Riddhi Siddhi Marketing Pvt. Ltd., Ahmedabad V. The Income tax Officer,Ward-5(3), Ahmedabad

ITA 1145/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5867 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-07-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Assessee Lawyers: SURESH R SHAH
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER RIDDHI SIDDHI MKT. (P) LTD., 3 RD FLOOR, NOBLES, ASHRAM ROAD, AHMEDABAD. VS. INCOME-TAX OFFICER, WARD 5(3), C.U. SHAH COLLEGE BUILDING, ASHRAM ROAD, AHMEDABAD. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI SURESH R. SHAH, AR REVENUE BY:- SHRI P. R. GHOSH, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUND:- 1. THE LD. AO ERRED IN DISALLOWING A SUM OF RS.51,375/ - OUT OF INTEREST CLAIMED AND LD. CIT(A) ERRED IN CONFIRMING THE SAME. YOUR APPELLANT SUBMITS THAT THE DISALLOWANCE OF INT EREST IS ARBITRARY, UNWARRANTED AND BAD IN LAW, THE SAME SHO ULD BE DELETED. WITHOUT PREJUDICE TO ABOVE YOUR APPELLANT SUBMITS T HAT THE LD. AO ERRED IN DISALLOWING THE INTEREST OF RS.51,375/- ON ADVANCE MADE TO VALLABH KRUPA INVESTMENTS. YOUR APPELLANT S UBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF CASE THE LD. . AO IS NOT JUSTIFIED IN DISALLOWING PART OF INTEREST PAYMENT. THE SAME SHOULD BE FULLY ALLOWED. WITHOUT PREJUDICE TO ABOVE YOUR APPELLANT SUBMITS T HAT THE LD. AO IS NOT JUSTIFIED IN DISALLOWING THE INTEREST ON ENTIRE ADVANCE ITA NO.1145/AHD2010 ASST. YEAR :2007-08 2 MADE OF RS.5,13,762/- TO ABOVE PARTY. YOUR APPELLAN T SUBMITS THAT THE COMPANY IS HAVING THE INTEREST FREE FUND B Y WAY OF SHARE CAPITAL AND RESERVE FUND FOR AGGREGATE SUM OF RS.4,15,048/- ON WHICH THE COMPANY HAS NOT PAID ANY INTEREST. THE LD. AO AT THE MOST CAN DISALLOW THE INTEREST ON NET BALANCE OF RS.98,714/- @ 10%. YOUR APPELLANT SUBMITS THAT I T BE SO HELD NOW. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE FILED RE TURN OF INCOME AT RS.95,290/-. IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) AN ADDITION OF RS.51,375/- WAS MADE BY DISALLOWING INTEREST PAID B Y THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS GIVEN INTEREST-FREE DEPOSI TS TO SHRI VALLABH KRUPA INVESTMENT. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE AO NOTICED THAT ASSESSEE HAS ADVANCED A SUM OF RS.5,13 ,752/- TO SHRI VALLABH KRUPA INVESTMENT FREE OF INTEREST. ON THE OTHER HAN D IT IS NOTICED BY THE AO THAT ASSESSEE HAS BEEN PAYING HUGE AMOUNT OF INT EREST ON THE LOANS AND ADVANCES TAKEN BY IT FROM VARIOUS FINANCIAL INS TITUTIONS. IT WAS EXPLAINED TO THE AO THAT SAID ADVANCES WERE GIVEN T O SHRI VALLABH KRUPA INVESTMENT PRIOR TO YEAR 2000 OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE TO EARN THE INTEREST. THAT PARTY HAD STOPP ED TO GIVE INTEREST ON THE SAID LOAN AND NOW RECOVERY OF THE PRINCIPAL AMOUNT IS DOUBTFUL AND, THEREFORE, INTEREST WAS NOT CHARGED. THE AO, HOWEVE R, DID NOT AGREE AND DISALLOWED @ 10% ON RS.5,13,375/- A SUM OF RS.51,37 5/-. 3. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO IN A CRYPTIC MANNER AS UNDER :- 5. I HAVE EXAMINED THE ASSESSMENT ORDER AND GROUND S OF APPEAL. I HAVE ALSO EXAMINED THE WRITTEN SUBMISSIONS GIVEN BY THE LD. AR SHRI SURESH R. SHAH ON 17/2/2010 IN TWO PAGES, BUT I AM NOT CONVINCED WITH THE WRITTEN SUBMISSION. THEREFORE, THE ASSESSMENT O RDER PASSED BY THE LD. AO IS APPROVED AS IT IS. 3 4. I HAVE HEARD THE PARTIES AND CAREFULLY PERUSED T HE MATERIAL ON RECORD. IN MY CONSIDERED VIEW THE LD. CIT(A) HAS NO T CARRIED OUT HIS APPELLATE FUNCTIONING IN THE MANNER REQUIRED. HE HA S PASSED A NON- SPEAKING AND CRYPTIC ORDER WITHOUT TOUCHING THE MAI N ISSUE. HE HAD TO GIVE A FINDING AS TO WHEN ASSESSEE HAD GIVEN ADVANC ES TO SHRI VALLABHKRUPA INVESTMENT AND WHETHER THOSE ADVANCES WERE GIVEN OUT OF INTEREST-FREE CAPITAL AVAILABLE WITH THE ASSESSEE. FURTHER A FINDING WAS REQUIRED TO BE GIVEN AS TO WHETHER DEPARTMENT HAS A CCEPTED NON-CHARGING OF INTEREST FROM THIS PARTY AND ACCORDINGLY NON-DIS ALLOWANCE ANY PART OF INTEREST PAID BY THE ASSESSEE ON FUNDS BORROWED BY IT ON INTEREST. THUS THE PRINCIPLE OF CONSISTENCY HAD TO BE EXAMINED AND IF DEPARTURE IS REQUIRED TO BE MADE JUSTIFICATION HAS TO BE GIVEN. IN CASE F UNDS WERE GIVEN FOR BUSINESS PURPOSES, NO DISALLOWANCE OUT OF INTEREST PAID COULD BE MADE. FURTHER IF FUNDS GIVEN TO SHRI VALLABHKRUPA INVESTM ENT ARE IRRECOVERABLE AND HAVE BECOME STICKY THEN NON-CHARGING OF INTERES T COULD BE HELD TO BE JUSTIFIED. THE LD. CIT(A) IS ACCORDINGLY DIRECTED T O DECIDE THE ISSUE ON MERITS THROUGH A SPEAKING ORDER. THE APPEAL OF THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 8/7/2010 SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER AHMEDABAD, DATED : 8/7/2010 4 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD