Shri Vishnubhai Punjabhai Patel, Ahmedabad V. The Asstt. Commissioner of Income Tax, Central Circle-2(4), Ahmedabad

ITSSA 30/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7195 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 25-01-2018
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER& MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.(S.S.)A. NOS.29, 30 & 31/AHD/2018 (ASSESSMENT YEARS :2012-13, 2013-14 & 2014-15) SHRI VISHNUBHAI PUNJABHAI PATEL, 10, SHAYONA KUTIR BUNGLOW, NR. BHAGAT VIDHYAPITH SOLA, AHMEDABAD 380 016 VS. ACIT, CENTRAL CIRCLE 2(4), AHMEDABAD. [ PAN NO. ACTPP 1158 P ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI R. B. TANK, A.R. RESPONDENTBY: SHRI SURENDRA KUMAR, CIT-D.R. DATE OF HEARING 12.07.2019 DATE OF PRONOUNCEMENT 30.07.2019 O R D E R PER MS. MADHUMITA ROY - JM: THIS BUNCH OF THREE APPEALSARE DIRECTED AGAINST A COMMON ORDER DATED 20.11.2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-12, AHMEDABAD UNDER SECTION 143(3) R.W.S. 153A/143(3) R .W.S. 153B(1)(B) OF THE INCOME TAX ACT (HEREINAFTER REFERRED AS TO THE ACT ) FOR ASSESSMENT YEARS 2012-13, 2013-14&2014-15. SINCE ALL THE APPEALS RELATE TO THE SAME ASSESSEE, THE SAME ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON O RDER. IT(SS)A NOS.29, 30 & 31/AHD/2018 VISHNUBHAIPUNJABHAI PATEL VS. ACIT ASST.YEARS 2012-13, 2013-14 & 2014-15 - 2 - IT(SS)A NO.29/AHD/2018 FOR A.Y. 2012-13: 2. THE ASSESSEE AN INDIVIDUAL, FILED ITS RETURN OF INCOME ON 30.03.2013 SHOWING TOTAL INCOME OF RS.20,43,600/-, WHICH WAS P ROCESSED U/S 143(1) ON 10.05.2013. SUBSEQUENTLY, A SEARCH ACTION U/S 132 O F THE ACT WAS CARRIED OUT IN THE GROUP CASES OF SHAYONA GROUP ON 15.10.2013, IN WHICH THE RESIDENCE OF THE ASSESSEE WAS ALSO COVERED. AS A RESULT WHEREOF, NOT ICE U/S 153A WAS SERVED UPON THE ASSESSEE ON 26.08.2014. IN RESPONSE WHEREO F BY AND UNDER A LETTER DATED 17.11.2014 THE ASSESSEE REQUESTED THE LEARNED AO TO CONSIDER THE ORIGINAL RETURN OF INCOME FILED ON 30.03.2013 AS RE TURN FILED U/S 153A OF THE ACT. THE ASSESSEE OBJECTED SUCH PROCEEDING U/S 153A OF THE ACT WHICH WAS DISPOSED OFF BY THE LEARNED AO WHILE FINALIZING THE ASSESSMENT. THE LEARNED AO DISALLOWED RS.13,88,596/- U/S 57(III) OF THE ACT TOWARDS THE INTEREST PAID BY THE ASSESSEE AND RS.4,19,506/- WAS FURTHER DISAL LOWED UPON APPLICATION OF SECTION 14A R.W.R. 8D OF THE RULE,ON THIS FACT THAT THE ASSESSEE HAS RECEIVED TOTAL INCOME OF RS.48,68,688/- OUT OF WHICH RS.14,7 0,870/- BEING THE PROFIT WHICH HAS BEEN CLAIMED EXEMPTION U/S 10(2A) OF THE ACT AND AGAINST TOTAL INCOME OF RS.48,68,688/-, INTEREST EXPENSES OF RS.1 3,88,596/- HAS BEEN CLAIMED BY THE ASSESSEE. IN APPEAL, THE LEARNED CIT (A) DELETED THE ADDITION MADE U/S 57(III) OF THE ACT TO THE TUNE OF RS.13,88 ,596/-. HOWEVER, THE ADDITION OF RS.4,19,506/- MADE U/S 14A WAS UPHELD HENCE, THE ASSESSEE BEFORE US. 3. THE ASSESSEES CASE BEFORE US IS THIS THAT THE I NTEREST EXPENDITURE WAS CLAIMED IN THE RETURN OF INCOME IS OF RS.13,88,596/ -. SINCE THE LEARNED ASSESSING OFFICER HAS ALREADY DISALLOWED THE ENTIRE INTEREST EXPENDITURE U/S 57(III) NO EXPENDITURE LEFT FOR FURTHER DISALLOWANC E. THIS PRINCIPLE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS DECIDED IN THE CASE OF M/S DALIA INVESTMENT PVT. LTD.-VS-DCIT, CIRCLE-12 IN ITA NO.2 818/KOL/2013. FURTHER THAT ASSESSEES OWN FUNDS AS WELL AS INTEREST FREE FUNDS ARE MORE THAN THE IT(SS)A NOS.29, 30 & 31/AHD/2018 VISHNUBHAIPUNJABHAI PATEL VS. ACIT ASST.YEARS 2012-13, 2013-14 & 2014-15 - 3 - INVESTMENT IN PARTNERSHIP FIRMS AND THEREFORE NO DI SALLOWANCE ON ACCOUNT OF INTEREST IS TO BE MADE. HE, THEREFORE, RELIED UPON THE JUDGMENT PASSED IN THE MATTER OF RELIANCE UTILITIES AND POWER REPORTED IN 313 ITR 340 (BOM). PHOTOCOPY OF EACH OF THE JUDGMENTS RELIED UPON BY T HE LEARNED AR WERE SUBMITTED BEFORE US. THE LEARNED DR, ON THE OTHER H AND, FAILS TO CONTROVERT THE SUBMISSIONS MADE BY THE LEARNED AR. 4. WE HAVE HEARD THE RESPECTIVE PARTIES, PERUSED TH E RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY CONSIDE RED THE JUDGMENT PASSED BY THE KOLKATA BENCH ON THIS COUNT THAT DISALLOWANCE O F EXPENSES CANNOT EXCEED THE AMOUNT TO ACTUAL EXPENSES CLAIMED BY THE ASSESS EE, OBSERVATION WHEREOF IS AS FOLLOWS: 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED EXPENSES UNDER THE HEAD SALARY, WAGES & BONUS WHICH WERE TREATED BY THE LOWER AUTHORITIES AS INCURRED IN CONNECTION WITH TH E AGRICULTURAL INCOME ONLY. THUS THE ENTIRE EXPENSES OF RS.1,98,500.00 WAS DISA LLOWED. HOWEVER WE NOTE THAT THE ASSESSEE BESIDES THE AGRICULTURAL INCOME H AD ALSO SHOWN SALES OF RS. 91,840.00 AND RENTAL INCOME OF RS. 79,200.00. THERE FORE, IT WILL BE WRONG ON THE PART OF THE AO TO TREAT THE ENTIRE EXPENSES TOW ARDS THE AGRICULTURAL INCOME ONLY. IN ADDITION TO THE ABOVE, WE ALSO NOTE THAT IT IS W ELL SETTLED LAW THAT A PRIVATE LIMITED COMPANY BEING A BODY CORPORATE HAS TO INCUR CERTAIN EXPENSES TO KEEP ITS STATUS ACTIVE. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. GANGA PROPERTIES LTD. REPORTED IN 199 ITR 94 (CAL) WHEREI N IT WAS HELD AS UNDER:- A LIMITED COMPANY EVEN IF IT DOES NOT CARRY ON BUS INESS, EVEN IF IT DERIVES INCOME FROM OTHER SOURCES, HAS TO MAINTAIN ITS ESTABLISHMENT FOR COMPLYING WITH STATUTORY OBLIGATION SO LONG AS IT IS IN OPERATION AND ITS NAME IS NOT STRUCK OFF THE REGISTER OR UNLE SS THE COMPANY IS DISSOLVED. SO LONG AS THE COMPANY IS IN OPERATION, IT HAS TO MAINTAIN THE STATUS AS A COMPANY AND IT HAS TO DISCHARGE CER TAIN LEGAL OBLIGATIONS AND FOR THAT PURPOSE IT IS NECESSARY TO APPOINT CLERICAL STAFF AND SECRETARY OR ACCOUNTANT AND INCUR INCIDEN TAL EXPENSES. IN THIS BACKGROUND, THE CONCLUSION OF THE TRIBUNAL THA T THE EXPENSES IT(SS)A NOS.29, 30 & 31/AHD/2018 VISHNUBHAIPUNJABHAI PATEL VS. ACIT ASST.YEARS 2012-13, 2013-14 & 2014-15 - 4 - INCURRED WERE WHOLLY AND EXCLUSIVELY FOR THE ACTIVI TIES TO EARN INCOME WAS A REASONABLE CONCLUSION. THE TRIBUNAL WAS, THUS, JUSTIFIED IN ALLOWING THE E XPENDITURE CLAIMED BY THE ASSESSEE AS DEDUCTION. HOWEVER THE LD. AR BEFORE US HAS NOT BROUGHT ANY MA TERIAL ON RECORD SUGGESTING THAT THE EXPENSES CLAIMED UNDER THE HEAD OF BUSINESS WERE INCURRED EXCLUSIVELY FOR THE BUSINESS PURPOSE AND N O PART OF IT WAS INCURRED IN CONNECTION WITH THE EXEMPTED ITA NO.2818/KOL/13 & 0 4/KOL/14 A.Y. 2006-07 M/S DALIA INVESTMENT PVT. LTD. VS. DCIT CIR-12 KOL. PAGE 5 DECLARED BY THE ASSESSEE. IN THE ABSENCE OF INFORMATION WE APPREHEN D THAT THE ASSESSEE SHOULD NOT AVAIL THE DOUBLE DEDUCTION OF THE SAME EXPENSES . INDEED, THE FACTS THAT THE ASSESSEE HAS SHOWN BEING SALES AND A BODY CORPORATE CANNOT BE JUST BRUSH ASIDE. THEREFORE THE DISALLOWANCE OF THE ENTIRE EXP ENSES CANNOT BE MADE. BUT AT THE SAME TIME THE AMOUNT OF EXPENDITURE NECESSAR Y FOR THE SUSTENANCE OF THE COMPANY AND WHICH HAS NEXUS WITH THE BUSINESS A CTIVITY OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION. THUS IN THE ABSENCE OF THE INFORMATION WE ARE OF TH E VIEW THAT ALL THE EXPENSES INCURRED BY THE ASSESSEE CANNOT BE TREATED AS BUSIN ESS EXPENSES. THEREFORE IN OUR VIEW AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE THE JUSTICE SHALL BE SERVED IF THE DISALLOWANCE MADE BY THE AO IS RESTRI CTED TO THE REASONABLE EXTENT. HENCE, IN THE INTEREST OF JUSTICE & FAIR PL AY WE ARE INCLINED TO RESTRICT THE DISALLOWANCE OF THE EXPENSES TO THE TUNE OF 50% OF THE EXPENSES CLAIMED BY THE ASSESSEE. IN VIEW OF ABOVE WE RESTRICT THE D ISALLOWANCE TO THE EXTENT OF 50% OF THE EXPENDITURE AS DISCUSSED ABOVE. ACCORDIN GLY, AO IS DIRECTED. THUS, THE PART GROUND REGARDING SALARY, WAGE & BONU S OF APPEAL OF ASSESSEE IS PARTLY ALLOWED. IT APPEARS FROM THE RECORDS THAT THE ASSESSEE HAS C APITAL BALANCE OF RS.1,35,93,407/- AND INTEREST FREE FUNDS OF RS.39,4 0,000/-. THE TOTAL INVESTMENT IN THE PARTNERSHIP FIRM WAS RS.1,40,16,428/-. ADMIT TEDLY SINCE THE APPELLANT OWNED FUND AS WELL AS INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT MADE IN PARTNERSHIP FIRM DISALLOWANCE ON ACCOUNT OF INTERES T IS NOT SUSTAINABLE IN VIEW OF THE JUDGMENT PASSED IN THE MATTER OF RELIANCE UT ILITIES AND POWER. HENCE, WE DELETE THE ADDITION MADE BY THE LEARNED AUTHORIT IES BELOW U/S 14A OF THE ACT. HENCE, APPEAL IS THUS ALLOWED. IT(SS)A NOS.29, 30 & 31/AHD/2018 VISHNUBHAIPUNJABHAI PATEL VS. ACIT ASST.YEARS 2012-13, 2013-14 & 2014-15 - 5 - IT(SS)A NO.30 & 31/AHD/2018 FOR A.Y. 2013-14 & 2014 -15: 5. THESE APPEALSAREIDENTICAL TO THAT OF THE ISSUE A LREADY BEEN DEALT WITH BY US IN IT(SS)A NO.30 & 31/AHD/2018 FOR A.Y. 2013-14 & 2014-15 AT PARA NO.4 AND IN THE ABSENCE OF ANY CHANGED CIRCUMSTANCE S THE SAME SHALL APPLY MUTATIS MUTANDIS. HENCE, THESE APPEALSPREFERRED BY THE ASSESSEE ARE ALSO ALLOWED. 6. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 30/07/2019 SD/- SD/- ( WASEEM AHMED) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED /07/2019 PRITIYADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-12, AHMEDABAD. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION. 12.07.2019 (DICTATION PAGES3 ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16.07.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 24.07.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER