Shri Ashokkumar Khimraj (HUF), Ahmedabad V. The Income Tax Officer, Ward-2(2)(1), Ahmedabad

ITA 764/AHD/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9896 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Wrong claim; Capital expenditure

Judgement Text

, ,L ,L,L ,L- -- -,E ,E,E ,E- -- -LH LHLH LH * ** * IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; ,OA OAOA OA EK/ EK/EK/ EK/KQFERK KQFERK KQFERK KQFERK JKW; JKW;JKW; JKW;] U; ] U;] U; ] U;KF KFKF KF;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 764/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) ASHOKKUMAR KHIMRAJ (HUF), 217, 1 ST FLOOR, NEW CLOTH MARKET, SARANGPUR, AHMEDABAD. / VS. ITO, WARD 2(2)(1), AHMEDABAD. ./ ./ PAN/GIR NO. : AACHA 6987 N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY RANJAN & SMT. IRA KAPOOR, A.R. / RESPONDENT BY : SHRI VIRENDRA SINGH, SR. D.R. / DATE OF HEARING 23/10/2018 !'# / DATE OF PRONOUNCEMENT 07/12/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)10, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-1 0/ITO WARD- 2(2)(1)/417/15-16 DATED 16.02.2017 ARISING IN THE M ATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 19.02.2016 RELEVANT TO ASSESSMENT YEAR (AY) 2013-14. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE ORDER PASSED BY CIT (A) IS BAD IN LAW AND DESER VES TO BE CANCELLED AS HE HAS PASSED AN ORDER WITHOUT CONSIDE RING AND APPRECIATING THE FACTS OF CASE OF APPELLANT. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S EASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING T HE DISALLOWANCE OF INTEREST PAID OF RS 5,85,383/- U/S 57(III) WHICH BY THE APPELLANT'S OWN ADMISSION HAD BEEN WRONGLY CLAI MED UNDER THAT THE SAID SECTION AND HE HAD FURTHER ERRED IN A LSO NOT ALLOWING THE CLAIM OF THE APPELLANT FOR DEDUCTION O F THE SAID INTEREST PAID UNDER SECTION 36(1)(III) OF THE ACT. EVEN THOUGH THE APPELLANT, BY THE DOCUMENTS FILED, HAD ESTABLISHED THE NEXUS BETWEEN THE LOAN TAKEN AND THE UTILIZATION THEREOF FOR THE PURPOSE OF THE APPELLANT'S BUSINESS. 3. THE APPELLANT CRAVES LEAVE TO ADD. ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DU RING THE COURSE OF HEARING OF THE APPEAL. 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS THA T LD. CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION OF INTEREST EXPENSES AMO UNTING TO RS.5,85,383/- U/S 36(1)(III) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A HUF AND ENGAGED IN THE WHOLESALE BUSINESS OF CLOTH UNDER THE NAME AND STYLE OF M/S. RIDHI SIDHI TRADERS. THE ASSESSEE IS ALSO DEALING IN SHARES. THE ASSESSEE FOR BOTH THE BUSINESS IS MAINTAINING A SEPARATE SET OF BOOKS OF ACCOUNT. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 3 - 4.1 THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S SHOWN LOSSES UNDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO RS.5,54,685/- ONLY. AS SUCH, THE ASSESSEE HAS SHOWN INTEREST EXPE NSES PAID TO M/S. RISHABH ENTERPRISES FOR RS.5,85,383/- AGAINST THE B ANK INTEREST INCOME OF RS.1,510/-. THE INTEREST EXPENSE WAS CLAIMED BY THE ASSESSEE U/S 57(III) OF THE ACT. ACCORDINGLY, THE ASSESSEE HAS D ECLARED LOSSES UNDER THE HEAD INCOME FROM OTHER SOURCES. 4.2 ON A QUESTION BY THE AO, THE ASSESSEE VIDE LETT ER DATED 29.12.2015 SUBMITTED THAT IT HAD CLAIMED INTEREST EXPENSES UND ER THE HEAD INCOME FROM OTHER SOURCES INADVERTENTLY. AS SUCH, THE ASSE SSEE HAS TAKEN A LOAN FROM RISHABH ENTERPRISES IN ITS PERSONAL CAPACITY, BUT THE SAME WAS TRANSFERRED TO ITS PROPRIETARY CONCERN NAMELY RIDHI SIDHI TRADERS. THEREFORE, THE ASSESSEE IS ENTITLED TO A DEDUCTION OF INTEREST EXPENSES U/S 36(1)(III) OF THE ACT. THE ASSESSEE IN SUPPORT OF H IS CLAIM FILED THE DETAILS OF THE AMOUNT RECEIVED BY IT FROM RISHABH ENTERPRIS ES AND TRANSFERRED TO ITS PROPRIETARY CONCERN NAMELY RIDHI SIDHI TRADERS WHICH IS PLACED ON PAGE 3 OF THE AO ORDER. HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF TH E ASSESSEE BY OBSERVING THAT THERE WAS NO CLAIM MADE BY IT FOR TH E INTEREST PAID TO RISHABH ENTERPRISES IN THE PROFIT AND LOSS ACCOUNT OF RIDHI SIDHI TRADERS. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 4 - 4.3 THE AO ALSO OBSERVED THAT THE PROPRIETARY CONCE RN OF THE ASSESSEE, I.E. RIDHI SIDHI TRADERS HAS IN FACT RECEIVED INTER EST INCOME FROM M/S. RISHABH ENTERPRISES. 4.4 THE AO ALSO OBSERVED THAT THERE IS A MISMATCH B ETWEEN THE DATES ON WHICH THE MONEY WAS RECEIVED BY THE ASSESSEE AND THE DATE ON WHICH IT WAS TRANSFERRED TO M/S RIDHI SIDDHI TRADERS. 4.5 THE AO FURTHER OBSERVED THAT THE INTEREST EXPEN SE IS ELIGIBLE FOR DEDUCTION U/S 57(III) OF THE ACT ONLY WHEN SUCH EXP ENSE HAS BEEN INCURRED IN CONNECTION WITH THE INTEREST INCOME. AS SUCH, THERE WAS NO NEXUS BETWEEN THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE AND INTEREST INCOME SHOWN BY IT. IN VIEW OF THE ABOVE, THE AO DISALLOWED THE INTERES T EXPENSES OF RS. 5,85,383/- AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE L OAN WAS TAKEN BY IT FROM RISHABH ENTERPRISES IN THE A.Y. 2012-13 AND AC CORDINGLY, INTEREST EXPENSE WAS ALSO INCURRED IN THE A.Y. 2012-13. THER E WAS NO DISALLOWANCE OF INTEREST EXPENSES CLAIMED BY IT IN THE INTIMATION ISSUED UNDER SECTION 143(1) OF THE ACT. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 5 - 5.1 THE ASSESSEE FURTHER CLAIMED THAT THE AMOUNT RE CEIVED BY IT FROM RISHABH ENTERPRISES WAS TRANSFERRED TO RIDHI SIDHI TRADERS A PROPRIETOR CONCERN OF THE ASSESSEE. AS SUCH, THERE WAS A SEPAR ATE SET OF THE FINANCIAL STATEMENT PREPARED BY THE ASSESSEE FOR IT S SHARE TRADING ACTIVITY AS WELL AS ITS PROPRIETARY CONCERN. THE ASSESSEE AL SO CONTENDED THAT IT NEVER PREPARED ANY CONSOLIDATED FINANCIAL STATEMENT FOR BOTH THE CONCERN. THEREFORE, THE ASSESSEE HAS NOT SHOWN ANY INTEREST INCOME FROM ITS PROPRIETARY CONCERN, BUT THE INTEREST EXPENSES PAID TO RISHABH ENTERPRISES WAS CLAIMED AS EXPENDITURE IN ITS PERSONAL FINANCIA L STATEMENT. 5.2 THE LOAN TAKEN BY THE ASSESSEE WAS TRANSFERRED TO M/S RIDHI SIDHI TRADERS, AND THE AO DID NOT DISPUTE THIS FACT DURIN G THE ASSESSMENT PROCEEDINGS. 5.3 THE ASSESSEE ALSO CLAIMED THAT THE EXPENSES WER E CLAIMED U/S 57(III) OF THE ACT WRONGLY, BUT IT SHOULD HAVE BEEN CLAIMED UNDER THE PROVISION OF SECTION 36(1)(III) OF THE ACT. HOWEVER , IF THE WRONG CLAIM MADE BY THE ASSESSEE, IT DOES NOT DISENTITLE IT FOR CLAIMING THE DEDUCTION UNDER THE CORRECT HEAD OF INCOME. HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENTION O F THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN PERUSED AND PLACED ON RECORD. THE ASSESSMENT ORDER PASSED BY TH E AO HAS ALSO BEEN GONE THROUGH. DURING THE COURSE OF APPEAL PROCEEDIN GS, THE APPELLANT ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 6 - HAS FILED THE BALANCE SHEET AND PROFIT & LOSS ACCOU NT OF THE APPELLANT IN HIS SEASONAL CAPACITY. ON GOING THROUGH THE BALANCE SHEET WHICH IS PLACED ON PAGE NO. 20 OF THE PAPER BOOK FILED, IT I S SEEN THAT MERE IS NO LOAN IN THE LIABILITY SIDE OF THIS BALANCE SHEET AS ON 31/03/2013. THE BALANCE SHEET SUBMITTED BY THE APPELLANT IS REPRODU CED. THE APPELLANT HAS ALSO FILED THE PROFIT AND LOSS AC COUNT IN WHICH HE HAS CLAIMED AN AMOUNT OF RS.5,61,276/-AS INTEREST EXPEN SES. HOWEVER, THERE ARE NO DETAILS WHATSOEVER AS TO WHOM THIS INTEREST HAS BEEN PAID ON WHAT AMOUNT AT WHAT RATE OF INTEREST AND FOR WHAT P URPOSE. EVEN THE NEXUS AS HAS BEEN CLAIMED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS RELATING TO THE FINANC IAL YEAR 2011-12 WHICH IS RELEVANT FOR NE ASSESSMENT YEAR 2012-'I3. THE ASSESSMENT IN QUESTION IS ASSESSMENT YEAR 2013-' AND AS PER THE BALANCE SHEET SUBMITTED BY THE APPELLANT, THERE IS NO LOAN OUTSTA NDING IN THE PERSONAL BALANCE SHEET OF THE APPELLANT OR CORRESPONDING INV ESTMENT IN THE PROPRIETORSHIP FIRM IN THIS YEAR AS HAS BEEN CLAIME D BY THE APPELLANT. IN THE ABSENCE OF-THESE DETAILS WHICH ARE VERY FACTUAL AND BASIC FOR ALLOWING ANY DEDUCTION FOR INTEREST EXPENSE, THE SU BMISSIONS OF THE APPELLANT CANNOT BE ACCEPTED AND THEREFORE REJECTED . ACCORDINGLY, THE GROUNDS OF APPEAL FILED BY THE APPELLANT ARE DISMIS SED. SINCE THE APPELLANT COULD NOT FILE ANY EVIDENCES/D OCUMENTS TO PROVE THAT INTEREST PAID BY THE APPELLANT HAVE BEEN INVES TED IN THE PROPRIETORSHIP FIRM DURING THE ASSESSMENT YEAR IN Q UESTION I.E. ASSESSMENT YEAR 2013-14 (FINANCIAL YEAR STARTING 01 /04/2012 TO 31/03/2017).THE CLAIM OF THE APPELLANT THAT IT SHOU LD BE ALLOWED. U/S 36(1)(III) UNDER THE HEAD PROFIT AND GAIN AND THE BUSINESS WOULD ALS O CANNOT BE CONSIDERED IN THE ABSENCE OF ANY MONEY/AM OUNT BEING INVESTED IN THE PROPRIETORSHIP FIRM AS EVIDENT FROM THE BALANCE SHEET PLACED ON PAGE NO.20 OF THE PAPER BOOK BY THE APPEL LANT. THEREFORE, THERE IS NO FORCE EVEN IN THE ALTERNATIV E ARGUMENT OF THE APPELLANT GROUND ALSO DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 7 - 6. THE LD AR BEFORE US FILED A PAPER BOOK RUNNING F ROM PAGES 1-49 AND SUBMITTED THAT THE FUND RECEIVED FROM RISHABH E NTERPRISES WERE UTILIZED FOR THE PURPOSE OF THE BUSINESS. THEREFORE , IT IS VERY MUCH ELIGIBLE FOR DEDUCTION U/S 36(1)(III) OF THE ACT. T HE LD. AR IN SUPPORT OF HIS CLAIM DREW OUR ATTENTION ON PAGE 24 OF THE PAPE R BOOK WHICH IS THE BANK STATEMENT OF THE ASSESSEE REFLECTING THE LOAN RECEIVED AND PAID TO RIDHI SIDHI ENTERPRISES. 6.1 THE LD. AR ALSO SUBMITTED THAT THE FINDING OF T HE AO THAT THERE WAS A MISMATCH BETWEEN THE DATES OF RECEIVED OF LOAN VI S--VIS LOAN TRANSFER TO M/S. RIDHI SIDHI ENTERPRISES IS INCORRECT. AS SU CH, THE LOAN WAS TRANSFERRED BY THE ASSESSEE TO M/S. RIDHI SIDHI ENT ERPRISES ON THE VERY SAME DATE WHEN IT WAS RECEIVED. 6.2 THE LD. AR ALSO SUBMITTED THAT THE PROPRIETOR O F RISHABH ENTERPRISES HAS ALREADY SHOWN THE AMOUNT OF INTERES T INCOME RECEIVED FROM THE ASSESSEE. THE LD. AR IN SUPPORT OF HIS CLA IM DREW OUR ATTENTION ON PAGE 42 OF THE PAPER BOOK WHERE A COPY OF INCOME TAX RETURN OF THE PROPRIETOR OF M/S RISABH ENTERPRISES IS PLACED. 6.3 THE LD. AR IN SUPPORT OF HIS CLAIM ALSO DREW OU R ATTENTION ON THE BALANCE SHEET OF THE HUF AS WELL AS THE BALANCE SHE ET OF RIDHI SIDHI WHEREIN THE INVESTMENT MADE BY THE ASSESSEE IN RIDH I SIDHI TRADERS WAS SHOWN. THE COPY OF THE BALANCE SHEET WAS PLACED ON RECORD. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 8 - 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE RE WAS NO INTEREST CLAIMED IN THE PROFIT AND LOSS ACCOUNT OF RIDHI SID HI ENTERPRISES. 7.1 THERE WAS NO DETAIL FURNISHED BY THE ASSESSEE A BOUT THE RATE OF INTEREST AT WHICH THE LOAN WAS TAKEN FROM RISHABH E NTERPRISES. 7.2 THERE IS NO PROVISION U/S 57 OF THE ACT FOR CLA IMING THE EXPENSES WITHOUT HAVING ANY CORRESPONDING INCOME. IN VIEW OF THE ABOVE, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LOWER AUTHORIT IES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE NOT IN DISPUTE. THEREFORE WE ARE INCLINED NOT TO REPEAT THE SAME FOR THE SAKE OF BREVITY AND CONVENIENCE. 8.1 THERE IS NO AMBIGUITY THAT THE ASSESSEE TOOK TH E LOAN IN THE IMMEDIATE PRECEDING A.Y. I.E. 2012-13 AND THE INTER EST CLAIMED THEREON WAS ALLOWED TO THE ASSESSEE WHILE PROCESSING THE RE TURN UNDER THE PROVISION OF SECTION 143(1) OF THE ACT. 8.2 THE AMOUNT OF LOAN TAKEN BY THE ASSESSEE FROM R ISHABH ENTERPRISES WAS VERY MUCH SHOWN IN ITS PERSONAL BAL ANCE SHEET AS ON 31.03.2013. THE LOAN WAS SHOWN AT RS.50,377/- ONLY. IN FACT, THERE WAS A ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 9 - REPAYMENT OF THE LOAN AMOUNT OF RISHABH ENTERPRISES BY THE ASSESSEE AS EVIDENT FROM THE COPY OF THE LEDGER PLACED ON PAGE 33 OF THE PAPER BOOK. THE COPY OF THE LEDGER IS REPRODUCED AS UNDER: ASHOKKUMAR KHIMRAJ HUF (2012-13) 21, SHITALKUNJ SOCIETY, RAMBAUG ROAD, SABARMATI, AHMEDABAD 380005 PERIOD:- FROM 01.04.2012 TO 31.03.2013 PAGE: 1 DOCUMENT DATE DOCUMENT NUMBER PARTICUALRS DEBIT (RS.) CREDIT (RS.) LEDGER OF : RISHABH ENTERPRISE AHMEDABAD. (RE1 ) 01/04/2012 OPENING OPENING BALANCE 63,03,532.00 09/08/2012 BP-222251 7,00,000.00 09/10/2012 BP-222253 4,00,000.00 16/10/2012 BP-222255 5,00,000.00 01/11/2012 BP-110101 CHQ/DD# : 82727 NNSB 50,000.00 26/11/2012 BP-222258 6,00,000.00 27/11/2012 BP-222259 3,00,000.00 28/11/2012 BP-222260 5,50,000.00 30/11/2012 BP-222261 15,00,000.00 03/12/2012 BP-222262 5,00,000.00 14/12/2012 BP-222266 3,50,000.00 18/12/2012 BP-222267 12,00,000.00 03/01/2013 BP-130301 CHQ/DD#: 82755 NNSB 50,000.00 11/02/2013 BP-359883 2,00,000.00 22/03/2013 BP-359889 80,000.00 31/03/2013 BP-153103 TDS ON INTEREST 58,538.00 31/03/2013 BP-153103 INTEREST CR. UPTO 31.03.2013 5,85,383.00 GRAND TOTAL: 69,38,538.00 69,88,915.00 CLOSING BALANCE: 50,377.00CR. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 10 - 8.3 WE ALSO NOTE THAT M/S RIDHI SIDHI TRADERS MADE THE PAYMENT TO M/S RISHABH ENTERPRISES. THEREFORE THERE WAS SHOWN THE AMOUNT WITHDRAWN IN THE BALANCE SHEET OF RIDHI SIDHI TRADE RS. THE RELEVANT EXTRACT OF THE BALANCE SHEET IS REPRODUCED UNDER: RIDHI SIDHI TRADERS ASHOKKUMAR HUF SCHEDULE 1 OF OWNERS CAPITAL 31.03.2013 31.03.201 2 OPENING BALANCE 8037699 1514206 ADD: ADDITION DURING THE YEAR 1070000 6010000 ADD: PROFIT, REMUNERATION ETC. DURING THE YEAR 1282529 747378 10390228 8271584 LESS: WITHDRAWAL DURING THE YEAR 7639827 233885 TOTAL 2750401 8037699 8.4 ON PERUSAL OF THE FINANCIAL STATEMENT OF THE AS SESSEE FOR ITS SHARE TRADING BUSINESS AND WHOLESALE CLOTH TRADE IT WAS O BSERVED THAT THE ASSESSEE TRANSFERRED THE FUND TO RIDHI SIDHI TRADER S, BUT THE LOAN LIABILITY WAS CLASSIFIED IN ITS PERSONAL BALANCE SHEET. AS SU CH, THE ASSESSEE HAS SHOWN INVESTMENT IN RIDHI SIDHI TRADERS IN ITS PERS ONAL BALANCE SHEET. THIS FACT CAN BE ESTABLISHED FROM THE CAPITAL ACCOU NT OF RIDHI SIDHI TRADERS VIS--VIS PERSONAL BALANCE SHEET OF THE ASS ESSEE. THE COPIES OF THE BALANCE SHEET OF THE ASSESSEE ARE PLACED ON PAG ES NO 18 TO 20 OF THE ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 11 - PAPER BOOK PERTAINING TO THE FINANCIAL YEAR ENDING AS ON 31.03.2012 AND 31.03.2013. 8.5 ONCE, IT IS ESTABLISH THAT THE ASSESSEE HAS USE D THE AMOUNT OF LOAN FOR THE PURPOSE OF BUSINESS THE SAME CANNOT BE DENI ED MERELY ON THE GROUND THAT IT WAS NOT CLAIMED IN THE FINANCIAL STA TEMENT OF RIDHI SIDHI TRADERS. IN FACT, IT WAS THE DUTY OF THE AO TO ALLO W THE CORRECT CLAIM WHICH WAS MADE BY THE ASSESSEE UNDER THE WRONG HEAD DUE TO OVERSIGHT. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM T HE CBDT CIRCULAR AND VARIOUS JUDGMENTS AS DETAILED BELOW: IN THE ABOVE REFERENCE, WE INVITE YOUR KIND ATTENT ION TO CENTRAL BOARD CIRCULAR ISSUED IN JUNE 1955 WHICH INTER ALIA READS AS FOLLOWS : 'OFFICERS OF THE DEPARTMENT MUST NOT LAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SH OULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PA RTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT, FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH THE ASSESSEE ON WHOM IT IS I MPOSED BY LAW, OFFICERS SHOULD A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE O MITTED TO CLAIM FOR SOME REASON OR OTHER. B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPT ED FOR CLAIMING REFUNDS AND RELIEFS. (CIRCULAR NO. 14(XL-35) OF 195 5 DATED 11.04.1955)' ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 12 - FURTHER, WE RELY UPON THE DECISION OF THE SUPREME C OURT IN NAVNIT LAL C. JAVERI V. K. K. SEN, APPELLATE ASSISTANT COMMISS IONER OF INCOME TAX [1965] 56 1TR 198 (SC). THERE THE MAJORITY OF THE L EARNED JUDGES HEARING THE APPEAL HELD THAT CIRCULAR ISSUED BY THE CENTRAL BOARD OF REVENUE, OF THE KIND OF CIRCULAR MENTIONED THEREIN , WOULD BE BINDING ON ALL. FURTHER IN VIEW OF THE DECISION OF HONBLE CACUTTA HIGH COURT IN THE CASE OF ICICI BANK EX-EMPLOYEES' WELFARE ASSOCIATIO N (SUPRA), IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE MERIT S TO BE ALLOWED. WE FIND THAT THE CBDT VIDE ITS CIRCULAR NO. 14(XI-35) OF 1955 DATED 11.04.1955 OPINED THAT THE OFFICER OF THE DEPARTMEN T MUST NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS AND THAT ALTHOUGH THE RESPONSIBILITY FOR CLAIMING REFUNDS A ND RELIEFS RESTS WITH THE ASSESSES ON WHOM IT IS IMPOSED BY LAW, YET (A) THE OFFICERS SHOULD DRAW THE ATTENTION OF THE ASSESSEE TO ANY REFUNDS O R RELIEFS TO WHICH THEY ARE ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM F OR SOME REASON OR OTHER, AND (B) FREELY ADVISE THEM WHEN APPROACHED B Y THEM AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO B E ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. THE HON'BIE GUJARAT HIGH COURT IN THE CASE OF S.R. KOSHTI VS CIT (2005) 276 ITR 165 (GUJ.) HAS HELD UN DER: 'THE AUTHORITIES UNDER THE INCOME TAX ACT, 1961 ARE UNDER AN OBLIGATION TO ACT IN ACCORDANCE WITH LAW. TAX CAN B E COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF AN ASSESSES, UNDER A MIS TAKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED IS OVER ASSESSE D, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXED DUE ARE COLLECTED. ONCE AN ASSESSEE IS IN A POSITION TO SHOW THAT HE H AS BEEN OVER ASSED UNDER THE PROVISION OF THE ACT, REGARDLESS OF WHETH ER THE OVER ASSESSMENT IS AS A RESULT OF THE ASSESSEE'S OWN MIS TAKE OR OTHERWISE, THE COMMISSIONER HAS THE POWER TO CORRECT SUCH AN ASSES SMENT UNDER SECTION 264(1) OF THE INCOME TAX AT, 1961. IF THE C OMMISSIONER REFUSED TO GIVE RELIEF TO THE ASSESSEE, HE WOULD BE ACTING DE HORS THE POWERS UNDER THE ACT.' ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 13 - IN THE LIGHT OF THE ABOVE JUDGEMENTS AND THE CIRCUL AR QUOTED ABOVE, THE INTEREST CLAIMED UNDER THE WRONG HEAD 'INCOME FROM OTHER SOURCES' CANNOT BE DENIED TO BE ALLOWED PARTICULARLY WHEN TH E AMOUNT OF INTEREST PAID ON LOANS TAKEN AND USED FOR THE PURPOSE OF BUS INESS. HENCE, THE DISALLOWANCES ARE CLEARLY WRONG AND AGAINST THE LAW CITED BY THE HON'BIE GUJARAT HIGH COURT BECAUSE THE DECISION OF THE JURISDICAONAL COURT IS BINDING UPON THE LEARNED A.O. FURTHER, CHART FILED BY THE ASSESSEE AND REPRODUCED BY THE LEARNED A.O IN THE ORDER IS SELF EXPLANATORY. BESIDES, THE BALANCE SHEET OF THE PROPRIETARY CONCE RN ITSELF PROVES THAT THE AMOUNT TAKEN BY THE ASSESSEE AS LOAN AND ENTERE D THE SAME IN HIS PERSONAL-SET OF BOOKS OF ACCOUNTS AND LATER ON INVE STED THE SAME IN HIS BUSINESS SET ITSELF PROVES THE NEXUS BETWEEN THE LO AN TAKEN AND INVESTMENT MADE. THUS THE LOAN TAKEN WHEN UTILIZED TO EARN TAXABLE INCOME LEADS TO AN INFERENCE THAT INTEREST PAID ON SUCH LOAN IS AN ALLOWABLE DEDUCTION THOUGH INADVERTENTLY CLAIMED UN DER THE HEAD ' INCOME FROM OTHER SOURCES'. THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT REFERRE D TO BY LEARNED A.O. VIZ. 'KALANDI INVESTMENT PVT LTD.' REPORTED AS 260 ITR 261 IS NOT APPLICABLE TO THE FACT OF THE ASSESSEE CASE BECAUSE THE LEARNED HON'BLE JUDGES OF THE HIGH COURT REMARKED THAT IF THE BORRO WING HAD BEEN UTILIZED NOT FOR THE PURPOSE OF MAKING OR EARNING T AXABLE INCOME THE INTEREST PAID THEREUPON SHALL NOT BE ALLOWED AS DED UCTION BUT IN THE EASE OF THE ASSESSEE SUCH LOANS WERE UTILIZED FOR THE PURPOSE OF BUSINESS AND AS SUCH THE ABOVE REFERRED CASE, THE P URPOSE OF WHICH THE BORROWING HAVE BEEN MADE STOOD FRUSTRATED, HENCE TH E DISALLOWANCE OF THIS INTEREST WAS CONFIRMED. IN THE CASE OF THE ASSESSEE, THE FACTS ARE DIFFEREN T BECAUSE THE BORROWING WERE UTILIZED FOR BUSINESS. HENCE THE DISALLOWANCE IS NOT LEGAL AND THE CLAIM OF INTEREST CANNOT BE DENIED SIMPLY BECAUSE T HAT INADVERTENTLY THE ASSESSEE CLAIMED SUCH INTEREST UNDER THE HEAD INCOM E FROM OTHER SOURCES. ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 14 - IT MAY ALSO BE POINTED OUT THAT THE SUPREME COURT I N SETH R. DALMIAS CASE [1977] 1 10 ITR 644 (SC) HAS LAID DOWN THE FOL LOWING CONDITION (AT P. 650) FOR THE PURPOSE OF APPLYING S. 57(III) OF THE INCOME TAX ACT, 1961 : '(I) THE EXPENDITURE MUST HAVE BEEN INCURRED SOLEL Y AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME OR MAKING PROFIT; (II) THE EXPENDITURE SHOULD NOT BE IN THE NATURE O F A CAPITAL EXPENDITURE; (III) THE AMOUNT IN QUESTION SHOULD NOT BE IN THE NATURE OF PERSONAL EXPENSES OF THE ASSESSEE; (IV) THAT THE EXPENDITURE SHOULD BE INCURRED IN TH E ACCOUNTING YEAR; AND (V) THERE MUST BE A CLEAR NEXUS BETWEEN THE EXPEND ITURE INCURRED AND THE INCOME SOUGHT TO BE EARNED.' THUS, IN A NUT SHELL, WHEN THE AMOUNT BORROWED WAS USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE INTERE ST PAID THEREUPON, IT IS PRAYED, BE ALLOWED AND DISALLOWANCE OF RS.585383/- BE DELETED. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT THE ASSES SEE IS ELIGIBLE FOR A DEDUCTION OF INTEREST EXPENSES INCURRED BY IT ON TH E AMOUNT TAKEN FROM RISHABH ENTERPRISES WHICH WAS UTILIZED IN THE BUSIN ESS OF RIDHI SIDHI TRADERS. 8.6 WE ALSO NOTE THAT THE GENUINENESS OF THE INTERE ST EXPENSE WAS NOT DOUBTED BY THE AUTHORITIES BELOW. THE ONLY REASON F OR MAKING THE DISALLOWANCE WAS THAT THERE IS NO PROVISION IN SECT ION 57(III) OF THE ACT FOR ALLOWING SUCH DEDUCTION OF INTEREST EXPENSE. AF TER CONSIDERING THE FACTS IN TOTALITY WE ARE INCLINED TO REVERSE THE OR DER OF AUTHORITIES BELOW ITA NO.764/AHD/2017 ASHOKKUMAR KHIMRAJ(HUF) VS. ITO A.Y. 2013-14 - 15 - AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HI M. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 07/12/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 07/12/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-10, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 27/10/2018 (DICTATION PAGE-7) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : 05/12/2018 3. OTHER MEMBER.. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 06/12/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT.. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 10. DATE OF DESPATCH OF THE ORDER