Suresh Linganagowda Patil, V. JCIT,

ITA 1227/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86084 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRA SAD
• Assessee Lawyers: JYOTHI
• Keywords: Salary income; Additional evidence; Commercial expediency
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI N.V. VASUDEVAN , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 1227 /BANG/201 3 (ASSESSMENT YEAR : 200 9 - 10 ) SHRI SURESH L I NGANAGOUDA PATIL, NO.428, 16 TH MAIN, 3 RD CROSS, 3 RD BLOCK, KORAMANGALA, BANGALORE - 560 034 PAN ACVPP 9147Q VS. JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE 11(2), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SMT. JYOTHI, ADVOCATE. RESPONDENT BY : DR. K. SHANKAR PRASAD, JCIT (D.R ) DATE OF H EARING : 07.01.2015. DATE OF P RONOUNCEMENT : 20.3. 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M. : T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (APPEALS) I, BANGALORE DT.31.5.2013 FOR ASSESSMENT YEAR 2009 - 10. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESSEE, AN INDIVIDUAL HAVING INCOME FROM SALARY, BUSI NESS AND OTHER SOURCES FILED HIS RETURN FOR ASSESSMENT YEAR 2009 - 10 ON 30.9.2009 DECLARING INCOME OF RS.36,52,814 AND AGRICULTURAL INCOME AT RS.19,14,000. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND T HE CASE WAS TAKEN UP 2 ITA NO. 1227 /BANG/ 2013 FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT.21.11.2011 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.9 3,61,460 AS AGAINST THE DECLARED INCOME OF R S.36,52,814. 2.2 AGGRIEVED BY THE ORDER OF ASSESSME NT FOR ASSESSMENT YEAR 2009 - 10 DT.21.11.2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS) I, BANGALORE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE ASSESSEE'S APPEAL VIDE ORDER DT.31.5.2013 , ALLOWING THE ASSESSEE PART IAL RELIEF. 3. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) I, BANGALORE DT.31.5.2013 FOR ASSESSMENT YEAR 2009 - 10, HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALLOWED THE INTEREST OF RS.52,19,708 PAID TO ICICI BANK AS CLAIMED BY THE APPELLANT IN FULL. 2. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAD NO GENUINE BUSINESS EXPEDIENCY IN ADVANCING THE LOAN AT CONCESSIONAL RATE TO THE FIRM. 3. ON THE FACTS, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ACCEPTED THE EVIDENCE PRODUCED BY THE APPELLANT WHERE THE APPELLANT WAS RESTRICTED TO GIVE LOAN TO THE FIRM AT CONCESSIONAL RATE ON BUSINESS C OMPULSION, WHEREAS THE LOAN BORROWED WAS FOR BUSINESS PURPOSES AND ACCORDINGLY HE OUGHT TO HAVE REFRAINED FROM DISALLOWING THE CLAIM OF THE APPELLANT. 4. WITHOUT PREJUDICE, THE DISALLOWANCE AS SUSTAINED BY THE LEARNED CIT (APPEALS) IS ARBITRARY, EXCESSIV E AND OUGHT TO BE DELETED IN FULL. 5. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3 ITA NO. 1227 /BANG/ 2013 4. GROUNDS AT S.NOS.1 TO 3 : DISALLOWANCE OF INTEREST PAID : RS.37,94,027. 4.1 IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD EARNED AND OFFERED INTEREST INCOME OF RS.51,19,667 FROM M/S. BASANT BETONS, A FIRM IN WHICH THE ASSESSEE WAS A PARTNER. THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE HAD TAKEN A LOAN OF RS.3,65,00,000 FROM ICICI BANK @ 15.25% INTEREST PER ANNUM AND ADVANCED THE SAME TO THE FIRM M/S. BAS ANT BE TONS @ 4% INTEREST PER ANNUM. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE INTEREST OF RS.52,19,708 PAID BY HIM TO THE ICICI BANK HAD BEEN SET OFF BY INTEREST OF RS.51,19,667 EARNED FR O M THE FIRM M/S. BASANT BETONS. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE HAVING TAKEN THE LOAN FROM ICICI BANK @ 15.75% INTEREST PER ANNUM, OUGHT TO HAVE CHARGED THE SAME RATE OF INTEREST I.E. 15.75% PER ANNUM ON THE SAME AMOUNT LENT TO M/S. BASANT BETONS. THE ASSESSING OFFICER BEING OF THE VIEW THAT THE AS SESSEE'S ACTION IN CHARGING INTEREST OF JUST 4% ON THE LOAN ADVANCED TO THE SAID FIRM WAS NOT PRUDENT FROM THE BUSINESS POINT OF VIEW, AND ALLOWED THE ASSESSEE'S INTEREST CLAIM TO THE EXTENT OF RS.13,25,640 OUT OF THE INTEREST OF RS.52,19,708 PAID BY THE A SSESSEE TO ICICI BANK; FOR THE REASON THAT THE DIFFERENCE IN THE RATE OF INTEREST I.E. 11.75%, P ER ANNUM, PAID BY THE ASSESSEE WAS IN EXCESS TO THE EXTENT OF RS.34,94,027. 4.2 ON APPEAL, THE LEARNED CIT (APPEALS) CALLED FOR A REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS PUT FORTH BY THE ASSESSEE. THE ASSESSING OFFICER IN HIS REMAND REPORT DT.11.10.2012, AFTER CONSIDERING THE ASSESSEE'S SUBMISSIONS, SUBMITTED THAT THERE 4 ITA NO. 1227 /BANG/ 2013 WAS NO MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT HE WAS FORCED BY CONDI TIONS LAID DOWN BY SBI VIDE THEIR LETTER DT.24.1.2008 TO ADVA NCE THE AMOUNT OF RS.3.65 CRORES BORROWED FROM ICICI BANK TO M/S. BASANT BETONS AND CHA R GE INTEREST THEREON ONLY AT 4% PER ANNUM , SINCE THE ASSESSING OFFICER FOUND ON A PERUSAL OF THE S AID SANCTI ON LETTER OF THE BANK THAT THERE IS NO MENTION OF SUCH A CONDITION THEREIN . IN THE LIGHT OF TH E REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, THE LEARNED CIT (APPEALS) HELD THAT THE DISALLOWANCE OF INTEREST AS MADE BY THE ASSESSING OFFICER WAS CORRECT AND UPHELD THE SAME. 4.3 THE LD. AR WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. THE LD. AR CONTENDED THAT THE AUTHORITIES BELOW OUGHT TO HAVE ALLOWED THE INTEREST OF RS.52,19,708 PAID TO ICICI BANK AS CLAIMED BY THE ASSESSEE AS THE LOAN WAS ADVANCE D AT A CONCESSIONAL RATE TO THE FIRM M/S. BASANT BETONS ON GROUNDS OF COMMERCIAL EXPEDIENCY AND BUSINESS COMPULSIONS. IN SUPPORT OF THIS CONTENTION, THE LD. AR PLACED RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF S.A. BUILDERS (288 IT R 1). THE LD. AR FILED WRITTEN SUBMISSIONS DT.6.1.2015 AND ALSO REITERATED THE SUBMISSIONS PUT FORTH BEFORE THE LEARNED CIT (APPEALS) IN APPELLATE PROCEEDINGS AND PRAYED THAT THE ASSESSEE'S APPEAL BE ALLOWED. 4.4 PER CONTRA, THE LD. DR SUPPORTED THE I MPUGNED ORDER OF THE LEARNED CIT (APPEALS). THE LD. DR SUBMITTED THAT ALL THE CONTENTIONS PUT FORTH BY THE ASSESSEE IN THIS APPEAL HAVE BEEN CONSIDERED BY THE LEARNED CIT (APPEALS) AND REJECTED, SINCE THE ASSESSEE S CLAIM OF BUSINESS COMPULSION, FOR ADVAN CING THE LOAN TO M/S. BASANT BETONS HAS NOT BEEN ESTABLISHED BEFORE THE AUTHORITIES BELOW AND HAS BEEN FOUND TO BE FACTUALLY INCORRECT. IT 5 ITA NO. 1227 /BANG/ 2013 WAS ALSO SUBMITTED THAT THE ASSESSEE HAS FACTUALLY FAILED TO ESTABLISH COMMERCIAL EXPEDIENCY AS CLAIMED AND THE DECI SION OF THE HON'BLE APEX COURT IN THE CASE OF S.A. BUILDERS (SUPRA) IS NOT APPLICABLE TO THE ASSESSEE'S CASE AND WOULD NOT COME TO HIS RESCUE. IN VIEW OF THE ABOVE, THE LD. DR PRAYED THAT THE DECISION OF THE LEARNED CIT (APPEALS) ON THIS ISSUE BE UPHELD. 4.5 BY LETTER DT.7.1.2015, THE LEARNED AUTHORISED REPRESENTATIVE HAS FILED A PAPER BOOK CONTAINING PAGES 1 TO 196, ALONG WITH AN APPLICATION U/R 18(4) OF THE ITAT RULES, 1963 SEEKING TO FILE ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. FROM A PERUSAL OF TH IS APPLICATION AND THE ATTACHMENTS THERETO, WE FIND THAT IN THE INDEX THERETO ON PAGE 1 OF THE PAPER BOOK THE ASSESSEE HAS SUBMITTED / CONFIRMED THAT THE ITEMS AT S. NOS. 2 TO 9 IN PAGES 6 TO 158 AND ITEM 12 AT PAGES 197 & 198 HAVE BEEN AL READY FILED BEFOR E THE AUTHORITIES BELOW. IN THAT VIEW OF THE MATTER, THESE DOCUMENTS BEING ADMITTEDLY ALREADY A PART OF THE RECORD OF THE AUTHORITIES BELOW, DO NOT CONSTITUTE FRESH EVIDENCE IN THE CASE ON HAND AND HAVING OBVIOUSLY BEEN ALREADY CONSIDERED BY THEM , THERE I S NO NECESSITY FOR THE SAME TO BE ADMITTED AS ADDITIONAL EVIDENCE. ITEM N O .1 AT PAGES 1 TO 5 OF THE PAPER BOOK ARE WRITTEN SUBMISSIONS DT.5.1.2015 PUT FORTH BY THE ASSESSEE BEFORE THIS APPEAL AND ARE DULY CONSIDERED IN THIS APPEAL. THESE WRITTEN SUBMISSI ONS (SUPRA) ARE ONLY ARGUMENTS OF THE ASSESSEE AND WOULD NOT CONSTITUTE ADDITIONAL EVIDENCE AS SUCH THAT REQUIRE TO BE ADMITTED. THE ITEMS AT S.NOS.10 AND 11 AT PAGES 159 TO 196 OF THE PAPER BOOK FILED ARE DOCUMENTS PERTAINING TO M/S. BASANT BETONS; SUCH AS ITS RETURNS OF INCOME AND PARTNERSHIP DEED. WE 6 ITA NO. 1227 /BANG/ 2013 FIND, ON PERUSAL THEREOF, THAT THESE ITEMS ARE NOT RELEVANT OR MATERIAL TO DECIDE THE ISSUE FOR ADJUDICATION BEFORE US ON MERITS IN THE CASE ON HAND AND THEREFORE DECLINE TO ADMIT THEM AS ADDITIONAL EVIDEN CE. IN THE LIGHT OF THE DISCUSSIONS ABOVE, WE FIND THAT THE ITEMS PLACED BEFORE US FOR ADMISSION AS ADDITIONAL EVIDENCE IN PAPER BOOK (PAGES 1 TO 198) ARE LARGELY EITHER ADMITTEDLY FILED BEFORE THE AUTHORITIES BELOW, VIZ. S.NOS.2 TO 9 AND 12 OR CONSIDERE D BY US, VIZ. S.NO.1 OR NOT RELEVANT FOR DECIDING THE OUTCOME OF THE ISSUE BEFORE US FOR ADJUDICATION ON MERITS, VIZ. S.NOS.10 AND 11 AND THEREFORE WE FIND NO REASON TO CONSIDER THEM AS ADDITIONAL EVIDENCE THAT REQUIRE TO BE ADMITTED. 4.6.1 WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNCEMENTS RELIED ON BY THE ASSESSEE. THE FACTS OF THE MATTER AS EMANATE FROM THE RECORD ARE THAT THE ASSESSEE HAD BORROWED A LOAN OF RS.3.6 5 CRORES FROM ICICI BANK @ 15.75% INTEREST PER ANNUM BY PLEDGING HIS OWN RESIDENTIAL PROPERTY. THE ASSESSEE THEN DIVERTED THE LOAN ENTIRELY TO M/S. BASANT BETONS, A FIRM IN WHICH HE WAS PARTNER AND CHARGED THE FIRM INTEREST @ 4% PER ANNUM, WHICH WAS FAR L OWER THAN THE RATE OF INTEREST V IZ. 17.5% PER ANNUM PAID BY HIM ON THE LOAN BORROWED FROM ICICI BANK. THE ASSESSEE'S CLAIM WAS THAT SINCE M/S. BASANT BETONS WAS RUNNING SHORT OF FUNDS, HE BORROWED THE LOAN OF RS.3.65 CRORES FROM ICICI BANK AND ADVANCED T HE SAME TO THE FIRM AS PER THE CONDITIONS LAID DOWN BY SBI VIDE THEIR LETTER DT.24.1.2008. THIS AVERMENT OF THE ASSESSEE WAS FOUND TO BE FACTUALLY INCORRECT, WHEN IN REMAND PROCEEDINGS THE ASSESSING OFFICER ON EXAMINATION OF THE SAID LETTER OBSERVED THAT T HE 7 ITA NO. 1227 /BANG/ 2013 SAID LETTER OF SBI OBSERVED THAT THE SAID LETTER IS SANCTION OF CREDIT FACILITIES TO M/S. BASANT BETONS AND THAT THERE IS NO MENTION IN THE SANCTION LETTER AS STATED BY THE ASSESSEE THAT INTEREST HAS TO BE CHARGED ONLY AT 4% PER ANNUM . THE ASSESSING OF FICER OBSERVED THAT THE SAID SANCTION LETTER INSTRUCTS THE BORROWER TO REDUCE ITS ADMINISTRATIVE EXPENSES AND DOES NOT MENTION THAT THE INTEREST LIABILITY OF THE FIRM REQUIRES TO BE REDUCED TO 4% AS CLAIMED BY THE ASSESSEE. IT IS NOT POSSIBLE FOR US TO CO NCUR WITH THE ASSESSEE'S CONTENTION THAT HE WAS FORCED TO GIVE THE LOAN AT CONCESSIONAL RATE OF INTEREST @ 4% PER ANNUM, AS THE ASSESSEE'S CONTENTION HAS BEEN PROVED TO BE FACTUALLY INCORRECT. BEFORE US, EXCEPT FOR REITERATING THE CLAIMS MADE BEFORE THE A UTHORITIES BELOW, THE ASSESSEE HAS FAILED TO CONTROVERT THE FINDINGS OF THE AUTHORITIES BELOW. 4.6.2 IN THIS FACTUAL MATRIX, WE FIND THAT THE ASSESSEE HAS FAILED TO ESTABLISH EITHER BEFORE THE AUTHORITIES BELOW OR BEFORE US THAT HE HAD GENUINE BUSIN ESS EXPEDIENCY FOR DIVERTING THE LOAN OF RS.3.65 CRORES TAKEN BY HIM FROM ICICI BANK @ 17.5% INTEREST PER ANNUM TO M/S. BASANT BETONS @ 4% INTEREST PER ANNUM. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT T HE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (APPEALS) IS TO BE UPHELD AND DO SO. CONSEQUENTLY, GROUNDS AT S.NOS.1 TO 3 RAISED BY THE ASSESSEE ARE DISMISSED. 5. THE GROUNDS AT S.NOS.4 & 6 ARE GENERAL IN NAT URE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 8 ITA NO. 1227 /BANG/ 2013 6. IN THE GROUND AT S.NO.5 , THE ASSESSEE CHALLENGES THE CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE ASSESSING OFFI CER HAS NO DISCRETION IN THE MATTER. THIS PROPOSITION HAS BEEN UPHELD BY THE HON'BLE APEX COURT IN THE CASE OF ANJUM H GHASWALA (252 ITR 1) AND W E, THEREFORE, UPHOLD THE ACTION OF THE ASSESSING OFFICER IN CHARGING THE SAID INTEREST. THE ASSESSING OFFICER IS, HOWEVER, DIRECTED TO RECOMPUTE TH E INTEREST CHARGEABLE U/S. 234B AND 234C OF THE ACT, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 7. IN THE RESULT, THE ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2009 - 10 IS DISMISSED. ORDER PRONOUNCED IN THE OPE N COURT ON 20 TH MARCH, 201 5 . SD/ - (N.V.VASUDEVAN) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELL ANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE