MIHIR ASHOK SAMPAT, MUMBAI V. ASST CIT CIR 17(2), MUMBAI

ITA 7584/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9091 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: RASHMIKANT C MOD I; KETKI RAJESHIRKE LD ARS
• Keywords: Business income; Opportunity of being heard; Onus to prove
• Section: 143(3)

Judgement Text

1 ITA NO.7584/MUM/2016 MIHIR ASHOK SAMPAT ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7584/MUM/2016 ( / ASSESSMENT YEAR: 2012-13 ) MIHIR ASHOK SAMPAT 274/279, ROOM NO.18 2 ND FLOOR, PEARL ARCADE, CHHEDA MANSION NARSHI NATHA STREET, MUMBAI-400 009. / VS. ACIT CIRCLE 17(2) AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AEQPS 8335 A ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) '#& / APPELLANT BY : SHRI RASHMIKANT C. MODI & MS. KETKI RAJESHIRKE LD. ARS $%'#& / RESPONDENT BY : MS. KAVITA P. KAUSHIK - LD.D R / DATE OF HEARING : 23/09/2019 / DATE OF PRONOUNCEMENT : 23/09/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-28, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO.CIT(A)- 2 ITA NO.7584/MUM/2016 MIHIR ASHOK SAMPAT ASSESSMENT YEAR-2012-13 28/IT-50/ACIT-17(2)/2015-16 DATED 17/10/2016 ON FOLLOWING GROUNDS OF APPEAL: - THE GROUNDS OF APPEAL STATED HEREIN BELOW ARE WITH OUT PREJUDICE TO EACH OTHER: - 1) THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN CONFIRMING DISALLOWANCE OF INTEREST OF RS. 33,96,886/- PAID TO BANK. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN HOLDING THAT INCOME EARNED BY WAY OF INTEREST AS A RULE BE TREATED AS INCOME F ROM OTHER SOURCES. THE PROVISIONS OF THE INCOME TAX ACT PROVIDE THAT THE INTEREST RECEIVED F ROM THE FIRM BY A PARTNER TO BE ASSESSED UNDER THE HEAD 'PROFIT & GAINS OF BUSINESS'. 3) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN REJECTING THE CLAIM OF THE APPELLANT MADE DURING THE ASSESSMENT PROCEEDINGS FO R CONSIDERING INTEREST EXPENDITURE AGAINST INTEREST RECEIVED FROM PARTNERSHIP FIRM WHE RE HE IS A PARTNER. 4) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) OUGHT TO HAVE CONSIDERED APPELLANT'S CLAIM OF INTEREST PAID TO THE BANK AGAINST INCOME R ECEIVED FROM TWO PARTNERSHIP FIRMS (WHERE THE APPELLANT IS PARTNER AND COMPUTED UNDER THE HEA D 'PROFIT AND GAINS OF BUSINESS'. WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMISSIONS. 2.1 FACTS AS EMANATING FROM RECORD ARE THAT THE ASS ESSEE BEING RESIDENT INDIVIDUAL WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 27/02/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED A T RS.54.81 LACS AFTER CERTAIN ADJUSTMENT AS AGAINST RETURNED INCOME OF RS .20.84 LACS FILED BY THE ASSESSEE ON 29/03/2014. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED INTEREST ON BANK FIXED DEPOSIT FOR RS.92,800 /- AGAINST WHICH THE ASSESSEE CLAIMED INTEREST EXPENDITURE OF RS.33,96,8 86/- AND EVENTUALLY REFLECTED LOSS OF RS.33,04,086/- UNDER THE HEAD INCOME FROM OTHER SOURCES. IN DEFENSE, THE ASSESSEE SUBMITTED THAT IT OBTAINED MORTGAGE LOAN ON A PROPERTY AND INVESTED THE SAME IN TWO PARTNERSHIP F IRMS AND EARNED INTEREST 3 ITA NO.7584/MUM/2016 MIHIR ASHOK SAMPAT ASSESSMENT YEAR-2012-13 THEREUPON FOR RS.19.06 LACS, WHICH WAS BUSINESS INC OME FOR THE ASSESSEE. HOWEVER, BY MISTAKE, THE INTEREST EXPENDITURE WAS C LAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOM E. HOWEVER, IN THE ABSENCE OF SUPPORTING MATERIAL TO PROVE THE NEXUS O F BORROWED FUNDS WITH THE INVESTMENT MADE IN THE FIRMS, THE SAID PLEA WAS REJECTED. FINALLY, INTEREST EXPENDITURE CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES WAS DISALLOWED. THE STAND OF LD. AO, UPON CONFIRMAT ION BY FIRST APPELLATE AUTHORITY, IS UNDER CHALLENGE BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], DRAWING OUR ATTENTION TO THE DOCUMENTS KEPT IN THE PAPER-BOOK, SOUGHT TO PUT FORWARD ASSESSEES CASE BY SUBMITTING THAT BORROWED FUNDS W ERE USED TO MAKE INVESTMENT IN THE PARTNERSHIP FIRM AND THERE WAS NE XUS BETWEEN THE TWO. IN THE ABOVE BACKGROUND, IT WAS SUBMITTED THAT THE EXP ENDITURE WAS ALLOWABLE AGAINST BUSINESS INCOME EARNED BY THE ASSESSEE BY W AY OF INTEREST FROM FIRMS. THE LD. DR, ON THE OTHER HAND, POINTED OUT T HE ASSESSEE COULD NOT PROVE THE SAID NEXUS DURING ASSESSMENT PROCEEDINGS. UPON PERUSAL OF DOCUMENTS PLACED BEFORE US, THE BENCH FORMED AN OPI NION THAT ASSESSEES CORRECT INCOME WAS TO BE COMPUTED IN ACCORDANCE WIT H LAW. THEREFORE, THE MATTER STAND RESTORED BACK TO LD. AO FOR RE-ADJUDIC ATION, IN THE LIGHT OF SUBMISSIONS MADE BY LD. AR, BEFORE US. NEEDLESS TO ADD THAT ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO THE ASSESSEE. THE ONUS TO PROVE THE NEXUS OF BORROWED FUNDS WITH INVESTMENT M ADE IN FIRMS SHALL REST UPON THE ASSESSEE. 4 ITA NO.7584/MUM/2016 MIHIR ASHOK SAMPAT ASSESSMENT YEAR-2012-13 4. THE APPEAL MAY BE TREATED AS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23/09/2019 SR.PS:-JAISY VARGHESE => ?> / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. O P $ Q , Q , / DR, ITAT, MUMBAI 6. P RST / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI