ACIT 13(2), MUMBAI V. RATANSEY HIRJI (HUF), MUMBAI

ITA 85/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71324 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALMAN KHAN

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . . .. . , ,, , !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. I.P. BANSAL,JUDICIAL MEMBER & RAJENDRA ,ACCOUNTANT MEMBER /. ITA NO.85/MUM/2011 , $ $ $ $ % % % % / ASSESSMENT YEAR-2007-08 ACIT 13(2) R.NO. 421, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 VS. RATANSEY HIRJI (HUF) 25 VALLAABHDAS TYEJPAL BUILDING, KESHAVJI NAIK ROAD, BHAT BAZAR,MUMBAI-400009. PAN:AAAHE6205G ( &' / APPELLANT) ( ()&' / RESPONDENT) &' &' &' &' * * * * ' '' ' / APPELLANT BY : SHRI SALMAN KHAN ()&' + * ' / RESPONDENT BY : NONE $ $ $ $ + ++ + , , , , / DATE OF HEARING : 17-09-2013 -.% + , / DATE OF PRONOUNCEMENT : 25-09-2013 '/ / O R D E R PER RAJENDRA, AM FOLLOWING GROUNDS OF APPEAL WERE FILED BY THE ASSES SING OFFICER (AO),AGAINST THE ORDER DATED 15-10-2010 OF THE CIT(A)-24,MUMBAI : (1) (I).ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING TH E DISALLOWANCE ON ADHOC BASIS ON ACCOUNT OF INTEREST EXPENDITURE T O 10% OF THE INTEREST PAID BY THE ASSESSEE OF RS. 1 ,20,03,667/- ACCEPTING THE DISALLOWANCE MADE BY THE ASSESEE ITSE LF IN THE COMPUTATION OF INCOME AS AGAINST 75% OF T OTAL CLAIM DISALLOWED BY THE AG HOLDING IT FOR NON-BUSINESS PU RPOSES AS NO BUSINESS HAS BEEN CARRIED ON DURING TH E YEAR, BUT THE ASSESSEE HAS BORROWED NEW BUSINESS LOANS FROM 4 33 PARTIES AMOUNTING TO RS, 10,68,75,909/-. (II).WHILE DOING SO, THE LD. CIT(A) FAILED TO APPRE CIATE THAT THE ASSESSEE HAD NOT PROVED WITH CONCRET E EVIDENCE THAT THE CLAIM OF INTEREST EXPENDITURE WAS WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF BUSINESS BECAUSE ASSE SSEE ITSELF HAS ADMITTED 10% OF THE CLAIM OF INTEREST EXPENSES ON A D HOC BASIS AS NOT RELATING TO THE PURPOSES OF BUSI NESS. (2).THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) O N THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSMENT OFFICER BE RESTORED. (3).THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND OR ADD ANY NEW GROUND, IF NECESSARY 2. ASSESSEE HUF,RECEIVING INCOME FROM WARE-HOUSING, FI LED ITS RETURN OF INCOME ON 26.07.2007 DECLARING TOTAL INCOME OF RS. NIL. ASSESSMENT WAS F INALISED ON 24.12.2009 BY THE AO U/S.143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSE SSEE AT RS. NIL.DURING THE ASSESSMENT PROCEED -INGS,AO FOUND THAT ASSESSEE HAD NOT CARRIED OUT AN Y BUSINESS,THAT IT HAD BORROWED LOANS FROM 433 PARTIES AMOUNTING TO RS. 10.68 CRORES, THAT IT HAD INCURRED INTEREST EXPENSE OF RS. 1.20 CRORES.AO DIRECTED THE ASSESSEE TO EXPLAIN THE PURP OSE OF LOAN TAKEN SPECIALLY WHEN NO BUSINESS WAS CARRIED OUT.ASSESSEE FILED ITS REPLY CLAIMING T HAT NEW LOANS HAD BEEN TAKEN FOR THE PURPOSE OF 2 ITA NO. 85/MUM/2011 RATANSEY HIRJI (HUF) MEETING DAY-TO-DAY EXPENDITURE AND TO REPAY OLD LOA NS.AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE.HE FURTHER FOUND THAT ASSESSEE ITSELF HAD DISALLOWED 10% OF THE INTEREST ON ACCOUNT OF EXPENDITURE INCURRED FOR NON-BUSINESS PURPOSE.HE HE LD THAT ASSESSEE WAS NOT ABLE TO PROVE THE NEXUS OF INTEREST EXPENDITURE AND THE BUSINESS CARR IED OUT BY IT.AS A RESULT,AO DISALLOWED 75% INTEREST EXPENDITURE I.E. OF RS.1.20 CRORES AND MAD E AN ADDITION OF RS.90.02 LACS TO THE TOTAL INCOME OF THE ASSESSEE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R,HE HELD THAT NEW LOANS WERE TAKEN TO REPAY THE OLD LOANS,THAT LOANS AMOUNTING TO RS. 1.74 CROR ES WERE REPAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION,THAT THE ASSESSEE WAS REQUIRED TO REPAY ALL LOANS TAKEN IN EARLIER YEARS FOR THE BUSINESS PURPOSE, THAT IN DOING SO IT INCURRED THE FRESH LIABILITY OF RS. 1.78 CRORES, THAT ON THE SAID AMOUNT INTEREST OF RS. 1.2 CRORES WAS PAID,THA T ALL THE ABOVE FACTS CLEARLY ESTABLISHED THE THE LOAN WAS TAKEN FOR BUSINESS PURPOSES,THAT THE INTER EST LIABILITY AROSE AND WAS PAID DURING THE YEAR UNDER CONSIDERATION.RELYING UPON THE DECISION OF TH E HONBLE SUPREME COURT DELIVERED IN THE CASE OF S.A.BUILDERS(288ITR1),HE HELD THAT ONCE COM MERCIAL EXPEDIENCY WAS ESTABLISHED THEN THE AO COULD NOT STEP INTO THE SHOES OF THE ASSESSE E,THAT THE GENUINENESS OF THE LOAN IN QUESTION WAS NOT IN DOUBT,THAT THE AO HAD ISSUED SUMMONS TO 52 PERSONS OUT OF 433 PERSONS FROM WHOM LOANS WERE TAKEN,THAT ALL THE 52 PERSONS COMPLIED W ITH THE DETAILS REQUIRED FOR BY THE AO, THAT LOAN CONFIRMATION FROM ALL THE 433 PARTIES WERE FIL ED BY THE ASSESSEE DURING THE COURSE OF APPELLA -TE PROCEEDINGS.FIANLLY,HE REDUCED THE DISALLOWANCE TO 10%,AS AGAINST THE 75% MADE BY THE AO. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTE D THAT THE ASSESSEE HAD NOT PROVED ANY NEXUS BETWEEN THE INTEREST PAID AND THE BUSINESS CA RRIED OUT BY IT,THAT HUGE INTEREST WAS PAID BY IT EVEN WHEN THERE WAS LULL IN THE BUSINESS OF THE ASS ESSEE IN THE YEAR UNDER CONSIDERATION.NOBODY APPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE PERUSED THE MATERIAL ON RECORD AND HAVE CON SIDERED THE SUBMISSIONS MADE BY THE DR. WE ARE OF THE OPINION THAT ADDITION MADE BY THE AO WAS NOT BASED ON ANY JUSTIFIABLE REASON. HE HAD NOT BROUGHT ON RECORD ANY DISCREPANCY FOUND IN THE BOOKS OF ACCOUNTS.HE HAD CHECKED THE GENUINENESS OF THE TRANSACTION ON TEST CHECK BASIS. FAA HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE HAD TAKEN NEW LOANS TO REPAY THE OLD BUSIN ESS LOANS OF THE EARLIER YEARS.THEREFORE, IN OUR OPINION ORDER OF THE FAA DOES NOT SUFFER FROM ANY L EGAL INFIRMITY.AS PER THE ESTABLISHED RULES OF TAXATION JURISPRUDENCE IF AN EXPENDITURE IS INCURRE D BY AN ASSESSEE FOR CARRYING OUT HIS BUSINESS, IN A PARTICULAR YEAR,IT HAS TO BE ALLOWED BY THE AO . IF AO WANTS TO DISALLOW IT, HE HAS TO BRING SOMETHING ON RECORD THAT CAN PROVE THAT EITHER EXPE NDITURE WAS NOT INCURRED AT ALL OR EVEN IF IT WAS INCURRED IT WAS NOT FOR BUSINESS PURPOSES.WE FI ND THAT INITIAL ONUS OF PROVING THAT EXPENDITURE WAS INCURRED BY IT WAS DISCHARGED BY TH E ASSESSEE IN THE CASE UNDER CONSIDERATION. BUT,AO HAS FAILED TO DISCHARGE HIS BURDEN WHILE MAK ING THE DISALLOWANCE.ONCE THE FACT OF TAKING LOAN FOR REPAYING OLD LOANS WAS NOT DISPROVED BY TH E AO,ASSESSEE-HUF WAS NOT EXPECTED TO PROVE ANYTHING IN THIS REGARD.TAX LIABILITY CAN BE FASTENED TO AN ASSESSEE ONLY WITH SOME POSITIVE EVIDENCE.WE FIND THAT AFTER CONSIDERING THE FACTS O F THE CASE,FAA HAS HELD THAT BUSINESS EXPEDIENCY NECESSITATED INTEREST PAYMENT.IN THESE C IRCUMSTANCES,ACTION OF THE AO CANNOT BE ENDORSED.THEREFORE,CONFIRMING THE ORDER OF THE FAA, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. 3 ITA NO. 85/MUM/2011 RATANSEY HIRJI (HUF) AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. 1 2 $1, 3 4 1! + !, 56. ORDER PRONOUNCED IN THE OP EN COURT ON 25 TH SEPTEMBER, 2013. '/ + -.% ' 7 , , , , 25.09.2013 . + 8. SD/- SD/- ( . .. . . .. . , ,, , / I.P.BANSAL ) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, 9$ /DATE: 25.09 .2013 SK '/ '/ '/ '/ + ++ + (,: (,: (,: (,: ;':%, ;':%, ;':%, ;':%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CI T / < = 5. DR D BENCH, ITAT, MUMBAI / :>8 (,$ . , . . . 6. GUARD FILE/ 8 ? ):, (, //TRUE COPY// '/$ / BY ORDER, @ / 5 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI