Surinder Kumar Singal, Chandigarh V. ACIT, C-5(1), Chandigarh

ITA 963/CHANDI/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6060 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH SR DR
• Keywords: Additional evidence; Set aside
• Section: 271(1)(c); 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B CHANDIGARH !, ' # $ , $ % & ' ( ) , *+ # BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 963/CHD/2018 / ASSESSMENT YEAR : 2014-15 SHRI SURINDER KUMAR SINGAL, SCO 15, MADHYA MARG, SECTOR 26, CHANDIGARH. VS THE ACIT, CIRCLE 5(1), CHANDIGARH. ./ PAN NO: ADYPS5462P / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI RACHIT GOYAL, CA # ! ' / REVENUE BY : SHRI MANJIT SINGH, SR.DR $ % ! &/ DATE OF HEARING : 05.12.2018 '()* ! &/ D ATE OF PRONOUNCEMENT : 17.01.2019 *,/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILIN G THE CORRECTNESS OF THE ORDER DATED 08.05.2018 OF CIT(A)-2 C HANDIGARH PERTAINING TO 2014-15 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THE IMPUGNED ORDER IN THE CASE CITED AS SUBJECT IS AGAINST THE FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER OF FRAMING THE TOTAL INCOME AT RS. 72,13,363/- AS AGAINST DECLARED AT RS . 64,70,430/- ERRONEOUSLY. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER OF DISALLOWING INTEREST EXPENSE OF RS. 7,42,933/- BY RESTRICTING T HE CLAIM U/S 57, WITHOUT APPRECIATING THE FACTS, LEGAL POSITION & MERITS OF THE CASE. 4. THE CIT (APPEALS) HAS ERRED BY INITIATING THE PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) WITHOUT APPRECIATING THE FA CTS AND BONAFIDE INTENTIONS OF THE APPELLANT. 5. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER THE G ROUNDS OF APPEAL BEFORE THE SAME ARE HEARD AND DISPOSED OFF. 6. IT IS PRAYED THAT THE ADDITION AND PENALTY PROCEEDI NGS AS INITIATED, SHALL KINDLY BE DELETED. ITA-963/CHD/2018 A.Y.2014-15 PAGE 2 OF 5 2. THE LD. AR SHRI RACHIT GOYAL APPEARING ON BEHALF OF THE A SSESSEE SUBMITTED THAT THE POINT AT ISSUE IS FULLY COVERED IN FAVO UR OF THE ASSESSEE IN AS MUCH AS IN 2012-13 ASSESSMENT YEAR, IDE NTICAL ISSUE WAS REMANDED TO THE AO. COPY OF THE ORDER DATED 03.07.201 8 IN ITA 1224/CHD/2016 WAS FILED IN SUPPORT OF THE SUBMISSION MADE. COPY OF THE ASSESSMENT ORDER DATED 03.03.2015 AND THE IMPUGNED ORDER DATED 08.09.2016 OF CIT(A)-2 CHANDIGARH PERTAINING TO 2012-13 AS SESSMENT YEAR WERE ALSO FILED SO AS TO HIGHLIGHT THAT THE ISSUE CONT INUES TO REMAIN THE SAME. 3. THE LD. SR.DR CONSIDERING THE ORDERS OF THE TAX AUTHOR ITIES ALONGWITH THE ORDER OF THE ITAT FILED FAIRLY STATED THAT TH E POINT AT ISSUE CONTINUES TO REMAIN THE SAME AS THERE IS NO CHANGE IN FACTS OR CIRCUMSTANCES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. IT IS SEEN THAT CONSIDERING THE FACT THAT THE A SSESSEE HAD SHOWN INCOME FROM OTHER SOURCES IN THE FORM OF INTEREST INCOME FR OM VARIOUS PARTIES MENTIONED IN PARA 2 OF THE ORDER, THE AO REQUIR ED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION U/S 57 OF THE ACT AND TO PROVE THAT THE EXPENSE OF INTEREST PAID TO ICICI BANK WAS INCURRED FOR EARNING THE INTEREST. REJECTING THE ASSESSEE'S EXPLANATION , DISALLOWAN CE OF RS. 7,42,933/- WAS MADE U/S 57 OF THE ACT. THE ASSESSEE C ARRIED THE ISSUE IN APPEAL BEFORE THE CIT(A). THE RELEVANT FINDING OF THE CIT(A ) ON THE ISSUE DISMISSING THE ASSESSEE'S APPEAL IS REPRODUCED HEREUNDER : 6.3 I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ORDER OF THE AO. THE TOTAL LOANS ADVANCED BY THE AP PELLANT ARE RS 3,52,47,012/- ON WHICH INTEREST OF RS 90,56,312/- H AS BEEN EARNED. DURING THE APPELLATE PROCEEDING THE ASSESSEE HAS ST ATED THAT THE WEIGHTED AVERAGE OF THE LOANS GIVEN IS RS 5,24,95,840/- WHIC H WAS MORE THAN THE LOAN TAKEN FROM ICICI BANK AND THEREFORE THE DISALLOWANC E WAS NOT CALLED FOR. FROM THE LEDGERS OF THE PARTIES TO WHOM THE LOANS H AD BEEN GIVEN, THE AO HAS CALCULATED THE TOTAL AMOUNT OF LOANS GIVEN AT R S 3,52,47,012/~ AND THIS FACT HAS NOT BEEN DISPUTED BY THE ASSESSEE. HO WEVER, THE BASIS OF CALCULATING THE WEIGHTED AVERAGE OF LOAN AT RS 5,24 ,95,840/- HAS NOT BEEN EXPLAINED IN THE APPELLATE PROCEEDINGS. NO SUCH PLE A WAS TAKEN BEFORE THE AO AND NO PLAUSIBLE JUSTIFICATION OR REASONING HAS BEEN PROVIDED FOR CALCULATING THE WEIGHTED AVERAGE OF LOANS AS SUBMIT TED DURING THE APPELLATE PROCEEDINGS. THUS, THE CONTENTION OF THE ASSESSEE THAT THE WEIGHTED AVERAGE OF LOANS WAS RS 5,24,95,840/- CANNOT BE ACC EPTED. FURTHER THE ASSESSEE HAS RELIED UPON THE CASE OF CIT VS DALMIA CEMENT LTD. 254 ITR 377 (DEL) TO SUPPORT HIS CASE WHEREIN THE HON'BLE H IGH COURT HAS STATED THAT ONCE IT WAS ESTABLISHED THAT THERE WAS NEXUS B ETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS, THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE. THIS CASE ITA-963/CHD/2018 A.Y.2014-15 PAGE 3 OF 5 RATHER SUPPORTS THE CASE OF REVENUE AS IN THE PRESENT CASE, THE AO HAS CLEARLY ESTABLISHED THAT THERE WAS NO NEXUS BETWEEN THE EXPENDITURE CLAIMED U/S 57 AND THE INCOME EARNED U/S 56 AS FAR AS THE LOANS OF RS 59,43,464/- WERE CONCERNED. IN VIEW OF THIS DISC USSION, I FIND NO INFIRMITY IN THE ORDER OF THE AO AND THE DISALLOWAN CE OF RS 7,42,939/- U/S 57 IS CONFIRMED. GROUND OF APPEAL NO 3 IS DISMI SSED. 5. IT IS SEEN THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO- ORDINATE BENCH IN THE AFOREMENTIONED ORDER. THE RELEVAN T FACTS FOUND DISCUSSED IN THE ORDER ARE EXTRACTED HEREUNDER : 5. THE NEXT ISSUE RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 72,24,534/- U /S 57(III) OF THE ACT. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTE D THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST INCOME EARNED AND EXPENDITURE CLAIMED. THAT THE ASSESSEE HAD RECEIVED LOAN AMOUNT FROM THE BA NK WHICH WAS FURTHER DISBURSED AS LOAN TO OTHER PARTIES FROM WHOM THE INTEREST INCOME WAS EARNED. THAT THE ASSESSEE WAS ENTITLED TO SET OFF T HE INTEREST EXPENDITURE AGAINST INTEREST INCOME AS THERE WAS A DIRECT NEXUS BETWEEN THE TWO. 6. THE LD. DR, ON THE OTHER HAND, HAS SUBMIT TED THAT THE ASSESSEE COULD NOT PROVE WITH SATISFACTORY EVIDENCE THE DIRECT NEX US BETWEEN INTEREST INCOME EARNED AND THE INTEREST EXPENDIT URE INCURRED BY THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IF THE AV ERMENTS OF THE ASSESSEE ARE TAKEN AS CORRECT, THE ASSESSEE, IN OUR VIEW, WILL BE ENTITLED TO CLAIM DEDUCTION OF THE EXPENDIT URE OUT OF THE INTEREST INCOME OFFERED BY THE ASSESSEE. WE THEREFO RE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE IS SUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH AND DECIDE THE SAME IN THE LIGHT OF THE ABOVE OBSERVATIONS MADE A FTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS C ASE. (EMPHASIS SUPPLIED) 6. WHEN THE ABOVE CONCLUSION IS CONSIDERED IN THE LIGHT OF THE FACTS AS CONSIDERED BY THE CIT(A) IN 2012-13 ASSESSMENT YEAR ADDRESSED IN PARA 9 OF THE ORDER, WE FIND THAT ON FACTS, THERE IS NO D IFFERENCE. THE RELEVANT EXTRACT FROM THE ORDER OF THE CIT(A) FILED BEFORE US WHICH CAME TO BE CONSIDERED BY THE ITAT IS EXTRACTED HEREUNDER FO R THE SAKE OF COMPLETENESS: 9. GROUND OF APPEAL NO. 5 IS AGAINST THE DISALLOW ANCE OF INTEREST EXPENDITURE OF RS. 72,24,534/- CLAIMED FRY THE APPE LLANT U/S 57(III) OF THE ACT. 9.1 BRIEF FACTS ON: THE ISSUE ARE THAT APPELLANT HA S ADVANCED LOANS TO VARIOUS PARTIES AND HAS EARNED INTEREST OF RS. .82, 00,422/- ON THESE LOANS DURING THE YEAR. APPELLANT HAS CLAIMED AS INTEREST PAID TO ICICI BANK OF RS. 72,24,534/- AGAINST THE ABOVE INTEREST EARNED ON TH E GROUND THAT BORROWED FUNDS HAVE BEEN USED TO EARN INTEREST INCOME. ASSES SING OFFICER QUESTIONED THE APPELLANT ON THE ALLOWABLY OF INTEREST U/S 57 O F THE ACT. THE APPELLANT COULD, NOT OFFER; ANY, .PLAUSIBLE EXPLANATION AND - THEREFORE, A.O. HELD THAT SEVERAL PAYMENTS WHICH HAVE BEEN MADE FROM THE LOAN ACCOUNT HAS ACTUALLY RELATES TO BUSINESS PAYMENT AND NOT FOR ADVANCING L OANS AND THEREFORE, IT ITA-963/CHD/2018 A.Y.2014-15 PAGE 4 OF 5 CANNOT BE SAID THAT THE EXPENDITURE OF INTEREST PAY MENT TO BANK HAS BEEN WHOLLY AND EXCLUSIVELY IS FOR THE PURPOSE OF EARNIN G INTEREST INCOME. THEREFORE, A.O. DISALLOWED INTEREST CLAIM OUT OF IN TEREST EARNED AND MADE ADDITION OF RS. 72,24,534/-. 9.2 APPELLANT MADE .SUBMISSION THAT INTEREST HA S BEEN PAID TO BANK ON THE LOANS WHICH WERE ADVANCED TO SUCH PARTIES FROM WHOM INTEREST HAS BEEN RECEIVED. APPELLANT FILED DETAILS REGARDING ADVANCE S OR LOANS TAKEN FROM ICICI BANK AND OTHER PARTIES. APPELLANT ALSO FILED DETAILS OF INTEREST BEARING LOANS AND FUNDS GIVEN ON INTEREST AS ADDITI ONAL EVIDENCE AND REQUESTED THAT THE SAME MAY BE ADMITTED AS IT GOES TO THE ROOT OF THE ISSUE AND THESE ARE MERELY TO SUPPORT THE SUBMISSIONS MAD E BEFORE THE A.O. 9.3 THE SUBMISSION OF THE APPELLANT WERE FORWAR DED TO AJO, FOR REPORT. ASSESSING OFFICER SUBMITTED HER REPORT AS UNDER:- THE SUBMISSION OF THE ASSESSES HAS BEEN PERUSED. RE GARDING THE ADMISSIBILITY OF THE ADDITIONAL EVIDENCE, IT IS STATED THAT THE A SSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO SUBMIT THE DETAILS DURING THE COURS E OF ASSESSMENT PROCEEDINGS. THEREFORE, IT IS NOT ACCEPTABLE IN THI S REGARD. WITH REGARD TO THE MERITS OF THIS GROUND, IT IS SUBMITTED THAT FRO M THE PERUSAL OF THE DERAILS SUBMITTED IT HAS BEEN NOTICED THAT AN AMOUNT OF RS. 7,12,41,661/- WAS TAKEN AS LOAN FROM ICICI BANK BY THE ASSESSEE FOR HIS BUS INESS AND PERSONAL PURPOSE. ASSESSEE HAS CLAIMED DEDUCTION U/S 57 OF T HE ACT OF RS, 72,24,534/- ON ACCOUNT OF INTEREST PAID TO BANK. THE ASSESSEE CLAI MED THAT INTEREST PAID TO ICICI BANK RELATES TO ADVANCES MADE FROM EARNING TH E INTEREST INCOME. IT WAS FURTHER NOTICED THAT SEVERAL PAYMENTS WHICH HAVE : BEEN MADE FROM THE LOAN ACCOUNT ACTUALLY RELATES TO BUSINESS PAYMENTS AND NOT ADVANCE FOR LOAN. AFTER GOING THROUGH THE ASSESSEE'S SUBMISSION IT CANNOT BE SAID THAT THE ENTIRE/FULL EXPENDITURE OF PAYING INTEREST TO. THE BANK HAS BEEN FULLY OR WHOLLY AND EXCLUSIVELY INCURRED FOR EARNING THE INTEREST I NCOME AS PER THE REQUIREMENT OF THE SECTION 57 OF THE ACT FOR CLAIMING THE DEDUC TION.-THEREFORE, KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES AVAILABLE ON RE CORD, THE THEN AO HAD RIGHTLY DISALLOWED THE 'DEDUCTION CLAIMED U/S 57 OF THE INCOME TAX ACT, 1961. 9.3.1 THE REMAND REPORT OF THE A.O, WAS GIVEN TO TH E APPELLANT FOR MAKING SUBMISSION. APPELLANT FILED HIS SUBMISSION AND AGAI N A NEXUS OF FUNDS BORROWED AND ADVANCES MADE, ASSESSMENT ORDER FOR AS SESSMENT YEAR 2013- 14 WAS, ENCLOSED WITH THE SUBMISSION. THE SUBMISSIO N OF THE APPELLANT, REMAND REPORT OF THE A.O. AND THE OTHER RELEVANT FA CTS ON THE RECORD HAVE BEEN CONSIDERED. AT THE STAGE OF FILING SUBMISSION, ON THE REMAND REPORT APPELLANT FURTHER FILED A NEXUS OF FUNDS, BORROWED AND ADVANCED ALONGWITH COPY, THE ASSESSMENT, FOR A.Y. 2013-14. THESE ARE A DDITIONAL EVIDENCE INTRODUCED BY THE APPELLANT AT THE STAGE WHEN REMAN D REPORT OF THE A.O. WAS RECEIVED IN THIS OFFICE AND A.O. HAD NO OCCASIO N TO SEE THESE EVIDENCES AND THEREFORE, THESE EVIDENCES ARE IGNORED IN ADJUD ICATION OF THIS APPEAL. AFTER CAREFUL CONSIDERATION OF A.O'S REPORT AND ASS ESSEE SUBMISSION. IT IS SEEN THAT THE APPELLANT HAS NOT ESTABLISHED THE NEX US BEFORE THE A.O. THAT THE BORROWED FUND HAVE BEEN USED TO EARN INTEREST I NCOME. THIS-ONUS IS ON THE APPELLANT WHICH HAS NOT BEEN DISCHARGED. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO CONTROVERT THE FINDINGS OF THE A.O. THEREFORE, IN THE ABSENCE OF A CLEAR NEXUS OF THE BORROWED FUNDS UTIL IZED FOR EARNING INTEREST INCOME NO SET OFF OF INTEREST EXPENSES CAN BE GIVEN AGAINST THE INTEREST INCOME AS INCOME FROM OTHER SOURCES U/S 57 OF THE ACT. THE DISALLOWANCE MADE BY THE AO IS UPHELD. GROUND OF AP PEAL NO. 5 IS DISMISSED. ITA-963/CHD/2018 A.Y.2014-15 PAGE 5 OF 5 7. THUS, IN THE ABSENCE OF ANY DISTINCTION ON FACTS AND IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH, WITH IDENTICAL DIRECTIO N, THE IMPUGNED ORDER IS SET ASIDE BACK TO THE FILE OF THE AO. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.01. 2019. SD/- SD/- ( % & ' ( ) ) ( ! ) (ANNAPURNA GUPTA) (DIVA SI NGH) *+ #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER & % (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. $ / / CIT 4. $ / ( )/ THE CIT(A) 5. -01 2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 # / ASSISTANT REGISTRAR