Shri Sheth Rasiklal Bhudardas, Bhavnagar V. The Income tax Officer, Ward-2(3), Bhavnagar

ITA 2203/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9916 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-09-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JHA SRDR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2203/AHD/2010 ASSESSMENT YEAR:2007-08 DATE OF HEARING:9.9.10 DRAFTED:14.9.1 0 SHETH RASISKLAL BHUDARDAS, TOWER CHOWK, BOTAD-364710 PAN NO.ABAFS3173K V/S . INCOME TAX OFFICER, VAPI WARD-2(3), BHAVNAGAR (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SURESH GANDHI, AR RESPONDENT BY:- SHRI S.K. JHA, SR-DR O R D E R THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-XX, AHMEDABAD IN APPEAL NO. CI T(A)-XX/134/09-10 DATED 05- 02-2010. THE ASSESSMENT WAS FRAMED BY ITO, WARD-2(3 ), BHAVNAGAR U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) VIDE HIS ORDER DATED 17-11-2009 FOR ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING OF DISALLOWANCE OF INTEREST ON LOAN AND ADVANCES AT RS.4,68,543/- AS THE ASSESSEE HAS DIVERTED INTEREST BEARING LOAN TO INTE REST FREE LOAN AND ADVANCES. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1.1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE NOT CONSIDERING THE IMPORTANT FACT THAT ENTIRE LOANS AND ADVANCES OF RS .40,54,500/-, ON WHICH INTEREST @ 12% HAS BEEN CALCULATED, HAVE NOT BEEN G IVEN DURING THE F.Y. 2006-07. 1.2 THE LD. CIT(A) HAS ERRED WHILE NOT CONSIDERING THE FACT THAT IN THE PRECEDING YEAR, ON THE SAME FACTS AND CIRCUMSTANCES OF THE CASE, THE THEN A.O HAS NOT DISALLOWED/ADDED THE INTEREST ON SUCH L OANS AND ADVANCES. ITA NO2203/AHD/2010 A.Y.2007-08 SHETH R BHUDARDAS V. ITO WD-2(3) BNG PAGE 2 1.3 THE LD. CIT(A) HAS ERRED WHILE NOT CONSIDERING THE IMPORTANT FACT THAT THE APPELLANT FIRM WAS ALSO HAVING INTEREST FREE FUNDS AVAILABLE AT ITS DISPOSAL TO THE TUNE OF RS.44,05,549/-. 1.4 THE LD. CIT(A) HAS ERRED WHILE NOT CONSIDERED T HE SUBMISSION OF THE APPELLANT THAT AT THE MOST INTEREST TO THE EXTENT O F THE LOANS & ADVANCES OF RS.12,10,000/- GIVEN DURING THE F.Y 2006-07 FOR THE MONTH OF MARCH, 2007 CAN BE ADDED/DISALLOWED. 1.5 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF INTEREST ON LOANS & AD VANCES AMOUNTING TO RS.4,68,543/- MADE THE A.O. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE, SHRI SURESH GANDHI STATED THAT THE ASSESSEE HAS ADVANCED THE FOLLOWING INTEREST FR EE LOANS DURING THE YEAR:- 1. MANDAKIMI SHANTILAL DESAI RS. 7,30,000 2. CHANDRAVADAN SHAH RS.12,00,000 3. RAJSAN DAIRY FOOD PVT. LTD. RS. 67,000 4. R.M. SHAH & CO. RS. 10,000 5. RAJENDRA MALOO RS. 20,000 TOTAL RS.20,27,000 HE FURTHER STATED THAT INTEREST FREE FUNDS AVAILABL E WITH THE ASSESSEE TO THE TUNE OF RS.44,05,549/- AND HE PRODUCED COPIES OF AUDITED AC COUNTS FOR THE YEAR ENDING 31- 03-2007 AND ACCORDING TO HIM, THE ASSESSEE WAS HAVI NG INTEREST FREE LOAN AND ADVANCES AT A DISPOSAL TO THE TUNE OF RS.44,05,549/ -. 4. HAVING HEARD THE RIVAL CONTENTIONS AND GOING THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE I FIND FROM THE ASSESSMEN T ORDER THAT THIS PLEA WAS TAKEN BEFORE ASSESSING OFFICER AND ASSESSING OFFICER HAS RECORDED THE FINDING AS UNDER:- IN ADDITION TO ABOVE, IT ALSO SUBMITTED THAT INTER EST FREE SOURCES OF FUNDS AVAILABLE AT THE DISPOSAL OF THE ASSESSEE FIRM HAVE TO BE TAKEN INTO CONSIDERATION WHILE LOOKING AT INTEREST FREE LOANS/ ADVANCES. FROM THE BALANCE SHEET, IT CAN BE NOTED THAT THE ASSESSEE FIRM WAS H AVING FOLLOWING SOURCES OF FUNDS WHICH ARE INTEREST FREE. 1. SHRI VALLABH GINNING & PRESSING PVT. LTD. RS.42 ,74,749/- 2. DOSHI FINSTOCK RS. 1,00,800/- 3. SHIVLAL LAXMICHAND RS. 30,000/- RS.44,05,549/- ITA NO2203/AHD/2010 A.Y.2007-08 SHETH R BHUDARDAS V. ITO WD-2(3) BNG PAGE 3 HOWEVER, ON VERIFICATION OF BALANCE SHEET, IT IS RE VEALED THAT THE UNSECURED LOAN FROM SHRI VALLABH GINNING & PRESSING PVT. LTD. AND UNSECURED LOAN FROM DOSHI FINSTOCK ARE RECEIVED IN THIS FINANCIAL YEAR ONLY. FURTHER, UNSECURED LOAN FROM SHRI SHIVLAL LAXMICHAND IS OLD ONE. IT IS ALSO VERIFIED FROM THE RECORDS THAT THE SO-CALLED SUNDRY DEPOSITORS ARE NO T ACTUALLY DEPOSITORS. BUT THEY ARE CREDITORS. I FIND THAT ONCE ASSESSING OFFICER IS OF THE VIEW T HAT THESE ARE OLD CREDITORS TO WHOM INTEREST BEING PAID BY ASSESSEE AND OUTSTANDING SIN CE MANY YEARS AND INTEREST FREE FUNDS ARE AVAILABLE WITH THE ASSESSEE, THE AO CANNO T DISALLOW THE INTEREST EXPENSES. BUT THIS FACT NEEDS VERIFICATION THAT THIS INTEREST FREE FUND OF SHRI VALLABH GINNING & PRESSING, PVT. LTD, AND DOSHI FINSTOCK ARE AVAILABL E WITH THE ASSESSEE OR NOT. IN CASE THE ASSESSEE HAS AVAILABILITY OF INTEREST FREE FUNDS TO THE EXTENT OF INTEREST FREE ADVANCES, THE ASSESSING OFFICER WILL ALLOW THE CLAI M OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 09/09/2010 SD/- (MAHAVIR SING H) (JUDICIAL MEMBER) AHMEDABAD, DATED : 09/09/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XX, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD