SHRI GOVIND SHARAN GUPTA, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR

ITA 58/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8440 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Keywords: Business income

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 58/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 SH. GOVIND SHARAN GUPTA B-162, SETHI COLONY, JAIPUR. CUKE VS. THE ACIT, CIRCLE-5, JAIPUR. TOLFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AEOPG 3451 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPON DENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 13/01/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-II, JAIPUR DATED 26.11.2018 FOR THE ASSESSME NT YEAR 2013-14 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DISALLOWING THE CLAIM OF INTEREST EXPENDITURE OF RS. 6,63,196/- AGA INST THE INTEREST INCOME OF RS. 11,74,488/- DECLARED UNDER T HE HEAD INCOME FROM BUSINESS AND INCOME FROM OTHER SOURCES. ITA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 2 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF AO IN TREATING THE AGRICULTURAL INCOME OF RS. 45,600/- AS NON AGRICULTURAL INCOME. 2. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT THE ASSESSEE IN THE RETURN OF INCOME HAS DECLARED INTER EST FROM PARTNERSHIP FIRM M/S SRS BUILDERS AND M/S MURLIWALA BUILDERS AT RS.8,53,556/- UNDER THE HEAD INCOME FROM BUSINESS AND INTEREST FROM PARTIES AT RS.5,11,292/- UNDER THE HEAD INCOME FROM OTHER SOU RCES. HE ALSO PAID INTEREST ON THE FUNDS BORROWED AT RS. 6,63,196 /- AND CLAIMED IT AS DEDUCTION UNDER THE HEAD INCOME FROM OTHER SOURCES . THE AO OBSERVED THAT ASSESSEE HAS NOT FURNISHED SATISFACTO RY EXPLANATION AS TO HOW THE INTEREST EXPENSES RELATE TO EARNING OF INTE REST INCOME WHEN THE LOANS TAKEN COULD EASILY BEEN USED FOR ANY PURPOSE BY THE ASSESSEE. ACCORDINGLY, HE DISALLOWED THE CLAIM OF INTEREST OF RS.6,63,196/-. 3. IN APPEAL, THE LD. CIT(A) HELD THAT ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST EXPENSES OF RS.6,63,196/- AGA INST THE INTEREST INCOME OF RS.5,11,292/- DECLARED UNDER THE HEAD INC OME FROM OTHER SOURCES. THOUGH THE ASSESSEE HAS INTEREST INCOME FR OM PARTNERSHIP FIRM BUT ASSESSEE HAS NOT CLAIMED DEDUCTION OF INTEREST PAID OUT OF INTEREST INCOME FROM PARTNERSHIP FIRM. SHE THEREFORE, CONFIR MED THE DISALLOWANCE. 4. IN THE AFORESAID FACTUAL BACKGROUND, IT WAS SUBM ITTED BY THE LD AR THAT THE LOWER AUTHORITIES HAVE NOT DISPUTED THA T ASSESSEE HAS DECLARED INTEREST INCOME OF RS.13,64,848/- (8,53,55 6+5,11,292) UNDER THE HEAD INCOME FROM BUSINESS AND INCOME FROM OT HER SOURCES. ITA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 3 AGAINST THE SAME, ASSESSEE HAS CLAIMED INTEREST EXP ENDITURE OF RS.6,63,196/- BUT ENTIRE CLAIM WAS MADE UNDER THE H EAD INCOME FROM OTHER SOURCES INSTEAD OF CLAIMING PART OF THE EXPE NDITURE UNDER THE HEAD INCOME FROM BUSINESS. HOWEVER, THIS DOES NOT AFFECT THE COMPUTATION OF TOTAL INCOME. FROM THE BALANCE SHEET OF THE ASSESSEE, IT CAN BE NOTED THAT ASSESSEE HAS OWN CAPITAL OF RS.1, 23,68,332/-. AS AGAINST THIS, INVESTMENT IN LAND & BUILDING, FIXED ASSETS AND INVESTMENT IN SHARES/ PPF IS ONLY RS.1,03,48,906/- (5,90,246+87,84,333+9,71,327). FURTHER ON UNSECURED LOAN OF RS. RS.1,39,30,139/-, INTEREST PAID IS RS.6,63,196/ - WHEREAS ON THE FUNDS DEPLOYED, INTEREST RECEIVED IS RS.13,64,848/- . THUS, IT IS EVIDENT THAT BORROWED FUNDS HAD BEEN UTILISED FOR EARNING T HE INTEREST INCOME FROM PARTNERSHIP FIRM AND OTHER PARTIES. THE LD. CI T(A) HAS ALSO ACCEPTED THIS FACT BUT ONLY ON THE GROUND THAT ASSE SSEE HAS NOT CLAIMED THE INTEREST EXPENDITURE AGAINST THE INTEREST INCOM E FROM PARTNERSHIP FIRM HAS DISALLOWED THE ENTIRE CLAIM OF INTEREST. T HIS IS NOT JUSTIFIED AS THERE IS NO BAR IN THE ACT THAT IF ASSESSEE HAS CLA IMED THE DEDUCTION OF EXPENDITURE UNDER ONE PARTICULAR HEAD OF INCOME, TH E SAME CANNOT BE ALLOWED UNDER ANY OTHER HEAD OF INCOME. FURTHER, DI SALLOWANCE OF THE ENTIRE EXPENDITURE EVEN AS PER LD. CIT(A) IS NOT JU STIFIED FOR THE REASON GIVEN BY HER FOR CONFIRMING THE DISALLOWANCE. IN VI EW OF ABOVE, DISALLOWANCE CONFIRMED BY LD. CIT(A) BE DIRECTED TO BE DELETED. 5. PER CONTRA, THE LD. DR IS HEARD WHO HAS RELIED O N THE FINDING OF THE LOWER AUTHORITIES. ITA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CASE OF THE ASSESSEE IS TH AT THE BORROWED FUNDS HAVE BEEN UTILIZED FOR ADVANCING TO THE PARTN ERSHIP FIRM AND FOR ADVANCING TO THE OTHER PARTIES AND ON SUCH BORROWED FUNDS, IT HAS INCURRED INTEREST EXPENDITURE OF RS 663,196 AND HAS EARNED INTEREST INCOME OF RS 13,64,848 AND THEREFORE, ONLY THE NET INTEREST INCOME CAN BE BROUGHT TO TAX AFTER ALLOWANCE OF WHOLE OF THE I NTEREST EXPENDITURE. THE CASE OF THE REVENUE IS THAT THE INTEREST ON PAR TNERSHIP FIRM HAS BEEN SHOWN UNDER THE HEAD BUSINESS INCOME AGAINST WHICH NO EXPENSES HAVE BEEN CLAIMED AND INTEREST FROM OTHER PARTIES HAVE BEEN SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES AG AINST WHICH THE WHOLE OF INTEREST EXPENSE HAS BEEN CLAIMED. NO DOU BT, THERE APPEARS TO BE MISTAKE ON PART OF THE ASSESSEE IN TERMS OF C LAIMING THE WHOLE OF THE INTEREST EXPENDITURE AGAINST INCOME FROM OTHER SOURCES RATHER THAN CLAIMING IT PROPORTIONALLY AGAINST INTEREST FROM PA RTNERSHIP FIRM AND OTHER PARTIES, HOWEVER, THE SUBSTANCE OF THE MATTER IS THAT WHERE THERE IS A NEXUS ESTABLISHED BETWEEN THE BORROWED FUNDS A ND LENDING THEREOF, AS IN THE INSTANT CASE, A PRINCIPLE WHICH IS RELEVA NT BOTH IN CONTEXT OF BUSINESS INCOME AND INCOME FROM OTHER SOURCES, THER EFORE, IN SUCH CIRCUMSTANCES, THERE IS NO BASIS FOR DISALLOWANCE O F INTEREST EXPENDITURE. THE FACT THAT THE ASSESSEE HAS WRONGL Y CLAIMED THE SAME IN THE RETURN OF INCOME UNDER ONE HEAD INSTEAD OF B OTH THE HEADS PROPORTIONALLY IS NOT A BAR AGAINST ALLOWANCE OF SU CH CLAIM OF EXPENDITURE UNDER RESPECTIVE HEADS WHEN THE SUBSTAN CE OF THE TRANSACTION THAT THE BORROWED FUNDS HAVE BEEN UTLIS ED FOR SUBSEQUENT LENDING HAS NOT BEEN DISPUTED BY THE REVENUE AND A SPECIFIC CONTENTION ITA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 5 WAS RAISED BEFORE THE LOWER AUTHORITIES. IN THE RE SULT, THE GROUND OF APPEAL IS ALLOWED. 7. REGARDING GROUND NO. 2, THE LD. AR SUBMITTED THA T THE ASSESSEE OWNED 1.33 BIGHA OF LAND AT VILLAGE MANGARH, TEHSIL BASI ON WHICH HE DECLARED AGRICULTURAL INCOME OF RS. 45,600/-. THE A O TREATED THE SAME AS INCOME FROM OTHER SOURCES FOR THE REASON THAT AS SESSEE FAILED TO SUBSTANTIATE THAT HE HAS PERFORMED ANY AGRICULTURAL OPERATION. ON APPEAL, THE LD. CIT(A) HELD THAT THE LAND IS PRESEN TLY NOT IRRIGATED, AGRICULTURAL INCOME IS RECEIVED IN CASH AND THE NAT URE OF CROP CULTIVATED IS NOT GIVEN. SHE THEREFORE CONFIRMED TH E ADDITION. 8. IN THE AFORESAID FACTUAL BACKGROUND, THE LD. AR SUBMITTED THAT ASSESSEE HAS REGULARLY DECLARED AGRICULTURAL INCOME FROM THIS LAND WHICH HAS BEEN ACCEPTED IN THE PAST. ONLY BECAUSE THE LAN D IS NOT IRRIGATED AT PRESENT CANNOT BE A REASON FOR DISALLOWING THE CLAI M OF AGRICULTURAL INCOME FOR THE YEAR UNDER CONSIDERATION. IN VIEW O F ABOVE, THE AO BE DIRECTED TO ALLOW THE CLAIM OF AGRICULTURAL INCOME. 9. PER CONTRA, THE LD. DR IS HEARD WHO HAS RELIED O N THE FINDING OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT THAT THE ASSESSEE HAS SHOWN AGRICULTURE INCOME AND THE SAME HAS BEEN CLAIMED AS EXEMPT FROM TAX. THE ONUS IS CLEARLY ON THE ASSESSEE TO DEMONSTRATE CARRYING ON OF THE AGRICULTURE OPERATIONS DURING THE YEAR AND EARNING OF AGRICULTU RAL INCOME. IN ITA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 6 ABSENCE OF THE SAME, MERELY BY STATING THAT THE ASS ESSEE OWNS 1.33 BIGHA OF LAND AT VILLAGE MANGARH, TEHSIL IS NOT SUF FICIENT TO DISCHARGE THE ONUS CAST ON HIM. THE FINDINGS OF THE LOWER AU THORITIES THEREFORE REMAIN UNCONTROVERTED BEFORE US AND THE SAME ARE HE REBY CONFIRMED. IN THE RESULT, THE GROUND OF APPEAL IS DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-13/01/2020. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SH. GOVIND SHARAN GUPTA, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-5, 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. 58/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR