Mrs. Gowri Dhawan, New Delhi V. ITO, New Delhi

ITA 2632/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3854 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA RAM SAH
• Assessee Lawyers: ABHIMANYU; MOHIT JHAMA ADVS
• Keywords: Prejudicial to interest
• Section: 263; 63

Judgement Text

1 ITA NO. 2632/DEL/2014 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI G. D. AGRAWAL, PRES IDENT AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 2632/DEL/2 014 (A.Y 2009-10) GOWRI DHAWAN S-217, GROUND FLOOR, PANCHSHEEL PARK NEW DELHI AEZPD6487K (APPELLANT) VS ITO WARD-3(4) NEW DELHI (RESPONDENT) APPELLANT BY SH. ABHIMANYU & MOHIT JHAMA, ADVS RESPONDENT BY SH. RAJA RAM SAH, CIT DR ORDER PER SUCHITRA KAMBLE THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER DATED 7/3/2014 PASSED BY CIT(A)-, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1 THE LD. COMMISSIONER OF INCOME TAX HAS ERRED IN LA W AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN WRONGLY ASSUMING J URISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT 1961 2 THAT ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE ASSUMPTION OF JURISDICTION BY THE CIT U/S 263 IS MERELY A CHAN GE OF OPINION ON THE SAME SET OF FACTS AND DESERVES TO BE QUASHED AND SET ASI DE. DATE OF HEARING 07.12.2017 DATE OF PRONOUNCEMENT 30.01.2018 2 ITA NO. 2632/DEL/2014 3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE PRECONDITION FOR INITIATION OF PROCEEDINGS UNDER SE CTION 263 ARE NOT SATISFIED BY THE LD. CIT. 4 THAT ONTHE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DISALLOWING INTEREST OF RS 17,9 2,224 OUT OF TOTAL INTEREST OF RS 39,91,530 CLAIMED U/S 24(B) OF THE INCOME TAX AC T, 1961. 5 THE APPELLANT PRAYS LEAVE OF THE HONBLE TRIBUNAL T O ADD, AMEND, ALTER ALL OR ANY GROUNDS OF APPEAL AS THE CIRCUMSTANCES M AY WARRANT. 3. ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143 (3 ) OF THE IT ACT, ON 28.04.2011 ACCEPTING THE RETURNED LOSS OF RS. 37,63 ,341/-. WHILE WORKING OUT THE LOSS OF RS. 37,63,341/-, THE ASSESSEE AS WELL A S ASSESSING OFFICER ADOPTED THE LOSS FROM HOUSE PROPERTY INCOME AT RS. 43,65,87 2/-. THE WORKING OF SAID LOSS, IN THE COMPUTATION OF INCOME AS PER RETURNED IS AS UNDER:- INCOME FROM HOUSE PROPERTY LET OUT ANNUAL VALUE : 600000 LESS: STANDARD DEDUCTION U/S 24(A) : 180000 INTEREST U/S 24(B) : 3991530 1/5 OF CONSTRUCTION PERIOD INTEREST : 794342 -4965872 TAXABLE INCOME FROM HOUSE PROPERTY - 4365872 THE INTEREST CLAIMED OF RS. 39,91,530/- IS ON FOLLO WING TWO LOANS:- LOAN A/C NO. AMOUNT LBDEL00001204691 21,99,306/- NHDEL00000729964 17,92,224/- TOTAL 39,91,530/- THE COMMISSIONER OF INCOME TAX OBSERVED THAT INTERE ST SO CLAIMED AND ALLOWED BY ASSESSING OFFICER IN THE ASSESSMENT ORDER U/S 14 3 (3) WAS NOT CORRECT AS EXCESS INTEREST OF RS. 28,91,8777/- HAS BEEN ALLOWE D TO THE ASSESSEE. ACCORDINGLY, A SHOW CAUSE NOTICE DATED 24.10.2011 W AS ISSUED BY CIT TO REVISE 3 ITA NO. 2632/DEL/2014 THE SAID ORDER U/S 263 OF THE IT ACT AND THE ASSESS EE WAS GIVEN OPPORTUNITY TO FURNISH ITS OBJECTION IF ANY AGAINST PROPOSED REVIS ION. 4. AS PER PROVISIONS OF SECTION 24(B) OF THE ACT, THE INTEREST PAYABLE ON BORROWED CAPITAL BORROWED FOR ACQUIRING/CONSTRUCTIN G/ REPAIRING/ RENEWAL /RECONSTRUCTION OF PROPERTY FROM WHICH RENTAL INCOM E WAS TAXABLE AND WAS ALLOWABLE DEDUCTION. THE PROPERTY UNDER REFERENCE W AS JOINTLY OWNED BY THE ASSESSEE AND HER HUSBAND MR. KAMAL KARMAKAR. THE E NTIRE RENT RECEIVED FROM THE PROPERTY WAS BEING OFFERED BY THE ASSESSEE ONLY . THE LOAN NO. LBDEL00001204691 WAS SANCTIONED IN THE NAME OF ASSE SSEE WHICH WAS FOR ACQUIRING THE PROPERTY UNDER REFERENCE ONLY. THE NA ME OF HER HUSBAND WAS ONLY MENTIONED AS CO-APPLICANT. THE INTEREST ON SAI D LOAN WAS PAID FROM HER ACCOUNT ONLY. THE LOAN NO. NHDEL00000729964 WAS THO UGH FOR THE PROPERTY UNDER REFERENCE BUT NOT BORROWED BY THE ASSESSEE. I T WAS BORROWED BY HER HUSBAND MR. KAMAL KARMAKAR WHO THOUGH WAS SHOWN JOI NT OWNER, AS PER ASSESSEES OWN ADMISSION AS MENTIONED ABOVE WAS ONL Y FOR NAME SAKE AND ENTIRE RENTAL INCOME FROM SAID PROPERTY WAS OFFERED BY THE ASSESSEE HERSELF. THE INTEREST ON SAID LOAN IS ALSO NOT PAID BY THE ASSES SEE BUT BY MR. KAMAL KARMAKAR. ON PERUSAL OF THE BALANCE SHEET OF MR. KA MAL KARMAKAR, IT WAS NOTICED THAT ASSESSEE HAD ADVANCED SOME MONEY TO MR . KAMAL KARMAKAR AND THE OPENING BALANCE AS ON 01.04.2008 WAS RS. 1,12,9 4,40,000/-. MR KAMAL KARMAKAR PAID THE INSTALLMENT ON SAID LOAN AND INT EREST THEREON AND CORRESPONDING JOURNAL ENTRIES HAD BEEN PASSED IN TH E LEDGER ACCOUNT OF GOWRI DHAWAN AS A RESULT THE CLOSING BALANCE IS RS,77,30, 767/-. THUS, EVEN AS PER ACCOUNTING ENTRY IT WAS VERY CLEAR THAT THE LOAN BO RROWED WAS UTILIZED TO REPAY THE LOAN AND INDIRECTLY INTEREST WAS CLAIMED TO HAV E BEEN PAID ON BORROWED FUNDS AGAINST SAID PROPERTY. 5. THE CIT U/S 263 OF THE INCOME TAX ACT, 1961 HELD AS UNDER:- 4 ITA NO. 2632/DEL/2014 WHEN ENTIRE RENTAL INCOME FROM THE SAID PROPERTY I S BEING OFFERED BY THE ASSESSEE. THE INTEREST PAID OF RS. 21,99,306/- ON T HIS LOAN NO. LBDEL00001204691 BY THE ASSESSEE IS ALSO ALLOWABLE FULLY IRRESPECTIVE AS TO WHETHER THERE IS ANY CO-APPLICANT OF THE LOAN OR THE PROPERTY IS JOINTLY OWNED OR NOT. THUS, TO THE EXTENT OF ALLOWANCE OF I NTEREST ON SAID LOAN AMOUNTING TO RS. 21,99,306/- THE ACTION OF AO IS FO UND TO BE CORRECT, IF HOWEVER, SAME CANNOT BE SAID ABOUT INTEREST OF RS. 17,92,224/- PAID ON LOAN NO. NHDEL00000729964 AS IT IS NOT PAID BY THE ASSESSEE. THE INTEREST SO PAID IS THEREFORE NOT ALLOWABLE IN THE HANDS OF ASSESSEE AS PER PROVISION OF SECTION 24 (B) OF THE ACT. TO THAT EXT ENT THE AO HAS ERRONEOUSLY ALLOWED THE INTEREST CLAIMED BY THE ASSESSEE. 6. BEING AGGRIEVED BY THE SAME, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. AR SUBMITTED THAT THE ASSESSEE HERSELF I S OFFERING RENTAL INCOME AND IN-FACT THE INTEREST FOR THE SECOND LOAN PAID B Y THE HUSBAND WAS FROM THE FUNDS WHICH WERE GIVEN BY THE ASSESSEE HERSELF IN T HE PAST. THE SAID DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER AFTER VERIFICATION HAS PASSED PROPER ORDER. 8. THE LD. DR SUBMITTED THAT THIS CASE IS SQUARELY COVERED BY THE RATIO OF HONBLE APEX COURT IN CASE OF MALABAR INDUSTRIAL CO MPANY LTD. VS. CIT 243 ITR 83 WHEREIN IT IS EXPRESSED THAT THE TERM PREJUD ICIAL TO THE INTEREST OF THE REVENUE IS NOT CONFINED ONLY TO THE LOSS OF TAX BUT ALSO INCLUDES THE INCORRECT EXEMPTION OF FACT OR AN INCORRECT APPLICATION OF LA W. THE LD. DR ALSO RELIED UPON THE JURISDICTIONAL HIGH COURT DECISION IN CASE OF CIT VS. NAGESHWAR KNIT WEARS PVT. LTD. 345 ITR 135 (DELHI) WHEREIN IT WAS HELD THAT IF THE ASSESSING OFFICER FAIL TO CONDUCT THE INVESTIGATION. HE COMM ITS AN ERROR AND THE WORD ERRONEOUS INCLUDES FAILURE TO MAKE ENQUIRY. THUS , THE LD. DR SUBMITTED THAT 5 ITA NO. 2632/DEL/2014 THE CIT(A) HAS PROPERLY HAS INVOKED THE JURISDICTI ON U/S 263 AND PASSED VALID ORDER. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORDS. IT IS PERTINENT TO NOTE THAT THE FUNDS WE RE TOTALLY EXPLAINED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS BEFORE T HE ASSESSING OFFICER AND THE SAME FACT WAS STATED BEFORE THE CIT AS WELL AS WHILE GIVING OBJECTION TO 263 NOTICE. THE ORDER PASSED BY THE COMMISSIONER IN CA PACITY OF SECTION 263 IS MERELY A SECOND OPINION AND DOES NOT FALL IN THE CA TEGORY OF PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE HAS ALREADY OFFE RED TAX ON THE RENTAL INCOME. THEREFORE, THE ASSESSING OFFICER HAS PROPERLY VERIF IED ALL THE FACTS. THOUGH ON THE SURFACE THE ASSESSING OFFICERS ORDER MAY LOOK SHORT OF LINES BUT IT IS PASSED WITH DUE DILIGENCE AND THERE IS NO NEED TO INVOKING SECTION 263 POWER BY THE COMMISSIONER. AS REGARD THE CASE LAWS SUBMITTED BY THE LD. DR OF THE APEX COURT AS WELL AS OF THE JURISDICTIONAL HIGH COURT T HE SAME ARE APPLICABLE IN THE CASE WERE THE ASSESSING OFFICER FAILS IN HIS/HER DU TY TO ASSESS THE INCOME PROPERLY AND BECAUSE OF THAT THERE IS A PREJUDICIAL INTEREST OF THE REVENUE. BUT IN THE PRESENT CASE THE ASSESSING OFFICER HAS TAKEN COGNIZANCE OF ALL THE MATERIAL PROVIDED BY THE ASSESSEE DURING THE ASSESS MENT PROCEEDINGS AND AFTER VERIFYING THE SAME HAS PASSED JUST AND PROPER ORDER . THEREFORE, IN LIGHT OF THE ABOVE FINDINGS, THE ORDER OF THE COMMISSIONER U/S 2 63 OF THE ACT IS SET ASIDE. 10. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2018 . SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) PRESIDENT JUDICIAL MEMBER DATED: 30/01/2018 R. NAHEED * 6 ITA NO. 2632/DEL/2014 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 08/12/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 11/12/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 30.01.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 3 0 .01.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 2632/DEL/2014