The ITO, Ward-8(2), Ahmedabad V. Studio-3 Architects Pvt.Ltd., Ahmedabad

ITA 1812/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6902 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS R K TOPIWALA
• Keywords: Reopening of assessment
• Section: 147

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WD- 8(2), AHMEDABAD. VS. STUDIO-3 ARCHITECTS (P) LTD., MADHUMALTI COMPLEX, NAVRANGPURA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- MRS. R. K. TOPIWALA, DR RESPONDENT BY:- MR. GAURAV NAHTA O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND :- (1) THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.612510/- MADE BY THE AO ON ACCOUNT OF INTEREST EXPENSES. WHEREAS THE ASSESSEE HAS RAISED FOLLOWING GROUND IN ITS CROSS OBJECTION : (1) THE LD. CIT(A)XIV, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN PASSING APPELLATE ORDER DATED 15.3.2010 FOR ASST . YEAR 2004- 05 IN THE CASE OF APPELLANT BY REJECTING THE GROUND OF REOPENING OF ASSESSMENT U/S 147 STATING THAT AO HAS FOLLOWED DUE PROCEDURE AS PER THE PROVISIONS OF INCOME TAX ACT. 2. DURING THE COURSE OF HEARING THE LD. AR WITHDREW THE CROSS OBJECTION AND ACCORDINGLY THE SAME IS TREATED AS RE JECTED. ITA NO.1812/AHD/2010 ALONG WITH CO NO.232/AHD/2010 ASST. YEAR 2004-05 ITA NO.1812/AHD/2010 & CO.232/AHD/2010 ASST. YEAR 2004-05 2 3. IN RESPECT OF APPEAL FILED BY THE REVENUE LD. A R SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL FO R ASST. YEAR 2006-07 DECIDED IN ITA NO.1841/AHD/2009 VIDE PARA 9 TO 9.2. 4. THE FACTS RELATING TO THE ISSUE ARE THAT THE ASS ESSEE COMPANY HAD BORROWED INTEREST BEARING FUNDS FROM BANK AT RS.35, 46,621/- BEING AMOUNT OUTSTANDING AT THE END OF THE YEAR AND IT GA VE INTEREST FREE ADVANCES TO THE SISTER CONCERN. THE AO ACCORDINGLY DISALLOWED THE INTEREST PAID ON BORROWED FUNDS BY PRESUMING THAT S UCH INTEREST BEARING BORROWED FUNDS WERE ADVANCES TO SISTER CONCERN FREE OF INTEREST. THE LD. CIT(A) HAD DELETED THE ADDITION BY FOLLOWING HIS OW N ORDER FOR ASST. YEAR 2006-07. THE REVENUE CHALLENGED HIS ORDER IN A PPEAL BEFORE THE TRIBUNAL WHICH AS REFERRED ABOVE DELETED THE ADDITI ON AS UNDER :- 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CI T{A), THE AFORESAID ADVANCE OF RS.1.04,70,526/- TO M/S ASOPALAV ESTATE AND LEASING PVT. LTD. AND RS,23,76,8Q5/- TO M/S. MISTRY ASSOCIATES WAS GI VEN FOR THE PURPOSE OF BUSINESS OF THE ASSESSES . THERE IS NOTHING ON R ECORD TO SUGGEST THAT THE SAID AMOUNT WAS FOR NON-BUSINESS PURPOSES. BEFORE T HE LD. CIT(A), THE ASSESSEE CONTENDED THAT MAJORITY OF LOANS HAD BEEN ADVANCED IN THE PRECEDING YEARS OUT OF AVAILABLE SURPLUS WITH THE C OMPANY AND THAT THE ASSESSEE HAD NOT UTILIZED BORROWED FUNDS FOR THE PU RPOSE, HON'BLE KARNATAKA HIGH COURT IN BIT TUL (P.) LTD. V. CIT [I TRC 141 OF 1977 DATED 29-7-1930) HELD THAT THERE SHOULD BE MATERIAL TO JUSTIFY THE CONCLUSION THAT ANY BORROWED MONEY BY THE ASSESSEE IN A YEAR IN WHICH INTEREST HAD BEEN PAID HAD BEEN DIVERTED FOR NON-BU SINESS PURPOSE BEFORE MAKING ANY DISALLOWANCE. SINCE THE REVENUE HAVE NOT PLACED ANY MATERIAL BEFORE US THAT BORROWED FUNDS HAD INDEED B EEN UTILIZED FOR ADVANCING INTEREST FREE LOANS AND ADVANCES FOR NON- BUSINESS PURPOSES IN THE YEAR UNDER CONSIDERATION OR EVEN IN THE EARLIER YEARS NOR ANY SUCH DISALLOWANCE IN RELATION TO FUNDS ADVANCED IN THE P RECEDING YEARS IS STATED TO HAVE BEEN MADE, APPARENTLY, THERE WAS NO GROUND FOR MAKING ANY DISALLOWANCE OF INTEREST IN THE YEAR UNDER CONS IDERATION, 9.1 EVEN OTHERWISE, HON'BLE BOMBAY HIGH COURT I N CIT VS. RELIANCE UTILITIES AND POWER LTD {2009) 313 ITR 340 (BOM.) H ELD THAT IF THERE ITA NO.1812/AHD/2010 & CO.232/AHD/2010 ASST. YEAR 2004-05 3 WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRA FT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOU LD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INV ESTMENTS. 9.2 IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID D ECISIONS, ESPECIALLY WHEN IN THE INSTANT CASE THE REVENUE HAVE NOT PLACED BEF ORE US ANY MATERIAL THAT THE BORROWED FUNDS HAD INDEED BEEN UTILIZED TO WARDS THE AFORESAID ADVANCES WHILE THE ADVANCES WERE FOUND BY THE LD. C IT(A), FOR BUSINESS PURPOSES, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.2 IN THE APPEAL IS DIS MISSED. SINCE THE FACTS OF THE CASE ARE SIMILAR AS IN ASST. YEAR 2006-07, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, W E CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVE NUE. AS A RESULT, BOTH THE APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE C.O. FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 8/4/11. SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 8/4/11. MAHATA/- ITA NO.1812/AHD/2010 & CO.232/AHD/2010 ASST. YEAR 2004-05 4 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 1/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 6/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..