Archana Saberwal , Coimbatore V. ITO Non Corp Ward 2(4) , Coimbatore

ITA 1671/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7451 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Commercial expediency

Judgement Text

, (SMC), , IN THE INCOME TAX APPELLATE TRIBUNAL, A (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1671/CHNY/2017 / ASSESSMENT YEAR : 2011-2012 ARCHANA SABERWAL, 36-36, THIRUMAGAL NAGAR 9 TH CROSS, PEELAMEDU PUDUR, COIMBATORE 641 004. [PAN ACYPA 3160F] VS. THE INCOME TAX OFFICER, N.C. WARD II (4) COIMBATORE. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 27-06-2018 !' /DATE OF PRONOUNCEMENT : 02-07-2018 % / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS DIR ECTED AGAINST AN ORDER DATED 31.03.2017 OF LD. COMMISSIONER OF IN COME TAX (APPEALS)-2, COIMBATORE. 2. ASSESSEE HAS FILED THIS APPEAL WITH A DELAY OF ONE DAY. CONDONATION PETITION HAS BEEN FILED. REASON SHOWN FOR THE DELAY ITA NO.1671 /CHNY/2017 :- 2 -: SEEMS TO BE JUSTIFIED. LD. DEPARTMENTAL REPRESENTAT IVE DID NOT RAISE ANY SERIOUS OBJECTION. DELAY IS CONDONED. APPEAL IS ADMITTED. 3. GROUNDS TAKEN BY THE REVENUE ARE REPRODUCED HEREUN DER:- 1. THE ASSESSING OFFICER ERRED IN THIS DISALLOWING INTEREST PAYMENT RAISED EN HOUSE PROPERTY. 2. THE ASSESSING OFFICER ERRED IN THIS DISALLOWING INTEREST PAYMENT MADE BY ACCOUNT PAYEE CHEQUES ASSESS TO TAX. 3. THE CLT APPEAL ERRED IN REJECTING THE INTEREST PAYMENT TO CREDITORS FOR NON AVAILABILITY OF CONFIRMATION LETTER. 4. THE CLT APPEAL ERRED IN NOT CONSIDERING THE PAN NO. LEDGER ACCOUNT AND THE INTEREST PAYMENT MADE BY BANKING CHANNELS BY ACCOUNT PAYEE CHEQUE OF THE CREDITORS. 5. THE ASSESSING OFFICER ERRED IN INITIATING PE NALTY PROCEEDINGS. 4. THROUGH THE ABOVE GROUNDS, ASSESSEE IS AGGRIEVED ON DISALLOWANCE OF B1,26,500/- CLAIMED BY IT U/S. 24(B ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AGAINST ITS INCOME FROM HOUSE PROPERTY AND DISALLOWANCE OF INTEREST PAYMENT OF B7,52,547/- CLAIMED BY IT AGAINST ITS INTEREST RECEIPTS. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT INTERES T PAYMENT ON THE HOUSING LOAN WAS DISALLOWED FOR A REASON T HAT COPY OF HOUSING LOAN SANCTIONING LETTER WAS NOT FURNISHED BY THE ASSESSEE. AS PER ITA NO.1671 /CHNY/2017 :- 3 -: THE LD. AUTHORISED REPRESENTATIVE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD CONFIRMED SUCH DISALLOWANCE TAKING A VIEW THAT PROOF FOR INTEREST ON LOAN BORROWED FOR HOUSE CONSTRUCTION W AS A MANDATORY REQUIREMENT FOR ALLOWING A CLAIM U/S.24(B) OF THE A CT. SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE, WAS THAT IF ASSE SSEE WAS GIVEN AN OPPORTUNITY, IT WILL BE ABLE TO SUBSTANTIATE PAYME NT OF INTEREST AGAINST HOUSING LOAN. 6. VIZ-A-VIZ, DISALLOWANCE OF INTEREST OF B7,52,547/- , SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE HAD ADVANCED LOANS TO TWO CONCERNS CALLED M/S. SABERWAL SURGICAL COMPANY PVT LTD AND M/S. JUPITER MANUFACTURING WORK S. AS PER THE LD. AUTHORISED REPRESENTATIVE, THESE WERE CLOSELY RELAT ED CONCERNS. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE W AS THAT THESE LOANS WERE GIVEN FOR COMMERCIAL EXPEDIENCY. FURTHER, CONT ENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE HAD CAP ITAL OF B63,43,000/- AND SOURCE TO THIS EXTENT FOR THE TOT AL LOANS OF B90,24,000/- ADVANCED TO RELATED PARTIES STOOD EXPL AINED. AS PER THE LD. AUTHORISED REPRESENTATIVE, APART FROM THESE UNS ECURED LOANS TO THE TUNE OF B99,93,000/- WAS UNAVAILABLE WITH THE ASSES SEE. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, INTEREST PAY MENTS MADE ON THE ITA NO.1671 /CHNY/2017 :- 4 -: LOANS OUGHT NOT HAVE BEEN DISALLOWED SINCE ADVANCES WERE GIVEN TO RELATED CONCERNS DUE TO COMMERCIAL EXPEDIENCY. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT PARA 4 OF THE ASSESSMENT ORDER, WHICH DEALT WITH DISALLOWANCE OF INTEREST B7,52,547/- WAS NOT CLEAR. NEVERTHELES S, ACCORDING TO HIM FOR THE SUM OF B1,26,500/- CLAIMED AS INTEREST ON B ORROWED CAPITAL AGAINST RENTAL INCOME, ASSESSEE WAS NOT ABLE TO FU RNISH ANY EVIDENCE, DESPITE SUFFICIENT OPPORTUNITIES GRANTED BY THE LOW ER AUTHORITIES. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. VIZ-A-VIZ, DISALLO WANCE OF B1,26,500/- AGAINST HOUSE PROPERTY INCOME, LD. AUTHORISED REPRE SENTATIVE HAS GIVEN AN UNDERTAKING THAT ASSESSEE WILL PRODUCE EVI DENCE FOR INTEREST PAYMENTS RELATING TO THE HOUSING LOAN IF GIVEN ON E MORE OPPORTUNITY. 9. COMING TO THE ASPECT OF INTEREST PAYMENT OF B7,52, 547/-, WHAT WAS HELD BY THE LD. ASSESSING OFFICER AT PARA 4 IS REPRODUCED HEREUNDER:- ASSESSEE'S INTEREST RECEIPTS AS PER FORM 26AS WAS MORE THAN THE INTEREST RECEIPT ADMITTED BY THE ASSESSEE IN RETURN OF INCOME AND HENCE ASSESSEE'S A.R WAS ASKED TO PRODUCE THE DETAILS OF INTEREST INCOME RECEIVED DURING THE YEAR. ASSESSEE'S REPRESENTATIVE IN HIS LETTER DATED NIL, REPLIED AS UNDER: 'THE INTEREST INCOME ADMITTED IN THE INCOME TAX RET URN HAS BEEN REFLECTED IN THE PROFIT AND LOSS ACCOUNT ALONGWITH OTHER INCOME. THE PROFIT AND LOSS ACCOUNT ITA NO.1671 /CHNY/2017 :- 5 -: ALSO REFLECTS THE INTEREST PAYMENT OF RS.12,62,633. 12 WHICH WAS UTILISED FOR THE ASSESSEE'S INCOME ACTIVI TIES WHICH HAS BEEN TAKEN IN TO ACCOUNT IN THE MEMO OF TOTAL INCOME.' FROM THE DETAILS OF INTEREST PAYMENT S CLAIMED BY ASSESSEE AND THE CONFIRMATIONS FURNISHED , IT IS SEEN PAYMENTS TO THE EXTENT OF RS.7.52.5471/- REMAINS UNEXPLAINED. THEREFORE INTEREST PAYMENTS TO THE EXTENT OF RS.7,52,5471/- IS DISALLOWED FROM THE NET LOSS OF RS.320406/- AND A SUM OF 3,20,406/- IS ADDED BACK AS INCOME FROM OTHER SOURCES. ON THE VERY SAME ISSUE ON ASSESSEES APPEAL, WHAT WAS HELD BY LD. COMMISSIONER OF INCOME TAX (APPEALS) AT PARA 4 OF H IS ORDER IS REPRODUCED HEREUNDER:- I HAVE CONSIDERED THE GROUNDS, WRITTEN SUBMISSIO NS AND DOCUMENTS FILED BY THE AR DURING THE HEARING. A S PER THE BALANCE SHEET, THE APPELLANT HAD ADVANCED LOANS TO RELATED CONCERNS NAMELY MLS SABERWAL SURGICAL COMPANY PVT LTD AND MLS JUPITER MANUFACTURING WORKS BUT DID NOT SHOW ANY INTEREST RECEIPT FOR THESE PAR TIES. ON PERUSAL OF BALANCE SHEET, IT IS NOTICED THAT THE APPELLANT HAD CAPITAL OF ABOUT RS. 63.43 LAKHS AGAI NST WHICH INVESTMENT OF ABOUT RS.90.24 LAKHS WERE SHOWN WHICH MEANS THAT ADVANCES TO RELATED CONCERNS ARE NOT GIVEN OUT OF CAPITAL. THE APPELLAN T HAD SHOWN UNSECURED LOANS OF RS. 99.93. LAKHS AND ADVANCES OF RS. 59.12. LAKHS AND SUCH ADVANCES INCLUDE RS. 53.34 LAKHS GIVEN TO THE RELATED CONCER NS. SO, IT IS OBVIOUS THAT ADVANCES WERE GIVEN OUT OF UNSECURED LOANS ON WHICH APPELLANT WAS ACCOUNTING INTEREST AND CLAIMING IT AS DEDUCTION. THE BUSINESS EXIGENCIES OF GRANTING SUCH INTEREST FREE ADVANCES WERE NOT PROVED. THEREFORE, THE AR'S ARGUMENT THAT INTER EST DISALLOWANCE WAS WRONGLY MADE CANNOT BE ACCEPTED. ON THE OTHER HAND, THE AO HAD MADE THIS DISALLOWANC E BECAUSE THE INTEREST PAYMENTS AS PER THE APPELLANT WERE NOT REFLECTED IN THE CONFIRMATIONS OF THE LOAN CREDITORS. THE AR HAS NOT FURNISHED ANY EXPLANATION WITH REGARD TO THAT - VARIATION. SECONDLY, IT IS ALSO NOTED FROM ASSESSMENT ORDER FOR AY. 2012-13 IN THE APPELLANT'S OWN CASE, A COPY OF WHICH WAS PRODUCED BY ITA NO.1671 /CHNY/2017 :- 6 -: THE AR, THAT SIMILAR INTEREST DISALLOWANCE WAS MADE AFTER A DETAILED DISCUSSION AND THAT FINDING MADE I N THAT YEAR EQUALLY HOLDS GOOD FOR THIS YEAR THOUGH AO DID NOT ELABORATE ON THIS MATTER IN THIS YEARS' ORDER. CONS IDERING THE CIRCUMSTANCES IN TOTALITY, I AM OF THE VIEW THA T AO WAS JUSTIFIED IN MAKING INTEREST DISALLOWANCE AND MAKING CONSEQUENT ADDITION AS INCOME FROM OTHER SOURCES. REGARDING DISALLOWANCE OF INTEREST. CLAIME D ULS24, EXCEPT STATING THAT SUCH INTEREST WAS ALLOWED IN AY. 2010-11, THE AR HAS NOT PRODUCED ANY PROOF FOR HAVING PAID INTEREST ON LOAN BORROWED FOR HOUSE CONSTRUCTION PURPOSES. THEREFORE, THIS DISALLOWANCE IS ALSO CONFIRMED. THE GROUNDS ARE REJECTED . WHAT I FIND IS THAT THERE IS AN OBVIOUS DICHOTOMY BETWEEN THE OBSERVATIONS OF THE LD. ASSESSING OFFICER AND WHAT IS STATED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IT IS NOT EV EN CLEAR, AS TO THE HEAD OF INCOME UNDER WHICH LD. COMMISSIONER OF INC OME TAX (APPEALS) CONSIDERED THE INTEREST. THOUGH IT IS STA TED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT ASSESSEE HAD ADVANCED LOANS TO SISTER CONCERNS, IT IS ALSO MENTIONED THA T ASSESSEE DID NOT FILE ANY CONFIRMATION OF THE LOAN CREDITORS. THE DISALL OWANCE WAS FOR INTEREST AND NOT FOR UNCONFIRMED CREDITS. CONSIDER ING THE CONTRADICTORY STANDS TAKEN BY THE LD. ASSESSING OFFICER AND LD. C OMMISSIONER OF INCOME TAX (APPEALS), I AM OF THE OPINION THAT QUES TION WHETHER ANY INTEREST DISALLOWANCE WAS WARRANTED, NEEDS A REVISI T BY THE LD. ASSESSING OFFICER. I SET ASIDE THE ORDERS OF THE L OWER AUTHORITIES AND REMIT THE ISSUE REGARDING INTEREST PAID ON HOUSING LOAN OF B1,26,500/- ITA NO.1671 /CHNY/2017 :- 7 -: AS WELL AS DISALLOWANCE OF INTEREST OF B7,52,547/- , BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED ON MONDAY, THE 2 ND DAY OF JULY, 2018, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:2ND JULY, 2018 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF