Jai Bhagwan, Kaithal V. Addl. CIT, Kurukshetra

ITA 160/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2412 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: MANISH KUMAR SINGHAL
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.160 /CHD/2012 (ASSESSMENT YEAR : 2008-09) SH.JAI BHAGWAN VS. THE ADDL. CIT, S/O SH.WILAYATI RAM, KURUKSHETRA RANGE, WILAYATI RAM JAI BHAGWAN, KURUKSHETRA. 2-B, NEW GRAIN MARKET, KAITHAL. PAN: AALPB4310R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH KUMAR SINGHAL RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 11.06.2013 DATE OF PRONOUNCEMENT : 21.06.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KARNAL DATED 01.11.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW: 1) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.5,90, 381/-UNDER SECTION 36(1)(III) OF THE ACT, DONE BY ASSESSING OFFICER, WITHOUT ESTABLISHING ANY DIRECT NEXUS BETWEEN THE INTEREST BEARING BORROWING S OF THE ASSESSEE AND ADVANCES. 2) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL ) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.41,521/- UNDER SECTION 36(1)(III) OF THE ACT, DONE BY ASSESS ING OFFICER, WITHOUT ESTABLISHING ANY DIRECT NEXUS BETWEEN THE I NTEREST BEARING BORROWINGS OF THE ASSESSEE AND ADVANCES. 2 3) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL ) HAS ERRED IN CONFIRMING THE LUMP-SUM DISALLOWANCE OF RS .1,25,000/-, DONE BY ASSESSING OFFICER, ON ACCOUNT OF NON-VERIFI ABLE SALARIES & WAGES WITHOUT RECOGNIZING THE EXPEDIENCY OF THE S AME FOR BUSINESS PURPOSE AND PROPER EVIDENCE PRODUCED FOR T HE SAME. 4) THAT THE ADDITION OF RS.50,400/- UNDER SECTION 40(A )(IA) OF THE ACT IS UNCALLED FOR AND IS IN GRAVE INJUSTICE TO TH E ASSESSEE. 5) THAT THE AD-HOC ADDITION OF RS.1,50,000/- IN RESPEC T OF INSUFFICIENT HOUSEHOLD WITHDRAWALS ON ARBITRARY GRO UNDS WITHOUT ANYTHING MATERIAL ON RECORD IS UNCALLED FOR AND UNJ UST. 6) THAT THE APPELLANT PRAYS THAT THE ADDITION/ DISALLO WANCE OF RS.9,57,305/- MADE IN RESPECT OF GROUND NO. 1 TO 5 ABOVE BE DELETED. 7) THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER VARY AND 7 OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE IN GROUND NOS.1 AND 2 RAISED BY THE AS SESSEE IS AGAINST THE DISALLOWANCE UNDER SECTION 36(1)(III) O F THE ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CA RRYING ON THE BUSINESS AS SALE PROPRIETOR OF M/S WILAYATI RAM RIC E & GENERAL MILL AND M/S WILAYATI RAM JAI BHAGWAN. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE IN SOLE PROPRIETARY CONC ERN OF M/S WILAYATI RAM RICE & GENERAL MILL HAD MADE CERTAIN I NTEREST FREE ADVANCES TO HIS FAMILY MEMBERS. THE SAID ADVANCES WERE CARRIED OVER FROM THE PRECEDING YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN THE P URPOSE OF THE SAID ADVANCES AND WHY NO INTEREST WAS CHARGED ON TH E SAID ADVANCES. THE ASSESSEE HAD PAID INTEREST ON VARIOUS LOANS RAI SED BY IT. THE EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSING OF FICER WAS THAT THE ASSESSEE FIRM IS NOT CHARGING INTEREST FROM SMT.POO NAM RANI, WHO IS WIFE OF THE PROPRIETOR SHRI.JAI BHAGWAN AND FIRM NI RANJAN DASS RAJESH KUMAR IN WHICH SHRI RAJESH GOEL IS A PROPRIE TOR WHO HAS ALSO GIVEN LOAN TO THE ASSESSEE FIRM AS UNSECURED L OAN FOR THE LAST 2-3 YEARS. THE FIRM IS ALSO NOT CHARGING INTEREST FROM SHRI VISHAL SIKKA AND SMT.KRISHANA RANGA BEING A VERY CLOSE FRI END OF THE 3 PROPRIETOR, HENCE NO INTEREST HAS BEEN CHARGED . THE ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSEE AND IN V IEW OF THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1 (&H)] COMPUTED THE I NTEREST @ 12% ON THE SAID ADVANCES AND DISALLOWED A SUM OF RS.5,9 0,384/- UNDER SECTION 36(1)(III) OF THE ACT. 4. THE ASSESSEE IN THE OTHER SOLE PROPRIETARY CONCE RN OF M/S WILAYATI RAM JAI BHAGWAN HAD ALSO GIVEN INTEREST FR EE ADVANCES TO VARIOUS PERSONS ON VARIOUS DATES AND THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE AC T AT RS.41,521/-. 5. THE CIT (APPEALS) HAS CONFIRMED THE DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT IN RESPECT OF T HE ADVANCES MADE BY THE ASSESSEE EXCEPT THE ADVANCES TO SHRI RAJESH GOEL WHERE THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO THE PRODUCTION OF EVIDENCE. 6. SHRI MANISH KUMAR SINGHAL APPEARED FOR THE ASSES SEE AND SHRI J.S.NAGAR PUT IN APPEARANCE ON BEHALF OF THE REVENU E AND PUT FORWARD THEIR CONTENTIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN HIS SOLE PROPRIETARY CONCERN OF M/S WILAYATI RAM RICE & GENERAL MILL HAD MADE CERTAIN INTEREST FREE ADVANCES TO HIS FAMILY MEMBERS AND FRIENDS AS UNDER: SR.NO. NAME AMOUNT INTEREST WORKED OUT 1. SMT.POONAM RANI RS.26,00,000/- FOR FULL YEAR RS.3,12,000/- 2. SH.RAJESH GOEL RS.10,50,000/- FOR 285 YEAR RS. 98,384/- 4 3. SMT.KRISHNA RANGA RS.2,00,000/- FOR FULL YEAR RS. 24,000/- 4. SH.SOHAN LAL & SONS RS.3,00,000/- FOR FULL YEAR RS. 36,000/- 5. SH.VISHAL SIKKA RS.10,00,000/- FOR FULL YEAR RS.1,20,000/- TOTAL RS.5,90,384/- 8. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IN T HE SOLE PROPRIETARY CONCERN THE ASSESSEE HAS SUFFICIENT CAP ITAL OF HIS OWN TO MAKE THE AFORESAID ADVANCES. THE ASSESSEE HAS PLAC ED ON RECORD THE BALANCE SHEET AS ON 31.3.2008 AT PAGE 56 OF THE PAP ER BOOK IN WHICH THE CAPITAL BALANCE OF THE PROPRIETARY CONCER N WAS RS.58,66,932/-. THE ASSESSEE HAD ADVANCED SUM OF R S.26 LACS TO HIS WIFE SMT.POONAM RANI. WE FIND MERIT IN THE PEA OF THE ASSESSEE THAT NO INTEREST IS DISALLOWABLE IN RESPECT OF THE SAID INTEREST FREE ADVANCES OF RS.26 LACS TO HIS WIFE SMT.POONAM RANI IN VIEW OF THE CAPITAL BALANCE AVAILABLE WITH THE ASSESSEE IN HIS PROPRIETARY CONCERN. THE ASSESSEE HAD FURTHER ADVANCED RS.2 LA CS TO SMT.KRISHNA RANGA, RS.3 LACS TO SHRI SOHAN LAL & SO NS AND RS.10 LACS TO VISHAL SIKKA WITH WHOM THE ASSESSEE ADMITTE DLY HAD NO TRADE TRANSACTION AND WERE ONLY FRIENDS OF THE ASSESSEE. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA) WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE AND INTEREST RELATABLE TO SUCH ADVANCES AR E DISALLOWABLE UNDER SECTION 36(1)(III) OF THE ACT. ACCORDINGLY, WE UPHOLD THE DISALLOWANCE OF INTEREST OF RS.24,000/- + RS.36,000/- + RS.1,20,000 = RS.1,80,000/-. THE LAST ADVANCE MADE BY THE ASSE SSEE IN THE SAID CONCERN WAS TO SHRI RAJESH GOEL OF RS.10,50,000/-. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT SHRI RAJESH GOEL, BROTHER OF THE ASSESSEE WAS SOLE PROPRIETOR OF M/S NIRANJAN DASS R AJESH KUMAR AND AS ON 31.3.2008 CREDIT BALANCE OF RS.44,35,023/- WA S OUTSTANDING IN 5 THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE SAID A DVANCE OF RS.10,50,000/- WAS TO BE ADJUSTED AGAINST THE UNSEC URED LOANS RECEIVED BY THE ASSESSEE. THE ASSESSEE HAD ALSO PL ACED ON RECORD THE COPY OF THE REGISTRATION CERTIFICATE UNDER HARY ANA BANK ISSUED TO NIRANJAN DASS RAJESH KUMAR AS PROPRIETARY CONCERN, PLACED AT PAGE 66 OF THE PAPER BOOK. IN VIEW OF THE ABOVE SAID FA CTS AND CIRCUMSTANCES, WE FIND NO MERIT IN ANY DISALLOWANCE OUT OF THE SAID ADVANCE OF RS.10,50,000/- TO SHRI RAJESH GOEL. NO DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT IS WAR RANTED IN RELATION TO THE SAID ADVANCE OF RS.10,50,000/-. IN VIEW THE REOF, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISAL LOWANCE UNDER SECTION 36(1)(III) OF THE ACT AT RS.1,80,000/-. TH E GROUND NO.1 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 9. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCES M ADE IN THE SOLE PROPRIETARY CONCERN OF THE ASSESSEE, M/S WILAYATI R AM JAI BHAGWAN AT RS.41521/-. THE SAID ADVANCES HAD BEEN MADE TO SMT.POONAM RANI I.E. WIFE OF THE ASSESSEE OF RS.1,70,000/-, M/ S NIRANJAN DASS RAJESH KUMAR RS.8,89,000/- AND M/S DALAL TRADING CO MPANY OF RS.55,000/-. THE ABOVE SAID DETAILS ARE AVAILABLE IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE PLACED AT PAGES 1 TO 4 OF THE PAPER BOOK. IN VIEW OF THE ORDER IN PARAS HEREINABOVE WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF INT EREST RELATABLE TO ADVANCES MADE TO SMT.POONAM RANI IS DELETED. THE IS SUE OF ADVANCE TO M/S NIRANJAN DASS RAJESH KUMAR I.E. PROPRIETARY CONCERN OF BROTHER OF THE ASSESSEE IS SET ASIDE. HOWEVER, THE DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT IN REL ATION TO ADVANCES 6 MADE TO M/S DALAL TRADING COMPANY IS UPHELD. THE GROUND NO.2 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 10. THE ISSUE IN GROUND NO.3 RAISED BY THE ASSESSEE IS ON ACCOUNT OF DISALLOWANCE OUT OF SALARY AND WAGES EXPENSES OF RS.1,25,000/-. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.5,30,059 /- UNDER THE HEAD SALARY AND WAGES. HOWEVER, THE ASSESSEE FAILE D TO PRODUCE THE VOUCHERS/BILLS IN RESPECT OF THE SAID EXPENDITURE A ND SUM OF RS.1,25,000/- WAS DISALLOWED BY THE ASSESSING OFFIC ER WHICH WAS UPHELD BY THE CIT (APPEALS). THE CLAIM OF THE ASSE SSEE BEFORE US WAS THAT IT WAS NOT MAINTAINING ANY VOUCHER BUT THE SIGNATURE OF THE EMPLOYEE/S OR THE WAGE EARNER/S WERE TAKEN ON THE C ASH BOOK ITSELF. OUR ATTENTION WAS DRAWN TO THE EVIDENCE FILED IN RE SPECT THEREOF IN THE PAPER BOOK. IN THE TOTALITY OF THE FACTS AND C IRCUMSTANCES OF THE CASE, WE UPHOLD THE DISALLOWANCE OF RS.35,000/- OUT OF SALARY AND WAGES FOR NON VERIFICATION OF SUCH EXPENDITURE. TH E GROUND NO.3 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 11. THE ISSUE IN GROUND NO.4 IS AGAINST THE DISALLO WANCE MADE OUT OF FREIGHT CHARGES BY INVOKING THE PROVISIONS OF SE CTION 40(A)(IA)OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION HAD HIRED TRUCK NO.HR-69-3386 SIX TIMES @ RS.8400/-. THE TOT AL PAYMENT MADE BY THE ASSESSEE WAS RS.50400/- DURING THE YEAR BUT NO TAX WAS DEDUCTED AT SOURCE OUT OF THE SAID PAYMENT. THE AS SESSING OFFICER IN VIEW THEREOF DISALLOWED SUM OF RS.50,400/- WHICH WAS UPHELD BY THE CIT (APPEALS). 12. ON THE PERUSAL OF RECORD WE FIND THAT THE ASSES SEE WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SECTIO N 194C OF THE ACT FOR HIRING THE SAME TRUCK THROUGHOUT THE YEAR FOR S IX TIMES @ 7 RS.8400/- PER HIRE. THE TOTAL PAYMENTS MADE DURING THE YEAR WERE EXCEEDING RS.50,000/- AND IN VIEW OF THE PROVISIONS OF SECTION 194C OF THE ACT WHERE CUMULATIVE PAYMENTS DURING THE FIN ANCIAL YEAR WERE ABOVE RS.50,000/-, THE REQUIREMENT IS TO DEDUCT TAX AT SOURCE OUT OF THE SAID PAYMENTS. THE TOTAL PAYMENT MADE BY THE A SSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.50,400/- AND TH E ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE OUT OF SAID PAYMENTS . IN VIEW OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE AND DEPOSIT THE SAME WITHIN THE STIPULATED TIME, THE SAID EXPENDITURE IS NOT ALLOWABLE AS A DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT. WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN THIS RE GARD AND THE GROUND NO.4 RAISED BY THE ASSESSEE IS DISMISSED. 13. THE ISSUE IN GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION MADE FOR ESTIMATION OF HOUSEHOLD EXPENSES. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD WITHDRAWN RS.70,000/- FROM ITS PROPRIETARY CONCERN FOR MEETING THE HOUSEHOLD EXPEN SES AND HAD ALSO RECEIVED RS.67,157/- ON SALE OF THE AGRICULTURAL PR ODUCE, WHICH WAS UTILIZED FOR HOUSEHOLD EXPENSES. THE ASSESSEE HAVI NG FAILED TO JUSTIFY THE CLAIM OF AGRICULTURAL PRODUCE, NO CREDI T FOR THE SAME WAS ALLOWED BY THE ASSESSING OFFICER AND THE CIT (APPEA LS). THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,50,000/- ON ACCOUNT OF LOW WITHDRAWALS FOR HOUSEHOLD EXPENSES, WHICH WAS C ONFIRMED BY THE CIT (APPEALS). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FAMILY OF THE ASSESSEE CONSISTS OF SELF, WIFE A ND ONE SON WHO WAS STUDYING IN SCHOOL AT THE RELEVANT TIME. THE A SSESSEE HAS CLAIMED THAT IT HAD SPENT RS.70,000/- OUT OF WITHDR AWAL FROM HIS SOLE PROPRIETARY CONCERN AND RS.67,157/- OUT OF SAL E OF AGRICULTURAL 8 PRODUCE FOR MEETING THE HOUSEHOLD EXPENSES. THE CO MPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERATION FILED BY TH E ASSESSEE ALONGWITH ACKNOWLEDGMENT OF FILING THE RETURN OF IN COME ARE PLACED AT PAGES 141 AND 142 OF THE PAPER BOOK. THE PERUSA L OF THE SAID COMPUTATION OF INCOME REFLECTS THE ASSESSEE TO HAVE SHOWN TOTAL INCOME OF RS.1,10,638/- AND AGRICULTURAL INCOME OF RS.10,85,000/-. THE SAID INCOME HAS BEEN SHOWN IN THE HANDS OF THE ASSESSEE AND AGRICULTURAL INCOME HAS BEEN CONSIDERED FOR TAX PUR POSE. IN THE ENTIRETY OF THE SAID FACTUAL ASPECTS WE FIND NO MER IT IN THE ORDERS OF THE AUTHORITIES BELOW IN REJECTING THE EXPLANATION OF THE ASSESSEE IN RESPECT OF SOURCES OF MEETING THE HOUSEHOLD EXPENSE S. IN VIEW THEREOF, THE CREDIT FOR AGRICULTURAL INCOME UTILIZE D BY THE ASSESSEE FOR MEETING THE HOUSEHOLD EXPENSES MERITS TO BE ALL OWED AND NO ADDITION IS WARRANTED ON ACCOUNT OF LOW HOUSEHOLD E XPENSES. THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED. 15. THE GROUND NO.6 RAISED BY THE ASSESSEE BEING GE NERAL IS DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JUNE, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH