DR, JAYAPRAKASH S. N. HEBAAR, MUMBAI V. ITO WD 11(2)(4), MUMBAI

ITA 4250/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7418 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L K AGARWAL
• Assessee Lawyers: N B SINGH
• Keywords: Depreciation; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE PRAMOD KUMAR, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.4250/MUM/2009 - A.Y 2004-05 DR. JAYAPRAKASH S.N.HEBBAR, 1, DIAMOND PALACE, HILL ROAD, BANDRA [W], MUMBAI PAN NO.AABPH 0677 B VS. THE INCOME TAX OFFICER, WARD 11(2)(4), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.B.SINGH. REVENUE BY : SHRI L.K.AGARWAL. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST CI T(A)S ORDER DATED 19-3-2009. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT[APPEALS] HAS NOT JUSTIFIED BY ADDING INTEREST OF RS.50040/- I.E. @ 8.34% ON LOAN AMOUNT OF RS.600000/- GIVEN TO RAVI CLASSES ON NOTIONAL BASIS WITHOUT KNOWING THE FACTS OF THE CASE THAT WHEN THE RECOVERY OF PRINCIPAL LOAN AMOUN T IS DOUBTFUL THEN THERE IS NO QUESTION OF CHARGING INTE REST OF THE SAME. (REFERENCE I.T.A.NO.5148/M/07 DATED 21-4-2009 , BETWEEN APPELLANT V/S RESPONDENT, ASSESSMENT YEAR 2 003- 04. DECIDED IN FAVOUR OF APPELLANT). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT[APPEALS] HAS ERRED IN DISALLOWING THE MOTOR CAR EXPENSES OF RS.8246/-, DEPRECIATION THEREON OF RS.12378/- AN D INTEREST ON MOTOR CAR LOAN OF RS.4387/- I.E. 20% OF THE TOTA L MOTOR CAR EXPENSES DEPRECIATION AND INTEREST ON MOTOR CAR LOA N WITHOUT KNOWING THE FACTS THAT THE APPELLANT IS A DOCTOR BY PROFESSION AND SAME IS USED FOR THE PROFESSION PURPOSE ONLY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT[APPEALS] HAS ERRED IN DISALLOWING THE TELEPHONE EXPENSES OF RS.33490/- WITHOUT KNOWING THE FACTS TH AT THE APPELLANT IS A DOCTOR BY PROFESSION AND SAME IS USE D FOR THE PROFESSION PURPOSE ONLY. (REFERENCE APPEAL NO. CIT[A] 2 XI/ITO-11(2)(4)/IT-211/05-06 DATED 17-04-2007, BETW EEN APPELLANT V/S RESPONDENT, ASSESSMENT YEAR 2003-04. DECIDED IN FAVOUR OF APPELLANT). 3. AS REGARDS GROUND NO.1 BRIEF FACTS ARE THAT THE ASSESSEE IS A DOCTOR BY PROFESSION AND FILED HIS RETURN OF INCOME ON 31-10-2004 DECLARING TOTAL INCOME OF RS.37,67,994/-. DURING TH E ASSESSMENT PROCEEDINGS U/S.143[3], AO NOTICED FROM SCHEDULE E OF THE BALANCE- SHEET UNDER THE HEAD LOANS AND ADVANCES THAT THE ASSESSEE HAD GIVEN A LOAN OF RS.6 LAKHS TO RAVI CLASSES AND THE LOAN I S NOT YET SQUARED UP. HE FURTHER NOTICED THAT THE ASSESSEE HAS NOT CHARGE D ANY INTEREST ON THE LOAN GIVEN TO RAVI CLASSES WHEREAS HE HAS RECEI VED LOAN OF RS.2,37,417/- FROM HIS OWN HUF J S N HEBBAR AND HAS PAID INTEREST @ 8.34%. AFTER CALLING FOR EXPLANATION FROM THE ASSES SEE AS TO WHY NO INTEREST IS CHARGED FROM RAVI CLASSES AND AFTER CON SIDERING THE ASSESSEES EXPLANATION, AO CAME TO THE CONCLUSION T HAT THE INTEREST HAS TO BE CHARGED ON THE LOAN OF RS.6 LAKHS ADVANCED TO RAVI CLASSES @ 8.34%. 4. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS I N SECOND APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATI NG THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, SUBM ITTED THAT THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND THE AO AS WELL AS THE CIT[A] HAVE NOT CONSIDERED THE ISSUE IN THE PROPER PERSPECTIVE BUT HAS ADDED THE NOTIONAL INTEREST IN THE HANDS OF THE ASSESSEE. HE 3 SUBMITTED THAT THIS ISSUE HAD COME UP BEFORE J BE NCH OF THE TRIBUNAL FOR THE A.Y 2003-04 WHEREIN THE AO HAD MADE AN ADDI TION OF NOTIONAL INTEREST @ 6% ON LOAN AMOUNT OF RS.12 LAKHS GIVEN T O RAVI CLASSES AND THE TRIBUNAL VIDE ORDERS DATED 21-4-2009 HAD SE T ASIDE THE ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION DENOVO ON MERITS. HE HAS FILED A COPY OF THE SAID ORDER BEFORE US AT PAGE-1 OF THE PAPER BOOK. THE LD. DR HAD NO OBJECTION TO REMITTING THE MATTER BACK TO THE AO FOR DENOVO CONSIDERATION. IN VIEW OF THE SAME AND IN THE INTER EST OF JUSTICE, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE F ILE OF THE AO FOR DENOVO CONSIDERATION IN ACCORDANCE WITH LAW AFTER G IVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. THIS GROUND OF APPEA L IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. AS REGARDS GROUND NO.2, FACTS IN BRIEF ARE THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,25,056/- TO THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF EXPENSES RELATED TO MOTOR CAR. AO DISALL OWED 20% OF THE SAME ON THE GROUND THAT THE PERSONAL USE OF THE MOT OR CAR SIMULTANEOUSLY WITH PROFESSIONAL USE CANNOT BE RULE D OUT. THE ORDER OF THE AO WAS CONFIRMED BY THE CIT[A] AND THE ASSESSE E IS IN SECOND APPEAL BEFORE US. 8. THOUGH THE LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW TO TH E EFFECT THAT THE MOTOR CAR IS USED FOR THE PURPOSE OF PROFESSION ONL Y, WE FIND THAT THIS ISSUE HAD ALSO COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL FOR A.Y 2003-04 AND THAT THE TRIBUNAL HAS HELD THAT PERSONA L USE OF THE CAR 4 COULD NOT BE RULED OUT AND DISALLOWANCE OF EXPENSE S AT 20% OUT OF THE MOTOR CAR EXPENSES, DEPRECIATION AND INTEREST O N MOTOR CAR COULD NOT BE SAID TO BE EXCESSIVE. THEREFORE, RESPECTFULL Y FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE THIS GROUND OF APPEAL IS REJECTED AND THE ORDER OF THE C IT[A] IS CONFIRMED. 9. AS REGARDS GROUND NO.3, WE FIND THAT THE AO DISA LLOWED THE TELEPHONE EXPENSES OF RS.33,490/- ON THE GROUND THA T THEY RELATED TO THE TELEPHONES INSTALLED AT THE RESIDENCE AND THE C IT[A] HAS ALSO CONFIRMED THE SAME. EVEN BEFORE US, THE ASSESSEE HA S NOT FURNISHED ANY EVIDENCE TO SHOW THAT THESE EXPENSES ARE WHOLLY AND EXCLUSIVELY FOR PROFESSIONAL PURPOSES AND NOT FOR PERSONAL PURP OSES. THEREFORE, THIS GROUND OF APPEAL IS ALSO REJECTED. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31ST DAY OF MARCH, 2010. SD/- SD/- (PRAMOD KUMAR) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:31 ST MARCH, 2010. P/-* 5 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON P 2 DRAFT PLACED BEFORE AUTHOR P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER