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Income Tax Appellate Tribunal, “ SMC ” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & MS SUCHITRA KAMBLE
आदेश/O R D E R
PER SUCHITRA KAMBLE, JM:
The captioned appeal has been filed at the instance of the Assessee against the order dated 26.12.2023 passed by the National Faceless Appeal Centre(NFAC)/CIT(A), arising in the matter of assessment order passed under s. 144(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18.
2 2. The assessee has raised the following grounds of appeal:
1. The order passed by the Ld.CIT(A) is against law, equity & justice.
The Ld. CIT (A) has erred in law and facts in upholding not allowing deduction claimed by appellant of Rs.30,37,469/- u/s.57 of the Act.
Your appellant craves liberty to add, amend alter or modify all or any grounds of appeal before final appeal.
3. The assessee filed his return of income for Assessment Year 2017-18 on 31.10.2017, declaring total income of Rs.12,77,150/-. The case of assessee was selected for scrutiny with the reasons of “Large deduction claimed u/s.57”. Accordingly, notice u/s. 143(2) o the Income-tax Act, 1961 was issued. Subsequently, statutory notices were issued for which the assessee did not file any reply or written submission. The Assessing Officer issued show-cause notice dated 20.11.2019, and in response to said show-cause notice, the assessee furnished balance sheet, profit and loss account, assesee’s capital accounts in firms where he claimed to have been a partner, ledger of income showing interest paid to the extent of Rs.5,30,509/- only to Chandrakant P Patel, Ushaben Nareshbhai Patel. The AO observed that no written reply explaining the allowability of deductions claimed u/s.57 of the Act was furnished. The assessee did not furnished bank account statements, bank loan statements, ledger confirmation with PAN of the depositor parties, rate of interest charged from loan parties and their confirmations. Thus, the AO made the addition of Rs.30,37,469/- thereby disallowing claim of assessee u/s.57 of the Act.
Being aggrieved by the assessment order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A), dismissed the appeal of the assessee.
The Ld.AR submitted that the Ld.CIT(A)has erred in law and on facts in upholding not allowing the deduction claimed by the assessee of Rs.30,37,469/- u/s.57 of the Act. The Ld.AR has submitted a summary of interest income and interest expenses as under:
As per this record there is surplus interest income, question of disallowance by invoking section 57 of the Act does not arise, as per the contention of the Ld.AR. The assessee is having interest free capital of Rs.1,63,39,484/- and if there are fund available both interest free and overdraft and loans are taken then a presumption would arise that investments would be out of the interest free fund generated or available with the company. If the interest free fund are sufficient to meet the investment then in the instant case the said presumption would established considering the fact which was totally ignored by the Ld.CIT(A). The Ld.AR relied upon the following judicial precedents:
4 1. Hon'ble high court of Gujarat in the case of Commissioner of Income Taxt v. Amod Stamping (P.) Ltd [2014] 45 taxmann.com 427 (Gujarat) 2. Hon'ble Gujarat High court in the case of Assistant Commissioner of income-tax, Bharuch Circle v. Gujarat Narmada Valley Fertilizers Co. Ltd. 42 taxmann.com 579 (Gujarat) 3. Hon'ble Bombay High Court in the case of Commissioner of Income-tax vs. Reliance Utilities & Power Ltd [2009] 178 Taxman 135 (Bombay) 4. Hon'ble ITAT Ahmedabad in the case of Swagat Infrastructure Ltd. Vs. Joint Commissioner of Income-tax, Range-8 [2013] 37 taxmann.com 83 (Ahmedabad - Trib.) 5. Hon'ble ITAT Ahmedabad in the case of Income Tax Officer Vs. Karnavati Petrochem (P) Ltd. had held that:
The Ld.AR has also given the details related to parties from whom the amount of received during the year as well as part of utilization:
The Ld.DR submitted that the assessee has not furnished the bank account statements, bank loan statements, ledger confirmation with PAN of 5 the depositor parties before the AO and therefore the AO has rightly made the disallowance which was claimed u/s.57 of the Act. The Ld.DR further submitted the assessee failed to establish the nexus as required u/s.57 of the Act, related to the expenses claimed which have been incurred to earn the income of such expenses were wholly and exclusively made to earn such income. Thus, the Ld.CIT(A), has rightly rejected the claim of expenditure of the assessee.
We have heard both the parties and perused the material available on record. It appears that the assessee has given details relating to the fund flow statements as well as bank statements including that of confirmation of Ushaben Patel and Chandrakant P Patel including their ITR and bank statements the certificate of interest of Indusind bank, OD account Indusind term loan were also submitted before the Ld.CIT(A). The calculation given by the assessee during the hearing related to expenditure has been taken on record and it is found that the assessee has rightly claimed the expenditure as per the section 57 of the Act and has established the nexus to earn the income and expenses incurred. Thus the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.