SANDEEP KUMAR HISSARIA ( PROP. OF M.S, A.T. TEXTILES), MUMBAI V. DCIT RG 14(2), MUMBAI

ITA 5504/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9226 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 06-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Earning of tax free income; Cost of acquisition; Corroborative evidences; Capital expenditure
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.5504/MUM/2010(A.Y. 2006-07) SANDEEP KUMAR HISSARIA, (PROP. OF M/S. A.T. TEXTILES), SAURI BLDG., 74/80, BABU GENU ROAD, 3 RD FLOOR, KALBADEVI ROAD, MUMBAI 400 002. PAN: AAAPH 3095A (APPELLANT) VS. THE DCIT, RANGE 14(2), 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 021. (RESPONDENT) APPELLANT BY : SHRI VIJAY KOTHARI RESPONDENT BY : SHRI V.KRISHNAMOORTHY DATE OF HEARING : 06/12/2012 DATE OF PRONOUNCEMENT : 19/12/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-25, MUMBAI DATED 20/5/2010 FOR THE ASSESSMENT YEAR 2006- 07. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EAD AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING CLAIM OF DEDUCTION OF INTEREST PAID OF RS. 20,21,278/- WITHOUT APPRECIATING THAT THE INTEREST PAID WAS ON BORROWINGS MADE FOR INVESTMENT OF CAPITAL IN THE PROPRIETORSHIP CON CERN, A.T.TEXTILES; FOR DERIVATIVE TRADING IN SHARES AND SECURITIES AND FOR PURCHASE OF SHARES OF HARIOM METAKOKE PVT. LTD. 2. THE LEARNED COMMISSIONER , INCOME TAX (APPEALS) ERRED IN CHARGING INTEREST U/S. 234B AND 234D OF THE ACT AND HAVING R EGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELL ANT DENIES ITS LIABILITY FOR PAYMENT OF INTEREST CHARGED. ITA NO.5504/MUM/2010(A.Y. 2006-07) 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF T RADING OF INDUSTRIAL AND ALLIED PRODUCTS AND ALSO DEALING IN CLOTH AND DERIVATIVE T RADING IN SHARES AND SECURITIES AND ALSO DECLARED CAPITAL GAINS. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT VARIOUS BORROWINGS WERE MADE BY THE ASSESSEE FOR THE PURPOSE OF CARRYING ON BUSINESS OF PROPRIETORSHIP A ND ALSO FOR DERIVATIVE TRADING. THE ASSESSEE ALSO BORROWED AMOUNT FOR PURCHASE OF S HARES OF HARIOM METAKOKE PVT. LTD.. THE AO DISALLOWED A SUM OF RS.20,21,278 /- BEING INTEREST ON THE BORROWINGS FOR THE REASON THAT NEXUS BETWEEN BORROW ED FUNDS AND ITS UTILIZATION IN INVESTMENT FOR EARNING EXEMPT INCOME OR INCOME FRO M OTHER SOURCES HAS NOT BEEN PROVED BY THE ASSESSEE AND, THEREFORE, HE DISALLOWE D THE AFOREMENTIONED AMOUNT. 3. THE ADDITION WAS AGITATED IN AN APPEAL FILED B EFORE LD. CIT(A) AND LD. CIT(A) HAS DECIDED THIS ISSUE EX-PARTE QUA THE ASSESSEE. HE PROCEEDED TO DECIDE THE APPEAL OF THE ASSESSEE EX-PARTE AS PER HIS OBSERVAT ION CONTAINED IN PARA-4 OF HIS ORDER. THE RELEVANT PARA IS REPRODUCED HEREUNDER: 4. IN RESPONSE TO STATUTORY NOTICES ISSUED INITIALL Y, SHRI VIJAY KOTHARI, CA WITH SHRI VIJAY AGARWAL, CHARTERED ACCOUNTANT, APPEARED ON BEHALF OF THE APPELLANT AND FILED SOME DETAILS I.E. COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME, COMPUTATION OF TOTAL INCOME, P S L A/C., CAPITAL A/ C. AND BALANCE SHEET ETC. DURING THE APPELLATE HEARING ON 09.04.2010, THE AUT HORIZED REPRESENTATIVES OF THE APPELLANT WERE REQUESTED TO PROVE NEXUS OF INTE REST CLAIMED AS DEDUCTION AGAINST INTEREST INCOME WITH SUPPORTING EVIDENCES A ND ALSO ASKED TO FILE COPIES OF LEDGER ACCOUNTS AND BANK STATEMENTS ETC. AND THE BASE WAS ADJOURNED TO 28.04.2010. BUT ON THE ADJOURNED DATE NO ONE APPEAR ED NEITHER ANY ADJOURNMENT WAS SOUGHT. NOTICE FOR HEARING WAS AGAI N ISSUED ON 14.05.2010 FIXING THE HEARING TO 20.05.2010. BUT ON THIS DATE ALSO NEITHER ANYONE APPEARED NOR ANY SUBMISSIONS IN WRITING, DETAILS CA LLED FOR AND APPLICATION SEEKING ADJOURNMENT WERE FILED. IT IS THUS, EVIDENT THAT THE APPELLANT IS NOT INTERESTED IN PURSUING THE APPEAL FILED AND THE GR OUNDS RAISED AND THE APPELLANT IS NOT IN A POSITION TO ESTABLISH THE NEX US OF INTEREST CLAIMED AS DEDUCTION AGAINST INTEREST COME. I ALSO DO NOT FIN D IT APPROPRIATE TO AGAIN ISSUE A NOTICE FOR HEARING AND WAIT FOR THE NON COMPLIANC E ON THE PART OF THE APPELLANT, INSTEAD I PREFER TO PROCEED WITH THE DIS POSAL OF APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND ON MERIT. ITA NO.5504/MUM/2010(A.Y. 2006-07) 3 3.1 LD. CIT(A) HAS ARRIVED AT THE CONCLUSION THAT S UBMISSIONS MADE BY THE ASSESSEE BEFORE AO HAS REVEALED THAT INTEREST PAID ON BORROWINGS WERE UTILIZED FOR INVESTMENT OF CAPITAL IN PARTNERSHIP CONCERN M/S. A .T. TEXTILES AND IN THE SHARES OF HARIOM METAKOKE PVT. LTD., WHICH ARE IN THE NA TURE OF CAPITAL EXPENDITURE AND ARE ALSO PERSONAL IN NATURE. HE, THEREFORE, HELD T HAT THE EXPENDITURE IS NOT ADMISSIBLE FOR DEDUCTION UNDER SECTION 57(3) OF THE ACT. THEREFORE, HE UPHELD THE ACTION OF AO. REGARDING LEVY OF INTEREST HE OBSERV ED THAT LEVY OF INTEREST U/S. 234 C & 234D IS MANDATORY AND CONSEQUENTIAL, THEREFORE, HE DISMISSED THAT GROUND ALSO. AGGRIEVED BY THE SAID ORDER ASSESSEE HAS FI LED AFOREMENTIONED APPEAL. 4. AT THE OUTSET IT WAS THE CASE OF LD. A.R THAT T HIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE EARLIER ORDER OF TRIBUNAL IN RE SPECT OF ASSESSMENT YEAR 2001-02, WHEREIN IT IS HELD THAT INTEREST ON FUNDS BORROWED FOR ACQUISITION OF SHARES IS TO BE TAKEN INTO ACCOUNT TOWARDS COST OF ACQUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. COPY OF THE SAID ORDER IS ENCLOSED A T PAGE 22 TO 24 OF THE PAPER BOOK. IT IS AN ORDER DATED 10/2/2010 IN ITA NO.1637/MUM/2 009. HE SUBMITTED THAT LD. CIT(A) HAS NOT PROPERLY APPRECIATED THE FACTS O F THE PRESENT CASE AND HAS DECIDED THE ISSUE BY WAY OF AN EX-PARTE ORDER ON T HE GROUND THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL. HE SUBM ITTED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ACCEPTED. 5. ON THE OTHER HAND, LD. D.R RELIED UPON THE ORDER S PASSED BY AO AS WELL AS LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE OBSERVATIONS OF LD. CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE BY WAY OF AN EX-PARTE ORDER HAVE ALREADY BEEN REPRODUCED IN THE EARLIER PART OF THIS ORDER. WE NOTICED THAT IT HAS NOT BE EN SPECIFIED BY LD. CIT(A) THAT WHETHER NOTICE OF FIXING DATE OF HEARING ON 20//5 /2010 WAS SERVED ON THE ASSESSEE AS WHAT HAS BEEN STATED IS THAT SUCH NOTI CE WAS ISSUED. IT IS THE CASE OF ITA NO.5504/MUM/2010(A.Y. 2006-07) 4 LD. A.R THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE AS THE SAME IS ALSO COVERED BY THE EARLIER DECISION OF THE TRIBUNAL. SUCH CLAIM O F LD. A.R HAS NOT BEEN EXAMINED BY LD. CIT(A). KEEPING IN VIEW THE INTEREST OF JUS TICE, WE ARE OF THE OPINION THAT IT WILL BE APPROPRIATE IF THE MATTER IS RESTORED BACK TO THE FILE OF LD. CIT(A) WITH A DIRECTION TO GIVE PROPER OPPORTUNITY TO THE ASSESS EE TO JUSTIFY ITS CLAIM AND AFTER GIVING SUCH OPPORTUNITY THE ISSUE RAISED IN PRESENT APPEAL WILL BE DECIDED DE-NOVO AS PER LAW. WE DIRECT ACCORDINGLY. SINCE WE ARE RESTORING THIS APPEAL TO THE FILE OF LD. CIT(A) WE DO NOT EXPRESS ANY OPINION ON MERITS AS LD. CIT(A) WILL RE-ADJUDICATE THE ISSUES IN THE PRESENT APPEAL AS PER AFOREMEN TIONED DIRECTIONS. 7. IN THE RESULT, FOR STATISTICAL PURPOSES THE APPE AL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19 TH DAY OF DEC. 2012 SD/- SD/- (SANJAY ARORA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH DEC. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R E BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.