FOUR DIMENSION PROPERTIES P.LTD, MUMBAI V. ITO 8(1)(4), MUMBAI

ITA 3726/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1725 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.3726/MUM/2016 (ASSESSMENT YEAR 2012-13) M/S. FOUR DIMENSION PROPERTIES PVT. LTD., B-4 PAREKH APARTMENT SAROJINI ROAD, NEAR MCDONALDS, VILE PARLE (W), MUMBAI PAN:AAACF 3232C ...... APPEL LANT VS. THE INCOME TAX OFFICER 8(1) MUMBAI .... RESPONDENT APPELLANT BY : NONE RESPONDENT BY : MS BEENA SANTOSH DATE OF HEARING : 07/12/2016 DATE OF PRONOUNCEMENT : 09/12/2016 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2012-13 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-16, MUMBAI DATED 30/03/2016, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT) DATED 13/11/2014. 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWI NG GROUND OF APPEAL:- 1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN CONFIRMING DISALLOWANCE OF RS. 1352489/- ON ACCOUNT OF INTERES T EXPENSES OUT OF TOTAL INTEREST EXPENDITURE OF RS. 2347511/-. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN NOT APPRECIATING THE FACTS OF THE CASE AND CONFIRMED THE ACTION OF L EARNED ASSESSING OFFICER. 2 ITA NO.5166/MUM/2015 (ASSESSMENT YEAR 2009-10) 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) CONFIRMING DISALLOWANCE OF RS. 1352489/- ON ACCOUNT OF INTEREST EXPENSES IS UNLAWFUL, UNWARRANTED AND NOT BASED ON THE FACTS OF THE CASE AND NEEDS TO BE DELE TED. 4. THAT ASSESSEE COMPANY CRAVES LEAVE TO ADD, ALTER AND/OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. AT THE TIME OF LAST HEARING, IT IS SEEN THAT THE APPEAL WAS ADJOURNED AT THE WRITTEN REQUEST OF THE ASSESSEES COUNSEL AND THE NEXT DATE OF HEARING I.E. 07/12/2016 WAS ANNOUNCED IN THE COURT. IN SPITE OF THIS, NONE APPEARED ON BEHALF OF THE ASSESSEE ON 07/12/2016, THEREFORE, I PROCEED TO DECIDE THE APPEAL EX-PARTE, QUA THE ASSESSEE, AFTER HEARING LD . DEPARTMENTAL REPRESENTATIVE AS PER RULE 24 OF INCOME TAX (APPEL LATE TRIBUNAL) RULES, 1963. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESS EE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF REAL ESTATE. IN T HIS APPEAL, THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.13 ,52,489/- ON ACCOUNT OF INTEREST EXPENDITURE OUT OF THE TOTAL INTEREST EXPE NDITURE CLAIMED OF RS.23,47,511/-. 3.1 IN THE CONTEXT OF THE SAID DISPUTE, THE RELEVAN T DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT IT WAS NOTED THAT ASS ESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.24,40,120/-. THE ASSESSING OFFIC ER HAS ALSO NOTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS NO T SHOWN ANY BUSINESS ACTIVITY EXCEPT RECEIPT OF INTEREST INCOME OF RS.10 ,87,631/-, AGAINST WHICH DEDUCTION FOR INTEREST EXPENDITURE OF RS.24,40,120 /- HAS BEEN CLAIMED. IT HAS ALSO BEEN NOTED THAT INTEREST OF RS.23,47,511/- WAS PAID TO ALLAHABAD BANK ON THE LOAN RAISED AND THE BALANCE OF RS.92,609/- WAS PAID FOR AN UNSECURED LOAN 3 ITA NO.5166/MUM/2015 (ASSESSMENT YEAR 2009-10) RAISED FROM M/S. KALANI INDUSTRIES PVT. LTD. IT HAS ALSO NOTED BY THE ASSESSING OFFICER THAT ASSESSEE RECEIVED INTEREST INCOME OF RS.10,83,713/- FROM ONE M/S. WANDERLAND REAL ESTATE PVT. LTD. AND RS.3,918/ - FROM M/S. ROLLIES AGENCIES PVT. LTD. ON BEING ASKED TO JUSTIFY, ASSE SSEE CLAIMED THAT THE SOURCE OF THE ADVANCES YIELDING INTEREST INCOME WAS FROM T HE DEPLOYMENT OF THE SECURED LOAN TAKEN FROM ALLAHABAD BANK. THE ASSES SING OFFICER DISAGREED WITH THE ASSESSEE AND NOTED THAT THERE WAS NO NEXUS BETW EEN THE DEPLOYMENT OF LOAN FUNDS FOR EARNING INTEREST INCOME EVEN IN THE CONTEXT OF THE LOAN RAISED FROM ALLAHABAD BANK. WITH REGARD TO THE INTEREST E XPENDITURE INCURRED ON LOAN FROM ALLAHABAD BANK, THE ASSESSING OFFICER DISALLOW ED THE SAME. IN SO FAR AS THE INTEREST PAID TO M/S. KALANI INDUSTRIES PVT. LT D. WAS CONCERNED, IN THE ABSENCE OF ANY BUSINESS NEXUS SHOWN, THE CORRESPOND ING INTEREST WAS ALSO DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. S O HOWEVER, WHILE COMPUTING DISALLOWANCE OF INTEREST EXPENDITURE, THE ASSESSING OFFICER GAVE CREDIT FOR THE INTEREST INCOME EARNED OF RS.10,87,631/-, AND THUS, DISALLOWED A SUM OF RS.13,15,489/- OUT OF INTEREST EXPENDITURE UNDER S ECTION 36(1)(III) OF THE ACT. THE CIT(A) HAS ALSO DISMISSED THE PLEA OF THE ASSE SSEE BY MAKING THE FOLLOWING DISCUSSION:- 6.1.1 VIDE THIS GROUND APPELLANT HAS AGITATED AGA INST DISALLOWANCE OF RS.13,52,489/- ON ACCOUNT OF INTEREST EXPENSES. IN PARA 5 OF THE ASSESSMENT ORDER, THE LD. A.O HAD MENTIONED THAT DURING THE YEAR UNDE R CONSIDERATION, THE APPELLANT HAD NO CONSTRUCTION ACTIVITY AND THE ONLY SOURCE OF INCOME DISCLOSED BY THE APPELLANT COMPANY WAS INCOME FROM OTHER SOURCES. ACCORDING T O THE A.O, DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD NO BUSINESS ACTIVITY EXCEPT IN RESPECT OF INTEREST INCOME OF RS.10,87,631/- AGAINST WHICH IT HAD CLAIMED INTEREST EXPENDITURE OF RS.24,40,120/-. THE A.O CONCLUDED THAT THE APPE LLANTS CLAIM OF ENTIRE INTEREST EXPENDITURE INCURRED ON SECURED LOAN WAS NOT ALLOWA BLE AS THERE WAS NO DIRECT NEXUS OF THE SECURED LOAN OBTAINED AND ITS SUBSEQUENT UTI LIZATION FOR EARNING INTEREST INCOME. AFTER CONSIDERING THE SUBMISSIONS OF THE A PPELLANT, THE LD. A.O ALLOWED INTEREST EXPENDITURE OF RS.10,87,631/- TO THE TUNE OF INTEREST INCOME SHOWN BY THE APPELLANT AND BALANCE AMOUNT WAS DISALLOWED WITH T HE OBSERVATION THAT NO BUSINESS ACTIVITY WAS CONDUCTED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AND IT WAS NOT UTILIZED FOR THE BUSINESS OF THE APPELLANT COMPANY. 4 ITA NO.5166/MUM/2015 (ASSESSMENT YEAR 2009-10) 6.1.2 DURING APPELLATE PROCEEDINGS A WRITTEN SUBMI SSION WAS FILED ON 23.03.2016. IN THE WRITTEN SUBMISSION, SUBMISSIONS WHICH WERE MADE BEFORE THE A.O WERE REPEATED. IT WAS CLAIMED THAT THE APPELLANT COMPAN Y TOOK SECURED LOANS FROM ALLAHABAD BANK ON WHICH INTEREST OF RS.23,47,511/- WAS PAID AND UNSECURED LOAN OF RS.9,48,330/- WAS TAKEN FROM KALANI INDUSTRIES P. L TD. ON WHICH INTEREST OF RS.92,609/- WAS PAID BY THE APPELLANT COMPANY. NOW HERE IT WAS DEMONSTRATED THAT LOAN TAKEN WERE UTILIZED FOR THE BUSINESS OF THE AP PELLANT OR WERE USED FOR EARNING INTEREST INCOME. IN ABSENCE OF PROPER EXPLANATION REGARDING APPLICATION OF LOANS TAKE I HAVE NO REASON TO ALLOW THE CLAIM MADE BY TH E APPELLANT IN TOTAL. IN VIEW OF IT, ADDITION MADE BY THE A.O IS CONFIRMED AND APPEAL OF THE APPELLANT IS DISMISSED. 4. EVEN BEFORE ME, NO MATERIAL OR EVIDENCE HAS BEEN LEAD BY THE ASSESSEE SO AS TO INTERFERE WITH THE DECISION OF THE CIT(A), WHICH IS HEREBY AFFIRMED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSE D. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/12/2016 SD/- (G.S.PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 09/12/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI