Shri Lalith Kumar Gulecha, CHENNAI V. ITO, CHENNAI

ITA 2958/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8096 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 18-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Salary income; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 2958/MDS/2016 / ASSESSMENT YEAR : 2011-2012 SHRI. LALITH KUMAR GULECHA, NO.402, MINT STREET, SOWCARPET, CHENNAI 600 079. [PAN ABPPL 0289G] VS. THE INCOME TAX OFFICER, BUSINESS WARD XI(2) CHENNAI 600 006. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. D. ANAND, ADVOCATE /RESPONDENT BY : SHRI. ASHISH TRIPATHI, IRS, JCIT. /DATE OF HEARING : 11-01-2017 ! /DATE OF PRONOUNCEMENT : 25-01-2017 % / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, IT HAS RAISE D THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS)-5, CHENNAI, IS WRONG, ILLEGAL AND IS OPPO SED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT (A) OUGHT TO HAVE SEEN THAT WHIL E THE ASSESSING OFFICER ADMITS THAT THE APPELLANT HAD BORROWED MONEY IN THE NORMAL COURSE OF ITS BUSINESS FOR THE PURPOSE OF INVESTMENT IN THE FIRM ERRED IN DISALLOW ING THE LOSS CLAIMED BY THE APPELLANT. ITA NO.2958/MDS/2016. :- 2 -: 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT ALTHO UGH THE APPELLANT ERRONEOUSLY CLAIMED THE LOSS UNDER SE CTION 57(III) OF THE COMMISSIONER OF INCOME TAX OUGHT TO HAVE ALLOWED THE LOSS UNDER THE HEAD BUSINESS LOSS AND U NDER SECTION 36 OF THE INCOME TAX ACT. 4. THE LEARNED CIT (A) ERRED IN LAW IN DISALLOWING A SUM OF RS.5,50,000/-- UNDER THE HEAD UNEXPLAINED CREDIT ORS. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE SAID CREDITORS ARE IDENTIFIABLE AND CREDITWORTHY. 5. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE APPELLANT HAD DISCHARGED HIS ONUS AND THAT THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE A DDITION UNDER THE HEAD UNEXPLAINED CREDITORS. 6. THE LEARNED CIT(A) ERRED TREATING THE LOSS DECLA RED BY THE APPELLANT AS INCOME OF THE APPELLANT WHILE COMP UTING THE TAXABLE INCOME. 7. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE L OSS DECLARED BY THE APPELLANT WAS CONVERTED INTO POSITI VE INCOME OF ACCOUNT OF DISALLOWANCE OF EXPENSE CLAIME D BY THE APPELLANT AND ADDITION U/S.68. THE LEARNED ASSE SSING OFFICER ERRED IN ADDING THE LOSS DECLARED BY THE AP PELLANT AS ALSO INCOME WHILE ARRIVING AT THE TAXABLE INCOME WH ICH TANTAMOUNT TO DOUBLE ADDITION AND DOUBLE JEOPARDY . 2. FACTS APROPOS ARE THAT ASSESSEE A PARTNER IN M/S. C HARIOT REALTY, WAS ALSO EARNING INCOME FROM SALARY. HE HA D FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF @68,320/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS IT WAS NOTED BY THE LD. ASSESSING OFFICER THAT ASSESSEE HAD CLAI MED INTEREST EXPENDITURE OF @7,15,694/- U/S.57(III) OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT). FROM THE DETAILS PRODUCED, LD. ASSESSING OFFICER ITA NO.2958/MDS/2016. :- 3 -: FOUND THAT ASSESSEE HAD NOT EARNED ANY INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. HE DISALLOWED A CLAIM O F EXPENDITURE OF @7,15,694/-. 3. LD. ASSESSING OFFICER ALSO NOTED THAT IN THE BOOKS OF ACCOUNTS ASSESSEE HAD SHOWN UNSECURED LOANS OF @5,0 6,500/- FROM ONE SMT. KAMALA BAI AND @40,000/- FROM THE ESTATE O F PUKHRAJ GULECHA. AS PER LD. ASSESSING OFFICER ASSESSEE COU LD NOT BRING IN ANY EVIDENCE TO PROVE THE ABOVE CREDITS. AN ADDITION O F @5,46,500/- WAS MADE. 4. ASSESSEE HAD CLAIMED IN THE RETURN OF INCOME A LOSS OF @4,31,677/-. AS PER LD. ASSESSING OFFICER THERE WA S NO DETAILS IN SUPPORT OF THE ABOVE CLAIM OF LOSS. HE ALSO MADE A N ADDITION OF @4,31,677/-. 5. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). VIZ-A-VIZ DIS ALLOWANCE OF EXPENDITURE CLAIMED U/S.57 (III) OF THE ACT, ARGUME NT OF THE ASSESSEE WAS THAT IT REPRESENTED INTEREST EXPENDITURE ON UNS ECURED LOANS RAISED FROM VARIOUS PARTIES, WHICH WERE INVESTED IN M/S. C HARIOT REALTY. AS PER THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR IT COULD NOT EARN ITA NO.2958/MDS/2016. :- 4 -: ANY INTEREST INCOME FROM M/S. CHARIOT REALTY AND TH EREFORE INTEREST OUTGO WAS CLAIMED AS EXPENDITURE. ASSESSEE ALSO ME NTIONED THAT THE EXPENDITURE WAS ERRONEOUSLY SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE RETURN OF INCOME. AS PER AS SESSEE IT OUGHT HAVE BEEN SHOWN UNDER THE HEAD INCOME FROM BUSINESS . 6. VIZ-A-VIZ ADDITION MADE FOR LOAN CREDITORS, CONTENT ION OF THE ASSESSEE WAS THAT CONFIRMATIONS FROM BOTH CREDITOR S WERE PRODUCED, TRANSACTIONS WERE THROUGH BANK AND BOTH CREDITORS W ERE ASSESSED TO TAX. 7. VIZ-A-VIZ DISALLOWANCE OF LOSS, ARGUMENT OF THE ASS ESSEE WAS THAT THE SAID SUM WAS THE RESULT OF NETTING INTERES T INCOME OF @2,86,199/- AGAINST INTEREST PAYMENT OF @7,15,694/- . CONTENTION OF THE ASSESSEE WAS THAT CLAIM OF @7,15,694/- WAS ALR EADY DISALLOWED BY THE LD. ASSESSING OFFICER AND THEREFORE DISALLOWANC E OF THE LOSS WOULD RESULT IN DOUBLE ADDITION. 8. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER GOI NG THROUGH THE SUBMISSIONS OF THE ASSESSEE HELD THAT I NTEREST OF @7,15,694/- CLAIMED U/S.57(III) OF THE ACT WAS RIG HTLY DISALLOWED BY THE LD. ASSESSING OFFICER SINCE NO INTEREST WAS RECEIVE D BY THE ASSESSEE FROM THE FIRM IN WHICH HE WAS A PARTNER AND SUCH IN TEREST EVEN IF ITA NO.2958/MDS/2016. :- 5 -: RECEIVED WOULD ONLY BE BUSINESS INCOME U/S.28(V) OF THE ACT. VIZ-A-VIZ ADDITION FOR LOAN CREDITORS, OBSERVATION OF THE LD . COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT ASSESSEE COULD NOT P ROVE THE RECEIPTS TO HAVE BEEN THROUGH CHEQUES. VIZ-A-VIZ DISALLOWANC E OF LOSS, OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) WAS THAT COMPUTATION OF THE LOSS BY SETTING OFF INTEREST INC OME WITH THE INTEREST EXPENDITURE WAS NOT EVIDENCED. IN THE RESULT, HE D ISMISSED THE APPEAL OF THE ASSESSEE ON ALL THE ISSUES. 9. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT BY VIRTUE OF CIRCULAR NO.14/1955 OF CBDT, OFFICERS OF THE DEPAR TMENT WAS OBLIGED NOT TO TAKE ADVANTAGE OF THE IGNORANCE OF THE ASSES SEE BUT TO ASSIST A TAX PAYER IN EVERY REASONABLE WAY. AS PER LD. AUTH ORISED REPRESENTATIVE ASSESSEE CLAIMED INTEREST EXPENDITUR E ERRONEOUSLY U/SEC.57(III) OF THE ACT. HOWEVER, ACCORDING TO HI M, SINCE THE LOANS TAKEN WERE USED FOR ENHANCING ASSESSEES CAPITAL IN M/S. CHARIOT REALTY WHERE HE WAS A PARTNER, INTEREST EXPENDITURE ON SUCH LOANS HAD TO BE ALLOWED UNDER THE HEAD INCOME FROM BUSINESS. AS PER LD. AUTHORISED REPRESENTATIVE JUST BECAUSE ASSESSEE MAD E A CLAIM UNDER THE WRONG HEAD OF INCOME, IT OUGHT NOT HAVE BEEN DI SALLOWED. IN SO FAR AS LOAN CREDIT WAS CONSIDERED, LD. AUTHORISED R EPRESENTATIVE ITA NO.2958/MDS/2016. :- 6 -: SUBMITTED THAT CONFIRMATIONS, PAN DETAILS ETC WERE SUBMITTED BUT THESE WERE IGNORED. FURTHER LD. AUTHORISED REPRESEN TATIVE SUBMITTED IF THE INTEREST EXPENDITURE WAS CONSIDERED UNDER THE H EAD INCOME FROM BUSINESS, THE RELEVANT LOSS WOULD HAVE TO BE ALLOW ED. 10. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 11. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS. IN SO FOR AS INTEREST EXPENDITURE OF @7,15,694/- IS CO NCERNED CONTENTION OF THE ASSESSEE IS THAT LOANS RAISED WERE USED FOR ENHANCING THE CAPITAL IN THE FIRM IN WHICH HE WAS A PARTNER. SIN CE INTEREST INCOME AND PROFIT SHARE FROM THE FIRM WOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS, INTEREST ON LOANS IF ANY RAIS ED BY THE ASSESSEE FOR INVESTING IN THE CAPITAL OF A FIRM WOULD DEFINI TELY BE ALLOWABLE UNDER THE SAME HEAD. JUST BECAUSE ASSESSEE MADE A CLAIM UNDER THE HEAD INCOME FROM OTHER SOURCES WOULD NOT DEMERIT ITS CLA IM IN ANY MANNER. LD. ASSESSING OFFICER IN MY OPINION WAS DUTY BOUND TO CONSIDER THE CLAIM OF THE ASSESSEE EVEN IF IT WAS MADE UNDER A W RONG HEAD. VIZ-A- VIZ CLAIM OF THE LOAN CREDITORS, NONE OF THE LOWER AUTHORITIES HAD VERIFIED WHETHER CONCERNED CREDITORS WERE ASSESSED TO TAX AND WHETHER DETAILS GIVEN BY THE ASSESSEE IN THIS REGAR D WAS CORRECT OR NOT. VIZ-A- VIZ DISALLOWANCE OF LOSS ONCE INTERES T EXPENDITURE IS ITA NO.2958/MDS/2016. :- 7 -: CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS THE CLAIM OF THE LOSS IF ANY WOULD GET SHIFTED TO THAT HEAD AND HAS TO BE CONSIDERED SEPARATELY. NO DOUBT AS MENTIONED BY THE LD. AUTHOR ISED REPRESENTATIVE ANY DISALLOWANCE SHOULD NOT RESULT I N A DOUBLE ADDITION. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT AL L THE ISSUES RAISED BY THE ASSESSEE REQUIRES A FRESH LOOK BY THE LD. AS SESSING OFFICER. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND R EMIT THE MATTER BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSI DERATION DENOVO. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 25TH JANUARY, 2 017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:25TH JANUARY, 2017 KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF