BHAVESH M. GADA, MUMBAI V. ITO 23(1)(2), MUMBAI

ITA 3612/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55479 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: PRADIP N KAPASI
• Keywords: Opportunity of being heard

Judgement Text

1 ITA 3611 & 3612/ M/2010,BHAVESH M. GADA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B BEFORE SHRI B.R. MITTAL, J.M. AND SHRI R.K. PANDA, A.M. ITA NO. 3611/MUM/2010 ASSESSMENT YEAR 2004-05 ITA NO. 3612/MUM/2010 ASSESSMENT YEAR 2006-07 SHRI BHAVESH M. GADA, PROP. LAXMI ENTERPRISES, C/O COPPER ROLLER PVT. LTD., DEVIDAYAL COMPOUND, LBS MARG, BHANDUP (W), MUMBAI 400 078. PAN AABPG 8617J VS. ITO WARD 23(1)(2), PRATYAKSHAKAR BHAVAN, MUMBAI. APPELLANT RESPONDENT APPELLANT BY : SHRI PRADIP N. KAPASI RESPONDENT BY : SHRI P.C. MAURYA DATE OF HEARING : 17.10.2011 DATE OF PRONOUNCEMENT : 17.10.2011 ORDER PER R.K. PANDA A.M. THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 02.02.2010 OF THE LD. CIT(A)- 33, MUMBAI RELATING TO A.YRS. 2004-05 & 2006-07 RESPECTIVELY. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOG ETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA 3611 & 3612/ M/2010,BHAVESH M. GADA ITA NO. 3611/MUM/2010 (BY THE ASSESSEE FOR A.Y. 200 4-05) 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUNDS OF APPEAL NO. 2 RELATING TO VALIDITY OF REA SSESSMENT PROCEEDINGS. THE LD. D.R. HAS NOT OBJECTED TO THE SAME. ACCORDINGLY, THIS GROUND BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 3. IN GROUNDS OF APPEAL NO. 1, THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTERE ST OF ` 7,95,753/- ON BORROWED FUNDS MADE BY THE A.O. 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAS C LAIMED EXPENSES OF ` 6,29,912/- BEING INTEREST PAID TO VARIOUS PARTIES O N BORROWED FUNDS IN THE PROPRIETARY CONCERN AND ` 1,65,841/- IS SHOWN AS INTEREST PAID TO PARTIES IN THE COMPUTATION OF TOTAL INCOME. WHILE GOING THROUGH TH E BALANCE SHEET AND CAPITAL ACCOUNT OF THE ASSESSEE, THE A.O. NOTED THAT MAJORI TY OF THE EXPENSES ARE WITHDRAWN BY THE ASSESSEE OVER A PERIOD OF LAST SEV ERAL YEARS AND AS A RESULT ASSESSEE SHOWS A NEGATIVE CAPITAL IN THE PROPRIETAR Y CONCERN. THE FUNDS SO WITHDRAWN ARE INVESTED IN ASSESSEES PERSONAL ASSET S, SHARES, INTEREST FREE LOANS TO PRIVATE COMPANIES ETC. IN WHICH THE ASSESS EE IS SUBSTANTIALLY INTERESTED AND REFLECTED IN ASSESSEES PERSONAL BAL ANCE SHEET. HE NOTED THAT THE ASSESSEE IN THE BALANCE SHEET OF HIS PROPRIETAR Y CONCERN M/S LAXMI ENTERPRISES HAS SHOWN LOAN TAKEN AT ` 47,66,286/- AND DEBITED AN AMOUNT OF ` 6,29,912/- AS INTEREST PAID ON THE SAME LOAN. SIMI LARLY, IN THE ASSESSEES BALANCE SHEET, THE ASSESSEE HAS SHOWN LOAN TAKEN AT ` 15,15,429/- AND DEBITED AN AMOUNT OF ` 1,65,841/-. THE ASSESSEE HAS ALSO SHOWN INVESTMEN T OF ` 24,00,000/- IN LAXMI NUTRITION PVT. LTD. THUS, THE A.O. CAME TO THE CONCLUSION THAT INTEREST BEARING LOANS HAVE NOT BEEN USED FOR BUSINESS PURPOSES. SINCE 3 ITA 3611 & 3612/ M/2010,BHAVESH M. GADA THE ASSESSEE FAILED TO PROVE THE CLAIM OF INTEREST ON THE BORROWED FUND AS AN EXPENDITURE WITHIN THE MEANING OF SECTION 36(1)(III ) OF THE ACT, THE A.O. DISALLOWED THE INTEREST OF ` 6,29,912/- CLAIMED IN THE PROFIT & LOSS ACCOUNT AN D ` 1,65,841/- CLAIMED IN THE COMPUTATION OF TOTAL INC OME. 3.2 IN APPEAL, THE LD. CIT(A) RELYING ON A COUPLE O F DECISIONS UPHELD THE ACTION OF THE A.O. AGGRIEVED WITH SUCH ORDER OF TH E LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GE 2 OF THE PAPER BOOK SUBMITTED THAT THE ASSESSEE HAS SHOWN TO HAVE RECEI VED INTEREST OF ` 271740/- BEING INTEREST RECEIVED ON LOANS & ADVANCES FROM VA RIOUS PARTIES . REFERRING TO PAGE 4 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE IN THE P&L ACCOUNT HAS SHOWN TO HAVE RECEI VED INTEREST OF ` 17615/- FROM LAXMI NUTRITION PVT. LTD., AN AMOUNT OF ` 500/- FROM TRISHULE TRADE AND AN AMOUNT OF ` 250/- FROM SUNSHINE ENTERPRISES. HE SUBMITTED THAT THE AMOUNT OF ` 24 LACS INVESTED IN M/S LAXMI NUTRITION PVT. LTD. IS ONLY TOWARDS THE END OF THE FINANCIAL YEAR, THEREFORE, SUCH PROP ORTIONATE INTEREST IS LESS. HE SUBMITTED THAT THE A.O AND THE LD. CIT(A) HAS NOT A PPRECIATED THE FACTS PROPERLY AND HAVE DISALLOWED THE ENTIRE INTEREST EX PENDITURE WHICH IS NOT JUSTIFIED. IN HIS ALTERNATIVE SUBMISSION, HE SUBMI TTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION T O VERIFY THE FULL DETAILS GIVEN IN THE AUDITED ACCOUNTS AS WELL AS COMPUTATION OF INCO ME AND DELETE THE DISALLOWANCE MADE BY THE A.O. 5. THE LD. D.R., ON THE OTHER HAND, WHILE SUPPORTIN G THE ORDER OF THE LD. CIT(A) SUBMITTED THAT HE HAS NO OBJECTION IF THE MA TTER IS RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION TO EXAMINE THE DETAILS SI NCE ADMITTEDLY, THE INTEREST INCOME SHOWN BY THE ASSESSEE HAS BEEN OVERLOOKED BY THE LOWER AUTHORITIES. 4 ITA 3611 & 3612/ M/2010,BHAVESH M. GADA 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE, THE A.O. DISALLOWE D THE INTEREST EXPENDITURE ON THE GROUND THAT INTEREST BEARING FUNDS HAVE BEEN UT ILISED FOR NON-BUSINESS PURPOSES OR INTEREST FREE ADVANCES. THE ABOVE DISAL LOWANCE HAS BEEN CONFIRMED BY THE LD. CIT(A) WITHOUT CONSIDERING THE INTEREST INCOME DISCLOSED BY THE ASSESSEE. IT IS THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED INTEREST FROM VARIOUS PARTIES TO WHOM ADVANCES ARE GIVEN. FROM THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE, WE FIND THE INCOME FROM OTHER SOURCES DISCLOSED AT ` 183964/- (NET) INCLUDES INTEREST INCOME OF ` 271740/-. SIMILARLY THE P&L ACCOUNT AS ON 31 ST MARCH. 2004 SHOWS THE INTEREST INCOME OF ` 18365/- WHICH INCLUDES INTEREST OF ` 17615/-FROM LAXMI NUTRITION PVT. LTD. THE ABOVE DETAILS OF INTEREST I NCOME WHICH ARE VERY MUCH AVAILABLE IN THE COMPUTATION OF INCOME AS WELL AS I N THE P&L ACCOUNT HAVE BEEN OVERLOOKED BY THE LOWER AUTHORITIES. WE, THEREFORE, FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MATTER REQUIRES FRESH ADJUDICATION AT THE LEVEL OF THE A.O. ACCORDINGLY, WE RESTORE THE ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO EXAMINE THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH AND IN ACCORDA NCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS A CCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 3612/MUM/2010 (BY ASSESSEE FOR A.Y. 2006-07 ) 7. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST A MOUNT OF ` 7,20,950/- ON BORROWED FUNDS. 5 ITA 3611 & 3612/ M/2010,BHAVESH M. GADA 7.1 AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUNDS OF APPEAL NO. 1 OF ITA NO. 3611/MUM/2010. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED IS RESTORED TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. FOLLOWING THE SAME RATIO, THIS GROUN D BY THE ASSESSEE IS ALSO RESTORED TO THE FILE OF THE A.O. FOR FRESH ADJUDICA TION AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 3611 /MUM/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND ITA NO. 3612/MU M/2010 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF I.E. ON 17.10.2011. SD/- SD/- (B.R. MITTAL) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 17.10.2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 33, MUMBAI 4. THE CIT 23, MUMBAI 5. THE DR BENCH, B 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI