Shri Vijay K.Shah, Bharuch V. The Income tax Officer,Ward-1, Bharuch

ITA 1298/AHD/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72901 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained investment; Principle of natural justice

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. !./ I.T.A. NO.1298/AHD/2009 A.Y. 2004-05 2. !./ I.T.A. NO.685/AHD/2010 A.Y. 2007-08 SHRI VIJAY KUMAR KANTILAL SHAH PROP.VIJAY TRANSPORT BHAGYODAY ESTATE ZADESHWAR ROAD, BHARUCH / VS. THE ITO WARD-1 BHARUCH/ ACIT CENTRAL CIRCLE-2 BHARUCH & !./'( !./ PAN/GIR NO. : AJOPS 2511 D ( &) / // / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY : SHRI S.N.DIVATIA, A.R. *+&) - , / RESPONDENT BY : SHRI R.K.DHANESTA, SR.D.R. ' . - $/ / / / / DATE OF HEARING : 03/02/2014 012 - $/ / DATE OF PRONOUNCEMENT : 06/02/2014 3 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TA X(APPEALS)-IV, AHMEDABAD (CIT(A) FOR SHORT) DATED 26/11/2008 AN D 21/12/2009 PERTAINING TO ASSESSMENT YEARS (AYS) 2004-05 & 2007 -08 RESPECTIVELY. ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 2 - 2. FIRST, WE TAKE UP THE ASSESSEES APPEAL FOR AY 2 004-05, I.E. ITA NO.1298/AHD/2009. THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO EACH OT HER: 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS AGAINST L AW AND FACTS OF THE CASE. 2. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE DI SALLOWANCE OF INTEREST OF RS.2,43,679/- INCURRED BY THE APPELLANT ON THE BORROWED FUNDS. THE LEARNED CIT(APPEALS) ERRED IN HOLDING T HAT THE APPELLANT HAD BORROWED FUNDS AT LOWER RATE OF INTER EST ALSO AND THEREFORE THE BORROWING AT HIGHER RATE OF INTEREST ATTRACTED THE DISALLOWANCE U/S.40A(2)(B) OF THE INCOME TAX ACT, 1 961. 3. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING DISAL LOWANCE OF INTEREST OF RS.39,828/- IN RESPECT OF LOAN TAKEN FO R CONSTRUCTION OF SELF OCCUPIED HOUSE PROPERTY. 4. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING DISALL OWANCE OF RS.78,000/- ON ACCOUNT OF INTEREST ON MONEY BORROWE D FOR NON- BUSINESS PURPOSE, I.E. CONSTRUCTION OF SELF OCCUPIE D PROPERTY. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE O R MODIFY ANY OF THE GROUNDS OF APPEAL. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2006, THEREBY THE ASSESSING OFFICER(AO) MADE ADDITIONS/DISALLOWANCES IN RESPECT OF INTEREST U/S. 40A(2)(B) OF THE ACT, INTEREST CLAIMED ON SELF-OCCUPIED PROPERTY AND INTE REST ON ACCOUNT OF EXCESS BORROWING. AGAINST THIS, ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS DI SMISSED THE APPEAL. ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 3 - 3.1. GROUND NO.1 IS GENERAL IN NATURE, NO ARGUMENT HAS BEEN ADVANCED BY THE LD.COUNSEL FOR THE ASSESSEE, THEREFORE THE S AME IS REJECTED AS SUCH. 4. GROUND NO.2 IS AGAINST CONFIRMATION OF DISALLOWA NCE OF INTEREST OF RS.2,43,679/- ATTRACTING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE IS AT VERY HIGHER RATE AND IS UNJUSTIFIED. THE AO HAS MADE DISALLOWANCE IN RESPECT OF THE PERSONS TO WHOM THE INTEREST WAS PAID IN EXC ESS OF 12%. THE LD.CIT(A) WITHOUT APPRECIATING THE FACTS IN RIGHT P ERSPECTIVE , CONFIRMED THE ADDITION. 4.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD.CIT(A) IS JUSTIFIED IN MAKING THE DISALLOWANCE SINCE THE ASSESSEE HIMSELF PAYING TH E INTEREST @ 6.5% ON THE LOAN TAKEN FROM P.D.SHROFF. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT WOULD SUB-SERVE THE INTEREST OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO THE INTEREST MADE IN EXCESS OF 15%. THE AO IS ACCORDINGLY DIRECTED TO RECOMPUTE THE DISALLOWANCE. THUS, THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 4 - 6. GROUND NOS.3 & 4 ARE TAKEN TOGETHER AS THE GROUN DS PERTAIN TO THE DISALLOWANCE OF INTEREST IN RESPECT OF LOAN TAKEN F OR CONSTRUCTION OF SELF- OCCUPIED PROPERTY. 6.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN MAKING ADDITION. 6.2. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT THE A SSESSEE HAS CLAIMED INTEREST ON THE PROPERTY WHICH WAS NOT COMPLETED DU RING THE YEAR. HE POINTED OUT THAT BOTH THE AUTHORITIES BELOW HAVE GI VEN FINDING ON FACT THAT THE PROPERTY WAS NOT CONSTRUCTED. THEREFORE, THE I NTEREST IN RESPECT OF PROPERTY UNDER CONSTRUCTION IS NOT ALLOWABLE U/S.24 (B) OF THE ACT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS GIVEN FINDING ON FACT THAT THE PROPERTIES WERE NOT CONSTRUCTED, THEREFORE IN VIEW OF THE EXPLANATI ON ATTACHED TO SECTION 24(B) OF THE ACT, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION OF INTEREST. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD.CIT(A) AS THE INTEREST IS CLAIMED BY THE ASSESSEE IS NOT ALLO WABLE IN VIEW OF THE FACT THAT THE EXPLANATION TO CLAUSE(B) OF SECTION 24 OF THE ACT SPEAKS ABOUT THE CONSTRUCTED PROPERTY. IN THIS CASE, THE PROPERTY O F THE ASSESSEE HAS NOT BEEN CONSTRUCTED. THUS, THESE GROUNDS OF ASSESSEE S APPEAL ARE REJECTED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR AY 2004-05, I.E. ITA NO.1298/AHD/2009 IS PARTLY ALLOWED. ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 5 - 9. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 685/AHD/2010 FOR AY 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1.1. THE ORDER PASSED U/S.250 OF THE ACT ON 21.12. 29 FOR AY 27-8 BY CIT(A)-IV, AHMEDABAD UPHOLDING THE VALIDITY OF ASSE SSMENT AND ADDITIONS MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AN D AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDI NG THE ADDITIONS WITHOUT CONSIDERING FULLY AND PROPERLY THE EXPLANAT ION OFFERED AND EVIDENCE PRODUCED BY THE APPELLANT. 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND/ OR ON FACTS IN UPHOLDING THE FOLLOWING ADDITIONS/DISALLOWANCES:- A) UNEXPLAINED INVESTMENT RS.2,56,365/- 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ABOVE SAID ADDITIONS/D ISALLOWANCE. 3.1. WITHOUT PREJUDICE AND IN THE ALTERNATIVE, THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED BENEFIT OF THE DISCLOSURE/ADD ITIONS MADE IN THE FIRM OF M/S.TIRUPATI CONSTRUCTION CO. IT IS THEREFORE PRAYED THAT THE ADDITIONS CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. 9.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 23/12/2008, THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION OF RS.2,56,365/- ON THE BASIS THAT THE ASSESSEE HAS U TILIZED THE INTEREST- BEARING FUND FOR NON-BUSINESS PURPOSE. AGAINST T HIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERI NG THE SUBMISSIONS, DISMISSED THE APPEAL. ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 6 - 10. THE LD.COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITION AND CONFIRMING THE SAME. ON THE CONTRARY, LD.SR.DR STRONGLY SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE GROUND NOS.1.1 & 1.2 ARE GENERAL IN NATURE AND THE LD.COUNSEL FOR THE ASSESSEE HAS NOT ADVANCED ANY AR GUMENT ON THESE GROUNDS, THEREFORE THE SAME ARE REJECTED. 12. GROUND NOS.2.1 IS AGAINST THE DISALLOWANCE OF R S.2,56,365/- BEING UNEXPLAINED INVESTMENT. THE AO HAS GIVEN A FINDING THAT THE INTEREST- BEARING FUNDS WERE UTILIZED FOR CONSTRUCTION OF BUN GALOWS WHICH WAS NOT FOR BUSINESS PURPOSE. ADMITTEDLY, THE ASSESSEE IS HAVING BUSINESS OF TRANSPORT, THEREFORE, THE ADDITION MADE BY THE AO O N THE BASIS THAT THE ASSESSEE HAS UTILIZED THE BORROWED FUND FOR NON-BUS INESS PURPOSES CANNOT BE FIND ANY FAULT. MOREOVER, THE LD.CIT(A) IN PA RA 3.2 OF HIS ORDER HAS RELIED ON THE DECISION OF THE HONBLE APEX COURT RE NDERED IN THE CASE OF S.A.BUILDERS VS. CIT REPORTED AT (2007) 288 ITR 1( SC) IN SUPPORT OF FINDING THAT THE AMOUNT WAS NOT UTILIZED FOR BUSINE SS PURPOSE. THE LD.CIT(A) HAS ALSO GIVEN A FINDING THAT THE DEDUCTI ON U/S.24 OF THE ACT WHICH WAS NOT PRESSED DURING THE APPELLATE PROCEEDI NGS. THIS FINDING OF THE LD.CIT(A) IS NOT CONTROVERTED BY THE LD.COUNSEL FOR THE ASSESSEE. THEREFORE, AFTER CONSIDERING THE TOTALITY OF THE FA CTS, WE DO NOT FIND ANY ITA NO.1298/AHD /2009 & ITA NO.685/AHD/2010 SHRI VIJAY KUMAR KANTILAL SHAH VS. ITO ASST.YEARS 2004-05 & 2007-08 RESPECTIVELY - 7 - INFIRMITY IN THE ORDER OF THE AUTHORITIES BELOW. T HUS, THIS GROUND OF ASSESSEES APPEAL IS REJECTED. 13. GROUND NOS.2.2 & 3.1 ARE GENERAL IN NATURE. TH E LD.COUNSEL FOR THE ASSESSEE HAS NOT ADVANCED ANY SPECIFIC ARGUMENT, T HEREFORE THESE GROUNDS ARE REJECTED. 14. IN THE COMBINED RESULT, ASSESSEES APPEAL IN I TA NO.1298/AHD/2009 FOR AY 2004-05 IS PARTLY ALLOWED, WHEREAS ASSESSEES APPEAL IN ITA NO.685/AHD/2010 FOR AY 200 7-08 IS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 06/ 02 /2014 6/.., .../ T.C. NAIR, SR. PS 3 - *$7 872$ 3 - *$7 872$ 3 - *$7 872$ 3 - *$7 872$/ COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. !! $ '9 / CONCERNED CIT 4. '9() / THE CIT(A)-IV, AHMEDABAD 5. 7 #: *$ , , / DR, ITAT, AHMEDABAD 6. :;< =. / GUARD FILE. 3' 3' 3' 3' / BY ORDER, +7$ *$ //TRUE COPY// > >> >/ // / !' !' !' !' ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD