RAJKUMAR U. BHANSALI, MUMBAI V. ITO., -14(1)(1), MUMBAI

ITA 425/MUM/2013

• Counselvise Citation: 42519914 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 14-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKASH KUMAR AGARWAL
• Keywords: Business income; Opportunity of being heard; Bad and doubtful debts

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.425/MUM/2013 ( ! ' # / ASSESSMENT YEARS : 2009-10) SHRI RAJKUMAR U BHANSALI, 80/82, SHAIKH MENON STREET, 1 ST FLOOR, SHOP NO.15, MAHAJAN GALLI, MUMBAI-400002. / VS. INCOME TAX - 14(1)(1), MUMBAI. ( $% / APPELLANT) .. ( &'$% / RESPONDENT) $ ./ ( ./PAN/GIR NO. : AEYPBO712L $% ) / APPELLANT BY : SHRI BHUPENDRA SHAH &'$% * ) /RESPONDENT BY : SHRI VIKASH KUMAR AGARWAL + , * - . / DATE OF HEARING : 17.7.2014 /0#' * - . /DATE OF PRONOUNCEMENT : 31.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 09.10.2012 PASSED BY LD CIT(A)-25, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE INTEREST DISALLOWANCE OF RS.7,42,591/- MADE BY THE AO. 3. THE FACTS RELATING THERETO ARE STATED IN BRIE F. THE ASSESSEE IS HAVING A PROPRIETARY BUSINESS NAMED M/S VAISHNO ENTERPRISES DOING TRADING IN MCX MARKET. IN THE RETURN OF INCOME, THE ASSESSEE COMPU TED THE TOTAL INCOME AS UNDER:- I.T.A. NO.425/MUM/2013 2 INCOME FROM BUSINESS 2,99,758 INCOME FROM OTHER SOURCES 69,767 LESS:- INTEREST EXPENSES 7,42,591 ------------- (6,72,824) -------------------- TOTAL INCOME NIL =========== THE AO NOTICED FROM THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE THAT THE INTEREST WAS INCURRED ON PERSONAL LOANS. HENCE HE DISALLOWED THE INTEREST CLAIM. BESIDES THE ABOVE, THE AO ALSO DISALLOWED THE CLAIM OF BAD DEBTS MADE IN THE BUSINESS CONCERN. IN THIS PROCESS, THE AO COMPUTED THE TOTAL INCOME AS UNDER:- INCOME FROM BUSINESS:- PROFIT FROM BUSINESS 2,99,758 ADD:- ADDITION TOWARDS BAD DEBTS 1,82,950 INTEREST EXPENSES 7,42,591 --------------- 12,25,299 LESS:- DEDUCTION UNDER CHAPTER VI-A 1,09,021 ------------- TOTAL INCOME 11,16,278 ======= IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A) GRANTED RELIEF IN RESPECT OF THE ADDITIONS MADE TOWARDS BAD DEBTS AND CONFIRMED THE DISALLOWANCE OF INTEREST EXPENSES. THE ASSESSEE IS AGGRIEVED BY THE DECISI ON OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES. AFTER GIVIN G EFFECT TO THE ORDER OF LD CIT(A), THE AO HAS COMPUTED THE TOTAL INCOME AS UND ER:- TOTAL INCOME AS PER ASSESSMENT ORDER 11,16,280 LESS:- RELIEF GRANTED IN RESPECT OF BAD DEBTS 1,82,950 --------------- TOTAL INCOME 9,33,330 ======= I.T.A. NO.425/MUM/2013 3 4. NOW THE SUBMISSION OF THE ASSESSEE BEFORE US IS THAT THE INTEREST EXPENSES WAS DIRECTLY DEBITED TO THE PERSONAL CAPIT AL ACCOUNT OF THE ASSESSEE AND IT WAS NEVER CLAIMED AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT OF THE BUSINESS CONCERN. HOWEVER, THE INTEREST EXPENSES O F RS.7,42,591/- WAS WRONGLY ADJUSTED AGAINST THE INCOME DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES DUE TO SOME SOFTWARE PROBLEM AND HENCE THE INCOME U NDER OTHER SOURCES RESULTED IN LOSS. AGAINST THIS LOSS, THE BUSINESS INCOME WAS ALSO WRONGLY ADJUSTED. HOWEVER, STILL THE ASSESSEE HAS DECLARED NIL INCOME IN THE RETURN OF INCOME. ACCORDINGLY HE SUBMITTED THAT THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN DISALLOWING INTEREST EXPENDITURE, WHICH WAS NEVER C LAIMED IN THE PROFIT AND LOSS ACCOUNT. 5. WE ALSO HEARD LD D.R AND PERUSED THE RECORD. FROM THE FINANCIAL STATEMENTS RELATING TO THE BUSINESS CONCERN OF THE ASSESSEE, WE NOTICE THAT THE ASSESSEE DID NOT CLAIM INTEREST EXPENDITURE WHILE C OMPUTING THE NET PROFIT FROM THE BUSINESS. HENCE THERE IS MERIT IN THE CONTENTI ONS OF THE ASSESSEE THAT THE INCOME FROM BUSINESS SHOULD NOT HAVE BEEN INCREASED BY MAKING DISALLOWANCE OF INTEREST EXPENDITURE. 6. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS DEBI TED HIS PERSONAL CAPITAL ACCOUNT WITH THE INTEREST AMOUNT. THE INCOME DECLA RED IN THE OTHER SOURCES IS ALSO CREDITED TO THE PERSONAL CAPITAL ACCOUNT. HEN CE IT IS NOT KNOWN AS TO WHETHER THE INTEREST EXPENDITURE WAS RELATABLE TO T HE INCOME DECLARED UNDER OTHER SOURCES. HOWEVER, THE ASSESSEE HAS ADMITTED THAT THE INTEREST EXPENDITURE WAS WRONGLY ADJUSTED AGAINST THE INCOME DECLARED UNDER OTHER SOURCES, MEANING THEREBY, THE ASSESSEE IS SURE THAT THE INTEREST EXPENDITURE IS I.T.A. NO.425/MUM/2013 4 NOT ALLOWABLE AGAINST THE INCOME COMPUTED UNDER OTH ER SOURCES ALSO. THE EFFECT OF THE ABOVE DISCUSSION SHOULD RESULT IN COMPUTATIO N OF TOTAL INCOME AS UNDER:- INCOME FROM BUSINESS 2,99,758 INCOME FROM OTHER SOURCES 69,767 --------------- 3,69,525 LESS DEDUCTION U/S CHAPTER VI-A 1,09,021 --------------- TOTAL INCOME 2,60,504 ======== HOWEVER, WE ARE OF THE VIEW THAT THE ABOVE SAID COM PUTATION REQUIRES VERIFICATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) WITH REGARD TO THE ISSUE RELATIN G TO INTEREST EXPENSES AND RESTORE THE MATTER RELATING TO COMPUTATION OF TOTAL INCOME TO THE FILE OF THE ASSESSING OFFICER TO COMPUTE THE TOTAL INCOME AFRES H IN THE LIGHT OF DISCUSSIONS MADE SUPRA AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COUR T ON 31ST JULY , 2014. /0#' + 1 2 3 31ST JULY, 2014 0 * , 4 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + , MUMBAI: 31ST JULY,2014. . . ./ SRL , SR. PS I.T.A. NO.425/MUM/2013 5 ! ' / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT. 3. + 6- ( ) / THE CIT(A)- CONCERNED 4. + 6- / CIT CONCERNED 5. 78 &-9! , . 9! ' , + , / DR, ITAT, MUMBAI CONCERNED 6. : , / GUARD FILE. ; + / BY ORDER, TRUE COPY < (ASSTT. REGISTRAR) . 9! ' , + , /ITAT, MUMBAI