MANJI K. PATEL, MUMBAI V. INCOME TAX OFFICER 5(2)(3), MUMBAI

ITA 1868/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5548 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Business income; Rectification of order
• Section: 143(3); 14A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 1868 / MUM/20 18 & 1869/MUM/2018 ( ASSESSMENT YEAR : 2011 - 12 ) SHRI MANJI K PATEL OFFICE NO.1, 2 ND FLOOR 3, PATEL BHUVAN 29, VIJAY WADI DR. N.N. SHAH LANE CHITRA BAZAR MUMBAI 400 002 VS. ITO WARD 5(2)(3) AAYAKAR BHAVAN MUMBAI PAN/GIR NO. AABPP0130D APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RUSHABH MEHTA REVENUE BY MS. N. HEMALATHA DATE OF HEARING 02 / 07 /201 8 DATE OF PRONOUNCEMENT 24 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE APPEALS ARE FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 10, MUMBAI DATED 24/10/2017 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) AND 154 OF THE IT ACT. ITA NO.1868/MUM/2018 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR ASSESSING INCOME FROM BUSINESS AT RS.31,67,240/ - AS AGAINST RS.21,18,861/ - OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME. ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 2 3. FROM THE RECORD WE FOUND THAT DURING TH E YEAR THE ASSESSEE HAS EARNED INCOME FROM PARTNERSHIP FIRM AS UNDER : I. TRISHUL ENTERPRISES I NTEREST ON CAPITAL RS. 15,20,898 II. PATEL & ASSOCIATES REMUNERATION RS. 2, 62,388 INTEREST ON CAPITAL RS. 20. 69.527 III. TRISHUL REALTORS INTEREST PAID ON CAPITAL RS. 6. 85.293 TOTAL INCOME FROM PARTNERSHIP FIRM RS. .31.67.420/ - 4 . IT WAS CONTENTION OF ASSESSEE BEFORE THE AO THAT HE HAS PAID TOTAL INTEREST OF RS. 1,37,99,484/ - ON BORROWED FU ND AND OUT OF SAID AMOUNT; THE ASSESSEE O N HIS OWN DISALLOWED INTEREST OF RS. 47,39,351/ - U/S 14A IN VIEW OF SUCH DISALLOWANCE MADE BY AO IN THE ASST. YEAR 2009 - 10, THUS HE HAS ALLOWABLE INTEREST OF RS.90,60,199/ - . THE ASSESSEE FURTHER SUBMITTED THAT HE HAS A LSO RECEIVED INTEREST OF RS.80,21,574, THEREFORE NET INTEREST PAYMENT OF RS. 10,38, 559/ - WAS CLAIMED BY ASSESSEE AGAINST BUSINESS INCOME FROM PARTNERSHIP FIRM AS STATED ABOVE, THAT HE HAS ALSO CLAIMED EXPENSES OF RS. 10,000 / - FOR PROFESSION TAX PAID, THUS HE HAD CLAIMED EXPENSES OF RS. 10,48,559/ - AGAINST THE BUSINESS INCOME AND VIDE L ETTER DATED 26/8/2013 IT WAS SUBMITTED BEFORE AO THAT THE ASSESSEE HAS OF HIS OWN DISALLOWED INTEREST OF RS.47.39 R 351/ - U/S. 14A AND THEREFORE THERE SHOULD NOT BE ANY FURTHER DISALLOWANCE OF INTEREST. HOWEVER, THE AO HAS ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 3 TAKEN BUSINESS INCOME AS PER RETURN/ COMPUTATION AND GIVEN NO EXPLANATION FOR ADOPTING BUSINESS INCOME AT HIGHER FIGURE OF RS. 31,67,420/ - AS AGAINST RS.21,18,860/ - SHOWN BY THE ASSESSES, HENCE IN THE ABSENCE OF SPEAKING ORDER THE ENHANCEMENT BE DELETED. 5. THE CIT(A) OBSERVED THAT THE CLAIM OF THE A SSESSEE ON ADMISSIBILITY OF EXPENSES OF RS. 10 , 48 , 559/ - CLAIME D AGAINST THE BUSINESS INCOME, THE AO HAS ELABORATED ON THE ADMISSIBILITY OF THE CLAIM WHILE DECIDING THE A SSESSEE 'S APPLICATION U/S 154(8) OF THE ACT VIDE ORDER DATED 11/04/2014. PRIMA FACIE THE A SSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.10,48,559/ - AGAINST THE REMUNERATION AND INTEREST RECEIVED ON PARTNER'S CAPITAL, RS. 31,67,420/ - , HOWEVER THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE BEFORE THE AO TO SUBSTANTIATE THE GENUINENESS OF THE EXPENS ES INCURRED, THEREFORE THE AO HELD THAT THE EXPENSES ARE NOT ALLOWABLE EITHER U/S 36(1)(III) OR U/S 37(1). ASSESSEE IS IN FURTHER APPEAL BEFORE US AGAINST THE IMPUGNED ORDER OF CIT(A). 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT IN THE COURSE OF ASSESSMENT U/S. 143(3), AO HAS DISALLOWED INTEREST EXPENSES OF RS.10,48,5 59 / - CLAIMED AGAINST INCOME FROM REMUNERATION AND INTEREST RECEIVED O N PARTNERS CAPITAL OF RS.31,67,240/ - . IT WAS CONTENTION OF LEARNED AR THAT ASSESSEE HAS ALREADY DISALLOWED INTEREST OF RS.47,39,351/ - U/S.14A AND THEREFORE, NO FURTHER DISALLOWANCE CAN BE MADE. THE DISALLOWANCE HAS BEEN MADE BY THE AO BASICALLY ON THE ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 4 GRO UND THAT ASSESSEE HAS NOT SUBSTANTIATED GENUINENESS OF THE EXPENSES INCURRED FOR EARNING INCOME FROM REMUNERATION AND INTEREST. INTEREST EXPENDITURE CAN BE ALLOWED ONLY IF IT IS PROVED THAT ASSESSEE HAS GENUINELY INCURRED THE SAME FOR EARNING THE INCOME FR OM BUSINESS . THE CIT(A) HAS ALSO OBSERVED THAT ASSESSEE HAS NOT PLACED ANY DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE CLAIM OR NEXUS OF THE EXPENSES WITH THE INCOME EARNED. 7 . FROM THE RECORD WE FOUND THAT ASSESSEES CLAIM OF INTEREST OF RS.10,48 ,559/ - AND EXPENSES OF RS.10,000/ - CLAIMED AGAINST TRISHUL ENTERPRISES WAS DISALLOWED ON THE PLEA THAT ASSESSEE WAS UNABLE TO PROVE THE SPECIFIC EXPENSES AGAINST THE SPECIFIC INCOME. 8 . LEARNED AR DRAWN OUR ATTENTION TO THE INCURRING OF ACTUAL EXPENSES ON THE BORROWED FUNDS WHICH WAS ALLEGED TO BE USED AS DEPLOYMENT OF CAPITAL IN THE PARTNERSHIP FIRM. AS PER LEARNED AR SUCH EXPENSES SHOULD BE ALLOWED AGAINST THE INCOME EARNED BY ASSESSEE OUT OF REMUNERATION FROM THE FIRM AND INTEREST ON PARTNERS CAPITAL SO RECEIVED BY IT. 9. IN VIEW OF ABOVE DISCUSSION AND IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO AND ASSESSEE IS DIRECTED TO EXPLAIN THE GENUINENESS OF THE EXPENSES SO INCURRED FOR EARNING INTEREST INCOME ON CAPITAL EMPLOYED WITH THE FIRM AND REMUNERATION SO AS TO ENABLE THE AO TO CONSIDER ITS ALLOWABILITY AGAINST THE INCOME SO EARNED. THE NEXUS OF EXPENSES SO INCURRED AGAINST ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 5 PARTICULAR HEAD OF INCOME IS ALSO REQUIRED TO BE ESTABLISHED BY T HE ASSESSEE BEFORE ALLOWING THE SAME. WE DIRECT ACCORDINGLY. 9 . IN THE RESULT, APPEAL IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ITA NO.1869/MUM/2018 10. IN THIS APPEAL ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO U/S. 154 OF THE IT ACT. 11. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT WHI L E PASSING ORDER U/S 143(1), THE ASSESSED INCOME GOT ENHANCED BY RS. 10 , 48 , 560/ - AND IT GOT PERPETUATED IN THE ASSESSMENT ORDER U/S 143(3) AND AS A RESULT, THE ASSESSED I NCOME GOT E NHANCED BY RS. 10,48, 560/ - . THE A SSESSEE , THEREFORE, APPLIED FOR RECTIFICATION OF MISTAKE U/S 154 AGAINST INTIMATION U/S 143(1) VIDE LETTER DATED 04/04/2014 AS ALSO AGAINST THE ORDER U/S 143(3) VIDE LETTER DATED 24/03/2014. HOWEVER, THE AO VIDE THE IMPUGNE D ORDER DATED 11/04/2014 HAS REFUSED TO RECTIFY THE MISTAKE . 12. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER: - 6.2.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IT IS OBSERVED THAT WHILE COMPUTING THE TOTAL IN COME OF THE APPELLANT U/S 143(3), THE AO HAS COMPUTED THE INCOME OF THE APPELLANT UNDER DIFFERENT HEADS OF INCOME. THE AO HAS COMPUTED THE TOTAL INCOME OF THE APPELLANT AT RS. 49,06.516 / - WHICH INCLUDES SALARY OF RS. 7,20,000/ - , INCOME FROM HOUSE PROPERTY RS,9,58,407/ - , INCOME FROM BUSINESS RS. 31,67,420/ - AND INCOME FROM OTHER SOURCES RS. 1,75,689/ - , BESIDES AGRIC ULTURAL INCOME OF RS. 15,42,820/ - . I T IS ALSO APPARENT FROM THE COMPUTATION OF TOTAL INCOME IN THE ASSESSMENT ORDER THAT THE AO HAS INCORPORATED THE INCOME 'AS PER COMPUTATION' UNDER VARIOUS HEAD AS PART OF ASSESSMENT ORDER IN CONTRADISTINCTION TO INCOME DETERMINED U/S 143(1). THEREFORE, EVEN IF THE ADJUSTMENT CARRIED OUT WHILE COMPUTING THE INCOME U/S 143(1) MAY NOT BE VALID, IT WOULD STILL BE VAL ID U/S 143(3) BECAUSE WHAT ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 6 FORMS PART OF THE ASSESSMENT ORDER IS INCOME AS PER COMPUTATION UNDER VARIOUS HEADS AND NOT INCOME 'COMPUTED' UNDER SECTION 143(1). THUS, THE AO HAS INCORPORATED THE WHOLE PROCESS OF COMPUTATION OF INCOME FURTHER THE APPELLANT H AD NOT CHALLENGE THE INTIMATION U/S 143(1) AT ANY STAGE PRIOR TO AND UPTO THE STAGE OF COMPLETION OF ASSESSMENT U/S 143(3).THEREFORE, IN MY VIEW, TT IS NOT A CASE WHERE A MISTAKE OCCURRING IN INTIMATION ISSUED U/S 143(1) HAS BEEN PROPAGATED WHILE ASSESSING INCOME UNDER 143(3) WHICH CAN BE SUBJECTED TO RECTIFICATION U/S SECTION 154 OF ACT . 13. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AO HAS ELABORATELY DISCUSSED THE ADDITION MADE IN THE ASSESSMENT ORDER FRAMED U/S.143(3), THEREFORE, THERE IS NO M ISTAKE APPARENT IN THE ORDER OF THE AO, THEREFORE, AO WAS JUSTIFIED IN REJECTING ASSESSEES APPLICATION U/S. 154 FOR DELETING THE ADDITION MADE ON ACCOUN T OF DISALLOWANCE OF INTEREST. O NLY MISTAKE APPARENT FROM RECORD CAN BE RECTIFIED U/S.154 AND NOT THE I SSUE WHICH IS DEBATABLE . WE HAVE ALREADY DISCUSSED THE ISSUE WHILE DECIDING THE ASSESSEES APPEAL AGAINST THE ORDER OF AO U/S. 143(3). THUS, THERE IS NO MERIT IN THE APPEAL OF ASSESSEE FILED U/S. 154. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 15. IN THE RESULT, APPEAL FILED BY ASSESSEE IN ITA NO.1868/MUM/2018 IS ALLOWED IN PART FOR STATISTICAL PURPOSES AND APPEAL FILED BY ASSESSEE IN ITA NO.1869/MUM/2018 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 07 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 1868 & 1869/MUM/2018 SHRI MANJI K PATEL 7 MUMBAI ; DATED 24 / 07 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//