Ajit Vitthal Dake, Ichalkaranji V. ITO, Ichalkaranji

ITA 499/PUN/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9894 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH; VINITA MENON
• Keywords: Opportunity of being heard; Wrong claim; Revised return

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.499/PN/2010 (ASSESSMENT YEAR 2006-07) AJIT VITTHAL DAKE, WARD NO.8, H.NO. 463, KHANJIRE MALA, ICHALKARANJI, PINCODE 416115. PAN NO. ABAPD 4331L .. APPELLANT VS. INCOME TAX OFFICER, WARD-3, VEERSHAIV BANK BUILDING, HULGESHWARI ROAD, ICHALKARANJI, PINCODE 416115. . . RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE DEPARTMENT BY : SRI S.K. SINGH & SMT. VINITA MEN ON DATE OF HEARING : 25 -10-2012 DATE OF PRONOUNCEMENT : 25 -10-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31-12- 2009 OF THE CIT(A)-KOLHAPUR, RELATING TO ASSESSMENT YEAR 2006-07. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF TRADING IN CLOTH, SHARES AND FIREWO OD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT ASSESSEE H AS CLAIMED LOSSES FROM HOUSE PROPERTY AMOUNTING TO RS.1,50,000/- WHICH IS ON ACC OUNT OF CLAIM OF INTEREST PAID ON CAPITAL BORROWED FROM ICICI HOME FINANCE COMPANY LTD. FROM THE LOAN REPAYMENT SCHEDULE OF ICICI BANK THE AO NOTED THAT IT HAS BEEN CLEARLY MENTIONED THAT IT IS OTHER LOANS. HE NOTED THAT THE ASSESSEE HAS ALSO ENCLOSED LEDGER ACCOUNT OF INTEREST ON HOME LOANS FOR THE PE RIOD FROM 01-04-2005 TO 31-03- 2006 APPEARING IN THE BOOKS OF R.K. TEXTILES. FROM THE LOAN AGREEMENT WITH ICICI HOME FINANCE COMPANY LTD. THE AO NOTED THAT THE LOA N OF RS. 54 LAKHS IS TAKEN FROM ICICI HOME FINANCE COMPANY LTD. ON 29-09-2005 AGAINST PROPERTY BEARING 2 PLOT NO.20,21,22, R.S. NO.311, BEHIND RAGHUNANDAN S IZERS, STATION ROAD, ICHALKARANJI. HE NOTED THAT THE SAID LOAN IS FOR T HE PURPOSE OF BUSINESS EXPANSION AS PER UNDERTAKING GIVEN BY THE ASSESSEE TO ICICI H OME FINANCE COMPANY LTD. THE PROPERTY IS A RESIDENTIAL BUNGALOW JOINTLY OWNE D BY THE ASSESSEE AND HIS BROTHER SRI AVINASH V. DAKE. THE AO THEREFORE REJE CTED THE EXPLANATION OF THE ASSESSEE REGARDING THE CLAIM OF DEDUCTION U/S.24 AS NOT TENABLE SINCE THE LOAN IS NOT TAKEN FOR CONSTRUCTION OF HOUSE OR RENOVATION OF HO USE. HE NOTED THAT THE SAME IS ALSO NOT TAKEN FOR REPAYMENT OF LOAN AS STATED BY T HE ASSESSEE IN HIS STATEMENT. THE AO ALSO REJECTED THE ALTERNATE CONTENTION OF THE AS SESSEE THAT DEDUCTION U/S.36(1)(III) SHOULD BE ALLOWED SINCE THE SAME HAS BEEN UTILISED FOR BUSINESS PURPOSE ON THE GROUND THAT THE SAME WAS NOT CLAIMED IN THE PROFIT AND LOSS ACCOUNT. 3. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT A N AMOUNT OF RS.13,13,000/- HAS BEEN REPAID TO M/S. KAILASH PROCESSOR OUT OF LO AN, HE NOTED THAT THE SAME IS CONTRARY TO ASSESSEES RETURN OF INCOME FOR A.Y. 20 04-05 AND 2005-06 WHEREIN THE ASSESSEE HAS NOT REPAID ANY INTEREST ON BORROWED FU ND AND SOUGHT DEDUCTION U/S.24. SINCE THE ASSESSEE HAS NOT FILED ANY REVISED RETURN EVEN AFTER RECEIVING THE NOTICE/S.143(2), THEREFORE, THE AO FOLLOWING THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT REPO RTED IN 284 ITR 323 DISALLOWED THE CLAIM OF DEDUCTION U/S.24 MADE BY THE ASSESSEE AT RS.1,50,000/-. 4. IN APPEAL THE LEARNED CIT(A) UPHELD THE ACTION O F THE AO BY HOLDING AS UNDER : 6. THE CONTENTIONS OF THE APPELLANT HAVE BEEN CONS IDERED. IT IS SEEN THAT EMI OF THE LOAN WAS STARTED ON 07-11-2005 AND TOTAL INTEREST C LAIMED UPTO 31-03-2006 WAS RS.2,10,584/-. AS FAR AS REPAYMENT OF LOAN TO M/S. KAILASH PROCESSORS IS CONCERNED, FROM THE ACCOUNT EXTRACT FURNISHED FOR A.Y. 2005-06, IT IS SEEN THAT AS ON 31-03-2005, AN AMOUNT OF RS.20,56,104/- WAS SHOWN AS OUTSTANDING L OAN. AS ON 31-03-2006, AN AMOUNT OF RS.7,43,104/- WAS SHOWN AS OUTSTANDING. THOUGH IT WAS CLAIMED THAT RS.13,13,000/- WAS REPAID OUT OF LOAN AVAILED FROM ICICI HOME FINA NCE, AN AMOUNT OF RS.5,18,000/- WAS ALREADY PAID UPTO 28-10-2005, I.E. BEFORE AVAIL ING THE LOAN FROM ICICI BANK. THIS ITSELF SHOWS THAT THE LOAN WAS NOT UTILISED FOR REP AYMENT OF EARLIER LOAN. AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER, NO INTEREST W AS PAID/PAYABLE ON THE LOAN TAKEN FROM M/S. KAILASH PROCESSORS. SINCE THE LOAN WAS ADMITT EDLY TAKEN FOR THE PURPOSE OF 3 EXPANSION OF BUSINESS, THE CLAIM MADE U/S.24(B) IS TOTALLY A WRONG CLAIM. THEREFORE, GROUND NO. 1 IS DISMISSED. 7. CLAIM U/S.36(1)(III) : IT IS ALSO SEEN THAT THE INVESTMENT MADE IN M/S. K RYSTAL GASOLINE CO. (RS.7,17,500/-) AND M/S. RAGHUNANDAN PROCESSORS (RS .5,55,000/-) DID NOT YIELD ANY TAXABLE INCOME SINCE THE SHARE INCOME FROM THESE FI RMS AND IS ALSO EXEMPT U/S.10. THE INTEREST ATTRIBUTABLE TO THIS INVESTMENT IS NOT ELI GIBLE FOR DEDUCTION U/S.36(1)(III). IT IS SEEN FROM THE DETAILS FILED THAT THE PROPRIETARY CO NCERN R.K. TEXTILES IS ENGAGED IN THE BUSINESS OF CLOTH SALES, FIREWOOD SALES AND SHARE T RADING. WHILE THE SHARE TRADING IS TREATED AS SPECULATION BUSINESS BY THE APPELLANT HI MSELF, NO SEPARATE INVESTMENT IN THIS BUSINESS WAS SHOWN. THOUGH SEPARATE PROFIT & LOSS A/C. WAS FILED FOR THESE BUSINESSES, A CONSOLIDATED BALANCE SHEET AS ON 31-03-2006 WAS F ILED. AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER THOUGH THESE FACTS ARE KNOWN TO T HE APPELLANT AT THE TIME OF PREPARATION OF RETURN OF INCOME AND ALSO DURING THE COURSE OF A SSESSMENT, NO ATTEMPT WAS MADE TO GIVE CORRECT PICTURE BY WAY OF FILING OF REVISED RE TURN OF INCOME. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT COULD NOT PR OVE WITH EVIDENCE THAT THE LOAN AVAILED WAS UTILISED FOR THE APPLICANTS BUSINESS T O BE ELIGIBLE FOR DEDUCTION U/S.36(1)(III). THE ASSESSING OFFICERS ACTION COULD NOT BE FOUND F AULT WITH. THEREFORE, THE APPELLANTS CLAIM FOR INVOKING THE PROVISIONS OF SECTION 24(B) AND 36(1)(III) ARE LIABLE TO BE REJECTED AND SECOND AND THIRD GROUNDS OF APPEAL ARE DISMISSE D. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISMISSED CLAIM OF THE ASSESSEE TO ALLOW INTEREST PAYMENT OF RS. 1,50,000/- U/S.24(B). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSE E TO ALLOW INTEREST PAYMENT ON LOAN TAKEN BE ALLOWED U/S.36(1)(III). 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT THE CASE WAS NOT PROPERLY EXPLAINED BEFORE THE AO OR CI T(A) SINCE THE PERSON WHO WAS APPEARING BEFORE THE AO AND CIT(A) WAS NOT WELL CONVERSANT. SHE SUBMITTED THAT WHEN THE AMOUNT IS INVESTED IN BUSINESS OF THE ASSESSEE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.36(1)(III). SHE SUBMITTED THAT IN THE INTEREST OF JUSTICE THE MATTER MAY BE RESTORED TO THE FILE OF THE AO WITH A DIRECT ION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN HIS CASE. 6.1 THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTI NG THE ORDER OF LD. CIT(A) SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 4 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). I FIND THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.24 AMOUNTING TO RS.1,50,000/- ON THE GROUND THAT THE LOAN HAS NOT BEEN UTILISED FOR CONSTRUCTION OR PURCHASE OF THE H OUSE OR REPAYMENT OF ANY EARLIER LOAN. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT A PART OF THE MONEY BORROWED HAS BEEN UTILISED FOR INVESTMENT IN THE FIRM AND ANOTHER PART INVESTED IN THE PROPRIETARY BUSINESS OF THE ASSESSE E AND THE BALANCE PORTION UTILISED FOR CONSTRUCTION OF THE HOUSE PROPERTY. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE MATTER HAS NOT BEEN PROPERLY EXPLAINED BEFORE THE AO AND CIT(A) FOR WHICH THE DISALLOWANCE HAS BEEN MADE. I FIND SOME FORCE IN THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE I DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO GIVE ONE M ORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN HIS CASE. THE AO SHALL DECIDE THE ISSUE AF RESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E. ON 25-10-12 SD/- (R.K. PANDA) ACCOUNTANT MEMBER PUNE DATED: THE 25 TH OCTOBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-KOLHAPUR 4. THE D.R. SMC BENCH, PUNE 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE