M/s Sriyansh Knitters Pvt. Ltd., Ludhiana V. ACIT, C-VII, Ludhiana

ITA 1177/CHANDI/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7807 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-01-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 26-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETINDER MANN JCIT
• Assessee Lawyers: RAJIV SHARMA
• Keywords: Opportunity of being heard; Proportionate interest; Set aside
• Section: 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 1177/CHD/2017 ASSESSMENT YEAR : 2012-13 M/S SRIYANSH KNITTERS PRIVATE LTD. H-7, TEXTILE COLONY, LUDHIANA THE ACIT CIRCLE-VII, LUDHIANA PAN NO: AACCS4628K APPELLANT RESPONDENT !' ASSESSEE BY : SHRI RAJIV SHARMA, ADVOCATE #!' REVENUE BY : SMT. GEETINDER MANN, JCIT $ %! & DATE OF HEARING : 22/01/2020 '()*! & DATE OF PRONOUNCEMENT : 22/01/2020 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 31/05/2017 OF LD. CIT(A)-3, LUDHIANA. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-3, LUDHIANA DATED 31.05.2017 IS WRONG AGAINST LAW AND FACTS OF THE CASE. 2. (A) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-3, LUDHIANA ERRED IN CONFIRMING ADDITION ON ACCOUNT OF DISALLOWANCE O F INTEREST EXPENSES OF RS.2,88,000/- BY WRONGLY APPLYING THE CASE OF M/S. ABHISHEK INDUSTRIES LTD. WHEN THESE EXPENSES RELATE TO TRADE AND WERE ADVANCES FO R CONSTRUCTION TO SH. KIRPAL SINGH. (B) THAT THE APPELLANT HAS CATEGORICALLY EXPLAINED THAT THESE ADVANCES RELATE TO TRADE FOR CONSTRUCTION OF GUEST HOUSE, WHICH HAS NO T BEEN COMPLETED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, BUT HAS BEEN C OMPLETED SUBSEQUENTLY. HENCE THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-3 FAILED TO APPRECIATE THE FACTS AND ERRED IN CONFIRMING THE ADDITION. (C ) THAT THE APPELLANT HAS AGREED TO ADDITION ON A CCOUNT OF UNVOUCHED EXPENSES AND NOT TO DISALLOWANCE OF INTEREST UNDER SECTION 36(L)(III) OF THE INCOME TAX ACT, 1961 AS PER GROUNDS IN FOREGOING PARAS, (D ) THE LEARNED CIT (APPEALS) 2 ERRED IN DISMISSING THIS GROUND REGARDLESS OF FACT THAT ON SAME ISSUE THE APPEAL HAS BEEN ALLOWED IN ASSESSMENT YEAR 2011-12 AND ASS ESSMENT YEAR 2013-14. 3. THAT THE APPELLANT CRAVES TO AMEND, ALTER, DELET E OR SUPPLEMENT ANY GROUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPO SED OFF. 3. FROM THE AFORESAID GROUNDS IT IS GATHERED THAT T HE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST AMOUNTING TO RS. 2,88,000/-. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS DERIVING INCOME FROM MANUFACTURING & SALE OF HOSIERY GOODS AND FIELD ITS RETURN OF INCOME ON 28/09/2012 DECLARING AN INCOME OF RS. 1,26,67,980/- UNDER NORMAL PROVISIONS AND RS. 1,30,93,247/- UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). LATER ON THE CASE WAS SELECT ED FOR SCRUTINY. THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDING NOTICED THAT TH E ASSESSEE HAD GIVEN INTEREST FREE ADVANCES OF RS. 24,00,000/- FOR NON B USINESS PURPOSES, THEREFORE THE PROPORTIONATE INTEREST WAS TO BE DISALLOWED UNDER S ECTION 36(1)(III) OF THE ACT, IN VIEW OF THE JUDGMENT IN THE CASE OF M/S ABHISHEK IN DUSTRIES LTD. REPORTED AT 286 ITR 1. 5. THE A.O. IN PARA 2.2 OF THE ASSESSMENT ORDER DT. 20/02/2015 OBSERVED THAT THE COUNSEL FOR THE ASSESSEE HAD AGREED THAT THE SA ID ADDITION SHOULD BE MADE TO THE TOTAL INCOME OF THE ASSESSEE. THE A.O. WORKE D OUT THE AMOUNT OF INTEREST AT RS. 2,88,000/- I.E; 12% OF RS. 24,00,000/- FOR 1 2 MONTHS AND MADE THE ADDITION U/S 36(1)(III) OF THE ACT, IN THE HANDS OF THE ASSE SSEE. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO ALSO SUSTAINED THE ADDITION BY OBSERVING IN PARA 4. 3 OF THE IMPUGNED ORDER AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUB MISSION. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS ITSELF OFFERED FOR AGR EED ADDITION AS IT HAS CLEARLY BEEN MENTIONED IN THE ASSESSMENT ORDER. THEREFORE, IN MY CONSIDERED VIEW THE APPELLANT HAS NO CASE FOR APPEAL AS IT HAS ITSELF A GREED FOR THE ADDITION TO BE 3 MADE IN ITS INCOME AT THE TIME OF ASSESSMENT PROCEE DINGS. THERE ARE SEVERAL JUDICIAL PRONOUNCEMENTS CONFIRMING THIS VIEW. FURTH ER, THE APPELLANT DURING THE COURSE OF THE APPELLATE PROCEEDINGS HAS MENTIONED A ND RELIED UPON THE ORDER OF CIT(A)-4, LUDHIANA IN THE CASE OF ITS OWN CONCERN. I AM NOT INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT. IN ITS WRITTEN, SU BMISSION THE APPELLANT HAS MISERABLY FAILED TO EXPLAIN ANY COMMERCIAL EXPEDIEN CY OR ANY BUSINESS RELATION OF ADVANCE OF RS. 24 LAC, TO SH. KIRPAL SINGH. IT I S OBSERVED THAT NEITHER THE APPELLANT HAS EXPLAINED THE POSITION OF INTEREST FR EE FUNDS AT THE TIME OF ADVANCEMENT OF LOANS. NEITHER ANY COMMERCIAL EXPEDI ENCY HAS BEEN EXPLAINED BY THE APPELLANT, WHILE ADVANCING THESE ADVANCES TO SH. KIRPAL SINGH. AT THE SAME TIME THIS FACT GOES AGAINST THE PROBABILITY OF ADVANCING HUGE SUM TO AN INDIVIDUAL FOR CONSTRUCTION OF GUESTHOUSE WHICH WAS YET TO TAKE PLACE. THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE'S CLAIM IN THIS REGARD. ACCORDINGLY, THE DISALLOWANCE OF RS.2,88,000/- U/S 36(1) (III) O F THE ACT ON ACCOUNT OF INTEREST FREE LOANS AND ADVANCE IS ORDERED TO BE CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. 7. NOW THE ASSESSEE IS IN APPEAL. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS HAVING SURPLUS FUNDS OUT OF WHICH INTEREST FREE ADVANCES W ERE GIVEN THEREFORE THE DISALLOWANCES MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. IT WAS STATED THAT THE ASSESSEE NEVER AG REED FOR THE ADDITION, IN SUPPORT OF THIS SUBMISSION, COPIES OF ORDER SHEETS WERE FUR NISHED WHICH ARE PLACED ON THE RECORD. IT WAS ALSO STATED THAT SIMILAR ADDITIONS M ADE BY THE A.O. IN THE PRECEDING A.Y. 2011-12 AND SUCCEEDING A.Y. 2013-14 HAVE BEEN DELETED BY THE LD. CIT(A). 9. IN HER RIVAL SUBMISSIONS THE LD. DR SUBMITTED TH AT THE ASSESSEE ITSELF AGREED FOR THE ADDITION AND NO REASON HAS BEEN GIVEN FOR D EVIATING FROM THE SAID STAND TAKEN BY THE ASSESSEE BEFORE THE A.O. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT IN THE COPIES OF THE ORDER SHEETS PLACED AT PAGE NO. 1 TO 7 OF THE ASSESSEES PAPER BOOK, NOWHERE IT IS MENTIONED THAT THE ASSESSEE AGR EED FOR THE ADDITION. IT IS ALSO NOTICED THAT THE CLAIM OF THE ASSESSEE BEFORE THE A.O. AS PER THE ORDER SHEET ENTRY DT. 19/02/2015 WAS THAT THE ADVANCES TO SHRI KRIPAL SINGH WERE GIVEN 4 FOR THE CONSTRUCTION OF GUEST HOUSE. THEREFORE BY C ONSIDERING THE CONTRADICTORY STAND OF THE A.O. I.E. THE ASSESSEE ADMITTED FOR AD DITION AND THE CLAIM OF THE ASSESSEE THAT NO SUCH ADMISSION WAS MADE FOR MAKING THE ADDITION AND THIS PLEA THAT NON INTEREST BEARING FUNDS WERE AVAILABLE WITH THE ASSESSEE. WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF A.O. TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2020 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 22/01/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE