Shri Nileshkumar N. Todi, Ahmedabad V. The Income Tax Officer, Ward-5(2)(3), Ahmedabad

ITA 3011/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4603 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-10-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 27-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NK GOEL
• Assessee Lawyers: P B PARMAR
• Keywords: Reopening of assessment; Principle of natural justice; Earning of tax free income; Tangible material; TDS
• Section: 271(1)(c); 143(3); 14A; 40(a)(ia); 201; 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI NILESHKUMAR N. TODI, GF/FF, BLOCK - A, AURA VILLA, THALTEJ, AHMEDABAD PAN: AAOPT2933K (APPELLANT) VS THE IT O , WARD - 5 ( 2)(3 ) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI N.K. GOEL , SR. D . R. ASSESSEE BY: SHRI P.B. PARMAR , A.R. DATE OF HEARING : 01 - 10 - 2 019 DATE OF PRONOUNCEMENT : 14 - 11 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2009 - 10 , ARI SES FROM ORDER OF THE CIT(A), AHMEDABAD - 5 DATED 1 0 - 09 - 2 015 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEAR NED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN REOPENING THE ASSESSMENT U/S 147 OF THE ACT. ON THE FACTS I T A NO . 3011 / A HD/20 15 A SS ESSMENT YEAR 2009 - 10 I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 2 AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ACTION OF REOPENING IS WITHO UT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACTS. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN DISALLOWING INTEREST EXPENSE OF RS.22,54,688/ - UNDER SECTION 36(1)(III) OF THE ACT. 3. BOTH THE POWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSION, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO H AVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THE ACTION OF THE LOWER AUTHORITIES IS CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 4. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN CON FIRMING ACTION OF LD. AO IN LEVYING INTEREST U/S 234A/B/C/D OF THE ACT. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN CONFIRMING THE ACTION OF LD. AO IN INITIATING PENALTY U/S 271(1)(C) OF THE ACT. 3 . THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLARING INCOME OF RS. 15 , 50 , 460/ - WAS FILED ON 4 TH NOV, 2011. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS MADE ON 4 TH NOV, 2011 WHEREIN TOTAL DISALLOWANCE OF RS. 4 , 96 , 801/ - WAS MADE COMPRISING OF DISALLOWANCE U/S. 14A OF THE ACT TO THE AMOUNT OF RS. 1 , 44 , 477/ - AND DISALLOWANCE U/S. 40(A)(IA) OF THE ACT OF RS. 3 , 52 , 324/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE ACT BY ISSUING OF NOTICE U/S. 148 OF THE ACT ON 31 ST MARCH, 2014. THE CASE WAS REOPENED ON THE REASON THAT T HE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF R S. 43 , 53 , 416/ - DURING THE YEAR UNDER CONSIDERATION AND ASSESSEE HAD INVESTED TOTAL AMOUNT OF RS. 5 , 25 , 23 , 37 0 / - ON PURCHASE OF VARIOUS ASSETS FROM WHICH EITHER EXEMPT INCOME WAS GENERATED OR NO INCOME WAS GENERA TED. IT WAS ALSO OBSERVED THAT CAPITAL OF THE ASSESSEE IN THE PROPRIETARY FIRM WAS OF RS. 1 , 47 , 33 , 670/ - ON 31 ST MARCH, 2009 AND LOAN AMOUNT CONSISTING OF SECURED AND UNSECURED LOAN WAS TO THE AMOUNT OF R S. 5 , 85 , 69 , 017/ - . IN VIEW OF THE ABOVE, THE ASSESS ING OFFICER WAS OF THE VIEW THAT ASSESSEE HAS INVESTED AN AMOUNT OF RS. 3 , 22 , 77 , 077/ - OUT OF LOAN FUNDS. THEREFORE, THE ASSESSING I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 3 OFFICER OBSERVED THAT LOAN AMOUNT WAS DIVERTED TOWARDS NON - BUSINESS PURPOSE AND CONSEQUENTLY INTEREST EXPENSES INCURRED OF DI VERSION OF LOAN WAS COMPUTED AT RS. 22 , 54 , 668/ - WHICH WAS DISALLOWED BY THE ASSESSING OFFI CER IN THE ASSESSMENT MADE U/S. 143(3) R.W.S. 147 OF THE ACT ON 22 ND DECEMBER 2014. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT( A) HAS DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND OF VALIDITY OF REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT STATING THAT THE ASSESSING OFFICER HAS RECORDED REASONS BEFORE ISSUING OF NOTICE U/S. 147 OF THE ACT. THE LD. CIT(A) HAS ALSO DISMISSE D THE APPEAL OF THE ASSESSEE ON THE DISALLOWANCE OF INTEREST AMOUNT OF RS. 22 , 54 , 668/ - STATING THAT ASSESSEE HAS FAILED TO JUSTIFY THAT THE INTEREST EXPENSES HAS BEEN INCURRED FOR THE BUSINESS. 5 . DURING THE CO URS E OF APPELLATE PROCEEDINGS BEFORE U S, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK COMPRISING DETA I LS AND COPIES OF DOCUMENTS FURBISHED BEFORE THE LOWER AUTHORITIES AT THE TIME OF HEARING. THE LD. COUNSEL HAS ALSO SUBMITTED THE COPY OF REASON S RECORDED BY THE ASSESSING OFFICER FOR REOPENING T HE ASSESSMENT U/S. 147 OF THE ACT. THE LD. COUNSEL HAS ALSO CONTENDED THAT AT THE TIME OF ORIGINAL ASSESSMENT , THE ASSESSING OFFICER HAD CONSIDERED ALL THE DETAILS PERTAINING TO INTEREST EXPENSES AND THERE WAS NO OTHER NEW TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSEE WHICH COULD LEAD TO BELIEF AS TO ESCAPEMENT OF ANY INCOME CHARGEABLE TO TAX. THE LD. COUNSEL HAS ALSO GIVEN THE BREAK - UP OF INVESTMENTS MADE BY THE ASSESSEE AND SUBMITTED THAT INTEREST AMOUNT OF RS. 6 ,3 0 , 833/ - PAID ON LOAN OBTAINED FOR PU RCHASE OF RESIDENTIAL PROPERTY H AS ALREADY BEEN CAPITALIZED , INVESTMENT I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 4 MADE IN THE MUTUAL FUND AND SHARES HAS ALREADY BEEN CONS IDER ED FOR DI SALLOWANCE U/S. 14A OF THE ACT AT THE ORIGINAL ASSESSMENT STAGE. REGARDING INVESTMENT IN THE PARTNERSHIP FIRM , I T IS SUBMITTED THAT THE SAME HAS BEEN MADE IN THE M ARCH 2009 AND INTERE ST ON WHICH WORKED OUT TO THE AMOUNT OF R S. 52,868/ - . IT IS EXPLAINED THAT FOR R EMAINING INVESTMENT OF R S. 48 , 04 , 121/ - , THE ASSESSEE W A S HAVING SUBSTANTIAL INTEREST FREE FUND TO THE A MOUNT OF RS. 1 , 47 , 33 , 670/ - IN THE FORM OF CAPITAL ON WHICH NO DISALLOWANCE IS REQUIRED TO BE MADE AFTER PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE INDUSTRIES LTD. 102 (2019 ) TAXMAN.COM 52. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF CIT VS. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOMBAY). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF L OWER AUTHORITIES AND PLACED RELIANCE ON THE DECISION OF DCIT VS. SAMBH AV ENERGY LTD. (2017) 80 TAXMAN.COM 389 (RAJASTHAN) DATED 11 TH APRIL, 2017. 6 . WE HAVE HEARD BOT H THE SIDES AND PERUSED THE MATERIA L ON RECORD. AFTER PERUSAL OF THE MATERIAL ON RECORD, IT IS OBSERVED THAT THE ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT WAS MADE ON 4 TH NOV, 2011 WHEREIN THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S. 14A OF THE ACT TO THE AMOUNT OF RS. 1 , 44 , 477/ - AND OTHER DISALLOWANCES OF RS. 3 , 52 , 324/ - U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF NON - COMP LIANCE WITH THE TDS PROVISION. ON EXAMINATION OF THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT THERE WAS NO T ANY INFORMATION AND SPECIFIC DETAIL COLLECTED BY THE ASSESSING OFFICER PERTAINING TO THE ISSUE OF UTILIZATION OF LOAN AMOUNT TOWARDS BUSINESS PURPOSE OR NON - BUSINESS PURPOS E. FURTHER FROM THE COPY OF REASON RECORDED PROVIDED TO THE ASSESSING OFFICER , IT IS NOTICED THAT THE SAME WAS RECORDED ON 31 ST MARCH, I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 5 2014 AN D THIS FACT WAS NOT DISPROVED THAT REASON S WERE RECORDED AFTER THE DATE OF ISSUING OF NOTICE U/S. 148 OF THE ACT. CON SIDERING THE AFORESAID FACTS AND CIRCUMSTANCES , WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN DISMISSING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF VALIDITY OF THE REOPENING OF ASSESSMENT. R EGARDING THE DISALLOWANCE OF RS . 22 , 54 , 688/ - U/S. 36(1)(II) OF T HE ACT , THE ASSE SSEE HAS GIVEN THE BREAK - UP OF INVESTMENT AS UNDER : - > RESIDENCE AURA VILLA (SELF OCCUPIED PROPERTY) : RS. 1,20,28,119/ - > SHARE INVESTMENTS : RS.29,90,000/ - > INVESTMENT IN PARTNERSHIP FIRM: RS.2,66,16,500/ - > LIC INVESTMENT: RS.27,55,568/ - > PPF INVESTMENT: RS.20,48,553/ - > MUTUAL FUND INVESTMENT: RS.5,72,000/ - TOTAL RS.4,70,10.740/ - OUT OF THE AFORESAID INVESTMENT , THE FOLLOWING INVESTMENTS WERE ALREADY CONSIDERED BY T H E ASSESSING OFFICER WHILE MAKING DISALLOWANCE U/S. 14A O F TH E ACT AS UNDER: - INVESTMENTS AS AT 31.03.08 AS AT 31. 03.09 MUTUAL FUNDS RS.5,72,000/ - RS.5,72,000/ - SHARES RS. 80,000/ - RS.29,90,000/ - TOTAL RS.6,52,000/ - RS.3 5,62,000/ - IN RESPECT OF INVES TMENT OF R S. 1,20,28,119/ - IN THE RE SIDENCE AURA VILLA, THE ASSESSEE HAS ALREADY CAPITALIZED THE INTEREST AMOUNT TO THE AMOUNT OF RS. 6 , 30 , 833/ - PERTAINING TO THE INVESTMENT IN THE AFORESAID PROPERTY. FURTHER , THE ASSESSEE HAS MADE INVESTMENT IN THE PART NERSHIP FIRM TO THE AMOUNT OF RS. 2 , 66 , 16 , 500/ - IN THE MONTH OF MARCH, 2009 ON WHICH TOTAL INTEREST OF RS. 52 , 868/ - WAS INCURRED. REGARDING BALANCE INVESTMENT OF RS. 48 , 04 , 121/ - , THE I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 6 ASSESSEE HAS SHOWN THAT IT HAD SUBSTANTIAL INTEREST FREE FUND OF RS. 1 , 4 7 , 33 , 670/ - IN THE FORM OF CAPITA L. IN THIS REGARD, WE HAVE PERUSED THE PAPER BOOK FILED BY THE ASSESSEE AND NOTICED THAT A T PAGE NO. 5 & 9 OF THE PAPER BOOK , THE ASSESSEE HAS GIVEN THE LEDGER ACCOUNT WHICH DEMONSTRATE THAT ON THE INVESTMENT MADE IN THE R ESIDENCE AURA VILLA, THE ASSESSEE HAD INCURRED INTEREST EXPENSES OF RS. 6 , 30 , 833/ - AND THE S AME WAS CAPITALIZED TO THE PROPERTY COST AS REFLECTED IN ANNEXURE 3 PLACED AT PAGE 5 OF THE PAPER BOOK. REGARDING INVESTMENT AT RS. 2 , 66 , 16 , 500/ - MADE IN THE PARTN ERSHIP FIRM IT IS NOTICED FROM PAGER NO. 13 OF THE PAPER BOOK FROM THE LEDGER ACCOUNT THAT ASSESSEE HAS MADE THIS INVESTMENT FROM 23 RD MARCH , 2009 TO 28 TH MARCH, 2009 DURING THE YEAR UNDER CONSIDERATION AND DURING THE YEAR ON THIS INVESTMENT , ASSESSEE HAS INCURRED AN INTEREST EXPENSES OF RS. 52 , 868/ - AS PER LEDGER ACCOUNT VIDE ANNEXURE A PLACED AT PAGE NO. 2 OF PAPER BOOK SUBMITTED BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES IT IS CLEAR THAT FOR THE BALANCE INVESTMENT OF RS. 4 , 80 , 412/ - , THE ASSESSEE WAS HAVING INTEREST FREE FUND OF RS. 1 , 47 , 33 , 6 70/ - IN THE FORM OF CAPITAL. AFTER CONSIDERING THE ABOVE, WE RESTRICT THE TOTAL DISALLOW ANCE OF INTEREST EXPENSES PERTAINING TO NON - BU SINESS PURPOSE TO RS. 52 , 868/ - INCURRED ON INVESTMENT MADE IN THE PARTNERSHIP FIRM A S ELABORATED ABOVE . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. GROUND NO. 4 IS PERTAINING TO THE CHARGING OF INTEREST U/S. 234A, B, C & D IS DISMISSED AS THE CHARGING OF INTEREST U/S. 234A, B, C & D IS MA NDATORY AS PER IT LAW. I.T.A NO. 3 011 /AHD/20 15 A.Y. 2009 - 10 PAGE NO SHRI NILESHKUMAR N. TODI VS. IT O 7 8. GROUND NO. 5 OF THE ASSESSE REGARDING INITIATING PENALTY U/S. 271(1)(C) IS PREMATURE AT THIS STAGE, THEREFORE, THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 14 - 11 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 14/11 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,