DCIT, Circle - 34, Kolkata, Kolkata V. Harish Prito Ramchandani, Kolkata

ITA 1231/KOL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3185 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 03-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA SR DR
• Assessee Lawyers: B P JAISWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1231/KOL/2010 ASSESSMENT YEAR:2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 34, 18, RABINDRA SARANI, PODDAR COURT, 3 RD FLOOR, KOLKATA 700 001 / V/S . HARISH PRITO RAMCHANDANI C/O. CHINOY CHABLANI & CO. 13, BRABOURNE ROAD, KOLKATA 700 001 [ PAN NO.ADFPR 4379 R ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI K.N. JANA, SR-DR /BY RESPONDENT SHRI B.P. JAISWAL, FCA /DATE OF HEARING 10-06-2013 /DATE OF PRONOUNCEMENT 21-06-2013 /O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL FILED BY REVENUE IS ARISING OUT OF ORD ER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XX, KOLKATA (CIT(A) FOR SHOR T) IN APPEAL NO.205/CIT(A)- XX/DC CIR 34/08-09/KOL DATED 09-03-2010. THE ASSESS MENT WAS FRAMED BY DCIT, CIRCLE-34, KOLKATA U/S.143(3) OF THE INCOME-TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 12-12-2008 FOR ASSE SSMENT YEAR (AY) 2006-07. 2. THE FIRST TWO ISSUES IN THIS APPEAL OF REVENUE I S AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF INTEREST WRITTE N OFF AND ADVANCES WRITTEN ITA NO.1231/KOL/2010 A.Y. 2006-07 DCIT CIR-34 KOL V. HARISH P RAMCHANDANI PAGE 2 OFF OF RS.88,050/- AND RS.12,500/- RESPECTIVELY. F OR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS.1 AND 2:- 1) THE LD. C.I.T.,(A)-XX, KOLKATA HAS ERRED ON FA CTS AND IN LAW TO ALLOW THE DISALLOWANCE OF INTEREST WRITTEN OFF O F RS.88,050/- MADE BY THE ASSESSING OFFICER. 2) THE LD. C.I.T.,(A)-XX, KOLKATA HAS ERRED ON FAC TS AND IN LAW TO ALLOW THE DISALLOWANCE OF ADVANCE WRITTEN OFF OF RS .12,500/- MADE BY THE ASSESSING OFFICER. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT ASSESSEE HAS WR ITTEN OFF INTEREST AMOUNT OF RS.88,050/- AND ALSO ADVANCE TO SLEEK SALES (SS FOR SHORT) OF RS.12,500/-. AS THE ASSESSEE COULD NOT PRODUCE DETAILS AND EVIDENCE S BEFORE THE AO, HE MADE DISALLOWANCE BY OBSERVING AS UNDER:- THE ASSESSEE HAS DEBITED SHARE OF LOSS OF FIRM OF RS.2,721/-, STOCK OF HORSE WRITTEN OFF OF RS.20000/- ACCRUED INTEREST WRITTEN OFF OF RS.88 ,050/- ADVANCE TO RCTC WRITTEN OFF OF RS.44,225/- AND ADVANCE TO SLEEK SALES WRITTEN O FF OF RS.12,500/-. THE A/R WAS ASKED TO SUBMIT THE DETAILS OF INCOME SHOWN IN RESP ECT OF ABOVE MENTIONED WRITTEN OFF EXPENDITURE IN EARLIER YEARS AND STEPS TO RECOVER T HE SAME AMOUNTS WITH EVIDENCES. IN ABSENCE OF DETAILS SUBMITTED IN RESPECT OF WRITTEN OFF EXPENSES, THE SAID EXPENDITURES ARE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO WITHOUT GOING INTO THE DETAILS DELETING THE DISALLOWANCE JUST ON THE BASIS OF SUBMISSION OF ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE BEFORE CIT(A) STATED T HAT IT HAD OFFERED INTEREST OF RS.88,050/- FOR TAXATION IN AY 2002-03 AND NO EVIDE NCE TO THAT EFFECT WAS FILED. FURTHER, THERE IS NO EVIDENCE IN RESPECT OF M/S. SL EEK SALES HAS BECOME BAD BUT CIT(A) ALLOWED THE CLAIM OF ASSESSEE. EVEN NOW BEFO RE US THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT LET THE ASSESSEE FILE DETAILS OF INTEREST WRITTEN OFF AND T HAT THE SAME WAS OFFERED FOR TAXATION IN AY 2002-03. FURTHER, THE ASSESSEE HAS L ED EVIDENCES THAT M/S. SLEEK SALES HAS BECOME BAD. IN SUCH CIRCUMSTANCES, WE SET ASIDE THIS ISSUE TO THE FILE ITA NO.1231/KOL/2010 A.Y. 2006-07 DCIT CIR-34 KOL V. HARISH P RAMCHANDANI PAGE 3 OF ASSESSING OFFICER AND RE-DIRECT HIM TO ALLOW LIB ERTY TO ASSESSEE TO FILE EVIDENCE AND THEN DECIDE THIS ISSUE. HENCE, THESE T WO ISSUES OF ASSESSEES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 4. COMING TO NEXT ISSUE IN THIS APPEAL OF REVENUE I S AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF INTEREST ON BOR ROWED FUNDS OF RS.13,16,080/-. FOR THIS, REVENUE HAS RAISED FOLLOW ING GROUND NO.3:- 3) THE LD. C.I.T.(A)-XX, KOLKATA HAS ERRED ON FAC TS AND IN LAW TO ALLOW THE ADDITION OF INTEREST ON BORROWED FUND OF RS.13,16,0 80/- MADE BY THE ASSESSING OFFICER. 5. BRIEFLY STATED FACTS ARE THAT ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTICED FROM THE COPY OF ACCOUNT THAT A SSESSEE HAD ADVANCED LOAN TO DIFFERENT PARTIES WITHOUT CHARGING ANY INTEREST AMOUNT BUT PAID INTEREST TOTALING TO RS.13,16,080/-. AS THE ASSESSEE ADVANCE D INTEREST FREE LOANS AND ALSO OBTAINED INTEREST BEARING LOAN ON WHICH INTEREST WA S PAID, THE AO DISALLOWED THE INTEREST PAID AMOUNTING TO RS.13,16,080/-. AGGRIEVE D, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING IN PARA-7 OF HIS ORDER, WHICH READS AS UNDER:- 7. GROUND NO. 4 RELATES TO DISALLOWANCE OF INTERES T OF RS.13,16,080/- ON BORROWED FUND. THE APPELLANT HAS CLAIMED INTEREST OF RS.13,1 6,080/- ON BORROWED FUND. THE AO HAS DISALLOWED THE CLAIM ON THE GROUND THAT THE APP ELLANT HAS GIVEN INTEREST-FREE LOANS TO DIFFERENT PARTIES. THE LD. AR CONTENDED TH AT THE BORROWED FUND WAS UTILIZED FOR THE PURPOSES OF BUSINESS. THE APPELLANT HAS PAI D INTEREST OF RS.45,500/- ON UNSECURED LOANS, THAT OF RS.2,953/- ON MOTOR-CAR LO AN, AND, THAT OF RS.12,67,627/- TO THE UCO BANK. THE INTEREST-BEARING LOANS AS ON 31-0 3-2006 AMOUNT TOO RS.87,77,560/-, COMPRISING, UNSECURED LOAN OF RS.1, 60,000/-, AND, LOAN OF RS.86,17,560/- FROM THE UCO BANK. ON THE OTHER HAND , THE APPELLANT HAS GIVEN TRADE ADVANCES OF RS.99,36,124/- AS ON 31-03-2006. THE AB OVE DETAILS CLEARLY SHOW THAT OVER 98% OF THE INTEREST-BEARING LOANS ARE ACTUALLY BANK LOANS; MOREOVER, THE LOANS ARE FULLY UTILIZED FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT. THE FACTS ARE NOT DISPU TED BY THE AO. I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT. THE FACTS ARE NOT DISPU TED BY THE AO. I AM OF THE OPINION, THAT, SINCE THE BORROWED FUND IS FULLY UTILIZED FOR THE PURPOSE OF BUSINESS, THERE IS NO JUSTIFICATION FOR THE AO TO DISALLOW THE INTEREST O N BORROWED FUND. GROUND NO.4 IS ALLOWED. ITA NO.1231/KOL/2010 A.Y. 2006-07 DCIT CIR-34 KOL V. HARISH P RAMCHANDANI PAGE 4 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE CO ULD NOT PROVE THAT THE INTEREST FREE ADVANCES ARE TREATING ADVANCES AS CLAIMED BY A SSESSEE BEFORE US NOW. BUT NOW THE ASSESSEE HAS FILED A LIST OF INTEREST FREE TRADE ADVANCES BUT COULD NOT FILE THE SAME BEFORE THE AUTHORITIES BELOW AS ADMITTED B Y HIM. IN SUCH CIRCUMSTANCES, THESE ADVANCES, WHICH ARE UNSECURED LOAN OR TRADE ADVANCES, NEEDS VERIFICATION AT THE LEVEL OF ASSESSING OFFICE R. HENCE, THIS ISSUE OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S BY SETTING ASIDE THIS ISSUE TO THE FILE OF AO. 7. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF INTEREST OF RS.83,675/ - CLAIMED ON HOUSE BUILDING PROPERTY. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE HA S DEBITED INTEREST ON LOAN BORROWED FOR HOUSING PROPERTY AMOUNTING TO RS.2,33, 675/-. ACCORDING TO ASSESSING OFFICER, THE ALLOWABILITY OF INTEREST IS ONLY OF RS.1.50 LAKH AND ACCORDINGLY, HE DISALLOWED THE SUM OF RS.83,675/- U /S.24(B) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE VIDE PARA-14, WHICH IS RE-PRODUCED AS UNDE R:- 14. IN THE ADDITIONAL GROUND NO.1, IT HAS BEEN CON TENDED THAT THE AO WAS NOT JUSTIFIED IN RESTRICTING THE CLAIM U/S. 24(B) TO RS .1,50,000/-. THE APPELLANT HAS CLAIMED INTEREST OF RS.2,33,675/- ON BORROWED FUND AS PER T HE PROVISIONS OF SECTION 24(B),. THE AO HAS NOTED THAT THE CLAIM IN EXCESS OF RS.1,50,00 0/- FOR INTEREST ON BORROWED CAPITAL IS APPLICABLE ONLY IN THE CASE OF HOUSE PRO PERTY SPECIFIED U/S. 23(2). BUT, IN THE PRESENT CASE, THE HOUSE PROPERTY WAS LET-OUT, AND, RENTAL INCOME OF RS.5,00,000/- WAS EARNED, AND, DULY SHOWN IN THE RETURN OF INCOME. I FIND SUBSTANCE IN THE CONTENTION OF THE APPELLANT. THE RESTRICTION OF RS.1,50,000/- IS NOT APPLICABLE IN THE CASE OF THE APPELLANT, AS THE PROPERTY WAS LET-OUT DURING THE Y EAR, AND, RENTAL INCOME OF RS.5,00,000/- WAS SHOWN. THE AO IS DIRECTED TO ALLO W THE CLAIM OF THE APPELLANT. THE ADDITIONAL GROUND NO. 1 IS ALLOWED. ITA NO.1231/KOL/2010 A.Y. 2006-07 DCIT CIR-34 KOL V. HARISH P RAMCHANDANI PAGE 5 NOW, REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER OBSERVED THAT THERE WAS INCOME FROM HOUSE PROPERTY AT RS.1,07,395 /- AND ASSESSEE PAID INTEREST ON ACCOUNT OF HOUSE BUILDING LOAN AT RS.2, 33675/-. ONCE THE ASSESSEE HAS INCOME FROM HOUSE PROPERTY, THE DISALLOWANCE OF INTEREST IS NOT RESTRICTED TO THE EXTENT OF RS.1.50 LAKH, BUT IT IS ALLOWABLE ON THE ENTIRE PAYMENT OF INTEREST. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED AS INDICATED ABOVE. ORDER IS PRONOUNCED IN OPEN COURT ON 21 ST JUNE, 2013 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER KOLKATA, *DKP DATE : 21ST JUNE, 2013 !'# - ITA NO.1231/KOL/2010 A.Y. 2006-07 DCIT CIR-34 KOL V. HARISH P RAMCHANDANI PAGE 6 %%& %%& %%& %%& '& '& '& '& / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ''%( ) / CONCERNED CIT 4. ) - / CIT (A) 5. &*+ %%%( , %( / DR, ITAT, KOLKATA 6. +,- ./ / GUARD FILE. BY ORD ER/ , 0/2 '3 %(,