MAHESH J. ANANDPARA, MUMBAI V. ITO 11(3)(1), MUMBAI

ITA 4486/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55629 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Keywords: Unexplained cash credit
• Section: 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO.4486/MUM/2009 ASSESSMENT YEAR- 2004-05 SHRI MAHESH ANANDPARA, GOBIND CHHAYA HSG. SOC., PREM NAGAR NO. 7, SHOP NO. 12, OFF MANDAPESHWAR ROAD, BORIVALI (W), MUMBAI-400 092 PAN-AABPA 5874F VS. THE ITO 11(3)(1), AAYAKAR BHAVAN, (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI BHUPENDRA SHAH RESPONDENT BY: SHRI G.P. TRIVEDI DATE OF HEARING :12.10.2011 DATE OF PRONOUNCEMENT: O R D E R PER B.R. MITTAL, JM : THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2004-05 AGAINST ORDER OF LD. CIT(A) DT.18 TH JUNE, 2009 ON FOLLOWING TWO GROUNDS: 1. TO DELETE THE ADDITION ON ACCOUNT OF INTEREST O N LOAN OF RS. 1,75,360/-. 2. TO DELETE THE ADDITION MADE ON ACCOUNT OF UNEXPL AINED CASH CREDIT OF RS. 1,50,000/-. 2. IN RESPECT OF GROUND NO. 1 OF THIS APPEAL DISPUTI NG DISALLOWANCE OF INTEREST ON LOAN OF RS. 1,75,360/-, RELEVANT FACTS ARE THAT ASSESSEE HAD TAKEN ITA NO. 4486/M/09 2 SECURED LOANS OF RS. 1,40,397/- AND UNSECURED LOANS OF RS. 32,89,132/- AS PER BALANCE SHEET. THE ASSESSING OFFICER STATED TH AT ASSESSEE HAS SHOWN INCOME FROM OTHER SOURCES AT RS.1,14,712/- BUT HAS CLAIMED INTEREST PAYMENT AT RS. 2,95,405/- ON SECURED AND UNSECURED LOANS. HE OBSERVED THAT ASSESSEE HAS SHOWN INVESTMENT IN FDR BONDS & MIS AMO UNTED TO RS. 15,08,285/-. THE AO OBSERVED THAT ASSESSEE HAD MAD E INVESTMENT OF THE BORROWED MONEY WHICH HAS GENERATED TAX FREE INTERES T AND DIVIDEND INCOME. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E THAT THE SAID TAX FREE AND DIVIDEND INCOME WAS GENERATED FROM OWN CAPITAL AND INTEREST FREE LOANS. THEREFORE, AO DISALLOWED THE PROPORTIONATE AMOUNT O F RS. 1,75,630/-. 3. IN THE FIRST APPEAL, ASSESSEE CONTENDED THAT HE PAID INTEREST TO VARIOUS PARTIES OF RS. 2,95,405/- AND BECAUSE OF THESE LOAN S, ONLY THE ASSESSEE COULD GENERATED INCOME OF RS. 10,23,397/-. THE ASSESSEE FURNISHED ALL THE DETAILS BEFORE LD. CIT(A) AND LD. CIT(A) CALLED FOR REMAND REPORT FROM AO. THE AO PROPOSED DISALLOWANCE TO 50% OF RS. 1,75,630/- A ND FURTHER STATED THAT IT IS DIFFICULT TO VERIFY THE DETAILS FURNISHED BY ASS ESSEE DURING REMAND PROCEEDING. HOWEVER, LD. CIT(A) HAS CONFIRMED THE A CTION OF AO I.E. SUSTAINING DISALLOWANCE OF RS. 1,75,630/- AS MADE B Y AO IN THE ASSESSMENT ORDER. 4. DURING THE COURSE OF HEARING, LD. AR REITERATED THE FACTS AS STATED BEFORE LD. CIT(A) THAT ASSESSEE HAD ITS OWN CAPITAL AND INTEREST FREE LOANS AGGREGATING TO RS 12,29,860/- AND THE SAME WERE UTI LIZED FOR RESIDENTIAL PREMISES AT RS. 3,61,000/-, SHARES RS. 53,750/-, RBI TAX FREE BONDS- RS. 4,00,000/-, LOANS AND ADVANCES RS. 2,34,805/- AND J EWELLERY RS,. 1,91,059/-. THE LD. AR SUBMITTED THAT THERE WAS A COMMON FUND M AINTAINED BY ASSESSEE AND HENCE THERE IS NO MATERIAL BEFORE AO TO HOLD TH AT THE BORROWED FUND WAS UTILIZED BY ASSESSEE FOR TAX FREE INVESTMENT AS WEL L AS FOR PERSONAL PURPOSES. HOWEVER, LD. DEPARTMENTAL REPRESENTATIVE IN HIS SUB MISSION JUSTIFIED THE ORDERS OF AUTHORITIES BELOW. ITA NO. 4486/M/09 3 5. WE HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AS PLACED ON RECORD. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THERE WAS A COMMON ACCOUNT MAINTAINED BY ASSESSEE. THERE IS ALSO NO DISPUTE T O THE FACT THAT ASSESSEE HAD HIS PERSONAL CAPITAL AND INTEREST FREE LOANS AG GREGATING TO RS. 12,29,860/- WHEREAS INVESTMENT IN NON GENERATING ASSETS IS AGGR EGATING TO RS. 12,40,614/-. WE OBSERVE AT PARA 12.1 OF THE ORDER OF LD. CIT(A) THAT ASSESSEE HAS SHOWN INVESTMENT AGGREGATING TO RS. 3 0,11,772/- AND THE INCOME DECLARED IS AT RS. 10,23,397/-. WE ALSO OBS ERVE THAT AO IN HIS REMAND REPORT STATED THAT IT IS DIFFICULT TO VERIFY ALL THE DETAILS AS FURNISHED BY ASSESSEE DURING REMAND PROCEEDINGS AND SUGGESTED TO RETAIN ADHOC DISALLOWANCE OF 50% OF RS. 1,75,630/-. HOWEVER, LD . CIT(A), HAS NOT CONSIDERED THE SAID ASPECTS AND CONFIRMED THE ACTIO N OF AO. WE ARE OF THE CONSIDERED VIEW THAT THE SAID ACTION OF AO IS NOT J USTIFIED. 6. CONSIDERING THE FACTS OF THE CASE, WE HOLD THAT DISALLOWANCE OF INTEREST OF RS. 1,75,630/- IS NOT JUSTIFIED. ACCORDINGLY, W E DELETE THE SAME BY ALLOWING GROUND NO. 1 TAKEN BY ASSESSEE. 7. IN RESPECT OF GROUND NO. 2 OF APPEAL, RELEVANT FA CTS ARE THAT ASSESSEE CLAIMED TO HAVE RECEIVED ON INHERITANCE JEWELLERY O F 30 TOLAS VALUED AT RS. 5,000/- PER TOLA AGGREGATING TO RS. 1.50 LAKHS FROM HIS MOTHER-IN-LAW ON THE DEATH OF HIS FATHER-IN-LAW LATE SHRI MANUBHAI PAREK H AS PER HIS WISHES. THE AO DID NOT ACCEPT THE SAID FACT AND CONSIDERED IT A S UNEXPLAINED CASH CREDIT AS PER PROVISIONS OF SEC. 68 OF THE ACT. IT IS RELE VANT TO STATE THAT AO STATED THAT SHRI MANUBHAI PAREKH HAD EXPIRED IN THE YEAR 1990 WHEREAS ASSESSEE HAS STATED THAT HE RECEIVED THE SAID JEWELLERY IN T HE FINANCIAL YEAR 2003-04. THEREFORE, AO STATED THAT LATE SHRI PAREKH ACTUALLY DID NOT POSSESS THE SAID ITEMS OF JEWELLERY. BEING AGGRIEVED, ASSESSEE FILE D AN APPEAL BEFORE LD. CIT(A). 8. THE ASSESSEE CONTENDED THAT IT IS NOT FACTUALLY CORRECT THAT LATE SHRI PAREKH EXPIRED IN THE YEAR 1990 BUT THE FACT IS THA T HE EXPIRED IN THE YEAR ITA NO. 4486/M/09 4 2000. THE ASSESSEE CONTENDED THAT HIS MOTHER-IN-LA W GAVE A LETTER DURING THE COURSE OF ASSESSMENT PROCEEDINGS STATING THE FA CT OF INHERITANCE BUT AO TOTALLY IGNORED IT. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF ASSESSEE ON THE GROUND THAT THERE IS NEITHER ANY WILL NOR EV IDENCE REGARDING CREDITWORTHINESS OF FATHER-IN-LAW, HIS SOURCES OF I NCOME, REASON FOR BEQUEATHING THE JEWELLARIES TO SON-IN-LAW AND NOT T O HIS OWN DESCENDENTS. HENCE, LD. CIT(A) CONFIRMED THE ACTION OF AO. THER EFORE ASSESSEE IS IN FURTHER APPEAL BEFORE TRIBUNAL. 9. DURING THE COURSE OF HEARING, LD. AR REFERRED TO PAGE 24 OF THE PAPER BOOK WHICH IS A COPY OF CONFIRMATION GIVEN BY ASSES SEES MOTHER-IN-LAW, SMT. HEMLATA PAREKH THAT SHE HAD GIVEN 30 TOLAS OF JEWEL LERY TO HIS SON-IN-LAW, THE ASSESSEE, AFTER THE DEATH OF HER HUSBAND AS PER HI S WISH FROM HIS ASSETS. THE LD. AR SUBMITTED THAT LATE SHRI MANUBHAI PAREKH ASSESSED TO TAX AS WELL AS HE FILED WEALTH TAX RETURN COPIES PLACED AT PAGE S 27 TO 34 OF THE PAPER BOOK. THE LD.AR SUBMITTED THAT SMT. HEMLATA PAREKH ALSO FILED AFFIDAVIT, COPY PLACED AT PAGE 25-26 OF THE PAPER BOOK GIVING DETAILS OF THE ITEMS AND WEIGHT OF EACH ITEM THAT SHE HAD GIVEN THE JEWELLER Y AGGREGATING 30 TOLAS TO HER SON-IN-LAW, THE ASSESSEE. THE LD. AR SUBMITTED THAT SAID JEWELLERY WAS NOT SOLD IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFORE IT COULD NOT BE ALSO CONSIDERED AS UNEXPLAINED CASH CREDIT AND TO MAKE ADDITION U/S. 68 OF THE I.T. ACT. HE SUBMITTED THAT SAID ADDITION MAY BE DELETED. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF AUTHORITI ES BELOW. 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. WE HAVE ALSO GONE THROUGH THE RELEVANT PAGES I.E. 24 TO 35 OF THE PAPER BOOK WHICH ARE COPIES OF CONFIRMATION LETTER FROM ASSESSEES MOTHER-IN-LAW A ND AFFIDAVIT OF SMT. HEMLATA PAREKH AND COPIES OF CHALLANS AND NOTICES E VIDENCING THAT LATE SHRI MANUBHAI PAREKH WAS ASSESSED TO WEALTH TAX. CONSID ERING THE ABOVE DOCUMENTS ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT LATE SHRI PAREKH WAS A MAN OF MEANS. FURTHER SMT. HEMLATA PAREKH, A SSESSEES MOTHER-IN-LAW ITA NO. 4486/M/09 5 NOT ONLY GIVEN CONFIRMATION BUT ALSO GIVEN AN AFFID AVIT THAT SHE HAD ALSO GIVEN 30 TOLAS OF JEWELLERY ITEMS MENTIONED IN THE AFFIDA VIT AT PAGES 25-26 OF THE PAPER TO THE ASSESSEE HER SON-IN-LAW AS PER WISHES OF HER LATE HUSBAND. CONSIDERING THE SAID FACTS, WE ARE OF THE CONSIDERE D VIEW THAT ASSESSEE HAS EXPLAINED SATISFACTORILY THAT HE RECEIVED THE SAID JEWELLERY AGGREGATING 30 TOALS FROM HIS MOTHER-IN-LAW. WE FIND SUBSTANCE IN THE CONTENTION OF LD. AR THAT SAID ADDITION OF RS. 1,50,000/- MADE BY AUTHOR ITIES BELOW U/S. 68 IS NOT JUSTIFIED PARTICULARLY ASSESSEE HAS NOT SOLD THE JE WELLERY IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF ABOVE, WE DELE TE THE ADDITION OF RS. 1,50,000/- BY ALLOWING GROUND NO. 2 TAKEN BY ASSESS EE. 11. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON THIS 19TH DAY OF OCTOBER, 201 1 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH OCTOBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 4486/M/09 6 DATE INITIALS 1. DRAFT DICTATED ON: 13.10.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 14.10.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: