Padam Sain Gupta, New Delhi V. CIT- XI, New Delhi

ITA 1192/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0009 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 23-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK WADEKAR
• Assessee Lawyers: VENKATESH CAS; S SH RANO JAIN
• Keywords: Business income; Salary income
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 1192 /DEL / 2012 ASSESSMENT YEAR: 2007 - 08 PADAM SAIN GUPTA, VS. COMMISSIONER OF INCOME PROP. OSWAL ELECTRICALS (PUMPS) TAX, NEW DELHI DELHI, C - 5/2A, RANA PRATAP BAGH, OPP. CC COLONY, DELHI (PAN: AAAPG4043G ) (APPELLANT) (RESPONDENT) APPELLANT BY : S /SH . RANO JAIN & VENKATESH, CAS RESPONDEN T BY: SH. VIVEK WADEKAR, CIT( DR) DATE OF HEARING: 23.04.2015 DATE OF PRONOUNCEMENT: 06.05.2015 ORDER PER INTURI RAMA RAO, A.M .: THIS IS AN APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 AGAINST THE ORDER OF LEARNED CIT - XI, NEW DELHI, PASSED IN EXERCISE OF HIS POWER UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) RAISING THE FOLLOWING GROUNDS OF APP EAL: I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (CIT) UNDER SECTION 263 OF THE ACT IS BAD, BOTH IN THE EYE OF LAW AND ON FACTS. II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE AO IS UNTENABLE IN THE ABSENCE OF ORDER OF THE AO BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. III. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN IGNORING THE FACT THAT BOTH THE ISSUES I.E. THE ELIGIBILITY OF THE INTEREST 2 ITA NO. 1192/DEL /2012 ASSESSMENT YEAR: 2007 - 08 INCOME UNDER SECTION 80I B AS WELL AS DEDUCTION ON ACCOUNT OF THE INTEREST EXPENDITURE WAS BEFORE THE AO AND AS SUCH THE JURISDICTION ON THESE ISSUES UNDER SECTION 263 CANNOT BE AS SUMED. IV. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN NOT APPRECIATING THE FACT THAT AS PER THE PROVISION OF THE SECTION 80IB IT IS THE INCOME OF THE ELIGIBLE ENTITY WHICH HAS TO BE CONSIDERED FOR ALLOWING DEDUCTION AND AS SUCH T HE INTEREST INCOME FOR THE ELIGIBLE ENTITY HAS BEEN RIGHTLY ALLOWED BY THE AO IN THE ASSESSMENT ORDER. V. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN SETTING ASIDE THE ASSESSMENT ORDER ON THE ISSUE OF INTEREST EXPENDITURE OF RS.1 0,13,000/ - WITHOUT POINTING OUT HOW SUCH EXPENDITURE IS NOT ALLOWABLE ON THE FACTS OF THE CASE. VI. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO HAVING TAKEN ONE OF THE POSSIBLE VIEW THE LEARNED CIT WAS NOT JUSTIFIED IN HOLDING THE ASSESSMENT ORDER AS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. VII. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN IGNORING THE CONTENTION OF THE APPELLANT THAT THE PROCEEDING UNDER SECTION 263 CANNOT BE USED FOR SUBSTITUTING OPINION OF THE AO BY THAT OF THE CIT. VIII. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED, BOTH ON FACTS AND IN LAW, IN INVOKING REVISIONARY POWER UNDER SECTION 263 OF THE ACT DESPITE THE FACT THAT EVEN AFTER THOROUGH EXAMINATION, NO SPECIFIC FINDINGS HAVE BEEN GIVEN ON THE ISSUE OF HOW THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IX. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN IND IVIDUAL DERIVING INCOME FROM SALARY, HOUSE PROPERTY, BUSINESS AND PROFESSION AND FROM OTHER SOURCES. FOR THE ASSESSMENT YEAR 2007 - 08, THE RETURN OF INCOME WAS FILED ON 31.10.2007 DISCLOSING TOTAL INCOME OF RS. 4,89,716/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 6 TH MAY, 2009 AT A TOTAL INCOME OF RS. 6,36,892/ - FOR DISALLOWANCE OF MISCELLANEOUS EXPENDITURE OF RS. 1 ,47,176/ - . THE ASSESSEE HAD NOT AGITATED THE ADDITI ON BEFORE THE CIT . HOWEVER, SUBSEQUENTLY THE LEARNED CIT - XI, NEW DELHI , ISSUED A SHOW 3 ITA NO. 1192/DEL /2012 ASSESSMENT YEAR: 2007 - 08 CAUSE NOTICE UNDER SECTION 263 , DATED 13.10.2011 CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT SHOULD NOT BE SET ASIDE FOR DE NOVO ASSESSMENT ON THE FOLLO WING ISSUES: (A) THE INCOME IN YOUR CASE HAS BEEN COMPUTED AFTER ALLOWING DEDUCTION U/S 80IB OF RS. 508,465/ - BEING 25% OF THE NET PROFIT AS PER P&L A/C WHICH INTER ALIA INCLUDE INTEREST INCOME OF RS. 9,43,487/ - . THUS, DEDUCTION OF R S. 2,35,872/ - (BEING 25% OF RS. 9,43,487/ - ) HAS EXCESSIVELY BEE N ALLOWED. (B) FURTHER, IN COMPUTATION OF INCOME, YOU HAVE CLAIMED DEDUCTION OF RS. 10,13,000/ - ON ACCOUNT OF INTEREST PAID AND YOU HAD ALREADY DEBITED INTEREST AMOUNTING TO RS 22,34,523/ - IN P&L ACCOUNT BESIDES BANK INTERES T AMOUNTING TO RS. 86,09,195/ - . THESE ASPECTS REQUIRED DETAILED EXAMINATION. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESEE VIDE ITS LETTER DATED 21 ST JANUARY, 2011 SUBMITTED THAT THE ISSUE S PROPOSED IN THE SHOW CAUSE NOTICE WERE ALREADY CONSIDERED BY THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. I T WAS FURTHER SUBMITTED THAT THE INTERESTS WERE REALIZED FROM THE CUSTOMERS ON ACCOUNT OF DELAYED PAYMENTS AND THEREFORE IT HAS A DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE COMPANY WHICH IS NOTHING BUT A BUSINESS RECEIPTS AND RELIED UPON THE DECISIONS OF HON BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASES OF CIT VS ADVANCE DETERGENTS LTD., (2010) 228 CTR (DEL.) 356 AND CIT VS. PODDAR PIGMENTS LTD., (2010) 41 DTR (DEL) 390. IN RESPECT OF INTEREST PAID OF RS 10,13,000/ - , IT WAS SUBMITTED THAT THE LOANS WHICH W ERE TAKEN IN THE NAME OF ASSESSEE ARE DIRECTLY CLAIMED AS DEDUCTION IN THE COMPUTATION OF TOTAL INCOME AND THE LOANS WHICH WERE TAKEN IN THE NAME OF THE PROPRIETOR 4 ITA NO. 1192/DEL /2012 ASSESSMENT YEAR: 2007 - 08 CONCERN M/S OSWAL ELECTRICALS PUMPS IS DEBITED TO PROFIT AND LOSS ACCOUNT. I T WAS FURT HER SU BMITTED THAT THE LOANS WERE RAISED ONLY FOR BUSINESS PURPOSE AND THEREFORE CLEARLY ALLOWABLE AS DEDUCTION. THE LEARNED CIT AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE , VIDE ORDER DATED 07.02.2012 HELD THAT THE ASSESEE FAILED TO SUBSTANTIATE HIS CLAIM IN SUPPORT OF ALLOWABILITY OF DEDUCTIONS OF INTEREST INCOME OF RS. 2,35,872/ - U/S 80IB AND DEDUCTION OF RS. 10,13,000/ - ON ACCOUNT OF INTEREST PAID AND SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFRESH AS PER THE LAW AFTER BEING HEARD BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE CAME UP BEFORE US WITH THE PRESENT APPEAL. 