Sh. Anil Aggarwal, Chandigarh V. ITO, Chandigarh

ITA 101/CHANDI/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8396 (ITAT-CHANDIGARH)
• Duration Of Justice: 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 101/CHD/2016 (ASSESSMENT YEAR : 2009-10) SH.ANIL AGGARWAL, VS. THE INCOME TAX OFFICER, H.NO.81, SECTOR 28-A, WARD-4(2), CHANDIGARH. CHANDIGARH. PAN: ACOPA 3772 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 03.03.2016 DATE OF PRONOUNCEMENT : 08.03.2016 O R D E R THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH DATED 14.1.2016 FOR ASSESSM ENT YEAR 2009-10, CHALLENGING THE DISALLOWANCE OF RS.5, 53,839/- OUT OF INTEREST. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE HAS RAISED UNSECURED LOAN FROM FAMILY MEMBERS, ON W HICH INTEREST OF RS.12,54,885/- WAS PAID AND CLAIMED EXP ENSES IN PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER FURTH ER NOTICED THAT THE ASSESSEE HAS DIVERTED RS.72,35,000 /- TO M/S KAY INNS PVT. LTD., WHERE THE ASSESSEE IS A DIR ECTOR. THE ASSESSING OFFICER HELD THAT THE INTEREST ON BOR ROWED 2 FUNDS CLAIMED DEDUCTION IN PROFIT & LOSS ACCOUNT, I S NOT ALLOWABLE AS EXPENSES AND AMOUNT OF RS.5,53,839/- W AS DISALLOWED ON PRO-RATA BASIS AND ADDED TO THE INCOM E OF THE ASSESSEE. 3. THE ASSESSEE SUBMITTED THAT THE LOAN OF RS.72,35,000/- WAS INVESTED AS QUASI CAPITAL IN M/S KAY INNS PVT. LTD. PURELY ON BUSINESS CONSIDERATION. S ECONDLY, THE AMOUNT WAS INVESTED TOTALLY OUT OF CAPITAL AND RESERVES AND, THEREFORE, DISALLOWANCE UNDER SECTION 36(1)(II I) OF THE INCOME TAX ACT IS NOT WARRANTED. 4. THE LEARNED CIT (APPEALS) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS NO NEXUS THAT OWN FUN DS HAVE BEEN DIVERTED TO M/S KAY INNS PVT. LTD. WAS PROVED. THE LEARNED CIT (APPEALS) FOLLOWING THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S ABHISHEK INDUSTRIES LTD., 286 ITR 1, DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL AND RUNNING A PARTNERSHIP CONCERN IN THE NAME AND STYLE OF M/S MO DERN METALS DEALING IN TRADING OF PLASTICS, ETC. THE AS SESSEE HAD ADVANCED CERTAIN AMOUNTS TO M/S KAY INNS PVT. LTD. WITHOUT CHARGING INTEREST AND THE ASSESSEE HAD RAISED CERTA IN AMOUNTS ON WHICH INTEREST HAS BEEN PAID. THE ASSES SEE HAS GIVEN LOAN OF RS.72,35,000/- TO M/S KAY INNS PVT. L TD., FROM WHOM NO INTEREST WAS CHARGED, WHEREAS THE ASSESSEE HAS 3 PAID INTEREST AMOUNTING TO RS.12,54,885/- ON VARIOU S LOANS. THE FACT OF THE MATTER IS THAT THE SUM OF RS.72,35, 000/- WAS INVESTED IN THE FORM OF QUASI CAPITAL IN M/S KAY IN NS PVT. LTD., OF WHICH THE ASSESSEE IS A PROMOTER DIRECTOR. THE AMOUNT WAS INVESTED PURELY FOR BUSINESS CONSIDERATI ON AND FOR BUSINESS PURPOSES. THEREFORE, NO NOTIONAL DIS ALLOWANCE OF INTEREST IS WARRANTED. THE AMOUNT WAS INVESTED TOTALLY OUT OF CAPITAL AND RESERVES AND HAD NOT CONNECTION EITHER WITH THE PROPRIETORSHIP CONCERN M/S MODERN METALS, NOR WITH THE UNSECURED LOANS RAISED WITH THE SAID FIRM. THE LOAN WAS TAKEN BY M/S MODERN METALS PURELY FOR THE PURPOSES OF BUSINESS. THE TOURISM FINANCE CORPORA TION OF INDIA LTD. HAS IMPOSED A CONDITION THAT THE UNSECUR ED LOANS RAISED BY THE SAID COMPANY SHALL BE INTEREST-FREE A ND A COPY OF LETTER DATED 21.3.2002 WAS PRODUCED. IT WAS ALS O SUBMITTED THAT OUT OF TOTAL ADVANCE OF RS.72 LACS, RS.50 LACS HAD BEEN ADVANCED DURING THE PRECEDING ASSESSMENT YEAR 2008-09 AND ONLY A SUM OF RS.22 LACS WAS ADVANCED O N 29.11.2008 I.E. RELEVANT TO ASSESSMENT YEAR UNDER A PPEAL 2009-10. WHILE FRAMING THE ASSESSMENT FOR ASSESSM ENT YEAR 2008-09, THE ASSESSING OFFICER RAISED A SPECIF IC QUERY WITH RESPECT TO THE CLAIM OF INTEREST PAID AT RS.8, 86,899/- AND AFTER SATISFYING WITH THE SAME ALLOWED THE CLAI M OF THE ASSESSEE. COPY OF THE ASSESSMENT ORDER DATED 10.11 .2010 HAS BEEN FILED. THE LEARNED COUNSEL FOR THE ASSESS EE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES P. LTD. VS. CIT, 379 ITR 347 A ND SUBMITTED THAT IN THIS CASE THE HON'BLE SUPREME COU RT 4 REVERSED THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA), RELIED ON BY THE AUTHORITIES BELOW AND THE HON'BLE SUPREME CO URT HELD THAT WHEN THE LOANS WERE GIVEN TO THE DIRECTO RS, THE ASSESSEE HAVING CREDIT BALANCE IN BANK ACCOUNT AT T HE TIME OF ADVANCE, INTEREST PAID OF BORROWINGS NOT TO BE D ISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. 6. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON ORDERS OF THE AUTHORITIES BELOW. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION A T THE LEVEL OF THE LEARNED CIT (APPEALS). THE LEARNED C OUNSEL FOR THE ASSESSEE FILED COPY OF ASSESSMENT ORDER FOR PRE CEDING ASSESSMENT YEAR 2008-09 AND CLAIMED THAT THE SUBSTA NTIAL LOAN WAS ADVANCED FOR PRECEDING ASSESSMENT YEAR 200 8-09, IN WHICH NO DISALLOWANCE HAS BEEN MADE BY THE ASSE SSING OFFICER. THEREFORE, THERE MAY NOT BE JUSTIFICATION TO DISALLOW THE SUBSTANTIAL AMOUNT IN THE YEAR UNDER A PPEAL OR THERE MAY NOT BE ANY DISALLOWANCE BY FOLLOWING THE RULE OF CONSISTENCY. FURTHER, THE ASSESSEE CLAIMED TO HAVE SUFFICIENT CAPITAL AND RESERVES AND NO DETAILS WERE FILED BEFO RE THE AUTHORITIES BELOW AS WELL AS BEFORE THE TRIBUNAL. THEREFORE, THIS ISSUE SHALL HAVE TO BE LOOKED INTO BY VERIFYING THE FACTS FROM THE RECORD. THE AUTHORITIES BELOW HAVE ALSO NOT VERIFI ED WHETHER THE LOAN WAS GIVEN OUT OF THE BOOKS OF M/S MODERN METAL S. THE AUTHORITIES BELOW HAVE ALSO FAILED TO GIVE ANY FIND ING ON THE DIRECTIVE ISSUED BY TOURISM FINANCE CORPORATION OF 5 INDIA LTD. THE DETAILED SUBMISSION MADE BEFORE TH E LEARNED CIT (APPEALS) IS FILED BEFORE US, WHICH IS ON THE LINE OF ARGUMENTS ADOPTED BY THE LEARNED COUNSEL FOR THE ASSESSEE BUT NO FINDINGS OF FACT HAVE BEEN GIVEN BY THE LEARNED CIT (APPEALS) ON THE SAME. THE LEARNED CIT (APPEALS) ALSO FAILED TO NOTE THAT THE DECISION IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA) HAVE BEEN REVE RSED BY THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCL ES P. LTD. (SUPRA). THEREFORE, THE MATTER REQUIRES RECON SIDERATION AT THE LEVEL OF THE LEARNED CIT (APPEALS). I ACCOR DINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTO RE THE MATTER IN ISSUE TO THE FILE OF THE LEARNED CIT (APP EALS) WITH DIRECTION TO REDECIDE THIS ISSUE IN THE LIGHT OF SU BMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE BY VER IFYING THE FACTS ON RECORDS AND IN THE LIGHT OF THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES P . LTD. (SUPRA). THE LEARNED CIT (APPEALS) SHALL GIVE SPEC IFIC FINDING ON THE FACTS OF ALL THE POINTS RAISED BY TH E ASSESSEE BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 8 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6