Ritika Gupta, 3/273, Vidhyadhar Nagar, Jaipur, Jaipur V. ITO Ward-4(2), Jaipur, Ward-4(2), Jaipur

ITA 551/JPR/2019

AI Insights

The case involves Smt. Ritika Gupta, who appealed against the order of the CIT (A)-2, Jaipur, which confirmed the disallowance of an interest expense of Rs. 5,10,513 by the AO. The interest was claimed on borrowed funds used for purchasing properties, which were later let out and generated rental income. The primary legal issue was whether the interest expense was deductible under section 24 of the IT Act, 1961, as the assessee claimed it was inadvertently filed under section 57. The Tribunal found that the assessee had established a nexus between the loan and the property purchase through additional evidence and thus remitted the case back to the AO for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132318 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-02-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Corroborative evidences
• Section: 142(1); 143(1); 139(1)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 551/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2012-13. Smt. Ritika Gupta, 3/273, Vidhyadhar Nagar, Jaipur. cuke Vs. Income Tax Officer, Ward 4(2), Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. ARVPG 6149 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj l s@ Assessee by : Ms. Shivangi Samdhani, CA jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 08/02/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/02/2023 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the assessee is directed against the order dated 27.04.2017 of ld. CIT (A)-2, Jaipur for the assessment year 2012-13. The assessee has raised the following grounds of appeal :- 1. In the facts and circumstances of the case and in law, ld. CIT (A) has erred in confirming the action of the ld. AO in making disallowance of interest expense of Rs. 5,10,513/-. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said disallowance of Rs. 5,10,513/-. 2. The assessee craves her rights to add, amend or alter any of the grounds on or before the hearing. 2 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. 2. The appeal filed by the assessee is delayed by 2 (Two) days. The assessee has submitted an application requesting condonation of delay. The assessee explained that the delay caused due to non receipt of the Order of the ld. CIT (A) dated 27.04.2017 which was remained undelivered. On enquiry from the appellate authority, the assessee came to know about passing of the impugned order and immediately thereafter she obtained certified true copy of the order from the Office of ld. CIT (A)-II, Jaipur on 15.02.2019. Earlier, Shri Suresh Khandelwal, Advocate was engaged to deal with the assessee’s taxation matters, later on the assessee engaged M/s. R. Sogani & Co., Chartered Accountant for handling her taxation matters and this took a couple of days in transferring the case file of the assessee to the present Chartered Accountant and preparation of filing the appeal before the Tribunal. As per provisions of section 253(3) of the IT Act, 1961, the appeal was due to be filed in the Office of the Tribunal on or before 16.04.2019 but the appeal was filed on 19.04.2019 with a delay of 2 days. The assessee, thus, submitted that there was no willful delay in filing of the appeal before the Tribunal but the delay caused due to situation beyond the control of the assessee. She therefore, requested to condone the delay of 2 days. On the other hand, the ld. D/R has no objection if the delay is condoned. 3. On going through the explanation of the assessee, I am satisfied that the assessee has a reasonable cause for filing the appeal delayed by 2 days. I, therefore, condone the delay of 2 days in filing the appeal before the Tribunal. 3 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. 4. The brief facts of the case are that the assessee was engaged in the business of wholesale trading of sugar, boora, patasha, mishri and makahana in the name and style of M/s. Geet Enterprises. The assessee filed her return of income declaring income of Rs. 4,54,178/- on 18.09.2012 under section 139(1) of the IT Act, which was processed under section 143(1) of the IT Act, 1961 at the returned income. The case of the assessee was selected for scrutiny and hence notice under section 143(2) of the IT Act, 1961 was issued on 23.089.2013 by the ITO. Thereafter, on change of incumbent, fresh notice under section 142(1) along with questionnaire was issued by the AO fixing date of hearing on 24.11.2014. In response to the notice, Shri Suresh Khandelwal, ld. A/R of the assessee attended the hearing and furnished the books of accounts consisting of cash book, ledger, bills and vouchers produced which have been examined on test check basis. During the assessment proceedings, the AO noticed that in the computation of income the assessee has claimed interest expenses of Rs. 5,10,573/- on borrowed funds. On perusal of the Balance Sheet of the assessee, the AO found that the assessee has not utilized the borrowed funds neither for earning the interest income nor for business purposes. On being asked to explain justification regarding claimed interest expenses, the assessee could not submit any nexus relationship between the borrowing fund and utilization of fund. The AO thus disallowed the interest expenses and made the addition of Rs. 5,10,513/-. On appeal, the ld. CIT (A) confirmed the disallowance and sustained the addition. 4 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. 5. Now the assessee is in appeal before the Tribunal. The solitary ground raised by the assessee is challenging the disallowance of interest expenses. 6. Before us, the ld. A/R for the assessee has submitted her written submissions as under :- 1. “ The assessee purchased immovable properties situated in Central Spine, Vidhyadhar Nagar, Jaipur. For purchasing the same assessee obtained interest bearing unsecured loans from Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF. 2. Such properties were let out by the assessee and the rental income from the same was offered for taxation. Since the assessee took loan for purchasing the said properties and paid interest during the year under consideration the assessee was entitled to claim deduction of interest u/s 24. The amount eligible for deduction u/s 24 was Rs. 5,10,573. 3. While filing return of income the assessee inadvertently claimed deduction of the said amount u/s 57. 4. The case of the assessee was selected for scrutiny and was asked to explain the deduction claimed u/s 57. The assessee furnished confirmation of accounts from Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF. 5. Without disputing the fact of making payment of interest addition was made and confirmed as the assessee could not establish link with the loan with the properties let out. 6. It is submitted that the assessee may please be allowed deduction of interest expense u/s 24. 7. The transaction of loan was complicated and, therefore, the assessee could not understand what to submit in order to satisfy the lower authorities. 5 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. 8. The assessee purchased property, however, was not having funds. Therefore, the assessee took loan from Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF. These entities in turn took loan from bank for purchasing commercial properties. The loan got disbursed directly in the bank account of the seller. Hence, the bank made payment to the seller, Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF made payment to bank by way of EMI and the assessee made payment to Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF. 9. Since the loan did not get credited to the account of the assessee, the assessee could not establish the nexus that the loan which was taken was utilized for the purpose of purchasing the property. 10. Now the assessee before the Hon’ble Bench have furnished additional evidences which further proves the case of the assessee. A confirmation of account, ledger accounts, bank statements of Machiwal & Sons have been placed on record. The confirmation states that the Machiwal & Sons made payment to the seller Rajendra Kumar Vaid through cheque no. 686540. Rajendra Kumar Vaid is the seller of the property which assessee purchased. Also the cheque number as mentioned in the confirmation finds mentioned the sale deed. Thus from the additional evidences nexus between the loan taken by the assessee and purchase of properties could be established. 11. Thus, the loan has direct nexus with the properties purchased and let out by the assessee and, hence, the assessee is eligible to claim deduction of the interest paid during the year u/s 24 amounting to Rs. 5,10,573/-. In view of above the addition of Rs. 5,10,573/- deserves to be deleted. Alternatively, the matter may please be set aside to the file of AO for appreciation of additional evidence.” 6 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. 7. On the other hand, the ld. D/R supported the orders of the revenue authorities. 8. I have heard learned Counsels for both the sides, perused the material available on record and gone through the orders of the revenue authorities. On perusal of the orders of revenue authorities, it is noticed that both the lower authorities have disallowed the interest expenses in absence of any nexus between the borrowed fund and utilization of the same. The assessee claimed that the assessee has paid interest on the loan taken from Machiwal & Sons and Ramesh Chand Machiwal & Sons HUF for purchase and construction of the property but she could not furnish any documentary evidence before the lower authorities in respect of loan taken from the above mentioned parties. Before us, the assessee has submitted additional evidences by way of filing (1) Confirmation of loan by Machiwal and Sons, (2) Ledger accounts for repayment of loan in the books of Machiwal and Sons, (3) Journal voucher in the books of Machiwal and Sons prepared at the time of taking loan, (4) Ledger accounts of Ritika Gupta in the books of Machiwal and Sons and (5) Bank statement (Loan A/c) in the books of Machiwal and Sons in support of her claim and prayed admission of these additional evidences under Rule 29 of ITAT Rules, 1963. Under the facts and circumstances of the case and in the interest of natural justice, I admit the additional evidences produced before me. I note that since the case of the assessee was decided in the absence of proper representation from the side of the assessee, I am of the considered view that it will be in the interest of justice if the matter is restored back to the file of the A.O. for deciding the matter afresh after providing a reasonable opportunity of being heard to the 7 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. assessee and considering the submissions and after verifying the additional evidences to be furnished by the assessee before the AO. The assessee is directed to appear before the AO and furnish necessary corroborative evidences in support of her case. As stated hereinabove, the case of the assessee is remitted back to the file of the AO for deciding afresh after affording an opportunity of hearing to the assessee. 9. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 20/02/2023. Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20/02/2023. Das/ vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Smt. Ritika Gupta, Jaipur. 2. izR;FkhZ@ The Respondent- The ITO, Ward 4(2), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File {ITA No. 551/JP/2019} vkns'kkuqlkj@ By order, 8 ITA No. 551/JP/2019 Smt. Titika Gupta, Jaipur. lgk;d iathdkj@Asst. Registrar