MAHESH HIRO MATHANI, MUMBAI V. ITO IT 4(1), MUMBAI

ITA 1266/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9544 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEELIMA V NADKARNI LD
• Assessee Lawyers: G L PURSNANY LD
• Section: 143(3)

Judgement Text

ITA NO.1266/MUM/2016 MAHESH HIRO MATHANI ASSESSMENT YEAR :2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1266/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) MAHESH HIRO MAHTANI 21-B, ELCO ARCADE 46, HILL ROAD BANDRA (W), MUMBAI-400 050. / VS. INCOME TAX OFFICER - 4(1) SCINDIA HOUSE BALLARD PIER MUMBAI-400 038. ! ./ ./PAN/GIR NO. AFBPM-6025-M ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : G.L. PURSNANY- LD. AR REVENUE BY : MRS. NEELIMA V. NADKARNI - LD.DR / DATE OF HEARING : 12/12/2018 / DATE OF PRONOUNCEMENT : 20/12/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-57, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-57/ARR.79/2015-16 DATED 29/12/2015.THE REVISED GROUNDS FILED BY THE ASSESSE E READ AS UNDER: - LEARNED ITO HAS ERRED IN MATTER OF FACT AS WELL AS LAW AS UNDER: - 1. DISALLOWING INTEREST PAID ON LOANS OF RS.24,11,2 26/- ITA NO.1266/MUM/2016 MAHESH HIRO MATHANI ASSESSMENT YEAR :2011-12 2 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. IN COME TAX OFFICER-4(1), MUMBAI [AO] IN SCRUTINY ASSESSMENT U/ S 143(3) ON 24/03/2014 WHEREIN THE INCOME OF THE ASSESSEE WAS A SSESSED AT RS.62.29 LACS AFTER CERTAIN ADDITIONS / DISALLOWANC ES AS AGAINST RETURNED INCOME OF RS.36.75 LACS FILED BY THE ASSESSEE ON 28 /03/2012. THE ASSESSEE BEING NON-RESIDENT REFLECTED INCOME UNDER THE HEAD HOUSE PROPERTY, CAPITAL GAINS & OTHER SOURCES. 2. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE EARNED INTEREST INCOME OF RS.24.60 LACS, THE MAJORI TY OF WHICH WAS EARNED FROM PARTIES OTHER THAN THE BANK. AGAINST TH E SAME, THE ASSESSEE CLAIMED INTEREST EXPENDITURE OF RS.24.11 LACS AND A CCORDINGLY, OFFERED INCOME OF RS.0.49 LACS AS INTEREST INCOME. THE ASSE SSEE WAS DIRECTED THE SUBSTANTIATE THE SAME. IN RESPONSE, THE ASSESSE E SUBMITTED DETAILS OF INTEREST RECEIVED AND PAID. IT WAS NOTED THAT TH E TRANSACTIONS WERE BETWEEN FAMILY MEMBERS ONLY AND IT WAS ALSO SEEN TH AT HUGE LOANS WERE TAKEN DURING THE YEAR WHICH WERE NOT UTILIZED TO EA RN THE INTEREST INCOME BUT ADVANCED AS SHARE APPLICATION MONEY OR TO REPAY THE EARLIER LOANS. ALTHOUGH THE ASSESSEE JUSTIFIED IT STAND VIDE REPLI ES DATED 05/02/2014, 21/02/2014 & 27/02/2014, HOWEVER, NOT CONVINCED LD. AO DISALLOWED THE INTEREST EXPENDITURE OF RS.24.11 LACS. THE STAND OF LD. AO, UPON CONFIRMATION BY FIRST APPELLATE AUTHORITY, IS UNDER APPEAL BEFORE US. THE LD. FIRST APPELLATE AUTHORITY CONFIRMED THE STAND O F LD. AO PRIMARILY IN VIEW OF THE FACT THAT THE ASSESSEE FAILED TO SHOW A NY CO-RELATION BETWEEN INTEREST PAID AND INTEREST RECEIVED BY THE ASSESSEE . 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI G.L.PURSNANY, ON THE STRENGTH OF FINANCIAL STATEMENTS AND OTHER ITA NO.1266/MUM/2016 MAHESH HIRO MATHANI ASSESSMENT YEAR :2011-12 3 DOCUMENTS AS PLACED IN THE PAPER-BOOK, SUBMITTED THAT LD. AO FELL IN ERROR BY NOT APPRECIATING THE FACT THAT LOANS RECEI VED BY THE ASSESSEE WERE DEPLOYED FOR MAJOR PART OF THE YEAR TO EARN TH E INTEREST INCOME AND THEREFORE, THERE WAS NEXUS BETWEEN THE INTEREST INC OME AND EXPENDITURE. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], MS. NEELIMA NADKARNI, SUBMITTED THAT THE ASSESSEE MISERABLY FAILED TO ESTABLISH THE SAID NEXUS IN TERMS OF PROVISIONS OF SECTION 57. 4. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. UPON CAREFUL CONSIDERA TION, WE FIND THAT THE MAIN PREMISE OF THE REVENUE TO DISALLOW THE INTERES T EXPENDITURE IS THE FACT THAT THE LOANS (LIABILITIES) REGISTERED A SHAR P INCREASE FROM RS.71.35 LACS TO RS.796.06 LACS DURING THE IMPUGNED AY AS AG AINST SHARP DECLINE IN LOANS (ASSETS) FROM RS.297.35 LACS TO RS .13.07 LACS AND FURTHER, THE LOANS OBTAINED BY THE ASSESSEE WERE UT ILIZED TO ADVANCE SHARE APPLICATION MONEY . ON THE OTHER HAND, THE CLAIM OF THE ASSESSEE REVOLVES AROUND THE FACT THAT THE ASSESSEE UTILIZED THE INTEREST-BEARING LOANS TO EARN INTEREST INCOME BY GRANTING LOANS FOR MAJOR PART OF THE YEAR AND THEREFORE, THERE WAS A NEXUS BETWEEN THE TWO. O UR ATTENTION IS ALSO DRAWN TO THE FACT THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.24.11 LACS FROM LOANS DURING IMPUGNED AY AND INCURRED TOT AL INTEREST EXPENDITURE OF RS.33.45 LACS, OUT OF WHICH EXPENDIT URE TO THE EXTENT OF RS.24.11 LACS ONLY HAS BEEN CLAIMED BY THE ASSESSEE AND BALANCE AMOUNT OF RS.9.34 LACS HAS BEEN TRANSFERRED TO CAPI TAL ACCOUNT AND NEVER CLAIMED AS DEDUCTION. ANOTHER NOTEWORTHY FACT IS THAT LOAN TO THE EXTENT OF RS.569.60 LACS RECEIVED BY THE ASSESSEE F ROM KUMAR MAHTANI @8% HAS BEEN LENT TO ROSHNI MAHTANI AT THE SAME RATE OF INTEREST FOR ITA NO.1266/MUM/2016 MAHESH HIRO MATHANI ASSESSMENT YEAR :2011-12 4 MAJOR PART OF THE YEAR AND THE SAME WAS SQUARED UP DURING THE IMPUGNED AY AND HENCE, NOT REFLECTED IN THE BALANCE SHEET AT YEAR END. THE ASSESSEE HAS PAID INTEREST OF RS.13.86 LACS TO KUMAR MAHTANI AS AGAINST RS.11.13 LACS RECEIVED FROM ROSHNI MAHTANI. SIMILARLY, INTEREST INCOME OF RS.12.97 LACS HAS BEEN REFLECTED FROM LOA NS GRANTED TO AN ENTITY NAMELY SHAMK MERCANTILE PVT. LTD. TO WHOM LOAN WAS GRANTED BY THE ASSESSEE OUT OF FUNDS BORROWED IN EARLIER YEARS FROM NANDA H.MAHTANI . ALL THESE FACTORS LEND CERTAIN CREDENCE TO THE AR GUMENTS OF LD. AR THAT THERE WAS SOME NEXUS BETWEEN THE FUNDS BORROWED BY THE ASSESSEE AND FUNDS LENT BY THE ASSESSEE. HOWEVER, I T IS ALSO NOTEWORTHY FACT THAT THE ASSESSEE, AT YEAR END, THE ASSESSEES MAJOR PART OF FUNDS HAVE BEEN DEPLOYED IN SHARES, DEBENTURES, BONDS AND MUTUAL FUNDS WHICH BOLSTER THE CASE OF THE REVENUE TO CERTAIN EX TENT. UNDER THE GIVEN CIRCUMSTANCES, WITH A VIEW TO END LITIGATION, WE AR E OF THE OPINION THAT IT WOULD BE PRUDENT TO GRANT CERTAIN ESTIMATED DEDUCTI ON OF INTEREST EXPENDITURE TO THE ASSESSEE. KEEPING IN VIEW OVERAL L FACTUAL MATRIX, WE ESTIMATE THE SAME @ RS.15 LACS WHICH THE ASSESSEE W OULD BE ENTITLED FOR DEDUCTION AGAINST INTEREST INCOME. ACCORDINGLY, THE IMPUGNED ADDITION OF RS.24.11 LACS AS MADE BY LD. AO SHALL S TAND RESTRICTED TO RS.9.11 LACS. THE LD. AO IS DIRECTED TO RECOMPUTE T HE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE DIRECTIONS. 5. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2018. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ITA NO.1266/MUM/2016 MAHESH HIRO MATHANI ASSESSMENT YEAR :2011-12 5 MUMBAI; DATED : 20/12/2018 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.