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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.1322/Hyd/2017 Assessment Year: 2007-08 Malka Komaraiah Vs. ITO, (HUF), Ward-10(1), Secunderabad. Hyderabad. PAN: AAEHM 1011 K (Appellant) (Respondent) Assessee by: Shri S. Rama Rao Revenue by: Shri K. Gopala Krishna, DR Date of hearing: 18.09.2018 Date of pronouncement: 03.10.2018 ORDER PER Smt. P. Madhavi Devi, J.M.:
This is assessee’s appeal for the Assessment Year 2007-08 filed against the order of CIT(A)-12, Hyderabad dated 15.05.2017. Assessee raised the following grounds of appeal:- “1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. the Ld. CIT(A) erred in confirming the action of the A.O. in not allowing the payments towards Municipal Taxes. 3. The Ld. CIT(A) erred in confirming the action of the A.O. in not allowing interest on the loans borrowed. 4. The Ld. CIT(A) erred in confirming the determination of the income from property by the A.O. at Rs. 7,33,786/-. 5. The Ld. CIT(A) erred in confirming the charging of interest u/s 234B of the I.T. Act, 1961.”
Brief facts of the case are that the assessee-HUF filed its return of income for the A.Y. 2007-08 on 27/07/2007 declaring total income of Rs. NIL. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer computed the total income at Rs. 1,12,63,815/- and thereby raised a demand of Rs. 49,37,887/-. Thereafter, on appeal to the CIT(A), the assessed income was reduced to Rs. 7,33,786/- and on further appeal to ITAT, the Tribunal had remitted the issue back to the file of the Assessing Officer for fresh consideration. In compliance with the directions of ITAT, A.O. initiated assessment proceedings by issuing a notice u/s 143(2) of the Act and required the assessee to produce the requisite information. The assessee did not adduce any evidence and therefore on the basis of evidence already available on record, the A.O. completed the assessment. He observed that in the assessment proceedings, there was a disallowance of interest amount claimed u/s 24(b) of the Act. The assessee had explained that it had purchased two shops in the commercial complex known as “Bhuvana Towers” comprising of UG-1 and UG-2 from Shalivahana Associates during the previous year for Rs. 45,86,385/- and thereafter additions / alterations were made in these floors by Shalivahana Associates by investing Rs. 63,15,316/- and therefore, the total amount payable by the assessee to Shalivahana Associates was Rs. 1,09,01,700/- and this liability was shown in the books of assessee-HUF. Further, during the Financial Year 2004-05, the assessee obtained a loan of Rs. 1,80,00,000/- from Syrian Catholic Bank, which was later taken over by SBI and this loan was utilised for payment of outstanding liability of Shalivahana Associates. It was submitted that on the instructions of Shalivahana Associates to discharge their liability to some concerns, the assessee had issued the cheques to some concerns and therefore, there was nexus between the amount invested in the flats which was outstanding and the loan utilised by the assessee and requested that the interest
payable to bank on the loan may be allowed u/s 24(b) of the Act. The A.O, however, observed that in the registered sale deed, while purchasing the property, it was clearly mentioned that the assessee had made the payment of sale consideration and that the assessee has availed the loan after purchase of the property and therefore he came to the conclusion that it is not a loan taken for purchase of property and interest paid on such loan is not allowable as a deduction u/s 24(b) of the Act. He further observed that while computing the income from house property, the claim of Municipal taxes is not allowable for deduction, but since while computing the income, the A.O. allowed the same u/s 24(a) of the Act. 3. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O. and the assessee is in second appeal before us. 4. At the time of hearing, Learned Counsel for the Assessee submitted that the Ground No.2 does not arise out of the assessment order and has been raised inadvertently and therefore he is not pressing the same. Accordingly, Ground no.2 is rejected as not pressed. 5. As regards Ground no.3, we find that the Tribunal had remanded the issue to the file of the Assessing Officer to examine the nexus between the loan availed by the assessee and the purchase of the property. The assessee had not produced any evidence before the A.O. and therefore the A.O. was constrained to complete the assessment on the basis of the material available before him. The Learned Counsel for the Assessee, has drawn our attention to pages 72 to 75 of the paper book, which are the ledger accounts of the assessee in the books of Shalivahana Associates for the relevant assessment year. It is seen there from that the payments made by the assessee from 15.07.2004 to 22.03.2005 are recorded as payments received from the assessee
towards sale consideration of UG-1 and UG-2 and paid directly to the respective parties as per their instructions. Ld AR has also drawn our attention to page 76 of the paper book which is a confirmation letter of Shalivahana Estates whereby they confirmed that a sum of Rs. 25 lakhs was paid by the assessee during the Financial Year 2004-05 on behalf of Shalivahana Estates to various other parties. PAN of the said parties is also mentioned in the letter. We find that a similar confirmation letter from Yeshaswi Infrastructures Limited, formerly named as Shalivahana Associates, which is placed at page 70 of the paper book, is also filed before us confirming that the assessee has made payments directly on behalf of Shalivahana Associates and Yashaswi Infrastructures Limited. 6. We find that neither the A.O. nor the CIT(A) have verified the veracity or authenticity of the confirmation letters filed by Shalivahana Associates. As argued by the Learned Counsel for the Assessee, though it is mentioned in the agreement that the sale consideration has been paid, in the books of Shalivahana Associates it is recorded as unpaid and due. Therefore, the A.O. ought to have examined Shalivahana Associates to verify the submissions of the assessee instead of confirming the disallowance made in the earlier proceedings. Since the assessee has failed to produce any evidence or any parties before the A.O and the CIT(A) in the remand proceedings, subsequent to remand of the issue to the A.O., we are of the opinion that the assessee also is to be blamed for the disallowances / additions made by the A.O. We therefore set-aside the issue to the file of the A.O, for examining the books of account of Shalivahana Associates and if it is found to be recorded that the payment is recorded as received only after the availing of the loan, then it shall be accepted that the loan is for the purpose of acquisition of flats and thereafter, the A.O. shall decide the allowability of deduction u/s 24(b) of the Act. Assessee is directed to furnish the
relevant material and cooperate with the Assessing Officer in completion of the remand proceedings expeditiously. We order accordingly. 7. As regards Ground No.4 also, since the assessment itself has been set-aside, we direct the A.O. to consider the assessee’s claim under this ground also afresh. 8. Ground no.1 is a general ground and Ground no.5 is consequential in nature. Therefore these grounds are rejected as such. 9. In the result, assessee’s appeal is treated as partly allowed for statistical purposes.
Pronounced in the open Court on 03rd October, 2018.
Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated:03rd October, 2018 OKK Copy to:- 1) Malka Komaraiah, 94, Minerva Complex, S.D. Road, Secunderabad – 500 003. 2) Income Tax Officer, Ward-10(1), I.T. Towers, A.C. Guards, Hyderabad. 3) The CIT(A)-12, Hyderabad 4) The Pr. CIT-2, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File