M/s Bansal Rice Mills, Ishmailabad V. ITO, Kurukshetra

ITA 1122/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64070 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Proportionate interest
• Section: 40A(3); 143(3); 234B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1122/CHD/2012 (ASSESSMENT YEAR : 2009-10) M/S BANSAL RICE MILLS, VS. THE INCOME TAX OFFICER , ISMAILABAD. WARD-2, KURUKSHETRA. PAN: AABFB9095K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 12.12.2012 DATE OF PRONOUNCEMENT : 18.12.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KARNAL DATED 21.08.2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED HI LAW AS WELL AS ON FACTS IN UPHOLDING THE D ISALLOWANCE OF PROPORTIONATE INTEREST ON INTEREST FREE ADVANCES TO M/S TARSEM KUMAR & CO, M/S BALAJI TRADERS AND M/S NIRANJAN SIN GH & SONS WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEAL S) HAS ERRED IN NOT APPRECIATING THE BUSINESS EXIGENCIES AND COMMER CIAL, EXPEDIENCY IN RESPECT OF THE AFORE MENTIONED ADVANCES IN THE CORR ECT PERSPECTIVE AND AS SUCH THE ORDER PASSED IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.1,55,665/- MA DE BY APPLYING THE 2 PROVISIONS OF SECTION 40A(3) WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN NOT ADM ITTING THE ADDITIONAL GROUND OF APPEAL RAISED BEFORE HIM WHICH READ AS ' THAT THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN MAKIN G THE ADDITION OF RS.50,000/-ANDINDISALLOWING LOSS OF RS.50,000/- OUT OF SARBATI ACCOUNT AND BASMATI ACCOUNT 'WHICH IS ILLEGAL, ARBI TRARY & UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.50,000/- MADE ON ACCOUNT OF AD- HOC DISALLOWANCE OF LOSS CLAIMED OUT OF SARBATI ACC OUNT, AND RICE BASMATI ACCOUNT WHICH IS ILLEGAL, ARBITRARY & UNJUS TIFIED. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) HAS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER S ECTION 234-A & 234- B OF THE ACT WHICH IS NOT CHARGEABLE IN THE FACTS O F THE CASE. 7. THAT THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS O F THE CASE AND IS, THUS, UNTENABLE. 3. THE ISSUE IN GROUND NOS. 1 AND 2 RAISED BY THE A SSESSEE IS AGAINST THE DISALLOWANCE OF INTEREST ON INTEREST FREE ADVAN CES MADE TO M/S TARSEM KUMAR & CO., M/S BALAJI TRADERS AND M/S NARA NJAN SINGH & SONS. THE DISALLOWANCE WAS MADE BY THE ASSESSING O FFICER IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1(P&H)]. THE TOTA L DISALLOWANCE WORKED OUT IS ONLY RS.35,900/- AFTER THE RELIEF GRA NTED BY THE CIT (APPEALS) ON ACCOUNT OF THE ADVANCES MADE TO M/S AN AND PARKASH & SONS. THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY BUSINESS NECESSITY FOR ADVANCING THE SAID LOAN. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COUR T CIT VS. ABHISHEK INDUSTRIES (SUPRA), WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS GROUND NOS. 1 AND 2 RAISED BY THE ASSES SEE. 4. THE GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINS T THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT AMOUNTING TO R S.1,55,665/-. THE ISSUES ON ACCOUNT OF CASH PAYMENTS MADE UNDER THE H EAD PADDY FREIGHT 3 AND RICE FREIGHT WERE ADJUDICATED UPON BY THE CIT ( APPEALS) VIDE PARAS 2.05 AND 2.06 WHICH ARE AS UNDER: 2.05 THE ISSUE IS EXAMINED. DURING THE ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT SOME OF THE PAYMENTS CLAIMED UNDER THE HEAD PADDY FREIGHT AND RICE FREIG HT EXPENSES WERE MADE IN CASH THOUGH THE SAME WAS MORE THAN RS. 20.000/- EACH. THE AO NOTED IN THE ASSESSMENT ORDER THAT NO REPLY FOR MAKING PAYMENTS EXCEEDING RS.20,000/- IN CASH IN VIOLATIO N OF SECTION 40A(3) OF THE ACT, WAS FILED DURING THE ASSESSM ENT PROCEEDINGS AND ALSO NOTED THAT EVEN NO TDS WAS DEDUCTED FROM T HESE PAYMENTS. THE SAME WAS, THEREFORE, DISALLOWED BY THE AO AND I S CHALLENGED BY THE APPELLANT VIDE GROUND NO. 2 OF APPEAL. 2.06 IN THE WRITTEN SUBMISSIONS, THE APPELLANT TR IED TO JUSTIFY THESE PAYMENTS ON THE GROUND THAT THE SAME WAS MADE TO THE TRUCK DRIVERS OF UP & BIHAR WHO INSISTED FOR PAYMENT IN C ASH. THE APPELLANT, HOWEVER, DID NOT SPECIFY THE CLAUSE OF RULE 6DD OF THE INCOME TAX RULES,1962 WHICH SPECIFIES THE CIRCUMSTANCES WHEN T HE PAYMENT EXCEEDING RS.20.000/- IN CASH CAN BE ALLOWED. THE A O SPECIFICALLY POINTED OUT THIS FACT IN HIS ORDER THAT THE PAYMENT MADE IN VIOLATION OF SECTION 40AQ3) DID NOTCOVERINRULE6DD. THE DISALLOWA NCE MADE BY THE AO IS, THEREFORE, CONFIRMED.GROUNDNO.2OFAPPEAL IS, AS SUCH, REJECTED. 5. IN VIEW OF THE EXPRESS PROVISIONS OF THE ACT AND ALSO THE CASH PAYMENTS BEING MADE BY THE ASSESSEE, WE UPHOLD THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. THE GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED. 6. THE GROUND NOS.4 AND 5 ARE NOT PRESSED, HENCE TH E SAME ARE DISMISSED AS NOT PRESSED. 7. THE GROUND NO.6 IS IN RELATION TO INTEREST UNDER SECTIONS 234A & 234B OF THE ACT. HENCE, THE SAME BEING CONSEQUENT IAL IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF DECEMBER, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH DECEMBER, 2012 *RATI* 0COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/T HE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 4