Shri Kamlesh Balchand Shah, Ahmedabad V. ITO, Ward-5(3)(1), Ahmedabad

ITA 840/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2324 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-09-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 05-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NK GOEL
• Assessee Lawyers: D K PARIKH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER& MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 840/AHD/2018 (ASSESSMENT YEAR: 2014-15) SHRI KAMLESH BALCHAND SHAH A-403, SUGAM AVENUE, VIKAS GRUH ROAD, OPP: MAHALAXMI TOWER, PALDI, AHMEDABAD- 380007 VS. ITO WARD-5(3)(1) AHMEDABAD [ PAN NO. AAF HS4 228 H ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : D. K. PARIKH, AR RESPONDENT BY : SHRI N. K. GOEL, SR. D.R. DATE OF HEARING 27.09.2019 DATE OF PRONOUNCEMENT 06.12.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 05.03.2018 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS) 5, AHMEDABAD UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) ARISING OUT OF THE ORDER DATED 30.12.2016 PASSED BY THE ITO, WARD-5(3)(1), AHMEDAB AD FOR ASSESSMENT YEAR 2014-15. 2. THE DISALLOWANCE OF INTEREST EXPENSES TO THE TU NE OF RS. 27,87,211/- HAS BEEN CHALLENGED BEFORE US BY THE AS SESSEE. THE SHORT POINT INVOLVED IN THE CASE IS THIS AS TO WHETHER TH E INTEREST EXPENSES CAN ITA NO.840/AHD/2018 SHRI KAMLESH BALCHAND SHAH VS. ITO ASST.YEAR 2014-15 - 2 - BE DISALLOWED ON THE GROUND THAT INTEREST WAS NOT P AID DURING THE YEAR WHEN THE MERCANTILE SYSTEM OF ACCOUNTING BEING CONS ISTENTLY FOLLOWED BY THE ASSESSEE. THE LD. AR IN SUPPORT OF HIS ARGUMEN T RELIED UPON A JUDGMENT PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JCIT NASIK AS ALSO A JUDGMENT PASSED BY THE CO-ORDINATE BENCH IN THE CASE OF THE BROTHER OF THE APPELLANT N AMELY SHRI JAYESH BALCHANDBHAI SHAH VS. ITO IN ITA NO. 2645/AHD/2017 FOR A.Y. 2014-15 WHERE ADDITION ON SIMILAR DISALLOWANCE HAS BEEN DEL ETED. A COPY OF EACH OF THE JUDGMENT HAS BEEN SUBMITTED TO US BY THE LD. AR. HOWEVER, THE LD. DR RELIED UPON THE ORDER PASSED B Y THE AUTHORITIES BELOW AND ALSO CONTENDED THAT THE ORDER PASSED BY THE CO- ORDINATE BENCH IN THE CASE OF THE BROTHER OF THE AS SESSEE SHRI JAYESH BALCHANDBHAI SHAH IS NOT APPLICABLE TO THE INSTANT CASE BEFORE US. THE LD. DR HAS FAILED TO SUBSTANTIATE HIS ARGUMENT AS T O HOW IN THE SIMILAR FACTS AND CIRCUMSTANCES IT IS NOT APPLICABLE. 3. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIAL AV AILABLE ON RECORD. IT APPEARS THAT THE LD. AO DISALLOWED THE EXPENDIT URE ON THE GROUND THAT INTEREST WAS NOT PAID DURING THE YEAR UNDER CO NSIDERATION WHICH WAS CONFIRMED BY THE LD. CIT(A) HOLDING THE SAID EXPEND ITURE IS NOTHING BUT A PROVISION ONLY. IT IS A SETTLED PRINCIPLE OF LAW THAT EVEN IF AN A MOUNT IS NOT ACTUALLY PAID BUT INCURRED ACCORDING TO THE METHOD OF ACCO UNTING, THE SAME WOULD BE TREATED AS PAID. SINCE THE ASSESSEE WAS FOLLO WED MERCANTILE SYSTEM OF ACCOUNTING, THE AMOUNT OF INTEREST COULD BE CLAIMED AS DEDUCTION EVEN IF IT ITA NO.840/AHD/2018 SHRI KAMLESH BALCHAND SHAH VS. ITO ASST.YEAR 2014-15 - 3 - WAS NOT ACTUALLY PAID BUT SIMPLY INCURRED. THE RAT IO, AFORESAID HAS BEEN LAID DOWN IN THE LAND MARK JUDGMENT OF TAPARIA TOOLS LTD. VS. JCIT BY THE HONBLE APEX COURT WHICH IS SQUARELY APPLICABLE TO THE CASE IN HAND. MORE SO, WE HAVE FURTHER CAREFULLY CONSIDERED THE O RDER PASSED BY THE CO-ORDINATE BENCH IN ITA NO. 2645/AHD/2017 FOR A.Y. 2014-15 IN THE CASE OF THE BROTHER OF THE ASSESSEE WHERE WE FIND T HAT IN THE SIMILAR SET OF FACTS, THE ADDITION HAS BEEN DELETED. IN THAT PART ICULAR JUDGMENT THE HONBLE CO-ORDINATE BENCH OBSERVED THAT AS PER THE MERCANTILE SYSTEM OF ACCOUNTING INTEREST EXPENSES ARE TO BE DEBITED TO T HE PROFIT AND LOSS ACCOUNT IRRESPECTIVE OF THE FACT THAT WHETHER THE S AME HAS BEEN PAID OR NOT. SINCE THE ASSESSEE IS FOLLOWING THE MERCANTIL E SYSTEM OF ACCOUNTING THE OUTSTANDING INTEREST EXPENSES WAS SHOWN AS INTE REST PAYABLE WHICH WAS NOT TAKEN INTO CONSIDERATION BY THE AUTHORITIES BELOW. SIMILARLY, IN THE CASE OF THE APPELLANT BEFORE US WE FIND ON A WR ONG NOTICE SIMILAR ADDITION HAS BEEN MADE BY THE AUTHORITIES BELOW WHI CH IS NOT SUSTAINABLE IN THE EYE OF LAW FOR THE REASON ALREADY DISCUSSED BY US HEREINABOVE. WE, THUS, DELETE THE IMPUGNED ADDITION. ASSESSEES APPEAL IS THUS ALLOWED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 06/12/2019 SD/- SD/- (WASEEM AHMED) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 06/12/2019 TANMAY, SR. PS TRUE COPY ITA NO.840/AHD/2018 SHRI KAMLESH BALCHAND SHAH VS. ITO ASST.YEAR 2014-15 - 4 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 04 .12.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.12.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 06.12.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .12.2019 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 06 .12.2019 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 06.12.2019 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