AKRUTI BUILDERS AND DEVELOPERS, MUMBAI V. ADDL CIT 15(2), MUMBAI

ITA 1659/MUM/2012

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7942 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1659/MUM/2012 (ASSESSMENT YEAR: 2007-08) M/S. AKRUTI BUILDERS AND DEVELOPERS A/101/N, SWETA PARK DAULAT NAGAR, ROAD NO. 2 BORIWALI (E), MUMBAI 400066 VS. ADDL. CIT - 15(2) MUMBAI PAN AALFA6477E APPELLANT RESPONDENT APPELLANT BY: MS. AASIFA KHAN RESPONDENT BY: SHRI RAJESH KUMAR YADAV DATE OF HEARING: 25.07.2018 DATE OF PRONOUNCEMENT: 19.09.2018 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER THIS APPEAL FILED BY ASSESSEE UNDER SECTION 253 OF THE INCOME TAX ACT, 1961 (IN SHORT, 'THE ACT') IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-26, MUMBAI DATED 13.01.2012 AND IT RELATES TO A.Y. 2006 -07, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE AO ON 21.12.200 9 UNDER SECTION 143(3) OF THE ACT. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIONS TO THE EXT ENT OF RS.1,24,386/- ON ACCOUNT OF INTEREST PAID ON BORROW ED FUNDS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIONS TO THE EXT ENT OF RS.37,50,000/- ON ACCOUNT OF UNSECURED LOANS RECEIV ED BY THE APPELLANT. 3. AGAINST CONFIRMATION OF ABOVE ADDITIONS, THE APP ELLANT IS IN APPEAL BEFORE THE HON'BLE TRIBUNAL WITH A PRAYER TO DELETE SUCH ADDITIONS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 23.10.2007 DECLARING TAXABLE INCOME OF RS. 17,95,060/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. ASSESSMENT WAS CO MPLETED UNDER SECTION 143(3) ON 21.12.2009. THE AO, WHILE PASSING THE ASS ESSMENT ORDER, MADE ITA NO. 1659/MUM/2012 M/S. AKRUTI BUILDERS AND DEVELOPERS 2 ADDITION OF RS. 44,50,000/- ON ACCOUNT OF UNSECURED LOANS AND DISAL LOWED INTEREST EXPENDITURE OF RS. 8,20,915/-. ON APPEAL BEFORE THE CIT(A) ADDITION ON ACCOUNT OF UNSECURED LOANS WAS RESTRICTED TO RS. 37,50,000/- AND INTEREST EXPENDITURE WAS RESTRICTED TO RS. 1,24,386/-. FURTHER AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AND THE LEARNED D.R. FOR THE REVENUE AND PERUSED THE MATERIAL AVAIL ABLE ON RECORD. GROUND NO. 1 RELATES TO DISALLOWANCE OF INTEREST OF RS. 1,24,386/-. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E HAS TAKEN INTEREST BEARING FUNDS FOR THE PURPOSE OF BUSINESS AND CLAIM ED THE EXPENSES IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS ALSO GIVEN INTEREST FREE ADVANCES TO SHREE KRISHNA DEVELOPERS. TWO PARTNERS OF THE ASSES SEE, NAMELY SHRI ASHOK PATEL AND SHRI MOHANLAL GOPALBHAI RAMJIYANI HELD PR OFIT SHARING IN THE SAID FIRM (SHREE KRISHNA DEVELOPERS) OF 25% AND 20% RESP ECTIVELY. THE ADVANCE WAS GIVEN TO SHRI KRISHNA DEVELOPER AS BUSINESS ADV ANCE. THE AMOUNT WAS UTILISED BY SHREE KRISHNA DEVELOPERS FOR COMMERCIAL PURPOSES. THE ASSESSEE WAS HAVING SURPLUS INTEREST FREE FUNDS AVAILABLE WI TH IT. THE ASSESSEE HAS CAPITAL OF RS. 32,37,799/- AS ON 31 ST MARCH, 2007. THE LOWER AUTHORITIES HAVE NOT REJECTED THE BALANCE SHEET OF THE ASSESSEE . THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OF RS. 22,50,000/- ONLY. THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT, THEREFORE NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENSES WAS WARRANTED. THE LEARNED COUNSE L FOR THE ASSESSEE HAS SHOWN US A COPY OF THE BALANCE SHEET AS ON 31 ST MARCH, 2007. IN SUPPORT OF HIS SUBMISSION THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. IN ITA NO. 1398 OF 2008. 5. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTED THE ORDER OF THE CIT(A). THE LEARNED D.R. FURTHER SUBMITTED THAT THE FACT TH AT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS WITH IT MAY B E VERIFIED BY THE AO. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE NOTICED THAT THE ASS ESSEE HAS PAID INTEREST OF RS. 8,20,915/- ON UNSECURED LOANS. THE UNSECURED LOANS AS ON 31 ST MARCH, ITA NO. 1659/MUM/2012 M/S. AKRUTI BUILDERS AND DEVELOPERS 3 2007 WAS RS. 42,50,000/-. THE ASSESSEE HAS GIVEN ADVANCES TO SHR EE KRISHNA DEVELOPERS, A FIRM IN WHICH TWO THE PARTNER S OF THE ASSESSEE FIRM ARE HAVING 45% SHARE. THE ASSESSEE HAS GIVEN INTEREST F REE LOANS OF RS. 22,50,000/-. THE AO DISALLOWED THE ENTIRE INTEREST PAID BY THE ASSESSEE. THE LEARNED CIT(A) PARTLY ALLOWED INTEREST DISALLOWANCE ON HIS OBSERVATION THAT THE DISALLOWANCE OF INTEREST SHOULD BE PROPORTIONAT E TO THE AMOUNT OF LOAN FOR THE PERIOD FOR WHICH IT WAS ADVANCED AND NOT FO R WHOLE OF THE YEAR. BEFORE US THE LEARNED A.R. VEHEMENTLY SUBMITTED THAT THE A SSESSEE HAS INTEREST FREE FUNDS AVAILABLE IN ITS CAPITAL ACCOUNT AND IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RE LIANCE UTILITIES AND POWER LTD. (SUPRA) NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE IS WARRANTED. THE LOWER AUTHORITIES HAVE NOT DISPUTED THE FACT TH AT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE IN ITS CAPITAL ACCOUNT TO MEET THE REQUIREMENT OF INTEREST FREE ADVANCED MADE BY T HE ASSESSEE TO GROUP CONCERN/SISTER CONCERN. THE ASSESSEE HAS INTEREST F REE FUND OF RS. 32,37,799/- AND THE ASSESSEE HAS GIVEN INTEREST FRE E LOANS OF RS. 22,50,000/- ONLY. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT THE DISALLOWANCE RESTRICTED BY THE LEARNED CIT(A) TO THE EXTENT OF RS. 1.24 LAKHS IS ALSO DELE TED. GROUND NO. 1 OF THE APPEAL IS ALLOWED. 7. GROUND NO. 2 RELATES TO CONFIRMATION OF ADDITION OF RS. 37.50 LAKHS ON ACCOUNT OF UNSECURED LOANS. THE LEARNED A.R. OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIOD THE ASSESSEE RECEIVED CE RTAIN UNSECURED LOANS AMOUNTING TO RS. 44,50,000/- FROM 10 PARTIES. THE AO ADDED THE ENTIR E AMOUNT UNDER SECTION 68 OF THE ACT HOLDING THAT THE LOAN TRANSACTIONS WERE NOT GENUINE. THE CIT(A) CONFIRMED THE ADDITION WITH RESPECT TO 6 PARTIES. THE LEARNED A.R. FURTHER SUBMITS THAT THE ASSESSEE HAS FURNISHED ALL DOCUMENTARY EVIDENCES IN RESPECT OF LENDERS TO PROV E THE CAPACITY OF LENDER, IDENTITY AND GENUINENESS OF TRANSACTIONS. THE LOAN WAS TAKEN THROUGH ACCOUNT PAYEE CHEQUES. ASSESSEE PAID INTEREST THROU GH ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TDS IN ACCORDANCE WITH LAW. ALL DOCUMENTARY EVIDENCES WERE FURNISHED BEFORE THE LOWER AUTHORITI ES. THE ASSESSEE HAS FURNISHED COMPLETE NAME, ADDRESS, PAN AND LOAN CONF IRMATION OF ALL THE CREDITORS. THE LEARNED A.R. FURTHER SUBMITS THAT SU BSEQUENTLY THE ASSESSEE HAS REPAID THE LOANS. THE LEARNED A.R. OF THE ASSES SEE FURNISHED DETAILS OF ITA NO. 1659/MUM/2012 M/S. AKRUTI BUILDERS AND DEVELOPERS 4 REPAYMENT OF LOAN AND PRAYED THAT THE DETAILS ABOUT REPAYMENT WAS NOT FURNISHED BEFORE THE LOWER AUTHORITIES AND THE ISSU E MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION OF FACTS AND FOR PA SSING APPROPRIATE ORDER IN ACCORDANCE WITH LAW. 8. ON THE OTHER HAND, THE REVENUE SUBMITS THAT THE ASS ESSEE HAS NOT GIVEN DETAILS AND CONFIRMATION OF THE PARTIES TO PR OVE THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS NOT DISCHARGED HIS ON US BY FILING SUFFICIENT DOCUMENTARY EVIDENCES. 9. IN THE REJOINDER SUBMITTED, THE LEARNED A.R. SUBMIT S THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS OF ALL THE CREDITORS , WHICH IS SUMMARISED BY THE LEARNED CIT(A) IN PARA 4.1.1 OF HIS ORDER. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSES SEE HAS FURNISHED THE DETAILS OF REPAYMENT OF LOAN, WHICH WAS ADMITTEDLY NOT BEFORE THE LOWER AUTHORITIES. CONSIDERING THE RELEVANCY OF THE DETAI LS REGARDING REPAYMENT OF LOANS IN SUBSEQUENT PERIOD, WE DEEM IT APPROPRIATE TO RESTORE THIS GROUND OF APPEAL TO THE FILE OF AO TO VERIFY THE FACTS AND PA SS APPROPRIATE ORDER IN ACCORDANCE WITH LAW. GROUND NO. 2 OF THE APPEAL IS ALLOWED STATISTICALLY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2018. SD/- SD/- ( N.K. PRADHAN ) ( PAWAN SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19 TH SEPTEMBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -26, MUMBAI 4. THE CIT - 15, MUMBAI 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.