M/s. Narendra Industries, Burhanpur V. The ADDL. CIT RANGE- KHANDWA, Khandwa

ITA 118/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5693 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S N AGRAWAL

Judgement Text

M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, INDORE BEFORE SHRI D.T. GARASIA, HON'BLE JUDICIAL MEMBER ITA NO. 118/IND/2014 A.Y.2008-09 M/S NARENDRA INDUSTRIES BURHANPUR PAN AAAFN 7193D ::: APPELLANT VS ADDL. COMMISSIONER OF INCOME TAX RANGE, KHANDWA ::: RESPONDENT APPELLANT BY SHRI S.N. AGRAWAL & SHRI PANKAJ MOGRA RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 18.7.2016 DATE OF PRONOUNCEMENT 2 5 .7.2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 28.11. 2013. 2. THE GROUND NO. 1 IS THAT THE LEARNED CIT(A) ERRED IN MAINTAINING THE DISALLOWANCE OF RS.4,30,003/- MADE BY T HE ASSESSING OFFICER OUT OF INTEREST EXPENSES. M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 2 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND THAT THE ASSESS EE HAS ADVANCED A LOAN OF RS. 2 CRORES ON 16.8.2007 TO ONE M/S K.S. CONSUPRO INDIA PVT. LTD.. THE AMOUNT OF RS.1,95,00,000/- WAS RECEIVED BY THE ASSESSEE ON VARI OUS DATES. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT T HE ASSESSEE WAS HAVING SECURED AND UNSECURED LOANS. THE AMOUNT WAS ADVANCED TO THE ABOVE PARTY FREE OF INTEREST. WHEN CONFRONTED, THE ASSESSEE ACCEPTED THAT NO INTERES T HAS BEEN CHARGED. THE ASSESSEES COUNSEL REQUESTED THAT THE INTEREST @ 9% PER ANNUM SHOULD BE CHARGED ON THE DEPOSIT AND UNSECURED LOAN DURING THE YEAR NOT EXCEEDI NG 9%. THE DETAILED WORKING OF CALCULATION WAS GIVEN BY T HE ASSESSING OFFICER IN THE ASSESSING OFFICER. THE MATT ER WAS CARRIED TO THE LEARNED CIT(A) AND THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 3 4. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS CAPITAL OF PARTNERS WHICH WAS CREDITED IN THE BOOKS OF THE FIRM TO THE EXTENT OF RS.88588197/- ON WHICH NO INTEREST WAS PAID BY THE FIRM. HOWEVER, IN THE YEAR UNDER CONSIDERATION TEMPORARY ADVANCE WAS GIVEN THAT TOO FOR BUSINESS PURPOSES. THE ASSESSEE HAS TAKEN LOAN FROM STATE BANK OF INDIA IN THE FORM OF CASH CREDIT LIMIT OF RS.63310783 /-. THE AMOUNT SO BORROWED WAS UTILISED TOWARDS THE OBJECT FOR WHICH THE SAID LOAN WAS TAKEN. THE AMOUNT DUE FROM SUNDRY DEBTORS WAS RS.94451128 AND CLOSING STOCK ON 3 1 ST MARCH WAS RS.55652564/-. THEREFORE, THE ASSESSEE HAS NO T DIVERTED THE INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT WHEN THE ASSESSEE HAS INTEREST FREE FUNDS IN HIS ACCOUNT, NO DISALLOWANCE OF INTEREST CAN BE MADE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDE R OF M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 4 THE TRIBUNAL IN ITA NO. 602/IND/2014 AND HE ALSO RELIE D UPON THE DECISION OF THE BOMBAY HIGH COURT IN THE C ASE REPORTED IN 178 TAXMANN.135(BOM). 5. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSEE HAS GIVEN TEMPORARY LOAN TO ONE PARTY AT DELHI BUT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO PROV E THAT THE ASSESSEE HAS GIVEN THIS LOAN FOR BUSINESS PURP OSES TO M/S K.S. CONSUPRO INDIA PVT. LTD. WHEN THE ASSESSE E HAS NOT USED THIS AMOUNT FOR BUSINESS PURPOSES, INTER EST IS TO BE CHARGED FROM THE ABOVE PARTY AND THE ASSESSING OFFICER AND THE LEARNED CIT(A) ARE JUSTIFIED IN DISALLO WING THE SAME. 6. I HAVE HEARD THE RIVAL CONTENTIONS. DURING THE COUR SE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE WAS ASK ED TO PROVIDED COPIES OF ADVANCE GIVEN TO M/S K.S. CONSU PRO INDIA PVT. LTD. THE ASSESSEE WAS DIRECTED TO GIVE EVID ENCE WHETHER THIS AMOUNT WAS GIVEN FOR BUSINESS EXPEDIENC Y OR M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 5 NOT AND IF IT IS A BUSINESS TRANSACTION, THE EVIDENCE T HAT THIS ADVANCE WAS GIVEN FOR BUSINESS PURPOSES. THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS LOAN WAS G IVEN FOR PURCHASE OF GOODS AND THE PURCHASE WAS NOT FINALISE D, THEREFORE, THE AMOUNT WAS RECEIVED BACK BY THE ASSESSEE FOR WHICH NO INTEREST WAS CHARGED. I DO NOT AGREE WIT H THE SUBMISSION OF THE ASSESSEE BECAUSE THE ASSESSEE IS UNAB LE TO PROVE BEFORE ME THAT THE ASSESSEE HAS ADVANCED THIS LOAN TO M/S K.S. CONSUPRO INDIA PVT. LTD. FOR BUSINES S PURPOSES. M/S K.S. CONSUPRO INDIA PVT. LTD. IS NOT A SISTER CONCERN OF THE ASSESSEE. THE ASSESSEE HAD NO BUSINESS TRANSACTION WITH THIS PARTY PRIOR TO THIS ADVANCE AND SUBSEQUENTLY THE ASSESSEE HAD NO BUSINESS CONNECTION WITH M/S K.S. CONSUPRO INDIA PVT. LTD.. MOREOVER, TH E ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT THI S ADVANCE WAS GIVEN FOR BUSINESS PURPOSES. THE ASSESSEE AGREED BEFORE THE LOWER AUTHORITIES AND BEFORE ME ALSO THAT M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 6 THE INTEREST MAY BE CHARGED @ 9% BUT THE ASSESSEE WANSTED TO TAKE THE BENEFIT THAT HE HAVING SUFFICIENT INTEREST FREE FUND OF RS.119791242/-. THEREFORE, NO INTEREST HAS BEEN CHARGED BUT IN MY VIEW THE ASSESSEE HAS A PARTNERS ACCOUNT AND SUNDRY CREDITORS. MOREOVER, THE ASSESSEE HAS TAKEN TOTAL INTEREST BEARING FUNDS OF RS.67007411/-. THEREFORE, WHEN THE ASSESSEE IS PAYIN G INTEREST ON THE AMOUNTS BORROWED BY IT, THE ONLY BUS INESS FUND CAN BE USED ON THE GROUND OF BUSINESS EXPEDIENC Y AND NOT OTHERWISE. THE ASSESSEE IS TO PROVE THE NEXUS THAT THE ASSESSEE HAS BUSINESS TRANSACTIONS WITH THIS PARTY B UT DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT HE HAS NO BUSINESS TRANSACTIONS WITH THIS PARTY, THEREFORE, THE ASSESSEE WAS UNABLE TO PROVE THAT BUSINESS FUNDS WERE UTILISED FOR ADVANCING FOR BUSINESS PURPOSES. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CITED THE DECISIO N OF M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 7 ITAT, INDORE BENCH, IN THE CASE OF M/S KEHEMS ENGINEERING PVT. LTD.; ITA NO. 602/IND/2014 BUT IN THAT CASE THE ASSESSEE HAS MADE THE INTEREST IN SISTER CONCE RN. SIMILARLY, IN THE CASE OF BOMBAY HIGH COURT DECISION CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE O F CIT VS. RELIANCE UTILITIES & POWER LTD.; 178 TAXMAN 135(B OM) THE ASSESSEE HAD MADE INVESTMENT IN SISTER CONCERN FO R WHICH HE HAS NOT CHARGED ANY INTEREST. AS SUCH, THE F ACTS OF THESE CASES ARE DISTINGUISHABLE WITH THE FACTS OF TH E PRESENT CASE. THE PECULIAR FACTS OF THIS CASE PROVE THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT THE ADVANCE WAS GIVEN ON COMMERCIAL CONSIDERATION. THEREFORE, I DISMISS THIS GROUND. 7. SO FAR AS GROUND NO. 2 RELATING TO AD HOC DISALLOWANCE TO THE EXTENT OF RS.75,000/- OUT OF KAPAS EXPENSES IS CONCERNED, THE ASSESSING OFFICER FOUND THAT THE ASSES SEE HAS SHOWN FB BALES AT RS.13.83 CRORES AND COTTON SEED M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 8 SALES AT RS.4.17 CRORES AGAINST WHICH KAPAS EXPENSES WER E DEBITED TO RS.19.46 LACS. THE ASSESSING OFFICER ON V ERIFYING THESE FOUND THAT ALL THE EXPENSES WERE MADE IN CASH INCLUDING SOME OF THE PAYMENTS BEING MORE THANRS.20,000/- EACH. THE ASSESSEE SUBMITTED THAT THESE PAYMENTS WERE MADE TO LABOURERS. THE ASSESSING OFFICE R ACCORDINGLY DISALLOWED RS.1 LAC AND ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LEARNED CIT (A) REDUCED THE DISALLOWANCE TO RS.75,000/-. NOW THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CASH PAYMENTS WERE MADE TO LABOURERS AND THESE WERE FOR EXIGENCY OF BUSINESS. ON THE OTHER H AND, THE LEARNED DR REFUTTED THE SUBMISSION OF THE ASSESSEE AND SUBMITTED THAT LEARNED CIT(A) HAS ALREADY GRANTED RELIEF TO THE ASSESSEE AND THE ASSESSEE DOES NOT DESERVE MORE T HAN THAT. M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 9 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF T HE VIEW THAT THERE WAS NO BASIS FOR THE AUTHORITIES BELOW TO REJECT THE CLAIM OF EXPENSES OF THE ASSESSEE. I, THER EFORE, ALLOW THE SAME. 10. SO FAR AS GROUND NO. 3 REGARDING AD HOC DISALLOWANCE TO THE EXTENT OF RS.1 LAC IS CONCERNED, THE ASSESSIN G OFFICER FOUND THAT THE ASSESSEE HAS SHOWN PRESSING EXPENSES OF RS.24.25 LACS. THE ASSESSING OFFICER ON ESTIMATE DIS ALLOWED RS. 1,25,000/- I.E. 5% OF THE EXPENSES AND ADDED THE SAME TO TOTAL INCOME OF THE ASSESSEE. ON APPEAL, LEARNED CIT (A) GRANTED RELIEF OF RS.25,000/- AND RESTRICTED THE DISALLOWANCE TO RS.1 LAC. NOW THE ASSESSEE IS IN APPEAL. 11. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW IS NOT JUSTIFIED. ON THE OTHER HAND, THE LEARN ED DR JUSTIFIED THE ORDERS OF THE AUTHORITIES BELOW. M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 10 12. AFTER CONSIDERING THE ARGUMENTS OF THE PARTIES, I AM OF THE VIEW THAT THE DISALLOWANCE IS NOT CALLED FOR IN THI S CASE. I, THEREFORE, DELETE THE SAME. 13. SO FAR AS GROUND NO. 4 REGARDING MAINTAINING THE DISALLOWANCE OF RS. 1,49,283/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) IS CONCERNED, THE ASSESSING OFF ICER FOUND THAT DURING THE RELEVANT ASSESSMENT YEAR AN AMOUNT OF RS.1,49,283/- WAS PAID BY ONE M/S RAJ AGRO TECH PV T. LTD. AS GODOWN RENT TO CWC ON BEHALF OF THE ASSESSEE. THE SAME WAS REIMBURSED BY THE ASSESSEE TO THE ABOVE PARTY. SINCE THE AMOUNT EXCEEDED THE STATUTORY LIMIT OF RS.1 .20 LAKHS, THE ASSESSEE WAS LIABLE TO DEDUCT TDS U/S 194 OF THE ACT WHICH THE ASSESSEE DID NOT DO. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE CLAIM. ON APPEAL, TH E LEARNED CIT(A) ALSO CONFIRMED THE FINDING OF THE LEARN ED CIT(A). M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 11 14. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FINDINGS OF THE LOWER AUTHORITIES ARE NOT JUSTIFIED. ON THE OTHER HAND, THE LEARNED DR RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 15. I HAVE HEARD THE RIVAL CONTENTIONS. IN MY VIEW, I T WOULD BE APPROPRIATE TO SET ASIDE THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER TO HAVE A FRESH LOOK. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE FACTS AVAILABLE ON RECORD. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON 25 TH JULY, 2016 SD/- ( D.T. GARASIA) JUDI CIAL MEMBER 25 TH JULY, 2016 DN/- M/S NARENDRA INDUSTRIES ITA NO./ 118/IND/2014 12