SHRI DINESH MANGAL,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, JAIPUR

In ITA No. 519/JP2018 for A.Y. 2010-11, the sole ground of appeal relates to disallowance of Rs. 63,037/- out of interest expense claimed by the assessee. Briefly the facts of the case are that the assessee has shown rental income from his house property situated at 4/238 SFS Mansarovar, Jaipur and against the said rental income, he has claimed interest expenditure of Rs. 1,59,137/-. During the course of assessment proceedings, the AO issued a show cause notice and after considering the submissions of the assessee, the AO has disallowed interest expenditure of Rs 63,067 and his findings are as under:-

Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the said disallowance stating that the AO has given sufficient factual basis to make the disallowance and the assessee submissions nowhere factually rebuts the AO’s finding. Against the said findings, the assessee is now in appeal before us.

During the course of hearing, the ld. AR submitted that out of the loan of Rs. 17.60 obtained from LIC, a part of the loan is utilized for giving deposit to M/s Imaging Super Consultants Pvt. Ltd. as a pre- condition of appointment of assessee as a consultant and head Radiation Oncology and from this company, the assessee is getting professional receipts of Rs. 11,11,656/- which has been duly offered to tax . Hence, the interest which has been disallowed by the AO is eligible against the said professional receipts for computing the income under the head income from profession. It was further submitted that the said contention was raised before the Assessing Officer vide assessee’s reply dated 14.10.2013 which was not considered by the Assessing Officer and subsequently by the ld. CIT(A) which reads as under:

The ld. DR is heard who has relied on the finding of the lower authorities.

We have heard the rival contentions and perused the material available on record. It is not in dispute that the assessee has incurred the interest expenditure on loan taken from the LIC and a part of such interest expenditure has been disallowed by the AO while computing the income under the head “Income from House property”. At the same time, the assessee has made an alternate contention before the Assessing officer that such interest expenditure where disallowed under the head “Income from House property” may be allowed as deduction under the head “Income from profession” wherein the assessee has disclosed and offered to tax his professional receipts. We find that the alternate contention so raised by the assessee has not been addressed by the AO and even by the ld CIT(A). Therefore, in such circumstances, we are constrained to remand the matter back to the file of the Assessing officer which shall examine the same as per law after providing reasonable opportunity to the assessee.

Now, coming to ITA No. 520/JP/2018 for AY 2011-12. Ground No. 1 is similar to sole ground of appeal in ITA No. 519/JP2018, therefore, our findings and directions contained in ITA No. 519/JP/2018 shall apply equally in this regard. Ground no. 1 of assessee’s appeal is thus allowed for statistical purposes.

Ground no. 2 of assessee’s appeal relates to confirmation of addition of Rs. 1,97,600/- on account of undisclosed investment in jewellery on the basis of documents seized during the course of search.

Briefly the facts of the case are that a search and seizure operation U/s 132(1) of the Act was carried out on 08.06.2011 at the different premises of Dr. Anish Maru Group and the residential premises of the assessee was also covered under the search as he was associated with the said group. During the course of search, certain documents were seized as per Annexure AS of panchnama dated 08.06.2011 page No. 1 of Exhibit 1 and page no. 1 of Exhibit 2 which were containing entries related to certain purchase of jewellery items in the month of November 2010 to May 2011 and details thereof are reproduced at para 13 of the AO’s order. During the course of assessment proceedings, the assessee was asked to explain these entries and to explain why the same may not be treated as entries relating to purchase of jewellery by the assessee. In response, the assessee submitted that nothings on these pages were made by the wife of the assessee on the basis of enquiry made by her and since no

On appeal, the ld. CIT(A) has confirmed the said addition holding that no factual basis is offered by the assessee in his submission rebutting the findings of the Assessing Officer. Now the assessee is in appeal before us

The ld AR submitted that it was not disputed that nothings at page 1 of these two exhibits are in the handwriting of Smt. Beena Mangal, wife of assessee. Neither the assessee not his wife was questioned about notings on these pages at the time of search. For the first time the enquiry in respect of these papers were made by the AO in course of assessment proceedings. In reply dated 26.09.2013, the assessee while giving the page wise details of various annexure, with reference to these papers has explained that these notings are in respect of the enquiries made by her and that no such jewellery is purchase. Thereafter vide letter dated 14.10.2013 it was explained that notings on page 1 of exhibit 1 is in respect of the enquiry made by father in law of the assessee’s wife and notings on page of exhibit 2 is in respect of enquiry made by assessee’s wife. It was further stated that no such jewellery was purchased nor these items were found in the inventory of jewellery prepared at the time of search. The affidavit of assessee’s wife Smt. Beena Mangal was filed. In this affidavit she has explained the details of the enquiry made by her which resulted into these notings. This affidavit is not controverted. Therefore, without any corroborative material to establish that the notings of jewellery on these papers is actually purchased by the assessee, the addition made by the AO is only on surmises and conjectures.

It was further submitted that the AO has not referred to the reply of the assessee dated 14-10-2013 and the affidavit of Smt. Beena Mangal in the assessment order. From the affidavit and the notings on the paper it can be seen that the paper do not contain the name of any party from whom the jewellery is purchase nor there is any noting of the payment. Further on other pages of this annexure the details of the house hold actually incurred are noted but these notings are made on the last page of the diary which itself shows that the same do not represent the actual purchase of the jewellery. This is also correlated from the fact that the items of jewellery noted on these pages were not found in search. The reply of the assessee dated 14-10-2013 reads as under:

The ld. DR is heard who has relied on the findings of the lower authorities.

We have heard the rival contentions and perused the material available on record. It is the contention of the ld AR that the AO while framing the assessment has not referred the reply of the assessee dated 14-10-2013 and the affidavit of Smt. Beena Mangal. Since we have set-aside the other issue, this issue is also set-aside to the file of the AO to examine the same a fresh after taking into consideration the assessee’s submission and affidavit. In the result, the ground of appeal is allowed for statistical purposes.

Now, coming to ITA No. 520/JP/2018 for AY 2011-12. Ground No. 1 is similar to sole ground of appeal in ITA No. 519/JP2018, therefore, our findings and directions contained in ITA No. 519/JP/2018 shall apply equally in this regard. Ground no. 1 of assessee’s appeal is thus allowed for statistical purposes.

In ITA No. 521/JP2018 for AY 2012-13, ground no. 1 is similar to sole ground of appeal in ITA No. 519/JP2018, and ground no. 2 is similar to ground no. 2 in ITA No. 520/JP/2018. Therefore, our findings and directions contained in ITA No. 519 & 520/JP/18 shall apply equally in this regard. In the result, both the grounds of appeal are allowed for statistical purposes. In the result, all three appeals are allowed for statistical purposes. Order pronounced in the open Court on 20/12/2018.