M/s Wartyhully Estates Limited , Bangalore V. Income Tax Officer Ward-7(1)(4) , Bangalore

ITA 2725/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7363 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: S RAMASUBRAMANYAM
• Keywords: Opportunity of being heard; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2725/BANG/2017 ASSESSMENT YEAR : 2013-14 M/S WARTYHULLY ESTATES LTD., TOWER B, 9 TH FLOOR, AIRPORT ROAD, DOMLUR, BENGALURU-560 008. PAN : AAACW 1666 R VS. THE INCOME-TAX OFFICER, WARD-7(1)(4), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI S RAMASUBRAMANYAM, C.A RESPONDENT BY : SMT. R PREMI, JCIT DATE OF HEARING : 22-07-2020 DATE OF PRONOUNCEMENT : 14-08-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 01/11/2017, PASSED BY LD.CIT (A)-7, FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT, I S BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE INTEREST DISALLOWANC E OF RS.68,47,725/- ON THE GROUND THAT THE LOANS BORROWED ARE UTILIZED FOR CAPITAL INVESTMENT IN THE FIRMS EVEN THOUGH IT IS USED FOR MAKING ADVA NCES TO THE FIRMS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN PASSING THE ORDER WITHOUT ADJUDICAT ING THE ALTERNATE PAGE 2 OF 8 ITA NO.2725/BANG/2017 GROUND NOS. 4 TO 6 RAISED BEFORE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS). 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING THE CLAIM OF THE A PPELLANT THAT THE ENTIRE INTEREST OF RS.4,38,92,062/TOWARDS LOANS UTILIZED F OR ADVANCES MADE TO THE FIRMS. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER, THE APPELLANT CRAVES THE LEAVE OF THE INCOME TAX APPELL ATE TRIBUNAL, BANGALORE TO ADD, DELETE, MODIFY AND AMEND OTHERWIS E ANY OF THE GROUND EITHER AT THE TIME OF FILING THE APPEAL OR A T THE TIME OF HEARING. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND FILED ITS RETURN OF IN COME FOR YEAR UNDER CONSIDERATION ON 29/11/2013 DECLARING LO SS OF RS.1,96,469/-. 3. THE SAME WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRU TINY. CONSEQUENTIALLY YOU NOTICE UNDER SECTION 143 (2) WA S ISSUED TO ASSESSEE IN RESPONSE TO WHICH REPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD. AO AND FILED REQUISITE DETAILS. 4. LD.AO OBSERVED THAT ASSESSEE IS A OWNER OF COFFE E ESTATE AND ALSO PARTNER IN SEVERAL PARTNERSHIP FIRM S WHO ARE ALSO INTO THE BUSINESS OF COFFEE ESTATE. LD.AO IN THE SCRUTINY PROCEEDINGS OBSERVED THAT ASSESSEE CLAIMED DEDUCTIO N OF INTEREST PAID TO BANK AGAINST THE INTEREST EARNED F ROM PARTNERSHIP FIRMS. ACCORDINGLY, ASSESSEE WAS CALLED UPON TO FILE DETAILS OF CAPITAL INVESTED AND ADVANCES MADE BY ASSESSEE TO PARTNERSHIP FIRMS. ASSESSEE IN RESPONSE TO THE NOTICE FILED FOLLOWING DETAILS: PAGE 3 OF 8 ITA NO.2725/BANG/2017 5. ASSESSEE SUBMITTED THAT INTEREST IS EARNED FROM THE AMOUNTS SHOWN AS ADVANCE TO THE FIRMS AND NOT FROM CAPITAL INVESTED. IT WAS ALSO SUBMITTED THAT SOURCE OF ADVA NCE WAS THE LOAN TAKEN FROM J &K BANK LTD., AND HENCE THE I NTEREST PAID TO BANK HAS BEEN ADJUSTED AGAINST THE INTEREST EARNED FROM THE FIRMS ON ADVANCES. THE LD.AO HOWEVER REJEC TED THE SUBMISSIONS OF ASSESSEE BY OBSERVING THAT THE FIRMS HAVE SHOWN THE AMOUNT RECEIVED FROM THE PARTNERS UNDER T HE HEAD PARTNERS CAPITAL ACCOUNT AND PARTNERS CURRENT ACCOUNT. LD.AO CONCLUDED THAT INTEREST IS PAYABLE T O THE PARTNERS BOTH ON CAPITAL AND CURRENT ACCOUNT OF EAC H PARTNER AND THUS IT WAS HELD THAT THE AMOUNT INVEST ED AS ONLY FOR EARNING INTEREST OF THE PARTNERSHIP FIRMS AND ACCORDINGLY DISALLOWED THE PROPORTIONATE INTEREST ATTRIBUTABLE TO THE AMOUNT INVESTED IN. 6. AGGRIEVED BY ADDITION, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). 