Neeraj Kumar Sahu, Lucknow V. Dy. Commissioner of Income Tax, Lucknow

ITA 618/LKW/2005

• Counselvise Citation: 61823714 RSA 2005
• Duration Of Justice: 8 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 10-08-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: P K KAPOOR
• Keywords: Business income; Salary income; Opportunity of being heard; Principle of natural justice

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.618/LKW/2005 ASSESSMENT YEAR:1999 - 2000 SHRI NEERAJ KUMAR SAHU, 35 - A/1, FRIENDS COLONY, LUCKNOW. VS. DY.C.I.T., CENTRAL CIRCLE - IV, LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. K. KAPOOR, C.A. RESPONDENT BY SHRI ALOK MITRA, D. R. DATE OF HEARING 27/05/2014 DATE OF PRONOUNCEMENT 1 3 /06/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - I, KANPUR DATED 14/06/2005 FOR ASSESSMENT YEAR 1999 - 2000. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1 . 1 BECAUSE THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE RECEIPTS FROM M/S SAHU AGENCIES PVT. LTD. WAS NOT ASSESSABLE AS SALARY INCOME (AS HAD BEEN CLAIMED IN THE RETURN) IN THE HANDS OF THE APPELLANT, AS THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE DID NOT EXIST (BETWEEN THE S AID COMPANY AND THE APPELLANT) AND THERE WAS NO SUPERINTENDENCE AND CONTROL OF THE DIRECTORS AND ON THAT GROUND DISALLOWING THE APPELLANT'S CLAIM FOR STANDARD DEDUCTION AMOUNT TO RS.20,000/ - 1 . 2 BECAUSE THE APPELLANT'S RELATIONSHIP WITH THE ABOVE NAMED COMPAN Y WAS GOVERNED BY THE PROVISION OF THE COMPANIES ACT AND VARIOUS COVENANTS AS MADE/DEEMED TO HAVE BEEN ENTERED INTO BETWEEN THE PAYER AND THE PAYEE AND THERE WAS RESOLUTION PASSED BY THE BOARD OF DIRECTORS, 2 DEFINING THE TERMS AND CONDITIONS OF THE SERVICES AND REMUNERATION PAID TO THE APPELLANT ACCORDINGLY THE RECEIPT WAS ASSESSABLE AS SALARY INCOME ELIGIBLE FOR STANDARD DEDUCTION U/S 16(1). 2 . 1 BECAUSE THE CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DISALLOWING THE CLAIM OF INTEREST OF RS.16,06,015/ - ON BO RROWED FUNDS TAKEN FROM M/S. SAHU INVESTMENT MUTUAL BENEFIT COMPANY AND M/S GEMINI FINANCERS ON THE GROUND THE APPELLANT HAVE FAILED TO PROOF THE NEXUS BETWEEN THE BORROWED FUNDS AND THE UTILIZATION THEREOF IN THE BUSINESS OF THE APPELLANT FOR EARNING ANY TAXABLE INCOME. 2 . 2 BECAUSE THE LD. CIT (APPEALS) HAS FAILED TO APPRECIATE THE FACT THAT : - A) THE LOANS FROM M/S SAHU INVESTMENT MUTUAL BENEFIT COMPANY LTD. WERE TAKEN IN THE EARLIER YEARS WHICH HAS BEEN UTILIZED FOR THE BUSINESS PURPOSES WHEREIN THE INCOME DERIVED THERE FROM WAS TAXABLE; B) THE LOAN TAKEN FROM M/S GEMINI FINANCIERS WERE UTILIZED FOR PURCHASING OF SHARES WHICH WAS EITHER FOR PARTICIPATING IN SHARE CAPITAL OF VARIOUS BUSINESS CONCERN SO AS TO HAVE THE CONTROLLING INTEREST IN SUCH BUSINESS CO NCERNS, OR FOR THE PURPOSES OF ACQUIRING OF SHARES AS STOCK - IN - TRADE AND TO EARN BUSINESS INCOME BY SELLING THEM; C) ALL THE DETAILS OF UTILISATION OF THE FUNDS WERE ELABORATELY GIVEN BEFORE THE AUTHORITIES BELOW AND WHICH ALSO FORMS PART OF THE PAPER BOO K BEFORE THE LEARNED CIT (APPEAL). AND THEREFORE, THE DEDUCTION OF INTEREST AS HAVE BEEN CLAIMED ON THE BORROWINGS COULD NOT HAVE BEEN DISALLOWED EITHER BY INVOKING THE PROVISIONS OF SECTION 14 - A OR IN FACTS OF THE CASE. 3.1 BECAUSE THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE DISALLOWANCE TO THE EXTENT OF RS.72,000/ - ON THE GROUND THAT WITHDRAWALS MADE FROM HOUSE HOLD EXPENSES WERE INADEQUATE. 3 3.2 BECUASE THE APPELLANT HAS PLACED ON RECORD ALL THE RELEVANT AND FACTUAL DETAILS IN THIS REGARD AND ON DUE CONSIDERATION OF SUCH FACTS NO ADDITION WAS CALLED FOR EITHER ON FACTS OR IN LAW, AS ADDITION SO MADE IS SOLELY BASED ON ESTIMATE AND SURMISES. 3. BECAUSE THE ORDER IN APPEAL AGAINST ITS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 3. AT THE VERY OUTSET , IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS APPEAL WAS EARLIER DECIDED BY THE TRIBUNAL AS PER ITS DECISION DATED 19/05/2006 AND THE ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL AS PER GROUND NO. 1 REGARDING ALLOWABILITY OF STANDARD DE DUCTION WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. REGARDING THE SECOND ISSUE RAISED BY THE ASSESSEE IN RESPECT OF DISALLOWANCE OF THE ASSESSEES CLAIM FOR INTEREST OF RS.16,06,015/ - RAISED BY THE ASSESSEE AS PER GROUND NO. 2, THE TRIBUNAL DEC IDED THE ISSUE AGAINST THE ASSESSEE. HE FURTHER SUBMITTED THAT THEREAFTER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE HON'BLE ALLAHABAD HIGH COURT AND WHILE DECIDING THIS APPEAL OF THE ASSESSEE FOR THE PRESENT YEAR IN INCOME TAX APPEAL NO. 232 O F 2006, AS PER JUDGMENT DATED 12/08/2011, IT WAS HELD BY HON'BLE HIGH COURT THAT THE TRIBUNAL SHOULD DECIDE THE CONTROVERSY AFRESH. HE ALSO POINTED OUT THAT IT IS NOTED BY HON'BLE HIGH COURT THAT ON SIMILAR GROUND, THIS COURT REMANDED THE MATTER BACK TO T HE TRIBUNAL IN I.T.A. NO.183 AND 187 OF 2006 BY ORDER DATED 02/08/2010. HE SUBMITTED A COPY OF THIS JUDGMENT OF HON'BLE HIGH COURT AND POINTED OUT THAT IN THAT ORDER , THE ASSESSMENT YEAR WAS 94 - 95, 95 - 96, 96 - 97 & 97 - 98. HE SUBMITTED THAT IN THOSE YEARS A LSO , IDENTICAL THREE QUESTIONS WERE BEFORE HON'BLE HIGH COURT AND AS PER PARA 12 OF THE JUDGMENT, THE MATTER WAS REMANDED BACK TO THE TRIBUNAL ON LIMITED GROUND TO CONSIDER THE ASSESSEES CASE WITH REGARD TO INTEREST OF BORROWED CAPITAL PRIOR TO 1993 - 94 AN D INTEREST OF CAPITAL BORROWED AFTER 1993 - 94 ONWARDS. HE FURTHER SUBMITTED THAT CONSEQUENT TO THIS JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT, THE TRIBUNAL DECIDED THE ISSUE 4 AFRESH IN THOSE YEARS AS PER ITS DECISION DATED 09/12/2010 AND THE MATTER WAS RESTO RED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN ACCORDANCE WITH LAW AFTER KEEPING IN VIEW THE DIRECTIONS GIVEN BY HON'BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 08/10/2010 AND THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ BOYCE & CO. HE ALSO SUBMITTED THAT CONSEQUENT TO THIS TRIBUNAL ORDER DATED 09/12/2010, THE ASSESSING OFFICER PASSED ORDER FOR ASSESSMENT YEAR 97 - 98 U/S 143 (3)/254 ON 29/12/2011, A COPY OF WHICH IS AVAILABLE ON PAGE NO. 17 AND AS PER THIS O RDER, THE ASSESSING OFFICER HAS DISALLOWED INTEREST ON FRESH LOAN ONLY AND FOR THE BORROWED FUNDS PRIOR TO 93 - 94, NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. THE COPY OF THE ASSESSMENT ORDER IS PLACED ON PAGE NO. 17 OF THE PAPER BOOK. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT SINCE THE JUDGMENT OF ALLAHABAD HIGH COURT DATED 08/10/2010 WAS CONSIDERED BY HON'BLE ALLAHABAD HIGH COURT IN ITS JUDGMENT FOR TH E PRESENT YEAR, IT HAS TO BE ACCEPTED THAT THE FACTS ARE IDENTICAL. MOREOVER, LEARNED D.R. OF THE REVENUE ALSO COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR AS COMPARED TO EARLIER FOUR YEARS. IN THOSE YEARS, THE TRIBUNAL HAS RESTORED BA CK THE MATTER TO THE ASSESSING OFFICER FOR FRESH DECISION IN ACCORDANCE WITH LAW AFTER KEEPING IN VIEW THE DIRECTIONS GIVEN BY HON'BLE HIGH COURT AND THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE & CO. WE DECIDE THE ISSUE IN THE PR ESENT YEAR ALSO ON SIMILAR LINES. WE SET ASIDE THE ORDER OF LEARNED CIT (A) REGARDING THE ISSUE OF ALLOWABILITY OF INTEREST OF RS.16,06,105/ - AND RESTORE THIS MATTER BACK TO THE ASSESSING OFFICER FOR FRESH DECISION AS PER LAW AFTER KEEPING IN VIEW THE DIRECTIONS GIVEN BY HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 08/10/2010 IN EARLIER FOUR YEA RS. 5 THE ASSESSING OFFICER SHOULD ALSO KEEP IN MIND THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ BOYCE & CO. (SUPRA). NEEDLESS TO SAY , THE ASSESSING OFFICER SHOULD PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED ON THIS ASPECT FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 /06/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR