SMT. ANEESHA BAID,JAIPUR vs. ITO, WARD-6(1), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1313/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2016-17 cuke Smt. Aneesha Baid, ITO, B-114A, Dayanand Marg, Tilak Nagar, Vs. Ward-6(1), Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAXPM 4028 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rohan Sogani ( C.A.) jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (JCIT)a lquokbZ dh rkjh[k@ Date of Hearing : 17/08/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 19/10/2022 vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of the Ld. CIT(A), Ajmer dated 26.09.2019 for the Assessment year 2016-17 raising therein following grounds of appeal

“1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in, confirming the action of the ld. AO of making disallowing of interest u/s 57 of Rs. 15,64,133/- being 15% of investments of Rs. 1,04,27,554/-. The action of the ld. CIT(A) is illegal, unjustified and arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 15,64,133/- . 2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in, confirming the action of the ld. AO of making disallowing of commission paid u/s 57 of Rs. 4,44,588/-. The action of the ld. CIT(A) is illegal, unjustified and 2 ANEESHA BAID VS ITO, WARD 6(1), JAIPUR

arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 4,44,588/-.

2.1 Apropos Ground No. 1 and 2 of the assessee, brief facts of the case are that the assess had filed her return of income for the assessment year 2016-17 on 4-11-2016

declaring total income of Rs.14,29,180/- which was processed u/s 143(1)(a) of the Income Tax Act. The case of the assessee was selected for limited scrutiny to examine

the sole issue whether the deduction against income from other sources has been correctly shown in the return of income. The AO accordingly issued notice u/s 143(2) of the Act on 17-07-2017 which was duly served upon the assessee. The AO further issued

notice u/s 142(1) of the Act alongwith questionnaire on 4-07-2018, 12-10-2018 and 01-

12-2018 electronically through e-proceedings for which the assessee submitted online

replies from time to time. The AO noted that during the year under consideration, the assessee has shown income from other sources at Rs.2,00,576/- giving bifurcation of the same as under:-.

- Interest on Bank Savings 11,221 - Interest on FDR 25 - Interest on IT Refund 30,049 - Interest from Other Parties 79,92,803 80,34,098/- Less:- - Interest paid 72,21,918/- - 1,13,365 Conveyance - Bank Charges 3,022/- - Commission Paid 4,44,588 - Legal Fees 35,000 - Telephone Expenses 12,607 - Bank Charges 3022 (78,33,522)

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Total income from other sources 2,00,576/- Thus the AO found that the assessee has claimed a deduction u/s 57 of the Act at Rs.72,21,918/- on account of interest paid to various parties during the year and commission expenses of Rs.4,44,588/- alongwith various other expenses against interest

income of Rs.79,92,803/- received from other parties and thus declared net income from other sources at Rs.2,00,576/-. Before the AO, the assessee had furnished balance sheet/

statement of affairs as on 31-03-2016 from where the AO noticed that the assessee had made investment in jewellery, plots, residential house, building totalling to Rs.1,04,27,554/-. The AO thus observed that the assessee has failed to prove that entire

interest bearing funds had been invested exclusively for earning the interest income

declared under the head ‘’Income from other sources’’ and have not been invested in shares/house/plot/agriculture land/non-interest bearing advances/proprietorship concern.

The AO thus noted that the assessee is claiming deduction 57 of the Act from the income

declared under the head ‘’Income from other sources’’, the onus is on the assessee to prove that entire expenditure claimed has been incurred wholly and exclusively for earning the income declared under this head but the assessee has failed to discharge his

onus fully. The assesee submitted the breakup of the interest paid for which assessee paid

interest @ 15% to loan creditors. However, the AO disallowed the interest amounting to Rs.15,64,133/- taking into consideration the interest rate of 15% on the investment of Rs.1,04,27,544/-.

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2.2 Further, the AO had disallowed the claim of commission expenditure of Rs.4,44,588/- for want of documentary evidences. It is noted from the record that the assessee had submitted the breakup of the commission paid alongwith confirmation from the few parties. The AO thus observed that the assessee could not even furnish the list of the borrowers arranged by the agents. The assessee did not produce the confirmation

from all the parties in spite of enough opportunities by the AO. Hence, the AO

disallowed the claim of commission expenditure of Rs.4,44,588/- and added the same to the income of the assessee. Conclusively, the AO made the disallowance of interest

expenses of Rs.15,64,133/- and commission expenses of Rs.4,44,588/- respectively

2.3 In first appeal, the ld. CIT(A) has confirmed the action of the AO giving his

finding at para 4.3 of his order as under:-

“4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that either during the course of assessment proceedings or appellate proceedings, the appellant has not been able to furnish any Fund Flow Statement to show that entire interest expenses of Rs. 72,21,918/-, commission expenses of Rs. 4,44,588/- and bank charges of Rs. 3,022/- were incurred wholly and exclusively for earning the interest income of Rs. 79,92,803/-. There is no dispute about the fact that the appellant had made investment of Rs. 1,04,27,554/- in jewellery, plot, residential house and buildings etc. Therefore, I am of considered view that the AO has rightly disallowed the interest of Rs. 15,64,133/- computed @ per annum on the non interest earning investment of Rs.1,04,27,554/-, bank charges of Rs. 3,022/- and the commission expenses of Rs. 4,44,588/-. Accordingly, the disallowance of interest of Rs. 15,64,133/-, commission expenses of Rs. 4,44,588/- and bank charges of Rs. 3022/- made by the AO are hereby confirmed.’’

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2.4 Aggrieved by the order of the ld. CIT(A), the assessee has filed an appeal before

us praying that the ld. CIT(A) has erred in confirming the action of the AO as to disallowance of interest of Rs.15,64,133/- u/s 57 of the Act and disallowance of commission paid of Rs.4,44,588/- u/s 57 of the Act which should be allowed. To this effect, the ld. AR of the assessee has filed the following written submission.

“4.1 Snapshot of the Balance Sheet position of the assessee, as on 31.03.2015 and 31.03.2016 is as under:- (Figs. In Lacs) FY 2014-15 FY 2015-16 Particulars (A) (B) Own Funds (Including Accumulated Profits) 116 120 Unsecured Loans 282 535 Total 398 656 Fixed Assets 30 72 Investments 26 32 Loans & Advances (Asset) 326 535 Net Current Assets 16 17 Total 398 656

4.2 Balance Sheet of the assessee for FY 2015-16, forming part of the Paper Book at Pages 6-7, was submitted by the assessee to the lower authorities. Balance Sheet position of the assessee for FY 2014-15 is discernible from the Return of Income filed by the assessee for such year. 4.3 It is pertinent to note that, at the start of relevant previous year, assessee had own funds in the form of capital of Rs. 1.16 crores, assessee had taken loan of Rs.2.82 crores, however, the loan and advances provided were Rs.3.26 crores. Thus, it is clear that whatever loan obtained by the assessee was utilized for the purpose of extending loan to different parties at higher rate. Apart from this, the assessee had also utilized her own capital.

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4.4 In the preceding year, i.e. AY 2015-16 the assessee had taken loan and had extended the same to different parties. Interest Income was earned with corresponding Interest expenses incurred. Such interest expenses were claimed under section 57(iii). Such claim of the assessee was found to be correct, resultantly, no disallowance was made while passing order under section 143(3) for AY 2015-16. (PB : 1) 4.5 Thus, it is undisputed that in the preceding year the department had accepted the facts that assessee utilized the loan taken for the purpose of extending loans to different parties. 4.6 As at the end of the relevant previous year, the assessee had outstanding loan amount taken of Rs.5.35 crores which was almost equal to the amount of loan extended by the assessee. Further, the own funds of the assessee, being Rs.1.2 crores were greater than the investments made by the assessee in different assets. 4.7 Attention is drawn towards the decision of Hon’ble Supreme Court, rendered in the context of allowability of interest under Section 36(1)(iii) in the case of Reliance Industries Ltd [2019] 102 taxmann.com 52 (SC). In the said decision it has been held by the Hon’ble Supreme Court that when own funds are greater than the investments made in the assets, then it shall be presumed that the assessee had utilized its own funds for making investments in such assets.

4.8 Thus, in the present case, whatever loan was taken by the assessee was utilized for the purpose of extending loan to different parties. Accordingly, the interest expenses incurred on the loan taken was directly utilized for the purpose of earning interest income. Accordingly, as per section 57(iii), the interest expenses should be fully allowed against the interest income earned by the assessee. Further, the commission expenses for arranging the loan are also to be allowed as such commission expense has been expended wholly and exclusively for the purpose of making or earning interest income by the assessee.

In view of the above, the disallowance made by the ld. AO and upheld by ld. CIT(A) deserves to be deleted.”

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2.5 Further, the assessee has filed an Additional evidence on 31-08-2021 under Rule

29 of ITAT Rules, 1963 praying therein to admit the same, concerning the issue in question which is reproduced as under:

‘’S.No. 1. Copy of the balance sheet of the assessee as on 31-03-2015 (AE- PB:1) :

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The balance sheet as on 31-03-2015 is relevant for submitting the factual position that Mutual Funds, Flat and other assets were acquired by the assessee out of her own funds.

Although the factual position, as emerging out of the aforementioned balance sheet was submitted before the lower authorities at the time of proceeding before them. However, as a matter of abundant precaution, the present prayer is being made before the Hon’ble Bench for accepting the same as additional evidence.

The above evidence is very vital and crucial to the issue under appeal. The evidence, it is most humbly submitted, would enable the Hon’ble Tribunal to pass order effectively and its absence may not unfold the actual controversy and may lead to miscarriage of justice.

Reliance is placed on the following judicial pronouncement:-

Abhay Kumar Shroff vs Income Tax Officer, ITAT, Patna (Third Member Bench in ITA Nos. 95 & 193/Pat/1993 for A.Y. 1989-90 (1997) 63 ITD (PAT) 144. “Where additional evidence enables the Tribunal to pass order or for any other substantial cause it can admit the same.

“Held If one analyses the language of r. 29 what emerges is that although no right is vested in the parties to an appeal before the Tribunal to produce additional evidence-whether oral or documentary, if the Tribunal required any document to be produced or witnesses to be examined or affidavit to be filed, it may do so for reasons to be recorded. However, it is not as if this power vested in the Tribunal is arbitrary or unbridled. This rule itself prescribes the contingencies under which the exercise of such power is permissible. One such situation is whether the taking of additional evidence 'enables the Tribunal to pass orders' or 'for any other substantial cause.” Thus, where additional evidence enables the Tribunal to pass orders or for any other substantial cause it can require the parties to do so. There is not gain saying that while this power could be exercised by 9 ANEESHA BAID VS ITO, WARD 6(1), JAIPUR

the Tribunal suo motu the jurisdiction vested in the Tribunal could be got invoked at the instance of one of the parties before it. The additional evidences produced by the assessee were copies of correspondence entered between the assessee and the HUF landlord during the relevant period, and a letter of almost the same period which emanated from the Bank Manager, containing terms of lease and the advance of loan of Rs. 11.40 lacs. Patently, those documents would enable the Tribunal to pass orders effectively and their absence may not unfold the actual controversy and lead to a miscarriage of justice. No doubt that not a whisper has been made by the assessee as to why there was lapse on their part in not bringing this vital piece of evidence before the authorities below, yet this failing or reticence on their part or even ignorance or whatever one may term it cannot be said to produce any devastating effect of the magnitude where the powers vested by r. 29 referred to supra in the Tribunal could stand set at nought. The gravamen of the charge against the assessee as to the non- production of these vital documents either before the AO or before the learned CIT (A) would have a different effect in law. It was that the assessee as a matter of right cannot file or filing them before the Tribunal as a matter of course. If the assessee produces some documents at the appropriate time they have to be taken into consideration subject of course to all just exceptions, such as their relevance, etc. If not done at the assessment stage, the admission of documents has to be governed by r. 46A of the IT Rules, 1962 if produced for the first time before the first Appellate Authority. Having missed the bus and the matter travelled to the Tribunal, the admission of documents is to be governed by r.29 of the Tribunal Rules, 1963. Therefore if the documents sought to be admitted even at the second appellate stage are of a nature and qualitatively such that they render assistance to the Tribunal in passing orders or required to be admitted for any 'other substantial cause', it would rather be the duty of the Tribunal to admit them. However, once additional evidence is required to be admitted, there could be no gainsaying that the Department should be afforded reasonable opportunity of rebutting it. Audi alteram Partem is a valuable right of the parties to any lis. Nobody can be or should be condemned unheard is one of the strongest edifices on which the entire administration of justice stands."

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2.6 On the contrary, the ld. DR supported the orders of the authorities below.

However, the ld. DR objected to the additional evidence raised by the assessee at this juncture and submitted that it should have been raised by the assessee at the assessment

stage.

2.7 We have heard both the parties and perused the materials available on record. As regards the additional evidence raised by the assessee, the Bench finds that additional

evidence raised hereinabove will be useful to decide the case for which both the additions

have been confirmed by the ld. CIT(A) and to clarify the issue under dispute, we do not hesitate to admit the same in delivering justice to the party. We also noted that the ld.

CIT(A) has not elaborately discussed the issue while confirming both the additions.

According to the assessee, there is some confusion on the part of the revenue in appreciating the facts of the present case. Therefore, considering the interest of equity

and justice, we also set aside both the issue back to the file of A.O. with the direction to decide the same afresh after examining the balance sheet, cash book or any other

documents as he deems fit for deciding these issues. Before parting, we may make it clear that our decision to restore the matter back to the file of the A.O. shall in no way be construed as having any reflection or expression on the merits of the dispute which shall be adjudicated by A.O. independently in accordance with law.

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3.0. In the result, this appeal of the assessee is allowed for statistical purposes only. Order pronounced in the open Court on 19/10/2022. ¼ jkBksM deys'k t;UrHkkbZ ½ ¼ MkWa-,l-lhrky{eh½ (Dr. S. Seethalashmi) (RATHOD KAMLESH JAYANTBHAI) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 19/10/2022. Mishra

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