Sri Mukesh Gupta , Bangalore V. The Deputy Commissioner of Income Tax Circle-12(3), Bangalore

MA 3/BANG/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6137 (ITAT-BANGALORE)
• Duration Of Justice: 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR
• Keywords: Business income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER M.P. NO. 3/BANG/2019 (IN ITA NO. 1453 / BANG/201 8 ) ASSESSMENT YEAR : 20 1 2 - 1 3 SHRI MUKESH GUPTA, NO. 32, ASHAGEET, SHESHADRI ROAD, HOTEL SUPRABHAT COMPLEX, SHESHADRIIYER ROAD, ANANDRAO CIRCLE, BANGALORE 560 009. PAN: AANPG1383P VS. THE DCIT, CIRCLE 6 (1) (2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI RAVI SHANKAR, ADVOCATE REVENUE BY : SHRI A. RAMESH KUMAR, JCIT (DR) DATE OF HEARING : 1 8 . 01 .201 9 DATE OF PRONOUNCEMENT : 25 . 01 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; THIS M.P. IS FILED BY THE ASSESSEE IN WHICH IT IS S UBMITTED THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE IMPUGNED TRIBUNAL ORDER DA TED 20.07.2018. 2. THE RELEVANT CONTENTS OF THE M.P. BEING PARAS 4 TO 13 ARE REPRODUCED HEREINBELOW FOR READY REFERENCE. 4. THE PETITIONER / APPELLANT IN THE APPEAL BEFORE THIS HON'BLE BENCH RAISED ALTERNATIVE GROUNDS, WHICH ARE EXTRACTED BEL OW FOR READY REFERENCE OF THIS HON'BLE BENCH; 6. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE DISALLOWANCE OF EXPENDITURE A T 10% OF TOTAL EXPENDITURE ON AN ESTIMATE BASIS WAS NOT PERMITTED, WHEN THE BOOKS OF THE APPELLANT WAS NOT REJECTED, ON THE FAC TS AND CIRCUMSTANCE OF THE CASE. 5. THE PETITIONER / APPELLANT IN SUPPORT OF GROUND NO. 6 ABOVE HAD IN THE PAPER BOOK FILED BEFORE THIS HON'BLE BENCH, DOC UMENTS FILED BEFORE THE LEARNED CIT(A), WHICH ARE NUMBERED AT PAGES 39, 40 AND 41 WHICH WAS NAMELY, THE COMPUTATION OF INCOME DEPICTI NG THE INCOME FROM PROFESSION, THE TDS DEDUCTED BY M/S SMILE ELEC TRONICS FOR PROFESSIONAL FEES AND THE INCOME AND EXPENDITURE AC COUNT DEPICTING THE RECEIPT OF PROFESSIONAL FEES. 6. THE ABOVE DOCUMENTS WERE FILED BEFORE THE ASSESS ING OFFICER AND IS NOT IN DISPUTE AND THE ABOVE DOCUMENTS WERE FILED A S A PART OF A PAPER M.P. NO. 3/BANG/2019 (IN ITA NO. 1453/BANG/2018) PAGE 2 OF 5 BOOK BEFORE THIS HON'BLE TRIBUNAL AND ON RECORD, TO BUTTRESS ITS CONTENTION THAT THE EXPENDITURE INCURRED WAS FOR TH E PROFESSION OF THE APPELLANT. 7. THIS HON'BLE TRIBUNAL HAS OBSERVED AT PARA 12 OF THE ORDER; AS NOTED ABOVE, THERE IS NO BUSINESS INCOME IN THE PRESENT YEAR. THE MAJOR EXPENDITURE DEBITED IN P&L ACCOUNT IS RS. 14, 29,951/- BEING INTEREST ON ACCOUNT OF SUNDARAM FINANCE HOUSING LOA N AND RS.4,19,981/- BEING PROCESSING FEE IN RESPECT OF LO AN FROM SUNDARAM FINANCE. THE INTEREST ONHOUSING LOAN IS AL LOWABLE IF THE HOUSE PROPERTY IS ACQUIRED BY USING SUCH HOUSING L OAN AND RENTAL INCOME IS EARNED AND /OR IF SUCH PROPERTY WAS USED FOR BUSINESS PURPOSES. (EMPHASIS SUPPLIED) 8. IT IS HUMBLY SUBMITTED THAT THE INTEREST INCURRE D WAS NOT FOR OBTAINING A HOUSING LOAN RATHER WAS A MORTGAGE LOAN OBTAINED FOR USE IN BUSINESS, FOR LENDING AN UNSECURED LOAN TO THE C OMPANY IN WHICH THE APPELLANT HAS EARNED PROFESSIONAL FEES, AND HEN CE THE FINDING THAT THE APPELLANT HAS NOT EARNED BUSINESS INCOME DURING THE YEAR AND THAT THE APPELLANT HAS OBTAINED A HOUSING LOAN WOULD AMO UNT TO AN ERROR APPARENT FROM RECORD. 9. IN VIEW OF THE ABOVE SUBMISSIONS, THE PETITIONER / APPELLANT HUMBLY SUBMITS THAT THE NON APPRECIATION OF THE FACTS AND THE CONTENTIONS RAISED WOULD CONSTITUTE AN ERROR ON RECORD. 10. RELIANCE IS PLACED ON THE PARITY OF REASONING O F THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. SAURASHT RA KUTCH STOCK EXCHANGE LTD., REPORTED IN 305 ITR 227. THUS, THE P ETITIONER / APPELLANT HUMBLY SUBMITS THAT THE HON'BLE INCOME-TA X APPELLATE TRIBUNAL BANGALORE 'B' BENCH, BANGALORE MAY BE PLEA SED TO RECTIFY THE ERROR IN SO FAR AS NON CONSIDERATION OF FACTS A ND SUBMISSIONS MADE BY THE PETITIONER / APPELLANT AS MENTIONED IN THE A BOVE PARAGRAPHS IN THE INTEREST OF JUSTICE AND EQUITY. 11. IT IS HUMBLY SUBMITTED THAT IF THIS MISCELLANEO US PETITIONER UNDER SECTION 254[2] OF THE ACT IS NOT CONSIDERED BY THIS HONBLE BENCH, THE PETITIONER / APPELLANT WOULD BE PUT TO GREAT HARDSH IP AND IRREPARABLE INJURY. 12. IT IS PRAYED THAT THIS HON'BLE TRIBUNAL HOLD TH AT; I. THE APPELLANT HAS EARNED PROFESSIONAL INCOME WHI CH IS DEPICTED AS DIRECTOR'S REMUNERATION. II. THE LOAN OBTAINED WAS A MORTGAGE LOAN USED FOR BUSINESS AND NOT A HOUSING LOAN. 13. IN VIEW OF THE ABOVE MENTIONED FACTS THE HON'BL E BENCH MAY KINDLY CONSIDER THE AMENDMENT OF THE ORDER DATED 20/07/201 8 IN ITA NO.1453/ BANG/ 2018 FOR THE ASSESSMENT YEAR 2012-13 [ASSESSEE APPEAL] UNDER THE PROVISIONS OF SECTION 254 [2] OF THE INCOME TAX ACT, 1961 FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JU STICE AND EQUITY. 3. IN COURSE OF HEARING BEFORE THE TRIBUNAL OF THIS M.P., IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IN PARA 12 OF THE IMPUGNED TRIBUNAL ORDER, IT IS OBSERVED M.P. NO. 3/BANG/2019 (IN ITA NO. 1453/BANG/2018) PAGE 3 OF 5 BY THE TRIBUNAL THAT THERE IS NO BUSINESS INCOME IN THE PRESENT YEAR. HE SUBMITTED THAT THIS OBSERVATION OF THE TRIBUNAL IS FACTUALLY INCORRECT AND IN THIS REGARD, HE DRAWN MY ATTENTION TO PAGES 39 TO 41 OF PAPER BOOK AND POINTED OUT THAT ON THESE PAGES, THERE IS COMPUTATION OF INCOME AND P&L ACCOUNT OF THE ASSESSEE FOR THE RELEVANT YEAR. HE POINTED OUT THA T AS PER THE P&L ACCOUNT, THERE IS AN INCOME OF THE ASSESSEE OF RS. 27.50 LAK HS UNDER THE HEAD DIRECTOR REMUNERATION. HE SUBMITTED THAT ALTHOUGH THIS IS S TATED TO BE DIRECTOR REMUNERATION BUT ACTUALLY THIS IS PROFESSIONAL INC OME AND THEREFORE, THIS OBSERVATION OF THE TRIBUNAL THAT THERE IS NO BUSINE SS INCOME IS INCORRECT. REGARDING SECOND MISTAKE, HE SUBMITTED THAT IN THE SAME PARA 12 OF THE TRIBUNAL ORDER, THIS IS ALSO STATED BY THE TRIBUNAL THAT THE MAJOR EXPENSE DEBITED TO THE P & L ACCOUNT IS RS. 14,29,951/- BEING INTEREST ON AC COUNT OF SUNDARAM FINANCE HOUSING LOAN AND RS. 4,19,981/- BEING PROCESSING FE E IN RESPECT OF LOAN FROM SUNDARAM FINANCE. THEREAFTER, THE TRIBUNAL OBSERVED THAT INTEREST ON HOUSING LOAN IS ALLOWABLE IF THE HOUSE PROPERTY IS ACQUIRED BY USING SUCH HOUSING LOAN AND RENTAL INCOME IS EARNED AND / OR IF SUCH PROPER TY IS USED FOR BUSINESS PURPOSES. THE BENCH ALSO OBSERVED THAT AS PER P&L ACCOUNT, NO RENTAL INCOME HAS BEEN RECEIVED AND THERE IS NO BUSINESS INCOME O R BUSINESS ACTIVITY AND THEREFORE, SUCH INTEREST ON SUNDARAM FINANCE HOUSIN G LOAN AND PROCESSING FESS FOR LOAN FROM SUNDARAM FINANCE ARE NOT AN ALLOWABLE EXPENDITURE. HE SUBMITTED THAT THIS LOAN FROM SUNDARAM FINANCE IS NOT HOUSING LOAN BUT IT IS A LOAN FOR BUSINESS PURPOSE OBTAINED BY MORTGAGING THE PROPERT Y AND THEREFORE, THIS OBSERVATION OF TRIBUNAL IS ALSO INCORRECT THAT THIS INTEREST PAYMENT IS ON A HOUSING LOAN. THE LD. DR OF REVENUE SUBMITTED THAT THERE I S NO MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE ASSESSMENT ORDER, THE AO HAS COMPUTED THE INCOME OF THE ASSESS EE AT RS. 20,89,262/- ON THIS BASIS THAT THERE WAS DECLARED INCOME IN THE RE TURN OF INCOME OF RS. 13,79,624/- AND THE AO MADE TWO ADDITIONS. FIRST A DDITION IS OF RS. 4,28,300/- U/S. 14A AND THE SECOND ADDITION IS OF RS. 2,81,338 /- AS PER THE DISCUSSION IN PARA 6 OF THE ASSESSMENT ORDER, IT IS SEEN THAT IT IS NOTED BY THE AO THAT THE ASSESSEE IS CLAIMING RS. 28,13,387/- AS INDIRECT EX PENSES IN THE P&L ACCOUNT M.P. NO. 3/BANG/2019 (IN ITA NO. 1453/BANG/2018) PAGE 4 OF 5 AND DURING THE COURSE OF SCRUTINY ASSESSMENT, THE L D. AR OF ASSESSEE WAS NOT ABLE TO ESTABLISH ALL BILLS AND VOUCHERS AND SINCE THESE EXPENSES ARE ON THE HIGHER SIDE COMPARED TO THE NATURE AND SCALE OF THE BUSINESS OF THE ASSESSEE, 10% OF THESE EXPENSES AMOUNTING TO RS. 2,81,338/- S TANDS DISALLOWED AND ADDED BACK TO THE INCOME TO THE ASSESSEE. THIS DIS ALLOWANCE WAS CONFIRMED BY CIT (A) ON THIS BASIS THAT ON THE ISSUE OF ESTIMATE D DISALLOWANCE IN THE ABSENCE OF COMPLETE DETAILS NO BEING AVAILABLE, THE ESTIMAT ED DISALLOWANCE APPEARS TO BE REASONABLE AND NOT EXCESSIVE. WHEN THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL HELD IN THE IMPUG NED TRIBUNAL ORDER THAT THE AO HAS MADE DISALLOWANCE OF 10% OF THE TOTAL INDIRECT EXPENSES DEBITED IN P&L ACCOUNT OF RS. 28.13 LAKHS BEING DISALLOWANCE OF RS . 2,81,338/- ONLY WHEREAS AS PER THE TRIBUNAL, THE EXPENSES OF RS. 2 LAKHS ON AC COUNT OF COMMISSION PAID, RS. 14,29,951/- BEING INTEREST IN RESPECT OF SUNDAR AM FINANCE HOUSING LOAN AND RS. 4,19,981/- BEING PROCESSING FEE IN RESPECT OF L OAN FROM SUNDARAM FINANCE ARE NOT ALLOWABLE AT ALL BUT THE TRIBUNAL IS NOT SU PPOSED TO INCREASE THE DISALLOWANCE WHILE DECIDING THE APPEAL OF THE ASSES SEE AND THEREFORE, IT WAS HELD THAT NO INFERENCE IS CALLED FOR IN THE ORDER OF CIT (A) ON THIS ISSUE. HENCE IT IS SEEN THAT THIS IS THE ULTIMATE DECISION OF TRIBUNAL AS PER THE IMPUGNED TRIBUNAL ORDER THAT NO INFERENCE IS CALLED FOR IN THE ORDER OF CIT (A) AND HENCE, THESE OBSERVATIONS OF THE TRIBUNAL THAT THE ASSESSEE HAS NO BUSINESS INCOME OR THAT THE INTEREST AND PROCESSING FEES OF LOAN ARE IN RES PECT OF HOUSING LOAN ETC. DO NOT AFFECT THE ULTIMATE DECISION OF THE TRIBUNAL THAT N O INFERENCE IS CALLED FOR IN THE ORDER OF CIT (A). STILL I EXAMINE THE VERACITY OF THIS CLAIM OF THE ASSESSEE THAT THIS OBSERVATION OF THE TRIBUNAL IS INCORRECT THAT THE A SSESSEE DOES NOT HAVE BUSINESS INCOME IN THE PRESENT YEAR. I FIND THAT AS PER THE P&L ACCOUNT OF THE ASSESSEE AVAILABLE ON PAGE NO. 41 OF THE PAPER BOOK, THE ASS ESSEE HAS DECLARED INCOME ON ACCOUNT OF CREDITORS WRITTEN OFF, DIRECTOR REMUN ERATION, DIVIDEND RECEIVED, INTEREST RECEIVED FROM BANKS, INTEREST RECEIVED K .G. ENTERPRISES AND PROFIT ON SALE OF SHARES. HENCE FROM THESE SIX HEADINGS OF I NCOME CREDITED IN THE P&L ACCOUNT, IT IS CLEAR THAT IN THE PRESENT YEAR, NO B USINESS INCOME IS THERE. HENCE IN MY CONSIDERED OPINION, THIS OBSERVATION OF TRIBU NAL IN PARA 12 THAT THERE IS NO BUSINESS INCOME IN THE PRESENT YEAR IS NOT INCORREC T. M.P. NO. 3/BANG/2019 (IN ITA NO. 1453/BANG/2018) PAGE 5 OF 5 3. REGARDING THE SECOND ALLEGED MISTAKE THAT THE IN TEREST PAID TO SUNDARAM FINANCE IS NOT IN RESPECT OF HOUSING LOAN, I FIND T HAT THE ASSESSEE HAS HIMSELF STATED IN P&L ACCOUNT AVAILABLE ON PAGE NO. 41 OF THE PAPER BOOK THAT INTEREST-SUNDARAM FINANCE HOUSING LOAN-RS. 14, 29,951/- AND THEREFORE, THIS OBSERVATION OF THE TRIBUNAL IS ALSO NOT INCORRECT WHEN THIS INTEREST OF RS. 14,29,951/- IS IN RESPECT OF HOUSIN G LOAN EVEN AS PER THE NOMENCLATURE GIVEN TO IT BY THE ASSESSEE HIMSELF IN P & L ACCOUNT. REGARDING THE AMOUNT OF RS. 4,19,981/-, THE ASSESSE E HIMSELF STATED IN THE P&L ACCOUNT AVAILABLE ON PAGE NO. 41 OF THE PAPER B OOK THAT PROCESSING FEE LOAN SUNDARAM FINANCE RS. 4,19,981/- AND SI NCE, THE ONLY LOAN FROM SUNDARAM FINANCE IS HOUSING LOAN, THIS OBSERVA TION OF THE TRIBUNAL IS ALSO NOT INCORRECT. HENCE I FIND NO APPARENT MISTA KE IN THE TRIBUNAL ORDER. 4. IN THE RESULT, THE M.P. FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH JANUARY, 2019. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.