The ITO, 2(1), Bhopal V. Smt. Sapna Devi Manwani, Bhopal

ITA 194/IND/2013

• Counselvise Citation: 19422714 RSA 2013
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Business expenditure
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO. 194/IND/2013 A.Y. : 2009-10 ITO, 2(2), SMT.SAPNA DEVI MANWANI, BHOPAL VS BHOPAL. APPELLANT RESPONDENT P.A.N. NO A A RPM3528N APPELLANT BY SHRI R .A.VERMA, SR. DR RESPONDENT BY SHRI SUMIT NEMA, ADV. DATE OF HEARING : 0 2 .0 9 .2015 DATE OF PRONOUNCEMENT : 30 .09.2015 -: 2: - 2 O R D E R PER GARASIA, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), RAIPUR,CAMP AT BHOPAL, DATED 30.12.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS 3,71,564/- U/S 36(1)(III) MADE B TO ON ACCOUNT OF EXPENSES OF PERSONAL NATURE CLAIMED AS BUSINESS EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 19,61,637/- U/S 40A(3) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH PAYMENT TOWARDS PURCHASES. -: 3: - 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE D ERIVES INCOME FROM BUSINESS OF SALE AND PURCHASE OF GRAINS ON WHOLESALE BASIS. IN THE YEAR UNDER CONSIDERATION, T HERE WAS INCREASE IN FIXED ASSETS, WHICH COMPRISES OF INVEST MENT IN HOUSE AND NON-BUSINESS ASSETS. THE ASSESSEE INCREAS ED THE SECURED LOAN OF RS. 62,88,601/-. THE ASSESSEE HAS D EBITED RS. 2,16,697/- UNDER THE HEAD INTEREST EXPENSES IN TH E PROFIT AND LOSS ACCOUNT AND HE HAS ALSO TAKEN THE LOAN ON INTEREST FOR PURCHASING THE HOUSE. THE AO WAS OF THE VIEW TH AT THE ASSESSEE HAS INCURRED INVESTMENT FOR ACQUIRING THE PERSONAL LOAN AND INTEREST OF RS. 3,71,594/- WAS PAID ON NO N-BUSINESS ASSETS. THEREFORE, THIS INTEREST WAS DISALLOWED BY THE ASSESSING OFFICER, BY OBSERVING AS UNDER :- S.NO. DETAILS OF INTEREST PAYMENTS AMOUNT (IN RS.) 1. BANK INTEREST PAID TO (A) JNS BANK OD ACCOUNT RS. 1,35,837/- (B) SBI RS. 19,060/- 1,54,897/- 2. INTEREST PAID TO SHRI PARSHURAM MANWANI (HUF) ON HIS OUTSTANDING OPENING BALANCE BECAUSE NO LOAN IS TAKEN FROM HIM IN THE SUBJECT YEAR. 2,16,697/- TOTAL INTEREST PAYMENTS DEBITED TO PROFIT AND LOSS ACCOUNT 3,71,594/ - -: 4: - 4 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING AS UNDER :- 8. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT AT THE END OF THE PREVIOUS YEAR, THE APPELLANT HAD INTEREST BEARING FUNDS TO THE TUNE OF RS.76.86 LACS AND INVESTMENT IN CURRENT ASSETS STOOD AT RS.L78.26 LACS WITH WHICH BORROWED FUNDS CAN BE SAID TO HAVE A REASONABLE NEXUS. FROM THE PERUSAL O F BALANCE SHEET PRODUCED BEFORE ME, I FIND THAT THE APPELLANT HAD SUFFICIENT NON INTEREST BEARING FUNDS INASMUCH AS THE APPELLANT HAD HIS OWN CAPITAL, PROF IT AND CURRENT LIABILITIES ON WHICH NO INTEREST WAS PA ID. IT IS NOT IN DISPUTE THAT THE APPELLANT WAS NOT PAY ING ANY INTEREST TO THE SUNDRY CREDITORS OR ON OTHER CURRENT LIABILITIES. I AM OF THE CONSIDERED OPINION THAT THE OVER-DRAFT FACILITY AVAILED BY THE APPELLANT HA D BEEN GRANTED TO THE APPELLANT BY THE BANK TO MEET I TS WORKING CAPITAL REQUIREMENTS. THE TERMS OF FINANCIN G GENERALLY PROVIDE A STIPULATION THAT SUCH OVER-DRAF T -: 5: - 5 FACILITY SHOULD BE UTILIZED ONLY FOR WORKING CAPITA L REQUIREMENTS AND NOT OTHERWISE. THE BANK BEING A LENDING AGENCY KEEPS AN EYE ON UTILIZATION OF SUCH WORKING CAPITAL LIMITS AND DIVERSION OF FUNDS FOR N ON BUSINESS PURPOSES. I FIND THAT THE AO DID NOT BRING ON RECORD ANY CORROBORATIVE EVIDENCE TO INDICATE TH AT THE BANK HAD TAKEN ANY ACTION AGAINST THE APPELLANT ON ACCOUNT OF UTILIZATION OF CASH CREDIT LIMIT FOR PURPOSES OTHER THAN THE WORKING CAPITAL NEEDS OF TH E BUSINESS OF THE APPELLANT. I AM IN AGREEMENT WITH T HE SUBMISSIONS OF THE APPELLANT THAT IF INTEREST IS DISALLOWED U/S 36(1)(III), THEN IN THAT CASE, DEDUC TION FOR INTEREST IS ALLOWABLE U/S 24 I.E. AS LOSS UNDER THE HEAD HOUSE PROPERTY. I DO NOT FIND FORCE IN THE SUBMISSION OF THE APPELLANT THAT THE PROFIT ELEMENT EMBEDDED IN SALES REALIZATION ALSO GETS CREDITED TO THE BANK ACCOUNT. I AM CONVINCED THAT THE APPELLANT HAD SUFFICIENT NON INTEREST BEARING FUNDS TO MAKE PAYMENT AGAINST PURCHASE OF HOUSE PROPERTY, THUS, DISALLOWANCE OF INTEREST IS NOT WARRANTED. LOOKING TO -: 6: - 6 THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. HENCE, THE DISALLOWANCE IS DELETED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE LD. SENIOR D.R. COULD NOT BRING ANY C ONTRARY TO THE FINDING OF THE LD. CIT(A). WE HAVE NO OPTION BU T TO ENDORSE THE VIEW OF THE LD. CIT(A). GROUND NO.1 OF THE REV ENUE FAILS. 6. AS REGARD THE GROUND NO.2 , SHORT FACTS ARE THAT T HE AO FOUND THAT THE ASSESSEE HAS SHOWN PURCHASE OF GO ODS FROM M/S. NIRMAL TRADERS BARESIA, BHOPAL. THE ASSESSEE H AS PURCHASED GOODS OF RS. 19,61,637/- DURING THE RELEV ANT YEAR AND ASSESSEE HAS RECEIVED ADAT OF RS. 19,815/- ONLY ON THESE PURCHASES. THE ASSESSEE DID NOT SHOW THIS CORRESPON DING ADAT SALE IN HIS PROFIT AND LOSS ACCOUNT. THE AO WANTED TO VERIFY FROM NIRMAL TRADERS WHETHER THEY HAVING BANK ACCOUN T OR NOT. THE ASSESSEE DID NOT PRODUCE THE SAME. THEREFORE, T HE AO HAS MADE THE ADDITION OF RS. 19,61,637/- U/S 40A(3) OF THE INCOME-TAX ACT, 1961. -: 7: - 7 7. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DELETED THIS ADDITION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS HELD THAT THE ASSES SEE HAS PURCHASED GOODS FROM NIRMAL TRADERS WHICH WERE SOLD DURING THE YEAR. THE ASSESSEE DID NOT MAINTAIN STOCK REGIS TER AND THE ASSESSEE HAS ONLY CREDITED OTHER COMMISSION OF RS. 19,815/-TO HER PROFIT AND LOSS ACCOUNT. THE AO HAS ISSUED SUMM ONS TO NIRMAL TRADERS AS TO VERIFY WHETHER HE HAS ASKED FO R CASH PAYMENT OTHERWISE BY THEN CHEQUE OR WHETHER THE NIR MAL TRADERS IN HIS AREA WAS HAVING BANK FACILITY OR NOT . WE FIND THAT THE LD. CIT(A) HAS NOT VERIFIED THIS FACT AND HE HAS SIMPLY ALLOWED THE CLAIM. THEREFORE, WE REVERSE THE FINDIN G OF THE LD. CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE OF A O TO DECIDE THE MATTER AFRESH AS PER LAW. GROUND NO. 2 IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. -: 8: - 8 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED :30 TH SEPTEMBER, 2015. CPU* 2.14