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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Appellant by : Shri. M. S. Mathuria, AR Respondent by : Smt. Ridhi Mishra, DR Date of Hearing 20.07.2023 Date of Pronouncement 24.08.2023 आदेश / O R D E R PER AMARJIT SINGH :-
The present appeal filed by the assessee is directed against the order passed u/s 263 of the Income Tax Act, 1961 [hereinafter “the Act”] by the Principal Commissioner of Income Tax [hereinafter „the Ld. PCIT‟] dated 31.03.2023 for A.Y. 2018-19.
P a g e | 2 Manish Shantilal Sanghvi Vs PCIT 2. The assessee has raised the following grounds of appeal as under:
1. On the facts and in the circumstances of the case and in law the learned Principal Commissioner of Income Tax, PCIT, Mumbai-17 erred in invoking the provisions of Section 263 of the Income Tax Act, 1961 for the assessment order passed on 24.02.2021 u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 by the Assessing Officer, Ne- AC, Delhi treating it erroneous and prejudicial to the revenue and set-aside the same, without appreciating the submission made, law, facts and circumstances of the case. 2. provisions of the Act ought to have been properly construed and regard being had to facts of the case no such revision order u/s. 263 of the Income Tax Act, 1961 should have been made. Reasons assigned by the learned Principal Commissioner of Income Tax, PCIT, Mumbai-17 is wrong and unlawful to justify the revision of the assessment order made by the assessing officer. The same to be annulled.
3. The fact in brief is that the assessment u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act for the assessment year 2018-19 was finalized on 24.02.2021 accepting returned income filed by the assessee.
4. Subsequently, on examination of the assessment record, the Ld. PCIT observed that the assessee‟s case was selected for limited scrutiny for verifying the issues of export/import and unsecured loans. Therefore, Ld. AO was expected to examine not only the source of unsecured loans of ₹ 756.54 lakhs but also the utilization of the same as the assessee has claimed huge P a g e | 3 Manish Shantilal Sanghvi Vs PCIT interest expenses of ₹ 78.72 lacs against these loans. As per the balance sheet submitted by the assessee there was significant increase in the unsecured loans as compared to the preceding years. The Ld. PCIT also noticed that during the year under consideration the assessee has also acquired fixed assets of ₹216.70 lacs and also provided loan and advances to the tune of ₹ 365.94 lacs totaling to ₹ 582.60 lacs but as per the profit and loss account only interest of ₹ 73,576/- was received during the year. Therefore, the Ld. PCIT was of the view that the assessee had utilized the unsecured loans for non business purpose and interest paid on the same has been claimed as business expenses. In response to the notice issued u/s 263 of the Act the assessee submitted has under: “i. The assessee is the owner of the proprietary concern M/s. Norac International which is engaged in trading of ferrous and non-ferrous metal mostly of import and supply in India. The assessee has provided the list of advances outstanding as on 31.03.2018 given to exporters amounting to Rs. 3.55 Cr. ii. The assessee has submitted that the immovable property was a residential premises purchased jointly for Rs. 2.16 Cr out of own capital of Rs. 24.95 lacs and loan of Rs. 1.91 Cr from ICIC Bank. Interest on said loan was debited to Capital A/c and not claimed as expenses ijn the Profit and loss A/c. iii. The assessee has submitted that the unsecured loans were utiled for business purpose only and advances made were for the business purpose and the interest expenses were rightly claimed as business expenses.”
P a g e | 4 Manish Shantilal Sanghvi Vs PCIT However the Ld. PCIT has not agreed with the submission of the assessee and stated that the assessee has not provided complete details of the unsecured loans along with its corresponding utilization for the business purpose. He also pointed out that as per list the total outstanding advances as on 31.03.2018 was for ₹3.65 crore whereas as per the balance sheet the year under consideration, the total unsecured loan was ₹7.56 crore. In view of the above the Ld. PCIT observed that the assessing officer has passed the assessment order in this case without proper and required verification.
Consequently the Ld. PCIT held that the assessment order dated 24.02.2021 passed by the AO is erroneous and prejudicial to the interest of the revenue. Accordingly, the AO was directed to frame the assessment denovo.
During the course of appellate proceedings before us. The Ld. Counsel filed paper book comprising details and copies of document furnished before the AO during the course of assessment proceedings. He referred various submission made by the assessee in response to the notice u/s 142(1) of the Act issued by the AO pertaining to unsecured loans and also referred copies of audited balance sheet of the assessee placed in the paper book and detail with name and address of the lenders P a g e | 5 ITA NO. 1275/Mum/2023 Manish Shantilal Sanghvi Vs PCIT from whom the unsecured loan was obtained as placed at page no. 66 of the paper book also stated loan was mainly utilized for import of goods.
On the other hand the Learned. Departmental Representative [hereinafter „the Ld. DR‟] contended that neither the AO asked the assessee about utilization of the loan nor the assessee has given any supporting materials that loan was utilized for the purpose of import of goods.
Heard both the sides and perused the material on record. Without retreating the fact as elaborated (supra) in this order, the Ld. PCIT has stated that at para 5.1 in the order passed u/s 263 of the Act that the assessee has not provided complete details of the unsecured loans along with its corresponding utilization for the business purpose. In this regard we have perused the copy of notice u/s 142(1) of the Act dated 11.02.2020 issued by the AO vide which various details in respect of the unsecured loan reflected in the balance sheet was called from the assessee. In response the assessee has furnished name and address of the unsecured loans creditors, their PAN no. and amount of unsecured loans taken during the year along with copies of confirmation of loan account and copies of income tax return filed by the lenders, their bank statement and their ledger account as placed in the paper book by the assessee.
P a g e | 6 Manish Shantilal Sanghvi Vs PCIT 9. The Ld. Counsel has demonstrated from the copy of various documents placed in the paper book as referred above that assessee has provided the complete details of unsecured loan obtained by the assessee during the year under consideration. However, we have find that regarding utilization of the loans the assessee has only stated that the loans were utilized for import of goods. In this regard we find that the assessee has not provided any other relevant material to demonstrate that unsecured loans were utilized for import of goods. Therefore, we observe that the AO has not verify the utilization of unsecured loan for the business purpose. Therefore, the order of the Ld. PCIT passed u/s 263 of the Act is sustained to the limited extent of verification of the claim of the assessee with respect to utilization of unsecured loan for business purpose. Accordingly, the appeal of the assessee is partly allowed subject to the term and condition as above.
In the result the appeal filed by the assessee is partly allowed.