Davender Kumar Parakh, Secunderabad, Secunderabad V. Dy.Commissioner of Income Tax, Circle-10(1), Hyderabad

ITA 1684/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2396 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

ITA NO 1684 OF 2017 DEVENDR A KUMAR PARAKH SECUNDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1684/HYD/2017 (ASSESSMENT YEAR: 2013-14) SHRI DEVENDER KUMAR PARAKH SECUNDERABAD PAN: ADLPA 6506 F VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 10 ( 1 ) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MS.ANAM SIDDIQUI FROM THE OFFICE OF SH.SUNIL KUMAR JAIN FOR REVENUE : SHRI RAMAKRISHNA BANDI, DR O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE LEARNED CIT (A)-6, HYDERABAD, DATE D 5.6.2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADING IN I RON & STEEL, HAS FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME O F RS.31,43,630. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS GIVEN LOANS TO VARIO US PARTIES TOTALING TO A SUM OF RS.42,15,109. THE ASSESSEE WAS ISSUED A SHOW-CAUSE NOTICE TO FURNISH INFORMATION AND ALSO T O SHOW-CAUSE AS TO WHY THE INTEREST SHOULD NOT BE CHARGED ON THE INTEREST FREE LOANS AND ADVANCE GIVEN BY THE ASSESSEE. THE ASSESS EE SUBMITTED ITS EXPLANATION. HOWEVER, THE AO WAS NOT CONVINCED BY THE ASSESSEES CONTENTION AND DISALLOWED INTEREST @ 12% ON THE AMOUNT OF ADVANCES GIVEN BY THE ASSESSEE. AGGRIEVED , THE DATE OF HEARING: 15.03 . 201 8 DATE OF PRONOUNCEMENT: 1 6 . 0 3 .20 18 ITA NO 1684 OF 2017 DEVENDR A KUMAR PARAKH SECUNDERABAD. PAGE 2 OF 5 ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGAINST THE CONFIRM ATION OF THE ADDITION BY THE CIT (A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: A. THE HON'BLE CIT (A)-6 HAS ERRED IN PARTLY DISALLOWING THE ADDITION MADE BY THE AO TO THE TUNE OF RS.5,05,813/-. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE ASSESSEE HAD GIVEN ADVANCES TO TWO PERSONS I.E. SHRI TARUN JAIN AND SHRI JATAN PAREKH TO SEARCH FOR OFFI CE SPACE FOR STARTING A BRANCH OFFICE AT JAIPUR AND THESE TWO PE RSONS HAVE RETURNED THE ADVANCES IN THE SUBSEQUENT YEARS. THER EFORE, ACCORDING TO HER, THE ADVANCES GIVEN BY THE ASSESSE E ARE FOR THE BUSINESS PURPOSES AND ARE NOT LOANS AND ADVANCES AS CONSIDERED BY THE AO AND NO INTEREST IS TO BE CHARGED ON THE S AID ADVANCES. 4. FURTHER, WITH REGARD TO THE ADVANCE GIVEN TO THE ASSESSEES WIFE MRS. ANU PARAKH, THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT MRS. ANU PARAKH HAD GIVEN H ER PROPERTY ON RENT TO THE ASSESSEE FOR CARRYING ON ITS BUSINES S AND THE ASSESSEE HAD GIVEN THE INTEREST FREE RENTAL ADVANCE OF RS.24.00 LAKHS TO HIS WIFE AND HAS NOT PAID ANY RENT FOR THE PERIOD THEREAFTER, TILL THE ADVANCE HAS BEEN ADJUSTED AGAI NST THE RENTS TO BE PAID BY THE ASSESSEE. SHE HAS DRAWN OUR ATTENTIO N TO THE RENTAL DEED FILED AT PAGE 4 OF THE PAPER BOOK TO DEMONSTRA TE THAT THE RENTAL DEED WAS TO TAKE EFFECT FROM 4.4.2011 AND TH AT THE ASSESSEE HAD TO DEPOSIT A SUM OF RS.24.00 LAKHS WITH THE LES SOR AS INTEREST FREE RENTAL DEPOSIT AND THEREFORE, SHE WAS NOT GIVE N ANY RENT BY ITA NO 1684 OF 2017 DEVENDR A KUMAR PARAKH SECUNDERABAD. PAGE 3 OF 5 THE ASSESSEE TILL 31.3.2019. SHE ALSO SUBMITTED THA T THE MONTHLY RENT OF RS.40,000, EXCLUSIVE OF ELECTRICITY AND WAT ER CONSUMPTION CHARGES SHALL COMMENCE FROM 1.4.2015 AND THE SAME S HALL BE APPLICABLE TILL 31.3.2019. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, A SUM OF RS.29,71,000 ADVANCED TO HIS WIF E INCLUDED THE SUM OF RS.24.00 LAKHS GIVEN AS INTEREST FREE RE NT DEPOSIT AND THE ACTUAL ADVANCE GIVEN TO HER IS ONLY RS.5,70,000 . SHE SUBMITTED THAT THE SUM OF RS.24.00 LAKHS WAS GIVEN FOR CARRYING OUT THE ASSESSEES BUSINESS IN THE RENTED PREMISES AND THEREFORE, IT CANNOT BE TREATED AS INTEREST FREE ADVANCE TO AS SESSEES WIFE. THUS, SHE PRAYED THAT THE ADDITION CONFIRMED BY THE CIT (A) BE DELETED. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT BEEN A BLE TO PROVE THE COMMERCIAL EXPEDIENCY OF MAKING ADVANCES TO SHR I TARUN JAIN AND JATAN PAREKH. WHEN A QUERY WAS RAISED AS T O THE OPENING OF ANY OFFICE IN JAIPUR EVEN SUBSEQUENT TO THE RELEVANT A.Y, THE LEARNED COUNSEL FOR THE ASSESSEE ANSWERED IN THE NEGATIVE. THEREFORE, THE COMMERCIAL EXPEDIENCY OF M AKING THE ADVANCES TO THESE TWO PERSONS AND THAT TOO FOR THE PURPOSES STATED BY THE ASSESSEE IS NOT PROVED. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDINGS OF THE CIT (A) ON TH IS ISSUE. 7. AS REGARDS THE ADVANCE OF RS.29,71,000 GIVEN TO THE ASSESSEES WIFE, WE FIND THAT THE ASSESSEE HAS FILE D THE ITA NO 1684 OF 2017 DEVENDR A KUMAR PARAKH SECUNDERABAD. PAGE 4 OF 5 UNREGISTERED RENTAL AGREEMENT DATED 4.4.2011 ACCORD ING TO WHICH, THE ASSESSEE IS REQUIRED TO GIVE AN INTEREST FREE R ENTAL DEPOSIT OF RS.24.00 LAKHS TO HIS WIFE AND THE OWNER OF THE PRO PERTY. THE MODE AND THE TIME OF PAYMENT AND WHETHER SUCH AN AD VANCE HAS BEEN ADJUSTED AGAINST THE RENT DUE TO THE OWNER OF THE PROPERTY AND WHETHER THE ASSESSEE HAS MADE ANY PAYMENT OF RE NT TO HIS WIFE WERE NOT PROVED BY THE ASSESSEE BEFORE THE CIT (A) NOR HAS HE FILED ANY EVIDENCE BEFORE US. THE ASSESSEE HAD TAKE N THIS CONTENTION ONLY BEFORE THE CIT (A) BY FILING THE CO PY OF THE RENTAL DEED. ON GOING THROUGH THE RENTAL DEED AND ALSO THE SALE DEED, WE FIND THAT MRS. ANU PARAKH HAD PURCHASED THE PROPERT Y ON 9.4.2010 AND HAS ALLEGEDLY GIVEN THE PROPERTY ON RE NT ON 4.4.2011. IN THE RENTAL DEED, THE ADDRESSES OF THE PARTIES AS WELL AS THE PROPERTY IS GIVEN AS IN TELANGANA, THE STATE WHICH WAS FORMED ONLY IN 2014. THEREFORE, EXISTENCE OF THE RE NTAL DEED IN 2011 IS ITSELF DOUBTFUL. IT APPEARS TO HAVE BEEN CR EATED FOR THE PURPOSES OF PRODUCING IT BEFORE THE CIT (A). THE AS SESSMENT ORDER WAS PASSED IN 4.3.2016 BUT THE ASSESSEE HAD NOT RAI SED ANY SUCH CONTENTION BEFORE THE AO, EVEN THOUGH THE ALLEGED R ENTAL DEED IS EXECUTED ON 4.4.2011 ITSELF. THEREFORE, I DO NOT SE E ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISS UE. 8. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2018. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 16 TH MARCH 2018. VINODAN/SPS ITA NO 1684 OF 2017 DEVENDR A KUMAR PARAKH SECUNDERABAD. PAGE 5 OF 5 COPY TO: 1 SHRI DEVENDER KUMAR PARAKH 309, 3 RD FLOOR, DIAMOND TOWERS, SD ROAD, SECUNDERABAD 500003 2 DCIT CIRCLE 10(1) HYDERABAD 3 CIT (A) - 6 HYDERABAD 4 PR. CIT 6 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER