Shri Dalpatlal Mansukhlal Shah, Banaskantha V. The ACIT, B.K.Circle, Palanpur

ITA 1228/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8398 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Capital asset; Depreciation; Additional evidence; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1228/AHD/2014 (ASSESSMENT YEAR: 2010-11) SHRI DALPATLAL MANSUKHLAL SHAH PROP OF AMBICA PRESTRESS INDUSTRIES, SONAL SOCIETY, SIHORI, TAL. KANKREJ, DIST.-BANASKANTHA - 385550 APPELLANT VS. ACIT, B.K. CIRCLE, C/O. INCOME TAX OFFICE, 2 ND FLOOR, SHRI HARI COMPLEX, ABU HIGHWAY, PALANPURA 385001 RESPONDENT PAN: AIMPS2525C /BY ASSESSEE : SHRI M. K. PATEL, A.R. /BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING : 07.09.2017 /DATE OF PRONOUNCEMENT : 27.09.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES AGAINST THE CIT(A)-XX, AHMEDABADS ORDER DATED 04.02.2014, IN C ASE NO. CIT(A)-XX/126/12- 13, UPHOLDING DISALLOWANCE OF TUBE WELL EXPENSES OF RS.5,60,243/- AND INTEREST EXPENSES OF RS.4,68,243/-; RESPECTIVELY, IN PROCEED INGS U/S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. ITA NO. 1228/AHD/14 (SHRI DALPATLAL M. SHAH VS. ACI T) A.Y. 2010-11 - 2 - 2. WE COME TO THE ABOVESTATED FORMER ISSUE OF DISAL LOWANCE OF TUBE WELL REPAIR EXPENSES OF RS.5,60,243/- MADE BY BOTH THE LOWER AU THORITIES. THERE IS NO DISPUTE ABOUT THE GENUINENESS OF THE IMPUGNED EXPENSES INVO LVING A TOTAL AMOUNT OF RS.6,59,110/-. THE DISPUTE BETWEEN THE PARTIES IS ABOUT ITS NATURE I.E. CAPITAL OR REVENUE EXPENDITURE. BOTH THE LOWER AUTHORITIES TR EAT THE SAME AS CAPITAL EXPENDITURE ELIGIBLE FOR DEPRECIATION @ 15%. 3. LEARNED AUTHORIZED REPRESENTATIVE TAKES US TO TH E INSTANT CASE FILE. HE VEHEMENTLY CONTENDS THAT THE IMPUGNED CLAIM IS THAT OF REPAIR ONLY WHEREIN THE MAIN TUBE WELL ALREADY EXISTED EARLIER. HE THEREFO RE SEEKS TO TREAT THE SAME AS REVENUE EXPENDITURE. THE REVENUE STRONGLY SUPPORTS THE CIT(A)S ACTION CONFIRMING THE IMPUGNED DISALLOWANCE. WE SOUGHT CL ARIFICATION FROM BOTH THE PARTIES ABOUT TREATMENT GIVEN TO THE TUBE-WELL IN T HE PRECEDING ASSESSMENT YEAR. LEARNED DEPARTMENTAL REPRESENTATIVE TAKES US TO PAG E 12 OF THE PAPER BOOK COMPRISING OF SCHEDULE A (DEPRECIATION STATEMENT) D EMONSTRATING THE ABOVE TUBE WELL TO FORM A CAPITAL ASSET ENTITLED FOR DEPRECIAT ION. THE ASSESSEE FAILS TO REBUT THIS FACTUAL POSITION. NOR IS IT ABLE TO CONTROVERT THE CIT(A)S CLINCHING FINDING THAT IT HAD REPLACED THE ENTIRE TUBE WELL SET ITSELF. WE T HEREFORE SEE NO REASON TO INTERFERE WITH THE CIT(A)S ABOVE CONCLUSION CONFIRMING ASSES SING OFFICERS ACTION. THE ASSESSEE FAILS IN ITS FIRST SUBSTANTIVE GROUND. 4. WE NOW COME TO ASSESSEES LATTER SUBSTANTIVE GRO UND ASSAILING CORRECTNESS OF RS.4,68,243/-. THE ASSESSEE ADMITTEDLY HAD DEBI TED INTEREST EXPENSES IN ITS P&L ACCOUNT AMOUNTING TO RS.17,66,699/- AS AGAINST INTE REST INCOME OF RS.8,18,663/-. THE ASSESSING OFFICER CAME ACROSS ITS INTEREST FREE ADVANCES MADE TO VARIOUS PARTIES WITHOUT SERVING ITS BUSINESS PURPOSE. THE S AID SIX PARTIES HAD AVAILED TOTAL ADVANCES AMOUNT OF RS.39,02,031/-. THE ASSESSING O FFICER THEREFORE INVOKED THE IMPUGNED INTEREST DISALLOWANCE @12% COMING TO RS.4, 68,243/- IN ASSESSMENT ORDER DATED 15.01.2013. ITA NO. 1228/AHD/14 (SHRI DALPATLAL M. SHAH VS. ACI T) A.Y. 2010-11 - 3 - 5. THE CIT(A) AFFIRMS ASSESSING OFFICERS ACTION AS UNDER: 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION MADE BY THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF THE INTEREST EXPENSES OF RS.4,68,243/- FOR THE REASON THAT INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF INTEREST FREE ADVANCES. IT HAS BEEN OBSE RVED BY THE AO THAT THE ADVANCES TO 6 PARTIES TOTALING TO RS.39,02,031/- HA S BEEN MADE WHILE THE APPELLANT HAD CLAIMED THE INTEREST EXPENDITURES AMOUNTING TO RS. 17,66,699/- IN THE PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS FAILED TO ESTAB LISH THAT SUCH ADVANCES WERE MADE FOR THE BUSINESS PURPOSES. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, ALTHOUGH ASSESSEE ATTENDED ON 10.1.2013 BEFORE THE A.O. BUT DID NOT REPLY TO THE SHOW CAUSE SO GIVEN. 4.4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT HAS MADE THE SUBMISSION THAT THE AO HAS DISALLOWED THE INTEREST ON THE ADVANCES FOR THE WHOLE YEAR WITHOUT CONSIDERING THE DATE OF DEPOSIT. FURTH ER CONTENDED THAT THE APPELLANT HAD SUFFICIENT OWN CAPITAL OF RS.32,92,240/- BESIDE S SOME INTEREST FREE LOANS. HERE IT IS TO BE MENTIONED THAT EVEN AS PER THE APPELLAN T THE OWN CAPITAL WAS AT RS.32,92,240/- WHILE THE ADVANCES WERE MUCH MORE TH AN THE ABOVE I.E. RS.39,02,031/-. SO, IT CANNOT BE SAID THAT THE OWN CAPITAL AND INTEREST FREE LOANS WAS UTILIZED FOR THE PURPOSE OF INTEREST FREE ADVAN CES. THE APPELLANT HAS NOT GIVEN ANY DETAILS SHOWING THE INTEREST FREE ADVANCES WERE MADE OUT OF THE OWN CAPITAL OF THE ASSESSEE OR INTEREST FREE LOANS. IT IS SEEN FRO M THE COPY OF THE BALANCE SHEET ATTACHED FOR 31.3.2010 THAT THERE WERE A NUMBER OF ASSETS IN VARIOUS FORMS AND THE SOURCES THEREOF WERE ONLY FROM THE CAPITAL AND OTHE R BORROWED FUNDS., ALL THE SUBMISSIONS ALONGWITH LEDGER ACCOUNT COPIES WERE MA DE FIRST TIME IN THE APPELLATE PROCEEDINGS AND HENCE THOSE WERE IN THE NATURE OF A DDITIONAL EVIDENCE UNDER RULE 46A. THE APPELLANT HAS NOT MADE ANY REQUEST FOR ADM ISSION OF SUCH DETAILS AND ADDITIONAL EVIDENCES. NEITHER ANY GOOD AND SUFFICIE NT REASONS WERE EXPLAINED FOR NON-SUBMISSION OF THOSE BEFORE THE A.O. IN ASSESSME NT PROCEEDINGS HENCE SAME ARE LIABLE TO BE REJECTED. EVEN THE APPELLANT HAS NOT G IVEN ANY DETAILS OF THE AVAILABILITY OF THE INTEREST FREE FUNDS ON THE DATE OF ADVANCES TO THE AFORESAID PARTIES. SINCE NO DETAILS IN RESPECT OF THE ISSUE HAVE BEEN SUBMITTED BEFORE THE A.O. AND HENCE THE AO WAS UNABLE TO ESTABLISH THE DIRECT NEXUS OF THE INTEREST FREE ADVANCES WITH THE INTEREST FREE FUNDS. IN VIEW OF T HE ABOVE, THE CASE LAW CITED BY THE APPELLANT ARE NOT APPLICABLE OVER THE FACTS. TH EREFORE, THE DISALLOWANCE MADE BY THE A.O. IS JUSTIFIED AND THE SAME IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 6. HEARD BOTH THE PARTIES. CASE FILE PERUSED. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD FILED ADDITIONAL EVIDENCE IN COURSE OF THE LOWER APPELLATE PROCEEDINGS ALONG WITH LEDGER ACCOUNT FORMING PART OF PAPER BOO K. THE CIT(A)S ABOVE EXTRACTED FINDINGS DECLINE THE SAME ON THE GROUND THAT THERE HAS NOT BEEN ANY ADDITIONAL EVIDENCE PETITION FILED AT THE ASSESSEES BEHEST. HE HAS NOT PAID ATTENTION TO ASSESSEES LEDGER BOOKS QUA THE INSTANT ISSUE AT ALL SO AS TO COMMENT UPON THE CORRECTNESS ITA NO. 1228/AHD/14 (SHRI DALPATLAL M. SHAH VS. ACI T) A.Y. 2010-11 - 4 - THEREOF VIS--VIS THE IMPUGNED INTEREST DISALLOWANC E. WE THEREFORE DEEM IT APPROPRIATE THAT THE LEARNED CIT(A) NEEDS TO RE-DEC IDE THE INSTANT ISSUE AFRESH AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE. THIS LATTER SUBSTANTIVE GROUND IS ACCEPTED FOR STATISTICAL PURPOSE. 7. THIS ASSESSEES APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSE. [PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF SEPTEMBER, 2017.] SD/- SD/- ( AMARJIT SINGH ) ( S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 27/09/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0