Varun Kumar Pawaiya, Bhopal V. I T O Ward1(2), Bhopal

ITA 114/Ind/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9025 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNEET KUMAR
• Keywords: Set aside
• Section: 251

Judgement Text

SMC I.T.A. 114 OF 2019 VARUN KUMAR PAWAIYA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.114IND/2019 A.Y. 2013-14 VARUN KUMAR PAWAIYA, BHOPAL / VS. ITO-1(2), BHOPAL (APPELLANT) (REVENUE ) P.A. N. AMNPP 3554 F APPELLANT BY WRITTEN SUBMISSION REVENUE BY SHRI PUNEET KUMAR, SR. DR DATE OF HEARING: 21.10.2020 DATE OF PRONOUNCEMENT: 23.11.2020 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS-3), INDORE DATE D 30.11.2018 CHALLENGING THE CONFIRMATION OF THE ADDITION OF RS. 3,50,000/- ON ACCOUNT OF DISALLOWANCE OF INTEREST MADE U/S 36(1)( III) OF THE INCOME TAX ACT. 2. FACTS, IN BRIEF, ARE THAT THE AO NOTED THAT THE ASSESSEE HAS SMC I.T.A. 114 OF 2019 VARUN KUMAR PAWAIYA 2 MADE INTEREST FREE ADVANCES TO FOUR PERSONS AT RS.4 7 LACS (RS.3,80,000 + RS.8,00,000 + RS.25,00,000 + RS.10,2 0,000). THE ASSESSEE HAD PAID INTEREST TO THE BANK ON CASH CRED IT LIMIT AS REFLECTED IN THE P & L ACCOUNT. HOWEVER, THE AO DISALLOWED TH E ENTIRE PAYMENT OF INTEREST TO THE BANK ON THE GROUND THAT BORROWED FUNDS HAVE BEEN UTILIZED FOR ADVANCING NON-BUSINESS LOANS. 3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL B EFORE THE LD. CIT(A) WHO ALSO CONFIRMED THE ACTION OF THE AO ON T HE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH THE BUSINESS EXIGENCIE S WITH THE AFORESAID FOUR PERSONS. 4. STILL AGGRIEVED, THE ASSESSEE HAS FILED AN APPEA L BEFORE THIS TRIBUNAL. BEFORE ME, THE ASSESSEE HAS FILED A WRITT EN SYNOPSIS WHEREIN IT IS CONTENDED THAT ALL THE INTEREST FREE LOAN TRANSACTIONS WERE MADE THROUGH THE SAVING BANK ACCOUNT OF THE ASSESSE E AND THERE IS NO INVOLVEMENT OF ASSESSEES BUSINESS CAPITAL WHICH WAS TAKEN ON LOAN FROM THE BANK IN FINANCING SUCH LOANS. FURTHER , IN THE RETURN, THE ASSESSEE HAS OFFERED INCOME FROM OTHER SOURCES AS I NTEREST INCOME AT RS.7,19,368 AND AFTER DEDUCING THE INTEREST PAID AT RS.5,77,610/-, THE NET INCOME WAS OFFERED AT RS.1,76,856/-, THEREFORE, THERE IS NO SMC I.T.A. 114 OF 2019 VARUN KUMAR PAWAIYA 3 BUSINESS FUNDS INVOLVED IN ADVANCING THE INTEREST F REE LOANS. THUS, THE ADDITION U/S 36(1)(III) IS UNJUSTIFIED. 5. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIV E (DR) RELIED UPON THE ORDER OF THE LD. CIT(A) BUT COULD NOT CONT ROVERT THE SUBMISSION OF THE ASSESSEE BY BRINGING ANY CONTRARY MATERIAL ON RECORD. 6. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. I FIND THAT THE AUTHORITIES BELOW COULD NOT CONSIDER THE FACT THAT THE TRANSACTIONS HAVE NO RELATION WITH THE BORROWED FUN DS AND ACCORDINGLY, THEY FAILED TO ESTABLISH THE NEXUS BEF ORE MAKING/CONFIRMING THE DISALLOWANCE. MY VIEW IS SUPP ORTED BY THE RATIO LAID DOWN IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS: 1. S.A. BUILDERS LTD. VS. CIT, 288 ITR 1 (SC); 2. R.D. JOSHI & CO. VS. CIT, 251 ITR 332 (MP); AND 3. D & H SECHERON ELECTRODES P. LTD. VS. CIT, 142 I TR 528 (MP). 7. ON CONSIDERATION OF ABOVE, I SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE A DDITION. SMC I.T.A. 114 OF 2019 VARUN KUMAR PAWAIYA 4 8. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23.11.20 20. SD/- (KUL BHARAT) JUDICIAL MEMBER INDORE; DATED : 23 /11/2020 VYAS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE