Shri Chakreshkumar P. Jain, Ahmedabad V. The ACIT, C.C. 2(4), Ahmedabad

ITA 2300/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9262 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Assessee Lawyers: K C THAKER
• Keywords: Opportunity of being heard; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NOS. 1547 & 2300/AHD/2013 / ASSESSMENT YEAR : 2009-10 & 2010-11 CHAKRESHKUMAR P. JAIN, C/O. ANMOL FABRICS PVT LTD, 61, HIRABHAI MARKET, KANKARIA, AHMEDABAD PAN : AAOPJ 7560 N VS ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI K C THAKER, AR REVENUE BY : SHRI G C DAXINI, SR DR DATE OF HEARING : 07 /12/2016 DATE OF PRONOUNCEMENT IN COURT : 06/02/20 17 / O R D E R THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-II I, AHMEDABAD DATED 07.03.2013 AND 23.07.2013 FOR ASSESSMENT YEARS 2009 -10 AND 2010-11 RESPECTIVELY. 2. THE COMMON GROUND RAISED IN BOTH THE YEARS IS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.4,44, 237/- FOR AY 2009-10 AND RS.3,81,927/- FOR AY 2010-11 MADE BY THE ASSESSING OFFICER OUT OF THE CLAIM OF INTEREST EXPENSES. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THERE IS NO DISPUTE ABOUT THE GENUINENESS OF THE BORROWINGS AND THE INCURRING OF IMPUGNED INTEREST EXPENDITURE. IT HAS BEEN ACCEPTED THAT THE ASSESSE E HAS VARIOUS PROPERTIES WHICH ARE LET OUT. THESE PROPERTIES WERE ACQUIRED/C ONSTRUCTED WITH THE HELP OF BORROWINGS MADE FROM VARIOUS SOURCES INCLUDING B ANKS FROM TIME TO TIME. AS A CONTINUOUS PRACTICE OF ACCOUNTING, THE A SSESSEE DEBITED THE INTEREST AGAINST THE INTEREST INCOME EARNED BY IT U NDER THE HEAD INCOME SMC-ITA NOS. 1547 & 2300/AHD/2013 CHAKRESHKUMAR P JAIN VS. ACIT AY : 2009-10 & 2010-11 2 FROM OTHER SOURCES. THE ASSESSEE CREDITED THE ACCO UNT WITH ALL THE RECEIPTS INCLUDING RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. LIKEWISE, ALL THE INTEREST PAID WAS DEBITED TO INCO ME FROM OTHER SOURCES AND THE RESULTANT FIGURE WAS DISCLOSED IN THE RETURN AS INCOME FROM OTHER SOURCES. THIS HAS BEEN ACCEPTED BY THE ASSESSING OF FICER IN PAST YEARS AS WELL AS IN SUBSEQUENT YEARS, I.E., AY 2011-12 AND 2 012-13. HOWEVER, IN THE TWO YEARS UNDER CONSIDERATION, THE LD. ASSESSING OF FICER RAISED QUERY IN THIS BEHALF. THE ASSESSEE EXPLAINED THE LOANS WITH RESP ECT TO DIFFERENT PROPERTIES. THE LD. ASSESSING OFFICER POINTED OUT THAT THE RENT AL INCOME IS TO BE SEGREGATED AND OFFERED AS HOUSE PROPERTY INCOME. THE ASSESSEE FILED REVISED RETURN ACCORDINGLY DISCLOSING THE RENTAL IN COME UNDER THE HEAD INCOME FROM OTHER SOURCES AND CLAIMING THE REBATE O F INTEREST FREE LOANS FOR BORROWING THE CAPITAL USED FOR ACQUISITION AND CONS TRUCTION OF THESE PROPERTIES. THE LD. ASSESSING OFFICER THOUGH TAXED HOUSE PROPERTY INCOME BUT DID NOT GIVE ALLOWANCE FOR INTEREST INCOME INCU RRED ON THE BORROWED CAPITAL WITHOUT GIVING OPPORTUNITY AND CONSIDERING THE PAST RECORD. 3.1 ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER OF T HE LD. ASSESSING OFFICER BY FOLLOWING OBSERVATIONS:- 6. FACTS OF THE CASE AND THE ARGUMENTS OF THE APPE LLANT HAVE BEEN CAREFULLY CONSIDERED. I HAVE ALSO EXAMINED THE ASSESSMENT REC ORD IN THIS CASE. IT IS FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDI NGS APPELLANT FURNISHED COPIES OF VARIOUS BANK ACCOUNTS MAINTAINED BY HIM. THE APPELLANT IS A PARTNER IN ANMOL EXPORTS AND COPY OF HIS LEDGER ACC OUNT AS PER BOOKS OF ANMOL EXPORTS WAS ALSO FILED BEFORE THE AO. APPELLA NT HAS ALSO FILED VARIOUS DETAILS BEFORE THE UNDERSIGNED WHICH INDICATE UNSEC URED LOANS RAISED BY HIM IN VARIOUS YEARS AND INVESTMENT IN FIXED ASSETS MAD E BY HIM. HOWEVER, FROM ANY OF THE DETAILS FILED BY THE APPELLANT EITHER BE FORE AO OR THE UNDERSIGNED IT CANNOT BE ESTABLISHED THAT FUNDS BORROWED BY HIM HA VE BEEN UTILIZED FOR ACQUISITION OF VARIOUS IMMOVABLE PROPERTIES. THEREF ORE, AO HAS RIGHTLY CONCLUDED THAT THE CLAIM OF APPELLANT FOR DEDUCTION OF INTEREST OF RS.4,44,237/- OUT OF RENTAL INCOME FROM PROPERTIES IS NOT ACCEPTABLE. THE DISALLOWANCE MADE BY AO IS IN ORDER AND THE SAME IS CONFIRMED. GROUND NO. 1 OF THE APPEAL IS THUS DISMISSED. SMC-ITA NOS. 1547 & 2300/AHD/2013 CHAKRESHKUMAR P JAIN VS. ACIT AY : 2009-10 & 2010-11 3 3.2 THE LD. COUNSEL FOR THE ASSESSEE THEN REFERRED TO VARIOUS PAGES OF PAPER-BOOK CONTENDING THAT THE ASSESSEE HAS FILED D ETAILED EXPLANATION BEFORE THE AUTHORITIES BELOW ALONG WITH BALANCE-SHE ETS ENDING AS ON 31.03.2005 TO 31.03.2009, ALONG WITH FUND FLOW SUMM ARY. 3.3 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ASSESSEE HAS PROVIDED ALL THE DETAILS ALONG WITH FUND FLOW STATE MENT AND THERE IS NO JUSTIFICATION IN REFUSING TO ALLOW THE INTEREST PAI D ON BORROWED CAPITAL FOR ACQUISITION/CONSTRUCTION OF THE RENTAL PROPERTIES. THEREFORE, THE ASSESSEES CLAIM DESERVES TO BE ALLOWED. 3.4 ALTERNATIVELY, IT IS CONTENDED THAT THE ISSUE M AY BE SET ASIDE AND RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY FROM THE RECORD THAT OVER A PERIOD OF TIME THE INTEREST HAS BEEN AL LOWED, ALL BE IT UNDER THE HEAD INCOME FROM OTHER SOURCES AND PROPER DECISIO N MAY BE RENDERED AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF B EING HEARD. 4. LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HA ND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND CONTENDS THAT A S PER LETTER DATED 24.10.2016 ISSUED BY ACIT, CC-2(4), AHMEDABAD, THE ASSESSEES RETURNS FOR AY 2011-12 & 2012-13 WERE PROCESSED U/S 141(1) AND NO SCRUTINY VERIFICATION WAS DONE. THE ORDER OF LD. CIT(A) WAS PASSED IN MARCH, 2013 WHICH MAY BE CONSIDERED. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. AS THE FACTS EMERGE, THE ASSESSEES OWNERSHIP AND RENTAL INCOME FROM IMPUGNED PROPERTIES HAS NOT BEEN DISPUTED. THE RENTAL INCOME SO FAR WAS ACCEPTED UNDER THE HEAD INCOME FROM OTHER SOURCES; CONSEQU ENTLY, THE INTEREST CLAIMED BY THE ASSESSEE WAS ALSO ALLOWED UNDER THAT HEAD. IN THESE YEARS, SMC-ITA NOS. 1547 & 2300/AHD/2013 CHAKRESHKUMAR P JAIN VS. ACIT AY : 2009-10 & 2010-11 4 THE ASSESSING OFFICER INDICATED THAT RENTAL INCOME SHOULD BE ASSESSED UNDER THE HEAD HOUSE PROPERTY INCOME. THE ASSESSEE FIL ED A REVISED RETURN. SECTION 24 ITSELF PROVIDES THAT THE INTEREST PAID B Y THE ASSESSEE QUA THE BORROWED CAPITAL FOR ACQUIRING/CONSTRUCTION OF THE IMMOVABLE PROPERTY IS ALLOWABLE DEDUCTION. FROM THE MATERIAL PLACED ON PA PER-BOOK AND THE OBSERVATIONS OF THE AUTHORITIES BELOW, IT EMERGES T HAT THE ASSESSEE PROVIDED SUFFICIENT DETAILS IN THIS BEHALF WHICH HAS NOT BEE N DULY APPRECIATED BY THE AUTHORITIES CONCERNED. FURTHER, THE ASSESSEES RETU RNS FOR AYS 2011-12 AND 2012-13 ALLOWING THE BORROWED CAPITAL INTEREST, THO UGH U/S 143(1), IS ALSO A RELEVANT FACTOR. IN THE ENTIRETY OF FACTS AND CIRC UMSTANCES, I AM INCLINED TO ACCEDE TO THE ALTERNATIVE PLEA OF THE LD. COUNSEL F OR THE ASSESSEE AND SET ASIDE THE MATTER BACK TO THE FILE OF THE LD. ASSESS ING OFFICER TO DECIDE THE SAME AFRESH AFTER VERIFYING THE RELEVANT RECORDS, A SSESSEES EVIDENCE, SUBMISSIONS AND AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 06/02/2017 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT. REGISTRAR) , / ITAT, AHMEDABAD