ACIT Cir-3[1] Dhule, Dhule V. Shri Kedarnath Gangadhar Badhan, Dhule

ITA 222/PUN/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0332 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: SUNEEL GANOO
• Section: 133A; 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! ' , $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.222/PUN/2012 ' ' / ASSESSMENT YEAR : 2008-09 ASST.C OMMISSIONER OF INCOME TAX, CIRCLE-3(1), DHULE. . / APPELLANT V/S SHRI KEDARNATH GANGADHAR BADHAN, PROP. DHULE TRADER, OPP. BALAJI TEMPLE, LANE NO.4, DHULE. PAN : AAMPB2253Q. . / RESPONDENT / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : SHRI SUNEEL GANOO ( / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) I, NASHIK DT.21.11.2011 FOR THE ASSESSMENT YEAR 2008-09. / DATE OF HEARING : 14.12.2016 / DATE OF PRONOUNCEMENT: 21.12.2016 2 ITA NO.222/PUN/2012 AY.NO.2008-09 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BUSINESS OF OIL, GHEE, PLYWOOD AND KIRANA GOODS. ASSESSE E FILED HIS RETURN OF INCOME FOR A.Y. 2008-09 ON 31.03.2009 DECLARIN G TOTAL INCOME OF RS.22,21,360/-. THE CASE WAS SELECTED FOR SCRUTINY. A.O. HAS NOTED THAT NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE AND THE ASSESSEE WAS ASKED TO FILE THE DETAILS. AO HAS NOTED THAT DESPITE ISSUING NOTICES U/S 1 43(2) AND 142(1), THE ASSESSEE DID NOT RESPOND. HE THEREFORE FRAME D ASSESSMENT U/S 144 VIDE ORDER DT.13.12.2010 AND DETERM INED THE TOTAL INCOME AT RS.70,73,670/-. AGGRIEVED BY THE ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORD ER DT.21.11.2011 (IN APPEAL NO.NSK/CIT(A)-I/407/2010-11) ALLOWE D THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLO WING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN DELETING THE ADDITION OF RS.9,23,091/- MADE BY THE A.O. ON ACCOUNT OF INTEREST. 2. THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN DELETING THE ADDITION OF RS.26,05,885/- MADE BY THE A.O., ON ACCOUNT OF EXCESS STOCK. 3. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS PRAYED LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN OCCASION DEMANDS. 3 ITA NO.222/PUN/2012 AY.NO.2008-09 3. FIRST GROUND IS WITH RESPECT TO DELETION OF ADDITION OF RS.9,23,091/- ON ACCOUNT OF INTEREST PAYMENT. 4. ON PERUSING THE TRADING ACCOUNT, AO NOTICED THAT ASS ESSEE HAD CLAIMED PAYMENT OF INTEREST OF RS.13,89,831/- WHICH INCLUDED INTEREST PAYMENT OF RS.9,23,091/- PAID TO DHULE TRADERS. AO ALSO NOTICED THAT ASSESSEE HAD MADE INVEST MENT IN LAND AND BUILDING AND HAD ALSO ADVANCED INTEREST FREE LOAN S AND ADVANCES. AO WAS OF THE VIEW THAT THERE WAS NO NEED T O TAKE LOANS FROM DHULE TRADERS WHEN THE TURNOVER WAS MINUSCULE . HE NOTED THAT ASSESSEE HAS NOT JUSTIFIED THE BORROWINGS FOR THE PURPOSE OF BUSINESS. HE ACCORDINGLY DISALLOWED INTEREST PAY MENT OF RS.9,23,091/-. AGGRIEVED BY THE ORDER OF AO. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION OF RS.9,23,091/- BY HOLDING AS UNDER. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER, THE REPORT OF THE AO AND THE RIVA L SUBMISSIONS. THE A.O. HAS RAISED TWO GROUNDS FOR DISALLOWING THE INTEREST U/S. 36(1)(III). THE FIRST CONTENTION IS THAT THE LOAN HAS BEEN UTILIZED FOR N ON BUSINESS PURPOSES IN RESPECT OF THE LOANS AND ADVAN CES RS.10,60,948/-, INVESTMENT IN PURCHASE OF LAND/GODOWN IN INDUSTRIAL ESTATE RS.27,65,069/-, INVESTMENT IN BUILDING RS.8,01,343/-. THE SECOND CONTENTION IS THAT THE TURNOVER OF DHULIA TRADERS I S MEAGER I.E. ONLY RS. 85,140/-. AS REGARDS THE FIRST CONTENTION RAISED BY THE A.O., THE APPELLANT HAS CORRECTLY POINTED OUT THAT THE SAID LOANS AND ADVAN CES AND INVESTMENTS IN LAND AND BUILDING ARE FOR BUSINE SS PURPOSE ONLY. THEREFORE, THIS CONTENTION RAISED BY THE A.O. STANDS REBUTTED. THE SECOND CONTENTION OF THE A.O., THAT THE TURNOVER IS MEAGER AND HENCE DISALLOWANCE OF 4 ITA NO.222/PUN/2012 AY.NO.2008-09 INTEREST IS JUSTIFIED CANNOT BE ACCEPTED AS THE INVESTMENT HAS BEEN MADE BY THE APPELLANT OUT OF INTEREST BEARING FUNDS IN THE BUSINESS ASSETS MAINL Y IN THE EARLIER YEARS AND IN THE SAID YEARS THE TURNOVE R OF DHULIA TRADERS WAS SUBSTANTIAL. FURTHER, AS LAID DO WN THAT IN ORDER TO CLAIM DEDUCTION OF INTEREST, THE B ORROWED FUNDS SHOULD BE USED FOR BUSINESS PURPOSES ONLY AND THERE IS NO PROVISION FOR DISALLOWANCE OF INTEREST FOR THE REASON OF A MEAGER TURNOVER. THE DECISIONS RELIED O N BY THE A.O. ARE ON DISTINGUISHABLE FACTS. IN THE CASE OF MIR MOHD. ALI VS. CIT 38 ITR 413 (MAD), IT HAS BEEN HEL D THAT IN ORDER TO CLAIM DEDUCTION OF INTEREST, THE A SSESSEE HAS TO ESTABLISH THAT THE BORROWED FUNDS WERE UTILI ZED FOR THE BUSINESS PURPOSES. IN THE CASE UNDER APPEAL , THE APPELLANT HAS POINTED OUT THAT ALL THE LOANS AND ADVANCES, BUILDING AND INDUSTRIAL LAND APPEARING IN THE BALANCE SHEET ARE FOR THE PURPOSES OF BUSINESS. IN THE CASE OF CIT VS. P GANU RAO & SONS 185 ITR 324 (MAD) - IT HAS BEEN HELD THAT THE BORROWED MONEY GIVEN AS L OAN TO HUF FOR CONSTRUCTION OF HOUSE NOT FOR THE PURPOSE OF BUSINESS AND HENCE LIABLE FOR DISALLOWANCE U/S. 36(1)(III). NO SUCH FACTS EXISTED IN THE CASE OF TH E APPELLANT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFI ED IN DISALLOWING INTEREST OF RS.9,23,091/- BY APPLYING PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THE AD DITION OF RS.9,23,091/- IS, THEREFORE, BASELESS AND IS DEL ETED. THIS GROUND OF APPEAL IS ALLOWED 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. SUBMITTED THAT DESPITE VARIOUS OPPORTUNITIES, ASSESSEE DID NOT FURNISH THE REQUISITE DETAILS BEFORE THE AO AND IN SUCH CIRCUMSTANCES, AO WAS FULLY JU STIFIED IN DISALLOWING THE INTEREST PAYMENT. HE THUS, SUPPORTED T HE ORDER OF AO. LD. A.R. ON THE OTHER HAND REITERATED THE 5 ITA NO.222/PUN/2012 AY.NO.2008-09 SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND SUPPORTED T HE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THAT LOANS AND THE ADVANCES, INDUSTRIAL LAND AND BUILDING APPEARING IN THE BALANCE SHEET ARE FOR THE PURPOSE OF BUSINESS AND THAT BORROWED FUNDS W ERE USED FOR BUSINESS PURPOSES AND THEREFORE NO DISALLOWANCE OF INTE REST WAS CALLED FOR. BEFORE US, REVENUE HAS NOT CONTROVERTED THE FINDINGS OF LD. CIT(A). IN SUCH CIRCUMSTANCES, WE FIND NO REASO N TO INTERFERE WITH THE ORDER OF LD. CIT(A). HENCE, THE GROUND IS DISMISSED . 8. NEXT GROUND IS WITH RESPECT TO DELETING THE ADDITION O F RS.26,05,855/- ON ACCOUNT OF EXCESS STOCK. 9. AO NOTED THAT ACTION U/S 133A WAS CONDUCTED AT T HE BUSINESS PREMISES OF THE ASSESSEE ON 06.11.2007 AND AT THAT TIME THE ASSESSEE HAD VOLUNTARILY DECLARED ADDITIONAL AMOUNT O N ACCOUNT OF EXCESS STOCK AT RS.26,05,855/-. HE NOTED THAT THOUGH ASSESSEE HAD CREDITED EXCESS STOCK IN THE PRO FITS AND LOSS ACCOUNT BUT HAD ALSO DEBITED IT TO THE TRADING ACCOUNT, THEREBY NEUTRALIZING THE EFFECT OF ADDITIONAL INCOME CREDITED TO THE P ROFIT AND LOSS ACCOUNT. HE DID NOT AGREE WITH THE ACCOUNTIN G TREATMENT GIVEN BY ASSESSEE AND THEREFORE MADE AN ADD ITION OF RS.26,05,885/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED 6 ITA NO.222/PUN/2012 AY.NO.2008-09 THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HO LDING AS UNDER : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, TH E ASSESSMENT ORDER, THE REPORT OF THE AO AND THE RIVAL SUBMISSIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE APPELLANT HAS IN FACT OFFERED THE EXCESS STOCK FOUND IN SURVEY ACTION AS ADDITIONAL GROSS PROFIT AT RS.26,05,855/-. THIS FACT IS EVIDENT FROM THE DETAILS OF TRADING ACCOUNTS FOR PRE-SURVEY PERIOD AND POST-SURVEY PERIOD FILED BY THE APPELLANT I N RESPECT OF THE PROPRIETARY CONCERNS OF SHRI BALAJI P LY DHULE AND FIVE STAR FAMILY MALL. THE FACT THAT THE APPELLANT HAS OFFERED THE EXCESS STOCK OF RS.26,05,855/- IS EVIDENT FROM THE SUBMISSION OF THE APPELLANT REPRODUCED ABOVE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ANOTHER ADDITION OF RS.26,05,855/- ON ACCOUNT OF EXCESS STOCK. THE ADDITION OF RS.26,05,855/- IS, THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. 10. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 11. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD. A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE LD . CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, THE REMAND REPORT OF THE AO AND ASSESSEES REPLY TO THE REMAND REPORT HAS GIVEN A FIND ING THAT ASSESSEE HAD OFFERED THE EXCESS STOCK FOUND AT THE TIME OF SURVEY ACTION AS ADDITIONAL AMOUNT OF PROFIT OF RS.22,45,855/- AND THEREFORE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF AMOUN T OF 7 ITA NO.222/PUN/2012 AY.NO.2008-09 EXCESS STOCK. BEFORE US, REVENUE HAS NOT CONTROVERTED THE FINDINGS OF LD. CIT(A). IN SUCH CIRCUMSTANCES, WE FIND NO REAS ON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS, THE GROUND OF REVENUE IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 21 ST DAY OF DECEMBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE; ! DATED : 21 ST DECEMBER, 2016. YAMINI ( ) *!+, -,! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5 6. COMMISSIONER OF INCOME TAX-(APPEALS) I, NASHIK COMMISSIONER OF INCOME TAX-I, NASHIK #$% &&'(, * '(, + / DR, ITAT, A PUNE; %-. / / GUARD FILE ( / BY ORDER , //// /// / TRUE COPY // T // // TRUE COPY // //TRUE COPY// 012 &3 '4 / SR. PRIVATE SECRETARY * '( , / ITAT, PUNE