BOHRA BHUPENDRAKUNMAR MULCHAND (HUF), MUMBAI v. INCOME TAX OFFICER 14(1)-3, MUMBAI

ITA 2881/MUM/2009 | 2004-2005
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 288119914 RSA 2009
Assessee PAN AACHB6153K
Bench Mumbai
Appeal Number ITA 2881/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 20 day(s)
Appellant BOHRA BHUPENDRAKUNMAR MULCHAND (HUF), 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 07-03-2011
Next Hearing Date 07-03-2011
Assessment Year 2004-2005
Appeal Filed On 05-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI T.R. SOOD (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO.2881/MUM/2009 ASSESSMENT YEAR- 2004-05 BOHRA BHUPENDRAKUMAR MULCHAND (HUF) 238/10 AGARWAL BUILDINGS THAKURDWAR ROAD MUMBAI-400 002 PAN-AACHB 6153K VS. THE ITO 14(1) - 3 EARNEST HOUSE NARIMAN POINT MUMBAI-400 021 (APPELLANT) (RESPONDENT) APPELLANT BY : APPELLANT BY: SHRI RAKESH MILWANI RESPONDENT BY: SHRI ANANDEE NATH MISSHRA 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 TH E ASSESSMENT 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 WHOLESA LE BASIS. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 27.10.2 004 DECLARING A TOTAL INCOME OF RS. 86 810/-. THE RETURN WAS PROCESSED U /S. 143(1) AND WAS SELECTED FOR SCRUTINY BY ISSUE OF NOTICE U/S. 143(2 ). THE ASSESSMENT WAS FINALLY COMPLETED ON 21.12.2006 BY DETERMINING THE TOTAL INCOME AT RS. 7 54 110/-. WHILE DETERMINING THIS INCOME THE AO HAD MADE THE DISALLOWANCES/ADDITIONS. ITA NO. 2881/M/09 2 3. THE ASSESSEE WAS DOING BUSINESS UNDER THE NAME A ND STYLE AS PROPRIETOR OF BOHRA CORPN. AND BOHRA SAREE CENTRE. AFTER THE A.Y. 2003- 04 THE ASSESSEE DID BUSINESS UNDER THE NAME AND ST YLE OF BOHRA SAREE CENTRE. IT WAS SUBMITTED THAT THE SAID PROPRIETORY CONCERN HAD AN AMOUNT OF RS. 23 85 237/- RECEIVABLE FROM DEBTORS A ND SUM OF RS. 18 70 627/- WAS PAYABLE TO CREDITORS AND CASH ON HA ND AT RS. 42 229/-. THE ASSESSEE REALIZED DEBTS OF BOHRA CORPORATION P AID CERTAIN LIABILITIES AND TRANSFERRED AMOUNTS TO BOHRA SAREE CENTRE. THE AMOUNT TOTALING RS.5 89 907/- WAS TRANSFERRED BY THE APPELLANT FROM BOHRA CORPORATION TO BOHRA SAREE CENTRE. THE AO CONSIDERED THE TRANSF ER OF FUNDS AS INCOME OF THE ASSESSEE. THE ASSESSEE FURNISHED BEFO RE THE AO THE CASH AND BANK BOOKS SHOWING RECEIPTS AND PAYMENTS INCLUD ING THE PAYMENT TO BOHRA SAREE CENTRE. THE ONLY REASON FOR CONSIDER ING THE SAID SUM AS UNEXPLAINED CREDIT BY THE AO WAS THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE PROOF OF RECEIPTS OF FUNDS BY BOHRA CORPORA TION. THE ASSESSEE EXPLAINED THAT THE ASSESSEE IS DOING BUSINESS IN PA LI WHICH IS NOT A CITY WHERE RECEIPTS ARE ISSUED. DEBTORS ARE EVEN FROM FA R FLUNG AREAS AS KOLKATTA ETC. IN FACT EVEN IN PLACES LIKE MUMBAI P AYMENTS ARE RECEIVED THROUGH POST AND NO RECEIPTS FOR THE SAME ARE ISSUE D. HENCE THE AOS CONCLUSION THAT THE RECEIPTS ARE NOT RECEIPTS FROM BOHRA CORPORATION IS ERRONEOUS. THE ASSESSEE FURTHER SUBMITTED THAT THE DEBTORS OF BOHRA CORPORATION ARE IN RESPECT OF SALES OF BOHRA CORPOR ATION AND HAVE ALREADY BEEN SUBJECTED TO INCOME TAX IN EARLIER YEA RS. THE REALIZATION OF SALES PROCEEDS IN THE CURRENT YEAR OF SALES MADE AN D CONSIDERED AS INCOME IN EARLIER YEARS CANNOT BE CONSIDERED AS INC OME OF THE CURRENT YEAR. THE AO IN THE ORDER HIMSELF HAS ADMITTED THAT THE AP OF THE ASSESSEE HAS GONE UP FROM 9.76% IN THE EARLIER YEAR TO 17.86% DURING THE YEAR UNDER REVIEW. NO OTHER SOURCE OF INCOME O THER THAN THE DECLARED SOURCE HAD BEEN NOTICED BY THE AO. THE AO HAS ERRONEOUSLY CONSIDERED CAPITAL ACCOUNT OF THE ASSESSEE IN THE B OOKS OF ACCOUNT OF BOHRA SAREE CENTRE AS ASSESSEES CAPITAL ACCOUNT W HICH IS NOT SO. THE ITA NO. 2881/M/09 3 CAPITAL ACCOUNT OF THE ASSESSEE CLEARLY SHOWS THAT NO SUCH CREDITS APPEARED IN THE ASSESSEE'S CAPITAL ACCOUNT. THE AS SESSEE SUBMITTED THAT THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF BOHRA CORPORATION WOULD REVEAL THAT THE CREDIT OF RS.5 89 907/- IS THE CAPITAL ACCOUNT OF BOHRA SAREE CENTRE EXACTLY EQUAL TO THE DEBIT OF SI MILAR ACCOUNTS IN THE CAPITAL ACCOUNT OF THE APPELLANT IN THE BOOKS OF BO HRA CORPORATION. IN VIEW OF THE ABOVE THE ASSESSEE PRAYED THAT THE ADD ITION OF RS.5 89 907/- 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 SHOWS AN ADDITION OF RS.5 89 907/-. ON ENQUIRIES MADE ABOUT THE SOURCES OF THESE ADDITIONS IT WAS EXPLAINED THAT ON THE CLOSU RE OF PROPRIETORY CONCERN NAMELY BOHRA CORPORATION ON 31.03.2003 WHE REIN THE ASSESSEE WAS HAVING OUTSTANDING DEBTORS TO THE TUNE OF RS.23.85 LAKHS AND CREDITORS TO THE TUNE OF RS.18.71 LAKHS AND M/S. BOHRA CORPORATION HAD PAID FOR THE LIABILITIES OUT THE DE BTS REALIZED AND INTRODUCED THE BALANCE AMOUNT IN THE CAPITAL OF THE PROPRIETORY CONCERN. OUT OF THE TOTAL SUM OF RS. .5 89 907/- A SUM OF RS.1 62 000/- WAS RECEIVED IN CASH AS IS EVIDENT FR OM THE CAPITAL ACCOUNT OF THE APPELLANT. SINCE THE ASSESSEE COULD NOT PRODUCE ANY PROOF THAT THESE RECEIPTS WERE ACTUALLY FROM THE DE BTORS OF ERSTWHILE PROPRIETORY CONCERN M/S. BOHRA CORPORATION IT WAS ASKED TO PRODUCE SOME OF THOSE PARTIES FROM WHOM THESE PAYME NTS HAVE BEEN RECEIVED. IN REPLY IT WAS EXPLAINED THAT ASSES SEE WAS RUNNING BUSINESS ACTIVITIES AT MANDIA ROAD RAJASHTRAN AND THEY HAVE NO PRACTICE OF ISSUING ANY RECEIPTS FOR PAYMENT MADE O R 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 PRODUCE THESE PARTIES TO PROVE THEIR IDE NTITY AND AUTHENTICITY OF ASSESSEES CLAIM THE AO TREATED TH E RECEIPTS AS CASH CREDIT IN THE HANDS OF THE ASSESSEE. 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. 5 89 907/- SHOWN AS DEPOSITS IN THE BOOKS OF BOHRA SAREE ITA NO. 2881/M/09 4 CENTRE IS TRANSFER OF FUNDS FROM ONE PROPRIETARY CO NCERN OF THE APPELLANT TO ANOTHER PRPRIETORY CONCERN I.E. FROM O NE POCKET OF ASSESSEE TO HIS OTHER POCKET. CASH AND BANK BOOKS O F BOHRA CORPORATION SHOWING THE RECEIPTS AND PAYMENTS INCLU DING PAYMENT TO BOHRA SAREE CENTRE WERE PRODUCED BEFORE THE AO. THE AMOUNTS ESPECIALLY THROUGH BANK WERE TRANSFERRED FROM THE B OOKS OF BOHRA CORPORATION AND THE AO WAS NOT JUSTIFIED IN STATING THAT THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATISFACT ORY. THE AO SHOULD HAVE ENFORCED ATTENDANCE OF DEBTORS INSTEAD OF RESORTING TO A SHORT CUT METHOD OF ADDING SUCH AMOUNTS U/S.68. THE ONLY REASON 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 FRO M ITS OWN DEBTORS . THE DEBTORS OF BOHRA CORPORATION ARE IN R ESPECT OF SALES AND HAVE ALREADY BEEN SUBJECTED TO INCOME TAX IN EA RLIER YEARS. ANY CASH CREDIT WOULD GO TO INCREASE THE CAPITAL ACCOUN T OF THE ASSESSEE A PERUSAL OF THE SAME WOULD REVEAL THAT THERE IS NO ADDITION TO THE CAPITAL ACCOUNT. ON THE CONTRARY THE CAPITAL ACCOU NT OF APPELLANT IN THE BOOKS OF BOHRA CORPORATION AND IN THE BOOKS OF BOHRA SAREE CENTRE WOULD REVEAL THE CREDIT OF RS. 5 89 907/- ALL THE OTHER ENTRIES ARE SAME INDICATING AMOUNT TRANSFERRED FROM BOHRA CORPORATION TO BOHRA SAREE CENTRE BOTH BEING PROPR IETORY CONCERNS OF THE APPELLANT. THUS IT IS A CLEAR CASE OF TRANS FER OF MONEY FROM ONE POCKET OF THE APPELLANT TO ANOTHER POCKET. THER EFORE ADDITION MADE 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 WHICH EMERGES IS THAT THE APPELLANT IN ITS CAPITAL ACCOUN T AS A PROPRIETOR IN THE BOOKS OF ACCOUNT OF M/S. BOHRA S AREE CENTRE HAS ON VARIOUS DATES CREDITED VARIOUS AMOUNTS BY WA Y OF CASH AND BANK IN THE NAME OF BOHRA CORPN THE TOTAL OF WHICH APPROXIMATELY AMOUNTS TO RS. 5 89 907/-. ON FINDIN G THESE AMOUNTS CREDITED THE AO REQUIRED THE APPELLANT TO EXPLAIN THE NATURE OF THESE ENTRIES TO WHICH IT WAS EXPLAINED T HAT THESE ARE THE TRANSFER AMOUNTS FROM BOHRA CORPN. ON REALI ZATION OF OUTSTANDING DEBTS IN SUPPORT OF WHICH BANK/CASH BOO K AND LIST OF CREDITORS/DEBTORS OF BOHRA CORPN. WERE SUPP LIED. ON FURTHER RAISING A QUERY BY THE AO TO PROVE THAT THE SE RECEIPTS WERE ACTUALLY FROM THE DEBTORS OF THE ERSTWHILE PRO PRIETORY CONCERN M/S. BOHRA CORPN. THE APPELLANT SHOWED ITS INABILITY IN DOING SO. IN THE ABOVE SUBMISSIONS ALSO THE APP ELLANT EXCEPT CLAIMING THAT THE RECEIPTS FROM THE OUTSTAND ING DEBTORS ITA NO. 2881/M/09 5 ONLY ARE TRANSFERRED TO THE ACCOUNT OF THE APPELLAN T AS PROPRIETOR IN THE BOOKS OF BOHRA SAREE CENTRE NO E VIDENCES WHATSOEVER IN SUPPORT OF ITS CLAIM BEING AUTHENTIC COULD BE FURNISHED EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. SINCE THE AO IS FOUND H AVING RAISED A SPECIFIC QUERY DURING THE ASSESSMENT PROCE EDINGS EITHER TO FURNISH THE CONFIRMATORY LETTERS FROM THE ALLEGED DEBTORS OR TO PRODUCE SOME OF THE DEBTORS FOR EXAM INATION BEFORE HIM THE APPELLANT RAISED HIS HANDS AND EXPR ESSED HIS INABILITY. TO WHICH IN THE ABOVE SUBMISSIONS IT H AS CLAIMED THAT AO SHOULD HAVE ENFORCED THE DEBTORS WHEREAS D URING THE ASSESSMENT PROCEEDINGS NO REQUEST TO THE AO FOR EI THER 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 SOUR CE OF ANY CASH/CREDIT ENTRIES IN ITS BOOKS BUT ALSO THE IDEN TITY OF THE PERSONS CREDITWORTHINESS OF THE PERSONS AND GENUIN ENESS OF THE TRANSACTIONS. IN THE INSTANT CASE THE APPELLA NT HAS CLAIMED THE SOURCE AS REALIZATION OF OUTSTANDING DE BTS. BUT ON FURTHER REQUIREMENT OF IT TO PROVE THE IDENTITY CR EDITWORTHINESS OF DEBTORS AND GENUINENESS OF THE TRANSACTIONS THE APPELLANT EXPRESSED ITS INABILITY. NOW IN THE ABOVE SUBMISSI ONS THE APPELLANT IS SHIFTING ITS ONUS ON THE AO BY STATING THAT HE SHOULD HAVE ENFORCED THE DEBTORS EITHER FOR SUBMITT ING 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 INS THE BOOKS OF BOHRA CORPN. AN D BOHRA SAREE CENTRE CLAIMING THE TRANSFER OF FUNDS IS THUS NOT SUFFICIENT A PROOF FOR CONSIDERING THE GENUINENESS OF THE TRANSACTIONS IN THE ABSENCE OF THE PROOF REGARDING DEBTORS AND THEIR CAPACITY OF REPAYMENT. THEREFORE I DO NOT F IND ANY INFIRMITY IN THE ACTION OF THE AO IN MAKING THIS AD DITION. THIS GROUND IS THEREFORE DECIDED AGAINST THE APPELLANT . 7. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. THE SHORT ISSUE FOR CONSIDERATION IS WHETHER THE AMOUNT OF RS. 589907 S HOWN AS DEPOSIT IN THE BOOKS OF BORA SAREE CENTRE HAS BEEN FROM BORA C ORPN. I.E. ONE PROPRIETORY CONCERN TO ANOTHER PROPRIETORY CONCERN. THE ASSESSEE EXPLAINED THAT ON THE CLOSURE OF THE PROPERTY CONCE RN NAMELY BORA CORPN. ON 31.3.2003 DUE TO CHANGE IN THE POLICY OF THE GUJARAT GOVT. ITA NO. 2881/M/09 6 REGARDING EXCISE DUTY DEBTORS WERE TO THE TUNE OF R S. 23.85 LACS AS AGAINST LOANS AND OTHER LIABILITIES AT RS. 18.71 LA CS AND M/S. BOHRA CORPN. HAD PAID FOR THE LIABILITIES OUT OF THE DEBT ORS REALIZED AND INTRODUCED THE BALANCE AMOUNT IN THE CAPITAL OF TH E PROPRIETARY CONCERN. 8. ON THE REQUEST OF THE AO THAT PROOF OF THE RECEI PTS ARE TO BE ESTABLISHED AND HENCE THE AO INSISTED ON THE PRODUC TION OF THOSE PARTIES FROM WHOM THE PAYMENTS HAVE BEEN RECEIVED. HOWEVER IN REPLY TO THE AO THE ASSESSEE SUBMITTED THAT IT WAS RUNNING BUS INESS ACTIVITIES AT MANDIA ROAD RAJASTHAN AND THEY HAVE NO PRACTICE O F ISSUING ANY RECEIPTS FOR PAYMENT MADE OR RECEIVED AND SINCE T HE MATTER IS OLD IT IS DIFFICULT TO COLLECT 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 O F THE ERSTWHILE PROPERTY CONCERN M/S. BHORA CORPORATION T`HE MATTER IS TO BE SENT BACK TO THE AO TO RE-EXAMINE THE ISSUE IN THE LIGHT OF THE PROO F/CONFIRMATION FROM THE PARTIES. THE AO SHALL DECIDE THE MATTER IN ACC ORDANCE WITH LAW AFTER GIVING 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 DISALLOWANC E OF RS. 62384/- ON ACCOUNT OF INTEREST AND THE SAME OUGHT TO BE DE LETED. 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. 62 384/- ON THE GROUND T HAT IT PERTAINS TO LOAN TAKEN IN INDIVIDUAL CAPACITY BY THE ASSESSEE. THE ASSESSEE HAD BEEN CLAIMING SUCH EXPENDITURE EVEN FOR EARLIER YEARS AND THE FUNDS UTILIZED BY THE ASSESSEE OUT OF BORROWING IN HIS PERSONAL CAPACITY HAS BEEN ALLOWED AS EXPENDITURE FOR THE PU RPOSE OF ASSESSEES BUSINESS FOR A.Y. 2003-04 AND ONCE THE F UNDS HAVE BEEN ALLOWED IN ONE YEAR THE SAME CANNOT BE DISALLOWED IN SUBSEQUENT PERIOD. THE ASSESSEE FURTHER CONTENDED THAT A PERU SAL OF THE ITA NO. 2881/M/09 7 BALANCE SHEET WOULD REVEAL THAT AGAINST THE PERSONA L CAPITAL OF RS. 10 21 971/- ONLY A SUM OF RS. 2 35 312/- HAS BEEN G IVEN TO UMEDRAJ S. JAIN. THE SAME THEREFORE IS FROM HIS PE RSONAL ACCOUNT. IN FACT AMOUNT MORE THAN THE PERSONAL CAPITAL OF TH E APPELLANT HAS BEEN INVESTED IN BOHRA SAREE CENTRE. FURTHER SUM O F RS. 1 84 286/- HAS BEEN INVESTED IN INTEREST BEARING FIXED DEPOSIT S WITH BANK. THE AO FAILED TO REALIZE THAT THE APPELLANT HAD EARNED INTEREST OF RS. 42 580/- IN HIS PERSONAL ACCOUNT ALSO. INVESTMENT IN BOHRA SAREE CENTRE EXCEEDS CAPITAL ACCOUNT BY RS. 2 00 .731/- B EING CAPITAL ACCOUNT OF APPELLANT IN THE BOOKS OF BOHRA SAREE CE NTRE AND PERSONAL CAPITAL OF THE APPELLANT. WITHOUT PREJUDI CE THE SAID INTEREST IS FULLY ALLOWABLE AND THE APPELLANT HAS TO PAY INT EREST ON SUCH DEFICIT @ 12% AMOUNTING TO RS. 24 088/-. WHEN INTE REST RECEIVED OF RS. 42 754/- IS ADDED TO IT THE TOTAL AMOUNT TO RS. 66 842/- WHICH IS MORE THAN THE INTEREST PAID BY THE APPELLANT. I N VIEW OF THE ABOVE THE APPELLANT CONTENDED THAT THE DISALLOWANC E OF INTEREST ON LOANS TAKEN IN PERSONAL CAPACITY OF RS. 62 384/- OU GHT 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 FINDI NG THAT IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE THERE ARE LO ANS TO THE TUNE OF RS. 41.51 LAKHS FOR WHICH CONFIRMATIONS HAVE BEEN F ILED. LOANS AND ADVANCES SHOWN IN THE BALANCE SHEET TO THE TUNE OF RS. 31.74 LAKHS IS IN FACT DEBTORS AS PER SCHEDULE 5 TO BALANCE SHE ET. DETAILS OF INTEREST PAID AND RECEIVED HAVE BEEN FURNISHED. TH ESE FACTS CLEARLY INDICATE THAT THE ASSESSEE HAD NOT UTILIZED THE INT EREST BEARING LOANS FOR HIS BUSINESS PURPOSES HENCE THE INTEREST CLAIME D WAS DISALLOWED. IN THE ABOVE SUBMISSIONS THE APPELLAN T HAS NOT DISPUTED THESE FACTS AS NARRATED BY THE AO IN HIS O RDER. IT HAS ALSO NOT REBUTTED THE CONCLUSION OF THE AO THAT THE LOA N OF RS. 41.51 LAKHS RAISED ON WHICH INTEREST WAS PAID HAD NOT BEE N UTILIZED FOR THE PURPOSES OF ITS BUSINESS BUT WAS USED FOR PERSO NAL PURPOSES. THE ONLY CONTENTION RAISED IS THAT IN THE EARLIER Y EAR I.E. FOR A.Y. 2003-04 SUCH EXPENDITURE HAS BEEN ALLOWED HENCE T HE SAME CANNOT BE DISALLOWED IN THE SUBSEQUENT PERIOD. TH IS CONTENTION IS HAVING NO MERIT AT ALL FOR THE REASON THAT EACH YEA R IS AN INDEPENDENT YEAR FOR THE PURPOSES OF INCOME TAX AND AS DURING THE YEAR UNDER APPEAL THE AO HAS GIVEN A SPECIFIC FIND ING OF HAVING NOT UTILIZED THE BORROWED FUNDS ON WHICH INTEREST IS PA ID FOR THE PURPOSES WHOLLY AND EXCLUSIVELY OF BUSINESS THEREF ORE EVEN IF SUCH INTEREST EXPENDITURE WAS ALLOWED IN THE EARLIER YEA R FOR THIS REASON THE SAME IS NOT ADMISSIBLE FOR THE YEAR UNDER APPEA L. EARLIER YEARS ITA NO. 2881/M/09 8 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 SHO ULD HAVE BEEN TAKEN IN THE NAME OF BUSINESS WHEREAS NO SUCH CONC LUSION AND OPINION IS FOUND HAVING EXPRESSED BY THE AO IN HIS ORDER. I ALSO DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE APPELLANT THAT THE APPELLANT HAS EARNED INTEREST OF RS. 42 580/- IN HIS PERSONAL ACCOUNT AGAINST THE INTEREST PAID IN HIS PERSONAL ACCOUNT OF RS. 62 384/- WHICH IS MORE AND OUGHT TO HAVE ALLOWED AS DEDUCTION FROM IN TEREST INCOME RECEIVED BY THE APPELLANT FOR THE SIMPLE REASON TH AT FOR DEDUCTION OF EXPENDITURE FROM AN INCOME 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 THE APPELLANT AS IT COULD NOT ESTABLISH THE NEXUS OF INTEREST INCOME EARNED HAVING BEEN OUT OF THE BORROWED FUNDS ON WHICH INTEREST WAS PAID THE QUESTION OF A LLOWING DEDUCTION OF INTEREST PAID AT RS. 62 384/- DOES NOT ARISE. IN OTHER WORDS THE APPELLANT HAS NOT ESTABLISHED THAT FOR E ARNING INTEREST OF RS. 42 580/- IT HAD INCURRED EXPENDITURE ON ACCOUN T OF INTEREST PAID OF RS. 62 384/-. IN THE ABSENCE OF SUCH NEXUS THE CLAIM OF THE APPELLANT CANNOT BE CONSIDERED TO BE AN ADMISSIBLE CLAIM. IN VIEW THEREFORE OF THE ABOVE DISCUSSED FACTS AND CIRCUMS TANCES OF THE CASE I DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE AO IN DISALLOWING INTEREST OF RS. 62 384/-. THIS GROUND THEREFORE I S DECIDED AGAINST THE APPELLANT. 13. WE FIND THAT THE ASSESSEE HAS NOT ESTABLISHED THAT FOR EARNING INTEREST OF RS. 42 580/- THE ASSESSEE HAS INCURRED EXPENDITURE ON ACCOUNT OF INTEREST PAID. THEREFORE WE REMIT THE I SSUE TO THE FILE OF THE AO TO VERIFY THE NEXUS BETWEEN THE BORROWED FUNDS A ND INTEREST PAID AND IF HE IS SATISFIED WE DIRECT THE AO TO ALLOW THE CLAIM. 14. 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/- (T.R. SOOD) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH MARCH 2011 RJ ITA NO. 2881/M/09 9 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR IL BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 2881/M/09 10 DATE INITIALS 1 DRAFT DICTATED ON: 17 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 22 .0 3 .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: _________ ______