Karwa Suryakant Bansilal, Latur V. Deputy Commissioner of Income-tax,

ITA 1031/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1032 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO S . 1030 & 1031 /PN/201 4 / ASSESSMENT YEAR S : 20 08 - 09 & 2009 - 10 SHRI KARWA SURYAKANT BANSILAL, PROP. M/S. KARWA AGENCIES, KARWA COMPLEX, M.G. ROAD, LATUR . / APPELLANT PAN: A BAPK9634M VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 3, NANDED . / RESPONDENT / APPELLANT BY : SHRI KISHORE PHADKE / APPELLANT BY : SHRI KISHORE PHADKE / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 01 . 0 9 .201 6 / DATE OF PRONOUNCEMENT: 09 . 0 9 .201 6 / ORD ER PER SUSHMA CHOWLA, J M : BOTH THE APPEAL S FILED BY THE ASSESSEE ARE AGAINST SEPARATE ORDER S OF CIT (A) , AURANGABAD , BOTH DATED 27 . 1 1 .20 1 3 RELATING TO ASSESSMENT YEAR S 20 08 - 09 AND 2009 - 10 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . BOTH THE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO S . 1030 & 1031 /PN/20 1 4 SHRI KARWA SURYAKANT BANSILAL 2 HOWEVER, REFERENCE IS BEING MADE TO THE FACTS IN ITA NO.1030/PN/2 014 TO ADJUDICATE THE ISSUES. 3. THE ASSESSEE IN ITA NO.1030/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED CIT(A), AURANGABAD, ERRED IN LAW AND ON FACTS IN SUSTAINING DISALLOWANCE OF INTEREST EXPENDITURE OF RS.6,84,548/ - MADE BY TH E DCIT - CIRCLE - 3, NANDED. THE IT AUTHORITIES OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS SUFFICIENT FUNDS FOR MAKING ADVANCES TO ASSOCIATED PARTIES AND HENCE, INFERENCE DRAWN BY THE IT AUTHORITIES AS TO USAGE OF BORROWED FUNDS FOR THE SAME IS INCORREC T. 2. THE ASSESSEE CRAVES LEAVE TO ADD / MODIFY / DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 4. BOTH THE APPEALS WERE FILED AFTER DELAY OF 95 DAYS. THE ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE REASONS FOR DELAY IN FILING THE APPEAL S LATE BEFORE T HE TRIBUNAL, WHICH READ AS UNDER: - AFFIDAVIT MYSELF, SURYAKANT BANSILAL KARWA, AGE 55 YEARS, RESIDENT OF LATUR, MYSELF, SURYAKANT BANSILAL KARWA, AGE 55 YEARS, RESIDENT OF LATUR, DESIGNATION PROPRIETOR OF M/S KARWA AGENCIES; HAS TO SOLEMNLY AND STATE AND AFFIRM AS UNDER: - I CARRY ON MY BUSINESS ACTIVITY BY THE NAME M/ S KARWA AGENCIES WHICH IS ENGAGED IN CARRYING A BUSINESS OF C & F AGENCY OF M/S RAJESHREE CEMENT AND M/S GRASIM INDUSTRIES IN LATUR. THE I - T PROCEEDINGS FOR A.Y. 2008 - 09 AND A.Y. 2009 - 10 WERE ONGOING BEFORE THE LEARNED INCOME - TAX OFFICER (A O ) IN LATUR AN D THEREAFTER, BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN AURANGABAD FOR SOME TIME. ASSESSMENT ORDER RECEIVED FROM THE LEARNED A O WAS OBJECTED BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) GAVE PARTIAL RELIEF VIDE HIS APPELLATE ORDER DATE D 27 / 11 / 2013 FOR A.Y. 2008 - 09 AS WELL AS A.Y. 2009 - 10. I RECEIVED THE SAID APPELLATE ORDER OF THE LEARNED CIT(A) ON 12 / 12 / 2013. FURTHER BEING A SOLE PROPRIETOR, I HAD TO KEEP TRAVELLING OUT OF LATUR FOR BUSINESS PURPOSES. AFTER RECEIPT OF CIT(A) ORDE R, I WAS CONFUSED ABOUT THE FUTURE COURSE OF ACTION. I WAS NOT MUCH AWARE OF THE SAME. IT WAS ADVISED BY CONSULTANT AT LATUR, THAT CONSIDERING SOME RECENT DECISIONS OF THE HIGH COURTS , ETC, THERE IS A MERIT IN FILING APPEALS. ACCORDINGLY, I FILED THE AP PEAL BEFORE THE HONORABLE ITAT, PUNE BENCH ON 16 / 05 / 2014 . IN THE MEAN TIME, PRECIOUS TIME OF FILING THE APPEAL WAS LOST. IN ALL THIS PROCESS, DELAY OF ABOUT 95 DAYS HAS CREPT INTO THE MATTER UNFORTUNATELY; CALCULATION - OF THE SAME IS AS FOLLOWS: 19 DA YS - FEBRUARY 14 31 DAYS - MARCH 14 30 DAYS - APRIL, 14 15 DAYS - MAY, 14 95 DAYS - DELAY IN FILING APPEAL ITA NO S . 1030 & 1031 /PN/20 1 4 SHRI KARWA SURYAKANT BANSILAL 3 THE SAID DELAY OF 95 DAYS IS PURELY NON - INTENTIONAL. I HAVE ALSO REQUESTED FOR CONDONATION OF THE DELAY BY MAKING A SEPARATE DELAY CONDONA TION PETITION. PLACE: LATUR DATE : 30/07/2016 SD/ - SURYAKANT BANSILAL KARWA PROPRIETOR (M/S. KARWA AGENCIES) 5. WE FIND MERIT IN THE PLEA OF ASSESSEE AND DELAY IN FILING BOTH THE APPEAL S LATE IS HEREBY CONDONED. WE PROCEED TO DECIDE THE PRESENT AP PEAL AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT AS AGAINST THE GROUNDS OF APPEAL RAISED IN THE MEMO OF APPEAL, AN ADDITIONAL GROUND OF APPEAL IS BEING RAISED I.E. WITHOUT PREJUDICE TO THE GROUND OF APPEAL NO.1, THE INTEREST DISALLOWED UNDER SECTION 36(1)(III) / 14A OF GROUND OF APPEAL NO.1, THE INTEREST DISALLOWED UNDER SECTION 36(1)(III) / 14A OF THE ACT RELATING TO INVESTMENTS IN LAND SHOULD BE ALLOWED TO BE CAPITALIZED. THE ASSESSEE IN THIS REGARD HAS RAISED THE FOLLOWING GROUND OF APPEAL: - 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO GROUND NO.1, APPELLANT IS ELIGIBLE FOR CAPITALIZATION OF INTEREST EXPENDITURE AMOUNTING TO RS.6,84,548/ - ON RELATED INVESTMENTS, AS COST OF IMPROVEMENT OF THE SAID INVESTMENTS. APPELLANT MAY PLEASE B E ALLOWED TO CAPITALIZE THE INTEREST EXPENDITURE. 7. ON PERUSAL OF RECORD, IT IS APPARENT THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN INCOME FROM CLEARING & FORWARDING AGENCY, INCOME FROM OTHER SOURCES, CAPITAL GAINS AND HOUSE PROPER TY. ON GOING THROUGH THE BALANCE SHEET, THE ASSESSING OFFICER NOTED THAT HUGE UNSECURED LOANS WERE RAISED FROM THE FAMILY MEMBERS, ON WHICH INTEREST WAS BEING PAID. THE INVESTMENTS IN THIS REGARD WERE MADE IN ASSETS WHICH DID NOT RELATE TO THE BUSINESS O F THE ASSESSEE. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD ON THE LIABILITIES SIDE OF THE BALANCE SHEET HAD SHOWN CAPITAL ITA NO S . 1030 & 1031 /PN/20 1 4 SHRI KARWA SURYAKANT BANSILAL 4 BALANCE OF RS. 1,94,64,091/ - , SECURED LOANS OF RS. 64,775/ - AND UNSECURED LOANS OF RS. 43,21,170/ - . THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD PURCHASED PLOT AT PUNE FOR RS. 53,58,796/ - , IN ADDITION THE ASSESSEE HAD MADE INVESTMENTS IN SHARES WITH DIFFERENT COMPANIES. THE BANK ACCOUNT USED BY THE ASSESSEE WAS CURRENT ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE COUNSEL FOR THE ASSESSEE HAD ACCEPTED THAT ON PARTICULAR DATES ON WHICH LOANS WERE RECEIVED BY THE ASSESSEE , THERE WAS NO NEED OF FUNDS FOR ASSESSEES BUSINESS PURPOSES. IT WAS FURTHER STATED BY THE COUNSEL BEFORE THE ASSESSING OFFICER THAT THE SAID LO ANS WERE UTILIZED FOR PURCHASE OF PLOT AT PUNE AND WERE ALSO USED FOR GIVING LOANS, FROM IT. THE ASSESSEE HAD SHOWN INCOME AND ALSO INVESTED IN SHARES, AGAINST WHICH HE HAD SHOWN LONG TERM AND SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER DID NOT ACCEP T THE PLEA OF ASSESSEE AS MAXIMUM LOANS WERE UTILIZED FOR INVESTMENT IN ASSETS WHICH WERE NOT RELATED TO THE BUSINESS OF ASSESSEE AND DISALLOWANCE OF INTEREST WAS MADE TO THE TUNE OF RS. 7,41,944/ - UNDER SECTION 14A OF THE ACT. 8. THE CIT(A) LOOKED AT THE DETAILS FURNISHED BY THE ASSESSEE AND OBSERVED THAT THE DISALLOWANCE OF INTEREST WAS TO BE MADE @ 76.92% OF THE TOTAL INTEREST EXPENDITURE OF RS. 8,89,948/ - SINCE EXEMPT INCOME WAS TO THE EXTENT OF 76.92% OF THE TOTAL INCOME. IN VIEW THEREOF, THE DISALLOWA NCE WAS RESTRICTED TO RS. 6,84,548/ - , AGAINST WHICH THE ASSESSEE IS IN APPEAL. 9. THE LIMITED ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST CAPITALIZATION OF INTEREST DISALLOWED TO THE VALUE OF ASSETS, WHICH WERE PURCHASED FROM INTEREST BEARING FUNDS. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, THERE IS MERIT IN THE CLAIM OF ASSESSEE THAT ONCE IT IS HELD THAT THE INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR INVESTMENT IN LAND, THEN THE INTEREST RELATABLE TO THE FUNDS UTILIZED FOR MAKING TH E SO - CALLED INVESTMENTS IN LAND, MERITS TO BE ITA NO S . 1030 & 1031 /PN/20 1 4 SHRI KARWA SURYAKANT BANSILAL 5 CAPITALIZED TO THE VALUE OF ASSETS. ACCORDINGLY, IT IS SO DIRECTED. THE DISALLOWANCE THOUGH IS CONFIRMED BUT THE INTEREST RELATABLE TO THE INVESTMENT IN LAND MERITS TO BE CAPITALIZED TO THE VALUE OF ASSETS. THE ASSESSING OFFICER IS SO DIRECTED. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED AND THE ORIGINAL GROUND OF APPEAL IS DISMISSED. 10. THE FACTS AND ISSUES IN ITA NO.1031/PN/2014 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA N O.1030/PN/2014 AND THE DECISION IN ITA NO.1030/PN/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.1031/PN/2014 . 1 1 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 9 TH DAY OF SEPTEMBER , 201 6 . SD/ - SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 9 TH SEPTEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RE SPONDENT; 3. ( ) / THE CIT(A) , AURANGABAD ; 4. / THE CIT , AURANGABAD ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // T RUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE