AVANTIKA PRATAPSINH MORARJI, MUMBAI v. ITO 5(3)(4), MUMBAI

ITA 4131/MUM/2009 | 2005-2006
Pronouncement Date: 07-09-2011 | Result: Allowed

Appeal Details

RSA Number 413119914 RSA 2009
Assessee PAN AACPM4395A
Bench Mumbai
Appeal Number ITA 4131/MUM/2009
Duration Of Justice 2 year(s) 2 month(s) 1 day(s)
Appellant AVANTIKA PRATAPSINH MORARJI, MUMBAI
Respondent ITO 5(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 07-09-2011
Date Of Final Hearing 08-08-2011
Next Hearing Date 08-08-2011
Assessment Year 2005-2006
Appeal Filed On 06-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI. PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PA L RAO (J.M) ITA NO.4131/MUM/2009 ASSESSMENT YEAR : 2005-2006 AVANTIKA PRATAP MORARJI 115 UNIQUE INDL. ESTATE 1 ST FLR. TWIN LANE PRABHADEVI MUMBAI 400 025. PAN : AACPM4395A VS. THE I.T.O.5(3)(4) AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHIVARAM. RESPONDENT BY : SHRI P. K. B. MENON. O R D E R PER VIJAY PAL RAO J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11.06.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-0 6. 2. THE ASSESSEE HAS RAISED ONLY GROUND IN THIS APPE AL: 1. THE LEARNED CIT(A) HAS ERRED IN ALLOWING ONLY 5 % OF THE INTEREST INCOME AS EXPENDITURE TO EARN SUCH INC OME INSTEAD OF THE CLAIM OF THE EXPENDITURE OF ` 9 19 540/- AS MADE BY THE ASSESSEE AT THE TIME OF FILING OF ROI FOR EARNING S UCH INCOME WITHOUT APPRECIATING THE LAW AND THE FACTS OF THE C ASE. 3. THE ASSESSEE HAS ALSO FILED FOLLOWING ADDITIONAL GROUNDS ALONG WITH AN APPLICATION DATED 24.04.2010: 1. THE LEARNED CIT(A) ERRED IN TREATING THE INTERE ST INCOME OF ` 11 33 489/- EARNED IN NORMAL COURSE OF BUSINESS AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AS PER THE RETURN OF INCOME. 2. THE LEARNED CIT(A) ERRED IN RESTRICTING THE BUSI NESS EXPENDITURE OF ` 9 19 540/- TO ONLY 5% WITHOUT APPRECIATING THE FACT THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY TO EARN THE ABOVE BUSINESS INCOME. 3. ON MERITS THE APPELLANT DENIES THE LIABILITY OF PENAL INTEREST U/S.234A 234B AND 234C. ITA NO.4131/MUM/2009 ASSESSMENT YEAR : 2005-2006 2 4. WE HAVE HEARD THE LEARNED DR AS WELL AS LEARNED AR ON ADMISSIBILITY OF ADDITIONAL GROUNDS AND CONSIDERED THE RELEVANT R ECORD. SINCE THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE CONNE CTED WITH THE MAIN GROUND OF APPEAL OF THE ASSESSEE AND ARISING /EMANA TING FROM THE IMPUGNED ORDER OF THE LEARNED CIT(A) AS WELL AS FROM THE ASS ESSING ORDER THEREFORE THE ADDITIONAL GROUND HAS NOT BEEN RAISED FIRST TIM E BEFORE US BUT THE SAME WAS ALREADY BEFORE THE CIT(A) AS WELL AS ASSESSING OFFICER. ACCORDINGLY IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T.(229 ITR 383) (SC) WE ADMIT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE FOR ADJUDICATION ON MERITS. 5. THE ASSESSEE IS AN INDIVIDUAL AND DECLARING INCO ME UNDER THE HEAD INCOME FROM BUSINESS INCOME FROM HOUSE PROPERTY AN D INCOME FROM OTHER SOURCES. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE DECLARED BUSINESS INCOME OF ` 2 17 738/-. THIS INCOME HAS BEEN COMPUTED BEING GROSS INTEREST OF ` 11 33 489/- RECEIVED BY THE ASSESSEE FROM VARIOUS COMPANIES AFTER CLAIMING EXPENSES OF ` 9 14 540/- HENCE THE ASSESSEE DECLARED BUSINESS INCOME AT ` 2 17 738/-. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS FOR E ARNING INTEREST INCOME AND INCOME BY WAY OF INTEREST IS REQUIRED TO BE TAX ED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER ACCORDINGLY ASSESSED THE INTEREST RECEIPT AS INCOME FROM OTHER SOURCES AND DISALLOWED THE ENTIRE EXPENSES OF ` 9 14 540/-. ON APPEAL THE LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE ASSE SSING OFFICER IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES HO WEVER THE CLAIM OF THE EXPENDITURE FOR EARNING THE INTEREST INCOME WAS ALL OW TO THE EXTENT OF 5% OF THE GROSS INTEREST ON AD-HOC BASIS. 5. WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. THE LEARNED AR CONTENDED THAT THE ASSESSEE IN THE BUSINESS OF MONEY LENDING AND IN THE EARLIER YEARS THE INTEREST INCOME IS ACCEPTED AS BUSINESS INCOME. THE EXPENDITURE INCU RRED BY THE ASSESSEE AS ONLY FOR EARNING THE INTEREST INCOME. HE HAS FURTH ER SUBMITTED THAT THE ITA NO.4131/MUM/2009 ASSESSMENT YEAR : 2005-2006 3 ASSESSING OFFICER ISSUED A NOTICE/LETTER DATED 14.0 9.2007 WHICH WAS STATED TO BE SERVED ON THE ASSESSEE ON 25.09.2007 AS PER T HE SAID LETTER. THE ASSESSEE WAS ASKED TO FILE THE PROOF OF THE EXPENSE S ON OR BEFORE 28.09.2007. HE HAS FURTHER CONTENDED THAT WITHOUT CONSIDERING T HE REPLY AND EXPLANATION OF THE ASSESSEE THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER DATED 04.10.2007. THEREFORE THE ASSESSEE W AS DENIED A PROPER OPPORTUNITY OF HEARING. HE HAS REFERRED THE SUBMIS SIONS OF THE ASSESSEE DATED 09.10.2007 TO THE ASSESSING OFFICER. HE HAS ALSO RELIED ON THE DECISION OF CIT VS. R.M. MEENAKSHISUNDARAM (1995) 2 12 ITR 220 AS WELL AS DECISION OF HONBLE SUPREME COURT IN THE CASE OF P. M. MOHAMMED MEERAKHAN VS. CIT (1969) 73 ITR 735. 6. ON THE OTHER HAND LEARNED DR HAS SUBMITTED THAT THE ASSESSEE DID NOT FILE THE RELEVANT EVIDENCE AND MATERIAL TO PROV E THAT THE EXPENDITURE WAS INCURRED FOR EARNING THE INTEREST INCOME DESPITE TH E SUFFICIENT OPPORTUNITY GIVEN BY THE ASSESSING OFFICER HE HAS RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 7. AFTER CONSIDERING THE RIVAL CONTENTION AND RELEV ANT RECORD WE NOTE THAT THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE ON 14.09.2010 SERVED ON THE ASSESSEE ON 25.09.2007. THE ASSESSEE WAS ASKED TO FILE THE PROOF OF EXPENSES ALLOWABLE U/S.57(III) ON OR BEFORE 28.09.2 007. THE ASSESSING OFFICER FINALLY FRAMED THE ASSESSMENT ON 04.10.2007 . WHEN THE SHOW CAUSE NOTICE WAS SERVED ON 25.09.2007 THEN THE TIME PERIO D ALLOWED TO THE ASSESSEE UP TO 28.09.2004 CANNOT BE SAID TO BE SUFF ICIENT AND PROPER SO AS TO CONSTITUTE AN EFFECTIVE OPPORTUNITY OF HEARING A FFORDED TO THE ASSESSEE. THE ASSESSING OFFICER IN PARA 4 HAS STATED THE FACT S AS UNDER: 4. BEFORE TREATING THE SAID INCOME AS INCOME FROM OTHER SOURCES AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE V IDE THIS OFFICE LETTER DATED 14.09.2007 TO SHOW CASUE WHY TH E INTEREST INCOME SHOULD NOT BE TAXED U/S.56(2). THE ASSESSEE WAS ALSO ASKED TO FILE THE PROOF OF THE EXPENSE ALLOWABLE U/ S.57(III). THE SAID LETTER WAS DULY SERVED ON THE ASSESSEE AT HER GIVEN ADDRESS ON 25.09.2007. SHE WAS ASKED TO FILE THE P ROOF ON OR BEFORE 28.09.2007. BUT SHE FAILED TO SUBMIT ANY RE PLY TO THE OPPORTUNITY GIVEN. IT IS THEREFORE HELD THAT SHE HA S NO OBJECTION ITA NO.4131/MUM/2009 ASSESSMENT YEAR : 2005-2006 4 TO ASSESS THE INTEREST INCOME UNDER THE HEAD INCOM E FROM OTHER SOURCES. SINCE NO PROOF OF THE EXPENSES AR E FILED THE ENTIRE EXPENSES OF ` 9 19 540/- IS DISALLOWED AS THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS. ACCORDINGLY THE INTEREST INCOME OF ` 11 33 489/- IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN INCOME-TAX EACH YEAR IS IN DEPENDENT AND A PRINCIPLE OF RE-JUDICATA IS NOT APPLICABLE. FURTHER THE HONBLE SUPREME COURT IN THE CASE OF NALINIKANT AMA RLAL MODY VS. CIT HELD THAT THE METHOD OF BOOK KEEPING FOLLOW ED BY AN ASSESSEE CANNOT DECIDE UNDER WHICH HEAD A PARTICULA R INCOME SHOULD GO. THE ACCOUNTING PRINCIPLES CANNOT OVERRI DE SEC.56. FROM THE ABOVE FINDINGS OF THE ASSESSING OFFICER IT IS CLEAR THAT THE ISSUE HAS BEEN ADJUDICATED IN THE ABSENCE OF ANY REPLY AND EX PLANATION OF THE ASSESSEE. THE CIT(A) HAS ALSO OBSERVED THAT THE A SSESSEE HAS NOT GIVEN EVIDENCE THAT ALL THE EXPENSES INCURRED ARE FOR THE EARNING THE INTEREST INCOME AND ACCORDINGLY ALLOWED THE DEDUCTION OF 5% OF THE GROSS INTEREST ON AD-HOC BASIS. IT IS MANIFEST FROM THE RECORD THAT THE ASSESSEE WAS NOT GIVEN A PROPER AND EFFECTIVE OPPORTUNITY AND THE ISSUE H AS BEEN ADJUDICATE BY THE LOWER AUTHORITIES WITHOUT CONSIDERING THE RELEVANT RECORD AND EXPLANATION OF THE ASSESSEE. ACCORDINGLY IN THE INTEREST OF JUSTI CE WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE MATTER TO THE R ECORD OF THE ASSESSING OFFICER FOR PASSING A DENOV ORDER ON THIS ISSUE AFT ER CONSIDERING THE RELEVANT MATERIAL AND EXPLANATION OF THE ASSESSEE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 7 TH DAY OF SEPTEMBER 2011. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI DATED 07.09.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI ITA NO.4131/MUM/2009 ASSESSMENT YEAR : 2005-2006 5 5. DEPARTMENTAL REPRESENTATIVE BENCH MUM BAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI