MS AVANTIKA PRATAPSINGH MORARJI, MUMBAI V. DY.CIT.RANGE 5 (3), MUMBAI

ITA 3830/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55179 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARSHASARATH NAIR
• Assessee Lawyers: PARAS S SAVLA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI. PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PA L RAO (J.M) ITA NO.3830/MUM/2010 ASSESSMENT YEAR : 2006-2007 AVANTIKA PRATAP MORARJI 115, UNIQUE INDL. ESTATE, 1 ST FLR., TWIN LANE, PRABHADEVI, MUMBAI 400 025. PAN : AACPM4395A VS. THE I.T.O.5(3)(4) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARAS S. SAVLA. RESPONDENT BY : SHRI PARSHASARATH NAIR. O R D E R PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.03.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-2 007. 2. THE ASSESSEE HAS RAISED FOLLOWING EFFECTIVE GROU NDS IN THIS APPEAL: 1. THE LEARNED CIT(A) ERRED IN TREATING THE INTER EST INCOME OF ` 18,12,578/- EARNED IN NORMAL COURSE OF BUSINESS AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AS PER THE RETURN OF INCOME. 2. THE LEARNED CIT(A) ERRED IN RESTRICTING THE BUSI NESS EXPENDITURE OF ` 12,20,119/- TO ONLY 5%, WITHOUT APPRECIATING THE FACT THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY TO EARN THE ABOVE BUSINESS INCOME. 3. ON MERITS, THE APPELLANT DENIES THE LIABILITY OF PENAL INTEREST U/S.234A, 234B, AND 234C. 3. THE ASSESSEE IS AN INDIVIDUAL AND DECLARING INCO ME UNDER THE HEAD INCOME FROM BUSINESS, INCOME FROM HOUSE PROPERTY AN D INCOME FROM OTHER SOURCES. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE DECLARED BUSINESS INCOME OF ` 6,37,451/-. THIS INCOME HAS BEEN COMPUTED BEING GROSS INTEREST OF ` 18,12,578/- RECEIVED BY THE ASSESSEE FROM VARIOUS COMPANIES AFTER CLAIMING EXPENSES OF ` 12,20,119/- HENCE THE ASSESSEE ITA NO.3830/MUM/2010 A.Y. : 2006-2007 2 DECLARED BUSINESS INCOME AT ` 6,37,451/-. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS FOR E ARNING INTEREST INCOME AND INCOME BY WAY OF INTEREST IS REQUIRED TO BE TAX ED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER ACCORDINGLY, ASSESSED THE INTEREST RECEIPT AS INCOME FROM OTHER SOURCES AND DISALLOWED THE ENTIRE EXPENSES OF ` 12,20,119/-. ON APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER S OURCES HOWEVER THE CLAIM OF THE EXPENDITURE FOR EARNING THE INTEREST INCOME WAS ALLOW TO THE EXTENT OF 5% OF THE GROSS INTEREST ON AD-HOC BASIS. 4. WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. THE LEARNED AR HAS CONTENDED THAT THE ASSESSEE IN THE BUSINESS OF MONEY LENDING AND IN THE EARLIER YEARS THE INTEREST INCOME IS ACCEPTED AS BUSINESS INCOME. THE EXPENDITURE INCU RRED BY THE ASSESSEE IS ONLY FOR EARNING THE INTEREST INCOME. HE HAS ALSO RELIED ON THE DECISION OF CIT VS. R.M. MEENAKSHISUNDARAM (1995) 212 ITR 220 A S WELL AS DECISION OF HONBLE SUPREME COURT IN THE CASE OF P.M. MOHAMMED MEERAKHAN VS. CIT (1969) 73 ITR 735. 5. ON THE OTHER HAND LEARNED DR HAS SUBMITTED THAT THE ASSESSEE DID NOT FILE THE RELEVANT EVIDENCE AND MATERIAL TO PROV E THAT THE EXPENDITURE WAS INCURRED FOR EARNING THE INTEREST INCOME DESPITE TH E SUFFICIENT OPPORTUNITY GIVEN BY THE ASSESSING OFFICER, HE HAS RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 6. HAVING CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORDS. WE FIND THAT THE CIT(A) HAS ALSO OBSERVED THAT THE ASS ESSEE HAS NOT GIVEN EVIDENCE THAT ALL THE EXPENSES INCURRED ARE FOR THE EARNING THE INTEREST INCOME AND ACCORDINGLY ALLOWED THE DEDUCTION OF 5% OF THE GROSS INTEREST ON AD-HOC BASIS. IT IS MANIFEST FROM THE RECORD THAT THE ASSESSEE WAS NOT GIVEN A PROPER AND EFFECTIVE OPPORTUNITY AND THE ISSUE H AS BEEN ADJUDICATE BY THE LOWER AUTHORITIES WITHOUT CONSIDERING THE RELEVANT RECORD AND EXPLANATION OF ITA NO.3830/MUM/2010 A.Y. : 2006-2007 3 THE ASSESSEE. WE FURTHER FIND THE ASSESSEE HAS TAK EN IDENTICAL GROUNDS IN THE ASSESSMENT YEAR 2005-06 IN ITA NO.4131/MUM/2009 AND WE HAVE ADJUDICATE THE ISSUE VIDE ORDER EVEN DATE AS UNDER: 7. AFTER CONSIDERING THE RIVAL CONTENTION AND RELEV ANT RECORD WE NOTE THAT THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE ON 14.09.2010 SERVED ON THE ASSESSEE ON 25.09.2007. T HE ASSESSEE WAS ASKED TO FILE THE PROOF OF EXPENSES AL LOWABLE U/S.57(III) ON OR BEFORE 28.09.2007. THE ASSESSING OFFICER FINALLY FRAMED THE ASSESSMENT ON 04.10.2007 WHEN TH E SHOW CAUSE NOTICE WAS SERVED ON 25.09.2007 THEN THE TIME PERIOD ALLOWED TO THE ASSESSEE UP TO 28.09.2004 CANNOT BE SAID TO BE SUFFICIENT AND PROPER SO AS TO CONSTITUTE AN EFFECT IVE OPPORTUNITY OF HEARING AFFORDED TO THE ASSESSEE. THE ASSESSING OFFICER IN PARA 4 HAS STATED THE FACTS AS UNDER: 4. BEFORE TREATING THE SAID INCOME AS INCOME FROM O THER SOURCES, AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE THIS OFFICE LETTER DATED 14.09.2007 TO SHOW CASUE WHY THE INTEREST INCOME SH OULD NOT BE TAXED U/S.56(2). THE ASSESSEE WAS ALSO ASKED TO FILE THE PROOF OF THE EXPENSE ALLOWABLE U/S.57(III). THE SAID LETTER WAS DULY SE RVED ON THE ASSESSEE AT HER GIVEN ADDRESS ON 25.09.2007. SHE WAS ASKED TO FILE THE PROOF ON OR BEFORE 28.09.2007. BUT SHE FAILED TO SUBMIT ANY RE PLY TO THE OPPORTUNITY GIVEN. IT IS THEREFORE HELD THAT SHE HAS NO OBJECTI ON TO ASSESS THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE, NO PROOF OF THE EXPENSES ARE FILED, THE ENTIRE EXPENSES OF ` 9, 19,540/- IS DISALLOWED AS THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS. A CCORDINGLY, THE INTEREST INCOME OF ` 11,33,489/- IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN INCOME-TAX EACH YEAR IS IN DEPENDENT AND A PRINCIPLE OF RE-JUDICATA IS NOT APPLICABLE. FURTHE R THE HONBLE SUPREME COURT IN THE CASE OF NALINIKANT AMARLAL MODY VS. CI T HELD THAT THE METHOD OF BOOK KEEPING FOLLOWED BY AN ASSESSEE CANN OT DECIDE UNDER WHICH HEAD A PARTICULAR INCOME SHOULD GO. THE ACCO UNTING PRINCIPLES CANNOT OVERRIDE SEC.56. FROM THE ABOVE FINDINGS OF THE ASSESSING OFFICER IT IS CLEAR THAT THE ISSUE HAS BEEN ADJUDICATED IN THE ABSENCE OF AN Y REPLY AND EXPLANATION OF THE ASSESSEE. THE CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT GIVEN EVIDENCE THAT ALL T HE EXPENSES INCURRED ARE FOR THE EARNING THE INTEREST INCOME AN D ACCORDINGLY ALLOWED THE DEDUCTION OF 5% OF THE GROSS INTEREST O N AD-HOC BASIS. IT IS MANIFEST FROM THE RECORD THAT THE ASS ESSEE WAS NOT GIVEN A PROPER AND EFFECTIVE OPPORTUNITY AND THE I SSUE HAS BEEN ADJUDICATE BY THE LOWER AUTHORITIES WITHOUT CO NSIDERING THE RELEVANT RECORD AND EXPLANATION OF THE ASSESSEE . ACCORDINGLY IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE MATTER TO THE R ECORD OF THE ASSESSING OFFICER FOR PASSING A DENOV ORDER ON THIS ISSUE AFTER CONSIDERING THE RELEVANT MATERIAL AND EXPLANATION O F THE ASSESSEE. FOLLOWING THE SAME RATIO WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE MATTER TO THE RECORD OF THE ASSESSING OFF ICER FOR PASSING A DENOV ITA NO.3830/MUM/2010 A.Y. : 2006-2007 4 ORDER ON THIS ISSUE AFTER CONSIDERING THE RELEVANT MATERIAL AND EXPLANATION OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 7 TH DAY OF SEPTEMBER, 2011. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI, DATED 07.09.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUM BAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI