Karan Virwani, Bangalore V. Income-tax Officer, National e-Assessment Centre, Delhi and DCIT, Circle 1(1)(1), Bangalore, Bangalore

ITA 576/BANG/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0346 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 08-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARITHIVEL
• Keywords: TDS; FORM 26AS
• Section: 250

Judgement Text

ITA No.576/Bang/2023 Karan Virwani, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.576/Bang/2023 Assessment Year: 2018-19 Karan Virwani No.332, Embassy Woods, 6A Cunningham Road Bangalore 560 001 PAN NO : AEDPV8612G Vs. Deputy Commissioner of Income- tax Circle-1(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri Aliasgar Rampurawala, A.R. Respondent by : Shri Parithivel, D.R. Date of Hearing : 31.10.2023 Date of Pronouncement : 31.10.2023 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of NFAC for the assessment year 2018-19 passed u/s 250 of the Income-tax Act,1961 ['the Act' for short] dated 13.6.2023. The assessee has raised following grounds of appeal: 1. Common Grounds 1.1 The Ld. AO and CIT(A) (hereinafter collectively referred as 'lower authorities') have erred in finalizing an order of assessment which is devoid of merits and are contrary to facts on record and applicable law and has been completed without adequate inquiries and as such is liable to be quashed. 1.2. The lower authorities have finalized its order with improper adjustments to the transaction of the Appellant, as a result of misapplying the provisions of the Act and by adopting faulty assessment procedure to finalize the adjustment, without considering the information, arguments and evidence provided by the Appellant. ITA No.576/Bang/2023 Karan Virwani, Bangalore Page 2 of 5 2. Disallowance of interest expenditure of INR 53,40,000 2.1. The lower authorities erred on the facts and circumstances of the case and in law, in making a disallowance of interest expenditure claimed under section 57 of the Act amounting to INR 53,40,000. 2.2. The lower authorities on the facts and circumstances of the case and in law, erred in disallowing the said interest expenditure under section 57 of the Act, merely for the reason that it was not paid during the year, without appreciating that the said interest expenditure accrued during the Impugned AY as borne out of the records of the Appellant. 2.3. Without prejudice, the lower authorities on the facts and circumstances of the case and in law, failed to appreciate that the said interest incurred for the Impugned AY and which was payable by the Appellant, was paid by in the subsequent AY. 2.4. The lower authorities on the facts and circumstances of the case and in law, erred in holding that there is no nexus between the interest received and offered to tax under the head 'Income from Other Sources' and the said interest that was incurred and claimed as an expenditure under the same head of income. 3. Short credit of TDS amount 3.1 The lower authorities on the facts and circumstances of the case and in law, erred in granting TDS credit of only INR 53,31,758 as against the eligible TDS credit of INR 1,14,98,286, as appearing in the Form 26AS for the impugned AY. 2. Ground Nos.1.1 & 1.2 are too general in nature, which do not require any adjudication. 3. Ground Nos.2.1 to 2.4 are with regard to disallowance of interest expenditure of Rs.53.40 lakhs. 4. Facts of the case are that Mr. Karan Virwani, the Assessee, declared Income from Other Sources. Among other items of income, the assessee earned interest of Rs 96,54,788/- which included interest of Rs.62,10,226/- from M/s. Lounge Hospitality LLP of which the assessee was once upon a time a partner, on a loan of Rs. Rs.5,73,41,089/- to the said LLP. The Assessee had borrowed Rs.4,45,00,000/- from his father Mr. Jitendra Virwani for the purpose of giving the loan to Lounge Hospitality LLP. The ITA No.576/Bang/2023 Karan Virwani, Bangalore Page 3 of 5 Assessee admitted a liability of Rs.53,40,000/- on account of interest payable to Mr. Jitendra Virwani on the amount borrowed from him. The Assessee claimed deduction for Rs.53,40.000 from the total interest income and returned the net interest of Rs.43,14.788/- (Rs. 96,54,788 minus Rs.53, 40,000). 4.1 The ld. AO called for confirmation from Jitendra Virwani in support of loan given by him and interest in respect thereof and from Lounge Hospitality LLP in support of loan borrowed and interest paid. The ld. AO received confirmation from Lounge Hospitality LLP evidencing loan received by the LLP and interest paid by it to the assessee. Likewise, the ld. AO also received confirmation from Mr. Jitendra Virwani evidencing loan given by him to the assessee and interest income accruing to him. However. the ld. AO disallowed interest paid since he recorded a finding that the assessee has not "debited" interest, and it is therefore, not 'paid' and proved; as per para 4 of the Assessment Order. 4.2 Finally. the ld. AO concluded his findings by stating in para 5 of the Assessment Order that thus, it clearly shows that assessee has not paid the interest of Rs.53,40,000/- to Shri Jitendra Virwani and therefore the deduction u/s 57 claimed by the assessee for Rs.53,40,000/- will be disallowed as the nexus of interest received and interest paid is not proved. Therefore, ld. AO proposed to disallow the deduction u/s 57 claimed by the assessee for Rs.53,40,000/- in absence of any valid proof of payment of interest of Rs.53,40.000/- by assessee. The amount of Rs.53,40,000/- will be added back to the total income of the assessee. 4.3 The lender Mr. Jitendra Virwani has declared income of Rs.53,40,000/- in his return as interest accruing to him, though not received. ITA No.576/Bang/2023 Karan Virwani, Bangalore Page 4 of 5 4.4. On appeal, ld. CIT(A) confirmed the order of ld. AO. Against this assessee is in appeal before us. 5. We have heard the rival submissions and perused the materials available on record. In this case, the main contention of ld. A.R. is that assessee has borrowed an amount of Rs.4.45 crores from his father and on which assessee has provided interest of Rs.53.40 lakhs and the same has been claimed as a deduction out of the interest received from the borrower i.e. M/s. Lounge Hospitality, LLP at Rs.62,10,226/-. The claim of deduction of interest payment at Rs.53.40 lakhs has been disallowed by the lower authorities on the reason that assessee is unable to prove the nexus of interest received from M/s. Lounge Hospitality, LLP for Rs.62,11,230/- and interest paid to Shri Jitendra Virwani for Rs.53,40,000/- as required u/s 57(iii) of the Act. Before us, the ld. A.R. filed the details of payment of interest to Mr. Jitendra Virwani and submitted that he has offered the same for taxation in his return of income under the head “income from other sources”. When this impugned interest has been treated as income in the hands of receiver of interest i.e. Shri Jitendra Virwani, same to be considered as an expenditure in the hands of present assessee. We find force in the argument of assessee’s counsel. Accordingly, income tax return of Shri Jitendra Virwani is to be examined for the assessment year 2018-19 to suggest that this interest income received by Shri Jitendra Virwani from the present assessee has been rightly offered for taxation and once it is offered for taxation in the hands of Shri Jitendra Virwani, the same has to be allowed as expenditure in the hands of the present assessee. Accordingly, the issue in dispute is remitted to the file of ld. AO for reconsideration and decide accordingly. 6. Next ground No.3.1 is with regard to non-granting of TDS credit property though it was reflected in Form 26AS. In our ITA No.576/Bang/2023 Karan Virwani, Bangalore Page 5 of 5 opinion, this issue has to be re-examined by the ld. AO after going through the Form 26AS and accordingly, direct the ld. AO to grant TDS credit as reflected in form 26AS. 7. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 31 st Oct, 2023 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 31 st Oct, 2023. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.