SHRI.N.M.VEERAIYAN, ERODE V. PCIT , COIMBATORE

ITA 533/CHNY/2022

AI Insights

The case involves an appeal by Shri N.M. Veeraiyan against the order of the Principal Commissioner of Income Tax, Coimbatore, which revised the assessment for the year 2017-18 under section 263 of the Income Tax Act, 1961. The revision was based on the finding that the interest expenditure claimed by the assessee on a loan was not properly examined in the original assessment. The Tribunal found that the Assessing Officer had not adequately scrutinized the details of the loan and its purpose, leading to an erroneous assessment that was prejudicial to the Revenue. The Tribunal directed a fresh assessment, emphasizing the need for a thorough examination of the facts.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134975 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 12-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 23-06-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Wrong claim; Assessment record; Condonation of delay; Set aside
• Section: 56; 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी वी. दुगाŊ राव, Ɋाियक सद˟ एवं ŵी मनोज कु मार अŤवाल, लेखा सद˟ के समƗ । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. No.533/Chny/2022 िनधाŊरण वषŊ/Assessment Year: 2017-18 Shri N.M. Veeraiyan, No. 333, Saveetha Hospital, Brough Road, Erode 638 001. [PAN: ACNPV1294N] Vs. The Assistant Commissioner of Income Tax, Circle I, Erode. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri T. Vasudevan, Advocate ŮȑथŎ की ओर से/Respondent by : Shri M. Murali, CIT सुनवाई की तारीख/ Date of hearing : 13.04.2023 घोषणा की तारीख /Date of Pronouncement : 21.04.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax – Coimbatore-1, Coimbatore, dated 23.03.2022 relevant to the assessment year 2017- 18 passed under section 263 of the Income Tax Act, 1961 [“Act” in short]. 2. The appeal filed by the assessee is delayed by 33 days in filing the appeal before the Tribunal. The assessee has filed a petition for I.T.A. No.533/Chny/22 2 condonation of delay against which, the ld. DR has not objected. Since the assessee was prevented by reasonable cause, we hereby condone the delay in filing the appeal and admit the appeal for adjudication. 3. Facts are, in brief, that the assessee filed his return of income for the assessment year 2017-18 on 11.09.2017 admitting total income of ₹.2,50,14,420/-. The case was selected for scrutiny through CASS for complete scrutiny and the assessment was completed under section 143(3) of the Act dated 25.10.2019 by accepting the income returned. Subsequently, on an examination of the assessment records, the ld. PCIT found certain errors in the assessment order passed under section 143(3) of the Act, prim facie, prejudicial to the interest of Revenue. Accordingly, by invoking the provisions of section 263 of the Act, the ld. PCIT issued show-cause notice dated 10.03.2022 for filing objections, if any, to the proposed revision towards interest expenditure claimed under section 57 of the Act. In response to the above show cause notice, none appeared on behalf of the assessee nor any submissions filed before the ld. PCIT. Hence, in the absence of any response from the assessee, the ld. PCIT initiated the proceedings under section 263 of the Act based on the materials available on record. I.T.A. No.533/Chny/22 3 3. In the revision order, the ld. PCIT has observed that on perusal of the assessment records for the assessment year 2017-18, the assessee had admitted ₹.1,00,52,900/- as receipt from M M Parking under the head income from other sources and debited ₹.62,97,818/- as interest paid to IndusInd Bank for loan to acquire MM Parking. On verification of the bank statement issued by the IndusInd Bank, the assessee had availed housing loan and the loan was sanctioned on 30.11.2016 and the assessee was repaying the loan amount by monthly EMI. Vide letter dated Nil submitted by the assessee it was stated that the site was used for parking lorries and other vehicles and collected ₹.300/- and ₹.500/- per day as parking fees. The parking income was admitted as income from other sources under section 56 of the Act. The allowable deduction under section 57 of the Act would be maintenance, development of vacant site and interest expenditure incurred, if any, relatable to the vacant site only. As the assessee had availed loan for entire land and building, the interest expenditure would be allowed only against the income from house property under section 24 of the Act. As the assessee had not admitted income under the head of house property, the interest expenditure for the house property claimed under section 57 of the Act is not allowable and requires to be I.T.A. No.533/Chny/22 4 disallowed. Since the above issue was not considered in the assessment order passed under section 143(3) of the Act, the same was erroneous in so far as it is prejudicial to the interest of the Revenue. Accordingly, the ld. PCIT set aside the assessment order and directed the Assessing Officer to redo the assessment. 4. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the Assessing Officer has examined the issue and passed the assessment order under section 143(3) of the Act. The ld. Counsel for the assessee has further submitted that vide notice under section 142(1) of the Act dated 10.05.2019, the Assessing Officer has specifically asked the assessee to furnish evidence in support of the claim of expenses towards interest payments for all kinds of loan including machinery loan, building loan, etc. By referring to page 5 of the notice, the Assessing Officer has also called for the details of deductions claimed under section 57 of the Act under the head “income from other sources” with relevant documents. It was further submission that in response to the above notice, the assessee has furnished all the details before the Assessing Officer. After considering the details given by the assessee, the Assessing Officer passed the I.T.A. No.533/Chny/22 5 assessment order under section 143(3) of the Act. The assessee has also submitted before the Assessing Officer that during the previous year relevant to the assessment year 2017-18, the assessee borrowed a sum of ₹.10,78,10,000/- from IndusInd Bank and produced copy of the sanction letter. From the said amount, the assessee had lent a sum of ₹.5,17,00,000/- to M/s. Mamu Tower P. Ltd and another sum of ₹.95,00,000/- to M/s. Queensland Entertainment P. Ltd. as a loan. The assessee did not charge any interest on these loans. The assessee also did not claim any deduction from the income for interest paid to the said bank. Balance amount out of the loan was kept in the current account and savings account of the assessee for future use and submitted that all the details were furnished before the Assessing Officer and were duly examined. 5. On the other hand, the ld. DR strongly supported the order passed by the ld. PCIT. 6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The case of the ld. PCIT is that during the assessment year 2017-18, the assessee had admitted ₹.1,00,52,900/- as receipt from M M Parking I.T.A. No.533/Chny/22 6 under the head income from other sources and debited ₹.62,97,818/- as interest paid to IndusInd Bank for loan to acquire MM Parking. The case of the assessee is that the assessee used MM Parking for parking lorries and other vehicles and collected ₹.300/- and ₹.500/- per day as parking fees and the parking income was admitted as income from other sources under section 56 of the Act. The ld. PCIT, after examining the entire facts of the case, observed that the interest of ₹.62,97,818/- debited from the income from other sources and shown it as interest paid to IndusInd Bank. According to the ld. PCIT, the Assessing Officer has not examined what is the loan the assessee has taken, what is the purpose of loan and the wrong claim made by the assessee. By considering the submissions of the assessee and also the revision order passed under section 263 of the Act, we are of the opinion that the Assessing Officer has not examined anything and simply he asked some question to the assessee and whatever reply the assessee has given was accepted by the Assessing Officer and correct facts are not coming out from the assessment order as well as revision order. In our opinion, the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In this case, it is necessary to be examined what was the loan obtained I.T.A. No.533/Chny/22 7 by the assessee and purpose of the loan taken and needs to examine all the facts in detail. Thus, we uphold the order of the ld. PCIT and without influence by the order passed by the ld. PCIT, the Assessing Officer is directed to pass fresh assessment order de novo in accordance with law after affording reasonable opportunity of being heard to the assessee. 7. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on 21 st April, 2023 at Chennai. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 21.04.2023 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.