K.Geetha, Hyderabad v. ACIT, Hyderabad

ITA 528/HYD/2007 | 2003-2004
Pronouncement Date: 08-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 52822514 RSA 2007
Assessee PAN AHEPK8102E
Bench Hyderabad
Appeal Number ITA 528/HYD/2007
Duration Of Justice 2 year(s) 8 month(s) 13 day(s)
Appellant K.Geetha, Hyderabad
Respondent ACIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 08-01-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2003-2004
Appeal Filed On 25-04-2007
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'B' BEFORE SHRI N.R.S.GANESAN AND SHRI CHANDRA POOJARI I.T.A.NO.528/HYD/2007 ASSESSMENT YEAR 2003-04 SMT. K.GEETHA HYDERABAD. .. APPELLANT (PAN AHEPK8102E) VERSUS ASST. CIT CIRCLE 2(2) HYDERABAD. ..RESPONDENT I.T.A.NO.529/HYD/2007 ASSESSMENT YEAR 2003-04 SHRI K.NARASIMHA RAO HYDERABAD. .. APPELLANT (PAN ADVPK3190M) VERSUS ASST. CIT CIRCLE 2(2) HYDERABAD. ..RESPONDENT APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI E.S.NAGENDRA PRASAD O R D E R PER N.R.S.GANESAN JUDICIAL MEMBER: THESE APPEALS OF THE ASSESSEES ARE DIRECTED AGAINS T TWO INDEPENDENT ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) III HYDERABAD FOR ASST. YEAR 2003-04 BOTH DATED 15-2-2007. SINCE COMMON IS SUES ARISE FOR CONSIDERATION IN BOTH THESE APPEALS WE HEARD THE A PPEALS TOGETHER AND WE DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF INTEREST ON OUTSTANDING LOAN. SHRI S.RAMA RAO LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF SMT. K.GEETHA THE DISALLOWANCE OF INTEREST OF RS.22 051 ON 2 THE OUTSTANDING LOAN WAS MADE WITHOUT CONSIDERING T HE FACT THAT THE LOAN WAS OBTAINED FOR THE PURPOSE OF EARNING INCOME. LIKEWIS E IN THE CASE OF SHRI K.NARASIMHA RAO INTEREST OF RS.94 461 ON OUTSTANDI NG LOAN WAS DISALLOWED WITHOUT CONSIDERING THE FACT THAT THE LOAN WAS OBTA INED FOR THE PURPOSE OF EARNING INCOME. ACCORDING TO THE LEARNED COUNSEL S INCE THERE WAS NEXUS THERE CANNOT BE ANY DISALLOWANCE OF INTEREST. ACCORDING T O THE LEARNED COUNSEL THE AMOUNT TAKEN FROM THE COMPANY WAS DEPOSITED FOR THE PURPOSE OF EARNING INTEREST INCOME. THEREFORE THE INTEREST PAID/PAYAB LE TO THE COMPANY HAS TO BE SET OFF. 3. ON THE CONTRARY SHRI E.S.NAGENDRA PRASAD LEARN ED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE IS NO NEXUS BE TWEEN THE AMOUNT BORROWED FROM THE COMPANY AND THE INTEREST RECEIVED ON THE D EPOSIT. THEREFORE THE CIT (A) BY FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. V.P.GOPINATHAN 248 ITR 449 CONFIRMED THE DISALLOW ANCE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE ASSESSEES CLAIM THAT THE AMOUNT BORROWED FROM THE COMPANY WAS UTILIZED FOR THE PURP OSE OF EARNING INTEREST INCOME NO MATERIAL IS AVAILABLE ON RECORD TO SUGGE ST THAT THE BORROWED AMOUNT WAS UTILIZED FOR THE PURPOSE OF EARNING INTEREST IN COME. ADMITTEDLY THE ASSESSEES HAVE INCOME FROM SALARY HOUSE PROPERTY A ND OTHER SOURCES. UNLESS AND UNTIL THE ASSESSEES PROVE THAT THE INTEREST WAS PAID EXCLUSIVELY FOR EARNING INTEREST INCOME THE SAME CANNOT BE ALLOWED WHILE C OMPUTING THE TAXABLE INCOME. IN OUR OPINION THE CIT (A) HAS RIGHTLY CON FIRMED THE DISALLOWANCE AFTER FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CAS E OF V.P.GOPINATHAN (SUPRA). 3 THEREFORE WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDERS OF THE LOWER AUTHORITY. ACCORDINGLY WE CONFIRM THE SAME. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.6 39 220 IN THE CASE OF K.GEETHA AND RS.9 72 990 IN THE CASE OF K.N ARASIMHA RAO AS DEEMED DIVIDEND. SHRI RAMA RAO LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT FOR THE PURPOSE OF TREATING THE PAYMENT TO THE BENEFICI AL SHAREHOLDERS AS DEEMED DIVIDEND THE ASSESSING OFFICER HAS TO COMPUTE THE ACCUMULATED PROFIT. REFERRING TO THE ORDER OF THE CIT (A) THE LEARNED COUNSEL SUBMITTED THAT THOUGH THE CIT (A) FOUND THAT THE ACCUMULATED PROFIT AT TH E END OF THE YEAR WAS RS.9 72 990 THE PROFIT WAS NOT COMPUTED ON THE DAY ON WHICH THE AMOUNTS WERE PAID TO THE ASSESSEES. ON A QUERY FROM THE BEN CH WHETHER THE MATTER CAN BE REMITTED BACK TO THE FILE OF THE AO TO COMPUTE T HE ACCUMULATED PROFIT ON THE DATE OF PAYMENT THE LEARNED COUNSEL SUBMITTED THAT HE HAS NO OBJECTION FOR REMITTING THE MATTER BACK TO THE FILE OF THE AO. HO WEVER THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEES MAY BE PERMITTED TO RA ISE ALL THE CONTENTIONS BEFORE THE AO. 6. SHRI NAGENDRA PRASAD THE LEARNED DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT THE ASSESSEES THEMSELVES ADMITTED TH AT THE ACCUMULATED PROFIT WAS RS.9 72 990. ACCORDING TO THE LEARNED DEPARTMEN TAL REPRESENTATIVE THE ASSESSEES CONTENDED BEFORE THE CIT (A) THAT THE ACC UMULATED PROFIT WAS APPLIED BY THE COMPANY TOWARDS FIXED ASSETS AND OTHER INVES TMENTS. ONCE THE ACCUMULATED PROFIT WAS ADMITTED BY THE ASSESSEE AT THE END OF THE RELEVANT PREVIOUS YEAR THERE IS NO NEED FOR REMITTING THE M ATTER BACK TO THE FILE OF THE AO FOR RE-CONSIDERATION. 4 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT THE ASSESSEE S ADMITTED ACCUMULATED PROFIT AT THE END OF THE RELEVANT PREVIOUS YEAR. FO R THE PURPOSE OF COMPUTING THE DEEMED DIVIDEND THE AO IS BOUND TO COMPUTE THE ACCUMULATED PROFIT ON THE DATE ON WHICH THE DEEMED DIVIDEND WAS PAID BY T HE COMPANY. ADMITTEDLY THE LOWER AUTHORITIES HAVE NOT COMPUTED THE ACCUMUL ATED PROFIT ON THE DATE OF PAYMENT OF MONEY. THE ASSESSEES ALSO HAVE NOT BROUG HT ON RECORD ANY MATERIAL FOR COMPUTING THE ACCUMULATED PROFIT ON THE DATE OF PAYMENT OF THE MONEY BY THE COMPANY. IN THAT FACTUAL SITUATION IN OUR OPIN ION THE ACCUMULATED PROFIT ON THE DATE OF PAYMENT OF MONEY BY THE COMPANY TO THE BENEFICIAL SHAREHOLDERS HAS TO BE COMPUTED. IN THE ABSENCE OF ANY MATERIAL TO COMPUTE THE ACCUMULATED PROFIT THE MATTER NEEDS TO BE RE-EXAMI NED BY THE AO. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES ON THIS ISSUE AND REMIT THE MATTER BACK TO THE FILE OF THE AO. THE AO SHALL RE-CONSIDER THE ISSUE OF DEEMED DIVIDEND AND COMPUTE THE ACCUMULATED PROFIT ON THE DATE ON WHICH THE MONEY WAS PAID TO THE ASSESSEES AND THEREAFTER DECI DE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. WE MAKE IT CLEAR THAT THE ASSE SSEES MAY PUT FORWARD ALL THE CONTENTIONS AVAILABLE BEFORE THE AO. THE AO SHA LL EXAMINE ALL THE CONTENTIONS OF THE ASSESSEES AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVAT IONS MADE BY THIS TRIBUNAL IN THIS ORDER. 8. THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IN THE CASE OF SMT. K.GEETHA IS ADDITION UNDER SEC. 68 OF THE INCOME-TAX ACT 19 61. SHRI RAMA RAO THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT A SUM OF RS.2 02 500 WAS 5 ADDED UNDER SEC. 68. ACCORDING TO THE LEARNED COUNS EL THE ASSESSEE FILED CONFIRMATION LETTERS. HOWEVER THE AO DISALLOWED TH E CLAIM OF THE ASSESSEE AND FOUND THAT THE ASSESSEE HAS NOT PROVED THE IDENTITY OF THE CREDITORS AND THEIR SOURCES. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE MAY NOT HAVE ANY OBJECTION TO PLACE ALL THE RELEVANT MATERIAL BE FORE THE AO IN CASE THE MATTER IS REMITTED BACK TO THE FILE OF THE AO. 9. SHRI NAGENDRA PRASAD THE LEARNED DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED THE D ETAILS OF IDENTITY AND CREDITWORTHINESS OF THE CREDITORS IN SPITE OF SEVER AL OPPORTUNITIES GIVEN BY THE AO. IN THE ABSENCE OF ANY MATERIAL TO PROVE THE IDE NTITY OF THE CREDITORS THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TION THE LOWER AUTHORITY HAS RIGHTLY CONFIRMED THE ADDITION. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY THE ASSES SEE PRODUCED CONFIRMATION LETTERS. THE AO APPEARS TO HAVE REJECTED THE CONFIR MATION LETTERS FILED BY THE ASSESSEE ON THE GROUND THAT ALL THE CONFIRMATION LE TTERS WERE IN SIMILAR FORM. THE AO HAS ALSO FOUND THAT THE CONFIRMATION LETTERS DO NOT CONTAIN DETAILS OF IDENTITY AND SOURCE OF INCOME OF THE CREDITORS. THE ASSESSEE NOW CLAIMS THAT SHE IS READY TO FILE THE NECESSARY DETAILS BEFORE T HE AO. WHEN THE ASSESSEE IS READY AND WILLING TO ESTABLISH THE IDENTITY AND CRE DITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTION IN OUR OPIN ION REMITTING THE MATTER BACK WOULD NOT CAUSE PREJUDICE TO THE INTERESTS OF THE REVENUE IN ANY WAY. THE INTENTION OF THE PARLIAMENT IS TO COMPUTE THE RIGHT TAXABLE INCOME. WHEN THE ASSESSEE CLAIMS THAT SHE CAN FURNISH THE NECESSARY DETAILS AS REQUIRED BY THE 6 LOWER AUTHORITY GIVING AN OPPORTUNITY TO PRODUCE S UCH MATERIAL MAY NOT PREJUDICE THE INTERESTS OF THE REVENUE AT ALL. IN O UR OPINION GIVING SUCH AN OPPORTUNITY WOULD MEET THE ENDS OF JUSTICE. ACCORDI NGLY WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND R EMIT THE MATTER BACK TO THE FILE OF THE AO. THE AO SHALL EXAMINE THE ISSUE ON T HE BASIS OF THE MATERIAL THAT MAY BE PRODUCED BY THE ASSESSEE BEFORE HIM AND THER EAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 11. IN THE RESULT BOTH THESE APPEALS OF THE ASSESS EES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 8-1-2010. SD SD (CHANDRA POOJARI) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD 8TH JANUARY 2010. RRRAO. COPY OF THE ORDER FORWARDED TO:- 1. SHRI S.RAMA RAO ADVOCATE 103 INDIRA DEVI NILAYAM 3-6-542/4 ST. NO.7 HIMAYATNAGAR HYDERABAD. 2. ACIT CIRCLE 2(2) HYDERABAD. 3. CIT II HYDERABAD. 4. CIT (A) III HYDERABAD. 5. DR ITAT HYDERABAD.