7. LD.CIT(A) AFTER CONSIDERING SUBMISSIONS OF ASSES SEE AND THE ASSESSMENT ORDER HELD AS UNDER: PAGE 4 OF 8 ITA NO.2725/BANG/2017 4.2 THE AR DURING THE HEARING OF THE CASE VEHEMENTLY CO NTENDED THAT THE CONCLUSION DRAWN BY THE AO IS NOT CORRECT AND THE SUBMISSIONS OF THE APPELLANT SHOULD BE ACCEPTED. TH E AR WAS ASKED TO FILE SUPPORTING DETAILS AND EVIDENCES IN S UPPORT OF HIS ARGUMENT: RELATING THE INVESTMENT IN FIRMS AND THE DATE OF LOAN RECEIVED FROM THE BANK (ORDER SHEET ENTRY 15/0 9/2017). HOWEVER, ON THE DATE OF HEARING ON 09/10/2017, NOBO DY APPEARED NOR ANY WRITTEN COMMUNICATION FILED. IN VI EW OF ABOVE, THE CONTENTION OF APPELLANT BEING UNSUBSTANT IATED CANNOT BE ACCEPTED. THE AO HAS GIVEN DETAILS AND CO GENT REASON FOR HIS DECISION AND THE DECISION OF THE AO TO DISALLOW OF THE PROPORTIONATE INTEREST IS UPHELD. LD.CIT(A) THUS UPHELD ADDITION MADE BY LD.AO. 8. AGGRIEVED BY ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 9. ASSESSEE HAS RAISED 2 ISSUES BEFORE THIS TRIBUNA L: 1. DISALLOWANCE OF RS.68,47,725/- ON THE GROUND THAT, LOANS BORROWED ARE UTILISED FOR CAPITAL INVESTMENT IN FIRMS. 2. LD.CIT(A) DID NOT ADJUDICATED THE CLAIM OF ASSESSEE THAT ENTIRE INTEREST OF RS.4,38,92,062/- TOWARDS LOAN UTILISED FOR ADVANCES TO THE FIRMS. ISSUE 1: 10. LD.AR SUBMITTED THAT ADVANCES GIVEN BY ASSESSEE TO THE FIRMS ARE FROM LOANS BORROWED FROM JAMMU AND KASHMIR BANK WHICH IS NOT DISPUTED BY REVENUE. IT I S ALSO AN ADMITTED POSITION THAT THE ADVANCES PAID TO THE FIR MS OUT OF PAGE 5 OF 8 ITA NO.2725/BANG/2017 LOAN HAVE BEEN CLASSIFIED AS CURRENT ASSETS IN BALA NCE SHEET OF ASSESSEE. LD.AR SUBMITTED THAT ASSESSING OFFICER ERRED IN HOLDING THAT ADVANCES MADE BY ASSESSEE WAS TOWARDS CAPITAL IN THOSE FIRMS AS AGAINST ADVANCES. HE SUBMITTED TH AT THIS OBSERVATION HAS BEEN MADE BY LD.AO ONLY ON THE BASI S OF THE BALANCE SHEET OF THE FIRMS THAT DO NOT SHOW ANY LIABILITY FROM ASSESSEE EXCEPT FOR THE CAPITAL ACCOUNT IN THE NAME OF ASSESSEE. 11. LD.AR SUBMITTED THAT, ASSESSING OFFICER WHILE CONCLUDING HAS HELD THAT AMOUNTS BORROWED HAVE BEEN UTILISED FOR CAPITAL INVESTMENT IN THE FIRMS AND AL SO ADVANCES GIVEN TO THE FORM AND THEREFORE HE DISALLOWED PROPO RTIONATELY AMOUNTING TO RS.68,47,725/-. LD.AR SUBMITTED THAT, SUCH CONTRARY VIEW TAKEN BY LD.AO IS NOT IN ACCORDANCE T O THE FACT IN THE PRESENT CASE. ISSUE NO.2: 12. LD.AR SUBMITTED THAT, INTEREST ON LOANS UTILISE D FOR ADVANCES WAS RS.4,38,92,062/- AND THAT THIS ISSUE H AS NOT BEEN VERIFIED BY LD.CIT(A). ON THE CONTRARY, LD.SR.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 13. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 14. AT THE OUTSET, ON PERUSAL OF ASSESSMENT ORDER, WE NOTE THAT, LD.AO MADE CERTAIN FACTUAL MISTAKES IN NOTING THAT ASSESSEE EARNED PROFITS TOWARDS ITS SHARE FROM PART NERSHIP FIRM AMOUNTING TO RS.2,13,87,620/-AS AGAINST LOSSES AMOUNTING TO RS.1,00,72,737/-. IT IS ALSO WRONGLY N OTED BY PAGE 6 OF 8 ITA NO.2725/BANG/2017 LD.AO THAT, INTEREST EARNED BY ASSESSEE FROM THE FI RM AMOUNTED TO RS.100,72,737/- AS AGAINST RS.2,13,87,6 20/-. WE ALSO NOTE THAT, LD.CIT(A) CONFIRMED THE ADDITION MADE BY LD.AO FOR A SUM OF RS. 68, 47, 725/- ONLY FOR THE R EASON THAT, ASSESSEE DID NOT FILE SUPPORTING DETAILS AND EVIDENCES TO CO-RELATE INVESTMENTS IN FIRMS AND DATE OF LOAN RECEIVED FROM BANK. WE ALSO NOTE THAT LD.CIT(A) DID NOT ADJU DICATE GROUND 5 RAISED BEFORE HIM. 15. CONSIDERING THE TOTALITY OF THE SITUATION, WE A RE OF VIEW THAT THE ISSUE NEEDS TO BE READJUDICATED BY LD.CIT( A) AFRESH. ASSESSEE IS DIRECTED TO FILE ALL REQUISITE DETAILS IN SUPPORT OF ITS CLAIM TO CO-RELATE INVESTMENT IN FORM AND DATE OF LOANS RECEIVED FROM BANK. 16. ACCORDINGLY, BOTH THESE ISSUES ARE REMANDED TO LD.CIT (A) FOR FRESH ADJUDICATION. 17. LD.CIT(A) IS DIRECTED TO PASS A DETAILED AND RE ASONED ORDER ON MERITS. NEEDLESS TO SAY THAT ASSESSEE SHAL L BE GRANTED PROPER OPPORTUNITY OF BEING HEARD. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2020. SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 14 TH AUGUST, 2020. /VMS/ PAGE 7 OF 8 ITA NO.2725/BANG/2017 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNA L. BANGALORE. PAGE 8 OF 8 ITA NO.2725/BANG/2017 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -08-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -08-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -08-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -08-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -08-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -08-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -08-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS