Shri Rajan I.Jriwala, Ahmedabad V. The Jt.CIT.,Range-12, Ahmedabad

ITA 2293/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9559 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: K D SHAH
• Keywords: Set aside
• Section: 143(3); 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND N.S. SAINI, ACCOUNTANT MEMBER) ITA NO.2293/AHD/2010 [ASSTT. YEAR : 2007-2008] RAJEN I. JARIWALA 333, PRABHUDAS ESTATE OPP: SHYAM KABADI MARKET DANILIMDA, AHMEDABAD. PAN : ACUPJ 10005 E VS. JCIT, RANGE-12 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.D. SHAH REVENUE BY : SHRI R.K. DHANESTA. O R D E R BHAVNESH SAINI, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-XX, AHMEDABAD DATED 7-4-2010 FOR THE ASSESSMENT YEAR 20 07-2008 CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISAL LOWANCE OF RS.1,88,145/- PASSED UNDER SECTION 36(1)(III) OF THE INCOME TAX A CT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE AO STATED THAT THE ASSES SEE HAS DEBITED RS.6,47,954/- IN THE PROFIT AND LOSS ACCOUNT. THE INTEREST HAD B EEN PAID ON UNSECURED LOAN OF RS.77,82,625/-. IT WAS FURTHER STATED THAT THE ASS ESSEE HAD SHOWN LOANS AND ADVANCES OF RS.15,67,877/- IN THE BALANCE SHEET WIT HOUT CHARGING ANY INTEREST ON SUCH LOAN AND ADVANCES. THE AO OBSERVED THAT TH E ASSESSEE HAS MADE THE ABOVE INTEREST FREE LOANS AND ADVANCES TO VARIOUS P ERSONS ON WHICH NO INTEREST HAVE BEEN CHARGED, HOWEVER, THE ASSESSEE HAS PAID I NTEREST AT THE RATE OF 12% ON THE SECURED AND UNSECURED LOAN. THE AO ACCORDIN GLY WORKED OUT THE INTEREST OF RS.1,88,145/- AT THE RATE OF 12% ON THE ABOVE AMOUNT WHICH WAS ITA NO.2293/AHD/2010 -2- GIVEN FOR NON-BUSINESS PURPOSE AND DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. 3. IT WAS POINTED BEFORE THE LEARNED CIT(A) THAT TH E ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF CLOTH SCREEN PRINTING IN THE NAME OF M/S.KRISHNA SCREEN ART AND IN THE NAMES OF SHRI GOVARDHAN TEXTI LES, SAROJ TEXTILES AND MADHAV TEXTILES. THUS, THE ASSESSEE WAS THE PROPRI ETOR OF ALL THESE CONCERNS AND THE MAIN CONCERN ACTIVELY DOING THE BUSINESS WA S M/S.KRISHAN SCREEN ART, BUT THE REMAINING CONCERNS CONTINUED ONLY FOR THE P URPOSE OF SETTLEMENT OF ACCOUNTS. IT WAS SUBMITTED THAT THE ASSESSEE FILED A CONSOLIDATED BALANCE SHEET EXPLAINING THE ABOVE POSITION AND IT WAS ALSO EXPLA INED THAT AN AMOUNT OF RS.15,67,877/- WAS LOANS AND ADVANCES OUT OF WHICH RS.77,170/- IN RESPECT OF M/S.KRISHNA SCREEN ART, IN RESPECT OF MADHAV TEXTIL E, RS.18,48,213/- WHICH WAS HAVING CREDIT OF RS.3,66,234/- AND IN RESPECT O F SANJAY BABUBHAI PATEL RS.8,729/-. IT WAS SUBMITTED THAT THE AMOUNTS WERE CARRY FORWARD FROM THE EARLIER YEARS IN WHICH NO DISALLOWANCE HAVE BEEN MA DE IN THE EARLIER YEAR. THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. SRIDEV ENTERPRISES, 192 ITR 165 WAS RELIED UPON. THE LEA RNED CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFI RMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS CLEARLY UNJUSTIFIED. THE ASSESSEE IS P ROPRIETOR OF FOUR CONCERNS, WHICH WAS EXPLAINED BEFORE THE AUTHORITIES BELOW. THERE WAS SUBSTANTIAL DEBIT BALANCE IN THE CONCERNS OF THE ASSESSEE I.E. KRISHN A SCREEN ART AND MADHAV TEXTILE AS NOTED ABOVE. IT IS THE AMOUNT OF SELF G IVEN TO THE SELF, HOWEVER, IN THE DIFFERENT CONCERNS, BELONGED TO THE ASSESSEE. THIS FACT IS LOST SIGHT OF BY THE AUTHORITIES BELOW. THE ASSESSEE IS PROPRIETOR OF A LL THESE CONCERNS AND IF THE AMOUNTS ROTATE FROM ONE PROPRIETARY CONCERN TO ANOT HER PROPRIETARY CONCERN, THERE IS NO QUESTION OF GIVING LOANS AND ADVANCES F OR THE NON-BUSINESS PURPOSE. ON ONE HAND, THE AO FEELS THAT THE ASSESSEE SHOULD CHARGE INTEREST AND ON OTHER ITA NO.2293/AHD/2010 -3- CONCERNS OF THE ASSESSEE, THE ASSESSEE SHOULD SHOW THE SAME AS EXPENDITURE. IN SUCH SCENARIO, THE ADDITION IS MERELY UNJUSTIFIED. MOREOVER, ORDER UNDER SECTION 143(3) IN THE PRECEDING ASSESSMENT YEAR IS FILED IN THE PAPER-BOOK, WHICH WOULD SHOW THAT IN THE EARLIER YEARS, NO INTE REST HAS BEEN CHARGED ON THE SAME DEBIT BALANCE. SINCE CARRY FORWARD AMOUNT WAS CONSIDERED IN THE ASSESSMENT YEAR UNDER APPEAL, ON WHICH NO DISALLOWA NCE HAVE BEEN MADE IN THE EARLIER YEAR, THERE IS NO QUESTION OF TAKING A CONT RARY VIEW, AS SETTLED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SRIDEV ENTERPRISES (SUPRA). IN VIEW OF THE ABOVE POSITION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 5. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 13 TH OCTOBER, 2010. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 13-10-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD