C Venkateswara Rao, Hyderabad V. ACIT, Circle-2(1), Hyderabad

ITA 944/HYD/2013

• Counselvise Citation: 94422514 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.985/HYD/13 (ASSESSMENT YEAR 2007 - 08) DY. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), HYDERABAD V/S. SHRI C.VENKATESWARA RAO, HYDERABAD (PAN - ABJPC 7670 A ) (APPELLANT) (RESPONDENT) & ITA NO.944/HYD/13 (ASSESSMENT YEAR 2008 - 09) SHRI C .VENKATESWARA RAO, HYDERABAD (PAN - ABJPC 7670 A ) V/S. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : S HRI S.RAMA RAO DEPARTMENT BY : SHRI KIRAN KATTA DR DATE OF HEARING 26 .0 8 .2014 DATE OF PRONOUNCEMENT 28.08.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER: OUT OF TH E SE TWO APPEALS, ONE APPEAL, BEING ITA N O.985/HYD/2013 IS THE APPEAL O F THE REVENUE, WHICH I S DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VIJAYAWADA DATED 27.3.2013 FOR THE ASSESSMENT YEAR I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 2 2007 - 08, WHIL E THE OTHER APPEAL BEING I T A NO.944/HYD/2013 IS THE APPEAL OF THE ASSESSEE WHICH IS DIRECTE D AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) III , HYDERABAD DATED 20 TH NOVEMB E R, 2012 FOR THE ASSESSMENT YEAR 2008 - 09. SINCE THE MAIN ISSUE INVOLVED IN BOTH THE SE APPEALS IS COMMON, THE SAME HAVE BEEN HE A RD TOGETHER AND ARE BEI N G DISPOSED OF F BY A COMMON CONSOLIDATED ORD E R FO R THE SAKE OF CONVENIENCE. REVENUE S APPEAL : ITA NO.9 85 /HYD/2013 : ASSESSMENT YEAR 200 7 - 0 8 2. WE SHALL FIRST TAKE UP THE APPEAL OF THE REVENUE, BEING ITA NO.985/HYD/2013 FOR THE ASSESSMENT YEAR 2007 - 08, WHICH INVOLVES A SOLITARY ISSUE RELATING TO DISA L LOWANCE OF RS.69,05,482 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST CLAIMED BY THE ASSESSEE AS DEDUCTION U/S. 24(B) OF THE ACT, WHICH IS DELETED BY THE CIT(A). 3. THE ASSESSEE IN THE PRE SENT CA S E IS AN IN D I VI DUAL WHO DERIVES INCOME INTER ALIA BY WAY OF INCOME FROM HOU S E PROPERTY. THE RETURN OF INCOME FOR THE YEAR UNDER CON S I D ERATION WAS FIL E D BY HIM ON 31.7.2007 DECLARING TOTAL INCOME OF RS.7,83,078. IN THE S A ID RETURN, RENTAL INCOME OF RS.1,05,48,835 RECEIVED FROM THE BUILDING OWNED BY TH E ASSESSEE AND GIV E N ON LEASE TO M/S. IMAGE HOSPI T ALS P. LTD. WAS SHOWN UNDER THE HEAD INCOM E FROM HOU S E PROP E RTY AND AFTER CLAIMING DEDUCTION OF RS.31,64,651 UN D ER S.24(A) AND INTER E ST UNDER S.24(B) OF R S .69,05,482, NET INCOME OF R S .4,28,703 WAS DECLARED BY THE ASSESSEE. DURIN G THE COU R SE OF ASSESSMENT PROCEEDINGS, THE CLAIM O F TH E ASSESSEE FOR DEDUCTION ON ACCOUNT OF IN T ER ES T UNDER S.24(B) WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATIO N, HE FOUND THAT THE SAID IN T EREST WAS PAID BY THE ASSESSEE ON THE LOANS TAKEN FORM PUNJAB NATIONAL BANK DURING THE YEAR UNDER CONSIDERATION, WH ICH W ERE I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 3 C LAIMED TO BE UTILIZED FOR REPAYMENT OF FIXED DEPOSITS MOBILIZED IN THE EARLIER YEARS FOR THE PURPOSE OF CONSTRUCTION OF HOSPITAL BUILDING THE CON S TRUC T ION OF THE HOSPITAL BUILDING WAS STA T ED TO BE UN D ERTAKEN OVER A PERIOD O F TIME FROM 1998 TO 2007 FOR WHICH THE FUNDS REQUIRED WERE CLAIMED TO BE RAISED BY MOBILSIING THE FIXED DEPOSITS. THE SAID DEPO S ITS W ERE CLAIMED TO B E REPAID IN THE YEAR UNDER CONSIDERATION F R OM THE LOANS AVAILED FROM PUNJAB NA T IONAL BANK AND IN T ER E ST PAID ON THE LOANS SO AVAILED FROM PUNJAB NA T IONAL BANK WAS CLAIMED TO BE EXPENDITURE DEDU C T I BL E UN D ER S.24(B) UNDER THE HEAD INCOM E FRO M HOU S E PROP E RTY . IN THIS REGARD, THE ASSESSEE WAS C AL L ED UPON BY THE ASSESSING OFFICER TO PROVE THE NEXUS BETWEEN THE CON S TRUC T ION ACTIVITY AND THE FIXED DEPOSITS MOBILIZED . I N THE ABSENCE OF ANY BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE OR ANY OTHER EVIDENCE PRODUCED IN SUPPORT, THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NO T ESTABLISH ANY DIRECT NEXUS BETWEEN THE VALUE ADDITION MADE TO THE BU I LDING AND THE FIXED DEPOSITS MOBILIZE D. HE THER E FORE, DISALLOWED THE DEDUCTIONS CLAIMED BY THE ASSESSEE UNDER S.24(B) ON ACCOUNT OF IN T ER E ST PAID ON THE LOANS TAKEN FROM PUNJAB NA T IONAL BANK IN THE ASSESSMENT COMPLETED UN D ER S.143(3 ) VIDE ORDER DATED 24.12.2009. 4 . AGAIN S T THE ORDER PASSE D BY TH E ASSESSING OFFICER UN D ER S.143(3) , APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) DISPUTING THEREIN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUN T OF IN T ER E ST UNDER S.24(B). AFTER C ONSIDERING THE SUBMI S SION S MADE BY THE ASSESSEE AND THE M A TE R IAL AVAILABLE ON RECORD, THE CIT(A) DELETED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS GIVE N IN HIS IMPUGNED ORDER - I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 4 IN THE LIGHT OF WHAT HAS BEEN STATED (SUPRA), I H A VE PERUSED THE R E CORDS. IT I S AN ADMITTED FACT THAT THE APPELLANT DURING THE Y E AR OF ACCOUNT RAISED A LOAN OF R S .9.96 CRORE FROM PUNJAB NATIONAL B ANK AND OTHER BANKS AND UTILIZED THE SAME FOR REPAYM E NT OF THE EARLIER PRIVATE LOANS RAISED. IN THIS CONN E C T ION I MAY MAKE A MENTION ABOUT THE CIRCULAR NO.28 DT.20 . 08.1969 ISSUED BY THE C.B.D.T. WHEREIN IT IS STATED THAT SECTION 24(1) (VI) OF THE IT ACT, 1961 PROVIDES THAT WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED , RENEWED OR RE - CONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL SHALL BE ALLOWED AS AN ADMISSIBLE DEDUCTION IN THE COMPUTATION OF THE INCOME FROM THE SAID PROPERTY. A QUESTION HAS BEEN RAISED WHETHER IN A CASE WHERE A FRESH LOAN HAS BEEN RAISED TO REPAY THE ORIGINAL LOAN TAKEN FOR THE ABOVE PURPOSE, THE INTEREST PAYABLE IN RESPECT OF THE SECOND LOAN WOULD ALSO BE ADMISSIBLE AS A DEDUCTION UNDER S. 24(1)(VI) OF THE IT ACT. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT IF THE SECOND BORROWING HAS R EALLY BEEN USED MERELY TO REPAY THE ORIGINAL LOAN AND THIS FACT IS PROVED TO THE SATISFACTION OF THE ITO, THE INTEREST PAID ON THE SECOND LOAN WOULD ALSO BE ALLOWED AS A DEDUCTION UNDER S.24(1)(VI). SEC.24(1)(VII) (PR E SENTLY SECTION 24(B) PROVIDES THAT W H E RE THE PROPER T Y HAS BEEN AC Q UIRED, CONSTRUCTED, REPAIRED, RENEWED OR CONSTRUCTED WITH BORROWE D CAPITAL, THE AMOUNT OF ANY INTER ES T PAYABLE ON SUCH CAPI T AL SHALL BE DEDUCTED FORM COMPU T ATION OF INCOME FROM HOU S E PROPERTY. THE ONLY CON D ITION PRECEDENT FOR ALLO W IN G DEDUCTION UNDER SEC.24(B) I S THAT THERE MUST BE NEXUS BETWEEN THE IN T ER E ST PAID AND THE PROPERTY CON S TRUCT E D/ACQUIRED. IN THE PRESENT CASE, AS I COULD SEE, THERE IS NO DENIAL BY THE ASSESSING OFFICER THAT THE APPELLANT HAS REPAID THE ORIGINAL LO ANS TAKEN FROM PRIVATE PARTIES FROM THE N E W LOANS TAKEN FROM THE BANKS. THE CIR C ULAR NO.28 OF THE C. B .D.T. REFERRED TO ABOVE ALSO CLEARLY AUTHO R I S ES ALLOWING OF INTER E ST ON THE BORROWED FUNDS BEIN G UTILIZED FOR REPAYM E N T O F THE ORIGINAL LOAN TAKEN FOR THE PU R P O SE OF CONSTRU CT ION OF THE CAPITAL ASSET. THE BALANCE OF THE AMOUNT OF LOAN WAS UTILIZED FOR MAKING IMP R OVEMENT OF THE HOSPITAL BUILDIN G AN D THE DEPOSIT WAS WITH THE HOSPITAL. BOTH WERE FOR THE PU R PO S E O F RECEIPT OF RENT AND, THEREFORE, THE S AME IS ALL O W ABLE AS A DEDUCTION. 5. AGGRIEVED BY THE O R DER OF THE LEARNED CIT(A), REVENUE HAS PREFERRED THIS APPEAL B E FORE THE TRIBUNAL. I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 5 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE REL E VANT MATERIAL ON RECORD. IT IS OB S ERVED THAT THE CLAIM O F TH E ASSESSEE FOR DEDU CT ION ON AC C OUN T OF IN T ER E ST UNDER S.24(B) WAS ALLOWED BY THE LEARNED CIT(A) RELYING ON THE CBDT CIRCULAR N O.28 DATED 20.8.1969, WHEREIN IT IS CLARIFIED BY THE CBDT T H AT IF THE SECOND BORROWING HAS REALLY BEEN USED M ERE LY TO REPAY THE ORIGINAL LOAN TAKEN FOR THE ACQUISITION OR CON S TRU CT ION OF THE HOU S E PROPERTY, AND THI S FACT IS PROVED TO THE SATISFACTION O F THE ASSESSING OFFICER, THE IN T ER E ST PAID ON THE SECOND LOAN WOULD ALSO BE ALLOWED AS DEDUCTION. IN THIS R E GARD, TH E LEARNED DEPARTMENTAL REPRESENTATIVE HAS INVITED OUR ATTENTION TO THE FINDING RECORDED BY THE ASSESSING OFFICER ON PAGE 5 AND 6 OF THE ASSESSMENT ORDER TO THE EFFECT THAT IN THE ABSENCE OF BOOKS O F ACCOUNT MAINTAINED BY THE ASSESSEE OR ANY OTHER DOCUM E N T A RY EVIDEN C E PRODUCED IN SUPPORT, THE DIRECT NEXUS BETWEEN THE VALUE ADDITIONS MADE TO THE BUILDING AND THE FIXED DEPOSITS MOBILIZED COULD NO T BE ESTABLISHED. HE HAS CONTENDED THAT THIS ADVERSE FIN D IN G RECORDED BY THE ASSESSING OFFICER HAS BEEN COMPL E TELY OVERLOOKED/IGNORED BY THE LEARNED CIT(A), WHILE ALLOWING THE CLAIM O F TH E ASSESSEE FOR DEDUCTION ON ACCOUNT OF IN T ER E ST UNDER S.24(B) OF THE ACT AND T HIS POSITION CLEARLY EVIDENT FROM THE IMPUGN E D ORD E R OF THE LEARNED CIT(A) IS NO T DISPUTED BY THE LE ARNED COUN S EL FOR THE ASSESSEE. HE HOWEVER, HAS SUBMITTED HAT ALL THE FIXED D EPOSITS WERE MOBILI S ED BY THE ASSESSEE DURING THE RESPECTIVE EARLIER YEARS WHE N THE CON S T R UCTION OF TH E HOSPITAL BUILDING WAS CARRIED ON AND THE ASSESSEE IS IN A POSITION TO ESTA BLISH THAT THE SAID DEPO S ITS WERE UTILIZED FOR THE CON S TRUC T ION OF HOSPI T AL BUILDI N G, IF OPPORTUNITY IS A F FORDED TO HIM IN THI S R E GARD. SIN C E THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO HAS NO OBJECTION TO AFFORDING SUCH OPPORTUNITY TO THE ASSESSEE, WE SE T ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND R E STORE THE MATTER TO TH E FILE O F THE I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 6 ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE S AME AFRESH IN THE LIGHT OF THE CBDT CIRCULAR DATED 20.8.1969, AFTER GIVING THE ASSESSEE PR O PER AND S UFFICIENT OPPORTUNITY TO ESTABLISH THAT THE FIXED DEP O SI T S MOBILIZED DURING THE EARLIER Y E ARS WERE UTILIZE FOR THE CON S TRU CT ION OF TH E HOSPITAL BUILDING. 7. THE APPEAL OF THE REVENUE , BEING ITA NO.985/HYD/2013 , IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ASSESSEES APPEAL : ITA NO.944/HYD/2013 : ASSESSMENT YEAR 2008 - 09 8. AS R E GARDS THE APPEAL O F THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09, IT IS OBS E RVED THAT THE ISSUE INVOLVED THEREIN RELATING TO DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY TH E CIT(A) ON AC C OUN T OF IN T ER E ST OF R S .1,32,10,651 MADE UNDER S.24( B) IS SIMILAR TO THE ONE INVOLVED IN THE APPEAL O F T H E REVENUE FOR ASSESSMENT YEAR 2007 - 08 WHICH IS AL READY DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN FOR ASSESSMENT YEAR 2007 - 08, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND R E STORE THE MAT T ER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SA ME AFRESH AS PER THE SAME DIRECTION GIVEN FOR ASSESSMENT YEAR 2007 - 08 . T HE RELEVANT GROUNDS OF THE ASSESSEE ON THIS APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. THE REMAINING ISSUE IN APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09 AS R AISED IN GROUND NO.4 RELATES TO ADDITION OF R S .15,60,000 MADE BY THE ASSESSING OFFICER ON AC C OUN T O F C ASH DEPOSIT FOUND TO B E MA D E BY THE ASSESSEE IN HIS BANK AC C OUN T TREATING THE SAME AS UN E XPLAINED, WHICH IS SUSTAINED BY THE LEARNED CIT(A) T O THE EXTENT OF R S .1,56,000. I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 7 10. DURING TH E COU R SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE A DEPOSIT OF R S .15,60,00 IN CASH IN HIS BANK ACCOUN T WITH DCB BANK ON 4.7.2007. SINCE THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION AS RE G ARDS THE SOU R CE OF THE SAID CASH DEPOSIT, THE ASSESSING OFFICER TREATED THE SAME AS UNEXPLAINED IN VE STMENT OF THE ASSESSEE AND THE ADDITION OF R S .15,60, 0 00 WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE UNDER S.69. 11. BEFO R E THE LEARNED CIT(A), IT WAS POINTED OUT BY THE ASSESSEE THAT THE AMOUNT DEPOSITED IN BANK ACCOUNT ON 4.7.2007 WAS ACTUALLY RS.1,56 , 000 AND NO T RS.15,60,000 AS TAKEN BY THE ASSESSING OFFICER. K EEPING IN VIEW THIS SUBMISSION MADE BY THE ASSESSEE, TH E LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO V E RIFY THE EXACT AMOUNT O F CASH DEPOSIT AND PRO V IDE RELIEF TO THE ASSESSEE ACCORDINGLY. 12. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT BESIDES POINTING OUT THE MISTAK E IN THE AMOUNT O F C ASH DEPOSIT TAKEN BY THE ASSESSING OFFICER, EXPLANATION AS RE G ARDS TO THE SOU R CE OF THE CASH DEPOSIT OF RS.1,56,000 MADE IN THE BANK ACCOUNT WITH DCB BANK WAS ALSO OFFERED BY THE ASSESSEE BEFORE THE CIT(A) . HE HAS CONTENDED T H A T THE L EARNED CIT(A) HOWEVER, HAS FAILED TO CONSIDER SAID EXPLANATION AND URGED THAT THE MATTER MAY THEREFORE BE R E STORED TO THE FILE O F THE ASSESSING OFFICER FOR VERIFYING THE EXPLANATION OF THE ASSESSEE AS REGARDS THE CASH DEPOSIT OF R S .1,56,00 MADE IN THE BAN K ACCOUNT. SIN C E THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT RAISED ANY OBJECTION IN THIS REGARD, WE RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR DECIDIN G THE SAME AFRESH AFTER GIVING THE ASSESSEE PROPER AND SUFFI CI ENT OPPORTUNITY TO EXPLAIN THE SOURCE OF THE CASH OF I TA NO. 944 & 985/H YD/201 3 SHRI C.VENKATESWARA RAO, HYDERABAD 8 RS.1,56,000 DEPOSITED IN THE BANK ACCOUNT ON 4.7.2007. GROUND NO.4 OF THE ASSESSEES APPEAL I S ACCOR D IN G LY TREATED AS ALLOWED FOR STATISTICAL PU R PO S ES. 13. IN THE RESULT, APPEAL O F THE REVENUE AS WELL AS THAT OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 28 TH AUGUST, 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 28 TH AUGUST, 2014 COPY FORWARDED TO: 1. SHRI C.VENKATESWARA RAO, C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3 - 6 - 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 . DY./ASSTT. COMMISSIONER OF INCOME - TAX CIRCLE 2(1), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) VIJAYAWADA COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD 5 . COMMISSIONER OF INCOME - TAX I I HYDERABAD 6 . DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S