RISHI SURESH BHASIN, MUMBAI V. DCIT 20(2), MUMBAI

ITA 5514/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8432 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: MUKESH B ADVANI
• Keywords: Gift; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Additional evidence; Onus to prove
• Section: 143(3); 14A

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.5514/ MUM/2016 ( / ASSESSMENT YEAR : 2011-12) MR. RISHI SURESH BHASIN, 301, GREEN ACRES, LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI 400 053. / V. DY. COMMISSIONER OF INCOME TAX- 20(2), PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI 400 034. ./ PAN : AEKPB1001N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI MUKESH B. ADVANI REVENUE BY : MS. POOJA SWAROOP, DR / DATE OF HEARING : 27-02-2017 / DATE OF PRONOUNCEMENT : 01-03-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5514/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 13 TH JUNE, 2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 36, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2011- 12, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 8 TH JANUARY, 2014 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO ) U/S 143(3) OF THE INCOME-TAX ACT ,1961 (HEREINAFTER CALLED THE ACT). ITA 5514/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- THE LEARNED C.IT. (A) HAS ERRED IN CONFIRMING THE ENTIRE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER PERTAINING TO T HE INTEREST PAID TO THE BANK BY THE APPELLANT AMOUNTING TO RS.3,42,543/- TOW ARDS THE OVERDRAFT FACILITY OBTAINED BY HIM INSPITE OF THE FACT THAT MOST OF THESE FUNDS WERE UTILISED FOR ACQUIRING TAXABLE INTEREST BEA RING ASSETS. THIS FACT IS ALSO CONFIRMED BY THE LEARNED ASSESSING OFFIC ER IN HIS ASSESSMENT ORDER PASSED U/S 143(3) OF INCOME TAX ACT 1961 ON PAGE 2 PARA 1. HENCE, AT BEST THE DISALLOWANCE SHOULD HAVE BEEN RESTR ICTED BY THE CIT (A) TO RS. 66,837/- U/S 14 A OF THE INCOME TA X ACT READ WITH RULE 8D (2) (II), WHICH HAS ALSO BEEN CONFIRMED BY THE LEARNED ASSESSING OFFICER IN HIS ASSESSMENT ORDER PASSED U/S 143(3). THE APPELLANT PRAYS BEFORE YOUR LORDSHIP TO GRANT A RE LIEF OF RS. 2,75,706/- (RS. 3,42,543/-LESS RS. 66,8371-) & OBLI GE. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) OF THE ACT, IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS DECLARED INTEREST INCOME OF R S. 17,68,305/- AND CLAIMED INTEREST EXPENSES OF RS. 3,42,543/- UNDER T HE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE WAS ASKED TO EXPLAIN A S TO WHY INTEREST EXPENSES OF RS. 3,42,543/- SHOULD NOT BE DISALLOWED U/S 57 O F THE ACT. IN REPLY, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE INTEREST PAID ON LOAN ACCOUNT WAS TO KEEP HIS INVESTMENT INTACT AND EARN MORE INCOME. THE ASSESSEE SUBMITTED BEFORE THE AO THAT LOAN ADVANCED BY THE ASSESSEE TO M/S RAM FASHION EXPORTS PVT. LTD. AS AT 31ST MARCH, 2011 WAS RS. 56 ,94,510/- , AGAINST WHICH INTEREST EARNED WAS @ 12% AMOUNTING TO RS. 9,92,350 /- WHICH WAS OFFERED FOR TAXATION IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE ASSESSEE FURTHER SUBMITTED THAT INTEREST OF RS. 3,42,543/- W AS PAID ON OD A/C WITH DENA BANK WHEREIN INTEREST @ 10% WAS CHARGED BY THE BANK ON T REDUCING BALANCE. THE A.O. REJECTED THE CONTENTION OF THE A SSESSEE . THE AO OBSERVED ITA 5514/MUM/2016 3 THAT SECTION 57(III) OF THE 1961 ACT STIPULATES THA T DEDUCTION SHALL BE ALLOWED OF ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. THE A.O. OBSE RVED THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PROVE THAT THE INTE REST EXPENDITURE OF RS. 3,42,543/- WAS INCURRED AND CLAIMED AS DEDUCTION WA S WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INC OME OF RS. 9,92,350/-. THE ASSESSEE WAS ASKED TO FILE FURTHER DETAILS ALONG WI TH COPIES OF THREE OD ACCOUNT WITH DENA BANK. THE A.O. ON VERIFICATION O F THESE ACCOUNTS OBSERVED THAT THE ASSESSEE HAS MADE HUGE WITHDRAWALS FROM TH ESE ACCOUNTS NOT ONLY FOR THE PURPOSE OF MAKING PAYMENT TO M/S. RAM FASHI ON EXPORTS (P) LTD. FROM WHOM THE ASSESSEE HAD RECEIVED INTEREST ALONG WITH THE INTEREST ON FDS IN DENA BANK BUT FOR MAKING SEVERAL OTHER PAYMENTS LIKE PURCHASE OF FLAT, PROPERTIES, PPF, MUTUAL FUNDS, JEWELLERY, CASH WITH DRAWALS ETC. . THE AO OBSERVED THAT THE ASSESSEE HAS ALSO CREDITED SOME O F HIS RECEIPTS LIKE SALARY FROM FASHION EXPORTS (P) LTD. TO THIS OD ACCOUNT BU T THE SAME DO NOT MATCH WITH THE WITHDRAWALS MADE BY THE ASSESSEE FOR MAKIN G PAYMENT ON WHICH NO INTEREST IS EARNED. THUS, THE A.O. REJECTED THE ASS ESSEE'S CLAIM FOR DEDUCTION OF RS.3,42,543/- AND MADE ADDITION TO THE TUNE OF RS. 3,42,543/- VIDE ASSESSMENT ORDER DATED 08-01-2014 PASSED BY THE AO U/S 143(3) OF THE ACT . IN ALTERNATIVE WITHOUT PREJUDICE, THE A.O. ALSO OBS ERVED THAT THE ASSESSEE HAS MADE INVESTMENT IN ASSETS EARNING EXEMPT INCOME AND THE ASSESSEE HAS EARNED DIVIDEND INCOME, INTEREST ON PPF ETC. WHICH WERE CLAIMED EXEMPT BY THE ASSESSEE. IT WAS ALSO OBSERVED THAT THE ASSESSE E BORROWED FUNDS IN THE NATURE OF LOANS/ UNSECURED LOANS AND PAID INTEREST ON BORROWED FUNDS. THE AO WORKED OUT DISALLOWANCE UNDER RULE 8D(2)(II) OF INCOME-TAX RULES, 1962 R.W.S 14A OF 1961 ACT AT RS. 66,837/- WHICH WAS HE LD TO BE DISALLOWED IN ALTERNATIVE, WITHOUT PREJUDICE , BY THE AO VIDE ASS ESSMENT ORDER DATED 08-01- 2014 PASSED BY THE AO U/S 143(3) OF THE ACT. ITA 5514/MUM/2016 4 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 08-01-2 014 PASSED BY THE A.O. U/S 143(3) OF 1961 ACT, THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE LD. CIT(A) BY FILING FIRST APPEAL. THE LD. CIT(A), HOW EVER, REJECTED THE CLAIM OF THE ASSESSEE RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. V.P. GOPINATHAN REPORTED IN 248 ITR 449(SC) AND OBSERVED THAT THE ASSESSEE HAD STATED THAT THE OD FROM DENA BANK WAS TAKEN TO MEET URGENT NEED OF FUNDS FROM DENA BANK AND THE ASSESSEE DERIV ES INCOME ONLY FROM OTHER SOURCES AND HAS NO BUSINESS. THUS, THE LD. CI T(A) CAME TO THE CONCLUSION THAT THE INTEREST PAID ON LOAN TAKEN AG AINST THE FD COULD NOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INCOME FROM THE SAID FDS TO BE ALLOWED AS EXPENSES U/S 57(III) OF THE ACT, VIDE APPELLATE ORDER DATED 13.06.2016 PASSED B Y LEARNED CIT(A). 5. AGGRIEVED BY THE APPELLATE ORDER DATED 13.06.20 16 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRI BUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE FILED DETAILED PAPER BOOK WHICH CONTAINS 23 PAGES. THE PAPER BOOK IS CERTIFIED BY MR. MUKESH B. ADVANI ON BEHALF OF M B ADVANI & CO, CHARTERED ACCOUNTANTS. I T IS STATED IN THE INDEX TO PAPER BOOK THAT DOCUMENTS CONTAINED AT S. NO. 1 AND 2 WHICH ARE PLACED AT PAGES 1 TO 4 OF THE SAID PAPER BOOK FILED WITH THE TRIBUNAL WERE SUBMITTED BEFORE THE A.O. AND THE LD. CIT(A) , WHILE PAGES FR OM PAGE 5 TO 23 PLACED IN PAPER BOOK FILED WITH THE TRIBUNAL ARE IN THE NATUR E OF ADDITIONAL EVIDENCES WHICH WERE NOT FILED BEFORE THE LOWER AUTHORITIES A ND ARE FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE LD. COUNSEL HAS MADE STREN UOUS ARGUMENTS IN DETAIL ON MERITS TO JUSTIFY THAT THERE IS A DIRECT NEXUS B ETWEEN THE LOAN BY WAY OF OD OBTAINED FROM DENA BANK ON WHICH INTEREST OF RS.3,4 2,543/- WAS PAID BY THE ASSESSEE AND THE LOAN GRANTED TO M/S RAM FASHION EX PORTS PVT. LTD. BY THE ASSESSEE FROM WHERE ASSESSEE HAS EARNED INTEREST IN COME OF RS. 9,92,350/- WHICH WAS OFFERED FOR TAXATION BY THE ASSESSEE IN T HE RETURN OF INCOME FILED ITA 5514/MUM/2016 5 WITH THE REVENUE. THE LD. COUNSEL DREW OUR ATTENTI ON TO THE LEDGER ACCOUNT OF M/S RAM FASHION EXPORTS PVT. LTD. A, BANK STATEM ENTS AND OTHER DOCUMENTS TO PROVE THAT THE ENTIRE AMOUNT OF RS. 50 LACS OD AVAILED FROM DENA BANK BY THE ASSESSEE WAS DIRECTLY DISBURSED BY THE ASSESSEE TO THE SAID RAM FASHION EXPORTS PRIVATE LIMITED CARRYING INTERE ST @ 12% P.A. ON WHICH INTEREST OF RS. 9,92,350/- WAS EARNED BY THE ASSES SEE DURING PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR WHICH HAS BEEN BROUGHT TO TAX IN RETURN OF INCOME FILED WITH THE REVENUE. IT IS SUB MITTED THAT THE AO ERRED IN HOLDING THAT PROPERTIES WERE PURCHASED BY THE ASSES SEE OUT OF THE OD AVAILED FROM DENA BANK RATHER IT WAS SUBMITTED THAT GIFTS W ERE RECEIVED FROM FATHER OF THE ASSESSEE THROUGH BANKING CHANNELS TO INVEST IN PROPERTIES , WHICH GIFTS WAS ACCEPTED BY THE REVENUE AND THE AUTHORITIES BEL OW ERRED IN CONCLUDING THAT PROPERTIES WERE PURCHASED OUT OF OD AVAILED FR OM DENA BANK. OUR ATTENTION WAS DRAWN TO PAPER BOOK FILED WITH THE TR IBUNAL TO PROVE THE SAID CONTENTION BY THE ASSESSEE. THUS , IT IS CONTENDED THAT INTEREST PAID ON OD ACCOUNT FROM DENA BANK SHOULD BE ALLOWED AS DEDUCTI ON FROM INTEREST EARNED FROM RAM FASHION EXPORTS PRIVATE LIMITED. OUR ATTEN TION WAS DRAWN TO VARIOUS DOCUMENTS FILED IN PAPER BOOK FILED WITH TH E TRIBUNAL WHICH ARE MAINLY ADDITIONAL EVIDENCES FILED BEFORE THE TRIBUN AL FOR THE FIRST TIME. 7. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS FIL ED ADDITIONAL EVIDENCES FROM PAGES 5 TO 23 IN THE PAPER BOOK FILED WITH TH E TRIBUNAL, WHICH WERE NOT FILED BEFORE THE AUTHORITIES BELOW AND HENCE THESE ADDITIONAL EVIDENCES CANNOT BE RELIED UPON BY TRIBUNAL TO ADJUDICATE THIS APPEA L. THERE IS NO APPLICATION FILED BY THE ASSESSEE FOR ADMISSION OF THESE ADDITI ONAL EVIDENCES WHICH SHOULD BE DISCARDED AT THRESHOLD. THE LEARNED DR RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSE D MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE HAD PAID AN INTEREST AMOUNT OF ITA 5514/MUM/2016 6 RS. 3,42,543/- TO THE DENA BANK ON OD ACCOUNT. IT IS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAD DISBURSED LOANS TO M/S RAM FASHION EXPORTS PVT. LTD. OUT OF THE PROCEED OF OD LOAN AVAILED BY THE ASSESSEE FROM DENA BANK, AGAINST WHICH INTEREST WAS EARNED TO THE TUNE OF RS. 9,92,350/- FROM LOANS ADVANCED BY THE ASSESSEE TO RAM FASHION EXPOR TS PRIVATE LIMITED. THE AUTHORITIES BELOW DID NOT ACCEPTED THE CONTENTION O F THE ASSESSEE THAT THERE IS NEXUS BETWEEN OD AVAILED BY ASSESSEE FROM DENA BANK AND INTEREST-BEARING LOANS ADVANCED BY THE ASSESSEE TO SAID RAM FASHION EXPORTS PRIVATE LIMITED. THE ASSESSEE HAS NOW PRODUCED DOCUMENTARY EVIDENCES VIDE PAPER BOOK FILED WITH THE TRIBUNAL TO ESTABLISH THAT THERE WAS DIREC T NEXUS BETWEEN THE OD AVAILED BY THE ASSESSEE FROM DENA BANK AND LOANS AD VANCED TO SAID CONCERN RAM FASHION EXPORTS PRIVATE LIMITED, WHICH ARE IN T HE FORM OF ADDITIONAL EVIDENCES FILED FOR THE FIRST TIME BEFORE THE TRIBU NAL WHICH WERE NOT PLACED BEFORE THE AUTHORITIES BELOW BY THE ASSESSEE. WE HA VE ALSO OBSERVED THAT THE A.O. HAS NOT APPRECIATED THE CONTENTIONS OF THE ASS ESSEE AND THE EVIDENCES SO PLACED BY THE ASSESSEE BEFORE THE AO VIDE BALANCE S HEET , CAPITAL ACCOUNT FILED BY THE ASSESSEE BEFORE THE AO . UNDER THESE C IRCUMSTANCES AND KEEPING IN VIEW FACTUAL MATRIX OF THE MATTER AS DISCUSSED A BOVE, THE INTEREST OF JUSTICE WILL BE BEST SUB-SERVED IF THE ISSUES IN THE INSTAN T ARE SET ASIDE AND RESTORED BACK TO THE FILE OF THE A.O. FOR DE-NOVO DETERMINAT ION OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW. WE ARE DIRECTING ADMISSION OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE IN THE INTEREST OF JUSTICE, W HICH ADDITIONAL EVIDENCES ARE PLACED IN PAPER BOOK PAGE 5-23 FILED WITH THE TRIBU NAL. THE ASSESSEE IS DIRECTED TO APPEAR BEFORE A.O. AND PRODUCE ALL THE ADDITIONAL EVIDENCES AND EXPLANATIONS IN SUPPORT OF HIS CONTENTIONS IN HIS D EFENSE. THE A.O. SHALL GRANT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCOR DANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW BEFORE DE-NO VO DETERMINATION OF THE ISSUE ON MERITS. WE WOULD LIKE TO CLARIFY THAT WE HAVE NOT COMMENTED ON MERITS OF THE ISSUES IN THE INSTANT APPEAL AND THE AO SHALL BE FREE TO ITA 5514/MUM/2016 7 ADJUDICATE THE ISSUES ON MERITS AFTER CONSIDERING A ND EVALUATING THE EVIDENCES AND EXPLANATIONS OF THE ASSESSEE ON MERITS. WE ORDE R ACCORDINGLY 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN I TA NO. 5514/MUM/2016 FOR ASSESSMENT YEAR 2011-12 IS ALLOWED FOR STATISTI CAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON IST MARCH, 20 17. # $% &' 01-03-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 01-03-2017 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI