Mukul Gupta, New Delhi V. ITO WARD - 61(2), New Delhi

ITA 934/DEL/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4807 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 28-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.934/DEL/2020 ASSESSMENT YEAR: 2014-15 MUKUL GUPTA 206, HANS BHAWAN, 1, BAHADUR SHAH ZAFAR, MARG, NEW DELHI PAN NO. AJXPG4271H VS ITO WARD -61 (2) CIVIC CENTRE, MINTO ROAD, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. MUKUL GUPTA, CA RESPONDENT BY SH. VIPUL KASHYAP, SR. DR DATE OF HEARING: 27/09/2021 DATE OF PRONOUNCEMENT: 30/09/2021 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE CIT(A)-20, NEW DELHI DATED 20.01.2020 PERTAININ G TO A.Y. 2016-17. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.1429758/-BY RESTRICTING THE INTEREST EXPENSE ONLY TO THE EXTENT OF INCOME EARNED UNDER SECTION 57 OF THE ACT. 2 3. ASSESSEE IS A CHARTERED ACCOUNTANT BY PROFESSION . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE A O NOTICED THAT THE ASSESSEE HAS BORROWED RS.4,50,91,200/- FRO M M/S. Y. K. GUPTA CO. IN WHICH HE IS A PARTNER AND HAS PAID INT EREST OF RS.54,06,032/-. THE AO FURTHER NOTICED THAT THE AS SESSEE HAS EXTENDED A LOAN OF RS.6,37,49,869/- TO M/S. SMARTES T CORPORATE SERVICES PVT. LTD. FROM WHICH HE HAD RECEIVED INTER EST OF RS.3976274/- WHICH WAS CLAIMED DEDUCTIONS U/S.57 O F THE ACT. 4. THE AO WAS OF THE OPINION THAT ON BORROWED FUNDS THE ASSESSEE HAS PAID INTEREST OF RS.54,06,032/- WHEREA S THE ASSESSEE HAS RECEIVED INTEREST MUCH LESS FROM THE L OAN GIVEN BY HIM. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY T HE INTEREST OF RS.1429758/- SHOULD NOT BE TAXED UNDER INCOME FROM OTHER SOURCES AT THE SAME CANNOT BE ALLOWED AS INCOME U/S .57 (III) OF THE ACT. ASSESSEE FILED REPLY WHICH WAS NOT ACCEPT ED BY THE AO TO CONCLUDED THE ASSESSMENT PROCEEDINGS BY MAKING ADDI TION OF RS.1429758/-. 5. ASSESSEE AGITATED THE MATTER BEFORE THE CIT(A) A ND STRONGLY CONTENDED THAT THE ENTIRE AMOUNT OF RS.4.50 CRORES BORROWED FROM M/S. Y. K. GUPTA & COMPANY WAS GIVEN AS LOAN T O M/S. SMARTEST CORPORATE SERVICES PVT. LTD. THE ENTI RE INTEREST PAID ON RS.4.50 CRORES SHOULD BE ALLOWED AS EXPENS ES U/S. 57 (III) BECAUSE THE SAID EXPENDITURE WAS INCURRED WHO LLY AND 3 EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INC OME FROM M/S. SMARTEST CORPORATE SERVICES PVT. LTD. 6. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS THE CIT(A) HELD AS UNDER :- 7. BEFORE ME THE COUNSEL REITERATED WHAT HAS BEEN S TATED BEFORE THE LOWER AUTHORITIES AND THE DR STRONGLY SU PPORTED THE ASSESSMENT ORDER AND ORDER OF THE CIT(A). 4 8. I HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AU THORITIES BELOW. AS MENTIONED ELSEWHERE THE ASSESSEE IS A CH ARTERED ACCOUNTANT. THE ASSESSEE BORROWED RS. 4.50 CRORES FROM M/S. Y.K. GUPTA & CO. A FIRM OF CHARTERED ACCOUNTANTS WH EREIN THE ASSESSEE IS A PARTNER THE ASSESSEE EXTENDED LOAN OF RS.6.3 CRORES TO M/S. SMARTEST CORPORATE SERVICES PRIVATE LIMITED THE ASSESSEE IS CLAIMING INTEREST PAID AS DEDUCTION FROM INTERES T RECEIVED ON THE GROUND THAT INTEREST EXPENSES WERE INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INC OME. I FAIL TO UNDERSTAND THIS TRANSACTION OF THE ASSESSEE. THE A SSESSEE IS A PRACTICING CHARTERED ACCOUNTANT AND IS NOT ENGAGE I N MONEY LAUNDERING BUSINESS. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BORROWED THE MONEY FROM HIS FIRM FOR THE PURPOSES O F HIS PROFESSION. THE ASSESSEE IN HIS WISDOM BORROWED MO NEY AT A HIGHER RATE OF INTEREST AND LENDED THE SAME AT A LO WER RATE OF INTEREST. IN MY CONSIDERED OPINION THE AO SHOULD HA VE DISALLOWED THE ENTIRE INTEREST CLAIMED BY THE ASSESSEE BUT I C ANNOT IMPROVE THE ASSESSMENT ORDER NOR I CAN IMPROVE THE ORDER OF THE CIT(A). IN MY CONSIDERED OPINION BORROWING MONEY AT A HIGHE R RATE OF INTEREST FROM A RELATED PARTY AND LENDING THE SAME AT LOWER RATE OF INTEREST TO AN UNRELATED PARTY DEFIES ALL COMMERCIA L PRUDENCE EXPECTED FROM A CHARTERED ACCOUNTANT. SURROUNDING CIRCUMSTANCES CANNOT BE IGNORED. 5 9. CONSIDERING THE FACTS OF THE CASE IN TOTALITY I DECLINE TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THE APP EAL FILED BY THE ASSESSEE IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.2021. SD/- (N. K. BILLAIYA) ACCOUNTANT MEMBER *NEHA* DATE:- 30.09.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI 6 DATE OF DICTATION 28 .09.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.09.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 30.09.2021 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 30.09.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 30.09.2021 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 30.09.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 30.09.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.09.2021 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER