Inani Trading Compnay, Latur V. Income-tax Officer,

ITA 1556/PUN/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9233 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-06-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 18-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Corroborative evidences; Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.707/PUN/2014 / ASSESSMENT YEAR : 2009-10 M/S. INANI TRADING COMPANY, 84/2, INANI HOUSE, MAIN ROAD, LATUR-413512. PAN : AAAFI6033R ....... / APPELLANT / V/S. ITO, WARD-3(3), LATUR. / RESPONDENT . / ITA NO.1556/PUN/2016 / ASSESSMENT YEAR : 2009-10 M/S. INANI TRADING COMPANY, 84/2, INANI HOUSE, MAIN ROAD, LATUR-413512. PAN : AAAFI6033R ....... / APPELLANT / V/S. ITO, WARD-1, LATUR. / RESPONDENT ASSESSEE BY : SHRI M. K. KULKARNI REVENUE BY : SHRI S. B. PRASAD / DATE OF HEARING : 18.07.2019 / DATE OF PRONOUNCEMENT : 19.09.2019 / ORDER PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION INVOLVING THE ASSESSMENT YEAR 2009-10. WHILE THE ASSESSEES APPEAL IN ITA 2 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 NO.707/PUN/2014 IS FILED AGAINST THE REVISION ORDER OF THE CIT, AURANGABAD U/S 263 OF THE ACT; WHERE, THE APPEAL IN ITA NO.1556/PUN/2016 IS FILED IN CONNECTION WITH THE FRESH ASSESSMENT ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) R.W.S. 263 OF THE ACT. 2. FIRST, WE SHALL TAKE UP THE APPEAL IN ITA NO.707/PUN/2014 FOR ADJUDICATION IN THE FOLLOWING PARAGRAPHS. ITA NO.707/PUN/2014 U/S 263 OF THE ACT - ON REVISION ORDER 3. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THE HON. COMMISSIONER OF INCOME TAX IS NOT JUSTIFIED AND HAS ERRED IN PASSING AN ORDER U/S 263 FOR A.Y. 2009-10 DIRECTING DISALLOWANCE OF INTEREST EXPENDITURE OF RS.30,86,240/-. 2. THE HON. COMMISSIONER OF INCOME TAX IS NOT JUSTIFIED AND HAS ERRED IN HOLDING IN HIS ORDER U/S 263 THAT THE APPELLANT HAS DIVERTED THE INTEREST BEARING FUNDS TO NON BUSINESS PURPOSES AND MAKING A DIRECTION OF DISALLOWANCE AS STATED IN THE GROUND NO.1 3. THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) IS NOT ERRONEOUS NOR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THEREFORE THE ORDER OF REVISION PASSED BY THE HON. COMMISSIONER OF INCOME TAX IS WORTHY TO BE QUASHED. 4. ANY OTHER GROUND OR GROUNDS AS MAY URGED OR TAKEN UP AT THE TIME OF HEARING OF THE APPEAL OR BEFORE THAT. 4. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A FIRM CONSISTING OF THREE PARTNERS AND IS ENGAGED IN THE BUSINESS OF TRADING OF BARDANA UNDER THE NAME AND STYLE M/S INANI TRADING COMPANY AT LATUR. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.49,760/-. THE CASE WAS SELECTED FOR SCRUTINY. THEREAFTER, THE 3 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 ASSESSING OFFICER FINALIZED THE ASSESSMENT U/S 143(3) ON 05.12.2011 AND ASSESSED THE TOTAL INCOME OF RS.89,730/-. THE CIT, AURANGABAD VERIFIED THE ASSESSMENT RECORDS OF THE ASSESSEE AND NOTED THAT THE ASSESSEE TOOK A LOAN OF RS.3 CRORE FROM JANTA SAHAKARI BANK LTD., PUNE ON 24.05.2008. RELATING TO THIS LOAN, THE ASSESSEE INCURRED AND CLAIMED THE INTEREST EXPENDITURE OF RS.30,86,240/- AND DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. ON EXAMINING THE UTILIZATION ASPECT OF THIS LOAN, THE CIT NOTED THAT ON RECEIPT OF THE LOAN, THE SAID AMOUNT WAS TRANSFERRED TO DINESHKUMAR MURLIDHAR INANI, LATUR AND IT IS INTEREST-FREE LOAN. AFTER GIVING SHOW CAUSE NOTICE TO THE ASSESSEE, AFTER HEARING THE ASSESSEE ON THIS ISSUE AND AFTER EXAMINING THE WRITTEN RESPONSE OF THE ASSESSEE, THE CIT HELD THAT THE ASSESSEE FAILED TO BRING ANY CORROBORATIVE EVIDENCE TO SUBSTANTIATE THAT THE LOAN GIVEN BY THE ASSESSEE CONSTITUTES A TRADING ADVANCE. THE ASSESSEE EXPLAINED THE SAME CONSTITUTES TRADING ADVANCE AS THE ASSESSEE PURCHASED BARDANA. THE CIT CONCLUDED THAT IT IS A CASE OF DIVERSION OF INTEREST BEARING BORROWED FUNDS TOWARDS INTEREST-FREE ADVANCES TO DINESHKUMAR MURLIDHAR INANI. THE CIT DID NOT ACCEPT THE SAME. THE PURCHASE OF BARDANA FROM THE SAID CONCERN HAPPENED IN THE MONTH OF SEPTEMBER, 2008 AND THE SAME IS UNCONNECTED TO THE LOAN GIVEN BY THE ASSESSEE IN THE MONTH OF MAY. INVOKING THE RATIO OF THE HONBLE SUPREME COURTS JUDGEMENTS IN THE CASE OF S.A. BUILDERS LTD. VS. CIT, 158 TAXMANN.COM 74 (SC), THE CIT DIRECTED THE ASSESSING OFFICER TO PASS A CONSEQUENTIAL ORDER BY MAKING ADDITION OF RS.30,86,240/- INVOKING THE 4 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 PROVISIONS OF SECTION 36(1)(III) OF THE ACT BEING BORROWED FUNDS UTILIZED FOR NON-BUSINESS PURPOSES. 5. AGGRIEVED WITH THE SAID REVISION ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 6. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE LOAN WAS UNDISPUTEDLY TAKEN BY THE ASSESSEE FROM JANTA SAHAKARI BANK LTD., PUNE. THERE IS ALSO NO DISPUTE ON THE FACT THAT THE BARDANA WAS SUPPLIED BY DINESHKUMAR MURLIDHAR INANI. THE CIT ALSO ACCEPTED THE FACT THAT THE AMOUNT WAS EVENTUALLY TRANSFERRED TO DINESHKUMAR MURLIDHAR INANI. THERE APPEARS SOME CONFUSION IN THE NAMES WITH REFERENCE TO THE PROPRIETORSHIP CONCERN, MR. DINESH M. INANI AND MR. MURLIDHAR PUSARAM INANI. THE FACT IS THAT THE PAYMENT IS MADE ONLY TO THE FIRM M/S DINESHKUMAR MURLIDHAR INANI. FURTHER, THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE PURCHASED BARDANA AMOUNTING TO RS.9,46,82,473/- FROM THE SAID CONCERN, M/S DINESHKUMAR MURLIDHAR INANI. THE CIT DISMISSED THE CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT THERE IS TIME GAP FOR THE PROPRIETORSHIP CONCERN TO SUPPLY THE BARDANA TO ASSESSEE IN THE MONTH OF SEPTEMBER, 2008. OTHERWISE, THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE PURCHASED BARDANA FROM THE SAID CONCERN AGAINST WHICH THE ASSESSEE MADE THE PAYMENTS TO THE SAID CONCERN THROUGH M/S. PRAGYA ENTERPRISES. THE CITS OBJECTION IS ONLY WITH REFERENCE TO THE ACTION OF FAILURE ON PART OF THE ASSESSEE IN FURNISHING CORROBORATIVE EVIDENCES TO SUBSTANTIATE THE REQUIREMENT OF GIVING THE TRADING ADVANCES IN THIS REGARD. 5 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEAVILY ON THE SAID ORDER OF THE CIT IN GENERAL, AND THE CONTENTS OF PARA 3.2 AND 3.3, IN PARTICULAR. 8. ON HEARING BOTH THE SIDES, WE FIND THAT THE ISSUE IS WHETHER THE SAID AMOUNT OF RS.3 CRORE CONSTITUTES A TRADING ADVANCE OR NOT GIVEN TO M/S DINESHKUMAR MURLIDHAR INANI. IN THIS REGARD, AS EXPLAINED IN THE PRECEDING PARAGRAPHS, WE FIND THERE IS BUSINESS TRANSACTION BETWEEN THE ASSESSEE AND M/S DINESHKUMAR MURLIDHAR INANI WHO SUPPLIED THE BARDANA TO THE ASSESSEE. THE PAYMENTS MADE IN THE MONTH OF SEPTEMBER, 2008 AGAINST THE PURCHASE OF THE BARDANA. IT IS ALSO A FACT THAT THE ASSESSEE MADE THE PAYMENTS AGAINST THE SAID PURCHASES THROUGH M/S. PRAGYA ENTERPRISES ABOUT WHICH THERE IS NO ADVERSE INFERENCE BY THE REVENUE. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT IT IS A MATTER OF DISBELIEVE AND PREMATURE TRANSFER OF THE ONUS TO THE ASSESSEE TO DEMONSTRATE THE AMOUNT OF RS.3 CRORE PAID BY THE ASSESSEE IS NOT TRADING ADVANCE. WE ALSO FIND, GIVING OF RS.3 CRORE TO M/S DINESHKUMAR MURLIDHAR INANI TO PURCHASE OF BARDANA FROM THE SAID CONCERN AND FURTHER CONSIDERATION TO THE SAID CONCERN THROUGH M/S. PRAGYA ENTERPRISES ARE BORNE ON RECORD ABOUT WHICH THERE IS NO DISPUTE. THEREFORE, CONSIDERING THE EXISTENCE OF BUSINESS NEXUS OF THE PROFITS, WE ARE OF THE OPINION THAT DIRECTION OF THE CIT FOR DISALLOWANCE OF INTEREST EXPENDITURE OF RS.30,86,240/- IS NOT UNSUSTAINABLE IN LAW. THEREFORE, WE FIND THERE IS NO ERRONEOUS ASSESSMENT OF FACT AND LAW IN THIS CASE. 6 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 THEREFORE, THE ORDER OF THE ASSESSING OFFICER IS FAIR AND REASONABLE AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. THUS, THE REVISION ORDER OF THE CIT U/S 263 OF THE ACT STANDS QUASHED. ACCORDINGLY, THE RELEVANT GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.707/PUN/2014 IS ALLOWED. 10. NOW, COME TO THE APPEAL IN ITA NO.1556/PUN/2016 FOR ADJUDICATION IN THE FOLLOWING PARAGRAPHS. ITA NO.1556/PUN/2016 - U/S 143(3) R.W.S. 263 OF THE ACT - ON FRESH ASSESSMENT ORDER 11. SINCE THE APPEAL OF THE ASSESSEE IN ITA NO.707/PUN/2014 IS ALLOWED ON THE GROUND THAT THE REVISION ORDER PASSED BY THE CIT U/S 263 OF THE ACT IS UNSUSTAINABLE IN LAW. CONSEQUENTLY, WE ARE OF THE OPINION THAT THE ADJUDICATION OF THE GROUND RELATED TO THE FRESH ASSESSMENT ORDER RAISED IN THE APPEAL OF THE ASSESSEE IN ITA NO.1556/PUN/2016, BECOMES AN ACADEMIC EXERCISE ONLY. THEREFORE, THE APPEAL OF THE ASSESSEE IN ITA NO.1556/PUN/2016 IS DISMISSED AS ACADEMIC. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.1556/PUN/2016 IS DISMISSED. 7 ITA NO.707/PUN/2014 ITA NO.1556/PUN/2016 13. RESULTANTLY, THE APPEAL IN ITA NO.707/PUN/2014 IS ALLOWED AND THE APPEAL IN ITA NO.1556/PUN/2016 IS DISMISSED. ORDER PRONOUNCED ON 19 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 19 TH SEPTEMBER, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-2, AURANGABAD. 4. THE PR.CIT-2, AURANGABAD. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.