RAMNIKLAL JIVRAJ KARANI, MUMBAI V. ITO 17(3)(4), MUMBAI

ITA 1174/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3464 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUSH SONKAR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Opportunity of being heard

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . !' #$%& , !' () ! BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO. 1174/MUM/2012 ( * * * * / ASSESSMENT YEAR : 2007-08 RAMNIKLAL JIVRAJ KARANI, RAJNIKETAN BLDG., FLAT NO. 6, 356, TELANG CROSS ROAD, NEAR MATUNGA MUMBAI-400 019 / VS. THE ITO (3)(4), MUMBAI )+ !' ./ ,- ./PAN/GIR NO. : AACPK 1267H ( +. /APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ! / APPELLANT BY: SHRI JITENDRA SINGH /0+. 2 1 ! / RESPONDENT BY : SHRI PIYUSH SONKAR 2 3' / DATE OF HEARING : 30.5.2013 45* 2 3' / DATE OF PRONOUNCEMENT : 30.5.2013 (!6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-19, MUMBAI DT. 2.12.2011 PERTAINING TO ASSES SMENT YEAR 2007-08. 2. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO DI SALLOWANCE OF INTEREST EXPENDITURE AT RS. 3,26,039/-. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS TA KEN SECURED AND UNSECURED LOANS AT RS. 43,57,915/-. ON FURTHER SCR UTINIZING THE BALANCE SHEET, THE AO NOTICED THAT THE ASSESSEE HAS GIVEN L OANS AND ADVANCES AT ITA NO.1174/M/2012 2 RS. 39,09,438/-. ON FURTHER SCRUTINY OF THE STATEM ENT OF ACCOUNTS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED INTEREST EXPE NDITURE AT RS. 4,09,850/- WHEREAS INTEREST RECEIVED ON LOANS AND ADVANCES IS SHOWN AT RS. 41,633/- ONLY. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO W HY INTEREST SHOULD NOT BE DISALLOWED UNDER THE PROVISO TO SEC. 36(1)(III) ON THE LOANS AND ADVANCES GIVEN TO THE PARTIES OUT OF BORROWED FUNDS . IT WAS EXPLAINED BY THE ASSESSEE THAT THE LOANS AND ADVANCES GIVEN BY T HE ASSESSEE ARE NOT OUT OF INTEREST BEARING FUNDS. THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND WAS OF THE FIRM BELIEF THAT THE ASSESS EE HAS GIVEN INTEREST FREE LOANS TO THE PARTIES. AT THE SAME TIME THE AS SESSEE HAS TAKEN LOANS FROM BANKS AND OTHER ASSOCIATES ON WHICH IT HAS PAI D INTEREST. ACCORDINGLY, THE AO CALCULATED THE AMOUNT OF INTERE ST TO BE DISALLOWED BY USING THE FOLLOWING FORMULA TOTAL LOAN GIVEN X INTEREST PAID TOTAL UNSECURED LOAN AND COMPUTED THE DISALLOWANCE AT RS. 3,26,039/- 4. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE POIN TED OUT THAT THOUGH THE AO HAS REFERRED TO THE LOANS GIVEN TO SOME PART IES BUT HAS NOT GIVEN ANY NAMES TO WHOM THE INTEREST FREE LOANS HAVE BEEN GIVEN. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THE BALA NCE SHEET FOR THE YEAR UNDER CONSIDERATION AND POINTED OUT THAT THE ASSESS EE HAS NOT ONLY BORROWED CAPITAL BUT HAS MORE THAN THAT OWN CAPITAL AND THE LOANS AND ADVANCES REFERRED TO BY THE AO HAVE BEEN GIVEN OUT OF OWN CAPITAL AND NOT BORROWED CAPITAL. ITA NO.1174/M/2012 3 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE SUBMISSION, PERUSED THE O RDERS OF THE LOWER AUTHORITIES AND THE STATEMENT OF ACCOUNTS SUB MITTED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SHOWN B ORROWED CAPITAL TO THE EXTENT OF RS. 4,48,476/- WHICH COMPRISES OF LOANS T AKEN AT RS. 43,57,915/- AND LOAN GIVEN AT RS. 39,09,438/- AND N ET FIGURE OF RS. 4,48,476/- HAS BEEN SHOWN AS LOAN LIABILITY. IT AP PEARS THAT THE AO HAS NOT CONSIDERED THE BIFURCATION AND THEREFORE HAS ON LY REFERRED TO SOME PARTIES WITHOUT MENTIONING THEIR NAMES. THEREFORE , IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK T O THE FILE OF THE AO. THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER CON SIDERING THE DETAILS OF LOANS TAKEN AND GIVEN AS EXHIBITED IN THE BALANCE S HEET OF THE ASSESSEE KEEPING IN MIND THE OWN CAPITAL OF THE ASSESSEE. T HE AO IS ALSO DIRECTED TO VERIFY THE INDIVIDUAL ACCOUNTS OF THE PERSONS TO WHOM LOANS HAS BEEN GIVEN BEFORE COMING TO ANY DECISION. NEEDLESS TO M ENTION, THE AO IS EXPECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.5.2013 . (!6 2 5* '! 7 8( 9 30.5.2013 5 2 : SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT !' () / ACCOUNTANT MEMBER MUMBAI; 8( DATED 30.5.2013 . . ./ RJ , SR. PS ITA NO.1174/M/2012 4 (!6 (!6 (!6 (!6 2 22 2 /3# /3# /3# /3# ;!#*3 ;!#*3 ;!#*3 ;!#*3 / COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. #=: /3 , , / DR, ITAT, MUMBAI 6. : > / GUARD FILE. (!6 (!6 (!6 (!6 / BY ORDER, 0#3 /3 //TRUE COPY// ? ?? ? / @ @ @ @ , , , , (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI