M/S DREAM FLATS PVT. LTD, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR

ITA 72/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9541 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Cost of acquisition; Reassessment proceedings
• Section: 143(1); 72; 147

Judgement Text

;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NOS. 72 & 73/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2010-11 & 12-13. M/S. DREAM FLATS PVT. LTD., 8A, KASTIYA LANE, KANOTA BAGH, TAKTE SHAHI ROAD, JAIPUR. CUKE VS. THE DCIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABCD 2826 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : MS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.01.2020. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/01/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF THE LD. CIT (A) BOTH DATED 26 TH DECEMBER, 2018 FOR THE ASSESSMENT YEARS 2010-11 AND 2012-13 RESPECTIVELY. THE ASSESSEE HAS RAISED C OMMON GROUNDS IN THESE APPEALS AND THE GROUNDS RAISED FOR THE ASSESSMENT Y EAR 2010-11 ARE REPRODUCED AS UNDER :- 1) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARN ED AO IN PASSING THE ORDER U/S 143(3)/147 OF THE INCOME TAX ACT, 1961. 2) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,58,285/- ON ACCOUNT OF INTEREST CLAIMED BY THE ASSESSEE U/S 24(B) OF THE INCOME TAX ACT, 1961 WHERE THERE IS NO INTEREST FRE E ADVANCES TO THE DIRECTORS DURING THE YEAR. 2 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. 3) THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. GROUND NO. 1 IS REGARDING CHALLENGING THE REASSESSM ENT ORDER PASSED UNDER SECTION 147 OF THE IT ACT. 2. THE LD. A/R OF THE ASSESSEE HAS NOT PRESSED GROU ND NO. 1 OF THE ASSESSEES APPEAL. WE FURTHER NOTE THAT THIS GROUND WAS ALSO N OT PRESSED BEFORE THE LD. CIT (A). ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. GROUND NO. 2 IS REGARDING DISALLOWANCE OF INTEREST UNDER SECTION 24(B) OF THE IT ACT. 3. THE ASSESSEE IS A COMPANY AND FILED ITS RETURN O F INCOME ON 28 TH SEPTEMBER, 2010 AT TOTAL INCOME OF RS. 98,800/-. THE RETURN O F INCOME WAS INITIALLY PROCESSED UNDER SECTION 143(1) ON 25.05.2011. SUBSEQUENTLY, T HE AO REOPENED THE ASSESSMENT ON THE GROUND THAT THE ASSESSEE HAS CLAI MED DEDUCTION UNDER SECTION 24(B) AT RS. 22,05,416/- ON ACCOUNT OF INTEREST ON BORROWED CAPITAL WHEREAS THE SAID BORROWED FUND WAS NOT UTILIZED FOR ACQUISITION OF T HE HOUSE PROPERTY AGAINST WHICH THE SAID DEDUCTION IS CLAIMED. IN THE REASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS ACQUIRED THE HOUSE PROPERTY IN QUE STION BY UTILIZING THE LOAN TAKEN FROM THE DIRECTORS OF THE ASSESSEE AND SUBSEQUENTLY THE ASSESSEE HAS ALSO TAKEN THE LOAN FROM ICICI BANK WHICH WAS NOT FULLY UTILIZED F OR REPAYMENT OF THE LOAN TAKEN FROM THE DIRECTORS. ACCORDINGLY, THE AO ARRIVED TO THE CONCLUSION THAT OUT OF THE TOTAL LOAN OF RS. 1,58,12,096/-, A SUM OF RS. 44,30 ,000/- WAS NOT UTILIZED FOR REPAYMENT OF LOAN BUT IT WAS UTILIZED FOR EXCESS PA YMENT TO SOME OF THE DIRECTORS. ACCORDINGLY, THE AO HAS MADE THE PROPORTIONATE DISA LLOWANCE OF DEDUCTION ON 3 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. ACCOUNT OF INTEREST UNDER SECTION 24(B) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND SUBMITT ED THAT THE COST OF ACQUISITION OF THE PROPERTY IN QUESTION WAS RS. 1,82,89,238/- WHER EAS THE LOAN TAKEN FROM THE ICICI BANK WAS ONLY RS. 1,58,12,096/-. THE ENTIRE LOAN AMOUNT WAS UTILIZED BY THE ASSESSEE FOR REPAYMENT OF THE INTEREST FREE ADVANCE TAKEN FROM THE DIRECTORS AT THE TIME OF PURCHASE OF THE PROPERTY IN QUESTION. THER EFORE, THE SAID LOAN TAKEN BY THE ASSESSEE FROM ICICI BANK WAS FINALLY UTILIZED FOR R EPAYMENT OF THE LOAN TAKEN FROM THE DIRECTORS FOR THE PURPOSE OF ACQUIRING THE PROP ERTY IN QUESTION. HENCE THE ASSESSEE CONTENDED BEFORE THE LD. CIT (A) THAT ONCE THE LOAN TAKEN FROM THE BANK FOR REPAYMENT OF THE EARLIER LOAN TAKEN FOR ACQUISI TION OF THE PROPERTY IN QUESTION, THE INTEREST ON SUCH LOAN IS AN ALLOWABLE DEDUCTION UNDER SECTION 24(B). THE LD. CIT (A) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THE SIMILAR REASONING THAT OUT OF THE LOAN AMOUNT, THE ASSESSEE HAS UTILIZED CERTAIN AMOUNT FOR EXCESS PAYMENT TO T HE DIRECTORS OVER AND ABOVE THE LOAN AMOUNT. 4. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO HAS CONSIDERED THE INCORRECT DETAILS OF THE LOAN AND RE PAYMENT OF LOAN BY THE ASSESSEE TO ITS DIRECTORS. HE HAS REFERRED TO THE DETAILS G IVEN BY THE AO AT PAGE 3 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HA S TAKEN A LOAN OF RS. 53,50,000/- FROM SMT. RAJ KUMARI AGARWAL WHICH WAS REPAID BY THE ASSESSEE BY UTILIZING THE LOAN TAKEN FROM ICICI BANK. HOWEVER, THE AO HAS SHOWN THE LOAN TAKEN FROM THE DIRECTOR AT RS. 30,00,000/- ONLY AS AGAINS T RS. 53,50,000/-. HE HAS REFERRED TO THE LEDGER ACCOUNT AT PAGE 38 OF THE PA PER BOOK AND SUBMITTED THAT THE LOAN AMOUNT IS CLEARLY SHOWN AT RS. 53,50,000/- WHE REAS THE AO HAS SHOWN AT RS. 4 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. 30,00,000/-. SIMILARLY, THE AO HAS ALSO TAKEN THE WRONG FIGURE OF LOAN AMOUNT AND REPAYMENT IN CASE OF SHRI JUGAL KISHORE. HENCE THE LD. A/R HAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO IS BASED ON ASSUMPTION OF WRONG FACTS. HE HAS FURTHER CONTENDED THAT EVEN AT THE END OF THE FINAN CIAL YEARS 2006-07 AND 2007-08 THERE WAS NO DEBIT BALANCE IN THE ACCOUNT OF THE DI RECTORS BUT THE ASSESSEE HAS FULLY REPAID THE LOAN AMOUNT AND IN SOME CASES OF DIRECTO RS EXCESS PAYMENT WAS MADE WHICH WAS AGAIN RECEIVED BACK AND UTILIZED FOR REPA YMENT OF THE LOAN AMOUNT OF THE OTHER DIRECTORS. THUS THE LD. A/R HAS SUBMITTED TH AT WHEN THESE ACCOUNTS WERE SETTLED BEFORE THE END OF THE FINANCIAL YEAR 2008, THEN THE INTEREST CANNOT BE DISALLOWED FOR THE YEARS UNDER CONSIDERATION ONCE T HE LOAN TAKEN FROM THE BANK WAS FINALLY UTILIZED FOR REPAYMENT OF THE INTEREST FREE LOAN TAKEN FROM THE DIRECTORS FOR ACQUISITION OF THE PROPERTY IN QUESTION. HE HAS RE FERRED TO THE LEDGER ACCOUNT OF THE INDIVIDUAL DIRECTOR SHOWING THE DETAILS OF THE ADVA NCE TAKEN BY THE ASSESSEE AND REPAYMENT OF THE LOAN AND SUBMITTED THAT AS ON 31 ST MARCH 2008 THERE WAS NO EXCESS PAYMENT TO ANY OF THE DIRECTORS. THEREFORE, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS LIABLE TO BE DELETED. 5. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO HAS CLEARLY POINTED OUT SOME PART OF THE LOAN TAKEN BY THE ASSESSEE FRO M THE ICICI BANK WAS NOT UTILIZED FOR REPAYMENT OF THE LOAN TAKEN FROM THE D IRECTORS BUT THE AMOUNT WAS UTILIZED FOR EXCESS PAYMENT TO THE DIRECTORS AND, T HEREFORE, TO THAT EXTENT THE AO WAS JUSTIFIED IN DISALLOWING THE PROPORTIONATE INTE REST CLAIMED BY THE ASSESSEE UNDER SECTION 24(B) OF THE ACT. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE FACTS AS EMERGED FROM THE ASSESSMENT O RDER REGARDING THE ACQUISITION 5 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. OF PROPERTY IN QUESTION BY THE ASSESSEE AS WELL AS THE LOAN TAKEN FROM THE DIRECTORS FOR THE PURPOSE OF ACQUIRING THE SAID PROPERTY AND SUBSEQUENTLY SUBSTITUTED BY THE LOAN TAKEN FROM THE ICICI BANK ARE THAT THE ASSESSE E PURCHASED THE PROPERTY IN QUESTION ON 06.10.2006 FOR A CONSIDERATION OF RS. 1 ,82,89,238/- BY UTILIZING A LOAN AMOUNT OF RS. 1,78,00,000/- TAKEN FROM THE THREE DI RECTORS, NAMELY, SMT. RAJ KUMARI AGARWAL, SHRI JAGAL KISHORE AND SMT. JAI MAL A AGARWAL. THEREAFTER, THE ASSESSEE HAS TAKEN A LOAN OF RS. 1,75,00,000/- FROM THE ICICI BANK ON 09.07.2007. THE SAID LOAN WAS UTILIZED BY THE ASSESSEE FOR MAKI NG REPAYMENT OF THE LOANS TAKEN FROM THE DIRECTORS. HOWEVER, THE PAYMENT MADE TO T HE DIRECTORS IS NOT EQUIVALENT TO THE LOAN AMOUNT/ADVANCE TAKEN FROM THE DIRECTORS BUT IN SOME CASES THE PAYMENT WAS SHORT AND IN SOME CASES IT WAS MORE THA N THE ADVANCE AMOUNT. THE AO HAS TAKEN THE DETAILS OF THE REPAYMENT MADE BY T HE ASSESSEE AS ON THE TABLE AT PAGE 3 OF HIS ORDER AS UNDER :- NAME LOAN AMOUNT REPAYMENT OF LOAN EXCESS PAYMENT SMT. RAJ KUMARI AGARWAL 30,00,000 53,50,000 23,50,000 SHRI JUGAL KISHORE 1,03,00,000 52,20,000 - SMT. JAI MALA AGARWAL 45,00,000 65,80,000 20,80,000 TOTAL 1,78,00,000 1,71,50,000 44,30,000 WE FIND THAT THE LOAN AMOUNT AGAINST SMT. RAJ KUMAR I AGARWAL IS INCORRECTLY SHOWN AT RS. 30,00,000/- AS AGAINST RS. 53,50,000/-. THI S FACT IS VERIFIED FROM THE RELEVANT LEDGER ACCOUNT AND WE FIND THAT THE LOAN AMOUNT WAS RS. 53,50,000/- AND THE REPAYMENT WAS ALSO OF EQUAL AMOUNT, THEREFORE, THER E WAS NO EXCESS PAYMENT IN CASE OF SMT. RAJ KUMARI AGARWAL WHEREAS THE AO HAS TAKEN RS. 23,50,000/- AS EXCESS PAYMENT. THIS IS CLEARLY AN INCORRECT FACT ASSUMED BY THE ASSESSEE WHILE 6 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. MAKING THE DISALLOWANCE. EVEN THE DETAILS OF LOAN AND REPAYMENT AGAINST SHRI JUGAL KISHORE ARE ALSO WRONGLY MENTIONED BY THE AO. IN T HE SAID TABLE, THE LOAN AMOUNT WAS SHOWN AT RS. 1,03,00,000/- AND THE REPAYMENT WA S SHOWN ONLY RS. 52,20,000/-. IN THIS CASE, THE ASSESSEE HAS MADE EXCESS PAYMENT INITIALLY. HOWEVER, FROM THE LEDGER ACCOUNT, WE FIND THAT THE SAID PAYMENT WAS A GAIN RECEIVED BACK BY THE ASSESSEE BEFORE THE END OF THE FINANCIAL YEAR IN TH E MONTH OF AUGUST 2007 AND IN NOVEMBER, 2007 OF RS. 33,00,000/- AND RS. 5,70,000/ - RESPECTIVELY. THEREFORE, THIS ISSUE OF RE-PAYMENT OF LOAN AND SETTLEMENT OF ACCOU NT WAS OVER AT THE END OF THE FINANCIAL YEAR 2007-08. SIMILARLY IN CASE OF SMT. JAI MALA AGARWAL, THE LOAN AMOUNT WAS RS. 70,80,000/- WHEREAS THE AO HAS WRONGLY MENT IONED AS RS. 45,00,000/- AND REPAYMENT WAS MADE BY THE ASSESSEE AT RS. 65,80,000 /-, THEREFORE, THERE IS NO EXCESS PAYMENT IN THAT CASE. FURTHER, WE FIND FROM THE LEDGER ACCOUNT THAT THE ACCOUNT OF SMT. JAI MALA AGARWAL WAS SETTLED BEFORE THE END OF THE FINANCIAL YEAR 2007-08 AND THERE WAS NO EXCESS PAYMENT OR OUTSTAND ING. IN VIEW OF THESE FACTS, ONCE THE ACCOUNTS OF THESE THREE DIRECTORS WERE SET TLED BEFORE THE END OF THE FINANCIAL YEAR 2007-08 BY UTILIZING THE LOAN TAKEN FROM THE ICICI BANK, NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE FOR THE ASSESSMENT YEARS 2010-11 AND 12-13 IS CALLED FOR. SINCE THE ENTIRE LOAN AMOU NT AVAILED BY THE ASSESSEE FROM ICICI BANK WAS FINALLY UTILIZED FOR REPAYMENT OF TH E LOANS TAKEN FROM THE DIRECTORS BEFORE THE END OF THE FINANCIAL YEAR 2007-08, THEN THE ISSUE WAS NO MORE SURVIVED THEREAFTER AND CONSEQUENTLY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST E XPENDITURE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST PAYMENT UNDER SECTION 24(B) OF THE ACT. THE ISSUE IN BOTH THE 7 ITA NOS. 72 & 73/JP/2019 M/S. DREAM FLATS PVT. LTD., JAIPUR. APPEALS IS COMMON AND BASED ON THE SAME FACTS, ACCO RDINGLY, BOTH THE ADDITIONS/DISALLOWANCES MADE BY THE AO IN RESPECT O F THE ASSESSMENT YEARS 2010-11 AND 2012-13 ARE DELETED. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/01/2020 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/01/2020. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. DREAM FLATS PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE DCIT, CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 72 & 73/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR