BIPINDRAKUMAR BHUPENDRAKUMAR BOHRA, MUMBAI v. INCOME TAX OFFICER 14(1)-3, MUMBAI

ITA 2875/MUM/2009 | 2004-2005
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 287519914 RSA 2009
Bench Mumbai
Appeal Number ITA 2875/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 20 day(s)
Appellant BIPINDRAKUMAR BHUPENDRAKUMAR BOHRA, MUMBAI
Respondent INCOME TAX OFFICER 14(1)-3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 25-03-2011
Date Of Final Hearing 14-12-2010
Next Hearing Date 14-12-2010
Assessment Year 2004-2005
Appeal Filed On 05-05-2009
Judgment Text
1 ITA NO . 2875/M/09 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO.2875/MUM/2009 ASSESSMENT YEAR- 2004-05 BIPINDRAKUMAR BHUPENDRAKUMAR BOHRA 238/10 AGARWAL BUILDINGS THAKURDWAR ROAD MUMBAI-400 002 PAN-AABPB 3001B VS. THE ITO 14(1) - 3 EARNEST HOUSE NARIMAN POINT MUMBAI-400 021 (APPELLANT) (RESPONDENT) APPELLANT BY : APPELLANT BY: SHRI RAKESH MILWANI RESPONDENT BY: SMT. ASHIMA GUPTA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 16.2.2009 PASSED BY THE LD. CIT(A)-XIV FOR THE ASSE SSMENT YEAR 2004-05. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CLOTH TRADING AND PROCESSING ON WHOLESALE BASIS. T HE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 27.10.2004 DECLARING A TOTAL I NCOME OF RS. 1 41 610/-. THE RETURN WAS PROCESSED U/S. 143(1) AND WAS SELECT ED FOR SCRUTINY BY ISSUE OF NOTICE U/S. 143(2). THE ASSESSMENT WAS FINALLY COM PLETED ON 21.12.2006 BY DETERMINING THE TOTAL INCOME AT RS. 12 33 330/-. WHILE DETERMINING THIS INCOME THE AO HAD MADE THE DISALLOWANCES/ADDITIONS . 3. THE ASSESSEE WAS DOING BUSINESS UNDER THE NAME A ND STYLE AS PROPRIETOR OF BOHRA & BOHRA VALLABH IINDUSTRIES AND BHERUNATH EXPORTS. AFTER THE A.Y. 2 ITA NO . 2875/M/09 2003-04 THE ASSESSEE DID BUSINESS UNDER THE NAME A ND STYLE OF BHERUNATH EXPORTS. IT WAS SUBMITTED THAT THE SAID PROPRIETOR Y CONCERN HAD AN AMOUNT OF RS. 27 04 313/- RECEIVABLE FROM DEBTORS AND SUM OF RS. 11 66 521/- WAS PAYABLE TO CREDITORS AND CASH ON HAND AT RS. 1701/- . THE ASSESSEE REALIZED DEBTS OF VALLABH INDUSTRIES PAID CERTAIN LIABILITI ES AND TRANSFERRED AMOUNTS TO BHERUNATH EXPORTS. THE ASSESSEE RECEIVED RS. 9 87 8 91/- FROM VALLABH INDUSTRIES AS PER THEIR CAPITAL ACCOUNT ATTACHED. OUT OF THE SAID AMOUNT AN AMOUNT OF RS. 8 03 000/- BY CHEQUE WAS DEPOSITED DI RECTLY IN THE ACCOUNT OF BHERUNATH EXPORTS. A FURTHER AMOUNT OF RS. 13 991 /- WITHDRAWN FROM BANK ACCOUNT OF VALLABH INDUSTRIES WAS PAID ON ACCOUNT O F THE ASSESSEE FOR WHICH COPY OF THE BANK ACCOUNT STATEMENT SHOWING THE SAID PAYMENT WERE ENCLOSED. THE ASSESSEE FURTHER RECEIVED RS. 1 70 900/- IN CAS H FROM VALLABH INDUSTRIES OUT OF THIS SUM OF RS. 1 40 900/- WAS GIVEN TO BHER UNATH EXPORTS. FURTHER THE ASSESSEE GAVE TOKEN AMOUNT OF RS. 25 CASH ON 1.4.20 03 AND FURTHER SUM OF RS. 31 000/- ON 26.9.2003. THE AMOUNT TOTALING TO RS. 9 74 901.25 WERE SHOWN AS DEPOSITS BY THE ASSESSEE IN THE BOOKS OF BHERUNA TH EXPORTS. THE AO CONSIDERED THE TRANSFER OF FUNDS AS FROM ON E PROPRIETORY CONCERN TO ANOTHER PROPRIETORY CONCERN OF THE ASSESSEE OF R S. 9 43 900/- AND CASH DEPOSIT OF RS. 31 001.25 AS INCOME OF THE ASSESSEE . THE ASSESSEE FURNISHED BEFORE THE AO THE CASH AND BANK BOOKS OF VALLABH I NDUSTRIES SHOWING RECEIPTS AND PAYMENTS INCLUDING THE PAYMENT TO BHERUNATH EXP ORTS. THE ONLY REASON FOR CONSIDERING THE SAID SUM AS UNEXPLAINED CREDIT BY THE AO WAS THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE PROOF OF RECE IPTS OF FUNDS BY BOHRA CORPORATION. THE ASSESSEE EXPLAINED THAT THE ASSESS EE IS DOING BUSINESS AT MANDIA ROAD RAJASTHAN WHICH IS NOT A CITY WHERE RE CEIPTS ARE ISSUED. DEBTORS ARE EVEN FROM FAR FLUNG AREAS AS KOLKATTA ETC. IN F ACT EVEN IN PLACES LIKE MUMBAI PAYMENTS ARE RECEIVED THROUGH POST AND NO R ECEIPTS FOR THE SAME ARE ISSUED. HENCE THE AOS CONCLUSION THAT THE RECEIPTS ARE NOT RECEIPTS FROM VALLABH INDUSTRIES IS ERRONEOUS. THE ASSESSEE FURTH ER SUBMITTED THAT THE DEBTORS OF VALLABH INDUSTRIES ARE IN RESPECT OF SAL ES OF VALLABH INDUSTRIES AND 3 ITA NO . 2875/M/09 HAVE ALREADY BEEN SUBJECTED TO INCOME TAX IN EARLIE R YEARS. THE REALIZATION OF SALES PROCEEDS IN THE CURRENT YEAR OF SALES MADE AN D CONSIDERED AS INCOME IN EARLIER YEARS CANNOT BE CONSIDERED AS INCOME OF THE CURRENT YEAR. THE AO HAS ERRONEOUSLY CONSIDERED CAPITAL ACCOUNT OF THE ASSES SEE IN THE BOOKS OF ACCOUNT OF BHERUNATH EXPORTS AS ASSESSEES CAPITAL ACCOUNT WHICH IS NOT SO. THE CAPITAL ACCOUNT OF THE ASSESSEE CLEARLY SHOWS THAT NO SUCH CREDITS APPEARED IN THE ASSESSEE'S CAPITAL ACCOUNT. THE ASSESSEE SUBMI TTED THAT THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF VALLABH IND USTRIES AND THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF BHERUNATH E XPORTS WOULD REVEAL THAT OTHER THAN THE CREDIT OF RS. 31 001.25 ALL THE OTHE R ENTREIS ARE SAME INDICATING AMOUNT TRANSFERRED FROM VALLABH INDUSTRIES TO BHERU NATH EXPORTS BOTH BEING PROPRIETORY CONCERNS OF THE ASSESSEE WHICH CLEARLY INDICATES THAT IT IS TRANSFER OF MONEY FROM ONE POCKET TO ANOTHER POCKET OF THE A SSESSEE NOT WARRANTING ANY ADDITION AS UNDISCLOSED INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE THE ASSESSEE PRAYED THAT THE ADDITION OF RS.9 74 000/- ON ACCOUNT OF CASH CREDIT BE DELETED. 4. THE AO HELD AS FOLLOWS: THE AO HAS DISCUSSED THIS ISSUE ON PAGE 1 AND 2 OF HIS ORDER BY GIVING THE FACTS THAT ASSESSEES CAPITAL ACCOUNT SH OWS AN ADDITION OF RS.9.74 901/-. ON ENQUIRIES MADE ABOUT THE SOURCES OF THESE ADDITIONS IT WAS EXPLAINED THAT ON THE CLOSURE OF PROPRIETORY CO NCERN NAMELY VALLABH INDUSTRIES ON 31.03.2003 WHEREIN THE ASSESSEE WAS HAVING OUTSTANDING DEBTORS TO THE TUNE OF RS.27.04 LAKHS AND CREDITORS TO THE TUNE OF RS.11.67 LAKHS OUT OF WHICH THE ASSESSEE COULD COL LECT RS. 20.50 LAKHS AND AFTER PAYING OFF THE CREDITORS THE BALANCE AMO UNT OF RS. 9.74 LAKHS HAD BEEN INTRODUCED IN THE CAPITAL ACCOUNT OF BHERU NATH EXPORTS. THESE RECEIPTS WERE IN THE FORM OF CASH AND CHEQUES. SIN CE THE ASSESSEE COULD NOT PRODUCE ANY PROOF THAT THESE RECEIPTS WERE ACTU ALLY FROM THE DEBTORS OF ERSTWHILE PROPRIETORY CONCERN VALLABH INDUSTRIES I T WAS ASKED TO PRODUCE SOME OF THOSE PARTIES FROM WHOM THESE PAYMENTS HAVE BEEN RECEIVED. IN REPLY IT WAS EXPLAINED THAT ASSESSEE WAS RUNNING BU SINESS ACTIVITIES AT MANDIA ROAD RAJASHTRAN AND THEY HAVE NO PRACTICE O F ISSUING ANY RECEIPTS FOR PAYMENT MADE OR RECEIVED AND SINCE THE MATTER IS OLD IT IS DIFFICULT TO COLLECT CONFIRMATION OR PRODUCE THESE PARTIES. SINCE THE ASSESSEE FAILED TO FURNISH ANY CONFIRMATION LETTERS OR PRODU CE THESE PARTIES TO PROVE 4 ITA NO . 2875/M/09 THEIR IDENTITY AND AUTHENTICITY OF ASSESSEES CLAIM THE AO TREATED THE RECEIPTS AS CASH CREDIT IN THE HANDS OF THE ASSESSE E. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) AND SUBMITTED AS FOLLOWS: THE APPELLANT HAS VEHEMENTLY CONTENTED THAT THE AM OUNT OF RS.9 74 901 /- SHOWN AS DEPOSITS IN THE BOOKS OF BHERUNATH EXPO RTS IS TRANSFER OF FUNDS FROM ONE PROPRIETARY CONCERN OF T HE APPELLANT TO ANOTHER PRPRIETORY CONCERN I.E. FROM ONE POCKET OF ASSESSEE TO HIS OTHER POCKET. CASH AND BANK BOOKS OF VALLABH INDUSTRIES SHOWING THE RECEIPTS AND PAYMENTS INCLUDING PAYMENT TO BHWERUNATH EXPORTS WE RE PRODUCED BEFORE THE AO. THE AMOUNTS ESPECIALLY THROUGH BANK WERE TR ANSFERRED FROM THE BOOKS OF VALLABH INDUSTRIES AND THE AO WAS NOT JUSTIFIED IN STATING THAT THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATIS FACTORY. THE AO SHOULD HAVE ENFORCED ATTENDANCE OF DEBTORS INSTEAD OF RESO RTING TO A SHORT CUT METHOD OF ADDING SUCH AMOUNTS U/S.68. THE ONLY REAS ON GIVEN BY THE AO IS THAT THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE THESE PARTIES. WHEREAS THE APPELLANT HAS PRODUCED ALL DOCUMENTARY EVIDENCE POSSIBLE TO PROVE THE AMOUNTS RECEIVED FROM ITS OWN DEBTORS . THE DEBTORS OF VALLABH INDUSTRIES ARE IN RESPECT OF SALES AND HAVE ALREADY BEEN SUBJE CTED TO INCOME TAX IN EARLIER YEARS. ANY CASH CREDIT WOULD GO TO INCREASE THE CAPITAL ACCOUNT OF THE ASSESSEE A PERUSAL OF THE SAME WOULD REVEAL TH AT THERE IS NO ADDITION TO THE CAPITAL ACCOUNT. ON THE CONTRARY THE CAPITA L ACCOUNT OF APPELLANT IN THE BOOKS OF VALLABH INDUSTRIES AND IN THE BOOKS OF BHERUNATH EXPORTS WOULD REVEAL THAT OTHER THAN CREDIT OF RS. 31 001.2 5 ALL THE OTHER ENTRIES ARE SAME INDICATING AMOUNT TRANSFERRED FROM VALLABH INDUSTRIES TO BHERUNATH EXPORTS BOTH BEING PROPRIETORY CONCERNS OF THE APPELLANT. THUS IT IS A CLEAR CASE OF TRANSFER OF MONEY FROM ONE POCKET OF THE APPELLANT TO ANOTHER POCKET. THEREFORE ADDITION MA DE IS NOT JUSTIFIED AND REQUIRES TO BE DELETED. 6. THE LD. CIT(A) HELD AS FOLLOWS: FROM THE FACTS AND CONCLUSION ARRIVED AT BY THE AO AND THE ABOVE CONTENTIONS OF THE APPELLANT THE UNDISPUTED FACT W HICH EMERGES IS THAT THE APPELLANT IN ITS CAPITAL ACCOUNT AS A PROP RIETOR IN THE BOOKS OF ACCOUNT OF BHERUNATH EXPORTS HAS ON VARIOUS DATE S CREDITED VARIOUS AMOUNTS BY WAY OF CASH AND BANK IN THE NAME OF VALLABH INDUSTRIES THE TOTAL OF WHICH APPROXIMATELY AMOUNTS TO RS. 9 43 900/-. ON FINDING THESE AMOUNTS CREDITED THE AO REQUIRED THE APPELLANT TO EXPLAIN THE NATURE OF THESE ENTRIES TO WHICH IT WAS EXPLAINED THAT THESE ARE THE TRANSFER AMOUNTS FROM VALLABH INDUSTRIES. ON REALIZATION OF OUTSTANDING DEBTS IN SUPPORT OF WHICH 5 ITA NO . 2875/M/09 BANK/CASH BOOK AND LIST OF CREDITORS/DEBTORS OF VAL LABH INDUSTRIES. WERE SUPPLIED. ON FURTHER RAISING A QUERY BY THE A O TO PROVE THAT THESE RECEIPTS WERE ACTUALLY FROM THE DEBTORS OF TH E ERSTWHILE PROPRIETORY CONCERN VALLABH INDUSTRIES. THE APPELL ANT SHOWED ITS INABILITY IN DOING SO. IN THE ABOVE SUBMISSIONS AL SO THE APPELLANT EXCEPT CLAIMING THAT THE RECEIPTS FROM THE OUTSTAND ING DEBTORS ONLY ARE TRANSFERRED TO THE ACCOUNT OF THE APPELLANT AS PROPRIETOR IN THE BOOKS OF BHERUNATH EXPORTS NO EVIDENCES WHATSOEVER IN SUPPORT OF ITS CLAIM BEING AUTHENTIC COULD BE FURNISHED EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROC EEDINGS. SINCE THE AO IS FOUND HAVING RAISED A SPECIFIC QUERY DURI NG THE ASSESSMENT PROCEEDINGS EITHER TO FURNISH THE CONFI RMATORY LETTERS FROM THE ALLEGED DEBTORS OR TO PRODUCE SOME OF THE DEBTORS FOR EXAMINATION BEFORE HIM THE APPELLANT RAISED HIS HA NDS AND EXPRESSED HIS INABILITY. TO WHICH IN THE ABOVE SUB MISSIONS IT HAS CLAIMED THAT AO SHOULD HAVE ENFORCED THE DEBTORS W HEREAS DURING THE ASSESSMENT PROCEEDINGS NO REQUEST TO THE AO FO R EITHER ISSUING SUMMONS OR COMMISSION AS PER THE PROVISIONS OF I.T. ACT HAS BEEN MADE BY THE APPELLANT. IT IS A TRITE LAW THAT THE ONUS IS ON THE APPELLANT TO PROVE NOT ONLY THE SOURCE OF ANY CASH/ CREDIT ENTRIES IN ITS BOOKS BUT ALSO THE IDENTITY OF THE PERSONS CR EDITWORTHINESS OF THE PERSONS AND GENUINENESS OF THE TRANSACTIONS. I N THE INSTANT CASE THE APPELLANT HAS CLAIMED THE SOURCE AS REALI ZATION OF OUTSTANDING DEBTS. BUT ON FURTHER REQUIREMENT OF I T TO PROVE THE IDENTITY CREDITWORTHINESS OF CREDITORS AND GENUINE NESS OF THE TRANSACTIONS THE APPELLANT EXPRESSED ITS INABILITY . NOW IN THE ABOVE SUBMISSIONS THE APPELLANT IS SHIFTING ITS ONUS ON THE AO BY STATING THAT HE SHOULD HAVE ENFORCED THE DEBTORS EITHER FOR SUBMITTING CONFIRMATION LETTERS OR BEING PRESENT FOR EXAMINATI ON. THIS CONTENTION ON THE PART OF THE APPELLANT IS DEVOID O F ANY MERIT PARTICULARLY IN VIEW OF THE FACT THAT THE APPELLAN T HAD NEVER BEFORE THE AO HAS MADE ANY SUCH REQUEST. THE MERE FILING OF COPIES OF ACCOUNTS IN THE BOOKS OF VALLABH INDUSTRIES AND BH ERUNATH EXPORTS CLAIMING THE TRANSFER OF FUNDS IS THUS NOT SUFFICIE NT A PROOF FOR CONSIDERING THE GENUINENESS OF THE TRANSACTIONS IN THE ABSENCE OF THE PROOF REGARDING DEBTORS AND THEIR CAPACITY OF R EPAYMENT. THEREFORE I DO NOT FIND ANY INFIRMITY IN THE ACTIO N OF THE AO IN MAKING THIS ADDITION. THIS GROUND IS THEREFORE D ECIDED AGAINST THE APPELLANT. 7. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. THE SHORT ISSUE FOR CONSIDERATION IS WHETHER THE AMOUNT OF RS. 9 74 901 .25 SHOWN AS DEPOSIT IN THE BOOKS OF BHERUNATH EXPORTS HAS BEEN FROM VALLABH INDUSTRIES I.E. ONE PROPRIETORY CONCERN TO ANOTHER PROPRIETORY CONCERN. THE ASSESSEE EXPLAINED 6 ITA NO . 2875/M/09 THAT ON THE CLOSURE OF THE PROPERTY CONCERN NAMELY VALLABH INDUSTRIES ON 31.3.2003 DEBTORS WERE TO THE TUNE OF RS. 27.04 LAC S AND CREDITORS WERE TO THE TUNE OF RS. 11.67 LACS. DURING THE YEAR OUT OF TH E OUTSTANDING DEBTORS OF RS. 27.04 LACS OF VALLABH INDUS. ASSESSEE COULD COLLEC T RS. 20.50 LACS AND AFTER PAYING OFF THE CREDITORS THE BALANCE AMOUNT OF RS. 9.74 LACS HAD BEEN PRODUCED IN THE CAPITAL ACCOUNT OF BHERUNATH EXPORT S. 8. ON THE REQUEST OF THE AO THAT PROOF OF THE RECEI PTS ARE TO BE ESTABLISHED AND HENCE THE AO INSISTED ON THE PRODUCTION OF THOS E PARTIES FROM WHOM THE PAYMENTS HAVE BEEN RECEIVED. HOWEVER IN REPLY TO THE AO THE ASSESSEE SUBMITTED THAT IT WAS RUNNING BUSINESS ACTIVITIES A T MANDIA ROAD RAJASTHAN AND THEY HAVE NO PRACTICE OF ISSUING ANY RECEIPTS FOR PAYMENT MADE OR RECEIVED AND SINCE THE MATTER IS OLD IT IS DIFFICULT TO COL LECT CONFIRMATION OR PRODUCE THESE PARTIES. 9. WE HAVE PERUSED THE DETAILS AND FIND THAT IN THE ABSENCE OF PROOF THAT THESE RECEIPTS ARE ACTUALLY FROM THE DEBTORS OF THE ERSTWHILE PROPERTY CONCERN VALLABH INDUSTRIES THE MATTER IS TO BE SENT BACK T O THE AO TO RE-EXAMINE THE ISSUE IN THE LIGHT OF THE PROOF/CONFIRMATION FROM T HE PARTIES. THE AO SHALL DECIDE THE MATTER IN ACCORDANCE WITH LAW AFTER GIVI NG REASONABLE OPPORTUNITY TO THE ASSESSEE. 10. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS FO LLOWS: CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E THE CIT(A) ERRED ON FACTS AND IN CONFIRMING DISALLOWANCE OF RS . 29275/- ON ACCOUNT OF INTEREST AND THE SAME OUGHT TO BE DELETED. 11. BEFORE THE LD. CIT(A) THE AR OF THE ASSESSEE C ONTENTED AS FOLLOWS: IN RESPECT OF GROUND NO. 3 IT IS CONTENDED THAT TH E AO DISALLOWED INTEREST OF RS. 29 275/- ON THE GROUND THAT IT PERT AINS TO LOAN TAKEN IN INDIVIDUAL CAPACITY BY THE ASSESSEE. THE ASSESSEE HAD BEEN CLAIMING SUCH EXPENDITURE EVEN FOR EARLIER YEARS AND THE FUN DS UTILIZED BY THE ASSESSEE OUT OF BORROWING IN HIS PERSONAL CAPACITY HAS BEEN ALLOWED AS EXPENDITURE FOR THE PURPOSE OF ASSESSEES BUSINESS FOR A.Y. 2003-04 AND 7 ITA NO . 2875/M/09 ONCE THE FUNDS HAVE BEEN ALLOWED IN ONE YEAR THE S AME CANNOT BE DISALLOWED IN SUBSEQUENT PERIOD. THE CAPITAL OF TH E APPELLANT IN THE BOOKS OF BHERUNATH EXPORTS IS RS. 12 39 911.- AND THE INT EREST PAID ON PERSONAL LOANS IS RS. 29 275/- CONSTITUTING ONLY 2.36% WHICH IS MUCH LOWER THAN THE NORMAL RATES OF INTEREST.. THE AO FAILED TO RE ALIZE THAT THE APPELLANT HAD EARNED INTEREST OF RS. 32 403/- IN HIS PERSONA L ACCOUNT ALSO WHICH IS HIGHER THAN INTEREST PAID IN HIS PERSONAL ACCOUNT O F RS. 29 275/-.AS INTEREST RECEIVED MORE THAN THE INTEREST PAID IN PE RSONAL ACCOUNT ALSO THE AO EVEN IF NOT SATISFIED THAT INTEREST HAS BEEN PAI D ON LOANS TAKEN FOR THE PURPOSE OF BUSINESS OUGHT TO HAVE ALLOWED AS DEDUC TION FROM INTEREST RECEIVED BY THE APPELLANT. . IN VIEW OF THE ABOVE THE APPELLANT CONTENDED THAT THE DISALLOWANCE OF INTEREST ON LOANS TAKEN IN PERSONAL CAPACITY OF RS. 29 275/- OUGHT TO BE ALLOWED. 12. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND SU BMISSIONS AND HAVE ALSO PERUSED THE ORDER OF THE AO. THE AO HAS DISCUSSED THIS ISSUE ON PAGE 2 OF HIS ORDER AND GIVEN A FINDING THAT IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE THERE ARE ADDITIONAL LOANS TO THE TUNE OF RS12.26 LAKHS WHICH HAS NOT BEEN REFLECTED IN THE BALANCE S HEET OF THE ASSESSEES BUSINESS I.E. PROPRIETORY CONCERN NAMELY BHERUNATH EXPORTS WHEREAS THE INTEREST PAYMENT OF RS. 29 275/- IS DEBITED TO THE P&L ACCOUNT AGAINST THE LOAN HAVING SHOWN AT RS. 97 529/- ONLY. THESE FACT S CLEARLY INDICATE THAT THE ASSESSEE HAD NOT UTILIZED THE INTEREST BEARING LOANS FOR HIS BUSINESS PURPOSES HENCE THE INTEREST CLAIMED WAS DISALLOWED. IN THE ABOVE SUBMISSIONS THE APPELLANT HAS NOT DISPUTED THESE F ACTS AS NARRATED BY THE AO IN HIS ORDER. IT HAS ALSO NOT REBUTTED THE CON CLUSION OF THE AO THAT THE LOAN OF RS. 12.26 LAKHS RAISED ON WHICH INTEREST WA S PAID HAD NOT BEEN UTILIZED FOR THE PURPOSES OF ITS BUSINESS BUT WAS U SED FOR PERSONAL PURPOSES. THE ONLY CONTENTION RAISED IS THAT IN TH E EARLIER YEAR I.E. FOR A.Y. 2003-04 SUCH EXPENDITURE HAS BEEN ALLOWED HENCE T HE SAME CANNOT BE DISALLOWED IN THE SUBSEQUENT PERIOD. THIS CONTENT ION IS HAVING NO MERIT AT ALL FOR THE REASON THAT EACH YEAR IS AN INDEPENDENT YEAR FOR THE PURPOSES OF INCOME TAX AND AS DURING THE YEAR UNDER APPEAL THE AO HAS GIVEN A SPECIFIC FINDING OF HAVING NOT UTILIZED THE BORROWE D FUNDS ON WHICH INTEREST IS PAID FOR THE PURPOSES WHOLLY AND EXCLUSIVELY OF BUSINESS THEREFORE EVEN IF SUCH INTEREST EXPENDITURE WAS ALLOWED IN THE EAR LIER YEAR FOR THIS REASON THE SAME IS NOT ADMISSIBLE FOR THE YEAR UNDER APPEA L. EARLIER YEARS MISTAKE CANNOT BE ALLOWED TO BE REPEATED ON FINDING THE FACT IN A SUBSEQUENT YEAR. I ALSO DO NOT FIND ANY FORCE IN T HE CONTENTION OF THE APPELLANT THAT AO IS OF THE OPINION THAT FOR CLAIMI NG THE FUNDS UTILIZED FOR THE PURPOSES OF BUSINESS THE SAME SHOULD HAVE BEEN TAKEN IN THE NAME OF BUSINESS WHEREAS NO SUCH CONCLUSION AND OPINION IS FOUND HAVING EXPRESSED BY THE AO IN HIS ORDER. I ALSO DO NOT FI ND ANY FORCE IN THE 8 ITA NO . 2875/M/09 ARGUMENT OF THE APPELLANT THAT THE APPELLANT HAS EA RNED INTEREST OF RS. 32 403/- IN HIS PERSONAL ACCOUNT AGAINST THE INTERE ST PAID IN HIS PERSONAL ACCOUNT OF RS. 29 275/- WHICH IS MORE AND OUGHT TO HAVE ALLOWED AS DEDUCTION FROM INTEREST INCOME RECEIVED BY THE APPE LLANT FOR THE SIMPLE REASON THAT FOR DEDUCTION OF EXPENDITURE FROM AN IN COME TREATED TO BE FALLING U/S. 56 OF THE I.T. ACT THE PROVISIONS OF SEC. 57 WHICH SPECIFIES THE ADMISSIBILITY IS TO BE SATISFIED. IN THE CASE OF T HE APPELLANT AS IT COULD NOT ESTABLISH THE NEXUS OF INTEREST INCOME EARNED HAVIN G BEEN OUT OF THE BORROWED FUNDS ON WHICH INTEREST WAS PAID THE QUES TION OF ALLOWING DEDUCTION OF INTEREST PAID AT RS. 29 275/- DOES NOT ARISE. IN OTHER WORDS THE APPELLANT HAS NOT ESTABLISHED THAT FOR EARNING INTEREST OF RS.32 403 /- IT HAD INCURRED EXPENDITURE ON ACCOUNT OF INTEREST PAID OF RS. 29 275/-. IN THE ABSENCE OF SUCH NEXUS THE CLAIM OF THE APPELLA NT CANNOT BE CONSIDERED TO BE AN ADMISSIBLE CLAIM. IN VIEW THEREFORE OF T HE ABOVE DISCUSSED FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT FIND ANY IN FIRMITY IN THE ACTION OF THE AO IN DISALLOWING INTEREST OF RS. 29 275/-. TH IS GROUND THEREFORE IS DECIDED AGAINST THE APPELLANT. 13. WE FIND THAT THE ASSESSEE HAS NOT ESTABLISHED THAT FOR EARNING INTEREST OF RS. 29 275/- THE ASSESSEE HAS INCURRED EXPENDITURE ON ACCOUNT OF INTEREST PAID. THEREFORE WE REMIT THE ISSUE TO THE FILE OF THE AO TO VERIFY THE NEXUS BETWEEN THE BORROWED FUNDS AND INTEREST PAID AND IF HE IS SATISFIED WE DIRECT THE AO TO ALLOW THE CLAIM. 4. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH 2011 SD/- SD/- (R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH MARCH 2011 RJ 9 ITA NO . 2875/M/09 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI 10 ITA N O. 2875/M/09 DATE INITIALS 1 DRAFT DICTATED ON: 22 . 03 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 23 .03.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______