SHANTI SARUP RENIWAL, MUMBAI V. ACIT CEN CIR 38, MUMBAI

ITA 2554/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1018 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 17-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDEDR
• Assessee Lawyers: REEPAL G TRALSHAWALAAR
• Keywords: Reasonable cause
• Section: 14A

Judgement Text

INCOME-TAX APPELLA TE TRIBUNAL IBENCH MUMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./2554/MUM/2015, /ASSESSMENT YEAR: 2007-08 SHANTISWAROOP RENIWAL 156, MAKER CHAMBERS-VI 220, JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI-400 021. PAN:ADMPR 3332 F VS. ACIT, CENTRAL CIRCLE-38 AAYAKAR BHAVAN MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SH.SAURABH DESHPANDE-DR ASSESSEE BY: SHRI REEPAL G. TRALSHAWALA-AR / DATE OF HEARING: 08/11/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT). / PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 20/01/2015,OF THE CIT (A)-54,MUMBAI,THE ASSESSEE IS FILED THE PRESENT APPEAL,ASSESSEES,AN INDIVIDUALS,FILED HIS R ETURN OF INCOME ON DECLARING INCOME OF RS. THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT O N U/S.143(3)OF THE ACT,DETERMINING HIS INCOME AT RS. . 2. VIDE HIS APPLICATIONS,DATED 18/03/2017,THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL AND HAS REQUESTED TO ADMIT THE SAME.IT HAS BEEN STATED THAT THE ADDITIONAL GROUNDS DO NOT INVOLVE VERIFICATION OF FACTS AND ARE LEGAL IN NATURE.THE A UTHORISED REPRESENTATIVE(AR) REITERATED THE SAME SUBMISSIONS BEFORE US.THE DEPARTMENTAL REPRESE NTATIVE(DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.WE HAVE GONE THROUGH THE ADDITIONAL GR OUNDS AND FIND THEY DO NOT INVOLVE VERIFICATION OF FACTS AND ARE OF LEGAL NATURE.THERE FORE,WE ADMIT THE SAME. 3.VIDE ITS APPLICATION DATED 09.11.2016 THE ASSESSE E HAS STATED THAT THERE WAS DELAY OF ONE DAY IN FILING THE APPEAL,THAT THE ACCOUNTANT FORGOT TO SEN D THE PAPERS TO THE OFFICE OF THE CA DUE TO HEAVY WORKLOAD OF YEAR ENDING WORK,THAT THE APPEAL FEE WAS PAID IN TIME.THE APPLICATION IS ACCOMPANIED BY THE AFFIDAVIT OF THE ASSESSEE.BEFORE US,THE AR REITERATED THE SUBMISSION MADE IN THE APPLICATION.WE ARE OF THE OPINION THAT THERE WA S REASONABLE CAUSE OF THE DELAY IN FILING THE APPEAL.HENCE,WE CONDON THE DELAY. [2554/M/15] SHANTISWAROOP RENIWAL 2 4. BEFORE PROCEEDING FURTHER,WE WOULD LIKE TO TAKE NOT ICE OF THE CERTAIN FACTS OF THE CASE.THE ORIGINAL ASSESSMENT HAD TRAVELLED UP TO THE TRIBUNA L AND WAS REMANDED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.THE ORDER PASSED BY THE ASSE SSING OFFICER (AO) U/S.143 (3) R.W.S.254 OF THE ACT,WAS CHALLENGED BEFORE THE FIRST APPELLATE A UTHORITY (FAA),WHO CONFIRMED THE ORDER OF THE AO. 4. EFFECTIVE GROUND OF APPEAL IS NOT FOLLOWING THE DIR ECTIONS OF THE TRIBUNAL ORDER,DATED 28/04/ 2011.THE AR FAIRLY CONCEDED THAT IDENTICAL ISSUE HA D ARISEN IN CASE OF THE TWO ASSESSEES OF THE SAME GROUP,THAT THE TRIBUNAL HAD RESTORED BACK THAT THE MATTER TO THE FILE OF AO WITH CERTAIN DIRECTIONS. 4.1. WE FIND THAT IN THE CASE OF SANJEEV RENIWAL (HUF), THE TRIBUNAL, ON 21/09/2016 (ITA/ 1487/ MUM/2015) HAD DEALT THE ISSUE AS UNDER: 2.FACTS IN BRIEF, ARE THAT THE ASSESSEE IS A RESIDE NT HUF AND CLAIMED INTEREST EXPENSES OF RS.13,12,705/- AGAINST SHORT TERM CAPITAL GAINS OF RS.27,23,515/-. THE INTEREST CLAIM OF THE ASSESSEE WAS NOT ALLOWED BY THE ASSESSING OFFICER A ND THE SAME WAS CONFIRMED BY CIT(A) AGAINST WHICH ASSESSEE PREFERRED APPEAL BEFORE ITAT VIDE IT A NOS. 451&457/MUM/10. THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED VIDE ITAT ORDER DATED 1 6.03.2011 BY ISSUING FOLLOWING DIRECTIONS:- 7.1 HOWEVER, WE FIND MERIT IN THE SUBMISSION OF LE ARNED COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE HAS PURCHASED THE SHARES OU T OF THE BORROWINGS MADE FROM SHRI SHANTI SARUP RENIWAL, THEREFORE, AT LEAST THE INTEREST ATTRIBUTABLE TO SUCH SCRIPT FOR THE NUMBER OF DAYS WHICH WAS HELD BY THE ASSESS EE SHOULD BE ALLOWED AS DEDUCTION. FROM THE STATEMENT OF STCG, WE FIND THE ASSESSEE HAS CALCULATED INTEREST OF RS.12,81.220. HOWEVER, SUCH CALCULATION WAS NOT BEFORE THE ASSESSING OFFICER OR THE CIT(A). WE, THEREFORE, DEEM IT PROPE R TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERI FY THE INTEREST SO CALCULATED BY THE ASSESSEE ON THE BASIS OF THE UTILIZATION OF THE BOR ROWED FUNDS FOR THE NUMBER OF DAYS FROM THE DATE OF PURCHASE TO THE DATE OF SALE OF THE SHARES. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE BY VERIFYING SUCH CALCULATION, COPY OF WHICH IS PLA CED IN PAPER BOOK PAGES 14 & 15. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PURSUANT TO ABOVE DIRECTION OF ITAT, FRESH ASSESSME NT ORDER WAS PASSED BY THE ASSESSING OFFICER VIDE ORDER DATED 05.10.2012. BUT THE DEDUCTION OF INTERE ST EXPENSES WAS AGAIN DENIED BY THE ASSESSING OFFIC ER ON THE PRIMACY PREMISES THAT ASSESSEE HAS FAILED TO PROVE THE NEXUS OF UTILIZATION OF BORROWED FUNDS F OR INVESTMENT IN SHARES AND HAS FAILED TO COMPLY WITH THE DIRECTIONS OF THE HONBLE ITAT, MUMBAI IN THIS REGARD. THE AO MADE THE FOLLOWING OBSERVATIONS WHIL E DENYING THE CLAIM OF THE ASSESSEE WITH RESPECT TO DEDUCTION OF INTEREST EXPENSES:- 6.7 NOW, DESPITE GIVING AMPLE OPPORTUNITY, THE ASS ESSEE IS CLEARLY DENYING ESTABLISHING THE NEXUS OF UTILIZATION OF BORROWED FUNDS FOR INVESTME NT IN SHARES AND THUS IT IS VIOLATING DIRECTIONS GIVEN BY HONBLE ITAT, MUMBAI IN THIS RE GARD [2554/M/15] SHANTISWAROOP RENIWAL 3 6.8 IT IS ALSO A FACT THAT IT IS THE ASSESSEE ONLY WHO POSSESSES THE INFORMATION WITH THEM AS TO WHICH FUND WAS USED BY HIM FOR WHAT PURPOSE AND HE IS DENYING SUCH INFORMATION NOW TO THE A.O. 6.9 THE CHART OF INTEREST COMPUTATION SUBMITTED BY THE ASSESSEE DOES NOT PERTAIN TO THE BORROWED FUNDS BEING USED BUT ONLY ANY FUNDS BEIN G USED FOR INVESTMENTS. THIS WAS NOT THE DIRECTION GIVEN BY THE HONBLE ITAT, MUMBAI. 6.10 THUS FROM THE ABOVE IT IS CLEAR THAT THE ASSES SEE HAS NOT FULFILLED DIRECTION OF ITAT, MUMBAI AND IT HAS NOT PROVIDED ANY COMPUTATION OF I NTEREST W.R.T. UTILIZATION OF BORROWED FUNDS FOR INVESTMENT IN SHARES. 6.11 THUS, ON, ON THE BASIS OF THE ABOVE FACTS, NO DEDUCTION OF INTEREST EXPENSES CAN BE GIVEN TO THE ASSESSEE AGAINST THE INCOME FROM SHORT -TERM CAPITAL GAINS (STCG) AND THUS THE ISSUE IS DECIDED ACCORDINGLY 3. AGAINST THE SAME, ASSESSEE PREFERRED APPEAL BEFO RE CIT(A) BUT THE SAME WAS DISMISSED VIDE ORDER DATED 14.11.2014. THE ASSESSEE CONTENDED THAT THE ISSUE WHETHER AMOUNT BORROWED FOR INVESTMENT IN SHARES CAN BE ALLOWED AS COST OF ACQ UISITION HAS ALREADY BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID ORDER OF THE ITAT. AS NO CALCULATION OF CLAIM OF INTEREST WAS PROVIDED TO THE A.O. DURING THE ASSESSMENT PROCEEDI NGS AND WITH A VIEW TO VERIFY THESE CALCULATIONS, SUITABLE DIRECTIONS WERE ISSUED BY TH E ITAT AND THEREFORE, A.O.S ACTION IN CALLING UPON THE APPELLANT TO ESTABLISH THE NEXUS BETWEEN T HE BORROWINGS OF FUNDS AND ITS UTILIZATION FOR INVESTMENTS WAS IN CLEAR BREACH OF THE JUDICIAL DIS CIPLINE. IT WAS CLAIMED THAT THE HONBLE ITAT, BASED ON DOCUMENTS AND SUBMISSIONS HAD ACCEPTED THE FACT ABOUT THE BORROWINGS OF THE FUNDS AND ITS UTILIZATION IN MAKING INVESTMENT IN SHARES. IT WAS SUBMITTED THAT THE A.O. SIMPLY HAD TO VERIFY THE CALCULATION OF INTEREST AND NOT TO ONCE AGAIN A SK THE APPELLANT TO PROVE THE FACT THAT HAD ALREADY BEEN DECIDED BY A HIGHER AUTHORITY WITH RES PECT TO THE UTILIZATION OF THE BORROWED FUNDS FOR THE PURPOSE OF THE INVESTMENTS. CIT(A) OBSERVED THAT THERE WAS NOTHING TO INDICATE THAT THE ASSESSEE HAD DEMONSTRATED BEFORE THE HONBLE TRIBUN AL THE NEXUS OF BORROWED FUNDS WITH SCRIP- WISE INVESTMENTS WITH THE HELP OF COGENT MATERIALS. FURTHER, THE ONUS WAS ON THE ASSESSEE TO SHOW THAT THE SHARES WERE ACQUIRED FROM BORROWED FUND BE CAUSE THE SOURCE OF ACQUISITION OF SHARES WAS WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE AN D ASSESSEE WAS UNDER OBLIGATION TO PROVE THE SAME WITH THE HELP OF THE BANK STATEMENTS, CONTACT NOTES, BROKERS ACCOUNT ETC. THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE TO SUBSTANTIATE ITS CLAI M AND THEREFORE, THE APPEAL OF THE ASSESSEE WAS DISMISSED. AGGRIEVED BY THE STAND OF THE REVENUE, THE ASSESSEE IS AGAIN IN APPEAL BEFORE US. 4. THE LEARNED AUTHORIZED REPRESENTATIVE [AR] OF TH E ASSESSEE HAS RAISED VARIOUS CONTENTIONS IN ITS SUPPORT AND FILED VARIOUS DOCUME NTS INCLUDING STATEMENT OF SHORT TERM CAPITAL GAINS, BANK STATEMENT AS PER ASSESSEES BOOKS OF AC COUNTS AND CORRESPONDENCES MADE WITH THE LOWER AUTHORITIES TO SUBSTANTIATE HIS CLAIM. THE AR CONTENDED THAT THE CLAIM OF THE ASSESSEE IN PRINCIPLE WITH RESPECT TO INTEREST ON BORROWED CAPI TAL HAS ALREADY BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE EARLY DIRECTIONS OF THE ITAT AND LO WER AUTHORITIES ARE ONLY REQUIRED TO VERIFY THE CALCULATIONS WITH RESPECT TO NUMBER OF DAYS FOR WHI CH BORROWED CAPITAL HAS BEEN USED FOR THE PURPOSE OF MAKING INVESTMENTS FROM WHICH SHORT TERM CAPITAL GAINS HAVE BEEN EARNED BY THE ASSESSEE. THE LEARNED DR, ON THE OTHER HAND HAS REL IED UPON THE STAND OF THE LOWER AUTHORITIES AND CONTENDED THAT ASSESSEE NEEDS TO SUBSTANTIATE I TS CLAIM WITH RESPECT TO INTEREST ON BORROWED CAPITAL AS WELL AS COMPUTATION THEREOF. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE MAIN DISPUTE IN MATTER IS THAT WHETHER THE CLAIM OF THE ASSESSEE IN PRINCIPAL WITH RESPECT TO INTEREST ON BORROWED CAPITAL HAS BEEN SETTLED BY THE EARLIER DI RECTIONS OF THE ITAT OR NOT. FOR THIS, IT WOULD [2554/M/15] SHANTISWAROOP RENIWAL 4 BE PRUDENT TO REPRODUCE THE RELEVANT OPERATIVE PART OF THE EARLIER DIRECTIONS OF THE ITAT WHICH IS AS FOLLOWS:- 7.1 HOWEVER, WE FIND MERIT IN THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSES SEE THAT SINCE THE ASSESSEE HAS PURCHASED THE SHARES OUT OF THE BORROWINGS MADE FROM SHRI SHANTI SARUP RENIWAL, THEREFORE, AT LEAST THE INTEREST ATT RIBUTABLE TO SUCH SCRIPT FOR THE NUMBER OF DAYS WHICH WAS HELD BY THE ASSESSEE SHOULD BE ALLOW ED AS DEDUCTION . FROM THE STATEMENT OF STCG, WE FIND THE ASSESSEE HAS CALCULATED INTERE ST OF RS.12,81.220. HOWEVER, SUCH CALCULATION WAS NOT BEFORE THE ASSESSING OFFICER OR THE CIT(A). WE, THEREFORE, DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASS ESSING OFFICER WITH THE DIRECTION TO VERIFY THE INTEREST SO CALCULATED BY THE ASSESSEE ON THE BASIS OF THE U TILIZATION OF THE BORROWED FUNDS FOR THE NUMBER OF DAYS FROM THE DATE OF PURCH ASE TO THE DATE OF SALE OF THE SHARES (EMPHASIS SUPPLIED BY US) HENCE, THE EARLIER BENCH OF THE TRIBUNAL FINDS MERI T IN CLAIM OF ASSESSEE WITH RESPECT TO DEDUCTION OF INTEREST ON BORROWED FUNDS AND AS A STAND HAS BE EN TAKEN BY FELLOW BENCH AND WITH A VIEW TO OBSERVE JUDICIAL DISCIPLINE, WE NEED NOT DELVE INTO THE ISSUE AGAIN ON MERITS AND ALSO HELD THE SAME. THEREFORE, THE ONLY THING TO BE VERIFIED IS T HE FACTUM OF UTILIZATION OF BORROWED FUNDS FROM THE AFORESAID LENDER AND COMPUTATION OF INTEREST FO R THE PERIOD DURING WHICH THESE FUNDS HAVE REMAIN UTILIZED. THE LEARNED COUNSEL FOR THE ASSESS EE PRODUCED BEFORE US STATEMENT OF SHORT TERM CAPITAL GAIN AND BANK LEDGER AND WITH THE HELP OF S AMPLE ENTRIES, DEMONSTRATED BEFORE US A CORRELATION BETWEEN BORROWED FUNDS AND INVESTMENTS MADE IN SHARES. THEREFORE, FOR THE VERY LIMITED PURPOSE OF VERIFICATION OF NEXUS AND COMPUT ATION, THE MATTER IS AGAIN RESTORED BACK TO THE FILE OF THE AO TO VERIFY THE CLAIM OF THE ASSESSEE ON ABOVE LINES. 5. AS THE FACTS OF THE CASE UNDER CONSIDERATION ARE SI MILAR TO THE FACTS OF THE HUF, THEREFORE RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL,WE DIRECT THE AO TO FOLLOW THE DIRECTIONS OF THE TRIBUNAL MENTIONED AT PARAGRAPH NUMBER 5 OF THE SAID ORDER.EFFECTIVE GROUND OF APPEAL (GOA-1TO4) IS DECIDED IN FAVOUR OF THE ASSESSEE, IN PART. 6. IN THE ADDITIONAL GROUNDS THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE MADE BY THE AO UNDER SECTION 14A OF THE ACT.BEFORE US,THE AR ARGUED THAT THE ASSESSEE HIMSELF HAD MADE DISALLOWANCE UNDER THE HEAD INTEREST EXPENDITURE,THAT HE HAD SUF FICIENT OWN FUND TO MAKE INVESTMENTS,THAT ONE TO ONE NEXUS OF INTEREST PAYMENT AND INVESTMENT MAD E WAS ESTABLISHED BEFORE THE AO AFTER THE MATTER WAS RESTORED BACK TO HIM,THAT STRATEGIC INVE STMENT MADE BY THE ASSESSEE WAS IGNORED BY THE AO, WHILE COMPUTING DISALLOWANCE.THE DR SUPPORT ED THE ORDER OF THE FAA. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.THE AY. UNDER APPEAL IS THE YEAR WHEN PROVISIONS OF RULE 8D OF THE INCOM E TAX RULES,1962(RULES)WERE NOT APPLICABLE. SO,IF ANY DISALLOWANCE IS TO BE MADE IT WILL HAVE T O MADE ON SOME OTHER BASIS.THE ISSUE NEEDS FURTHER VERIFICATION,AS THE ASSESSEE HAS RAISED MAN Y AN ARGUMENTS IN HIS ADDITIONAL GROUNDS. CONSIDERING THE FACT THE ISSUE IS INTERLINKED WITH THE FIRST EFFECTIVE GROUND OF APPEAL,WE ARE OF THE [2554/M/15] SHANTISWAROOP RENIWAL 5 OPINION,THAT IN THE INTEREST OF JUSTICE MATTER SHOU LD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.THE AO IS DIRECTED TO AFFORD A REASONA BLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ADDITIONAL GROUNDS OF APPEAL(EFFECTIVE GOA-2) ARE A LLOWED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2018. 03 , 2018 SD/- SD/- /RAVISH SOOD ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03 .01.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.