ACIT- 17 (1), MUMBAI V. ANIRUDDHA BHANUPRASAD MEHTA, MUMBAI

ITA 5053/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8542 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 31-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A D ASHAR
• Keywords: Opportunity of being heard; Proportionate interest; Set aside
• Section: 143(3); 143(2); 13

Judgement Text

ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 5053 /MUM/2018 (ASSESSMENT YEAR: 2014 - 15 ) THE ACIT - 17 (1) ROOM NO. 117, AAYAKAR BHAVAN, M.K. MARG , MUMBAI 400 020 VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA, 3 RD FLOOR, UNION COOP. INSURANCE BLDG, 23, SIR P.M. ROAD, FORT, MUMBAI 400 001 PAN AABPM6682M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAVINDER SINDHU , D.R RESPONDENT BY: MS. A.D. ASHAR, A.R DATE OF HEARING: 13 .01.2020 DATE OF PRONOUNCEMENT: 15 .01.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 55, MUMBAI, DATED 08.05.2018, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER FRAMED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 30.12.2016. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THOUGH THE BORROWED FUNDS WERE RAISED IN THE BOOKS OF THE ASSESSEE'S PROPRIETARY CONCERN, M/S. UMIYA BUILDERS A DEVELOPERS BUT THOSE FUNDS WERE DIVERTED TO THE PERSONAL BANK ACCOUNT OF THE ASSESSEE AND FROM THAT ACCOUNT TH E ASSESSEE HAD DIVERTED THE SAME TO HIS WIFE AS INTEREST - FREE LOANS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN HOLDING THAT THE LOAN GIVEN TO WIFE WAS NOT GIVEN FROM THE UNSECURED LOANS AND HENCE THE INTEREST PAID BY THE ASSESSEE FROM HIS PROPRIETARY CONCERN'S ACCOUNT IS ALLOWABLE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN NOT APPRECIATING THE SPECIFIC REASONS AND FACTS A FIGURE S CITED BY THE THEN A.O. IN PARA 4(1) OF THE ASSESSMENT ORDER WHICH REVEAL THAT THE FUNDS DIVERTED FROM THE ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 2 PROPRIETARY CONCERN TO THE PERSONAL BANK ACCOUNT OF THE ASSESSEE ARE GIVEN AWAY TO ASSESSEE'S WIFE AND HENCE INTEREST IN CURRED THEREON IS DISALLOWAB LE. THE APPELLANT PRAYS THAT THE ORDER OF THE A.O. SHOULD BE RESTORED AND ORDER OF THE CIT(A) SHOULD BE SET ASIDE. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE WHO IS A PROPRIETOR OF TWO CONCERNS VIZ. (I) M/S UMIYA BUILDERS AND DEVELOPERS WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIVITY; AND (II) M/S UMIYA SERVICES WHICH IS ENGAGED IN THE BUSINESS OF MAINTENANCE OF BUILDINGS, HAD E - FILED HIS RETURN OF INCOME FOR A.Y. 2014 - 15 ON 29.01.2015, DECLARING A TOTAL INCOME OF RS.5,90,58,440/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD SHOWN WORK - IN - PROGRESS OF RS.15,92,46,506/ - . ON A PERUSAL OF THE DETAILS, IT WAS OBSERVED BY THE A.O THAT THE AFORESAID WORK - IN - PROGRESS INCLUDED INTEREST EXPENDITURE OF RS.1,97,74,800/ - . IT WAS GATHERED BY THE A.O ON A PERUSA L OF THE BALANCE SHEET OF THE ASSESSEE THAT HE HAD INTER ALIA ADVANCED AN INTEREST FREE LOAN OF RS.10,18,08,940/ - TO HIS WIFE MS. GUA RI MEHTA. AS SUCH, THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE PROPORTIONATE INTEREST PERTAINING TO THE AFO RESAID INTEREST FREE LOAN ADVANCED BY HIM TO HIS WIFE MAY NOT BE DISALLOWED. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE TH AT THE AFORESAID UNSECURED LOAN OF RS.10,18,08,940/ - WAS ADVANCED BY HIM TO HIS WIFE FROM HIS PERSONAL ACCOUNT DURING THE YEAR 2010 AN D NOT FROM HIS PROPRIETARY CONCERN. APART FROM THAT , IT WAS THE CLAIM OF THE ASSESS EE THAT THE AFORESAID INTEREST E XPENDITURE OF RS.1,97,74,800/ - PERTAINED TO THE BORROWED FUNDS WHICH WERE EXCLUSIVELY UTILISED BY HIM FOR HIS BUSINESS DURING THE YEAR UNDER CONSIDERATION. ON THE BASIS OF HIS AFORESAID CLAIM, IT WAS SUBMITTED BY THE ASSESSEE THAT NO PART OF THE INTEREST EXPENDITURE COULD BE ATTRIBUTED TO THE AFORESAID INTEREST FREE LOAN THAT WAS ADVANCED BY HIM TO HIS WIFE. HOWEVER, THE A.O AFTER NECESSARY DEL IBERATIONS WAS NOT PERSUADED TO ACCEPT THE AFORESAID CLAIM OF THE ASSESSEE. ON A PERUSAL OF THE FACTS, IT WAS GATHERED BY THE A.O THAT THE ASSESSEE HAD ON VARIOUS OCCASIONS DURING THE PERIOD RELEVANT TO FINANCIAL YEAR 2010 - 11 TRANSFERRED FUNDS FROM HIS AFO RESAID PROPRIETARY CONCERN TO HIS PERSONAL BANK ACCOUNT AND UTILISED THE SAME FOR ADVANCING O F INTEREST FREE LOANS TO HIS WIFE. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A.O HOLDING A CONVICTION THAT THE ASSESSEE HAD APPROPRIATED PART OF THE INTEREST BEARING FUNDS FOR PROVIDING INTEREST FREE LOANS TO HIS WIFE, THUS WORKED OUT A PROPORTIONATE DIS ALLOWANCE OF THE INTEREST @ 12% PER ANNUM OF RS.10,18,08,940/ - RESULTING TO A ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 3 CONSEQUENTIAL DISALLOWANCE OF RS.1,22,17,073/ - . AS THE AFORESAID INTEREST EXPENDI TURE FORMED PART OF THE WORK - IN - PROGRESS OF THE ASSESSEE, THEREFORE, THE A.O REDUCED IT FROM THE SAME AND SCALED DOWN THE AMOUNT OF THE WORK - IN - PROGRESS TO RS.14,70,29,433/ - [RS.15,92,46,506/ - ( - ) RS.1,22,17,073/ - ] 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS OBSERVED BY THE CIT(A) THAT THE A.O WAS IN ERROR IN NOT CONSIDERING THE FACT THAT THE LOANS WERE TAKEN IN THE PROPRIETARY CONCERN OF THE ASSESSEE ONLY DURING THE FINANCIAL YEAR 2012 - 13. IN FACT, IT WAS OBSERVED BY THE CIT(A) THAT PRIO R TO THE FINANCIAL YEAR 2012 - 13 NO UNSECURED LOAN S WERE RAISED BY THE AFORESAID PROPRIETARY CONCERNS OF THE ASSESSEE. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE CIT(A) WAS OF THE VIEW THAT AS TH E ASSESSEE HAD GIVEN AN UNSECURED LOAN TO HIS WIFE FROM HIS PERSONAL SAVING BANK ACCOUNT IN THE YEAR 2010 - 11, I.E TWO YEARS PRIOR TO THE YEAR IN WHICH THE UNSECURED LOANS WERE RAISED BY HIS PROPRIETARY CONCERN S , THEREFORE, IT WAS BEYOND COMPREHENSION THAT THE SOURCE OF THE SAID LOAN COULD BE RELATED TO THE INTEREST BEARING FUNDS THAT WERE RAISED BY THE ASSESSEE IN THE SUBSEQUENT PERIOD. APART FROM THAT, IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD SUFFICIENT CAPITAL TO JUSTIFY THE AFORESAID LOAN THAT WAS ADVANCED BY HIM TO HIS WIFE. ACCORDINGLY, ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE CIT(A) VACATED THE DISALLOWANCE OF THE INTEREST EXPENDITURE MADE BY THE A.O. 4. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER I N APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R ) RELIED ON THE ASSESSMENT ORDER. 5. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE HAD DRAWN SUPPORT FROM THE ORDER PASSED BY THE CIT(A). 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. AS IS DISCERNIBLE FROM THE ASSESSMENT ORDER, PART OF THE AFORESAID LOAN OF RS.10,18,08,940/ - THAT WAS ADVANCED BY THE ASSESSEE TO HIS WIFE MS. GAURI A. M EHTA WAS SOURCED AS UNDER : SR. NO. BANK NAME DATE NARRATION DEBIT CREDIT 1. KOTAK MAHINDRA BANK 22.04.2010 FTD FROM UMIYA 40,00,000 2. 23.04.2010 GAURI A. MEHTA 40,00,000 3. 03.05.2010 FTD FROM UMIYA 10,00,000 4. 03.05.2010 RTGS GAURI MEHTA 10,00,000 ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 4 5. 30.06.2010 FTD FROM UMIYA 3,25,00,000 6. 30.06.2010 FTD TO GAURI 3,25,00,000 7. 30.06.2010 FTD FROM UMIYA 5,00,00,000 8. 30.06.2010 FTD TO GAURI 5,00,00,000 ON A PERUS AL OF THE AFORESAID DETAILS, IT CAN SAFELY BE GATHERED THAT THE ASSESSEE ON RECEIPT OF FUNDS FROM HI S AFORESAID PROPRIETARY CONCERN HAD THEREAFTER UTILISED THE SAME EITHER ON THE SAME DAY OR A DAY THEREAFTER FOR ADVANCING OF LOAN TO HIS WIFE. AS SUCH, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT THE LOAN WAS ADVANCED BY HIM TO HIS WIFE FROM HIS PERSONAL BANK ACCOUNT. ADMITTEDLY, THE IMMEDIATE SOURCE OF THE AFORESAID LOAN HAPPENS TO BE PERSONAL BANK ACCOUNT OF THE ASSESSEE, BUT A PERUSAL OF THE AFORESAID DETAILS CLEARLY REVEALS THAT FUNDS OF THE PROPRIETARY CONCERN OF THE ASSESSEE WERE TRANSFERRED TO THE AFORESAID PERSONAL BANK ACCOUNT OF THE ASSESSEE FOR THE PURPOSE OF FACILITATING ADVANCING OF THE INTEREST FREE LOANS TO HIS WIFE. ON A PERUSAL OF THE ORDER OF THE CIT(A), WE FIND, THAT THE LATTER HAD PROCEEDED WITH A VIEW THAT THE ASSESSEE HAD RAISED LOANS IN HIS PROPRIETARY CONCERN ONLY DURING THE YEAR 2012 - 13. AS SUCH, THE CIT(A) WAS OF THE VIEW THAT IN THE YEAR 2010 - 11 WHEN THE ASSESSEE HAD ADVANCED LOAN TO HIS WIFE, NO UNSECURED LOANS WERE TAKEN BY THE AFORESAID PROPRIETARY CONCERN OF THE ASSESSEE. ON A PERUSAL OF T HE ORDER OF THE CIT(A), WE FIND, THAT A CHART REFLECTING THE DETAILS OF THE LOANS WHICH WERE RAISED BY THE PROPRI ETARY CONCERN OF THE ASSESSEE I.E DATE OF RAISING OF LOAN, AMOUNT OF LOAN, REPAYMENT OF LOAN ETC. HAD BEEN REPRODUCED, AS UNDER: DATE OF LOAN TAKEN 31.03.2011 31.03.2010 REPAYMENT DATE OF OPENING LOAN SCHEDULE E CURRENT YEAR PREVIOUS YEAR RS. RS. UNSECURED LOAN BARCLAYS BANK 0 608627.00 01.08.2010 ING VYSYS BANK LD. 0 88867.12 08.08.2010 KOTAK MAHINDRA BANK 0 172158.00 05.07.2010 STANDARD CHARTED BANK 0 348359.22 18.07.2010 NARAINDAS BODARAM 0 500000.00 18.05.2010 PRAKASH B TALREJA 18.02.2011 3,60,00000 3,60,00000 25.04.2010 RAMESH MOTIRAM 18.02.2011 2250000 0.00 ROSHNI A DARUAYANANI 03.03.2011 20,00,000 0.00 SETH HOTCHAND LAKSHMICHAND 18.02.2011 1250000 0.00 KISHAN DAS SHYMALAL 04.03.2011 10,00,000 0.00 PAVAN PRAKASH DEVATHA 04.03.2011 1500000 0.00 KAILASH ASSOCIATE 18.02.2011 10,00,000 0.00 ASHOK DARAYANI 0.00 40,00,000 21.10.2010 BHARAT AMARANANI 0.00 10,00,000 13.10.2010 TOTAL 45000000 10318011.34 ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 5 7. ON A PERUSAL OF THE AFORESAID DETAILS, WE ARE OF THE CONSIDERED VIEW THAT NOW W HEN THE CIT(A) HAD HIMSELF OBSERVED THAT THE ASSESSEE HAD RAISED LOANS DURING THE PERIOD 13.02.2011 TO 04.03.2011, THEREFORE, THE SAID FACT IN ITSELF MILITATES AGAINST HIS FINDING THAT NO LOANS WERE RAISED BY THE ASSESSEE PRIOR TO FINANCIAL YEAR 2012 - 13. BE THAT AS IT MAY, WE FIND THAT THE AFORESAID DETAILS THAT HAD BEEN FILED BY THE ASSESSEE WITH THE CIT(A) WERE NOT THERE BEFORE THE A.O. IN OUR CONSIDERED VIEW, IN ALL FAIRNESS THE MATTER REQUIRES TO BE RESTORE D TO THE FILE OF THE A.O WITH A DIRECTION TO VERIFY THE ACTUAL SOURCE FROM WHERE THE LOAN AGGREGATING TO AN AMOUNT OF RS.10,18,08,940/ - WAS ADVANCED BY THE ASSESSEE TO HIS WIFE. IN CASE, IT IS GATHERED BY THE A.O THAT THE ASSE SSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH HIM AT THE RELEVANT POINT OF TIME WHEN THE RESPECTIVE LOANS WERE ADVANCED BY HIM TO HIS WIFE, WHICH WOULD EXPLAIN THE SOURCE OF THE SAID LOANS, THEREIN NO DISALLOWANCE OF THE INTEREST EXPENDITURE WOULD BE CALLED FOR IN THE HANDS OF THE ASSESSEE. OUR AFORESAID VIEW IS SUPPORTED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD. [CIVIL APPEAL NO. 10 OF 2019 (SLP (C) NO. 37/2019)] DATED 02.01.2019 . IN THE AFORESAID CASE, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT IF THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE SUFFICIENT TO MEET ITS INVESTMENT, IT COULD BE PRESUMED THAT THE SAME WAS MADE FROM THE INTEREST FREE FUNDS WHICH WERE AVAILABLE WITH THE ASSES SEE AND NOT FROM THE BORROWED FUNDS. ACCORDINGLY, ON THE BASIS OF OUR AFORESAID OBSERVATIONS WE RESTORE THE MATTER TO THE FILE OF THE A.O FOR FRESH ADJUDICATION. NEEDLESS TO SAY, THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD A REASONABL E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. RESULTANTLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNC ED IN THE OPEN C OURT ON 15. 01.2020 SD/ - SD/ - ( SHAMIM YAHYA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 15 /01/2020 ROHIT, P.S. ITA NO.5053/MUM/2018 A.Y. 2014 - 15 THE ACIT - 17(1) VS. SHRI ANIRUDDHA BHANUPRASAD MEHTA 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI