ACIT, New Delhi V. Sh. Anmol Aggarwal, Delhi

ITA 2224/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74423 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y KAKKAR
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI R. P. TOLANI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A.NO.2224/DEL/2013 ASSESSMENT YEAR : 2008-09 ACIT VS. ANMOL AGGARWAL, CIRCLE 36 (1), S-72, SUDNER BLOCK SHAKARPUR, NEW DELHI. DELHI. PAN: AAEPA3099B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. S. SINGHVI, C. A RESPONDENT BY : MS. Y. KAKKAR, DR . O R D E R PER R. P. TOLANI, JUDICIAL MEMBER THIS IS REVENUE APPEAL, FOLLOWING GROUNDS ARE RAISE D: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) HAD ERRED IN DELETING ADDITION OF RS.8,32,8 21/- DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THE ELECTRICITY EXPENSES ARE ON HIGHER SIDE AND THERE I S POSSIBILITY OF SUPPRESSION OF SALES. THE CLAIM OF ASSESSEE OF F UEL AND ELECTRICITY EXPENSES AT RS.33,21,286/- AGAINST SALE OF RS.38,10,515/- FROM NOIDA UNIT (A-63, SECTOR-5, NOI DA) IS CLEARLY ON THE HIGHER SIDE, WHEN ALL THE MANUFACTUR ING TAKES PLACE AT NOIDA ONLY. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) HAD ERRED IN DELETING ADDITION OF RS.4,17,7 80/- ON THE 2 ACCOUNT OF INTEREST DISALLOWED BY THE ASSESSING OFF ICER U/S 36(1) (III) OF THE IT ACT EVEN WHEN INTEREST FREE LOAN OF RS.32,30,000/- ADVANCE TO 6 PARTIES AS PER ORDER OF ASSESSING OFFICER AND NO COMMERCIAL EXPEDIENCY IS ESTABLISHED IN ADVANCING SUCH INTEREST FREE LOAN TO VARIOUS PARTIE S. (III) THE APPELLANT CRAVES LEAVE TO ADD, ALLOW OR A MEND ANY OR ALL THE GROUND OF APPEAL BEFORE OR DURING THE COURS E OF HEARING OF THE APPEAL. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF ICE AT NOIDA AND HEAD OFF ICE AT SHAKARPUR, DELHI. ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS. 33,31,28 6/- TOWARDS POWER AND FUEL EXPENSES, THE BILLS THEREOF HERE CALLED FOR. THE ASSESSING OFFICER FOUND THAT THE BILLS WERE NOT IN THE NAME OF ASSESSEE AND AS PER TRANSFER MEMORANDUM FILED BY THE ASSESSEE FOR FACTORY PREMIS ES WERE TRANSFERRED IN THE ASSESSEES NAME ONLY AFTER THE END OF THE FINAN CIAL YEAR. THE ASSESSING OFFICER OBSERVED THAT AT NOIDA UNIT, THE ASSESSEE H AS SHOWN SALES OF RS.38,10,515/-, WHEREAS THE ELECTRICAL EXPENDITURE HAS BEEN CLAIMED AT RS.33,31,286/-, WHICH WAS DISPROPORTIONATE AND THER E WAS A POSSIBILITY OF SUPPRESSION OF SALES QUA FOR NOIDA UNIT. THEREFORE, DISALLOWANCE OF 25% OF EXPENSES AMOUNTING TO RS.8,32,821/- WAS MADE BY THE ASSESSING OFFICER. 3. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL, WHERE IT WAS PLEADED THAT THE ICE MANUFACTURED AT NOIDA IS SOLD AT BOTH THE P LACES THAT IS FACTORY PREMISES AS WELL AS SHAKARPUR HEAD OFFICE. THE MANU FACTURING BEING AT 3 NOIDA PREMISES NATURALLY THE EXPENSES RELATING TO M ANUFACTURE OF ICE INCLUDING POWER AND FUEL EXPENSES ARE SHOWN TO BE I NCURRED IN NOIDA PREMISES ONLY. THE ASSESSING OFFICER WHILE OBSERVIN G THAT THE SALE AT NOIDA UNIT IS LESS IS COMMITTED ERROR IN IGNORING THE HEA D OFFICE SALES, WHICH ARE OUT OF THE ICE MANUFACTURED AT NOIDA ONLY. NO EVIDE NCE OF ANY SALE OUT OF THE BOOKS HAS BEEN FOUND AND A VAGUE FINDING HAS BE EN GIVEN THAT THERE IS POSSIBILITY OF SALE OUT OF THE BOOKS. 4. CIT (A) FOUND MERIT IN THE ARGUMENT OF ASSESSEE AND DELETED THE ADDITION BY FOLLOWING OBSERVATIONS: 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE. AS FAR AS THE ELECTRICITY BILLS NOT BEING IN THE NAME OF THE APPE LLANT AND BEING IN THE NAME OF SH. SHYAMKAMAL GRAPHIC LTD. IS CONCE RNED, IT IS SEEN THAT THE APPELLANT HAD FILED A COPY OF THE TRA NSFER MEMORANDUM BEFORE THE ASSESSING OFFICER TO SHOW THA T THE FACTORY PREMISES OF THE APPELLANT HAD BEEN PURCHASE D FROM SH. SHYAMKAMAL GRAPHIC LTD. IN THE NAME OF M/S BHIMESHW ARY INDUSTRIES, A UNIT OF THE APPELLANT. AS THE FACTORY PREMISES HAD NOT BEEN REGISTERED IN THE APPELLANTS NAME DURING THE PERIOD UNDER CONSIDERATION, THE ELECTRICITY BILLS CONTINUE D TO BE RECEIVED IN THE NAME OF THE PREVIOUS OWNER, I.E. SH . SHYAMKAMAL GRAPHIC LTD. COPIES OF THE ELECTRICITY B ILLS FOR THE WHOLE YEAR WERE FILED BEFORE THE ASSESSING OFFICER AND A COPY OF THE SAME WAS AGAIN PLACED ON RECORD IN THE PAPER BOOK. IN VIEW OF THE ABOVE OF THESE FACTS NO ADVERSE INFEREN CE SHOULD HAVE BEEN DRAWN AS THE APPELLANT HAD BEEN CARRYING OUT HIS MANUFACTURING ACTIVITIES FROM THE SAME PREMISES DUR ING THE YEAR UNDER CONSIDERATION AS WELL AS THE EARLIER PER IODS. 4 9. WITH REGARD TO THE ASSESSING OFFICERS OBSERVAT IONS THAT THE ELECTRICITY CHARGES WERE ON THE HIGHER SIDE, IT IS SEEN THAT THE ASSESSING OFFICER HAD COMPARED THE ELECTRICITY CHARGES WITH THE SALES OF THE NOIDA UNIT ONLY. THE APPELLANT HAD HIS MANUFACTURING FACILITIES AT NOIDA. THE SALES OF THE MANUFACTURED ICE WAS BEING CARRIED OUT BOTH FROM NO IDA AS WELL AS THE HEAD OFFICE OF DELHI. THEREFORE, WHILE CONSIDERING THE EXTENT OF THE ELECTRICITY EXPENSES THE WHOLE OF THE SALES OF THE APPELLANT BOTH AT NOIDA UNIT AS WELL AS DELHI H EAD OFFICE SHOULD HAVE BEEN TAKEN INTO ACCOUNT. AS THE ASSESSI NG OFFICER COMPARED THE ELECTRICITY EXPENSES ONLY WITH THE SAL ES OF THE NOIDA UNIT, HE THEREFORE, FORMED A WRONG IMPRESSION OF THE ELECTRICITY EXPENSES BEING ON THE HIGHER SIDE. MORE OVER, NOTHING ADVERSE HAS BEEN POINTED OUT FROM THE BILLS OF THE ELECTRICITY EXPENSES. THEREFORE, DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF POWER AND FUEL EXPENSES AM OUNTING TO RS.8,32,821/- IS DELETED BEING ARBITRARY. 5. APROPOS SECOND ISSUE, ASSESSEE CLAIMED INTEREST AND BANK CHARGES AMOUNTING TO RS.17,46,377/- ON THE BANK ACCOUNTS. T HE ASSESSING OFFICER FOUND THAT ASSESSEE HAD ADVANCES INTEREST FREE LOAN S TO RELATED PARTIES AMOUNTING TO RS.32,30,000/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE BORROWED FUNDS HAVE BEEN DIVERTED TO RELATED PARTIE S AS INTEREST FREE ADVANCES. A PROPORTIONATE DISALLOWANCE OF RS.4,17,7 80/- WAS MADE. IN FIRST APPEAL ASSESSEE CONTENDED THAT ASSESSING OFFICER HA D FAILED TO APPRECIATE ITS EXPLANATION THAT ASSESSEE APART FROM BANK LOANS HAD ALSO RAISED INTEREST FREE LOANS FROM VARIOUS OTHER PARTIES AMOUNTING TO RS.38 ,50,000/- WHOSE NAMES ARE MENTIONED IN CIT (A)S ORDER AT PARA 8. 5 6. THUS, THE ASSESSEE HAD RAISED INTEREST FREE FUND OF RS.38,50,000/-, WHEREAS IT HAD ADVANCED INTEREST FREE LOANS AMOUNTI NG TO RS.32,30,000/-. WHICH WAS LESS THAN THE INTEREST FREE FUNDS RAISED, THEREFORE, NO DISALLOWANCE WAS CALLED FOR. 7. CIT (A) FOUND MERIT IN APPEAL AND DELETED THE AD DITION BY FOLLOWING OBSERVATIONS: 13. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE. THE APP ELLANT HAS MADE INTEREST FREE ADVANCES TO VARIOUS PERSONS AMOU NTING TO RS.32,30,000/-, WHEREAS THE APPELLANT HAD RAISED IN TEREST FREE UNSECURED LOANS AMOUNTING TO RS. 38,50,000/- AS APP EARING UNDER THE HEAD UNSECURED LOANS IN THE BALANCE SHEET OF THE APPELLANT. AS THE APPELLANT HAD NOT MADE ANY INTERE ST PAYMENT ON THE UNSECURED LOANS NO DISALLOWANCE OF BANK INTE REST AND BANK CHARGES SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER BECAUSE THE INTEREST FREE FUNDS AVAILABLE WITH HIM WERE MORE THAN THE INTEREST FREE ADVANCES MADE. THEREFORE, TH E ADDITION OF RS.4,17,780/- MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DELETED. 8. AGGRIEVED REVENUE IS BEFORE US, THE LD. DEPARTME NTAL REPRESENTATIVE RELIED ON THE ORDER OF ASSESSING OFFICER AND APROPO S GROUND NO.2 RELIED ON HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF YA M RESTAURANT REPORTED IN 327 ITR 150 (DEL). 9. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND C ONTENDS THAT APROPOS THE FIRST ISSUE FACTUALLY IT HAS BEEN DEMONSTRATED THAT ASSESSING OFFICER MADE A CLEAR MISTAKE IN IGNORING THE HEAD OFFICE SALES, WHILE DISALLOWING 25% ON 6 AD-HOC ELECTRICITY EXPENSES BESIDES THERE IS NO EVI DENCE WHATSOEVER ON RECORD TO SUGGEST ANY SALE ORDER OF CIT (A) IS RELI ED ON. APROPOS SECOND ISSUE, LD. COUNSEL FOR THE ASSESSEE RELIED ON HONB LE SUPREME COURT IN THE CASE OF S.A BUILDERS REPORTED IN 288 ITR 01 AND HON BLE HIGH COURT IN THE CASES OF BHARTI TELEVENTURE REPORTED IN 331 ITR 502 FOR THE PROPOSITION THAT IN CASE WHEN ASSESSEE HAD MORE INTEREST FREE FUND A VAILABLE TO IT THEN NO DISALLOWANCE QUA THE INTEREST FREE LENDING TO ASSOC IATED CONCERN CAN BE MADE. SIMILARLY, THE BUSINESS EXPEDIENCY IS TO BE A LSO EXAMINED. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAD GON E THROUGH THE MATERIAL PLACED ON RECORD. APROPOS THE FIRST ISSUE, WE FIND THAT ASSESSING OFFICER HAS COMMITTED A MISTAKE IN ADOPTING THE SAL E OF ICE AT NOIDA FACTORY ONLY, WHEREAS THE MAJORITY OF SALES HAVE BEEN REPOR TED AT SHAKARPUR HEAD OFFICE, BESIDES THERE IS NO EVIDENCE WHAT SO EVER T O SUGGEST ANY SALE OUT OF BOOKS, MORE SO WHEN THE BOOKS OF ACCOUNT OF THE ASS ESSEE ARE NOT REJECTED. 11. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE SEE NO INFIRMITY IN THE ORDER OF CIT (A). APROPOS THE FIRST GROUND O F THE REVENUE AND THIS GROUND OF THE REVENUE IS DISMISSED. APROPOS THE SEC OND GROUND ABOUT INTEREST DISALLOWANCE, IT IS NOT BEEN DISPUTED THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS.38,50,000/- AS INTEREST FREE LOANS FRO M VARIOUS PARTIES AND THE INTEREST FREE ADVANCES HAVE BEEN GIVEN TO A LESSER EXTENT OF RS.32,30,000/-. 7 THERE IS NO ALLEGATION THAT THE LOAN BEARING FUNDS WERE DIRECTLY DIVERTED TO SISTER CONCERN. IN THESE CIRCUMSTANCES, WE SEE NO I NFIRMITY IN THE ORDER OF CIT (A) WHICH IS UPHELD. THE CASE LAWS OF YUM RESTA URANT CITED BY LD. DEPARTMENTAL REPRESENTATIVE HAS NO RELIANCE TO THE PRESENT CASE AS IT RELATES TO REIMBURSEMENT OF EXPENSES BETWEEN ASSOCIATED CON CERNS. 12. IN OUR CONSIDERED VIEW, THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF BHARTI TELEVENTURE IS APPLICABLE TO ASSESSE ES CASE AND FACTUALLY THERE BEING NO DIVERSION OF INTEREST BEARING FUNDS. THE O RDER OF CIT (A) IS UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.201 4. SD/- SD/- (T. S. KAPOOR) (R. P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST MARCH, 2014. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR, ITAT. S. SINHA