Sh. Ram Murti Prop., Aligarh V. A.C.I.T.-1, Aligarh

ITA 121/AGR/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5925 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHARMA
• Keywords: Wrong claim
• Section: 143(3)

Judgement Text

I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [CORAM : BHAVNESH SAINI JM AND PRAMOD KUMAR AM] I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 RAM MURTI .APPELLANT PROPRIETOR : UMA EXPORTS D 53, INDUSTRIAL ESTATE, ALIGARH [ PAN: AAYPM9991Q] VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, ALIGARH ..RESPONDENT APPEARANCES BY: PANKAJ GARG, FOR THE APPELLANT S D SHARMA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 25, 2014 DATE OF PRONOUNCING THE ORDER : JUNE 30, 2014 O R D E R PER PRAMOD KUMAR: ITA NO 121/AGRA/13 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 26TH DECEMBER 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS), IN THE MATTER OF AS SESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007- 08. 2. IN GROUND NOS. 1, 2 AND 3, THE ASSESSEE HAS RAIS ED GRIEVANCES AGAINST LEARNED CIT(A)S HOLDING THAT AMOUNTS OF RS 1,10,000, ON ES TIMATED BASIS, RS 78,000, IN RESPECT OF INTEREST FREE ADVANCE TO SMT MAMTA AGARWAL, AND RS 1,58,878, IN RESPECT OF INTEREST OF FREE ADVANCE TO SHRI RAKESH AGARWAL, ARE TO BE DISALLOW ED OUT OF INTEREST PAID BY THE ASSESSEE. WE WILL TAKE UP ALL THE THREE ISSUES TOGETHER. I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 2 OF 5 3. TO ADJUDICATE ON THE ABOVE ISSUES, ONLY A VERY F EW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESEEE, A MANUFACTURER AND TRADER OF HARDWARE GOODS, HAD TAKEN CERTAIN INTEREST BEARING BORROWINGS FROM BANKS ETC AND WAS PAYING INTEREST ON SUCH BORROWINGS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTED THAT, ON ONE HAND, THE ASSESSEE HAS RESORTED TO SUCH BORROWI NGS, AND ON THE OTHER HAND, HE HAS GIVEN INTEREST FREE ADVANCE TO SMT MAMTA AGRAWAL, H IS DAUGHTER IN LAW, AMOUNTING TO RS 6,50,000. ON THESE FACTS, THE ASSESSING OFFICER DIS ALLOWED INTEREST COMPUTED @12% ON THE AMOUNT ADVANCED TO SMT AGARWAL, AND THE AMOUNT SO W ORKED OUT TO RS 78,000. THE AO WAS OF THE VIEW THAT THE INTEREST SO PAID COULD NOT BE SAID TO HAVE BEEN FOR THE PURPOSES OF BUSINESS, AND, AS SUCH, DISALLOWABLE UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSING OFFICER FURTHER NOTED THAT THE ON SEVERAL DATES, TH E ASSESSEE HAS DRAWN CASH FROM THE BANK ACCOUNT BUT NOT PUT IT TO ANY USE. THESE AMOUNTS WE RE TAKEN IN THE CASH BOOK, BUT NOT IMMEDIATELY USED. IN RESPECT OF SUCH WITHDRAWALS OF CASH, WHICH ENDED UP INCREASING INTEREST LIABILITY OF THE ASSESSEE, THE ASSESSING O FFICER DISALLOWED RS 1,10,000 ON AN ESTIMATED BASIS. AGGRIEVED, INTER ALIA, BY THESE DI SALLOWANCES, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS . NOT ONLY THAT THE CIT(A) CONFIRMED THESE DISALLOWANCES, HE ENHANCED THE DISALLOWANCES BY RS 1,58,878 IN RESPECT OF ANOTHER INTEREST FREE ADVANCE TO SHRI RAKESH AGARWAL. THE A SSESSEE IS AGGRIEVED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT IT IS AN UNDISPUTED POSITION THAT I NTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE ARE FAR IN EXCESS OF THE INTEREST FREE ADV ANCES GIVEN BY THE ASSESSEE. IN THE DOCUMENTS FILED BEFORE US, IT IS SHOWN THAT THE ASS ESSEE HAD A CAPITAL OF RS 176 LAKHS AND BUSINESS PROFIT OF RS 82.45 LAKHS, AND BOTH THESE A MOUNTS PUT TOGETHER ARE FAR IN EXCESS OF THE INTEREST FREE INVESTMENTS MADE BY THE ASSESSEE. WITH THESE UNDISPUTED FACTS IN MIND, LET US TAKE A LOOK AT THE LEGAL POSITION LAID DOWN BY H ONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD (313 ITR 340) , AS STATED THUS, THE PRINCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INT EREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOU LD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INT EREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. ON THE BASIS OF THIS PRINCIPLE, AS H AS BEEN CONSISTENTLY HELD BY COORDINATE I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 3 OF 5 BENCHES OF THIS TRIBUNAL, AS LONG AS INTEREST FREE FUNDS AVAILABLE TO AN ASSESSEE ARE IN EXCESS OF THE NON BUSINESS INVESTMENTS OR INTEREST FREE ADVANCES, PRESUMPTION HAS TO BE THAT INVESTMENTS OR INTEREST FREE ADVANCES ARE OUT OF INTEREST FREE ADVANCES, AND, ACCORDINGLY, DISALLOWANCE IN RESPECT OF INTEREST PA ID ON BORROWINGS CANNOT BE MADE ON THE GROUND THAT THE BORROWED MONIES HAVE NOT BEEN USED FOR BUSINESS PURPOSES. IN THIS VIEW OF THE MATTER, AND HAVING REGARD TO THE FACTS AND FIGU RES CITED BEFORE US WHICH ARE NOT DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE UPHO LD THE GRIEVANCE OF THE ASSESSEE. THE IMPUGNED INTEREST DISALLOWANCES ARE, ACCORDINGLY, D ELETED. 6. GROUND NOS 1, 2 AND 3 ARE THUS ALLOWED. 7. GROUND NOS. 4 AND 5 DEAL WITH SMALL DISALLOWANCE S AND NO SPECIFIC ARGUMENTS HAVE BEEN ADVANCED IN RESPECT OF THE SAME. ACCORDINGLY, AND PARTICULARLY LOOKING TO THE SMALLNESS OF AMOUNTS INVOLVED, THESE GROUNDS ARE DI SMISSED AS NOT PRESSED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN T HE TERMS INDICATED ABOVE. ITA NO 120/AGRA/13 9. THIS APPEAL, WHICH CALLS INTO QUESTION CORRECTNE SS OF LEARNED COMMISSIONER (APPEALS)S ORDER DATED 27 TH DECEMBER 2012 UPHOLDING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSE SSMENT YEAR 2007-08. 10. THE PENALTY IMPUGNED IN THIS APPEAL IS OF RS 58 ,000 AND IT PERTAINS TO QUANTUM DISALLOWANCES OF INTEREST ON BORROWINGS, WHICH STAN DS DELETED BY OUR ORDER HEREINABOVE IN ITA NO. 121/AGRA/13, AND TO DISALLOWANCE OF RS 60,4 91 FOR SALES TAX LIABILITY FOR THE ASSESSMENT YEAR 1981-82. 11. AS THE FIRST DISALLOWANCE STANDS DELETED IN QUA NTUM PROCEEDINGS, AND THERE CANNOT BE THUS ANY OCCASION FOR IMPOSITION OF PENALTY IN C ONNECTION WITH THE SAME, WE ONLY NEED TO DEAL WITH IMPOSITION OF PENALTY IN RESPECT OF SECON D QUANTUM DISALLOWANCE OF RS 60,491 FOR SALES TAX LIABILITY. 12. THE ASSESSING OFFICER NOTED THAT THE AMOUNT OF RS 60,491 DOES NOT PERTAIN TO THE RELEVANT ASSESSMENT YEAR AND, ACCORDINGLY, THE SAME WAS DISALLOWED. THE ASSESSEE DID NOT I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 4 OF 5 CHALLENGE THIS DISALLOWANCE. WHEN ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED IN RESPECT OF THIS WRONG CLAIM, IT WAS EXPLAINED BY THE ASSESSEE THAT IT WAS AN INADVERTENT MISTAKE AS EVEN TAX AUDITOR DID NOT POINT OUT THE SAME. THE ASSESSING OFFICER DID NOT ACCEPT THIS EXP LANATION AND HELD THAT THE ASSESSEE KNOWINGLY FURNISHED INACCURATE PARTICULARS OF THE I NCOME ON THIS ACCOUNT AND HIS EXPLANATION DOES NOT SEEM TO BE BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF INCOME HAVE NOT BEEN DISCLOSED BY HI M. ACCORDINGLY, THE PENALTY WAS IMPOSED FOR FURNISHING OF INACCURATE PARTICULARS. A GGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. L EARNED CIT(A) HELD THAT ANGLE OF CONCEALMENT IS MORE THAN ESTABLISHED AND INDICATED THAT IT WAS A CASE OF FALSE CLAIM. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 14. WE HAVE SEEN, FROM THE MATERIAL PRODUCED BEFORE US, THAT THE DEDUCTION WAS MADE IN A TRANSPARENT MANNER INASMUCH AS IT WAS STATED IN T HE PROFIT AND LOSS ACCOUNT AS SALES TAX ARREARS 81-82 AND AS SUCH IT CANNOT BE SAID TO BE A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS ALSO AN UNDISPUTED POSITION THAT E VEN THE TAX AUDITOR MISSED THE DISALLOWANCE IN THE TAX AUDIT REPORT. THERE IS NOTHING BEFORE US TO INDICATE MALAFIDE IN THIS ACTION. IT IS ALSO NOT A CASE OF DOUBLE DEDUCTION FOR THE SAME AMOUNT, AS THE RELEVANT PREVIOUS YEAR WAS THE YEAR IN WHICH PAYMENT WAS MADE. IN THESE CIRCUMSTAN CES, EVEN IF IT WAS AN INADMISSIBLE CLAIM, BY NO STRETCH OF LOGIC, THIS CAN BE A FIT CA SE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. LEARNED DEPARTMENTAL REPRESEN TATIVE, WHEN CONFRONTED WITH THESE FACTS, DID NOT HAVE MUCH TO SAY, BEYOND PLACING HIS DUTIFUL RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 15. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING I N MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DELETE THE IMPUGNED PENALTY. T HE ASSESSEE GETS THE RELIEF ACCORDINGLY. 16. IN THE RESULT, THIS APPEAL IS ALLOWED. I.T.A. NO.: 120 AND 121/AGRA/2013 ASSESSMENT YEAR: 2007-08 PAGE 5 OF 5 17. TO SUM UP, WHILE ITA 120/AGRA/13 IS ALLOWED, IT A 121/AGRA/13 IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF JUNE, 2014. SD/- SD/- BHAVNESH SAINI PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AGRA, THE 30 TH DAY OF JUNE, 2014. COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA