SANJAY SAVLA, MUMBAI V. ITO 24(2)(2), MUMBAI

ITA 7234/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7849 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: S C AGARWAL
• Keywords: Business income; Depreciation
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 7234/MUM/2014 ASSESSMENT YEAR: 2009 - 10 SHRI SANJAY SAVLA SHOP NO. 7, 1 ST FLOOR, SHANTINATH SHOPPING CENTRE, S.V. ROAD, MALAD (W) MUMBAI - 400064 VS. ITO - 24(2)(2) ROOM NO. 604, C - 13, PRATYAKSH KAR BHAVAN, B.K.C., BANDRA (E) MUMBAI - 400051. PAN NO. ABAPS9229C APPELLANT RESPONDENT ASSESSEE BY : MR. S.C. AGARWAL , AR REVENUE BY : MR. T.A. KHAN , DR DATE OF HEARING : 11/10 /2017 DATE OF PRONOUNCEMENT : 29/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 34 , MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). THERE HAS BEEN A DELAY OF 27 DAYS ON THE PART OF THE ASSESSE E TO FILE THE APPEAL. THE ASSESSEE HAS FILED AN AFFIDAVIT FOR CONDONING THE ABOVE DELAY STATING THAT HE HAD TO GO TO HIS NATIVE PLACE FOR A MONTH DURING THE RELEVANT TIME. WE ARE SATISFIED WITH THE CONTENTS OF THE AFFIDAVIT AND CONDONE THE DELAY OF 27 DAYS IN FILING THE APPEAL. SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 2 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE AGRICULTURAL INCOME OF RS.1,60,866/ - AS INCOME FROM OTHER SOURCES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD OFFERED GROSS INCOME OF RS.6,60,866/ - AS AGRICULTURAL INCOME FROM WHICH HE HAD SHOWN TO HAVE INCURRED EXPENDITURE OF RS.3,46,426/ - RESULTING INTO A NET AGRICULTURAL INCOME OF RS.3,14,440/ - . THE ASSESSING OFFI CER (AO) OBSERVED THAT THE AGRICULTURAL LAND WAS NOT REFLECTED IN THE BALANCE SHEET SUBMITTED BY THE ASSESSEE. THE ASSESSEE HAD SUBMITTED THREE BILLS SHOWING SALE OF AGRICULTURAL CROPS TO THREE PARTIES IN CASH. AS THE ASSESSEE COULD NOT FILE DOCUMENTS PROV ING OWNERSHIP OF THE AGRICULTURAL LAND AND ALSO FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE FOR INCURRING EXPENSES OF RS.3,46,246/ - , THE AO TREATED THE GROSS INCOME OF RS.6,60,866/ - AS INCOME FROM OTHER SOURCES AND BROUGHT IT TO TAX. 4. AGGRIEVED BY THE ORD ER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. C IT(A). THE LD. CIT(A) HELD THAT (I) SMT. MANJULABEN HIRJI SAVLA & OTHERS WERE THE OWNERS OF VARIOUS POCKETS OF AGRICULTURAL LAND IN KACHHA, GUJARAT, (II) SMT. MANJULABEN HIRJI SAVLA, THE MOTHER OF THE ASSESSEE HAD PERMITTED THE ASSESSEE TO CULTIVATE THE AGRICULTURAL LAND ON HER BEHALF UNDER AN AGREEMENT DATED 25.03.1995, FOR WHICH SHE WAS ENTITLED TO A COMPEN SATION OF RS.10,000/ - PER ANNUM, (III) EXTRACTS OF 7/12 ISSUED BY TALATI, FARADI GRAM PANCHAYAT, KACHHA, GUJARAT SHOWS THAT THE ASSESSEE WAS CULTIVATING GROUNDNUTS, JAWAR, GUVAR MUG AND TAL ON THESE PIECES OF AGRICULTURAL LAND. SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 3 AS THE ASSESSEE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE AND THE INCOME WAS EARNED IN CASH, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1,60,866/ - THEREBY GIVING A RELIEF OF RS.5,00,000/ - TO THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A COPY OF (I) 7/12 EXTRACT OF LAND AT MADVI KUTCH (GUJARA T) , (II) O WNERSHIP RIGHTS LETTER OF LAND AND (III) SALE BILLS, MAHAVIR TRADERS AND SHAKTI TRADERS. IT IS SUBMITTED BY HIM THAT THE ASSESSEE HAD NOT SHOWN ANY EXCESS AGRICULTURAL INCOM E THAN WHAT WAS ACTUALLY EARNED. IT IS ALSO STATED THAT RELEVANT DETAIL S OF LAND HOLDING AND EXPENDITURE INCURRED WERE FILED BEFORE THE AO. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIALS ON RECORD . WE FIND THAT THE LD. CIT (A) HAVING GONE THROUGH THE 7/12 OF THE EXTRACT OF LAND AT MADVI KUTCH, GUJARAT AND SALE BILLS HAS RESTRICTED THE DISALLOWANCE TO A REASONABLE AMOUNT OF RS.1,60,866/ - THEREBY GIVING RELIEF OF RS.5,0 0,000/ - TO THE ASSESSEE. AS THE ORDER OF THE LD. CIT(A) RE STRICTING THE DISALLOWANCE TO RS.1,60,866/ - IS REASONABLE, WE UPHOLD THE SAME. THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. 8. THE 2 ND GROUND RAISED IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENSES. SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 4 9. THE AO MADE AN ADDITION OF RS.4,86,134/ - BY DISALLOWING THE FOLLOWING EXPENDITURE INCURRED BY THE ASSESSEE AS AGAINST VEHICLE HIGHER CHARGES OF RS.3,36,000/ - EARNED BY HIM: SR. NO. ITEM AMOUNT (RS.) 1. DEPRECIATION ON CARS 2,48,741 2. INTEREST ON CAR LOANS 1,21,827 3. MOTOR CAR EXPENSES 80,034 4. MOTOR CAR INSURANCE 35,532 TOTAL 4,86,134 MOREOVER, THE AO TREATED THE INCOME FROM VEHICLE HIRING CHARGES OF RS.3,36,000/ - EARNED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AS AGAINST THE BUSINE SS INCOME SHOWN BY THE ASSESSEE. THE AO ALSO MADE A DISALLOWANCE OF RS.2,12,201/ - COMPRISING OF THE FOLLOWING EXPENSES: SR. NO. EXPENSES AMOUNT (RS.) 1. AIR CONDITION MAINTENANCE 2,550 2. BANK CHARGES 5,304 3. BROKERAGE 31,775 4. CREDIT CARD EXPENSES 1,24,630 5. DEPRECIATION 10,672 6. DIGITAL SIGNATURE 1,750 7. DIWALI EXPENSES 5,200 8. MEMBERSHIP & SUBSCRIPTION 562 9. PROFESSION CHARGES 15,000 10. TELEPHONE EXPENSES 14,688 TOTAL 2,12,201 10. IN APPEAL, THE LD. CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT HIS INCOME FROM VEHICLE RUNNING CHARGES EARNED BY HIM SHOULD BE CONSIDERED AS HIS P ROFITS AND GAINS FROM BUSINESS. HOWEVER, SHE RESTRICTED THE CLAIM OF MOTOR CAR EXPENSES TO RS.50,000/ - AS AGAINST RS.80 ,034/ - CLAIMED BY THE ASSESSEE, THUS CONFIRMING THE ADDITION OF RS.30,034/ - . SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 5 OUT OF THE DISALLOWANCE OF RS.2,12,201/ - MADE BY THE AO, THE LD. CIT(A) RESTRICTED IT TO RS.50,000/ - ON THE REASON THAT THE ELEMENT OF PERSONAL USE COULD NOT RULED OUT. 11. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A COPY OF THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD. CIT(A). ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEV ANT MATERIAL ON RECORD. WE FIND THAT THE LD. CIT(A) HAS AGREED WITH THE CONTENTIONS OF ASSESSEE AND TREATED INCOME OF RS.3,36,000/ - AS PROFITS AND GAINS FROM BUSINESS. SHE HAS ONLY SUSTAINED A DISALLOWANCE OF RS.30,034/ - . AGAIN OUT OF DISALLOWANCE OF RS. 2,12,201/ - MADE BY THE AO, THE LD. CIT(A) HAS SUSTAINED ONLY RS.50,000/ - ON THE REASON THAT THE PERSONAL USE COULD NOT BE RULED OUT. AS THE ORDER OF THE LD. CIT(A) IS BASED ON REASONS AND THE DISALLOWANCE OF EXPENSES BY HER IS A MODEST AMOUNT, WE CONFIR M THE SAME. THE 2 ND GROUND OF APPEAL IS THUS DISMISSED. 13. THE 3 RD GROUND RAISED IN THIS APPEAL IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST MADE BY THE AO. THE ADDITIONAL GROUND FILED BY THE ASSESSEE REITERATE THE SAME T HING. 14. THE AO OBSERVED THAT THE ASSESSEE HAD EARNED THE FOLLOWING INTEREST O F RS.7,37,130/ - DURING THE YEAR: SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 6 SR. NO. ITEM AMOUNT (RS.) 1. INTEREST ON FD WITH RAMESHWAR CO - OP BANK 4,18,423 2. INTEREST ON OTHER LOANS GIVEN 3,18,707 TOTAL 7,37,130 AS AGAINST THESE, THE ASSESSEE HAD CLAIMED EXPENSES OF RS.8,96,123/ - . THE BREAK - UP OF THE SAID CLAIM OF EXPENSES IS AS UNDER: SR. NO. EXPENSES AMOUNT (RS.) 1. INTEREST ON OVERDRAFT WITH RAMESHWAR CO - OP BANK 3,91,555 2. INTEREST ON OTHER LOANS TAKEN 3,61,719 3. INTEREST ON PREMISES LOAN 1,42,849 TOTAL 8,96,123 THE AO DISALLOWED INTEREST OF RS.5,04,568/ - (RS.3,61,719/ - PLUS RS.1,42,849/ - ) ON THE REASON THAT THE ASSESSEE FAILED TO FILE A COPY OF CASH FLOW STATEMENT EVIDENCING INTEREST EARNED AN D INTEREST PAID. 15. IN APPEAL, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1,85,861/ - (RS.5,04,568/ - MINUS RS.3,18,707/ - ) 16. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE INTEREST WAS PAID FOR THE PURPOSE OF BUSINESS AND PROFESSION AN D THEREFORE, THE SAME SHOULD BE ALLOWED U/S 36(1)(III) OF THE ACT. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.8,96,123/ - AGAINST THE BUSINESS INCOME. THE AO HAS WRONGLY CONSIDERED IT AS A CLAIM AGAINST INTEREST INCOME EARNED BY THE ASSESSEE. THE ASSESSEE HA S BORROWED LOANS FROM VARIOUS PARTIES. THE SAME WAS DONE FOR THE PURPOSE OF BUSINE SS OF THE ASSESSEE AS HIS EVIDENT FROM ITS AUDITED ACCOUNTS. SHRI SANJAY SAVLA ITA NO. 7234/MUM/2014 7 IN VIEW OF THE ABOVE, WE DELETE THE DISALLOWANCE OF RS.1,85,861/ - ARRIVED AT BY THE LD. CIT(A). THUS THE 3 RD GROUND OF APPEAL IS ALLOWED. 18. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/12/2017. SD/ - SD/ - (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 29/12/2017 RAHUL SHARM A, SR. P.S. 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 . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI