Hindustan Fertilizers, Jind V. ITO, Jind

ITA 1126/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90135 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: A K JAIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 1126/CHD/2015 ASSESSMENT YEAR: 2007-08 HINDUSTAN FERTILIZERS, VS. THE ITO, OLD ANAJ MANDI WARD 1 JIND JIND PAN NO. AAEFH0242H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. JAIN RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 25/05/2015 DATE OF PRONOUNCEMENT : 25/05/2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), ROHTAK DATED 13.10.2014 RELATING TO ASSE SSMENT YEAR 2007- 08. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK IS AGAINST FACTS & IS BAD IN LAW. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE 2 ASSESSING OFFICER OF AN ADDITION OF RS. 2,98,677/- BY DISALLOWING INTEREST PAID TO THE CASH CREDITORS DEBITED TO PROFIT & LOSS ACCOUNT OF THE APPELLANT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E BUSINESS OF THE ASSESSEE FIRM IS HANDLING AND TRANSPORTATION OF FER TILIZER AT JIND FOR THE LAST SEVERAL YEARS. FOR THE ASSESSMENT YEAR 200 7-08 ASSESSEE SUBMITTED ITS RETURN OF INCOME DECLARING TOTAL INCO ME AT RS. 40,660/- ON 31/10/2007, AND THE ASSESSMENT WAS COMPLETED ON AN INCOME OF RS. 98,790/- UNDER SECTION 143(3) OF THE ACT VIDE O RDER DATED 27/10/2009. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 143(3)/147 OF THE INCOME TAX ACT 1961 . ON A PERUSAL OF CAPITAL ACCOUNT OF PARTNERS, THE AO NOTICED THAT THERE WAS AN OPENING DEBIT BALANCE OF RS. 35,55,689/- IN THE NAM E OF ONE PARTNER SHRI DAYA NAND AND NO INTEREST WAS CHARGED FROM HI M. SIMILARLY, IN THE CASE OF SHRI RAMESHWAR DASS THERE WAS AN OPENIN G CREDIT BALANCE OF RS. 1,69,026/- BUT A DRAWING OF RS. 5,30 ,000/- WAS MADE DURING THE YEAR, RESULTING THEREBY A CLOSING DEBIT BALANCE OF RS. 3,40,642/- AND NO INTEREST FROM THE PARTNER WAS CHA RGED. ACCORDING TO THE A.O, ON THE ONE HAND THE ASSESSEE IS PAYING INTEREST TO THE CREDITORS BUT ON THE OTHER HAND THE ASSESSE HAS NOT CHARGED ANY INTEREST FROM THE PARTNERS. THE AO OPINED THAT BUSI NESS FUNDS WERE DIVERTED TOWARDS NON-BUSINESS PURPOSES. THE DEBIT B ALANCE IS IN THE ACCOUNTS OF BOTH THE PARTNERS AT THE END OF THE YEA R WAS APPROXIMATELY RS. 39.00 LACS. EVEN AT THE BEGINNING OF THE YEAR, THERE WAS DEBIT BALANCE OF RS. 35.55 LACS. THE AO O BSERVED THAT THE INTEREST @ 12% ON RS. 35.00 LACS COMES TO RS. 4.20 LACS. IN ACTUAL, THE INTEREST PAID BY THE ASSESSEE FOR ARRANGING FUNDS I S RS. 323677/-. THE 3 AO OBSERVED THAT ENTIRE INTEREST EXPENSES OF RS. 32 3677/- DESERVES TO BE DISALLOWED. HOWEVER, THE AO OBSERVED THAT RS. 25 ,000/- HAS ALREADY BEEN DISALLOWED IN THE ASSESSMENT ORDER DT. 27/10/2009 PASSED UNDER SECTION 143(3) OF THE ACT. IN VIEW OF THE ABOVE THE AO DISALLOWED RS. 2,98,677/- ( RS. 323677.00 - RS. 25, 000.00 DISALLOWED UNDER SECTION 143(3) DT. 27/10/2009). 4. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 2,98,677, AND HENCE THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 5. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AT LENGTH AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. THERE IS NO DISPUTE AS REGARDS THE FACTS OF THE PRESENT CASE. I T IS OBSERVED THAT THERE IS A OPENING DEBIT BALANCE OF RS. 35,55,689/- IN THE NAME OF ONE PARTNER, SHRI DAYA NAND. IT IS CLEAR THAT THE S AID AMOUNT WAS NOT DIVERTED DURING THE YEAR UNDER CONSIDERATION; BUT I T STANDS AS BALANCE BROUGHT FORWARD FROM THE EARLIER YEARS. IT IS SETTLED LAW THAT AS FAR AS AN OPENING BALANCE IS CONCERNED NO DISALL OWANCE OF THE INTEREST IS CALLED FOR. ADMITTEDLY IN THE CASE OF S HRI RAMESHWAR DASS THERE WAS AN OPENING CREDIT BALANCE OF RS. 1,69,026 /- BUT A DRAWING OF RS. 5,30,000/- WAS MADE DURING THE YEAR, RESULTI NG THEREBY A CLOSING DEBIT BALANCE OF RS. 3,40,642/ AND NO INTER EST FROM THE AFORESAID PARTNER WAS CHARGED. AS PER THE DETAILS O F UNSECURED LOANS AND THE INTEREST PAID AVAILABLE IN ASSESSEES COMPILATION IT IS CLEAR THAT OPENING BALANCE IS OF RS. 69,19,423/-. D URING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, TH E ASSESSEE HAS BORROWED A SUM OF RS. 15,28,842.68 AND REPAID THE A MOUNT OF RS. 11,60,152.00. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS. 32,36,77.00 AS AN INTEREST ON BORR OWED FUNDS. 4 FROM THE ABOVE IT IS CLEAR THAT AO HAS WRONGLY OBSE RVED THAT RS. 35.55 LACS TO RS. 39.00 LACS WAS USED FOR NON B USINESS PURPOSES DURING THE YEAR UNDER CONSIDERATION. HOWEVER IN THE CASE OF SHRI RAMESHWAR DASS PARTNER THERE WAS AN OPENING CREDIT BALANCE OF RS. 1,69,026/- BUT A SUM OF RS. 5,30,000/- WAS DIVERTED TO HIM DURING THE YEAR UNDER CONSIDERATION, RESULTING THEREBY A CLOSI NG DEBIT BALANCE OF RS. 3,40,642/- AND NO INTEREST FROM THE PARTNER WAS CHARGED. THUS, THE AMOUNT OF RS. 3,40,642/- WAS DIVERTED FOR NON-B USINESS PURPOSES. IT IS OBSERVED THAT INTEREST @ 12% ON RS. 3,40,642/ - COMES TO RS. 40,877/- AND THE SAID AMOUNT IS HEREBY DISALLOWED. THUS THE ASSESSEE GETS A RELIEF OF RS. 257800 (RS. 298677.00 RS. 408 77.00) 6. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON 25.05.2015 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 25/05/2015 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR