Sri Ashish Kumar Patwari , Kolkata V. I.T.O.,Ward-43(2), Kolkata

ITA 505/KOL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9865 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-09-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE
• Keywords: Business income; Business expenditure; Rule of consistency
• Section: 142(1); 133(6); 143(2)

Judgement Text

1 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 , SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 505/KOL/2019 ASSESSMENT YEAR: 2012-13 SHRI ASHISH KUMAR PATWARI (PAN: AFRPP4714Q) VS INCOME-TAX OFFICER, WARD-43(2), HALDIA APPELLANT RESPONDENT DATE OF HEARING 02.09.2019 DATE OF PRONOUNCEMENT 25.09.2019 FOR THE APPELLANT SHRI RAVI TULSIYAN, FCA FOR THE RESPONDENT SHRI PINAKI MUKHERJEE, ADDL. CIT , SR. DR ORDER THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-13, KOLKATA DATED 31.12.2018 FOR AY 2012-13 ON THE FOLL OWING GROUNDS: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HAVING UPHELD THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.10,06,209/- ON UNSECURED LOAN BORROWED AND INVESTED IN THE CAPITAL OF TWO PROPRI ETARY CONCERNS AS NOT ALLOWABLE BUSINESS EXPENDITURE IN THE HANDS OF THE APPELLANT ON THE AL LEGED GROUND THAT THE LOAN AND INTEREST THEREON HAD BEEN SHOWN IN HIS P/L ACCOUNT AND NOT I N THE RESPECTIVE BOOKS OF THE PROPRIETARY CONCERNS. 2. THAT, THE LD. CIT(A) ERRED IN NOT HAVING CONSI DERED THAT THERE IS NO SEPARATE IDENTITY OF THE PROPRIETARY CONCERN AND IF THE INTEREST EXPENDI TURE WOULD HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE PROPRIETARY CONCERN INSTEAD OF INDI VIDUAL ACCOUNT, LOGICALLY IT WOULD EVENTUALLY BE IN THE ACCOUNT OF THE SAME PERSON AND THAT BEING SO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.10,06,209/- IS ARBITR ARY, WITHOUT ANY VALID REASONS AND LIABLE TO BE DELETED. 3 THAT, THE LD. AO & CIT(A) ERRED IN NOT HAVING C ONSIDERED THAT BALANCE SHEET OF THE APPELLANT CLEARLY REFLECTED THAT THE LOANS BORROWED IN INDIVIDUAL CAPACITY WERE TRANSFERRED/INVESTED IN THE PROPRIETORSHIP CONCER NS FOR EARNING PROFIT FROM BUSINESS AND HENCE THE INTEREST COST INCURRED ON THE SAID PERSON AL BORROWINGS WAS INTEGRAL PART OF EARNING PROFIT IN THE SAID BUSINESS AND HENCE DEDUC TIBLE U/S.36(1)(III) OF THE ACT. 4. THAT, AS THE ID. AO & CIT(A) FAILED TO BRING O N RECORD ANY COGENT MATERIAL TO ESTABLISH THAT INTEREST BEARING LOAN HAD NOT BEEN INVESTED/UT ILIZED IN THE PROPRIETARY CONCERNS BUT USED FOR PERSONAL PURPOSES, THEY HAVE ERRED IN HAVING DI SALLOWED INTEREST EXPENDITURE OF RS.10,06,209/- ON SUCH BUSINESS LOAN WHEN THE PROP RIETARY CONCERNS HAVE NO SEPARATE LEGAL 2 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 ENTITY AND THE INCOME OF THE PROPRIETARY CONCERNS I S TAXABLE IN THE INDIVIDUAL HANDS OF THE APPELLANT. 5. THAT, THE INTEREST PAID ON OLD LOANS BORROWED BY THE APPELLANT AND CARRIED FROM EARLIER YEARS WAS ALLOWED IN THE ASSESSMENTS AS A BUSINESS EXPENDITURE IN THE HANDS OF THE APPELLANT FOR IMMEDIATELY EARLIER A.Y. AND SUBSEQUE NT A.YS AND AS PER RULE OF CONSISTENCY, THE DISALLOWANCE OF SUCH IDENTICAL EXPENDITURE ON T HE SAME UNSECURED CARRIED FORWARD OLD LOAN IS UNCALLED FOR AND NOT SUSTAINABLE IN LAW. 6. THAT, THE LD. AO & CIT(A) ALSO ERRED IN HAVING DISALLOWED INTEREST EXPENSES AS NOT RELATED TO BUSINESS BY HOLDING THAT TAX AUDIT IS REQUIRED FOR THE EXPENDITURE CLAIMED M PERSONAL ACCOUNT IN SPITE OF THE FACT THAT AS PER I .T. ACT, PERSONAL ACCOUNT WAS NOT LIABLE FOR TAX AUDIT U/S.44AB AND ACCOUNTS OF THE PROPRIETARY CONCERNS WERE STATUTORILY AUDITED U/S.44AB OF THE ACT. 7. THAT, AS THE ORDER OF LD. C.I.T.(A) ON THE ABO VE ISSUES SUFFER FROM ILLEGALITY AND IS DEVOID OF ANY MERIT, THE SAME SHOULD BE QUASHED AND YOUR A PPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 8. THAT, THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODIFY, SUBSTITUTE, ADD TO, ABRIDGE AND/OR RESCIND ANY OR ALL OF THE ABOVE GROUNDS. 2. THOUGH THE ASSESSEE HAS PREFERRED EIGHT GROUNDS OF APPEAL, THE MAIN GROUNDS ARE GIVEN IN GROUND NOS. 1 TO 6 ABOVE. GROUND NOS. 7 A ND 8 ARE GENERAL IN NATURE, SO IT STANDS DISMISSED. 3. THE MAIN GRIEVANCE OF THE ASSESSEE IS REGARDING THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE TO THE TUNE OF RS.10,06,209/- WHICH THE ASSESSEE AN INDIVIDUAL, WHO HAVE TAKEN UNSECURED LO AN AND INVESTED IN HIS TWO PROPRIETARY CONCERNS. BRIEF FACTS OF THE ISSUE AS NOTED BY AO ARE THAT THE ASSESSEE E-FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 30/9/2012 DECLARING A TOTAL INCOME OF RS.6,68,971/-. LATER THE CASE WAS SELECTED FOR SCRU TINY THROUGH CASS AND ACCORDINGLY NOTICES U/S 142(1) AND 143(2) WERE ISSUED AND SERVE D UPON THE ASSESSEE. DURING THE CONCERNED PREVIOUS YEAR THE ASSESSEE WAS ENGAGED IN TRADING OF YARN. THE AO ACKNOWLEDGES THAT DURING THE ASSESSMENT PROCEEDINGS , BOOKS OF ACCOUNTS, BANK STATEMENTS, LOAN CONFIRMATIONS AND BILL/VOUCHERS WERE PRODUCED BY THE A.R. OF THE ASSESSEE. ENQUIRIES HAVE BEEN MADE BY ISSUING LETTERS U/S 133(6) OF THE ACT. THE REPLIES TO THE SAME WERE TALLIED WITH THE ASSESSEE'S CLAIM. THE AO ALSO NOTICED THA T THE ASSESSEE HAS CLAIMED