M/S. MIHAR BUILDERS, MUMBAI V. ASSTT. C.I.T.,CIRCLE-25(3), MUMBAI

ITA 6157/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49511 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.6157/MUM/2008 : ASST.YEAR 2005-2006 M/S.MIHAR BUILDERS NEEL KAMAL, GROUND FLOOR, GOKHALE ROAD, DAHANUKAR WADI KANDIVLI (WEST), MUMBAI 400 067. PAN : AAAFM2938F. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 25(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JITENDRA SANGHAVI RESPONDENT BY : DR. B.SENTHIL KUMAR O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 26.07.2008 IN RELATI ON TO THE ASSESSMENT YEAR 2005-2006. 2. FIRST GROUND IS AGAINST THE CONFIRMATI ON OF DISALLOWANCE FOR INTEREST. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE PAID INTEREST ON LOAN AMOUNTING TO RS.37,82,572 WHICH AMOUNT WAS DEBITED TH E PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS CALLED UPON TO FURNISH LOAN CONFIRMATI ONS IN RESPECT OF THE LOANS IN ORDER TO VERIFY THE GENUINENESS OF THE CLAIM OF INTE REST PAID. THE ASSESSE E FILED TO FURNISH LOAN CONFIRMATIONS BUT SUPPLIE D THE NAMES OF THE PARTIES TO WHOM INTEREST WAS PAID. TO VERIFY THE GENUINENESS OF THE INTEREST PAYMENT, NOTICES U/S.133(6) WERE SENT TO ALL THE PARTIES BY THE A.O. WHOSE ADDRES SES WERE FURNISHED BY THE ASSESSEE. A TABULATION HAS BEEN MADE IN THE ASSESSMENT ORDER INDICATING THE NAME, NOTICES ISSUED U/S.133(6), SERVED OR NOT, REPLIES FURNISHED BY THE PARTIES, INTEREST CONFIRMED BY THE PARTY AND LASTLY INTEREST ALLOWED. FROM THIS TABLE IT CAN BE SEEN THAT CERTAIN PARTIES DID NOT RESPOND TO THE NOTICES ISSU ED U/S.133(6) AND IN CERTAIN OTHER CASES LETTERS SENT WERE RETURNED UNSERVED. STILL IN CERTAIN OTHER CASES THE PARTIES STATED THAT THEY HAD NOT RECEIVED INTEREST. OUT OF THE TOTAL PARTIES WHO ACCEPTED THAT INTEREST ITA NO.6157/MUM/2008 M/S.MIHAR BUILDERS. 2 WAS PAID TO THEM AMOUNTING TO RS.4.75 LA KHS, THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOUR CE AND HENCE DISALLOWA NCE WAS CALLED FOR U/S.40(A)(IA)A AMOUNTING TO RS.2,09,165. HE, THEREFOR E, ALLOWED INTEREST AT RS.2,66,410 (RS.4,75,575 2,09,165) AND DI SALLOWED THE REMAINING INTEREST OF RS.35.16 LAKHS. NO RELIEF WAS A LLOWED IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. THE LEARNED A.R. HAS PLACED ON RECORD A STATEMENT INDICATING THE DETAILS OF PARTIES FROM WHOM LOANS WERE TAKEN IN AN EARLIER YEAR AND THE GENUINENESS OF THE LOANS WAS ACCEPTED AND ALSO THE INTEREST WAS ALLOWE D AS DEDUCTION VIS--VIS THOSE PARTIES IN RESPECT OF WHOM THE INTEREST WAS NOT ALLOWED IN THE EARLIER YEAR VIZ. ASSESSMENT YEAR 2004-2005. ACCORDING TO THIS STATEMENT A SUM OF RS.27,06,475 REPRESENTS AMOUNT OF INTEREST PAID BY THE A SSESSEE DURING THE YEAR TO THOSE PARTIES IN RESPECT OF WHOM THE INTEREST WAS PAID AND ALLOWED BY THE A.O. IN SCRUTINY ASSESSMENT FOR ASSESSMENT YEAR 2004-2005. IT WAS, THEREFORE, CONTENDED THAT TO THAT EXTENT THE INTEREST BE ALLOWED . IT IS AXIOMATIC THAT IF GE NUINENESS OF LOAN HAS BEEN ACCEPTED BY THE REVENUE IN THE PAST AND IN TEREST HAS BEEN ALLO WED TO BE DEDUCTED, THERE CANNOT BE ANY CASE FOR NOT ALLOWING IN TEREST ON SUCH LOANS IN SUBSEQUENT YEAR WHEN THE VERY FACT OF PAYMENT OF INTE REST IS NOT DISPUTED. THE IMPUGNED ORDER DISALLOWING INTEREST IN SUCH CASES ALSO CA NNOT BE UPHELD. IN OUR CONSIDERED OPINION THE ENDS OF JUSTICE WOULD M EET ADEQUATELY IF THE IMPUGNE D ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. WE ORDER AC CORDINGLY AND DIRECT THE ASSESSING OFFICER TO VERIFY THE AMOUNT OF INTEREST PAID BY THE ASSESSEE IN THE INSTANT YEAR ON THE LOANS WHICH WERE TAKEN IN EARLIER YEARS ON WHICH INTEREST WAS ALLOWED BY THE ASSESSING OFFICER HIMSELF U/ S.143(3) IN ASSESSME NT YEAR 2004-2005 IN THE LIGHT OF EVIDENCE, WHICH THE LD. AR IS NOW TRYING TO PLACE ON RECORD IN THE SHAPE OF BALANCE SHEETS OF CERTAIN CONCERNS ETC.. ON ALL OTHER LOANS THE INTEREST IS HEREBY DIRECTED TO BE RIGHTLY DISALLOWED. ITA NO.6157/MUM/2008 M/S.MIHAR BUILDERS. 3 4. GROUND NOS.2 AND 4 WERE NOT PRESSED BY THE LEARNED A.R., WHICH HEREBY STAND DISMISSED. 5. GROUND NO.3 IS AGAINST TH E CONFIRMATION OF DISALLOWAN CE OF LOSS ON SALE OF LAND OF RS.6,77,530. BRIEFLY STATED THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE DEBITED THIS SUM, BEING THE LO SS ON SALE OF PLOT IN THE PROFIT AND LOSS ACCOUNT OF PROJECT MIHAR APAR TMENT. NO DETAIL TO JUST IFY THE LOSS WAS FURNISHED BEFORE THE A.O. BEFORE THE LEARNED CI T(A) IT WAS ARGUED THAT THIS PLOT WAS PURCHASED AT CHARKOP MANY YEARS BACK AND FU RTHER THE INTEREST ATTRIBUTABLE TO THE EXTENT OF COST WAS CAPITALIZ ED YEAR AFTER YEAR. FURTHE R THIS PLOT WAS SHOWN AS INVESTMENT WHICH WAS SOLD BY THE ASSESSEE R ESULTING INTO A LOSS OF RS.6.77 LAKHS. THE LEARNED CIT(A) REFUSED TO INTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELE VANT MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE PURCHASED THIS PLOT AS INVESTMENT AND PROMPTLY INDICATED IT SO IN ITS BALANCE SHEET. EV EN THE INTEREST EXPENDITURE ON LOAN ATTRIBUTABLE TO THIS PLOT WAS ALSO CAPITA LIZED. EVEN THOUGH TH E ASSESSEE IS A BUILDER BUT THAT PLOT WAS TAKEN AS INVESTMENT AND WAS NEVER USED FOR CONSTRUCTION. IN THIS YEAR THE PLOT WAS SOLD AS SUCH WHICH RESULTE D INTO THE SAID LOSS OF RS.6.77 LAKHS. IN OUR CONSIDERED OPINION THE LOSS CAN BE ALLOWED ONLY IF IT ARISES OU T OF STOCK-IN-TRADE AND NOT OUT OF INVESTMENT / FIXED ASSETS. AS THE SAID PLOT WAS HELD BY THE ASSESSEE AS INVESTMENT AND EVEN CAPITALIZED THE INTERE ST THERE ON, IN OUR CONSIDERED OPINION, THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIR MING THE DISALLOWANCE OF LOSS OF RS.6.77 LAKHS. THIS GROUND IS NOT ALLOWED. 7. GROUND NO.5 IS AGAINST CONFIRMATION THE ADDITION IN RESPECT OF CREDIT ENTRIES OF RS.4,82,000 AND RS.2,05,000. THE ASS ESSEE INCLUDED THES E AMOUNTS UNDER THE HEAD `SUNDRY CREDITORS TOTALING TO RS.8. 35 LAKHS. THE AMOUNT OF RS.4.82 LAKHS WAS SHOWN AS PAYABLE TO M/S.S HLOK CONSTRUCTION AND TH E REMAINING AMOUNT OF ITA NO.6157/MUM/2008 M/S.MIHAR BUILDERS. 4 RS.2,05,000 WAS SHOWN AS PAYABLE TO RAJAN CHANDARANA. IN THE ABSENCE OF ANY DETAILS HAVING BEEN FURNISHE D IN RESPECT OF THESE TW O CREDITS, THE A.O. MADE ADDITION WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. THE LEARNED A.R. HAS PLACED ON R ECORD A COPY OF THE ORDER PASSED BY THE LEARNED CIT(A) DATED 29.12.2 010 IN RELATION TO PENALTY U/S.271(1)(C) FOR THE INSTANT YEAR. FROM PARA 3.5 OF THE SAID ORDE R IT CAN BE SEEN THAT THE ASSESSEE FILED CONFIRMATIONS OF THESE PART IES WITH PERMANENT ACCOUNT NUMBER BEFORE THE LEARNED CIT(A), ON WHICH BASIS THE LEARNED CIT( A) REFUSED TO UPHOLD THE PENALTY. THE LEARNED A.R. CONTENDED THAT AT THE TIM E WHEN THE ASSESSMENT WAS GOING ON THE ASSESSEE DID NOT HAVE SUFF ICIENT TIME TO OBTAIN THE REQUISITE INFORMATION, BUT SUBSEQUENTLY THE NECESSARY INFORMATION WA S OBTAINED WHICH WAS PLACED BEFORE THE LEARNED CIT(A) DURING THE PENALTY PROCEED INGS. IT WAS PRAYED THAT ONE MORE OPPORTUNITY BE GRANTED SO AS TO PUT FORTH THE CASE BEFORE THE A.O. IN THIS REGARD. FROM THE ORDER OF THE LEARNED CIT(A) IN APPEAL AGAINST PENALTY U/S.271(1)(C) IT CAN BE SEEN THAT THE ASSESSEE SUBMITTED C ONFIRMATIONS ALONG WITH PERMANENT ACCOUNT NUMBER OF THESE TWO CREDITORS, WHICH MATTER HAS BEEN DISCUSSED AT PARA 3.5 OF THE ORDER. IT INDICATES THAT THE ASSESSEE SUB SEQUENTLY ACQUIRED THE NECESSARY DETAILS TO PROVE THE GENUINENESS OF THE CREDIT. IN OU R CONSIDERED OPINION IT WOULD BE JUST AND FAIR IF THE IMPUGNED ORDER IS SET ASIDE THE MATT ER IS RESTORED TO THE FILE OF A.O. FOR EXAMINING THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. GROUND NO. 6 IS AGAINST THE SUSTENANCE OF ADDITION OF RS.38,90,901 IN RESPECT OF NEW LOANS RECEIVED DURING THE YEAR. TH E ASSESSING OFFICER MADE THE ADDITION WHICH HAS BEEN UPHELD BY THE LEARNED FIRS T APPELLATE AUTHORITY ON THE GROUND THAT NECESSARY DETAILS TO PROVE THE GENUINENESS OF THE CREDIT WERE NOT FURNISHED. THE LEARNED A.R. INVITED OUR ATTENTION TOWARDS THE ORDER OF THE LEARNED CIT(A) ITA NO.6157/MUM/2008 M/S.MIHAR BUILDERS. 5 U/S.271(1)(C) FROM WHERE IT CAN BE SEEN TH AT THE ASSESSEE FURNISHED CERTAIN DETAILS BEFORE HIM, WHO ORDERED FO R THE DELETION OF PENALTY ON THE AMOUNT OF SUCH NEW LOANS. THE LEARNED A.R. CONTENDED THAT NOW THE NECESSARY DETAILS WERE AVAILABLE WHICH COULD BE VERIFIED BY THE A.O. IN VIEW OF THE SIMILARITY OF THE FACTS OF GROUND NO.5 ALONG WITH GROUND NO.6 AND FOLLOWING THE VIEW TAKEN IN GROUND NO.5, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A.O. FOR TAKING A FRESH DECISION AS PER LAW AFTER A LLOWING A REASONABLE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. IN THE RESULT THE APPEAL IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 15 TH JULY, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.