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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 02.02.2016 passed by the Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.
2. The assessee has raised the following grounds: - “1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in sustaining the addition of Rs.1,78,06,159/- made y the AO on account of undisclosed interest income.
ITA. No.1532/M/2016 A.Y. 2011-12
The appellant craves a leave to add, to alter and/or to amend any of the grounds of appeal on or before the date of hearing of appeal.” The brief facts of the case are that the assessee was a 3. partnership firm engaged in the business project management services. The assessee filed its return of income declaring total income to the tune of Rs.14,40,837/- including interest income to the tune of Rs.15,27,927/- for the A.Y. 2011-12. The Assessing Officer noticed that the assessee has shown the investment in FDR of Rs.10 crores with CKP Co-operative Bank Ltd. against which in the immediate preceding year i.e. AY 2010-11, interest of Rs.1,10,38,680/- was disclosed as income on which finance charges of Rs.1,08,21,294/- was debited being interest paid on loan taken for the business. The Assessing Officer was of the view that the said interest was the income from other sources and no such business expenditure on account of interest paid in connection with the business is allowable. The assessee has tried to suppress the income on this account since no business was carried out since assessment year 2009-10. The assessee’s audit report also speaks that the interest income was not disclosed. As per P&L Account during the year the assessee has disclosed to the interest to the tune of Rs.15,27,927/- on account of other income earned on private loans given to the various parties. During the A.Y. 2009-10 the said income was also treated as income from other sources claimed as business income which was not accepted in the A.Y. 2009-10 and the assessee’s appeals was pending
ITA. No.1532/M/2016 A.Y. 2011-12 before the CIT(A). The interest income on FDRs of Rs.10 crores to the tune of Rs.1,78,06,159/- was treated as income from other sources. The assessee filed an appeal before the CIT(A) who confirmed the order of the AO, therefore, the assessee has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. All the issues related to the confirmation of addition of Rs.1,78,06,159/-. The appellant placed the term deposit with CKP-Cooperative bank. At the end of financial year 2009-10, the term balance was of Rs.10 crores and equivalent balance was in the loan account. The assessee requested the bank to adjust the balance in term deposit against the loan amount which was obtained on security of the said deposit. The contention of the assessee is that the bank neither charged interest on loan nor paid any interest on term deposit, therefore, the amount of the interests nowhere accrued in favour of the assessee. It is also contended by the Ld. Representative of the assessee that the interest income to the tune of Rs.1,78,06,159/- was added on notional basis whereas the contention of the Ld. Representative of the Department is that the Bank certificate speaks about the interest income to the tune of Rs.1,78,06,159/-, therefore, the same was rightly added to the income of the assessee. The factual position is not in dispute. The assessee deposited the security with the CKP- Co-operative Bank and ITA. No.1532/M/2016 A.Y. 2011-12 against the said security deposits, the appellant availed the loan from the same bank. The amount to the tune of Rs.10 crores was lying in the F.Y. 2009-10 in Term Deposits with the CKP Bank Co-operative Bank Ltd. on 02.04.2010 and on the request of the assessee, the loan amount was adjusted against the said term deposits and nothing was received at that time. The Ld. Representative of the assessee has argued that his case is fully covered in view of the law settled in the case of Godhra Electricity Co. Ltd. Vs. CIT (1997) 225 ITR 746 (SC) and CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC). The copy of letter of the bank concerned dated 05.03.2014 is on record which lies at page no. 14 of the paper book in which on 01.04.2010, the term deposit has been shown to the tune of Rs.11,78,06,159/-including accrued interest to the tune of Rs.1,78,06,159/- on 31.03.2011. The loan on dated 01.04.2010 was to the tune of Rs.11,78,06,159/- which also exists on 31.03.2011. The term deposit was adjusted against the loan account without paying interest to the assessee. The assessee also showed the adjustment in the closing balance which lies at page no. 31 of the paper book. This is the factual position and the controversy is required to be adjudicated in view of the law relied by the Ld. Representative of the assessee mentioned above i.e Godhra Electricity Co. Ltd. Vs. CIT (1997) 225 ITR 746 (SC) and CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC). Therefore, in the said circumstances, we are of the view that the document issued by the bank and the closing balance of ITA. No.1532/M/2016 A.Y. 2011-12 the assessee is further liable to be considered in the light of the law relied by the assessee (supra) in the interest of justice. Therefore, we set aside the finding of the CIT(A) on these issues and restore the matter before the AO to decide the issues in the light of the law relied by the Ld. Representative of the assessee in accordance with law by giving an opportunity of being heard to the assessee.