AJAY GOEL, MEERUT V. ITO, WARD- 1(1), MEERUT

ITA 7269/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5662 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 06-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R MISHRA
• Assessee Lawyers: V K GOEL
• Keywords: Unexplained cash credit; Capital asset; Business expenditure; Opportunity of being heard; Cost of acquisition; Wrong claim; Agreed addition; Capital expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH.BHAVNESH SAINI, JUDICIAL MEMBER ITA NO.7269/DEL/2017 [ASSESSMENT YEAR: 2014-15] APPELLANT BY SH. V. K .GOEL, ADV. RESPONDENT BY SH. B.R.MISHRA, SR.DR DATE OF HEARING 13.06.2018 DATE OF PRONOUNCEMENT 20 .06.2018 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD.CIT(A), MEERUT DATED 09.11.2017 FOR AY 2014-15. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUN D NO.1 OF THE APPEAL OF THE ASSESSEE CLAIMING DEDUCTION OF INTEREST, THE SA ME IS DISMISSED AS NOT PRESSED. 4. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION ON ACCOUNT OF INTEREST ON LOAN DEBITED IN P&L ACCOUNT OF RS.1,87, 283/-. THE AO NOTED THAT DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESS EE HAS PURCHASED A COMMERCIAL PLOT NO.A-7, T.P.NAGAR, MEERUT VIDE REGI STERED SALE DEED DATED 22.07.2013. THE ASSESSEE WAS REQUIRED TO EXPLAIN T HE SOURCE OF INVESTMENT IN THE PROPERTY. THE ASSESSEE EXPLAINED THAT PAYMENT OF RS.8 LACS WAS MADE IN AJAY GOEL, C/O-VINOD KUMAR GOEL, 282, BOUNDARY ROAD, CIVIL LINES, MEERUT, UTTAR PRADESH. PAN-AAQPG9765L VS ITO, WARD-1(1), MEERUT. (APPELLANT) (RESPONDENT) ITA NO.7269/DEL/2017 PAGE | 2 FY 2012-13 THROUGH UNION BANK OF INDIA FOR WHICH HE HAS TAKEN LOAN OF RS.10 LACS AND REST OF THE PAYMENTS WERE MADE FROM PUNJAB NATIONAL BANK. THE AMOUNTS OF LOAN WAS CREDITED IN PNB AGAINST THE LOA N TAKEN FROM HDB FINANCE SERVICES ON 10.07.2013. BANK ACCOUNT STATEMENT, LE DGER ACCOUNT OF PLOT AND INTEREST EXPENSES LEDGER ETC. WERE OBTAINED WHICH W ERE EXAMINED CAREFULLY BY THE AO. THE AO NOTED THAT THE ASSESSEE HAD DEBITED INTEREST EXPENSES OF RS.3,18,723/-. LEDGER ACCOUNT OF INTEREST EXPENSES HAS BEEN EXAMINED AND FOUND THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENS ES OF RS.1,45,429/- AGAINST INTEREST PAID TO UBI, MEERUT AND INTEREST EXPENSES OF RS.41,854/- AGAINST HDB FINANCE SERVICES. THE ASSESSEE HAS TAKEN THESE LOA NS FOR ACQUIRING OF COMMERCIAL PLOT WHICH WAS NOT UTILIZED IN HIS BUSIN ESS. IN OTHER WORDS, THIS PLOT IS A CAPITAL ASSET OF THE ASSESSEE AND HAS NOT HING TO DO WITH HIS BUSINESS ACTIVITIES. HENCE, INTEREST EXPENSES CLAIMED FOR R EPAYMENT OF LOAN CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. THE AO NOTED THAT AFTER DISCUSSION, THE ASSESSEE HAS SUBMITTED THAT HE HAS MADE A WRONG CLA IM OF INTEREST EXPENSES IN P&L ACCOUNT OF THE FIRM AND AGREED FOR ADDITION OF RS.1,87,283/-. THE AO, ACCORDINGLY, DISALLOWED THE SAME. 4.1. THE ASSESSEE MADE A PRAYER SIMPLICITOR THAT 1/ 5 TH OF THE INTEREST SHOULD BE ALLOWED AND ACCUMULATED FROM THE YEAR OF USE. L D. CIT(A) NOTED THAT THERE IS NO PROVISION IN THE ACT TO ACCUMULATE INTEREST O N THE ACQUISITION OF BUSINESS ASSET. IT IS A CAPITAL EXPENDITURE AND WILL BE ADD ED TO THE COST OF ACQUISITION OF THE ASSETS. THIS GROUND WAS DISMISSED. 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I DO NOT FI ND ANY MERIT IN THIS GROUND OF THE APPEAL OF THE ASSESSEE. IT IS WELL S ETTLED LAW THAT NO APPEAL LIES ON AGREED ADDITIONS. I RELY UPON THE DECISION OF H ONBLE BOMBAY HIGH COURT IN ITA NO.7269/DEL/2017 PAGE | 3 THE CASE JIVAT LAL PURTAPSHI 65 ITR 261 , DECISION OF HONBLE KERALA HIGH COURT IN THE CASE VAMA DAVAN BHANU 330 ITR 559 AND DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANTA SINGH KARTAR SINGH 125 ITR 239 . THE ASSESSEE MADE A CLAIM OF DEDUCTION OF THE INTEREST BEFORE THE AO. HOWEVER, THE ASSESSEE SUBMITTED THAT WRONG CLAIM IS MADE, THEREF ORE, AGREED FOR THE ADDITION OF THE AMOUNT IN QUESTION. SINCE THE ASSESSEE AGRE ED FOR ADDITION BEFORE AO, THEREFORE, NO APPEAL LIES ON THIS GROUND BEFORE LD. CIT(A). FURTHER, WHATEVER PRAYER WAS MADE BEFORE LD.CIT(A) FOR ALLOWANCE OF 1 /5 OF THE INTEREST WAS NOT ARISING OUT OF THE ORDER OF THE AO. LD.CIT(A) ALSO CORRECTLY HELD THAT THERE IS NO PROVISION IN THE ACT TO ACCUMULATE INTEREST ON ACQU ISITION OF BUSINESS ASSET. NO EVIDENCE OF USE OF PLOT HAS BEEN FILED. THIS GR OUND IS SAME AS GROUND NO.1, NOT PRESSED. THEREFORE, THIS GROUND OF APPEAL OF T HE ASSESSEE WAS NOT MAINTAINABLE IN LAW. THE SAME IS, ACCORDINGLY, DIS MISSED. 6. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.9,01,183/- ON ACCOUNT OF MERGED CAPITAL ACCOUNT OF TWO FIRMS O F THE ASSESSEE. BRIEFLY THE FACTS OF THE CASE ARE THAT IN THE PRECEDING PREVIOU S YEAR I.E. F.Y. 2012-13, THE ASSESSEE DECLARED INCOME FROM BUSINESS OF WHOLESALE TRADING OF WASHING POWDER UNDER THE PROPRIETORSHIP FIRM M/S YASH ENTER PRISES AND WHOLESALE TRADING OF BIDI UNDER PROPRIETORSHIP FIRM M/S SHIVI INTERNATIONAL. DURING THE EXAMINATION OF FINANCIAL STATEMENT OF PROPRIETORSHI P FIRM M/S SHIVI INTERNATIONAL FOR AY 2014-15 UNDER APPEAL, IT CAME TO THE NOTICE THAT THE ASSESSEE HAS MERGED ALL ASSETS & LIABILITIES OF PR OPRIETORSHIP FIRM M/S YASH ENTERPRISES INTO M/S SHIVI INTERNATIONAL. THIS MER GER CAME INTO EFFECT ON 01.04.2013. AS PER BALANCE SHEET OF M/S YASH ENTER PRISES AS ON 31.03.2013, CAPITAL OF THE PROPRIETOR WAS AT RS.12,45,940/-. HO WEVER, THE CAPITAL ITA NO.7269/DEL/2017 PAGE | 4 TRANSFERRED FROM M/S YASH ENTERPRISES WAS SHOWN AT RS.21,47,123/- IN THE BALANCE SHEET OF M/S SHIVI INTERNATIONAL AS ON 31.0 3.2014. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. THE ASSESSEE GAVE DETAI L OF THE CAPITAL CONTRIBUTION AND SUBMITTED THAT BALANCE SHEET OF M/S YASH ENTERP RISES IS MISPLACED. THE AO REPRODUCED BALANCE SHEET OF BOTH THE FIRMS OF TH E ASSESSEE AND NOTED THAT THE ASSESSEE HAS FAILED TO RECONCILE THE DIFFERENCE . THE AO/LD.CIT(A) FOUND THAT THERE IS A SUNDRY CREDITORS OF RS.3,76,927/-; CLOSING STOCK OF RS.66,832/- FOR WHICH NO DETAILS HAVE BEEN GIVEN. THERE IS UNS ECURED LOAN FROM SMT. SHOBHA RANI OF RS.3 LACS WHICH IS ALSO NOT EXPLAINE D AND THAT THERE IS A LIABILITY OF RS.1,57,423/-. SINCE THE ASSESSEE COU LD NOT PROVIDE THE CORRECT DETAIL OF CAPITAL CONTRIBUTION, THEREFORE, THE AO M ADE ADDITION OF RS.9,01,183/- BEING UNEXPLAINED CREDIT IN TERMS OF SECTION 68 OF THE ACT. 7. THE ONLY ARGUMENT OF THE ASSESSEE BEFORE LD.CIT( A) WAS THAT NO ADDITION U/S 68 OF THE ACT CAN BE MADE AS THESE LIABILITIES RELATE TO ASSESSMENT YEAR 2013-14 AND DOES NOT PERTAIN TO ASSESSMENT YEAR UND ER APPEAL I.E. 2014-15. LD.CIT(A) FOUND CONTENTION OF THE ASSESSEE BE TECHN ICALLY CORRECT AS IT IS A CASE OF CESSATION OF LIABILITY AND AO SHOULD HAVE MADE A DDITION U/S 41(1) OF THE ACT AND NOT U/S 68 OF THE ACT. IT IS ALSO NOTED THAT T HE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL/EVIDENCE TO SHOW THAT THESE LIABILITIES ARE STILL PAYABLE. LD.CIT(A), ACCORDINGLY, CONFIRMED THE ADDITION U/S 41(1) OF THE ACT. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF THE AO. THE AO MADE ADDITION U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CAPITAL CONTRI BUTION MADE BY THE ASSESSEE U/S 68 OF THE ACT. HOWEVER, LD.CIT(A) DID NOT APPR OVE ADDITION U/S 68 OF THE ACT. LD.CIT(A) CONFIRMED THE ADDITION U/S 41(1) OF THE ACT BECAUSE THE ITA NO.7269/DEL/2017 PAGE | 5 ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THESE LIABILITIES ARE STILL PAYABLE. LD. COUNSEL FOR THE ASSESSEE PO INTED OUT THAT BALANCE SHEET OF BOTH THE PROPRIETORSHIP CONCERNS OF THE ASSESSEE ARE AVAILABLE BEFORE THE AO AND ALSO REPRODUCED IN THE ASSESSMENT ORDER. THERE FORE, SUCH FINDING OF LD.CIT(A) IS INCORRECT. I MAY NOTE THAT THE CONTEN TION OF THE ASSESSEE IS CORRECT THAT BOTH THE BALANCE SHEET WERE AVAILABLE WITH THE AO AND THAT NO OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE TO EXPLAIN THE CONDI TIONS OF SECTION 41(1) OF THE ACT IF SATISFIED IN THE PRESENT CASE. THEREFORE, T HE MATTER REQUIRES RE- CONSIDERATION AT THE LEVEL OF THE AO. I, ACCORDING LY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SECTION 41(1) OF THE ACT STRICTLY ON MERITS BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF APPEAL OF THE APPEAL O F THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATE:- 20.06.2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) CONCERNED 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI