Sanjay Seth, Kanpur V. Income Tax Officer-4(3), Kanpur

ITA 155/LKW/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9078 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.155/LKW/2014 ASSESSMENT YEAR:2007 - 08 INCOME TAX OFFICER - 4(3), KANPUR. VS SHRI SANJAY SETH, 19 - B, DADA NAGAR, KANPUR. PAN:AJRPS6608Q (RESPONDENT) (APPELLANT) SHRI S. K. JAIN, F.C.A. APPELLANT BY SHRI PRAMOD KUMAR, D.R. RESPONDENT BY 18/02/2015 DATE OF HEARING 23 /03/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, KANPUR DATED 01/01/2014 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: (I) THAT THE LD. C.I.T.(APPEALS) - I, KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE FOLLOWING ADDITIONS/DISALLOWANCES ARBITRARILY: ( A ) RS.1,78,267.97 BEING THE DISALLOWANCE OF INTEREST PAID BY THE APPELLANT ON FUNDS BORROWED AND INVESTED IN VARIOUS COMPANIES ON WHICH I NTEREST HAS BEEN EARNED, AND ( B ) RS.12,000.00 BEING THE UNFOUNDED, ARBITRARY AND ADHOC ADDITION ALLEGEDLY FOR LOW WITHDRAWALS FOR HOUSE HOLD EXPENSES. 2 (II) THAT THE ORDER OF LD. C.I.T.(APPEALS) - I, KANPUR IS BAD IN LAW AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND EQUITY. (III) THAT WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, THE ADDITIONS/DISALLOWANCES MADE BY THE LD. A.O. AND SUSTAINED BY THE LD. C.I.T.(APPEALS) - I, KANPUR ARE UNJUSTIFIED, UNWARRANTED AND IN ANY CASE MUCH TOO HIGH AND EXCESSIVE. (IV) THAT ANY OTHER RELIEF OR RELIEFS DEEMED FIT IN THE FACTS OF THE CASE, BE GRANTED. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT FULL DETAILS WERE GIVEN BEFORE THE AUTHORITIES BELOW AND IN THIS REGARD , HE DRAWN OUR ATTENTION TO PAGE NO. 3 & 4 OF ORDER OF CIT(A). HE POINTED OUT THAT ON PAGE NO. 4 OF THE ORDER OF CIT(A), FOR THE LOANS BY THE ASSESSEE FROM ICICI, KOTAK MAHINDRA BANK AND ABN AMRO BANK OF RS.13.34 LAC, IT HAS BEEN SHOWN THAT RS.11.30 LAC WA S USED FOR GIVING INTEREST EARNING ADVANCES TO M/X EXCEL IMPEX INDIA PVT. LTD. AND M/S SCARCO SHORES PVT. LTD. ON THE VERY NEXT DAY OF THE BORROWING. HE SUBMITTED THAT IN SPITE OF THIS DIRECT NEXUS BETWEEN THE BORROWING THE LOAN FOR WHICH INTEREST EXPENDI TURE WAS INCURRED AND ADVANCING OF LOAN FOR EARNING INTEREST INCOME , DEDUCTION WAS NOT ALLOWED OF INTEREST EXPENDITURE. HE SUBMITTED THAT UNDER THESE FACTS, THE ACTION OF THE AUTHORITIES BELOW IS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE. 4. REGARDING SECOND GROUND I.E. REGARDING ADDITION OF RS.12,000/ - ON ACCOUNT OF ALLEGED LOW HOUSE HOLD WITHDRAWALS, HE SUBMITTED THAT IT IS NOTED BY CIT(A) ON PAGE NO. 8 OF HIS ORDER THAT FOR A FAMILY OF FIVE MEMBERS, TOTAL WITHDRAWAL OF THE ASSESSEE AND OTHE R FAMILY MEMBERS WERE TO THE EXTENT OF RS.2.21 LACS IN ADDITION TO PAYMENT OF ELECTRICITY BILLS, SCHOOL FEES, LIC 3 PREMIUM ETC. SEPARATELY BY WAY OF CHEQUES AND THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) IS NOT JUSTIFIED. 5. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING THE FIRST GROUND I.E. REGARDING DISALLOWANCE OF INTEREST OF RS.1,78,267.97, WE FIND THAT IT HAS BEEN SUBMITTED BY THE AS SESSEE BEFORE THE CIT(A) THAT OUT OF BORROWED FUNDS OF RS.13.34 LAC ON VARIOUS DATES DURING MARCH TO JUNE 2005, LOANS WERE GIVEN TO TWO COMPANIES I.E. M/X EXCEL IMPEX INDIA PVT. LTD. AND M/S SCARCO SHORES PVT. LTD. TO THE EXTENT OF RS.11.30 LAC ON THE VERY NEXT DAY ON WHICH BORROWING WAS MADE BUT THE DETAILS OF INTEREST INCOME IS NOT AVAILABLE IN THE ORDER OF CIT(A). IF IT IS FOUND THAT THE BORROWED FUNDS ON WHICH INTEREST WAS PAID WAS GIVEN AS ADVANCE TO SOME OTHER PERSONS AND INTEREST INCOME WAS EARNED O N SAID ADVANCE, IT HAS TO BE ACCEPTE D THAT THERE IS DIRECT NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND INTEREST EARNING ADVANCES AND IN THAT SITUATION, DEDUCTION ON INTEREST ACCOUNT IS AVAILABLE U/S 57(III) OF THE ACT BUT SINCE THE FACTS REGARDING AN Y INTEREST INCOME FROM THESE TWO COMPANIES IS NOT AVAILABLE ON RECORD, THE ISSUE CANNOT BE DECIDED IN THE ABSENCE OF SUCH DETAILS. HOWEVER, IN THE INTEREST OF JUSTICE, WE FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION AFTER EXAMINING THIS CLAIM OF THE ASSESSEE THAT THE INTEREST BEARING BORROWED FUNDS WERE USED FOR EARNING INTEREST INCOME AND IF IT IS FOUND THAT THE ASSESSEE IS ABLE TO ESTABLISH THIS CLAIM, THEN TO THE EXTENT IT IS ESTABLISHED BY THE ASSESSEE T HAT INTEREST EXPENDITURE IS INCURRED FOR EARNING INTEREST INCOME , TO THAT EXTENT, THE INTEREST SHOULD BE ALLOWED U/S 57(III). WITH THESE OBSERVATIONS, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR FRESH DECISION 4 AFTER AFFORD ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1 IS ALLOWED FOR STATISTICAL PURPOSES. 7. REGARDING GROUND NO. 2, WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 8 OF HIS ORDER THAT IT IS THE SUBMISSION OF THE ASSESSEE BEFORE HIM THA T FOR A FAMILY OF FIVE MEMBERS, TOTAL WITHDRAWAL OF THE ASSESSEE AND OTHER FAMILY MEMBERS WERE TO THE EXTENT OF RS.2.21 LACS IN ADDITION TO PAYMENT OF ELECTRICITY BILLS, SCHOOL FEES, LIC PREMIUM ETC. SEPARATELY BY WAY OF CHEQUES. IN SPITE OF THIS, THE ADD ITION WAS CONFIRMED BY CIT(A) ON THE BASIS THAT THE ASSESSEE HAS NOT GIVEN EVIDENCE OR DETAILS OR HEAD WISE / MONTH WISE EXPENSES FOR HOUSE HOLD EXPENSES. HE HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE TO ESTABLISH SUFFICIENCY OF FUNDS FOR RUNNING THE HOUSE HOLD EXPENSES. HE HAS ALSO OBSERVED THAT MERE FURNISHING OF DETAILS OF WITHDRAWALS DOES NOT ESTABLISH THAT THEY WERE ADEQUATE. IN OUR CONSIDERED OPINION, THE BASIS OF THE DECISION OF CIT(A) IS NOT PROPER BECAUSE WHEN THE ASSESSEE HAS SHOWN WITHDRAWALS OF RS.2.21 LAC BY HIM AND HIS FAMILY MEMBERS, THE HOUSE HOLD EXPENSES IN ADDITION TO PAYMENT OF ELECTRICITY BILLS, SCHOOL FEES ETC., THE BURDEN WAS ON THE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSEE WAS HAVING EXPENDITURE ON HOUS E HOLD ACCOUNT IN EXCESS OF THE WITHDRAWAL SHOWN BY THE ASSESSEE AND HIS FAMILY MEMBERS. WITHOUT BRINGING ANY EVIDENCE ON RECORD INDICATING MORE HOUSE HOLD EXPENSES, NO ADDITION IS JUSTIFIED. SINCE IN THE PRESENT CASE, NO BASIS IS INDICATED BY THE ASSESS ING OFFICER OR BY CIT(A) THAT THE HOUSE HOLD EXPENSES WERE MORE THAN THE WITHDRAWAL SHOWN BY THE ASSESSEE AND HIS FAMILY MEMBERS, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. IN FACT THE ASSESSING OFFICER HAS MADE ADDITION ON THE BASIS THA T THE ASSESSEE HAS SHOWN ONLY RS.48,000/ - AS PERSONAL DRAWING AND BY ESTIMATING THE EXPENSES OF THE ASSESSEE AT RS.60,000/ - , HE MADE ADDITION OF RS.12,000/ - . IN FACT THE ASSESSEE HAS SHOWN WITHDRAWAL OF RS.60,000/ - AS 5 NOTED BY CIT(A) ON PAGE NO. 8 APART FR OM WITHDRAWAL OF RS.60,000/ - BY HIS FATHER, RS.40,000/ - BY HIS WIFE AND RS.60,000/ - BY MS. SAUMYA SETH DAUGHTER OF THE ASSESSEE. CONSIDERING ALL THESE FACTS, WE DELETE THIS ADDITION MADE BY THE ASSESSING OFFICER ON AD HOC BASIS. GROUND NO. 2 IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED IN THE TERMS INDICATED ABOVE. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 /03/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR