ANIL K SHAH,MUMBAI vs. ITO 29(1)(1), MUMBAI

The only issue to be decided in this appeal of the assessee is, whether or not the learned CIT(A),in the facts and circumstances of the case, was justified in upholding the action of the Assessing Officer

We have considered rival submissions and perused the material available on record. We find that the assessee is a proprietor of M/s. K.J. Steels, engaged in the business of trading and during the year under consideration, the assessee had derived income from other sources. The return of income for the assessment year 2013–14 was filed by the assessee on 27th March 2014, declaring total income of ` 3,00,140. We find that in the said return of income, the assessee had claimed deduction under section 57(iii) of the Income Tax Act, 1961 (for short "the Act") in respect of interest paid in the sum of ` 6,11,994. The Assessing Officer directed the assessee to substantiate the nexus between the interest received on fixed deposit by the assessee and the interest paid on borrowed fund as above along with documentary evidences. The assessee, vide letter dated 3rd March 2016, gave a response before the Assessing Officer. On a perusal of the details furnished by the assessee, the Assessing Officer observed that the assessee had paid interest to various parties against loan taken by him to the tune of ` 5,46,617, and interest paid on overdraft amounting to ` 65,337, thereby totaling to `6,11,994, towards interest paid. We find that the Assessing Officer had observed that the assessee had not clearly demonstrated the nexus between the interest

We find that the learned Authorised Representative had pleaded that the assessee had earned interest income on fixed deposit to the tune of ` 9,49,659. This fact is also evident from the computation of total income enclosed in Page–25 of the paper book filed by the assessee. The learned Authorised Representative also pleaded that the loans borrowed by the assessee were utilized for making investment in fixed deposit which in turn had fetched interest income to the assessee. Accordingly, he argued that the nexus between the interest paid and interest received stand established. The learned Authorised Representative, however, fairly conceded that let this aspect to be factually verified by the Assessing Officer afresh. When this was put before the learned Departmental Representative, he vehemently relied upon the orders of the authorities below. Considering the totality of the facts and circumstances of the case, we deem it fit and proper in the interest of justice and fair play to remand this issue to the file of the Assessing Officer for denovo adjudication in accordance with law.

In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 13.12.2019