Shri Pritam Nemchand Sanghvi, Kolhapur V. DCIT, Cir.2, Kolhapur, Kolhapur

ITA 485/PUN/2011

• Counselvise Citation: 48524514 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH VARMAMS ANN KAPTHUAMA
• Keywords: Salary income
• Section: 143(3); 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 485/PN/2011 (ASSTT. YEAR : 2006-07) SHRI PRITAM NEMCHAND SANGHVI ... APPELLANT F-41, TRADE CENTER, STATION ROAD, KOLHAPUR PAN : ADWPS 3157 M V. THE D.C.I.T, CIRCLE - 2, KOLHA[UR RESPONDENT APPELLANT BY : SHRI. M.K. KULKARNI RESPONDENT BY : SHRI MUKESH VARMA/MS.ANN KAPTHUAMA DATE OF HEARING : 3/7/12 DATE OF PRONOUNCEMENT : 11-7-12 ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE ASSESSEE HAD CHALLENGED THE IMPUGNE D ORDER OF THE LD CIT II, KOLHAPUR, DATED 16.3.2011 PASSED U/S. 263 OF THE INCOME TA X ACT. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. C.I.T. II, KOLHAPUR ERRED IN ASSUMING JURISDICTION UNDER SECTIO N 263 AND PASSING ORDER UNDER THAT SECTION IN RESPECT OF THE ISSUE OF DEDUCTABILITY OF INTEREST PAID BY THE APPELLANT DURING THE YEAR SINCE THE A.O. H AD ALREADY CONSIDERED THE ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS UNDER SECTION 143(3). 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D C.I.T. II KOLHAPUR, ERRED IN GIVING A FINDING THAT THE A,O HAS NOT AT A LL CONSIDERED THE ISSUE OF NEXUS BETWEEN THE INTEREST EARNED AND THE INTEREST PAID PARTICULARLY IN VIEW OF VARIOUS SUBMISSIONS MADE BY THE APPELLANT JU STIFYING THE CLAIM OF DEDUCTION OF INTEREST DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D C.I.T.-II KOLHAPUR, ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 IGNORI NG THE FACT THAT WHEN A.O. TAKES ONE F THE POSSIBLE VIEWS ON AN ISSUE AFTER DUE CONSIDERATION, ITA . NO.485//PN/2011 SHRI PRITAM NEMCHAND SANGHVI., A.Y. 2006-07 PAGE OF 5 2 REVOKING PROVISION OF SECTION 263 IN SUCH A CASE IS NOT IN ACCORDANCE WITH LAW. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. C.I.T. II KOLHAPUR ERRED IN DIRECTING THE A.O. TO REOP EN THE ASSESSMENT FOR RE-EXAMINING THE CLAIM OF DEDUCTION OF INTEREST CLAIMED BY T HE APPELLANT. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE APPELLANT IS ENTITLED TO DEDUCTION OF INTEREST PAID BY HIM ON THE F UNDS BORROWED AS CLAIMED BY HIM IN THE RETURN OF INCOME. 3. THE FACTS REVEAL FROM THE RECORD ARE AS UNDER. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.11,11,470/- FO R THE A.Y. 2006-07 ON 31-10-2006. THE ASSESSEES CASE WAS SELECTED FOR S CRUTINY AND COMPLETED U/S. 143(3) OF THE ACT. THE A.O MADE DISALLOWANCE TO THE EX TENT OF RS.30,919/- AND MADE THE ADDITION WHICH WAS IN RESPECT OF VEHICLE EXP ENSES AND INSURANCE. THE LD CIT, KOLHAPUR, SUBSEQUENTLY EVOKED HER POWER U /S. 263 OF THE ACT VIDE ORDER DATED 16-03-2011 SET ASIDE THE ASSESSMENT ORDE R DATED 28-11-2008. IN THE IMPUGNED ORDER, THE LD CIT HAS OBSERVED THAT THE ASSESSEE HAS SHOWN INCOME FROM INTEREST FROM BANKS AND FROM OTHER SOURCES U NDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO RS. 12,52,190/ - AND HAS CLAIMED THE DEDUCTION U/S. 57 ON ACCOUNT OF INTEREST PAYMENT TO DEPOSITORS AMOUNTING TO RS.23,85,762/- AND HAS SHOWN THE NET LOSS TO THE EXT ENT OF RS.11,33,572/- UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSES SEE HAS CLAIMED THE SET OFF OF THE SAID LOSS AGAINST THE INCOME FROM SALARY. IT IS FUR THER OBSERVED THAT IN THE ASSESSMENT PROCEEDINGS U/S. 143(3), THE A.O HAS NOT V ERIFIED THE PURPOSES FOR WHICH THE BORROWED FUNDS HAVE BEEN USED, THE RATE A T WHICH THE FUNDS WERE BORROWED AND THE RATE AT WHICH THE ADVANCES WERE GIVE N, DATE WISE WORKING OF INTEREST RECEIVED AND PAID, UTILIZATION OF BORROWED FUNDS IN IMMOVABLE PROPERTIES FROM WHICH NO INCOME IS EARNED, ETC. LD CIT WAS OF THE OPINION THAT THE CLAIM OF SET OFF HAS BEEN CLAIMED WITHOUT DUE VERIFICATION.. THE LD CIT OFFERED THE OPPORTUNITY TO THE ASSESSEE, WHO WAS REPRESENTED THRO UGH THE CHARTERED ITA . NO.485//PN/2011 SHRI PRITAM NEMCHAND SANGHVI., A.Y. 2006-07 PAGE OF 5 3 ACCOUNTANT. THE ASSESSEE CONTENDED THAT THE SAID ISSU E WAS FOR CONSIDERATION DURING THE PROCEEDINGS U/S 143(3), AS WELL AS U/S 154, AND THE A.O HAS VERIFIED THE SAME AND DROPPED THE PROCEEDINGS. SO FAR AS THE P ROCEEDINGS U/S 154 ARE CONCERNED, IT IS SEEN THAT THE REASONS FOR DROPPING TH E PROCEEDINGS INITIATED U/S. 154 ARE THAT AS THE A.O WAS OF THE OPINION THAT THE SAID ISSUE WAS NOT COVERED UNDER THE AMBIT OF SEC. 154 AND HENCE, THE PROC EEDINGS U/S. 154 WERE DROPPED. IN SUM AND SUBSTANCE, THE PROCEEDINGS INITIATED BY THE A.O ON THIS ISSUE U/S. 154 WERE DROPPED AS THE ASSESSEE PLEADED TH AT THE SAID ISSUE WAS A DEBATABLE ISSUE. SO FAR AS ASSESSMENT ORDER PASSED U/S . 143(3) IS CONCERNED, THE LD CIT WAS OF THE OPINION THAT THE A.O HAS NOT A T ALL EXAMINED OF THE ISSUE OF THE NEXUS BETWEEN THE INTEREST EARNED AND THE INTER EST PAID BY VERIFYING THE PAYMENT TO EACH INDIVIDUAL PARTY. THE LD CIT HAD FURTHE R OBSERVED THAT FROM THE DETAILS OF INVESTMENT, SHARES TRANSACTION, RE-PAYMENT OF HOUSING LOAN ETC., IT IS APPARENT THAT SOME OF THE BORROWED FUNDS AND UNSECU RED LOANS ON WHICH INTEREST HAS BEEN PAID ARE NOT UTILIZED EXCLUSIVELY FOR EAR NING CORRESPONDING INTEREST INCOME. IN SUM AND SUBSTANCES, IN THE OPINION OF THE LD CIT, THE A.O WAS DUTY BOUND TO EXAMINE THE CORRECTNESS OF THE CLAIM OF LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WAS SET OFF AGAINST THE OTHER HEAD I.E. SALARY INCOME. THE LD CIT SET ASIDE THE ORDER TO THAT EXTEN T AND DIRECTED THE A.O TO RE-EXAMINE THE ENTIRE ISSUE OF CLAIM OF DEDUCTION U/S. 57 O F THE ACT, MORE PARTICULARLY, IN THE CONTEXT OF INTEREST PAYMENTS TO DEPO SITORS AMOUNTING TO RS.23,85,762/- AND PASSED THE NECESSARY ORDERS. NOW TH E ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL PUT FORTH HIS ARGUMENTS BY TAK ING CONTENTION THAT THE A.O HAS CONSIDERED THIS ISSUE IN THE SCRUTINY ASSESSMENT AND THEREAFTER ONLY HAS PASSED ASSESSMENT ORDER U/S. 143(3) OF THE ACT. HE SUBMITS THAT THE ASSESSMENT ORDER PASSED BY THE A.O IS NOT ERRONEOUS A ND UNLESS THE ASSESSMENT ORDER IS ERRONEOUS, THE LD. CIT HAS NO JURISDICTION TO S ET ASIDE THE SAME BY ITA . NO.485//PN/2011 SHRI PRITAM NEMCHAND SANGHVI., A.Y. 2006-07 PAGE OF 5 4 EXERCISING POWERS U/S. 263. HE PLEADED FOR CANCELLING THE O RDER PASSED U/S. 263. PER CONTRA, THE LD CIT D.R. TOOK US THROUGH TH E ASSESSMENT ORDER AND SUBMITS THAT THERE IS NOT EVEN A WHISPER IN THE ENTIRE O RDER IN RESPECT OF THE DEDUCTION OF INTEREST CLAIMED BY THE ASSESSEE AND LOSS WAS CREATED TO GET THE BENEFIT OF SET OFF AGAINST THE OTHER HEADS OF INCOME. HE P LEADED THAT THE ORDER PASSED BY THE A.O PROJECTS THE LACK OF ENQUIRY AS THE A .O FAILED IN HIS LEGAL DUTY TO CORRECTLY DETERMINE THE LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD CIT D.R. PLEADED FOR CONFIRMING THE ORDER OF THE LD CIT. 5. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE ARGUM ENT OF BOTH THE PARTIES AS WELL AS THE RECORD BEFORE US. WE HAVE ALSO P ERUSED THE ASSESSMENT ORDER BUT THERE IS NOT EVEN A WHISPER BY THE A.O AS RIG HTLY ARGUED BY LD CIT (DR) EVEN THOUGH THE ASSESSEE MADE THE HUGE CLAIM OF RS. 23,8 3,762/- U/S. 57 ON ACCOUNT OF INTEREST PAYMENT TO THE DEPOSITORS. THE AS SESSEE HAS SHOWN THE LOSS OF RS. 11,33,572/- AND CLAIMED THE SET OFF OF THE SAID LOSS AGAINST THE SALARY INCOME. NOTHING HAS BEEN GIVEN EVEN PLACED BEFORE US BY THE ASSESSEE TO SHOW THAT DURING THE ASSESSMENT PROCEEDINGS, THE A.O MADE TH E ENQUIRY OR SOUGHT THE DETAILS ON THIS ISSUE FROM THE ASSESSEE. IF IT IS CLAIME D BY THE ASSESSEE THAT THE ISSUE WAS DISCUSSED AND CONSIDERED BY THE A.O. IN THE ASSESSMENT PROCEEDINGS, THEN ASSESSEE SHOULD HAVE BROUGHT ON RECO RD SOME MATERIAL LIKE QUERY LETTER FROM THE A.O OR SUBMISSION FILED BY THE ASSESS EE BUT EXCEPT ORAL ARGUMENT, NOTHING IS THERE ON RECORD TO SUPPORT THE CONTENTION OF T HE ASSESSEE. 6. SO FAR AS THE POWER OF CIT U/S 263 IS CONCERNED, THE LAW IS WELL SETTLED IN THE PLETHORA OF THE DECISIONS INCLUDING THE LANDMARK DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD., 243 ITR 83 THAT TWO CONDITIONS MUST BE FULFILLED FOR EXERCISING THE POWERS U/S . 263 THAT (1) THE ORDER WHICH IS THE SUBJECT MATTER OF REVISION IS ERRONEOU S AND (2) IT SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR OPINION, TH E ORDER PASSED BY THE A.O IN THE A.Y. 2006-07 U/S. 143(3) DATED 28.11.2008 IS ERRON EOUS AS WELL AS ITA . NO.485//PN/2011 SHRI PRITAM NEMCHAND SANGHVI., A.Y. 2006-07 PAGE OF 5 5 PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THE EXTENT MENTIONED IN THE ORDER PASSED BY THE LD CIT U/S. 263. WE FIND NO REASON TO INT ERFERE WITH THE SAME. ACCORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 11 TH JULY, 2012 SD/- SD/- (R.K. PANDA) ACCOUNTANT MEMBER (R.S. PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 11TH JULY, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE ADDL. CIT KOLHAPUR 4. THE CIT II - KOLHAPUR 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /-TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE