SURESH A SHAH, MUMBAI V. DCIT 14(2), MUMBAI

ITA 7561/MUM/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0142 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 07-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 80G; 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 7561 / MUM/ 20 1 3 ( / ASSESSMENT YEAR: 20 09 - 10 ) SURESH A SHAH 902, GARDENVIEW, 9 TH FLOOR, OPP SHREEPAL NAGAR, NEPEANSEA RD, MUMBAI 400 006 / VS. DCIT 14(2) EARNEST HOUSE, 3 RD FLOOR, R. NO. 302 NARIMAN POINT MUMBAI PIN:400021 ./ ./ PAN/GIR NO. : AAIPS 0938 F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 04 .0 7 .2017 / DATE OF PRONOUNCEMENT : 29. 0 8 . 2017 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 08 .10.201 3 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 25 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2006 - 07 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - (1) ON THE FACTS AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 41,13,000 MADE U/S 69 OF THE INCOME ASSESSEE BY : SHRI SANJIV M. SHAH REVENUE BY: SHRI RAM TIWARI, DR SURESH A. SHAH 2 TAX ACT, 1961 IN RESPECT OF THE VALUE OF TENANCY RIGHTS OF OFFICE PREMISES ON THE BASIS OF VALUATI ON AS PER STAMP DUTY READY RECKONER ON ASSUMPTIONS AND SURMISES WITHOUT ANY EVIDENCE TO PROVE THAT PAYMENT WAS ACTUALLY MADE TO THE LANDLORD AND WITHOUT APPRECIATING THE FACT THAT THE LANDLORD HAD CONFIRMED OF NOT RECEIVING ANY PAYMENT FOR GRANTING THE TEN ANCY RIGHTS. (2) ON THE FACTS AND IN LAW AND WITHOUT PREJUDICE TO GROUND NO. 1, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF FULL AMOUNT OF RS. 41,13,000 IN THE HANDS OF APPELLANT, ON PROTECTIVE BASIS, WITHOUT APPRECIATING THE FACT THAT THE TENA NCY RIGHTS WERE JOINTLY ACQUIRED BY THREE PERSONS IE. APPELLANT, KIRTILAL M SHAH AND AMARCHAND P SHAH AND ONLY RT - 1 ,000, BEING APPELLANT'S SHARE CAN BE ASSESSED IN HIS HANDS. (3) ON THE FACTS AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE OF INTEREST PAID TO THE EXTENT OF RS. 3,34,000 ON THE GROUND THAT APPELLANT HAD UNDERSTATED THE ASSESSABLE NET INTEREST INCOME BY CONSIDERING NET INTEREST INCOME AS RS. 1,83,139 AGAINST THE CORRECT FIGURE OF RS. 9,50,487. (4) ON THE FACTS AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF PERSONAL EXPENSES TO THE EXTENT OF RS. 2,00,000 AS LOW WITHDRAWALS ON ASSUMPTIONS AND SURMISES WITHOUT APPRECIATING THE FACT THAT APPELLANT HAD ALREADY SHOWN PERSONAL EXPENSES OF RS. 2,49,889 FOR THE FULL YEAR FOR A FAMILY OF TWO MEMBERS WHICH WAS REASONABLE AND ACCEPTED BY THE LEARNED AO IN THE PRECEDING AND SUBSEQUENT YEARS. (5) APPELLANT PRAYS FOR LEAVE TO ADD, AMEND OR DELETE ANY GROUND/S OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 31 .0 7 .200 6 DECLARING TOTAL INCOME TO THE TUNE OF RS. 34,33,390/ - FOR THE A.Y.2006 - 07 . AN AIR INFORMATION WAS RECEIVED IN WHICH IT CAME INTO NOTICE THAT THE ASSESSEE PURCHASED IMMOVA BLE PROPERTY AT RS.41,13,000/ - AND SHARES OF RS.12,61,000/ - IN THE F.Y. 2005 - 06 BUT THE SAME WAS NOT DECLARED, THEREFORE, A SATISFACTION NOTE WAS PREPARED TO THE EFFECT THAT THE INCOME TO THE TUNE OF RS. 53,74,000/ - WAS ESCAPED ASSESSMENT. THEREFORE, ASSESS MENT ORDER WAS REOPENED U/S 147 OF THE I.T. SURESH A. SHAH 3 ACT, 1961 A FTER OBTAINING THE NECESSARY APPROVAL OF AUTHORITY . N OTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, THE STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. THE AS SESSEE EXPLAINED THAT THE ASSESSEE DID NOT PURCHASE THE IMMOVABLE PROPERTY BUT TOOK ROOM NO. 8 AND 9 OF 6 TH FLOOR OF PHONIX B UILDING, S.V.P. ROAD, MUMBAI ALONGWITH TWO OTHERS ON MONTHLY RENT OF RS.940/ - . AN AMOUNT OF RS.4 1,13,000/ - WAS NOT THE PURCHASE CON SIDERATION BUT MARKET VALUE OF PROPERTY TAKEN FOR PAYMENT OF STAMP DUTY. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE INVESTMENT OF RS.41,13,000/ - , T HEREFORE, THE SAME WAS TREATED AS UN EXPLAINED U/S 69 OF THE I.T. ACT , 1961 HENC E ADDED TO THE INCOME O F THE ASSESSEE. THE ASSESSEE ALSO CLAIMED THE INTEREST TO THE TUNE OF RS.40,54,593/ - AND BANK CHARGES OF RS. 24,483/ - AGAINST THE INTEREST INCOME. SINCE THESE EXP ENSES WERE NOT PROPERLY EXPLAINED THEREFORE, THESE EXPENSES WERE DECLINED AND ADDE D TO THE IN COME OF THE ASSESSEE . THE ASSESSEE WITHDRAWAL AN AMOUNT RS.1,95,000/ - WHICH WAS FOUND LOW WITHDRAWAL. THEREFORE, THE ADDITION OF RS.5,00,000/ - WAS MADE ON ACCOUNT OF LOW WITHDRAWAL . THE ASSESSEE ALSO CLAIMED THE DEDUCTION OF RS.1,16,000/ - U/S 80G . T HE SAM E WAS NOT FOUND PROPER THEREFORE THE SAME WAS ALSO DISALLOWED. ASSESSEE ALSO CLAIMED THE STT PAID OF RS.20,204/ - BUT THE ASSESSEE HAS NO INCOME FROM S HARE, THEREFORE THE SAID CLAIM WAS ALSO DECLINED AND THE INCOME WAS ASSESSED TO THE TUNE OF RS. 1,22,42, 470/ - . THEREAFTER, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BUT THE AS SESSEE WAS NOT SATISFIED ON THE ISSUE S WHICH HAS BEEN MENTIONED ABOVE, THEREFORE, THE PRESENT APPEAL HAS BEEN FILED BEFORE US. SURESH A. SHAH 4 IS SUE NO.1 & 2 : - 4 . UNDER THESE ISSUE S THE ASSESSEE HAS CHALL ENGED THE ADDITION OF RS. 41,13,000/ - MADE U/S 69 OF THE I.T. ACT, 1961. T HE CONTENTION OF THE ASSESSEE IS THAT HE DID NOT PURCHASE THE PROPERTY HOWEVER, HE TOOK ROOM NO. 8 - 9 ON 6 TH FLOOR PHONIX BU ILDING, S.V.P. ROAD, MUMBAI ALONGWITH TWO OTHER ON MONTHLY RENT OF RS.940/ - . IT IS ALSO CONTENDED THAT AN AMOUNT OF RS.4 1,13,000/ - WAS NOT THE PURCHASE CONSIDERATION BUT MARKET VALUE OF THE PROPERTY TAKEN FOR PAYMENT OF STAMP DUTY. THE ASSESSEE DID NOT DIS CLOSE THE SAID TRANSACTION IN HIS RETURN INCOME . IT IS ALSO IN DISPUTE THAT AN AMOUNT OF RS.41,13,000/ - WAS PAID TO ACQUIRE THE TENANCY RIGHT IN THE PROPERTY MENTIONED ABOVE. THE TENANCY AGREEMENT IS ON THE RECORD WHICH LIES AT PAGE NO.22 TO 43 OF THE PAPE R BOOK. THE SAID AGREEMENT SPEAKS ABOUT THE FACT THAT THE ASSESSEE ALONGWITH KIRTILAL, M. SHAH AND AMARCHAND P SHAH PURCHASE D THE SAID PROPERTY TO THE EXTENT OF 1/3 SHARE EACH. THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE PAYMENT TO THE TUNE OF RS.41,1 3,000/ - . HOWEVER, THE SHARE OF THE ASSESSEE WAS ONLY TO THE EXTENT OF 1/3 IN THE SAID PROPERTY. NO EVIDENCE WAS PRODUCED BEFORE THE AO AS WELL AS BEFORE THE CIT(A) FOR EXPLAINING THE SOURCE OF PAYMENT OF RS.41,13,000/ - . N OTHING HAS PRODUCED BEFORE US. THE FULL ADDITION TO THE AMOUNT OF RS.41,13,000/ - U/S 69 OF THE I.T. ACT , DOESNT SEEMS JUSTIFIABLE BECAUSE THE ASSESSEE WAS HAVING ONLY 1/3 SH ARE IN THE MENTIONED PROPERTY . M EANING THEREBY THE ASSESSEE PAID SURESH A. SHAH 5 TO THE EXTENT 1/3 SHARE OF THE SAID AMOUNT. SINCE, THE SOURCE OF PAYMENT HAS NOT BEEN PROVE D THEREFORE, THE ADDI TION TO THE EXTENT OF 1/3 SHARE OF RS.41.13,000/ - IS HEREBY ORDERED TO BE CONFIRMED. ACCORDINGLY, THIS ISSUE IS HEREBY PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. ISSUE NO. 3 : - 5 . ISSUE NO.3 IS IN CONNECTION WITH THE CONFIRMATION OF THE DISALLOWANCE OF INTEREST TO THE TUNE OF RS.3,34,000/ - . BEFORE GOING FURTHER , IT IS NECESSARY TO ADVERT FINDING OF THE CIT(A) ON RECORD FOR READY REFERENCE . : - 5.5 I HAVE PERUSED THE ASSESSMENT ORDER, REMAND REPORT , SUBMISSIONS OF THE APPELLANT AND FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ICICI BANK LETTER DATED 3 1.01.2005 ADDRESSED TO THE APPELLANT SHOWING THE TERMS OF 'LOAN AGAINST SECURITIES' ACCOUNT AGAINST THE SECURITY OF KVP STATES THAT THE LOAN W ILL BE 90% OF FACE VALUE OF KVP WITH RATE OF INTEREST @6.50% P.A., AND THE ACCOUNT WILL BE IN THE FORM OF CURRENT ACCOUNT (OVERDRAFT ACCOUNT). THE APPELLANT HAS HIGHLIGHTED THE PAYMENTS MADE TO POST MASTER! SR. POST MASTER FOR RS. 150 LAKHS ON 07.02.2005, AND RS. 95 LAKHS ON 22.02.2005, BOTH REFLECTING IN OD A/C NO. 6904, AND RS. 100 LAKHS ON 02.03.2005 REFLECTING IN OD A/C NO. 7075. IN VIEW OF THE ABOVE FINDINGS, THE CONTENTION OF THE APPELLANT THAT OD FUNDS WERE USED TO INVEST IN NSC/ KVP CANNOT BE COMPLE TELY DENIED. MOREOVER, THE CONTENTION OF THE APPELLANT THAT HE PAID INTEREST @6.50% ONLY ON ICICI BANK OD (AS AGAINST @8% EARNED BY HIM) IS SUPPORTED BY THE AFORESAID LETTER OF ICICI BANK. THE APPELLANT HAS ALSO EARNED ITEREST ON OTHER LOANS GIVEN TO VARIO US PARTIES. THE AGGREGATE INTEREST RECEIVED BY THE APPELLANT FROM VARIOUS INVESTMENTS EXCEEDS THE INTEREST PAID. GIVEN ALL THESE FACTS ON RECORD, IT WOULD BE DIFFICULT TO JUSTIFY THE DISALLOWANCE OF INTEREST PAID ON OD ACCOUNTS IN I) ENTIRETY, WHILE TAXING THE INTEREST EARNED ON INVESTMENTS MADE OUT OF THESE ACCOUNTS. SURESH A. SHAH 6 HE APPELLANT HAS SHOWN INVESTMENT IN NSC/ KVP AS ON 31.03.2005 AT RS.201.33 + 146.24 = RS.347.57 LAKHS, WHICH RECONCILES WITH AFORESAID INVESTMENTS DEBITED IN OD ACCOUNT DURING FY 2004 - 05 AT R S.150 + 95 + 100 = RS.345 LAKHS, AS THE DIFFERENCE AMOUNT OF RS.2.57 LAKHS IS ASSUMED TO BE ON ACCOUNT OF INTEREST ACCRUED TILL 31.03.2005. IN THE CURRENT ASSESSMENT YEAR, THE APPELLANT HAS EARNED AGGREGATE INTEREST ON NSC/ KVP AT RS. 15.73 + 11.29 = 27.02 LAKHS, WHICH IS ALMOST EQUAL TO 8% OF THE INVESTMENT OF RS. 345 LAKHS. THE APPELLANT WAS CHARGED INTEREST 6.50% ON THE OD ACCOUNT, AND HENCE, EVEN ASSUMING THAT THE OD WAS USED THROUGHOUT THE YEAR, THE APPELLANT SHOULD BE LEFT WITH NET SURPLUS INTEREST ON NSC/ KVP @8% - 6.50% = 1.50% OF RS.345 LAKHS I.E. AT RS.5, 17,500/ - HOWEVER, IT IS A FACT THAT THE APPELLANT HAS SHOWN NET INTEREST INCOME OF RS.1,83,139/ - ONLY (I.E. INTEREST RECEIVED OF RS.42,37,732/ - LESS INTEREST PAID OF RS.40,54,593/ - ). HENCE, THE AP PELLANT HAS UNDERSTATED THE ASSESSABLE NET INTEREST INCOME BY AT LEAST RS.5,17,500 -- 1,83,139 = RS.3,34,361/ - (ROUNDED OFF TO RS.3,34,000/ - ) THEREFORE, OUT OF THE DISALLOWANCE OF INTEREST PAID OF RS.40,54,593/ - THE DISALLOWANCE IS CONFIRMED TO THE EXTENT OF RS.3,34,000/ - AND THE APPELLANT GETS RELIEF OF THE BALANCE AMOUNT I.E.RS.40,54,593 - 3,34,000 = RS.37,20,593/ - FURTHER, THE BANK CHARGES OF RS.25,483/ - INCURRED FOR AVAILING THE OD FACILITY IS TO BE ALLOWED IN FULL IN VIEW OF THE NEXUS OF INTEREST EARNE D AND PAID ON THE SAID OD ACCOUNTS ESTABLISHED FOR MAJOR PORTION OF FUNDS AVAILED FROM SUCH ACCOUNTS. IN VIEW OF THE ABOVE, THE APPELLANT GETS RELIEF FROM DISALLOWANCE OF INTEREST PAID TO THE EXTENT OF RS.37,20,593/ - AND FROM BANK CHARGES OF RS.25,483/ - IN FULL. THEREFORE, THE GROUNDS NO.3 & 4 OF THE APPEAL ARE PARTLY ALLOWED. 6 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING , WE NOTICED THAT THE FIGURE OF DEPOSIT AND INTEREST PAID HAS DULY DISCUSSED BY CIT(A) IN HIS ORDER. NOTHING DISTINGUISHABLE FACTS HAS BEEN PLACE D ON RECORD. EVEN, AT THE TIME OF ARGUMENT NOTHING WAS ARGUED THAT WHICH FIGURE HAS WRONGLY BEING TAKEN INTO CONSIDERATION WHILE DECLINED THE CLAIM OF THE ASSESSEE REGARDING INTEREST TO THE TUNE OF RS.3,34,000/ - . IN VIEW OF THE SAID CIRCUMSTANCE S WE ARE OF THE VIEW THAT THE CIT(A) HAS SURESH A. SHAH 7 RIGHTLY CONFIRMED THE SAID ADDITION HENCE, THE ORDER OF THE CIT(A) IN THIS REGARD IS NOT LIABLE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ISSUE NO. 4: - 7 . ISSUE NO. 4 IS IN CONNECTION WITH THE ADDITION OF PERSONAL EXPENSES TO THE TUNE OF RS. 2,00,000/ - ON ACCOUNT OF LOW WITHDRAWALS TO THE TUNE OF RS. 2,49,889/ - . AO HAS MADE THE ADDITION TO THE EXTENT OF 5,00,000/ - ON ACCOUNT OF LOW WITHDRAWAL WHICH WAS RESTRICTED BY THE CIT(A) TO THE EXTENT OF 2,00,000/ - . SINCE, IT WAS INCUMBENT UPON THE ASSESSEE TO EXPLAIN THE EXPENDITURE WHICH HAS NOT BEEN EXPLAINED. MOREOVER, NOTHING DISTINGUISHABLE MATERIAL HAS BEEN PRODUCED BEFORE US TO JUSTIFY THE CLAIM RAISE D BY THE ASSESSEE THEREFORE IN THE SAID CIRCUMSTANCES WE CONFIRMED THE FINDING OF THE CIT(A) ON THIS ISSUE. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY A LLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29.08. 2017 . SD/ - SD/ - ( R.C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 29.08. 2017 V.P SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT SURESH A. SHAH 8 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