Case Law Details
Hitesh Shantilal Mehta Vs DCIT (ITAT Mumbai)
The case revolves around the disallowance of interest expenses on the Assessee’s investments and the subsequent decision of ITAT to restore ground appeals for further examination.
In this case, the Department argued that the claimed interest expenses were mere book entries and would never be paid. However, ITAT decided to send the appeals back to the Assessing Officer (AO) for reconsideration and recalculation. The outcome of the ruling was partially favorable to the Assessee, as several grounds were restored for further evaluation.
The Assessee relied on a previous ruling by the Tribunal in a similar case involving Sudhir S. Mehta. The Tribunal had directed the AO to allow deduction in respect of the accrued interest, calculated at 12% per annum. The current case shares similar facts, leading to the allowance of the appeal for statistical purposes.
Conclusion: The ITAT Mumbai branch allowed the interest expense liability provision in the case of Hitesh Shantilal Mehta Vs DCIT (ITAT Mumbai). This ruling is significant as it pertains to the disallowance of interest expenses on the Assessee’s investment in shares and securities. The decision to restore ground appeals for reconsideration and recalculation resulted in a partly favorable outcome for the Assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the Assessee is directed against the order of Commissioner of Income Tax (Appeals)-52, Mumbai (hereinafter referred to as “the CIT(A)”) dated 08.09.2022, for the assessment year 1993-94.
2. Shri Dharmesh Shah appearing on behalf of the assessee submitted at the outset that he is not pressing ground no. 1 of appeal. In respect of ground no. 2, the Ld. Authorised Representative (AR) submits that the assessee had created a provision in respect of interest liability. This liability had accrued on account of investment made in shares and securities through various broker firms of Harshad S. Mehta Group. The assessee had brought to the notice of Assessing Officer (AO) that similar addition in past has been deleted by the Tribunal in the case of Dr. Pratima H. Mehta, one of the family members of the assessee. The AO brushed aside the decision cited by the assessee and disallowed interest expenses. The Ld. AR submitted that in assessee’s own case in ITA No.4430/Mum/2017 for assessment year 2012-13, the Tribunal vide order dated 27.12.2017 has allowed the claim of assessee subject to verification and interest quantification.
2.1 The Ld. AR submitted that in ground no. 3 of appeal, the assessee assailed addition of Rs.21,241/- on account of difference in ledger balance as compared with the books of Late Harshad S. Mehta. The AO has erred in stating that the assessee has agreed for the addition. In First Appellant Proceedings, the assessee raised objection to the observation of AO. The CIT(A) rejected the ground stating that the assessee should have filed rectification application before the AO.
2.2 The Ld. AR submitted that ground no. 4 of appeal, the assessee has assailed levy of interest u/s 220 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and in ground no. 5 of appeal, the grievance of assessee is that the TDS made on income for subsequent years was not adjusted against the demand for the year under consideration. In ground no. 6 of appeal, the assessee has assailed charging of interest u/s 234B of the Act. He submitted that ground no. 4, 5 and 6 of appeal can be restored back to the AO as there are calculation errors while adjudicating the said issues. The AO while making the addition has failed to consider the payments.
3. Per contra, Dr. P. Daniel representing the Department vehemently defended the impugned order. The Ld. Counsel for the Department submits that the interest expenses claimed by the assessee is merely a book entry. The said expenditure will never be paid. He further submits that as regard ground no. 3, the AO had made addition on the basis of concession allowed by the AR of assessee. On other issues raised in appeal, the Ld. Counsel supported the findings of CIT(A).
4. We have heard the submissions made by rival sides and have examined the orders of authorities below. In ground no. 1 of appeal, the assessee has assailed rejection of books of account. The Ld. AR stated at Bar that he is not pressing ground no. 1. In view of the statement made by Ld. AR of the assessee, ground no. 1 of appeal is dismissed as not pressed.
5. In ground no. 2 of appeal, the assessee has assailed disallowance of interest expenses Rs.2,46,71,575/-. The contention of the assessee is that similar ground has been decided by the Tribunal in assessee’s own case in ITA No.4430/Mum/2017 (supra). We find that the Tribunal while adjudicating this issue in assessee’s appeal for AY 2012-13 has observed that the ground is similar to ground no. 1 raised in the case of Sudhir S. Mehta in ITA No.5799/Mum/2015 for AY 2009-10, both sides have agreed that whatever view has been taken in the case of Sudhir S. Mehta may be taken in the case of assesse. The appeal in the case of Sudhir S. Mehta for AY 200910 and the appeal of assessee for AY 2012-13 were decided by the Tribunal vide composite order dated 27.12.2017. The Co-ordinate Bench while deciding the issue of liability of interest expenses in the case of Sudhir S. Mehta concluded as under:
“16. In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum amounting to Rs.2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to Rs.3,51,176/- after verifying the calculation of the interest quantification.”
Since, facts germane to the addition on account of disallowance of interest expenses in the impugned AY are similar, ground no. 2 of appeal is allowed for statistical purpose, in same terms.
6. In ground no. 3 of appeal, the assessee has assailed addition of Rs.21,241/- on account of difference in ledger balance viz-a-viz books of Late Shri Harshad S. Mehta. The ground was dismissed by the AO on the alleged concession granted by the AR of the assessee. Before CIT(A) and the Tribunal, the Ld. AR of the assessee had contested that no such concession was granted before AO. Without delving further on the controversy of concession, we deem it appropriate to restore this issue back to the file of AO for deciding the issue on merits. Ground no. 3 of appeal is thus, allowed for statistical purpose.
7. In ground no. 4 of appeal, the assessee has assailed levy of interest u/s 220 of the Act. The Ld. AR stated that this issue can be restored back to the file of AO as there are calculation errors. The Ld. DR has not objected to the same. The ground no. 4 of appeal is restored to AO for recalculation, after considering objections of the assessee. Ground no. 4 of appeal is allowed for statistical purpose.
8. In respect of ground no. 5 and 6, the Ld. AR has made similar prayer of restoring back the file to the AO as there are calculation errors. Both grounds are restored to AO for recalculation after considering objections of the assessee. Thus, ground no. 5 and 6 of appeal are allowed for statistical purpose.
9. In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on Tuesday the 23rd day of May 2023.
