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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2016-17, arises from order of the National Faceless Appeal Centre (NFAC), Delhi dated 06-12-2021, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.
Page No 2 Vinodbhai Sunderjibhai Kansagara vs. NFAC
The assessee has raised the following grounds of appeal:- Grounds of appeal Tax effect relating to each Ground of appeal (see note below)
The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as the "CIT(A)"] erred on facts as also in law in deciding the appeal ex pa tie. The CIT(A) ha did not allow reasonable opportunity of being heard, therefore the appeal may kindly be restored.
2. The learned CIT(A) erred on facts as 9,00,569/- also in law in sustaining the addition of Rs.27,65,615/- made by the AO by disallowing the interest expenses. The disallowance made is totally unjustified and the same may kindly be deleted.
Page No 3 Vinodbhai Sunderjibhai Kansagara vs. NFAC
3. The Ld. CIT(A) erred on facts as also in law in treating the business loss from commodity transaction as speculative business one and therefore not allowing setoff of the disallowance of interest made as above. The Action of the AO in treating the business loss as speculative one is totally "unjustified particularly when the same was not the issue in limited scrutiny. The action of AO in treating the genuine business loss as speculative and not allowing set of disallowance is bad in law and the same may kindly be allowed alternatively.
4. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
Total tax effect (see note below) 9,00,569/-
The brief facts of the case are that during the course of assessment, the AO primarily made two additions: firstly, the AO observed that assessee had claimed interest expenses of � 35.46 lakhs but had not deducted TDS @30% on the same amounting to � 7.80 lakhs. Further, on going through the details of interest expenditure, the AO held that the interest expenditure is inadmissible for the reason that the interest expenditure has not been Page No 4 Vinodbhai Sunderjibhai Kansagara vs. NFAC incurred wholly and exclusively for the purpose of earning income. In the instant case, the funds borrowed by the assessee have not been used by the assessee for its business/profession nor used to earn any type of taxable income. Accordingly, the AO disallowed the interest expenditure claimed by the assessee and added the same to the taxable income of the assessee (since the assessee had already disallowed a sum of � 7.80 lakhs u/s 40(a)(ia) of the Act, the AO disallowed the balance amount of � 27.65 lakhs and added the same to taxable income of the assessee). Secondly, the AO held that loss incurred by the assessee in commodity transactions should be treated as speculative business losses since the assessee did not comply with the prescribed conditions. The assessee filed appeal before Ld. CIT(Appeals) against the aforesaid order.
In appellate proceedings, Ld. CIT(Appeals) dismissed appeal of the assessee on account of non-appearance despite several opportunities and he upheld the order of the Ld. Assessing Officer. While passing the order Ld. CIT(Appeals) observed as below:
“As can be seen from the findings of the AQ, the AO has established that the interest bearing funds have not been utilised for the business purpose of the appellant and therefore it cannot be stated that the interest expenditure is wholly and exclusively incurred for the purpose of business of the appellant During the appellate proceedings, as can be seen from the para 3 above, although opportunities were granted, the appellant has not complied Therefore the fact remains that the appellant has not controverted the findings of the AO as per the assessment order during the appellate proceedings On perusal of the documents on record. I am of the considered opinion that the AO has rightly disallowed interest expenditure of Rs. 27,65,615/- as the borrowed funds have not been wholly and exclusively utilised for the Page No 5 Vinodbhai Sunderjibhai Kansagara vs. NFAC purpose of business of the appellant and therefore, the addition of Rs. 27,65,615/- is hereby confirmed.
During the assessment proceedings, the AO examined the transactions of the appellant in commodity exchanges and held that the appellant has not satisfied the conditions prescribed which is detailed in para 9 of the assessment order. Therefore, the AO held that the loss incurred in commodity transactions should be treated as speculative business loss and the same is allowed to be carried forward to the subsequent assessment years. As can be seen from para 9 of the assessment order the AO examined the transactions in commodity exchanges and has concluded that the appellant has not satisfied the prescribed conditions and hence treated the losses as speculative business loss As per the grounds of appeal the appellant has stated that certain documents with respect to commodity transactions were submitted to the AD which was not considered by the AO In this regard, it is stated that although as per para 3 above opportunities were granted, the appellant has not complied during the appellate proceedings Therefore it is stated that even during the appellate proceedings, the appellant has not submitted the documents with respect to transactions in commodity exchanges. Hence, the fact remains that the appellant has not controverted the findings of AO as per the assessment order during the appellate proceedings In view of these facts, I am of the considered opinion that the AO has rightly treated the same as speculative business loss as the appellant has not satisfied the prescribed conditions. Therefore, the action of the AO is upheld and accordingly the grounds of appeals are dismissed.”
Before us, the Ld. Counsel for the assessee submitted that the assessee could not cause appearance before Ld. CIT(Appeals) since he was unable to download documents from the official Department website. The Ld. Counsel for the assessee submitted that the assessee has good case on merits and it could be observed that the last two notices were issued by Ld. CIT(Appeals) within a brief period of time i.e. there was little time gap in the last two Page No 6 Vinodbhai Sunderjibhai Kansagara vs. NFAC notices. Accordingly, the Ld. Counsel for the assessee submitted that if given an opportunity of hearing, he would be able to demonstrate with supporting documents that the assessee has a good case on merits. The Ld. DR also did not object to the matter being set aside to the file of Ld. CIT(Appeals) for de-novo considerations after giving due opportunity of hearing to the assessee. Accordingly, in the interests of justice, the matter is being set aside to file of Ld. CIT(Appeals) to hear the matter afresh after giving due opportunity of hearing to the assessee to present his case on merits.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14-03-2023