Bhavesh Ramesh Shah, Sangli V. JCIT, Range-2, Sangli

ITA 1675/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85293 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Proportionate interest; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1675/PN/2013 (ASSESSMENT YEAR: 2008-09) BHAVESH RAMESH SHAH C/O M/S. V.G. COMPUTERS VENKATESH SENATE, 1 ST FLOOR, KARMAVEER BHAURAO PATIL CHOWK, SANGLI 416416 PAN: ACZPS8621C . APPELLANT VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 2, SANGLI . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 11-12-2014 DATE OF PRONOUNCEMENT : 18-12-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 14.06.2013 RELATING TO ASSESSMENT YEAR 20 08-09 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION O F INTEREST AMOUNTING TO RS.3,45,984/- ON THE ADVANCE PAID TO MRS. SWATI LELE WHEN THE ADVANCE WAS PAID FOR CONSTRUCTIO N OF NEW PROPERTY AND WHEN THERE WAS NO NEXUS OF THE ADVANCE PAID TO THE BORROWED FUNDS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF INT EREST ITA NO.1675/PN/2013 BHAVESH RAMESH SHAH 2 AMOUNTING TO RS.5,40,000/- WHEN FOR THE EARLIER YEARS I T WAS ACCEPTED BY THE DEPARTMENT THAT THE IMPUGNED AMOUNT OF ADVANCE GIVEN TO ONE SHRI. SUDHIR NIRGUDKAR WAS A T RADE ADVANCE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF PR OPORTIONATE INTEREST AMOUNTING TO RS.1,05,000/- ON THE ADVANCE GIVE N TO SHRI. KISHOR SHAH WHEN THE IMPUGNED ADVANCE WAS GIVEN DURING THE FINANCIAL YEAR RELEVANT TO AY 2006-07 AND WHEN NO N EXUS COULD BE ESTABLISHED OF THE ADVANCE PAID WITH THE BOR ROWED FUNDS. 4. THE REASONS ASSIGNED FOR CONFIRMING THE ADDITIONS OF RS.3,45,984/-, 5,40,000/- AND RS.1,05,000/- ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS ON RECORD AN D PROVISIONS OF LAW. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY AND / OR DELETE ANY OF THE GROUNDS OF APPEAL. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. IN VIEW THEREOF, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER H EARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ASSESSEE IS AGGRIEVED BY THE ADDITION MADE ON A CCOUNT OF DISALLOWANCE OF INTEREST ON ADVANCES MADE TO DIFFERENT PERSONS. 5. THE BRIEF FACTS OF THE CASE ARE THAT, DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD KEPT A DEPOSIT OF RS.22,00,000/- WITH ONE MRS. SWATI AB HAY LELE. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF ADVANC ES MADE TO THE SAID PERSON. IT WAS EXPLAINED BY THE ASSESSEE VIDE LETTE R DATED 30.08.2010 THAT THE ADVANCE OF RS.22,00,000/- WAS GIVEN TO MRS. SWATI ABHAY LELE FOR CONSTRUCTION OF ICFAI BUILDING AND AFTE R COMPLETION OF THE BUILDING, THE SAME WAS GIVEN ON RENT TO I CFAI. THE ASSESSEE ON THE ONE HAND HAD MADE INTEREST FREE ADVAN CES AND ON THE ITA NO.1675/PN/2013 BHAVESH RAMESH SHAH 3 OTHER HAND, HAD PAID INTEREST OF RS.38,82,590/- ON BORRO WED FUNDS AGAINST LOANS TAKEN FROM VARIOUS BANKS AND FINANCIAL COMPAN IES. THE EXPLANATION OF THE ASSESSEE WAS THAT IT HAD MADE THE SA ID ADVANCES TO MRS. SWATI ABHAY LELE FOR CONSTRUCTION OF ICFAI BUILDING WHIC H WAS CONSTRUCTED IN JOINT OWNERSHIP OF FIVE PERSONS, WAS FOUND T O BE NOT SATISFACTORY AND PROPORTIONATE INTEREST ON SUCH ADVANCE S / DEPOSITS MADE WITH MRS. SWATI ABHAY LELE WAS DISALLOWED BY THE ASSE SSING OFFICER AT RS.3,45,984/-. SIMILAR PROPORTIONATE INTEREST ON THE ADVANCES / DEPOSITS GIVEN TO DR. SHRI SUDHIR NIRGUDKAR ON ADVANCES GIVEN AMOUNTING TO RS.36,00,000/- WAS COMPUTED BY THE A SSESSING OFFICER AND INTEREST OF RS.5,40,000/- WAS DISALLOWED. THE ASS ESSEE HAD FURTHER DEPOSITED RS.7,00,000/- WITH SHRI KISHOR SHAH AND THE SAID ADVANCE / DEPOSIT CONTINUED FROM EARLIER YEARS TILL 31.0 3.2008. THE ASSESSING OFFICER FOLLOWING THE SIMILAR LINE OF REASONING AS IN THE CASE OF MRS. SWATI ABHAY LELE COMPUTED THE DISALLOWANCE O F PROPORTIONATE INTEREST @ 15% ON RS.7,00,000/- BEING RS.1 ,05,000/- AND THE SAME WAS DISALLOWED. 6. THE CIT(A) VIDE PARAS 4 AND 5 OBSERVED AS UNDER:- 4. DURING THE ASSESSMENT, THE ASSESSING OFFICER HAS FOUND THAT AS IN THE LAST YEAR, THE APPELLANT CONTINUED TO KEEP DEPOSIT OF RS.22 LAKHS WITH ONE MRS. SWATI ABHAY LELE. THE TRANSA CTION WAS MADE WITH HER FROM 01/04/2007 TO 23/10/2009. THE APPELLANT WAS ASKED TO EXPLAIN THE NATURE OF THESE T RANSACTION AND DETAILS OF INTEREST CHARGED FROM THE DEPOSIT. I T WAS STATED BY THE APPELLANT THAT THE ADVANCE WAS GIVEN FOR CONSTRUC TION OF BUILDING NAMED ICFAI BUILDING. AFTER COMPLETION, THE SA ME WAS GIVEN TO ICFAI ON RENT. THE ORIGINAL PLOT WAS IN THE NAME OF FIVE PERSONS ON WHICH THE BUILDING WAS CONSTRUCTED JOINTL Y. RENT RECEIVED NEXT YEAR WAS SHOWN AS INCOME UNDER THE HE AD 'HOUSE PROPERTY'. THE APPELLANT DID NOT FURNISH ANY PURCHA SE DEED AND DETAILS REGARDING THE CONSTRUCTION. AS PER THE ASSE SSING OFFICER, THE APPELLANT COULD NOT PROVE WITH SUPPORTING EVIDENCE AS TO THE REQUIREMENT OF THE KEEPING OF HUGE ADVANCE WITH MRS. SWATI LELE AND MERELY STATED THAT HE RECEIVED RENT IN THE NEXT YEAR WHICH WAS DISCLOSED AS INCOME UNDER THE HEAD HOUSE PROPERT Y'. WHEN THE APPELLANT PAID SUCH HUGE INTEREST ON BORROWINGS, THER E WAS NO REASON TO PUT HUGE AMOUNT OF RS.22 LAKHS WITH THE AF ORESAID ITA NO.1675/PN/2013 BHAVESH RAMESH SHAH 4 PARTY FOR SUCH A LONG TIME. ACCORDINGLY, THE PROPORTI ONATE INTEREST WAS DISALLOWED BY THE ASSESSING OFFICER. 5. SIMILAR ARGUMENTS HAVE BEEN MADE BEFORE THE UNDERS IGNED ALSO. IT WAS STATED ON BEHALF OF THE APPELLANT THAT THE ADVANCE WAS GIVEN TO MRS. SWATI LELE FOR CONSTRUCTION OF HOUS E ON WHICH RENT HAS BEEN CREDITED FROM NEXT ASSESSMENT YEAR. HO WEVER, NO PRUDENT PERSON WILL KEEP SUCH A SUBSTANTIAL AMOUNT OF ADVANCE WITHOUT INTEREST WHEN HE IS PAYING INTEREST ON LOANS TAKEN. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER IS HEREBY CONFIRMED. 7. THE DISALLOWANCE ON ACCOUNT OF PROPORTIONATE INTEREST RELATABLE TO THE ADVANCE OF RS.22,00,000/- TO MRS. SWATI ABHAY LE LE AT RS.3,45,984/-, ADVANCE OF RS.36,00,000/- TO SHRI SUDHIR NIRGU DKAR AND THE PROPORTIONATE INTEREST OF RS.5,40,000/- AND FURTHE R PROPORTIONATE INTEREST ON ADVANCE TO SHRI KISHOR SHAH O F RS.7,00,000/- AT RS.1,05,000/- WAS UPHELD BY THE CIT(A). 8. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ADVANCES M ADE BY THE ASSESSEE AS AGAINST INTEREST EXPENDITURE CLAIMED ON BORROWED FUN DS. 9. THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDEN CE TO ESTABLISH THE REQUIREMENTS OF MAKING THE AFORESAID INTEREST FREE ADVANCES EITHER IN THE YEAR UNDER CONSIDERATION OR IN T HE EARLIER YEARS. FURTHER, THE ASSESSEE HAS FAILED TO ESTABLISH ITS CASE ESP ECIALLY, WHEN INTEREST BEARING BORROWED FUNDS WERE AVAILABLE WITH THE AS SESSEE. ON THE OTHER HAND, THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 38,82,590/- ON THE INTEREST PAID ON BORROWED LOANS. IN V IEW OF THE FACT THAT THE ASSESSEE WAS INCURRING INTEREST EXPENDITUR E ON BORROWED LOANS, THE NECESSITY OF MAKING THE INTEREST FREE ADVANCES TO DIFFERENT PERSONS HAVING NOT BEEN ESTABLISHED BY THE ASSESSEE, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. UPHOLDING THE ORDER OF ITA NO.1675/PN/2013 BHAVESH RAMESH SHAH 5 CIT(A), THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER, 2014. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 18 TH DECEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE