Ashok Raj Nath, Panipat V. ACIT, Panipat

ITA 1065/DEL/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0112 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Assessee Lawyers: SATISH K GOEL
• Keywords: Opportunity of being heard; Rule of consistency; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1065 /DEL/2009 ASSESSMENT YEAR : 2006-07 SHRI ASHOK RAJ NATH, ACIT, C/O M/S DEEPAK WOOLEN MILLS, PANIPAT CIRCLE, GT ROAD, PANIPAT. V. PANIPAT. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AAFPN-8330-F APPELLANT BY : SHRI SATISH K. GOEL, ADVOCATE. RESPONDENT BY : SHRI B. KISHORE, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL FILED AGAINST THE ORDE R OF LD CIT(A), KARNAL DATED 4.2.2009 FOR ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 OF THE APPEAL IS GENERAL. GROUND NO. 2 OF THE APPEAL READS AS UNDER:- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE ORDER OF LD CIT(A) IN CONFIRMING THE ORDER OF ACIT IN TRE ATING RENTAL INCOME OF `.463388/- IN RESPECT OF PROPERTY UNIT NO.206 WHICH WAS PAID TO M/S PJ ASSOCIATES (PURCHASER) IN THE HANDS OF THE APPELLAN T IS ALTOGETHER ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. PAGE 2 OF 11 ITA NO1065./DEL/09 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D GIVEN PROPERTY BEING UNIT NO.206, CYBER PARK, GURGAON ON RENT TO M/S UNITECH LTD. @ RS.1,15,847/- PER MONTH FROM MAY, 2005 TO MARCH, 2006 BUT IN THE RETU RN OF INCOME, RENT FOR ONLY FIVE MONTHS WAS DECLARED BY THE ASSESSEE AND SUBSEQ UENTLY IN THE REVISED RETURN, THE ASSESSEE DECLARED GROSS RENTAL INCOME O F RS.8,10,928/- FOR SEVEN MONTHS ALTHOUGH SUCH REVISED RETURN OF INCOME WAS N OT FILED IN TIME AND THEREFORE, THE ASSESSING OFFICER TREATED IT AS NONE ST. IT IS THE CLAIM OF THE ASSESSEE THAT RENT FOR THE PERIOD OF FOUR MONTHS FR OM DECEMBER, 2005 TO MARCH, 2006 HAS BEEN TRANSFERRED TO M/S P.J. ASSOCIATES BY CHEQUE DATED 8.6.2006. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT THE PROPERTY IN QUESTION WAS SOLD BY THE ASSESSEE TO M/S P.J. ASSOCIATES AND AS PER THE MUTU AL UNDERSTANDING, THE RENT FOR THE LAST FOUR MONTHS WAS TRANSFERRED TO THE BUY ER BECAUSE PURCHASE ADVANCE OF RS.47 LAKHS WAS RECEIVED BY THE ASSESSEE FROM TH AT PARTY ON 29.12.2005 AND BECAUSE OF THIS REASON, THE ASSESSEE HAD DECLARED R ENTAL INCOME FOR SEVEN MONTHS ONLY UP TO NOVEMBER, 2005 IN THE REVISED RET URN AND THE SAME WAS DECLARED WRONGLY FOR FIVE MONTHS IN THE ORIGINAL RE TURN OF INCOME. THE ASSESSING OFFICER WAS NOT SATISFIED AND HE HELD THAT NO SALE AGREEMENT WAS EFFECTED BEFORE THE END OF THE FINANCIAL YEAR AND THEREFORE, THE EN TIRE RENT OF RS.12,74,316/- IS ASSESSABLE IN THE HANDS OF THE ASSESSEE AND HE DID THE SAME. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US . 4. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THA T ALTHOUGH THERE IS IS NO WRITTEN AGREEMENT BUT IT WAS AGREED BY THE ASSESSEE WITH THE BUYER M/S PJ ASSOCIATES THAT FROM THE MONTH OF DECEMBER, 2005, R ENTAL INCOME STILL BELONG TO THAT PARTY AND ACCORDINGLY, THE SAME WAS TRANSFERRE D TO M/S PJ ASSOCIATES AND THAT PARTY HAS DECLARED THE SAME IN HIS INCOME. IT IS SUBMITTED THAT CERTIFICATE OF THAT PARTY IS AVAILABLE ON PAGE NO.3 & 4 OF THE PAP ER BOOK AS PER WHICH IT IS CERTIFIED BY THAT PARTY THAT THE NET AMOUNT OF RENT OF RS.5,72,806/- FOR THE PERIOD FROM DECEMBER, 2005 TO MARCH, 2006 WAS RECEIVED BY THAT PARTY BY WAY OF CHEQUE FROM THE ASSESSEE. IT IS ALSO SUBMITTED THAT SUCH RENTAL INCOME UP TO PAGE 3 OF 11 ITA NO1065./DEL/09 MARCH, 2006 IS AMOUNTING TO RS.3,80,106/- AFTER TDS OF RS.82,482/- UP TO MARCH, 2006 AND ACCORDINGLY THE GROSS RENT UP TO MARCH, 20 06 WAS RS.4,62,588/-. IT IS SUBMITTED THAT IT IS CERTIFIED BY THAT PARTY THAT I T HAS NOT CLAIMED CREDIT OF TDS IN THE PRESENT YEAR OR IN THE NEXT YEAR ON THIS IMPUGN ED AMOUNT OF RS.5,72,806/- AND TDS AMOUNT WAS RS.82,482/- FOR THE PRESENT YEAR AND RS.38,594/- FOR THE NEXT TWO MONTHS I.E. APRIL, 2006 AND MAY, 2006 AND TOTAL TDS AMOUNT IS OF RS.1,21,076/-. IT IS ALSO SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THE ASSESSEE HAS ALSO NOT CLAIMED CREDIT OF TDS IN THE PRESENT YEAR FOR FOUR MONTHS FROM DECEMBER, 2005 TO MARCH, 2006 ALTHOUGH THE ASS ESSING OFFICER HAS ALLOWED CREDIT FOR TDS OF THIS PERIOD ALSO BECAUSE HE HAS INCLUDED THIS INCOME OF FOUR MONTHS IN THE TAXABLE INCOME OF THE ASSESSEE. IT IS ALSO SUBMITTED BY HIM THAT IF THE GROUND OF THE ASSESSEE IS ALLOWED AND T HIS ADDITION MADE BY THE ASSESSING OFFICER IS DELETED THEN THE ASSESSING OFF ICER MAY BE DIRECTED TO EXCLUDE THE CREDIT OF TDS FOR THIS PERIOD OF FOUR M ONTHS FROM DECEMBER, 2005 TO MARCH, 2006 AMOUNTING TO RS.82,482/-. 5. REGARDING MERIT OF ADDITION, IT IS SUBMITTED THA T THE PROPERTY IN QUESTION WAS REGISTERED IN THE NAME OF THE BUYER AFTER MAY, 2006 AND HENCE, UNDER SIMILAR CIRCUMSTANCES, THE RENT FOR THE PERIOD OF A PRIL, 2006 TO MAY, 2006 WAS ALSO TRANSFERRED BY THE ASSESSEE TO THE ACCOUNT OF BUYER AND IN THE NEXT YEAR, RENTAL INCOME OF THESE TWO MONTHS WAS NOT ADDED IN THE INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER ALTHOUGH THE ASSESSMENT WA S COMPLETED IN THAT YEAR ALSO U/S 143(3) OF THE ACT. HE SUBMITTED A COPY OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 ON 26.11.2009 IN SUPPORT OF THIS CONTENTION. IT IS SUBMITTED BY HIM THAT WHE N THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN THE NEXT YEAR , THERE IS NO REASON FOR NOT ACCEPTING THE SAME IN THE PRESENT YEAR. RELIANCE I S PLACED ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF CIT V. REITA BISCUITS CO. PVT. LTD. AS REPORTED IN 309 ITR 154. IT IS SUBMITTED THAT IT WAS HELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THIS CASE THAT IN VIEW OF PRINCIPLE OF CONSISTENCY, ONCE THE ISSUE ON THE MERIT HAS BEE N DECIDED AGAINST THE PAGE 4 OF 11 ITA NO1065./DEL/09 REVENUE ON THE SAME ISSUE DURING THE SUBSEQUENT ASS ESSMENT YEAR, THEIR LORDSHIPS DO NOT DEEM IT APPROPRIATE TO TAKE A DIFF ERENT VIEW ON A TECHNICAL REASON IN THE EARLIER YEAR. 6. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON BLE APEX COURT RENDERED IN THE CASE OF CIT V. PODDAR CEMENT PVT. L TD. AS REPORTED IN 226 ITR 625. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HO NBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF PALLONJEE M. MISTRY V. CIT AS REPORTED IN 178 TAXMAN 341 (BOM.) AND ALSO ON THE JUDGMENT OF HONBLE PATN A HIGH COURT RENDERED IN THE CASE OF CIT V. KRISHANA LAL AJMANI AS REPORTED IN 111 TAXMAN 466 (PAT.). 7. AS AGAINST THIS, LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT IS ALSO SUBMITTED BY HIM THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT T HE ASSESSEE HAS RECEIVED ADVANCE OF RS.47 LAKHS ON 29.12.2005 BUT NO SALE AG REEMENT HAS BEEN EFFECTED DURING THE YEAR UNDER CONSIDERATION. IT IS SUBMITTE D BY HIM THAT IN THE ABSENCE OF AGREEMENT FOR SALE, IT IS NOT ASCERTAINABLE AS TO W HETHER THE ASSESSEE WAS REQUIRED TO MAKE PAYMENT OF RENTAL INCOME TO THE BU YER FROM DECEMBER, 2005 ONWARDS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPU TE ON THIS FACTUAL ASPECT THAT ADVANCE OF RS.47 LAKHS WAS RECEIVED BY THE ASSESSEE FROM M/S PJ ASSOCIATES ON ACCOUNT OF SALE OF THE IMPUGNED PROPERTY BY THE ASSESSEE TO THAT PARTY. THE DISPUTE IS REGARDING THE RENTAL INCOME FROM THE MON TH OF DECEMBER, 2005 TO MARCH, 2006 I.E. FOR FOUR MONTHS. IT IS ALSO ADMITT ED FACTUAL POSITION THAT UNDER SIMILAR CIRCUMSTANCES, THE ASSESSEE RECEIVED RENTAL INCOME FOR THE MONTH OF APRIL AND MAY, 2006 AND THE SAME WAS ALSO PASSED ON TO TH E BUYER BY WAY OF THE SAME CHEQUE OF DATED 8.6.2006 BECAUSE AS PER THE DE TAILS AVAILABLE ON PAGE NO.3 & 4 OF THE PAPER BOOK, ONE CHEQUE NO.618356 FO R RS.5,72,806/- WAS RECEIVED BY THAT PARTY FROM THE ASSESSEE ON 5.6.200 6. AS PER THE DETAILS OF THIS PAGE 5 OF 11 ITA NO1065./DEL/09 AMOUNT, IT IS ON ACCOUNT OF RENTAL INCOME RECEIVED BY THE ASSESSEE FROM DECEMBER, 2005 TO MAY, 2006 AFTER DEDUCTING TDS OF RS.1,21,076/-. AS PER THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08 SUBMIT TED BY THE ASSESSEE BEFORE US, IT IS SEEN THAT THE ASSESSING OFFICER HA S NOT MADE ANY ADDITION IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF RENT FOR THE M ONTH OF APRIL & MAY, 2006. HENCE, IT IS SEEN THAT THE ASSESSING OFFICER HAS AC CEPTED THE CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR THAT THE RENTAL INC OME FROM THIS PROPERTY DOES NOT BELONG TO THE ASSESSEE ALTHOUGH THE PROPERTY IN QUESTION WAS REGISTERED IN THE NAME OF THE BUYER AFTER MAY, 2006. HENCE, IT IS SEEN THAT THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR UNDER SIMILAR FACTS AND CIRCUMSTANCES. HENCE, IN TH E PRESENT YEAR, WHETHER THIS CLAIM OF THE ASSESSEE DESERVES TO BE ACCEPTED OR NO T IS TO BE DECIDED BY US. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE IN IT S ENTIRETY. WE FIND THAT THIS IS ADMITTED POSITION THAT CAPITAL GAIN ON SALE OF THIS PROPERTY WAS DECLARED BY THE ASSESSEE IN THE NEXT YEAR AND HENCE, AS PER THE ASS ESSEE ALSO, OWNERSHIP OF THE PROPERTY WAS WITH THE ASSESSEE IN THIS YEAR AND HEN CE, IF WE APPLY THE LEGAL POSITION STRICTLY, RENTAL INCOME FOR THE PERIOD FRO M DECEMBER, 2005 TO MARCH, 2006 IS ALSO TAXABLE IN THE HANDS OF THIS ASSESSEE ONLY BUT WE FIND THAT THREE OTHER ASPECTS ARE ALSO VERY MUCH IMPORTANT. ONE ASP ECT IS THE TAX IMPACT. AS PER THE TAX IMPACT OF THE IMPUGNED ADDITION OF RS.4 ,63,388/- IN THE PRESENT YEAR, IT IS WORKED OUT BY THE ASSESSEE AT RS.1,09,184/- A FTER DEDUCTING 30% AS PER THE PROVISIONS OF SECTION 24 OF THE ACT AND THE TAX WAS DETERMINED AT RS.97,312/- @ 30% OF RS.3,24,372/- AND AFTER MAKING ADDITION OF S URCHARGE AND EDUCATION CESS, TOTAL TAX PAYABLE IS OF RS.1,09,184/-. IT IS THE SU BMISSION OF THE LD AR OF THE ASSESSEE THAT IN CASE, WE DECIDE THIS ISSUE IN FAVO UR OF THE ASSESSEE, THE ASSESSING OFFICER MAY BE DIRECTED TO DISALLOW CREDI T OF TDS FROM THE RENTAL INCOME OF THESE FOUR MONTHS FROM DECEMBER, 2005 TO MARCH, 2006 WHICH IS AMOUNTING TO RS.82,482/-. HENCE, THE NET TAX IMPAC T COMES TO RS.26,702/-. THE SECOND IMPORTANT ASPECT IS THAT THE CLAIM OF THE AS SESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER ALSO IN THE SUBSEQUENT YEAR B ECAUSE IN SPITE OF COMPLETING THE ASSESSMENT OF ASSESSMENT YEAR 2007-08 U/S 143(3 ), NO ADDITION HAS BEEN PAGE 6 OF 11 ITA NO1065./DEL/09 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RENTAL INCOME FOR THE MONTH OF APRIL & MAY, 2006 ALTHOUGH THE SAME WAS ALSO REFUNDED BY THE ASSESSEE TO SHRI PJ SINGH BY WAY OF SAME CHEQUE NO.618356 DATED 5.6.200 6 AND THE PROPERTY IN QUESTION WAS TRANSFERRED BY THE ASSESSEE TO THE BUY ER AFTER THAT DATE ONLY. HENCE, IT IS SEEN THAT UNDER SIMILAR CIRCUMSTANCES, THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR. AS PE R THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF CIT V. REITA BISCUITS CO. PVT. LTD. (SUPRA), IF THE ISSUE IS BEING DECIDED IN SUBSEQUENT YEAR IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, DIFFERENT VIEW CA NNOT BE TAKEN IN THE PRECEDING YEAR. HENCE, THIS JUDGMENT OF HONBLE PUN JAB & HARYANA HIGH COURT BECOMES APPLICABLE UNDER THESE FACTS OF THE PRESENT CASE AND AS PER THE SAME, THE CLAIM OF THE ASSESSEE HAS TO BE ACCEPTED IN THE PRESENT YEAR ALSO THAT RENTAL INCOME FROM DECEMBER, 2005 TO MARCH, 2006 ALSO DID NOT ACCRUE TO THE ASSESSEE. THE THIRD IMPORTANT POINT IS THAT EVEN IF IT IS HELD THAT RENTAL INCOME IS ASSESSABLE IN THE HANDS OF THE ASSESSEE THEN THIS A MOUNT OF RS.4,63,338/- PAID BY THE ASSESSEE TO SHRI PJ SINGH HAS TO BE REDUCED FROM THE CAPITAL GAIN TAX IN THE HANDS OF THE ASSESSEE IN THE SUBSEQUENT YEAR I. E. ASSESSMENT YEAR 2007-08 AND AS A RESULT, THE SHORT TERM CAPITAL GAIN OF RS. 3,77,756/- DECLARED BY THE ASSESSEE IN THAT YEAR WILL BE CONVERTED INTO SHORT TERM CAPITAL LOSS OF RS.85,632/- AND THE DIFFERENCE IN TAX IN THAT YEAR WILL WORK OU T TO RS.1,36,764/- IN ASSESSMENT YEAR 2007-08. TAX PAYABLE BY THE ASSESSEE IN THAT YEAR WILL GO DOWN BY THIS AMOUNT WHEREAS THE TAX LIABILITY CREATED BY THE ASS ESSING OFFICER IN THE PRESENT YEAR IS ONLY OF RS.1,09,184/-. THIS IS BECAUSE OF T HIS REASON THAT ON ACCOUNT OF RENTAL INCOME OF RS.4,63,388/-, THE ASSESSEE IS GET TING DEDUCTION OF 30% U/S 24 AND HENCE THIS TAX LIABILITY IS GOING DOWN TO THIS AMOUNT TO RS.1,09,184/- WHEREAS THE CONSEQUENT RELIEF FROM SHORT TERM CAPITAL GAIN WILL BE ON THE FULL AMOUNT OF RS.4,63,388/-. IF WE CONSIDER THESE FACTORS, WE FEE L THAT THE REVENUE IS NOT GAINER BY REJECTING THE TREATMENT GIVEN BY THE ASSESSEE AN D VARIOUS CONSEQUENTIAL ORDERS ARE TO BE PASSED I.E. IN THE CASE OF THE ASSESSEE IN NEXT YE AR AND ALSO IN THE HANDS OF THE BUYER FOR THE PRESENT YEAR BECAUSE REN T INCOME CANNOT BE ASSESSED IN THE HANDS OF BOTH I.E, THE PRESENT ASSESSEE AND THE BUYER TO WHOM RENT IS PAGE 7 OF 11 ITA NO1065./DEL/09 TRANSFERRED BY THIS ASSESSEE BUT ONE ASPECT IS NOT CLEAR AS TO WHETHER THAT ASSESSEE HAS INCLUDED THIS AMOUNT IN HIS TAXABLE IN COME OR NOT BECAUSE AS PER THE CERTIFICATE ON PAGE NO.3-4 OF THE PAPER BOOK, T HAT PARTY IS CERTIFYING THAT THEY HAVE RECEIVED THE NET AMOUNT OF RS.572806/- AND DID NOT CLAIM TDS CREDIT BUT THERE IS NO MENTION THAT THEY HAD INCLUDED THIS AMO UNT IN TAXABLE INCOME AS PER THE RETURN OF INCOME FILED. HENCE, WE FIND THAT IF THIS AMOUNT HAS BEEN DECLARED AS INCOME BY THAT PARTY , THAN THE SAME SHOULD NOT BE ADDED IN THE HANDS OF THIS PRESENT ASSESSEE TO AVOID MULTIPLE CONSEQUENTIAL RE CTIFICATIONS WITHOUT ANY TAX GAIN TO THE REVENUE AND ALSO BECAUSE THE REVENUE HA S ACCEPTED THIS CLAIM IN NEXT YEAR AND AS PER THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. REITA BISCUITS CO. (SUPRA), DIFFEREN T STAND CANNOT BE TAKEN IN THIS YEAR BUT FOR THIS, THE ASSESSING OFFICER HAS TO FIN D OUT AS TO WHETHER THE BUYER HAS DECLARED THIS INCOME OR NOT IN ITS RETURN OF IN COME. WE, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH IS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A DECISION AFRESH. THE ASSESS ING OFFICER SHOULD FIND OUT AS TO WHETHER THE BUYER, TO WHOM THIS RENTAL INCOME IS TRANSFERRED BY THIS ASSESSEE HAS DECLARED THIS INCOME IN ITS RETURN OF INCOME OR NOT IN THE PRESENT YEAR. IF THE BUYER HAS DECLARED THIS INCOME IN THE RETURN OF INC OME FILED BY THE BUYER FOR THE PRESENT YEAR, THEN NO ADDITION SHOULD BE MADE IN TH E HANDS OF THIS ASSESSEE ON ACCOUNT OF RENT FOR DECEMBER, 2005 TO MARCH, 2006 A ND THE ASSESSING OFFICER SHOULD WITHDRAW THE CREDIT OF TDS OF RS.82,482/- ON RENTAL INCOME FOR DECEMBER, 2005 TO MARCH, 2006 BECAUSE IF THE INCOME IS NOT TA XED IN THE HANDS OF THIS ASSESSEE, CREDIT FOR TDS CANNOT BE ALLOWED. BUT IF THIS RENTAL INCOME FOR DECEMBER, 2005 TO MARCH, 2006 HAS NOT BEEN DECLARED BY THE BUYER IN ITS RETURN OF INCOME THEN SUCH RENTAL INCOME HAS TO BE TAXED I N THE HANDS OF THIS ASSESSEE. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER A S PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE WANT TO MAKE IT CLEAR THAT BURDEN IS ON THE ASSE SSEE TO BRING EVIDENCE ON RECORD ESTABLISHING THAT THE BUYER HAS DECLARED THI S INCOME IN ITS RETURN OF INCOME FOR THIS ASSESSMENT YEAR. THIS GROUND IS ALLOWED FO R STATISTICAL PURPOSES. 9. GROUND NO.3 OF THE APPEAL IS AS UNDER:- PAGE 8 OF 11 ITA NO1065./DEL/09 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE ORDER OF LD IN ALLOWING PART RELIEF OF ONLY RS.29,166/- I N RESPECT OF DISALLOWANCE OF INTEREST PAID AT RS.2,51,507/- TO M/S DSPL IS AR BITRARY, ILLEGAL VOID AND UNCALLED. 10. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE D ECLARED INTEREST INCOME OF RS.73,630/- AGAINST THE GROSS INTEREST INCOME OF RS .9,87,808/- BY REDUCING RS.2,51,507/- ON ACCOUNT OF INTEREST PAID. THE ASS ESSEE HAS TAKEN A LOAN OF RS.1 CRORE FROM M/S DSPL ON 20.12.2005 WHICH WAS CL AIMED AGAINST THE RUNNING ACTIVITY OF SHARE INVESTMENT AND MUTUAL FUND MANAGE D BY DSPML ON WHICH INTEREST OF RS.2,,51,507/- WAS PAID BY THE ASSESSEE FOR THE PERIOD FROM 20.12.2005 TO 31.3.2006. THE ASSESSING OFFICER HEL D THAT THIS INTEREST PAYMENT IS NOT ALLOWABLE AGAINST INTEREST INCOME ON FDRS AN D OTHER PARTIES ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREF ORE, THE ASSESSING OFFICER REJECTED THE CLAIM FOR REDUCTION OF INTEREST PAYMEN T OF RS.2,51,507/- FROM THE INTEREST INCOME. BEING AGGRIEVED THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE LD CIT (A). LD CIT(A) HAS HELD THAT THE ASSE SSEE HAS EARNED INTEREST FROM BANK TO THE EXTENT OF RS.29,166/- BECAUSE THE SAME AMOUNT WAS LYING IN THE SAVINGS BANK A/C AND ON THIS BASIS, LD CIT(A) ALLOW ED DEDUCTION TO THE ASSESSEE TO THE EXTENT OF RS.29,166/- AND CONFIRMED THE BALANCE DISALLOWANCE. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 11. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE TH AT ON PAGE NO.17 OF THE PAPER BOOK IS A CERTIFICATE FROM BANK OF INDIA AS P ER WHICH, THE ASSESSEE HAS EARNED INTEREST INCOME OF RS.86,741/- FROM THAT BAN K DURING 1.4.2005 TO 31.3.2006. IT IS ALSO SUBMITTED THAT THE BANK STATE MENT FROM 3.12.2005 TO 31.3.2006 OF THE SAME BANK IS AVAILABLE ON PAGE NO. 18-19 OF THE PAPER BOOK AS PER WHICH, THERE IS CREDIT ENTRY OF RS.1 CRORE IN T HIS BANK ACCOUNT OF THE ASSESSEE ON 20.12.2005 AND THEREAFTER THROUGH OUT UP TO 31.3 .2006, THE ASSESSEE WAS HAVING CREDIT BALANCE WITH THE BANK IN EXCESS OF RS .1 CRORE. IT IS ALSO SUBMITTED PAGE 9 OF 11 ITA NO1065./DEL/09 THAT AS PER THE SAME BANK STATEMENT, ON 4.2.2006, T HE BANK HAS CREDITED INTEREST OF RS.55,775/- FOR A PERIOD FROM 1.8.2005 TO 31.1.2 006. IT IS ALSO SUBMITTED THAT SINCE ON THIS AMOUNT OF RS.1 CRORE LYING WITH THE B ANK IN SAVINGS BANK A/C, THE ASSESSEE WAS EARNING INTEREST INCOME, DEDUCTION OF INTEREST PAID IS ALLOWABLE TO THE ASSESSEE AND THE SAME CANNOT BE RESTRICTED TO T HE EXTENT OF ACTUAL INTEREST INCOME. 12. AS AGAINST THIS, LD DR OF THE REVENUE SUPPORTED THE ORDER OF LD CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD CIT(A) HAS WOR KED OUT THE INTEREST INCOME ON ACCOUNT OF THIS DEPOSIT OF RS.1 CRORE IN SAVINGS BA NK A/C OF THE ASSESSEE BY APPLYING 3.5% OF BANK INTEREST RATE AND HE HAS HELD THAT THE ASSESSEE HAS EARNED INTEREST INCOME FOR ONE MONTH ONLY ON THIS B ASIS THAT THE BANK HAS CREDITED INTEREST UP TO 31.1.2006 ONLY ON 4.2.2006 ALTHOUGH THERE WAS CREDIT BALANCE AFTER THAT ALSO UP TO 31.3.2006. UNDER THI S FACTUAL POSITION, WE FIND THAT ON THIS AMOUNT OF RS.1 CRORE, THE ASSESSEE WAS EARN ING INTEREST INCOME FROM THE IST DAY OF CREDIT IN THE SAME SAVINGS BANK A/C I.E. ON 20.12.005. EVEN FOR THE PERIOD AFTER 31.1.2006, INTEREST INCOME MUST BE THE RE ON THIS ACCOUNT ALTHOUGH THE SAME IS NOT CREDITED BY THE BANK TILL 31.3.2006 . INTEREST FOR THE PERIOD FROM 1.2.2006 UP TO 31.3.2006 MUST HAVE BEEN CREDITED BY BANK IN THE NEXT YEAR BEING INTEREST FOR 1.2.2006 TO 31.7.2006. THE ASSESSING O FFICER COULD HAVE BROUGHT TO TAX SUCH INTEREST INCOME IN THE PRESENT YEAR FOR 1. 2.2006 TO 31.3.2006 BUT THIS WAS NOT DONE BUT EVEN THAN, IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT EARNING INCOME IN THIS PERIOD. NOW, THE QUESTION IS WHETHER FOR THE INTEREST BEARING BORROWED FUNDS WHICH WAS UTILIZED FOR EARNING INTER EST INCOME, DEDUCTION ON ACCOUNT OF INTEREST PAYMENT IS ALLOWABLE ONLY TO TH E EXTENT OF ACTUAL INTEREST INCOME THEREON OR THE WHOLE AMOUNT OF INTEREST PAYM ENT SHOULD BE ALLOWED. IN OUR CONSIDERED OPINION, WHEN THE INTEREST BEARING B ORROWED FUNDS HAVE BEEN UTILIZED BY THE ASSESSEE FOR EARNING INTEREST INCOM E WHICH IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, DEDUCTION ON ACCOUN T OF FULL PAYMENT OF INTEREST PAGE 10 OF 11 ITA NO1065./DEL/09 IS ALLOWABLE TO THE ASSESSEE AND IT CANNOT BE RESTR ICTED TO THE EXTENT OF ACTUAL INTEREST INCOME ONLY. HENCE, WE DELETE THE DISALLOW ANCE OF INTEREST EXPENDITURE CONFIRMED BY LD CIT(A). THIS GROUND OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED IN THE TERMS INDICATED ABOVE. 15. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY 1 8TH OF MARCH, 2011. SD/- SD/- (R.P. TOLANI) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 18.3.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). PAGE 11 OF 11 ITA NO1065./DEL/09