Joydev Bag, Howrah V. I.T.O.,Ward-46(2), Kolkata

ITA 2226/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4949 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 30-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ)] I.T.A. NO. 2226/KOL/2019 ASSESSMENT YEAR: 2015-16 JOYDEV BAG..............................................................................................APPELLANT KHALORE, BAGNAN, HOWRAH 711 303. [PAN: AJHPB 2070 P] VS ITO, WARD 46(2), KOLKATA................................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI ASIM PRAKASH, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI JAYANTA KHANRA, JCIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 14, 2020 DATE OF PRONOUNCING THE ORDER : FEBRUARY 21, 2020 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 14, KOLKATA DATED 18.07.2019 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS. 6,01,567/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST EXPENDITURE. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRADING OF BETEL-LEAF. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 08.10.2015 DECLARING A TOTAL INCOME OF RS. 7,98,820/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 6,01,567/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BANK INTEREST. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED BY THE AO TO EXPLAIN THE BUSINESS EXPEDIENCY OF THE SAID EXPENDITURE BY EXPLAINING THE PURPOSE OF LOAN TAKEN AND UTILISATION OF THE SAME. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE THAT HE WAS UTILISING CASH CREDIT FACILITY 2 I.T.A. NO. 2226/KOL/2019 ASSESSMENT YEAR: 2015-16 JOYDEV BAG FROM AXIS BANK RIGHT FROM THE YEAR 2009 AND THE SAID FACILITY ALLOWED TO THE EXTENT OF RS. 45 LAKHS IN THE YEAR UNDER CONSIDERATION WAS FOR THE PURPOSE OF WORKING CAPITAL. THE AO HOWEVER FOUND FROM THE PERUSAL OF BALANCE SHEET OF THE ASSESSEE THAT THERE WAS HARDLY ANY INCREASE IN THE WORKING CAPITAL OF THE BUSINESS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THE LOAN TAKEN FROM BANK WAS ACTUALLY UTILISED BY THE ASSESSEE FOR THE CONSTRUCTION OF BUILDING WHICH WAS IN PROGRESS. HE ACCORDINGLY HELD THAT THE BANK INTEREST PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION DID NOT REPRESENT THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAME WAS DISALLOWED BY HIM IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 30.11.2017. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BANK INTEREST. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THERE WAS HOWEVER NO COMPLIANCE ON THE PART OF THE ASSESSEE TO THE NOTICES ISSUED BY HIM FIXING THE SAID APPEAL FOR HEARING FROM TIME TO TIME. THE LD. CIT(A), THEREFORE, PROCEEDED TO DISPOSE OF THE APPEAL OF THE ASSESSEE VIDE HIS APPELLATE ORDER DATED 18.07.2019 PASSED EX-PARTE WHEREIN HE CONFIRMED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BANK INTEREST FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5 OF HIS IMPUGNED ORDER: 5. I HAVE PERUSED THE ASSESSMENT AND RELEVANT APPELLATE RECORDS. DURING THE APPELLANT PROCEEDINGS, DESPITE REPEATED NOTICES NEITHER ANYBODY ATTENDED NOR WAS ANY WRITTEN REPLY FILED ON THE DATE OF HEARING. FROM THIS, IT IS REASONABLE TO INFER THAT THE ASSESSEE IS NOT SERIOUS TO PURSUE ITS CASE. THE CASE IS THEREFORE, DECIDED ON THE BASIS OF WRITTEN SUBMISSION FILED BY 3 I.T.A. NO. 2226/KOL/2019 ASSESSMENT YEAR: 2015-16 JOYDEV BAG THE APPELLANT. THE A.O. IN THE ASSESSMENT ORDER HAD ADDED BACK INTEREST AMOUNTING TO RS. 6,01,567/- PAID ON BANK LOAN ON THE GROUNDS THAT THE LOAN HAD NOT BEEN USED FOR BUSINESS BUT WAS USED FOR CONSTRUCTION OF BUILDING OWNED BY THE APPELLANT. THE A.O. HAD HELD THAT THE INTEREST PAID SHOULD BE TREATED AS CAPITAL EXPENDITURE. THE A.O. HAD ALSO OBSERVED THAT THE NET PROFIT OF THE APPELLANT HAD DECLINED FROM 30.20% IN 2012-13 TO 1.48% IN 2014-15. THE DECLINE IN PROFIT IS DUE TO INTEREST ON HOUSE PROPERTY BEING DEBITED TO BUSINESS ACCOUNT. THE APPELLANT IS CONSTRUCTING A BUILDING AND HAS CLAIMED AS A DEDUCTION, INTEREST AMOUNTING TO RS. 6,01,567/- AS REVENUE EXPENDITURE IN HIS P&L A/C. IT MAY BE MENTIONED THAT THE BUILDING IS NOT YIELDING ANY INCOME AND CONSTRUCTION IS NOT YET COMPLETED. THEREFORE, THE A.O. HAD RIGHTLY DISALLOWED THE EXPENDITURE ON THE GROUNDS THAT IT IS CAPITAL IN NATURE AND EXPENDITURE ON INTEREST COULD NOT BE DEBITED TO BUSINESS ACCOUNT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CASH CREDIT FACILITY WAS AVAILED BY THE ASSESSEE IN EARLIER YEAR AND THERE WAS HARDLY ANY INCREASE OR FRESH UTILISATION OF THE SAID LOAN AVAILED FROM BANK DURING THE YEAR UNDER CONSIDERATION, I AM OF THE VIEW THAT THE UTILISATION OF LOAN IS REQUIRED TO THE CONSIDERED VIS--VIS EVERY YEAR WHEREIN THE INTEREST PAID ON SUCH LOAN IS CLAIMED BY THE ASSESSEE AS DEDUCTIBLE BUSINESS EXPENDITURE. THE ONUS, IN THIS REGARD, IS ON THE ASSESSEE TO ESTABLISH THAT INTEREST BEARING LOAN AVAILED BY HIM FROM BANK IS UTILISED FOR THE PURPOSE OF HIS BUSINESS DURING THE RELEVANT YEAR SO AS TO MAKE HIM ELIGIBLE TO CLAIM THE INTEREST AS DEDUCTIBLE BUSINESS EXPENDITURE. IT IS OBSERVED THAT THE CASE OF THE ASSESSEE AS MADE OUT BEFORE THE AO WAS THAT THE CASH CREDIT FACILITY OF RS. 45 LAKHS WAS AVAILED BY HIM DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF 4 I.T.A. NO. 2226/KOL/2019 ASSESSMENT YEAR: 2015-16 JOYDEV BAG WORKING CAPITAL. A PERUSAL OF THE RELEVANT BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2015 (COPY PLACED AT PAGE NO 24 OF THE PAPER BOOK) HOWEVER SHOWS THAT THERE WAS HARDLY ANY INVESTMENT MADE BY THE ASSESSEE IN THE WORKING CAPITAL AND THE ENTIRE AMOUNT OF LOAN AVAILED FROM BANK WAS UTILISED FOR THE PURPOSE OF BUILDING WHICH WAS UNDER CONSTRUCTION. AS PER THE CLEAR MENTION MADE IN THE BALANCE SHEET OF THE ASSESSEE, THE SAID BUILDING WAS UNDER CONSTRUCTION AND THERE IS NOTHING BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE SAID BUILDING WAS MEANT FOR THE PURPOSE OF HIS BUSINESS. KEEPING IN VIEW ALL THESE FACTS OF THE CASE, I FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST AND UPHOLDING THE SAME, I DISMISS THIS APPEAL FILED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2020. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 21/02/2020 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. JOYDEV BAG, KHALORE, BAGNAN, HOWRAH 711 303. 2. ITO, WARD 46(2), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA