BETONS, A FIRM IN WHICH ASSESSEE IS A PARTNER. THUS THERE WAS DIRECT NEXUS FOR THE BORROWED FUNDS AND ITS INVESTMENT IN THE FIRM, BASANT BETONS. THE CIT(APPEALS), FOLLOWI NG ITS EARLIER ORDER FOR THE AY 2009-10 CONFIRMED THE DISALLOWANCE. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS FILED A COPY OF THE ORDER OF TRIBUNAL CONFIRMING TH E ORDER OF CIT(A) FOR THE AY 2009-10 ALONG WITH LETTER OF PARTNERSHIP FIRM, C OMPUTATION OF INCOME, PROFIT & LOSS ACCOUNT OF THE ASSESSEE AS WELL AS OF THE FIRM AND THE BALANCE SHEET OF THE FIRM, ETC., WITH THE SUBMISSION THAT T HE FUNDS WERE BORROWED FOR THE PURPOSE OF INVESTMENT IN THE FIRM AS THE FIRM W AS NOT ABLE TO BORROW THE FUNDS. SINCE THE FUNDS WERE BORROWED FOR BUSINESS EXIGENCIES, INTEREST PAID TO THE BANK ON THE BORROWED FUND SHOULD BE ALL OWED. THE ASSESSEE HAS ALSO FILED THE STATEMENT OF THE BANKERS, ADVA NCING THE LOAN AND THE DISBURSEMENT TO THE PARTNERSHIP FIRM AS IT WAS FACI NG FINANCIAL CRISIS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IN THE EARLIER ASSESSMENT YEAR, THE ENTIRE RELEVANT EVIDENCE WAS N OT CONSIDERED BY THE LOWER AUTHORITIES AND THEY HAVE MADE THE ADDITIONS. HE, HOWEVER, ITA NO.1008/BANG/2016 PAGE 4 OF 5 SUBMITTED THAT IN THE EARLIER YEARS AT LEAST INTERE ST CHARGED FROM THE FIRM SHOULD HAVE BEEN ALLOWED BY THE TRIBUNAL. 6. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIAN CE ON THE ORDER OF CIT(APPEALS). 7. HAVING CAREFULLY EXAMINED THE ORDER OF LOWER AUT HORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT IN THE EARLIER A SSESSMENT YEARS, PAYMENT OF INTEREST WAS DISALLOWED ONLY FOR THE REASON THAT IT WAS DIVERTED TO THE PARTNERSHIP FIRM, WITHOUT ASSESSING THE BUSINESS NE ED OF SUCH INVESTMENT IN THE LIGHT OF JUDGMENT OF HONBLE APEX COURT IN T HE CASE OF S.A. BUILDERS V. CIT, 288 ITR 1 (SC) . DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS FILED ENORMOUS EVIDENCE TO EXPLAIN THE BUSINESS NEED OF THE INVESTMENT OF BORROWED FUND IN THE PARTNERSHIP FIRM . THEREFORE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES A FRESH LOOK BY T HE AO IN THE LIGHT OF JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS (SUPRA) . ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(APPEALS) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO READJUDICATE THE IS SUE AFRESH IN THE LIGHT OF JUDGMENT THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS (SUPRA) , AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. IF NEED BE, THE CIT(APPEALS) MAY ALSO CALL FOR REMAND REPORT FROM T HE AO ON THE NEW EVIDENCE FILED BY THE ASSESSEE. ITA NO.1008/BANG/2016 PAGE 5 OF 5 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2017. SD/- SD/- ( A.K. GARODIA ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 28 TH APRIL, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.