Income Tax Appellate Tribunal - Mumbai
Suresh A Shah, Mumbai vs Dcit 14(2), Mumbai on 29 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI
BEFORE SHRI R.C. SHARMA, AM AND SHRI AMARJIT SINGH, JM
आयकर अपील सं / I.T.A. No.7561/Mum/2013
(निर्धारण वर्ा / Assessment Year: 2009-10)
Suresh A Shah बिधम/ DCIT 14(2)
Vs. Earnest House, 3rd Floor, R.
902, Gardenview, 9th Floor, No. 302 Nariman Point
Opp Shreepal Nagar, Mumbai Pin:400021
Nepeansea RD,
Mumbai - 400 006
स्थायी लेखा सं ./जीआइआर सं ./PAN/GIR No. : AAIPS0938F
(अपीलाथी /Appellant) .. (प्रत्यथी / Respondent)
Assessee by: Shri Sanjiv M. Shah
Revenue by: Shri Ram Tiwari, DR
सुनवाई की तारीख / Date of Hearing: 04.07.2017
घोषणा की तारीख /Date of Pronouncement: 29.08.2017
आदे श / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 08.10.2013 passed by the Commissioner of Income Tax (Appeals)-25, Mumbai [hereinafter referred to as the "CIT(A)"] relevant to the A.Y.2006-
07.
2. The assessee has raised the following grounds:-
"(1) On the facts and in law, the learned CIT (A) erred in confirming the addition of Rs. 41,13,000 made u/s 69 of the Income Suresh A. Shah Tax Act, 1961 in respect of the value of tenancy rights of office premises on the basis of valuation as per stamp duty ready reckoner on assumptions and surmises without any evidence to prove that payment was actually made to the landlord and without appreciating the fact that the landlord had confirmed of not receiving any payment for granting the tenancy rights. (2) On the facts and in law and without prejudice to ground no.
1, the learned CIT (A) erred in confirming the addition of full amount of Rs. 41,13,000 in the hands of appellant, on protective basis, without appreciating the fact that the tenancy rights were jointly acquired by three persons ie. Appellant, Kirtilal M Shah and Amarchand P Shah and only RT-1 ,000, being appellant's share can be assessed in his hands.
(3) On the facts and in law, the learned CIT (A) erred in confirming the disallowance of interest paid to the extent of Rs. 3,34,000 on the ground that appellant had understated the assessable net interest income by considering net interest income as Rs. 1,83,139 against the correct figure of Rs. 9,50,487. (4) On the facts and in law, the learned CIT (A) erred in confirming the addition of personal expenses to the extent of Rs. 2,00,000 as low withdrawals on assumptions and surmises without appreciating the fact that appellant had already shown personal expenses of Rs. 2,49,889 for the full year for a family of two members which was reasonable and accepted by the learned AO in the preceding and subsequent years.
(5) Appellant prays for leave to add, amend or delete any ground/s of appeal on or before the final date of hearing."
3. The brief facts of the case are that the assessee filed his return of income on 31.07.2006 declaring total income to the tune of Rs.34,33,390/- for the A.Y.2006-07. An AIR information was received in which it came into notice that the assessee purchased immovable property at Rs.41,13,000/- and shares of Rs.12,61,000/- in the F.Y. 2005-06 but the same was not declared, therefore, a satisfaction note was prepared to the effect that the income to the tune of Rs.53,74,000/- was escaped assessment. Therefore, assessment order was reopened u/s 147 of the I.T. 2 Suresh A. Shah Act, 1961 after obtaining the necessary approval of authority. Notice u/s 148 of the Act was issued and served upon the assessee. Thereafter, the statutory notices were issued and served upon the assessee. The assessee explained that the assessee did not purchase the immovable property but took Room No. 8 and 9 of 6th Floor of Phonix Building, S.V.P. Road, Mumbai alongwith two others on monthly rent of Rs.940/-. An amount of Rs.41,13,000/- was not the purchase consideration but market value of property taken for payment of stamp duty. The Assessing Officer was not satisfied with the investment of Rs.41,13,000/-, therefore, the same was treated as unexplained u/s 69 of the I.T. Act, 1961 hence added to the income of the assessee. The assessee also claimed the interest to the tune of Rs.40,54,593/- and bank charges of Rs. 24,483/- against the interest income. Since these expenses were not properly explained therefore, these expenses were declined and added to the income of the assessee. The assessee withdrawal an amount Rs.1,95,000/- which was found low withdrawal. Therefore, the addition of Rs.5,00,000/- was made on account of low withdrawal. The assessee also claimed the deduction of Rs.1,16,000/- u/s 80G. The same was not found proper therefore the same was also disallowed. Assessee also claimed the STT paid of Rs.20,204/- but the assessee has no income from share, therefore the said claim was also declined and the income was assessed to the tune of Rs.1,22,42,470/-. Thereafter, the assessee has filed the appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied on the issues which has been mentioned above, therefore, the present appeal has been filed before us.
3Suresh A. Shah ISSUE NO.1 & 2:-
4. Under these issues the assessee has challenged the addition of Rs.41,13,000/- made u/s 69 of the I.T. Act, 1961. The contention of the assessee is that he did not purchase the property however, he took Room No. 8-9 on 6th Floor Phonix Building, S.V.P. Road, Mumbai alongwith two other on monthly rent of Rs.940/-. It is also contended that an amount of Rs.41,13,000/- was not the purchase consideration but market value of the property taken for payment of Stamp Duty.
The assessee did not disclose the said transaction in his return income. It is also in dispute that an amount of Rs.41,13,000/- was paid to acquire the tenancy right in the property mentioned above. The tenancy agreement is on the record which lies at Page No.22 to 43 of the paper book. The said agreement speaks about the fact that the assessee alongwith Kirtilal, M. Shah and Amarchand P Shah purchased the said property to the extent of 1/3 share each. The assessee failed to explain the source of the payment to the tune of Rs.41,13,000/-. However, the share of the assessee was only to the extent of 1/3 in the said property. No evidence was produced before the AO as well as before the CIT(A) for explaining the source of payment of Rs.41,13,000/-. Nothing has produced before us. The full addition to the amount of Rs.41,13,000/- u/s 69 of the I.T. Act, doesn't seems justifiable because the assessee was having only 1/3 share in the mentioned property . Meaning thereby the assessee paid 4 Suresh A. Shah to the extent 1/3 share of the said amount. Since, the source of payment has not been proved therefore, the addition to the extent of 1/3 share of Rs.41.13,000/- is hereby ordered to be confirmed. Accordingly, this issue is hereby partly allowed in favour of the assessee.
ISSUE NO. 3:-
5. Issue no.3 is in connection with the confirmation of the disallowance of interest to the tune of Rs.3,34,000/-. Before going further, it is necessary to advert finding of the CIT(A) on record for ready reference.:-
"5.5 I have perused the assessment order, remand report, submissions of the appellant and facts and circumstances of the case. I find that the ICICI Bank letter dated 3 1.01.2005 addressed to the appellant showing the terms of "Loan against Securities"
account against the security of KVP states that the loan will be 90% of face value of KVP with rate of interest @6.50% p.a., and the account will be in the form of current account (overdraft account). The appellant has highlighted the payments made to Post Master! Sr. Post Master for Rs. 150 lakhs on 07.02.2005, and Rs. 95 lakhs on 22.02.2005, both reflecting in OD A/c No. 6904, and Rs. 100 lakhs on 02.03.2005 reflecting in OD A/c No. 7075. In view of the above findings, the contention of the appellant that OD funds were used to invest in NSC/ KVP cannot be completely denied. Moreover, the contention of the appellant that he paid interest @6.50% only on ICICI Bank OD (as against @8% earned by him) is supported by the aforesaid letter of ICICI bank. The appellant has also earned iterest on other loans given to various parties. The aggregate interest received by the appellant from various investments exceeds the interest paid. Given all these facts on record, it would be difficult to justify the disallowance of interest paid on OD accounts in i) entirety, while taxing the interest earned on investments made out of these accounts.
5Suresh A. Shah he appellant has shown investment in NSC/ KVP as on 31.03.2005 at Rs.201.33 + 146.24 = Rs.347.57 lakhs, which reconciles with aforesaid investments debited in OD account during FY 2004-05 at Rs.150 + 95 + 100 = Rs.345 lakhs, as the difference amount of Rs.2.57 lakhs is assumed to be on account of interest accrued till 31.03.2005. In the current assessment year, the appellant has earned aggregate interest on NSC/ KVP at Rs. 15.73 + 11.29 = 27.02 lakhs, which is almost equal to 8% of the investment of Rs. 345 lakhs. The appellant was charged interest 6.50% on the OD account, and hence, even assuming that the OD was used throughout the year, the appellant should be left with net surplus interest on NSC/ KVP @8% - 6.50% = 1.50% of Rs.345 lakhs i.e. at Rs.5, 17,500/- However, it is a fact that the appellant has shown net interest income of Rs.1,83,139/- only (i.e. interest received of Rs.42,37,732/- less interest paid of Rs.40,54,593/-). Hence, the appellant has understated the assessable net interest income by at least Rs.5,17,500 -- 1,83,139 = Rs.3,34,361/- (rounded off to Rs.3,34,000/-) Therefore, out of the disallowance of interest paid of Rs.40,54,593/- the disallowance is confirmed to the extent of Rs.3,34,000/- and the appellant gets relief of the balance amount i.e.Rs.40,54,593 - 3,34,000 = Rs.37,20,593/- Further, the bank charges of Rs.25,483/- incurred for availing the OD facility is to be allowed in full in view of the nexus of interest earned and paid on the said OD accounts established for major portion of funds availed from such accounts.
In view of the above, the appellant gets relief from disallowance of interest paid to the extent of Rs.37,20,593/- and from bank charges of Rs.25,483/- in full. Therefore, the grounds No.3 & 4 of the appeal are partly allowed."
6. On appraisal of the above mentioned finding, we noticed that the figure of deposit and interest paid has duly discussed by CIT(A) in his order. Nothing distinguishable facts has been placed on record. Even, at the time of argument nothing was argued that which figure has wrongly being taken into consideration while declined the claim of the assessee regarding interest to the tune of Rs.3,34,000/-. In view of the said circumstances we are of the view that the CIT(A) has 6 Suresh A. Shah rightly confirmed the said addition hence, the order of the CIT(A) in this regard is not liable interfere with at this appellate stage. Accordingly, this issue is decided against the assessee.
ISSUE NO. 4:-
7. Issue no. 4 is in connection with the addition of personal expenses to the tune of Rs.2,00,000/- on account of low withdrawals to the tune of Rs.2,49,889/-. AO has made the addition to the extent of 5,00,000/- on account of low withdrawal which was restricted by the CIT(A) to the extent of 2,00,000/-. Since, it was incumbent upon the assessee to explain the expenditure which has not been explained. Moreover, nothing distinguishable material has been produced before us to justify the claim raised by the assessee therefore in the said circumstances we confirmed the finding of the CIT(A) on this issue.
8. In the result, the appeal filed by the assessee is hereby ordered to be partly allowed.
Order pronounced in the open court on 29.08.2017.
Sd/- Sd/-
(R.C. SHARMA) (AMARJIT SINGH)
लेखा सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER
मुंबई Mumbai; ददनां क Dated : 29.08.2017
v.p singh
आदे श की प्रनिनिनि अग्रेनर्ि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant 7 Suresh A. Shah
2. प्रत्यथी / The Respondent.
3. आयकर आयु क्त(अपील) / The CIT(A)-
4. आयकर आयु क्त / CIT
5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधिक िंजीकधर /(Dy./Asstt. Registrar) आिकर अिीिीि अनर्करण, मुंबई / ITAT, Mumbai 8