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Order u/s.254(1)of the Income-tax Act,1961(Act). लेखा सद�य सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार/ PER RAJENDRA, AM- लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the orders,dated 20/01/2015,of the CIT (A)-54,Mumbai,the assessee is filed the present appeal,Assessees,an individuals,filed his return of income on declaring income of Rs. The Assessing Officer(AO)completed the assessment on u/s.143(3)of the Act,determining his income at Rs. .
2.Vide his applications,dated 18/03/2017,the assessee has filed additional grounds of appeal and has requested to admit the same.It has been stated that the additional grounds do not involve verification of facts and are legal in nature.The Authorised Representative(AR) reiterated the same submissions before us.The Departmental Representative(DR) left the issue to the discretion of the Bench.We have gone through the additional grounds and find they do not involve verification of facts and are of legal nature.Therefore,we admit the same.
3.Vide its application dated 09.11.2016 the assessee has stated that there was delay of one day in filing the appeal,that the accountant forgot to send the papers to the office of the CA due to heavy workload of year ending work,that the appeal fee was paid in time.The application is accompanied by the affidavit of the assessee.Before us,the AR reiterated the submission made in the application.We are of the opinion that there was reasonable cause of the delay in filing the appeal.Hence,we condon the delay.
[2554/M/15] Shantiswaroop Reniwal 4.Before proceeding further,we would like to take notice of the certain facts of the case.The original assessment had travelled up to the Tribunal and was remanded back to the file of the AO for fresh adjudication.The order passed by the Assessing Officer (AO) u/s.143 (3) r.w.s.254 of the Act,was challenged before the First Appellate Authority (FAA),who confirmed the order of the AO. 4.Effective ground of appeal is not following the directions of the Tribunal order,dated 28/04/ 2011.The AR fairly conceded that identical issue had arisen in case of the two assessees of the same group,that the Tribunal had restored back that the matter to the file of AO with certain directions.
4.1.We find that in the case of Sanjeev Reniwal (HUF), the Tribunal, on 21/09/2016 (ITA/ 1487/ Mum/2015) had dealt the issue as under: “2.Facts in brief, are that the assessee is a resident HUF and claimed interest expenses of Rs.13,12,705/- against short term capital gains of Rs.27,23,515/-. The interest claim of the assessee was not allowed by the assessing officer and the same was confirmed by CIT(A) against which assessee preferred appeal before ITAT vide ITA Nos. 451&457/Mum/10. The appeal of the assessee was partly allowed vide ITAT order dated 16.03.2011 by issuing following directions:- “7.1 However, we find merit in the submission of learned counsel for the assessee that since the assessee has purchased the shares out of the borrowings made from Shri Shanti Sarup Reniwal, therefore, at least the interest attributable to such script for the number of days which was held by the assessee should be allowed as deduction. From the statement of STCG, we find the assessee has calculated interest of Rs.12,81.220. However, such calculation was not before the assessing officer or the CIT(A). We, therefore, deem it proper to restore the matter to the file of the assessing officer with the direction to verify the interest so calculated by the assessee on the basis of the utilization of the borrowed funds for the number of days from the date of purchase to the date of sale of the shares. Needless to say, the assessing officer shall afford reasonable opportunity of being heard to the assessee by verifying such calculation, copy of which is placed in paper book pages 14 & 15. The ground raised by the assessee on this issue is partly allowed for statistical purpose.” Pursuant to above direction of ITAT, fresh assessment order was passed by the assessing officer vide order dated 05.10.2012. But the deduction of interest expenses was again denied by the assessing officer on the primacy premises that assessee has failed to prove the nexus of utilization of borrowed funds for investment in shares and has failed to comply with the directions of the Hon’ble ITAT, Mumbai in this regard. The AO made the following observations while denying the claim of the assessee with respect to deduction of interest expenses:- “6.7 Now, despite giving ample opportunity, the assessee is clearly denying establishing the nexus of utilization of borrowed funds for investment in shares and thus it is violating directions given by Hon’ble ITAT, Mumbai in this regard
[2554/M/15] Shantiswaroop Reniwal 6.8 It is also a fact that it is the assessee only who possesses the information with them as to which fund was used by him for what purpose and he is denying such information now to the A.O. 6.9 The chart of interest computation submitted by the assessee does not pertain to the “borrowed funds” being used but only any funds being used for investments. This was not the direction given by the Hon’ble ITAT, Mumbai. 6.10 Thus from the above it is clear that the assessee has not fulfilled direction of ITAT, Mumbai and it has not provided any computation of interest w.r.t. “utilization” of “borrowed funds” for investment in shares. 6.11 Thus, on, on the basis of the above facts, no deduction of interest expenses can be given to the assessee against the income from Short-term Capital Gains (STCG) and thus the issue is decided accordingly”
Against the same, assessee preferred appeal before CIT(A) but the same was dismissed vide order dated 14.11.2014. The assessee contended that the issue whether amount borrowed for investment in shares can be allowed as ‘cost of acquisition’ has already been settled in favour of the assessee by the aforesaid order of the ITAT. As no calculation of claim of interest was provided to the A.O. during the assessment proceedings and with a view to verify these calculations, suitable directions were issued by the ITAT and therefore, A.O.’s action in calling upon the appellant to establish the nexus between the borrowings of funds and its utilization for investments was in clear breach of the judicial discipline. It was claimed that the Hon’ble ITAT, based on documents and submissions had accepted the fact about the borrowings of the funds and its utilization in making investment in shares. It was submitted that the A.O. simply had to verify the calculation of interest and not to once again ask the appellant to prove the fact that had already been decided by a higher authority with respect to the utilization of the borrowed funds for the purpose of the investments. CIT(A) observed that there was nothing to indicate that the assessee had demonstrated before the Hon’ble Tribunal the nexus of borrowed funds with scrip- wise investments with the help of cogent materials. Further, the onus was on the assessee to show that the shares were acquired from borrowed fund because the source of acquisition of shares was within the special knowledge of the assessee and assessee was under obligation to prove the same with the help of the bank statements, contact notes, brokers account etc. The assessee has failed to produce evidence to substantiate its claim and therefore, the appeal of the assessee was dismissed. Aggrieved by the stand of the revenue, the assessee is again in appeal before us.
The learned authorized representative [AR] of the assessee has raised various contentions in its support and filed various documents including statement of short term capital gains, bank statement as per assessee’s books of accounts and correspondences made with the lower authorities to substantiate his claim. The AR contended that the claim of the assessee in principle with respect to interest on borrowed capital has already been settled in favour of the assessee by the early directions of the ITAT and lower authorities are only required to verify the calculations with respect to number of days for which borrowed capital has been used for the purpose of making investments from which short term capital gains have been earned by the assessee. The learned DR, on the other hand has relied upon the stand of the lower authorities and contended that assessee needs to substantiate its claim with respect to interest on borrowed capital as well as computation thereof.
We have heard the rival contentions and perused the material on record. The main dispute in matter is that whether the claim of the assessee in principal with respect to interest on borrowed capital has been settled by the earlier directions of the ITAT or not. For this, it would 3
[2554/M/15] Shantiswaroop Reniwal be prudent to reproduce the relevant operative part of the earlier directions of the ITAT which is as follows:- “7.1 However, we find merit in the submission of learned counsel for the assessee that since the assessee has purchased the shares out of the borrowings made from Shri Shanti Sarup Reniwal, therefore, at least the interest attributable to such script for the number of days which was held by the assessee should be allowed as deduction. From the statement of STCG, we find the assessee has calculated interest of Rs.12,81.220. However, such calculation was not before the assessing officer or the CIT(A). We, therefore, deem it proper to restore the matter to the file of the assessing officer with the direction to verify the interest so calculated by the assessee on the basis of the utilization of the borrowed funds for the number of days from the date of purchase to the date of sale of the shares……” (emphasis supplied by us) Hence, the earlier bench of the tribunal finds merit in claim of assessee with respect to deduction of interest on borrowed funds and as a stand has been taken by fellow bench and with a view to observe Judicial discipline, we need not delve into the issue again on merits and also held the same. Therefore, the only thing to be verified is the factum of utilization of borrowed funds from the aforesaid lender and computation of interest for the period during which these funds have remain utilized. The learned counsel for the assessee produced before us statement of short term capital gain and bank ledger and with the help of sample entries, demonstrated before us a correlation between borrowed funds and investments made in shares. Therefore, for the very limited purpose of verification of nexus and computation, the matter is again restored back to the file of the AO to verify the claim of the assessee on above lines.” 5.As the facts of the case under consideration are similar to the facts of the HUF, therefore respectfully following the above order of the Tribunal,we direct the AO to follow the directions of the Tribunal mentioned at paragraph number 5 of the said order.Effective ground of appeal (GOA-1to4) is decided in favour of the assessee, in part.
6.In the additional grounds the assessee has challenged the disallowance made by the AO under section 14A of the Act.Before us,the AR argued that the assessee himself had made disallowance under the head interest expenditure,that he had sufficient own fund to make investments,that one to one nexus of interest payment and investment made was established before the AO after the matter was restored back to him,that strategic investment made by the assessee was ignored by the AO, while computing disallowance.The DR supported the order of the FAA.
7.We have heard the rival submissions and perused the material before us.The AY. under appeal is the year when provisions of Rule 8D of the Income tax Rules,1962(Rules)were not applicable. So,if any disallowance is to be made it will have to made on some other basis.The issue needs further verification,as the assessee has raised many an arguments in his additional grounds. Considering the fact the issue is interlinked with the first effective ground of appeal,we are of the 4
[2554/M/15] Shantiswaroop Reniwal opinion,that in the interest of justice matter should be restored back to the file of the AO for fresh adjudication.The AO is directed to afford a reasonable opportunity of hearing to the assessee. Additional grounds of appeal(Effective GOA-2) are allowed in favour of the assessee,in part.