Kizekkencheery Sundaram Balakrishnan, CHENNAI V. ITO Non Corporate Ward 13(2), CHENNAI

ITA 2067/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6593 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 02-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Opportunity of being heard; Notional interest
• Section: 234B; 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , , & BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2067/CHNY/2018 ' ' /ASSESSMENT YEAR: 2014-15 SHRI KIZEKKENCHEERY SUNDARAM BALAKRISHNAN, D-3, 3 RD FLOOR, NO.18 ASHOK ENCLAVE, I AVENUE, ASHOK NAGAR, CHENNAI-600 083. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD-13(2), NO.121 AAYAKAR BHAVAN, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. [PAN: AKSPB 5364 J ] ( * /APPELLANT) ( +,* /RESPONDENT) * - / APPELLANT BY : MR.G.BASKAR, ADV. +,* - /RESPONDENT BY : MR. AR.V.SREENIVASAN, JCIT - /DATE OF HEARING : 20.02.2019 - /DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSION OF INCOME TAX (APPEALS)-14, CHENNAI DATED 30.05.2018 FOR THE AY 2014-15. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING IN TOTO THE ADDITION OF NOTIONAL INTEREST OF RS.1,60,77,283/- 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT CONSIDERING THAT MAJOR PORTION OF THE LOANS ADVANCED WERE FROM ASSESSEES OWN FUNDS, FOR WHICH HE WAS UNDER NO OBLIGATION TO CHARGE INTEREST. ITA NO.2067/CHNY/2018 :- 2 -: 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N PROCEEDING AS IF NOTIONAL INTEREST HAS ACCRUED/ RECEIVABLE, WHEN SUFFICIENT E VIDENCE WAS FURNISHED TO SHOW THAT THE LOANS WERE GIVEN WITHOUT ANY STIPULATION O F INTEREST. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N PROCEEDING TO ADJUDICATE THE ALTERNATE PLEA WITHOUT ADJUDICATION THE MAIN PL EA. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING INTEREST U/S.234A AND 234B OF THE IT ACT WHEN THE ADDITION I TSELF IS UNSUSTAINABLE. 6. ANY OTHER GROUND/S THAT MAY BE RAISED AT THE TIM E OF HEARING. 3. THE APPELLANT IS AN INDIVIDUAL DERIVING INCOME F ROM BUSINESS OF MONEY LENDING. THE RETURN OF INCOME FOR THE AY 201 4-15 WAS FILED ON 26.03.2016 DISCLOSING LOSS OF RS.8,30,194/-. AGAIN ST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ITO, NO N-CORPORATE WARD- 13(2), CHENNAI, VIDE ORDER DATED 29.12.2016 PASSED U/S.143(3) OF THE INCOME TAX ACT AT A TOTAL INCOME OF RS.1,64,00,780/ -. WHILE DOING SO, THE ASSESSING OFFICER HAD DISALLOWED THE MADE ADDITION ON ACCOUNT OF INTEREST ON SBI HOUSING LOAN OF RS.2,97,500/- AND ALSO MADE ADDITION ON ACCOUNT OF NOTIONAL INTEREST FROM THE PARTIES TO WHOM THE M ONEY WAS LENT OF RS.1,60,77,283/-. 4. THE BRIEF FACTS OF THE ADDITION ON ACCOUNT OF NO TIONAL INTEREST ARE THAT THE APPELLANT IS IN THE BUSINESS OF MONEY LEND ING AND ALSO BORROWED MONEY FROM CHOLAMANDALAM FINANCE AND ECL FINANCE. THE APPELLANT HAD MADE A CLAIM FOR ALLOWANCE EXPENDITURE OF RS.41,23, 032/- ON THE LOANS BORROWED FROM THE ABOVE ORGANIZATIONS. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE APPELLANT HAD ADVANCED THE MONEY TO THE FOLLOWING PARTIES: ITA NO.2067/CHNY/2018 :- 3 -: SL.NO. NAME OF THE DEBTORS (SHRI/SMT/M/S/MS.) CLOSING BALANCE AS ON 31.03.2014 (IN RS.) 1 P.D.ABRAHAM 5,43,50,000/- 2 SWARGA CHITRA 8,02,02,602/- 3 T.R.RUKMANI 1,05,137/- 4 SANEESH ABRAHAM 21,00,000/- 5 LILK ABRAHAM 21,00,000/- 6 SUNITHA ABRAHAM 21,00,000/- 7 V.PRASANNA 3,40,000/- 8 SRI HARI JAYARAMAN 1,50,000/- 9 P.RADHAKRISHNAN 1,65,000/- TOTAL 14,16,12,739/- THEREFORE, THE ASSESSING OFFICER FURTHER OBSERVED THAT EXCEPT IN THE CASE OF SHRI PD ABRAHAM, NO INTEREST WAS CHARGED FR OM OTHER PARTIES. HENCE, THE ASSESSING OFFICER BROUGHT TO TAX, THE NO TIONAL INTEREST OF RS.1,60,77,283/- CALCULATED AT THE RATE OF 14% ON T HE OUTSTANDING BALANCES. 5. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CITA(A) WHO VIDE IMPUGNED ORDER HELD THAT THE ADDITION SHOU LD BE RESTRICTED TO THE EXTENT OF NET OF NOTIONAL INTEREST AND INTEREST EXP ENDITURE. 6. BEING DISSATISFIED WITH THE DECISION OF THE LD.C ITA(A), THE APPELLANT IS IN APPEAL BEFORE US. IT IS SUBMITTED THAT NO BO RROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF LENDING TO THE PARTIES IN RESPECT OF WHOM NO INTEREST WAS CHARGED. HE FURTHER SUBMITTED THAT TH ERE IS NO PROVISION OF LAW TO CHARGE ANY NOTIONAL INCOME IN SUPPORT OF THI S PROPOSITION, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. J. CHELLADURAI [204 TAXMMAN 0258]. ON THE O THER HAND, THE LD.SR.DR PLACED RELIANCE ON THE ORDERS OF LOWER AUT HORITIES. ITA NO.2067/CHNY/2018 :- 4 -: 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIALS ON RECORD. THE SHORT ISSUE THAT ARISES FOR CONSIDERATION BEFOR E US IS WHETHER ANY INTEREST INCOME IS ACCRUED TO THE APPELLANT ON THE AMOUNTS ADVANCED TO THE PARTIES. THIS ISSUE REQUIRES TO BE ADJUDICATED WITH REFERENCE TO THE TERMS AND CONDITIONS OF THE CONTRACT BETWEEN THE BO RROWER AND LENDER. IT IS STATED BEFORE US THAT THERE IS NO WRITTEN AGREEM ENT OR ANY SECURITY OBTAINED FROM THE BORROWERS AGAINST THE AMOUNT LENT . UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER SHOULD HAVE CR OSS-EXAMINED THE BORROWERS AND OTHER COLLATERAL EVIDENCE TO VERIFY T HE VERACITY OF THE STAND OF THE APPELLANT. THEREFORE, WE REMAND THE ISSUE B ACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON THE ABO VE LINES AFTER AFFORDING THE OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 27 TH FEBRUARY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTA NT MEMBER /CHENNAI, 3 /DATED: 27 TH FEBRUARY, 2019. TLN - +45 65 /COPY TO: 1. * /APPELLANT 4. 7 /CIT 2. +,* /RESPONDENT 5. 5 + /DR 3. 7 ( ) /CIT(A) 6. ' /GF