Sh.Surinder Kumar Singal, Chandigarh V. Dy.Commissioner of Income Tax, Chandigarh

ITA 1224/CHANDI/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7525 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: VINIT KRISHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1224/CHD/2016 ASSESSMENT YEAR: 2012-13 SH. SURINDER KUMAR SINGAL VS. DCIT SCO 15, SECTOR 20, CIRCLE 5 (1) CHANDIGARH CHANDIGARH PAN NO. ADYPS5462P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINIT KRISHAN RESPONDENT BY : SHRI MANJIT SINGH, DATE OF HEARING : 19.06.2018 DATE OF PRONOUNCEMENT : 03.07.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE AGAINST THE ORDER DATED 08.09.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEAL)-2, CHANDIGARH [HEREINAFTER REFE RRED TO AS CIT(A)]. THE ASSESSEE IN THIS APPEAL HAS TAKEN THE FOLLOWING GROUNDS:- 1) THAT THE ORDER PASSED UNDER SECTION 250(6) OF T HE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH IN APPEAL NO. 54/2/2015-16 DATED 08.09.2016 IS CONTRARY TO LAW AN D FACTS OF THE CASE. ITA NO. 1224/CHD/2016- SH. SURINDER KUMAR SINGAL, CHANDIGARH 2 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIG ARH GRAVELLY ERRED IN SUSTAINING ADDITION OF RS. 4,27,8 94/- OUT OF TOTAL ADDITION OF RS. 11,49,279/- MADE BY LD. AS SESSING OFFICER UNDER SECTION 36(I)(III) ON ACCOUNT OF INTE REST FREE ADVANCES GIVEN BY APPELLANT. 3 A) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH GRAVELLY ERRED IN NOT CONSIDERING THE SUBMISSIONS AND EVIDENCES FILED BY THE APPELLANT IN RESPONSE TO REMAND REPORT OF THE LD. ASSESSING OFFI CER WITH RESPECT DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 72,24,534/- CLAIMED UNDER SECTION 57(III) OF INCOME TAX ACT. B) THAT IN THAT FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIG ARH GRAVELLY ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 72,24,534/- MADE BY THE LD. ASSESSING OFFICER OF IN TEREST EXPENDITURE CLAIMED BY APPELLANT UNDER SECTION 57. C) THAT WITHOUT PREJUDICE TO GROUND NUMBER 3(B) OF THE DISALLOWANCE OF RS. 72,24,534/- UNDER SECTION 57 (I II) UPHELD BY THE LD. CIT(A), CHANDIGARH IS HIGHLY EXCE SSIVE. 4. THAT THE APPELLANT CRAVES TO ADD, AMEND OR ALTER ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING O F APPEAL, WITH THE PERMISSION OF THE HON'BLE INCOME TAX APPEL LATE TRIBUNAL, CHANDIGARH. ITA NO. 1224/CHD/2016- SH. SURINDER KUMAR SINGAL, CHANDIGARH 3 2. THE ASSESSEE IN THE ABOVE GROUNDS OF APPEAL HAS RAISED TWO EFFECTIVE ISSUES. THE FIRST ISSUE IS RELATING T O DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCOME TAX ACT. A T THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THO UGH THE ASSESSING OFFICER HAD MADE DISALLOWANCE ON THIS ISS UE OF RS. 11,49,279/-, HOWEVER, THE LD. CIT(A) HAS RESTRICTED THE SAME TO RS. 4,27,894/-, OBSERVING THAT THE ASSESSEE HAD ADV ANCED. INTEREST FREE ADVANCE/LOANS OF RS. 35,65,780/- AND NOT OF RS. 95,77,326/- AS TAKEN BY THE ASSESSING OFFICER. NOW , THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EVEN THE ASSESSEE WAS HAVING ITS OWN INTEREST FUNDS FREE FUN DS OUT OF WHICH THE INVESTMENTS WERE MADE BY THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE MAY BE GIVEN OP PORTUNITY TO PROVE THE NEXUS BETWEEN THE OWN MONEY / INTEREST FREE FUND WITH THE INVESTMENTS/INTEREST FREE ADVANCES GIVEN B Y THE ASSESSEE. 3. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE FI NDINGS OF THE LOWER AUTHORITIES. HOWEVER, HE COULD NOT REB UT AVERMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF THE ASSESSEE WOULD BE ABLE TO PROVE THE NEXUS BETWEEN T HE OWN FUNDS AND THE INTEREST FREE ADVANCES, THEN NO DISAL LOWANCE U/S 36(I)(III) SHOULD BE ATTRACTED. 4. IN THE VIEW OF THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH. IF THE ASSESSEE WILL BE ABLE TO PROVE THE NEXUS BETWEEN THE OWN FUNDS/INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND THE INTEREST FREE A DVANCES ITA NO. 1224/CHD/2016- SH. SURINDER KUMAR SINGAL, CHANDIGARH 4 GIVEN TO THIRD PARTIES, NO DISALLOWANCE ON THIS ISS UE WILL BE ATTRACTED . 5. THE NEXT ISSUE RAISED BY THE ASSESSEE IS AGAINST TH E DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 72,24,5 34/- U/S 57(III) OF THE ACT. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST INCOME EARNED AND EXPENDITURE CLAIMED. THA T THE ASSESSEE HAD RECEIVED LOAN AMOUNT FROM THE BANK WHI CH WAS FURTHER DISBURSED AS LOAN TO OTHER PARTIES FROM WHO M THE INTEREST INCOME WAS EARNED. THAT THE ASSESSEE WAS E NTITLED TO SET OFF THE INTEREST EXPENDITURE AGAINST INTEREST I NCOME AS THERE WAS A DIRECT NEXUS BETWEEN THE TWO. 6. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED THA T THE ASSESSEE COULD NOT PROVE WITH SATISFACTORY EVIDENCE THE DIRECT NEXUS BETWEEN INTEREST INCOME EARNED AND THE INTERE ST EXPENDITURE INCURRED BY THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IF THE AVERMENTS OF THE ASSESSEE ARE TAKEN AS CORRECT, THE ASSESSEE, IN OUR VIEW, WILL BE ENTITLED TO CLAIM DEDUCTION OF THE EXPENDIT URE OUT OF THE INTEREST INCOME OFFERED BY THE ASSESSEE. WE THEREFO RE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE IS SUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH AND DECIDE THE SAME IN THE LIGHT OF THE ABOVE OBSERVATIONS MADE AF TER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS C ASE. ITA NO. 1224/CHD/2016- SH. SURINDER KUMAR SINGAL, CHANDIGARH 5 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.07.2018 GANESH KUMAR COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR