Sh. Kamaldeep Singh, Khanna V. DCIT, Khanna

ITA 1234/CHANDI/2009

• Counselvise Citation: 123421514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: K J SHALLEY
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1234/CHD/2009 ASSESSMENT YEAR: 2006-07 SHRI KAMALDEEP SINGH, VS THE DCIT, CIRCLE, S/O SHRI RAJINDER SINGH, KHANNA C/O M/S H.L. CHOPRA STEEL ROLLING MILLS, KHANNA PAN NO. ACHPS3575K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.J.SHALLEY RESPONDENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 24.04.2012 DATE OF PRONOUNCEMENT : 27.04.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-II, LUDHIANA DATED 10.9.2009 RELATING TO ASS ESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AND FAC TS OF THE CASE BY CONFIRMING THE ADDITION OF RS. 2,48,971/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST FREE A DVANCES TO THE FIRM IN WHICH THE ASSESSEE IS A PARTNER. 2 2. THAT THE LD. CIT(A) HAS MISCONSTRUED AND IGNORED TH E PROVISIONS OF SECTION 36(I) (III) OF THE INCOME TA X ACT, 1961. 3. THAT THE LD. CIT(A) HAS ALSO MISCONSTRUED AND MISAP PLIED THE PROVISION OF SECTION 14A OF THE INCOME TAX ACT, 1961, SECTION 14A IS NOT APPLICABLE IN THE ASSESSEES CAS E. 3. IT IS OBSERVED THAT THE APPEAL FILED BY THE ASSE SSEE IS TIME BARRED BY TWO DAYS. THE ASSESSEE HAS FILED AN APPLICATION FOR CO NDONATION OF DELAY IN FILING THE APPEAL DULY SUPPORTED BY HIS AFFIDAVIT DATED 27 .2.2010. THE CONTENTION OF THE ASSESSEE IS THAT THE IMPUGNED ORDER WAS PASSED ON 10.9.2009 AND DELIVERED TO THE ASSESSEE ON 23.10.2009. THE DELAY IS OCCURR ED DUE TO THE FACT THAT THE ASSESSEE WAS SUFFERING FROM TRAUMATIC EPILEPSY CHRO NIC DISEASE SINCE MANY YEARS AND AT THE RELEVANT TIME HE WAS ADMITTED IN T HE HOSPITAL NAMELY DAYANAD MEDICAL COLLEGE & HOSPITAL, LUDHIANA DUE TO SUDDEN AGGRAVATION OF THE DISEASE. DUE TO ILLNESS, THE ASSESSEE COULD NOT FI LE THE APPEAL IN TIME BEFORE THE TRIBUNAL AND THERE IS DELAY OF TWO DAYS. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE CONTENTION OF THE ASSESSEE. THE EXPLANATION GIVEN BY THE ASSESSEE IS SATISFACTORY. CONSIDERING THE SMALLNESS OF DELAY AND THE SETTLED LEGAL POSITION THAT THE JURISDICTION TO CONDONE DEL AY SHOULD BE EXERCISED LIBERALLY, WE ARE OF THE VIEW, THAT THE DELAY OF TW O DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL SHOULD BE CONDONED. ACCORDINGL Y, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 4. AS REGARDS THE GROUNDS OF APPEAL REFERRED TO HER EIN ABOVE, THE RELEVANT FACTS ARE THAT FROM THE PERUSAL OF COPY OF ACCOUNT FILED WITH THE INCOME TAX 3 RETURN, THE ASSESSING OFFICER NOTICED THAT THE ASSE SSEE HAD ADVANCED FOLLOWING AMOUNTS TO M/S CHOPRA ALLOYS FREE OF INTEREST :- DATE NARRATION DEBIT CREDIT BALANCE D/C 01.04,05 OPENING BALANCE 2,20,000 2,20,0,00 CR 16.04.05 BY CH. NO.59551 3,00,000 5,20,000 CR 25.04.05 BY CH. NO.354882 1,50,000 6,70,000 CR. 05.05.05 BY CH. NO.595512 10,00,000 16,70,000 CR 22.09.05 BY CH NO . 1,30,000 18,00,000 CR : 28.10.05 8,00,000 26,00,000 CR 31.03.06 * > ' ' ' ' ' ' TO AMT OF NET LOSS 2005 - 06 1,98,863.64 24,01,136.36 CR ' - - ' ' ~ ; TOTAL 1,98,863.64 26,00,000 24,01,136.36 CR THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSE E HAD PAID INTEREST ON THE LOANS TO VARIOUS PERSONS. THE ASSESSING OFFICER OPI NED THAT THE ASSESSEE HAS DIVERTED INTEREST FREE BEARING FUNDS TO M/S CHOPRA ALLOYS. HE, THEREFORE, ASKED THE ASSESSEE AS TO WHY THE CORRESPONDING INTE REST SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE QUERY OF THE ASSESSI NG OFFICER, THE ASSESSEE SUBMITTED THAT THERE WAS NO CLAUSE IN THE PARTNERSH IP DEED OF M/S CHOPRA ALLOYS TO GRANT INTEREST ON THE CAPITAL OF THE PART NERS. IT WAS EXPLAINED THAT THE AMOUNT IN QUESTION WAS ADVANCED BY THE ASSESSEE AS HIS CAPITAL AS A PARTNER AND THAT, THEREFORE, NO INTEREST WAS PAYABLE BY THE FIRM IN VIEW OF THEIR BEING NO SUCH STIPULATION IN THE PARTNERSHIP DEED. ACCOR DINGLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THER E WAS NO GROUND FOR DISALLOWING INTEREST ON THE AMOUNT INVESTED AS CAPI TAL IN THE SAID PARTNERSHIP FIRM. THE ASSESSING OFFICER DID NOT ACCEPT THE CONT ENTION OF THE ASSESSEE STATING THAT THE CASE OF THE ASSESSEE IS SQUARELY C OVERED BY THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. 4 REPORTED IN (2006) 286 ITR 1 (P&H). THE ASSESSING OFFICER, THEREFORE, HELD THAT THE INTEREST TO THE EXTENT OF AMOUNT ADVANCED TO M/S CHOPRA ALLOYS DESERVES TO BE DISALLOWED. THE DISALLOWANCE WORKED OUT BY THE ASSESSING OFFICER CAME TO RS. 2,48,971/-. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE PARA 6 OF THE IMPUGNED ORDER HELD THAT DISALLOWANCE OF INTEREST C ANNOT BE SUSTAINED ON THE GROUND TAKEN BY THE ASSESSING OFFICER. THE CIT(A) ALSO HELD THAT THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ABH ISHEK INDUSTRIES LTD (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HOWEVER, CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 2,48,971/- UNDER THE PROVIS IONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI K.J. SHALLEY, LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CIT(A) HAS NOT AFFORDED ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE CONFIRMING THE DISALLOW ANCE OF RS. 2,48,971/- UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 14A OF THE ACT ARE NOT APPLIC ABLE TO THE FACTS OF ASSESSEES CASE. WE FIND THAT THE GROUND ON WHICH THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF IMPUGNED AMOUNT OF RS. 2,4 8,971/- HAS BEEN REJECTED BY THE CIT(A). HOWEVER, THE CIT(A) CONFIR MED THE ADDITION UNDER DIFFERENT SECTION, I.E. SECTION 14A OF THE ACT. BE FORE APPLYING THE PROVISIONS OF SECTION 14A, THE CIT(A) HAS NOT GIVEN ANY OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. IT AMOUNTS TO VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE. WE, 5 THEREFORE, REMAND THE MATTER TO CIT(A) TO DECIDE TH IS LIMITED ISSUE AS TO WHETHER THE PROVISIONS OF SECTION 14A OF THE ACT AR E APPLICABLE OR NOT TO THE FACTS OF THE PRESENT CASE. IF THE CIT(A) HOLDS THA T PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO THE FACTS OF PRESENT CASE, TH EN NO ADDITION SHOULD BE MADE. THE CIT(A) IS DIRECTED TO GIVE AN OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. FOR STATISTICA L PURPOSES, THE APPEAL IS ALLOWED. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27TH DAY OF APRIL, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 27 TH APRIL, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR