M/S SAVATEX PVT LTD, MUMBAI V. ACIT CIRCLE-2 (3)(2), MUMBAI

ITA 6829/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3986 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 06-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Assessee Lawyers: PRAKASH JOTHWANI
• Keywords: Capital asset; Business income; Depreciation; Principle of natural justice; Cost of acquisition; Revised return; Set aside; Capital Gains
• Section: 154; 143(3); 142(1); 43D; 201; 143(2); 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAVAN KUMAR G ADALE (JM) I.T.A. NO. 6829/MUM/2019 (ASSESSMENT YEAR 2016-17) SAVATEX PVT.LTD. 79/91, 4 TH FLOOR MEHTA HOUSE SAMACHAR MARG, FORT MUMBAI-400 001 PAN : AAACS0729B VS. ACIT,CIRCLE - 2(3)(2) ROOM NO.552, 5 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI PRAKASH JOTHWANI DEPARTMENT BY SHRI VIJAY KUMAR MENON DATE OF HEARING 15 .07 .2021 DATE OF PRONOUNCEMENT 06 . 10 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-6 DATED 25.10.2019 AND PERTAINS TO ASSESSMENT YEAR 20 16-17. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE LD. CIT (APPEALS) FAILED TO CONSIDER THAT TH E APPELLANT WENT FOR THE SAID HEARING ON 09.08.2019 AND DUE TO THE NON-AVAILABILI TY OF THE CIT (A) THE APPELLANT SEEKED FOR ADJOURNMENT AND WAS TOLD THAT FRESH NOTI CE WILL BE ISSUED FOR HEARINGS. 2. [A] THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE D ISALLOWANCE OF RS 82,41,0067- FOR INTEREST EXPENDITURE INCURRED WITHOUT CONSIDERI NG THE ORDERS OF THE EARLIER YEARS OF THE A.O, WHERE THE CLAIM HAS BEEN ALLOWED AND ALSO NOT CONSIDERED THE TRIBUNAL ORDER FOR A. Y 2010-11 IN APPELLANT OWN CASE WHERE THE INTEREST EXPENDITURE HAD BEEN SET ASIDE BY ITAT. [B] THE LD. CIT (APPEALS) ERRED IN UPHOLDING THE DISALL OWANCE BY MERELY RELYING ON THE PREDECESSOR DECISION OF EARLIER YEAR I.E. 2012- 13 AND WITHOUT CONSIDERING THE SUBMISSION FILED BY THE APPELLANT. 3. ITA NO.6829/MUM/2019 2 [A] THE LD. CIT (APPEALS) HAS FAILED TO CONSIDER TH E FACT THAT THERE IS AN APPARENT MISTAKE WHERE DISALLOWANCE ON INTEREST EXPENDITURE WAS COMPUTED DOUBLE IN THE ASSESSMENT ORDER WHICH HAS TO BE RECTIFIED U/S 154 OF THE L.T ACT WHICH WAS POINTED OUT TO A.O DURING THE PROCEEDINGS AND WHICH FACT WA S NOT CONSIDERED BY THE CIT (A). [B] THE LD. CIT (APPEALS) FURTHER HAS ALSO FAILED TO CONSIDER THE FACT THAT A.O DID NOT RESPOND TO THE APPLICATION OF RECTIFICATION MAD E BY APPELLANT. WHICH IS BAD IN LAW. 4. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE D ISALLOWANCE OF INDEXATION BENEFIT WITHOUT CONSIDERING THE VARY FACT THAT SALE CONSIDE RATION OF SHOP NO. 1 WAS SHOWN UNDER PROFIT FROM BUSINESS INCOME AND AT THE SAME T IME THIS TRANSACTION HAS ALSO BEEN SHOWN AS CAPITAL GAINS IN THE COMPUTATION OF INCOME . 5. THE LD. CIT (APPEALS) ERRED STATING THAT THERE W AS ABSENCE OF COMPLETE FACTS WHEREAS HAVE FAILED TO CONSIDER THE DOCUMENTS FILED IN THE PAPER BOOK WHICH CLEARLY SHOWED THE FACTS. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF INVESTMENTS IN SECURITIES AND REAL ESTATE. IT E-FIL ED ITS RETURN OF INCOME FOR A.Y.2016- 17 ON 17.09.2016 DECLARING TOTAL INCOME AT RS.64,48 ,309/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS M ANUALLY SELECTED FOR SCRUTINY UNDER COMPULSORY SELECTION CRITERIA. ACCORDINGLY, S TATUTORY NOTICES U/S. 143(2) AND 142(1) WERE ISSUED AND DULY SERVED ON THE ASSESSEE THROUGH ITBA PORTAL. IN RESPONSE TO THE AFORESAID NOTICES, THE ASSESSEE MADE SUBMISS IONS FROM TIME TO TIME. THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 22.12.2018 DETERMINING TOTAL INCOME AT RS. 1,71,66,1807- UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF (-) RS. 1,06,44,015/- U/S.115JB OF THE ACT. IN THE ASSE SSMENT SO COMPLETED, THE AO DISALLOWED RS.82,41,006/- ON ACCOUNT OF INTEREST EX PENDITURE U/S.36(1)(II) OF THE ACT .AND RS.24,76,860/- BEING INDEXATION BENEFIT CLAIME D ON DECLARED BUSINESS INCOME. 4. APROPOS, ISSUE OF DISALLOWANCES OF INTEREST EX PENDITURE:- THE AO IN THE ASSESSMENT ORDER HAS OBSERVED THAT AS SESSEE HAD INCURRED INTEREST EXPENDITURE OF RS. 82,41, 006/- ON LOANS A VAILED DURING THE YEAR. IN CONTRAST TO INTEREST EXPENDITURE CLAIMED, ASSESSEE HAD DECLARED INCOME FROM OPERATIONS AMOUNTING TO RS. 15,47, 887/- WHICH INCLUDED DIVIDE ND INCOME OF RS.4,19,867/-, ITA NO.6829/MUM/2019 3 INTEREST INCOME OF RS. 10,72, 125/- AND INCOME FROM UNDIVIDED TRUST PROPERTY OF RS.55,895/-. THE ASSESSEE HAD ALSO DECLARED OTHER I NCOME OF RS.1, 29,49, 135/- UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION, WHICH INCLUDED PROFIT ON SALE OF INVESTMENT OF RS.5,24,135/-AND PROFIT ON SALE OF IN TANGIBLE ASSETS OF RS.1,24,25,000/-. FURTHER, OTHER EXPENSES OF MEAGER AMOUNT OF RS.2,96 ,358/-. ON VERIFICATION OF THE PROFIT & LOSS ACCOUNT, AO OPINED THAT ASSESSEE HA D INCURRED ABNORMALLY HIGH INTEREST EXPENDITURE AS COMPARED TO INCOME DECLARED. MOREOVE R, IN A.Y.2010-11, 2012-13, 2013-14 AND 2014-15, ASSESSEE HAD SIMILAR INTEREST EXPENDITURE WITH REGARD TO LOANS TAKEN FROM RELATED PARTIES AND M/S.CITICORP FINANCE INDIA LTD. WHEREIN THE AOS DISALLOWED THE ENTIRE EXPENDITURE IN THE PREVIOUS Y EAR RELEVANT TO A.Y.2010-11, 2011- 12, 2012-13, 2013-14 AND 2014-15 ON ACCOUNT OF WHIC H ASSESSEE HAD FAILED TO ILLUSTRATE OR PROVE THE NEXUS BETWEEN INTEREST EXPE NDITURE INCURRED AND INCOME EARNED, THE ASSESSEE DID NOT ACCEPT THE STAND OF TH E ASSESSING OFFICER AND PREFERRED APPEAL BEFORE LD. CIT(A). LD. CIT(A) DISMISSED THE ASSESSEE'S APPEAL FOR A.Y.2010- 11 AND 2012-13 AND UPHELD THE ADDITIONS MADE BY THE LD. AOS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE T O JUSTIFY THE NEXUS BETWEEN INTEREST PAID AND INCOME EARNED AS THERE WAS NO BUS INESS ACTIVITY DURING THE YEAR. THE AO THEREFORE ASKED THE ASSESSEE TO SHOW CAUSE AND E XPLAIN WHY THE ENTIRE INTEREST PAYMENT SHOULD NOT BE DISALLOWED AND ADDED TO THE T OTAL INCOME SINCE ASSESSEE HAD FAILED TO PROVE THE NEXUS. SINCE THE FACTS OF THE C ASE WERE SIMILAR TO THE FACTS FOR THE YEAR UNDER CONSIDERATION WERE SIMILAR TO THE FACTS, CIRCUMSTANCES AND EVENTS OF THE CASE OF A.Y.2010-11, 2011-12, 2012-13, 2013-14 AND 2014-15, LD. CIT(A) UPHELD THE ADDITIONS MADE BY THE AO IN A.Y.2010-11 AND 201 2-13 AND SINCE ASSESSEE HAD NOT MADE ANY COGENT OR CONVINCING EXPLANATION, HENC E THE AO DISALLOWED THE AMOUNT OF INTEREST PAID TO THESE PARTIES OF RS.82,41,006/- AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 5. UPON ASSESSEES APPEAL LD.CIT(A) NOTED THE ASSE SSEE SUBMISSIONS AS UNDER:- ITA NO.6829/MUM/2019 4 ' DISALLOWANCE U/S.36(1)(II) OF INTEREST EXPENDITURE RS.82,41,006/- I)THE LD. AO HAS FAILED TO CONSIDER THAT THE APPELL ANT HAD INCURRED AN EXPENDITURE ON ACCOUNT OF INTEREST ON VARIOUS LOANS. THE AO HAS AL SO FAILED TO OBSERVE THAT THE ASSESSEE HAD MADE ADVANCE LOANS TO THE DIRECTORS AND SISTER CONC ERN COMPANY WHICH WERE FOR BUSINESS PURPOSE AND OUT OF THAT ADVANCES THEY HAVE EARNED I NTEREST INCOME. THE APPELLANT HAS ALSO BORROWED LOAN ADVANCES FROM OTHER SOURCES FROM WHIC H THEY HAVE INCURRED INTEREST EXPENDITURE. THEREFORE, THE APPELLANT HAS PROVIDED ALL ACCOUNTS DETAILS ANNEXURED IN THE PAPER BOOK WHICH EXPLAIN THE NEXUS BETWEEN INTEREST PAID AND INCOME EARNED. DRAWING YOUR ATTENTION TO THE DECISION OF MUMBAI TRIBUNAL I N ASSESSEE'S OWN CASE FOR A.Y.2010-11 IN ITA NO.1030/ MUM/2016 DECIDED ON 21.06.2019 WHICH S AYS THE ISSUE INVOLVED WITH REGARD TO ELIGIBILITY OF INTEREST PAID ON LOANS TAKEN BY T HE ASSESSEE. THE PAPER BOOK FILED BY THE ASSESSEE CONTAINING VARIOUS DETAILS WHEREIN IT GOES TO PROVE THAT THE LOANS WERE TAKEN BY THE ASSESSEE IN EARLIER YEARS AND ACCEPTED AS GENUINE A ND INTEREST PAID ON SUCH LOANS WERE ALSO ALLOWED BY REVENUE TILL A.Y.2009-10. THE APPEAL FOR AY.2010-11 HAS BEEN FILED AND HAS BEEN REMANDED IN CIT(A). PENDING DECISIONS OF SUBSE QUENT PREVIOUS YEARS CANNOT DENY THAT THE NEXUS BETWEEN INTEREST PAID AND INCOME EARNED W AS NOT GENUINE WHICH HAS BEEN A/READY ACCEPTED BY A.O. AND PROVED IN EARLIER YEARS TO BE GENUINE. THEREFORE, THE DISALLOWANCE MADE BY A.O. IS BAD IN LAW AND MUST BE DELETED. RECTIFICATION U/S.154: (II) HERE, IT IS SUBMITTED THAT THE APPELLANT, A T TIME OF HEARING BEFORE THE A.O. HAS POINTED OUT THE MISTAKE IN THE ASSESSMENT ORDER WHICH HAS T O BE RECTIFIED U/S.154 OF THE I.T. ACT. THE APPELLANT HAS WRITTEN LETTER FOR THE RECTIFICATION OF THE MISTAKE WHERE THE DISALLOWANCE ON INTEREST EXPENDITURE WAS WRONGLY COMPUTED. THERE WA S NO RESPONSE OR ACTION BY A.O. ON THE RECTIFICATION OF THE ERROR IN ASSESSMENT ORDER. THE A.O. CANNOT BE JUSTIFIED IN REJECTING THE APPLICATION OF THE ASSESSEE MADE U/S.154 FOR RECTIF ICATION OF THE APPARENT MISTAKE. (III) RELIANCE IS PLACED ON FOLLOWING: AC/T VS RUPAM IMPEX (ITAT AHMEDABAD) 'CIT(A) REVERSED THE ORDER OF AO. IT WAS HELD THAT THE AO HAS COMPLETELY ERRED BY NOT RECTIFYING SUCH MISTAKES WHICH WERE CLEARLY APPAREN T VERY WELL FROM RECORDS IN APPELLANT'S CASE. THE MISTAKES WERE SO GLARING THAT THE AO WAS NOT EVEN REQUIRED TO LOOK OR VERIFY ANY OTHER DOCUMENT. IF SUCH KIND OF TYPOGRAPHICAL OR CL ERICAL MISTAKES ARE NOT RECTIFIED, THE PROVISIONS OF SECT/ON 154 WOULD BECOME REDUNDANT. C ONSIDERING THE TOTALITY OF FACTS AND THE ABOVE DISCUSSION, THE AO IS NOT CORRECT IN REFUSING THE RECTIFICATION OF THE APPELLANT.' 'ITAT HELD THAT IN THE FIGURES SET OUT IN THE ASSES SMENT ORDER ARE ADMITTEDLY INCORRECT. CLEARLY, THE ASSESSING OFFICER DID NOT EVEN APPLY H IS MIND TO THE MATERIAL ON RECORD. HE DID A SIMPLE CUT AND PASTE JOB FROM THE STATEMENT OF TA XABLE INCOME FILED BY THE ASSESSEE. THE STARTING POINT OF HIS COMPUTATION OF INCOME WAS INC ORRECT, HE ACCEPTS IT BUT STILL FIGHTS SHY OF GIVING EFFECT TO THE NATURAL COROLLARIES OF DISCOVE RING THIS MISTAKE, IF THERE IS A MISTAKE, IT IS TO BE RECTIFIED. THERE CANNOT BE ANY JUSTIFICATION OF ASSESSING OFFICER'S INERTIA IN THIS RESPECT. THE SAME IS THE POSITION WITH RESPECT TO THE DEPREC IATION FIGURE, AND THE SAME IS THE STAND OF THE ASSESSING OFFICER.' ITA NO.6829/MUM/2019 5 6. HOWEVER, LD.CIT(A) DID NOT DEAL WITH THE SUBMIS SION AND HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, WRITTEN SUBMISSION OF THE APPELLA NT AND MATERIAL AVAILABLE ON RECORD. AN IDENTICAL ISSUE HAD COME UP FOR CONSIDER ATION IN APPELLANTS OWN CASE IN AY 2012-13 AND THE SAME HAS BEEN DECIDED BY MY LEAR NED PREDECESSOR CIT(A) VIDE ORDER BEARING NO.CIT(A)-6/IT-62/2015-16 DATED 29.07 .2016 BY OBSERVING AS UNDER: '4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE APPELLANT HAS NOT MADE ANY SUBMISSIONS DESPITE ADEQUATE OPPORTUNITIES GRANTED TO IT. AS STATED BY THE AO, SIMILAR DISALLOWANCE MADE IN A.Y.2010-11 WAS ACCEPTED BY THE ASSESSEE AND NO APPEAL WAS PREFERRED ON THE ISSUE. I FURTHER FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE UNDE RSIGNED IN APPELLANT'S OWN CASE IN APPEAL NO.CIT(A)-6/IT-92/2012-13. AFTER CONSIDERING THE SUBJECT OF THE APPELLANT, IT WAS HELD THAT THE AO HAD RIGHT LY CONSIDERED THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY AN D THERE WAS NO ANNEXURE BETWEEN THE INCOME AND EXPENSES INCURRED INCLUDING THE INTEREST EXPENDITURE. ACCORDINGLY, THE DISALLOWANCE WAS INTEREST EXPENDIT URE WAS UPHELD. IN THIS YEAR ALSO THE APPELLANT HAS NOT BEEN ABLE TO ESTABL ISH ANNEXURE BETWEEN INTEREST EXPENDITURE AND INCOME EARNED BY IT. HENCE , THE CLAIM OF THE EXPENSES TOWARDS INTEREST HAS BEEN RIGHTLY DISALLOWED BY THE AO. THE GROUND IS ACCORDINGLY DISMISSED. ' SINCE THE FACTS ARE SIMILAR INCLUDING COMPLETE NON -PARTICIPATION OF THE APPELLANT IN THESE PROCEEDINGS DESPITE GRANT OF ADEQUATE OPPORTU NITIES AS HAS BEEN MENTIONED AT PARA 4 ABOVE, AND ISSUE BEING IDENTICAL, I HAVE NO REASON TO DEVIATE FROM THE FINDINGS OF MY LEARNED PREDECESSOR. HENCE, FOLLOWING THE RUL E OF CONSISTENCY, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 7. APROPOS, ISSUE OF CAPITAL GAIN:- BRIEF FACTS OF THE ISSUE ARE THAT THE AO HAS OBSER VED THAT ASSESSEE IN THEIR INCOME TAX RETURN FILED FOR A.Y.2016-17 HAD SHOWN S ALE OF ASSET OF SHOP NO.1 UNDER THE HEAD PROFIT FROM BUSINESS INCOME AND AT T HE SAME TIME ALSO CLAIMED SUCH TRANSACTION AS PART OF THEIR BUSINESS OPERATIONS. F OR SUCH BUSINESS TRANSACTION, THE ASSESSEE HAD CLAIMED INDEXATION BENEFIT ON SALE OF TENANTED PREMISES OF SHOP NO.1 AMOUNTING TO RS.24,76,860/-. AT THE SAME TIME, ASSE SSEE INTENDED TO CLAIM THE SAME AS CAPITAL GAINS INCOME IN THEIR COMPUTATION OF INC OME AND ACCORDINGLY INDEXATION BENEFITS ON THE SAID TRANSACTION. HENCE, THE AO DIS ALLOWED THE CLAIM OF INDEXATION BENEFIT OF RS.24,76,860/- AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. IN THIS ITA NO.6829/MUM/2019 6 REGARD, THE AO PLACED RELIANCE ON THE DECISION OF H ON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LIMITED VS CIT (284 ITR 323) WHEREIN IT HAS BEEN HELD THAT IT IS NECESSARY FOR AN ASSESSEE TO REVISE ITS RETURN OF INCOME FOR USING ANY NEW CLAIM WHICH IS NOT RAISED IN THE ORIGINAL RETURN OF INCOME. 8. UPON ASSESSEES APPEAL LD.CIT(A) CONFIRMED AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, WRITTEN SUBMISSION OF THE APPELLA NT AND MATERIAL AVAILABLE ON RECORD. THE APPELLANT IN THIS CASE SEEKS TO CLAIM B ENEFIT OF INDEXATION ON A PROPERTY SOLD DURING THE YEAR. IT CLAIMS THE SALE TAKEN PLAC E TO BE THAT OF THE TENANCY RIGHT IN THE SHOP NO.1. THE AO .N THE ASSESSMENT ORDER HAS C LEARLY MENTIONED THAT THE SALE OF ASSET AND CONSIDERATION THEREOF OF SHOP NO.1 HAS BE EN SHOWN BY THE ASSESSEE IN THE INCOME-TAX RETURN FILED UNDER THE HEAD 'PROFIT FROM BUSINESS INCOME'. IF THE SALE CONSIDERATION IS PART OF THE ASSESSEE'S BUSINESS IN COME THERE CANNOT BE ANY CASE OF TAKING SUCH CONSIDERATION TO HAVE BEEN GENERATED FR OM THE SALE OF ASSETS HELD AS INVESTMENT BY THE ASSESSEE. FURTHER THERETO, NO FAC TS OR ANY FURTHER DETAILS HAVE BEEN MENTIONED OR SUBMITTED DURING THE COURSE OF APPELLA TE PROCEEDINGS BUT FOR THE SUBMISSION WHICH HAS BEEN REPRODUCED AT PARA 7.2 AB OVE. THE OPPORTUNITIES GRANTED AND THE RESPONSE THERETO OF THE ASSESSEE HAS BEEN C LEARLY MENTIONED AT PARA 4 OF THIS ORDER AND FOR REASONS BEST KNOWN TO THE ASSESSEE, T HE ADEQUATE COMPLIANCE BRINGING OUT COMPLETE FACTS REGARDING THE CASE HAVE NOT BEEN SUBMITTED. IT IS FURTHER OBSERVED THAT THE AO HAS ALSO PLACED RELIANCE ON THE DECISIO N OF HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LIMITED VS CIT (284 ITR 323) TO SUPPORT THAT FOR ANY FRESH CLAIM, ASSESSEE HAS TO FILE ITS REVISED RETURN OF I NCOME AND THE NEW CLAIM CANNOT BE MADE BEFORE HIM WITHOUT RECOURSE TO FILING OF THE R EVISED RETURN. FROM THE DETAILS AVAILABLE ON RECORD, IT ALSO CANNOT BE ASCERTAINED THAT ASSESSEE ACTUALLY HAS MADE ANY NEW CLAIM WHICH HAS BEEN SOUGHT TO BE ADMITTED DURI NG THE INSTANT PROCEEDINGS. IN THE ABSENCE OF COMPLETE FACTS, THE CLAIM OF THE ASS ESSEE THAT BENEFIT OF INDEXATION SHOULD BE GRANTED TO IT ON SALE OF THE ASSET OF SHO P NO.1 IS NOT FOUND TO BE ACCEPTABLE AND IS ACCORDINGLY, REJECTED. THIS GROUND OF APPEAL IS ACCORDINGLY, DISMISSED. 9. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED HIS SUBMISSION AS UNDER:- DISALLOWANCE U/S 36 (1) (II) OF INTEREST EXPENDITURE RS 82,41,006/- ITA NO.6829/MUM/2019 7 I) THE LD A.O HAS FAILED TO CONSIDER THAT THE APPELLANT HAD INCURRED AN EXPENDITURE ON THE ACCOUNT OF INTEREST ON VARIOUS L OANS. THE A.O HAS ALSO FAILED TO OBSERVE THAT THE ASSESEE HAD MADE ADVANCE LOANS TO THE DIRECTORS AND SISTER CONCERN COMPANY WHICH WERE FOR BUSINESS PURPOSE AND OUT OF THAT ADVANCES THEY HAVE EARNED INTEREST INCOME. THE APPELLANT HAS ALSO BORROWED LO AN ADVANCES FROM OTHER SOURCES FROM WHICH THEY HAVE INCURRED INTEREST EXPENDITURE. THEREFORE, THE APPELLANT HAS PROVIDED ALL ACCOUNTS DETAILS ANNEXURED IN THE PAPE R BOOK WHICH EXPLAIN THE NEXUS BETWEEN INTERESTS PAID AND INCOME EARNED. DRAWING Y OUR ATTENTION TO THE DECISION OF MUMBAI TRIBUNAL IN ASSESEE'S OWN CASE FOR A.Y 2010- 11 IN ITA NO.L030/MUM/2016 DECIDED ON 21.06.2019 WHICH SAYS THE ISSUE INVOLVED WITH REGARD TO ELIGIBILITY OF INTEREST PAID ON LOANS TAKEN BY THE ASSESSEE. THE P APER BOOK FILED BY THE ASSESSEE CONTAINING VARIOUS DETAILS WHEREIN IT GOES TO PROVE THAT THE LOANS WERE TAKEN BY THE ASSESSEE IN EARLIER YEARS AND ACCEPTED AS GENUINE A ND INTEREST PAID ON SUCH LOANS WERE ALSO ALLOWED BY REVENUE TILL A.Y 2009-10, THE APPEA L FOR A.Y 2010-11 HAS BEEN FILED AND HAS BEEN REMANDED TO CIT (A). PENDING DEC ISIONS OF SUBSEQUENT PREVIOUS YEARS CANNOT DENY THAT THE NEXUS BETWEEN INTEREST P AID AND INCOME EARNED WAS NOT GENUINE. WHICH HAS BEEN ALREADY ACCEPTED BY A.O AND PROVED IN EARLIER YEARS TO BE GENUINE. THEREFORE, THE DISALLOWANCE MADE BY A.O IS BAD IN LAW AND MUST BE DELETED. RECTIFICATION U/S'154 II) HERE, IT IS SUBMITTED THAT THE APPELLANT, AT TIME OF HEARING BEFORE THE A.O HAS POINTED OUT THE MISTAKE IN THE ASSESSMENT ORDER WHI CH HAS TO BE RECTIFIED U/S 154 OF THE I.T ACT. THE APPELLANT HAS WRITTEN LETTER FOR T HE RECTIFICATION OF THE MISTAKE WHERE THE DISALLOWANCE ON INTEREST EXPENDITURE WAS WRONGL Y COMPUTATED. THERE WAS NO RESPONSE OR ACTION BY A.O ON THE RECTIFICATION OF T HE ERROR IN ASSESSMENT ORDER. THE A.O CANNOT BE JUSTIFIED IN REJECTING THE APPLICATIO N OF THE ASSESSEE MADE U/S 154 FOR RECTIFICATION OF THE APPARENT MISTAKE. III) RELIANCE IS PLACED ON FOLLOWING : ACIT VS RUPAM IMPEX (ITAT AHEMDABAD) 'CIT (A) REVERSED THE ORDER OF AO. IT WAS HELD THAT THE AO HAS COMPLETELY ERRED BY NOT RECTIFYING SUCH MISTAKES WHICH WERE CLEARLY APP ARENT VERY WELL FROM RECORDS IN APPELLANT'S CASE. THE MISTAKES WERE SO GLARING THAT THE AO WAS NOT EVEN REQUIRED TO LOOK OR VERIFY ANY OTHER DOCUMENT. IF SUCH KIND OF TYPOGRAPHICAL OR CLERICAL MISTAKES ARE NOT RECTIFIED, THE PROVISIONS OF SECTION 154 WO ULD BECOME REDUNDANT. CONSIDERING THE TOTALITY OF FACTS AND THE ABOVE DISCUSSION, THE AO IS NOT CORRECT IN REFUSING THE RECTIFICATION OF THE APPELLANT. 'ITAT HELD THAT IN THE FIGURES SET OUT IN THE ASSES SMENT ORDER ARE ADMITTEDLY INCORRECT. CLEARLY THE ASSESSING OFFICER DID NOT EV EN APPLY HIS MIND TO THE MATERIAL ON RECORD. HE DID A SIMPLE CUT AND PASTE JOB FROM T HE STATEMENT OF TAXABLE INCOME FILED BY THE ASSESSEE. THE STARTING POINT OF HIS CO MPUTATION OF INCOME -WAS INCORRECT, ITA NO.6829/MUM/2019 8 HE ACCEPTS IT BUT STILL FIGHTS SHY OF GIVING EFFECT TO THE NATURAL COROLLARIES OF DISCOVERING THIS MISTAKE. IF THERE IS A MISTAKE, IT IS TO BE RECTIFIED. THERE CANNOT BE ANY JUSTIFICATION OF ASSESSING OFFICER'S INERTIA IN THIS RESPECT. THE SAME IS THE POSITION WITH RESPECT TO THE DEPRECIATION FIGURE, AND THE SA ME IS THE STAND OF THE ASSESSING OFFICER. ' GROUND NO: 2 DISALLOWANCE OF INDEXATION BENEFIT CLAIMED RS 24,76 ,860/- IV) THE LD. A.O FAILED TO UNDERSTAND THE TRANSA CTION AND COMPUTATION OF THE CAPITAL GAIN. THE APPELLANT HAS SOLD PROPERTY WROTH RS 1, 5 000, OOO/- AND HAS CLAIMED INDEXATION U/S 48. THE PROPERTY SOLD BY THE APPELLA NT WAS NOT AN INHERITED PROPERTY, IT WAS A TENANCY RIGHT WHICH WAS PURCHASED BY THE A PPELLANT AND HENCE IT WAS INTANGIBLE CAPITAL ASSETS FOR THE APPELLANT. IN BOO KS OF ACCOUNT THE PROPERTY WAS SHOWN AS AN INTANGIBLE ASSETS AND THERE WAS NO CLAI MS OF DEPRECIATION ON THE PROPERTY AS IT WAS INTANGIBLE ASSETS AND IT WAS NOT USED FOR BUSINESS NEEDS OR PURPOSE. HERE, THE PROPERTY IS CONSIDERED AS NON BUSINESS LONG TER M ASSETS BECAUSE IT DOES NOT FULFILL THE BUSINESS NEEDS, IT'S SEPARATE. THEREFORE, NON B USINESS LONG ASSETS CAN CLAIM THE BENEFIT OF INDEXATION ON THE COST OF ACQUISITION AN D COST OF IMPROVEMENT UNDER SECTION 48. PLACING RELIANCE ON THE FOLLOWING : BHARAT ENTERPRISES, MUMBAI VS DEPARTMENT OF INCOME TAI (1TAT MUMBAI) 'FROM THE DEFINITION OF CAPITAL ASSET IT IS EVIDENT THAT A BUSINESS ASSET ALSO COMES WITHIN THE CATEGORY OF CAPITAL ASSET LIKE ANY NON B USINESS INVESTMENT ASSET. UNLIKE IN THE HOLDING OF NON BUSINESS INVESTMENT ASSET, THERE ARE ADVANTAGES OR BENEFITS ACCRUED TO IN THE HOLDING OF A BUSINESS ASSET. THE FOREMOST IS THE DEPRECIATION ALLOWANCE THAT CAN BE CLAIMED FROM THE BUSINESS INCOME AS A DEDUCT ION. THERE ARE ALSO OTHER DEDUCTIONS .FROM THE BUSINESS INCOME AVAILABLE TO B USINESS ASSETS LIKE EXPENSES ON MAINTENANCE CURRENT REPAIRS. INSURANCE, AND INTERES T ON BORROWED CAPITAL UTILIZED FOR ACQUISITION OF THE ASSET ETC., AS PROVIDED* SECTIO N 30 TO 43D IN THE COMPUTATION OF THE BUSINESS INCOME. THE BENEFITS TO BUSINESS ASSET S ARE ALSO AVAILABLE THROUGHOUT ITS HOLDING PERIOD. FOR NON BUSINESS INVESTMENT ASSET N O SUCH DEDUCTIONS ARE AVAILABLE FROM INCOME TO WHICH IT HAS BEEN APPLIED. BUT FOR N ON BUSINESS INVESTMENT LONG TERM ASSETS. THE BENEFITS OF INDEXATION ON COST OF ACQUI SITION AND COST OF IMPROVEMENT ARE PROVIDED IN SECTION 48.' V) HERE, ACCORDING TO SECTION 50 IF THE ASSETS HAS BEEN HELD FOR A PERIOD OF MORE THAN 36 MONTHS. THE BENEFIT OF INDEXATION AND BENEFIT OF LOWER RATE APPLICABLE TO THE LONG TERM CAPITAL GAIN WILL BE AVAILABLE. HENCE, THE APP ELLANT HAS HELD THE ASSETS BEYOND TIME LIMIT AND IS ELIGIBLE FOR THE BENEFIT OF INDEX ATION ON COST OF ACQUISITION. HENCE, THIS ADDITION IS BAD IN LAW AND AGAINST THE PRINCIP LE OF NATURAL JUSTICE. RELIANCE PLACED ON FOLLOWING: ITA NO.6829/MUM/2019 9 PRABODH INVESTMENT & TRADING COMPANY VS ASSESEE (31 JANUARY 2007) (ITAT MUMBAI) 'IN THE PRESENT CASE THERE IS ALSO NO DISPUTE THAT THE FLAT UNDER CONSIDERATION WAS PURCHASED BY THE ASSESSEE IN THE YEAR 1987. IT WAS THUS HELD FOR A PERIOD OF MORE THAN THIRTY SIX MONTHS AND THEREFORE A LONG TERM CAPITAL ASSET. ACCORDINGLY THE CAPITAL GAINS IS DIRECTED TO BE ASSESSED AS LONG TERM CAPIT AL GAINS AFTER ALLOWING THE BENEFIT OF COST INDEXATION AS CLAIMED BY THE ASSESSEE ' IN VIEW OF THE ABOVE SUBMISSIONS, THE APPELLANT, SU BMITS THAT THE LD. A.O WAS NOT AT ALL JUSTIFIED IN MAKING ADDITION OF RS82,41,006/- F OR INTEREST EXPENDITURE AND RS 24,76,860 AGAINST INDEXATION BENEFIT TO THE TOTAL I NCOME AND HENCE, THE SAME MUST BE DELETED. 11. PER CONTRA LD. DR RELIED UPON THE ORDER OF AUT HORITIES BELOW. 12. AS REGARDS, THE ISSUE OF DISALLOWANCE OF INTER EST EXPENDITURE, WE NOTE THAT THE ASSESSEES CONTENTION IS THAT AUTHORITIES BELOW HAV E NOT APPLIED THEIR MIND ON THIS ISSUE. IT HAS BEEN PLEADED THAT AO HAS FAILED TO CO NSIDER THAT ASSESSEE HAS INCURRED EXPENDITURE ON ACCOUNT OF INTEREST ON VARIOUS LOANS THAT ASSESSEE HAS MADE ADVANCE LOANS TO DIRECTORS AND SISTER CONCERNS RECEIVED FOR BUSINESS PURPOSE AND OUT OF THAT ADVANCES THEY HAVE EARNED INTEREST INCOME. THAT ASS ESSEE HAS ALSO BORROWED LOAN ADVANCES FROM OTHER SOURCES FROM WHICH THEY HAVE IN CURRED INTEREST EXPENDITURE. THE ASSESSEE HAS PROVIDED ALL THE ACCOUNT DETAILS ANNEX URED IN THE PAPER BOOK, WHICH EXPLAINED THE NEXUS BETWEEN INTEREST PAID AND INCOM E EARNED. THE ASSESSEE HAS ALSO REFERRED TO THE ITAT DECISION IN ASSESSEES OWN CAS E FOR AY 2010-11 IN WHICH ITAT HAS CATEGORICALLY HELD THAT ASSESSEES COUNSEL HAS FILED A PAPER BOOK CONTAINING VARIOUS DETAILS, WHEREIN IT GOES TO PROVE THAT THE LOANS WERE TAKEN BY THE ASSESSE IN THE EARLIER YEARS AND ACCEPTED AS GENUINE AND INTER EST PAID ON SUCH LOANS WERE ALSO ON SUCH LOANS WERE ALSO ALLOWED BY REVENUE IN THE AY 2009-10 AND PRECEDING ASSESSMENT YEAR. AFTER NOTING THESE FACTS, ITAT HAD REMANDED THE MATTER TO THE LD.CIT(A) FOR DENOVO ADJUDICATION. ITA NO.6829/MUM/2019 10 13. NOW IN THE PRESENT CASE, WE NOTE THAT AO IN TH E ASSESSMENT ORDER HAS OPINED THAT ASSESSEE HAS INCURRED ABNORMALLY HIGH EXPENDITURE AS COMPARED TO INCOME DECLARED. THIS IS AN ABSTRACT OBSERVATION WITHOUT ANY FIGURES GIVEN FOR COMPARISON. FURTHER, IT HAS BEEN MENTIONED THAT SIMILAR INTEREST ON LOANS TAKEN FROM THE PARTIES WERE DISALLOWED IN EARLIER YEARS AS ASSESSEE HAS FAILED TO PROVE THE NEXUS BETWEEN INTEREST EXPENDITURE INCURRED AND INCOME EARNED. FURTHER AO OBSERVED THAT ASSESSEE FAILED TO JUSTIFY THE NEXUS OF INTEREST PAID AND INCOME EARN ED AS THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR. THIS AGAIN IS AN ABSTRACT OBSERVAT ION IN CONTRAST TO THE EARLIER OBSERVATION THAT THERE WAS INCOME DECLARED BY THE A SSESSEE. AO FURTHER MENTIONED THAT ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE EN TIRE INTEREST PAYMENT SHOULD NOT BE DISALLOWED AND ADDED. AFTER PUTTING THIS ISSUE IN T HE ORDER SHEET THAT QUESTION WAS ISSUED TO THE ASSESSEE, THERE IS NO MENTIONED AS TO WHATSOEVER WAS THE REPLY OF THE ASSESSEE. THE AO SIMPLY SAYS THAT IN EARLIER YEARS THE DISALLOWANCE WAS DONE AND ASSESSEE HAD NOT MADE COGENT OR CONVINCING EXPLANA TION, HENCE THE AO DISALLOWED THE AMOUNT OF INTEREST PAID TO THESE PARTIES AMOUN TING TO RS. 82,41,006/-. 14. UPON ASSESSEES APPEAL, LD.CIT(A) PASSED EVEN A FURTHER LACONIC ORDER SHOWING COMPLETE ABSENCE OF APPLICATION OF MIND AS ABOVE. H E MENTIONS THAT AO HAD MADE A SIMILAR DISALLOWANCES IN AY 2010-11 AND ASSESSEE HA S ACCEPTED AND NO APPEAL WAS PREFERRED ON THE ISSUE. HOWEVER, AS NOTED IN THE FA CTS HEREINABOVE MATTER FOR AY 2010-11 HAD TRAVELLED TO THE ITAT AND ITAT FIRSTLY FAVORABLY OBSERVED THAT ASSESSEE HAS GIVEN ALL THE DETAILS PROVING THE NEXUS AND THA T UP TO EARLIER YEAR, NO DISALLOWANCES WAS MADE IN THIS REGARD. HENCE, THE A BOVE SHOWS THAT WITHOUT ANY APPLICATION OF MIND, THE AUTHORITIES BELOW ARE PASS ING ORDERS YEAR AFTER YEAR FOR REASON BEST KNOWN TO THEM WHEN ASSESSEE HAS GIVEN T HE NECESSARY DETAILS AND NO DISALLOWANCE WAS DONE IN EARLIER YEARS AS NOTED BY THE TRIBUNAL. WITHOUT ANY CHANGE IN FACTS AND CIRCUMSTANCES AND WITHOUT ANY APPLICAT ION OF MIND, THE REVENUE AUTHORITIES ARE GOING ON MAKING THE ADDITIONS IN ABSTRACT MANNER WITHOUT BRINGING ITA NO.6829/MUM/2019 11 ON RECORD, COGENT MATERIAL. SUCH A RELINQUISHMENT OF STATUTORY DUTIES CANNOT BE REWARDED BY REMITTING THE MATTER FOR FRESH INNING EVERY TIME. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION, THE ORDERS OF TH E AUTHORITIES BELOW SHOWS COMPLETE LACK OF APPLICATION OF MIND AND IN THE BACKGROUND O F AFORESAID DISCUSSIONS, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 15. AS REGARDS, THE ISSUE OF CAPITAL GAIN, AUTHORI TIES BELOW HAVE DECLINED TO ACCEPT THE FRESH CLAIM OF THE ASSESSEE ON THE TOUCHSTONE OF HO NBLE SUPREME COURT IN THE CASE GOETZ( INDIA) LTD VS CIT 284 ITR 323. WE NOTE THAT IN THE CASE OF GOETZ( INDIA) LTD (SUPRA). HONBLE SUPREME COURT HAS HELD THAT THEIR DECISION IN THAT CASE WILL NOT IMPINGE UPON THE ITAT POWER IN ADMITTING FRESH CLAI MS OTHERWISE THAT BY REVISED RETURN. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF AO AND DIRECT HIM TO EXAMINE THE FACTUAL VERACITY OF ASSESSEES CLAIM AND DECID E THE SAME AFTER GIVING DUE OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE. 16. IN THE RESULT, APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 06.10.2021. SD/- SD/- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUN TANT MEMBER MUMBAI; DATED : 06/10/2021 THIRUMALESH, SR.PS 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. ITA NO.6829/MUM/2019 12 BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI