ITO 9(2)(2), MUMBAI V. BINAL S. KORADIA, MUMBAI

ITA 9170/MUM/2010

• Counselvise Citation: 917019914 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: VIMAL PUNMIYA
• Keywords: Unexplained investment; Business income; Salary income; Deemed dividend; Assessment record

Judgement Text

, CH CHCH CH INCOME TAX APPELLATE TRIBUNAL MUMBAI - B BENCH MUMBAI . . , / ! ! ! ! , BEFORE S/SH.B.R.MITTAL,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 9170/MUM/2010, ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 ITO 9(2)(2), R.NO. 225, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. SHRI BINAL S.KORADIA, C-402, GOKUL DIVINE, IRLA, S.V.ROAD, VILE PARLE WEST, MUMBAI-400056 PAN: AACPK9718P ( $% / APPELLANT ) ( &'$% / RESPONDENT) /. ITA NO. 02/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 SHRI BINAL S.KORADIA, C-402, GOKUL DIVINE, IRLA, S.V.ROAD, VILE PARLE WEST, MUMBAI-400056 VS. ITO 9(2)(2), R.NO. 225, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN: AACPK9718P ( $% / APPELLANT ) ( &'$% / RESPONDENT) $% $% $% $% ( (( ( ) ) ) ) / REVENUE BY : SHRI SURENDRA KUMAR &'$% ( ) / ASSESSEE BY : SHRI VIMAL PUNMIYA ' ' ' ' ( (( ( *+ *+ *+ *+ / DATE OF HEARING : 06 . 02 .201 4 ,-# ( *+ / DATE OF PRONOUNCEMENT : 14 . 02 .201 4 ' ' ' ' , 1961 ( (( ( 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M: CHALLENGING THE ORDERS DT.19-10-2010 OF THE CIT(A)- 20,MUMBAI, ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CORSS-APPEALS.AO HAS RAISED FOL LOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.48,95,739/-WHICH REPRESENTS UNEX PLAINED INVESTMENT TAXABLE U/S.69 OF THE INCOME-TAX ACT,1961 AND REPRESENTING THE INVESTMENT IN ONE OF THE TWO FLATS OWNED BY THE ASSESSEE,OF WHICH ONLY ONE WAS DISCLOSED. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,24,000/- MADE U/S.23 OF THE INCOME -TAX ACT, 1961 OVERLOOKING THE FINDING IN THE ASSESSMENT ORDER,THE RELEVANT INCOME FROM HOUSE PRO PERTY WAS NOT DISCLOSED. 3.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) BE SET ASIDE ON THE GROUNDS MENTIONED ABOVE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. GROUND FILED BY THE ASSESSEE READ AS UNDER: 2 ITA NO. 9170/MUM/2010 & 02/MUM/2011 SHRI BINAL S.KORADIA 1.THE LEARNED C.I.T.(A) HAS ERRED IN FACT AND IN LA W IN CONFIRMING THE PARTIAL ADDITION OF RS.70,40,850/- AS DEEMED DIVIDEND U/S.2(22)(E) OF T HE INCOME TAX ACT, 1961. 2.THE LEARNED C.I.T.(A) HAS ERRED IN FACT AND IN LA W IN CONFIRMING DISALLOWANCE OF RS.3,10,215/- U/S.57(III) OF THE INCOME TAX ACT,1961 BEING THE IN TEREST PAID ON OVERDRAWN CAPITAL WITH PARTNERSHIP FIRM VIZ. M/S.SAGAR CONSTRUCTION. 3.THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. ITA/9170/MUM/2010,AY-2007-08: 2.ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME ON 31.10.2007,DECLARING TOTAL INCOME OF RS. 62,780/-.AO FINALISED THE ASSESSMENT ORDER U/S.143( 3) OF THE ACT,ON 04.12. 2009,DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,52,29,770 /-. FIRST GROUND OF APPEAL PERTAINS TO DELETING THE ADD ITION OF RS.48,95,739/-WHICH REPRESENTS UNEXPLAINED INVESTMENT TAXABLE U/S.69 OF THE ACT.DU RING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD SHOWN INVESTMENT IN RESIDENTI AL PROPERTY AMOUNTING AT RS.48,95,739/-,THAT SAME WAS APPEARING IN THE BALANCE-SHEET.STATING THA T EXPLANATION OR PROOF OF INVESTMENT FURNISHED BY THE ASSESSEE WERE INADEQUATE,HE TREATED THE SAID SUM AS UNEXPLAINED INVESTMENT AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT FROM THE BALANCE-SHEET IT TRANSPIRED THAT THE ASSES SEE HAD SHOWN FIXED ASSETS AT RS.73,87,743/-, THAT THE BREAK-UP OF THE FIXED ASSETS SHOWED INVEST MENT IN RESIDENTIAL FLATS AT RS.48,95,739/-,THAT THE SAID FIGURE REPRESENTED THE OPENING BALANCE BRO UGHT FORWARD FROM THE EARLIER YEAR,THAT THE BREAK-UP ALSO SHOWED THE CLOSING BALANCE OF THE SAM E FIGURE OF RS.48,95,739/-,THAT THERE WAS THUS NO INVESTMENT MADE DURING THE CURRENT YEAR,THAT BRE AK-UP OF THE FIXEL ASSETS WAS ALSO GIVEN TO THE AO,THAT HE HAD REFERRED TO IN THE ASSESSMENT ORDER, THAT IT WAS NOT UNDERSTANDABLE AS TO HOW AND WHY THE AO HAD MADE THE IMPUGNED ADDITION.THEREORE, ADDITION MADE OF RS.48,95,739/- BY THE AO HAD NO LEGS TO STAND. 2.2. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTE D THE ORDERS OF THE AO ,WHERES AS THE AUTHORISED REPRESENTATIVE(AR) SUPPORTED THE ORDER O F THE FAA AND SUBMITTED THAT NO INVESTMENT WAS MADE DURING THE YEAR UNDER APPEAL.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT THE PROPERTY WAS NOT OWNED BY THE ASSESSEE IN THE YEAR UNDER CON SIDERATION,WHEREAS ORDER OF THE AO IS SILENT ON THIS ISSUE.DR COULD NOT CONTROVERT THE FACT NARR ATED BY THE FAA.FROM THE ACCOUNTS OF THE ASSESSEE IT IS CLEAR THAT AMOUNT IN QUESTION WAS OP ENING BALANCE FOR THE YEAR UNDER APPEAL. THEREFORE,NO ADDITION COULD HAVE BEEN MADE FOR THE YEAR.WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY INFIRMITY.THEREFOR E,CONFIRMING HIS ORDER WE DECIDE GROUND NO.1 AGAINST THE AO. 3. SECOND GROUND IS ABOUT DELETING THE ADDITION OF RS. 4,24,000/- MADE U/S. 23 OF THE ACT,MADE BY THE AO.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND T HAT THAT THE ASSESSEE HAD DECLARED THREE HOUSE PROPERTIES DURING THE YEAR UNDER APPEALS,THAT THE FIRST PROPERTY WAS AT SV ROAD,VILE PARLE,THAT THE SAID PROPERTY WAS DECLARED AS SELF O CCUPIED PROPERTY THE OTHER TWO WERE SHOWN AS LET OUT,THAT THE ASSESSEE COMPUTED LOSS OF RS.79,93 1 UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH WAS SET OFF AGAINST SALARIES. REFER RING TO THE ASSESSMENT RECORDS OF THE WIFE OF THE ASSESSEE,AO OBSERVED THAT THE ASSESSEE HAD LET OUT THE PROPERTY AT SV ROAD TO M/S SAGAR CONSTRUCTIONS (SC) AND M/S KARODIA CONSTRUCTIONS (K C),THAT HE DID NOT OFFER ANY RENTAL INCOME TO TAX,THAT HE DID NOT OFFER ANY EXPLANATION IN THIS R EGARD.AS A RESULT AO COMPUTED INCOME FROM THIS PROPERTY AT RS.50,400/-. AO FURTHER OBSERVED THAT T HE ASSESSEE HAD TWO OTHER PROPERTIES FROM WHICH HE HAD NOT DISCLOSED ANY INCOME,THAT THE PROP ERTIES WERE STATED TO BE AT SV ROAD AND WERE ALSO LET OUT TO SC AND KC,THAT ONE GALA AT SAMPADA WAS CLAIMED TO BE LET OUT TO BIANCO TEXTILES 3 ITA NO. 9170/MUM/2010 & 02/MUM/2011 SHRI BINAL S.KORADIA SOLUTIONS(BTS). THE AO ESTIMATED INCOME FROM PROPER TIES AND MADE AN ADDITION OF AGGREGATE SUM OF RS.4,24,200/- (50,400+100800+273000) UNDER T HE HEAD INCOME FROM HOUSE PROPERTY. 3.1. ASSESSE PREFERRED AN APPEAL BEFORE THE FAA.BEFORE H IM AR SUBMITTED THAT HE HAD ALREADY OFFERED RENTAL INCOME FROM THE PROPERTY GALA NO.G-0 5 WHICH WAS LET OUT TO BTC WHOSE OFFICE ADDRESS AT 301,PRESSMAN HOUSE,VILLE PARLE WAS MENTI ONED IN THE STATEMENT OF TOTAL INCOME,THAT THE AO HAD TAKEN THIS OFFICE PREMISES AS IF IT BELO NGED TO THE ASSESSEE,THAT THE PROPERTY, C-403 AT SV ROAD WAS OWNED BY HIS WIFE AND SHE HAD DECLARED INCOME FROM THAT PROPERTY,THAT THE SELF OCCUPIED PROPERTY (0-402) OF THE ASSESSEE WAS NOT L ET OUT,AS ALLEGED BY THE AO. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT O RDER HE HELD THAT A PLAIN READING OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS SIMPLY MADE PRESUMPTUOUS AND BASELESS ADDITION OF RS.4,24,000/-. 3.2. BEFORE US,DR SUPPORTED THE ORDER OF THE AO AND AR M ADE THE SAME SUBMISSIONS THAT WERE MADE BEFORE THE FAA.AFTER HEARING THE RIVAL SUBMISS IONS WE ARE OF THE OPINION THAT ASSESSEE DID NOT OWN THREE PROPERTIES AS ALLEGED BY THE AO.AS TH E ORDER OF THE AO IS NOT BASED ON FACTS AND THE FAA HAS DECIDED THE ISSUE CONSIDERING THE FACTUAL P OSITION,SO CONFIRMING HIS ORDER WE DECIDE GROUND NO.2 AGAINST THE AO. APPEAL FILED BY THE AO STANDS DISMISSED. ITA/02/MUM/2011,AY-2007-08: 4. NOW,WE WOULD TAKE THE APPEAL FILED BY THE ASSESSEE. FIRST GROUND OF APPEAL IS ABOUT CONFIRMA - TION OF THE PARTIAL ADDITION OF RS.70,40,850/- AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESS EE WAS A BENEFICIAL SHAREHOLDER IN M/S KARODIA CONSTRUCTION P. LTD.(KCPL)HOLDING 50% OF TH EIR SHARES,THAT HE HAD TAKEN LOAN OF RS.99,32,251/- FROM THE SAID COMPANY WHICH HAD ACCU MULATED PROFITS OF RS.8,00,97,861.AO TABULATED THE DETAILS OF LOAN IN THE ASSESSMENT ORD ER AND IN ABSENCE OF EXPLANATION HE TREATED THE LOAN AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT AND ADDED RS.99,32,251/- TO THE INCOME OF THE ASSESSEE. 4.1. BEING AGGRIEVED THE ASSESSEE SUBMITTED BEFORE THE F AA THAT THE IMPUGNED SUM INCLUDES SALARY INCOME OF RS.1,65,000/- WHICH THE AO REFERRE D TO IN THE ASSESSMENT ORDER AS CASH LOANS, THAT SAID SUM SHOULD NOT BE ADDED TO HIS INCOME,THA T SALARY WAS ALREADY OFFERED FOR TAXATION, THAT IN THE BALANCE SUM OF RS,97,67,511/- THERE WAS AN E RROR,THAT THE CORRECT AMOUNT WAS RS.1,08, 67,500/-, THAT THE AO HAD IGNORED ANOTHER CREDIT OF RS.1,00,000/-,THAT THE AGGREGATE CREDIT IN HIS ACCOUNT WITH THE SAID COMPANY WAS RS. 1,09,67,500/- AND NOT RS.97,67,511/- AS WORKED OUT BY THE AO, THAT THE AO HAD IGNORED THE OPENING DEBIT BALAN CE OF RS.30,87,850/- AND OTHER DEBITS OF RS.3,30, 000/-, RS.2,88,800/-, AND RS.2,00,000/-AGG REGATING TO RS.39,26,650/-WHICH SHOULD HAVE NOT BEEN CONSIDERED FOR ADDITION.REGARDING THE BALA NCE OUTSTANDING OF RS.70,40,850/-,ASSESSEE SUBMITRED THAT IT REPRESENTED ADVANCE RECEIVED FROM THE COMPANY TOWARDS PURCHASE OF FLAT WHICH ULTIMATELY FELL THROUGH AND THE AMOUNT WAS LATER RE FUNDED,THAT IT WAS NOT A LOAN OR ADVANCE COVERED BY SECTION 2(22)(E) AND THE ENTIRE ADDITION OF RS.99,32,251 SHOULD BE DELETED. 4.1.A. IN HIS ORDER FAA HELD THAT THE AO HAD ERRED IN BRIN GING TO TAX RS.1,65,000/-WHICH REPRESSE - NTED REMUNERATION FROM KCPL,THAT THE ASSESSEE HAD C ORRECTLY POINTED OUT ERRORS COMMITTED BY THE AO,THAT THE LEDGER ACCOUNT OF THE ASSESSEE WITH TH E SAID COMPANY REVEALED TOTAL CREDIT OF RS. 1,09,67,500/-,THAT THERE WERE OPENING DEBIT BALANC E AND OTHER DEBITS AGGREGATING TO RS. 39,26,650/-AS POINTED OUT BY THE ASSESSEE,THAT THER E WAS A CREDIT BALANCE OF RS.70,40,850/- WHICH ALONE COULD HAVE BEEN CONSIDERED AS LOAN OR ADVANCE FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. REFERRING TO THE PROVISIONS OF SECTION HE HELD THAT THE ASSESSEE WAS A BENEFICIAL OWNER OF MORE THAN 10% SHARES OF KCPL,THAT THE COMPANY HAD A CCUMULATED PROFITS OF MORE THAN AGGREGATE OF ALL THE PAYMENTS ON VARIOUS DATES,THAT A PLAIN R EADING OF SECTION 2(22)(E) SHOWED THAT IN THE CIRCUMSTANCES STATED THEREIN ANY PAYMENT BY A COMPA NY TO A SHAREHOLDER WOULD TO THE EXTENT OF ITS 4 ITA NO. 9170/MUM/2010 & 02/MUM/2011 SHRI BINAL S.KORADIA ACCUMULATED PROFIT WOULD AMOUNT TO DIVIDEND IN THE HANDS OF SUCH SHAREHOLDER,THAT ONLY ADVANCE OR LOAN MADE IN THE ORDINARY COURSE OF ITS BUSINESS WERE TREATED AS EXEMPT WHERE THE LENDING OF MONEY WAS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY,THAT SAID CONDITIONS DID NOT APPLY IN THE CASE UNDER APPEAL,THAT THE PROVISIONS OF THE SE CTION DID NOT EXCLUDE A PAYMENT IF THAT WAS ADVANCED TOWARDS PURCHASE OF A PROPERTY EVEN IF SAM E WAS REFUNDED LATER.HE RELIED UPON THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT AND SUPR EME COURT DELIVERED IN THE CASES OF P.K. BADIANI(76 ITR361)AND MUKUNDIDY K SHAH(290ITR433)HE LD THAT THE CONCEPT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT POSTULAT ED TWO FACTORS, NAMELY, WHETHER PAYMENT WAS A LOAN AND WHETHER ON THE DATE OF PAYMENT THERE EXI STED ACCUMULATED PROFITS,THAT THOSE TWO FACTORS HAD TO BE CORRELATED,THAT IN THE MATTER UND ER APPEAL SAID CORRELATION LED TO THE CONCLUSION THAT THERE WAS CREDIT BALANCE OF RS.70,40,850/-IN T HE ACCOUNT OF THE COMPANY IN THE BOOKS OF THE ASSESSEE,THAT THE AOS ACTION WAS RIGHT IN TREATING THE BALANCE TO THE EXTENT OF RS.70,40,850/- AS DEEMED DIVIDEND.HE RESTRICTED THE ADDITION TO THAT EXTENT AND THE ASSESSEE GOT RELIEF OF RS,28,91,401/-. 4.2. BEFORE US,AR SUBMITTED THAT KCPL HAD GIVEN AN ADVAN CE OF RS.70.20 LAKHS FOR THE PURCHASE OF FLAT,THAT IN THE ACCOUNTS OF THE COMPANY SAID AM OUNT IS SHOWN AS AN ADVANCE,THAT IN THE MATTER OF THE WIFE OF THE ASSESSEE,SIMILAR ISSUE WAS DEALT BY THE ITAT(ITA/03/MUM.2011-AY.2007- 08,DATED 19.04.2013),THAT THE TRIBUNAL HAD HELD THA T ADVANCE FOR PURCHASE OF FLAT COULD NOT BE TAXED U/S.2 (22)(E) OF THE ACT.HE RELIED UPON THE C ASES OF ARVIND KUMAR JAIN(18TAXMANN. COM. 132),CREATIVE DRYING AND PRINTING (P.)LTD.(184 TAXM ANN.483), RAJKUMAR (181 TAXMANN. 155). DR SUPPORTED THE ORDERS OF THE FAA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATTER BEFORE US.WE FIND THAT IN THE CASE OF WIFE OF THE ASSESSEE,MRS.AMISHA B KORADIA(SUPRA) ,IDENTICAL ISSUE WAS DISCUSSED BY THE TRIBUNAL AS UNDER : WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE DISPUTE BEFORE US IS REGARDING THE ADVANCE OF RS. 58 LACS S TATED TO HAVE BEEN GIVEN TO THE ASSESSEE BY THE COMPANY FOR PURCHASE OF FLAT. THE ASSESSEE HAS FILE D A COPY OF THE RESOLUTION OF M/S KORADIA CONSTRUCTION P. LTD. DATED 09.09.2006 WHEREIN THE C OMPANY HAD DECIDED TO PURCHASE THE FLAT NOS C-402 AND C-403 SITUATED AT GOKUL DIVINE, IRLA, S.V .ROAD, VILE PARLE(W) MUMBAI 400 056 FROM THE ASSESSEE AND HER HUSBAND. FROM THE BOOKS OF ACC OUNTS AND AUDIT REPORT OF M/S KORADIA CONSTRUCTION P. LTD., IT IS EVIDENT THAT THE COMPAN Y HAS SHOWN THIS AMOUNT OF RS. 58 LACS AS ADVANCE FOR THE PURCHASE OF PROPERTY. AS PER THE SC HEDULE E TO THE BALANCE SHEET OF M/S KORADIA CONSTRUCTION P. LTD, THE AMOUNT OF RS. 58 LACS HAS BEEN CLEARLY SHOWN AS TOWARDS PURCHASE OF PREMISES. THEREFORE, IN VIEW OF THE FACT THAT THE C OMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEALING IN PROPERTIES AND THE PURPOSE OF ADVANC ING MONEY TO THE ASSESSEE, AS PER THE RECORD OF THE COMPANY IS FOR PURCHASE OF PROPERTY; THEREFORE, FALLS UNDER THE BUSINESS/COMMERCIAL TRANSACTION BETWEEN THE COMPANY AND THE ASSESSEE. IT IS TO BE NOTED THAT THE RETURN OF THE COMPANY HA S BEEN FILED WITH THE SAME ASSESSING OFFICER WHO HAS JURISDICTION OVER THE ASSESSEE. THEREFORE, WHEN THE AMOUNT OF ADVANCE OF RS. 58 LACS GIVEN TO THE ASSESSEE BY THE COMPANY FOR THE PURCHASE OF PRO PERTY AS RECORDED IN THE BOOKS OF ACCOUNT OF THE COMPANY, THEN IT CANNOT BE PRESUMED THAT THE SA ID AMOUNT FALLS UNDER THE AMBIT OF LOAN AND ADVANCES IN THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. MOREOVER, IT IS PERTINENT TO NOTE THAT RS. 50 LACS WAS GIVEN TO THE ASSESSEE ON 15.02.2007 AND THEREFORE, THIS AMOUNT REMAINS ONLY FOR 1 MONTHS DURING THE YEAR UNDER CONSIDERATION. FURTHER, THE AMOUNT OF RS. 8 LACS WAS GIVEN TO THE ASSESSEE ON 28 TH DEC 2006 AND THE SAID AMOUNT REMAINS WITH THE ASSESSEE ONLY FOR 3 MONTHS IN VIEW OF THE SHORT SPAN OF PERIOD OF 1 MONTHS IN RESPECT OF RS. 50 LACS AND 3 MONTHS IN RESPECT OF 8 LACS. IT I S OTHERWISE NOT PERMISSIBLE TO MAKE FULL ADDITION OF THE SAID AMOUNT FOR THE YEAR UNDER CONSIDERATION . ONCE THE ASSESSEE HAS ESTABLISHED THAT THE SAID AMOUNT WAS GIVEN TO THE ASSESSEE FOR THE PURCH ASE OF FLAT WHICH IS IN THE NATURE OF COMMERCIAL TRANSACTION BETWEEN THE PARTIES, THEN IN THE ABSENC E OF PROVING CONTRARY BY THE DEPARTMENT, THE ADDITION TO THE EXTENT OF RS. 58 LACS IS NOT JUSTIF IED. THIS VIEW IS FORTIFIED BY SERIES OF DECISION AS RELIED UPON BY THE ASSESSEE. HENCE, IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AND 5 ITA NO. 9170/MUM/2010 & 02/MUM/2011 SHRI BINAL S.KORADIA CIRCUMSTANCES OF THE CASE, THE ADDITION TO THE EXTE NT OF RS.58 LACS U/S 2(22)(E) IS DELETED AND CONSEQUENTLY, THE ADDITION OF BALANCE AMOUNT OF RS. 7,99,604/- IS CONFIRMED. FROM THE ABOVE,IT IS CLEAR THAT TRIBUNAL HAD HELD T HAT ADVANCE RECEIVED BY THE ASSESSEE FOR PURCHASE OF FLAT COULD NOT BE TREATED DEEMED DIVIDE ND.WE FIND THAT IN THE MATTER BEFORE US, AMOUNT RECEIVED BY THE ASSESSEE WAS MEANT FOR PURCH ASING A FLAT.THEREFORE, RESPECTFULLY, FOLLOWING THE ORDER OF THE COORDINATING BENCH WE RE VERSE THE ORDER OF THE FAA AND DECIDED GROUND NO.1 IN FAVOUR OF THE ASSESSEE. 5. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF INTE REST.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE WAS A PARTNER IN PARTNERSHI P FIRMS M/S. ADITYA DEVELOPERS(AD) AND SAGAR CONSTRUCTIONS (SC),THAT HE EARNED INTEREST OF RS.1. 24 LAKHS ON HIS CAPITAL WITH M/S. AD, THAT THE ASSESSEE HAD ADJUSTED THE INTEREST AMOUNT AGAINST I NTEREST PAYMENT OF RS.3,10,215/-ON OVERDRAWN CAPITAL FROM M/S.SC.AO HELD THAT THE INTEREST PAYME NT HAD NO NEXUS WITH THE INTEREST EARNED AND WAS THUS NOT AN ADMISSIBLE DEDUCTION UNDER SECTION 57(III) OF THE ACT.AS A RESULT,HE ADDED THE ENTIRE INTEREST INCOME OF RS.1,24,775/- TO THE INCO ME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. 5.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT THE ASSESSEE WITHDREW A TOTAL SUM OF RS.16,20, 000/- BETWEEN 20.07.2006 AND 07.09.2006 FROM M/S. SC AND INTRODUCED A SUM OF RS.20,00,000/- ON 27.12.2006 IN M/S AD,THAT BOTH THE TRANSACTIONS WERE THROUGH BANK,THAT THERE WAS TIME GAP OF MORE THAN 3 MONTHS BETWEEN THE AMOUNTS DRAWN FROM O NE FIRM AND THE AMOUNT DEPOSITED WITH THE OTHER FIRM,THAT NO EXPLANATION WAS GIVEN ABOUT THE TIME GAP BETWEEN THE TWO TRANSACTIONS,THAT THERE WAS NO LINKAGE BETWEEN THE TWO THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE CLAIM MADE BY HIM.HE UPHELD THE ACTION OF THE AO IN DISALLOWIN G THE DEDUCTION. 5.2. BEFORE US,AR CONTENDED THAT THE ASSESSEE WITHDREW C APITAL FROM M/S.SC AND CONTRIBUTED THE SAME TO M/S.AD ON WHICH HE EARNED INTEREST INCOME O F RS.1,24,775,THAT INTEREST PAYMENT OF RS.3,10,215/- HAD DIRECT NEXUS WITH THE INTEREST EA RNED AND SHOULD BE ALLOWED AS DEDUCTION.HE RELIED UPON THE ORDER OF THE TRIBUNAL DELIVERED IN THE CASE OF THE AMISHA B KORADIA(SUPRA).DR SUPPORTED THE ORDER OF THE FAA. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IDENTICAL ISSUE HAS BEEN DEALT BY THE TRIBUNAL IN THE MATTER OF THE WIFE OF THE ASSESSEE AS UNDER: WE HAVE HEARD THE LD. AR AS WELL AS THE LD DR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS INTRODUCED RS. 50 LACS AS CAPITAL IN ADITYA DEVELOPERS AND WITHDRAWAL OF RS. 56 LACS WITH SAGAR CONSTRUCTION. THUS, THE ASSESSEE HA S EARNED INTEREST INCOME FROM PARTNERSHIP FIRMS M/S ADITYA DEVELOPERS, AT THE SAME TIME; THE ASSESSEE HAD INTEREST EXPENDITURE OF RS. 65,429/- ON DEBIT BALANCE WITH THE OTHER PARTNERSHI P FIRM 8.AT THE OUTSET, WE NOTE THAT THE ASSESSING OFFICER HAS ASSESSED INTEREST INCOME RECEIVED FROM THE FIRM AS INCOME FROM OTHER SOURCES WHICH ITSELF CONT RARY TO THE PROVISIONS OF SEC. 28(V). CHARGING OF PAYMENT OF INTEREST IS PROVIDED UNDER THE PARTNERSH IP DEED AND THEREFORE, THE AMOUNT OF INTEREST RECEIVED FROM THE PARTNERSHIP FIRM HAS TO BE ASSESS ED AS BUSINESS INCOME IN TERMS OF SECT. 28(V) WHICH PROVIDES AS UNDER: (V) ANY INTEREST, SALARY, BONUS, COMMISSION OR REMU NERATION, BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A PARTNER OF A FIRM FROM SUCH FIRM: PROVIDED THAT WHERE ANY INTEREST, SALARY, BONUS, CO MMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, OR ANY PART THEREOF HAS NOT BEEN ALLOWED TO BE DEDUCTED UNDER CLAUSE (B) OF SECTION 40, THE INCOME UNDER THIS CLAUSE SHALL BE ADJUSTED TO THE E XTENT OF THE AMOUNT NOT SO ALLOWED TO BE DEDUCTED. 8.1.THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASS ESSEE HAS OVERDRAWN FROM THE PARTNERSHIP FIRM M/S SAGAR CONSTRUCTION; THEREFORE, THE INTEREST PAI D TO THE SAGAR CONSTRUCTION FOR THE DEBIT 6 ITA NO. 9170/MUM/2010 & 02/MUM/2011 SHRI BINAL S.KORADIA BALANCE IN THE CAPITAL ACCOUNT IS AN ALLOWABLE EXPE NDITURE AGAINST THE BUSINESS INCOME OF THE ASSESSEE AND PARTICULARLY AGAINST THE INTEREST/REMU NERATION RECEIVED FROM THE PARTNERSHIP FIRM. AS THE FACTS OF BOTH THE CASES ARE SIMILAR,THEREFOR E RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL PRONOUNCED IN THE MATTER OF THE WIFE OF THE ASSESSE E,WE REVERSE THE ORDER OF THE FAA. GROUND NO.2 FILED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR . AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED ,WHEREAS APPEAL FILED BY THE ASSESSEE IS ALLOWED. 0 *1 '0*-+ 4 5 6 ( * 78 9 '0* ( : ( * 78. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2014. / ( ,-# < 14 QJ QJQJ QJ + , 2014 - ( . . SD/- SD/- ( . . . B.R.MITTAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, =' /DATE: 14.02.2014 SK / / / / ( (( ( &*> &*> &*> &*> ? >#* ? >#* ? >#* ? >#* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR B BENCH, ITAT, MUMBAI / >B. &*' CH CHCH CH , . . . 6. GUARD FILE/ . C . '>* &* //TRUE COPY// /' / BY ORDER, D / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI.