S. RAJ & CO., MUMBAI V. I.T.O. 19(1)(4), MUMBAI

ITA 7467/MUM/2011

• Counselvise Citation: 746719914 RSA 2011
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 04-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G N MALWANA
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NOS. 7466, 7467, 7468 & 7471/MUM/2011 ASSESSMENT YEARS: 2003-04, 2004-05, 2005-06 & 2006-07 M/S. S. RAJ & CO. ASHIANA 1 ST FLOOR, 87, LINKING ROAD, SANTACRUZ (WEST), MUMBAI- 400 054 PAN: AAAFS 9789 G VS. ITO 19(1)(4) PIRAMAL CHAMBERS MUMBAI 400 012 (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI K.R. LAKSHMINARAYANAN REVENUE BY : SHRI G.N. MALWANA DATE OF HEARING : 26.08.2013 DATE OF PRONOUNCEMENT : 30.08.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE ORDERS OF THE LD.CIT(A) 22, MUMBAI ALL DATED 29.09.2011 FOR THE A SSESSMENT YEARS 2003-04, 2004-05, 2005-06 & 2006-07. ALL THESE APPEALS ARE D ISPOSED BY WAY OF THIS COMMON ORDER. 2. THE ONLY ISSUE RAISED IN THE GROUNDS OF ALL THES E APPEALS RELATE TO THE ADDITION OF INTEREST AMOUNTING TO RS.6,68,233/-, 7,48,222/-, 8,38,234/- & 9,38,821/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2003-04, 2004 -05, 2005-06 & 2006-07 ON NOTIONAL BASIS. 3. BRIEFLY STATED, THE ASSESSEE, A FIRM IN THE RETU RNS OF INCOME FOR THE ASSESSMENT YEARS 2001-02 & 2002-03, HAS OFFERED INT EREST INCOME ON ACCRUAL BASIS ON THE LOANS GIVEN TO FAMILY MEMBERS NAMELY K IRTIKA A WADHWANI, WADHWANI ASSOCIATES AND WADHWANI CONSTRUCTION RESPECTIVELY A MOUNTING TO RS.15,05,523/-, 20,57,868/- AND 9,44,328/-. THE CASE HAD BEEN REOPE NED ON THE ISSUE THAT THE ITA NOS. 7466, 7467, 7468 & 7471/MUM/2011 M/S. S. RAJ & CO. ASSESSMENT YEARS: 2003-04, 2004-05, 2005-06 & 2006-07 2 ASSESSEE HAD NOT DECLARED THE INTEREST INCOME AGAIN ST LOANS ADVANCED ALTHOUGH INTEREST INCOME HAD BEEN OFFERED IN EARLIER YEARS 2 001-02 AND 2002-03 IN RESPECT OF THE SAME LOANS. IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, THE AO MADE THE IMPUGNED ADDITIONS OF INTEREST FOR THE YEARS UNDER CONSIDERATION ON NOTIONAL BASIS AS THE ASSESSEE HAD BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND SINCE THE ASSESSEE HAD EAR LIER OFFERED INCOME FROM INTEREST ON ACCRUAL BASIS FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRI EVED BY THE IMPUGNED ORDERS, THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 4. BEFORE US, THE LD. AR HAS REITERATED THE SAME SU BMISSIONS MADE BEFORE THE LOWER AUTHORITIES WHICH INTER ALIA INCLUDE THAT THE ASSESSEE HAS NOT ACTUALLY RECEIVED ANY INTEREST TILL TODAY AND THERE IS NO LIKELIHOOD OF ANY RECEIPTS AT ANY TIME IN FUTURE ALSO. THE ASSESSEE HAS NOT OFFERED THE INTEREST TO TAX SINCE THE LOAN PARTIES HAVE BECOME HOSTILE AND STOPPED MAKING PAYMENT DUE TO LI TIGATION WITH THE SAID PARTIES. ALSO, THE LD. AR HAS DRAWN OUR ATTENTION TO THE RET URNS FILED BY THE SAID DEBTORS TO ESTABLISH THAT DURING THE YEAR UNDER CONSIDERATION, NO INTEREST IS BEING PAID TO THE ASSESSEE. FURTHER, RELIANCE HAS BEEN PLACED ON THE DECISIONS OF THE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. CAFIN HOMES LTD. [ 2011] 13 TAXMAN.COM43(KAR), HIGH COURT OF MADRAS IN THE CASE OF CIT VS. MOTOR C REDIT CO. P. LTD. 127 ITR 0572, THE HONBLE SUPREME COURT IN THE CASE OF STATE BANK OF TRAVANCORE VS. CIT 158 ITR 102. ON THE OTHER HAND, THE LD. DR HAS RELIED ON TH E ORDERS OF THE AO AND THE LD.CIT(A) IN SUPPORT OF THE REVENUES CASE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS NOT DISPUTED THAT THE ASSESSEE HAS BEEN CONTINUOUSLY FO LLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THE ASSESSEE HAS NOT PROVED THAT IN THE YEARS 2001-02 AND 2002-03, THE ASSESSEE HAS OFFERED THE INTEREST FOR TAX ON TH E BASIS OF ACTUAL RECEIPT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT PROVIDE D ANY MATERIAL/EVIDENCE TO ESTABLISH THAT THERE HAS BEEN A CLAIM FOR THE REPAY MENT OF THE LOAN/INTEREST AND A CONSEQUENT REFUSAL THEREON TO PAY THE SAME. IT IS A LSO NOTED THAT THE ASSESSEE HAS NOT WRITTEN OFF THE LOAN AS BAD DEBT. AS REGARDS TH E CONTENTION OF THE ASSESSEE THAT THE SAID INTEREST HAS NOT BEEN PAID TO THE ASSESSEE DUE TO THE LITIGATION WITH THE ITA NOS. 7466, 7467, 7468 & 7471/MUM/2011 M/S. S. RAJ & CO. ASSESSMENT YEARS: 2003-04, 2004-05, 2005-06 & 2006-07 3 DEBTORS, IN OUR VIEW IS NOT ACCEPTABLE AS THE AO AN D THE LD.CIT(A) HAS CORRECTLY HELD THAT THERE IS NO DISPUTE BETWEEN THE ASSESSEE AND T HE PARTIES TO WHOM THE LOANS HAVE BEEN MADE ON THIS ISSUE. MERE FACT THAT THE SA ID PARTIES HAVE NOT PAID THE IMPUGNED INTEREST TO THE ASSESSEE AS PER THEIR RETU RN CANNOT BE THE BASIS FOR GIVING RELIEF TO THE ASSESSEE AS THE SAME HAS BEEN ASSESSE D ONLY ON ACCRUAL BASIS AND NOT ON THE BASIS OF ACTUAL RECEIPT. ALSO, THE DECISIONS RELIED BY THE LD. AR ARE NOT APPLICABLE TO THE PRESENT CASE OF THE ASSESSEE AS T HE FACTS ARE DISTINGUISHABLE IN THE LINE OF THE ABOVE DISCUSSED FACTS. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LD.CIT(A) AND THE SAME ARE UPH ELD. 6. IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2013. SD/- SD /- (B. RAMAKOTAIAH) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.08.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR H BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.