KHURANA GASES P. LTD,MUMBAI vs. ASST CEN CIR 3(2), MUMBAI

The present appeal filed by the assessee is directed against the order passed by the CIT(A)-51, Mumbai, dated 30.08.2016, which in turn arises from the order passed by the A.O under Sec. 143(3)(ii) of the Income- tax Act, 1961, dated 30.03.2015 for A.Y 2012-13. The assessee has assailed the order of the CIT(A) on the following short grounds of appeal: “

Briefly stated, the assessee company which during the year under consideration was not having any business activity, but deriving its income from house property and other sources, had filed its return of income for A.Y

During the course of the assessment proceedings, it was observed by the A.O that the assessee had shown rental income of Rs. 85,50,000/- from a property at Raheja Centre, Free Press Journal Marg, 214, Nariman Point, Mumbai. Further, it was noticed by the A.O that the assessee had claimed a deduction of interest expenditure under Sec. 24(b) of Rs. 11,51,488/- in respect of the aforesaid property. In order to verify the veracity of the said claim the assessee was called upon by the A.O to furnish documentary evidence establishing that loan funds in respect of which the interest expenditure was claimed as deduction were utilised for the purpose of purchase of the aforesaid property. However, as the assessee failed to file any reply, thus the A.O disallowed the interest expenditure and after allowing the deduction under Sec. 24(a) of Rs. 25,65,000/- reworked the Net annual value of the aforesaid property at Rs. 59,85,000/-.

Aggrieved, the assessee assailed the aforesaid disallowance of interest expenditure claimed by him under Sec. 24(b) before the CIT(A). During the course of the appellate proceedings the assessee submitted before the CIT(A) that as the interest expenditure was allowed by the revenue in the earlier years, hence the same was not liable to be disallowed during the year under consideration. However, the CIT(A) observed that as the assessee despite repeated opportunities had failed to substantiate its claim of interest expenditure and establish that the loan funds were utilized in relation to the subject property, upheld the disallowance.

The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that the assessee has filed an application under Rule 29 of the Appellate Tribunal Rules, 1963 seeking liberty for placing on record certain documents by way of additional evidence. The ld. A.R submitted that as the said documents which clearly

We have heard the authorised representatives of both the parties in context of the issue pertaining to admission of additional evidence filed by the assessee. We find from a perusal of the orders of the lower authorities that the assessee despite sufficient opportunity had failed to substantiate its claim of deduction under Sec. 24(b) before them. However, finding force in the contention of the ld. A.R that as its claim of deduction of the interest expenditure pertaining to the loan funds raised for the subject property in the preceding years was accepted by the revenue in the those years, thus there was sufficient reason for the assessee to believe that there was no requirement of again establishing the nexus between the loan funds and the subject property during the year under consideration. We thus, in terms of our aforesaid observations admit the additional evidence filed by the assessee.

We have perused the additional evidence and find that it is the claim of the assessee that it had purchased the property under consideration viz. Raheja Centre, Free Press Journal Marg, 214, Nariman Point, Mumbai, vide a ‘Deed of transfer’ on 22.12.2009 for a consideration of Rs. 9,32,06,000/-. The assessee explaining the source of the aforesaid purchase consideration, had at Page 1 of his application for admission of additional evidence filed a ‘Chart’ explaining the source of the aforesaid funds. It is claimed by the assessee that in addition to its own funds, it had raised interest bearing loans from three parties viz. (i). Sh. Pushkar Khurana: Rs. 85,00,000/- (on 02.12.2009); (ii). EKC Ltd. : Rs. 3,00,00,000/- (on 22.12.2009) ; and Sh. P.K Khurana : Rs. 5,00,00,000/-[(on 22.12.2009) & Rs. 1,98,00,000/- (on 23.12.2009)]. The assessee had in his chart further made a mention as regards the utilisation of the aforesaid amounts for acquisition of the subject property. We further find that at Page 10-37 of the ‘Paper book’ of the assessee (for short ‘APB’) a copy of the ‘Deed of Transfer’ pertaining to the subject property has been filed. We find from a perusal of the deed of transfer that the subject property was transferred to the assessee for a consideration of Rs. 9,32,06,000/- on 22.12.2009.

We are of the considered view that as the assessee had failed to substantiate his claim of expenditure in respect of its claim of deduction under Sec. 24(b), and the documents filed before us by way of additional evidence were not there before the A.O, thus in all fairness restore the matter to the file of the A.O for fresh adjudication of the said claim of the assessee. The assessee shall during the course of the set aside proceedings substantiate on the basis of documentary evidence that an amount of Rs. 11,51,488/- as claimed in its return of income was incurred/payable towards interest expenditure during the year under consideration in respect of the loan funds which were utilised for the subject property. Further, the A.O shall during the course of the set aside proceedings verify that no part of the brought forward balances of the respective loans on 01.04.2011, which as claimed by the assessee were raised from the aforesaid lenders in the F.Y 2009-10 viz. (i). Sh. Pushkar Khurana: Rs. 85,00,000/- (on

The appeal of the assessee is allowed for statistical purposes.