Dilipsinh Vajesinh Solanki, Ahmedabad v. The Income tax Officer,Ward-9(2),, Ahmedabad

ITA 4376/AHD/2007 | 2004-2005
Pronouncement Date: 20-08-2010 | Result: Dismissed

Appeal Details

RSA Number 437620514 RSA 2007
Assessee PAN AJQPS4109R
Bench Ahmedabad
Appeal Number ITA 4376/AHD/2007
Duration Of Justice 2 year(s) 8 month(s) 10 day(s)
Appellant Dilipsinh Vajesinh Solanki, Ahmedabad
Respondent The Income tax Officer,Ward-9(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 20-08-2010
Date Of Final Hearing 16-08-2010
Next Hearing Date 16-08-2010
Assessment Year 2004-2005
Appeal Filed On 10-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D.C. AGRAWAL AM) ITA NO.4376/AHD/2007 A. Y.: 2004-05 DILIPSINH VAJESINH SOLANKI RAJA COMPLEX NR. VIJAY CHAR RASTA NAVRANGPURA AHMEDABAD VS THE INCOME TAX OFFICER WARD 9 (2) AHMEDABAD PA AJQPS 4109 R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI G. S. PATEL AR RESPONDENT BY SHRI BHUVNESH KULSHRESTHA DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XV AHMEDAB AD DATED 17-10-2007 FOR THE ASSESSMENT YEAR 2004-05. 2. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUNDS NO.1 AND 4 OF THE APPEAL AND FURTHER SUBMITTED THAT GROUND N O.5 IS RELATING TO CHARGING OF INTEREST WHICH IS CONSEQUENTIAL IN NATU RE AND IS ALSO NOT PRESSED. GROUNDS NO.1 4 AND 5 OF THE APPEAL ARE AC CORDINGLY DISMISSED BEING NOT PRESSED. 3. GROUNDS NO.2 AND 3 READ AS UNDER: 2. THE APPELLANT SUBMITS THAT THE LD CIT(A) HAS ER RED IN CONFIRMING THAT THE A. O. WAS RIGHT IN TREATING RS.1 20 000/- AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS ON THE BASIS OF REMAND REPORT DATED 28-09-07. 3. THE APPELLANT SUBMITS THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES O F RS.4 56 360/- MADE BY THE A. O. ON THE BASIS OF THE REMAND REPORT DATED 28-09-07. ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 2 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIALS ON RECORD. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.1 01 588/-. THE ASSES SEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SUPERVI SION OF CIVIL WORK. IN THE STATEMENT OF TOTAL INCOME FORMING PART OF THE R ETURN THE ASSESSEE HAS SHOWN INCOME FROM PROPERTY OF RS.5 26 177/- LO SS OF RS.4 20 418/- FROM PROPRIETARY BUSINESS AND INCOME FROM OTHER SOU RCES RS. 25 433/- BEING INTEREST AND DIVIDEND INCOME. TOTAL INCOME WA S WORKED OUT AT RS.1 31 192/-. AFTER CLAIMING DEDUCTION NET INCOME WAS WORKED OUT TO RS.1 01 588/-. THE ASSESSEE HAS CLAIMED VARIOUS EXP ENSES UNDER VARIOUS HEADS AGGREGATING TO RS.5 10 139/- WHICH ALSO INCLU DED INTEREST EXPENSES OF RS.4 56 360/- IN THE PROFIT & LOSS ACCO UNT OF BHUMI RAJA BUILDERS HIS PROPRIETORSHIP CONCERN. IN THE SAID P ROFIT & LOSS ACCOUNT THE ASSESSEE HAS SHOWN SUPERVISION CHARGES OF RS.1 20 0 00/- AND AFTER DEBITING VARIOUS EXPENSES AGGREGATING TO RS.5 10 13 9/- THE ASSESSEE HAS WORKED OUT NET LOSS OF RS.3 90 139/-. THE ASSESSEE WAS REPEATEDLY ASKED TO SUBMIT THE DETAILS OF RS.1 20 000/- SHOWN AS SUP ERVISION CHARGES IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE SUBMITTED T HAT HE HAS RECEIVED SUPERVISION CHARGES FOR CONSTRUCTION WORK FROM ABHI JEY NTC. THE AO ASKED THE ASSESSEE TO FURNISH COPY OF LETTER THROUG H WHICH WORK WAS AWARDED TO THE ASSESSEE AND TO SHOW WHETHER ANY TDS WAS DEDUCTED OR NOT. THE ASSESSEE EXPLAINED THE SAME FACTS BUT DID NOT PRODUCE ANY LETTER SHOWING THAT WORK WAS CARRIED ON SINCE 1996-97. THE REPLY OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO BECAUSE NO DETA IL OF SUPERVISION CHARGES HAS BEEN FILED NO TDS IS DEBITED. NOTING I S EXPLAINED AS TO HOW THE EXPENDITURE HAS BEEN INCURRED FOR EARNING SUPER VISION CHARGES OF RS.1 20 000/-. THE AO FURTHER NOTED THAT THE ASSESS EE HAS IN FACT WITHOUT INDULGING IN ANY BUSINESS ACTIVITY HAS CLAI MED THE LOSS WHICH WAS ADJUSTED AGAINST INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. THE ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 3 LOSS HAS BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT AGAINST THE RECEIPT OF SUPERVISION CHARGE OF RS.1 20 000/- WHICH IS NON-BU SINESS RECEIPT. THE AO THEREFORE NOTED THAT DESPITE GIVING OPPORTUNIT Y TO THE ASSESSEE THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS. THE ASSE SSEE HAS NOT CONDUCTED ANY BUSINESS IN THE ASSESSMENT YEAR IN QU ESTION AND THEREFORE DEDUCTION CANNOT BE ALLOWED. THE RECEIPT OF RS.1 20 000/- CANNOT BE TREATED AS BUSINESS INCOME. SAME WAS TREA TED AS UNEXPLAINED RECEIPT FROM OTHER SOURCES. THE AO FURTHER NOTED TH AT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.4 56 360/- IN THE P ROFIT & LOSS ACCOUNT U/S 36(1) (III) OF THE IT ACT BEING AMOUNT OF INTER EST PAID IN RESPECT OF CAPITAL BORROWED FOR BUSINESS PURPOSES. THE AO NOTE D THAT SINCE NO BUSINESS IS CONDUCTED BY THE ASSESSEE THEREFORE S UCH INTEREST PAYMENT ON BORROWED CAPITAL CANNOT BE ALLOWED. THE AO FURTH ER NOTED THAT THE LOAN WAS OBTAINED AFTER MORTGAGING THE OFFICE BUILD ING AND NO NEXUS OF LOAN TAKEN AND ACQUISITION OF OFFICE BUILDING HAS B EEN ESTABLISHED. THE AO FURTHER NOTED THAT SINCE NO BUSINESS ACTIVITY IS CARRIED ON BY THE ASSESSEE THEREFORE THE CLAIM OF DEDUCTION FOR INT EREST SHALL ALSO TO BE DISALLOWED. THE ASSESSEE RAISED THE SAME SUBMISSION S BEFORE THE LEARNED CIT(A). SUBMISSIONS OF THE ASSESSEE ARE INCORPORATE D IN THE IMPUGNED ORDER. THE REMAND REPORT OF THE AO IS ALSO REPRODUC ED TO SHOW THAT THE AO CALLED FOR THE DETAILS FROM ABHIJEY NON TRADING CO. WHO HAVE EXPLAINED IN THEIR REPLY THAT THE ASSESSEE IS DEVEL OPER OF ITS FLATS SINCE 1996-97 AND WAS ASKED TO SUPERVISE AND MAINTAIN THE FLATS TILL THEY ARE SOLD. NO TDS WAS DEDUCTED ON SUPERVISION CHARGES. T HE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE REMAND REPORT AND MATERIAL ON RECORD NOTED THAT THE ASSESSEE HAD BEEN EARNING SUPERVISION CHARGES SINCE 1996-97 BUT HE TOOK LOAN IN MARCH 1999. THE P URPOSE FOR WHICH LOAN WAS TAKEN HAS NOT BEEN SPECIFIED BY THE BANK I N THEIR REPLY BUT LOAN WAS TAKEN AGAINST MORTGAGE OF THE PROPERTY AS HAS B EEN NOTED BY THE AO AS THE OFFICE BUILDING. THE LEARNED CIT(A) CONSIDER ING THE MATERIAL ON RECORD AND IN THE LIGHT OF THE FINDINGS OF THE AO N OTED THAT THE ASSESSEE ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 4 HAS NOT BEEN ABLE TO PROVE ANY NEXUS BETWEEN INTERE ST PAID AND SUPERVISION CHARGES RECEIVED AND FURTHER LOAN WAS T AKEN FROM BANK THROUGH LOAN AGREEMENT BETWEEN THE BANK AND SEVERAL OTHER PERSONS BESIDES THE ASSESSEE. THE ASSESSEE HAS FAILED TO ES TABLISH THAT INTEREST WAS PAID FOR ANY BUSINESS PURPOSE. THE LEARNED CIT( A) ACCORDINGLY CONFIRMED THE FINDINGS OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO V ARIOUS REPLIES FILED BEFORE THE AO AT THE ASSESSMENT STAGE (PB-16 17 AND 18). THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E RECEIVED SUPERVISION CHARGES FROM ABHIJEY NON TRADING CO. FO R SUPERVISING THE CONSTRUCTION WORK UNTIL THEY ARE SOLD BY THAT PARTY . HE HAS SUBMITTED THAT THE LOAN WAS TAKEN IN EARLIER YEARS AND THAT S UPERVISION CHARGES AND INTEREST INCOME HAVE NOT BEEN DISALLOWED IN EARLIER YEARS. HOWEVER HE HAS ADMITTED THAT NO ORDER U/S 143(3) OF THE IT ACT HAS BEEN PASSED IN THE CASE OF THE ASSESSEE AFTER SCRUTINIZING THE CLA IM OF THE ASSESSEE. HE HAS SUBMITTED THAT SINCE THE ASSESSEE WAS MAINTAINI NG OFFICE FOR THE BUILDER OFFICE THEREFORE EVEN IF NO BUSINESS IS C ONDUCTED OR CARRIED OUT IN THE ASSESSMENT YEAR IN QUESTION EXPENDITURE IS ALLOWABLE. HE WAS HOWEVER UNABLE TO EXPLAIN AS TO HOW THE EXPENDITUR E CLAIMED IN THE PROFIT & LOSS ACCOUNT WAS HAVING ANY NEXUS WITH EAR NING OF SUPERVISION CHARGES. HE HAS MERELY CLAIMED THAT FOR EARNING SUP ERVISION CHARGES THE ASSESSEE HAD TO MAINTAIN OFFICE. HE HAS FURTHER SUB MITTED THAT INTEREST WAS PAID TO THE BANK AGAINST LOAN WHICH WAS TAKEN F OR THE PURPOSE OF BUSINESS. THEREFORE DISALLOWANCE SHOULD NOT HAVE B EEN MADE IN THE MATTER. ON THE OTHER HAND LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO BUSINESS WA S CARRIED OUT BY THE ASSESSEE IN THE ASSESSMENT YEAR IN QUESTION. THEREF ORE ADDITION HAS ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 5 BEEN RIGHTLY MADE BY THE AO WHICH HAS BEEN RIGHTLY CONFIRMED BY THE LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. SECTION 36(1) (III) OF THE IT ACT PROVIDES AS UNDER: 36 (1) (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION: [ PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EX TENSION OF EXISTING BUSINESS OR PROFESSION (WHETHER CAPITALISE D IN THE BOOKS OF ACCOUNT OR NOT); FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISIT ION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST P UT TO USE SHALL NOT BE ALLOWED AS DEDUCTION.] SECTION 37 OF THE IT ACT PROVIDES AS UNDER: 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 [***] AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION. 8. ON CONSIDERATION OF THE ABOVE PROVISIONS IT I S CLEAR THAT DEDUCTION COULD BE ALLOWED UNDER THE ABOVE PROVISIONS TO THE ASSESSEE FOR THE PURPOSE OF COMPUTING BUSINESS INCOME WHEN INTEREST IS PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSING AND FURTHER THAT EXPENSES SHOULD BE LAID OUT OR EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE BEFORE GRANTING DEDUCTION OF THE EXPENDITURE UNDER THE ABOVE SECTIONS THE ASSESSEE SHALL HAVE TO PROVE THAT EXPENDITURE LAID OUT WAS FOR THE PURPOSE OF BU SINESS. THERE SHOULD BE NEXUS BETWEEN THE BUSINESS ACTIVITIES AND THE EX PENDITURE SPENT BY THE ASSESSEE. ADMITTEDLY IN THE CASE OF THE ASSESS EE NO BUSINESS ACTIVITY ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 6 WAS CARRIED OUT BY THE ASSESSEE. THE ASSESSEE ONLY CLAIMED SUPERVISION CHARGES FROM ABHIJEY NON TRADING CO. FOR THE LAST S EVERAL YEARS AND SUPERVISION CHARGES WAS ONLY RS.10 000/- PER MONTH AND ACCORDINGLY REMAND REPORT WAS FILED BY THE AO (PB-3) OF PAYMEN T OF SUPERVISION CHARGES SHALL BE PAID TO THE ASSESSEE IN RESPECT OF FLATS TILL THEY ARE SOLD. THESE FACTS THEREFORE CLEARLY PROVE THAT NONE OF THE OFFICE EXPENSES CLAIMED BY THE ASSESSEE WAS HAVING ANY NEXUS WITH T HE RECEIPT OF SUPERVISION CHARGES. THE ASSESSEE COULD NOT SUPERVI SE THE FLATS BY SITTING IN THE OFFICE. THE ASSESSEE CLAIMED EXPENDITURE OF ABOUT RS.5 10 139/- IN THE PROFIT & LOSS ACCOUNT AGAINST THE RECEIPT OF SU PERVISION CHARGES OF RS.1 20 000/-. THE FIGURE SHOWN BY THE ASSESSEE ITS ELF IS HIGHLY UNNATURAL AND SPEAKS ABOUT THE CONDUCT OF THE ASSES SEE. SINCE THE ASSESSEE FAILED TO EXPLAIN AS TO WHAT WAS THE PURPO SE IN SPENDING THE ABOVE AMOUNT FOR EARNING RS.10 000/- PER MONTH AS S UPERVISION CHARGES THEREFORE EXPENDITURE CLAIMED IN THE PROF IT & LOSS ACCOUNT COULD NOT BE TREATED TO HAVE BEEN INCURRED OR SPENT FOR A NY BUSINESS PURPOSE. THUS THE ASSESSEE FAILED TO DISCHARGE ONUS UPON HI M TO PROVE THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS ALSO NOT BUSINESS OF THE ASSESSEE TO RECEIVE SUPERVISION CHARGES. SINCE THE DETAILS OF SUPERVISION CHARGES H AVE NOT BEEN PROVED TO THE SATISFACTION OF THE AUTHORITIES BELOW AND NO BU SINESS IS CONDUCTED IN THE ASSESSMENT YEAR IN QUESTION THEREFORE THE AO WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS RECEIVED RS.1 20 000/ - AS INCOME FROM OTHER SOURCES WHICH REMAINED UNEXPLAINED. AS REGARD S DEDUCTION OF INTEREST OF RS.4 56 360/- IT IS CLEAR FROM THE FIN DINGS OF THE AUTHORITIES BELOW THAT THE ASSESSEE TOOK THE LOAN IN THE YEAR 1 999 AND NOTHING IS EXPLAINED AS TO WHAT WAS THE PURPOSE FOR BORROWING THE CAPITAL. IT WAS TAKEN AS LOAN THROUGH AGREEMENT WHICH WAS EXECUTED BY SEVERAL PERSONS WITH THE BANK. SINCE NO BUSINESS IS CONDUCTED IN T HE ASSESSMENT YEAR IN QUESTION; THEREFORE THE ASSESSEE SHALL HAVE TO PRO VE THAT INTEREST PAID ON BORROWED CAPITAL FOR THE PURPOSE OF BUSINESS. HOWEV ER THE ASSESSEE HAS ITA NOS. 4376/AHD/2007 DILIPSINH VAJESINH SOLANKI VS ITO ((2) AHMEDABAD 7 FAILED TO EXPLAIN AS TO HOW PAYMENT OF INTEREST WAS HAVING ANY NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. MOREOVE R THE ASSESSEE CLAIMED DEDUCTION OF THE INTEREST PAYMENT IN THE PR OFIT & LOSS ACCOUNT AGAINST RECEIPT OF SUPERVISION CHARGES. SINCE THE S UPERVISION CHARGES ARE NOT BUSINESS RECEIPT OF THE ASSESSEE THEREFORE IN TEREST PAYMENT COULD NOT BE TREATED AS AMOUNT INCURRED FOR THE PURPOSE O F BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO PROVE ANY NEXUS BETWEEN INTEREST PAID AND THE SUPERVISION CHARGES. CONSIDERING THE ABOVE DISCUSSIONS IT IS CLEAR THAT THE ASSESSEE HA S FAILED TO SATISFY THE REQUIREMENTS OF SECTION 36(1) (III) AND SECTION 37 OF THE IT ACT IN THE MATTER. THEREFORE THE AUTHORITIES BELOW WERE JUSTI FIED ANY REJECTING THE CLAIM OF THE ASSESSEE. WE THEREFORE DO NOT FIND A NY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THE APPEAL OF THE ASSESSEE. 9. NO OTHER POINT IS ARGUED OR PRESSED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 20-08-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 20-08-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD