M/S Mihir Bakre Projects, Pune V. Addl. CIT, Pune

ITA 1710/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1015 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1710/PN/2012 $& ' !(' / ASSESSMENT YEAR : 2007-08 M/S. MIHIR BAKRE PROJECTS, LANE NO. 15, F. NO. 1, AMOGH APARTMENTS, PRABHAT ROAD, PUNE-411004 PAN : AAMFM9653R ....... / APPELLANT )& / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE-3, PUNE / RESPONDENT ASSESSEE BY : SHRI ABHAY AVCHAT REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 05-10-2015 / DATE OF PRONOUNCEMENT : 09-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 25-08 -2011 FOR THE ASSESSMENT YEAR 2007-08. 2. THE APPEAL HAS BEEN FILED WITH A DELAY OF 298 DAYS. TH E ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY. THE APPLICAT ION IS 2 ITA NO. 1710/PN/2012, A.Y. 2007-08 SUPPORTED BY AN AFFIDAVIT CITING REASONS FOR DELAY. AFTER PE RUSAL OF SAME, WE ARE SATISFIED THAT THE DELAY IN FILING OF APPEAL IS NO T INTENTIONAL OR DELIBERATE. THE DELAY OF 298 DAYS IN FILING OF TH E APPEAL IS CONDONED AND THE APPEAL IS ADMITTED TO BE HEARD ON MERITS. 3. THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST DISALLOWANC E OF INTEREST RS.6,56,250/-, FOR ALLEGEDLY ADVANCING INTEREST BEAR ING FUND TOWARDS INTEREST FREE ADVANCES. THE ASSESSEE FILED ITS RE TURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 22-10-2007, DECLARIN G TOTAL INCOME OF RS.2,12,19,428/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S. 143(2) WAS ISSUED TO THE ASSE SSEE ON 29-08-2008. DURING THE COURSE OF SCRUTINY ASSESSMENT, T HE ASSESSING OFFICER INTER ALIA MADE DISALLOWANCE OF INTEREST RS.6,56,250/- ON ACCOUNT OF DIVERTING INTEREST BEARING FUND FOR NON-BUSINESS PURPOSE WITHOUT CHARGING ANY INTEREST. AGGRIEVED BY THE ASSESSMENT ORDER DATED 10-12-2009, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTE D THE APPEAL OF THE ASSESSEE AND CONFIRMED THE FINDINGS OF ASSESS ING OFFICER. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). 4. SHRI ABHAY AVCHAT APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT, THE ASSESSEE HAD ADVANCED RS.75,00,000/- FROM OWN FUNDS TO SHRI N.V. JADHAV. THE ASSESSEE HAD SUFFICIENT BALANCE OF OWN INTEREST FREE FUNDS ON THE DATE OF ADVANCE. THE ASSESSEE HAD TR ANSFERRED THE RIGHTS IN THE LAND AND HAD RECEIVED RS.1,51,00,000/- AS ADV ANCED. THIS FACT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE ASSESSEE HAD ADVANCED RS.75,00,000/- TO SHRI N.V. JADHAV FROM THE A MOUNT 3 ITA NO. 1710/PN/2012, A.Y. 2007-08 RECEIVED FROM THE TRANSFER OF RIGHTS IN THE LAND. THUS, TH E AUTHORITIES BELOW HAVE ERRED IN MAKING DISALLOWANCE OF RS.6,56,250/- BY A LLEGING THAT INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR GIVING INT EREST FREE ADVANCES. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. RELIANCE UTILITIES & POWER LTD. REPORTED AS 221 CTR (BOM) 435. 5. AU CONTRAIRE SHRI DHEERAJ KUMAR JAIN REPRESENTING THE DEPARTMENT SUBMITTED THAT, THE ASSESSING OFFICER DID NOT H AVE SUFFICIENT FUNDS AT THE TIME OF ADVANCING INTEREST FREE LOAN T O SHRI N.V. JADHAV. THE ASSESSING OFFICER HAS SPECIFICALLY RECORDED THE FINDINGS IN THIS REGARD, THAT AT THE TIME OF ADVANCING INTEREST FREE LOAN IN THE MONTH OF AUGUST, THE CASH FLOW STATEMENT SHOWS THAT THE ASSESSEE WAS NOT HAVING OWN FUNDS TO THE EXTENT OF INTEREST FREE LOAN ADVANCED. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW ANY COMMERCIAL EXPEDIENCY FOR ADVANCING INTEREST FREE LOAN OUT OF INTEREST BEARING FUNDS. HENCE, THE DISALLOWANCE OF INTEREST HAS BEEN RIGHTLY MADE BY THE AUTHORITIES BELOW. TO SUPPORT OF HIS SUBMISSIONS, THE LD. DR PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREM E COURT OF INDIA IN THE CASE OF S.A BUILDERS LTD. VS. CIT REPORTED AS 288 ITR 1. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE SOLITARY ISSUE RAISED IN THE APPEAL IS AGAINST THE DISALLOWANC E OF INTEREST RS.6,56,250/-. DURING THE PERIOD RELEVANT TO THE ASSESSM ENT YEAR UNDER APPEAL THE ASSESSEE HAD ADVANCED A SUM OF RS.75 ,00,000/- WITHOUT CHARGING INTEREST TO SHRI N.V. JADHAV, WHO IS ENGAG ED IN THE CONSTRUCTION OF ROADS. THE CONTENTION OF THE ASSESSEE IS THAT THE LOAN HAS BEEN ADVANCED BY THE ASSESSEE FROM OWN FUNDS AND NOT INTEREST 4 ITA NO. 1710/PN/2012, A.Y. 2007-08 BEARING FUNDS, WHEREAS ACCORDING TO THE DEPARTMENT THE ASSESSEE HAS GIVEN ADVANCE TO SHRI N.V. JADHAV OUT OF INTEREST BEARING FUNDS. 7. THE ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY STA TED THAT THE AMOUNT HAS BEEN ADVANCED BY THE ASSESSEE IN THE MONTH OF AUGU ST. ACCORDING TO THE ASSESSING OFFICER AN EXAMINATION OF CASH FLOW STATEMENT SHOWS THAT THE ASSESSEE DOES NOT HAVE OWN SUFFICIENT FUNDS FOR ADVANCING TO SHRI N.V. JADHAV. HOWEVER, THE ASSESSING OFFICER ADMITTED THE FACT THAT AS ON 31-08-2006 THE ASSESSEE WAS HAVING INTEREST FREE FUNDS TO THE TUNE OF RS.1,51,00,000/-, RECEIVE D AS ADVANCE FROM TRANSFER OF RIGHTS IN THE LAND. THE RELEVANT EXTRACT OF THE FINDINGS OF ASSESSING OFFICER IN PARA 6.2.4 OF THE ASSESSMENT ORDER R EADS AS UNDER: ..THE SITUATION BECOMES CLEAR AFTER EXAMINING THE CASH FLOW STATEMENT FOR THE MONTH OF AUGUST IN WHICH ADVANCE WAS GIVEN. AS ON 31-08-2006 ASSESSEE WAS NOT HAVING ANY INTEREST FREE FUNDS BUT FOR THE ADVANCES OF RS.1,51,00,000/- RECEIVED FOR THE TRANSFER OF RIGHT S IN THE LAND. ASSESSEE WAS NOT HAVING ANY OTHER INTEREST FREE FUNDS IN THE MONTH OF AUGUST 2006 TO SOURCE THE INTEREST FREE ADVANCES. THE OTH ER FUNDS AVAILABLE IN THE FORM OF CAPITAL AND UNSECURED LOANS WERE ALL IN TEREST BEARING FUNDS. THUS, THE ABOVE MENTIONED CONTENTION WOULD NOT COME TO THE RESCUE OF THE ASSESSEE IF WE TAKE A CLOSE LOOK AT THE FACTS. UNDISPUTEDLY, THE ASSESSEE HAS ADVANCED RS.75,00,000/- I N THE MONTH OF AUGUST. THE ADVANCE RECEIVED BY THE ASSESSEE ON ACCOUNT OF TRANSFER OF RIGHTS IN LAND IS MORE THAN SUFFICIENT TO FUND THE ADVANCES MADE BY THE ASSESSEE TO SHRI N.V. JADHAV DURING THAT PERIOD. 8. THUS, IN VIEW OF THE FACT THAT THE ASSESSEE WAS HAVING SUFFICIENT FUNDS FOR ADVANCING TO SHRI N.V. JADHAV FROM THE TRANSFER O F RIGHTS IN THE LAND. WE ARE OF THE CONSIDERED VIEW THAT THE AUTHOR ITIES BELOW HAVE ERRED IN MAKING DISALLOWANCE OF RS.6,56,250/-. WE FIND MERIT IN THE 5 ITA NO. 1710/PN/2012, A.Y. 2007-08 APPEAL OF THE ASSESSEE. ACCORDINGLY, WE ALLOW THE APPEAL O F THE ASSESSEE AND DELETE THE ADDITION OF RS.6,56,250/-. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 09 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 09 TH OCTOBER, 2015 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, PUNE 4. ' / THE CIT-II, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE