Kenon Pankajbhai Patel, Ahmedabad V. DCIT, Circle-5(2), Ahmedabad

ITA 2343/AHD/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8747 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 25-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: S N DIVATIA
• Keywords: Set aside
• Section: 143(3); 195; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER KENON PANKAJBHAI PATEL, 104, PAEL VAS, GASNA GAM, VASNA, AHMEDABAD-380007 PAN: ADMPP3113E (APPELLANT) VS THE DCIT, CIRCLE-5(2), NATUREVIEW BUILDING, OFF ASHRAM ROAD, AHMEDABAD (RESPONDENT) REVENUE BY: SHRI L.P. JAIN, SR. D.R. ASSESSEE BY: SHRI S.N. DIVATIA, A.R . DATE OF HEARING : 26-07-2021 DATE OF PRONOUNCEMENT : 29-07-20 21 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2013-14, ARISES FRO M ORDER OF THE CIT(A), AHMEDABAD-5 DATED 11-08-2017, IN PROCEEDIN GS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-5 AHMEDABAD IN UPHOLDING THE DI SALLOWANCE OF INTEREST EXPENSES OF RS. 60,03,825/-. ITA NO. 2343/AHD/2017 ASSESSMENT YEAR 2013-14 I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 2 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RET URN OF INCOME SHOWING TOTAL INCOME OF RS. 29,31,029/- ON 3 RD MARCH, 2014. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT. DURING THE COURSE OF ASSESSME NT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN INTEREST INCOME OF RS. 76,87,844/- AND ALSO CLAIMED INTEREST EXPENSES OF RS. 67,32,728/- IN THE PROFIT AND LOSS ACCOUNT. THE DETAIL OF SUCH INCOME AND EXPENDITURE SHOWN IN THE ASSESSMENT ORDER ARE AS UNDER:- DISALLOWANCE OF EXPENSES CLAIMED U/S. 57(III) UNDER THE HEAD INCOME FROM OTHER SOURCES, APART FRO M INTEREST ON SAVING ACCOUNTS AND F.D IN BANKS, THE ASSESSEE HAS ALSO SHOWN THE FOLLOWING I NTEREST INCOME: SR. NO. NAME AMOUNT (IN RS.) 1 CHANCHOL INFRA. PVT. LTD. 15,780/- 2 SAUMIL DESAI 50,137/- 3 KINNAR V.SHAH 1,34,000/- 4 PARIH RATILAI PATEL 4,19,900/- 5 JAYANLIBHAI PATEL 6,14,005/- 6 JIMMY PATEL 6,11,638/- 7 CHANCHAL INFRA PVL. LTD. 58,42,384/- TOTAL 76,87,844/- 5.2 HOWEVER, THE ASSESSEE HAS CLAIMED INTEREST EXPE NSES AGAINST THE ABOVE INTEREST INCOME AMOUNTING TO RS. 67,32,728/-. THESE EXPENSES HAVE B EEN CLAIMED AS PER FOLLOWING DETAILS: SR. NO. NAME AMOUNT (IN RS.) 1 CHEER TRADING & INVESTMENT 8,30,220/- 2 ROSHAN JASRAI JAIN & MAMTA 77,000/- 3 CHEER TRADING & INVESTMENT 3,75,000/- 4 ROSHAN JASRAJ JAIN & MAMTA 28,877/- 5 SHASVAT 5,616/- 6 SATELITE INFOMEDIA P. LTD. 50,000/- I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 3 7 BHIKHABHAI R. PROJAPATI 4,95,000/- 8 ARNRUTABEN R. PRAJAPATI 4,95,000/- 9 KISHORCHAND K. BANSAL 1 ,35,205/- 10 ROSHAN JASRAJ JAIN & MAMTA 40,000/- LI ANILKUMAR MITHALLA JAIN 7,50,000/- 12 ANMOL ANILKUMAR JAIN 22,50.000/- 13 CHEER TRADING 5- INVT. 3,58,5627- 14 DHOIRYA JYOTISH 88,767/- 15 HITESH SHAH 1,80,000/- 16 JAY HITESH SHAH 60,000/- 17 BHAVIN INDRAJIT PARIKH 5,12,877/- 18 BARK CHARGES 604/- TOTAL 17,32,728/- IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OF FICER, THE ASSESSEE HAS SUBMITTED FUND FLOW STATEMENT SHOWING DETAIL OF LOA N RECEIVED ALONG WITH DETAIL OF LOAN ADVANCED AND UTILIZATION OF LOAN AMO UNT ON DIFFERENT DATES AS REPRODUCED AT PAGE NO. 4 TO 7 OF THE ASSESSMENT ORD ER. AFTER TAKING INTO CONSIDERATION, THE FUND FLOW STATEMENT FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER STATED THAT CLAIM OF INTEREST EXP ENSES WAS TO BE CONSIDERED AS PER THE PROVISION OF SECTION 57(III) OF THE ACT. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT MOST OF THE AMOUNT OF INTEREST EXPENSES CLAIMED BY THE ASSESSEE HAD NOT ANY NEXUS WITH THE AMOUNT O N WHICH THE ASSESSEE HAD EARNED INTEREST INCOME. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT BEEN ABLE TO EXACTLY EXPLAIN THAT THE MONEY BORROWED WERE NOT UTILIZED TO EARN INTEREST INCOME EXCEPT TO THE EXTE NT OF AMOUNT OF INTEREST EXPENSES OF RS. 7,28,903/-. THEREFORE, THE ASSESSI NG OFFICER HAS DISALLOWED I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 4 THE ENTIRE EXPENSES TO THE AMOUNT OF RS. 60,03,825/ - AFTER REDUCING THE INTEREST EXPENSES TO THE AMOUNT OF RS. 7,28,903/- O UT OF THE TOTAL INTEREST EXPENSES OF RS. 67,32,728/-. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REI TERATING THE FACTS REPORTED BY THE ASSESSING OFFICER. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS FURNISHED PAPER BOOKS COMPRISING THE DETAILS AN D COPIES OF DOCUMENTS FURNISHED BEFORE THE LOWER AUTHORITIES DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. THE LD. COU NSEL CONTENDED THAT ASSESSING OFFICER HAS NOT CONSIDERED THE COMPLETE S UBMISSION IN THE FORM OF FUND FLOW STATEMENT ALONG WITH COPIES OF LEDGER ACC OUNT OF THE PARTIES FROM WHOM THE LOANS WERE TAKEN AND THE PARTIES TO WHOM T HE LOANS WERE GIVEN. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT WITHOUT SPECIFICALLY CONTRADICTING THE SUBMISSION OF THE ASSESSEE, THE ASSESSING OFFIC ER HELD IN A GENERAL MANNER THAT THERE WAS NO NEXUS BETWEEN THE AMOUNT O N WHICH INTEREST INCOME WERE EARNED AND THE AMOUNT OF INTEREST EXPE NSES CLAIMED. THE LD. COUNSEL HAS ALSO SUBMITTED THAT ASSESSING OFFICER H AS ONLY CONSIDERED THE FRESH BORROWING BUT FAILED TO TAKE INTO CONSIDERATI ON THE OPENING BALANCE OF LOAN AMOUNT GIVEN AND TAKEN REFLECTED IN THE LEDGER ACCOUNT OF THE PARTIES SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED T HE ORDER OF LOWER AUTHORITIES. I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 5 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN INTEREST INCOME OF RS. 76,87,844/- AND CLAIMED INTE REST EXPENSES TO THE AMOUNT OF RS. 67,32,124/- IN THE PROFIT AND LOSS AC COUNT. THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSION OF THE ASSE SSEE EXPLAINING THAT LOAN TAKEN FROM THE CREDITORS WERE USED FOR EARNING INTE REST INCOME. THE ASSESSING OFFICER HAS PARTLY ACCEPTED THE PLEA OF T HE ASSESSEE AND DISALLOWED MOST OF THE INTEREST EXPENSES STATING THAT ONLY INT EREST EXPENSES OF RS. 7,28,903/- WAS HAVING DIRECT NEXUS WITH THE INTERES T INCOME. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD NOT E XPLAINED THAT BORROWED MONEY WERE FULLY UTILIZED FOR EARNING INTEREST INCO ME. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL SU BMITTED THAT THE ASSESSING OFFICER HAS INCORRECTLY REJECTED THE CLAIM OF INTER EST EXPENDITURE WITHOUT CONSIDERING THE RELEVANT DETAILS AND SUPPORTING EVI DENCES AS PLACED IN THE PAPER BOOK FROM PAGE NO. 1 TO 144 WHICH WERE ALSO S UBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WITH THE ASSISTA NCE OF LD. REPRESENTATIVES WE HAVE GONE THROUGH THE PAPER BOOK SHOWING THE DET AILS AND COPIES OF LEDGER ACCOUNT OF THE PARTIES TO WHOM THE INTEREST WAS PAID ON THE BORROWED AMOUNT AND DETAIL OF PARTIES TO WHOM THE INTEREST W AS RECEIVED ON THE AMOUNT ADVANCED. AS PER THE LEDGER ACCOUNT IT IS NOTICED THAT INTEREST AMOUNT OF RS. (15,780+58,42,384/-) TOTALING TO RS. 58,58,164/- WAS RECEIVED FROM ONE PARTY NAMELY CHANCHAL INDIA INFRA PVT. LTD . OUT OF THE TOTAL INTEREST INCOME 76,87,894/- AND THE ASSESSEE CLAIMED OF HAVI NG INVESTED THE INTEREST BEARING BORROWED FUND IN THIS COMPANY. IT IS OBSER VED THAT THESE MATERIAL FACTS HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFIC ER. IN THIS REGARD, THE WORKING OF THE ASSESSING OFFICER OF ALLOWING INTERE ST EXPENSES TO THE I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 6 AMOUNT OF RS. 7,28,903/- GIVEN AT PAGE NO. 10 OF TH E ASSESSMENT ORDER IS REPRODUCED AS UNDER:- SR. NO. DATE OF INVESTMENT NO. OF DAYS AMOUNT RATE OF INTEREST AMOUNT OF INTEREST 1 17.09.2012 195 8000000 12 512,877 2 12.12.2012 110 1000000 12 36,164 3 20.03.2013 11 1 3000000 15 47,014 4 20.03.2013 11 380100 15 1,375 5 20.03.2013 11 3100000 15 11,211 6 21.03.2013 10 3700000 15 12,164 7 05,01.2013 85 1000000 12 27,945 8 07.02.2013 52 2500000 15 42,740 9 04.03.2013 27 2000000 12 17,753 10 05.03.2013 26 2300000 12 19,660' TOTAL 728,903 AFTER PERUSAL OF THE ABOVE MENTIONED COMPUTATION OF INTEREST EXPENSES PREPARED BY THE ASSESSING OFFICER, IT IS O BSERVED THAT THE ASSESSING OFFICER HAS NOT EXPLAINED THE PARTICULARS OF THE TR ANSACTIONS AND HE HAS ALSO NOT TAKEN INTO CONSIDERATION THE INTEREST EXPENSES/ INTEREST INCOME CLAIMED IN THE P & L A/C WHICH IS PERTAINED TO THE LOAN/ADVANC ES OBTAINED/RECEIVED IN THE EARLIER YEARS. IT IS OBSERVED FROM THE COPIES OF THE LEDGER ACCOUNTS OF PARTIES FROM WHOM LOANS WERE OBTAINED AND ADVANCES WERE GIVEN THAT THERE WERE ENTRIES OF BROUGHT FORWARD BALANCES WHICH DEMO NSTRATE THAT ASSESSING OFFICER HAS NOT EXAMINED THE AMOUNT OF INTEREST EXP ENSES/INTEREST INCOME CLAIMED DURING THE YEAR PERTAINING TO SUCH LOAN/ADV ANCES EXTENDED/RECEIVED IN THE EARLIER YEAR. THE ASSESSING OFFICER IS REQU IRED TO EXAMINE BOTH THE I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 7 BROUGHT FORWARD AND FRESH TRANSACTIONS OF BORROWING S AND ITS UTILIZATION. EVEN IN THE CASE OF CHANCHAL INVESTMENT FROM WHOM T HE ASSESSEE HAS SHOWN THE MAJOR PART OF INTEREST INCOME RECEIVED, THERE W AS OPENING BALANCE BROUGHT FORWARD BALANCE TO THE AMOUNT OF RS. 3,20, 37,283/-. NORMALLY, WHENEVER ANY IRREGULARITY CREPT IN THE PROCEEDINGS THEN AFTER REMOVING THE IRREGULARITY PROCEEDINGS IS TO BE INITIATED FROM TH AT STAGE BUT BY REMITTING THE ISSUE TO THE LD. FIRST APPELLATE AUTHORITY WE WOULD BE MULTIPLYING THE LITIGATION BECAUSE THE LD. CIT(A) WOULD CALL FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND PROCEEDINGS WOULD COMMENCE I N TWO STAGES, IN ORDER TO AVOID THAT SITUATION WE WOULD DEEM IT PROPER TO SET ASIDE THE ORDER TO THE ASSESSING OFFICER FOR DECIDING AFRESH AFTER AFFORDI NG OPPORTUNITY AND EXAMINATION OF INFORMATION/EVIDENCES FILED. IT IS NEEDLESS TO SAY THAT OBSERVATION MADE BY US WILL NOT INJURE OR IMPAIR TH E CASE OF THE ASSESSING OFFICER AND WILL NOT CAUSE ANY PREJUDICE TO THE DEF ENCE EXPLANATION OF THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29-07-2021 SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER AC COUNTANT MEMBER AHMEDABAD : DATED 29/07/2021 I.T.A NO. 2343/AHD/2017 A.Y. 2013-14 PAGE NO KENON PANKAJBHAI PATEL VS. DCIT 8 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,