SHAKTI MALT PVT. LTD., JAIPUR V. INCOME TAX OFFICER, WARD-4-2, JAIPUR

ITA 172/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5048 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA CIT DHK
• Keywords: Audit objection; Proportionate interest; Cost of acquisition
• Section: 143(3); 2(A); 154; 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 172/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S. SHAKTI MALT PVT. LTD., A-131, 9-D ROAD, VISHWAKARMA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 4(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCS 1216 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE JKTLO DH VKSJ LS@ REVENUE BY : SMT. CHANCHAL MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12.10.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/10/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 13.11.2018 OF LD. CIT (A)-2, JAIPUR ARISING FROM THE ORDER PASSED UNDER SECTION 154 OF THE IT ACT FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE ORDER PASSED BY LEARNED ASSESSING OFFICER (INCOME-TAX OFF ICER, WARD- 4, JAIPUR), U/S 154 OF INCOME TAX ACT, 1961 MAKING DISALLOWANCE OF RS. 3,15,3000/- AND SAME BEING UPHE LD BY LEARNED CIT (APPEALS)-2, JAIPUR, IS BAD IN LAW AS W ELL AS ON FACTS AND SAME NEEDS TO BE CANCELLED. 2 ITA NO. 172/JP/2019 M/S. SHAKTI MALT PVT. LTD., JAIPUR. 2(A) THAT LD. ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE OF RS. 3,14,300/- OUT OF INTEREST, ON THE GROUND THAT APPELLANT COMPANY HAS PURCHASED AN INDUSTRIAL LAND FOR RS. 40 LACS AND PAID RS. 2.65 LACS FOR REGISTRATION, WHICH IS NOT C ORRECT STATEMENT OF FACTS. LD. CIT (A) HAS ALSO ERRED IN UPHOLDING T HE SAME. (B) FULL FACTS OF THE PURCHASE OF LAND WAS SUBMITTE D AND COPY OF LEASE DEED WAS ALSO FILED BEFORE THE LD. ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDING AND SUCH PURCHASE OF LAND HAS NO RELEVANCE TO BORROWED FUNDS. THEREFORE, NO MISTAKE APPARENT ON THE FACE OF RECOR D AND SUCH TYPE OF DISALLOWANCE CANNOT BE MADE BY WAY OF RECTI FICATION AND PASSING THE ORDER U/S 154. THE DISALLOWANCE MADE IS INCORRECT AND NOT IN ACCORDANCE WITH THE LAW AND THE SAME NEE DS TO BE DELETED. 3. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT COMPANY IS RUNNING IN PROFIT AND THERE ARE ADEQUATE EQUITY CAP ITAL AND RESERVE AND SURPLUS (RS. 347.18 LACS AS ON 31.3.201 2), ETC. AND INVESTMENT IN LAND WAS MADE OUT OF SUCH FUNDS AND H AD NO LINK TO BORROWED FUNDS. THUS, THE DISALLOWANCE OF INTERE ST MADE IS NOT CORRECT AND SAME NEEDS TO BE DELETED. 4. THAT THE APPELLANT RESERVES HIS RIGHT TO ADD, AL TER, AMEND ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEAR ING. THE HEARING OF THE APPEAL IS CONCLUDED THROUGH VIDE O CONFERENCE DUE TO PREVAILING CONDITION OF COVID 19 PANDEMIC. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THI S APPEAL WAS CALLED FOR HEARING. THE LD. D/R HAS SUBMITTED THAT THE ASSESS MENT WAS COMPLETED UNDER SECTION 143(3) OF THE IT ACT AND THEREAFTER THERE W AS AN AUDIT OBJECTION REGARDING NON DISALLOWANCE OF THE INTEREST EXPENDITURE IN RES PECT OF THE INVESTMENT MADE BY THE ASSESSEE OF RS. 40,00,000/- + REGISTRATION CHAR GES OF RS. 2,65,000/- FOR PURCHASE OF LAND WHICH IS SHOWN IN THE BALANCE SHEE T AS ADDITION IN THE CAPITAL 3 ITA NO. 172/JP/2019 M/S. SHAKTI MALT PVT. LTD., JAIPUR. ASSETS. SINCE THIS LAND WAS NOT USED FOR BUSINESS PURPOSES DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE OF RS. 79,40,422/- WAS PROPORTIONATELY TO BE DISALLOWED. T HE AO ACCORDINGLY PASSED AN ORDER UNDER SECTION 154 OF THE IT ACT WHEREBY INTER EST OF RS. 3,15,300/- WAS DISALLOWED IN RESPECT OF THE COST OF ACQUISITION OF THE LAND DURING THE YEAR UNDER CONSIDERATION. SHE HAS RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW. 3. HAVING CONSIDERED THE SUBMISSIONS OF THE LD. D/R AND CAREFUL PERUSAL OF THE ORDERS PASSED BY THE AO AS WELL AS IMPUGNED ORDER O F THE LD.CIT (A), IT IS NOTED THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 25 TH SEPTEMBER, 2012 DECLARING TOTAL INCOME OF RS. 12,10,219/-. THE AO COMPLETED THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) ON 8 TH JANUARY, 2015 AT THE TOTAL INCOME OF RS. 12,99,720 /-. THEREAFTER, THE AO HAS PASSED THE IMPUGNED ORDER DA TED 19.09.2015 UNDER SECTION 154 OF THE IT ACT WHEREBY INTEREST OF RS. 3,15,300/ - WAS DISALLOWED ON ACCOUNT OF THE COST OF ACQUISITION OF RS. 42,65,000/- OF THE L AND PURCHASED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE LD. CIT ( A) HAS CONFIRMED THE ORDER OF THE AO WHILE PASSING THE IMPUGNED ORDER IN PARA 2.3 AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE RE CTIFICATION ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT ASSESSEE HAS PURCHASED A PIECE OF LAND THIS YEAR AND AS PER ASSE SSING OFFICER BORROWED FUNDS WERE UTILIZED FOR PURCHASING IT. INT EREST TO THE EXTENT OF BORROWED FUNDS USED FOR THE SAME WAS NOT DISALLOWED . ACCORDINGLY, ASSESSING OFFICER PASSED ORDER UNDER SECTION 154 OF THE I.T. ACT, 1061 AND DISALLOWED A SUM OF RS. 3,15,300/-. THE ASSESSE E CONTENDED THAT 4 ITA NO. 172/JP/2019 M/S. SHAKTI MALT PVT. LTD., JAIPUR. IT IS ACQUIRED OUT OF ITS OWN FUNDS NOT BORROWED FU NDS AND THAT A DEBATABLE ISSUE CANNOT BE TAKEN UP UNDER SECTION 15 4 OF THE ACT. THE RECORD SHOWS THAT ASSESSEE HAS CASH CREDIT ACCOUNT AND UNSECURED LOANS WHICH ACCORDING TO ASSESSEE WERE UTILIZED FOR BUSINESS. OWN CAPITAL AND PROFIT WERE USED FOR ACQUIRING OF ASSET S. HOWEVER, IN ABSENCE OF DIRECT NEXUS, THIS PLEA CANNOT BE ACCEPT ED. THUS IT IS CLEAR THAT THE ASSESSEE HAS CONTENDED BE FORE THE LD. CIT (A) THAT THE SAID LAND WAS ACQUIRED BY THE ASSESSEE OUT OF ITS OWN FU NDS AND NOT BORROWED FUNDS. FURTHER, THE ISSUE OF DISALLOWANCE OF INTEREST ON A CCOUNT OF PURCHASE OF LAND IS A DEBATABLE ISSUE AND CANNOT BE A SUBJECT MATTER OF S ECTION 154 OF THE IT ACT. THE LD. CIT (A) CONSIDERED THE FACT THAT THE ASSESSEE HAS A VAILED CASH CREDIT LIMIT ON WHICH THE INTEREST WAS PAID DURING THE YEAR UNDER CONSIDE RATION BUT NO LOAN WAS TAKEN BY THE ASSESSEE FOR PURCHASE OF LAND IN QUESTION. THE REFORE, WHEN THE TOTAL BORROWED FUNDS OF RS. 5.92 CRORES IS LESS THAN THE TOTAL EXP ENDITURE ON THE CURRENT ASSETS OF RS. 7.43 CRORES THEN IT BECOMES A MATTER OF SCRUTIN Y TO FIND OUT WHETHER THE BORROWED FUND HAS BEEN UTILIZED BY THE ASSESSEE FOR PURCHASE OF LAND IN QUESTION. PRIMA FACIE, IT APPEARS THAT THE ASSESSEE HAS MADE INVESTMENT DURING THE YEAR IN THE CURRENT ASSETS WHICH IS MORE THAN THE BORROWED FUND S, THEREFORE, THE BORROWED FUNDS WAS UTILIZED BY THE ASSESSEE FOR THE CURRENT ASSETS AND NOT FOR THE ACQUISITION OF THE LAND IN QUESTION. FURTHER, WHILE PASSING TH E ORDER UNDER SECTION 154 OF THE ACT, THE AO HAS NOT ISSUED ANY NOTICE TO THE ASSESS EE AND WITHOUT GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE THE DISALLOW ANCE IS MADE. THUS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MAD E BY THE AO ON ACCOUNT OF 5 ITA NO. 172/JP/2019 M/S. SHAKTI MALT PVT. LTD., JAIPUR. PROPORTIONATE INTEREST EXPENDITURE IS HIGHLY ARBITR ARY AND NOT JUSTIFIED. THE SAME IS DELETED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 13/10/2 020. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 13/10/2020. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. SHAKTI MALT PVT. LTD., JAIP UR. 2. THE RESPONDENT THE ITO WARD 4(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 172/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR