Appeal details
Counselvise Citation
[2014] 120 COUNSELVISE.COM (IT) 6736 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-06-2014
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
18-06-2014
Assessment Year
2009-2010
Appeal Filed On
06-11-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2209/PN/2012 (A.Y: 2009-10) KUMAR BUILDERS 10 TH FLOOR, KUMAR BUSINESS CENTRE, CTS NO.29, OPP. PUNE CENTRAL, BUND GARDEN ROAD, PUNE 411001 PAN: AACFK1478L APPELLANT VS. JT. CIT, RANGE-4, PUNE RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SMT. SUNI TA RAO DATE OF HEARING: 18.06.2014 DATE OF ORDER : 23.06.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-II, [IN SHOR T CIT(A)] PUNE, DATED 23.07.2012 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS. 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.35,07,945/- OUT OF TOTAL INTEREST EXPENDITURE OF RS.5,60,59,753/- INCURRED BY THE APPELLANT FOR THE PURPOSE OF ITS BUSINESS ON THE GROUND THAT FUNDS HA VE BEEN ADVANCED TO THE RELATED PARTIES WITHOUT ANY APPARENT BUSINESS CONSIDERATION. 2. THE AO AND CIT(A) MAY PLEASE BE DIRECTED TO DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.35,07,94 5/-. 3. THE APPELLANT CRAVES LEAVE TO ADDITION, ALTER, AMEN D OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 2 ITA NO.2209/PN/12 KUMAR BUILDERS 2. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F DEVELOPING COMMERCIAL AND RESIDENTIAL PROJECTS AND EARNS RENTA L INCOME THEREFROM. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF 2,20,72,700/- AND THE SAME HAS BEEN ASSESSED U/S. 143(3) OF THE ACT DETERMINING TOTAL INCOME AT 2,55,80,650/-. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT CHARGED INTEREST ON THE AMOUNTS ADVANCED TO M/S KUMAR BEHAR EY RATHI AND L.K. JAIN (HUF), WHICH WAS AMOUNTING TO 1,20,93,741/- AND 18,60,44,773/- RESPECTIVELY. THE ASSESSING OFFICE R FURTHER OBSERVED FROM THE BALANCE SHEET OF THE FIRM THAT A SUM OF 59.78 CRORES HAD BEEN BORROWED AND THE INTEREST COST INCU RRED OF 6.83 CRORES WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. T HE ASSESSING OFFICER SOUGHT THE EXPLANATION OF THE ASSESSEE WITH RESPECT TO THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF INTEREST ON THE AFORESAID INTEREST FREE ADVANCES TO THE RELATED PARTIES. THE ASSESSING OFFICER HAS REJECTED THE EXPLANATION OF THE ASSESSE E AND HELD THAT THE AVAILABILITY OF THE FUNDS WITH THE ASSESSEE WAS LESS THAN THE AMOUNT OF ADVANCE TO THE RELATED PARTY AND THUS INF ERRED THAT THE AMOUNT OF ADVANCE WAS NOT COVERED BY AVAILABLE FUND S WAS OF 2,92,32,876/- ON WHICH THE PROPORTIONATE INTEREST @ 12% WHICH WORKED OUT TO 35,07,945/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE, WHICH WAS CONFIRMED BY TH E CIT(A). 3. THE LEARNED AUTHORIZED REPRESENTATIVE HAS OPPOSE D THE SAME BEFORE US ON BEHALF OF ASSESSEE, INTER ALIA, S UBMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 35,07,945/- OUT OF TOTAL INTEREST EXPENDITURE OF 5,60,59,753/- INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS ON THE GROUND THAT FUNDS HAVE BEEN ADVANCED TO THE RELATED PARTIES WIT HOUT ANY APPARENT BUSINESS CONSIDERATION AND REQUESTED TO DE LETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF 35,07,945/-. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 3 ITA NO.2209/PN/12 KUMAR BUILDERS 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT ISSUE BEFORE US IS WITH REGARD TO THE DISALLOWANCE OF 35,07,945/- ON ACCOUNT OF FACT THAT THE FUNDS HAD BEEN ADVANCED TO RELATED PARTIES WITHOUT ANY AP PARENT BUSINESS CONSIDERATION. AS STATED ABOVE, THE ASSES SEE HAD ADVANCED INTEREST FREE FUNDS AMOUNTING TO 19,81,38,514/- TO RELATED PARTIES I.E. 1,20,93,741/- TO M/S KUMAR BEHERAY RATHI AND 18,60,44,773/- TO MR. L.K. JAIN (HUF). THE RELEVA NT BALANCE SHEET OF THE ASSESSEE REVEALS THAT THE TOTA L FUNDS BORROWED WAS TO THE TUNE OF 59.78 CRORES AND THE EXPENDITURE INCURRED ON ACCOUNT OF INTEREST WAS OF 6.83 CRORES. THE EXPLANATION FURNISHED BY THE ASSESSEE THAT ONE OF T HE PARTNERS OF THE ASSESSEE FIRM, M/S KUMAR HOUSING CORPORATION LT D HAD INTRODUCED 19.73 CRORES AS CAPITAL ON WHICH NO INTEREST HAD BEEN PAID AND THAT OUT OF THE UNSECURED LOANS NO IN TEREST WAS PAID ON THE LOAN AMOUNTING TO 10,36,41,901/- WAS NOT RIGHTLY ACCEPTED BY THE ASSESSING OFFICER. HE NOTED THAT T HOUGH THE FUNDS HAD BEEN UTILIZED FOR GIVING INTEREST FREE AD VANCES, YET HE FOUND THAT THE INTRODUCTION OF CAPITAL BY THE PARTN ERS WAS DONE DURING THE YEAR. IN FACT, THE INTEREST FREE ADVANC ES WERE GIVEN IN EARLIER YEARS. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THAT THE FU NDS ADVANCED WERE FOR THE PURPOSE OF APPARENT BUSINESS CONSIDERA TION. THUS, HE WORKED OUT THE AVAILABILITY OF INTEREST FREE FUN DS WITH THE ASSESSEE WHICH INCLUDED 6,52,63,773/- IN THE CAPITAL ACCOUNT AND 10,36,41,901/- OF INTEREST FREE ADVANCES, HOWEVER, THE AMOUNT OF INTEREST FREE ADVANCES TO THE RELATED PAR TIES WAS TO THE TUNE OF 19,81,38,514/-. THUS, THE ASSESSING OFFICER FOUND THAT THE DIFFERENCE BETWEEN THE AVAILABILITY OF INTEREST FREE FUNDS AND AMOUNT ADVANCED WAS OF 2,92,32,876/-. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE PROPORTIONATE AMOU NT OF INTEREST OUT OF AFORESAID AMOUNT OF 2,92,32,876/- BEING 12% WHICH 4 ITA NO.2209/PN/12 KUMAR BUILDERS WORKED OUT TO 35,07,945/-, WHICH WAS RIGHTLY CONFIRMED BY THE CIT(A). WE FIND THAT THE ASSESSEE COULD NOT GIVE A NY REASONABLE EXPLANATION FOR ALLOWING THE ABOVE SAID INTEREST EX PENSES. THE ASSESSEE COULD NOT FURNISH ANY COGENT REPLY TO ESTA BLISH ANY APPARENT BUSINESS CONSIDERATION WHICH COULD JUSTIFY HIS CLAIM. MOREOVER, THE AVAILABILITY OF FUNDS WITH THE ASSESS EE WERE LESS THAN AMOUNT ADVANCED TO RELATED PARTIES AND THUS, R IGHTLY INFERRED THAT THE AMOUNT OF ADVANCE WAS NOT COVERED BY AVAILABLE FUNDS OF 2,92,32,876/- ON WHICH PROPORTIONATE INTEREST @ 12 % WHICH WORKED OUT TO 35,07,945/- WAS RIGHTLY DISALLOWED BY HIM AND CONFIRMED. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 23 RD OF JUNE, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 23 RD JUNE, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE
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