Sri Bharath Bail , Bangalore V. Deputy Commissioner of Income Tax Circle-11(1), Bangalore

ITA 1198/BANG/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8228 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD SHARMA
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Principle of natural justice; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO. 1 198 /BANG/201 8 ASSESSMENT YEAR : 20 1 0 - 1 1 SHRI. BHARATH BAIL, NO. 668, DUSTVEN HOUSE, 10 TH CROSS WEST OF CHORD ROAD, II STAGE, BASAVESWARANAGARA, BENGALURU 560 086. PAN : AAKPB 2510 L VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. B. S. BALACHANDRAN, ADVOCATE REVENUE BY : SHRI. VINOD SHARMA, JCIT DATE OF HEARING : 06 . 0 8 .201 8 DATE OF PRONOUNCEMENT : 28 . 0 9 .201 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), INTER ALIA , ON FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (A) BEING OPPOSED TO PRINCIPLES OF NATURAL JUSTICE SINCE THE SAME IS PASSED WITHOUT PROPER APPLICATION MIND TO THE FACTS AND MATERIALS AVAILABLE IN ASSESSMENT RECORDS. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD PLACED CONFIRMATIONS OF ALL LENDERS BEFORE THE AO WHICH WAS VERIFIABLE, BEFORE DISMISSING THE APPEAL SOLELY ON THIS GROUND. 3. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD SATISFIED ALL THE CONDITIONS OF S.57 SINCE AN ASSESSEE IS A MASTER IN HIS BUSINESS WHO KNOWS HOW TO CONDUCT HIS BUSINESS AND THE AO OUGHT TO SEE ONLY IF STATUTORY CONDITIONS ARE ITA NO. 1198/BANG/2018 PAGE 2 OF 4 SATISFIED, AND FOR THIS REASON ALONE THE IMPUGNED ASSESSMENT ORDER IS TO BE HELD BAD AND ILLEGAL. 4. WITHOUT PREJUDICE, THE CIT(A)OUGHT TO HAVE APPRECIATED THAT THE MERE FORM-16A AND TDS WOULD NOT IPSO FACT DECIDE AN ISSUE, THAT TOO JUST TO DENY A STATUTORY BENEFIT PROVIDED UNDER THE ACT. 5. WITHOUT PREJUDICE, THE DEPT HAVING NOT FOUND ANY DEFECT IN THE APPELLANT'S BOOKS NOR HAVING DOUBTED THE AUTHENTICITY OF EXPENSES DEBITED THAT WAS CLAIMED UNDER S.57(III) OF THE ACT; AND THAT THE AO HAVING NOT BROUGHT ON RECORD ANY MATERIAL TO DISLODGE APPELLANT'S CONTENTIONS, THE ORDER OF CIT(A) IS UNSUSTAINABLE IN LAW AND HENCE TO BE SET ASIDE 6. THE APPELLANT CRAVES THE LEAVE OF THE COURT TO ADD, AMEND, ALTER, AND/OR WITHDRAW ANY OR ALL GROUNDS BEFORE OR DURING THE HEARING. 2. THOUGH VARIOUS GROUNDS ARE RAISED BUT THEY ALL RELATE TO THE DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 57 OF THE ACT. 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT ASSESSEE HAD CLAIMED RS.20,49,950/- AS DEDUCTION UNDER SECTION 57 OF THE INCOME TAX ACT ON THE GROUND THAT BEING THE MANAGING DIRECTOR OF THE COMPANY, HE HAD MOBILIZED FUNDS FOR THE COMPANY THROUGH BORROWING FUNDS FROM VARIOUS PARTIES. SUCH BORROWINGS WERE MADE DIRECTLY BY THE SAID PARTIES INTO THE COMPANY ON BEHALF OF THE APPELLANT AND ON SUCH BORROWINGS, INTEREST EARNED WAS AT RS. 20,49,500/-. THE ASSESSEE HAS DECLARED INTEREST OF RS.20,49,500/- AND CLAIMED DEDUCTION OF THE SAME UNDER SECTION 57 ALSO AND ACCORDINGLY REPORTED NIL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE TDS CERTIFICATE FOR THE INTEREST PAID WAS ALSO ISSUED TO THE ASSESSEE AND HE CLAIMED THE ADJUSTMENT OF THE SAME ALSO. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT INTEREST ON BORROWINGS WERE DIRECTLY PAID BY THE COMPANY TO THE LENDER THOUGH THE BORROWINGS WERE ROUTED THROUGH ASSESSEE. THE ASSESSEE HAS CLAIMED THAT SINCE WHATEVER INTEREST WAS ACCRUED TO THE ASSESSEE, IT WAS DIRECTLY PAID TO THE LENDER. THE DEDUCTION OF THE SAME BE ALLOWED TO THE ASSESSEE TO COMPUTE THE INCOME FROM OTHER SOURCES. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, AO HAS DISALLOWED THE CLAIM OF DEDUCTION OF RS.20,49,500/-. ITA NO. 1198/BANG/2018 PAGE 3 OF 4 ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. 4. I HAVE CAREFULLY EXAMINED THE ORDERS OF AUTHORITIES BELOW IN THE LIGHT OF RIVAL SUBMISSIONS AND I FIND THAT ASSESSEE HIMSELF HAS DECLARED THE INTEREST INCOME OF RS.20,49,500/- ON WHICH TDS WAS DEDUCTED BY THE COMPANY FOR WHICH TDS CERTIFICATE WAS ISSUED TO THE ASSESSEE AND THE ASSESSEE HAS ALSO CLAIMED THE BENEFIT OF TDS DEDUCTED BY THE COMPANY ON PAYMENT OF INTEREST. THE CONTENTIONS OF THE ASSESSEE THAT HE HAS SIMPLY ORGANISED THE BORROWINGS FOR THE COMPANY AND IT WAS DIRECTLY GIVEN TO THE COMPANY BY THE LENDER AND INTEREST WAS ALSO DIRECTLY PAID TO THE LENDER. I AM UNABLE TO UNDERSTAND AS TO WHY TDS CERTIFICATE DEDUCTING THE TDS ON PAYMENT OF INTEREST WAS ISSUED TO THE ASSESSEE. IF THE ASSESSEE HAS RECEIVED THE BORROWINGS FROM THE LENDER AND FURTHER ADVANCED TO THE COMPANY AND WHENEVER THE COMPANY PAID THE INTEREST TO THE ASSESSEE AND IT WAS FURTHER PAID TO THE LENDER, THE TDS WAS ALSO REQUIRED TO BE DEDUCTED AT BOTH THE POINTS WHENEVER INTEREST WAS PAID TO THE LENDERS. IN THE INSTANT CASE, THE CONTENTION OF THE ASSESSEE IS THAT HE HAS SIMPLY ORGANIZED THE BORROWINGS FOR THE COMPANY AND THE BORROWING WAS DIRECTLY GIVEN TO THE COMPANY AND THE COMPANY DIRECTLY PAID THE INTEREST TO THE LENDERS. IN SUCH CIRCUMSTANCE WHERE IS THE NEED TO ISSUE THE TDS CERTIFICATE IN FAVOUR OF THE ASSESSEE. IF THE ASSESSEE RECEIVED THE TDS CERTIFICATE ON DEDUCTION ON INTEREST PAYMENT AND CLAIMED THE BENEFIT OF THE SAME, THEN HE SHOULD HAVE OFFERED THE CORRESPONDING INCOME ACCRUED ON ACCOUNT OF DEDUCTION OF TDS. IF THE INCOME IS ACCRUED TO THE ASSESSEE, THE ONUS IS UPON THE ASSESSEE TO ESTABLISH AS TO HOW HE HAS MADE THE PAYMENT TO THE LENDER. IN THE INSTANT CASE, ALL THESE ASPECTS WERE NOT EXAMINED BY THE LOWER AUTHORITIES. UNDER THESE CIRCUMSTANCES, I AM OF THE VIEW THAT CIT(A) HAS NOT PROPERLY EXAMINED THE FACTS OF THE CASE. THEREFORE, I SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE AO TO RE-EXAMINE THE CLAIM IN THE LIGHT OF ABOVE OBSERVATIONS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1198/BANG/2018 PAGE 4 OF 4 PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF SEPTEMBER, 2018. SD/- SD/- BANGALORE. DATED: 28 TH SEPTEMBER, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. ( A. K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER