Shri Raghvendra Mohta, Kolkata V. ACIT, Circle - 36, Kolkata, Kolkata

ITA 2415/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4605 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 06-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P J BHIDE FCA SHRI RABIN CH
• Assessee Lawyers: EPASS KOLKATA
• Keywords: Business income; Earning of tax free income; Corroborative evidences
• Section: 142(1); 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 2324 & 2415 / KOL / 2017 ASSESSMENT YEAR :2013-14 ACIT, CIRCLE-36, AAYAKAR BHAWAN, POORVA, 8 TH FLOOR, 110, SHANTIPALLY, KOLKATK-107 RAGHVENDRA MOHTA CALCUTTA STOCK EXCHANGE BUILDING, ROOM NO.43, 2 ND FLOOR, 7, LYONS RANGE, KOLKATA-700 001 [ PAN NO.AHTM 3146 P ] V/S . V/S . SHRI RAGHVENDRA MOHTA CALCUTTA STOCK EXCHANGE, ROOM-4C, 2 ND FLOOR, 7, LYONS RANGE, KOKATA-700 001 ACIT, CIRCLE-36 AAYKAR BHAWAN, POORVA, 8 TH FLOOR, E.M. BYE PASS, KOLKATA-107 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI P.J. BHIDE, FCA /BY REVENUE SHRI RABIN CHOWDHURY, CIT-DR /DATE OF HEARING 24-07-2019 /DATE OF PRONOUNCEMENT 28-08-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THE REVENUE AND ASSESSEE HAVE FILED THEIR CROSS-AP PEAL FOR ASSESSMENT YEAR 2013-14 ARISE AGAINST THE COMMISSIO NER OF INCOME TAX (APPEALS)-10, KOLKATAS COMMON ORDER DATED 11.08.20 17 PASSED IN CASE NO.39/CIT(A)-10/CIR-36/16-17/KOL, PROCEEDINGS U/S 1 43(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO.2324 & 2415/KOL/2017 A.Y. 2013-14 ACIT, CIR-36 KOL. VS. SH. RAGHVENDRA MOHTA PAGE 2 HEARD BOTH THE LEARNED REPRESENTATIVES. CASE FILE( S) PERUSED. 2. IT APPEARS AT THE OUTSET THAT THE ASSESSEES CRO SS-APPEAL ITA 2415/KOL/2017 SUFFERS FROM ONE DAYS DELAY. HE HAS REFERRED HIS CONDONATION PETITION DATED 07.12.2017 TO THIS EFFECT STATING RE ASONS THEREOF TO WRONG CALCULATION OF LIMITATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT DISPUTE THE SAME. WE THEREFORE CONDON E THE IMPUGNED ONE DAY DELAY OF THE INSTANT APPEAL. THE CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3. WE NOTICE FROM THE REVENUES FORMER SUBSTANTIVE APPEAL IN ITA NO.2324/KOL/2017 THAT IT SEEKS TO REVIVE PROPORTION ATE INTEREST EXPENDITURE DISALLOWANCE OF 70,395/- MADE BY THE ASSESSING OFFICER AND DELETED IN THE LOWER APPELLATE ORDER AS UNDER:- 04. GROUND NO 1. RELATES TO THE ACTION OF THE LD.A O IN DISALLOWING AN AMOUNT OF RS.70,395/- ON ACCOUNT OF PROPORTIONATE AMOUNT OF I NTEREST EXPENDITURE ON THE PERSONAL DRAWINGS. THE IMPUGNED MATTER HAS BEEN DEALT BY THE LD. A.O A S UNDER: THE ASSESSEE, SHRI RAGHEVENDRA MOHTA FURNISHED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 27.09.2013 DISCLOSING A TOTAL LOSS OF (-) RS.1,56,960/- . THE CASE HAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND SECTION 142(1) WERE ISSUED AND DULY SERVED TO THE ASSESSEE. 2. IN RESPONSE TO NOTICES, SRI JAGDISH MAHESHWARI, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED TIME TO TIME AND PRODUCED INFORMA TION, C:IARLFICATIONS, DETAILS, SUPPORTING EVIDENCE AS REQUISITIONED. WITH REFERENC E TO MATERIAL PRODUCED, THE AR ARGUED THE CASE IN SUPPORT OF THE RETURN FILED. THE SUBMISSIONS AND CLAIMS OF THE ASSESSEE WERE DULY PERUSED, THE EVIDENCE PRODUCED I NSPECTED AND VERIFIED ON TEST CHECK BASIS, AND THE CASE WAS DISCUSSED. 3. THE ASSESSEE DERIVES HER INCOME FROM SHARE DEALI NG. 4. DISALLOWANCE OF INTEREST EXP. ATTRIBUTABLE TO NEGAT IVE, CAPITAL : IT IS SEEN FROM THE BALANCE SHEET AS ON 31.03.2013 THAT THE ASSESSEE WAS MAINTAINING NEGATIVE CAPITAL BALANCE FOR RS.3,05,78 ,043.11/- FURTHER, IT IS SEEN THAT THE ASSESSEE HAS INTEREST EXPENSE OF RS. 3,05,50,00 5.46 IN HIS PROFIT & LOSS A/C. THE BALANCE SHEET REVEALED UNSECURED LOAN OF RS.2,3 0,424,795.68 AS ON 31.03.2013. AS THE ASSESSEE HAS WITHDRAWN AMOUNT OF RS.3,05, 78,043.11 OVER HIS CAPITAL IN HIS BALANCE SHEET AS ON 31.03.2013 WHICH WAS INCLUDING HIS PERSONAL DRAWINGS OF RS.5,86,629/-, THE AUTHORIZED REPRESENT ATIVE WAS ASKED WHY THE AMOUNT OF INTEREST EXPENSE ON THE SAID AMOUNT OF PERSONAL DRAWINGS, BY APPLYING THE RATE OF INTEREST EXPENSE COMPUTED ON HIS LOANS, SHOULD NOT BE DISALLOWED IN THE LIGHT OF THE THAT ASSESSEE WAS CLAIMING INTEREST EXPENSE ON HIS UNSECURED LOANS. IN RESPONSE, THE AUTHORIZED REPRESENTATIVE FAILED TO FURNISH HIS EXPLANATION WITH SUPPORTING EVIDENCE. THEREFORE, 12% OF THE AMOUNT OF DRAWINGS OF RS.5,86,629/- , I.E. THE AMOUNT BY WHICH THE ASSESSEE HAS WITHDRAWN EXCESS O VER HIS CAPITAL IN THE FORM HIS ITA NO.2324 & 2415/KOL/2017 A.Y. 2013-14 ACIT, CIR-36 KOL. VS. SH. RAGHVENDRA MOHTA PAGE 3 PERSONAL DRAWINGS IN HIS BALANCE SHEET, WHICH COMES TO RS.70,395/- IS DISALLOWED OUT OF TOTAL INTEREST EXPENSE CLAIMED IN THE PROFIT & LOSS A/C. [ ADDITION. RS.70,395/- ] 05. DURING THE COURSE OF THE APPEAL, THE APPELLANT / LD. A.R FOR THE APPELLANT- INDIVIDUAL HAVE SUBMITTED AS FOLLOWS: GROUND NO. 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ASSESSING OFFICER ERRED IN ADDING BACK A SUM OF RS.70,395/- ON ACCOUNT OF PROP ORTIONATE AMOUNT OF INTEREST EXPENDITURE ON THE PERSONAL DRAWINGS, AGGREGATING T O RS.5,86,639/-. TO THIS, WE SUBMIT THAT IN THE BOOKS OF ACCOUNTS OF RAGHVENDRA MOHTA, THE OPENING BALANCE OF CAPITAL ACCOUNT FOR PREVIOUS YEAR 2011-1 2, RELATING TO THE ASSESSMENT YEAR 2012-13, WAS RS.3,49,86,015.52. DURING THAT YE AR, THE APPELLANT INCURRED BUSINESS LOSS OF RS.6,79,08,129.73. DUE TO THIS LO SS, THE OPENING BALANCE OF CAPITAL ACCOUNT IN THE PREVIOUS YEAR 2012-13, IS NEGATIVE. DURING THE YEAR 2012-13, THE TOTAL AMOUNT OF FRESH CAPITAL INTRODUCED BY THE APPELLANT IS RS.47,57,602/-, AGAINST WHICH HIS PERSONAL DRAWINGS AMOUNTED TO RS.5,89,629/-. AT THE CLOSE OF THE FINANCIAL YEAR 2012-13, THE CLOSING BALANCE OF CAPITAL ACCOUNT STI LL HAS A NEGATIVE BALANCE OF RS.3,05,78,043.11. DURING THE FINANCIAL YEAR 2012-13, THE APPELLANT BO RROWED MONEY AS UNSECURED LOAN AND THE SAME WAS USED FOR BUSINESS PURPOSE. TH E BORROWED MONEY HAS BEEN SOLELY UTILIZED TO EARN BUSINESS INCOME AND NO MONE Y HAS EVER BEEN WITHDRAWN FROM THESE FUNDS FOR PERSONAL USE OF THE APPELLANT. - HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MA KING THE ABOVE ADDITION AS THE PERSONAL DRAWING IS MADE BY THE APPELLANT OUT OF HI S OWN FUND AND NOT FROM THE BORROWED FUND. 06. DECISION : 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD . AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.70,395/-. THE LD. AO OBSERVED FR OM THE BALANCE SHEET OF THE ASSESSEE, THAT AS ON 31.03.2013 THAT THE ASSESSEE W AS MAINTAINING NEGATIVE CAPITAL BALANCE FOR RS.3,OS,78,043.11/-, AND THAT FURTHER T HE ASSESSEE-INDIVIDUAL HAS CLAIMED INTEREST EXPENSE OF RS.3,05,50,005/- IN HIS PROFIT & LOSS A/C. IN THE FINDINGS OF THE LD.AO, THE BALANCE SHEET FURTHER REVEALED TH E UNSECURED LOAN OF HAS WITHDRAWN EXCESS AMOUNT OF RS.3,05,78,043/- OVER HI S CAPITAL IN HIS BALANCE SHEET AS ON 31.03.2013, AND THAT THIS AMOUNT INCLUDED HIS PERSONAL DRAWINGS OF RS.5,86,629/-. THE LD.AO HAS RECORDED THAT THE A.R FOR THE ASSESSEE-INDIVIDUAL WAS REQUIRED TO EXPLAIN AS TO WHY THE AMOUNT OF INTERES T EXPENSE ON THE SAID AMOUNT OF PERSONAL DRAWINGS WAS NOT TO DISALLOWED BY APPLYING THE RATE OF INTEREST EXPENSE COMPUTED ON HIS LOANS, AS THE ASSESSEE WAS CLAIMING INTEREST EXPENSE ON HIS UNSECURED LOANS. THE LD. AO HAS RECORDED THAT NO EX PLANATION OR SUPPORTING EVIDENCE WAS OFFERED/ FURNISHED IN THE MATTER, AND THEREFORE THE LD.AO CALCULATED 12% OF THE AMOUNT OF DRAWINGS OF RS.5,86,629/-, I.E . THE AMOUNT BY WHICH THE ASSESSEE HAS WITHDRAWN EXCESS OVER HIS CAPITAL IN T HE FORM HIS PERSONAL DRAWINGS IN HIS BALANCE SHEET, WHICH COMES TO RS.70,395/, AND D ISALLOWED THE SAME. 2. ON THE CONTRARY, IN APPEAL, IT HAS BEEN PLEADED BY THE APPELLANT THAT THE DRAWINGS WERE MADE OUT OF THE OWN FUNDS AND NO BORROWED FUND S WERE UTILIZED IN THE MATTER. IT WAS EXPLAINED THAT THAT IN THE BOOKS OF ACCOUNTS OF SHRI RAGHVENDRA MOHTA, THE OPENING BALANCE OF CAPITAL ACCOUNT FOR PREVIOUS YEA R 2011-12, RELATING TO THE ASSESSMENT YEAR 2012-13, WAS RS.3,49,86,015.52/-, A ND THAT DURING THAT YEAR, THE ASSESSEE HAD INCURRED BUSINESS LOSS OF RS.6,79,08,1 29.73. IT WAS FURTHER EXPLAINED ITA NO.2324 & 2415/KOL/2017 A.Y. 2013-14 ACIT, CIR-36 KOL. VS. SH. RAGHVENDRA MOHTA PAGE 4 THAT DUE TO SUCH LOSS THE OPENING BALANCE OF CAPITA L ACCOUNT IN THE PREVIOUS YEAR 2012-13, IS NEGATIVE, AND THAT DURING THE YEAR 2012 -13, THE TOTAL AMOUNT OF FRESH CAPITAL INTRODUCED BY THE APPELLANT IS RS.47,57,602 /-, AGAINST WHICH HIS PERSONAL DRAWINGS AMOUNTED TO RS.5,89,629/-. AT THE CLOSE OF THE FINANCIAL YEAR 2012-13, THE CLOSING BALANCE OF CAPITAL ACCOUNT STILL HAS A NEGA TIVE BALANCE OF RS.3,05,78,043.11. IT WAS ALSO SUBMITTED BY THE APPELLANT THAT DURING THE FINANCIAL YEAR 2012-13, THE APPELLANT BORROWED MONEY AS UNSECURED LOAN AND THE SAME WAS USED FOR BUSINESS PURPOSE, AND THAT THE BORROWED MONEY HAS BEEN SOLEL Y UTILIZED TO EARN BUSINESS INCOME AND NO MONEY HAS EVER BEEN WITHDRAWN FROM TH ESE FUNDS FOR PERSONAL USE OF THE APPELLANT. 3. AFTER EXAMINING THE MATTER, IN MY CONSIDERED VIE W FROM THE FIGURES AVAILABLE, THE BENEFIT OF THE DOUBT HAS TO BE GIVEN TO THE APPELLA NT, AS THERE HAS BEEN INTRODUCTION OF FRESH CAPITAL IN THE ACCOUNTS, WHICH HAS NOT BEE N DISPUTED BY THE LD. AO. THE WITHDRAWAL OF MONEY FOR THE PURPOSE OF DRAWINGS WAS FAR LESS THAN THE FRESH CAPITAL INTRODUCED, AND THEREFORE GENERALLY IT HAS TO BE FA VORABLY CONSIDERED THAT THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUS INESS ONLY, AS HAS BEEN CLAIMED BY THE APPELLANT. WITH SUCH VIEW OF THE MATTER, I F IND THAT THE DISALLOWANCE BY THE LD. AO OF A CERTAIN AMOUNT CLAIMED AS INTEREST EXPENSE IS UNSUSTAINABLE, AND THEREFORE IS ORDERED TO BE DELETED. THE GROUND OF APPEAL IS A LLOWED IN FAVOUR OF THE APPELLANT. 4. IT IS CLEAR FROM A PERUSAL OF THE CASE FILE THAT CIT(A) HAS EXAMINED THE ASSESSEES OPENING BALANCE OF CAPITAL ACCOUNT FOR T HE RELEVANT PREVIOUS YEAR, CORRESPONDING OPENING BALANCE AS WELL AS HIS DRAWIN G COME TO CONCLUSION THAT HE HAD INTRODUCED FRESH CAPITAL IN THE ACCOUNT WHICH HAS NOWHERE BEEN DISPUTED DURING ASSESSMENT. WE CONCLUDE IN THESE FA CTS THAT THE FRESH CAPITAL INTRODUCED FORMED SOURCE OF THE ASSESSEES WITHDRAW AL AND THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED PROPORTIONA TE INTEREST DISALLOWANCE OF 70,395/-.THE REVENUES INSTANT FORMER GRIEVANCE FAI LS ACCORDINGLY. 5. NEXT COMMON ISSUE RAISED IN THESE CROSS-APPEALS OF SEC. 14A R.W.S. 8D DISALLOWANCE AMOUNTING TO 2,70,45,296/- IN RELATION TO ASSESSEES EXEMPT INCOME OF 28,84,079/-. MR. BHIDE IS FAIR ENOUGH IN PIN-POINTI NG AT THE OUTSET THAT THE TAXPAYERS STAND THAT STRATEGIC INVESTMENT S RECORDED IN BOOKS STOCK- IN-TRADE IN NOT EXIGIBLE U/S 14A DISALLOWANCE NO MO RE HOLDS WATER IN VIEW OF THE HON'BLE APEX COURTS RECENT JUDGMENT SETTLING T HE LAW IN MAXOPP INVESTMENT LTD. VS. CIT (2018) 402 ITR 640 (SC). WE THUS UPHOLD THE ASSESSING OFFICERS ACTION INVOKING THE IMPUGNED DI SALLOWANCE IN PRINCIPLE. 5. NEXT COMES EQUALLY IMPORTANT ASPECT OF THE APPRO PRIATE COMPUTATION OF THE IMPUGNED DISALLOWANCE. HON'BLE DELHI HIGH COURT S JUDGMENT IN JOINT ITA NO.2324 & 2415/KOL/2017 A.Y. 2013-14 ACIT, CIR-36 KOL. VS. SH. RAGHVENDRA MOHTA PAGE 5 INVESTMENT LTD. VS. CIT 372 ITR 694 (DEL) DATED 25.02.2015 HOLDS THAT SUCH A DISALLOWANCE CANNOT EXCEED THE AMOUNT OF EXEMPT INC OME ITSELF. WE THEREFORE DIRECT THE ASSESSING OFFICER TO RESTRICT THE IMPUGN ED DISALLOWANCE TO THE EXTENT OF ASSESSEES EXEMPT INCOME ONLY. NECESSARY COMPUTA TION TO FOLLOW. THE REVENUES INSTANT LATTER SUBSTANTIVE GROUND AS WELL AS MAIN APPEAL ITA 2324/KOL/2013 IS REJECTED WHEREAS THE ASSESSEES CR OSS-APPEAL ITA 2415/KOL/2017 PLEADING THE INSTANT SOLE ISSUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSED IN ABOVE TERMS. ORDERED ACCORDINGLY. 6. THE REVENUES APPEAL ITA NO.2324/KOL/2017 IS DIS MISSED WHEREAS ASSESSEES CROSS-APPEAL ITA NO.2415/KOL/017 IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 28/ 08/2019 SD/- SD/- ( ) (( ) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 28 / 08 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-SHRI RAGHVENDRA MOHTA, CALCUTTA STOCK EXC HANGE, R.NO.4C, 2 ND FLOOR, 7, LYONS RA NGE, KOLKATA-001 2. /REVENUE-ACIT, CIR-36, AAYAKAR BHAWAN POORVA 8 TH FL, 110SHANTIPALLY, KOL-107 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ 4,