M/s Reliant Infrastructure P. Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 20/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2413 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Proportionate interest
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AMD MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 20/CHD/2012 ASSESSMENT YEAR : 2008-09 M/S RELIANT INFRASTRUCTURE P.LTD., V ADDL.CIT, SCO 50, SECTOR 17-E, RANGE-II, CHANDIGARH. CHANDIGARH. PAN: AADCR-1947F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PARIKSHIT AGGARWAL DEPARTMENT BY SHRI AKHILESH GUPTA DATE OF HEARING : 19.06.2013 DATE OF PRONOUNCEMENT : 21.6.2013 ORDER PER T.R.SOOD, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER PASSED BY THE LD. CIT(A) DATED 14.10.2011 U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING EFFECTIVE GROUNDS : 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREBY HE MADE AN ADDITION OF RS. 9,00,000/- (REDU CED TO RS. 6,10,164/- BY WORTHY CIT(A)) BY WRONGLY INVOKING THE PROVISION S OF SEC 36(L)(III) OF THE ACT ON ACCOUNT OF ADVANCE GIVEN TO M/S DEE ESS ESTATE. 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREBY HE MADE AN ADDITION OF RS. 9,00,0 00/- ( REDUCED TO RS. 6,10,164/- BY WORTHY CIT(A)) BY WRONGLY INVOKIN G THE PROVISIONS OF SEC 2 36(L)(III) OF THE ACT ON ACCOUNT OF ADVANCE GIVEN T O M/S DEE ESS ESTATE EVEN WHEN THE APPELLANT HAD SUFFICIENT INTEREST FRE E CAPITAL AND FREE RESERVES AND THE AVERAGE COST OF DEBT WAS MUCH LESS THAN APPLIED @ 12% BY LD. AO. 3.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREBY HE MADE AN ADDITION OF RS. 26,74,800/- BY W RONGLY INVOKING THE PROVISIONS OF SEC 36(1) (III) OF THE ACT ON ACCOUNT OF ADVANCE GIVEN FOR ACQUISITION OF STOCK IN TRADE. 3.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES A ND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREBY HE MADE AN ADDITION OF RS. 26,74,800/- BY W RONGLY INVOKING THE PROVISIONS OF SEC 36(1) (III) OF THE ACT ON ACCOUNT OF ADVANCE GIVEN FOR ACQUISITION OF STOCK IN TRADE EVEN WHEN THE APPELLA NT HAD SUFFICIENT INTEREST FREE CAPITAL AND FREE RESERVES AND THE AVERAGE COST OF DEBT WAS MUCH LESS THAN APPLIED @ 12% BY LD. AO. GROUND NO. 2 & 2.1 3. AFTER HEARING BOTH THE PARTIES, WE FIND DURING ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD MADE CERTAIN ADVANCES TO OTHER SISTER CONCERNS BUT NO IN TEREST HAS BEEN CHARGED AS PER THE LIST BELOW : S. NO. NAME OF THE CONCERNS AMOUNT OF ADVANCE AS ON 31.03.2008 I HARVANEET MALHOTRA 1,00,000/- 2 SANTOSH MALHOTRA 2,00,000/- 3 RELIANT MEGASTRUCFURE L 4,70,000/- 4 CHAWLA FILLING STATION | 29,301/- 5 PETRO & AGRO WAYS 25,82,715/- 6 C GEMS & JEWELS P LTD. 2,85,129/- 7 RELIANT POWER PVT. LTD. 63,587/- 8. DEE ESS ESTATE 75,00,000/- TOTAL ADVANCES 1,12,30,732/- INTEREST TO BE DISALLOWED @12% 13,47,688/- 3 4. THE AO, IN VIEW OF THE DECISION OF HON'BLE PUNJA B & HARYANA HIGH COURT IN CASE OF ABHISHEK INDUSTRIES V CIT 286 ITR 1 (P&H) AS WELL AS SECTION 36(1)(III) OF TH E ACT DISALLOWED THE PROPORTIONATE INTEREST. 5. ON APPEAL LD. CIT(APPEALS) CONFIRMED THE DISALLO WANCE. 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ASSESSEE HAS ACCEPTED ADDITION IN RESPECT OF ITEM N O.1 TO 7 AND ACCORDINGLY THIS MATTER WAS NOT CHALLENGED BEFO RE THE CIT(APPEALS). HOWEVER, AS FAR AS ADVANCE OF RS.75, 00,000/- WAS CONCERNED, THE SAME WAS GIVEN FOR STARTING AN O FFICE IN A BUSINESS COMPLEX AND THEREFORE, ADVANCE WAS PAID FOR BUSINESS PURPOSE. 7. ON THE OTHER HAND, LD. DR REFERRED TO PARA 3.3.2 OF THE ORDER OF THE CIT(APPEALS) AND POINTED OUT THAT ASSE SSEE HAD ADMITTED VIDE LETTER DATED 26.11.2010 THAT ADVANCES WERE NOT FOR BUSINESS PURPOSES. HE STRONGLY SUPPORTED T HE ORDER OF CIT(APPEALS). IN THE REJOINDER, LD. COUNSEL REI TERATED THAT ONLY 7 ITEMS OF ADVANCES I.E. FROM S.NO. 1 TO 7 OF THE TABLE GIVEN BY THE AO WERE ADMITTED AND EVEN ADDITION WAS ACCEPTED BY THE ASSESSEE. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, WE FIND THA T ASSESSMENT ORDER DOES NOT SHOW WHETHER ANY DETAILS WERE CALLED IN RESPECT OF THIS DISALLOWANCE. EVEN THE FI RST APPELLATE AUTHORITY SEEMS TO HAVE NOT CONSIDERED AL L THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. THEREF ORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. 4 CIT(APPEALS) AND REMIT THE SAME BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY WHETHER THE ADVANCES WERE GIV EN FOR BUSINESS PURPOSE? WHAT WAS THE LITIGATION? ONLY A FTER VERIFICATION OF THESE ISSUES, THE ISSUE IN HAND SHO ULD BE DECIDED IN ACCORDANCE WITH LAW. GROUND NO. 3 & 3.1 9. THIS GROUND HAS BEEN CHALLENGED ON ACCOUNT OF DISALLOWANCE OF INTEREST ON A SUM OF RS.2,22,90,000 /- FOR LAND AT SANTE MAJRA. THIS DISALLOWANCE HAS ALSO BE EN MADE ON THE BASIS OF THE DECISION OF HON'BLE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPR A). THIS ADDITION HAS BEEN CONFIRMED BY LD. CIT(APPEALS) BY OBSERVING THAT ADVANCE WAS TOWARDS CAPITAL WORK IN PROGRESS. 10. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT ADVANCE WAS FOR PURCHASE OF LAND AND CONSTRUCTION A CTIVITY WHICH HAS BEEN TREATED AS STOCK-IN-TRADE BY THE ASS ESSEE. 11. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER O F LD. CIT(APPEALS) AND SUBMITTED THAT SINCE SALE DEED WAS NOT REGISTERED IN THE NAME OF ASSESSEE, THEREFORE, IT C OULD NOT BE SAID THAT ADVANCE WAS FOR THE PURPOSE OF BUSINES S. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT ASSESSMENT ORDER DOES NOT MENTION ANY DETAILS REGAR DING WHAT ENQUIRIES WERE MADE AND WHAT WAS THE SUBMISSIO N OF THE ASSESSEE. THE ADDITION HAS BEEN CONFIRMED BY L D. CIT(APPEALS) BY OBSERVING THAT PAYMENT WAS MADE FOR 5 PURCHASE OF LAND WHICH HAS NOT BEEN REGISTERED IN T HE NAME OF ASSESSEE. AS POINTED OUT EARLIER THAT SUBMISSIO N OF LD. COUNSEL WAS THAT THERE WAS LITIGATION IN RESPECT OF LAND, HAS NOT BEEN CONSIDERED. FURTHER, THE ADDITION UNDER P ROVISO TO SECTION 36(1)(III) OF THE ACT CAN BE MADE ONLY IF A DVANCE HAS BEEN MADE TOWARDS PURCHASE OF CAPITAL ASSET AND NOT IN THE CASES WHERE ADVANCE HAS BEEN GIVEN FOR ACQUIRING ST OCK-IN- TRADE. THEREFORE, WE SET ASIDE THE ORDER OF LD. CI T(APPEALS) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO EXAMINE WHETHER ADVANCE WAS GIVEN FOR THE PURPOS E OF LAND WHICH WAS ACQUIRED AS CAPITAL ASSET OR STOCK-I N-TRADE. HE SHOULD ALSO EXAMINE THE ISSUE OF LITIGATION BECA USE OF WHICH LAND WAS NOT REGISTERED IN THE NAME OF ASSESS EE. THE MATTER SHOULD BE DECIDED IN ACCORDANCE WITH LAW AFT ER EXAMINING THESE ISSUES. 13. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE,2013. SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST JUNE,2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH