Bhawna Agarwal, Kolkata V. I.T.O.,Ward-28(2), Kolkata

ITA 2653/KOL/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1298 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-05-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 27-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAMOD HIMMATSINGHKA
• Keywords: Set aside

Judgement Text

ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A(SMC) BENCH, KOLKATA [VIRTUAL COURT HEARING] BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT I.T.A. NO. 2653/KOL/2019 ASSESSMENT YEAR: 2013-2014 BHAWNA AGARWAL,.................................... ...........................APPELLANT C/O. P.K. HIMMATSINGHKA & CO., B-4, 2 ND FLOOR, CENTRAL PLAZA, 41, B.B. GANGULY STREET, KOLKATA-700012 [PAN:ACGPA2048G] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-28(2), KOLKATA, DAKSHIN, 2, GARIAHAT ROAD (S), KOLKATA-700068 APPEARANCES BY: SHRI PRAMOD HIMMATSINGHKA, A.R., APPEARED ON BEHALF OF THE ASSESSEE SHRI JAYANTA KHANRA, JCIT , SR. D.R., APPEARED ON BEHALF OF THE REVENUE DATE OF CONCLUDING THE HEARING : MAY 13, 2021 DATE OF PRONOUNCING THE ORDER : JULY 07, 2021 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, KOLKATA DATED 29.04.2019 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS.5,93,455/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF INTEREST EXPENDITURE. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 27.09.2013 DECLARING TOTAL INCOME OF RS.2,33,850/-. AS MENTION ED IN THE ASSESSMENT ORDER, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF PULSES, COMMISSION AGENT ETC. IN THE RETURN OF INCOME FILE D FOR THE YEAR UNDER ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 2 CONSIDERATION, DEDUCTION OF RS.5,93,455/- WAS MADE BY THE ASSESSEE ON ACCOUNT OF INTEREST PAID ON UNSECURED LOAN. IN ORDE R TO JUSTIFY THIS CLAIM, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESS EE IN WRITING BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS:- IN PARA (2) OF YOUR LETTER YOU HAVE ASKED FOR AN EXPLANATION REGARDING INTEREST CLAIM OF RS.5,93,455 /- WHICH AS PER YOUR LETTER HAS BEEN PAID FOR INVESTME NTS WHEREIN NO INCOME HAS BEEN DERIVED. SIR, AS PER MY BALANCE SHEET AS AT 31.03.2013, MY T OTAL CAPITAL IS RS.3546739/- OUT OF WHICH RS. 2516679/- HAS BEEN INVESTED IN PURCHASE OF A FLAT & RS.1117584/- ARE HELD IN SHARES & MUTUAL FUNDS. I AM RUNNING MY PROPRIETORSHIP BUSINESS OF ADITYA K UMAR RAUNAK KUMAR (WHOSE AUDITED ACCOUNTS HAVE BEEN SUBMITTED TO YOU) OUT OF THE UNSECURED LOANS TAKEN IN MY PERSONAL NAME. AS PER THE BALANCE SHEET A SUM OF RS.19.00 LACS IS INVESTED IN THE SAID PROPRIETORSHIP CONCERN. INTERE ST ON WHICH @ 12% P.A. COMES TO ABOUT RS.228000/-. APART FROM MY PROPRIETORSHIP BUSINESS IN THE' NAME OF ADITYA KUMAR RAUNAK KUMAR, I HAVE ENTERED INTO PURCHASE & SALE OF REAL ESTATE FOR WHICH I HAVE BOO KED SOME FLATS. AS YOU ARE FULLY AWARE THAT THE REAL ESTATE BUSINES S IS NOT A BUSINESS WHEREIN THERE ARE DALLY PURCHASE & SALE TRANSACTIONS AND IS A CAPITAL INTENSIVE VENTURE. AT TIMES IT MAY TAKE MONTHS ON - EVEN A YEAR BEFORE THE FLAT IS SUBSEQUENTLY SOLD. THE FLATS THAT HAVE BEEN BOOKED BY ME WERE UNDER CONSTRUCTION UNITS WHICH WERE SOLD IN 'SUBSEQUENT YEARS. SINCE THE FLATS WERE BOOKED OUT OF BORROWED MONEY AND INTEREST WAS PAID THERE ON, THE SAME WAS CLAIMED AS AN EXPENDITURE. SIR, SINCE THE FLATS WERE BOOKED BY ME WITH BORROWE D MONEY AND WITH BASIC INTENTION OF RESALE WITHIN A F EW MONTHS AND NOT TO BE HELD BY ME FOR A LONG TIME OVE R THE YEARS. THE SUM SO INVESTED AS SUCH WERE RECORDED AS BUSINESS TRANSACTIONS IN MY BOOKS. FURTHER PROPER T DS HAS BEEN DEDUCTED AND DEPOSITED ON INTEREST PAID ON SUM BORROWED FOR SUCH INVESTMENT. ALMOST ALL INTEREST P AID BY ME ON UNSECURED LOANS HAS BEEN PAID @ 12% P.A. WHIC H BY ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 3 ROUGH ESTIMATES WILL BE MUCH MORE THAN THE AMOUNT CLAIMED. OUT OF WHICH ONLY A PORTION AMOUNT OF RS.593455/- HAS BEEN CLAIMED AS EXPENDITURE. OUT OF RS.593455/-AN AMOUNT OF RS.228000/- CAN BE PURPORTE D AS INTEREST ON SUM EMPLOYED IN PROPRIETORSHIP BUSIN ESS AND REST RS.365455/- AS INTEREST FOR REAL ESTATE BU SINESS. REST OF THE INTEREST WHICH WAS PAID FOR NON-BUSINES S INVESTMENT HAS BEEN CAPITALIZED AS IS EVIDENT FROM MY BALANCE SHEET UNDER THE HEAD PROCUREMENT EXPENSES APPEARING IN THE ASSETS SIDE. I THEREFORE, PRAY YOU NOT TO ADD THE INTEREST AMOUN T OF RS.593455/- TO MY RETURNED INCOME. 3. THE ASSESSING OFFICER DID NOT FIND THE ABOVE EXP LANATION OFFERED BY THE ASSESSEE TO BE ACCEPTABLE. ACCORDING TO HIM, TH E ASSESSEE HAD ALREADY CLAIMED BANK INTEREST OF RS.5,88,765/- ON TRADE LOA N IN HER PROPRIETARY CONCERN NAMELY ADITYA KUMAR RAUNAK KUMAR AND, THE REFORE, ANY FURTHER CLAIM OF INTEREST ON LOAN IN THE CASE OF THE SAID P ROPRIETARY CONCERN WAS NOT TENABLE. AS REGARDS THE OTHER CLAIM OF THE ASSE SSEE OF HAVING UTILIZED THE UNSECURED LOANS FOR THE PURPOSE OF HER BUSINESS OF PURCHASE AND SALE OF PROPERTIES, THE ASSESSING OFFICER FOUND THAT THE SAME WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. HE ALSO NOTE D THAT THERE WAS NOT EVEN A SINGLE SALE OF PROPERTY MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION TO EARN ANY INCOME AND EVEN IN THE BA LANCE-SHEET, THE AMOUNTS PAID WERE DECLARED AS ADVANCE FOR PURCHASE OF PROPERTIES AND NOT CLOSING STOCK OF REAL ESTATE BUSINESS. HE, THER EFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE INTER EST OF RS.5,93,455/- CLAIMED BY THE ASSESSEE. 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF INTEREST AMOUNTING TO RS.5,93,455/- WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND SINCE THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPORT OF HER CASE ON THIS ISSU E WERE NOT FOUND ACCEPTABLE BY HIM, THE LD. CIT(APPEALS) PROCEEDED T O CONFIRM THE ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 4 DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF INTEREST FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE CONSIDERED THE MATERIAL BEFORE ME. THE APPEL LANT IS AN INDIVIDUAL, AND HAS DERIVED INCOME FROM TRADI NG IN PULSES, COMMISSION AGENT AND INCOME FROM OTHER SOURCES. THE AO FOUND THAT THE ASSESSEE CLAIMED RS.6,98.545/- AS DEDUCTION U/S 57 OF THE INCOME TAX ACT, 1961 INCLUDING A CLAIM OF RS.5,94,455/- ON ACCOUNT OF INTEREST PAID ON UNSECURED LOAN, RS.1,05,000/- PAID ON ACCOUNT OF COMMISSION TO SRI RAJENDRA KUMAR GUPTA A ND RS.90/- ON ACCOUNT OF BANK CHARGE. THE AO OBSERVED THAT UNSECURED LOAN AS PER BALANCE SHEET AS ON 31.03.201 3 WAS RS 1,21.104.08 AND THE LOAN WAS UTILIZED TO INV EST IN SHARES, MUTUAL FUNDS & ADVANCES FOR PURCHASE OF PROPERTIES, BUT NO INCOME WAS DERIVED FROM SUCH INVESTMENT. THE A.O FOUND THE EXPLANATION OF THE APPELLANT TO BE UNSATISFACTORY AS IT WAS UNABLE TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION OF THE INTERES T OF RS.5.93.455/-, AS ALL INVESTMENTS WERE FOUND TO BE PERSONAL IN NATURE WHICH WAS SHOWN AS ADVANCE FOR PURCHASE AND NOT AS CLOSING STOCK FOR INVESTMENT IN PROPERTIES AND THE INTEREST EXPENDITURE OF RS.5,93, 455/- WAS NOT INCIDENTAL TO THE APPELLANT'S BUSINESS AND DISALLOWED AS NOT DEDUCTIBLE U/S 57 OF THE I.T. ACT ,1961. THE APPELLANT'S AM HAS MAINLY CHALLENGED THE DISALLOWANCE BY CLAIMING THAT IN THE BALANCE SHEET THERE WAS SALE FIGURE OF RS.24.60,OOO/- WHICH WAS DERIVED FROM SALE OF PROPERTIES DURING THE YEAR OF TWO PROP ERTIES AND A PROFIT OF RS. 153927/- WAS MADE THERE FROM. F ROM PERUSAL OF THE PROFIT & LOSS ALE AND THE AUDIT REPO RT IN FORM NO. 3CD, IT IS OBSERVED THAT IT PERTAINS TO TH E PROPRIETARY BUSINESS 'BHAWNA AGARWAL & ADITYA KUMAR RUANAK KUMAR' FOR THE PREVIOUS YEAR-ENDING MARCH 31 , 2013. THE NATURE OF BUSINESS, AS-PER ANNEXURE -1 TO THE AUDIT REPORT IS SHOWN AS TRADING & GENERAL COMMISSI ON AGENTS. THE A.O HAS ALSO RECORDED THE NATURE OF THE APPELLANT'S SOURCE OF INCOME AS 'TRADER OF PULSES, COMMISSION AGENT &, INCOME FROM OTHER SOURCES'. IT IS ALSO EVIDENT FROM THE LIST OF SUNDRY CREDITORS, SUN DRY DEBTORS I.E. R.P. COMTRADE PVT. LTD AND RAVI GREALS PVT. LTD AND IT IS INFERRED THAT THESE RELATE TO TRADING IN PULSES AND NO STOCK IN TRADE OR ANY TRANSACTION OF SALE & PURCHASE OF PROPERTIES IS MENTIONED BY THE AUDITORS IN THE AUDIT REPORT IN FORM 3CD. 'IT WAS ALSO CLAIMED BY ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 5 THE A/R THAT THE BALANCE SHEET OF THE APPELLANT THE RE WAS SALE FIGURE OF RS.24,60,000/- FROM SALE OF TWO PROPERTIES AND IT ALSO REFLECTS THAT MONIES WERE PA ID AS ADVANCES FOR PURCHASE OF FLATS. IT IS ALSO PERTINEN T TO NOTE THAT THE APPELLANT WAS UNABLE TO SUBMIT ANY DOCUMENTARY EVIDENCE EITHER DURING THE COURSE OF ASSESSMENT OR APPELLATE PROCEEDINGS TO SUBSTANTIATE ITS CLAIM THAT THE INTEREST EXPENDITURE WAS INCURRED FO R EARNING INCOME FROM OTHER SOURCES. THEREFORE, THE APPELLANT'S CLAIM IS FOUND LOBE INCORRECT AND TO BE AN AFTERTHOUGHT AND IS BEREFT OF ANY MERIT. THE APPELL ANTS AR HAS RELIED UPON THE RATIO OF DECISION IN THE CAS E OF RAJENDRA PRASAD MOODY (1979 AIR 373) BY THE APEX COURT. THE FACTS OF THE APPELLANT'S CASE WHEREIN TH E INVESTMENT WAS MADE IN PROPERTIES BY DIVERTING LOAN S FROM BUSINESS WHEREAS IN THE DECISION OF THE HON'BL E APEX COURT THE INVESTMENT WAS MADE OUT OF BORROWED MONIES FOR THE PURPOSE OF MAKING INVESTMENT IN SHAR ES OF CERTAIN COMPANIES FOR EARNING DIVIDEND ARE FOUND TO BE DISTINCT AND THUS THE RATIO OF THE DECISION RELI ED UPON IS FOUND TO BE NOT APPLICABLE IN THE APPELLANT'S CA SE. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT THERE IS NO INFIRMITY IN THE FINDING OR THE A. O THAT THE IMPUGNED INTEREST EXPENDITURE OF RS.5,93,455/- WAS NOT INCIDENTAL TO THE APPELLANT'S BUSINESS AND WAS CORRECTLY DISALLOWED AS NOT DEDUCTIBLE U/S 57 OF TH E I.T. ACT, 1961 WHICH IS CONFIRMED. THEREFORE, GROUND NO. 2 IS NOT ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE CLAIM OF HAVING UTILIZED THE RELE VANT UNSECURED LOANS FOR THE PURPOSE OF BUSINESS OF PURCHASE AND SALE OF PRO PERTIES WAS SPECIFICALLY MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS). HE HAS INVITED MY ATTENTION TO THE DETAILS FURNISHED BEFORE THE ASSES SING OFFICER AS WELL AS ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 6 BEFORE THE LD. CIT(APPEALS) TO SHOW THAT SUBSTANTIA L INVESTMENT WAS MADE BY THE ASSESSEE IN THE PURCHASE OF VARIOUS PROPERTI ES DURING THE COURSE OF BUSINESS OF PURCHASE AND SALE OF PROPERTIES. HE CON TENDED THAT THE INTEREST BEARING UNSECURED LOANS THUS WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF PURCHASE AND SALE OF PRO PERTIES, BUT THE CLAIM OF THE ASSESSEE OF HAVING CARRIED ON THE SAID BUSIN ESS AND HAVING UTILIZED INTEREST BEARING UNSECURED LOANS FOR THE PURPOSE OF THE SAID BUSINESS WAS DISALLOWED BY THE AUTHORITIES BELOW WITHOUT GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUPPORT AND SUBSTANT IATE HER CLAIM BY PRODUCING THE RELEVANT DETAILS AND DOCUMENTS. HE HA S CONTENDED THAT THE ASSESSEE IS IN A POSITION TO PRODUCE THE RELEVANT D ETAILS AND DOCUMENTS TO SUPPORT AND SUBSTANTIATE HER CLAIM ON THIS ISSUE AN D URGED THAT AN OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO DO SO B Y SENDING THE MATTER BACK TO THE ASSESSING OFFICER. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I CONSIDER IT FAIR AND P ROPER AND IN THE INTEREST OF JUSTICE TO ACCEPT THIS CONTENTION OF THE LD. COU NSEL FOR THE ASSESSEE. EVEN THE LD. D.R. HAS NOT RAISED ANY OBJECTION FOR SENDING THE MATTER BACK TO THE ASSESSING OFFICER FOR PROPER VERIFICATION OF THE ASSESSEES CLAIM. I, THEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY T HE LD. CIT(APPEALS) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE PROPER AND SU FFICIENT OPPORTUNITY TO SUPPORT AND SUBSTANTIATE HER CLAIM FOR DEDUCTION ON ACCOUNT OF INTEREST IN QUESTION BY PRODUCING THE RELEVANT DETAILS AND DOCU MENTS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 07, 2021 . SD/- (P.M. JAGTAP) VICE-PRESIDENT KOLKATA, THE 7 TH DAY OF JULY, 2021 ITA NO. 2653/KOL/2019 A.Y. 20 13-2014 BHAWNA AGARWAL 7 COPIES TO : (1) BHAWNA AGARWAL, C/O. P.K. HIMMATSINGHKA & CO., B-4, 2 ND FLOOR, CENTRAL PLAZA, 41, B.B. GANGULY STREET, KOLKATA-700012 (2) INCOME TAX OFFICER, WARD-28(2), KOLKATA, DAKSHIN, 2, GARIAHAT ROAD (S), KOLKATA-700068 (3) COMMISSIONER OF INCOME TAX (APPEALS)-8, KOLKA TA, (4) COMMISSIONER OF INCOME TAX , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SR. PRIVATE SECRETARY/DDO, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.