Sri Sanjay Kumar Binani, Kolkata V. LD. ACIT/ Circle-36, Kolkata, Kolkata

ITA 1491/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1634 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

I.T.A. NO. 1491/KOL./2016 ASSESSMENT YEAR: 2010 -2011 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A(SMC) BENCH, KOLKATA BEFORE SHRI S.V. MEHROTRA, VICE-PRESIDENT(KZ) I.T.A. NO. 1491/KOL/ 2016 ASSESSMENT YEAR : 2010-2011 SHRI SANJAY KR. BINANI,............................ ..................APPELLANT COMMERCIAL BUILDING (2 ND FLOOR), 23, NETAJI SUBHAS ROAD, KOLKATA-700 001 [PAN : AGUPB 4448 F] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...........RESPONDENT CIRCLE-36, KOLKATA, 110, SHANTI PALLY, AAYAKAR BHAWAN, POORVA, KOLKATA-700 107 APPEARANCES BY: SHRI R.C. RATHI, F.C.A., FOR THE ASSESSEE SHRI RAJENDRA PRASAD, ADDL. JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MAY 24, 2017 DATE OF PRONOUNCING THE ORDER : JUNE 08, 2017 O R D E R PER SHRI S.V. MEHROTRA, V.P.(KZ): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DA TED 04.04.2016 FOR THE ASSESSMENT YEAR 2010-11. 2. SHRI R.C. RATHI, F.C.A., APPEARED ON BEHALF OF T HE ASSESSEE AND SHRI RAJENDRA PRASAD, LD. ADDL. JCIT, D.R. REPRESENTED O N BEHALF OF THE REVENUE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.13,28,513/-. TH E ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) AT RS.17,37,962/-, INTER ALIA, MAKING THE DISALLOWANCE OF RS.1,92,000/- CLAIMED BY THE ASSESS EE TOWARDS INTEREST I.T.A. NO. 1491/KOL./2016 ASSESSMENT YEAR: 2010 -2011 PAGE 2 OF 5 PAID ON BORROWINGS FROM PARTNERSHIP FIRM UNDER SECT ION 36(1)(III). THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(APPEALS). BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ASSAILING THE SAID DISALLOWANCE OF RS.1,92,000/- UNDER SECTION 36(1)(III). 4. BRIEF FACTS APROPOS THIS ISSUE ARE THAT THE ASSE SSING OFFICER NOTICED IN THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE AS SESSEE IN HIS COMPUTATION OF INCOME HAD DEDUCTED THE AMOUNT OF RS .1,92,000/- FROM THE NET PROFIT OF HIS PROPRIETORSHIP CONCERN M/S. B INANI AGRI INPUTS AS INTEREST PAYMENT TO M/S. BINANI ENTERPRISES, A PART NERSHIP FIRM, IN WHICH THE ASSESSEE WAS A PARTNER. THE ASSESSING OFFICER E XAMINED THE BALANCE- SHEET OF M/S. BINANI AGRI INPUTS (PROPRIETORSHIP CO NCERN) AND M/S. CROP CARE (ANOTHER PROPRIETORSHIP CONCERN OF THE ASSESSE E) AND NOTED THAT THE ENTIRE EXPENSES INCIDENTAL TO BUSINESS HAD BEEN DEB ITED IN THE PROFIT & LOSS ACCOUNT INCLUDING INTEREST OF RS.16,83,790/-. HE CONCLUDED AFTER EXAMINING THE PERSONAL BALANCE-SHEET OF THE ASSESSE E INCLUDING THAT OF THE PARTNERSHIP CONCERN THAT THE ASSESSEE HAD NOT U TILIZED THE AMOUNTS WITHDRAWN FROM PARTNERSHIP FIRM FOR BUSINESS PURPOS ES OF HIS PROPRIETORSHIP CONCERN. HE ACCORDINGLY ISSUED SHOW- CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEES EXPLAN ATIONS AS PER HIS LETTER DATED 12.03.2013 WAS AS UNDER:- THE ASSESSEE IS A PARTNER IN A PARTNERSHIP FIRM UN DER THE NAME AND STYLE OF M/S. BINANI ENTERPRISES. DURING T HE FY 2009-10 THE ASSESSEE HAD OVERDRAWN HIS INVESTMENT I N THE PARTNERSHIP FIRM. ACCORDINGLY, THE ASSESSEE HAD PAI D AN INTEREST OF RS.1,92,000/- TO M/S. BINANI ENTERPRISE S IN RESPECT OF SUCH OVERDRAWN BALANCES DURING THE FY 20 09- 10. THE AMOUNT OVERDRAWN BY THE ASSESSEE WAS EMPLOY ED BY HIM IN HIS PROPRIETARY CONCERNS. AS THE CAPITAL EMPLOYED BY THE ASSESSEE IN HIS PROPRIETARY CONCERN M/S. BINANI AGRI INPUTS WAS MUCH MORE THAN THE CAPITAL EMPLOYED BY THE ASSESSEE IN HIS OTHER PROPRIETARY C ONCERN M/S. CROP CARE, THE INTEREST PAID TO M/S. BINANI ENTERPRISES WAS CLAIMED AS DEDUCTION FROM THE NET P ROFIT OF M/S. BINANI AGRI INPUTS. THE POSITION OF CAPITAL EMPLOYED BY THE ASSESSEE IN HIS TWO PROPRIETARY CON CERNS IS AS UNDER:- I.T.A. NO. 1491/KOL./2016 ASSESSMENT YEAR: 2010 -2011 PAGE 3 OF 5 NAME OF THE PROPRIETARY CONCERNS OPENING CAPITAL EMPLOYED AS ON 01.04.09(RS.) CLOSING CAPITAL EMPLOYED AS ON 31.03.10(RS.) M/S. BINANI AGRI INPUTS 92,83,302 CREDIT BALANCE 98,87,515/- CREDIT BALANCE M/S. CROP CARE 26,51,241 DEBIT BALANCE 28,96,539/- DEBIT BALANCE FROM THE ABOVE CHART IT IS EVIDENT THAT THE ASSESSE E HAS EMPLOYED BULK OF HIS OWN AND BORROWED FUNDS IN M/S. BINANI AGRI INPUTS. ACCORDINGLY, IT IS HUMBLY STATE D THAT THE CLAIM OF INTEREST PAYMENT TO M/S. BINANI ENTERP RISES IS A JUSTIFIED AND VALID EXPENSES U/S 36(1)(III) OF I.T. ACT, 1961 AND SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE AFORESAID EXPLANATION, THE AS SESSING OFFICER DISALLOWED THE ASSESSEES CLAIM PRIMARILY ON ACCOUN T OF THE FACT THAT THE AMOUNT INTRODUCED IN THE CAPITAL ACCOUNT OF THE TWO PROPRIETORSHIP CONCERNS WAS LESS THAN THE AMOUNT WITHDRAWN FROM TH E SAID TWO PROPRIETORSHIP CONCERNS, WHICH WAS AS UNDER:- NAME OF THE PROPRIETARY CONCERN AMOUNT INTRODUCED IN THE CAPITAL ACCOUNT DURING THE YEAR (RS.) AMOUNT WITHDRAWN FROM THE CAPITAL ACCOUNT DURING THE YEAR(RS.) M/S. BINANI AGRI INPUTS 14,03,389/- 14,74,309/- M/S. CROP CARE 2,12,070/- 12,37,439/- THUS HE CONCLUDED THAT SINCE THE WITHDRAWALS FROM T HE CAPITAL ACCOUNTS OF THE PROPRIETORSHIP CONCERNS WERE MORE THAN THE A MOUNT INTRODUCED IN THE SAID CONCERNS FROM THE PARTNERSHIP FIRM, THEREF ORE, NO AMOUNT WAS UTILIZED FOR BUSINESS PURPOSES. THESE FINDINGS WERE CONFIRMED BY THE LD. CIT(APPEALS). 5. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAG E 67 OF THE PAPER BOOK, WHEREIN THE CAPITAL ACCOUNT OF THE ASSESSEE I N THE BOOKS OF M/S. I.T.A. NO. 1491/KOL./2016 ASSESSMENT YEAR: 2010 -2011 PAGE 4 OF 5 BINANI ENTERPRISES, A PARTNERSHIP FIRM, IS CONTAINE D TO DEMONSTRATE THAT THE AMOUNTS WERE WITHDRAWN FROM THE PARTNERSHIP FIR M. HE FURTHER REFERRED TO PAGE 69 OF THE PAPER BOOK, WHEREIN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. BINANI AGRI INPUTS (P ROPRIETORSHIP CONCERN) IS CONTAINED TO DEMONSTRATE THAT THE AMOUNTS WITHDR AWN FROM THE PARTNERSHIP FIRM WERE CREDITED IN THIS PROPRIETORSH IP CONCERN. HE REFERRED TO PAGE 73 OF THE PAPER BOOK, WHEREIN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. CROP CARE (ANOTHER PR OPRIETORSHIP CONCERN) IS CONTAINED TO DEMONSTRATE THAT THE TOTAL SUM OF R S.2,12,070/- HAD BEEN CREDITED IN THE SAID ACCOUNT. THE LD. COUNSEL FOR T HE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER WRONGLY CONCLUDED THAT T HE TOTAL WITHDRAWALS IN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. BINANI AGRI INPUTS WERE RS.14,74,309/- BECAUSE THE SAID WITHDRA WALS INCLUDE A SUM OF RS.10,26,528/- BEING THE TDS RECEIVABLE AND, THE REFORE, THE SAID AMOUNT WAS NOT TO BE CONSIDERED TOWARDS THE WITHDRA WALS MADE BY THE ASSESSEE FOR COMING TO THE CONCLUSION THAT THE WITH DRAWALS WERE MORE THAN THE AMOUNT INTRODUCED IN THE CAPITAL ACCOUNT A ND, THEREFORE, ONLY PROPORTIONATE DISALLOWANCE SHOULD HAVE BEEN MADE. 6. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THIS PLEA WAS NEVER TAKEN BY THE ASSESSEE BEFORE THE REVENUE AUTHORITIE S AND IT HAS BEEN TAKEN FOR THE FIRST TIME AND, THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR EXAMINING THE ASS ESSEES PLEA IN THIS REGARD. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. IN PRINCIPLE THE FINDINGS OF L OWER REVENUE AUTHORITIES THAT NO AMOUNT WAS UTILIZED TOWARDS BUSINESS PURPOS ES OUT OF THE WITHDRAWALS MADE FROM PARTNERSHIP FIRM, IS JUSTIFIE D BECAUSE IF THE AMOUNT WITHDRAWN BY THE ASSESSEE FROM THE PARTNERSH IP FIRM WERE MORE THAN THE AMOUNT INTRODUCED IN THE CAPITAL ACCOUNT O F HIS PROPRIETORSHIP CONCERNS OF THE ASSESSEE, THEN IT CANNOT BE SAID TH AT THE AMOUNT HAS BEEN UTILIZED FOR BUSINESS PURPOSES. HOWEVER, THE ASSESS EES PLEA THAT TDS I.T.A. NO. 1491/KOL./2016 ASSESSMENT YEAR: 2010 -2011 PAGE 5 OF 5 RECEIVABLE IS NOT TO BE CONSIDERED TOWARDS WITHDRAW AL DESERVES TO BE ACCEPTED SUBJECT TO VERIFICATION BY THE ASSESSING O FFICER. AFTER VERIFICATION OF THIS PLEA, THE ASSESSING OFFICER WI LL ONLY MAKE PROPORTIONATE DISALLOWANCE IN THE CASE OF BINANI AG RI INPUTS. HOWEVER, AS FAR AS THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE B OOKS OF M/S. CROP CARE IS CONCERNED, I FIND THAT ONLY A SUM OF RS.2,12,070/- WAS INTRODUCED IN THE CAPITAL ACCOUNT AGAINST WHICH THE WITHDRAWALS ARE M UCH MORE AND THEREFORE IT WILL NOT BE CONCLUDED THAT THE SAID WI THDRAWALS FROM PARTNERSHIP FIRM WERE UTILIZED BY THE ASSESSEE FOR HIS PROPRIETORSHIP BUSINESS PURPOSES. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 08.06.2017. SD/- S.V. MEHROTRA (VICE-PRESIDENT) DATED: 08.06.2017 COPIES TO : (1) SHRI SANJAY KR. BINANI, COMMERCIAL BUILDING (2 ND FLOOR), 23, NETAJI SUBHAS ROAD, KOLKATA-700 001 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-36, KOLKATA, 110, SHANTI PALLY, AAYAKAR BHAWAN, POORVA, KOLKATA-700 107 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-10, KOLK ATA (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.