Asvini Foundations, CHENNAI V. ACIT Non Corporate Circle 1(1), CHENNAI

ITA 2012/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6600 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 22-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NOS. 2011 & 2012/CHNY/2018 / ASSESSMENT YEARS: 2014-15 & 2015-16 M/S. ASVINI FOUNDATIONS, C/O SREEDHAR, SURESH & RAJAGOPALAN CHARTERED ACCOUNTANTS, 3-8, GREEN HAVEN, NEW NO. 26, THIRD MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600020. [PAN:AAIFA3453H] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 1(1), CHENNAI 34. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : NONE / RESPONDENT BY : SHRI A. SUNDARAJAN, JCIT / DATE OF HEARING : 15.10.2019 /DATE OF PRONOUNCEMENT : 17.10.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 2, CHENNAI, DATED 29.05.2018 RELEVANT TO THE ASSESSMENT YEARS 2014-15 & 2015-16. THE ONLY COMMON GROUND RAISED IN BOTH THE APPEALS OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF FINANCE COST UNDER SECTION 36(I)(III) OF THE INCOME TAX ACT, 1961 [ACT IN SHORT]. I.T.A. NOS. 2011 & 2012/CHNY/18 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 28.11.2014 FOR THE ASSESSMENT YEAR 2014-15 CLAIMING A LOSS OF .64,31,271/-. SIMILARLY, THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015- 16 ADMITTING TOTAL INCOME OF .(-)1,21,70,150/-. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AGAINST STATUTORY NOTICES, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY DISALLOWING THE INTEREST EXPENDITURE OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO ITS RELATED PARTY WITHOUT CHARGING ANY INTEREST FOR BOTH THE ASSESSMENT YEARS. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE UNDER SECTION 36(I)(III) FOR BOTH THE ASSESSMENT YEARS. 3. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. AT THE REQUEST OF THE LD. AR, TWICE THE HEARING OF THE APPEALS WAS ADJOURNED. HAVING NOTED THE NEXT DATE OF HEARING BY MAKING ENDORSEMENT IN THE ORDER SHEET, WHEN THE APPEALS WERE TAKEN UP FOR HEARING ON 15.10.2019, NONE APPEARED ON BEHALF OF THE ASSESSEE OR FILED ANY ADJOURNMENT PETITION. MOREOVER, THE ASSESSEE HAS NOT FILED ANY VAKALATH/POWER OF ATTORNEY IN FAVOUR OF ANY ADVOCATE/C.A. TO REPRESENT ITS CASE BEFORE THE TRIBUNAL. UNDER THESE FACTS AND CIRCUMSTANCES, WE PROCEED TO ADJUDICATE THE ISSUE ON MERITS BASED ON THE MATERIALS AVAILABLE ON RECORD AFTER HEARING THE LD. DR. I.T.A. NOS. 2011 & 2012/CHNY/18 3 4. WE HAVE HEARD THE LD. DR, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER HAS DISALLOWED INTEREST EXPENDITURE ON PROPORTIONAL BASIS AS THE ASSESSEE HAD DIVERTED INTEREST BEARING FUNDS TO ITS RELATED PARTY M/S. ASVINI FOUNDATIONS PRIVATE LIMITED WITHOUT CHARGING ANY INTEREST THEREON. HOWEVER, IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAD SUFFICIENT FUNDS CONSISTED OF PARTNERS CAPITAL AND CURRENT ACCOUNT BALANCE OUT OF WHICH THE FUNDS WERE TRANSFERRED TO M/S. ASVINI FOUNDATIONS PRIVATE LIMITED. ON PERUSAL OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT DURING THE ASSESSMENT YEAR 2014-15, THERE WAS OPENING CREDIT BALANCE AS ON 01.04.2013 OF .1,79,44,828/- IN THE NAME OF M/S. ASVINI FOUNDATIONS PRIVATE LIMITED. FURTHER, DURING THE RELEVANT YEAR, THERE HAS BEEN TRANSFER OF HUGE CAPITAL ON REGULAR INTERVALS TO M/S. ASVINI FOUNDATIONS PRIVATE LIMITED AND THE CLOSING BALANCE AS ON 31.03.2014 STOOD AS DEBIT BALANCE OF .11,24,60,394/-. THE LD. CIT(A) FURTHER OBSERVED THAT THE TOTAL DEBIT ENTRY IN THIS ACCOUNT DURING THAT YEAR WAS 19,20,18,903/- AS AGAINST THE TOTAL CREDIT OF 7,95,58,508/-. ON FURTHER EXAMINATION OF THE LEDGER ACCOUNT OF M/S. ASVINI FOUNDATIONS PRIVATE LIMITED, THE LD. CIT(A) NOTICED THAT THE AMOUNTS TRANSFERRED TO THIS COMPANY HAD EMANATED FROM THE ASSESSEES LOAN ACCOUNT/OVERDRAFT ACCOUNT WITH KARUR VYSYA BANK AND KVB (SOD) AND THE LOAN AMOUNTS WERE INTEREST-BEARING FUNDS. I.T.A. NOS. 2011 & 2012/CHNY/18 4 4.1 FURTHER, FROM THE LEDGER ACCOUNT OF M/S. ASVINI FOUNDATIONS PRIVATE LIMITED FOR THE ASSESSMENT YEAR 201516 REFLECTING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE LD. CIT(A) HAS NOTICED THAT THERE WAS OPENING DEBIT BALANCE AS ON 01.04.2014 OF .11,24,60,394/- AND AT THE END OF THE RELEVANT FINANCIAL YEAR I.E. ON 31.03.2015, THE TOTAL DEBIT BALANCE WORKED OUT TO .15,27,86,968/- AS AGAINST THE TOTAL CREDIT OF .9,71,48,902/-. THUS, THE NET DEBIT BALANCE OUTSTANDING AS ON 31.03.2015 WAS .5,56,38,066/-. THE SOURCES OF DEBIT ENTRIES TO THIS ACCOUNT WERE AGAIN FROM THE LOAN/OVERDRAFT ACCOUNT WITH KARUR VYSYA BANK AND KVB (SOD) WHICH WERE INTEREST-BEARING FUNDS. 4.2 IN VIEW OF THE ABOVE FACTS OF THE CASE, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS DIVERTED INTEREST-BEARING FUNDS TO ITS RELATED PARTY I.E. M/S. ASVINI FOUNDATIONS PRIVATE LIMITED. FURTHER, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS NOT UTILISED THE LOAN AMOUNT RAISED FROM THE BANK FOR THE PURPOSE FOR WHICH THE SAME WAS SANCTIONED BY THE BANK. FURTHER, IT IS NOWHERE REVEALED THAT THE CAPITAL LYING IDLE WITH THE ASSESSEE WAS BEING TRANSFERRED TO M/S. ASVINI FOUNDATIONS PRIVATE LIMITED AND MOREOVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE TO SHOW THE EXISTENCE OF EXCESS CAPITAL THAT WAS TRANSFERRED TO ITS RELATED PARTY. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING LOAN AMOUNTS TO M/S. ASVINI FOUNDATIONS PRIVATE LIMITED WITHOUT I.T.A. NOS. 2011 & 2012/CHNY/18 5 CHARGING ANY INTEREST AND THEREBY THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF PROPORTIONAL INTEREST COMPONENT FOR BOTH THE ASSESSMENT YEARS, WHICH WAS RIGHTLY CONFIRMED BY THE LD. CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 17 TH OCTOBER, 2019 IN CHENNAI. SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 17.10.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.