Shri Nilesh Bansilal Shah, Ahmedabad v. The Income tax Officer, Ward-5(2),, Ahmedabad

ITA 1300/AHD/2007 | 2004-2005
Pronouncement Date: 26-03-2010 | Result: Allowed

Appeal Details

RSA Number 130020514 RSA 2007
Assessee PAN ACMPS6181L
Bench Ahmedabad
Appeal Number ITA 1300/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 26 day(s)
Appellant Shri Nilesh Bansilal Shah, Ahmedabad
Respondent The Income tax Officer, Ward-5(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 26-03-2010
Date Of Final Hearing 10-03-2010
Next Hearing Date 10-03-2010
Assessment Year 2004-2005
Appeal Filed On 30-03-2007
Judgment Text
ITA.1300-1400/07 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHERI T. K. SHARMA JM AND D.C.AGRAWAL AM I.T.A.NO. 1300/AHD/2007(BY ASSESSEE) AND I.T.A. NO.1400/AHD/2007 (BY DEPT.) ASSESSMENT YEAR: 2004-05 SHRI NILESH BANSILAL SHAH 9 AMARASHISH BUNGALOWS PRAHLADNAGAR NR. PARAS AURVED VEJALPUR AHMEDABAD. (APPELLANT) VS INCOME TAX OFFICER WARD 5(2) C.U.SHAH BUILDING ASHRAM ROAD AHMEDABAD. (RESPONDENT) PAN NO.ACMPS 6181 L APPELLANT BY :- MR. SAKAR SHARMA. RESPONDENT BY:- MR.M.C. PANDIT SR.D.R. O R D E R PER SHRI D.C. AGRAWAL. J.M. THESE ARE THE TWO CROSS APPEALS ONE FILED BY THE A SSESSEE AND THE OTHER FILED BY THE REVENUE AGAINST THE ORDER DT. 7. 2.2007 PASSED BY THE LD. CIT(A)-XI AHMEDABAD. IN ITS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.3 24 000/ - BEING THE INCOME FROM HOUSE PROPERTIES BY ADMITTING ADDITIONA L EVIDENCE AS MENTIONED IN PARAGRAPHS 4.1 AND 4.3.2. OF THE OR DER IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A(3) OF T HE INCOME TAX RULES 1962. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XI AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. C IT(A)-XI AHMEDABAD MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 2. WHEREAS IN ITS APPEAL THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS:- 1. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CONFI RMING THE ACTION OF THE A.O. DISALLOWING INTEREST OF RS.15 71 330/-. 2. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ACTION OF THE A.O. MAKING ADDITION OF RS.28 76 000/ - ON ACCOUNT OF CASH DEPOSITS MADE IN THE O.D. BANK ACCO UNT. ITA.NO.1400/AHD/2007(BY DEPARTMENT) 3. THE TAX EFFECT IN THIS CASE IS LESS THAN RS.2 LA KHS. AT THE OUTSET THE LD. A.R. FOR THE ASSESSEE POINTED OUT THAT THE APPE AL OF THE REVENUE SHOULD BE DISMISSED. THE LEARNED D.R. ON THE OTHER HAND OPPOSED THE ARGUMENTS OF LD. A.R. 4. AFTER HEARING THE PARTIES WE ARE OF THE CONSIDER ED VIEW THAT APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED IN LIMINE BECAUSE OF REVENUE EFFECT BEING LESS THAN RS.2 LAKHS. 5. AS A RESULT THE APPEAL OF THE REVENUE IS DISMISS ED. 3 ITA. NO.1300AHD/2007(BY ASSESSEE). 6. IN ASSESSEES APPEAL TWO ISSUES AS ABOVE ARE RAI SED. THE FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL AND DIRECTO R IN M/S. PARSHWA ELECTRONICS SERVICES LTD. A CLOSELY HELD COMPANY. THE ASSESSEE DERIVES SALARY INCOME FROM THIS COMPANY. IN THE RETURN OF I NCOME FILED BY THE ASSESSEE HE HAS DECLARED INCOME FROM OTHER SOURCE AS UNDER :- FIX DEPOSIT INTEREST FROM UNION BANK OF INDIA RS.17 05 304/- LESS:-INTEREST PAID TO BANK. RS.15 71 330/- ----------------- RS. 1 33 974/- ========== 7. ON BEING ASKED TO EXPLAIN THE CLAIM OF INTEREST PAYMENT TO THE BANK ASSESSEE SUBMITTED THAT ASSESSEE HAS OPENED F .D.R. WITH UNION BANK OF INDIA BY DEPOSITING A SUM OF RS.1 51 19 876 /-. AGAINST THIS FDR IT HAS OPENED AN O.D. ACCOUNT WITH THAT BANK AND FR OM TIME TO TIME WITHDRAWN THE MONEY FROM THE BANK AND USED IT FOR S ELF OR GAVE TO THE COMPANY FOR ITS USE. INTEREST INCOME EARNED FROM FD R WAS SHOWN AS INTEREST INCOME WHEREAS PAYMENT OF INTEREST ON O.D. WAS DEDUCTED THEREFROM. THE A.O. OPINED THAT THERE IS NO DIRECT NEXUS OF THE INTEREST PAYMENT WITH THE INTEREST INCOME AND INTEREST EXPEN DITURE IS NOT INCURRED FOR EARNING INTEREST INCOME. THEREFORE DEDUCTION O F INTEREST EXPENDITURE AGAINST INTEREST INCOME CANNOT BE ALLOWED. ACCORDIN G TO THE A.O. THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE I N SUPPORT OF HIS CLAIM. HE ACCORDINGLY DISALLOWED THE CLAIM OF EXPEN DITURE OF INTEREST OF RS.15 71 330/-. 8. IN ADDITION TO THIS A.O. NOTICED THAT ASSESSEE HAS DEPOSITED FOLLOWING SUMS IN THE O.D. ACCOUNT ON VARIOUS DATES AS UNDER :- 4 DATE. NARRATION. AMOUNT. 10.07.03 BY CASH 5 00 000 10.7.03 BY CASH 5 00 000 16.7.03 BY CASH 2 50 000 31.7.03 BY CASH 1 000 6.10.03 BY CASH 1 50 000 6.12.03 BY CASH 25 000 10.12.03 BY CASH 2 00 000 11.12.03 BY CASH 11 00 000 15.12.03 BY CASH 1 50 000 BY CASH 28 76 000 9. THE A.O. REQUIRED THE ASSESSEE TO SUBMIT THE EXP LANATION OF THE CASH SO DEPOSITED. IT WAS EXPLAINED THAT MONEY WAS DEPOSITED OUT OF WITHDRAWAL MADE PRIOR TO THESE DEPOSITS. THE CASH G IVEN TO THE COMPANY FOR ITS WORK WAS RECEIVED BACK AND WAS DEPOSITED IN THE BANK. FURTHER NO EVIDENCE IN SUPPORT OF IT WAS FILED AND ACCORDIN GLY A.O. TREATED IT AS UNEXPLAINED AND MADE THE ADDITION. 10. THE LD. C.I.T. (A) CONFIRMED THE SAME FOR THE REASONS MENTIONED BY THE A.O. IN HIS ORDER. 11. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. REGARDING THE FIRST ISSUE CLAIM OF LD. A. R. IS THA T EXPENDITURE HAS DIRECT NEXUS WITH THE INTEREST INCOME BECAUSE MONEY SO WIT HDRAWN WAS UTILIZED FOR BUSINESS PURPOSES. REGARDING SECOND ISSUE THE L D. A.R. SUBMITTED THAT A.O. SHOULD GIVE CREDIT OF WITHDRAWALS MADE FROM TI ME TO TIME AND WHICH IS PRIOR TO THESE DEPOSITS. IN OUR CONSIDERED VIEW CLAIM OF INTEREST EXPENDITURE HAS NO CONNECTION WITH THE EARNING OF I NTEREST INCOME. 5 INTEREST INCOME IS EARNED ON FDR MONEY DEPOSITED WI TH THE BANK ON WHICH INTEREST IS ACCRUING AUTOMATICALLY TO THE ASS ESSEE. THERE IS NO CASE THAT ASSESSEE HAD WITHDRAWN THE MONEY FROM SOMEWHER E ON WHICH THE ASSESSEE IS REQUIRED TO PAY INTEREST AND SAME MONEY IS DEPOSITED IN THE BANK WHICH IS EARNING INTEREST. ONCE MONEY DEPOSIT ED IN FDR IS INDEPENDENT THEN INTEREST PAYMENT ON O.D. ACCOUNT C OULD NOT BE RELATED TO EARNING OF INTEREST INCOME ON THE FDR. 12. HOWEVER INTEREST PAYMENT ON O.D. ACCOUNT IS RE QUIRED TO BE EXAMINED BY THE AO WHETHER IT WAS FOR THE BUSINESS PURPOSES OR WHETHER IT WAS ENTIRELY A PERSONAL WITHDRAWAL FROM O.D. IN CASE O.D. ACCOUNT WAS OPENED FOR BUSINESS PURPOSES AND MONEY WITHDRAWN TH ERE-FROM WAS UTILIZED IN BUSINESS THEN LOSS ON ACCOUNT OF INTERE ST PAYMENT TO BANK ON O.D. ACCOUNT WOULD BE THE BUSINESS LOSS AND ASSESSA BLE ACCORDINGLY AND CAN BE SET OFF AGAINST INTEREST INCOME ASSESSABLE U NDER THE HEAD INCOME FROM OTHER SOURCE. BEFORE US THERE IS NO MATERIAL T O SHOW THAT ASSESSEE HAD WITHDRAWN MONEY FROM O.D. ACCOUNT AND USED FOR BUSINESS PURPOSES. COPY OF ASSESSEES ACCOUNT FROM THE COMPANY FILED B EFORE US DID NOT SHOW DEPOSIT OF MONEY BY THE ASSESSEE OUT OF THE MO NEY WITHDRAWN FROM OD ACCOUNT. THUS APPARENTLY THERE IS NO DIRECT NEXU S OF THE MONEY DEPOSITED IN THE O.D. ACCOUNT AND RECEIVED BACK FRO M COMPANY. THERE IS APPARENTLY NO ONE TO ONE MATCHING OF ACCOUNT OF WIT HDRAWAL FROM THE O.D. ACCOUNT TO UTILIZATION OF THAT MONEY FOR BUSIN ESS PURPOSES. THE ASSESSEE HAS SUBMITTED COPY OF HIS ACCOUNT IN M/S. PARSHWA ELECTRONICS SERVICES LTD. WHICH IS AT PAGE-54 OF THE PAPER BOO K FILED BY THE ASSESSEE. HOWEVER IT REQUIRES TO BE EXAMINED TO MATCH WITH V ARIOUS WITHDRAWALS SHOWN IN THE O.D. ACCOUNT. IN THE INTEREST OF JUSTI CE WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO GIVE AN OPPORTUNITY TO T HE ASSESSEE TO ESTABLISH THAT WITHDRAWALS FROM O.D. ACCOUNT WAS FOR BUSINESS PURPOSES AND 6 THEREFORE INTEREST EXPENDITURE WAS HIS BUSINESS EX PENDITURE. OTHERWISE IT REMAINS A PERSONAL WITHDRAWAL FOR WHICH INTEREST IS PAID WHICH CANNOT BE ADJUSTED AGAINST INTEREST INCOME EARNED ON FDR. IN ORDER TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE AND AO WE SET ASIDE THI S ISSUE TO THE FILE OF THE A.O. THIS GROUND IS ALLOWED BUT FOR STATISTICA L PURPOSES. 13. REGARDING SECOND ISSUE WE NOTICE THAT ASSESSEE HAS WITHDRAWN RS.4 LAKHS ON 27.6.03 AND RS.8 LAKHS ON 9.7.03 AND DEPOS ITED RS.5 LAKHS EACH TWICE ON 10.7.2003. THE DEPOSIT OF THE SUM OF RS. 1 0 LAKHS ON 10.7.2003 IS IN CLOSE PROXIMITY WITH WITHDRAWAL OF RS.12 LAKH S. THEREFORE THE EXPLANATION OF THE ASSESSEE IS ACCEPTED THAT THE SU M OF RS.10 LAKHS SO DEPOSITED WAS OUT OF WITHDRAWAL OF RS.12 LAKHS ON T WO DATES VIZ. 26.7.03 AND 9.7.03. 14. THE ASSESSEE HAS FURTHER DEPOSITED SUM OF RS.2 50 000/- ON 16.7.03. THUS THIS SUM OF RS.2 50 000/- IS ALSO TR EATED AS EXPLAINED AS COMING OUT OF WITHDRAWALS OF RS.1 LAC ON 25.6.03 AN D BALANCE OF RS.2 LACS LEFT OUT OF WITHDRAWALS ON 27.6.03 AND 9.7.03. 15. THERE ARE DEPOSITS OF RS.15 00 000/- ON 6.10.03 RS.2 LAKHS ON 10 .12.03 RS.11 LAKHS ON 11.12.03 AND RS.1 50 000/ - ON15.12.03 AND RS.23 85 000/- ON 10.1.01.2004 AND RS.3 LAKHS ON 25 .3.2004.THE WITHDRAWALS FROM O.D. ACCOUNT ARE AS UNDER ALSO :- DATE OF WITHDRAWAL AMOUNT WITHDRAWN 11-08-03 1 50 000 16-08-03 30 000 18-08-03 20 000 7 23-08-03 35 000 26-08-03 10 00 000 27-08-03 22 000 30-08-03 15 000 01-09-03 30 000 01-09-03 10 000 02-09-03 75 000 04-09-03 1 10 000 08-09-03 50 000 09-09-03 15 000 10-09-03 1 00 000 11-09-03 5 00 000 16-09-03 65 000 20-09-03 45 000 23-09-03 50 000 26-09-03 50 000 17-10-03 75 000 13-11-03 6 00 000 16. THE CLAIM OF THE LEARNED A.R. IS THAT DEPOSIT S O MADE ON 6-10-03 ONWARDS SHOULD BE TREATED AS COMING OUT OF THE WITH DRAWAL. IN OUR CONSIDERED VIEW THE EXPLANATION OF THE ASSESSEE CAN NOT BE ACCEPTED IN ITS ENTIRETY. THE DEPOSIT AND WITHDRAWALS SHOULD IN CLO SE PROXIMITY OR IF THE DEPOSIT IS MADE THROUGH CHEQUES THEN ITS SOURCE SHO ULD BE IDENTIFIABLE. IN CASE OF TIME GAP BETWEEN CASH WITHDRAWAL AND DEPOSI T OUT OF IT WE TREAT A PERIOD OF 3 MONTHS AS REASONABLE PERIOD. IF DEPOSIT IS MADE WITHIN 3 MONTHS OF WITHDRAWAL THEN IT SHOULD BE TREATED AS E XPLAINED. THIS REQUIRE THE WORKING BY THE A.O. WE ACCORDINGLY RESTORE THIS ISSUE ALSO TO THE FILE 8 OF THE A.O. TO GIVE AN OPPORTUNITY TO THE ASSESSEE EITHER TO SHOW SOURCE OF DEPOSIT OR IF THERE ARE ONLY CASH DEPOSITS AND WITH DRAWAL THEN DEPOSITS MADE WITHIN THREE MONTHS SHOULD ALONE BE TREATED AS EXPLAINED. THE A.O. WILL DO THE NECESSARY WORKING AFTER GIVING OPPORTUN ITY TO THE ASSESSEE. THIS ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF T HE A.O. AS A RESULT THE APPEAL BY THE ASSESSEE IS ALLOWED BUT FOR STATISTIC AL PURPOSES. APPEAL OF THE REVENUE IS DISMISSED SD/- SD/- (T. K. SHARMA ) (D.C.AG RAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 26-03-2010 PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD. ORDER PRONOUNCED IN OPEN COURT ON 26 -03- 2010