Dagina, Palanpur V. The ITO, Ward-1, Palanpur

ITA 23/AHD/2020

AI Insights

The case involves Dagina, a trader in gold jewelry and diamonds, who appealed against the order of the CIT(A) which confirmed the addition of notional interest on loans and interest-free advances. The assessee had filed a return declaring a total income of Rs. 1,98,880 for the assessment year 2016-17, which was scrutinized under Sections 143(1) and 143(2) of the Income Tax Act, 1961. The Assessing Officer made several disallowances, including a significant one related to notional interest on advances. The CIT(A) partly allowed the appeal, but the Tribunal found merit in the assessee's arguments and reversed the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299961 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-01-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 02-01-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Notional interest
• Section: 142(1); 143(2); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . No .2 3/ A h d / 2 02 0 ( A s se ss m e nt Y e a r : 20 16- 17 ) Da gin a 14, W hi te H ou se , P a la c e R oa d, TA : P al a n pu r, P ala np u r V s . I T O War d - 1 , Pa l an p u r [ P AN N o. A A BF D5 04 8 E ] (Appellant) .. (Respondent) Appellant by : None Respondent by: Shri Ramesh Kumar, JCIT D a t e of H ea r i ng 31.01.2023 D a t e of P r o no u n ce me nt 10.02.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-4, Ahmedabad on 22.10.2019 for A.Y. 2016-17. 2. The grounds of appeal raised by the assessee are as under: “1. The Hon’ble CIT(A) has erred in point of law and on fact in confirming addition of notional interest of Rs. 6,63,000 @ 13% on Loans and interest free Advances of Rs. 51,00,000. 2. The appellant craves liberty to add, amend, alter, edit, delete, modify or change all or any of the ground of the appeal on or before the date of hearing of the appeal.” 3. The assessee carries on the business of trading in Gold Jewellery, Diamond, Fine Gold etc. The return of income was filed on 17.10.2018 declaring total income at Rs. 1,98,880/- alongiwth computation of income, Profit & Loss Account, Balance Sheet alongwith tax audit report under Section 44 AB of the Income Tax Act, 1961. The return was proceeded under Section 143(1) of the Act and the case was selected for scrutiny and notice under Section 143(2) was issued on 21.09.2017 which was served on the assessee. Thereafter, notice under Section 142(1) dated 10.01.2018 alognwith detail ITA No. 23/Ahd/2020 Dagina vs. ITO Asst.Year–2016-17 - 2 - questionnaire was issued and served on the assessee. In response to the notices the Authorized Representative of the assessee filed details from time to time. The Assessing Officer made disallowance of Rs. 5,000/- in respect of personal expenditure, disallowance of Rs. 21,4000/- in respect of gift article expenses, disallowance of Rs. 15,000/- in respect of donation expenses, disallowance of Rs. 2,954/- in respect of interest on delayed payment of VAT and disallowance of Rs. 12,66,032/- in respect of interest expenses against which bank interest income of Rs. 31,059/- was shown but the amount of Rs. 12,66,032/- was related to notional interest at 13% on the advance taken by the assessee. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. There is a delay of 10 days in filing the present appeal for which the assessee has filed affidavit as well as condonation of delay application explaining the delay. The delay appears to be genuine and hence the same is allowed. 6. At the time of hearing none appeared on behalf of the assessee despite giving the notice one Chouhan D.R. has received the notice on 12.12.2022 and the acknowledgement card is there on record. Therefore, we are proceeding on the basis of the submission made by the assessee before the CIT(A). 7. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). 8. Heard Ld. D.R. and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically given the finding that the sale figure given by the assessee and the related documents are ITA No. 23/Ahd/2020 Dagina vs. ITO Asst.Year–2016-17 - 3 - genuine and as the purchases are supposed to happen, in turn, the same was taken on record before the CIT(A). The CIT(A) observed that the assessee had no explanation for interest free loan of Rs. 51,00,000/- to various persons while incurring high interest cost for loans taken from the banks. But for that the assessee has given the explanation that this notional interest on the higher side is in respect of the business exigencies and therefore, the interest of 13% cannot be doubted. The assessee given the plausible explanation during the assessment order as well as before the CIT(A) which can be seen from the Annexure-I produced by the assessee and therefore, confirming the addition to the extent of 6,63,000/- by the CIT(A) was not justifiable and hence the appeal of the assessee is allowed. 9. In result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 10/02/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 10/02/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad