Sh. Ajit Mittal, New Delhi V. DCIT, New Delhi

ITA 4573/DEL/2014

• Counselvise Citation: 457320114 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 28-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 20-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Assessee Lawyers: S K SHARMA
• Keywords: Opportunity of being heard; Principle of natural justice; Proportionate interest
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 NEW DELHI) BEFORE SHRI I.C. SUDHIR: HONBLE JUDICIAL MEMBER ITA NO. 4573/DEL/2014 ASSESSMENT YEAR: 2005-06 AJIT MITTAL, VS. DCIT, 406- NILGIRI APPARTMENTS, CIRCLE 31(1), 9-BARAKHAMBA ROAD, NEW DELHI. NEW DELHI. (PAN: AAEPM6083B) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S.K. SHA RMA, ADV. DEPARTMENT BY: SMT. ANIMA BARNWA L, JCIT DATE OF HEARING : 28.08.2015 DATE OF PRONOUNCEMENT: 23 :11.2015 ORDER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THAT THE LEARNED CIT(APPEALS) XXVI, NEW DELHI H AS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ORD ER OF ASSESSMENT FRAMED UNDER SEC. 143(3) OF THE ACT DATED 20.06.14. 2. THAT THE LEARNED CIT(APPEALS) HAS FAILED TO APPR ECIATE THAT ASSESSMENT SO FRAMED U/S. 147/143(3) OF THE ACT WIT HOUT SATISFYING THE STATUTORY PER-CONDITION AS ENVISAGED IN THE ACT AND AS SUCH THE SAME DESERVED TO BE QUASHED AS SUCH. 3. THAT THE LEARNED CIT(APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING THE ADDITION MADE BY THE LD. ITO ON 2 ACCOUNT OF DISALLOWANCE OF INTEREST WHILE INVOLVING SEC. 36(1)(III)/37(1) OF THE INCOME-TAX ACT, 1961 AMOUNT ING TO RS.5,74,076. 4. THAT THE LEARNED CIT(APPEALS) HAS FAILED TO UNDE RSTAND THAT THE ACTION OF THE ASSESSING OFFICER WHILE CONSIDERING T HE FIGURE AS ON 31.3.2005 RELATING TO UNSECURED LOANS RECEIVED ON I NTEREST AMOUNTING TO RS.162.05 LACS AND LOANS & ADVANCES MADE WITHOUT INTEREST AMOUNTING TO RS.67.53 LACS FOR THE PURPOSE OF DISAL LOWANCE OF INTEREST WITHOUT TAKING INTO CONSIDERATION THE AMOUNT OF OWN S MONEY/CAPITAL OF RS.53,06,309 IS NOT JUSTIFIED AND FURTHER DISALL OWING INTEREST ON ABOVE SAID OF RS.5,74,076 OUT OF TOTAL OF RS.9,74,4 48 DEBITED TO PROFIT AND LOSS ACCOUNT PAID FOR BORROWED FUNDS IS IN CONT RAVENTION TO THE SPIRIT OF INCOME-TAX ACT, 1961. 5. THAT THE LEARNED CIT(APPEALS) HAS FAILED TO APPR ECIATE THE WRITTEN SUBMISSIONS AND EVIDENCE PLACED ON RECORD B Y THE ASSESSEE AND THAT RECORDED VARIOUS ADVERSE FINDINGS WHICH AR E FACTUALLY INCORRECT LEGALLY UNTENABLE AND CONTRARY. THESE WER E SETTLED PRINCIPLES OF NATURAL JUSTICE. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE GROUND NO.1 IS GENERAL IN NATURE. 3 4. IN GROUND NO.2, THE ASSESSEE HAS QUESTIONED VALI DITY OF ASSESSMENT FRAMED UNDER SEC. 147 READ WITH SECTION 143(3) OF T HE INCOME-TAX ACT, 1961 WITHOUT SATISFYING THE STATUTORY PRE-CONDITIONS AS ENVISAGED IN THE ACT AND AS SUCH THE SAME DESERVED TO BE QUASHED. 5. IN SUPPORT OF THIS GROUND, THE LEARNED AR SUBMIT TED THAT REASONS TO BELIEVE RECORDED BY THE ASSESSING OFFICER WERE VAGU E AS NO DATE WAS MENTIONED AS TO WHEN THESE REASONS WERE RECORDED OR WHEN IT WAS APPROVED BY THE APPROPRIATE AUTHORITIES. 6. THE LEARNED DR ON THE OTHER HAND OPPOSED THE GRO UND WITH THE SUBMISSION THAT MERE NON-MENTIONING OF DATE OF RECO RDING OF THE REASONS DOES NOT MEAN THAT ASSESSING OFFICER HAD NOT APPLIE D HIS MIND WHILE RECORDING THE REASONS. HE SUBMITTED THAT REOPENING WAS INITIATED ON THE BASIS OF INFORMATION RECEIVED BY THE ASSESSING OFFICER FR OM HIS COLLEAGUES THAT THERE WAS ESCAPEMENT OF TAXABLE INCOME IN THE CASE OF THE ASSESSEE. 7. ON GOING THROUGH THE ASST. ORDER, I FIND THAT NO SUCH OBJECTION AS CONTENDED ABOVE BY THE LD. AR WAS RAISED BEFORE THE AO DESPITE OPPORTUNITY AFFORDED BY THE AO IN THIS REGARD TO THE ASSESSEE. THE GROUND RAISED IN THIS 4 REGARD IS ALSO NOT SPECIFIC. EVEN BEFORE THE LEARNE D CIT(APPEALS), NO SUCH CONTENTION WAS RAISED IN SUPPORT OF THE SIMILAR GRO UND THAT THE REASONS RECORDED WERE UNDATED AND WITHOUT MENTIONING THE DA TE OF APPROVAL BY THE APPROPRIATE AUTHORITY. THUS, SUCH CONTENTION CANNOT BE RAISED BEFORE THE ITAT WITHOUT LEAVE FOR RAISING AN ADDITIONAL GROUND . I THUS DO NOT FIND SUBSTANCE IN THE CONTENTION OF THE ASSESSEE IN THIS REGARD. THE GROUND NO.2 IS ACCORDINGLY REJECTED. 8. THE OTHER GROUNDS ARE RELATING TO THE ADDITION O F RS.5,74,076 UNDER SEC. 36(1)(III)/37(1) OF THE ACT. 9. ON PERUSAL OF AUDITED BALANCE SHEET AS ON 31.3.2 004 AND THE BALANCE SHEET SHOWN AT THE BEGINNING OF THE YEAR I.E. AS ON 01.04.2004, THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS.65,55,777 WAS SH OWN AS LOANS AND ADVANCES AND THE ASSESSING OFFICER OBSERVED THAT EV EN IF THE OTHER ADVANCES ARE REMOVED/REDUCED FROM THE AMOUNT OF TOTAL ADVANC ES, THEN ALSO A SUM OF RS.67,53,845 WAS CLEARLY AN AMOUNT PARKED BY THE AS SESSEE IN HIS FAMILY CONCERNS OR GIVEN FOR THE PURPOSE WHICH WAS ADMITTE DLY NOT BUSINESS. HE NOTED FURTHER THAT DURING THE YEAR, THE AMOUNT OF A DVANCE HAS BEEN INCREASED FROM RS.57,75,031 TO RS.67,53,845. THUS, HE NOTED T HAT DURING THE YEAR THE ASSESSEE HAD MADE FRESH ADVANCE OF RS.19,13,814. TH E ASSESSEE HAD ALSO NOT CHARGED ANY INTEREST ON SUCH ADVANCES MADE. THE ASS ESSING OFFICER 5 ACCORDINGLY OBSERVED THAT ON ONE HAND THE ASSESSEE HAS MADE BORROWALS AND PAID INTEREST ON SUCH BORROWALS AND ON THE OTHER HA ND HAS PARKED SUCH INTEREST BEARING FUNDS TOWARDS ADVANCES. HE CALLED FOR EXPLANATION FROM THE ASSESSEE TO JUSTIFY INTEREST EXPENSES AND ALSO EXPL AIN AS TO WHY INTEREST PERTAINING TO THE INVESTMENT MAY NOT BE DISALLOWED UNDER SEC. 36(1)(III)/37(1) OF THE INCOME-TAX ACT, 1961. IN RE SPONSE THE ASSESSEE FURNISHED THE DETAILS OF BORROWINGS AND ALSO ADVANC ES MADE. THE ASSESSING OFFICER NOTED THAT NO SUBMISSION WAS MADE BY THE AS SESSEE ON THE ISSUE OF PROPORTIONATE DISALLOWANCE OF INTEREST. INSTEAD THE ASSESSEE ARGUED THAT NO PART OF INTEREST WAS LIABLE TO BE DISALLOWED SINCE ASSESSEE HAD UTILIZED HIS OWN CAPITAL FOR MAKING THESE ADVANCES OR INVESTMENT . THE ASSESSING OFFICER THUS HELD THAT IF THE CAPITAL BORROWED IS N OT UTILIZED FOR THE PURPOSE OF THE BUSINESS, THE ASSESSEE WILL NOT BE ENTITLED TO DEDUCTION AND ACCORDINGLY PROPORTIONATE INTEREST BY APPLYING INTE REST RATE OF 8.5% ON THE AMOUNT OF ADVANCES TO THE TUNE OF RS.67,53,845 RESU LTING IN RS.5,74,076 WAS DISALLOWED BY HIM UNDER SEC. 36(1)(III)/37(1) OF TH E ACT. THE SAME HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). THE GRIEVANCE O F THE ASSESSEE BEFORE THE ITAT IS THAT THE ASSESSING OFFICER WHILE MAKING DISALLOWANCE HAS FAILED TO CONSIDER THE AMOUNT OF ASSESSEES OWN MONEY/CAPI TAL OF RS.53,06,309 AND 6 FURTHER DISALLOWING INTEREST EXPENSES OF RS.5,74,07 6 OUT OF TOTAL OF RS.9,74,448 DEBITED TO PROFIT AND LOSS ACCOUNT PAID FOR BORROWED FUNDS. 10. ON PERUSAL OF ORDERS OF THE AUTHORITIES BELOW, I FIND SUBSTANCE IN THE ABOVE CONTENTION OF THE LEARNED AR THAT THE AUTHORI TIES BELOW WHILE MAKING AND UPHOLDING THE DISALLOWANCE UNDER SEC. 36(1)(III )/37(1) OF THE ACT HAVE FAILED TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE REGARDING AVAILABILITY OF HIS OWN MONEY AT RS.53,06,309 AND RS.9,74,448 ALREA DY DEBITED TO THE PROFIT AND LOSS ACCOUNT PAID ON BORROWED FUNDS. I THUS IN THE INTEREST OF JUSTICE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER TO MAKE FRESH ASSESSMENT IN THIS REGARD AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ON THE ABOVE CONTENTIONS RAISED BEFORE THE ITAT. 11. THE GROUND NOS. 3 TO 5 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN RESULT, THE APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 .11.2015 SD/- ( I.C. SUD HIR ) JUDICIAL MEMBER DATED: 23 /11/2015 MOHAN LAL 7 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 23.11.2015 DRAFT PLACED BEFORE AUTHOR 23.11.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 23 .11.201 5 KEPT FOR PRONOUNCEMENT ON 23.11.2015 FILE SENT TO THE BENCH CLERK 23.11.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.