Shri Indrakant Girdharlal Shah, Baroda V. The Income tax Officer,Ward-2(3), Baroda

ITA 152/AHD/2010

• Counselvise Citation: 15220514 RSA 2010
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: K R DIXIT
• Keywords: Unexplained investment; Rule of consistency; Additional evidence
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 152/AHD/2010 ASSESSMENT YEAR :2006-07 SHRI INDRAKANT GIRDHARILAL SHAH 6, NANDIDHAM, VASNA ROAD, BARODA - 390015 V/S . INCOME TAX OFFICER WARD 2(3) BARODA AAYKAR BHAVAN, RACECOURSE CIRCLE, VADODARA - 390007. PAN NO. AGQPS0140M (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI K. R. DIXIT, A.R. /BY RESPONDENT SHRI C.K. MISHRA, SR.D.R. /DATE OF HEARING 09.07.2012 /DATE OF PRONOUNCEMENT 09.07.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT(A)-II, BARODA, ORDER DATED 30 .10.2009 FOR ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) II BA RODA DATED 30- 10-2009 IS BAD IN LAW & FACTS. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- II BAR ODA HAS ERRED IN CONFIRMING THE ADDITIONS OF RS.2,10,000/- FRESH CAP ITAL INTRODUCED IN THE FIRM M/S. NEELA ASSOCIATES, BARODA IN CAPITAL ACCOU NT AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT. ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 2 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- II BAR ODA ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST PAID UNDER THE PROVISIONS OF SEC.57 (III) OF THE ACT AND IGNORED THE PRINCIPLE O F CONSISTENCY AS COMPARED TO EARLIER YEARS. 4. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- II BAR ODA HAS ERRED IN CONFIRMING THE A.O. WHICH WRONGLY APPLIES SEC.14A A ND DOES NOT APPLY SEC.57(III) CORRECTLY WHICH IS ALSO AGAINST THE RUL E OF CONSISTENCY BECAUSE FOR SEVERAL YEARS IN THE PAST THIS INTEREST PAYMENT HAS BEEN ALLOWED. 2. THE FIRST GROUND OF APPEAL IS GENERAL IN NATURE. THEREFORE, NO ADJUDICATION IS REQUIRED. 3. THE GROUND NO.2 IS AGAINST CONFIRMING THE ADDITI ON OF RS.2,10,000/- ON ACCOUNT OF FRESH CAPITAL INTRODUCED BY THE ASSESSEE IN THE FIRM M/S. NEELA ASSOCIATES, BARODA. 4. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSES SEE IS A PARTNER OF M/S. NEELA ASSOCIATES WHERE HE INTRODUCED FRESH CAPITAL OF RS. 2,65,000/- DURING THE YEAR UNDER CONSIDERATION. THE LD. A.O. HAD GIV EN REASONABLE OPPORTUNITY TO THE APPELLANT TO EXPLAIN THE SOURCE OF FRESH CAP ITAL INTRODUCED ON VARIOUS DATES. THE APPELLANT CLAIMED BEFORE THE A.O. THAT THE FRESH CAPITAL INTRODUCED HAD BEEN WITHDRAWN FROM THE BHARAT CO-OPERATIVE BAN K OF SB A/C NO. 9422. THE A.O. ASKED TO FURNISH THE DETAILS OF CHEQUE NO. AND DATE OF WITHDRAWAL OF THE CASH FROM THE ABOVE BANK BUT THE REQUIRED DETAI LS WERE NOT SUBMITTED BY THE APPELLANT. THEREFORE, HE MADE ADDITION OF RS.2 ,10,000/- U/S 69 AS UNEXPLAINED INVESTMENT. ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 3 5. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AP PELLANT CARRIED THE MATTER BEFORE THE CIT(A) WHO HAS CONFIRMED THE ADDI TION ON THE GROUND THAT RS.10,000/- WERE DEPOSITED WITH FIRM ON 27.07.2005 FROM A WITHDRAWAL MADE ON 10.08.2005 WHICH IS IMPOSSIBLE TO EXPLAIN THE SO URCE OF RS.10,000/-. FURTHER, CASH OF RS.2,00,000/- FROM THE BANK ACCOUN T HAD BEEN WITHDRAWN ON 20.08.2005 AND DEPOSITED WITH FIRM RS.1,00,000/- ON 03.10.2005 AND RS.50,000/- EACH ON 11.10.2005. 6. NOW THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THE CASH OF RS.10,000/- WAS CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE WHICH WAS WITHDRAWN ON 10.08.2005 FROM THE BANK FOR WHICH HE HAS FILED AFFIDAVIT OF SHRI VIPINBHAI VINUBHAI PATE L WHO HAD ADMITTED THAT THE APPELLANT WAS URGENT NEED OF MONEY ON 27.07.2005. THEREFORE, HE GAVE BEARER CHEQUE NO.258299 ACCOUNT NO.3096 DRAWN ON TH E UNION BANK OF INDIA, RACE COURSE BRANCH, VADODARA FOR RS.10,000/- TO SHR I PATEL. FURTHER, HE SUBMITTED ANOTHER AFFIDAVIT OF MISS RATI SHEOPURI, THE VICE PRESIDENT OF ABN AMRO BANK WHO NEGOTIATED WITH THE ASSESSEE ON LEASE THE ASSESSEES BUNGLOW @ RS.40,000/- PER MONTH WITH FURNITURE AND RS.30,000/- PER MONTH WITHOUT FURNISHING THE HOUSE. HE FURTHER ADMITTED THAT THESE EVIDENCES WERE NOT FILED BEFORE THE A.O. OR CIT(A) BECAUSE THEY GA VE NEW REASONS IN THEIR ORDERS I.E. A.O. HAD GIVEN REASONS FOR NOT EXPLAINI NG OF EXPLANATION WAS NOT WITHDRAWAL FROM THE BANK NEAR DATE OF DEPOSIT, THE ASSESSEE SHOWED THE WITHDRAWAL ENTRIES IN THE BANK ACCOUNT IN AUGUST 20 05. THE CIT(A) GAVE ANOTHER REASON THAT WHY WAS THE AMOUNT WITHDRAWN TW O MONTHS BEFORE THE ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 4 DEPOSIT. HE ALSO RELIED ON HONBLE GUJARAT HIGH CO URT DECISION IN 6 CTR 647 AND PRAYED TO ADMIT THE ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTICE, WHICH WERE FAILED TO PRODUCE IT EARLIER. 7. LD. D.R. VEHEMENTLY ARGUED THAT THE A.O. AS WELL AS LD. CIT(A) HAD CONSIDERED ALL THE EVIDENCES AND NEW EVIDENCE FILED BEFORE US IS NOT TO BE ADMITTED BEING FRESH EVIDENCE. 8. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND HEARD THE ARGUMENT OF BOTH SIDES. THE APPELLANT EXPLAINED VI DE HIS LETTER DATED 07.07.2008 BEFORE THE A.O. THAT RS.2,00,000/- DEPOS ITED INTRODUCED AS FRESH CAPITAL WITH PARTNERSHIP CONCERN BY WITHDRAWING CAS H RS.1,00,000/- ON 03.10.2005 FROM BHARAT CO-OPERATIVE BANK OF SB A/C NO. 9422 AND RS.50,000/- EACH ON 11.10.2005 BY WITHDRAWING THE C ASH FROM BHARAT CO- OPERATIVE BANK OF SB A/C NO. 9422 AND RS. 55,000/- CASH PAID FROM AGRICULTURE ACCOUNT IN JANUARY 2006 AND FEBRUARY 20 06. THUS, TOTAL FRESH CAPITAL INTRODUCED OF RS.2,65,000/-. THE APPELLANT HAD EXPLAINED ONLY RS. 2.5 LACS VIDE HIS ABOVE LETTER DATED. WHEN AGAIN SHOW CAUSE NOTICE WAS GIVEN BY THE LD. A.O., HE REPLIED VIDE HIS LETTER DATED 21.0 7.2008 AND CLAIMED THAT CHEQUE NO. 258299 DATED 27.07.2005 FOR RS.10,000/- WITHDRAWN FROM BANK AND DEPOSITED WITH M/S. NEELA ASSOCIATES AND RS. 2, 00,000/- WERE WITHDRAWN FROM THE BANK ACCOUNT OF BHARAT CO-OPERATIVE BANK O F SB A/C NO. 9422 VIDE CHEQUE NO.21489 DATED 19.08.2005. BEFORE, CIT(A), SIMILAR EXPLANATIONS WERE GIVEN BY THE APPELLANT. THE ASSESSEE HAD NOT FILED THESE AFFIDAVITS BEFORE THE A.O. OR BEFORE THE CIT(A). THESE ARE TH E ADDITIONAL EVIDENCES FILED ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 5 BY THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUS TICE AND GIVING REASONABLE OPPORTUNITY TO THE A.O. ON FRESH EVIDENCE, THE MATT ER IS REQUIRED TO BE RESTORED BACK TO THE A.O. THEREFORE, THIS MATTER IS SET ASI DE TO THE A.O. THE A.O. IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING HE ARD TO THE APPELLANT AND THE APPELLANT IS ALSO ORDERED TO MAKE FULL COMPLIANCE O F THE ORDER OF THE A.O. 9. THE THIRD AND FOURTH GROUNDS OF APPEAL ARE AGAIN ST CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.2,13,205/- U/S 57(II I) AND WRONGLY APPLICATION OF SECTION 14A. THE LD. A.O. OBSERVED THAT THE APPELL ANT HAD CLAIMED THE DEDUCTION OF EXPENSES TO THE TUNE OF RS.2,13,265/- AGAINST THE INTEREST INCOME OF RS.1,82,416/- CLAIMING THE NET LOSS OF RS.30,849 /- UNDER THE HEAD INCOME FROM OTHER SOURCES. THE APPELLANT MADE CLAIM OF IN TEREST TO THE FOLLOWING PERSONS: SR. NO. NAME OF THE PARTY AMOUNT 1 NEELA INDRAKANT SHAH 1,12,800 2 NEELA INDRAKANT SHAH 4,380 3 PURVISH INDRAKANT SHAH 36,315 4 INDRAKANT GIRDHARLAL SHAH HUF 23,770 5 UNION BANK OF INDIA, SULTANPURA BR. 19,895 6 UNION BANK OF INDIA, SIYED VASNA BR. 9,805 7 MR. ARUNBHAI PANDIT 6,300 TOTAL 2,13,265 BEFORE THE ASSESSING OFFICER, THE APPELLANT SUBMITT ED THAT LOANS HAD BEEN TAKEN FROM THE ABOVE MENTIONED PERSONS FOR UTILIZIN G THE MONEY IN EARNING INCOME. THE ASSESSEE FURTHER CLAIMED THAT HE HAD J OINED AS A PARTNER IN DIFFERENT PARTNERSHIP FIRMS AND INVESTED CAPITAL IN THE SAID FIRMS FROM BORROWED ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 6 FUNDS. HE FURTHER SUBMITTED THAT THE EXPENDITURE W AS ALLOWABLE AS PER SECTION 57(III). THE LD. A.O. WAS NOT CONVINCED THAT THE B ORROWINGS WERE MADE WHOLLY AND EXCLUSIVELY FOR EARNING INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE COULD NOT ESTABLISH TH AT THE BORROWINGS WERE ESSENTIAL FOR THE PURPOSE OF BUSINESS SPECIALLY SIN CE HE HAD NOT CARRIED OUT ANY BUSINESS IN THE YEAR UNDER CONSIDERATION. NO N EXUS BETWEEN FUNDS BORROWED AND FUNDS USED FOR THE PURPOSE OF INTRODUC TION IN CAPITAL ACCOUNT OF VARIOUS FIRMS WAS ESTABLISHED. THEREFORE, HE DISAL LOWED THE CLAIM OF INTEREST EXPENSES OF RS.2,13,265/-. 10. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A PPELLANT CARRIED THE MATTER BEFORE THE CIT(A) WHO ALSO CONFIRMED THE ADD ITION ON GROUND OF THERE IS NO NEXUS BETWEEN BORROWINGS AND THE EARNING OF INCO ME FROM OTHER SOURCE AND ALSO NO SATISFACTORY EVIDENCES WERE FILED BY TH E APPELLANT EITHER BEFORE THE A.O. OR BEFORE HER. 11. NOW THE APPELLANT IS BEFORE US. LD. COUNSEL FO R THE APPELLANT CONTENDED THAT THE DETAILED REPLY WAS FILED BEFORE THE LD. A.O. AS WELL AS BEFORE THE CIT(A). THE INTEREST WAS PAID FOR THE PURPOSE OF EARNING OF INCOME. HE FURTHER RELIED ON HONBLE ORISSA HIGH C OURT DECISION IN THE CASE OF INDUSTRIAL DEVELOPMENT CORPORATION OF ORISSA LTD. V S. CIT (2004) 268 ITR 130 (ORI) ON ALLOWABILITY OF INTEREST EXPENSES U/S 57(III) OF THE IT ACT FOR THE REASON OF PRINCIPLE OF CONSISTENCY AND ALSO HE RELIED ON RADHASWAMI SATSANG VS. C.I.T. 193 ITR 321 (SC) ON INTEREST ALLOWABLE U/S 57(III) OF THE IT ACT. ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 7 12. LD. D.R. CONTENDED THAT THE LD. A.O. AND CIT(A) HAD GIVEN DETAILED FINDINGS ON THE BASIS OF EVIDENCE FILED AND THERE I S NO FORCE IN THE APPELLANT CLAIM. THUS, THE LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE A.O. 13. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE ARGUMENTS OF BOTH SIDES. THE ASSESSEE UNDISPUTEDLY BORROWED THE MONEY WHICH WAS UTILIZED FOR THE PURPOSE OF INCOME FROM O THER SOURCE. THE GENUINENESS OF THE BORROWED HAS NOT DOUBTED BY THE A.O. THE BORROWINGS WERE MADE THROUGH BANK ACCOUNT CHEQUE. THE LD. A.O . HAD NOT BROUGHT ON RECORD ANY EVIDENCE THAT THESE BORROWINGS WERE USED FOR PERSONAL PURPOSES. THE APPELLANT HAD FILED PAN NOS. OF ALL THE RECIPIE NTS WHO HAVE DISCLOSED THE INTEREST INCOME IN THEIR RESPECTIVE RETURNS BEFORE THEIR A.OS. AS CLAIMED BY THE APPELLANT, INTEREST EXPENSES WERE ALLOWED BY TH E A.O. IN EARLIER YEAR. THUS, THE CIT(A) WAS NOT JUSTIFYING IN CONFIRMING T HE ADDITION ON ACCOUNT OF INTEREST PAYMENT OF RS.2,13,265/-. ACCORDINGLY, WE HAVE CONSIDERED VIEW THAT THE ADDITION CONFIRMED BY THE CIT(A) IS NOT JUSTIFI ED. THE ASSESSEES APPEAL ON THIS GROUND IS ALLOWED. 14. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09.07.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT ITA NO. 152/AHD/2010 A.Y. 06-07 PAGE 8 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 31.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 01.08.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 06.08.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 06.08.2012