Ram Lal Garg, Chandigarh V. ITO, Chandigarh

ITA 210/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9875 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Additional evidence; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 210/CHD/2016 ASSESSMENT YEAR: 2009-10 SHRI RAM LAL GARG, VS THE ITO, H.NO. 2202, SECTOR 38-C, WARD 4(1), CHANDIGARH. CHANDIGARH. PAN: AAWPG6837H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL BATRA RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 16.06.2016 DATE OF PRONOUNCEMENT : 17.06.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2 CHANDIGARH, DATED 05.01.2016 FOR ASSESSMENT YEAR 2009-10. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. GROUND NO. 1 IS GENERAL AND NEED NO ADJUDICATION. 4. ON GROUND NO. 2, ASSESSEE CHALLENGED THE DISALLOWANCE OF RS. 1,68,470/- ON ACCOUNT OF INTERE ST PAID ON BUSINESS EXPANSION. DURING THE COURSE OF EXAMINATION OF BALANCE SHEET, IT WAS FOUND THAT 2 ASSESSEE HAS LOANS AND ADVANCES (ASSETS) TO THE TUN E OF RS. 2.32 CRORES. ON GOING INTO THE DETAILS OF THE SAME, IT IS FOUND THAT ASSESSEE HAD TRANSFERRED A SUM OF RS. 1.23 CR TO M/S ROYAL PARK, BADDI IN WHICH ASSESSEE IS STATED TO BE A PARTNER. THE ASSESSEE FURNISHED COP Y OF THE ACCOUNT AND IT WAS NOTICED THAT OUT OF THE TOTA L FUNDS OF RS. 1.23 CR, THE INTEREST BEARING FUNDS ON WHICH INTEREST HAS BEEN CHARGED BY THE BANK AND DEBITED TO THE PROFIT & LOSS ACCOUNT BY ASSESSEE, H AD BEEN TRANSFERRED. THE DETAILS OF SAME IS NOTED IN PARA 3 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREFORE, PROPOSED TO DISALLOW INTEREST UNDER SECT ION 36(1)(III) OF THE ACT. THE ASSESSEE SUBMITTED THAT ASSESSEE ALONGWITH OTHER PARTNERS IS SETTING UP HOT EL AT BADDI FOR WHICH AMOUNT HAS BEEN INVESTED BY HIM AS CAPITAL. DURING THE YEAR, THERE WAS NO INCOME FROM THIS INVESTMENT. THE ASSESSING OFFICER, HOWEVER, D ID NOT ACCEPT CONTENTION OF THE ASSESSEE BECAUSE INTER EST BEARING FUNDS HAVE BEEN INVESTED BY THE ASSESSEE IN THE FIRM AND INTEREST PAID ON THE BORROWED FUNDS HA VE BEEN CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER, THEREFORE, ON PRO- RATA BASIS, DISALLOWED RS. 1,68,470/-. THE LD. CIT(APPE ALS) CONFIRMED THE ADDITION. 5. AFTER HEARING RIVAL SUBMISSIONS, I AM OF THE VIE W THAT MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF THE ASSESSING OFFICER. IT IS NOT IN DISPUTE THAT ASSES SEE 3 DIVERTED INTEREST BEARING FUNDS IN THE FIRM IN WHIC H ASSESSEE WAS A PARTNER. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO COMMERCIAL EXPEDIENC Y OF THE ASSESSEE, FUNDS HAVE BEEN DIVERTED TO THE FI RM IN WHICH ASSESSEE IS A PARTNER. THIS PLEA OF THE ASSE SSEE HAS NOT BEEN INVESTIGATED AND EXAMINED BY THE AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSE E RIGHTLY RELIED UPON RECENT DECISION OF HON'BLE SUPR EME COURT IN THE CASE OF HERO CYCLES 377 ITR 347 ON THE POINT OF COMMERCIAL EXPEDIENCY. 6. THE LD. DR ALSO ARGUED THAT THE BORROWED FUNDS WHICH HAVE BEEN INVESTED IN THE FIRM, THERE WAS NO INCOME EARNED THEREFORE, THE INTEREST SHOULD HAVE B EEN CAPITALIZED. THIS PLEA IS ALSO NOT EXAMINED BY THE ASSESSING OFFICER BECAUSE FIRM WAS AT PRE-OPERATIVE STAGE. THEREFORE, THE MATTER REQUIRES RE-CONSIDERA TION AT THE LEVEL OF THE ASSESSING OFFICER. I, ACCORDIN GLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE T HIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH DIRECTI ON TO RE-DECIDE THIS ISSUE STRICTLY IN ACCORDANCE WITH LA W BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 7. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ADDITION OF RS. 2,63,342/- ON ACCOUNT OF UNVOUCHED PURCHASE EXPENSES. THE ASSESSING OFFICER NOTED THA T ASSESSEE PRODUCED BOOKS OF ACCOUNT ALONGWITH 4 SUPPORTING VOUCHERS BUT EXPENSES MADE ON ACCOUNT OF BRICKS, MARBLE, SAND AND BAJRI IN A SUM OF RS. 2,63,342/- WERE NOT PRODUCED. THEREFORE, ADDITION WAS MADE. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION BECAUSE HE DID NOT ADMIT ADDITIONAL EVIDENCE UNDER RULE 46A OF IT RULES BECAUSE THERE WERE NO CIRCUMSTANCES EXISTING IN THE CASE OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE. 8. AFTER HEARING RIVAL CONTENTIONS, I DO NOT FIND A NY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. TH E LD. COUNSEL FOR THE ASSESSEE ADMITTED THAT NO APPLICATI ON FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF IT RULES HAVE BEEN FILED BEFORE LD. CIT(APPEALS). HE HAS MERELY CONTENDED THAT ASSESSEE IN THE WRITTEN SUBMISSION REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCE. HE HAS FILED COPIES OF VOUCHERS OF THE PURCHASES IN THE PAPER BOOK AT PAGE 4 TO 14. THESE ARE ONLY SELF MADE VOUCHERS OF THE ASSESSEE AND NO EXPLANATION HAS BEEN GIVEN BEFORE THE AUTHORITIES B ELOW AS TO HOW THESE WERE NOT PRODUCED BEFORE THEM. THEREFORE, IN THE ABSENCE OF ANY PLAUSIBLE EXPLANAT ION AND IN THE ABSENCE OF ANY APPLICATION MOVED FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE LD. CIT(APPEALS), THE LD. CIT(APPEALS) WAS JUSTIFIED IN REJECTING REQUEST OF THE ASSESSEE. IN THE ABSENCE OF ANY MATERIAL ON RECORD BEFORE THE AUTHORITIES BELOW , 5 THE ADDITION IS WHOLLY JUSTIFIED. THIS GROUND IS, ACCORDINGLY, DISMISSED. 9. ON GROUND NO.4, ASSESSEE CHALLENGED THE ADDITION OF RS. 65,660/- ON ACCOUNT OF UNDER VALUATION OF ST OCK. BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE IS IN TH E BUSINESS OF CIVIL CONSTRUCTION AND NOT MAINTAINING STOCK REGISTER. THE ASSESSING OFFICER NOTED THAT ASSESSEE PURCHASED IRON FOR RS. 1,50,000/- ON 31.03.2009. CLOSING STOCK OF IRON AND MARBLE HAS BE EN DECLARED AT RS. 84,340/-. THE ASSESSING OFFICER POINTED OUT THAT ENTIRE PURCHASE OF IRON ON 31.03.2 009 CANNOT BE CONSUMED ON THE SAME DAY AND IN THE ABSENCE OF STOCK REGISTER, VALUE OF STOCK WAS ESTIM ATED AND ADDITION OF RS. 65,660/- WAS MADE. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION BECAUSE NO SATISFACTORY EXPLANATION OF CONSUMPTION OF RAW MATE RIAL HAVE BEEN FILED. 10. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS). THE ASSESSEE HAS NOT MAINTAINED STOC K REGISTER AND NO SATISFACTORY EXPLANATION HAS BEEN G IVEN OF CONSUMPTION OF RAW MATERIAL AND STOCK. THE ASSESSEE MADE PURCHASES OF IRON ON THE CLOSING DAY OF THE FINANCIAL YEAR THEREFORE, IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL ON RECORD, AUTHORITIES BELOW W ERE 6 JUSTIFIED IN MAKING THE ABOVE ADDITION. THIS GROUN D FAILS AND IS DISMISSED. 11. GROUND NO. 5 IS NOT PRESSED AND IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 17 TH JUNE, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, 8ITAT/CHD