4 . IT WAS SUBMITTED BY LEARNED AUTHORIZED REPRESENTATIVE THAT THE VERY SAME ISSUE RAISED BY CIT VIDE SHOW CAUSE NOTICE UNDER SECT ION 263 OF THE ACT WAS EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY ISSUING THE QUESTIONNAIRE DATED 30.10.2009 WHICH IS AT PAGE NO. 46 OF THE PAPER BOOK. AFTER CONSIDERING THE REPLIES FILED BY THE ASSESSEE, THE ASSESSMEN T ORDER CAME TO BE PASSED. IT WAS FURTHER SUBMITTED THAT IN ANY EVENT THE DENIAL OF EXEMPTION OF INTEREST INCOME RECEIVED FROM THE CUSTOMER IS NOT CORRECT, INASMUCH AS, INTEREST RECEIVED FROM CUSTOMER S PARTAKES THE CHARACTER OF THE BUSINESS RECEIPTS AND TH EREFORE ELIGIBLE FOR EXEMPTION UNDER SECTION 80IB OF THE ACT. THE RATIO OF HON BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASES OF CIT VS 5 ITA NO. 1192/DEL /2012 ASSESSMENT YEAR: 2007 - 08 ADVANCE DETERGENTS LTD. (SUPRA) AND CIT VS. PODDAR PIGMENTS LTD. (SUPRA) ARE SQUARELY APPLICABLE. 5. AS REGARDS TO THE INTEREST CLAIM OF RS. 10,13,000/ - , IT WAS SUBMITTED THAT IT WAS NOT A CASE OF DOUBLE DEDUCTION. THE AMOUNT OF RS. 10,13,000/ - WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT AND IT WAS CLAIMED AS DEDUCTION DIRECTLY IN THE COMPUTATION OF TOTAL INCOME. WH EREAS THE AMOUNT OF RS. 22,34, 523/ - DEBITED TO PROFIT AND LOSS ACCOUNT IS ON ACCOUNT OF LOANS BORROWED BY THE PROPRIETOR CONCERN OF THE APPELLANT AND THEREFORE, IS NOT A CASE OF DOUBLE DEDUCTION. THEREFORE, THE CLAIM SHOULD BE ALLOWED. HE FURTHER SUBMITTED THAT IN ANY EVENT THE LEARNED CIT HAD NOT GIVEN FINDING AS TO HOW THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. ON THE OTHER HAND, LEARNED DR VEHEMENTLY OPPOSED THE APPEAL AND PLACED RELIANCE ON THE ORDER OF CIT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. IT IS TRITE LAW THAT THE COMMISSION ER CAN EXERCISE JURISDICTION UNDER SECTION 263 OF THE ACT ONLY ON THE FULFILLMENT OF TWIN CONDITIONS THAT THE ASSESSMENT ORD ER SHOULD NOT ONLY BE ERRONEOUS , BUT ALSO PREJUDICIAL TO THE IN TEREST OF REVENUE. BUT IN THE PRESENT CASE, THE COMMISSIONER HAD EXERCISED THE JURISDICTION IN RESPECT OF THE ITEMS WHICH HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. THE ASSESSING OFFICER AFTER EXAMINATION O F THE ISSUE ON HAND TOOK POSSIBLE VIEW AND THIS VIEW IS 6 ITA NO. 1192/DEL /2012 ASSESSMENT YEAR: 2007 - 08 SUPPORTED BY THE DECISIONS (SUPRA) OF HON BLE JURISDICTIONAL HIGH COURT. THE PROVISIONS OF SECTION 263 OF THE ACT DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR THAT OF ASSESSING OFFICER AND THEREFORE, THE LEARNED CIT, IN OUR CONSIDERED OPINION, ERRED IN EXERCISING THE JURISDICTION UNDER SECTION 263 OF THE ACT. THEREFORE, WE HAVE NO HESITATION TO QUASH THE IMPUG NED ORDER PASSED BY LEARNED CIT IN EXERCISE OF POWER UNDER SECTION 263 OF THE ACT. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESEE ARE ALLOWED AND APPEAL BE TREATED AS FULLY ALLOWED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 6 T H M A Y , 2015. S D / - S D / - (G.C. GUPTA) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 6 T H M A Y , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI