ACIT 21(2), MUMBAI V. MICHAEL X RAJA NADAR, MUMBAI

ITA 914/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3473 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Tax effect; Capital receipt
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 914/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) ACIT-21(2), R.NO.508 C-10, 5 TH FLOOR, B.K.C, BNDRA (E), MUMBAI-51. / VS. SHRI. MICHAEL X RAJA NADAR FLAT NO.104, EMERALD, BHAKTI PARK, ANIK WADALA LINK ROAD, WADALA (EAST) MUMBAI-400 022. ./ ./PAN/GIR NO. AAAFS 3316B ( /APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO. 64/MUM/2014 (ARISING OUT OF I.T.A. NO. 914/MUM/2013) ( / ASSESSMENT YEAR: 2009-10) SHRI. MICHAEL X RAJA NADAR FLAT NO.104, EMERALD, BHAKTI PARK, ANIK WADALA LINK ROAD, WADALA (EAST) MUMBAI-400 022. / VS. ACIT-21(2), R.NO.508 C-10, 5 TH FLOOR, B.K.C, BNDRA (E), MUMBAI-51. ./ ./PAN/GIR NO. AAAFS 3316B ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NAVEEN GUPTA / RESPONDENT BY : NONE / DATE OF HEARING : 12/01/2016 !'# / DATE OF PRONOUNCEMENT : 22/01/2016 2 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 06.11.2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI (HE REINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2009-10. THE REVENUE H AS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO.914/M/2013 ARE AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF UNSECURED LOANS OF RS.10,00,000/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE ASSESSEE HAD FAIL ED TO PROVE THE GENUINENESS OF LOAN TRANSACTION WITH DOCUMENTARY EVIDENCES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT SO CALLED LOAN AMOUNT WAS DIRECTLY DEPOSITED IN THE ACCOUNT OF PRIVATE LIMITED COMPANY INSTEAD OF ROUTI NG THROUGH BANK ACCOUNT. 2. AT THE OUTSET THE LD. AR OF THE ASSESSEE POINTED OUT THAT THE TAX EFFECT IN THIS APPEAL IS BELOW RS.10.00 LAKHS AND FURTHER SUBMITTE D THAT IN VIEW OF THE CBDT CIRCULAR NO.21/2015, DATED 10.12.2015 BROUGHT OUT BY THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FI NANCE, GOVERNMENT OF INDIA, 3 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR THE APPEAL WAS NOT MAINTAINABLE AND BE DISMISSED. T HE LD. DR ALSO AGREED TO THE SUBMISSION OF THE LD. AR. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE RECORDS BEFORE US THAT THE TAX INV OLVED IN THE DISPUTED ISSUE IS BELOW RS.10 LACS AND THEREFORE, IN VIEW OF THE CIRC ULAR NO 21/2015 DATED 10 TH DECEMBER, 2015 NO APPEALS SHOULD BE FILED BY THE RE VENUE BEFORE THE TRIBUNAL WHICH HAS TAX EFFECT OF RS. 10.00 LACS OR LESS AND THIS CIRCULAR IS ALSO APPLICABLE RETROSPECTIVELY TO ALL PENDING APPEALS. THE RELEVANT EXTRACT THE SAID CBDT CIRCULAR (SUPRA) IS AS UNDER:- THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PEN DING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/TRIBUNALS. PENDI NG APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRA WN/NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE IN STRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 4. CONSIDERING THE ABOVE, THE APPEAL FILED BY THE R EVENUE, IS THEREFORE DISMISSED. ITA NO.64/MUM/2012 (A.Y.2009-10) THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO.64/M/2012 ARE AS UNDER. 4 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR GROUNDS OF CROSS-OBJECTIONS THAT THE APPELLANT, HOWEVER THEY HAVE RAISED THREE GROUNDS IN THEIR APPEAL ACT ALL THE GROUNDS/POINTS ARE ONE AND THE SAME I.E., DISALLOWA NCE OF RS.10,00,000/ - (RUPEES TEN LAKH ONLY) IN THE ORDER PASSED BY THE LD. C.I.T AND HENCE THE INTERVENTION IN THE SAID ORDER IS NOT WARRANTED AT THIS STAGE AND THE ABOVE SAID APPEAL TO BE DISMISSED WITH CONST ON THE FOLLOWING AMONGST OTHER GROUNDS: A. THAT THE LD. C.I.T (A) PLEASED TO CONSIDER ALL THE POINTS RAISED IN THE APPEAL FILED BY THE RESPONDENT HEREIN AS THE SAID AMOUNT W AS TAKEN BY WAY OF CHEQUE FOR WHICH THE PRESENT RESPONDENT HAVING BOOKS OF AC COUNTS WHICH WAS DULY ACCOUNTED AND CONTINUOUSLY REFLECTED IN THE BALANCE SHEET SINCE FINANCIAL YEAR 2006-2007 ONWARDS AND HENCE, THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) HAVE CONSIDERED ALL THE POINTS AND HENCE THE PROPER AND FAIR ORDER CAME TO DELIVERED BY DELETING ADDITION TO THE TOTAL INCOME OF RS.I0,OO,OOO/ - WHICH WAS CLAIMED AS UNSECURED LOAN BY THE RESPONDE NT ON THE CONTRARY THE APPELLANT TREATED THE SAID AMOUNT AS INCOME OF THE RESPONDENT AND ACCORDINGLY THE RESPONDENT DIRECTED TO PAY TAX. B. THE APPELLANT MISERABLY FAILED TO MENTION UNDER WHICH SECTION OF INCOME TAX LAW/PROVISION OR RULES THERE UNDER, THE ADDITION OF RS. 10,00,000/ - CAN BE SUSTAINED AGAINST THE RESPONDENT. THE OBSERVATION OF THE CIT (A) WHILE PASSING THE O RDER DELETING THE ABOVE AID ADDITION OFRS.10.00,000 AS FOLLOWS:- BECAUSE THE FOLLOWING OBSERVATIONS OF LEARNED CIT( APPEAL) IN THE ORDER DATED 6/11/2012 PARA 3.3.I HAVE CONSIDERED THE ARGUMEN TS OF THE LD. AR AND PERUSED THE ASSESSMENT ORDER. THERE IS NOTHING BROUGHT ON R ECORD BY THE AO TO SUGGEST THE CONDITIONS OF SECTION 41(1) WAS SATISFIED IN THIS C ASE IN ORDER TO MAKE THE ADDITION ON THE GROUNDS OF CESSATION OF LIABILITY U/S 41 (1). S INCE FOR THE AMOUNT OF UNSECURED LOAN NO DEDUCTION HAS BEEN CLAIMED IN EARLIER YEARS, SEC . 41(1) CANNOT BE INVOKED AS THE AMOUNT HAS BEEN RECEIVED AS A LOAN AND NOT DURING T HE COURSE OF CARRYING OUT THE REGULAR BUSINESS TRANSACTION. THE AMOUNTS WERE NOT THE REVENUE RECEIPTS AT THE TIME OF RECEIPT IN AY 2007-08 AND HENCE THE AMOUNT REMAINED BEING CAPITAL RECEIPT ONLY IN CURRENT AY ALSO. THOUGH THERE IS NOTHING SPECIFIC B ROUGHT BY THE AO FOR CESSATION OF SUCH UNSECURED LOAN LIABILITY BUT IN VIEW OF THE DE CISION OF BOMBAY IN THE CASE OF XYLON HOLDINGS PVT.LTD. 26 TAXMANN 333(BOMBAY) AND MAHINDRA & MAHINDRA 261 ITR 5 01(B OM), SUCH. LOAN LIABILITY OF CESSATION C ANNOT BE TAXED AS INCOME U/S.28(IV) ALSO. SO FAR AS THE QUESTION OF MAKING ADDITION U/S .68 IS CONCERNED, SINCE THE LOAN OF RS.10,00,000/- HAVE BEEN RECEIVED IN FY 2006-07 AND APPEARING IN THE BALANCE SHEET 5 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR IN EARLIER YEARS ALSO, THE SAME CANNOT BE ADDED IN THE CURRENT YEAR, FOR WHATEVER REASONS. THUS THERE IS NO JUSTIFICATION TO SUSTAIN THE ADDITION OF RS.10,00,000/- UNDER ANY PROVISIONS OF THE I.T.ACT, 1961 AND HENCE THE S AME IS DIRECTED TO BE DELETED'. SECTION 68 CANNOT BE INVOKED SINCE THE LOAN OF RS.1 0,00,000/- HAS BEEN RECEIVED IN THE FINANCIAL YEAR 2006-2007 AND CONTINUOUS TO BE APPEA RING IN' THE BALANCE SHEET'. WITH REFERENCE TO THE POINT NO.2 OF GROUNDS OF APPE AL IS NOT CORRECT IN LAW AND IN FACT AS THE RESPONDENT IS HAVING ALL THE DOCUMENTAR Y PROOF THAT THE UNSECURED LOAN WAS RECEIVED BY CHEQUE AND THE SAME IS REFLECTED FR OM YEAR TO A STATED ABOVE ELABORATELY AND HENCE THE QUESTION OF DOCUMENTARY E VIDENCE DOES NOT ARISE AND HENCE THE SAME BE DELETED/ REJECTED. BY CONSIDERING THE ABOVE SAID REFLECTION/POINTS THE LD. CIT (A) OBSERVED AS UNDER: 'BECAUSE THE FOLLOWING OBSERVATIONS OF LEARNED CIT (APPEAL) IN THE ORDER DATED 6/11/2012 PARA 3.2 .....BEFORE ME IT HAS BEEN CLAI MED BY THE LD. AR THAT ALL THE DETAILS INCLUDING CHEQUE NUMBER WAS GIVEN BEFORE TH E \AD. IT WAS ALSO EXPLAINED THAT THE ASSESSEE HAD TAKEN LOAN FOR ENHANCING SHARE IN THE COMPANY AND THEREFORE THE CHEQUE OF UNSECURED LOAN WAS STRAIGHT AWAY DEPOSITE D IN THE COMPANY'S ACCOUNT INSTEAD OF ROUTING THROUGH HIS OWN BANK ACCOUNT BUT THE NECESSARY ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND COMPANY . THESE LOANS WERE TAKEN IN FY 2006-07 AND THEY ARE BEING REFLECTED IN 31/03/2007 ONWARDS. THESE LOANS ARE STILL APPEARING IN THE BALANCE SHEET AS ON 31/03/2009 ALS O. IT IS ALSO CONTENDED THAT THE ASSESSEE IS PAYING INTEREST ON THESE LOANS WHICH AR E DEBITED DIRECTLY IN THE CAPITAL ACCOUNT OF THE ASSESSEE AND NOT BEING CLAIMED AS DE DUCTION IN THE P&L A/C. THE NECESSARY COPIES OF THE BALANCE SHEET OF THE LAST 3 YEARS HAVE BEEN ENCLOSED IN SUPPORT OF THE ABOVE CONTENTION. IT HAS BEEN CONTEN DED THAT ONCE THE ASSESSEE SHOWING THE LIABILITY IN ITS BOOKS OF ACCOUNT AND INTEREST ALSO BEING PAID ON SUCH LOAN LIABILITY, THERE CAN BE NO PRESUMPTION FOR CESSATION OF SUCH L IABILITY JUST BECAUSE THE ASSESSEE COULD NOT BE FURNISH THE CONFIRMATION AT THE GIVEN POINT OF TIME. THE AD MADE THE ADDITION ON THE GROUNDS THAT THE LIABILITY HAS CEAS ED TO EXIST. THOUGH THE AD HAS NOT MENTIONED THE SECTION BUT AN ADDITION ON ACCOUNT OF CESSATION OF LIABILITY CAN BE MADE U/S41 (1) BUT SINCE THESE LIABILITIES ARE IN RESPEC T OF UNSECURED LOAN AND NO DEDUCTION HAS BEEN TAKEN IN EARLIER YEARS THE PROVISIONS OF S EC.41(1) CANNOT BE APPLIED. THE PROVISIONS OF SEC. 28(IV) ALSO CANNOT BE APPLIES AS THESE ARE CAPITAL RECEIPTS TAKEN AS UNSECURED LOAN. THE APPELLANT HAS RELIED ON THE DEC ISION IN THE CASE OF XYLON HOLDINGS PVT. LTD. 26 TAXMANN 333(BOMBAY) WHEREIN L IABILITY HAS BEEN HELD TO BE NOT ADDED U/S.28(IV) OR 41(1). IT HAS ALSO BEEN CONTEND ED THAT THE AD NOT DISPUTED THE RECEIPT OF THE UNSECURED LOAN IN FY 006-0 BY WAY OF CHEQUE WHICH WERE ALREADY 6 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR APPEARING IN THE BALANCE SHEET OF THE EARLIER YEARS . HENCE EVEN IF THE ASESSEE COULD NOT PRODUCE CONFIRMATION OR ADDRESS NO ADDITION CAN BE MADE EVEN U/S.68 AS THE LOAN HAS NOT BEEN TAKEN DURING THE YEAR. 3) WITH REFERENCE TO PARA NO.3 OF THE GROUNDS OF A PPEAL THE APPELLANT HAVE STATED THAT THE AMOUNT IS ROUTED THROUGH A PRIVATE LIMITED COMPANY BUT THE LD. A.O. UTTERLY FAILED TO APPRECIATE THE FACT THE RESPONDEN T IS ONE OF THE DIRECTOR OF THE SAID PRIVATE LIMITED COMPANY HAVING 20% SHARE HOLDI NG WHICH WAS CLEARLY MENTIONED/INFORMED TO THE LD. A.O. AND THE SAME IS INFORMED/SUBMITTED TO THE LD. CIT (A) WHO HAVE CONSIDERED ALL POINT AND OBSER VED CORRECTLY. THE RESPONDENT STATE THAT IT IS CRYSTAL CLEAR FROM THE FACTS AND CIRCUMSTANCES, GIVEN ABOVE, THE RESPONDENT PROVED ALL THE FACTS BEFORE T HE LD. LD. CIT (A) WHO HAVE ALSO CONSIDERED ELABORATELY ALL THE ISSUED AND CORRECTLY OBSERVED THROUGH HIS OBSERVATIONS IN THE ORDER PASSED BY HIM. UNDER THE ABOVE SAID FACTS AND CIRCUMSTANCES IT IS HUMBLY PRAYED THAT :- A) THAT THE APPEAL FILED BY THE PRESENT APPELLANT B E DISMISSED WITH COSTS TO THE RESPONDENT B) THE ORDER PASSED BY THE LD. CIT (A) BE CONFIRMED C) ANY OTHER RELIEF AS THIS HON'BLE TRIBUNAL DEEM F IT AND PROPER. 5. IN VIEW OF DISMISSAL OF ITA NO. 914/MUM/2013 THE CROSS OBJECTION FILED BY THE ASSESEE HAS BECOME INFRUCTUOUS. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2016 SD/- SD/- (AMIT SHUKLA) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED :22 .01.2016 PS. ASHWINI GAJAKOSH 7 ITA NO.914/M/13&C.O.64/M/14 SHRI. MICHAEL X RAJA NADAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI