ACIT, Chandigarh V. Sh. Surinder Kumar Singal, Chandigarh

ITA 1100/CHANDI/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9883 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: B M MONGA
• Keywords: Earning of tax free income; Difference of opinion; Change of opinion
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1100/CHD/2014 ASSESSMENT YEAR: 2008-09 THE ACIT, VS SHRI SURINDER KUMAR SINGAL , CIRCLE 5(1), SCO 15, SECTOR 26, CHANDIGARH. CHANDIGARH. PAN: ADYPS5462P & ITA NO. 1023/CHD/2014 ASSESSMENT YEAR: 2008-09 SHRI SURINDER KUMAR SINGAL, VS THE ACIT, SCO 15, SECTOR 26, CIRCLE 5(1), CHANDIGARH. CHANDIGARH. PAN: ADYPS5462P (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI S.K.MITTAL, DR ASSESSEE BY : SHRI B.M.MONGA & SHRI ROHIT KAURA DATE OF HEARING : 14.06.2016 DATE OF PRONOUNCEMENT : 16.06.2016 O R D E R BOTH THESE APPEALS ARE DECIDED THROUGH THIS COMMON ORDER. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 2 ITA 1100/2014 ( DEPARTMENTAL APPEAL ) 3. THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 24.09.2014 FOR ASSESSMENT YEAR 2008-09. 4. IN THE PRESENT APPEAL, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 96,000/- UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT. IN THIS CASE, OR IGINAL ASSESSMENT WAS MADE ON 24.10.2010 UNDER SECTION 143 (3) OF THE INCOME TAX ACT BY INTER-ALIA MAKING DISALLOW ANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT OF RS. 14,77,926/-. THE ASSESSEE HAD FILED APPEAL AGAINST THE ORDER DATED 24.12.2010 IN WHICH ASSESSEE AGITATED T HE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT. SUBSEQUENTLY THE CASE WAS REOPENED U/S 147 OF THE INCOME TAX ACT ON THE REASONS THAT WHILE CONSIDERIN G DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT, I NTEREST FREE LOANS OF RS. 3 LACS AND RS. 5 LACS ADVANCED TO HIGENIC FOODS & NEW ELECTRIC MANUFACTURERS WAS NOT CONSIDER ED. AS THE ASSESSEE HAD PAID INTEREST ON SECURED/UNSECU RED LOANS BUT NO INTEREST ON LOAN AND ADVANCE OF RS. 8 LACS WAS CHARGED, THEREFORE, ASSESSING OFFICER REOPENED THE ASSESSMENT. THE ASSESSING OFFICER MADE THE ADDITIO N OF RS. 96,000/- IN THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT. 4(I) THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS). THE LD. CIT(APPEALS) FOUND THAT 3 DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) O F THE ACT WAS ALREADY MADE IN THIS CASE ON VARIOUS INTEREST F REE LOANS AND ADVANCES. THE ASSESSEE HAD ALREADY FILED THE APPEAL AGAINST SAID ORDER OF THE ASSESSING OFFICER. THE LD. CIT(APPEALS) NOTED THAT AS PER THIRD PROVISO TO SECTION 147, ASSESSING OFFICER CAN REASSESS ONLY THE INCOME S WHICH ARE NOT SUBJECT MATTER OF APPEALS. IN THIS C ASE, LD. CIT(APPEALS) FOUND THAT DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT WAS SUBJECTS MATTER OF APPEAL , THEREFORE, ASSESSING OFFICER CANNOT REOPEN THE ASSE SSEE. THE LD. CIT(APPEALS) ALSO NOTED THAT THERE IS A CHA NGE OF OPINION BY THE ASSESSING OFFICER WHICH IS NOT ALLOW ED FOR RE-OPENING OF THE ASSESSMENT. ACCORDINGLY, RE-OPEN ING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS HEL D TO BE NULL AND VOID AND RE-ASSESSMENT ORDER WAS ANNULL ED. THE OTHER GROUNDS OF APPEAL ON MERIT WERE NOT CONSI DERED AS THE SAME HAVE BECOME INFRUCTUOUS. 5. THE LD. DR CONTENDED THAT LD. CIT(APPEALS) SHOUL D HAVE DECIDED THE ADDITIONS ON MERIT BECAUSE THE INT EREST FREE LOANS OF RS. 8 LACS WERE NOT CONSIDERED AT THE ORIGINAL ASSESSMENT STAGE. 6. AFTER CONSIDERING RIVAL SUBMISSIONS, I DO NOT FI ND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE LD. CIT(APPEALS) ANNULLED THE RE-ASSESSMENT ON THE REAS ONS THAT THERE WAS A CHANGE OF OPINION BY THE ASSESSING OFFICER FOR RE-OPENING OF THE ASSESSMENT AND THAT A S PER 4 THIRD PROVISO TO SECTION 147 OF THE ACT, ASSESSING OFFICER CAN RE-ASSESS ONLY THE INCOMES WHICH ARE NOT SUBJEC T MATTER OF APPEALS. IN THIS CASE, ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT HAS ALREADY MADE ADDITION UNDER SECTION 36(1)(III) OF THE ACT WHICH WAS ALSO SUBJEC T MATTER OF APPEAL. THE RE-OPENING OF THE ASSESSMENT WAS, THEREFORE, ANNULLED. THE REVENUE HAS NOT RAISED AN Y SPECIFIC GROUND OF APPEAL CHALLENGING THE ORDER OF LD. CIT(APPEALS) IN ANNULLING THE RE-ASSESSMENT ORDER. EVEN DURING THE COURSE OF ARGUMENTS, NO INFIRMITY HAVE B EEN POINTED OUT FOR ANNULLING THE RE-ASSESSMENT ORDER I N THIS CASE UNDER SECTION 147 OF THE ACT. AS SUCH, THERE WAS NO REASON FOR THE LD. CIT(APPEALS) TO DECIDE THE ADDIT IONS OF DISALLOWANCE OF RS. 96,000/- ON MERIT. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE NOTED ABOVE AND IN THE ABSENCE OF ANY MATERIAL ON RECORD TO CHALLENGE THE FINDINGS OF LD. CIT(APPEALS) ON LEGAL ISSUE, I AM NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS). THE DEPARTMENTAL APPEAL STANDS DISMIS SED. 8. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ITA 1023/2014 (ASSESSEE'S APPEAL) 9. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 24.09.2014 FOR ASSESSMENT YEAR 2008-09 CHALLENGING THE 5 ADDITION OF RS. 4,45,594/- ON ACCOUNT OF DISALLOWAN CE UNDER SECTION 57(III) OF THE INCOME TAX ACT. 9(I) BRIEFLY THE FACTS OF THE CASE ARE THAT DURING THE YEAR, ASSESSEE HAS SHOWN INCOME UNDER THE HEAD OTH ER SOURCES RS. 5,88,530/- WHICH INCLUDES INCOME FROM INTEREST, FDR AND LIC COMMISSION. THE ASSESSEE HAS CLAIMED AN INTEREST AMOUNT OF RS. 5,56,993/- AS DEDUCTION UNDER SECTION 57 FROM THE ABOVE INCOME. THE ASSESSEE SUBMITTED COPY OF THE ACCOUNT OF PARTIES F ROM WHOM INTEREST AND COMMISSION WAS RECEIVED DURING TH E YEAR AND COPY OF HDFC LOAN ACCOUNT OF RS. 99 LACS O N WHICH A TOTAL INTEREST OF RS. 5,93,271/- WAS PAID A GAINST WHICH RS. 5,56,993/- WAS ADJUSTED. THE ASSESSING OFFICER, ON PERUSAL OF THE LOAN SANCTION LETTER FOU ND THAT LOAN HAD BEEN SANCTIONED AGAINST HOUSE PROPERTY WHE REAS FROM THE LEDGER ACCOUNT OF THE PARTIES, IT WAS FOUN D THAT ASSESSEE HAS EARNED INTEREST INCOME ON DEBIT BALANC E WITH THEM OF EARLIER PERIOD. IT WOULD MEAN THAT HD FC LOAN OF RS. 99 LACS HAS NOT BEEN EXCLUSIVELY TAKEN FOR THE PURPOSE OF EARNING INCOME FROM OTHER SOURCES. DURI NG THE YEAR, ASSESSEE HAS ALSO CARRIED SPECULATION ACT IVITY BY INVESTING LARGE AMOUNT OF MONEY INTO SHARES AND MUT UAL FUNDS. FROM THE PERUSAL OF THE BANK STATEMENTS, IT IS EVIDENT THAT THERE ARE CONTINUOUS WITHDRAWALS OF TH E FUNDS FROM INVESTMENT ACTIVITY ALSO OF THE ASSESSEE . THE ASSESSING OFFICER, THEREFORE, NOTED THAT THERE IS A POSSIBILITY OF LOAN FUNDS BEING DIVERTED FOR INVEST MENTS 6 INTO SHARES ALSO AND EXPENDITURE INCURRED FOR EARNI NG EXEMPT INCOME IN THE FORM OF DIVIDENDS FROM SHARES AND MUTUAL FUNDS, IS AS SUCH NOT AN ALLOWABLE EXPENDITU RE. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE EARNING OF SUCH INCOME FROM OTHER SOURCES, HOWEVER, CONSIDERING THE FACTS OF THE CASE, 80% OF RS. 5,56, 993/- AMOUNTING TO RS. 4,45,594/- WAS DISALLOWED. 10. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND SAME FACTS WERE REITERATED. IT WA S EXPLAINED THAT ASSESSEE HAS TAKEN LOAN FROM HDFC BA NK FOR THIS PURPOSE AND THE AMOUNT FINANCED WAS FOR TH E PURPOSE OF EARNING INTEREST INCOME. THOUGH SOME LO ANS FROM WHICH INTEREST HAS BEEN RECEIVED WERE ADVANCED EARLIER FROM FUNDS AVAILABLE WITH THE ASSESSEE BUT BY TAKING THE IMPUGNED LOAN FROM THE BANKS, THOSE FUND S WERE RESTORED TO SAME FIGURE AS IT WAS, WHEN THE LO AN WAS GIVEN OUT OF THESE FUNDS. THE PRESENT LOAN IN QUES TION WAS WHOLLY AND EXCLUSIVELY USED TO EARN INCOME FROM OTHER SOURCES. OUT OF LOAN AMOUNT OF RS. 99 LACS T AKEN FROM HDFC BANK, RS. 85 LACS WERE ADVANCED TO AAR KA Y INNOVATIONS ALONE AND THE REMAINING AMOUNT WAS USED FOR REPAYING LOAN RAISED EARLIER. IT WAS, THEREFORE, S UBMITTED THAT DISALLOWANCE SHOULD NOT BE MADE. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND DISMISSED APPEAL OF THE ASSESSEE. 7 11. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESS EE REFERRED TO STATEMENT OF ASSESSABLE INCOME (PB-13) TO SHOW THAT INCOME FROM OTHER SOURCES EARNED WAS SHOW N IN A SUM OF RS. 5,88,530/- WHICH INCLUDES INCOME FROM INTEREST, FDR AND LIC COMMISSION. THE ASSESSEE CLA IMED INTEREST AMOUNT OF RS. 5,56,933/- AS DEDUCTION UNDE R SECTION 57(III) FROM THE ABOVE INCOME. THE LD. COU NSEL FOR THE ASSESSEE REFERRED TO PB-24 WHICH IS THE COPY OF THE HDFC BANK ACCOUNT TO SHOW THAT ON 05.10.2007, THERE IS HDFC LOAN AMOUNT OF RS. 98,03,291/-. ON THE SAME D AY, AMOUNT OF RS. 85 LACS WAS ADVANCED TO M/S AAR KAY INNOVATIONS LTD. FURTHER, ON 06.10.2007, THE LOAN OF RS. 7,60,000/- WAS ADVANCED TO NATIONAL WOOLLEN MILLS. THE LD. COUNSEL FOR THE ASSESSEE ALSO FILED DETAILS OF NEXUS BETWEEN HDFC LOAN AND LOAN ADVANCED TO THE ABOVE TW O PARTIES AND OTHERS. THESE DETAILS ON RECORD CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT LOAN TAKEN F ROM HDFC BANK HAS BEEN UTILIZED FOR THE PURPOSE OF EARN ING INTEREST INCOME ON ADVANCING LOAN TO THESE TWO PART IES AND OTHERS. THUS, THE ASSESSEE HAS EARNED INCOME F ROM OTHER SOURCES AGAINST WHICH INTEREST PAID TO HDFC BANK WAS ALSO RELATED TO EARNING OF INCOME FROM OTHER SO URCES. THE INTEREST PAID WAS, THEREFORE, LAID OUT OR EXPAN DED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME FROM OTHER SOURCES. THE ASSE SSING OFFICER DISALLOWED 80% OF THE INTEREST INCOME MEANI NG THEREBY EXPENDITURE HAVE BEEN INCURRED FOR EARNING 8 INCOME FROM OTHER SOURCES. THE ASSESSEE, IN THIS W AY, HAS BEEN ABLE TO EXPLAIN THAT THERE WAS NEXUS BETWE EN EXPENDITURE INCURRED FOR EARNING INCOME FROM OTHER SOURCES. THE EXPLANATION GIVEN BY ASSESSEE PROVED THAT INTEREST EXPENDITURE PAID TO HDFC BANK WAS FOR THE PURPOSE OF EARNING INTEREST I.E. 'INCOME FROM OTHER SOURCES'. I, THEREFORE, SET ASIDE THE ORDER OF AUT HORITIES BELOW AND DELETE ENTIRE ADDITION. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 13. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED AND APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 16 TH JUNE, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD