LOTUS INVESTMENTS LTD, MUMBAI V. ACIT CEN CIR 13, MUMBAI

ITA 7453/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2202 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Condonation of delay
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.7453/MUM/2013 ASSESSMENT YEAR: 2006-07 M/S LOTUS INVESTMENTS LTD. 1, ANUP, SUN BEAM CO.OP. HOUSING SOCIETY, JUHU VERSOVA LINK ROAD, ANDHERI (W), MUMBAI-400053 / VS. ACIT, CENTRAL CIRCLE-13, CGO BUILDING, 11 TH FLOOR, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. AAACL6350M % $& ' # ( / DATE OF HEARING : 09/12/2015 ' # ( / DATE OF ORDER: 09/12/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 18/02/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO IMPOS ING PENALTY !' # ! / ASSESSEE BY SHRI STANY SALDANHA $ ! / REVENUE BY SHRI MOHAMMED RIZWAN M/S LOTUS INVESTMENT LTD. ITA NO.7453/MUM/2013 2 OF RS.2,63,357/- U/S 271(1)(C) OF THE INCOME TAX AC T, 1961 (HEREINAFTER THE ACT). 2. WE FIND THAT THERE IS DELAY OF 213 DAYS FOR FILI NG THE APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE HAS FILE D AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFF IDAVIT STATING THE REASONS OF DELAY. ON THE OTHER HAND, TH E LD. DR, CONTENDED THAT THE ASSESSEE HAS BEEN VERY CASUAL, T HEREFORE, DELAY MAY NOT BE CONDONED. 2.1. WE HAVE PERUSED THE REASONS OF DELAY AND NOT S ATISFIED WITH THE REASONS, HOWEVER, WE ARE OF THE VIEW THAT IN VIEW OF THE ORDER OF THE TRIBUNAL, WHEREIN, THE QUANTUM ADD ITION HAS BEEN SENT TO THE FILE OF THE ASSESSING OFFICER, THE ASSESSEE SHOULD NOT SUFFER. BY TAKING A LENIENT VIEW, WE IMP OSE A COST OF RS.25,000/-, WHICH IS TO BE DEPOSITED BY THE ASS ESSEE IN THE PRIME MINISTER RELIEF FUND. THE ASSESSEE AGREED FO R THE COST. THE ASSESSEE IS DIRECTED TO DEPOSIT RS.25,000/- WIT HIN TWENTY DAYS FROM THE RECEIPT OF THIS ORDER AND SHALL PRODU CE THE RECEIPT OF SUCH DEPOSIT BEFORE THE LD. ASSESSING OF FICER. SUBJECT TO THIS CONDITION OF DEPOSIT, THE PENALTY A PPEAL OF THE ASSESSEE SHALL BE HEARD BY THE ASSESSING OFFICER. 3. DURING HEARING OF THIS APPEAL, LD. COUNSEL FOR T HE ASSESSEE, SHRI STANY SALDHANA, CONTENDED THAT THE Q UANTUM ADDITION, ON THE BASIS OF WHICH PENALTY WAS IMPOSED , HAS BEEN SET-ASIDE TO THE FILE OF THE LD. ASSESSING OFFICER BY THE TRIBUNAL VIDE ORDER DATED 30/09/2013 (ITA NO.4701/MUM/2009). THIS M/S LOTUS INVESTMENT LTD. ITA NO.7453/MUM/2013 3 FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR, SHRI MOHAMMED RIZWAN. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PORTION FROM THE AFORESAID ORDER DATED 30/09/2013 FOR READY REFERENCE:- THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 17.06.09 RELEVANT TO ASSE SSMENT YEAR 2006-07. 2. THE ONLY SUBSTANTIVE ISSUE COMING OUT OF THE GRO UND OF APPEAL IS REGARDING DISALLOWANCE OF A SUM OF RS.7,8 2,403/- BEING INTEREST PAID ON BANK OVERDRAFT. DURING ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, THE ASSESSING OFFICER DISALLOWED TH E INTEREST AMOUNT OF RS.7,82,403/- WHICH THE ASSESSEE CLAIMED TO BE PAID TO BANK AGAINST OVERDRAFT/LOAN. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE OVERDRAFT FACILITY WAS GRANTED TO THE ASSESSEE AGAINST THE SECURITY OF HIS FDR WITH THE BANK FOR RS.1,34,48,380/- WHICH EARNED CORRESPONDING INTEREST OF RS.6,83,467/ - AND THE SAME WAS OFFERED AS INCOME OF THE ASSESSEE. THE ASS ESSEE THUS HAS CLAIMED THAT THERE IS A NEXUS BETWEEN THE FDR I NTEREST AND THE INTEREST PAID ON OVERDRAFT AND AS SUCH HAS CLAI MED THE SAID M/S LOTUS INVESTMENT LTD. ITA NO.7453/MUM/2013 4 OVERDRAFT INTEREST AS BUSINESS EXPENDITURE. THE SEC OND CONTENTION OF THE LD. REPRESENTATIVE OF THE ASSESSE E HAS BEEN THAT THE OVERDRAFT LOAN AMOUNT WAS UTILIZED BY THE ASSES SEE TOWARDS REPAYMENT OF INTEREST AND LOAN AMOUNT OF RS.13.53 C RORES OUTSTANDING AGAINST THE ASSESSEE. THESE LOAN AMOUNT S WERE USED BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT BUSI NESS OF THE ASSESSEE. ON THE OTHER HAND LD. D.R. HAS RELIED UPO N THE AUTHORITIES BELOW. 3. A PERUSAL OF THE ORDER UNDER APPEAL REVEALS THAT THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.7,82,403 /- HAS BEEN CONFIRMED BY THE LD. CIT(A) OBSERVING THAT THERE WA S NO NEXUS BETWEEN THE INTEREST INCOME ACCRUED TO THE ASSESSEE ON THE FDR AND THE INTEREST PAID ON THE OVERDRAFT. WE DO NOT F IND ANY INFIRMITY OF THE FINDING OF THE LD. CIT(A), SO FAR THE NEXUS BETWEEN THE INTEREST INCOME AND THE INTEREST PAID O N OVERDRAFT IS CONCERNED. IT MAY BE OBSERVED THAT EVEN IF THE FDR IN QUESTION WAS KEPT AS A SECURITY WITH THE BANK FOR THE OVERDR AFT FACILITY THAT ITSELF DOES NOT ESTABLISH ANY NEXUS BETWEEN TH E INTEREST EARNED ON SUCH FDR WITH THE LOAN TAKEN FROM THE BAN K AND THE INTEREST PAID THERE UPON. FOR THE PURPOSE OF SANCTI ON OF OVERDRAFT FACILITY/LOAN, THE BANK GENERALLY REQUIRE S SOME SECURITY WHICH MAY BE EITHER IN THE SHAPE OF FDR OR IN THE SHAPE OF ANY OTHER VALUABLE PROPERTY INCLUDING IMMO VABLE PROPERTY. MERELY BECAUSE THE FDR WAS KEPT AS A SECU RITY FOR THE OVERDRAFT FACILITY, IT DOES NOT ESTABLISH ANY N EXUS BETWEEN THE TWO. MOREOVER THE INCOME FROM INTEREST ON THE F DR HAS BEEN COMPUTED UNDER THE HEAD OTHER SOURCES, WHERE AS THE M/S LOTUS INVESTMENT LTD. ITA NO.7453/MUM/2013 5 INTEREST PAID ON THE LOAN AMOUNT HAS BEEN CLAIMED F OR BUSINESS PURPOSES. HOWEVER, THERE SEEMS TO BE A FORCE IN THE SECOND CO NTENTION OF THE LD. A.R. TO THE EFFECT THAT THE OVERDRAFT LOAN AMOUNT WAS PAID/USED FOR THE BUSINESS OR FOR THE REPAYMENT OF UNSECURED LOAN/INTEREST OF RS.13.53 CRORES OUTSTANDING AGAINS T THE ASSESSEE. HOWEVER, THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE AUTHORITIES BELOW. UNDER SUCH CIRCUMSTANCES WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE AS TO WHETHER THE OVERDRAFT AMOUNT OF LOAN UPON WHICH THE PAYMENT OF INTEREST EXPENDITURE OF RS.7,82,403/- HAS BEEN CLAIMED WAS U SED FOR THE REPAYMENT OF THE OUTSTANDING LOANS WHICH WERE USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IF THE CO NTENTION OF THE ASSESSEE IN THIS RESPECT IS FOUND TRUE, THEN THE AS SESSEE WILL BE ENTITLED TO CLAIM THE EXPENDITURE BEING USED FOR TH E PURPOSE OF BUSINESS. NEEDLESS TO SAY THAT THE AO WILL GIVE PRO PER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND THE EVIDENCES/DOCUMENTS, IF ANY REQUIRED, THEREAFTER, T O PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 3.2. WE FIND THAT THE CO-ORDINATE BENCH VIDE ORDER DATED 30/09/2013 (SUPRA) REMANDED THE QUANTUM ADDITION TO THE FILE OF THE LD. ASSESSING OFFICER WITH RESPECT TO E NTITLEMENT TO M/S LOTUS INVESTMENT LTD. ITA NO.7453/MUM/2013 6 THE CLAIM OF EXPENDITURE, BEING USED FOR BUSINESS P URPOSES, THEREFORE, THE PENALTY APPEAL IS ALSO REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER TO DECIDE ON MERIT AS THE SAME WILL BE OUTCOME OF THE APPEAL ON QUANTUM ADDITION. THE A SSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD, THUS, THE APPE AL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE ALLOWED FOR STA TISTICAL PURPOSES ONLY. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF THE LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 09/12/2015 SD/- SD/- ( SANJAY ARORA ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % & MUMBAI; * DATED : 09/12/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 % 2# ( , ) / THE CIT, MUMBAI. 4. 1 1 % 2# / CIT(A)- , MUMBAI 5. 4$5 /# , 1 ,( 6 , % & / DR, ITAT, MUMBAI 6. ! 8& / GUARD FILE. ! / BY ORDER, 04,# /# //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI