MADHU NARPAT MEHTA, MUMBAI V. ACIT CEN CIR 23(OLD), MUMBAI

ITA 4921/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9886 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTANU KUMAR SAIKIA
• Keywords: Business income; Rule of consistency; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 4921 / MUM/20 15 & 4922/MUM/2015 ( ASSESSMENT YEAR : 2010 - 11 & 2011 - 12 ) SMT. MADHU NARPAT MEHTA 901, JUHU HARSHAL,SAMRTH RAMDAS MARG, GULMOHAR CROSS ROAD NO.8 J.V.P.D. SCHEME VILE PARLE (W) MUMBAI 400 049 VS. ACIT, CENTRAL CIRCLE 23(OLD) ACIT, CENTRAL CIRCLE - 4(1) MUMBAI( NEW) PAN/GIR NO. AAOPM145H APPELLANT ) .. RESPONDENT ) ITA NO. 4918/ MUM/20 15 & 4919/MUM/2 015 ( ASSESSMENT YEAR : 2010 - 11 & 2011 - 12 ) SHRI NARPAT MEHTA 901, JUHU HARSHAL, SAMRTH RAMDAS MARG, GULMOHAR CROSS ROAD NO.8 J.V.P.D. SCHEME VILE PARLE (W) MUMBAI 400 049 VS. ACIT, CENTRAL CIRCLE 23(OLD) ACIT, CENTRAL CIRCLE - 4(1) MUMBAI( NEW) PAN/GIR NO. AA EPM9981G APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI ANUJ KISNADWALA REVENUE BY SHRI SANTANUKUMAR SAIKIA DATE OF HEARING 13 / 03 /201 8 DATE OF PRONOUNCEME NT 14 / 03 /201 8 / O R D E R PER BENCH : THESE ARE APPEALS FILED BY TWO ASSESSEE S AGAINST THE ORDER OF CIT(A) - 52, MUMBAI DATED 12/06/2015 FOR A.Y.2010 - 11 AND 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.153A OF THE IT ACT. ITA NO. 4 921/MUM/2015 AND OTHER THREE APPEALS SHRI NARPAT MEHTA & SMT. MADHU NARPAT MEHTA 2 2. GRIEVANCE OF BOTH THE ASSESSEE IN BOTH THE YEARS UNDER CONSIDERATION IS SAME. ASSESSEE HAS AGITATED DISALLOWANCE OF CLAIM OF INTEREST EXPENSES AGAINST INTEREST INCOME EARNED ON CAPITAL ACCOUNT WITH THE PARTNERSHIP FIRM. 3. FACTS IN ITA NO.4921/MUM/2015 ARE THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF RS.45,39,958/ - FROM PARTNERSHIP FIRM IN WHICH SHE IS PARTNER. ASSESSEE HAD ALSO EARNED INCOME FROM OTHER SOURCES OF RS.2,74,838/ - . ASSESSEE HAD CLAIMED INTEREST EXPENSES OF RS.10,52,028/ - AGAINST THE INTEREST INCOME. AO HELD THAT INTERES T INCOME FROM PARTNERSHIP FIRM IS NOT IN THE NATURE OF BUSINESS INCOME BUT IS ONLY IN THE NATURE OF INCOME FROM OTHER SOURCES. THE LEARNED ASSESSING OFFICER DISALLOWED THE I NTEREST & OTHER EXPENSES OF RS. 11,53,237/ - BY TREATING THE SAME AS PERSONAL EXPENSE S. THE LEARNED ASSESSING OFFICER HELD THAT SINCE ASSESSEE FAILED TO PROVE THE NEXUS BETWEEN THE INTEREST EARNED & EXPENSES CLAIMED AGAINST THE SAID INCOME, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 57(III) OF THE IT ACT. THE LEARNED ASSESSING OFFICER H AS DISALLOWED DEDUCTION OF INTEREST & OTHER EXPENSES OF RS. 11,53,237 / - AND ASSESSED THE INTEREST INCOME A T GROSS AMOUNT OF RS. 48,14,796/ - UNDER THE HEAD OTHER SOURCES. 4. BEFORE CIT(A), IT WAS ARGUED THAT INTEREST INCOME FROM THE PARTNERSHIP FIRM IS CHAR GEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCE. THE CIT(A) ACCEPTED ASSESSEE S CONTENTION THAT SUCH INCOME IS TO BE ASSESSE D U/S.40(3) OF THE ACT AND THEREFORE, DIRECTED THE AO TO ITA NO. 4 921/MUM/2015 AND OTHER THREE APPEALS SHRI NARPAT MEHTA & SMT. MADHU NARPAT MEHTA 3 ASSESS THE INTEREST INCOME FROM PARTNERSHIP FIRM UNDER THE HEAD INCOME FROM BUSINESS IN PLACE OF INCOME FROM OTHER SOURCE. THE CIT(A) DID NOT ALLOW DEDUCTION OF INTEREST EXPENDITURE AGAINST SUCH INTEREST INCOME ON THE PLEA THAT ASSESSEE HAS NOT PROVED UTILISATION OF BORROWED FUNDS FOR INVESTMENT IN THE PARTNERSHIP FIRM. 5. LEARNED AR PLACED ON RECORD PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE TRIBUNAL RULES. THE PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE READS AS UNDER: - 2. THE APPELLANT IS AN INDIVIDUAL AND HER MAIN SOURCE OF INCOME IS INTEREST EARNED FROM PARTNERSHIP FIRMS. THE APPELLANT IS WIFE OF SHRI NARPAT MEHTA, WHO WAS AN EMPLOYEE OF KANAKIA GROUP. THE PREMISES OF KANAKIA CROP WERE SEARCHED ON 29.03.2011 AND ALSO PREMISES OF THE APPELLANT WAS ALSO COVERED. THE APPELLANT FILED HER RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S.L53A OF THE ACT DISCLOSING INCOME OF RS.45,78,930/ - WHICH MAINLY CONSISTED OF INTEREST EARNED FROM FIRMS. WHILE COMPUTING THE INCOME, THE APPELLAN T HAD CLAIMED DEDUCTION ON ACCOUNT OF INTEREST AND OTHER EXPENSES IN THE SAME MANNER IN WHICH IT WAS CLAIMED REGULARLY IN EARLIER YEARS. 3. THE ASSESSING OFFICER CALLED FOR JUSTIFICATION TO CLAIM DEDUCTION FOR INTEREST AND EXPENSES. THE APPELLANT EXP RESSED HER INABILITY TO FURNISH DETAILS AS SHE HAD BEEN TO NATIVE PLACE FOR PERIOD OF 10 DAYS DUE TO ILLNESS OF THE RELATIVE. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE FOR THE REASON THAT NEXUS COULD NOT BE ESTABLISHED BETWEEN INTEREST INCOME AND EX PENSES CLAIMED AGAINST IT. 4. THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE AS NO NEXUS COULD BE ESTABLISHED AND EXPENSES COULD NOT BE ALLOWED MERELY ON BASIS OF RULE OF CONSISTENCY, MORE PARTICULARLY WHEN EARLIER ASSESSMENTS HAD BEEN COMPLETED U/S.14 3(1) OF THE ACT. 5. IT IS SUBMITTED THAT THE MAJOR FUNDS HAD BEEN INVESTED BY THE APPELLANT IN PARTNERSHIP FIRM IN THE EARLIER YEARS AND THE BORROWINGS ON WHICH INTEREST HAS BEEN PAID ARE ALSO ON OLD LOANS. THIS WILL BE EVIDENT FROM PAGES 3 - 4 OF THE P APER BOOK 2 FILED BEFORE YOUR HONOURS SEPARATELY. IT IS SUBMITTED THAT THE SAID DETAILS CLEARLY REVEAL THAT THE INVESTMENTS IN FIRM WOULD NOT HAVE BEEN POSSIBLE WITHOUT BORROWINGS. AS SUCH, THE APPELLANT IS ENTITLED TO CLAIM ITA NO. 4 921/MUM/2015 AND OTHER THREE APPEALS SHRI NARPAT MEHTA & SMT. MADHU NARPAT MEHTA 4 DEDUCTION FOR INTEREST PAID ON BORROWED FUNDS WHICH HAVE BEEN UTILIZED IN MAKING INVESTMENT IN FIRMS FROM WHICH THE APPELLANT HAS EARNED INTEREST INCOME. IT IS SUBMITTED THAT THE DETAILS FURNISHED BEFORE YOUR HONOURS ARE DULY SUPPORTED BY ENTRIES MADE IN THE BOOKS OF ACCOUNT AND EVIDENC ED BY ENTRIES IN THE BANK. 6. IT IS SUBMITTED THAT THE APPELLANT WAS PREVENTED FROM FILING THESE DETAILS DUE TO FAMILY REASONS AND THAT BEFORE THE CIT(A) THESE DETAILS COULD NOT BE FILED FOR WANT OF PROPER ADVICE AS THE CHARTERED ACCOUNTANT APPEARING BEFORE CIT(A) WAS HOPEFUL TO GET RELIEF ON PRINCIPLE OF RULE OF CONSISTENCY RATHER THAN ESTABLISHING NEXUS. 7. IT IS HUMBLY SUBMITTED THAT THE NON - PRODUCTION OF THE RELEVANT DOCUMENTS WAS NOT DUE TO ANY MALAFIDE INTENTION OR NEGLIGENCE ON THE PART OF THE APPELLANT. IT IS HUMBLY SUBMITTED THAT THE ADMISSION OF THE ADDITIONAL EVIDENCE WOULD NOT, IN ANY WAY, PREJUDICE THE REVENUE; RATHER IT WOULD RENDER ASSISTANCE TO THIS HON'BLE TRIBUNAL TO DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW. WE, THEREFORE, PRA Y THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ADMIT THE ADDITIONAL EVIDENCE UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963. 8. IN VIEW OF THE ABOVE, WE SUBMIT THAT THE DOCUMENTS COMPILED IN THE PAPER BOOK FOR A,Y. 2010 - 11 AT PAGES 3 - 4 FILED BEFO RE YOUR HONOURS, THAT COULD NOT BE FURNISHED BEFORE THE ASSESSING OFFICER AND THE CIT (A), MAY KINDLY BE ADMITTED . 9. IN THE INTERESTS OF JUSTICE AND EQUITY, WE MOST HUMBLY PRAY YOUR HONOURS TO KINDLY ADMIT THE ADDITIONAL EVIDENCE AND IF YOUR HONOURS' MAY, IF CONSIDER FIT, RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE OF VERIFICATION OF THE ABOVE DETAILS AND MAKE THE ASSESSMENT. CONSIDERING THE FACTUAL ASPECTS OF THE MATTER, IT IS HUMBLY PRAYED THAT YOUR HONOURS MAY BE PLE ASED TO ADMIT THE ADDITIONAL EVIDENCES IN THE INTEREST OF JUSTICE AND FAIR PLAY AND TO ADJUDICATE THE DISPUTES IN ACCORDANCE WITH LAW. 6. ON THE OTHER HAND, LEARNED DR OPPOSED THE PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE AND CONTENDED THAT ASSESSEE HAS BEEN GIVEN DUE OPPORTUNITY BOTH BY THE AO AND CIT(A),THEREFORE, ADDITIONAL EVIDENCE SHOULD NOT BE ACCEPTED AT THIS STAGE. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT MAJ OR FUNDS ITA NO. 4 921/MUM/2015 AND OTHER THREE APPEALS SHRI NARPAT MEHTA & SMT. MADHU NARPAT MEHTA 5 HAVE BEEN INVES TED BY THE ASSESSEE IN THE PARTNERSHIP FIRM IN EARLIER YEARS AND THE BORROWINGS ON WHICH INTEREST HAS BEEN PAID ARE ALSO ON OLD LOANS. FOR THIS PURPOSE ASSESSEE HAS PLACED ON RECORD, BALANCE SHEET FOR THE YEAR ENDING ON 31/03/2009 A ND 31/03/2010. ASSESSEE HAS ALSO PLACED ON RECORD IN THE FORM OF ADDITIONAL EVIDENCE IN THE FORM OF STATEMENT SHOWING OPENING BALANCE, TRANSACTION DURING THE YEAR AND CLOSING BALANCE OF THE UNSECURED LOANS TAKEN BY THE ASSESSEE DURING THE F.Y.2009 - 10. 8. OUR ATTENTION WAS ALSO INVITED TO THE CHART SHOWING OPENING BALANCE, TRANSACTION DURING THE YEAR AND CLOSING BALANCE OF THE INVESTMENT MADE IN THE FI RM BY THE ASSESSEE DURING THE F.Y.2009 - 10. WE ALSO OBSERVE THAT DUE TO REASONS BEYOND HIS CONTROL THE ASSES SEE WAS PREVENTED FROM FILING THESE DETAILS BEFORE THE LOWER AUTHORITIES. WE ALSO OBSERVE THAT NON - PRODUCTION OF RELEVANT D OCUMENTS WAS NOT DUE TO ANY MALA FIED INTENTION OR NEGLIGENCE ON THE PART OF THE ASSESSEE. MOREOVER, ACCEPTING THE ADDITIONAL EVIDENCE IN NO WAY PREJUDICE THE INTER EST OF REVENUE RATHER THESE GOES TO ROOT OF THE ISSUE FOR DECIDING THE ALLOWABILITY OF INTEREST EXPENDITURE INCURRED FOR EARNING INTEREST INCOME FROM THE PARTNERSHIP FIRM. THEREFORE, IN THE SUBSTANTIAL INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR EXAMINING THESE EVIDENCES AND FOR DECIDING THE ISSUE AFRESH AS PER LAW. 9. FACTS AND CIRCUMSTANCES IN ITA NO.4922/MUM/2015, 4918/MUM/2015 & 4919/MUM/2015 ARE EXACTLY THE SAME, THEREFORE, ITA NO. 4 921/MUM/2015 AND OTHER THREE APPEALS SHRI NARPAT MEHTA & SMT. MADHU NARPAT MEHTA 6 FOLLOWING REASONING GIVEN HEREINABOVE, MATTER IS RESTORED BACK TO THE FILE OF THE AO WITH THE SIMILAR DIRECTION. WE DIRECT ACCORDINGLY. 10. IN THE RESULT, APPEALS ARE ALLOWED IN PART FOR STATISTICAL PURPOSES IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 03 /201 8 S D/ - ( RAM LAL NEGI ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 03 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REG ISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//