KISHINCHAND G. UTTAMCHANDANI, MUMBAI V. ASST CIT 19(3), MUMBAI

ITA 6757/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2261 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2013
• Court: TRIBUNAL
• Assessee Lawyers: A P SINHA
• Section: 143(3); 37

Judgement Text

1 I.T.A. NO.178 /MUM/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACOUNTANT MEMBER) I.T.A. NO.6757/MUM/2013 (ASSESSMENT YEAR: 2009-10) MR KISHINCHAND G UTTAMCHANDANI, 4A, CHAND TERRACE, ST ANDREWS ROAD, BANDRA (W), MUMBAI 50 VS ACIT 19(3) MUMBAI PAN : AACPU1765C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A.P. SINHA RESPONDENT BY SHRI GANESH BARE DATE OF HEARING : 14-07-2016 DATE OF PRONOUNCEMENT : 27 -07-2016 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER C ALLED CIT(A)] DT 17-9- 2013 PASSED AGAINST THE ASSESSMENT ORDER OF THE AO DT 29-12-2011 U/S 143(3) FOR A.Y. 2009-10. DURING THE COURSE OF HEARING ASSESSEE FILED REVISED GROUNDS OF APPEAL, SUBSTITUTING THE ORIGINAL GROUNDS. THE REVISED GRO UNDS READ AS UNDER: 2 I.T.A. NO.178 /MUM/2013 1-BECAUSE THE LD. C.I.T.(A) ERRED WHILE SUSTAINING THE ADDITION OF RS. 2,81,74,649.00 WITH APPRECIATING TH AT BECAUSE OF NETTING OF INTEREST PAID [WHICH WAS MUCH HIGHER] AND INTEREST RECEIVED THE ABOVE INTEREST WAS NOT DI SCLOSED. 1-(A) BECAUSE THE LD. C.I.T.(A) ERRED WHILE NOT APP RECIATING THE VIJAYA BANK CERTIFICATE, DATED 19.12.2011 WHICH WAS FILED BEFORE THE ASSESSING OFFICER. AS PER THAT CERTIFICA TE INTEREST OF RS. 2,81,74,649.00 HAS BEEN ADJUSTED BY THE BANK AG AINST VARIOUS LOANS TAKEN BY THE APPELLANT ON O.D. I -(B)BECAUSE THE LD. C.I.T. (A) ERRED WHILE NOT AP PRECIATING THE VIJAYA BANK CERTIFICATE, DATED 16.7.2013 WHICH CATE GORICALLY SPEAKS ABOUT PAYMENT OF INTEREST AND CHARGING OF IN TEREST BY THE BANK. 1-(C) BECAUSE THE LD. C.I.T. (A) ERRED WHILE NOT AP PRECIATING THE COMPUTATION OF INCOME FILED BEFORE HIM CLAIMING DED UCTION OF INTEREST OF RS. 3,90,70,691.00 FOR ACQUIRING PROPER TIES WHICH ARE HIS BUSINESS ASSETS. 1 -(D)BECAUSE THE LD. LOWER AUTHORITIES HAVE LEGALL Y ERRED WHILE NOT ALLOWING THE DEDUCTION OF [RS. 3,90,70,691.00 - 2,81,74,649.00] = RS. 1,08,96,042.00 UNDER SECTION 37 (1) OF THE INCOME TAX ACT, 1961, AS IT WAS HIS BUSINESS EX PENSE. 2. GROUND 1 DEALS WITH THE GRIEVANCE OF THE ASSESSEE WITH RESPE CT TO ACTION OF LOWER AUTHORITIES IN SUSTAINING THE ADDIT ION OF RS.2,81,74,649 ON ACCOUNT OF INTEREST INCOME ON THE FDR HELD WITH VIJ AYA BANK. 3. IT HAS BEEN SUBMITTED BY THE LD. COUNSEL THAT ASSE SSEE HAD FDRS WITH VIJAYA BANK AND ALSO AVAILED OVERDRAFT FACILITY AGAINST TH E FDRS FROM VIJAYA BANK. THE ASSESSEE PAID INTEREST ON THE OVERDRAFT FACILIT Y TO VIJAYA BANK OF RS.3,90,70,591 AND EARNED INTEREST ON THE FDRS WITH VIJAYA BANK FOR RS.2,81,74,649. IT IS STATED THAT ASSESSEE OMITTED TO REPORT BOTH THE TRANSACTIONS IN ITS RETURN OF INCOME. THE LOWER AU THORITIES HAVE MADE ADDITION OF INTEREST INCOME AMOUNTING TO RS.2,81,74 ,649 BUT DEDUCTION OF 3 I.T.A. NO.178 /MUM/2013 INTEREST OF RSA.3,90,70,691 HAS BEEN OMITTED TO BE GRANTED. BEING AGGRIEVED, ASSESSEE IS BEFORE US. 3. DURING THE COURSE OF HEARING BEFORE US, IT HAS BEEN STATED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE IN NOT REPORTING THE TRANSACTIONS, AS IS EVIDENT FROM THIS FACT THAT INTEREST EXPENSES ARE MORE THAN THE INTEREST INCOME . IT HAPPENED INADVERTENTLY DUE TO OVERSIGHT. IT WAS FURTHER SUB MITTED THAT THE AO WAS DUTY BOUND TO TREAT BOTH THE TRANSACTIONS UNIFORMLY. IF THE AO IS TAKING INTO ACCOUNT INCOME, THEN HE IS BOUND UNDER THE LAW TO G IVE ADVANTAGE OF THE EXPENSES ALSO, BECAUSE THE INCOME TAX ACT ENVISAGES TAXABILITY OF NET INCOME AND NOT OF THE GROSS RECEIPTS. 4. PER CONTRA, THE LD. DR FAIRLY STATED THAT THIS ISSU E CAN BE SENT BACK TO THE FILE OF THE AO FOR PROPER VERIFICATION ON FACTS. 5. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES. WE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL THAT IN C ASE OF INCOME IS BEING TAXED, THEN, INTEREST EXPENSES SHOULD ALSO BE CONSIDERED, IF ALLOWABLE AS PER LAW. THUS, WE SEND THIS ISSUE BACK TO THE FILE OF THE AO WITH THE DIRECTION THAT IF DIRECT NEXUS IS FOUND BY THE AO, THEN BENEFIT OF NE TTING BETWEEN THE INTEREST INCOME AND INTEREST EXPENSES SHOULD BE PROVIDED. T HE BALANCE AMOUNT OF INTEREST EXPENDITURE SHOULD ALSO BE CONSIDERED TO B E ALLOWED AS PER PROVISIONS OF THE ACT. IN THIS REGARD, THE ASSESSE E SHALL SUBMIT REQUISITE DETAILS AND DOCUMENTARY EVIDENCES WHICH SHALL BE CONSIDERED BY THE AO WHILE DECIDING THE ISSUE AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS FREE TO RAISE ALL LE GAL AND FACTUAL ISSUES BEFORE THE AO. THIS GROUND IS TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES AS INDICATED ABOVE. 4 I.T.A. NO.178 /MUM/2013 6. IN GROUND 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LOWE R AUTHORITIES IN DISALLOWING THE DEDUCTION OF INTERES T ON BORROWED CAPITAL CLAIMED FOR PURCHASE OF PROPERTY U/S 24(B) OF THE A CT AMOUNTING TO RS.1,02,51,496 AGAINST THE RENTAL INCOME SHOWN BY T HE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT HAS BEEN SUB MITTED THAT THE DISALLOWANCE HAS BEEN MADE BY THE LOWER AUTHORITIES UNDER SOME MIS- APPRECIATION AND MISUNDERSTANDING OF FACTS WHEREBY IT HAS BEEN PRESUMED BY THE LOWER AUTHORITIES THAT THE LOAN ON WHICH AFORES AID AMOUNT OF INTEREST HAS BEEN PAID HAS NOT BEEN UTILISED FOR ACQUIRING THE P ROPERTY, THE INCOME OF WHICH HAS BEEN SHOWN AS INCOME FROM HOUSE PROPERTY , AND THAT THE LOAN WAS UTILISED ELSEWHERE FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE FACTS SO MISUNDERSTOOD, THE LOWER AUTHORITY DENIED THE BENEF IT OF DEDUCTION U/S 24(B). IT IS STATED THAT COMPLETE EVIDENCE ARE AVAILABLE F ROM WHERE IT CAN BE SHOWN THAT OVERDRAFT FACILITY ON WHICH IMPUGNED INTEREST WAS PAID WAS UTILISED FOR ACQUIRING THE PROPERTY FROM WHICH INCOME FROM HOUSE PROPERTY HAS BEEN SHOWN IN THE RETURN. IT IS ALSO STATED THAT IN SUB SEQUENT ASSESSMENT YEARS, NO DISALLOWANCE HAS BEEN MADE IN THE ASSESSMENTS FRAME D U/S 143(3). 7. PER CONTRA, LD. DR RELIED UPON THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES. OUR ATTENTION WAS DRAWN BY LD. COUNSEL ON VARIOUS EVIDENCES SHOWI NG UTILISATION OF LOAN FOR ACQUIRING IMPUGNED PROPERTY. OUR ATTENTION WAS ALS O DRAWN ON THE FACT THAT SIMILAR INTEREST HAS BEEN ALLOWED IN THE SUBSEQUENT ASSESSMENT YEARS BY THE AO HIMSELF. THE LD. COUNSEL HAS CLAIMED THAT THERE ARE REQUISITE EVIDENCES TO CLEAR THE CONFUSION AND DOUBTS ARISING IN THE MIND OF THE LOWER AUTHORITIES. THUS, WE SEND THIS ISSUE ALSO BACK TO THE FILE OF T HE AO FOR ADJUDICATION AFRESH. THE ASSESSEE SHALL FURNISH REQUISITE DETAILS AND DO CUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM WHICH SHALL BE CONSIDERED BY T HE AO BEFORE DECIDING THIS 5 I.T.A. NO.178 /MUM/2013 ISSUE AFRESH. NEEDLESS TO ADD THAT ADEQUATE OPPORT UNITY OF HEARING SHALL BE GRANTED TO THE ASSESSEE. AS A RESULT, THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THIS _27 TH _ DAY OF JULY, 2016. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT :27 JULY, 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , A-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES