SURESH TREVADIA, MUMBAI V. ITO 7(3)(4), MUMBAI

ITA 3932/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9159 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: HITESH M SHAH
• Keywords: Business income; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3932 / MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI SURESH TREVADIA B - 1401, CHAITANYA TOWER CHS LTD., APPASAHEB MARATHE MARG PRABHADEVI MUMBAI - 400 004 VS. ITO 7 (3 )(4, AAYAKAR BHAVAN 6 TH FLOOR, M.K.ROAD MUMBAI - 400020 PAN/GIR NO. APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI HITESH M SHAH REVENUE BY MS. N. HEMALATHA DATE OF HEARING 04 / 10 /201 7 DATE OF PRONOUNCEME NT 16 / 10 /2 01 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - MUMBAI DATED 17/03/2017 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT DATED 28/03/2013. 2. IN THIS APPEAL ASSESS EE IS AGGRIEVED FOR DISALLOWANCE OF INTEREST EXPENDITURE. 3. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HON'BLE CIT(A) ERRED IN UPHOLDING THE ASSESSING OFFICER'S ACTION OF DISALLO WING INTEREST EXPENSES OF RS.11,43,082/ - OUT OF PAYMENT MADE OF RS.56,03,7337 - U/S 57(III) OF THE ACT AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX ACT AND RULES MADE THERE UNDER. 2. ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW THE HON'BLE CIT(A) ERRED IN NOT ADJUDICATING THE GROUND BY ITA NO. 3932/MUM/2017 SHRI SURESH TREVADIA 2 STATING THAT THE WORKING OF FUND UTILIZATION IS AN ADDITIONAL EVIDENCE AND THE SAME CANNOT BE ENTERTAINED U/S 46A AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX ACT AND RULES MA DE THERE UNDER. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 4 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD P ERUSED. 5 . FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUAL DE RIVING INCOME FROM HOUSE PROPERTY, BUSINESS INCOME, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO OBSERVED THAT ASSESSEE HAS EARNED INTEREST INCO ME OF RS. 30,09,656/ - AGAINST WHICH IT HAS INCURRED INTEREST EXPENDITURE OF RS.56,03,733/ - . THE AO WORKED OUT AVERAGE INTEREST OF 11% ON THE LOAN GIVEN, ACCORDINGLY HE DISALLOWED INTEREST EXPENDITURE OF RS.11,43,082/ - . 6 . BY THE IMPUGNED ORDER, CIT(A) CONF IRMED THE DISALLOWANCE. 7 . I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AO HAS DISALLOWED INTEREST, BY APPLYING AVERAGE METHOD OF INTEREST ON THE FUNDS ADVANCED BY ASSESSEE. HOWEVER, THE ASSESSEE HAS FURNISHED FUND FLOW STATEMENT, WHEREIN INTEREST WAS COMPUTED AS PER THE FUND FLOW METHOD. HOWEVER, THE CIT(A) HAS NOT ACCEPTED THE FUND FLOW METHOD ON THE PLEA THAT IT IS AN ADDITIONAL EVIDENCE AND THE SAME CANNOT BE ENTERTAINED UNDER RULE 46A . HOWEVER, I DO NOT FIND ANY MERIT IN THE CONTENTION OF LEARNED CIT(A) IN SO FAR AS ALL THE FACTS AND FIGURES WITH REGARD TO THE DATE, THE AMOUNT OF LOAN, RATE OF INTEREST WERE VERY MUCH BEFORE THE LOWER AUTHORITIES. THE ASSESSEE ITA NO. 3932/MUM/2017 SHRI SURESH TREVADIA 3 HAS APPLIED SCIENTIFIC MET HOD OF FUND FLOW SO AS TO WOR K OUT THE AMOUNT OF INTEREST TO BE DISALLOWED WHEREAS AO HAS COMPUTED THE SAME AS PER AVERAGE METHOD OF INTEREST RATE. AS PER MY CONSIDERED VIEW, FUND FLOW METHOD IS MORE SCIENTIFIC SO AS TO ARRIVE TO THE AMOUNT OF DISALLOWANCE TO BE MADE IN RESPECT OF THE INTEREST BEARING FUNDS ADVANCED AT LOW RATE OF INTEREST. 7. AS PER THE FUND FLOW METHOD, SUCH DISALLOWANCE WORKS OUT TO BE RS.1,91,698/ - . STATEMENT FURNISHED AS PER FUND FLOW METHOD DULY INCORPORATED THE INTEREST BEARING FUND TAK EN AND THE INTEREST BEARING LOAN GIVEN, ACCORDING TO WHICH THE DISALLOWANCE WORKS OUT TO RS.1,91,698/ - . ACCORDINGLY, I DIRECT THE AO TO RESTRICT THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS.1,91,698/ - IN PLACE OF DISALLOWANCE OF RS.11,43,082/ - SO MADE BY THE AO. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 16 / 10 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 10 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//