ITO, Ward - 37(3), Kolkata, Kolkata V. Shri Anand Kumar Agarwal, Kolkata

ITA 183/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3101 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2012
• Court: TRIBUNAL
• Department Lawyers: DILI P KR RAKSHIT
• Assessee Lawyers: V N PUROHIT
• Keywords: Notional interest
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . . . . . . . , !' /AND #! $'# , ) [BEFORE SHRI K. K. GUPTA, AM & SHRI MAHAVIR SINGH, JM] '% '% '% '% / I.T.A NO. 183/KOL/2012 $&' !() $&' !() $&' !() $&' !()/ // / ASSESSMENT YEAR: 200 8- 0 9 INCOME-TAX OFFICER, WD-37(3), KOLKATA. VS. SHRI AN AND KUMAR AGARWAL (PAN:ADAPA5362N) (+, /APPELLANT ) (-.+,/ RESPONDENT ) DATE OF HEARING: 02.04.2013 DATE OF PRONOUNCEMENT: 05.04.2013 FOR THE APPELLANT: SHRI DILIP KR. RAKSHIT, S R. DR FOR THE RESPONDENT: SHRI V. N. PUROHIT / / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXIV, KOLKATA IN APPEAL NO. 822/CIT(A)0XXIV/37(3)/10-11 DATED 28.12.2011. ASSES SMENT WAS FRAMED BY ITO, WARD- 37(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 27.12. 2010. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AG AINST THE ORDER OF CIT(A) DELETING THE ADDITION OF RS. 11,69,852/- MADE BY AO AS UNEXPLAIN ED LOAN TAKEN FROM AGARWAL ENGINEERING WORKS. FOR THIS, REVENUE HAS RAISED FOLLOWING GROU ND NO.1: 1.LD. CIT(A) ERRED IN LAW AS WELL AS ON FACT IN DE LETING THE ADDITION OF RS.11,69,852/-. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A DEALER IN STEEL AND IRON UNDER THE PROPRIETARY FIRM NAMED AS BALAJI INFOTECH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BOOKS OF ACCOUNT, BANK STATEMENT, DETAILS OF JOB WORK DON E, LABOUR PAYMENTS, PURCHASES MADE AND STOCK REGISTER WERE PRODUCED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT THERE IS DIFFERENCE IN LOAN OF RS.11,69,852/- AND H E MADE ADDITION BY RECORDING THE FOLLOWING FACTS IN PARA 5 AS UNDER: 2 ITA NO.183/K/2012 SHRI ANAND KR. AGARWAL AY: 2008-09 5. TOTAL LOAN TAKEN FROM AGARWALA ENGG. WORKS OF R S.548453/- AS REFLECTED IN THE BALANCE SHEET OF MR. ANAND KUMAR AGARWAL AS AT 31.0 3.2008, WHEREAS ANUP KR. AGARWALS BALANCE SHEET SHOWS THAT THE ASSESSEE TAK EN LOAN OUTSTANDING AS AT 31.03.08 WAS RS.17,18,305/- AND FROM ANAND KR. AGARWAL OF RS .51880/-. THE ASSESSEE HAS RIGHTLY SHOWN IN RESPECT OF LOAN TAKEN FROM ANUP KR. AGARWA L OF RS.51880/- BUT IN RESPECT OF LOAN TAKEN FROM AGARWAL ENGG. WORKS OF RS.548453/- AS SH OWN IN THE BALANCE SHEET OF MR. ANAND KR. AGARWAL IS DEFLATED AS ANAND KUMAR AGARWA LS BALANCE SHEET SHOWS THAT HE HAD LOAN GIVEN TO AGARWAL ENGG. WORKS OF RS.1718305 /- AS AT 31.03.2008. THEREFORE, DIFFERENCE IN LOAN WAS RS.1169852/- IS BEING ADDED BACK WITH THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO DELETED THE ADDITION VIDE PARA 5.3 OF HIS APPELLATE ORDER AS UNDER: 5.3. I HAVE CONSIDERED THE ABOVE SUBMISSION OF LD. A/R AND ALSO THE OBSERVATION OF THE ASSESSING OFFICER ON THIS ISSUE. DURING THE COURSE OF APPEAL, THE LD. A/R CLARIFIED THAT THE APPELLANT HAS TAKEN A LOAN OF RS.5,48,453/- FRO M AGARWAL ENGINEERING WORKS WHICH IS THE PROPRIETORSHIP CONCERN OF SHRI ANUP KU MAR AGARWAL. THE CAPITAL BALANCE OF SHRI ANUP KUMAR AGARWAL WAS RS.17,18,305/-. THE LD. A/R CLARIFIED THAT THE ASSESSING OFFICER HAS WRONGLY SUBSTITUTED THE CAPIT AL OF THE SAID CREDITOR FOR THE LOAN TAKEN BY THE APPELLANT FROM HIS PROPRIETORSHIP CONC ERN. ON PERUSAL OF THE DETAILS FILED BY THE LD. A/R, I FIND THAT THE ASSESSING OFFICER H AS WRONGLY TREATED THE WHOLE CAPITAL OF RS.17,18,305/- BELONGING TO SHRI ANUP KUMAR AGARWAL AS LOAN GIVEN TO THE APPELLANT WHEREAS THE APPELLANT HAS TAKEN THE LOAN OF RS.5,48 ,453/- FROM M/S. AGARWAL ENGINEERING WORKS WHICH IS THE PROPRIETORSHIP CONCE RN OF SHRI ANUP KUMAR AGARWAL. THUS THE ADDITION OF RS.11,69,852/- IS BASELESS AND WRONG. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.11 ,69,852/- AS UNDERSTATEMENT OF LOAN. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO WAS HANDLING THE CASE OF ASSESS EE SHRI ANAND KR. AGARWAL AS WELL AS SHRI ANUP KR. AGARWAL. THE ASSESSEE SHRI ANAND KR. AGAR WAL IS THE PROPRIETOR OF BALAJI INFOTECH. SHRI ANUP KR. AGARWAL IS PROPRIETOR OF AGARWAL ENGI NEERING WORKS. THE ASSESSEE OBTAINED A LOAN OF RS.5,48,453/- FROM SHRI ANUP KR. AGARWAL BU T IN THE CAPITAL ACCOUNT OF SHRI ANUP KR. AGARWAL THERE APPEARS A BALANCE OF RS.17,18,305 AS HIS CAPITAL. THERE WAS NO FIGURE OF LOAN OUTSTANDING OF RS.17,18,305/- FOR ASSESSEE SHRI ANA ND KR. AGARWAL. THE AO TOOK THIS CAPITAL BALANCE OF SHRI ANUP KR. AGARWAL FOR THE LOAN TAKEN BY ASSESSEE AND HE WRONGLY SUBSTITUTED THE OPENING CAPITAL OF THE SAID PARTY FOR THE LOAN TAKEN BY ASSESSEE, WHICH STAND AT THE FIGURE OF RS.5,48,453/-. IN SUCH CIRCUMSTANCES, WE ARE OF TH E VIEW THAT THE AO HAS COMPLETELY MIS- APPRECIATED THE FACTS AND ACCOUNTING DETAILS. IN O UR VIEW, THERE IS A PLAIN AND SIMPLE FACT THAT THE ASSESSEE TOOK LOAN IN HIS PERSONAL ACCOUNT FROM SHRI ANUP KR. AGARWAL AT A SUM OF RS.5,48,453/- AND THE FIGURE ASSUMED BY THE AO AT RS.17,18,305/- APPEARS IN THE ASSESSEES 3 ITA NO.183/K/2012 SHRI ANAND KR. AGARWAL AY: 2008-09 PERSONAL BALANCE SHEET PREPARED FROM SEPARATE PERSO NAL ACCOUNT MAINTAINED. HENCE, THERE IS NO UNDERSTATEMENT OR UNEXPLAINED LOAN INTRODUCED BY TH E ASSESSEE OR SHRI ANUP KR. AGARWAL IN HIS NAME. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW TH AT CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS GROUND OF REVENUES A PPEAL IS DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION OF NOTIONAL INTEREST AT RS.2,44,874/-. FO R THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: LD. CIT(A) ERRED IN LAW AS WELL AS ON FACT IN DELE TING THE ADDITION OF RS.2,44,874/-. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS MADE THE ADDITION OF INTERE ST ON LOAN GIVEN BY ASSESSEE @ 10% OF THE TOTAL LOAN. THE AO RECORDED THE FACTS AND MADE ADD ITION VIDE PARA 3 OF HIS ASSESSMENT ORDER AS UNDER: 3. THE ASSESSEE HAD GIVEN LOAN/ADVANCE/DEPOSIT OF RS.24,48,743/- AS REFLECTED IN BALANCE SHEET OF SHREE BALAJI INFOTECH. BUT INCOME AGAINST GIVEN LOAN WAS NOT SHOWN IN HIS INCOME. THEREFORE, THE INTEREST RATE IS CALCUL ATED @ 10% I.E. RS.244874/- HAD RECEIVED IS BEING PRESUMED. SO, IT IS BEING ADDED BACK WITH THE TOTAL INCOME OF THE ASSESSEE. 8. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO DELETED THE ADDITION BY GIVING FOLLOWING FINDING VIDE PARA 3.3 OF HIS APPELLATE OR DER AS UNDER: 3.3. I HAVE CAREFULLY EXAMINED THE ABOVE SUBMISSIO N OF THE LD. A/R. IT HAS BEEN CLARIFIED THAT THE INTEREST OF RS.2,31,133/- HAS BE EN ACCOUNTED FOR AND INCLUDED IN THE TOTAL INCOME AS PER SCHEDULE-E OF THE AUDITED ACC OUNT. THUS THERE IS NO SCOPE FOR MAKING ANY FURTHER ADDITION ON THE BASIS OF NOTION AL INTEREST. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.2,44,874/- WH ICH HAS BEEN ESTIMATED AS NOTIONAL INTEREST @ 10% ON LOAN/ADVANCE/DEPOSIT OF RS.24,48, 743/-. THUS THE APPELLANT GETS A RELIEF OF RS.2,44,874/-. THIS GROUND OF APPEAL IS ALLOWED. 9. WE FIND THAT THE AO HAS CALCULATED NOTIONAL INTE REST @ 10% ON THE FOLLOWING COMPONENTS: LOANS RS.16,31,334/- ADVANCE RS. 8,172/- VAT RS. 42,537/- EARNEST MONEY RS. 7,66,600/- RS.24,48,743/- 4 ITA NO.183/K/2012 SHRI ANAND KR. AGARWAL AY: 2008-09 FIRSTLY, IT IS TO BE MENTIONED THAT THERE IS NO SCO PE FOR ASSUMING NOTIONAL INTEREST ACCRUING ON THE THREE ITEMS I.E. ADVANCE, VAT AND EARNEST MONEY . THE ONLY ISSUE LEFT IS INTEREST ON LOAN FOR A SUM OF RS.16,31,334/- AS APPEARING IN THE FOREGOI NG STATEMENT. THE AO HAS COMPUTED NOTIONAL INTEREST PURELY ON ASSUMPTION AND THERE IS NO REFERENCE TO INTEREST FREE LOANS ADVANCED BY THE ASSESSEE AND WITHOUT GIVING A FINDING THAT T HERE IS NEXUS BETWEEN INTEREST FREE ADVANCES AND INTEREST FREE LOANS, THE AO COULD NOT MAKE ANY ADDITION. HONBLE CALCUTTA HIGH COURT IN THE CASE OF SATYA & CO. LTD. (1997) 140 CTR (CAL) 5 69 HELD THAT NO NOTIONAL INTEREST CAN BE COMPUTED ON INTEREST FREE REFUNDS, DEPOSITS OR THE AMOUNT EQUIVALENT TO INTEREST AT THE PREVAILING RATE AND DEPOSIT TO BE ADDED. IN SUCH C IRCUMSTANCES AND EVEN OTHERWISE, THE ASSESSEE HAS COMPUTED INTEREST OF RS.2,31,133/- AND INCLUDED IN THE TOTAL INCOME AS PER SCHEDULE-E OF THE AUDITED ACCOUNTS THERE IS NO SCOPE FOR ANY ADDI TION BASED ON NOTIONAL INTEREST. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) ON THI S COUNT AND HENCE, THE SAME IS CONFIRMED. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 05.04.201 3 SD/- SD/- . . . . . . . . , #! #! #! #! $'# $'# $'# $'# , (K. K. GUPTA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 0 0 0 0) )) ) DATED : 5TH APRIL, 2013 !12 $&34 $5! JD.(SR.P.S.) 5 ITA NO.183/K/2012 SHRI ANAND KR. AGARWAL AY: 2008-09 / 6 -$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT ITO, WARD-37(3), KOLKATA. 2 -.+, / RESPONDENT SHRI ANAND KUMAR AGARWAL, C/O SHREE BALAJI INFOTECH, 7, RAJ MOHAN STREET, KOLKATA-700 073. 3 . $/& ( )/ THE CIT(A), KOLKATA 4. 5. $/& / CIT KOLKATA 7!>$ -$& / DR, KOLKATA BENCHES, KOLKATA .7 -$/ TRUE COPY, /&?/ BY ORDER, # '4 /ASSTT. REGISTRAR .