A DEDUCTION OF INTEREST OF RS. 10,06,209/- ON UNSECURED LOAN IN HI S PERSONAL P/L ACCOUNTS WHEREIN HE CREDITED HIS NET BUSINESS INCOME AMOUNTING RS.16,81 ,496/-. THE AO NOTED THAT THIS AMOUNT 3 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 OF NET BUSINESS INCOME HAS BEEN DERIVED THROUGH THE ACCOUNTS OF THE BUSINESS DULY COVERED BY AUDIT U/S 44AB WHEREIN THE ASSESSEE DEBITED ALL THE BUSINESS EXPENDITURE INCLUDING INTEREST EXPENDITURE IN RESPECT OF UNSECURED LOANS TAKEN FOR AND UTILIZED IN HIS BUSINESS. THEREFORE, ACCORDING TO THE AO, FURTHER CLAIM OF IN TEREST IN RESPECT OF ANOTHER PORTION OF UNSECURED LOAN TAKEN IN HIS PERSONAL ACCOUNTS TO DE DUCT FROM HIS NET BUSINESS INCOME COMPUTED THROUGH AUDITED ACCOUNTS IS NOT ALLOWABLE AND SO HE ISSUED SHOW CAUSE NOTICE (SCN). PURSUANT TO SCN OF AO THE ASSESSEE REPLIED AS UNDER : . IN CASE OF INDIVIDUAL ACCOUNT NO TAX AUDIT IS R EQUIRED AS PER PROVISIONS OF THE I. T. ACT, 1961 U/S 44AB. HOWEVER, BOTH THE PROPRIETARY CONCER NS ARE DULY TAX AUDITED UNDER I. T. ACT, 1961 BY QUALIFIED FIRM OF CHARTERED ACCOUNTANTS.' AFTER RECEIPT OF THE AFORESAID REPLY OF ASSESSEE, T HE AO ADMITS THAT IT IS CORRECT TO STATE THAT IN CASE OF INDIVIDUAL ACCOUNT NO TAX AUDIT IS REQUI RED AS PER PROVISION OF THE SECTION 44AB OF THE INCOME TAX ACT, 1961. AND THE AO OBSERVES ;- BUT THE MATTER OF THE FACT IS THAT THE ACCOUNTS OF THE ASSESSEE'S BUSINESS IS SUBJECT TO A UDIT U/S 44AB AND THE ASSESSEE CLAIMS A DEDUCTION FROM HIS NET BUSINESS INCOME IN RESPECT O F INTEREST EXPENDITURE AND HE ALSO CLAIMS THAT THE CONCERNED LOAN IS UTILIZED IN HIS BUSINESS . THAT MEANS THAT THE INTEREST EXPENDITURE SO CLAIMED IS A BUSINESS EXPENDITURE. IT CAN ALSO N OT BE DENIED THAT BUSINESS EXPENDITURE MUST ALWAYS BE SHOWN AND DEBITED IN THE ACCOUNTS OF THE BUSINESS. BUT IN THIS CASE AN AMOUNT OF UNSECURED LOAN OTHER THAN THE LOANS SHOWN IN THE ACCOUNTS OF THE ASSESSEE'S PROPRIETORSHIP BUSINESS AND INTEREST THEREON CLAIME D TO BE A BUSINESS EXPENDITURE ARE SHOWN IN ANOTHER SET OF ACCOUNTS. IF ANY LOAN IS TA KEN FOR THE PURPOSE OF BUSINESS THE ASSESSEE IS DUTY BOUND TO SHOW IT IN THE ACCOUNTS O F THAT BUSINESS WHICH IS SUBJECT TO AUDIT U/S.44AB IN ORDER TO ENABLE THE AUDITOR TO REPORT P ROPERLY ON THE SAID LOANS IN FORM 3CD. BUT IN THIS CASE THE ASSESSEE DID NOT INCLUDE THE I NTEREST EXPENDITURE OF RS.10,06,209/- AND THE RELATED LOAN AMOUNT IN THE AUDITED ACCOUNTS OF HIS PROPRIETORSHIP BUSINESS . IN VIEW OF THE ABOVE REASONS, THE SAID AMOUNT WAS DISALLOWED B Y THE AO AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A) WHO DID NOT GO INTO THE REASONS GIVEN BY THE AO TO DENY THE DISALL OWANCE, HOWEVER, HAD GIVEN A DIFFERENT REASON TO DENY THE CLAIM. ACCORDING TO LD. CIT(A) , IT IS FOR THE ASSESSEE TO PROVE WITH CASH 4 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 FLOW STATEMENT OR OTHERWISE AS TO HOW THE PERSONAL LOAN WAS UTILIZED IN EACH OF HIS BUSINESS. ACCORDING TO THE LD. CIT(A), SINCE THE ASSESSEE DID NOT PROVE THAT LOAN WAS SUBSTANTIALLY USED FOR HIS BUSINESS, THE AOS ACTION CANNOT BE IN TERFERED WITH . ACCORDING TO LD. CIT(A), THE BALANCE SHEET FIGURE SHOWS ONLY THE AMOUNT AS O N 31.03.2012 AND THE UTILISATION OF LOAN COULD BE DEMONSTRATED BY WAY OF LOAN TRAIL WHICH HA S NOT BEEN PLACED IN THE APPEAL PAPERS. AND, THEREFORE, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THIS DIFFERENT REASON. AGGRIEVED, THE ASSESSEE IS BEFORE THE TRIBUNAL. 5. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE CAREFULLY. IT IS NOTED THAT THE ASSESSEE HAS T WO PROPRIETORSHIP CONCERNS NAMELY, M/S. SRI BALAJI PRINTS AND M/S. RAJ COMMERCIAL. THE ASSESSE E MAINTAINS THREE (3) BALANCE SHEETS I.E. TWO (2) IN RESPECT OF TWO (2) OF HIS PROPRIETORSHIP CONCERNS; AND MAINTAINS THE OTHER BALANCE- SHEET THAT OF HIS INDIVIDUAL/SELF. THE ASSESSEE HA S TAKEN LOAN FROM VARIOUS LENDERS IN EARLIER YEARS AMOUNTING TO RS.65,60,000/- AND THE OUTSTANDI NG LOAN AMOUNT AS ON 31.03.2012 WAS RS.92,91,253/- BREAK UP OF WHICH IS GIVEN IN PAGES 1 AND 2 OF THE PAPER BOOK. THE ASSESSEE HAD TAKEN THE LOAN IN HIS PERSONAL CAPACITY AND THE SAID AMOUNT WAS INTRODUCED AS HIS CAPITAL IN THE ASSESSEES PROPRIETORSHIP CONCERN M/S. SRI B ALAJI PRINTS AND M/S. RAJ COMMERCIAL. FOR THE LOAN TAKEN BY THE ASSESSEE, AN AMOUNT OF RS .10,06,209/- WAS PAID AS INTEREST TO THE LOAN CREDITORS AND THE SAID AMOUNT WAS CLAIMED AS D EDUCTION FROM THE TOTAL INCOME OF THE ASSESSEE WHICH IS FOUND FROM A PERUSAL OF THE PROF IT & LOSS ACCOUNT ENCLOSED AT PAGE 3 OF THE PAPER BOOK. WHEN THE AO ASKED FOR AN EXPLANATI ON AS TO THE INTEREST AMOUNT CLAIMED TO THE TUNE OF RS.10,06,209/- THE ASSESSEE EXPLAINED T HAT THE INTEREST PAID ON LOAN TAKEN IN PERSONAL ACCOUNT HAVE NOT BEEN UTILIZED FOR ANY PER SONAL PURPOSE, BUT HE INVESTED IT IN THE PROPRIETARY CONCERN FOR EARNING INCOME AND, THEREFO RE, IT IS AN ALLOWABLE EXPENDITURE BEING NOT A PERSONAL EXPENDITURE. HOWEVER, THE AO DID NO T ACCEPT THE EXPLANATION GIVEN BY THE ASSESSEE FOR THE REASON THAT THE INTEREST EXPENDITU RE CLAIMED FOR DEDUCTION HAS NOT BEEN COVERED IN THE TAX AUDIT REPORT AS PER SEC. 44AB OF THE ACT. THE ASSESSEE EXPLAINED THAT IN CASE OF AN INDIVIDUAL ACCOUNT, NO TAX AUDIT IS REQU IRED U/S. 44AB OF THE ACT AND SINCE BOTH THE PROPRIETARY CONCERNS HAVE BEEN AUDITED AS PER L AW, THE AUDIT REPORT OF THE TWO PROPRIETARY CONCERNS HAVE BEEN TAKEN INTO CONSIDERA TION FOR DRAWING UP THE THIRD (3) BALANCE SHEET OF THE ASSESSEE WHICH WAS MADE IN HIS PERSONA L CAPACITY. HOWEVER, THE AO WAS NOT 5 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 SATISFIED WITH THE EXPLANATION RENDERED BY THE ASSE SSEE AND, THEREFORE, DISALLOWED THE INTEREST CLAIM TO HAVE BEEN EXPENDED BY THE ASSESSE E TO THE TUNE OF RS.10,06,209/-. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO BY ALLEGI NG THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY SPECIFIC DETAILS BY SUBMITTING CASH F LOW TRAIL OF THE LOAN AMOUNT BEING UTILIZED BY THE TWO BUSINESS CONCERNS AND CONFIRMED THE ACTI ON OF AO. ASSAILING THE ACTION OF THE LD. CIT(A), THE LD. AR CONTENDED THAT PROPRIETARY CONCERN IS A TYPE OF ENTERPRISE I.E. OWNED AND RUN BY ONE PERSON AND THERE IS NO LEGAL DISTINCTION BETWEEN THE OWNER AND THE BUSINESS ENTITY. THEREFORE, PROPRIETARY CONCERN IS NOT A SEPARATE LEGAL ENTITY. FOR THE AFORESAID PROPOSITION THE LD. AR DREW OUR ATTENTION TO THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF SVAPN CONSTRUCTIONS VS. IDP L EMPLOYEES COOPERATIVE GROUP 127 (2006) DLT 80 WHEREIN HONBLE HIGH COURT HAS HELD A S UNDER: 15. PERUSAL OF THE PETITION REVEALS THAT PETITION HAS BEEN FILED IN THE NAME OF SOLE PROPRIETORSHIP FIRM WHICH IS NOT A LEGAL ENTITY THR OUGH ITS SOLE PROPRIETOR. A SOLE PROPRIETORSHIP FIRM IS NOT A LEGAL ENTITY WHICH CAN SUE IN ITS OWN NAME THOUGH ANY TWO PERSONS CLAIMING OR BEING LIABLE AS PARTNERS AND CA RRYING ON BUSINESS MAY SUE OR BE SUED IN THE NAME OF FIRM OF WHICH SUCH PERSONS ARE PARTNERS AT THE TIME OF ACCRUING OF CAUSE OF ACTION, HOWEVER UNDER ORDER XXX OF THE CODE OF CIVI L PROCEDURE AND UNDER ANY OTHER PROVISION OF CODE A PERSON CARRYING ON BUSINESS IN A NAME OTHER THAN HIS CAN SUE IN THE NAME OTHER THAN HIS. IN MIRAJ MARKETING CORPORATION (SUPRA) RELIED ON BY THE RESPONDENT, IT WAS HELD THAT A SOLE PROPRIETORSHIP FIRM WHICH IS N OT A LEGAL ENTITY CANNOT SUE IN ITS OWN NAME. IN THAT CASE, PLAINTIFF WAS DESCRIBED TO BE A PROPRIETORSHIP FIRM REPRESENTED THROUGH A PERSON WHO HAD NEITHER SIGNED THE PLAINT NOR HAD SI GNED THE POWER OF ATTORNEY WHICH WAS FILED IN THE CASE AND NO STATEMENT WAS MADE IN THE PLAINT AS TO WHO WAS THE PROPRIETOR OF THE FIRM. IN THE CASE OF P. C. ADVERTISING (SUPRA), IT WAS HELD THAT THE SUIT FILED IN THE NAME OF PROPRIETORSHIP FIRM WHICH WAS NEITHER A REGISTERED COMPANY NOR A JOINT FAMILY NOR A PARTNERSHIP FIRM, IN THE ABSENCE OF ANY PRAYER TO S EEK AMENDMENT TO ALLOW THE SOLE PROPRIETOR TO SUE IN HIS NAME WAS MAINTAINABLE. 16. THE PETITION HAS BEEN FILED IN THE NAME OF M/S SVAPN CONSTRUCTIONS AND NOT IN THE NAME OF SHRI.A. K. KHANNA ITS SOLE PROPRIETOR. IN THE P ETITION FILED BY THE PETITIONER, NO PRAYER HAS BEEN MADE SEEKING AMENDMENT TO SUE IN THE NAME OF T HE SOLE PROPRIETORSHIP FIRM. EVEN ACCORDING TO THE AVERMENTS MADE IN THE PETITION, TH OUGH IT IS STATED THAT MR. A.K. KHANNA IS THE SOLE PROPRIETOR OF THE FIRM, M/S. SVAPN CONSTRU CTION, HOWEVER, NO PERMISSION HAS BEEN SOUGHT TO SUE IN THE NAME OF THE SOLE PROPRIETORSHI P FIRM. IF THE SOLE PROPRIETORSHIP FIRM IS NOT A LEGAL ENTITY, THE PETITION SHOULD HAVE BEEN F ILED BY THE SOLE PROPRIETOR IN HIS NAME ON BEHALF OF HIS SOLE PROPRIETORSHIP FIRM AND NOT IN T HE NAME OF SOLE PROPRIETORSHIP FIRM. CONSIDERING IT FROM ANY POINT, THE INEVITABLE INFER ENCE IS THAT A PETITION IN THE NAME OF A SOLE PROPRIETORSHIP FIRM'S NAME WHICH IS NOT A LEGAL ENT ITY IS NOT MAINTAINABLE. 6. THE LD. AR ALSO DREW OUR ATTENTION TO THE DECISI ON OF THE HON'BLE DELHI COURT IN THE CASE OF MIRAJ MARKETING CORPORATION VS VISHAKA ENGI NEERING AND ANR. REPORTED IN 115 (2004) DLT 471 WHEREIN IT IS HELD THAT 6 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 '11 A PROPRIETORSHIP FIRM HAS NO LEGAL ENTITY LIK E A REGISTERED FIRM. SUIT CANNOT BE INSTITUTED IN THE NAME OF UNREGISTERED PROPRIETORSH IP FIRM AND THE SAID SUIT IS TO BE INSTITUTED IN THE NAME OF PROPRIETOR. THERE IS NO STATEMENT MA DE IN THE PLAINT BY THE PLAINTIFF AS TO WHO IS THE PROPRIETOR OF THE FIRM. SH. AMITABH SHARMA W AS DESCRIBED IN THE CAUSE TITLE OF THE PLAINT ONLY AS AN AUTHORISED REPRESENTATIVE. THE NA ME OF THE PROPRIETOR OF THE SAID PROPRIETORSHIP FIRM IS NOT GIVEN IN THE PLAINT. THE PLAINT WAS NOT SIGNED BY THE AUTHORISED REPRESENTATIVE. A SOLE PROPRIETORSHIP FIRM IS NOT A LEGAL ENTITY WHICH CAN SUE OR BE SUED IN ITS OWN NAME. SUCH SUIT RELATING TO OR AGAINST THE AFFA IRS OR CLAIMS OF A PROPRIETORSHIP CONCERN HAS TO BE BROUGHT OR MADE AGAINST THE PERSON WHO IS THE SOLE PROPRIETOR OF THE FIRM'. 7. THUS IT WAS CONTENDED BY THE LD. AR THAT WHEN TH ERE IS NO SEPARATE IDENTITY OF THE PROPRIETARY CONCERN AND THE PROPRIETOR (I.E. THE AS SESSEE IN THIS CASE), EVEN IF THE INTEREST EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IS ACCOUNTED FOR IN THE BOOKS OF THE PROPRIETOR (I.E. THE ASSESSEE) AND NOT IN THE BOOKS OF THE PROPRIETARY CONCERNS, IT WILL NOT ALTER OR AFFECT THE ALLOWABILITY OF THE EXPLANATION. FURT HER, THE LD. AR DREW MY ATTENTION TO P&L ACCOUNT AND BALANCE SHEET PLACED AT PAGE 3 OF PAPER BOOK. FROM A PERUSAL OF IT, IT IS DISCERNED THAT THE INVESTMENT IN PROPRIETORSHIP CON CERNS TOTALS TO RS 1,39,18,579.38/-. THE OWN FUNDS OF THE ASSESSEE IS WHEN TOTALED COMES TO RS 48,47,568.07 WHICH FUND EVEN IF WAS UTILIZED ENTIRELY IN THE PROPRIETORSHIP CONCERN , I NOTE WAS NOT SUFFICIENT TO COVER THE ENTIRE INVESTMENT OF RS.1.39 CR. I.E. DIFFERENCE IS NOTED AS (RS.1.30 CR. RS.48.49 LAKHS = RS. 81.51 LACS). THERFORE IN THE LIGHT OF THIS FACT, IT CAN BE SAFELY ASSUMED THAT THE INVESTMENT SHOWN IN PROPRIETORSHIP CONCERNS HAD TO BE MET OUT OF BORROWED FUNDS. THEREFORE, FROM THE PERUSAL OF THE BALANCE SHEET ITSELF IT IS NOTED THA T THE BORROWED FUNDS WHICH IS TO THE TUNE OF RS. 92 LAKHS WHICH FUND WAS THUS UTILIZED IN THE PR OPRIETORSHIP CONCERN AND, THEREFORE, THE LD. CIT(A)'S CONTENTION THAT UTILISATION OF LOAN CA N ONLY BE PROVEN THROUGH A CASH FLOW STATEMENT CANNOT BE COUNTENANCED IN THE FACTS OF TH E CASE AS DISCUSSED. THEREFORE, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE CLAIM OF THE A SSESSEE IN THE RIGHT PERSPECTIVE AND, THEREFORE, SINCE THE AMOUNT WHICH THE ASSESSEE HAS BORROWED HAS BEEN UTILIZED AND INVESTED BY THE ASSESSEE IN THE TWO CONCERNS, THE INTEREST I S AN ALLOWABLE EXPENDITURE. MOREOVER, IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT IN THE SUB SEQUENT TWO ASSESSMENT YEARS I.E. FOR AY 2013-14 AND 2014-15 THE INTEREST PAID ON THE VERY S AME LOAN BORROWED BY THE ASSESSEE WHICH IS CARRIED FORWARDED FROM EARLIER YEARS WAS A LLOWED AS BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE, [COPY OF THE SAME IS SEEN PL ACED AT PAGE 6 TO 13 OF THE PAPER BOOK]. THUS, IT IS SEEN THAT AO HAS ACCEPTED THE ALLOWABIL ITY OF THE SAID INTEREST EXPENDITURE IN SUBSEQUENT YEARS AND, THEREFORE, I AM OF THE VIEW T HAT A CONSISTENT STAND NEEDS TO HAVE BEEN 7 ITA NO. 505/KOL/2019 ASHISH KR. PATWARI, AY- 2012-1 3 TAKEN AND TAKING INTO CONSIDERATION THE FACTS NOTED SUPRA, I AM INCLINED TO ALLOW THE CLAIM OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 25TH SE PTEMBER, 2019. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED :25TH SEPTEMBER , 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT SHRI ASHISH KR. PATWARI, 178, J. L. BAJAJ STREET, KOLKATA-700 007. 2 RESPONDENT ITO, WARD-43(2), HALDIA 3. 4. CIT(A)- 13, KOLKATA (SENT THROUGH E-MAIL) CIT-, , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR