LATE SHRI GURDIAL KAWATRA THROUGH SHRIMATI SANTOSH KAWATRA, NAWANSHAHAR V. INCOME TAX OFFICER, NAWANSHAHAR

ITA 220/ASR/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4031 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2018
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Keywords: Principle of natural justice
• Section: 207

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 220/Asr/2018 Assessment Year: 2009-10 Late Sh. Gurdial Kawatra, Through Smt. Santosh Kawatra L/H Prop. M/s Gurdial General Store Main Bazar Rahon Distt. Nawanshahr Doaba [PAN: AAWPK 0542R] Vs. Income Tax Officer, Nawanshahr (Appellant) (Respondent) Appellant by : Sh. Rakesh Joshi, Adv. Respondent by: Sh. Satbir Singh, Sr. DR Date of Hearing: 23.02.2022 Date of Pronouncement: 25.04.2022 ORDER Per Anikesh Banerjee, JM: The instant appeal was filed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-1, Jalandhar [in brevity the CIT(A)], bearing Appeal No. 421/11-12/CIT(A)-1/JAL dated 03.01.2018 u/s 250(6) of the Income Tax Act, 1961 [in brevity the Act], in respect of Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal which is as under: “1. That the order of the Ld. Commissioner of Income Tax (Appeals)-1, Jal is against law & facts of the case. ITA No. 220/Asr/2018 Gurdial Kawatra v. ITO 2 2. That the Ld. Commissioner of Income Tax (Appeals)-1, Jal, has erred in law and facts of the case in conforming the addition of Rs. 1,14,890/- = on account of interest of advance u/s 36(iii) of the IT Act, 1961. 3. That the Ld. Commissioner of Income Tax (Appeals)-1, Jal, has further also erred in law and facts of the case in conforming the addition of Rs.3,79,669/- = on account of estimated monthly stock statement furnished to the Bank. 4. That the Ld. Commissioner of Income Tax (Appeals)-1, Jal. Further also erred in law & facts of the case in violation of the principles of Natural Justice. 5. That the impugned order under appeal is arbitrary and contrary to Law & facts of the case, hence deserves to be cancelled.” 3. Brief fact of the case is that the assessee running his business with some secured loan and he had interest free funds. The assessee paid some advance during the financial year 08-09 an amount of Rs. 8 lacs. Accordingly, the ld. AO disallowed the interest u/s 36(1)(iii) of the total amount of Rs.,1,14,890/-. The ld. Assessing Officer (in brevity the AO) collected some information u/s 133(6) of the Act from Punjab National Bank, Rahon regarding stock statement furnished by the assessee to bank for raising loans. In the stock statement, closing stock for the month of February, 2009 was shown at Rs.29,45,000/- whereas per monthly trading account furnished during the course of assessment proceedings, figure of closing stock worked out at Rs.25,65,331/-. Hence, there was a difference Rs. 3,79,669/-. The difference of the closing stock was added back with the total income of the assessee. The assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) uphold the order of the ld. AO. 4. The aggrieved assessee filed an appeal before us. ITA No. 220/Asr/2018 Gurdial Kawatra v. ITO 3 5. The ld. counsel of the assessee argued that the assessee has own capital amount of Rs.8,39,3,788/- which is purely a interest free funds. Another hand they made the advance for some business expediency amount of Rs.8 lacs. So the entire investment from its interest free funds. Accordingly, the addition u/s 36(1)(iii) is bad in law. 6. On the other hand, the ld. DR submitted that the assessee has invested in fixed assets and other different loans and advance. So, this particular amount is not be to ascertain whether it is actually interest free funds are not. 7. The ld. counsel of the assessee further argued on the issue of the difference of closing stock which was added back by the ld. AO an amount of Rs. 3,79,669/-. As per the ld. counsel of the assessee, these difference is nothing but a normal stock statement filed by the assessee for enhancement of his loans for smooth running of the business. The counsel of the assessee submitted a paper book dated 22.12.2021 and referred the judgments of the Hon’ble Supreme Court in the case of Manjul Sales Corporation v. CIT, 298 ITR 298 (SC), in the case of S.A. Builders Ltd. v. CIT(A) 288 ITR 001 (SC), judgments of Hon’ble Punjab & Haryana High Court in the case of CIT(Central) Gurgaon v. Sheena Exports 207 Taxman 75 [2012] (P&H). As per the judgment of the Hon’ble Punjab High Court, it is mentioned that the ld. Assessing Officer made an addition on account of difference in value of stock, as per the stock statement submitted to the bank and closing stock of monthly trading account. It is found that the assessee maintained details of stocks for its consumptions, production and closing balance. Accounts had been maintained day to day basis. The ld. AO did not point out any discrepancies in books with reference to purchase and closing stock. Whether since the value furnished to bank is without any details or any verification by bank. This ITA No. 220/Asr/2018 Gurdial Kawatra v. ITO 4 would not constitute basis to make addition in absence of other evidence to contrary. 8. The ld. DR vehemently argued and placed the order of the Hon’ble Kolkata High Court in the case of Binod Kumar Agarwal v. CIT, W.B.-XIX 94 taxmann.com 422 (Cal). The ld. DR explained the judgment of the Punjab & Haryana High Court. As per this order, the assessee produced details of stock statement purchase, sale and closing stock and also day to day stock. But in case the assessee only placed the stock statement in bank and the difference of the monthly closing stock which the bank was not duly verified. The ld. AO rightly added the amount. So the addition must be sustained. 9. We heard both the parties & considered the documents available in records. As per the assessee, the amount was invested from interest free funds but the counsel of the assessee did not produce in cash flow statement before us. So in this point it is not possible for us to verify the utilization of funds whether it is interest free or its interest added funds. Considering this, the matter is setting aside to the ld. AO for further verification related utilization of the funds of the assessee related to disallowance of interest u/s 36(1)(iii) of the Act. 9.1. In the next ground, the addition of the stock amount of Rs.3,79,669/- which was difference in the stock statement produced before bank and the monthly stock statement of the assessee. We are here relying on the judgment of the jurisdiction high court i.e. Punhjab & Haryana High Court, supra. As per essence of judgment of Hon’able jurisdictional court, supra, the assessee is allowed to get reasonable opportunity to substantiate his claim related difference in stock. Accordingly, the matter is setting aside before the ld. AO for further verification of the said stock by ITA No. 220/Asr/2018 Gurdial Kawatra v. ITO 5 considering the books of account of the assessee. The reasonable opportunity should be given to assessee for substantiate his claim. 10. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on 25.04.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member Date: 25.04.2022 *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order