Madhulata Kankani, Kolkata V. ITO, Ward - 12(1), Kolkata , Kolkata

ITA 772/KOL/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0845 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR MITRA
• Keywords: Salary income; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI S.S, GODARA, JUDICIAL MEMBER ITA NO.772/KOL/2018 ASSESSMENT YEAR:2012-13 MADHULATA KANKANI 5, KIRAN SHANKAR ROY ROAD, KOLKATA-700001 [ PAN NO. AFLPK 2585 C ] / V/S . INCOME TAX OFFICER, WARD-12(1), R. NO. 11, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKTAA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI DEEPAK JAIN, CA /BY RESPONDENT SHRI DILIP KUMAR MITRA, ADDL. CIT-DR /DATE OF HEARING 19-09-2018 /DATE OF PRONOUNCEMENT 05-10-2018 /O R D E R THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 , ARISES AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, KOLKATAS O RDER DATED 08.01.2018 PASSED IN CASE NO.526/CIT(A)-4/2013-14/2014-15 AFFIRMING THE ASSESSING OFFICERS ACTION DISALLOWING INTEREST AMOUNT OF 9,44,912/- ALLEGING DIVERSION OF INTEREST BEARING F UNDS IN ASSESSMENT ORDER DATED 22.08.2014, INVOLVING P ROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES INSTANT APPEAL SUFFERS FROM 37 DA YS DELAY IN FILING. SHE HAS FILED HER CONDONATION PETITION STATING REASONS THEREOF AS COMMUNICATION GAP WITH HER AUDITORS. LEARNED DEPARTMENTAL REPRESENTATIVE IS VE RY FAIR IN NOT DISPUTING ITA NO.772/KOL/2018 A.Y. 2 012-13 MADHULATA KANKANI VS. ITO WD-12(1 ), KOL. PAGE 2 CORRECTNESS THEREOF. I CONDONE THE IMPUGNED DELAY I N 37 DAYS KEEPING IN MIND THE ABOVE SOLEMN AVERMENTS. 3. I FIND AT THE OUTSET THAT CIT(A)S DETAILED DISC USSION COMPRISES OF ASSESSMENT FINDINGS AND ASSESSEES SUBMISSIONS AS FOLLOWS:- 3.1 THE AO HAS STATED THE FOLLOWING IN SUPPORT OF THE DISALLOWANCE: THE LOAN FROM THE ICICI BANK WAS TAKEN BY THE ASSE SSEE AS LOAN AGAINST PROPERTY. THIS PROPERTY AT 79, VIVEKANANDA ROAD WAS PURCHASED BY THE ASSESSEE FOR RS.5,80,000/- IN 1991 . THE ASSESSEE HAD TAKEN A LOAN OF RS.62 LAKHS FROM T HE ICICI BANK BY PLEDGING THIS PROPERTY ON 10.06.2008. AS PER THE BA LANCE SHEET AS 31.03.2012, THE LOAN WAS MAINLY UTILIZED FOR INVEST MENT, IN PPF, ICICI PRUDENTIAL LIFE INSURANCE, SHARES AND INTEREST FREE LOANS TO GROUP CONCERN M/ KANKANI ESTATES PVT LTD. RS.19.50 LAKHS, M/S KANKARI CONSTRUCTION PVT LTD. RS.15.78 LAKHS ETC. DURING THE YEAR THE ASSESSEE PAID RS.9,544,912/- AS INTEREST ON LOANS TAKEN BY IT. AS THE LOAN TAKEN BY THE ASSESSEE WAS NOT UTILIZED FOR ANY OF THE INCOMES FROM OTHER SOURCES, SHE WAS ASKED TO SH OW CAUSE AS TO WHY THE BANK CHARGES PAID BY IT SHOULD NOT BE ALLOWED A S EXPENSES FROM OTHER SOURCES, AS CLAIMED BY HER IN THE RETURN OF I NCOME AS WELL COMPUTATION OF TOTAL INCOME FILED DURING THE ASSESS MENT PROCEEDINGS. (VIDE NOTING DATED 18.07.2014) IN THE ORDER SHEET). HOWEVER, THE ASSESSEE NOR HER AUTHORIZED REPRESENTATIVE FILED AN Y EXPLANATION. AS THE LOAN WAS INTEREST FREE ADVANCES/LOANS TO THE GROUP COMPANIES OF THE ASSESSEE, AND IT WAS NOT AT ALL UTILIZED FOR EA RNING OTHER INCOME VIZ. COMMISSION, COMMODITY PROFIT AND PROFESSIONAL CHARG ES, THE SAME IS DISALLOWED. THUS THE SUM OF RS.9,44,912/- IS ADDED TO ITS INCOME FROM OTHER SOURCES. 3.2 THE AR HAS RE-EMPHASIZED THE FACTS STATED IN ST ATEMENT OF FACT WHICH IS REPRODUCE BELOW: THE APPELLANT AN INDIVIDUAL WHO DISCLOSED INCOME F ROM SALARY, PROPERTY AND OTHER SOURCES SUBMITTED HER RETURN IN FORM NO. ITR 2. HOWEVER, THE ACTIVITIES CARRIED ON BY THE APPELLANT EMANATES FRO M BUSINESS AND FOR THAT PURPOSE, HE HAD SECURED LOAN FROM BANK AND ACCORDIN GLY, SHE WAS LIABLE TO SUBMIT HER RETURN IN ITR 4. THE LD. INCOME TAX O FFICER, WARD 12(1), KOLKATA (HEREINAFTER REFERRED TO AS THE LD.AO FOR T HE SAKE OF BREVITY) HOWEVER FRAMED THE ASSESSMENT ORDER DETERMINING THE TOTAL INCOME AT RS.16,66,770/- BY DISALLOWING THE INTEREST OF R.9,4 4,912/- BEING PAID TO BANK AN LOAN TAKEN. THE CRUX OF THE CONTENTION OF T HE LD. ASSESSING OFFICER THE INCOME DISCLOSED UNDER THE HEAD O THER SOURCES AMOUNTED TO RS.14,06,823/- BUT THE FUNDS OBTAINED B Y WAY OF BANK LOAN WERE NOT FULLY UTILIZED FOR EARNING SUCH INCOME. IT WAS EMPHATICALLY POINTED OUT THAT IT IS NOT A CONDITION IN LAW THAT THE FUNDS BORROWED MUST ITA NO.772/KOL/2018 A.Y. 2 012-13 MADHULATA KANKANI VS. ITO WD-12(1 ), KOL. PAGE 3 BE IMMEDIATELY UTILIZED IN INCOME EARNING ACTIVITIE S. IN FACT, THE LD. ASSESSING OFFICER OUGHT TO HAVE ASSESSED THE INCOME FROM SUCH ACTIVITIES UNDER THE HEAD BUSINESS. FURTHER, THE LD . ASSESSING OFFICER WAS NOT SATISFIED WITH SUCH IMMACULATE EXPOSITION A ND BEING DISSATISFIED THEREWITH PROCEEDED TO MAKE THE ADDITION. IT IS AXI OMATIC THAT THE APPELLANT IS THE SOLE ARBITER OF THE MANNER OF COND UCT OF HER BUSINESS AND HER ABSOLUTE LIBERTY IN THIS RESPECT CANNOT BE INTE RFERED WITH. THE MANNER OF UTILIZATION OF BORROWED FUNDS IS THE SOLE PREROG ATIVE OF THE APPELLANT AND HER LIABILITY IN THIS MATTER IS ABSOLUTE. IT IS UTTERLY SPECIOUS TO THINK THAT THERE MUST BE PROXIMATE NEXUS BETWEEN THE LOAN TAKEN AND INCOME EARNED FROM BORROWINGS. BEING AGGRIEVED WITH SUCH M ISINTERPRETATION OF FACTS AS CONCEIVED BY THE LD. ASSESSING OFFICER AND INFRACTION OF LAW, THE APPELLANT HAS PREFERRED THIS APPEAL, INTER ALIA, ON THE FOLLOWING. 3.3 FINDING OF CIT(A): I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISS IONS OF THE ASSESSEE. THE ASSESSEE IS SHOWING INCOME MAINLY INFORM OF SALARY FROM ASSOCIATE CONCERN, COMMISSIONS INCOME AND COMMODITY PROFIT. IN THE IMM EDIATELY PRECEDING YEAR THE ASSESSEE IS SHOWING INCOME FROM SALARY FROM ASS OCIATE CONCERNS AND INCOME FROM DESIGNING FEES MAINLY. IN THE IMMEDIATE LY SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2013-14 THE ASSESSEE IS SHOWING OTH ER INCOME OF RS.5.84 LAKHS (CREDITED TO PROFIT AND LOSS ACCOUNT) AND SAL ARY OF RS.5.06 LAKHS. THUS, ANALYSIS OF FACTS IN THE CASE OF ASSESSEE REVEAL TH E ASSESSEE IS CARRYING HARDLY ANY BUSINESS ACTIVITY AS CLAIMED BY THE ASSESSEE IN THE RETURN FILED, GRANTING OF LOAN TO ASSOCIATE CONCERN ON INTEREST FREE BASIS CO ULD HARDLY BE QUALIFIED AS A BUSINESS VENTURE. THEREFORE, THE AO HAS RIGHTLY DIS ALLOWED THE INTEREST ON BORROWED FUNDS WHICH HAS BEEN USED MAINLY TO ADVANC E INTEREST FREE LOAN TO ASSOCIATE CONCERNS. THEREFORE, THE TREATMENT GIVEN BY THE AO IN THE ASSESSMENT SEEMS TO BE QUITE JUDICIOUS, THEREFORE, THE GROUNDS RAISED ARE HEREBY DISMISSED. 4. I HAVE HEARD RIVAL SUBMISSIONS. IT IS SUFFICIENT LY CLEAR FROM THE CIT(A)S FINDINGS UNDER CHALLENGE IN PARA 3.3 THAT THE ASSES SEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY AND THEREFORE BOTH THE LOWER AUTHORITIES R EJECT HER LOAN TO ASSOCIATE CONCERNS WITHOUT CHARGING ANY INTEREST COULD TO BE NOT QUALI FIED AS A BUSINESS VENTURE. I FIND NO MERIT IN THIS SOLE REASON. IT EMERGES FROM THE CASE FILE THAT TWO RELATED ENTITIES IN ISSUE M/S KANKANIA ESTATES PVT. LTD. AND M/S KANKARI CONS TRUCTION PVT. LTD. HAVE DULY CARRIED OUT THEIR BUSINESS AS PER THEIR RESPECTIVE MUSTER DATA. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE SAID CLINCHING FACTS. I CONCLUDE IN THIS FACTUAL BACKDROP THAT IT IS NOT NECESSARY FOR THE ASSESSEE HERSELF TO CARRY OUT ANY BUSINESS ACTIVITY SINCE SHE HAS ALREADY PROVED THAT HER TWO RELATED ENTITIES HAVE BEEN CARRYING ITA NO.772/KOL/2018 A.Y. 2 012-13 MADHULATA KANKANI VS. ITO WD-12(1 ), KOL. PAGE 4 OUT THEIR BUSINESS ACTIVITIES. I QUOTE HON'BLE APEX COURTS DECISION IN HERO CYCLES PVT. LTD. VS. CIT CIVIL APPEAL NO.518 OF 2008 DECIDED ON 05.11.2014 AND S.A. BUILDERS VS. CIT (2007) 288 ITR 1 (SC) TO CONCLUDE THAT THE ADVANCE IN QUESTION CAN BE HELD TO BE INVOLVING COMMERCIAL EXPEDIENCY IN THE GIVEN FAC TS AND CIRCUMSTANCES OF THE CASE. THE IMPUGNED INTEREST DISALLOWANCE OF 9,44,912/- IN ISSUE STANDS DELETED THEREFORE. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05/10/2018 SD/- (S.S. GODARA) JUDICIAL MEMBE R KOLKATA, *DKP/SR.PS - 05/10/2018 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-MADHULATA KANKANI, 5, KIRAN SHANKAR ROY RD. KOLKATA-001 2. /RESPONDENT-ITO WARD-12(1), R.NO.11, AAYAKAR BHAWAN , P-7, CHOWRINHEE SQUA RE, KOLKATA-69 3. ' % / CONCERNED CIT 4. % - / CIT (A) 5. & ))' , ' / DR, ITAT, KOLKATA 6. + / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO ',