Anand Parikh, Sec'bad, Hyderabad V. ITO, Ward-10(1), Hyd, Hyderabad

ITA 1036/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2240 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Notional interest
• Section: 234B; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B SMC : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO. 1036/HYD/2016 ASSESSMENT YEAR : 2007 - 2008 SHRI ANAND PARIKH, SECUNDERABAD. PAN: AECPP 6081 J VS. INCOME TAX OFFICER, WARD - 10(1), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI S. RAMA RAO FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 21.12.2017 DATE OF PRONOUNCEMENT : 21.12.2017 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 9, HYDERABAD AND IT PERTAINS TO A.Y. 200 7 - 2008. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL. 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. T HE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 16,65,981/ - OF THE IT ACT. 3. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE CREDITS WERE RELATING TO FIVE DIFFERENT CREDITORS AND THAT THE CREDITS WERE EXPLAINED PROPERLY BEFORE THE ASSESSING OFFICER. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 86,480/ - MADE BY THE ASSESSING OFFICER BY DISALLOWING INTEREST PAYMENTS ON THE GROUND THAT TDS WAS NOT MADE. 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 74,990/ - MAD E BY THE ASSESSING OFFICER TOWARDS INTEREST IN ADDITION TO THE INTEREST INCOME ADMITTED BY THE APPELLANT. 6. THE LD. CIT(A) ERRED IN DISALLOWING 30% OF THE EXPENDITURE DEBITED OR RS. 92,265/ - . 7. THE LD. CIT(A) ERRED IN CONFIRMING LEVY OF INTEREST U/S 234B OF THE ACT. 2. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. ASSESSEE W A S ENGAGED IN WHOLE SALE BUSINESS OF TEXTILES. FOR THE YEAR 2 UNDER CONSIDERATION HE DECLARED TOTAL INCOME OF RS. 53,280/ - . WHEN THE CASE WAS TAKEN UP FOR SCRUTINY, T HE A.O. CALLED FOR INFORMATION WITH REGARD TO THE LOANS OBTAINED BY THE ASSESSEE AND ALSO CALLED UPON THE ASSESSEE TO FURNISH REASONS FOR NOT D E D U C T I N G TAX AT SOURCE ON INTEREST PAYMENTS. SINCE THE ASSESSEE COULD NOT FURNISH THE INFORMATION, A.O. MADE THE FOLLOWING ADDITIONS AND DETERMINED THE TOTAL INCOME AT RS. 19,72,990/. (A) UNEXPLAINED LOANS IN THE NAME S OF SMT. KIRAN DEVI, FAMBRING FABRICS, BHAKTI TEXT, H. BHANWARLAL JAIN AND PR A MEELA JAIN - RS. 16,65,981/ - (B) NON - DEDUCTION OF TAX AT SOURCE ON INTEREST PAID / ACCRUED INTO GOVT. A/C - RS. 86,480/ - (C) NON - RECONCILIATION OF INTEREST RECEIPTS (ASSESSEE OFFERED AN AMOUNT OF RS. 74,990/ - AS INCOME) - RS. 74,990/ - (D) DISALLOWANCE OF EXPENDITURE OF 30% ON ACCOUNT OF NON - VERIFIABLE NATURE OF BILLS / VOUCHERS _ RS. 92,265/ - 3. ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT THE ASSESSEE FILED EVIDENCE IN THE FORM OF ACCOUNT COPIES OF FEMINGO FABRICS, BHAKTI TEXTILES, KIRAN DEVI, P . BHANVARAL JAIN AND PRAMEELA JI AN . BUT THE A.O. HAVING COMPETED THE ASSESSMENT U/S 144 OF THE ACT, REPORT WAS CALLED FOR FROM THE ASSESSING OFFICER IN RESPONSE TO WHICH IT WAS STATED THAT THE EVIDENCES WERE ALREADY FURNISHED BEFORE THE A.O. BUT THE ASSESSEE HAVING NOT APPEARED BEFORE THE A.O., THE SOURCES WERE NOT PROVED. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, EXCEPT FOR THE ACCOUNT COPIES, THE ASSESSEE HAS NOT FILED ANY CONFIRMATION LETTERS NOR ANY OTHER PROOF IN SUPPORT OF HIS CONTENTION. SINCE THE ONUS IS UPON THE ASSESS EE TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS, LD. CIT(A) CONFIRMED THE ADDITION MADE U/S 68 OF THE ACT. 3 4. ASSESSING OFFICER DISALLOWED INTEREST PAYMENTS AMOUNTING TO RS. 86,480/ - ON THE GROUND THAT TAX WAS NOT DEDUCTED AT SOU RCE AND THE ASSESSEE FAILED TO FILE FORM NO. 15 G/H. SINCE THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE EVEN BEFORE THE LD. CIT(A), THE ADDITION MADE BY THE A.O. WAS CONFIRMED BY THE LD. CIT(A). 5. WITH REGARD TO THE DIFFERENCE IN INTEREST INCOME RECEIVED BY THE ASSESSEE, THE ASSESSEE HAVING NOT RECONCILED AT ANY STAGE, THE SAME WAS UPHELD BY THE LD. CIT(A). 6. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF NON - VERIFIABILITY OF VOUCHERS, NO EVIDENCE HAVING BEEN FURNISHED TO CONTRADICT THE FINDINGS OF THE ASSESSING OFFICER, LD. CIT(A) AFFIRMED THE ACTION OF THE A.O. 7. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 8. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CREDIT IN THE NAME OF KIRAN DEVI DOES NOT BELONG TO THE YEAR OF ACCOUNT AND HENCE NO ADDITION CAN BE MADE. SIMILARLY, IN THE CASE OF FAMBRING FABRICS IT WAS STATED THAT THE CREDIT WAS AC CEPTED IN THE EARLIER PAST AND INTEREST WAS ALSO PAID TO THE SAID PARTIES IN THE EARLIER YEARS AND THEREFORE, THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST. SIMILAR ARGUMENTS WERE ADVANCED IN RESPECT OF THE OTHER THREE CREDITORS BY STATING THAT T HEY PERTAIN TO THE EARLIER YEARS AND HENCE NO ADDITION CAN BE MADE IN THIS YEAR. SIMILARLY, WITH REGARD TO THE DISALLOWANCE OF INTEREST IT WAS SUBMITTED THAT THE PERSON CONCERNED HAVING PROVIDED CERTIFICATE IN FORM NO.15 G, NO TDS IS REQUIRED. WITH REGARD TO ADDITION OF RS. 74,990/ - IT WAS SUBMITTED THAT INTEREST CAN BE TREATED AS INCOME ONLY TO THE EXTENT IT IS ACCRUED TO THE ASSESSEE AND THE AMOUNT WHICH IS NOT ACCRUED CANNOT BE TREATED AS INCOME. IN OTHER WORDS, NOTIONAL INTEREST CANNOT BE ADDED. IT WAS ALSO CONTENDED THAT THE EXPENDITURE INCURRED IN THE NATURE OF SALARIES, TRAVELLING EXPENSES, OFFICE RENT ETC., 4 IS REASONABLE AND DISALLOWANCE OF 30% OF THE EXPENDITURE IS ON HIGH SIDE. LD COUNSEL FOR THE ASSESSEE PLACED BEFORE US ACCOUNT COPIES OF TH E CREDITORS TO SUBMIT THAT NONE OF THE LOANS PERTAIN TO THIS YEAR AND HENCE NO ADDITION CAN BE MADE U/S 68 OF THE ACT. IT WAS ALSO CONTENDED THAT IF INTEREST PAID ON SUCH LOANS IS D I S ALLOWED U/S 40(A)(IA) OF THE ACT, IT IMPLIES THAT SOURCES ARE GENUINE IN WH ICH EVENT ADDITION COULD NOT HAVE BEEN MADE U/S 68 OF THE ACT. 9. WE HAVE ALSO HEARD THE LD DR IN THIS REGARD AND CAREFULLY PERUSED THE RECORD. AS REGARDS THE ADDITION MADE U/S 68 OF THE ACT, THE EVIDENCE PLACED BEFORE THE LD. CIT(A) PRIMA FACIE INDICATE THAT THE CASH CREDITS PERTAIN TO THE EARLIER YEARS. SINCE THE ASSESSING OFFICER DID NOT GET PROPER OPPORTUNITY TO VERIFY THE CLAIM, ASSESSMENT HAVING BEEN MADE U/S 144 OF THE ACT , W E DEEM IT FAIR AND REASONABLE TO SET ASIDE THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO CONSIDER THE MATTER AFRESH IN ACCORDANCE WITH LAW. THE A.O. MAY ALSO VERIFY AS TO WHETHER THE INTEREST PAID ON SUCH LOANS IS ALLOWED AS DEDUCTION AND IF SO WHETHER IT IS APPROPRIATE TO MAKE AN ADDITION WITH REGARD TO CASH CREDIT U/S 68 OF THE ACT. 10. THE NEXT ISSUE IS WITH REGARD TO APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT S INCE TAX WAS NOT DEDUCTED AT SOURCE ON INTEREST PAID BY THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT THE OTHER PARTY HAS PROVIDED A CERTIFICATE IN FORM NO. 15 G AND THEREFORE , NO TDS WAS MADE. HOWEVER, THE ASSESSEE FAILED TO FILE FORM NO. 15 G/H EVEN BEFORE THE TRIBUNAL. UNDER THESE CIRCUMSTANCES, WE ARE NOT PERSUADED TO ACCEPT THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY THE ADDITION MADE U/S 40(A)(IA) OF THE ACT IS HEREBY CONFIRMED. 11. AS REGARDS THE ADDITION OF RS. 74 ,990/ - THE ASSESSEE COULD NOT FURNISH ANY DETAILS EITHER BEFORE THE A.O. OR BEFORE THE LD. CIT(A) AND 5 ADMITTED THE DIFFERENCE IN RECONCILIATION AS INTEREST EARNED IN THIS YEAR. HOWEVER, FOR THE FIRST TIME THE ASSESSEE CONTENDS THAT NOTIONAL INTEREST CANNO T BE TAXED IN THIS YEAR . HOWEVER, NO EVIDENCE WAS PLACED EVEN BEFORE THE TRIBUNAL TO SUPPORT THE CONTENTION OF THE ASSESSEE . THEREFORE, WE ARE OF THE VIEW THAT THE ADDITION OF RS. 74,990/ - IS JUSTIFIED IN TH E CIRCUMSTANCES OF THE CASE. 12. AS REGARDS THE DISALLOWANCE OF 30% OF THE EXPENDITURE, LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IS IN TEXTILE BUSINESS AND CONSIDERING THE TURNOVER OF THE ASSESSEE THE EXPENDITURE CLAIMED IS REASONABLE AND MERELY BECAUSE CERTAIN VOUCHERS COULD NOT BE VE RIFIED, DISALLOWANCE OF 30% IS UNREASONABLE. WE HAVE HEARD THE LD DR ALSO IN THIS REGARD AND CAREFULLY PERUSED THE RECORD. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT RESTRICTING THE DISALLOWANCE / ADDITION TO RS. 50,000/ - WOU LD MEET THE ENDS OF JUSTICE AND WE DIRECT THE A.O. ACCORDINGLY. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2017. S D / - S D / - (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT OKK, SR.PS COPY TO 1. SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3 - 6 - 643. STREET NO.9, HIMAYAT NAGAR, HYDERABAD 500029. 2. INCOME TAX OFFICER, WARD - 10(1), AAYAKAR BHGAWAN, BASHEERBAGH, HYDERABAD. 3. CIT (A) - 9, HYDERABAD. 4. PR. CIT - 6, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE.