SANDHU BUILDERS, MUMBAI V. ITO 19(3)(4), MUMBAI

ITA 1328/MUM/2012

• Counselvise Citation: 132819914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Additional evidence
• Section: 143(3); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , , BEFORE SHRI B.R. B ASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 1328 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 07 08 ) SANDHU BUILDERS 41, PALI HILL, BANDRA (W) MUMBAI 400 050 .. / APPELLANT V/S INCOME TAX OFFICER WARD 19(3)(4) PIRAMAL CHAMBERS LOWER PAREL , MUMBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAXFS4480K / ASSESSEE BY : MR. VIPUL B. JOSHI A/W MR. NISHIT GANDHI / REVENUE BY : MR. ASHO K SURI / DATE OF HEARING 10 . 0 2 .201 4 / DATE OF ORDER 14.02.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPU GNED ORDER DATED 10 TH FEBRUARY 2014 , PASSED BY THE COMMISSIONER (APPEALS) XXX , MUMBAI, FOR THE QUANTUM OF SANDHU BUILDERS 2 ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 07 08 , ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED: 1 . 1 IN CONFIRMING DISALLOWANCE OF INTEREST OF ` 94,12,603 ON THE GROUND THAT LOAN CONFIRMATORY LETTERS WERE NOT FURNISHED. 1 . 2 NOT APPRECIATING THE FACT THAT LOANS WERE TAKEN IN A.Y. 2006 07 AND NOT IN A.Y. 2007 08. 1 . 3 NOT CONSIDERI NG THE FACT THAT DURING COURSE OF THE ASSESSMENT PROCEEDINGS XEROX COPY OF TDS CERTIFICATES ISSUED TO VARIOUS PARTIES FROM WHOM LOANS WERE TAKEN WERE FURNISHED TO THE ASSESSING OFFICER. 2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPE R OF PROJECTS. DURING THE YEAR, THE ASSESSEE HAD SHOWN ONE PROJECT AT 41, PALI HILL, BANDRA. THE ASSESSING OFFICER NOTED THAT THE OPENING WORK IN PROGRESS (WIP) AS ON 1 ST APRIL 2006 HAS BEEN SHOWN AT ` 26,18,57,221 AND CLOSING WIP AS ON 31 ST MARCH 2007, HA S BEEN SHOWN AT ` 29,91,23,915. IT WAS FURTHER NOTED BY HIM THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 94,12,603 BEING INTEREST PAID ON UNSECURED LOANS IN WIP ACCOUNT. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF LOANS TAKEN ALON G WITH THE CONFIRMATION FROM THE PARTIES FROM WHOM THE SAID LOAN WAS OBTAINED AND INTERESTS HAVE BEEN PAID. IN RESPONSE, THE ASSESSEE COULD NOT FURNISH THE DETAILS OF THE SAID PARTIES OR THE CONFIRMATION AS REQUIRED. AFTER GIVING AMPLE OPPORTUNITY TO THE A SSESSEE, THE ASSESSING OFFICER OBSERVED THAT SUCH A PAYMENT OF INTEREST CANNOT BE ALLOWED. OUT OF THE GROSS AMOUNT OF INTEREST AT ` 94,12,603, THE ASSESSEE HAS SHOWN AN AMOUNT OF ` 78,41,423 AS PAYABLE AS ON 31 ST MARCH 2007 IN THE BALANCE SHEET. THE AMOUNT SHOWN TO HAVE BEEN PAID OUT OF INTEREST , IS SANDHU BUILDERS 3 ONLY THE TDS AMOUNT WHICH HAVE BEEN DEDUCTED AND PAID ON BEHALF OF THE THREE PARTIES FROM WHOM LOAN WAS TAKEN. ACCORDINGLY, HE DISALLOWED THE CLAIM OF INTEREST AND REDUCED T HE SAME FROM THE WIP OF THE 31 ST MARCH 2007, WHICH WAS REDUCED FROM ` 29,91,23,915 TO ` 28,97,11,312. 3 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS CONTENDED THAT THE ASSESSEE HAS TAKEN LOAN FROM CERTAIN PARTIES DURING THE ASSESSMENT YEAR 2006 07, FOR THE PURPOSE OF BUSINESS ON WHICH THE TOTAL INTEREST PROVIDED IN THE ACCOUNT OF THE SAID PARTIES AGGREGATED TO ` 94,12,603. FURTHER, THE ASSESSING OFFICER HAD NOT MADE OUT A CASE THAT THESE LOANS WERE NOT USED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE ALSO SUBMITTED COPY OF BANK PASS BOOK WHER EIN THE LOAN RECEIVED WERE DULY SHOWN ALONG WITH THE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. ONCE THE LOAN HAS BEEN TAKEN FOR THE BUSINESS PURPOSE, THE INTEREST HAS TO BE ALLOWED. THE LEARNED COMMISSIONER (APPEALS) HELD THAT THE ASSESSEE FAILED T O FURNISH THE LOAN CONFIRMATIONS AND ALSO TO CLARIFY FOR WHAT PURPOSE THE LOANS WERE TAKEN. NO NEXUS BETWEEN THE LOAN TAKEN AND THE PURPOSE OF THE BUSINESS HAVE BEEN ESTABLISHED. THUS, HE CONFIRMED THE DISALLOWANCE OF THE INTEREST FROM THE WORK IN PROGRESS . 4 . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT MOST OF THE LOANS WERE TAKEN IN THE ASSESSMENT YEAR 2006 07, FOR THE PURPOSE OF THE BUSINESS, WHICH HAVE BEEN DULY REFLECTED IN THE BALANCE SHEET. THE INTEREST WHICH HAS BEEN CAPITALIZED IS ON ACCOUNT OF SUCH LOANS ONLY. ONCE THE MAJORITY OF THE LOANS HAS BEEN TAKEN IN THE EARLIER YEARS, THEN NO DISALLOWANCE OF INTEREST ON SUCH LOANS CAN BE MADE IN THIS YEAR. THE LEARNED COUNSEL HAS ALSO FILED PETITION FOR ADDITIONAL EVIDENCE , WHEREIN YEARWISE LEDGER AC COUNT OF THE SAID PARTIES FOR THE SANDHU BUILDERS 4 ASSESSMENT YEAR 2006 07 AND 2007 08 HAS BEEN GIVEN ALONG WITH BANK STATEMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 07 AND 2007 08. HE SUBMITTED THAT THESE EVIDENCES WILL GO TO SHOW THAT MAJOR LOANS HAVE BEEN RECEIVE D IN THE EARLIER YEARS. 5 . THE LEARNED D .R. , ON THE OTHER HAND, SUBMITTED THAT ONCE THE ASSESSEE HAS DEBITED ANY EXPENDITURE OR HAS CAPITALIZED THE ONUS IS UPON THE ASSESSEE TO PROVE THE SAME THAT IT WAS FOR THE BUSINESS PURPOSE. THE A.O. AND THE LEARNED CIT (A) HAVE CATEGORICALLY BROUGHT OUT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE LOAN , AS NO CONFIRMATION OR DETAILS WERE FILED AND ALSO THE BUSINESS PURPOSE OF THE SAID LOAN COULD NOT BE ESTABLISHED. HE THUS STRONGLY RELIED UPON THE FINDING S OF THE A .O. AND THE LEARNED C IT(A) . 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE RECORDS, IT IS SEEN THAT THE ASSESSEE HAS TAKEN LOANS FROM VARIOUS PERSONS WHICH ARE COMING AS OP ENING BALANCE IN THIS YEAR. T HE MAIN ISSUE PERTAINS TO INTEREST DEBITED IN THE WORK IN PROGRESS AS ON 31 ST MARCH 2007 I.E., THE INTEREST EXPENDITURE HAVE BEEN CAPITALIZED IN THE BOOKS. THE REVENUES CASE IS THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE LOAN AND, ACCORDINGLY, THE INTEREST HAS BEEN DISALLOWED AND HAD BEEN DEDUCTED FROM WORK IN PROGRESS. THE ASSESSEES CONTENTION IS THAT MAJORITY OF THESE LOANS TAKEN FROM THE THREE PARTIES ON WHICH THE INTEREST HAS BEEN DISALLOWED , HAS BEEN TAKEN IN THE EARLIER YEARS, HENCE, NO DISALLOWANCE IS CALLED FOR IN THIS YEAR . THE ASSESSEE HAS ALSO DEDUCTED TDS ON SUCH INTEREST PAYABLE AND HAS ALSO DEPOSITED THE SAME. WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT O NCE THE LOAN HAS BEEN RECEIVED IN THE EARLIER ASSESSMENT YEAR WHICH ARE DULY REFLECTED IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF SANDHU BUILDERS 5 INCOME AND THE SAME HAS NOT BEEN DISTURBED BY THE DEPARTMENT, THEN SUCH A LOAN TAKEN IN THE EARLIER YEARS CANNOT BE HELD TO BE NON GENUINE IN THIS YEAR . IF THE INTEREST HAS BEEN PAID / PAYABLE IN THE EARLIER YEARS, AS WELL AS IN THE PRESENT ASSESSMENT YEAR, THEN THERE CANNOT BE A QUESTION OF DOUBTING THE GENUI NENESS OF THE LOAN IN THIS YEAR, O NLY FOR THE PURPOSE OF DISALLOWING THE INTEREST IN THIS YEAR. TO DISALLOW THE INTEREST IN THIS YEAR ON LOANS TAKEN, THEN, T HE ASSESSING OFFICER OUGHT TO HAVE BEEN MADE ADDITION UNDER SECTION 68 IN THE EARLIER YEAR IF HE HA D ANY DOUBT ABOUT THE GENUINENESS OF THE LOAN. ONCE NO ADDITION HAS BEEN MADE ON ACCOUNT OF UNEX PLAINED CREDIT OF LOAN IN THE EARLIER YEAR UNDER SECTION 68, THEN NO DISALLOWANCE CAN BE MADE OUT OF INTEREST IN THE PRESENT YEAR. MOREOVER, THE ASSESSEE HAS DULY DEDUCTED TDS ON SUCH PAYMENT OF INTEREST AND HAS BEEN DEPOSITED WITH THE GOVERNMENT ACCOUNT, THE DETAILS OF WHICH ARE ALREADY THERE IN THE RECORD. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT DISALLOWANCE OF INTEREST BY WAY OF REDUCING THE WORK IN PROGRESS AS ON 31 ST MARCH 2007, IS UNCALLED FOR. THUS, THE GROUND RAISED BY THE AS SESSEE IS ALLOWED. 7 . 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 14 TH FEBRUAR Y 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUAR Y 2014 SD / - . . B.R. BHASK ARAN ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 14 TH FEBRUAR Y 2014 SANDHU BUILDERS 6 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT , MUMBAI