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TMI Blog2023 (9) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... nly and it is directly related to each other. In support of the aforesaid submission, the assessee furnished various charts, forming part of the paper book to show the nexus between the interest income and interest expenditure claimed under section 57 of the Act. As evident from the record that neither the aforesaid submission/the details regarding the nexus of the interest expenditure with interest income was sought by the AO during the assessment proceedings nor the same was furnished by the assessee. As noted above during the assessment proceedings, the AO only sought the details of expenditure claimed u/s 57, ledgers of all such expenditures, and supporting documents/proof of payment made. Thus, there was no examination of the nexus between interest income and interest expenditure. As noted above under section 57(iii) of the Act the expenditure claimed as a deduction, while charging the income under the head income from other sources , should be expended wholly and exclusively for the purpose of making or earning such income. Since the return filed by the assessee was selected for limited scrutiny, inter-alia, regarding deduction against income from other sources, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the parameters for grant of condonation laid down by the Hon ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, nothing has been brought on record to show that the assessee shall stand to benefit by late filing of the present appeal. In view of the above and having perused the submissions made in the affidavit filed by the assessee, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore we condone the delay in filing the appeal by the assessee and we proceed to decide the appeal on merits. 5. In its appeal, the assessee has raised the following grounds: [A] Grounds of Appeal: 1. In the facts of the case and in Law, the learned PCIT erred in invoking Section 263 to the case of the Appellant only by way of change of opinion, without pointing out any error in the order of the A.O. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment proceedings has not verified the claim of expenses under section 57 of the Act and has also not established the nexus between the income earned and expenses claimed. Thus, the claim of interest expenses of Rs.34,23,183, has been allowed under section 57 of the Act without proper verification. To this extent, the learned PCIT alleged that the action of the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. 9. In response to the aforesaid notice, the assessee submitted that the claim of expenses by the assessee was duly verified and thoroughly checked by the AO at the time of assessment proceedings before allowing the claim of the assessee under section 57 of the Act. The assessee submitted that the AO specifically asked the assessee about the genuineness of the claim made under section 57 of the Act and also asked to prove the allowability of the expenditure, which were duly responded with necessary details by the assessee during the assessment proceedings. The assessee further submitted that all the borrowed funds have been invested mostly in the land and in repaying the previous loans from various persons, therefore the interest payment h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial available on record. Vide notice dated 28/08/2018, issued under section 143(2) of the Act, forming part of the paper book from pages 29-30, the return filed by the assessee was selected for limited scrutiny for examination of the following issues:- (a) Salary income (b) Deduction against income from other sources 14. During the assessment proceedings, notice dated 23/10/2019, was issued under section 142(1) of the Act, forming part of the paper book from pages 13-15, seeking the following details from the assessee:- (i) Details regarding income from other sources (ii) Details of expenditure claimed under section 57 against the head income from other sources (iii) Copy of ledgers of all such expenditures (iv) Supporting documents/proof of payments made (v) Details regarding TDS deducted for the expenses/payments (vi) Details of payment made for expenses to specified persons covered under section 40(A)(2)(b) of the Act 15. The aforesaid notice was replied to by the assessee and details as required were submitted during the assessment proceedings. From the paper book furnished by the assessee we find that the assessee filed bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment, the assessee furnished the following extracts of the ledger account in its books, forming part of the paper book on page 36:- INTEREST Ledger Account 1 Apr 2016 to 31 Mar 2017 Date Particulars Vch Type Vch no. Debit Credit 31.03.2017 Cr Mool Singh B. Deora Interest @ 12% P.A. Journal 35 2,16,583.00 Cr Narendra C. Panani Interest @ 12% P.A. Journal 36 13,98,767.00 Cr Prime Civil Infrastructure Pvt. Ltd. Interest @ 12% P.A. Journal 37 4,87,800.00 Cr Neelima R. Madhani Interest @ 12% P.A. Journal 38 13,23,033.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither the aforesaid submission/the details regarding the nexus of the interest expenditure with interest income was sought by the AO during the assessment proceedings nor the same was furnished by the assessee. As noted above during the assessment proceedings, the AO only sought the details of expenditure claimed under section 57, ledgers of all such expenditures, and supporting documents/proof of payment made. Thus, there was no examination of the nexus between interest income and interest expenditure. As noted above under section 57(iii) of the Act the expenditure claimed as a deduction, while charging the income under the head income from other sources , should be expended wholly and exclusively for the purpose of making or earning such income. Since the return filed by the assessee was selected for limited scrutiny, inter-alia, regarding deduction against income from other sources, the AO was required to examine not only the details and proof of payment of such expenditure but also its nexus with the interest income chargeable under the head income from other sources as per section 57 of the Act. Since there is no material available on record to show that this aspect was e ..... 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