M/S. PRITHVI REALTORS & HOTELS P. LTD., MUMBAI V. DY CIT-CC-5(4), MUMBAI

ITA 400/MUM/2021

AI Insights

M/s. Prithvi Realtors & Hotels Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), which upheld the Assessing Officer's decision to disallow interest expenses claimed by the assessee. The case was reopened under sections 147/148 of the Income Tax Act, 1961, after it was noted that the assessee had no business income or activities during the relevant period but had advanced significant loans without charging interest. The Tribunal dismissed the appeal due to the assessee's lack of participation and failure to substantiate their claims.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301300 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 04-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 25-03-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PUTTING
• Keywords: Business expenditure
• Section: 147; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.400/M/2021 Assessment Year: 2010-11 M/s. Prithvi Realtors & Hotels Pvt. Ltd., 3 rd Floor, Dheeraj Arma, Anant Kanekar Marg, Bandra East, Mumbai – 400 051 PAN: AACCP6911E Vs. Dy. Commissioner of Income Tax, Central Circle 5(4), Room No.1927, 19 th Floor, Air India Building, Nariman Point, Mumbai - 400021 (Appellant) (Respondent) Present for: Assessee by : None Revenue by : Shri Ashish Kumar Deharia, D.R. Date of Hearing : 05 . 01 . 2023 Date of Pronouncement : 12 . 01 . 2023 O R D E R Per : Kuldip Singh, Judicial Member: The appellant, M/s. Prithvi Realtors & Hotels Pvt. Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 17.09.2019 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment year 2010-11 on the grounds inter-alia that :- “1) The Learned CTT (A) has erred in law & on facts in upholding the Learned AO's action of issuing notice issued u/s 148 and erred in initiating the reassessment proceedings. The notice issued u/s 148 is ITA No.400/M/2021 M/s. Prithvi Realtors & Hotels Pvt. Ltd. 2 bad in law. The conditions stipulated u/s 147 is not satisfied. The reassessment order passed by the Learned AO may be treated as invalid. The Appellant prays that reassessment order passed by the Learned AO may be cancelled. 2) The Learned CIT (A) has erred in law & on facts in upholding the Learned AO's action of disallowing interest expenses of Rs2,59,02.269/-. 3) The Appellant craves leave to add to and/or amend and/or delete and/or modify and/ or alter the aforesaid grounds of appeal as and when the occasion demands. 4) All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another.” 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: the assessee company is into the business of builders and developers and filed the return of income on the basis of which assessment was completed under section 143(3) of the Income Tax Act,1961 (for short ‘the Act’) by assessing the loss at Rs.2,58,82,126/- as disclosed in the revised return. Thereafter, the case was reopened by initiating the proceedings under section 147/148 of the Act. The Assessing Officer (AO) noticed that the assessee has no business income or business activities during the period under consideration but it is found that the assessee has given loans and advances to the tune of Rs.27,65,64,023/- to various parties from whom no interest has been charged. From the profit & loss account it was also noticed that the assessee has claimed finance expenses including interest expenses amounting to Rs.2,59,02,269/-. Since no business activity is there during the year under consideration and only income from other source has been disclosed in the return of income the interest expenses claimed by the assessee under the head finance expenses cannot be allowed and consequently the AO disallowed the interest ITA No.400/M/2021 M/s. Prithvi Realtors & Hotels Pvt. Ltd. 3 claimed by the assessee to the tune of Rs.2,59,02,269/- and thereby framed the assessment under section 143(3) and 147 of the Act. 3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal. 4. This appeal was filed on 26.03.2021, thereafter 8 notices were issued through RPAD but only on one hearing i.e. on 03.02.2022 the assessee sent a letter seeking adjournment which was granted but thereafter failed to appear before the Bench. It appears that the assessee is not interested in prosecuting the present appeal. So the Bench has decided to dispose of the present appeal on the basis of material available on record with the assistance of the Ld. D.R. for the Revenue. 5. We have heard the Ld. Departmental Representative for the Revenue, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon. 6. Bare perusal of the para 3 of the impugned order passed by the Ld. CIT(A) goes to prove that the assessee initially put in appearance before the Ld. CIT(A) and made a request for adjournment till the last week of October 2017. Thereafter, numerous notices were sent to the assessee who has not preferred to put in appearance and ultimately the Ld. CIT(A) was constrained to pass the order on 17.09.2019 by returning following findings: ITA No.400/M/2021 M/s. Prithvi Realtors & Hotels Pvt. Ltd. 4 “7.1 Ground of appeal no.3 is in respect of disallowance of interest expenses of Rs.2,59,02,769/-. 7.2. In the re-assessment proceedings, the AO noted that the assessee has no business income or business activities during the period under consideration. The assessee has given loans and advances to the tune of 27,65,64,023/- to various parties from whom no interest has been charged. Further, the assessee has claimed finance expenses including interest expenses amounting to Rs.2,59,02,269/- Since no business activity is there in the year under consideration and only income from other sources has been disclosed in the return, the interest expenses claimed under the head finance expenses cannot be allowed. In response to query letter dated 13-02-2016, the assessee furnished written submission on 11-03-2016. It was submitted that the assessee company had incurred the interest expenditure of Rs.2,59,02,269/- on secured loan obtained from Punjab & Maharashtra Coop. Bank Ltd. during the FY 2008-09. The said loan was utilized for the purpose of purchase of land / property during the FY 2008-09. However, during the year under consideration, the said purchase of land / property was not materialized and consequently amount was received back. Subsequently, the said secured loan was repaid by the assessee company during the year under consideration out of the money received back resulting into reduction of secured loan from Ra19,23,75,800/- to Rs 28,18,749/- as on 31-03-2009 & 31-03-2010 respectively. Thus, the said loan was utilized for the purpose of business of the assessee company and eligible for deduction u/s.36(1) At the time of assessment proceedings u/s.143(3), the then AO had duly verified all the details in respect of the above interest expenditure and utilisation of low The then AD had allowed the entire interest expenses of Rs.2.39.02.269/- to be claimed as business expenses. The contention of the assessee wa accepted by the AD. The assessee has not furnished any documentary evidence or copy of agreement in support of the claim that loan from Punjab & Maharashtra Coop Bank taken in FY 2008-09 have been utilized towards purchase of land / property. The assessee could not explain the reasons for not materializing the deal of purchase of land during the year under consideration. The assessee failed to establish the nexus of the business purpose of the said transaction. Therefore, the AO held that no business activities were there in the year under consideration and accordingly, interest expenditure claimed amounting to Rs.2,59,02,269/- was disallowed and added to the total income of the assessee. 7.3 In the appellate proceedings, no specific submissions in respect of this ground has been filed. 7.4. I have considered the facts of the case. The assessing officer has given his reasons for his conclusion that no business activities were there in the year under consideration and accordingly, interest expenditure claimed amounting to Rs.2,59,02,269/- was disallowed. It ITA No.400/M/2021 M/s. Prithvi Realtors & Hotels Pvt. Ltd. 5 is reasonable view which has not been shown to be incorrect in the appellate proceedings. Ground of appeal no 2 is dismissed.” 7. We have perused the impugned order passed by the Ld. CIT(A) which is passed on the basis of facts duly thrashed when the assessee has admittedly advanced the loan of Rs.27,65,64,023/- and claimed finance expenses including interest expenses amounting to Rs.2,59,02,269/- the addition made by the AO and confirmed by the Ld. CIT(A) is sustainable as no explanation whatsoever has been brought on record by the assessee by putting in appearance. Even before the Tribunal the assessee has not preferred to put in appearance despite availing numerous opportunities and duly served for 03.02.2022. So in these circumstances, finding no illegality or perversity in the impugned findings returned by the Ld. CIT(A), the present appeal filed by the assessee is hereby dismissed. Order pronounced in the open court on 12.01.2023. Sd/- Sd/- (S. RIFAUR RAHMAN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 12.01.2023. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench ITA No.400/M/2021 M/s. Prithvi Realtors & Hotels Pvt. Ltd. 6 //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.