M/s B.K. Rope Store, Ludhiana V. ITO, Ludhiana

ITA 1368/CHANDI/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9949 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: LALIT TAKYAR
• Keywords: Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH S.M.D, CHANDIGARH !', # $ !, . %.. . & , '( $ BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 1368/CHD/2016 / ASSESSMENT YEAR : 2007-08 M/S B.K. ROPE STORE TALAB BAZAR, LUDHIANA THE ITO WARD-II(1), LUDHIANA ./ PAN NO: AABFB4182D / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. LALIT TAKYAR # ! ' / REVENUE BY : SMT. CHANDRAKANTA $ % ! &/ DATE OF HEARING : 30/08/2018 '()* ! &/ DATE OF PRONOUNCEMENT : 25/09/2018 ')/ ORDER PER DR. B.R.R. KUMAR: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-1, LUDHIANA DT. 22/09/2016. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE LEARNED CIT (APPEAL)HAS ERRED IN ALLOWING PART RELIEF TO THE ASSESSEE WHICH IS AGAINST LAW & FACTS OF THE CASE. 2. THAT THE ASSESSMENT FRAMED UNDER SEC 143 (3) \ 147 HAS BEEN WRONGLY RE- OPEN IT IS A CASE OF CHANGE OF OPINION ONLY AND BAS ES ON AUDIT OBJECTION. NEXT YEAR NO ADDITION HAS BEEN MADE ON THE SIMILAR GROUN DS IN THIS CASE. 3. THAT THE LEARNED CIT HAS WRONGLY CONFIRMED THE INTE REST DISALLOWED ON THE LOAN TAKEN BY THE PARTNERS AND OTHER CO-APPLICANT U NDER THE HEAD (HOME LOANS). IT WAS USED BY THE FIRM AND LOAN IS A LOAN. ALL THE RELEVANT PAPERS WERE GIVEN AT THE TIME OF ASSESSMENT AS WELL AS BEFORE T HE CIT (A). 3. BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL AS SESSMENT WAS FRAMED UNDER SECTION 143(3) ON 10.12.2009 AND THE NOTICE U/S 148 ISSUED ON 28.3.2012 I.E. WITHIN FOUR YEARS OF THE ORIGINAL ASSESSMENT. REASONS WERE DULY RECORDED FOR ISSUE OF NOTICE U/S 148. THE SAID NOTICE WAS ISSUED AFTER TH E APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX CONCERNED AND THE OBJECT IONS RAISED BY THE ASSESSEE AGAINST THE NOTICE UNDER SECTION 148 HAVE BEEN DULY DISCUSSED IN THE 2 ASSESSMENT ORDER UNDER SECTION 143 (3) READ WITH SE CTION 147 OF THE ACT. THE REASONS FOR ISSUING OF NOTICE UNDER SECTION 148 ARE AS UNDER: ASSESSMENT IN THIS EASE WAS COMPLETED U/S 143(3) OF THE L.T. ACT AT AN INCOME OF RS 86,060/- ON 10.12.2009. FROM PERUSAL OF RECORD, IT IS FOUND THAT THE ASSESS EE HAS FURNISHED COPY OF PARTNERSHIP DEED FOR THE PERIOD 01.04.2008 ONWARDS WHEREAS ASSESSMENT U/S 143(3) WAS MADE FOR THE PERI OD 01.04.2006 TO 31.03.2007. AS THE ASSESSEE HAS FAILED TO PRODUC E THE PARTNERSHIP DEED FOR THE RELEVANT PERIOD THEREFORE, THE CASE HA S TO BE ASSESSED AS PER PROVISIONS OF SECTION 185 OF THE L.T. ACT. 1 961.HENCE, THE INTEREST PAID AMOUNTING TO RS.5.43.269/- TO THE PAR TNERS OF THE FIRM IS REQUIRED TO BE ADDED BACK TO THE ASSESSED INCOME OF THE ASSESSEE. 2. SECTION 40A(2)(B) ;- FROM THE PERUSAL OF P&L ACCOUNT, IT HAS BEEN NOTICED THAT THE ASSESSEE HAS DECLARED INTEREST INC OME AMOUNTING TO RS. 2,46,828/-. FROM THE RELEVANT DOCUMENTS, IT HAS BEEN NOTICED THAT THE ASSESSEE HAS CHARGED INTEREST ON ADVANCES AND LOANS @ 9% ONLY. FURTHER, IT HAS BEEN NOTICED THAT THE ASSESSE E HAS TAKEN UNSECURED LOANS AMOUNTING TO RS. 90,78,440/- AND PA ID INTEREST ON THESE LOANS @ 12% AND @ 18%. THE ASSESSEE HAS PAID HIGHER RATE OF INTEREST TO TH E RELATED PERSONS @ 1 8% WHEREAS IT HAS CHARGED INTEREST @ 9% ON THE LOANS AND ADVANCES GIVEN BY IT. NONCE, THE EXCESS/ UNREASONAB LE INTEREST PAID BY THE FIRM TO THE RELATED PERSONS EXCESS OF 9 % AMOUNTING TO RS. 5,00,538/- IS REQUIRED TO BE DISALLOWED U/S 40A (2)(B) OF THE L.T. ACT, 1961 AND ADDED BACK TO THE ASSESSED INCOME OF THE ASSESSEE. 3. FURTHER, ONE OF THE PARTNER SH. BHAWNESH KUMAR HAS TAKEN HOME LOAN AMOUNTING TO RS. 75 LACS FROM IC1CI BANK LUDHIANA. THIS LOAN AHS BEEN REPAID IN EQUAL MONTHLY INSTALLMENTS OF RS. 1,01,200/-. THE OUTSTANDING BALANCE OF HOUSING LOAN AMOUNTING T O RS. 71,99,697/- AS ON 31.03.2007 HAS BEEN SHOWN IN THE BALANCE SHEET STATEMENT OF THE FIRM. AS PER BANK STATEMENT, ASSES SEE HAS PAID INTEREST ON THIS HOUSE LOAN AMOUNTING TO RS. 6,19,1 47/- UPTO 31.03.2007. THE ASSESSEE HAS DEBITED THE BANK INTER EST AMOUNTING TO RS. 8,23,000/- TO P&F ACCOUNT. OUT OF THIS AMOUN T INTEREST AMOUNTING TO RS. 6,19,147/- IS 'REQUIRED TO BE DISA LLOWED U/S 36(10(III) BEING PAID FOR NON-BUSINESS PURPOSE AND THIS AMOUNT OF RS. 6.IS), 147/- IS REQUIRED TO BE ADDED BACK TO TH E ASSESSED INCOME OF THE ASSESSEE. 4. ONE OF THE PARTNER SH. MILKHI RAM HAS MADE ADDITION TO HIS CAPITAL ACCOUNT AMOUNTING TO RS. 3 FACS AFTER D EPOSIT OF CASH AMOUNTING TO RS. 2,76,000/-IN HIS SAVING BANK ACCOU NT NO. 02510120008155 MAINTAINED WITH KOTAK MAHINDRA BANK. LUDHIANA. THE SOURCE OF THIS CASH CREDIT HAS TO BE VERIFIED. AS THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISION S OF SECTION 185, 40A(2)(B) AND 36(I)(III) OF THE L.T. ACT. 1961 AND TO VERILY THE SOURCE OF CASH CREDIT I HAVE, THEREFORE, REASONS TO BELIEV E THAT RS. 16,62,954/- IS REQUIRED TO BE ADDED BACK TO THE INC OME OF THE ASSESSEE. THUS, THE INCOME OF THE ASSESSEE HAS ESCA PED ASSESSMENT FOR A.Y. 2007-08 IT IS A FIT CASE FOR TAKING ACTION U/S 147 OF THE I . T . ACT. 1961. 4. ON HEARING OF BOTH THE PARTIES AND ON PERUSAL OF THE REASONS WE FIND THAT, 1. THE DETAILS OF THE LOANS HAVE BEEN DULY EXAMINED BY THE ASSESSING OFFICER VIDE PARA NO. 1 OF THE ASSESSMENT ORDER DT. 10/12/2 009 WHEREIN THE BOOKS 3 OF ACCOUNTS HAVE BEEN DULY EXAMINED. THUS, THE LOAN S AND THE INTEREST PAYMENTS STANDS EXAMINED AND IN THE ABSENCE OF RECE IPT OF ANY OTHER NEW INFORMATION, REOPENING TO DISALLOW THE PURPORTE D DIFFERENTIAL INTEREST IS NOT ALLOWABLE. 2. THE ASSESSING OFFICER HAS MENTIONED THAT ONE OF THE PARTNERS HAS TAKEN HOME LOAN AND PAID INTEREST OF RS. 619147/- TO THE BANK ON ACCOUNT OF HOME LOAN TAKEN BY THE PARTNER. THIS ASSUMPTION OF THE ASSESSING OFFICER IS NOT CORRECT AS PER THE FACTS ON RECORD. THE LOAN HA S BEEN RECEIVED BY ALL THE MEMBERS OF THE FIRM (THE ASSESSEE) AND THE AMOU NTS HAVE BEEN DULY REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. HEN CE, PRIMAFACIE NO ESCAPEMENT OF INCOME CAN BE DETERMINED. SINCE, THE REOPENING IS ON WRONG FACTS THE SAME CANNOT BE HELD TO BE VALID. 3. THE ASSESSING OFFICER MENTIONED THAT ONE OF THE PAR TNER MADE ADDITION TO THE CAPITAL ACCOUNT OF RS. 3,00,000/- AND THE SOURC E NEEDS TO BE VERIFIED. HAVING COMPLETED THE ASSESSMENT UNDER SECTION 143(3 ) IN THE ABSENCE OF ANY OTHER INFORMATION THE PROVISIONS OF SECTION 148 CANNOT BE USED TO RE- EXAMINE THE ISSUES STANDS EXAMINED IN THE ORIGINAL PROCEEDINGS. 5. SINCE WE HOLD THAT THE RE-OPENING DONE BY THE AS SESSING OFFICER IS NOT VALID BASED ON THE FACTS ON RECORD, THE APPEAL OF T HE ASSESSEE TAKEN UP AT GROUND NO. 2 IS HEREBY ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- !' . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) # $/ JUDICIAL MEMBER '( $/ ACCOUNTANT MEMBER AG DATE: 25/09/2018 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH 6. 38 :%/ GUARD FILE (+ $ / BY ORDER, ; #/ ASSISTANT REGISTRAR