ACIT, CHENNAI V. Shri A.V.S.Raja, CHENNAI

ITA 768/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51991 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 28-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation; Business expenditure; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 767, 768 & 769/MDS/2011 (ASSESSMENT YEARS : 1998-99, 1999-2000 AND 2000-01) THE A.C.I.T COMPANY CIRCLE VI(2) CHENNAI (APPELLANT) VS. SHRI A.V.S. RAJA A-7, SECOND AVENUE IIND FLOOR, ANNA NAGAR, CHENNAI. PAN NO. AAEPR 6507 P (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR, ADV OCATE. DEPARTMENT BY : SHRI K.E .B RENGARAJAN, JR. STANDING COUNSEL. DATE OF HEARING : 13.10.2011 DATE OF PRONOUNCEMENT : O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY DEPARTMENT FOR THE ASSE SSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AGAINST THE CO NSOLIDATED ORDER DATED 31.01.2011 OF COMMISSIONER OF INCOME TA X [A]-V, CHENNAI. I.T.A. NO.767. 768 & 769/MDS/11 2 2. THE REVENUE HAS TAKEN IN TOTAL THREE COMMON GROU NDS OF APPEAL IN ALL THE YEARS UNDER CONSIDERATION WHEREIN THE SOLE ISSUE INVOLVED IN THE GROUNDS OF APPEAL OF THE ASSESSEE I S THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS ASSESSEES INCOME UNDER THE HEAD BUSINESS AND ALLOW INTEREST PAID TO INDIAN BANK AND ALSO OTHER EXPENDITURE OF SALARY AND BONUS AND DEPRECIATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER HAS OBSERVED THAT THE ASSESSEE HAS TAKEN LOAN OF RS. 3 0 LAKHS FROM INDIAN BANK TO SPEND FOR AGRICULTURAL PURPOSES. TH E ASSESSEE LATER ON ADVANCED THIS SUM TO ONE SHRI H. SRINIVASAN. TH EREFORE, IT WAS HELD BY THE ASSESSING OFFICER THAT THE OBJECT OF TH E LOAN WAS NOT FOR BUSINESS PURPOSES IN AS MUCH AS FOR THE REASON THAT THE LOAN WAS UTILIZED TO ADVANCE MONEY TO SHRI H. SRINIVASAN DID NOT BY ITSELF INDICATE THAT THE LOAN GIVEN WAS IN THE COURSE OF H IS BUSINESS OF MONEY LENDING. ACCORDINGLY, IT WAS HELD THAT INTER EST PAYMENT CLAIMED WAS NOT TO BE CONSIDERED AS FOR THE PURPOSE S OF BUSINESS AND ACCORDINGLY RS. 6,42,555/- WAS DISALLOWED IN T HE COMPUTATION I.T.A. NO.767. 768 & 769/MDS/11 3 OF TAXABLE INCOME IN THE RESPECTIVE ASSESSMENT YEAR S. FURTHER, THE INCOME-TAX OFFICER HAD DISALLOWED SALARY AND BONUS AS WELL AS DEPRECIATION IN VIEW OF HIS FINDING ON THE MONEY LE NDING ACTIVITY. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED AS UNDER : 'ACCORDING TO THE APPELLANT THAT HE HAD BEEN CARRYING ON THE MONEY LENDING BUSINESS RIGHT FROM THE YEAR 1991 IN THE NAME OF 'AARTHREYAS' AND HIS BUSINESS INCOME WAS ASSESSED AS SUCH FOR ALL THESE YEARS INCLUDING THE ASSESSMENT YEAR 1998-99 TO 2000-01. BUT IN THE ORDER OF THE I.T.O COMPANY CIRCLE VI (2), CHENNAI -34 DATED 23.10.2007, HE HAD TAKEN A DIFFERENT STAND THAN THE ONE IN THE ORIGINA L ORDER, BY TREATING THE INCOME FROM MONEY LENDING BUSINESS UNDER THE HEAD 'INCOME FROM OTHER SOURCE', THIS IS TOTALLY AGAINST THE FACTS OF THE CA SE AND THE LEGAL POSITION. THIS STAND WAS TAKEN BY HIM NEARLY TO DISALLOW, THE INTEREST FROM THE INDIAN BANK FOR THE LOAN TAKEN FROM THE BANK AND USED IN THE COURSE OF MONEY LENDING BUSINESS TO ADVANCE TO ONE OF THE LOANEES NAMELY H.SRINIVASAN. I.T.A. NO.767. 768 & 769/MDS/11 4 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE LD. CIT(A) HELD AS UNDER: 14. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER WHO HAS MADE THE REASSESSMENT CONSEQUENT TO TRIBUNAL OR DER. WHEN THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICE R TO LOOK IN TO THE SPECIFIC ISSUE OF CONSIDERING THE SWORN ST ATEMENT GIVEN BY ONE MR. H. SRINIVASAN, ONE OF THE LOANEES AFRESH AND PASS THE ORDER, THE ASSESSING OFFICER HAS TAKEN A D IFFERENT STAND TO ASSESS THE INCOME FROM MONEY LENDING BUSIN ESS UNDER THE HEAD INCOME FROM OTHER SOURCES BY SHIFTING THE SAME FROM BUSINESS HEAD. HERE THE APPELLANT HAS RIGH TLY POINTED OUT THAT EVEN UNDER THE HEAD 1.0.S THE EXPEND ITURE NAMELY THE INTEREST PAID TO INDIAN BANK WAS ALLOWA BLE U/S 57 (HIII). THE ALLOWABILITY OF THE INTEREST ON LOAN FROM INDIAN BANK WAS TO BE CONSIDERED BY THE PURPOSE FOR WHICH T HE AMOUNT WAS UTILIZED RATHER THEN THE PURPOSE FOR WHICH THE AMOUNT WAS BORROWED FROM THE BANK. HERE IT IS PROVED BY THE APPELLANT THAT THE AMOUNT WAS UTILIZED BY HIM IN THE MONEY LENDING BUSINESS BY LENDING TO ONE MR. H.SRINIVAS WH O HAS CONFIRMED THE SAME IN HIS SWORN STATEMENT. HENCE IN MY VIEW THERE IS A MERIT IN THE ARGUMENT OF THE APPELLANT TH AT THE INTEREST IS ALLOWABLE AS BUSINESS EXPENDITURE UNDER TH E HEAD BUSINESS. FURTHER THERE WAS NO DISPUTE WITH RESPECT TO THE I.T.A. NO.767. 768 & 769/MDS/11 5 ASSESSING THE INCOME OF THE MONEY LENDING BUSINESS O F THE APPELLANT NAMELY AARTHREYAS TILL THE STAGE OF COMPL ETION OF APPEAL PROCEEDINGS IN THE I.T TRIBUNAL. BUT IN THE REASSESSMENT PROCEEDINGS NO STRONG REASONS WERE REC ORDED BY THE ASSESSING OFFICER FOR SHIFTING THE BUSINESS INCO ME FROM THE HEAD BUSINESS TO THE HEAD I.0.S AND EVEN IN THAT CASE ALSO FOR DENYING THE DEDUCTION U/S 57 (HIII) BY GOING BEYO ND THE SPECIFIC DIRECTION OF I.T. TRIBUNAL. 15. THE SUBMISSIONS OF THE APPELLANT, OBSERVATIONS O F THE LD. CIT(A) IN THE FIRST APPEAL, THE DIRECTIONS OF T HE TRIBUNAL AND RECORDINGS OF THE ASSESSING OFFICER IN HIS REAS SESSMENT ORDER WERE CAREFULLY LOOKED INTO BY ME. ACCORDINGLY , I HEREBY DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME UN DER THE HEAD BUSINESS AND ALLOW THE INTEREST PAID TO INDIAN BANK IN ALL THE THREE YEARS AS BUSINESS EXPENDITURE BESIDES THE O THER EXPENDITURES OF SALARY, BONUS AND DEPRECIATION ETC. 6. THE LD. D.R. FULLY JUSTIFIED THE ORDER OF THE AS SESSING OFFICER WHEREAS THE LD. A.R. FULLY JUSTIFIED THE ORDER OF T HE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE I.T.A. NO.767. 768 & 769/MDS/11 6 INSTANT CASE, THE DISPUTE INVOLVES THE DISALLOWANCE OF INTEREST EXPENDITURE CLAIMED BY ASSESSEE IN RESPECT OF LOAN TAKEN FROM INDIAN BANK. THIS IS THE SECOND ROUND OF APPEAL BE FORE THIS TRIBUNAL. THE LD. CIT(A) DELETED THE DISALLOWANCE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER BY OBSERV ING AS UNDER: 14. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER WHO HAS MADE THE REASSESSMENT CONSEQUENT TO TRIBUNAL OR DER. WHEN THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICE R TO LOOK IN TO THE SPECIFIC ISSUE OF CONSIDERING THE SWORN ST ATEMENT GIVEN BY ONE MR. H. SRINIVASAN, ONE OF THE LOANEES AFRESH AND PASS THE ORDER, THE ASSESSING OFFICER HAS TAKEN A D IFFERENT STAND TO ASSESS THE INCOME FROM MONEY LENDING BUSIN ESS UNDER THE HEAD INCOME FROM OTHER SOURCES BY SHIFTING THE SAME FROM BUSINESS HEAD. HERE THE APPELLANT HAS RIGH TLY POINTED OUT THAT EVEN UNDER THE HEAD 1.0.S THE EXPEN DITURE NAMELY THE INTEREST PAID TO INDIAN BANK WAS ALLOWA BLE U/S 57 (HIII). THE ALLOWABILITY OF THE INTEREST ON LOAN FROM INDIAN BANK WAS TO BE CONSIDERED BY THE PURPOSE FOR WHICH T HE AMOUNT WAS UTILIZED RATHER THEN THE PURPOSE FOR WHICH THE AMOUNT WAS BORROWED FROM THE BANK. HERE IT IS PROVED BY THE APPELLANT THAT THE AMOUNT WAS UTILIZED BY HIM IN THE MONEY I.T.A. NO.767. 768 & 769/MDS/11 7 LENDING BUSINESS BY LENDING TO ONE MR. H.SRINIVAS WH O HAS CONFIRMED THE SAME IN HIS SWORN STATEMENT. HENCE IN MY VIEW THERE IS A MERIT IN THE ARGUMENT OF THE APPELLANT TH AT THE INTEREST IS ALLOWABLE AS BUSINESS EXPENDITURE UNDER TH E HEAD BUSINESS. FURTHER THERE WAS NO DISPUTE WITH RESPECT TO THE ASSESSING THE INCOME OF THE MONEY LENDING BUSINESS O F THE APPELLANT NAMELY AATHREYAS TILL THE STAGE OF COMPLE TION OF APPEAL PROCEEDINGS IN THE I.T TRIBUNAL. BUT IN THE REASSESSMENT PROCEEDINGS NO STRONG REASONS WERE REC ORDED BY THE ASSESSING OFFICER FOR SHIFTING THE BUSINESS INCO ME FROM THE HEAD BUSINESS TO THE HEAD I.0.S AND EVEN IN THAT CASE ALSO FOR DENYING THE DEDUCTION U/S 57 (HIII) BY GOING BEYO ND THE SPECIFIC DIRECTION OF I.T. TRIBUNAL. 15. THE SUBMISSIONS OF THE APPELLANT, OBSERVATIONS O F THE LD. CIT(A) IN THE FIRST APPEAL, THE DIRECTIONS OF T HE TRIBUNAL AND RECORDINGS OF THE ASSESSING OFFICER IN HIS REAS SESSMENT ORDER WERE CAREFULLY LOOKED INTO BY ME. ACCORDINGLY , I HEREBY DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME UN DER THE HEAD BUSINESS AND ALLOW THE INTEREST PAID TO INDIAN BANK IN ALL THE THREE YEARS AS BUSINESS EXPENDITURE BESIDES THE O THER EXPENDITURES OF SALARY, BONUS AND DEPRECIATION ETC. I.T.A. NO.767. 768 & 769/MDS/11 8 8. DURING THE COURSE OF HEARING, THE LD. D.R. WAS R EQUESTED BY THE BENCH TO PRODUCE THE COPY OF THE ORDER OF THE T RIBUNAL PASSED IN THE FIRST ROUND OF APPEAL. THE LD. D.R. SUBMITT ED THAT THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL HAS B EEN EXTRACTED BY THE LD. CIT(A) IN HIS ORDER AND THE SAME IS NOT IN DISPUTE. WE THUS FIND THAT THE TRIBUNAL IN THE ORIGINAL ORDER REMAND ED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE SPECIFIC DIRECTION TO CAREFULLY EXAMINE THE STATEMENT OF SHRI H. SRINI VASAN AND THEREAFTER READJUDICATE THE ISSUE OF ALLOWABILITY O F INTEREST EXPENDITURE AS PER LAW. THUS WE FIND THAT THE ISSU E OF THE HEAD UNDER WHICH INTEREST INCOME DECLARED BY THE ASSESSE E IS TO BE ASSESSED WAS NOT AN ISSUE WHICH WAS REMANDED BACK B Y THE TRIBUNAL TO THE FILE OF THE ASSESSING OFFICER. THEREFORE, I N OUR CONSIDERED OPINION, THE LD. CIT(A) WAS JUSTIFIED IN OBSERVING THAT THE ASSESSING OFFICER HAS EXCEEDED HIS JURISDICTION IN DECIDING T HE ISSUE OF HEAD UNDER WHICH INTEREST INCOME RETURNED BY THE ASSESSE E IS ASSESSABLE IN THE PROCEEDINGS PURSUANT TO THE REMAND MADE BY T HE TRIBUNAL. FURTHER, WE FIND THAT THE ASSESSING OFFICER HAS BRO UGHT NO MATERIAL ON RECORD AFTER VERIFYING THE STATEMENT OF SHRI H. SRINIVASAN ON THE I.T.A. NO.767. 768 & 769/MDS/11 9 BASIS OF WHICH IT CAN BE HELD THAT INTEREST EXPENDI TURE INCURRED BY THE ASSESSEE CANNOT BE ALLOWED AS PER LAW. WE, THU S, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). IT IS CO NFIRMED. GROUNDS OF APPEAL OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DISMISSED. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER, 2011. SD/- SD/- (GEORGE MATHAN) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST OCTOBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE