M/s. Archit Construction, Ahmedabad V. The ACIT.,Circle-9, Ahmedabad

ITA 1305/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9159 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-11-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 10-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Assessee Lawyers: S N SOPARKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO. 1305, 1306 AND 1307/AHD/2008 A. Y.: 1999-2000, 2000-01 AND 2001-02 M/S. ARCHIT CONSTRUCTION, C/O. SHRI SATISHCHANDRA B. SHAH, 28, NUTAN SOCIETY, PALDI, AHMEDABAD VS THE A. C. I. T., CIRCLE-9, AHMEDABAD PA NO. AACFA 6224 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI M. MATHIVANAN, DR O R D E R PER BHAVNESH SAINI, JM: ALL THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED CI T(A)-XV, AHMEDABAD DATED 08-02-2008, FOR ASSESSMENT YEARS 1999-2000, 2 000-01 AND 2001-02. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS THE GROUND OF APPEAL RELATING TO REOPENING OF THE ASSESSMENT U/S 147/148 OF THE IT ACT IN ALL THE APPEALS, THE SAME ARE ACCORDINGLY DISMIS SED NOT BEING PRESSED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE IN ALL THE APPEALS CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE D ISALLOWANCE OF RS.3,76,062/- RS.9,00,706/- AND RS.7,65,075/- OUT O F INTEREST EXPENDITURE TREATING IT AS INCURRED FOR NON-BUSINES S PURPOSE IN ALL THE ASSESSMENT YEARS RESPECTIVELY. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES MAINLY ARGUED IN THE ASSESSMENT YEAR 1999-2000 AND HAVE SUBMITTED THAT THE FACTS ARE COMMON IN ALL THE YEARS UNDER AP PEAL. THEREFORE, FOR ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 2 THE SAKE OF CONVENIENCE WE TAKE UP THE APPEAL FOR A SSESSMENT YEAR 1999- 2000 FOR THE PURPOSE OF DISPOSAL OF ALL THE APPEALS . 5. BRIEFLY, THE FACTS OF THE CASE ON THE ABOVE EFFE CTIVE GROUND OF APPEAL ARE THAT THE AO MADE THE ADDITION OF RS.3,76,062/- ON ACCOUNT OF THE EXPENSES OF INTEREST INCURRED FOR NON-BUSINESS PURP OSE. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT(A) AND WRITTE N SUBMISSION WAS FILED. IT IS NOTED IN THE IMPUGNED ORDER THAT AS PE R SCHEDULE I OF THE LIABILITIES SIDE OF THE BALANCE SHEET DEPOSITS/LOAN S RECEIVED HAVE BEEN SHOWN AT RS.3,69,87,169/-. DURING THE APPELLATE PRO CEEDINGS PAPER BOOK WAS FILED AND IT WAS ARGUED THAT ALL THE LOANS ARE NOT NEW AND NEITHER INTEREST HAS BEEN PAID ON ALL THE LOANS. THEREFORE, ARGUMENT OF THE AO THAT INTEREST SHOULD BE CHARGED AT 18% ON THE DEBIT BALANCES/AMOUNTS BORROWED FROM THE FIRM AND SHOWN OUTSTANDING IN THE PARTNERS ACCOUNT ON THE LAST DAY OF THE FINANCIAL YEAR HAS NO BASIS. THE ARGUMENT OF THE ASSESSEE HAS BEEN TAKEN CARE OF BY THE AO IN THE AS SESSMENT PROCEEDINGS AS HE HAS TAKEN THE RATE OF 12% INSTEAD OF 18% FOR MAKING THE ADDITION. A BRIEF SUMMARY IS GIVEN IN TABULAR F ORM INDICATING ON SUCH LOAN INTEREST WAS PAID BY THE FIRM AND ON WHICH NO INTEREST WAS PAID WHICH READS AS UNDER: SR. NO. NAME OF THE DEPOSITORS (PAGE 19 OF THE PAPER BOOK) AMOUNT OUTSTANDI NG AS ON 31.3.99 WHETHER INTEREST PAID OR NOT PAGE NO. OF THE PAPER BOOK GIVEN ON 6.2.08 INTEREST PAID AS PER PAGE 136 OF PAPER BOOK 1 PARASH HARISHKUMAR SHAH 1,33,938 NO INTEREST PAID 72 - 2 AVNIBEN HARISHKUMAR SHAH 1,85,000 -DO- 48 - 3 HARISHBHAI RAMANLAL SHAH 2,47,823 -DO- 58 - 4 HINA KANUBHAI SHAH 1,75,000 -DO- 60 - 5. SHOBHABEN HARISH KUMAR 3,65,146 -DO- 88 - ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 3 6 SAKALCHAND HARGOVANDAS 5,75,248 -DO- 84 - 7 ATUL CORPORATION 5,00,000 INTEREST PAID 46 1,875 8 RAMANLAL SAKALCHAND SHAH 2,80,000 NO INTEREST PAID 22 - 9 M. H. CHAVLA 3,16,650 INTEREST PAID 64 58,500 10 KANAYALAL SHAMDAS 5,28,550 -DO- 62 89,525 11 SHANTILAL H. KUSUMGAR HUF 8,35,362 -DO- 90 1,29,402 12 PARI GIRISHKUMAR LAHERCHANDBHAI 66,61,530 -DO- 76 10,70,125 13 PARI ATULKUMAR LAHERCHANDBHAI 42,13,515 -DO- 74 5,64,535 14 PARI PRAFULKUMAR AJITBHAI 1,22,607 -DO- 78 98,036 15 WEST VIEW H. P. LTD. 50,90,614 -DO- 94 11,91,136 16 CHANDRA MANIBEN C. PATEL 91,08,916 -DO- 52 16,95,851 17 NIRANJAN C. PATEL 4,15,045 -DO- 70 4,75,545 18 CHANDRIKA N. PATEL 61,24,187 -DO- 54 11,48,927 19 ASHINIBEN ALAY SHAH 1,15,500 NO INTEREST PAID 98 - 20 VARUN SANJAY RAVAL 35,000 -DO- 100 - 21 ASHIL ALAY SHAH 64,000 -DO- 54 - LESS BHAGYODAY SALES 705 INTEREST PAID 50 7,050 MAHAVIR TRADING 1355 -DO- 66 13,530 SHAH TRADING 1935 -DO- 86 19,330 PARI R. THAKARSI & CO. 547 -DO- 80 54,625 MIHIR R. PUNJABI 1470 -DO- 68 14,700 SUBODHCHANDRA MANILAL 450 -DO- 92 4,500 NAME OF 5 DEPOSITORS NOT APPEARING BUT INTEREST PAID OF RS.76,450 -DO- 136 76,450 TOTAL INTEREST PAID PAGE 136 - 137 66,39,642 INTEREST PAID BY THE FIRM FROM PARTNERS 1 SATISCHANDRA B. SHAH HUF 137 35,000 ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 4 2 SATISCHANDRA B. SHAH 137 -94,750 3 ALAY SATISCHANDRA SHAH 137 -3,22,250 4 SEJAL SATISHCHAND SHAH 137 -35,900 5 NILAMBEN S. SHAH 137 -1,52,545 TOTAL -5,70,445 INTEREST DEBITED IN THE P & L ACCOUNT IS INTEREST P AID OF RS.66,39,642 /- MINUS INTEREST RECEIVED OF RS.5,70,445/- WHICH COME S TO RS.60,69,197/-. 6. IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE AMOUNT SHOWN LESS ABOVE AGGREGATING TO RS.6,462/- FROM THE FIRM OF BHAGYODAYA SALES ONWARDS ARE THE TDS AMOUNTS WHICH ARE TO BE RECOVER ED FROM THE PARTNERS TO WHOM FULL INTEREST HAS BEEN PAID BY THE FIRM AND IT HAD TO RECOVER THE TDS AMOUNT FROM THEM. IT WAS EXPLAINED THAT THE ABOVE AMOUNTS SHOULD HAVE BEEN MENTIONED ON THE ASSETS SI DE OF THE BALANCE SHEET AS ADVANCE RECOVERABLE AND LOAN SHOWN ABOVE S HOULD HAVE BEEN SHOWN AT RS.3,69,93,631/- ( RS.3,69,87,169/- PLUS R S.6,462/-. IT WAS PLEADED THAT THE ADDITION IS NOT REQUIRED. THE LEAR NED CIT(A) ACCEPTED THE ARGUMENT OF THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE AO HAS CONSIDERED THIS CONTENTION OF THE ASSESSEE IN THE A SSESSMENT PROCEEDINGS THAT ON ALL LOANS THE FIRM DID NOT PAY INTEREST AND THAT IS WHY HE PROCEEDED TO CALCULATE INTEREST @12% ON THE SUM (CL OSING DEBIT BALANCES IN THE PARTNERS CAPITAL ACCOUNT) INSTEAD OF 6% CHA RGED BY THE FIRM FROM THE PARTNERS. THUS, THE FIRM PAID INTEREST @18% ON FURROWED FUNDS. PARA 9 OF THE ASSESSMENT ORDER GIVES THIS IN A TABULAR F ORM IN THE CASE OF 4 PARTNERS OF THE FIRM. IT WOULD SHOW THAT THE FIRM P AID HEAVY INTEREST @18% ON BORROWED FUNDS BUT DID NOT CHARGED INTEREST AT THE SAME RATE FROM THE PARTNERS. IN THIS BACKGROUND INSTEAD OF 18 %, THE AO HAS HOWEVER, PROCEEDED TO CALCULATE THE INTEREST. IT WA S EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE PARTNERS HAVE BEEN CHARGED INTEREST ON THE REDUCING DEBIT BALANCE @6% WHILE THE AO HAS CHARGED INTEREST @12%. IT WAS CONFIRMED BY THE ASSESSEE THAT THERE WERE INTER EST BEARING FUNDS ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 5 ALSO WHICH WERE USED TO GIVE LOANS TO THE PARTNERS. OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO GIVE DETAILS OF SEGREGATIN G ITS FUNDS IN ITS PARTNERS CASE. BUT NO CLEAR CUT ANSWER WAS GIVEN B Y THE ASSESSEE. THE LEARNED CIT(A) HOWEVER, CONSIDERED THE SUBMISSION O F THE ASSESSEE AND CONFIRMED THE ADDITION. HIS FINDINGS IN PARA 12 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 12. EVEN AFTER GOING THROUGH SEVERAL PAGES OF THE PAPER BOOK, THE CLEAR CUT QUANTUM AND DATES OF FUND S BORROWED BY THE PARTNERS, AND THOSE BORROWED BY THE FIRM, BUT LENT TO THE PARTNERS COULD NOT BE ASCERTAINED A S THE BANK ACCOUNT COPY GIVEN WAS NOT MARKED BY THE APPELLANT TO THIS AFFECT. ALSO THIS IS UNDISPUTED THAT THE FIRM HAS P AID INTEREST OF RS.66,39,642 AT 18% AND RECEIVED INTEREST OF RS. 5,70,445 AT THE RATE OF 6% FROM PARTNERS, AND THIS IS HOW AF TER NETTING INTEREST, DEBITED INTEREST EXPENSE OF RS.60,69,197 IN ITS PROFIT & LOSS ACCOUNT. (REFERENCE IS INVITED TO THE TABULA R CHART PREPARED FROM THE DETAILS RECEIVED IN THE PAPER BOO K OF THE APPELLANT, PARA -6 ABOVE). IN THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE RATE OF 12% TAKEN BY THE AO AS AGAINST 6% SHOWN BY THE APPELLAN T, TO BE THE RATE AT WHICH INTEREST SHOULD HAVE BEEN PAID BY THE PARTNERS TO THE FIRM ON THEIR BORROWINGS IS NOT AT ALL EXTRAVAGANT. THE ADDITION MADE THEREFORE OF RS.3,76 ,062 IS CONFIRMED. IN OTHER ASSESSMENT YEARS, THE AUTHORITIES HAVE SIM ILARLY GIVEN THE DETAILS OF INTEREST AND THE CHART THOUGH ON A DIFFE RENT AMOUNT WHICH ARE NOT REPRODUCED FOR THE SAKE OF BREVITY. THE FINDING S OF THE LEARNED CIT(A) ARE SAME AND IS ALSO NOT ACCORDINGLY REPRODUCED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T IN RESPONSE TO THE QUERY OF THE AO THE ASSESSEE FILED THE DETAILS OF I NTEREST PAYABLE/RECEIVABLE TO/FROM THE PARTNERS IN ANNEXURE A, COPY OF WHICH IS FILED AT PAGE 36 AND 37 OF THE PAPER BOOK IN ALL THE ASSESSMENT YEARS AND SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 6 NON-INTEREST BEARING FUNDS TO THE ASSESSEE WHICH WE RE AVAILABLE TO THE PARTNERS AND THE ASSESSEE FIRM. HE HAS SUBMITTED TH AT THE DETAILS FILED ON RECORD WOULD SHOW THAT THOUGH INTEREST PAYABLE W AS @12% AND THE INTEREST WORKED OUT ON NON-INTEREST BEARING LOANS W AS AT MORE AMOUNT AND THEREBY THE ASSESSEE HAS CHARGED MORE INTEREST IN THE ASSESSMENT YEAR 1999-2000, AND ASSESSMENT YEAR 2001-02. THE CH ART PRODUCED AT PAGE 36 AND 37 OF THE PAPER BOOK IS REPRODUCED AS U NDER: DETAILS OF INTEREST PAYABLE/RECEIVABLE TO/FROM THE PARTNERS ACCOUNTING YEAR 1998-99 NAME INTEREST @12% INTEREST BALANCE ON CLOSING CHARGE BALANCE 1. SATISCHANDRA B. SHAH 2,20,235 94,750 1,25 ,485 2. ALAYKUMAR S. SHAH 6,08,038 3,22,250 2,85,788 3. SEJALBEN S. SHAH 81,000 35,900 45,10 0 4. SATISCHANDRA B. SHAH (HUF) - 80,311 _________ - 80,311 8,28,962 4,52,900 3,76,062 ACCOUNTING YEAR 1999-2000 NAME INTEREST @12% INTEREST BALANCE ON CLOSING CHARGE BALANCE 1. SATISCHANDRA B. SHAH 4,63,600 87,250 3,76 ,350 2. ALAYKUMAR S. SHAH 7,33,077 3,90,965 3,42,112 3. SEJALBEN S. SHAH 2,58,359 34,500 2,23,859 4. SATISCHANDRA B. SHAH (HUF) - 41,615 ______-__ - 41,615 14,13,421 5,12,705 9,00,706 ACCOUNTING YEAR 2000-01 NAME INTEREST @12% INTEREST BALANCE ON CLOSING CHARGE BALANCE 1. SATISCHANDRA B. SHAH 2,29,673 2,29,673 2. ALAYKUMAR S. SHAH 4,61,949 4,61,949 3. SEJALBEN S. SHAH 68,220 68,220 4. SATISCHANDRA B. SHAH (HUF) - 5,232 __________ 5,232 7,65,075 - 7,65,075 ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 7 A.Y. 1999-2000 INTEREST PAYABLE @12% 3,76,075 INTEREST WORKED OUT ON NON INTEREST BEARING LOAN @12% ON 32,17,135 AS PER LIST 4,42,907 LESS 66,845 A. Y. 2000-01 INTEREST PAYABLE @12% 9,00,706 INTEREST WORKED OUT ON NON INTEREST BEARING LOAN @12% ON 19,75,000 AS PER LIST - 2,37,000 PLUS 6,63,706 A. Y. 2001-02 INTEREST PAYABLE @12% 7,65,075 INTEREST WORKED OUT ON NON INTEREST BEARING LOAN @12% ON 19,75,000 AS PER LIST - 16,29,420 LESS 8,64,345 8. THE LEARNED COUNSEL FOR THE ASSESSEE BY REFERRIN G TO THE ABOVE CHART SUBMITTED THAT THE ADDITION FOR ASSESSMENT YE AR 2000-01 MAY BE MAINTAINED IN A SUM OF RS.6,63,706/- AND ADDITIONS IN OTHER TWO YEARS MAY BE DELETED. 9. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUT HORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD AND DO NOT SUBSCRIBE TO THE VIEWS OF THE AUTHORITIES BELOW IN CONFIRMING THE ABOVE ADDITIONS.THE ASSESSEE HAS FIL ED SPECIFIC REPLY BEFORE THE AUTHORITIES BELOW COPY OF WHICH IS FILED AT PAG E 36 AND 37 OF THE PAPER BOOK NOTED ABOVE AND WOULD INDICATE THAT THE METHOD OF CALCULATING THE INTEREST INCURRED FOR NON-BUSINESS PURPOSE WAS CLEARLY UNJUSTIFIED. THE ASSESSEE WORKED OUT THE INTEREST O N NON-INTEREST BEARING ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 8 LOANS AT THE SAME RATE AS PER THE ABOVE LIST AND TH E ASSESSEE HAS CHARGED MORE INTEREST IN ASSESSMENT YEAR 1999-2000 AND IN T HE ASSESSMENT YEAR 2001-02. THEREFORE, THERE WAS NO BASIS TO MAKE THE ADDITIONS IN THESE ASSESSMENT YEARS. IN ASSESSMENT YEAR 2000-01 ALSO THE PROPORTIONATE ADDITION AS PER THE FINDINGS OF THE AUTHORITIES BEL OW COULD BE MAINTAINED IN A SUM OF RS.6,63,706/-. THE DETAILED SUBMISSION IN THE REPLY FILED BEFORE THE AUTHORITIES BELOW ARE INCORPORATED ABOVE WOULD SHOW THAT THE AUTHORITIES BELOW HAVE NOT ADVERSELY COMMENTED UPON THE CALCULATION OF THE ASSESSEE. IN THE ABSENCE OF ANY SPECIFIC MATERI AL AGAINST THE CALCULATION OF THE ASSESSEE FILED AT PAGE 36 AND 37 OF THE PAPER BOOK, WE HAVE NO OPTION EXCEPT TO ACCEPT THE CLAIM OF THE AS SESSEE. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DIRECT THAT THE ADDITIONS BE DELETED IN ASSESSMENT YEAR 1999-20 00 AND 2001-02. HOWEVER, IN ASSESSMENT YEAR 2000-01 THE ADDITION WO ULD BE MAINTAINED IN A SUM OF RS.6,63,706/- AS AGAINST MADE BY THE AU THORITIES BELOW IN A SUM OF RS.9,00,706/-. IN THE RESULT, THE GROUNDS OF THE APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 1999-2000 AND 2001-02 A RE ALLOWED, WHEREAS IN ASSESSMENT YEAR 2000-01, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. CHARGING OF INTEREST IS MANDATORY AND CONSEQUEN TIAL. THE SAME ARE ACCORDINGLY DISMISSED. 12. NO OTHER POINT IS ARGUED OR PRESSED. 13. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED PARTLY. ORDER PRONOUNCED ON 2-12-2010. (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 2-12 -2010 LAKSHMIKANT/- ITA NO.1305, 1306 AND 1307/AHD/2008 M/S. ARCHIT CONSTRUCTION VS ACIT, CIRCLE-9, AHMEDAB AD 9 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD