MAYUR BATRA,NEW DELHI vs. ACIT, CIRCLE- 61(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE, SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.7586/Del/2019 (ASSESSMENT YEAR 2015-16) Mr. Mayur Batra ACIT 7, Barakhamba Road Circle-61(1) Delhi-110 001 Vs. New Delhi

PAN-AEWPB 7677N (Appellant) (Respondent) Appellant By Mr. Ajay Vohra, Sr. Advocate and Ms. Somya Jain, CA Respondent by Mr. Jeetender Chand, Senior Departmental Representative (“Sr. DR” for short)

ORDER PER ANADEE NATH MISSHRA, AM: (A) This appeal by Asseessee is filed against the impugned

appellate order of Learned Commissioner of Income Tax (Appeals)-

38, New Delhi [Ld. CIT(A)”, for short], dated 16/07/2019 for

Assessment Year 2015-16. Grounds taken in this appeal are as

under:

“1. That the order passed by the Commissioner of Income Tax (Appeals)- 38 ('Ld. CIT(A)’) u/s 250 of the Income Tax Act, 1961 (‘Act’) is arbitrary,

2 ITA No.7586/Del/2019 Mayur Batra vs. ACIT

perverse, bad in law and invalid on the facts and circumstances of the case.

3 ITA No.7586/Del/2019 Mayur Batra vs. ACIT recipient of interest i.e. M/s Bajaj Finance Ltd. has disclosed the interest income received from the Appellant as it taxable income and also paid tax on the same for the year under consideration. 6. The Ld. CIT(A) has erred on facts and in law in ignoring the loan approval letter dated 11.07.2012 of Bajaj Finance Ltd. wherein it is clearly stated that the loan against pledge of property is sanctioned to the Appellant for ‘business use’ and erroneously observing that the Appellant could not substantiate that the loan was taken for business purposes. 7. The Ld. CIT (A) has erred on facts and in law in presuming that the Appellant did not comply with Rule 46A of Income Tax Rules, 1962 in furnishing additional evidences and/or case laws being relied upon by him and this presumption in itself is contradictory since, if the additional evidence was not admissible, there was no need for seeking remand report of the Ld. Assessing Officer. 8. The Appellant craves leave to add, delete, modify or vary any of the grounds of appeal at any time during the pendency of the appeal or at the time of hearing.”

(A.1) In this case, assessment order dated 13/12/2017 was

passed by the Assessing Officer u/s 143(3) of Income Tax Act (‘IT

Act’, for short) determining the total income at Rs.3,77,40,060/- as

against the returned income of Rs.2,21,55,940/-. The additions

made in the aforesaid assessment order included Rs.1,41,84,866/-

made by the Assessing Officer by invoking section 40(a)(ia). This

amount included Rs.74,88,616/- being interest on loan borrowed

from M/s Reliance Capital Limited and Rs.66,96,250/- being

interest on loan borrowed from M/s. Bajaj Finance Limited. The

Assessing Officer noted that the assessee had not deducted tax at

4 ITA No.7586/Del/2019 Mayur Batra vs. ACIT

source (TDS) in respect of interest payments u/s 194A of IT Act.

Invoking section 40(a)(ia), he made aforesaid addition totaling

Rs.1,41,84,866/-, which was confirmed by the learned CIT(A) vide

aforesaid impugned appellate order dated 16/07/2019 of learned

CIT(A). The assessee filed this present appeal in Income Tax

Appellate Tribunal (“ITAT” for short) against the aforesaid impugned

appellate order of Ld. CIT(A). In the course of appellate proceedings

in ITAT, paper book containing 229 pages was filed from the

assessee’s side containing the following particulars:

S. No. Particulars 1. Copy of computation of income along with the Income Tax Return for the financial year ended 31/03/2015. 2. Copy of audited financial statements for the financial year ended 31/03/2015 relevant to the assessment year under consideration. 3. Copy of tax audit report for the financial year ended 31/03/2015 relevant to the assessment year under consideration. 4. Submission dated 29/12/2017 filed in response to Notice dated 01/11/2017 u/s 142(1) & Show Cause Notice dated 05/12/2017 u/s 271(1)(b). 5. Written Submission dated 01/03/2019 in connection with the Appeal filed against the Assessment Order dated 30/12/2017 u/s 143(3). 6. Additional Written Submission dated 25/04/2019 filed in response to notice dated 11/01/2019 u/s 250(1). 7. Copy of loan approval letter dated 11/07/2012 issued by Bajaj Finance Ltd. specifying the purpose of loan.

5 ITA No.7586/Del/2019 Mayur Batra vs. ACIT 8. Copy of Chartered Account’s certificate under first proviso to section 201(1) furnished by M/s Reliance Capital Limited and M/s Bajaj Finance Ltd. confirming that income has been offered to tax. 9. Copy of remand report dated 13/06/2019 issued by the Assessing Officer. 10. Submission dated 16/07/2019 filed in response to notice dated 20/06/2019 seeking rejoinder to AO’s remand report.

(A.2) In addition copy of order of SMC Bench of ITAT, Delhi

Bench in the case of Zia Ur Rehman vs. Income-tax Officer [2018]

96 taxmann.com 482 (Delhi-Trib.) was also filed from the assessee’s

side in the course of appellate proceedings in Income Tax Appellate

Tribunal.

(B) At the time of hearing before us, Mr. Ajay Vohra, Senior

Counsel, appeared for the appellant assessee. The learned Senior

Counsel for the assessee submitted that the aforesaid additions

amounting to a total Rs.1,41,84,866/- deserved to be deleted

having regard to certificates under first proviso to section 201(1) of

IT Act, furnished by learned Chartered Accountants, wherein it had

been confirmed that M/s. Reliance Capital Ltd. and M/s. Bajaj

Finance Ltd. have offered the aforesaid amounts of Rs.74,88,616/-

and Rs.66,96,250/- respectively; totaling aforesaid amount of

6 ITA No.7586/Del/2019 Mayur Batra vs. ACIT Rs.1,41,84,866/- to tax. The learned Senior Counsel further drew

our attention to the fact that the aforesaid certificates issued u/s

201(1) of IT Act were filed by the appellant, in the course of

appellate proceedings before the Ld. CIT(A). He further submitted

that these certificates issued by the learned Chartered Accountants

u/s 201(1) of the IT Act could not have been furnished before the

Assessing Officer during the assessment proceedings because these

were not available with the assessee on 27th December, 2017 when

asked by the Assessing Officer; nor could these be made available

by 29th December, 2017 when the Assessing Officer asked to submit

it. In this regard, the learned Senior Counsel for the appellant

assessee drew our attention to the submissions made by the

assessee before the learned CIT(A) in the course of appellate

proceedings in the office of the learned CIT(A), as under, which

have been reproduced by the learned CIT(A) at page 7 of the

impugned appellate order:

“The Appellant could not submit these certificates as these were not available with the Appellant on 2 ' December 2017 when asked by the Ld. Assessing Officer nor could be made available by 29"'December 2017 when the Ld. Assessing Officer asked to submit it. The Appellant’s bonafide for not being able to furnish certificates from the lenders M/s Balaji Finance Ltd. & M/s Reliance Capital Ltd. was primarily due to

7 ITA No.7586/Del/2019 Mayur Batra vs. ACIT paucity of time coupled with the fact that the Appellant is an individual who is a non resident who predominantly stays abroad and the fact that the records were old and both the lending institutions are independent parties on which the Appellant cannot be exerting & administering unnecessary messure to issue certificates under given timelines. Both these institutions are also not under any statutory obligation to heed to the request of the Appellant. Regardless of above, Appellant was able to procure the certificates prescribed under the provisions of the Act read with rules and furnished the tame during the course of Appeal proceedings. The Appellant respectfully prays that due to an inadvertent delay for the reasons mentioned above in furnishing of these certificates there was no loss to the revenue. Tins clearly shows that the Appellant has fulfilled conditions of section 40(a) (m) after providing the CA certificate that the income is disclosed by both the payees (i.e. lender institutions) in their respective Return of Income and the conditions of Proviso to section 40(a) (ia) of the Act are met. Thus, the Appellant fulfills all the conditions prescribed under section 40(a) (ia) of the Act and is therefore entitled to the claim and its disallowance on mechanical grounds will be against the principles of natural justice and equity and result into undue hardship merely because requisite certificates could not be furnished during the course of assessment to the Ld. Assessing Officer.”

(B.1) The learned Senior Counsel for the assessee further

submitted that in view of the aforesaid facts and circumstances, the

learned CIT(A) should have admitted aforesaid certificates issued by

the learned Chartered Accountants u/s 201(1) of Income Tax Act;

by way of additional evidences under Rule 46A of Income Tax Rules,

1962 (“IT Rules”, for short). The learned Senior Counsel for the

assessee drew our attention to the fact that the learned CIT(A) did

not admit the aforesaid additional evidences merely on the ground

8 ITA No.7586/Del/2019 Mayur Batra vs. ACIT that the assessee had not submitted any separate application under

Rule 46A of IT Rules and, instead, these were filed as part of written

submissions during the course of appellate proceedings before the

learned CIT(A). The learned Senior Counsel for the assessee

requested that direction may be given to admit the aforesaid

additional evidences, in the nature of aforesaid certificates issued

by the learned Chartered Accountants u/s 201(1) of the IT Act,

which were filed by the assessee in the course of appellate

proceedings in the office of the learned CIT(A); and the issues in

dispute in the present appeal regarding allowability of interest

expenses amounting to the aforesaid total of Rs.1,41,84,866/- may

be restored to the file of the Assessing Officer with the direction to

pass fresh order in accordance with law after providing reasonable

opportunity to the assessee and after taking the aforesaid additional

evidences into consideration. The learned Sr. DR for Revenue

expressed no objection to this request; and he was in agreement

that direction may be given to admit the aforesaid additional

evidences, in the nature of certificates issued by the learned

Chartered Accountant u/s 201(1) of the IT Act, filed by the assessee

9 ITA No.7586/Del/2019 Mayur Batra vs. ACIT in the course of appellate proceedings in the office of the learned

CIT(A) and the issues in dispute in the present appeal regarding

allowability of interest expenses amounting to the aforesaid total of

Rs.1,41,84,866/- may be restored to the file of the Assessing Officer

with the direction to pass fresh order in accordance with law after

providing reasonable opportunities to the assessee and after taking

the aforesaid additional evidences into consideration. Having regard

to the comment of the learned CIT(A) at paragraph (4.2.2) of the

impugned appellate order, that business purpose of the interest

payment of Rs.66,96,250/- to M/s Bajaj Finance Ltd. was not

established; representatives of both sides; the learned Senior

Counsel for the assessee as also the learned Sr. DR for Revenue,

both were in agreement that the Assessing Officer may examine this

aspect also, before finalizing fresh order.

(B.2.1) The learned Senior Counsel for the assessee made a

specific prayer that the Assessing Officer may be directed to restrict

the scope of fresh order to the specific issue of allowability of

aforesaid amount of Rs.1,41,84,866/- after due verification. The

10 ITA No.7586/Del/2019 Mayur Batra vs. ACIT learned Senior DR was in agreement with this request also and did

not express any objection to it.

(C) We have heard both sides. We have perused the materials

on record. We find that the assessee had submitted explanation

before the learned CIT(A) as to why the aforesaid additional

evidences by way of certificates issued by Chartered Accountant

u/s 201(1) of IT Act could not be submitted by the assessee during

the assessment proceedings. The assessee’s submissions made

before the learned CIT(A) in this regard have already been

reproduced in the foregoing paragraph (B) of this order. There is no

dispute regarding the facts claimed by the assessee in the aforesaid

submissions. In view of the explanation furnished by the assessee

as to why these additional evidences could not be submitted to the

Assessing Officer in the course of assessment proceedings, the

issue before us is whether these additional evidences deserved to be

admitted by the learned CIT(A) having regard to provisions under

Rule 46A of IT Rules. On perusal of Rule 46A(1) of IT Rules, we find

that it mandates admission of additional evidence in the following

circumstances:

11 ITA No.7586/Del/2019 Mayur Batra vs. ACIT (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (C) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal: or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

In view of the aforesaid explanation submitted by the assessee in

the course of appellate proceedings in the office of the learned

CIT(A) already referred to in foregoing paragraph (B) of this order;

we are satisfied that, the assessee was prevented by sufficient cause

from producing the evidences which the assessee was called upon

to produce by the Assessing Officer; and also, that the assessee was

prevented by sufficient cause from producing before the Assessing

Officer the evidences which were relevant to the grounds of appeal.

Therefore, having regard to clauses (b) and (c) of Rule 46A(1) of IT

Rules; we are of the view that the additional evidences deserved to

be admitted by the Ld. CIT(A).

12 ITA No.7586/Del/2019 Mayur Batra vs. ACIT (C.1) Even if the assessee did not file a separate application for

admission of additional evidences under Rule 46A of Income Tax

Rules; it was open to the learned CIT(A) to admit the additional

evidences if the same were filed as part of the written submissions

during the course of appellate proceedings before her because,

there is nothing contained in Rule 46A of Income Tax Rules, 1962

to imply that filing of a separate application for admission of

additional evidences was a mandatory condition for admission of

additional evidences. Therefore, we are also of the view that the

learned CIT(A) erred in refusing to admit additional evidence merely

on the ground that a separate application seeking the admission of

additional evidences was not filed by the assessee.

(C.2) Moreover, if the learned CIT(A) was of the view

[erroneously, as we have held in preceding paragraph (C.1) of this

order] that filing of a separate application was a necessary

requirement for admission of additional evidences under Rule 46A

of Income Tax Rules; then she could and should have

communicated this (erroneous) requirement to the assessee, which

in her opinion was necessary to be fulfilled, and she should also

13 ITA No.7586/Del/2019 Mayur Batra vs. ACIT have accorded reasonable opportunity to the appellant assessee to

file a separate application for admission of additional evidences

under Rule 46A of Income Tax Rules. Failure on the part of the

learned CIT(A) to communicate this (erroneous) requirement, if in

her opinion this was a necessary requirement, to the appellant

assessee, and, to then instead refuse the admission of additional

evidences; was unjust, unfair and harsh.

(C.2.1) In view of the foregoing, we order the admission of the

aforesaid additional evidences in the nature of certificates issued by

the learned Chartered Accountants under Rule 201(1) of IT Act,

which were filed by the assessee in the course of appellate

proceedings in the office of the learned CIT(A). Further, we restore

the issue regarding allowability of interest expenses amounting to

rupees aforesaid total amount of Rs.1,41,84,866/- to the file of the

Assessing Officer with the direction to pass denovo order on the

specific issue of allowability of aforesaid amount of

Rs.1,41,84,866/-; after taking due cognizance of the aforesaid

additional evidences and after providing reasonable opportunity to

the assessee. We specifically clarify that the Assessing Officer will

14 ITA No.7586/Del/2019 Mayur Batra vs. ACIT be at liberty to carry out due verification of the aforesaid additional

evidences; and further, to examine the purpose of the interest

payment of Rs.66,96,250/- to M/s Bajaj Finance Ltd. having regard

to the assessee’s business/profession; before finalizing fresh order,

for coming to a conclusion about its allowability. All the grounds of

appeal are treated as disposed of in accordance with aforesaid

directions.

(D) For statistical purposes, this appeal is partly allowed.

Order pronounced on 28/11/2022

Sd/- Sd/- (SAKTIJIT DEY) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:28/11/2022 Pk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI