Jugal Kishor Bhatia Prop., Mathura V. ACIT, Mathura

CO 3/AGR/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 3141 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER & SHRI A. L. GEHLOT, ACCOUNTANT MEMBER C.O. NO. 03/AGRA/2010 (IN ITA NO. 458/AGRA/2009) ASST. YEAR : 2005-06 SHRI JUGAL KISHORE BHATIA, VS. A.C.I.T. 3(1), PROP. M/S. KAMAL PAPER, MATHURA 986, GALI KASERAN, MANDI RAMDAS, MATHURA (PAN: ABBPB 8357 R). (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI PANKAJ GARGH, ADVOCATE FOR REVENUE : SHRI A.K. SHARMA, JR. D.R. DATE OF HEARING : 13.03.2012 DATE OF PRONOUNCEMENT : 16.03.2012 ORDER PER BHAVNESH SAINI, J.M. : THIS CROSS OBJECTION BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF LD. CIT(A)- I, AGRA DATED 10.09.2009 FOR THE ASSESSMENT YEAR 20 05-06. 2. THIS CROSS OBJECTION WAS FILED ON FILING THE DEP ARTMENTAL APPEAL IN ITA NO. 458/AGRA/2009. VIDE SEPARATE ORDER, THE DEPARTMENTA L APPEAL HAS ALREADY BEEN DISMISSED, BEING NOT MAINTAINABLE VIDE ORDER DATED 04.04.2011. THIS CROSS OBJECTION OF THE ASSESSEE IS, THEREFORE, TAKEN FOR CONSIDERAT ION. C.O. NO. 03/AGRA/2010 2 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 1, BEING THE ADDITION ALREADY DELETED BY THE LD . CIT(A). IT WAS FILED MERELY TO SUPPORT THE FINDINGS OF LD. CIT(A). GROUND NO. 1 OF CROSS OBJECTION IS, ACCORDINGLY DISMISSED, BEING NOT PRESSED. 4. ON GROUND NO. 2 & 3 OF THE CROSS OBJECTION, THE ASSESSEE CHALLENGED THE ADDITION OF RS.60,000/- ON ACCOUNT OF INTEREST. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS DIRECTED THE AO T O WORK OUT PROPORTIONATE INTEREST BURDEN ARISING TO THE BUSINESS CONCERN ON ACCOUNT O F DIVERSION OF PROPRIETORS CAPITAL ON VARIOUS DATES AND SUBSTITUTE THE SAME INSTEAD OF THE ADDITION OF RS.1,20,000/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE T HE ISSUE IN THE SET ASIDE PROCEEDINGS HAS NOT BEEN TAKEN UP BY THE LD. A.O., THEREFORE, D IRECTION MAY BE ISSUED TO HIM TO DECIDE THE ISSUE ACCORDINGLY AND HE WILL NOT BE PRE SSING GROUND NO. 2 & 3 OF THE CROSS OBJECTION. IN VIEW OF THE ABOVE STATEMENT OF THE LD . COUNSEL FOR ASSESSEE, GROUND NO. 2 & 3 OF THE CROSS OBJECTION ARE DISMISSED AS NOT PRE SSED WITH THE DIRECTION TO AO TO DECIDE THIS ISSUE EXPEDITIOUSLY AS IS DIRECTED BY T HE LD. CIT(A) IN THE IMPUGNED ORDER. 5. ON GROUND NO.4 OF THE CROSS OBJECTION, THE ASSES SEE CHALLENGED THE DISALLOWANCE OF INTEREST OF RS.19,286/-. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS SH OWN DEDUCTION OF RS.19,286/- AS C.O. NO. 03/AGRA/2010 3 INTEREST PAID TO SHRI KAMAL SETH AND SHRI N.K. BHAT IA ON LOANS RAISED FROM THEM. A PERUSAL OF PERSONAL SET OF BALANCE SHEET REVEALED T HAT LOANS RAISED AT RS.2,60,362/- WERE ACTUALLY UTILIZED FOR GIVING ADVANCES OF RS.2, 72,000/-, CASH IN HAND RS.2,12,343/- AND ACQUIRING ASSETS FROM IT, FROM WHICH, IN TURN, NO INCOME IS EARNED OR EXEMPTED INCOME IS EARNED. THUS, THE CLAIM OF DEDUCTION OF I NTEREST FROM TAXABLE INCOME OF THE ASSESSEE WAS HELD TO BE NOT ALLOWABLE. THE AO FURTH ER NOTED THAT THE ASSESSEE MAINTAINED BOOKS OF ACCOUNT WHICH ARE AUDITED AND T HE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S. 194A OF THE IT ACT, BUT N O TAX IS DEDUCTED. THEREFORE, THE CLAIM IS ALSO DISALLOWABLE U/S. 40(A)(IA) OF THE AC T TO THE EXTENT OF RS.14,860/- BEING INTEREST PAID TO SHRI KAMAL SETH WITHOUT TDS. HOWEV ER, TELESCOPING ADJUSTMENT WAS MADE OUT OF TOTAL DISALLOWANCES OF RS.19,286/- AND NO SEPARATE ADDITION WAS MADE ON THIS ISSUE. 6. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ACCOUNTS OF BOTH THE PARTIES, SHRI KAMAL SETH AND SHRI N.K. BHATIA WERE OLD AND B ROUGHT FORWARD FROM THE PRECEDING ASSESSMENT YEAR. COPY OF PROFIT & LOSS AC COUNT REVEALED THAT INTEREST OF RS.29,671/- RECEIVED FROM EARTH SANITATION PVT. LTD . WAS CREDITED, AGAINST WHICH THE IMPUGNED INTEREST OF RS.19,286/- WAS DEBITED. IT WA S, THEREFORE, CLEAR THAT EARNING OF INTEREST AND PAYMENT OF INTEREST WERE RESULTING IN PROFIT OF RS.10,385/-. THE ASSESSEE HAS OWN CAPITAL OF RS.84,18,780/- AS ON 01.04.2004 AND, THEREFORE, HE WAS AT LIBERTY TO UTILIZE THE SAID FUNDS ACCORDING TO HIS DISCRETION. THE TDS PROVISIONS ARE NOT APPLICABLE. THE LD. CIT(A), HOWEVER, FOUND THAT SIN CE THE ASSESSEE HAS NOT BEEN ABLE C.O. NO. 03/AGRA/2010 4 TO ESTABLISH NEXUS OF INTEREST PAYMENT WITH RECEIPT OF THE INTEREST, THEREFORE, IN TERMS OF SECTION 57(III), THE CLAIM OF THE ASSESSEE IS NO T ADMISSIBLE. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF CROSS OBJECTION. THE LD. CIT(A) RIGHTLY H ELD THAT THE CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE IN TERMS OF SECTION 57(III) OF THE I T ACT. THE ASSESSEE SHALL HAVE TO PROVE THAT PAYMENT OF INTEREST HAS ANY NEXUS WITH T HE INTEREST EARNED FROM DIFFERENT PARTIES. NO OTHER FINDING HAS BEEN GIVEN BY THE LD. CIT(A). THE AO ALSO GAVE SPECIFIC FINDING ON PERUSAL OF BALANCE SHEET THAT LOANS RECE IVED WERE ACTUALLY UTILIZED FOR GIVING ADVANCES AND AS SUCH, IN THE ABSENCE OF ANY MATERIAL BEFORE US, WE DO NOT FIND APPROPRIATE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THIS GROUND OF CROSS OBJECTION IS, ACCORDINGLY, DISMISSED. 8. ON GROUND NO. 5 OF THE CROSS OBJECTION THE ASSES SEE CHALLENGED THE DISALLOWANCES OUT OF TELEPHONE, MOBILE AND VEHICLE EXPENSES. THE AO FOUND THAT THE ASSESSEE CLAIMED TOTAL EXPENDITURE OF RS.1,60,042/- ON VARIOUS HEADS. HE ALSO OBSERVED THAT PERSONAL USE OF TELEPHONE, MOBILE AND VEHICLES CANNOT BE RULED OUT. 1/6 TH OUT OF THE SAME WAS, ACCORDINGLY, DISALLOWED ON ACC OUNT OF PERSONAL USE OF THESE FACILITIES. SINCE NET PROFIT RATE WAS APPLIED, NO S EPARATE ADDITION WAS MADE ON ACCOUNT OF THESE DISALLOWANCES OF EXPENDITURE. THE LD. CIT( A) CONFIRMED THIS ADDITION, AS THE C.O. NO. 03/AGRA/2010 5 ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THA T HE HAD OTHER PERSONAL RESOURCES TO MEET OUT THE PERSONAL USE OF TELEPHONE, VEHICLES ETC. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF THE CROSS OBJECTION. THE ASSESSEE IS AN I NDIVIDUAL AND USE OF TELEPHONE, MOBILE AND VEHICLE FOR PERSONAL USER CANNOT BE RULE D OUT. NO LOG BOOK IS PRODUCED TO PROVE THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ABSENCE OF ANY MATERIAL ON RECORD, NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT 1/10 TH OF THE TOTAL EXPENDITURE MAY BE DISALLOWED, BEING EXCESSIVE DISALLOWANCE MAD E BY THE AO. HOWEVER, NOTHING IS POINTED OUT AS TO HOW THE ADDITION WAS EXCESSIVE IN NATURE. GROUND NO. 5 OF THE CROSS OBJECTION IS, ACCORDINGLY, DISMISSED. 10. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY