Sh. Devinder Kumar, Ludhiana V. ITO, W-VII(1), Ludhiana

ITA 1270/CHANDI/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4938 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPIKA MOHAN
• Keywords: Charitable institution; Earning of tax free income; Reasonable cause
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1270/CHD/2017 (ASSESSMENT YEAR : 2011-12) SH.DEVINDER KUMAR, VS. THE INCOME TAX OFFICER, 14, SURYA VIHAR, WARD-VII (1), RISHI NAGAR, LUDHIANA. LUDHIANA. NEW ADDRESS: C/O M/S SHREE AUM HOSPITAL AASHIANA COMPLEX, BARI BRAHMANA, JAMMU. (JAMMU & KASHMIR). PAN: AENPK0344L (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : MS. DEEPIKA MOHAN, JCIT DATE OF HEARING : 16.05.2018 DATE OF PRONOUNCEMENT : 30.05.2018 ORDER PER ANNAPURNA GUPTA, AM : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 4, LUDHIANA (HEREINAFTER REFERRED TO AS CIT(APPEALS )) DATED 19.6.2017 RELATING TO ASSESSMENT YEAR 2011-12. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WHO IS AN ARCHITECT BY PROFESSION HAD FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 21.03,2012 DECL ARING THEREIN AN INCOME OF RS.2,33,090/- WHICH WAS STATED TO BE PROCESSED UNDER SECTION 143(1) OF THE ACT AT THE RE TURNED INCOME. HOWEVER, THE ASSESSMENT IN THIS CASE WAS COMPLETED BY THE ASSESSING OFFICER VIDE ORDER UNDER SECTION 143(3) OF THE ACT DATED 15.01.2014 AT AN ASSESSED I NCOME OF 2 RS.19,30,496/-. MAKING THE FOLLOWING ADDITIONS TO T HE RETURNED INCOME OF THE ASSESSEE:- ( I). ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN VARIOUS BANK ACCOUNTS MAINTAINED BY THE ASSESSEE WITH DIFFERENT BANKS RS.7,30,500/- (II) ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST BY INVOKING PROVISIONS OF SECTION 36(1)(III) OF THE ACT ON THE GROUND THAT ASSESSEE HAS GIVEN INTEREST FREE LOANS ADVANCES TO RELATED/UNRELATED PARTIES/CONCERNS WHICH WERE CONSIDERED BY THE ASSESS- ING OFFICER FOR NON-BUSINESS PURPOSES. RS.5,99,33 0/- (III) ADDITION ON ACCOUNT OF UNPROVED UNSECURED LOANS RS.3,50,000/- (IV) ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT RS.17,576/- 3. AGGRIEVED BY THE SAME, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(APPEALS). THE APPEAL WAS FIXED FO R HEARING ON VARIOUS OCCASIONS WHICH WERE EITHER NOT ATTENDED OR ADJOURNMENT SOUGHT BY THE ASSESSEE. THE DETAILS OF THE SAME ARE REPRODUCED AT PARA 5.1 OF THE CIT(APPEALS) S ORDER. THEREAFTER THE CIT(APPEALS) NOTED THAT EVEN NO WRIT TEN SUBMISSIONS WERE FILED IN SUPPORT OF VARIOUS GROUND S OF APPEAL AND, THEREFORE HOLDING THAT THE ASSESSEE BEI NG NOT INTERESTED IN PURSUING THE APPEAL ,HE PROCEEDED TO DISPOSE OFF THE SAME ,EX-PARTE, ON THE BASIS OF MATERIAL AV AILABLE ON RECORD. THE LD.CIT(APPEALS) NOTED THEREAFTER THAT V ARIOUS ADDITIONS MADE IN THE CASE HAD BEEN MADE AFTER CONS IDERING THE REPLY FILED BY THE ASSESSEE FROM TIME TO TIME A ND SINCE NO SUBMISSIONS HAD BEEN MADE IN SUPPORT OF VARIOUS GROUNDS RAISED IN APPEAL DESPITE SUFFICIENT OPPORTU NITIES 3 PROVIDED TO THE ASSESSEE, THE LD.CIT(APPEALS) WAS O F THE OPINION THAT THE ASSESSEE HAD NOTHING TO SAY IN THE MATTER WITH REGARD TO VARIOUS ADDITIONS. FURTHER NOTING TH AT THE ASSESSEE COULD NOT DEMONSTRATE HOW THE ADDITIONS MA DE BY THE ASSESSING OFFICER WERE INCORRECT AND THAT THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE ADDITIONS MAD E WERE NOT CORRECT, THE LD.CIT(APPEALS) HELD THAT THE ASSE SSING OFFICER WAS FULLY JUSTIFIED IN MAKING VARIOUS ADDIT IONS AND THEREBY DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (A)-4, LUDHIANA HAS ERRED IN DISMISSING THE APPEAL AND HENCE CONFIR MING ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER. 2. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT NO SUFFICIENT AND REASONABLE OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO REPRESENT THE CASE BEFORE HIM AND ALSO THE ASSESSEE WAS PREVENTED BY SUFFICIENT/REASONABLE CAUSE IN NOT APPEARING BEFORE HI M. 3. THAT THE LD. CIT(A) HAS FAILED TO TAKE INTO CONSI DERATION THAT THOUGH EMAIL SENT TO HIS OFFICE, IT HAS BEEN COMMUNICATED TO HIM THAT THE APPELLANT HAD UNDERGONE HEART SURGERY AND WAS ADMITTED TO THE HOSPITAL AND, THEREFORE, REQUESTED FOR TIME AND WHICH HAS BEEN IGNORED. 4. NOTWITHSTANDING THE ABOVE SAID GROUNDS OF APPEAL, I T IS SUBMITTED THAT EVEN OTHERWISE WHILE DISMISSING THE APPEAL, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE SUBMISSIONS FILED BY THE ASSESSEE DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER AND ALL OT HER DOCUMENTS AND MATERIAL ALREADY ON RECORD BEFORE THE ASSESSING OFFICER. 5. BEFORE US ALSO DESPITE VARIOUS OPPORTUNITIES GIV EN TO THE ASSESSEE EITHER ADJOURNMENT WAS SOUGHT VERBALLY OR NONE CAME PRESENT, ON THE DATES FIXED FOR HEARING. EVEN ON 16.05.2018, WHEN THE CASE WAS FINALLY HEARD, NONE 4 APPEARED ON BEHALF OF THE ASSESSEE DESPITE THE ADJOURNMENT OF THE HEARING OF THE CASE TO THE SAID DATE I.E. 16.5.2018, BEING MADE IN THE OPEN COURT ON THE LAST DATE OF HEARING I.E. 22.03.2018, WHEN SHRI GAURAV SHARMA, P ROXY COUNSEL FOR THE ASSESSEE WHO HAD SOUGHT ADJOURNMENT VERBALLY, WAS PRESENT IN PERSON. WE, THEREFORE, AGR EE WITH THE LD.CIT(APPEALS) THAT THE ASSESSEE IS NOT INTERE STED IN PURSUING THE APPEAL, HAVING NOTHING TO SAY WITH REG ARD TO VARIOUS ADDITIONS MADE IN THIS CASE AND EVEN THE GR OUNDS RAISED BEFORE US RELATING TO REASONABLE OPPORTUNITY OF HEARING NOT BEING GRANTED TO THE ASSESSEE ,OR THAT THERE WAS REASONABLE AND SUFFICIENT CAUSE WITH THE ASSESSEE F OR NOT APPEARING BEFORE THE CIT(APPEALS). WE THEREFORE DIS MISS GROUND NO.2 & 3 RAISED BY THE ASSESSEE IN THIS REGA RD. 6. FURTHER VIS-A-VIS THE GROUND RAISED BY THE ASSES SEE AGAINST THE ACT OF THE CIT(APPEALS) IN CONFIRMING A LL ADDITIONS MADE BY THE ASSESSING OFFICER, WE SHALL B E SEPARATELY DEALING WITH EACH ADDITION MADE ON THE B ASIS OF ORDERS OF THE LOWER AUTHORITIES BELOW US, WHICH IS THE ONLY MATERIAL AVAILABLE WITH US, SINCE EVEN BEFORE US TH E ASSESSEE HAS NOT FILED ANY SUBMISSIONS IN WRITING. 7. ON PERUSING THE ORDER OF THE ASSESSING OFFICER W E FIND THAT THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CA SH FOUND DEPOSITED IN BANK, OF RS.7,30,500/-, WAS MADE AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE. THE AS SESSING OFFICER HAD NOTED THAT THERE WAS CASH DEPOSITED IN THE VARIOUS BANK ACCOUNTS OF THE ASSESSEE TO THE TUNE O F 5 RS.92,10,000/-. ON ASKING THE ASSESSEE TO EXPLAIN T HE SAME, THE ASSESSEE FILED REPLY, REPRODUCED IN PARA 2 OF THE ASSESSING OFFICERS ORDER, AFTER CONSIDERING WHICH THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE VIS-A-VIS CASH DEPOSITS TO THE TUNE OF RS.84,79,500 /-. THE BALANCE, TO THE EXTENT OF RS.7,30,000/-,WAS HELD TO BE STILL REMAINING UNEXPLAINED AND ADDITION MADE OF THE SAME TO THE INCOME OF THE ASSESSEE. SINCE THE ASSESSING O FFICER HAS MADE THE ADDITION AFTER CONSIDERING THE ASSESSE ES REPLY AND THE ASSESSEE HAS NOTHING TO SAY ON THE ISSUE, A S NOTED ABOVE BY US, WE FIND NO INFIRMITY IN THE ORDER OF T HE CIT(APPEALS), UPHOLDING THE ADDITION SO MADE OF RS.7,30,500/- ON ACCOUNT OF UNEXPLAINED CASH DEPOSI TS. 8. REGARDING THE DISALLOWANCE OF INTEREST U/S 36(1) (III) OF THE ACT, WE FIND, THAT THE ASSESSING OFFICER HAD NO TED THAT THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS TO HI S FAMILY MEMBERS AND FAMILY CONCERN/TRUST AND AT THE SAME TI ME HAD PAID INTEREST ON LOANS TO FINANCIAL INSTITUTION S AND BANKS. THE SAME WAS CONFRONTED TO THE ASSESSEE ASKI NG HIM WHY INTEREST @ 10% BE NOT DISALLOWED ON THE INTERES T FREE LOANS/ADVANCES GIVEN, TO WHICH, WE FIND THE ASSESSE E REPLIED THAT THEY WERE ALL FRIENDLY LOANS AND LOANS GIVEN TO CHARITABLE TRUSTS AND THEREFORE NO INTEREST WAS CHA RGED. FURTHER OPPORTUNITIES WERE ALSO GIVEN TO THE ASSESS EE WHEREIN HE CONTENDED THAT THE LOANS RAISED WERE FOR BUSINESS PURPOSE ONLY. THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE, HELD T HAT THE 6 ASSESSEE HAD FAILED TO ESTABLISH THE COMMERCIAL EXP EDIENCY FOR MAKING THE SAID LOANS AND ALSO THAT THE LOANS R AISED WERE USED IN THE BUSINESS OF THE ASSESSEE. HE THERE FORE HELD THAT THE ASSESSEE HAD DIVERTED INTEREST BEARING FUN DS FOR NON BUSINESS PURPOSES AND DISALLOWED INTEREST PERTA INING TO THE SAME, RESULTING IN DISALLOWANCE OF INTEREST OF RS.5,99,330/-. SINCE THE ASSESSING OFFICER HAS MAD E THE DISALLOWANCE AFTER CONSIDERING THE ASSESSEES REPLY AND THE ASSESSEE HAS NOTHING TO SAY ON THE ISSUE, AS NOTED ABOVE BY US, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ,UPHOLDING THE DISALLOWANCE MADE OF INTEREST U/S 36(1)(III) O F THE ACT, OF RS.5,99,300/-. 9. THE ASSESSING OFFICER, WE FIND ALSO MADE DISALLO WANCE OF UNSECURED LOANS TAKEN BY THE ASSESSEE AMOUNTING TO RS.3,50,00/- FROM ONE SMT.SAROJ BHATIA, FOR THE REA SON THAT THE ASSESSEE HAD FAILED TO DISCHARGE HIS ONUS OF PR OVING THE IDENTITY & CREDITWORTHINESS OF THE LOANEE AND ALSO THE GENUINENESS OF THE TRANSACTION. WITH RESPECT TO THE SAME, WE FIND THAT THE ASSESSING OFFICER HAD NOTED THAT T HE LOAN WAS NOT TAKEN IN THE IMPUGNED YEAR AND WAS OUTSTAND ING AS AT THE END OF THE PRECEDING YEAR ALSO I.E 31-03-201 0, PERTAINING TO A.Y 2010-11. IN VIEW OF THE SAME, WE HOLD THAT THE SAID LOAN CANNOT BE TREATED AS INCOME OF THE AS SESSEE FOR THE IMPUGNED YEAR. THE ADDITION SO MADE TO THE INCOME OF THE ASSESSEE AMOUNTING TO RS. 3,50,000/- IS THER EFORE DELETED. 7 10. THE ASSESSING OFFICER, WE FIND, HAS ALSO MADE DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO IN COME EARNED WHICH IS EXEMPT FROM TAX, AS PER SECTION 14A OF THE ACT, AMOUNTING TO RS.17,576/-. THE ASSESSING OFFICE R HAD NOTED THAT THE ASSESSEE HAD MADE INVESTMENT IN MUTU AL FUNDS/SHARES, INCOME FROM WHICH BY WAY OF DIVIDEND WAS EXEMPT FROM TAX. HE THEREFORE ASKED THE ASSESSEE AS TO WHY EXPENSES RELATING TO THE SAME BE NOT DISALLOWED U/S 14A OF THE ACT, TO WHICH THE ASSESSEE DENIED INCURRING ANY EXPENSES AND ALSO DENIED EARNING ANY EXEMPT INCOME FROM THE SAID INVESTMENTS. THE AO DISMISSED THE ASSESSEE S CONTENTIONS AND PROCEEDED TO DISALLOW EXPENSES CALC ULATED AS PER RULE 8D OF THE INCOME TAX RULES,1962,WHICH AMOUNTED TO RS.17,576/-. 11. WITH REGARD TO THE SAID DISALLOWANCE MADE U/S 1 4A ,WE ARE NOT IN AGREEMENT WITH THE AO/CIT(A).THE AO HAS NOTED THE FACT THAT NO DIVIDEND INCOME WAS EARNED BY THE ASSESSEE ON THE SAID INVESTMENTS. IN VIEW OF THE SAID FACT, WE HOLD THAT NO DISALLOWANCE U/S 14A IS WARRANTED. THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS LAK HANI MARKETING INCL (2014) 272 CTR 265 (P&H) HAS HELD TH AT NO DISALLOWANCE U/S 14A IS WARRANTED WHEN NO EXEMPT IN COME IS EARNED. RESPECTFULLY FOLLOWING THE SAME WE DELE TE THE DISALLOWANCE MADE U/S 14A OF THE ACT AMOUNTING TO RS.17,576/- . IN VIEW OF THE ABOVE WE DELETE THE ADDITIONS MADE ON ACCOUNT OF THE FOLLOWING: 8 UNEXPLAINED LOAN RS.3,50,000/- U/S 14A RS.17,576/- WHILE THE ADDITIONS/DISALLOWANCES MADE ON ACCOUNT OF THE FOLLOWING IS UPHELD: UNEXPLAINED CASH DEPOSITED IN BANK RS.7,30,500 /- INTEREST U/S 36(1)(III) R S.5,99,330/- 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS, T HEREFORE, PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH MAY, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH