KIRTIKUMAR T DOSHI, Mumbai V. ITO, 18(2)(2), Mumbai

ITA 555/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1730 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 03-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR

Judgement Text

म ु ंबई ठ “एस एम स ” , म ु ंबई स , स सम! IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER सं. 555/म ु ं/2019 ( %. 2014-15) ITA NO.555/MUM/2019(A.Y 2014-15) Kirtikumar T. Doshi, ...... ' /Appellant 259, Johari Mansion, 2 nd Floor, Kalbadevi Road, Mumbai 400 002. PAN:AAAPD-9244-R ब% म Vs. Income Tax Officer-18(2)(1), Earnest House, Nariman Point, Mumbai 400 021. ..... ( ) /Respondent सं. 556/म ु ं/2019 ( %. 2014-15) ITA NO.556/MUM/2019(A.Y 2014-15) Kirtikumar T. Doshi(HUF) ...... ' /Appellant 259, Johari Mansion, 2 nd Floor, Kalbadevi Road, Mumbai 400 002. PAN: AAEHK-0147-A ब% म Vs. Income Tax Officer-18(2)(1), Earnest House, Nariman Point, Mumbai 400 021. ..... ( ) /Respondent ' * / Appellant by : Shri B.N.Rao ( ) * /Respondent by : Shri Shankar स ु % ई + ) / Date of hearing : 25/02/2022 ,-. + ) / Date of pronouncement : 20/05/2022 2 ITA NO.555/MUM/2019(A.Y 2014-15) ITA NO.556/MUM/2019(A.Y 2014-15) श/ ORDER These two appeals by two assessee are directed against the orders of Commissioner of Income Tax (Appeals)-53, Mumbai for Assessment Year 2014-15 in their respective cases. Both the impugned orders are of even date i.e 17/12/2018. The appeal in ITA No.555/Mum/2019 is by assessee as individual and appeal in ITA No.556/Mum/2019 is in the capacity of HUF. Since, identical issues are involved in these two appeals, these appeals are taken up together for adjudication and decided by this common order. 2. The appeal in ITA No.555/Mum/2019 is taken as the lead case, hence, the facts are narrated from the said appeal. ITA No.555/Mum/2019 A.Y.2014-15 3. Shri B.N.Rao appearing on behalf of the assessee submitted that assessee is a trader in Cloth. The assessee filed his return of income for Assessment Year 2013-14 declaring total income of Rs.12,96,040/-. During the period relevant to the assessment year under appeal the assessee had taken unsecured loan from his friends, relatives and associates amounting to Rs.9,58,12,555/-. Since, unsecured loan amounts were received in excess of the requirement of the assessee, the assessee advanced the same amount as loan. The assessee paid interest on unsecured loans at an average rate of 13% and lended the excess loan amount on interest @12%. The ld. Authorized Representative for the assessee submitted that the assessee had borrowed funds from relatives, friends and associates and not from the banks or Financial Institutions. The assessee was getting unsecured loan at a rate less than the rate compared to Bank/Financial Institutions. The assessee claimed the difference between the interest received and interest paid i.e. 3 ITA NO.555/MUM/2019(A.Y 2014-15) ITA NO.556/MUM/2019(A.Y 2014-15) Rs.8,05,863/- as expenditure. The Assessing Officer disallowed the same in scrutiny assessment proceedings. 4. The ld. Authorized Representative for the assessee further submitted that in assessment proceedings the Assessing Officer made addition of Rs.85,000/- declared by the assessee as agricultural income exempt from tax. The Assessing Officer held the agricultural income declared by the assessee as ‘Income from Other Sources’. Against the additions made by the Assessing Officer, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order dismissed the appeal of assessee in toto. The ld. Authorized Representative for the assessee submitted that CIT(A) has dismissed the appeal of assessee without examining the facts and documents on record. 5. Shri Shankar representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. 6. Both sides heard orders of authorities below examined. In ground No.1 of the appeal the assessee has assailed addition of Rs.8,05,863/- on account of disallowance of interest expenses. The contention of the assessee is that assessee has taken unsecured loans from friends, relatives and associates at a rate ranging between 12% to 15%. At the same time assessee had advanced loans to various parties @ 12%. In the process the assessee has paid interest of Rs.86,21,915/- and received interest of Rs.78,16,052/-. The difference between the interest paid and interest received i.e. Rs.8,05,863/- has been claimed as expenditure. It is relevant to mention here that the Assessing Officer has neither disputed the borrowings nor has disputed the lending of the amounts. The Assessing Officer has disallowed excess interest paid over interest received by invoking the provisions of Section 40A(2)(b) of the Act. It 4 ITA NO.555/MUM/2019(A.Y 2014-15) ITA NO.556/MUM/2019(A.Y 2014-15) is observed that before making disallowance u/s. 40A(2)(b) the Assessing Officer has not carried out exercise to identify the loans taken from relatives as defined u/s. 2(41) of the Act to which provisions of Section 40A(2)(b) applies. The Assessing Officer has invoked the provisions of Section 40A(2)(b) in a mechanical manner. In my considered view the addition is unsustainable, hence, deleted. In the result, ground No.1 of the appeal is allowed. 7. In ground No.2 of appeal the Assessing Officer has made addition of Rs.85,000/- on account of agricultural income. The assessee has not been able to show any documentary evidence to substantiate that the aforesaid amount was earned by the assessee from agricultural activities. The assessee has filed a copy of Jamabandi. A perusal of the same shows that the name of the assessee is mentioned against the column cultivator. However, there is no mention of any crop being cultivated on the said land during the relevant period. Since, the assessee has failed to show that any agricultural activity was carried out on the land during the period relevant to the assessment year under appeal, we find no infirmity in the findings of the authorities below in holding that the assessee has failed to show any income from agricultural source. Hence, ground No.2 of the appeal is dismissed being devoid of any merit. 8. In the light of above findings, appeal of assessee is partly allowed. ITA NO.556/MUM/2019- A.Y. 2014-15: 9. The solitary issue in the appeal is with regard to addition of Rs.2,54,670/- on account of interest expenses. Both sides unanimously stated 5 ITA NO.555/MUM/2019(A.Y 2014-15) ITA NO.556/MUM/2019(A.Y 2014-15) that the facts in ITA No.555/Mum/2019 are identical to the facts on the issue raised in ground No.1 of the appeal in ITA No.556/Mum/2019. 10. Since, facts are identical, the findings given while adjudicating ground No.1 of appeal in ITA No.555/Mum/2019 would mutatis mutandis apply to the ground raised in appeal ITA No.556/Mum/2019 11. In the result, appeal of assessee is allowed for parity of reasons. 12. To sum up, appeal of assessee in ITA No.555/Mum/2019 is partly allowed and appeal in ITA No.556/Mum/2019 is allowed. Order pronounced in the open Court on Friday the 20 th day of May, 2022. Sd/- (VIKAS AWASTHY) स /JUDICIAL MEMBER म ु ंबई/ Mumbai, 0 % ं /Dated 20 /05/2022 Vm, Sr. PS (O/S) त ल प अ े षतCopy of the Order forwarded to : 1. '/The Appellant , 2. ( ) / The Respondent. 3. ु 1)( )/ The CIT(A)- 4. ु 1) CIT 5. 2 3 ( ) % , . . ., म ु बंई/DR, ITAT, Mumbai 6. 3 45 6 7 /Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai