Shri Jayantilal M. Modi, Ahmedabad V. The Income tax Officer,Ward-12(4), Ahmedabad

ITA 1066/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0194 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-07-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 24-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Proportionate interest; Corroborative evidences; Set aside
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.1066/AHD/2008 A. Y.: 2001-02 JAYANTILAL M. MODI, C/O. MUKESH M.PATEL & CO., 3-4, VITHALBHAI BHAVAN, NR. S. P. COLONY RLY CROSSING, AHMEDABAD 13 VS THE INCOME TAX OFFICER, WARD -12 (4), AHMEDABAD PA NO. ABOPM 4363 R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MUKESH M. PATEL, AR RESPONDENT BY SHRI K. M. MAHESH, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XX, AHMEDABAD DATED 26-11-2007 FOR ASSESSMENT YEAR 2001-02, CHALLENGING THE CONFIRMATI ON OF THE ADDITION ON ACCOUNT OF INTEREST OF RS.2,82,120/- MADE BY THE AO DEEMING IT TO BE USED FOR PERSONAL PURPOSE BY THE ASSESSEE. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,78,194/-. AFT ER DISALLOWING CERTAIN EXPENSED THE TOTAL INCOME WAS DETERMINED AT RS.9,14 ,840/-. THEREAFTER, THE LEARNED COMMISSIONER- VI, AHMEDABAD HAS SET ASI DE THE ORDER U/S 263 OF THE IT ACT DATED 09-03-2006 DIRECTING THE AO TO EXAMINE THE ASSESSMENT ORDER. THE LEARNED COMMISSIONER RAISED T HE QUERIES THAT IN THE BALANCE SHEET AMOUNT OF RS.23,61,000/- HAS BEEN SHOWN AS LOAN AND ADVANCES BUT THE ACTUAL AMOUNT TOWARDS LOANS AN D ADVANCES IS AT ITA NO.1066/AHD/2007 JAYANTILAL M. MODI VS ITO 12(4), AHMEDABAD 2 RS.24,61,000/-. THE DIFFERENCE OF RS.1,00,000/- IS NOT RECONCILED. FURTHER, THE AMOUNT OF RS.300.56 LACS HAS BEEN REFL ECTED AS UNSECURED LOAN IN THE BALANCE SHEET AND THE ASSESSEE HAS PAID INTEREST THEREON AND DEBITED TO THE PROFIT & LOSS ACCOUNT. THE AO HAS NO T PROPERLY VERIFIED THE ISSUE AND HAS NOT DISALLOWED PROPORTIONATE INTEREST . BESIDES, THE LOANS AND ADVANCES, THE BORROWED FUNDS WERE UTILISED FOR EXTENDING INTEREST FREE LOANS. FURTHER, INTEREST EXPENSES HAVE BEEN CL AIMED AT RS.4,25,000/- AND IT IS NOT CLEAR WHY SUCH AMOUNT H AS BEEN CLAIMED. IT APPEARS THAT THE AMOUNT AGAINST WHICH INTEREST HAS BEEN CLAIMED HAS NOT BEEN UTILISED FOR THE PURPOSE OF BUSINESS. THE AO WAS ACCORDINGLY DIRECTED TO VERIFY THE SAME. THE AO NOTED ON THE AB OVE GROUND THAT NO INCOME ON ACCOUNT OF INTEREST APPEARS ON PROFIT & L OSS ACCOUNT EVEN THOUGH LOANS AND ADVANCES TO THE EXTENT OF RS.23.51 LACS WAS EXTENDED. IT WAS STATED BY THE ASSESSEE THAT THE ADVANCES GIV EN TO SADBHAV REALITY IS PAID TOWARDS ADVANCE PAYMENT FOR PURCHASE OF RES IDENTIAL PROPERTY. HENCE, NO INTEREST INCOME HAS BEEN SHOWN ON THESE A DVANCES. THE ASSESSEE WAS ASKED TO FURNISH SUPPORTING EVIDENCE T O PROVE THE LINK OF THESE INVESTMENTS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE SAID AMOUNT WAS PAID TO SADBHAV REALITY FROM HIS INCOME OF EARL IER YEARS. DURING THE ACCOUNTING YEAR 1998-99 THE ASSESSEE HAD WITHDRAWN RS.26,49,117/- FROM HIS CAPITAL ACCOUNT AND MAJORITY OF THIS AMOUN T WAS PAID TO SADBHAV REALITY FOR PURCHASE OF THE HOUSE. COPY OF THE CAPITAL ACCOUNT WAS ALSO FILED. IT WAS FURTHER SUBMITTED THAT IN TH E ASSESSMENT YEAR UNDER APPEAL I.E. 2001-02, NO INTEREST BEARING FUND WAS DIVERTED FOR NON INTEREST BEARING LOANS AND ADVANCES AND WHATEVER FU ND WAS PAID TO SADBHAV REALITY WAS PAID FROM THE EARLIER YEARS. TH E AO AFTER VERIFYING THE PAYMENTS MADE TO SADBHAV REALITY NOTED THAT REC EIPTS NO.15, 16, 17 AND 19 ARE ALL DATED 23-03-2000, THEREFORE, PAYMENT S ARE MADE ON 23-03-2000 AND NOT IN EARLIER YEARS. THEREFORE, CON TENTION OF THE ASSESSEE IS NOT CORRECT. THE AO, THEREFORE, NOTED THAT THE INTEREST CLAIMED AT RS.4,25,000/- HAD NOT BEEN UTILISED FOR BUSINESS PURPOSES. ITA NO.1066/AHD/2007 JAYANTILAL M. MODI VS ITO 12(4), AHMEDABAD 3 PROPORTIONATE DISALLOWANCE OUT OF THE INTEREST WAS MADE FOR A SUM OF RS.2,82,120/-. SAME SUBMISSIONS WERE REITERATED BEF ORE THE LEARNED CIT(A) AND IT WAS SUBMITTED THAT BORROWED FUNDS WER E USED ONLY FOR BUSINESS PURPOSE AND THAT NO INTEREST BEARING FUNDS HAVE BEEN DIVERTED. IT WAS FURTHER REITERATED THAT AS NO FUND OR ADVANC E HAS BEEN GIVEN IN THE ASSESSMENT YEAR IN QUESTION, THEREFORE, ADDITION IS UNJUSTIFIED. THE LEARNED CIT(A), HOWEVER, CONFIRMED THE ADDITION. HI S FINDINGS IN PARA 6 ARE REPRODUCED AS UNDER: 6. I HAVE CONSIDERED T HE CONTENTIONS OF THE COUNS EL OF THE APPELLANT AND HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER OF THE AO. AS REGARDS THE DIFFEREN CE OF RS.1,00,000/- REFLECTED LESS IN THE BALANCE SHEET, IT WAS NOTHING BUT A TYPING MISTAKE AS THE ACTUAL BALANCE OUTSTANDING WAS IN THE NAME OF M/S. ANIL TRADERS AT RS.10,000/-ONLY AND NOT RS.1,10,000/-. HENCE, THE A CTUAL TOTAL OF LOANS AND ADVANCES WAS OF RS.23,61,000/- A ND NOT RS.24,61,000/-. AS REGARDS THE BORROWED FUNDS NOT U TILIZED FOR THE PURPOSE OF BUSINESS, IT IS SEEN THAT NO INC OME ON ACCOUNT OF INTEREST APPEARS IN THE PROFIT AND LOSS ACCOUNT EVEN THOUGH LOAN AND ADVANCES TO THE EXTENT OF RS.23.51 LACS WERE EXTENDED. IT IS CONTENDED BY THE APPELLANT THAT THE SAID AMOUNT WAS AN ADVANCE PAYMENT TOWARDS THE PURCHASE OF RESIDENTIAL PROPERTY TO ONE, SADBHAV REALITY. THE A PPELLANT COULD NOT EXPLAIN AS TO HOW THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS WITH SPECIFIC INSTANCES OF BUSINESS INVESTMENTS AND PERSONAL INVESTMENTS. THEREFORE, TH E CONTENTION OF THE APPELLANT THAT PAYMENT MADE BY TH E APPELLANT WAS NOT FROM HIS INCOME OF THE EARLIER YE AR IS NOT CORRECT. MOREOVER, THE APPELLANT HAS SHOWN WITHDRA WAL FROM HIS CAPITAL ACCOUNT DURING THE ACCOUNTING YEAR 1998 -99 AT RS.26,49,117/-, THE INVESTMENT AND USE OF THE SAME HAS NOT BEEN CLARIFIED. THEREFORE, IT IS VERY WELL PROVED T HAT THE BORROWINGS TO THE EXTENT OF RS.23,61,000/- HAVE NOT BEEN SPENT FOR THE PURPOSE OF BUSINESS. HENCE, THE ADDIT ION MADE BY THE AO IS VERY WELL JUSTIFIED AND HEREBY CONFIRM ED. THIS GROUND OF APPEAL IS REJECTED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED COPIES OF THE RECEIPTS DATED 23-03-2000 AS ARE REFERRED TO BY THE AO IN THE ASSE SSMENT ORDER AND HAS ITA NO.1066/AHD/2007 JAYANTILAL M. MODI VS ITO 12(4), AHMEDABAD 4 POINTED OUT FROM THE RECEIPTS THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES BEARING DATED 05-10-1998, 04-12-1998, 26-10 -1999 AND 17-11-1999. HE HAS SUBMITTED THAT THE BUILDER HAS I N FACT ISSUED THE RECEIPTS LATER ON BUT THE DATES OF PAYMENT CLEARLY REVEALED THAT THE PAYMENTS HAVE BEEN MADE IN THE EARLIER YEARS. ON TH E OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE ADDITION IS CLEARLY UNJUSTIFIED. THE ASSESSEE HAS SPECIFICALLY PLEADED BEFORE THE AUTHORITIES BELOW THAT AMOUNT WAS PAID T O SADBHAV REALITY IN THE EARLIER YEARS AND NO INTEREST BEARING FUNDS HAV E BEEN DIVERTED IN THE ASSESSMENT YEAR IN QUESTION. THE ASSESSEE ALSO FILE D COPIES OF THE ABOVE RECEIPTS DATED 23-03-2000 BEFORE THE AO AND THE AO NOTED FROM THE RECEIPTS THAT PAYMENTS ARE ONLY MADE ON 23-03-2000 AND NOT IN THE EARLIER YEARS. THIS WAS THE REASON FOR DISALLOWING PROPORTIONATE INTEREST NOT USED FOR BUSINESS PURPOSE. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPIES OF THE SAME RECEIPTS BEFORE US AS WERE FILED BEFORE THE AO WHICH CLEARLY REVEAL THAT THOUGH THE DATES OF THE RECEIPT S IN QUESTION ARE DATED 23-03-2000 BUT THE PAYMENTS MENTIONED IN THE RECEIP TS WERE MADE THROUGH CHEQUES DATED 05-10-1998, 04-12-1998, 26-10 -1999 AND 17-11-1999. THE DATES OF THE CHEQUES MENTIONED IN T HE RECEIPTS HAVE NOT BEEN APPRECIATED BY THE AUTHORITIES BELOW. SINCE TH E PAYMENTS THROUGH CHEQUES HAVE BEEN MADE IN EARLIER YEARS, THEREFORE, IT WOULD PROVE THAT NO INTEREST BEARING FUNDS HAD BEEN DIVERTED TO SADB HAV REALITY IN THE ASSESSMENT YEAR IN QUESTION. THEREFORE, PROPORTIONA TE DISALLOWANCE OF THE INTEREST IS HIGHLY UNJUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE A UTHORITIES BELOW AND DELETE THE ADDITION. ITA NO.1066/AHD/2007 JAYANTILAL M. MODI VS ITO 12(4), AHMEDABAD 5 6. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 06-08-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 06-0 8-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD