Sri. Shivakumar, Mysore V. ACIT, Bangalore

ITA 185/BANG/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51333 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIZWI JT
• Assessee Lawyers: A SHANKAR
• Keywords: Depreciation; Opportunity of being heard; Cost of acquisition; Revised return; Set aside; Capital Gains
• Section: 143(3); 133A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 185/BANG/2011 ASSESSMENT YEAR : 2007-08 SRI SHIVAKUMAR, NO.997, PROP. MAHALAKSHMI SWEETS, III MAIN ROAD, VIDYARANYAPURAM, MYSORE 570 008. PAN : AELPS 5929R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MYSORE. APPELLANT RESPONDENT APPELLANT BY : SHRI A. SHANKAR, ADVOCATE RESPONDENT BY : SHRI S.H. RIZWI, JT.CIT(DR) DATE OF HEARING : 01.11.2011 DATE OF PRONOUNCEMENT : 01.11.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 15.12.2010 OF CIT(APPEALS), MYSORE. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL. ITA NO.85/BANG/2011 PAGE 2 OF 6 1. THE ORDER OF THE LEARNED AUTHORITIES BELOW IS O PPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND C IRCUMSTANCES OF THE APPELLANTS CASE. 2. THE APPELLANT DENIES HIMSELF LIABLE TO BE ASSES SED ON A TOTAL INCOME OF RS.28,05,423/- AS AGAINST THE RETUR NED INCOME BY THE APPELLANT OF RS.27,72,270/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN LAW IN NOT ALLOWING THE APPELLANT THE INTEREST OF RS.6,90,858/ - (INTEREST ON UNSECURED LOAN OF RS.2,89,181/- + INTEREST ON BANK LOAN OF RS.4,01,677/-) TO CAPITALIZE AND ALLOWED AS COST OF ACQUISITION BEING PAYMENT OF INTEREST WERE INCURRED TOWARDS THE PURCHASE OF PROPERTY UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE. 4. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN LAW IN THE ALTERNATIVE IN NOT ALLOWING THE INTEREST PAID ON UN SECURED LOAN AND INTEREST PAID TO BANK OF RS.6,90,858/- AS EXPENDITU RE IN THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN LAW IN HOLDING THAT THE PURCHASE OF PROPERTY IS IN THE NAT URE OF INVESTMENTS UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT OUGHT TO HA VE FILED A REVISED RETURN TO CLAIM THE SAID EXPENDITURE AND FURTHER HE LD THAT SINCE HE HAS NOT FILED THE REVISED RETURN THE CLAIM IS NOT A LLOWABLE. THE SAID VIEW OF THE LEARNED CIT(A) IS NOT CORRECT AND IS NOT IN ACCORDANCE WITH LAW UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE. 7. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE CIRCULAR OF BOARD IS CLEAR AND RELYING UPON THE SAM E HE OUGHT TO HAVE GIVEN THE BENEFIT OF THE CLAIM OF EXPENDITURE AND FURTHER OUGHT TO HAVE APPRECIATED THAT THE POWERS VESTED IN HIM IS CO- TERMINIOUS WITH THE LEARNED ASSESSING OFFICER AND O UGHT TO HAVE GIVEN THE BENEFIT OF CLAIM OF THE EXPENDITURE BEING A GENUINE AND ALLOWABLE EXPENDITURE UNDER THE FACTS AND CIRCUMSTA NCES OF THE CASE. 8. THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARG ED TO INTEREST UNDER 234 B AND C OF THE ACT UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE. ITA NO.85/BANG/2011 PAGE 3 OF 6 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBST ITUTE AND DELETE ANY OR LET THE GROUNDS OF APPEAL URGED ABOVE . 10. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DU RING THE HEARING OF APPEAL THE APPELLANT PRAYS THAT THE APPE AL BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 3. THE MAIN GRIEVANCE OF THE ASSESSEE VIDE GROUND N OS. 6 & 7 IN THIS APPEAL IS THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFI ED IN HOLDING THAT THE ASSESSEE OUGHT TO HAVE FILED A REVISED RETURN TO CL AIM THE EXPENDITURE AND SINCE THE SAID REVISED RETURN WAS NOT FILED, THE CL AIM WAS NOT ALLOWABLE. THE SAID GROUNDS WERE ARGUED AT THE FIRST INSTANCE. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS RUNNING A BUSINESS IN THE NAME AND STYLE OF M/S. SREE MAHALAK SHMI SWEETS, MYSORE AND FILED A RETURN OF INCOME ON 30.10.2007 DECLARIN G AN INCOME OF RS.27,72,270, WHICH WAS PROCESSED U/S. 143(1) OF TH E INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT ] ON 27.3.09. 5. IN THIS CASE, A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 22.6.2006. PU RSUANT TO THE SAME, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT AND DETERMINED TH E INCOME OF THE ASSESSEE AT RS.28,05,423 VIDE ORDER DATED 23.12.06. THE CLAIM OF THE ASSESSEE WAS THAT THE INTEREST ON UNSECURED LOAN TO THE EXTENT OF RS.2,89,181 AND THE INTEREST ON BANK LOANS TO THE E XTENT OF RS.4,01,677 HAVE BEEN UTILIZED FOR PURCHASE OF SITES AND HAD NO T BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT. AS PER THE ASSESSEE, THE AF ORESAID INTEREST OUGHT TO HAVE BEEN ADDED TO THE COST OF ACQUISITION OF THE S ITES DURING THE ITA NO.85/BANG/2011 PAGE 4 OF 6 COMPUTATION OF SHORT TERM CAPITAL GAINS. THE SAID CLAIM WAS MADE BY THE ASSESSEE VIDE LETTER DATED 11.12.09 DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. RELIANCE WAS PLACED ON THE JUDGMENT O F THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S. SRI HARIRAM HOTELS PVT. LTD. V. CIT IN ITA NO.58/2009, ORDER DATED 01.12.2009. HOWEVER , THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND REJECT ED THE AFORESAID CLAIM. 6. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS), WHO CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT TH E ASSESSEE SHOULD HAVE TAKEN DUE CARE WHILE FILING RETURN OF INCOME. HE A LSO OBSERVED THAT IN THE AMENDED PROVISIONS OF THE ACT, THE ASSESSEE IS ALLO WED A PERIOD OF ONE FULL YEAR TO REVISE ITS RETURN IN CASE THERE HAS BEEN AN Y OMISSION IN THE ORIGINAL RETURN. HE ACCORDINGLY CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THE AO COULD NOT HAVE ENTERTAINED THE ASSESSEES CLAIM. NOW THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE MADE A CLAIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO BY FILING A LETTER DATED 11.12.2009 I.E., BEFORE PASSI NG THE ASSESSMENT ORDER BY THE AO, THEREFORE, THE AO WAS DUTY BOUND TO ALLOW T HE CLAIM OF THE ASSESSEE. IT WAS FURTHER STATED THAT THE POWERS OF THE LD. CIT(APPEALS) ARE CO-TERMINUS WITH THE POWERS OF THE AO AND HE CAN DO WHAT THE AO COULD HAVE DONE. THEREFORE, THE LD. CIT(APPEALS) SHOULD HAVE ACCEPTED THE CLAIM OF THE ASSESSEE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) CIT V. KANPUR COAL SYNDICATE (1964) 53 ITR 225 (SC) ITA NO.85/BANG/2011 PAGE 5 OF 6 (II) JCIT V. HERO HONDA FINLEASE LTD. (2008) 115 T TJ (DEL)(TM). (III) GOETZE (INDIA) LTD. V. CIT (2006) 284 ITR 323 (SC) 8. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SU PPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE A CLAIM RELATING TO CAPITALIZATION OF THE INTEREST AMOUNTING TO RS.6,90 ,858 (INTEREST ON UNSECURED LOANS RS.2,89,181 + INTEREST ON BANK LOAN RS.4,01,677) BEFORE THE AO BY FILING A LETTER DATED 11.12.2009 DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE SAID CLAIM WAS NOT ENTERTAINED BY THE AO FOR THE REASON THAT IT HAD NOT BEEN CLAIMED IN THE PROFIT & LOSS A CCOUNT. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT TH E ASSESSEE HAD NOT FILED THE REVISED RETURN FOR MAKING THE SAID CLAIM. IT I S WELL SETTLED THAT THE APPELLATE PROCEEDINGS ARE CONTINUATION OF THE ASSES SMENT PROCEEDINGS AND THE POWERS OF THE CIT(APPEALS) ARE CO-TERMINUS WITH THE POWERS OF THE AO. THEREFORE THE LD. CIT(A) WAS NOT PRECLUDED FROM DEA LING WITH THE CLAIM OF THE ASSESSEE BECAUSE THE SAID CLAIM WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 10. ON A SIMILAR ISSUE, THE ITAT DELHI B THIRD ME MBER BENCH IN THE CASE OF JCIT V. HERO HONDA FINLEASE LTD. (SUPRA ) HAS HELD THAT THE CLAIM BY THE ASSESSEE FOR HIGHER DEPRECIATION BY WAY OF LETT ER COULD BE CONSIDERED BY THE CIT(APPEALS) BY VIRTUE OF HIS CO-EXTENSIVE P OWERS OVER THE ITA NO.85/BANG/2011 PAGE 6 OF 6 ASSESSMENT PROCEEDINGS AND ALSO BY VIRTUE OF SECTIO N 250(5) OF THE ACT. IN THE PRESENT CASE ALSO, THE ASSESSEE MADE A CLAIM DU RING THE COURSE OF ASSESSMENT PROCEEDINGS BY FILING A LETTER BEFORE TH E AO, BUT THE SAID CLAIM WAS NOT ACCEPTED BY THE AO AND THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A). IN OUR OPINION, THE LD. CIT(A) OUGHT TO HA VE DECIDED THE ISSUE WHICH WAS AGITATED BY THE ASSESSEE BY FILING A LETT ER BEFORE THE AO IN ACCORDANCE WITH LAW. WE THEREFORE DEEM IT APPROPRI ATE TO SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(APPEALS) AND R EMAND THE ISSUE BACK TO HIS FILE FOR FRESH ADJUDICATION IN ACCORDANCE WI TH LAW, AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF NOVEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 1 ST NOVEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.