Ajay Gandhi, Kanpur V. Asstt. Commissioner of Income Tax (Central Circle- V), Kanpur

ITA 155/LKW/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3248 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW SMC BENCH, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NOS.155 & 156/LKW/2013 ASSESSMENT YEARS:2005-06 & 2006-07 AJAY GANDHI PROP. M/S GANDHI TRADING CO. 111A/145, ASHOK NAGAR KANPUR V. ACIT CENTRAL CIRCLE V KANPUR PAN:ACIPG4867H (APPELLANT) (RESPONDENT) A PP ELLANT B Y : SHRI. ABHINAV MEHROTRA, ADVOCATE RESPONDENT BY: SHRI. ALOK MITRA, D.R. DATE OF HEARING: 17.06.2013 DATE OF P RONOUNCEMENT: 24.07.2013 O R D E R THESE APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS. THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. GROUND NO.1 IN BOTH THE APPEALS RELATES TO THE DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSE SSEE UNDER VARIOUS HEADS AT ` 1,38,535 IN ASSESSMENT YEAR 2005-06 AND ` 84,824 IN ASSESSMENT YEAR 2006-07. 3. THE FACTS IN BOTH THE CASES AR E ALMOST SIMILAR EXCEPT THE DIFFERENCE IN QUANTUM. WE , HOWEVER, FOR REFERENCE EXTRACT THE FACTS OF THE CASE FOR ASSESSMENT YEAR 2005-06. THE FACTS IN BRIE F BORNE OUT FROM RECORD IN THIS REGARD ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING VARIOUS INCOME FROM MONEY LENDING BUSI NESS AND BANK INTEREST. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE :-2-: ASSESSEE RECEIVED INTEREST AT ` 5,46,033 FROM VARIOUS PERSONS, AGAINST WHICH INTEREST OF ` 2,88,996 WAS CLAIMED AS EXPENSES PAID AND AFTER CLAIMING VARIOUS OTHER EXPENSES LIKE VEHICLE MA INTENANCE, STAFF WELFARE, PETROL EXPENSES, CONVEYANCE, ETC., THE NET INCOME OF ` 1,18,580 WAS DECLARED. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE INCOME FROM MONEY LENDING BUSINESS MAY NOT BE TREATED AS INCOME FROM OTHER SOURCES LIKE LAST YEARS AS THERE IS NO LICENSE WITH THE ASSESSEE FOR DO ING MONEY LENDING BUSINESS. ACCORDING TO THE ASSESS ING OFFICER, THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCO UNT, BILLS AND VOUCHERS, ET C. FOR VERIFICATION OF THE EXPENSES CLAIMED. TH E ASSESSING OFFICER ACCO RDINGLY DISALLOWED THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE AND TREATE D THE INCOME SHOWN BY THE ASSESSEE FROM MONEY LENDIN G BUSINESS AS INCOME FROM OTHER SOURCES. HE, HOWEVER, ALLOWED INTE REST PAID BY THE ASSESSEE ON THE BORROWED FUNDS. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), BUT DID NOT FIND FAVOUR WITH HIM. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE MONE Y LENDING LICENSE IS NOT NECESSARY TO DO PETTY BUSINESS OF MONEY LENDING AND THE CLAIM OF THE ASSESSEE CANNOT BE DISALLOWED SIMPLY FOR THE REASON THAT ASSESSEE WAS NOT HAVING LICENSE FOR MONEY LENDING BUSINESS. THE LD. CO UNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ENTIRE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER BUT THE ASSESSING OFFICER HAS WR ONGLY MENTIONED IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT WERE NOT PRODUCED. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RE LIANCE UPON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. EASTMAN INDUSTRIES [2010] 05 TAXMANN.COM 215 IN SUPPORT OF HIS CONTENTION THAT LICENSE IS NOT REQUIRED FOR MONEY LEND ING BUSINESS. HE HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE SETTLEMENT COMMISSION IN THE GROUP CASES OF THE ASSESSEE, IN WHICH IT HAS BEEN OB SERVED BY THE SETT LEMENT COMMISSION :-3-: THAT THE GROUP WAS ENGAGED IN THE BUSINESS OF PETTY FINANCE TOWARDS ELECTRONIC ITEMS UPTO 1997, AFTER WHICH IT HAS STARTED MICRO-FINANCE BUSINESS. THEREFORE, ONCE IT HAS BE EN HELD BY THE SETTLEMENT COMMISSION THAT THE ASSESSEE WAS ENGAGED IN TH E BUSINESS OF MONEY LENDING, NO CONTRARY STAND CAN BE TAKEN BY THE DE PARTMENT BEFORE ANY OTHER AUTHORITY. 6. THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT IN FACT THE ASSESSEE HAS GIVEN LOAN TO ONLY 11 PE RSONS AND MOST OF THE PERSONS ARE RELATED TO THE ASSESSEE. THEREFORE, IT CANNOT BE HE LD THAT THE ASSESSEE IS ENGAGED IN MONEY LENDING BUSINESS. 7. AFTER GIVING A THOUGHTFUL CONSIDER ATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD , I FIND THAT BEFO RE THE SETTLEMENT COMMISSION THE CONTROVERSY WITH REGARD TO THE NATURE OF BUSINESS ACTIVITY WAS RAISED AND IT WAS DECIDED BY THE SETTLEMENT COMM ISSION THAT THE ASSESSEE WAS ENGAGED IN MONEY LENDIN G BUSINESS. IT IS ALSO SETTLED POSITION OF LAW THAT THE NATURE OF MONEY LENDING BUSINESS CANNOT BE DECIDED ON THE BASIS OF MONEY LENDING LICENSE. THE ASSESSEE HAS FURNISHED LIST OF DEBTORS AS WELL AS THE CREDITORS WHEREFROM IT IS NOTICED THAT THE ASSESSEE HAS GIVEN LOAN TO ONLY 11 PE RSONS AND HAS PAID INTEREST TO SIX PERSONS ON THE BORROWED FUNDS. SI NCE IT HAS BEEN CONCLUDED BY THE SETTLEMENT COMMISSION THAT THE AS SESSEE IS ENGAGED IN MONEY LENDING BUSINESS, I FIND NO JUSTIFICATION IN TAKI NG A CONTRARY VIEW IN THIS REGARD. MOREOVER, IN ASSESSMENT YEAR 2003-04 NO DISALLOWAN CE WAS MADE ON THIS ACCOUNT AND MONEY LENDING BUSINESS WA S ACCEPTED BY THE DEPARTMENT. A COPY OF THE ASSESSMENT ORDER FOR AS SESSMENT YEAR 2003-04 IS PLACED ON RECORD AT PAGE 13 OF THE COMPILATION OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT THE NATURE OF BUSINESS OF THE ASSESSEE IS MONEY LENDING. THEREFORE, SOME EXPENS ES INCURRED INCIDENTAL TO THE BUSINESS ACTIVITY ARE TO BE ALLOWED. 8. THE LOWER AUTHORITIES HAVE NOT EX AMINED THE REASONABLENESS OF THE EXPENSES CLAIMED BY THE ASSESSEE TO EARN BUSINESS INCOME. THE LOWER :-4-: AUTHORITIES HAVE OUT RIGHTLY MADE DI SALLOWANCE ON TH E GROUND THAT THE ASSESSEE WAS NOT ENGAGED IN MONEY LENDING BUSINESS AND TREATED THE INCOME OF THE ASSESSEE AS INCOME FROM OTHE R SOURCES AND ALLOWED EXPENSES UNDER SECTION 57(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT' ). NOW IT HAS BEEN HE LD THAT THE ASSESSEE WAS ENGAGED IN MONEY LENDING BUSINESS, THE EXPENSES INCURRED IN CIDENTAL TO THE BUSINESS ACTIVITIES ARE TO BE ALLOWED AS EXPENDITURE. BUT THE REASONABLENESS OF THE EXPENDITURE CAN BE EXAMINED BY THE ASSESSING OFFICER. I ACCORDINGLY SE T ASIDE THE ORDER OF THE LD . CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER WITH A DIRECTION TO EXAMINE THE REASONABLENESS OF THE EXPENDITURE TO EARN INTEREST INCOME IN THE MONEY LENDING BUSINESS. 9. SIMILAR GROUND IS RAISED IN OTHE R APPEAL ALSO AND I DECIDE THE SAME ACCORDINGLY. 10. IN ITA NO. 155/LKW/2013, THE OTHER GROUND RAISED IS WITH REGARD TO THE DISALLOWANCE OF CLAIM OF DEDU CTION UNDER SECTION 80L OF THE ACT. 11. IN THIS REGARD, IT IS NOTICED TH AT THIS ISSUE WAS NOT ADJUDICATED UPON BY THE LD. CIT(A) THOU GH IT WAS SPECIFICALLY RAISED BEFORE HIM . IN THE ABSENCE OF PROPER ADJUDICATION OF THIS ISSUE, I RESTORE THE MATTER TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO ADJUDICATE THE ISSUE AFTER AFFORDING OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.7.2013. SD/- [SUNIL KUMAR YADAV] JUDICIAL MEMBER DATED:24.7.2013 JJ:2606 :-5-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR