Kanubhai M. Patel, Vapi V. The Asstt. Commissioner of Income Tax, Circle, Vapi

ITA 2094/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2075 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 12-08-2016
• Court: TRIBUNAL

Judgement Text

SHRI KANUBHAI M PATEL V. ACIT-VAPI/I.T.A. NO.2094/AHD/2016/A.Y.:12-13 PAGE 1 OF 5 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2094/AHD/2016 / A.Y.:2012-13 SHRI KANUBHAI M. PATEL, PROP. BHARAT ACID & CHEMICAL PLOT NO. CIB/32 GIDC VAPI PAN:ACCPP 2381D V S . ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -VAPI APPELLANT /RESPONDENT /ASSESSEE BY SHRI SHREYAS S. KAPADIA, CA /REVENUE BY SHRI J. K. CHANDANI, SR. D.R. / DATE OF HEARING: 06.06.2018 /PRONOUNCEMENT ON 07.06.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VALSAD, (IN SHORT THE CIT (A)) DATED 15.06.2016 PERTAINING TO ASSESSMENT YEAR 2012-13, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -VAPI (IN SHORT THE AO) DATED 14.03.2014 UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). SHRI KANUBHAI M PATEL V. ACIT-VAPI/I.T.A. NO.2094/AHD/2016/A.Y.:12-13 PAGE 2 OF 5 2. THE SOLE GROUND STATES THAT LD. CIT (A) ERRED IN UPHOLDING ADDITION TO THE EXTENT OF RS. 2,98,580 MADE ON ACCOUNT OF NOTIONAL INTEREST ON TEMPORARY LOAN GIVEN TO THE APPELLANT`S SON BY REDUCING INTEREST CALCULATED @12% TO 9%. 3. SHORT ISSUE UNDER CONSIDERATION IS THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCES OF RS. 33,17,560 TO HIS SON SHRI NEPAL KANUBHAI PATEL, WHEREAS THE ASSESSEE HAS PAID INTEREST ON BANK LOAN @ 12%. THEREFORE, THE AO DISALLOWED NOTIONAL INTEREST @ 12% ON RS. 33,17,560 WHICH WORKED OUT TO RS. 3,98,107. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). WHEREIN IT WAS CLAIMED THAT THIS LOAN WAS GIVEN OUT OF PERSONAL FUNDS. IT WAS ALSO SUBMITTED THAT DURING PAST, THE AO HAS CALCULATED INTEREST @ 9% WHEREAS DURING THE YEAR UNDER CONSIDERATION, THE AO HAS CALCULATED INTEREST @ 12% AND THERE IS NO CHANGE IN CIRCUMSTANCES. IT WAS ALSO SUBMITTED THAT SAID LOAN WAS GIVEN OUT OF CASH CREDIT ACCOUNT MAINTAINED WITH BANK AND ON WHICH INTEREST WAS BEING PAID. SIMILAR ISSUE IN A.Y. 11-12 WAS DECIDED AGAINST THE ASSESSEE. IN VIEW OF THIS MATTER, LD. CIT (A) DIRECTED THE AO TO CALCULATE DISALLOWABLE OF NOTIONAL INTEREST @9% SHRI KANUBHAI M PATEL V. ACIT-VAPI/I.T.A. NO.2094/AHD/2016/A.Y.:12-13 PAGE 3 OF 5 INSTEAD @12% CALCULATED BY HIM AS PER LAST YEAR. THUS, ADDITION OF RS. 3,98,107 WAS REDUCED TO RS. 2,98,580. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS EARNED PROFIT OF RS. 1,11,52,675 FOR THE YEAR ENDED ON 31.03.2011 IN WHICH ADVANCE OF RS. 45.90 LAKH WAS GIVEN. THE ASSESSEE HAS FILED A CHART GIVING WORKING OF CAPITAL EMPLOYED AND ARRIVED AT AN AMOUNT OF RS. 5,07,79,986 AS OWN CAPITAL AND INTEREST-FREE FUNDS AVAILABLE FOR PERSONAL USE. THEREFORE, IT WAS CLAIMED THAT NO INTEREST WOULD BE DISALLOWED ON NOTIONAL BASIS ON LOAN OF RS. 33,17,560 GIVEN TO HIS SON. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ISSUE IS COVERED IN ITS FAVOUR BY DECISION OF HON`BLE CALCUTTA HIGH COURT IN THE CASE OF WOOL COMBERS OF INDIA LTD. CIT [1982] 134 ITR 219 (CAL). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE IN THE CASE OF ARIHANT AVENUE & CREDIT LTD. [2013] 217 TAXMAN 105 (GUJ), CIT V. RAGHUVIR SYNTHETICS LTD. [2013] 354 ITR 227 (GUJ) , AND CIT VS. RELIANCE SHRI KANUBHAI M PATEL V. ACIT-VAPI/I.T.A. NO.2094/AHD/2016/A.Y.:12-13 PAGE 4 OF 5 UTILITIES & POWER LTD. (2009)313 ITR 340 (BOM)/ 178 TAXMAN 135 (BOM). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LD. CIT (A) OBSERVED THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE SAID ADVANCE IS GIVEN OUT OF INTEREST-FREE FUNDS AVAILABLE WITH THE APPELLANT. IT IS ALSO DISCLOSED THAT THE SAID LOAN/ ADVANCE HAS BEEN GIVEN OUT OF CASH CREDIT ACCOUNT MAINTAINED WITH BANK AND ON WHICH INTEREST @12% WAS BEING PAID. A SIMILAR ISSUE ALSO AROSE IN A.Y. 11-12 IN WHICH ISSUE WAS DECIDED AGAINST THE ASSESSEE. HOWEVER, WHETHER THE ASSESSEE HAS FILED ANY APPEAL AGAINST THE SAID ORDER OF CIT (A) HAS NOT BEEN BROUGHT TO OUR KNOWLEDGE. THIS MEANS EITHER THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST SAID ORDER OR IT MIGHT HAVE BEEN DECIDED AGAINST HIM BY TRIBUNAL. IN VIEW OF FORGOING FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT CIT (A) HAS CLEARLY ESTABLISHED THAT LOAN WAS GIVEN OUT OF CASH CREDIT ACCOUNT MAINTAINED WITH BANK ON WHICH THE ASSESSEE HAS PAID INTEREST. SHRI KANUBHAI M PATEL V. ACIT-VAPI/I.T.A. NO.2094/AHD/2016/A.Y.:12-13 PAGE 5 OF 5 THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY HELD THAT THERE IS NO NEXUS BETWEEN INTEREST FREE ADVANCES AND INTEREST FREE LOANS GIVEN. THEREFORE, IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY ANOMALY AND INFIRMITY IN THE ORDER OF LD. CIT (A). THEREFORE, THE SOLE GROUNDS OF APPEAL OF THE ASSESSEE IS DISMISSED. THE CASE LAWS RELIED BY THE ASSESSEE ARE NOT RELEVANT TO THE FACTS OF THE CASE AS THERE IS DIRECT NEXUS OF CASH CREDIT ACCOUNT AND LOAN GIVEN TO RELATIVE FALLING UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. IN VIEW OF THIS MATTER, THIS GROUNDS OF APPEAL IS THEREFORE, DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2018. SD/- SD/- ( . . ) /(C.M. GARG) ( . . ) /(O.P.MEENA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER / SURAT: / DATED : 7 TH JUNE, 2018/OPM COPY SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT