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Income Tax Appellate Tribunal, JAIPUR BENCHES ‘A’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1156/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1156/JP/2019 fu/kZkj.k o"kZ@Assessment Year :2009-10 cuke Smt. Rama Bajaj, ITO, Vs. 1/567, Vidhyadhar Nagar, Ward-4(2), Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEEPB6564L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rohan Sogani (CA) jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/09/2021 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/09/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT (A)-2, Jaipur dated 25.07.2019 wherein the assessee has taken the following grounds of appeal:-
1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO, in disallowing the interest claimed under Section 24(b) of the Income Tax Act, 1961, amounting to Rs. 3,56,678/-. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the deduction of interest under Section 24(b), as claimed.
2 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur 2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO, in not allowing deduction of balance interest on housing loan, against income from other sources. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the deduction of balance interest paid on housing loan, against interest income offered for tax under income from other sources.
3. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO, in making addition of Rs. 40,000/- under section 68 of the Income Tax Act, 1961. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition, made by ld. AO and sustained by ld. CIT(A). ”
Regarding Ground No. 1, the ld. submitted that the assessee has incurred interest expenses of Rs. 5,06,678/-. However, in the return of income, the assessee has claimed only a sum of Rs. 3,48,888/- u/s 24(b) of the Act and the balance interest pertaining to the construction period was inadvertently not claimed in the return of income amounting to Rs. 1,57,790/-. It was submitted that the revised claim was made before the ld. CIT(A) amounting to Rs. 5,06,678/-. However, the ld. CIT(A) amounting to Rs. 5,06,678/-. However, the ld. CIT(A) has confirmed the action of the Assessing Officer in allowing interest of Rs. 1.5 lakh only for the reason that the housing loan was not fully utilized for purpose of construction of the house. It was submitted that interest on a part of the loan which was utilized for lending, the assessee earned interest income of Rs. 2,89,004/- and against that the assessee has claimed interest expense
3 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur of Rs. 2,74,705/-. It was submitted that the ld. CIT(A) has not considered the same and has merely confirmed the order of the Assessing Officer. It was accordingly submitted that to the extent of loan utilized for construction of the house, the assessee be allowed a deduction towards interest amounting to Rs. 2,31,973/- and as regards the amount of loan utilized towards onward lending in respect of which interest income has already been offered to tax, the interest expense of Rs. 2,74,705/- should be allowed.
In this regard, the assessee further relied on the written submissions made before the ld. CIT(A) which is reproduced as under:-
“2.1 During the year the appellant had paid interest of Rs.5,06,678/- to ICICI Bank against the housing loan taken for the purpose of construction of second floor. The construction of the second floor was completed during the relevant assessment year. These facts are undisputed. Out of total interest of Rs. 5,06,678/-, ld. AO allowed claim of Rs. 1,50,000/- only resulting into a disallowance of Rs. 3,56,678/-.
2.2 Out of the total interest of Rs. 5,06,678/-, interest of Rs. 1,57,790/- pertained to construction period. Due to ignorance of law, the appellant had claimed only the balance interest of Rs. 3,48,888/- (5,06,678 - 1,57,790) u/s 24(b) during the year.
2.3 During the course of assessment proceedings, the claim of the assessee stood revised as under:
S. No. Particulars Amount (In Rs.) Interest to be allowed under Income from Other 1. Sources 2,74,705/-
4 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur Balance Interest to be allowed under Income from 2. House Property a) Rented House Property- 81,973/- b) SOP House Property 1,50,000/- Total 5,06,678/- 2.4 The ld. AO alleged that as per balance sheet submitted by appellant, against the outstanding housing loan of Rs. 44,12,966/-, investment in property has been shown at Rs. 20,12,207/-. Therefore, the housing loan was not fully utilized for housing purpose and accordingly, the ld. AO allowed the interest of Rs. 1,50,000/- against the self occupied property and disallowed the deduction of Rs. 1,98,888/- (3,48,888 -1,50,000).
2.5 During the assessment proceedings, it was explained vide letter dated 5th December, 2011 that a part of the housing loan has been used for giving advances to other parties. The ld. AO himself accepted the fact that the housing loan was not fully utilized for the purpose of construction of the house. However, he failed in appreciating the fact that interest on that part of the loan which has been used for lending and earning interest is allowable under section 56 of the Income Tax Act, 1961.
2.6 Interest pertaining to that portion of loan which is utilized for the purpose of construction of the house is allowable under section 24(b) and the remaining interest is allowable under section 56. Based on actual utilization of housing loan mentioned as above the interest of Rs. 5,06,678/- would be allowable as detailed in para 2.3 above and so claimed during assessment proceedings.
2.7.1 It is humbly submitted that as per Explanation to section 24(b) interest payable on capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, shall be deductable u/s 24(b) in equal installments for the said previous year and for each of the four immediately succeeding previous years. In the present case, since the construction of the property was completed during the relevant assessment year full interest would be allowable u/s 24(b) and no part of interest would be disallowable on account of being related to construction period.
2.7.2 The ld. AO’s allegation that in the certificate of ICICI bank, there is specific mention that pre EMI interest from April, 2008 to March, 2009 is zero is irrelevant because even if there is interest for pre construction period, the interest is fully allowable if construction is completed in relevant assessment year, in view of Explanation to section 24(b) as explained above.
2.7.3 The observation of the ld. AO that regular EMI of Rs. 49,743/- is being paid from the month of April, 2008 onwards can have no adverse bearing on the claim of the assessee.
2.7.4 The ld. AO’s allegation that appellant has shown rental income of Rs. 36,000/- for the whole year for one portion of the house property is also irrelevant because as mentioned earlier the appellant has let out a portion of first floor whereas the construction was done on second floor.
2.7.5 The construction of the second floor was completed during the relevant assessment year. Due to ignorance of law, the assessee did not claim the interest which pertained to the construction period. These facts
6 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur were evident on record. Even if the appellant made no claim of the balance interest of Rs. 1,57,790/-, the ld. AO was bound to give relief to which the appellant appeared to be clearly entitled but which he had omitted to claim the same for some reason. Your attention is invited to the CBDT Circular No. 14 of 11 April 1955, which states that: “Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should:-
(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs; (c) Public Relation Officers have been appointed at important centers, but by the very nature of their duties, their field of activity is bound to be limited.”
2.7.6 The very purpose of assessment proceedings u/s 143(3) of the Act is to correctly assess the tax liability of an assessee in accordance with law.. It was therefore against all cannons of law for the ld. A.O. to not 7 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur allow reliefs to which appellant was clearly entitled but which she had omitted to claim on account of bonafide error. The AO, under the law, is duty bound to pass the assessment order in accordance with the provisions of law.
2.7.7 We place reliance on the judgment of the jurisdictional High Court in the case of Commissioner of Income Tax v. Rajasthan Fasteners (P) Ltd. (2014) 266 CTR (Raj) 401 wherein it was held as under: “The purpose of assessment proceedings before the taxing authorities was to assess the income correctly and the tax liability of an assessee in accordance with law.”
2.8 Deduction u/s 56 2.8.1 It is humbly submitted that the appellant has taken housing loan of Rs. 45,00,000/- in the month of March, 2008, which was utilized as under: S. Particular Nature Amount Date No. Pinkcity Landbase (P) Ltd. Advance 4,50,000/- 17/03/2008 1.
Shree Shyam Landbase (P) Advance 20,00,000/- 17/03/2008 2. Ltd. Repayment of loan to IDBI Repayment 15,34,481/- 06/03/2008 taken for construction of 3. ground floor and 1st floor 1,97,028/- F.Y. 2007-08 Construction Expenses – 4. Expenses Second Floor 1,33,486/- F.Y. 2008-09 5. Interest & Other Expenses Expenses 1,85,005/- F.Y. 2007-08 TOTAL 45,00,000/- Above facts were before ld. AO vide letter dated 5th December, 2011.
8 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur 2.8.2 As may be observed from above, the housing loan was also utilized to give advance to Pinkcity Landbase (P) Ltd and Shree Shyam Landbase (P) Ltd, against which the appellant was earning interest income. The advances given to Pinkcity Landbase (P) Ltd. and Shree Shyam Landbase (P) Ltd. on 17th March, 2008 were returned back and were again given as advance for earning interest income as under:- Amount Received Amount paid Date Name of Party Amount Date Name of Party Amount 8/09/2008 PCLBPL 450000 8/09/2008 SSLBPL 2000000 09/09/2008 RSBPL 2375000 TOTAL 2450000 TOTAL 2375000 21/11/2008 RSBPL 2375000 22/11/2008 RSBPL 320000 22/11/2008 SCLMTPL 2055000 TOTAL 2375000 TOTAL 2375000 Copy of Bank Statement evidencing the above utilization in the Financial Year 2008-09 is placed on record. 2.9 Variation and Increase in claim can be made for the first time before CIT(A)
2.9.1 It is submitted that the details of the utilization of the housing loan were already on record before the ld. AO.
2.9.2 Although during the assessment proceedings, through written submissions, claim of interest was varied and increased, yet, alternatively without prejudice to above, the variation / increase in claim can be made for the first time before the CIT(A).
2.9.3 The total claim of interest stands at Rs. 5,06,678/- and the same is claimed under different sections as follows:
S. No. Particulars Amount (In Rs.) Interest to be allowed under Income from 1. Other Sources 2,74,705/- Balance Interest to be allowed under Income 2. from House Property a) Rented House Property- 81,973/- b) SOP House Property- 1,50,000/- Total 5,06,678/- 2.9.4 First appeal is an extension of assessment proceedings. The powers of CIT(A) are co-terminus with that of AO. In this view of the scheme of the law even verification of facts at CIT(A) level should not obstruct admission of additional claim. When CIT(A) is empowered, on further verification of facts, for enhancement of income then there is no reason that same powers are not utilized for admitting additional claim. ITAT is not the extension of assessment proceedings and therefore any additional claim before ITAT may not be acceptable if the same requires verification of facts.
2.9.5 Since the entire assessment is open before the CIT(A), there is no reason for his not entertaining the claim, or directing the AO to allow appropriate relief, on facts being submitted to CIT(A) even if not on record.
2.9.6 The Hon’ble Supreme Court in Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688 (SC) has dealt with this issue of admission of additional ground by first appellate authority. The Hon’ble Supreme Court at para 3 has analysed the powers of first appellate authority contained in section 251 of the act and has observed that-
10 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur “The act does not contain any express provision debarring an assessee from raising an additional ground in appeal and there is no provision in the Act placing restriction on the power of the Appellate Authority in entertaining an additional ground in appeal. In the absence of any statutory provision, general principle relating to the amplitude of appellate authority's power being co-terminus with that of the initial authority should normally be applicable.”
2.9.7 The Hon’ble Supreme Court in the above case has considered the judgement of CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) and has reproduced the observations of the Hon’ble Supreme Court in the said case in Para 5 of Jute Corporation of India Ltd. vs. CIT (supra) order-
"If an appeal, lies, Section 31 of the Act describes the powers of the AAC in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the Income Tax Officer. He can do what the Income Tax Officer can do and also direct him to do what he has failed to do. "
“The declaration of law is clear that the power of the AAC is co- terminus with that of the ITO, and if that is so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the ITO. No exception could be taken to this view as the Act does not 11 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur place any restriction or limitation on the exercise of appellate power. Even otherwise, an Appellate Authority while hearing appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO.”
2.9.8 In view of the Jute Corporation of India Ltd. vs. CIT (Supra) decision of the Hon’ble Apex Court, the first appellate authority is duty bound to accept additional claim if the twin conditions contained in section 250(5) are satisfied whether or not the facts are already on record.
Thus, there is a difference in this regard when an additional ground/claim is taken before ITAT and when it is taken before CIT(A).
2.9.9 Even in National Thermal Power Company Ltd. vs CIT 1998 229 ITR 383 SC, the Hon’ble Supreme Court in Para 3 has observed as under:
“Under Section 254 of the IT Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law”
12 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur 2.9.10 We also place reliance on the recent judgment of the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax v. Mitesh Impex dated 02-04-2014. Copy of the order is enclosed.
2.9.11 We also place reliance on the judgment of the jurisdictional High Court in the case of Commissioner of Income Tax v. Rajasthan Fasteners (P) Ltd. (2014) 266 CTR (Raj) 401 wherein it was held as under: “Power of CIT(A) was co terminus with that of the ITO and the appellate authority could modify the assessment order on an additional ground even if not raised before the ITO; CIT(A) was therefore justified in accepting assessee’s claim for exemption under section 10B.”
In view of the above submissions, entire interest expense of Rs. 5,06,678/- may please be allowed under income from house property as well under income from other sources as above.”
Regarding Ground No. 3, the ld. AR submitted that during the year, the appellant had deposited cash of Rs. 40,000/- in Bank on 5th July, 2008. The ld. AO added the same on account of unexplained cash credits on the allegation that source of the same is not verifiable as no cash book/cash flow statement was submitted by the appellant.
5. It was submitted that the appellant is preparing books of account. The cash had been deposited by appellant out of cash withdrawals from bank and cash in hand as under: Particulars Amount (in Rs.) Opening Balance 27,076/- Add:- Cash Withdrawals from Bank on 15-4-2008 1,00,000/- Add:- Rent from house property received in cash for 9,000/-
three months (3000*3) 1,36,076/- Less:- Household Drawings for three months @ Rs. 30,000/- 10,000/- per month Less:- Construction Expenses upto 5-7-2008 31,190/- Total cash available as on 5-7-2008 74,886/- Cash deposited in Bank (added by ld. AO) 40,000/- Copy of Cash Book of the Financial Year 2008-09 is placed on record.
During the course of assessment proceedings the source of cash deposited was explained to be out of cash in hand. The cash book is a further evidence to substantiate what was explained to the ld. AO. In view of the above, the addition of Rs. 40,000/- on account of unexplained cash credit may please be deleted.
Per contra, the ld. DR relied on the findings of the lower authorities and it was submitted that the housing loan was not fully utilized for housing purposes and the AO rightly allowed the interest to the extent of Rs 1,50,000/- against self-occupied property and which was rightly sustained by the ld CIT(A) without allowing any further relief to the assessee. It was further submitted that the assessee has not been able to establish from where cash which was subsequently deposited in the bank account was initially generated. It was accordingly submitted that the addition of Rs 40,000/- was rightly confirmed by the ld. CIT(A) and the appeal of the assessee be dismissed.
We have heard the rival submissions and pursued the material available on record. The facts which are emerging from records are that the assessee has taken housing loan from ICICI Bank of Rs 45,00,000/-, a 14 Smt. Rama Bajaj, Jaipur Vs. ITO, Jaipur part of the said loan was utilized towards construction of second floor of the house property and related expenses as well as repayment of earlier loan taken from IDBI Bank for construction of ground and first floor. It is also an admitted fact that a part of the property was self-occupied and a part let out in respect of which rental income has been offered to tax. It is also an admitted fact that a part of the housing loan was utilized for advancing to certain parties from whom the assessee has shown interest receipts in her return of income. Therefore, the fact that the loan was taken and utilized for the purposes of construction of house property and for advancing to certain parties and on such borrowing, the assessee has incurred an interest expense of Rs 5,06,678/- during the financial year is clearly emerging from records. Therefore, the interest pertaining to the quantum of loan utilised for construction of house property amounting to Rs 2,31,973/- shall be eligible for deduction against the income shown under the head “Income from house property” and the remaining interest of Rs 2,74,705/- pertaining to the quantum of loan utilised for advancing to certain parties shall be eligible for deduction against the interest income of Rs 2,89,004/- shown under the head “Income from other sources”.
Regarding addition of Rs 40,000/- towards unexplained cash deposit in the bank account, on perusal of cash flow statement, it is noted that the assessee was having cash of Rs 74,886/- in her hands which reasonably explain the source of cash deposit of Rs 40,000/- in her bank account. The addition so made is hereby directed to be deleted.
In the result, appeal of the assessee is allowed.