Shri Hirenbhai Revabhai Patel,HUF, Visnagar V. The Income tax Officer,Patan Ward-3, Mehsana

ITA 70/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8332 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 08-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R J SHAH
• Keywords: Business income; Business expenditure; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER HIREN R PATEL - HUF, 10, ALKA SOCIETY, NEAR GAYATRI MANDIR ROAD, VISNAGAR, DIST. MEHSANA, PAN: AAEHP8425L (APPELLANT) VS THE ITO, PATAN, WARD - 3 MEHSANA (RESPONDENT) HIREN R PATEL, 10, ALKA SOCIETY, NEAR GAYATRI MANDIR ROAD, VISNAGAR, DIST. MEHSANA, PAN: ABOPP6064G (APPELLANT) VS THE ITO, PATAN, WARD - 3 MEHSANA (RESPONDENT) REVENUE BY : S H RI K. MADHUSUDAN , SR. D . R. ASSESS EE BY: S H RI R.J. SHAH , A.R. DATE OF HEARING : 26 - 09 - 2 017 DATE OF PRONOUNCEMENT : 09 - 10 - 2 017 I T A NO . 70 / A HD/20 16 A SS ESSMENT YEAR 200 8 - 09 ITA NO. 71 /AHD/20 16 ASSESSMENT YEAR 200 8 - 09 I.T.A NO S . 70 & 71 /AHD/20 16 A.Y. 2008 - 09 PAGE NO HIREN R. PATEL HUF & HIREN R. PATEL VS. ITO 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO ASSESSEE S APPEAL S FOR A.Y. 2008 - 09 , AR ISE FROM ORDER OF THE CIT(A), GANDHINAGAR, AHMEDABAD DATED 26 - 10 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. AS THE FACTS IN BOTH THE APPEALS ARE SIMILAR, SO, WE TAKE ITA NO. 70/AHD/2016 AS THE LEAD CASE AND DECIDE BOTH THE APPEALS FOR THE SAKE OF CONVENIENCE. 3 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 70/AHD/2016 1. THE ID. A O AS WELL AS THE ID. CIT (A) HAS DISALLOWED INTEREST EXPENSE OF RS. 8,03, 060/ - PAID TO MEHSANA URBAN BANK. THE ENTIRE EXPENSES ARE THE EXPENSES INCURRED FOR THE BUSINESS PURPOSE. THE ID.AO AS WELL AS THE ID. CIT (A) HAS ERRED IN CONSIDERING THE FACTS OF T HE CASE ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED BY THE APPELLANT, WHEN NO SUCH ADDITION IS JUSTIFIED. THE SAME MAY KINDLY BE DELETED. 2. THE ID. AO AS WELL AS THE ID. CIT (A) HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AND HAS PASSED THE ASSESSME NT ORDER WITH A BIAS FRAME OF MIND. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMIN G ACTION OF THE ID. AO IN INITIATING PENALTY U/S 271(1 )(C) OF THE ACT. 4 . IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 1 , 65 , 520/ - WAS FILED ON 29 - 03 - 2009 . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF T HE ACT ON 20 TH AUGUST, 2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 8, 0 3,0 60/ - U/S. 57 OF THE ACT AS INTEREST EXPENSES. I.T.A NO S . 70 & 71 /AHD/20 16 A.Y. 2008 - 09 PAGE NO HIREN R. PATEL HUF & HIREN R. PATEL VS. ITO 3 THE ASSESS EE HAS NOT FURNISHED THE REQUIRED DET AILS OF SUCH EXPENSES AT THE TIME OF ASSESSMENT PROCEEDINGS. CONSEQUENTLY , THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST EXPENSES OF RS. 8 , 03 , 060/ - PAID TO MEHSANA URBAN BANK AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5 . AGGRIEVED AGAINST THE DEC ISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 4.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND SUBMISSION FILED BY APPELLANT. APP ELLANT HAS SHOWN OF RS.8,03,060/ - . APPELLANT HAS CLAIMED THAT INTEREST EXPENDITURE IS PAID TOWARDS LOAN FROM INTEREST INCOME OF RS.1,399/ - AS INCOME FROM OTHER SOURCES AND CLAIMED INTEREST EXPENDITURE MEHSANA URBAN BANK AND SAME IS USED IN THE BUSINESS OF APPELLANT BEING REAL ESTATE BUSINESS. THE APPELLANT HAS ALSO CLAIMED THAT IN A.Y. 2006 - 07, HE HAS FILED ITR SHOWING BUSINESS INCOME BUT DUE TO INADVERTENCE, INCOME OF CURRENT YEAR IS NOT SHOWN AS INCOME FROM BUSINESS. THIS CONTENTION OF APPELLANT CANNOT BE ACCEPTED AS APPELLANT HAS NOT SHOWN ANY BUSINESS INCOME IN THE YEAR UNDER CONSIDERATION NOR ESTABLISHED ANY NEXUS WITH USE OF BORROWED FUNDS FOR BUSINESS PURPOSE. EVEN APPELLANT HAS SHOWN INCOME FROM CAPITAL GAIN AGAINST WHICH INTEREST EXPENDITURE CANNOT BE ALLOWED. APPELLANT HAS ALSO CLAIMED THAT MONEY BORROWED FROM BANK WERE UTILIZED FOR REPAYMENT OF UNSECURED LOAN WHICH WERE IN FACT USED FOR INVESTMENT IN PARTNERSHIP FIRMS BEING SHARDUL CORPORATION FROM WHICH TAXABLE INTEREST INCOME IS EARNED, HENCE, IN TEREST EXPENDITURE NEED TO BE ALLOWED. EVEN THIS CLAIM OF THE APPELLANT CANNOT BE ACCEPTED AS HE HAS SHOWN INTEREST INCOME FROM SAID FIRM OF RS. 1,399/ - AGAINST WHICH HE HAS CLAIMED INTEREST EXPENDITURE OF RS.8,01,661/ - IN THE COMPUTATION OF TOTAL INCOME. INTEREST INCOME EARNED BY APPELLANT IS VERY MINOR WHEN COMPARED TO INTEREST EXPENDITURE ALREADY CLAIMED BY THE APPELLANT AND ALLOWED BY THE AO. APPELLANT HAS ALSO CLAIMED THAT FUNDS WERE UTILIZED FOR MAKING PAYMENT TO CREDITORS FOR GOODS BUT AS APPELLANT H AS NOT SHOWN ANY BUSINESS INCOME IN YEAR UNDER CONSIDERATION AND NO DIRECT NEXUS IS ESTABLISHED,, THIS CLAIM OF APPELLANT CANNOT BE ALLOWED. EVEN APPELLANT HAS SHOWN PROFIT ON SALE OF LAND AS SHORT TERM CAPITAL GAIN. EVEN APPELLANT HAS NOT REFLECTED LAND P URCHASED AS STOCK - IN - TRADE IN THE P&L ACCOUNT IN THE RETURN OF INCOME FILED. FURTHER, AS CLAIMED BY THE APPELLANT, THE ABOVE INTEREST IS PAID TO MEHSANA URBAN BANK AND THE FUNDS BORROWED FROM THE BANK WERE UTILIZED FOR BUSINESS PURPOSE OF REAL ESTATE. FU RTHER, IT IS ALSO CLAIMED THT HE IS FILING INCOME TAX RETURN (WHICH IS THE ITR FOR THE ASSESSEE CARRYING OUT THE BUSINESS OR PROFESSION) FOR THE AY 2008 - 09, BUT DUE TO THE MISTAKE OF THE ITP RETURN WAS FILED IN THE CATEGORY OF FFR TO BE USED WHEN THE INCOM E IS TAXED UNDER THE HEAD OF 'INCOME FROM OTHER SOURCES' INSTEAD OF ITR TO BE USED WHEN THE INCOME IS TAXED UNDER THE HEAD 'BUSINESS & PROCESSION. IT IS ALSO CLAIMED BY THE APPELLANT THAT THE AO MISUNDERSTOOD DUE TO NEGLIGENCE OF THE ITP THE SAID EXPENSES WERE WRONGLY CLASSIFIED AND WERE WRONGLY ADJUSTED AGAINST THE INCOME FROM I.T.A NO S . 70 & 71 /AHD/20 16 A.Y. 2008 - 09 PAGE NO HIREN R. PATEL HUF & HIREN R. PATEL VS. ITO 4 OTHER SOURCES DUE TO WHICH THERE IS NO CHANGE IN THE TOTAL INCOME OF THE APPELLANT. IT IS ALSO STATED BY THE APPELLANT THAT FOR THE PREVIOUS YEARS I.E. AYS 2006 - 07 AND 2007 - 08, APPEL LANT HAS FILED THE RETURN IN THE CATEGORY OF ITR USED WHEN THE INCOME IS TAXED UNDER THE HEAD BUSINESS &. PROFESSION. THESE CLAIM OF THE APPELLANT AND OTHER CLAIMS UNDER THE PROVISIONS OF INCOME - TAX ACT CAN BE MADE BY WAY OF FILING LEGITIMATE/PROPER RETURN OF INCOME ARID MAINTAINING PROPER BOOKS OF ACCOUNT WHICH ARE MANDATORY UNDER THE INCOME - TAX ACT. APPELLANT HAS CLOSED DOWN HIS BUSINESS HENCEFORTH AND AS SUBMITTED IN HIS SUBMISSION HAS NOT FILED PROPER RETURN OF INCOME IN WHICH THE INCOME WAS REQUIRED TO BE SHOWN UNDER THE HEAD BUSINESS & PROFESSION. MOREOVER, APPELLANT HAS NOT PROVED BY WAY OF ANY COGENT EVIDENCES THAT THE BORROWED FUNDS WERE USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN VIEW THEREOF, THE CONTENTION OF THE AO THAT APPELLANT HAS SHOWN VERY MEAGER INCOME FROM OTHER SOURCES AGAINST WHICH HUGE, EXPENDITURE HAS BEEN CLAIMED BY THE APPELLANT CANNOT BE ALLOWED IS UPHELD. CONSIDERING ALL THESE FACTS, DISALLOWANCE OF INTEREST EXPENDITURE MADE BY THE AO FOR RS.8,03,060/ - IS HELD JUSTI FIED AND IS HEREBY UPHELD. THIS GROUND OF APPEAL IS REJECTED. 6 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAILS OF SUBMISSION MADE AT THE TIME OF ASSESSMENT PROCEEDINGS BEFORE THE ASSES SING OFFICER AND BEFORE THE LD. CIT(A) AT THE TIME OF APPELLATE PROCEEDINGS . HE HAS AND CONTENDED THAT LD. CIT(A) ERRED IN NOT ALLOWING THE CLAIM OF INTEREST EXPENSES MADE BY THE ASSESSEE. ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). 7 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME AND NOT ESTABLISHED THAT THE BORROWED FUNDS WERE USED F OR BUSINESS PURPOSES DURING THE YEAR UNDER CONSIDERATION. WE HAVE FURTHER OBSERVED THAT ASSESSEE HAS ALREADY CLOSED DOWN ITS BUSINESS IN THE PRECEDING YEARS AND NO BUSINESS ACTIVITIES WAS CARRIED OUT DURING THE YEAR UNDER CONSIDERATION . WE ALSO FIND NO D IRECT NEXUS COULD BE ESTABLISHED FOR CLAIM OF HUGE INTEREST EXPENSES OF RS.8,03,060/ - AGAINST MARGINAL I.T.A NO S . 70 & 71 /AHD/20 16 A.Y. 2008 - 09 PAGE NO HIREN R. PATEL HUF & HIREN R. PATEL VS. ITO 5 INTEREST INCOME OF RS.1399/ SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES INTER ALIA AS SUPRA IT HAS BEEN DEMONSTRATED VERY CLEARLY IN THE FINDINGS OF T HE LD.CIT(A) THAT THE NATURE OF INTEREST EXPENSES WAS BUSINESS EXPENSES WHICH CANNOT BE ALLOWED AS ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION . IN VIEW OF THE ABOVE OF THE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE LD. CIT(A) . THEREFORE, THE APPEAL OF THE ASSESSEE IS REJECTED. 8 . IN THE RESULT , BOTH THE APPEAL S OF THE ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 09 - 10 - 201 7 SD / - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 09 /10 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,