SHRI. SUNILKUMAR SITARAM AGARWAL,MUMBAI vs. ASST. CIT 17(3), MUMBAI

This is an appeal by the assessee against the order dated 25.04.2019 of learned Commissioner of Income Tax (Appeals)–28, Mumbai for the assessment year 2014-15.

The dispute in the present appeal is confined to disallowance of interest expenditure of Rs.6,00,596/-. 3. Briefly the facts are, the assessee is an individual and derives income from house property, business and other sources. For the assessment year under dispute, the assessee filed his return of income on 18.09.2014 declaring total income of Rs.20,67,220/-. In course of assessment proceedings, the Assessing Officer noticed that against the interest income earned from bank amounting to Rs.3,158/, the assessee has claimed deduction of interest expenditure of Rs.6,00,596/-. Thereby, showing a negative net interest income of Rs.55,97,438/-. After calling upon the assessee to furnish the documentary Assessment Year: 2014-15 evidence to justify the claim of interest expenditure u/s 57(iii) and alleging that the assessee, despite ample opportunity being provided, was unable to produce any documentary evidence to show the nexus between the interest income and expenditure claim, disallowed an amount of Rs.6,00,596/-. Though, the assessee contested the aforesaid disallowance before learned Commissioner (Appeals), however, he was unsuccessful. 4. The learned counsel for the assessee submitted, the loan on which the assessee had paid interest was borrowed in the preceding assessment year. Drawing our attention to reply dated 29.11.2016 filed before the Assessing Officer placed at page no. 3 of the paper book, learned counsel for the assessee submitted that the loan was availed for investing in his proprietary concern as well as towards capital in partnership firm. He submitted, since the loan was utilized for the purpose of business, the interest expenditure has to be allowed as deduction from the income earned under the head business and profession. Without prejudice, the learned counsel submitted, in the return of income filed for the assessment year 2013-14, the assessee has claimed deduction of interest paid on loan availed against the income from house property. Thus, he submitted, the interest expenditure should be allowed either against the business income or against the income from house property. The learned counsel also submitted, if the assessee had claimed the expenditure under a wrong head of income, he could not be prevented from claiming such expenditure against the correct head of income. 5. The learned Departmental representative strongly relying upon the observations of the Assessing Officer and learned Commissioner (Appeals) submitted, the assessee having failed to furnish any evidence to establish the nexus between the interest expenditure and the interest income, the disallowance made is justified. Further, she submitted, the alternative claim of deduction against business income or income from house property having not been made either before the Assessing Officer or before learned Commissioner (Appeals) could not be entertained at this stage. Assessment Year: 2014-15 6. I have considered rival submissions and perused the material on record. It is evident from the computation of total income filed along with return of income for the impugned assessment year, a copy of which is at page 1 of the paper book, the assessee has claimed interest expenditure on the loan availed against the bank interest shown under the head income from other sources. The Assessing Officer has alleged that the in course of assessment proceedings the assessee has not furnished any evidence to show the nexus between income earned and expenditure incurred. The allegation of learned Commissioner (Appeals) while upholding the disallowance is identical. However, before me, learned counsel has submitted that the interest expenditure was wrongly claimed against the interest income and it has to be allowed against either the business income or income from house property. As it appears, the aforesaid alternative claim has been made for the first time before the Tribunal and was never made before the Departmental Authorities. Of course, in reply dated 29.11.2016 stated to have been filed before the Assessing Officer in course of assessment proceedings for the impugned assessment year, the assessee has submitted that the loan availed has been invested in his business concern. Further, it appears from the computation of total income accompanying the return of income filed for the assessment year 2013-14, the assessee has claimed the interest expenditure on the loan availed against the house property income. In my considered opinion, the alternative claim made by assessee for deduction of interest expenditure either against the business income or against the house property income needs to be examined by Assessing Officer having regard to the evidences brought on record by assessee. Accordingly, I set aside the impugned order of learned Commissioner (Appeals) and restore the issue to the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. Grounds are allowed for statistical purposes. In the result, appeal filed by the assessee is allowed for statistical purposes. Assessment Year: 2014-15 Order pronounced in the open court on 22nd February, 2021. (SAKTIJIT DEY) JUDICIAL MEMBER