LATE RAVJI MAJETHIA, MUMBAI V. ITO WD 23(3)(2), MUMBAI

ITA 583/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2161 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNI KUMAR AGA RWAL
• Assessee Lawyers: R SARBHUSHAN
• Keywords: Business income
• Section: 143(3); 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 583/MUM/2015 (ASSESSMENT YEAR : 2008-09) LATE RAJIV MEJETHIA, THROUGH L/H LILADHAR MAJETHIA, 7, PATHAI NIWAS, N.S.ROAD, MULUND (WEST), MUMBAI 400 080 PAN: AEEPM 7537B ... APPELLANT VS. THE ITO,WARD 23(3)(2), C-10, 4 TH FLOOR, PARTYAKSH KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDR (EAST) MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI R.SARBHUSHAN RESPONDENT BY : SHRI SUNI KUMAR AGA RWAL DATE OF HEARING : 19/10/2015 DATE OF PRONOUNCEMENT : 30/11/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL IS PREFERRED BY THE ASSES SEE AND IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 14/11/ 2014 OF CIT(A)-33, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2008-09, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICE R DATED 31/01/2013 UNDER SECTION 154 OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). 2 ITA NO. 583/MUM/2015 (ASSESSMENT YEAR : 2008-09) 2. IN THIS APPEAL THE FIRST AND THE FOREMOST GRIEV ANCE OF THE ASSESSEE IS THAT THE ORDER PASSED BY THE ASSESSING OFFICER ON 31/01/2013 UNDER SECTION 154 OF THE ACT WAS BEYOND JURISDICTION. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESS EE IS AN INDIVIDUAL WHO HAD FILED HER RETURN OF INCOME ON 10/11/2008 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING AN INCOME OF RS .1,56,320/-, WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT UNDER SECTION 1 43(3) OF THE ACT DATED 27/10/2010, WHEREIN THE RETURNED INCOME WAS A CCEPTED. THE TOTAL INCOME OF THE ASSESSEE WAS RS.1,56,320/-, WHI CH COMPRISED OF THE BUSINESS INCOME OF RS.59,035/- AND INCOME FROM OTHE R SOURCES AT RS.97,285/-. SUBSEQUENTLY, THE ASSESSING OFFICER I SSUED A NOTICE UNDER SECTION 154 OF THE ACT ON THE GROUND THAT CERTAIN M ISTAKE APPARENT FROM THE RECORD HAD CREPT INTO THE ASSESSMENT ORDE R, IN AS MUCH AS, THE DEDUCTION FOR INTEREST PAID OF RS.4,61,586/- WA S WRONGLY ALLOWED AND THAT SUCH A MISTAKE WAS RECTIFIABLE UNDER SECTI ON 154 OF THE ACT. THE ASSESSEE RESISTED THE ACTION OF THE ASSESSING O FFICER AND CONTENDED THAT THERE WAS NO MISTAKE APPARENT FROM THE RECORD, WHICH WAS RECTIFIABLE WITHIN THE MEANING OF SECTION 154 OF TH E ACT. THE ASSESSING OFFICER REJECTED THE PLEA OF THE ASSESSEE AND DISAL LOWED THE AMOUNT OF RS.4,61,586/- AND THE AMENDED TOTAL INCOME WAS DETE RMINED AT RS.6,17,910/-. THE SAID STAND OF THE ASSESSING OFFI CER HAS SINCE BEEN UPHELD BY THE CIT(A) ALSO AND ACCORDINGLY, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO. 583/MUM/2015 (ASSESSMENT YEAR : 2008-09) 4. BEFORE ME, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE DISALLOWANCE OF RS.4,61,586/- MADE OUT OF INTEREST EXPENDITURE WAS NOT A MISTAKE RECTIFIABLE WITHIN THE SCOPE OF SECTION 154 OF THE ACT. 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE APPEARING FOR THE REVENUE HAS REFERRED TO THE DISCUSSION I N THE ORDERS OF THE AUTHORITIES BELOW TO POINT OUT THAT THE CLAIM FOR INTEREST PAID WAS WRONGLY ALLOWED UNDER SECTION 57 OF THE ACT IN THE ASSESSMENT FINALIZED U/S. 143(1) OF THE ACT BECAUSE SUCH INTEREST EXPEND ITURE COULD NOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF EARNING INTEREST INCOME. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL STANDS. F ACTUALLY SPEAKING, IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT ON 27/10/2010, A DEDUCTION FOR INTEREST EXPENSES OF RS .4,61,586/- WAS ALLOWED AGAINST THE INTEREST INCOME OF RS.4,31,661/ -. SUBSEQUENTLY, THE ASSESSING OFFICER SOUGHT TO RECTIFY SUCH ASSESSMENT BY INVOKING SECTION 154 OF THE ACT, ON THE GROUND THAT INTEREST EXPENDI TURE OF RS.4,61,586/- WAS NOT AN ALLOWABLE DEDUCTION. FROM THE ORDERS OF THE AUTHORITIES BELOW, IT IS REVEALED THAT DURING THE YEAR UNDER C ONSIDERATION ASSESSEE HAD EARNED INTEREST ON LOANS OF RS.4,30,798/- FROM M/S. JALARAM ENTERPRISES P. LTD., EKTA TRADING AND JALRAM ENTER PRISES. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD ALSO PURCHA SED A PROPERTY FOR RS.12,08,000/- AND ASSESSEE HAD OBTAINED LOAN FROM THREE PARTIES, HARESH MAJETHIA-RS.85,000/-, G.K.DAND HUF - RS.7,0 0,000/- AND DEEPAK KARANI RS.4,00,000/-. THE LOAN ADVANCED T O M/S. JALRAM ENTERPRISES P. LTD. WAS RECEIVED BACK AND SUCH PROC EEDS WERE USED TO 4 ITA NO. 583/MUM/2015 (ASSESSMENT YEAR : 2008-09) REPAY THE LOANS RAISED FROM THE THREE PARTIES. IN THIS BACKGROUND, THE ASSESSING OFFICER WAS OF THE OPINION IN THE PROCEED INGS INITIATED BY ISSUANCE OF NOTICE U/S. 154 OF THE ACT THAT INTERES T EXPENDITURE OF RS.4,61,586/- WAS SPENT TOWARDS PURCHASE OF PROPERT Y AND, THEREFORE, THE SAME COULD NOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES BY WAY O F INTEREST AND COMMISSION. 6.1 PRESENTLY, THE PRELIMINARY OBJECTION OF THE ASS ESSEE IS THAT SUCH DENIAL OF DEDUCTION WAS OUTSIDE THE SCOPE AND AMBIT OF SECTION 154 OF THE ACT, WHICH PERMITS RECTIFICATION OF ONLY A MIS TAKE APPARENT FROM THE RECORD. ACCORDING TO THE ASSESSEE, THE IMPUGN ED ISSUE WAS A DEBATABLE ISSUE AND THUS, OUTSIDE THE SCOPE OF SECT ION 154 OF THE ACT. IT IS A TRITE LAW THAT A MISTAKE APPARENT ON THE RECO RD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH IS ES TABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS WHICH MAY HAVE CONCEIVABLY TWO POSSIBLE OPINIONS. IN THE PRESENT CASE, IT IS QUI TE CLEAR THAT THE ISSUE REGARDING THE ALLOWABILITY OF INTEREST EXPENDITURE OF RS.46,586/- IS AN ISSUE, WHICH IS DEBATABLE AND IN MY OPINION THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN PRESUMING THAT ON THIS QUESTION TH ERE CAN BE NO TWO OPINIONS, SO AS TO JUSTIFY THE IMPUGNED ACTION UND ER SECTION 154 OF THE ACT. I MAY HASTEN TO ADD HERE THAT I AM NOT ON THE MERITS OF THE ALLOWABILITY OF EXPENDITURE BUT AS TO WHETHER SUCH A DISALLOWANCE IS PERMISSIBLE WITHIN THE SCOPE AND AMBIT OF SECTION 1 54 OF THE ACT. 5 ITA NO. 583/MUM/2015 (ASSESSMENT YEAR : 2008-09) 6.2 IN VIEW OF THE AFORESAID DISCUSSION, I CONCLUD E BY SETTING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SE CTION 154 OF THE ACT DATED 31/01/2013. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2015. SD/- (G.S. PANNU) ACCOUN TANT MEMBER MUMBAI, DATED 30/11/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS