The ITO, Ward-3(2), Surat V. Shri Manojbhai Jagdishbhai Patel, Surat

ITA 1430/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94623 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIDIPAKSUTARIA
• Keywords: Source of fund; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , BEFORE: SHRIRAJPALYADAV, JUDICIAL MEMBER SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 1430/AHD/2012 ASSESSMENT YEAR : 2009-10 INCOME-TAX OFFICER, WARD 3(2), ROOM NO.208, 2 ND FLOOR, AYAKARBHAVAN, MAJURAGATE, SURAT V/S . SHRIMANOJBHAIJAGDISHBHAI PATEL 8, SUJATA SOC. TADWADI, RANDER ROAD, SURAT - 395009 PAN NO. ACSPP7818H (APPELLANT) .. (RESPONDENT) / BY REVENUE SHRIDIPAKSUTARIA, SR. D.R. /BY ASSESSEE SHRI MAHESH CHHAJED, C.A. /DATE OF HEARING 19.10.2015 / DATE OF PRONOUNCEMENT 5 /11/2015 O R D E R PER :MANISH BORAD, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, SURAT, DATED 12.04.2012. ASSESSMENT FOR THE YEAR 2 009-10 WAS FRAMED ON 12.12.2011 BY ITO, WARD-3(2), SURAT. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 2 [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.18,51,175/ - MADE ON ACCOUNT OF DISALLOWANCES OF INTEREST PAYMENT WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST ON HIM TO PROVE THE GENUINENESS THAT THE INTEREST PAYMENT WAS NOT DIVERSION OF INTEREST BEARING FUNDS TO NON INTEREST BEARING LOANS AND ADVANCES. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILE D ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 29.09.2009 DECLARING TOTAL INCOME AT RS. 2,24,688/-. ASSESSEESCASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT PROCEEDING S WERE CARRIED OUT BY ASSESSING OFFICER FOR FRAMING THE ASSESSMENT U/S.14 3(3) OF THE IT ACT (HEREINAFTER REFERRED AS THE ACT). DURING COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT IN THE BALANCE SHEET OF THE ASSESSEE LOANS AND ADVANCES STOOD GIVEN AT RS.2,06,81,372/- AS ON 31.0 3.2009. ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH ITEM WISE COPIES OF L OANS AND ADVANCES ACCOUNTS GIVEN TO VARIOUS PARTIES ALONG WITH REASON FOR NOT CHARGING OF INTEREST FROM THESE PARTIES. IN RESPONSE, ASSESSEE FILED VARIOUS DETAI LS INCLUDING SOURCE OF FUND REQUIRED TO GIVE LOANS AND ADVANCES TO VARIOUS PART IES. ALONG WITH THESE SUBMISSIONS, ASSESSEE HAD ITS OWN ACCEPTED DEEMED I NTEREST INCOME OF RS.3,58,473/-. HOWEVER, ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY RECEIVED FROM THE ASSESSEE AND DISALLOWED TOTAL INT EREST OF RS.18,51,175/- CHARGED BY THE ASSESSEE IN P&L ACCOUNT UNDER THE HE AD FINANCE CHARGES. 4. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) WHO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY GIVING FO LLOWING OBSERVATIONS: 5. I HAVE CONSIDERED THE FACTS OF THE CASE, BASIS OF ADDITION MADE BY AO AND SUBMISSION OF APPELLANT. AS IT IS CLEAR FROM THE EX PLANATION OF THE APPELLANT AND COPIES OF DOCUMENTS SUBMITTED DURING THE APPELLATE PROCEEDINGS, AO FAILED TO CONSIDER THE RELEVANT FACTS OF THE CASE EXPLAINED B Y APPELLANT DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS DECIDED THE MATTER WITHOUT DISCUSSING IT ON MERIT THOUGH HE WAS HAVING ALL THE RELEVANT INFORMATION AND EXPLANA TION IN HIS POSSESSION. FURTHER, THE APPELLANT HAS CATEGORICALLY ESTABLISHED THE NEX US BETWEEN INTEREST FREE LOANS AND FUNDS ADVANCED AND INTEREST FREE FUNDS AVAILABLE WI TH HIM. IN THE CASE OF M/S. AKSHARINFO SERVICES PVT. LTD, IT HAS BEEN PROVED BY APPELLANT THAT FOR GIVING INTEREST ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 3 FREE LOAN OF RS.27,20,000/-, APPELLANT WAS HAVING C LOSING BALANCE OF RS.55,61,278/-IN HIS BANK. SIMILARLY, IN THE CASE OF CHAMPAKLALSOPAR IWALA, IT HAS BEEN SUBMITTED THAT FOR GIVING ADVANCE OF RS,50,00,000/- ON 03.12.2008, APPELLANT HAD RECEIVED RS.75,00,000/- FROM SALE OF SHARES ON THE SAME DATE . IN THE SAME WAY, IN OTHER CASES ALSO, AS REPRODUCED IN SUBMISSIONS, APPELLANT HAS E STABLISHED THAT HE WAS HAVING SUFFICIENT INTEREST FREE FUNDS FOR GIVING INTEREST FREE LOANS AND ADVANCES TO DIFFERENT PARTIES.THE CLAIM OF APPELLANT IS SUPPORTED BY DOCU MENTARY EVIDENCE IN FORM OF BANK STATEMENTS WHEREIN THE RELEVANT ENTRIES ARE REFLECT ED. 5.1 IN VIEW OF ABOVE FACTS, IT IS CLEAR THAT THE DI SALLOWANCE MADE BY AO IS WRONG AND WITHOUT ANY BASIS. THE APPELLANT HAS SUCCESSFULLY E STABLISHED THAT INTEREST FREE LOANS AND ADVANCES HAVE BEEN GIVEN BY HIM OUT OF INTEREST FREE FUNDS AVAILABLE; THEREFORE, THERE IS NO REASON FOR MAKING DISALLOWANCE OF INTER EST ON ACCOUNT OF INTEREST BEARING LOANS. IT HAS ALSO BEEN EXPLAINED THAT IN THE EARLI ER ASSESSMENT YEARS I.E. 2007-08 AND 2008-09, APPELLANT'S CASE WAS SCRUTINIZED ON SAME F ACTS BUT NO SUCH DISALLOWANCE MADE. THE XEROX COPIES OF ASSESSMENT ORDERS FILED D URING THE APPELLATE PROCEEDINGS CONFIRM THIS FACT. 5.2 IN VIEW OF ABOVE DISCUSSION, IT IS HELD THAT TH ERE IS NO MERIT IN DISALLOWANCE MADE BY ASSESSING OFFICER, HENCE, ADDITION IS DELETED. H OWEVER, THE APPELLANT HIMSELF HAD AGREED FOR ADDITION OF RS.3,50,473/- AS PER ORDER S HEET ENTRY DATED 02.12.2011 AND THIS FACT HAS BEEN SUBMITTED BY HIM DURING APPELLAT E PROCEEDINGS ALSO, THEREFORE ADDITION TO THAT EXTENT IS UPHELD. 6. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 5. AGGRIEVED REVENUE CAME IN APPEAL BEFORE THE TRIB UNAL. LD. D.R. SUPPORTED THE ORDER OF ASSESSING OFFICER AND IN SUP PORT OF HIS CONTENTION THAT ASSESSEEWAS NOT HAVING HIS OWN INTEREST FREE FUNDS, REFERRED TO THE DEBIT BALANCE OF THE ASSESSEES CAPITAL ACCOUNT FOR THE YEAR UNDE R APPEAL. ON THE OTHER HAND, LD. A.R. HAS FILED A DETAILED PAPER BOOK ALONG WITH COPIES OF LETTERS SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE TIME OF ASS ESSMENT PROCEEDINGS WHICH WERE NOT ADJUDICATED ON MERITS. 5.1 LD. A.R. ALSO SUBMITTED THAT THE TOTAL LOANS AN D ADVANCES WHICH WERE STOOD GIVEN AS ON 31.03.2009 AT RS.2,06,81,372/- WE RE NOT NEW LOANS GIVEN DURING THE YEAR. OUT OF RS.2,06,81,372/-, FRESH LO ANS AND ADVANCES GIVEN DURING THE YEAR WAS RS.1,18,70,000/- AND RS.88,11,372/- WE RE OLD LOANS WHICH HAVE BEEN BROUGHT FORWARD FROM PREVIOUS YEAR. OUT OF TH E OLD LOAN BROUGHT FORWARD AT RS.88,11,372/-, INTEREST HAS BEEN CHARGED ON RS. 81,55,873/-. ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 4 5.2 LD. A.R. HAS ALSO GIVEN SPECIFIC DETAILS FOR TH E NEW LOANS AND ADVANCES OF RS.1,18,70,000/- IN HIS LETTER DATED 09.12.2011 AT PAGE NOS. 25 TO 27 IN THE PAPER BOOK FILED ON 16.10.2015. THESE DETAILS SUPPORT TH E CLAIM OF THE ASSESSEE THAT HE WAS HAVING SUFFICIENT INTEREST FREE FUNDS, WHICH WERE THEREAFTER GIVEN AS INTEREST FREE LOANS AND ADVANCES. LD. A.R. FURTHER SUBMITTED THAT OUT OF FRESH LOANS GIVEN DURING THE YEAR UNDER APPEAL AT RS.1,18 ,70,000/-, LOANS AND ADVANCES TO THE TUNE OF RS.91,50,000/- WERE GIVEN F OR BUSINESS PURPOSES RELATING TO REAL ESTATE PROJECT OF THE ASSESSEEIN THE NAME O F M/S. BHAKTIDHARM DEVELOPERS. LD. A.R. ALSO REFERRED TO THE AUDITED BALANCE SHEET OF THE ASSESSEE WHEREIN HE HAS SHOWN INTEREST PAYMENT OF RS.18,51,1 75/- WHICH INCLUDED INTEREST PAID TO BANK AT RS.4,81,311/- AND RS.13,69 ,864/- TO VARIOUS LENDERS ON UNSECURED LOAN. DURING THE YEAR UNDER APPEAL, ASSE SSEE HAS ALSO SHOWN INTEREST INCOME OF RS.10,40,040/- WHICH HE HAS EARNED FROM L OANS AND ADVANCES GIVEN. LD. A.R. FURTHER SUBMITTED THAT DURING ASSESSMENT P ROCEEDINGS, HE HAS HIMSELF ACCEPTED TO HAVE DEEMED INTEREST INCOME OF RS.3,58, 473/- WHICH THE ASSESSING OFFICER HAS ALSO MENTIONED IN THE ASSESSMENT ORDER BUT HAS FAILED TO GIVE COGNIZANCE IN THE FINAL COMPUTATION OF INCOME ASSES SED BY HIM. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. FROM PERUSAL OF THE ASSESSMENT ORDER IT IS REVEALED THAT THE AO HAS MADE ADDITION OF RS.18,51,175/- WHEREIN HE HAS NOT CONSI DERED THE DEEMED INTEREST INCOME AT RS.3,58,473/- AGREED BY THE ASSESSEE TO H AVE EARNED ON INTEREST FREE LOANS AND ADVANCES. HAD THIS DEEMED INTEREST INCOME BEEN CONSIDERED BY THE AO THEN THE ADDITION WOULD HAVE BEEN SCALED DOWN FR OM RS.18,51,175/- TO RS.14,92,702/-. FURTHER DURING THE APPELLATE PROCEE DINGS BEFORE THE CIT(A), HE HAS ALSO MENTIONED ABOUT THE ASSESSEES AGREED ADDI TION OF RS.3,58,473/- (WRONGLY TYPED AS RS.3,50,473/-). THEREFORE, THE AM OUNT MENTIONED IN GROUND NO.1 OF THE APPEAL BY REENUE MENTIONED AT RS.18,51, 175/- SHOULD BE CORRECTED ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 5 BY THE CORRECT AMOUNT OF RS.14,92,702/-. THE LD. DR HAS ACCEPTED THE SAME AND ACCORDINGLY, THE FIRST GROUND OF APPEAL OF REVENUE SHALL BE AGAINST THE CIT(A)S FINDING WHO HAS ERRED IN DELETING THE ADDITION OF R S.14,92,702/-. THE SOLITARY ISSUE WHICH IS TO BE ADJUDICATED IS THAT WHETHER TH E ASSESSEE HAS UTILIZED THE AVAILABLE FUNDS SUBJECT TO INTEREST AGAINST THE INT EREST FREE LOANS AND ADVANCES. LOOKING TO THE AUDITED FINANCIAL STATEMENT, IT REFL ECTS THAT ASSESSEE HAS DEBIT CAPITAL BALANCE OF RS.5,93,01,244/- WHICH THE LD. D .R. HAS REFERRED TO SUPPORT THAT ASSESSEE WAS HAVING NO INTEREST FREE FUNDS. T HIS DEBIT CAPITAL BALANCE OF THE ASSESSEE IS ON ACCOUNT OF BROUGHT FORWARD BUSINESS LOSSES AS WELL AS LOSS INCURRED DURING THE YEAR UNDER APPEAL AND NOT ON AC COUNT OF ANY WITHDRAWAL OF FUNDS FROM THE CAPITAL ACCOUNT. ASSESSEE IS HAVING UNSECURED LOANS OF RS.9,17,62,468/- AS ON 31.03.2009 AND THE INTEREST VIS--VIS PAID ON UNSECURED LOAN DURING THE YEAR IS ONLY RS.13,69,864/- WHICH M EANS THAT ASSESSEE IS HAVING SUFFICIENT AMOUNT OF FUNDS AS UNSECURED LOAN ON WHI CH INTEREST WAS NOT PAYABLE AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. D.R. FURTHER, THE ONLY QUESTION RAISED BY A.O. IN HIS ASSESSMENT ORDER IS REASONS FOR NOT CHARGING INTEREST UNDER LOANS AND ADVANCES SHOWN IN THE BALA NCE SHEET AT RS.2,02,81,372/- AND THE SAME HAS BEEN PROPERLY REP LIED BY THE ASSESSEE ALONG WITH SUPPORTING EVIDENCES WHICH AMICABLY JUSTIFY TH AT ASSESSEE WAS HAVING SUFFICIENT SOURCE OF INTEREST FREE FUNDS. FURTHER, MOST OF THE INTEREST FREE LOANS /ADVANCES, WERE FOR THE BUSINESS PURPOSES. OUT OF T OTAL LOANS AND ADVANCES AS ON 31.03.2009 SHOWN AT RS.2,06,81,372/- ONLY A SUM OF RS.1,18,70,000/- WAS FRESH LOAN GIVEN DURING THE YEAR AND FURTHER OUT OF RS.1, 18,70,000/-, A SUM OF RS.91,50,000/- WAS GIVEN FOR REAL ESTATE BUSINESS A ND ONLY A SUM OF RS.27,20,000/- WAS GIVEN AS INTEREST FREE LOANS AND ADVANCES. THE ASSESSEE HAS AGREED FOR ADDITION ON INTEREST OF RS.1,30,254/- ON THE FRESH LOANS OF RS.27LACS GIVEN TO M/S. AKSHAR INFO SERVICE (P) LTD. CALCULAT ED ON THE BASIS OF DAYS FOR WHICH LOANS WERE GIVEN. FURTHER, AFTER REDUCING RS .1,18,70,000/- ON THE TOTAL ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 6 LOAN ADVANCE OF RS.2,06,81,372/-, THE REMAINING AMO UNT COMES TO RS.88,11,372/- AND OUT OF THIS REMAINING AMOUNT OF RS.88,11,372/-, ASSESSEE HAS ALREADY SHOWN INTEREST INCOME OF RS.10,40,040/- FRO M OLD LOAN OF RS.81,55,873/-. 6.1 UNDER THESE CIRCUMSTANCES AND FROM THE ABOVE TR ANSACTIONS, WE ARE OF THE VIEW THAT ASSESSEE HAS PROVED THE GENUINENESS OF IN TEREST PAYMENT AND ALSO PROVED THAT THERE WAS NO DIVERSION OF INTEREST BEAR ING FUND TO NON INTEREST BEARING LOANS AND ADVANCES. 7. ACCORDINGLY,THE APPEAL OF REVENUE IS DISMISSED.. THIS ORDER PRONOUNCED IN OPEN COURT ON 5/11/2015 SD/- SD/- ( RAJPALYADAV) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER 5/11/2015 S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ! '# $ / CONCERNED CIT 4. $ - / CIT (A) 5. %&'(('# , '# , )* ! / DR, ITAT, AHMEDABAD 6. '+,-. / GUARD FILE. BY ORDER/ / , 0 / ) '# , )* ! 2 ITA NO. 1430/AHD/12A.Y. 09-10 (ITO VS. SHRIMANOJBHA I J. PATEL) PAGE 7 STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 19.10.2015 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 20.10.2015 4) DATE OF CORRECTION 21.10.2015 5) DATE OF FURTHER CORRECTION 05.11.2015 6) DATE OF INITIAL SIGN BY MEMBERS 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON