ACIT, CHENNAI V. Shri P.K.P.Narayanamurthy, CHENNAI

ITA 623/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61176 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SIBENDU MOHARANA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 623/MDS/2012 (ASSESSMENT YEAR : 2008-09) A . C.I.T BUSINESS CIRCLE CHENNAI (APPELLANT) VS. SHRI P.K.P. NARAYANAMOORTHY NO. 71/1, RASAPPA CHETTY STREET PARK TOWN CHENNAI 600 003 PAN : ACRPN 6800 C (RESPONDENT) REVENUE BY : SHRI SIBENDU MOHARANA, CIT ASSESSEE BY : SHRI R. VIJA YARAGHAVAN, ADVOCATE DATE OF HEARING : 24.05.2012 DATE OF PRONOUNCEMENT : 24.05.2012 O R D E R PER V. DURGA RAO, JM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE LD. CIT(A-IV, CHENNAI DATED 03.02.2012 FOR A SSESSMENT YEAR 2008-09. 2 ITA NO. 6 23/MDS/2012 2. THE REVENUE HAS RAISED SOLE GROUND OF APPEAL REG ARDING RESTRICTING THE DISALLOWANCE OF INTEREST EXPENDITUR E CLAIMED BY THE ASSESSEE AGAINST INCOME FROM OTHER SOURCES. 3. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGE D IN SHARE TRADING BUSINESS AND HE IS A DIRECTOR OF SRI SHANTH OSH STEELS PVT. LTD AND PARTNER IN THE FIRM VADIVAMBIGAI TRAILOR INDUST RIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER OBSERVED THAT THE ASSESSEE HAD CLAIMED RS. 24.48 LAKHS AS IN TEREST PAYMENT. THE ASSESSING OFFICER DISALLOWED THE ENTIRE INTERES T PAYMENT ON THE GROUND THAT THE BORROWED FUNDS WERE NOT UTILIZED FO R THE PURPOSE OF BUSINESS. DURING THE COURSE OF APPELLATE PROCEEDIN GS, THE ASSESSEE SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME-TAX THAT ALL THE BORROWINGS WERE UTILIZED FOR BUSINESS PURPOSES AND THESE AMOUNTS WERE GIVEN AS LOAN TO OTHERS AND INTEREST WAS COLLE CTED FROM THOSE PARTIES AND THE SAME WAS OFFERED AS INCOME. THE LD . COMMISSIONER OF INCOME-TAX, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWED THIS GROUND OF APPEAL RAISED BY THE ASSESSEE. ON 3 ITA NO. 6 23/MDS/2012 BEING AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. COUNSEL FOR THE REVENUE SUBMITTED THAT W HEN THE FUNDS BORROWED BY THE ASSESSEE WERE NOT USED FOR TH E PURPOSE OF BUSINESS, THE ENTIRE CLAIM OF THE ASSESSEE HAS TO B E DISALLOWED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. COMMISSIONER OF INCOME-TAX AND SUBMITTED THAT INTEREST RECEIVED WAS OFFERED FO R TAXATION AND ONLY THE AMOUNT OF INTEREST PAID MINUS INTEREST REC EIVED HAS TO BE TAXED IN THE HANDS OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS BORROWED HUGE FUNDS AND GAVE IT TO OTH ERS AS LOAN. THE ASSESSEE HAS PAID HIGHER RATE OF INTEREST ON TH E FUNDS BORROWED AND COLLECTED LOWER RATES OF INTEREST FROM PARTIES TO WHOM IT GAVE LOAN. THE ASSESSEE FAILED TO EXPLAIN THE REASON FO R GIVING THE LOAN 4 ITA NO. 6 23/MDS/2012 AT LOWER INTEREST. EVEN BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE WAS NOT ABLE TO EXPLAIN FOR WHAT PURPOSE THE FUNDS WERE BORROWED AND SUFFERED LOSS OF RS. 4,78,000/-. WE, THEREFOR E, IN THE INTEREST OF JUSTICE, SET ASIDE THE ORDER OF THE LD. COMMISSI ONER OF INCOME- TAX AND REMIT THE MATTER BACK TO THE FILE OF THE AS SESSING OFFICER TO DECIDE THE ISSUE DE NOVO AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND OF APPEAL RAISE D BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 24 TH OF MAY, 2012. SD/- SD/- (O.K. NARAYANAN) (V. DURGA R AO) VICE PRESIDENT JUDICIAL MEMB ER CHENNAI, DATED THE 24 TH MAY, 2012. VL/ COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE