Ranjanaben Mukeshbhai Patel, Mumbai V. DCIT, Circle-2, , Bhavnagar

ITA 1714/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0598 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 30-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALIT P. JAIN
• Keywords: Business income; Depreciation; Earning of tax free income; Corroborative evidences; Set aside
• Section: 14A; 13; 20

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO.1714/AHD/2018 ( / ASSESSMENT YEAR : 2015-16) RANJANABEN MUKESHBHAI PATEL PLOT NO.2, 901 SHIVLING 10 TH ROAD JVPD SCHEME VILLE PARLE (EAST) MUMBAI MAHARASHTRA 400 056 / VS. THE DY.CIT CIRCLE-2 BHAVNAGAR ./ ./PAN/GIR NO. : AEOPP 1384 G ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : -NONE- / RESPONDENT BY : SHRI LALIT P.JAIN, SR.DR /DATE OF HEARING 12/03/2020 / DATE OF PRONOUNCEMENT 13 / 0 3 /20 20 / O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)6, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-6 /139/17-18 DATED 15/05/2018 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'TH E ACT') DATED 14/11/2017 RELEVANT TO ASSESSMENT YEAR (AY) 2015-16. ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 2 - 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY LEARNED CIT(A) IS BAD IN LAW AND DESERVED TO BE QUASHED AND SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF INTEREST EXPENSES OF RS.6 6,000/- MADE BY THE LEARNED ASSESSING OFFICER ASSUMING THAT INTEREST FR EE ADVANCE WAS MADE TO M/S.MAGIS R CUBE CREATION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF FURTHER INTEREST EXPENSE OF RS.50,28,000/- OVER AND ABOVE THE DISALLOWANCE MADE VOLUNTARILY BY THE APPELLANT UNDER SECTION 14A OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE RS.1,68,000/- WHICH WAS PART OF THE SUM OF RS.34,77,641/- DISALLOWED BY THE APPELLANT VOLUN TARILY UNDER SECTION 14A OF THE ACT. 3. TODAY, THE CASE WAS FIXED FOR HEARING BUT NONE A PPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOURNMENT APPLICATION HAS BEEN FILED ON RECORD. 4. FROM THE RECORDS, WE OBSERVE THAT REQUIRED NOTIC E WAS SENT TO THE ASSESSEE BY REGISTERED POST WHICH WAS DULY SERVED U PON THE ASSESSEE AND IN THIS RESPECT ACKNOWLEDGMENT FROM THE DEPARTMENT OF POSTS HAS ALREADY BEEN PLACED ON RECORD WHICH SHOWS THAT EVEN IN SPITE OF SERVICE OF NOTICE, THE ASSESSEE OR HER REPRESENTATIVE HAS NOT COME BEFORE THIS COURT FOR ATTENDING THE HEARING WHICH GOES TO SHOW THAT ASSESSEE IS NOT INTERESTED IN PURSUING WITH HER PRESENT APPEAL. HOWEVER, LD.DR PRESENT IN THE COURT IS READY WITH ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 3 - THE ARGUMENTS, THEREFORE WE PROCEED TO DECIDE THE A PPEAL ON MERITS EX-PARTE QUA THE ASSESSEE, AFTER HEARING THE LD.DR. 5. BRIEF FACTS OF THE CASE ARE THAT THE ORDER U/S.1 43(3) OF THE ACT FOR THE YEAR UNDER CONSIDERATION WAS PASSED BY THE ASSESSIN G OFFICER ON 14/11/2017 THEREBY MAKING ADDITIONS UNDER DIFFERENT HEADS. 6. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREF ERRED APPEAL BEFORE LD.CIT(A) AND CIT(A) AFTER CONSIDERING THE CASE OF THE ASSESSEE, PARTLY ALLOWED THE APPEAL WHEREBY SUSTAINED SOME OF THE AD DITIONS. 7. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE ASSESSEE IS IN APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREINABOVE. 8. GROUND NO.1 OF THE ASSESSEES APPEAL IS GENERAL IN NATURE WHICH REQUIRES NO INDEPENDENT ADJUDICATION. 9. GROUND NO.2 RAISED BY THE ASSESSEE RELATES TO CH ALLENGING THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE ADDITION OF INTERE ST EXPENSES. 10. WE HAVE HEARD THE LD.DR, PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. F ROM THE RECORDS WE NOTICED THAT THE LD.,CIT(A) HAS DEALT WITH THIS GROUND IN P ARA-5.3 OF HIS ORDER WHICH IS REPRODUCED BELOW: ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 4 - 5.2 THE APPELLANT SUBMITTED AS FOLLOWS:- 3. GROUND NO .1 - DISALLOWANCE OF INTEREST EXPENSES OF RS.66000/- WITH RESPECT TO MAGIC R CUBE 3.1 THE SUM GIVEN TO MAGIC R CUBE CREATION PVT. LTD . WAS IN NATURE OF BUSINESS ADVANCE WITH AN IDEA TO START A PROJECT IN ENTERTAINMENT IN DUSTRY. THE SAID PROJECT NEVER TOOK OFF AND THE BALANCE AMOUNT WAS NOT RETURNED BACK BY MAGIC R CUBE. THE ADVANCE REPRESENTS A CAPITAL LOSS FOR YOUR APPELLANT AND WILL BE EVENTUA LLY WRITTEN OFF TO CAPITAL ACCOUNT OF THE APPELLANT. THE AMOUNT TO MAGIC R. CUBE WAS ORIGINAL LY ADVANCED IN ASSESSMENT YEAR 2009-10 (ON 02-04-2008). THE ENTIRE ONE TO ONE CO-RELATION OF BORROWED FUNDS FOR THE YEAR AND IT'S APPLICATION WAS GIVEN TO LEARNED AO R (AND DISCUSSED ABOVE). YOUR HONOUR WOULD APPRECIATE THAT NONE OF THE INTEREST BEARING BORROWED FUNDS ST AND UTILIZED IN MAKING ADVANCE TO MAGIC R CUBE. FURTHER, THE DATE OF ADVANCE IS QUITE OLD AND EARLIER THAN DATE OF ACCEPTANCE OF THE ANY OF THE INTEREST BEARING BORROWED FUNDS FOR THE YEAR ON WHICH INTEREST WAS PAID. ACCORDINGLY, WE CAN PRESUME THAT NO INTEREST BEARIN G BORROWED FUNDS WERE UTILIZED IN MAKING SUCH ADVANCE. ACCORDINGLY, NO NOTIONAL DISAL LOWANCE IS CALLED FOR BY PRESUMING UTILIZATION OF BORROWED FUNDS. 3.2 THE CONTENTION OF THE LEARNED AO THAT WE HAVE ACCEPTED THE DISALLOWANCE IS MISTAKEN AS WE HAD ACCEPTED THE ADDITION OF NOTIONA L RENTAL INCOME OF RS.42,706/- AND NOT THIS ADDITION.' 5.3 AFTER CONSIDERING FINDINGS OF THE AO AND SUBMI SSIONS OF THE APPELLANT, THIS GROUND IS ADJUDICATED AS UNDER. THE AO OBSERVED THAT THE APPELLANT HAD ADVANCED RS. 5,50,000/- TO MAGIC R. CUBE AND DID NOT CHARGE ANY INTEREST ON THE SAME. THE AO ALSO OBSERVED THAT THE APPELLANT HAD PAID INTEREST OF RS. 1,59,51,279/- ON UNSECURED LOANS AND INTEREST WAS CHARGED @ 12%. ON BEING ASKED BY THE AO, THE APPELL ANT FAILED TO ESTABLISH THAT RS. 5,50,000/- WAS ADVANCED TO MAGIC R. CUBE FROM INTER EST FREE FUNDS. THE AO OBSERVED THAT 'ON GOING THROUGH THE ACCOUNTS OF THE ASSESSEE, IT IS SEEN THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO MAKE SUCH INTEREST FREE ADVANCES WITHOUT BORROWING FUNDS.' ACCORDINGLY, THE AO, RELYING ON JUDGMENT OF HON'BLE KERALA HIGH COURT IN CIT VS. M.M. NAGALINGA NADAR SONS 15 CRT 257 (2009) (KA ) DISALLOWED RS. 66,000/- ON ACCOUNT OF INTEREST @ 12% ON ADVANCE OF RS. 5,50,00 0/-. THE APPELLANT IS M APPEAL AGAINST THIS ACTION OF THE AO. DURING THE APPEAL PROCEEDINGS THE APPELLANT SUBMITT ED THAT RS. 5,50,000/- GIVEN TO MAGIC R. CUBE WAS IN NATURE OF BUSINESS ADVANCE WIT H AN IDEA TO START A NEW PROJECT IN ENTERTAINMENT INDUSTRY. THE APPELLANT SUBMITTED THAT THE AMOUNT WAS ORIGINALLY ADVANCED IN A.Y. 2009-10. THE APPELLANT FURTHER SUB MITTED THAT ENTIRE ONE TO ONE CORRELATION OF BORROWED FUNDS FOR THE YEAR AND ITS APPLICATION WAS GIVEN TO AO AND ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 5 - THAT NONE OF INTEREST BEARING BORROWED FUNDS WERE U TILIZED FOR MAKING ABOVE ADVANCE. FURTHER, THAT THE DATE OF ABOVE ADVANCE IS QUITE OLD AND EARLIER THAN DATE OF ACCEPTANCE OF ANY OF INTEREST BEARING BORROWED F UNDS. SUBMITTING THUS THE APPELLANT SUBMITTED THAT NO NATIONAL DISALLOWANCE O N ADVANCE OF RS. 5,50,000/- IS CALLED FOR. AFTER CONSIDERING ALL FACTS AND CIRCUMSTANCES OF TH E CASE, I AM NOT INCLINED TO A:GREE WITH THE CONTENTION OF THE APPELLANT. THOUGH THE AP PELLANT HAS SUBMITTED THAT NO INTEREST BEARING FUNDS ARE USED FOR ABOVE ADVANCE B UT NO SUPPORTING EVIDENCE WAS FILED. ACCORDINGLY, ADDITION OF RS. 66,000/- IS UPH ELD. THIS GROUND OF APPEAL IS REJECTED. 10.1. SINCE THE ASSESSEE HAS NOT REBUTTED THE FINDI NGS OF THE LD.CIT(A) BY WAY OF ANY WRITTEN SUBMISSIONS, WE DO NOT SEE ANY R EASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A), THE SAME IS HEREBY U PHELD AND THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 11. GROUND NO.3 RAISED BY THE ASSESSEE RELATES TO C HALLENGING THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF FUR THER INTEREST EXPENSE OF RS.50,28,000/-. 12. WE HAVE HEARD LD.DR AND PERUSED THE MATERIAL AV AILABLE ON RECORD. FROM THE RECORDS WE FIND THAT THE LD.CIT(A) HAS DEA LT WITH THIS GROUND IN PARA-73.3 OF HIS ORDER AND THE SAME IS REPRODUCED H EREUNDER: 7.3 AFTER CONSIDERING FINDINGS OF THE AO AND SUBMI SSIONS OF THE APPELLANT, THIS GROUND IS ADJUDICATED AS UNDER. IT IS SEEN THAT THE APPELLANT CLAIMED INTEREST EXPE NSE OF RS. 1,59,51,279/- AGAINST BUSINESS INCOME FROM PARTNERSHIP FIRM R.K. INDUSTRI ES UNIT II. THE INTEREST WAS LATER REVISED TO RS. 1,24,73,638/- BY WAY OF REVISED RETU RN OF INCOME. THE APPELLANT ALSO ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 6 - DISALLOWED RS, 34,77,641/- U/S 14A OF THE ACT. THE AO HAS CLEARLY BROUGHT OUT THAT ALL BORROWED FUNDS ON WHICH INTEREST HAS: BEEN PAID AND CLAIMED AS SET-OFF, WERE NOT USED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. I N PARA 4.7, THE AO HAS CLEARLY MENTIONED THAT BORROWED FUNDS TO THE EXTENT OF RS. 4.19 CR. WERE USED FOR PURPOSE OTHER THAN IIN BUSINESS I.E. THESE FUNDS ARE NOT IN VESTED IN R.K. INDUSTRIES UNIT II. AMOUNT OF RS. 4.19 CR. ALSO INCLUDES AMOUNT OF RS. 14 LACS WHICH HAVE BEEN USED FOR 'HOUSING LOAN'. THIS AMOUNT OF RS. 14 LACS BY NO ST RETCH OF IMAGINATION CAN BE TREATED AS INVESTED IN BUSINESS. HENCE DISALLOWANCE OF INTEREST ON THIS AMOUNT IS CONFIRMED. FOR THE BALANCE RS. 4.05 CR., THE APPELL ANT IN HER SUBMISSION REITERATED WHAT SHE HAD SUBMITTED BEFORE THE AO. GIST OF SUBMI SSION OF THE APPELLANT IS THAT BORROWED FUNDS THROUGH MOVEMENT OF FUNDS BETWEEN VA RIOUS CONCERNS WERE ULTIMATELY INVESTED IN THE BUSINESS. DURING DISCUSS IONS ALSO IN THE COURSE OF APPEAL PROCEEDINGS THE AR OF THE APPELLANT TRIED TO EXPLAI N THE ABOVE BY EXPLAINING THE MOVEMENT OF FUNDS. THE APPELLANT ALSO FILED COPY OF HER BANK BOOK IN SUPPORT OF HER CONTENTION. IT IS SEEN THAT IT IS A COMPLEX MAZE OF MOVEMENT OF FUNDS. I HAVE CAREFULLY GONE THROUGH SUBMISSIONS OF THE APPELLANT ALONG WITH BANK BOOK! HOWEVER, LOOKING AT MOVEMENT OF FUNDS, I AM NOT CONVINCED BY SUBMISSIONS OF THE APPELLANT THAT FUNDS OF RS. 4.04 CR HAVE BEEN INVESTED IN BUS INESS. AFTER CONSIDERING ALL SUBMISSIONS AND DOCUMENTS I AM INCLINED TO AGREE WI TH FINDINGS OF THE AO THAT FUNDS OF RS. 4.05 CR. RECEIVED FROM DHAVAL SHAH HAV E NOT BEEN INVESTED IN R.K. INDUSTRIES UNIT II AND HAVE BEEN ADVANCED TO SHREE RAM VESSEL SCRAP PVT. LTD. AND MONEY ANCHOR FINANCIAL SERVICES. ACCORDINGLY, I AM INCLINED TO AGREE WITH THE AO THAT INTEREST PAID ON RS. 4.05 CR CANNOT BE ALLOWED . CASE LAWS RELIED ON BY THE APPELLANT ARE NOT APPLICABLE AS FACTS ARE DIFFERENT . IN VIEW OF ABOVE DISCUSSION, I HOLD THAT THE AO WAS [JUSTIFIED IN MAKING DISALLOWANCE O F RS. 50,28,000/-. ACCORDINGLY, ADDITION OF RS. 50,28,000/- IS UPHELD. THE APPELLANT HAS FURTHER RAISED A GROUND THAT INTE REST ON RS. 14,00,000/- RECEIVED FROM DHAVAL SHAH WHICH HAS BEEN USED FOR R EPAYMENT OF HOUSING LOAN CANNOT BE DISALLOWED SINCE THE APPELLANT HAS SUO MO TTO MADE DISALLOWANCE U/S 14A OF THE ACT. THERE IS NO SUBSTANCE IN THE CONTENTION OF THE APPELLANT. DISALLOWANCE U/S 14A OF THE ACT IS MADE IN RESPECT OF INTEREST A ND OTHER EXPENSES INCURRED FOR EARNING EXEMPT INCOME. HOWEVER, THE AO HAS MADE DIS ALLOWANCE OF INTEREST ON FUNDS WHICH WERE NOT USED FOR BUSINESS. IT IS NOT U NDERSTOOD AS TO HOW HOUSING LOAN OF RS. 14 LACS IS CONNECTED WITH EXEMPT INCOME. THE APPELLANT IN S UPPORT OF HER CONTENTION HAS RELIED ON JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN HITECH ANALYTICAL SERVICES VS PR. CIT, (2017) 86 TAXMANN.COM 164(GUJARAT). A PERUSAL OF THIS JUDGMENT SHOWS THAT FACTS IN THIS CASE ARE VERY DIFFERENT FROM FACTS OF PRESENT APPEAL. IN HITECH ANALYTICAL VS PR. CIT(SUPRA) THE ISSUE WAS REGARDING CLAIM OF EXPENSES LIKE AUDIT FEE, BANK ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 7 - CHARGES, CAR LOAN INTEREST DEPRECIATION, PETROL AND TELEPHONE EXPENSES BY PARTNER AGAINST INCOME FROM PARTNERSHIP FIRM. CLEARLY, THIS IS NOT THE CASE IN THE PRESENT APPEAL. HENCE, RATIO OF THIS JUDGMENT IS NOT APPLIC ABLE. IN VIEW OF ABOVE, I HOLD THAT THERE IS NO SUBSTANCE IN CONTENTION OF THE APPELLAN T. HENCE THIS GROUND OF APPEAL IS REJECTED. IN VIEW OF DISCUSSION ABOVE INTEREST DISALLOWANCE O F RS.50,28,000/- IS UPHELD. THESE GROUNDS OF APPEAL IS REJECTED. 12.1. SINCE THE ASSESSEE HAS NOT REBUTTED OR CONTRO VERTED THE FINDINGS OF THE LD.CIT(A) BY WAY OF ANY WRITTEN SUBMISSION, THEREFO RE WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A) AND HE NCE THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 13. GROUND NO.4 RAISED BY THE ASSESSEE RELATES TO C HALLENGING THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE RS.1, 68,000/- . 14. AFTER HAVING GONE THROUGH THE ORDER OF LD.CIT(A ), WE FIND THE LD.CIT(A) HAS ALREADY DEALT WITH THIS GROUND WHILE PASSING HI S ORDER WHICH HAS ALREADY BEEN REPRODUCED HEREINABOVE WHILE DECIDING OTHER GR OUNDS OF THE ASSESSEE. HOWEVER, ASSESSEE HAS NOT SUBSTANTIATED OR REBUTTED THE FINDINGS SO RECORDED BY THE LD.CIT(A) BY WAY OF WRITTEN SUBMIS SION, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT (A) AND UPHOLD THE SAME AND GROUND RAISED BY THE ASSESSEE IS DISMISSED. ITA NO.1714/AHD/2018 RANJANABEN MUKESHBHAI PATEL VS. DY.CIT ASST.YEAR 2015-16 - 8 - 15. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13 - 03 - 2020 AT AHMEDABAD SD/- SD/- ( AMARJIT SINGH) ( SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13 / 03 /2020 & . . , . ' . ./ T.C. NAIR, SR. PS ! '! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ()* + / CONCERNED CIT 4. + ( ) / THE CIT(A)-6, AHMEDABAD 5. ,-. '')* , )* , ( / DR, ITAT, AHMEDABAD 6. .01 / GUARD FILE. / BY ORDER, , ' //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12.3.20 (DICTATION-PAD 7- P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 12.3.20 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.2.20 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.2.20 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER