Anil Kumar (HUF), New Delhi V. ITO WARD - 46(2), New Delhi

ITA 9683/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8620 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 23-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH DAHIYA
• Keywords: Business income; Corroborative evidences; Commercial expediency; Capital expenditure; Bogus
• Section: 37; 56; 143(3); 40(a)(ia); 37(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 9683/DEL/2019 : ASSTT. YEAR : 2016-17 SH. ANIL KUMAR (HUF), 4032, CHAWRI BAZAR, DELHI-110006 VS INCOME TAX OFFICER, WARD-46(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAAHA7048A ASSESSEE BY : SH. K. SAMPATH, ADV. REVENUE BY : SH. JAGDISH SINGH DAHIYA, SR. DR DATE OF HEARING: 15.07.2020 DATE OF PRONOUNCEMENT: 17.07.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-16, NEW DELHI DATED 27. 11.2019. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. LD. CIT (A)-16, DELHI IS NOT JUSTIFIED IN LAW A ND FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING ADDITION OF RS.1,59,37,109/- MADE BY THE AO. 2. LD. CIT (A)-16, DELHI IS NOT JUSTIFIED IN CONFIR MING INTEREST INCOME AS BUSINESS INCOME HENCE EXPENDITURE INCURRED OR INTEREST PAID IS NOT ALLOWA BLE U/S 57(III) OF THE ACT. 3. LD. CIT (A) IS NOT JUSTIFIED IN LAW AND FACTS AN D CIRCUMSTANCES OF THE CASE IN CONFIRMING THAT ASSESS EE HAS DISCLOSED INCOME IN WRONG HEAD. THE ASSESSING OFFICER IS DUTY BOUND TO ASSESS THE INCOME IN THE ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 2 CORRECT HEAD AND ONLY REAL INCOME IS TO BE TAXED IF HE CONSIDERS THAT DISCLOSURE IN WRONG HEAD OF INCOME. 4. LD. ASSESSING OFFICER HAS FAILED TO APPRECIATE T HE CONSISTENT SYSTEM OF ASSESSEE AND ACCEPTED BY DEPARTMENT. FACTS OF THE CASE: 3. RETURN OF INCOME IN THIS CASE WAS FILED ON 19.11 .2016 DECLARING NIL INCOME. THE CASE WAS SELECTED FOR L IMITED SCRUTINY FOR THE REASON WHETHER THE DEDUCTION AGAI NST INCOME FROM OTHER SOURCES HAS BEEN CORRECTLY SHOWN IN THE RETURN OF INCOME'. ACCORDINGLY, NOTICE U/S 143(2) WAS ISSUED AND THE ASSESSMENT U/S 143(3) WAS FRAMED AT AN INCOME OF RS . 1,59,37,110/- BY DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. FOR BETTER APPRECIATION OF FACTS, THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT (A) IS REPRODUCED HEREUNDER:- THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF INC OME IN THIS CASE WAS E-FILED ON 19.11.2016 DECLARING NIL INCOME. T HE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. SUBSEQU ENTLY, THIS CASE WAS SELECTED FOR LIMITED SCRUTINY WITH THE REASON WHETHER THE DEDUCTION AGAINST INCOME FROM OTHER SOURCES HAS BEE N CORRECTLY SHOWN IN THE RETURN OF INCOME. SUBSEQUENTLY STATUTO RY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSED. ON PERUSAL OF THE COMPUTATION OF INCOME AND P&L. ACCOUNT TILED BY THE ASSESSEE, I T WAS OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 95,8 5,469/- INTEREST PAID TO M/S ADITYA BIRAL AND RS 63,S1,639/- AS INTE REST PAID ON LOANS AGGREGATING TO RS. 159,37,109/- AS INTEREST EXPENDI TURE. AGAINST THIS THE ASSESSEE HAS SHOWN INTEREST OF RS. 1,34,39,809/ - UNDER THE HEAD INTEREST RECEIVED. IT WAS ALSO OBSERVED THAT THE A SSESSEE HAS CLAIMED DEDUCTION OF PS. 1,59,37,109/ U/S 57 OF THE IT ACT, 1961 ON ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 3 ACCOUNT OF INTEREST PAID AGAINST THE INTEREST INCOM E OF RS. 1,34,39,809/- AND THUS CLAIMED LOSS OF RS. 24,97,30 0/- ON ACCOUNT OF INTEREST PAID. FURTHER FROM THE DETAILS FILED BY TH E ASSESSEE, IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS RECEIVED INTERE ST INCOME @ 12% ON LOAN ADVANCED AND PAID INTEREST ON LOANS @ 12-15 50% ON LOAN TAKEN IN THIS REGARD THE ASSESSEE WAS ASKED TO FURN ISH THE DETAILS OF THE PERSONS TO WHOM INTEREST WAS PAID DURING THE F. Y. 2015-16. AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE, TH E AO RECORDED A FINDING THAT THE ASSESSEE DID NOT FILE ANY JUSTIFIC ATION FOR THE AMOUNT OF INTEREST PAID AS DEDUCTION NOR PRODUCE ANY EVIDE NCE REGARDING IDENTITY OF THE PARTIES, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF PARTIES WHO HAVE ADVANCED SUCH LOANS TO THE ASSESSEE AND TO WHOM INTEREST AMOUNT HAS BEEN PAID. THE ASSESSEE HAS NOT EXPLAINED THE CORRECT NATURE OF SUCH INTERE ST EXPENDITURE AND HAS ALSO FAILED TO PROVE THE NEXUS BETWEEN SUCH EXP ENDITURE INCURRED & THE INCOME SOUGHT TO BE EARNED. ACCORDINGLY, THE AO RECORDED A FINDING THAT THE ASSESSEE HAS NOT FULFILLED THE CON DITION LAID DOWN IN SECTION 57(III) OF THE I.T ACT, 1961 AND HENCE DISA LLOWED THE CLAIM OF RS 1,59,37,109/- AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE. WITHOUT PREJUDICE TO THE AFOREMENTIONED FINDING, TH E AO ALSO CONCLUDED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF FINANCING BY TAKING LOANS AND FURTHER GRANTING OR LOANS TO EA RN INTEREST INCOME AND HENCE TREATED THE INTEREST INCOME AS BUSINESS I NCOME OF THE ASSESSEE. THE AO FURTHER OBSERVED THAT WITHOUT PREJ UDICE TO DISALLOWANCE OF INTEREST PAID AGGREGATING TO RS 1,5 9,37,109/- U/S 57(III) OF THE I.T. ACT, 1961, THE SAME IS ALSO NOT ALLOWABLE UNDER SECTION 40(A)(IA) OF THE I T ACT, 1961 AS NO IDS HA S BEEN DEDUCTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAP TER XVII-B. BEFORE ME, THE AR OF THE APPELLANT CONTENDED THAT T HE AO WAS WRONG IN REJECTING THE CLAIM OF DEDUCTION U/S 57(III) OF THE INCOME TAX ACT AND TREATING THE INTEREST INCOME AS BUSINESS INCOME , AR CLAIMED ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 4 THAT THE NEXUS BETWEEN INCOME EARNED AND EXPENDITUR E CLAIMED WAS ESTABLISHED. THE AR FURTHER CONTENDED THAT EVEN IF THE INTEREST PAID/INTEREST RECEIVED WAS I PART OF BUSINESS ACTIV ITY, THE INTEREST PAID SHOULD BE ALLOWED U/S 37(1) OF THE INCOME TAX ACT. THE CLAIM OF THE APPELLANT WAS EXAMINED. THE UNDISPUTED FACT IS THAT THE APPELLANT HAS CLAIM ED DEDUCTION OF RS. 1,59,31,109/ U/S 57 OF THE I T ACT, 1961 ON ACC OUNT OF INTEREST PAID AGAINST THE INTEREST INCOME OF RS. 1,34,39,809 /- AND THUS CLAIMED LOSS OF RS 24,97,300/. THE AO AFTER EXAMINI NG THE FACTS/EVIDENCES FILED, RECORDED A FINDING THAT THE APPELLANT WAS UNABLE TO ESTABLISH A NEXUS BETWEEN INCOME EARNED U NDER THE HEAD INCOME FROM OTHER SOURCES AND EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR PURPOSE OF EARNING SUCH INCOME AS PER SECTION 57(III) OF THE INCOME TAX ACT. THE AR OF TH E APPELLANT, HOWEVER, CLAIMED THAT NEXUS IS ESTABLISHED AND FILE D DOCUMENTS SUCH AS LEDGER ACCOUNT OF DBS BANK AND IDFC BANK IN APPE LLANT'S BOOKS, BANK ACCOUNT NO 820210109581 OF RAM KISHORE & SONS IN DBS BANK AND LEDGER ACCOUNTS OF SHAILESN KUMAR KALWADIA, SHA RAD KALWADIA AND SANJAY KUMAR KAIWADIA TO WHOM LOANS HAD BEEN AD VANCED BY THE APPELLANT THE AR CLAIMED THAT LOANS WERE GIVEN TO THE AFOREMENTIONED 3 PERSONS, AFTER RECEIVING LOAN FROM RAM KISHORE NAGAR MAI MARKETING (P) LTD OF RS. 20,00,000/-, RS. 25,00,000/- AND RS. 20,00,000/ ON 27.03.2015, 28.03.2015 AND 30.03. 2015 AS REFLECTED IN THE LEDGER ACCOUNT OF THE COMPANY AND THIS LOAN RECEIVED FROM RAM KISHORE NAGAR MAL COMPANY WAS ADV ANCED TO THE THEM, HENCE THERE WAS A CLEAR-CUT NEXUS BETWEEN THE LOANS RECEIVED AND LOANS TAKEN AND HENCE BETWEEN THE INTEREST INCO ME EARNED AND INTEREST PAID. A PERUSAL OF THE ACCOUNTS SO PRODUCE D WAS MADE AND MY OBSERVATIONS IN THIS REGARD ARE AS UNDER: ALTHOUGH THE AMOUNTS OF RS 20,00,000/- RS 25,00,000 /- AND RS 20,00,000/ HAVE BEEN DEBITED ON 27.03.2015, 28.03.2 015 AND 30.03.2016 IN THE ACCOUNT OF RAM KISHOR NAGAR MAL A CCOUNT, ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 5 THE CONCOMITANT CREDIT IN THE ACCOUNT OF ANIL KUMAR (HUE) IS NOT REFLECTED. THAT THE LOANS GIVEN OUT ARE SOURCED FROM LOANS TAK EN AS CLAIMED BY THE APPELLANT, IS NOT ESTABLISHED FROM A NY OF THE ACCOUNTS FILED BY THE APPELLANT. A PERUSAL OF THE ITR SHOWS A LIST OF PARTIES FROM W HOM LOANS HAVE BEEN TAKEN AND TO WHOM INTEREST HAS BEEN PAID ON ACCOUNT OF LOAN TAKEN HOWEVER, THE LIST DOES NOT IN CLUDE THE NAME OF RAM KISHORE NAGAR MAL MARKETING (P) LTD. IN FACT, THE APPELLANT HAS RECEIVED INTEREST FROM THE SAID PARTY WHICH COMPLETELY REPUDIATES THE CLAIM OF THE APPELLANT. THE APPELLANT HAS PAID INTEREST ON LOANS TO 11 PART IES AND RECEIVED INTEREST FROM 7 PARTIES. HOWEVER, THE APPE LLANT, NEITHER DURING COURSE OF ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDINGS WAS ABLE TO ESTABLISH THAT IN TEREST PAID OF RS 1,59,37,109/- WAS EXPENDED TO EARN INTEREST I NCOME OF RS 1,34,39,809/-. A SCANNED COPY OF THE PARTIES FROM WHOM INTEREST WA S RECEIVED AND TO WHOM INTEREST WAS PAID IS DETAILED AS UNDER TO AUTHENTICATE MY TWO IMMEDIATELY PRECEDING OBSERVATI ONS: FROM A PERUSAL OF THE ABOVE ANALYSIS, IT IS CLEAR T HAT THE APPELLANT NEITHER DURING COURSE OF ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDING HAS ABLE TO ESTABLISH THAT INT EREST PAID OF RS 1,59,31,109/ WAS EXPENDED TO EARN INTEREST INCOME O F RS 1,34,39,809/-. IN THE ABSENCE OF SUCH A NEXUS HAVIN G BEEN ESTABLISHED, I SEE NO REASON TO INTERFERE WITH THE FINDING OF THE AO THAT THE CLAIM OF DEDUCTION OF RS 159,31,109/- DOES NOT FALL WITHIN THE AMBIT OF SECTION 56(III) OF THE INCOME TAX ACT. ALSO, AS THE APPELLANT HAD ADMITTED BEFORE THE AO T HAT HE WAS CONDUCTING THE BUSINESS OF GIVING LOANS ON INTEREST , THE AO RIGHTLY TREATED HIS INTEREST INCOME AS BUSINESS INCOME. AS TO THE ARS CLAIM ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 6 THAT IF THE INTEREST INCOME IS TREATED AS BUSINESS INCOME, HE MAY BE ALLOWED INTEREST EXPENSES U/S 37 OF THE INCOME TAX ACT. TO EXAMINE THE CLAIM OF THE AR OF THE APPELLANT I W OULD LIKE TO REFER TO PROVISIONS OF SECTION 37 OR THE INCOME TAX ACT W HICH MANDATES AS UNDER: 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD, PROFITS AND GAINS OF BUSINESS OR P ROFESSION' CONDITIONS FOR ALLOWANCE UNDER SECTION 37 ARE CLEAR SUCH EXPENDITURE SHOULD NOT BE COVERED UNDER THE SPECIFIC SECTION I.E. SECTION 30 TO 36. EXPENDITURE SHOULD NOT BE OF CAPITAL NATURE THE EXPENDITURE SHOULD BE INCURRED DURING THE PRE VIOUS YEAR THE EXPENDITURE SHOULD NOT BE OF PERSONAL NATURE. THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY OR EXCLUSIVE FOR THE PURPOSE OF THE BUSINESS OR PROFESSION. THE BUSINESS SHOULD BE COMMENCED HERE, IT IS PERTINENT TO OBSERVE THAT THE AO HAS GI VEN A CLEAR AND UNEQUIVOCAL FINDING THAT THE ASSESSEE HAS BEEN UNAB LE TO ESTABLISH THAT INTEREST EXPENDED IS FOR INCOME EARNED. THIS F INDING HAS BEEN UPHELD BY ME IN THE PRECEDING PARAS ALSO, THE APPEL LANT, NEITHER DURING ASSESSMENT PROCEEDINGS NOR APPELLATE PROCEED INGS HAS BEEN ABLE TO ESTABLISH THAT THE INTEREST EXPENDED OF RS 1.59 CRORE HAS BEEN INCURRED WHOLLY OR EXCLUSIVELY FOR PURPOSE OF BUSINESS. HERE, IT IS PERTINENT TO OBSERVE THAT ONUS WITH REGARD TO AN Y EXPENSE CLAIMED UNDER SECTION 37 SQUARELY LIES UPON THE PERSON CLAI MING SUCH AN EXPENSE. SO, IT IS ALSO CLEAR THAT THE ONUS IS UPON THE ASSESSEE TO ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 7 SUBSTANTIATE CLAIM OF EXPENSES WITH REQUISITE EVIDE NCE AND ALSO TO ESTABLISH THAT IT WAS FOR BUSINESS OR ON ACCOUNT OF COMMERCIAL EXPEDIENCY. THIS ONUS HAS NOT BEEN DISCHARGED BY TH E APPELLANT COMPANY. HERE, RELIANCE IS BEING PLACE ON THE PRINCIPLES ENU NCIATED BY THE HON'BLE ITAT NEW DELHI DHARMENDRA KUMAR VS ITO, ITA NO 1121/DEL/17, WHEREIN THE HON'BLE ITAT NEW DELHI HEL D AS UNDER: 4.2.4 FROM THE ABOVE, IT IS EVIDENT THAT BEFORE AL LOWING A CLAIM OF EXPENDITURE MADE BY THE ASSESSEE, IT IS NECESSARY T O EXAMINE THAT APPELLANT HAS DISCHARGED HIS ONUS TO ESTABLISH THAT THE CLAIM HAS BEEN MADE CONSIDERING THE ABOVE PROPOSITION OF THE SPECIFIC SECTION 37(1) OF THE ACT. HOWEVER FROM THE FACTS OF THE PRE SENT CASE AND NON-COMPLIANCE OF THE STATUTORY NOTICES ISSUED DURI NG ASSESSMENT AND APPELLATE STAGE, IT IS NOT DISCERNIBLE WHETHER THE CLAIM OF EXPENSES MADE IN RESPECT OF ABOVE HEADS ARE FULLY A LLOWABLE IN VIEW OF ABOVE PROVISIONS OF SECTION 37(1) OF THE ACT. TH EREFORE, THE ONUS IS ON THE APPELLANT TO SUBSTANTIATE THAT THE EXPEND ITURE HAS BEEN LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. 4.2.5 HOWEVER, APPELLANT FAILS TO DISCHARGE HIS ON US NOT ONLY DURING THE ASSESSMENT STAGE BUT EVEN AT THE APPELLATE STAG E TOO, DESPITE BEING GIVEN AMPLE OPPORTUNITIES, AS INDICATED ABOVE . IN THESE CIRCUMSTANCES, THERE IS NO OCCASION TO DEVIATE FROM THE CONCLUSION DRAWN BY THE AO THAT ASSESSEE HAS NO CONCRETE EVIDE NCE WITH HIM TO JUSTIFY THE CLAIM OF ABOVE EXPENSES. IN THE ABSENCE OF SUPPORTING EVIDENCES, BILLS & VOUCHERS, BOOKS OF ACCOUNTS, IT IS FAIR AND JUST ON THE PART OF THE AO TO CONSIDER VARIOUS BUSINESS EXI GENCIES AND MAKE AN ESTIMATE FOR MAKING DISALLOWANCE CUT OF EXPENSES CLAIMED. KEEPING IN VIEW THE ABOVE FACTUAL MATRIX OF THE CAS E, I AM OF THE CONSIDERED VIEW THAT AO HAS RIGHTLY MADE AN EARNEST ATTEMPT TO MAKE JUST AND REASONABLE DISALLOWANCE TO THE EXTENT OF 10% OUT OF ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 8 TOTAL EXPENSES CLAIMED OF RS. 2,21,25,132/-. THE SA ME IS UPHELD AND GROUND OF APPEAL TAKEN BY THE APPELLANT IS DISMISSE D. A SIMILAR ADJUDICATION HAS BEEN MADE BY ITAT, BANGA LORE IN THE CASE OF KANHAIYA LAL DUDHERIA VS CIT ON 17 MAY, 2017 IN ITA 782 AND 1495, WHEREIN THE TRIBUNAL HELD AS UNDER: BUT THE ONUS LIES ON THE ASSESSEE TO PROVE THAT TH E EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. ONCE THE ASSE SSEE DISCHARGES THIS ONUS, ASSESSOO WOULD BE ENTITLED TO DEDUCTION U/S 37(1). IN THE PRESENT CASE, NO FACTUAL CONDITION WAS LAID BY THE ASSESSEE TO ESTABLISH THAT THIS EXPENDITURE WAS INCURRED FOR BU SINESS PURPOSE NOR ANY ATTEMPT IS DISCERNIBLE BEFORE THE TOWER AUTHORI TIES MERE BALD ASSERTION THAT THE EXPENDITURE WAS INCURRED FOR PRO MOTING BUSINESS CANNOT BE ACCEPTED WITHOUT ESTABLISHING THE NEXUS B ETWEEN EXPENDITURE AND BUSINESS. HERE, BEFORE CONCLUDING, I WOULD LIKE TO ADD THAT I N NORMAL CIRCUMSTANCES, IT IS NOT THE JOB OF THE REVENUE TO STEP INTO THE SHOES OF THE ASSESSEE AND TO DECIDE HOW HE SHOULD RUN HIS BUSINESS. BUT WHEN THE ASSESSEE STARTS CLAIMING INTEREST EXPENSES FOR THE FUNDS WHICH ARE NOT DEPLOYED IN THE BUSINESS THEN IT BECO MES THE DUTY OF THE REVENUE TO INVESTIGATE THE CLAIM AND MAKE A DIS ALLOWANCE OF EXPENSES WHICH ARE BOGUS IN AS MUCH AS THEY HAVE NO T BEEN INCURRED FOR THE PURPOSES OF BUSINESS THIS IS WHAT THE AO HA S DONE. I UPHOLD THE FINDING OF THE AO IN THIS REGARD. THE CLAIM OF THE APPELLANT THAT THE AO HAS VIOLATED CONSISTENCY IN NOT ACCEPTING THE ACCOUNTING TREATMENT APPLIED BY T HE AO. HERE, IT IS PERTINENT TO APPRECIATE THAT PERPETUATING AN ERROR DOES NOT BECOME A QUASI JUDICIAL AUTHORITY AND IF ON THE BASIS OF EVI DENCES ON RECORD, THE AO ASCERTAINS THE ERROR IN THE CLAIM OF THE APP ELLANT, HE IS EMPOWER TO REDRESS THE ERROR. THUS, THE CLAIM OF TH E APPELLANT HAS NO LOCUS STANDI AND IS REJECTED. HERE I WOULD LIKE TO DRAW STRENGTH ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 9 FROM THE PRINCIPLE ENUNCIATED BY THE APEX COURT, TH AT THERE IS NO VALOUR IN PERPETUATING AN ERROR. HERE, I WOULD LIKE TO DRAW STRENGTH FROM THE ORDER OF THE APEX COURT IN THE CASE OF DIS TRIBUTORS (BARODA) (P) LTD. VS. UOI (1985) 155 ITR 120 (SC) WHEREIN IT WAS HELD THAT TO PERPETUATE AN ERROR IS NO HEROISM, TO RECTIFY IT IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. 4. THUS, WE FIND TWO ISSUES ARISE OUT OF THE ORDER OF THE LD. CIT(A). (A) WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM THE E XPENDITURE INCURRED IN EARNING OF THE INTEREST INCOME AS PER T HE PROVISIONS OF SECTION 57 OF THE ACT. (B) WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUC TION U/S 37 IN CASE SUCH INTEREST INCOME IS TO BE TREATED UNDER TH E HEAD INCOME FROM THE PROFITS AND GAINS OF BUSINESS OR P ROFESSION. 5. WITH REGARD TO THE ISSUE WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM THE EXPENDITURE INCURRED IN EARNING OF THE IN TEREST INCOME AS PER THE PROVISIONS OF SECTION 57 OF THE ACT, WE FIND THAT THE ASSESSEE HAS EARNED INTEREST OF RS.1,34,39,809/- FR OM THE FOLLOWING PARTIES: SL.NO. PARTICULARS AMOUNT 1. UNIVERSAL BUILDWELL PVT. LTD. 6420000.00 2. RAM KISHORE NAGARMAL MARKETING PVT. LTD. 3941360.00 3. C L INTERNATIONAL 397017.00 4. KABRA PLASTICS LTD. 1961432.00 5. SANJAY KUMAR KALWADIA 240000.00 6. SHAILESH KUMAR KALWADIA 240000.00 7. SHARAD KALWADIA 240000.00 TOTAL 1 , 34 , 39 , 809 .00 6. THE ASSESSEE HAS PAID INTEREST TO THE FOLLOWING PARTIES: ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 10 SL.NO. PARTICULARS AMOUNT 1. SATISH PUSHPA CHANDER GOYAL 120000.00 2. ANJANI SINGHANIA HUF 94867.00 3. NEENA SINGHANIA 45175.00 4. ANIL BANSAL 3489777.00 5. ANAND PARKASH SINGHANIA 757340.00 6. RKS GLOBAL AGENCIES LTD. 4025891.00 7. ABHA GUPTA 322900.00 8. RAM KISHORE ORGANICS PVT. LTD. 522278.00 9. RAM & RAM COMMERCIAL 109000.00 10. ADITYA BIRLA FINANCE LTD. 6351639.00 11. INTEREST PAID TO RELANCE CAPITAL LTD. 96242.00 TOTAL 1,59,37,109.00 7. BUT FOR THE AMOUNT RECEIVED ON INTEREST, THE ASS ESSEE WOULD NOT BE IN A POSITION TO LEND THE AMOUNT ON IN TEREST TO EARN INTEREST INCOME. HENCE, NETTING OF THE INTERES T INCOME ON THE INTEREST EXPENDITURE IS A PREREQUISITE FOR CORR ECT DETERMINATION OF TAXABLE INCOME. KEEPING IN VIEW, T HE FACTS NARRATED ABOVE, THE DECISION OF THE LD. CIT (A) THA T THERE IS NO NEXUS BETWEEN THE INTEREST EARNED AND THE INTEREST PAID CANNOT BE UPHELD. AS A RESULT, THE ASSESSEE IS ALLOWED TO CLAIM THE INTEREST EXPENSES. 8. REGARDING THE ALTERNATE DECISION OF THE LD. CIT (A) THAT THE INTEREST INCOME CONSTITUTES THE BUSINESS INCOME, EV EN IN THOSE CIRCUMSTANCES, THE INTEREST PAID TO EARN SUCH INTER EST INCOME IS TO BE ALLOWED AS DEDUCTION U/S 37 OF THE ACT. 9. SINCE, WE HOLD IN PRINCIPLE THAT THE EXPENDITURE IS ALLOWABLE EITHER WAY-: U/S 57, IF THE INCOME IS TRE ATED UNDER THE HEAD INCOME FROM OTHER SOURCES AS PER THE PROVISI ONS OF SECTION 56 OR U/S 37, IF THE INCOME IS TREATED UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS PE R THE ITA NO. 9683/DEL/2019 ANIL KUMAR (HUF) 11 PROVISIONS OF SECTION 28, AT THIS JUNCTURE, WE REFR AIN FROM DETERMINING ISSUE OF THE CLAIM OF PRECLUSION OR COL LATERAL ESTOPPEL UNDER WHICH HEAD THE INCOME EARNED BY TH E ASSESSEE IS TAXABLE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/07/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) VICE PRESIDENT ACCOU NTANT MEMBER DATED: 17/07/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR