ITO, Patiala V. Sh. Dharam Pal Goyal, Patiala

ITA 119/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5194 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 119/CHD/2016 ASSESSMENT YEAR : 2011-12 THE ITO, VS SHRI DHARAM PAL GOYAL, WARD 4, KOTHI NO. 1, AASHIRWAD, PATIALA. NIHAL BAGH, PATIALA. PAN: AGEPP3023E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR RESPONDENT BY : SHRI DEEPAK AGGARWAL DATE OF HEARING : 07.03.2017 DATE OF PRONOUNCEMENT : 25.04.2017 O R D E R PER ANNAPURNA GUPTA,AM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) PATIALA DATED 09.12.2015 FOR ASSESSMENT YEAR 2011-12. 2. GROUND NOS. 1 AND 2 RAISED BY THE REVENUE ARE INTER-LINKED AND ARE, THEREFORE, BEING TAKEN UP TOG ETHER. THE GROUNDS READ AS UNDER : 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.61,18,200/- MADE AN ACC OUNT OF DISALLOWANCE OUT OF VAT PAYABLE U/S 43B OF THE INCOME TAX ACT, 1961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S CHOWRINGHEE SALES BUREAU (P) LTD. VS. CIT (1 973) 87 ITR 542 (SC), WHEREIN, THE HON'BLE APEX COURT HAS SETTLED THE ISS UE. 2 3. IN THE SAID GROUND, THE REVENUE HAS CHALLENGED T HE ACTION OF THE CIT (APPEALS) IN DELETING THE ADDITIO N MADE UNDER SECTION 43B OF INCOME TAX ACT,1961 ( IN SHORT THE ACT) ON ACCOUNT OF VAT PAYABLE AMOUNTING TO RS. 61,18,200/-. 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT A SUM OF RS. 2,32,78,602/- WAS SHOWN AS VAT PAYABLE AS AT THE END OF THE FINANCIAL YEAR I.E. ON 31.03.2 011 IN THE BALANCE SHEET IN RESPECT OF THE PATIALA BRANCH OF THE ASSESSEE NAMELY M/S GOYAL AUTOMOBILES, VILLAGE CHAMERHERI. THE ASSESSING OFFICER FURTHER OBSERVED THAT OUT OF THE SAID VAT PAYABLE, ONLY A SUM OF RS. 1,71,60,430/- WAS PAID BY THE ASSESSEE UPTO THE DUE DATE OF FILING OF ITR I.E. UPTO 30.09.2011 AND VAT AMOUNTING TO RS. 61,18,200/- WAS NOT PAID TILL THEN . THE ASSESSING OFFICER MADE ADDITION OF THE SAME BY TREATING THE VAT AMOUNT RECEIVED BY THE ASSESSEE AS ITS TRADING RECEIPT AND BY HOLDING THAT THE DEDUCTION O F THE SAME COULD NOT BE ALLOWED BECAUSE THE ASSESSEE FAIL ED TO DEPOSIT THE VAT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME AS REQUIRED UNDER SECTION 43B OF THE ACT. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT (APPEALS) WHERE THE ASSESSEE MADE DETAILED SUBMISSI ONS REPRODUCED AT PARA 5.1 OF THE ORDER. THE ASSESSEE CONTENDED BEFORE THE CIT (APPEALS) THAT ITS VAT COLLECTION HAD NOT BEEN ROUTED THROUGH ITS PROFIT A ND 3 LOSS A/C AND HAD SHOWN IT IN A SEPARATE ACCOUNT REFLECTING THE BALANCE PAYABLE IN THE BALANCE SHEET . THE ASSESSEE ALSO SUBMITTED THAT IT WAS MERELY ACTI NG AS AN AGENT OF THE GOVERNMENT COLLECTING VAT AND REMIT TING THE SAME TO THE GOVERNMENT. THE ASSESSEE ALSO SUBMITTED THAT THE ENTIRE VAT LIABILITY HAD BEEN DEPOSITED UPTO 14.11.2011 WHICH WAS BEFORE THE DUE DATE OF PAYMENT TO BE MADE UNDER THE VAT ACT I.E. 20.11.2011. THE ASSESSEE FURTHER RELIED ON A NUMBE R OF DECISIONS OF THE HIGH COURTS IN SUPPORT OF ITS CONT ENTION THAT FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNT, AS PER WHICH NO TAX IS DEBITED TO THE PROFIT & LOSS ACCOUN T AS AN EXPENSE NOR ANY DEDUCTION CLAIMED IN RESPECT OF THE SAID AMOUNT, NO QUESTION OF DISALLOWANCE UNDER SECT ION 43B ARISES. 6. THE CIT (APPEALS) AFTER CONSIDERING THE ASSESSEE 'S SUBMISSIONS, DELETED THE DISALLOWANCE MADE RELYING UPON THE DECISION OF THE GAUHATI HIGH COURT IN THE CASE OF INDIA CARBON LTD. VS INSPECTING ASSTT. COMMISSIO NER & ANR. (1993) 200 ITR 757 AND ON THE DECISION OF TH E DELHI HIGH COURT IN THE CASE OF CIT VS NOBLE & HEWI TT (INDIA) P.LTD. (2008) 166 TAXMAN 48 (DEL). 7. BEFORE US, THE LD. DR FILED WRITTEN SUBMISSIONS OF HIS ARGUMENTS ON THE ISSUE DATED 09.01.2017 STATING THAT THE ASSESSING OFFICER HAD ADDED THE AMOUNT OF VAT PAYABLE OF RS. 61,18,200/- AS TRADING RECEIPT AS PE R PROVISIONS OF SECTION 145A OF THE ACT WHICH WAS IN 4 ACCORDANCE WITH THE DECISION OF HON'BLE SUPREME COU RT IN THE CASE OF M/S CHOWRINGHEE SALES BUREAU (P) LTD. VS CIT (1973) 87 ITR 542. THE LD. DR FURTHER ARGUED T HAT THE CIT (APPEALS) HAD ERRED IN DELETING THE ADDITIO N MADE BY FOLLOWING THE DECISION OF THE GAUHATI HIGH COURT AND THE DELHI HIGH COURT SINCE THE SAID DECIS ION HAD NOT DISTINGUISHED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S CHOWRINGHEE SALES BUREAU (P) LTD. (SUPRA). 7(I) LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAN D, RELIED UPON THE ORDER OF THE CIT (APPEALS) AND FURT HER PLACED RELIANCE ON THE DECISION OF THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS KHUSHI RAM BHAGWAN DASS REPORTED IN 296 ITR 720 AND POINTED OUT THAT THE SA ID DECISION CLEARLY STATED THAT SALES TAX COLLECTIONS ACCOUNTED FOR BY THE ASSESSEE FOLLOWING THE MERCANT ILE SYSTEM OF ACCOUNTING WHICH REMAINED PAYABLE WAS TO BE EXCLUDED FROM THE ASSESSEE'S BUSINESS INCOME AND TH AT THE ASSESSEE WAS MERELY A TRUSTEE IN RESPECT OF COLLECTION OF CENTRAL SALES TAX FROM ITS CUSTOMERS. 8. WE HAVE HEARD CONTENTIONS OF BOTH THE PARTIES, GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND PERUSED THE DOCUMENTS REFERRED TO BEFORE US. WE FI ND NO INFIRMITY IN THE ORDER OF THE CIT (APPEALS). TH E ISSUE IN DISPUTE BEING DISALLOWANCE OF VAT PAYABLE WHICH REMAINED UNPAID ON THE DUE DATE OF FILING OF RETURN OF INCOME, AS PER THE PROVISIONS OF SECTION 43B, WE FI ND 5 THAT THIS ISSUE HAS BEEN DEALT WITH BY A NUMBER OF HIGH COURTS AS CITED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US. THE CIT (APPEALS) HAS RIGHTLY DELETED T HE ADDITION IN THE PRESENT CASE RELYING UPON THE AFORE SAID DECISIONS I.E. THE GAUHATI HIGH COURT IN THE CASE O F INDIA CARBON 200 ITR 759 (SUPRA) AND CIT VS NOBLE & HEWITT INDIA P.LTD. (SUPRA). FURTHER, WE FIND TH AT NO DIFFERING DECISION OF THE JURISDICTIONAL HIGH COURT WAS BROUGHT TO OUR NOTICE BY THE LD. DR. MOREOVER THE HON,BLE DELHI HIGH COURT IN THE CASE OF NOBLE & HEWITT(SUPRA) HAS CONSIDERED AND DISTINGUISHED THE JUDGEMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (P) LTD VS CIT(1977) 110 I TR 385 WHICH WE FIND WAS RENDERED FOLLOWING THE DECISI ON OF THE APEX COURT IN CHOWRINGHEE SALES BUREAU (P) L TD VS CIT (1973) 87 ITR 542(SC) . THUS WE FIND NO MERI T IN THE ARGUMENT OF THE LD.DR THAT THE RELIANCE PLACED BY THE LD.CIT(A) ON THE ABOVESTATED JUDGEMENTS OF THE HONBLE GAUHATI AND DELHI HIGH COURT WERE MISPLACED SINCE THEY HAD NOT CONSIDERED THE JUDGEMENT OF THE APEX COURT IN CHOWRINGHEE SALES BUREAU(SUPRA) IN VIEW OF THE SAME, WE HOLD THAT THE ISSUE STANDS SETTLED IN FAVO UR OF THE ASSESSEE AND NO ADDITION ON ACCOUNT OF VAT PAYA BLE CAN BE MADE IN THE HANDS OF THE ASSESSEE U/S 43B OF THE INCOME TAX ACT,1961. WE, THEREFORE, UPHOLD THE ORD ER OF THE CIT (APPEALS) IN THIS REGARD AND DISMISS GRO UND NO. 1 AND 2 RAISED BY THE REVENUE. 6 9. GROUND NOS. 3 AND 4 RAISED BY THE REVENUE ARE INTER-LINKED AND READ AS UNDER : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED DELETING THE ADDITION OF RS.42,164/- MADE AN ACCOUNT OF DISALLOWANCE U/S 36(L)(III) OF THE INCOME TAX ACT, 1961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED DELETING THE ADDITION WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY BUSINESS EXIGENCY IN THIS REGA RD DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS AS WELL. 10. IN THE SAID GROUND, REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS. 42,164/- MADE UNDER SEC TION 36(1)(III) OF THE ACT. 11. BRIEFLY FACTS RELATING TO THE ISSUE ARE THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFF ICER OBSERVED THAT THE ASSESSEE HAD GIVEN A LOAN OF RS. 18 LACS TO SHRI KARAN GOYAL WHICH WAS NOT FOR ANY BUSI NESS PURPOSE. THE ASSESSEE FAILED TO GIVE ANY EXPLANATI ON IN THIS REGARD AND THEREFORE, ASSESSING OFFICER DISALL OWED INTEREST PERTAINING TO THE SAID LOAN @ 15% PER ANNU M AMOUNTING TO RS. 42,164/-. THE CIT (APPEALS) DELET ED THE DISALLOWANCE MADE FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SHIV NANDAN BUILDCO N PVT. LTD. VS CIT 60 TAXMAN 347. 12. BEFORE US, LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND STATED THAT SINCE NO BUSINESS PURPOSE FOR ADVANCING THE INTEREST FREE LOAN HAD BE EN GIVEN, THE DISALLOWANCE OF INTEREST UNDER SECTION 7 36(1)(III) OF THE ACT HAD BEEN RIGHTLY MADE. THE L D. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON ORDER OF THE CIT (APPEALS) AND FURTHER STATED THAT IT HAD SUFFICIENT OWN INTEREST FREE FUNDS FOR GIVING SAID LOAN AND THEREFORE, NO DISALLOWANCE UNDER SECTION 36(1)( III) OF THE ACT WAS WARRANTED. THE LD. COUNSEL FOR THE ASS ESSEE RELIED UPON DECISION OF THE APEX COURT IN THE CASE OF HERO CYCLES (P) LTD. VS CIT,CENTRAL ,LUDHIANA IN CI VIL APPEAL NO.514 OF 2008 DT 05-11-15 IN THIS REGARD. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW AND GONE THROUGH TH E DOCUMENTS REFERRED BEFORE US. THE ISSUE BEFORE US RELATES TO DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT. THE FACTS WHICH ARE NOT DIS PUTED IN THE PRESENT CASE ARE THAT THE ASSESSEE HAD ADVANCED A LOAN OF RS. 18 LACS TO ONE MR. KARAN GOYAL. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAD NOT ESTABLISHED THE BUSINESS PURPOSE OF ADVANCING THE LOAN. NO ARGUMEN TS WITH RESPECT TO THIS ASPECT HAVE BEEN RAISED BEFORE US, THEREFORE, IT IS AGREED THAT THERE WAS NO BUSINESS PURPOSE INVOLVED IN ADVANCING THE SAID LOAN TO MR. KARAN GOYAL. THE ONLY ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE IS THAT IT HAD SUFFICIENT OWN FUNDS WHICH WERE INTEREST FREE FOR THE PURPOSE OF GIVING THE SAID LO AN AND IN SUPPORT OF THIS ARGUMENT, LD. COUNSEL FOR THE AS SESSEE HAS RELIED UPON DECISION OF THE APEX COURT IN THE C ASE OF HERO CYCLES (SUPRA). WE ARE IN AGREEMENT WITH THE SAID 8 PROPOSITION THAT WHERE THERE ARE SUFFICIENT INTERES T FREE OWN FUNDS AVAILABLE, THE PRESUMPTION IN SUCH CASE I S THAT THE ADVANCES HAVE BEEN MADE OUT OF THE SAME. THE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT.LTD. VS CIT JALANDHAR (2016) 381 IT R 107(P&H) HAS LAID DOWN THE SAID PROPOSITION AT PARA 16 OF ITS ORDER AS UNDER : 16. AS WE NOTED EARLIER, THE FUNDS/RESERVES OF THE APPELLANT WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES MADE BY IT OF RS.10.29 CRORES TO ITS SISTER COMPANY. WE ARE ENTIRELY IN AG REEMENT WITH THE JUDGMENT OF THE BOMBAY HIGH COURT IN COMMISSIONER O F INCOME TAX VS. RELIANCE UTILITIES & POWER LTD., (2009) 313 ITR 340, PARA-10, THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE A PRESUM PTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INTEREST FREE F UNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENT. 14. THE SAME HAS BEEN UPHELD BY THE HON'BLE SUPREM E COURT IN THE CASE OF HERO CYCLES (SUPRA), ALSO RELI ED UPON BY THE LD. COUNSEL FOR THE ASSESSEE. BUT HAVI NG SAID SO, WE FIND THAT IT HAS NOT BEEN ESTABLISHED B EFORE US THAT SUFFICIENT INTEREST FREE OWN FUNDS WERE AVA ILABLE WITH THE ASSESSEE WHEN THE SAID LOAN WAS GIVEN TO M R. KARAN GOYAL. NO DOCUMENTS BRINGING OUT THE SAID FA CTS HAVE BEEN PRODUCED BEFORE US OR EVEN BEFORE THE LOW ER AUTHORITIES. 15. IN VIEW OF THE SAME, WE CONSIDER IT APPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT AND THE A PEX COURT AS RELIED UPON BY US ABOVE AND CONSIDERING TH E FACTS OF THE PRESENT CASE. WE MAY ADD THAT THE ASS ESSEE 9 BE GIVEN DUE OPPORTUNITY OF HEARING IN THIS REGARD AND IS FREE TO ADDUCE ALL EVIDENCES ON WHICH IT WISHES TO PLACE RELIANCE IN SUPPORT OF ITS CONTENTIONS. IN THE LIGH T OF THE ABOVE, GROUND OF APPEAL NOS. 3 AND 4 RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) ( ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH APRIL, 2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD