Smt. GEETA DEVI BINDAL, Indore V. The ACIT Circle 5(1), Indore

ITA 233/IND/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5719 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Notional interest

Judgement Text

SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI O.P. MEENA, AM ITA NO. 233/IND/2014 A.Y.2005-06 SMT. GEETA DEVI BINDAL INDORE PAN AEKPB 7308A ::: APPELLANT VS ACIT, CIRCLE 5(1) INDORE ::: RESPONDENT APPELLANT BY SHRI GIRISH AGRAWAL AND SHRI VIJAY BANSAL RESPONDENT BY SHRI MOHD.JAVED DATE OF HEARING 6.9.2016 DATE OF PRONOUNCEMENT 5 . 1 0 .2016 O R D E R PER SHRI D.T. GARASIA, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 28.1.2 013. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AGAINST DISALLOWING THE NOTIONAL INTEREST @ 12% ON ADVANCES GI VEN SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 2 TO MAHAVIR GLOBAL, MAHAVIR TRADERS, TRISHUL COAL SERVICES AND LINKSON MOVERS. 3. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 5 IN CASE OF Y .P. SINGHANIA, THEREFORE, THE SAME IS DISMISSED. 4. THE SHORT FACTS OF THE CASE ARE THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUN D THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO FOUR PART IES MAHAVIR GLOBAL RS. 10,06,500/-, MAHAVIR TRADERS RS. 10 LACS, TRISHUL COAL SERVICES RS. 2,50,000/- AND LINKSON MOVERS RS.3 LACS. AFTER CAREFUL EXAMINATION O F THE CASE AND TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE ASSESSEE HAS NO BUSINESS CONNECTION WITH THE ABOVE PARTIES AND INTEREST FREE LOANS HAVE BEEN GIVEN TO THE ABOVE PARTIES FOR THE PURPOSE OTHER THAN THE BUSINESS. THE ASSESSING OFFICER, THEREFORE, WORKED OUT THE NOTION AL SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 3 INTEREST @ 12% AND MADE THE ADDITION OF RS. 3,66,902/- IN THE CASE OF MAHAVIR GLOBAL, RS. 57,961/- IN THE CASE OF MAHAVEER TRADERS, RS. 30,000/- IN THE CASE OF TRISHUL COAL SERVICES AND RS.26,433/- IN THE CASE OF LINKSON MOVER S IN THE ORIGINAL ASSESSMENT ORDER WHICH WAS CONFIRMED BY T HE LEARNED CIT(A). WHEN THE MATTER WAS CARRIED TO THE TRIBUNAL, THE TRIBUNAL RESTORED THIS MATTER TO THE ASS ESSING OFFICER FOR DECIDING THE SAME. THE ASSESSING OFFICER AGAINST MADE THE SAID ADDITION AND THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. NOW THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FIRSTLY SUBM ITTED THAT THE ASSESSEE HAS NO BUSINESS CONNECTION WITH MAHAV IR GLOBAL BUT DURING THE SUBSEQUENT FINANCIAL YEAR 2005-06 BUSINESS TRANSACTION WAS ENTERED INTO AND IN THE ASSESSEES ACCOUNT THERE IS A CREDIT BALANCE OF THIS PART Y OF SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 4 RS. 4,85,975/-. THEREFORE, THE ASSESSEE HAS BUSINESS RELATIONS WITH THIS PARTY. FOR THE REMAINING THREE PART IES, ADVANCE WAS GIVEN WHICH WAS RECEIVED BACK IN THE SUBSEQUENT FINANCIAL YEAR. THEREFORE, THIS AMOUNT WAS ADVANCED OUT OF THE ASSESSEES OWN CAPITAL FUND. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED TOTAL CURRENT ASSETS AND TOTAL CURRENT LIABILITIES AND AFTER CONSIDERING THE SAME, THE NET CURRENT ASSETS WERE OF RS. 8,48,80,269/-. THE ASSESSE E HAD NO CAPITAL AVAILABLE AT RS. 1,24,21,595/- AND OUT OF THIS , THE ASSESSEE HAS GIVEN ADVANCE TO THE PARTIES. THEREFORE , IT MAY BE ALLOWED. THE LEARNED COUNSEL FOR THE ASSESSEE R ELIED UPON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAM KISHAN VERMA; 64 TAXMANN.COM 358 AND SUBMITTED THAT IF THE ASSESSEE HAD MADE INTEREST FREE ADVANCE AND WHERE THE CAPITAL OF THE ASSESSEE IS MORE THAN SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 5 THE INTEREST FREE ADVANCE MADE TO FRIENDS AND RELATIVES AND IF THE ASSESSING OFFICER WAS NOT ABLE TO PROVE, THE N EXUS BETWEEN THE INTEREST BEARING FUNDS HAVING BEEN DIVERT ED TOWARDS INTEREST FREE LOANS ADVANCES, NO PART OF INTERES T PAID ON LOANS COULD BE DISALLOWED. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE APPEAL MAY BE ALLOWED. 6. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT IN CASE OF MAHAVIR GLOBAL AND MAHAVIR TRADERS, THE ASSESSEE HAS GIVEN ADVANCE ON BEHALF OF THESE CONCERNS. THEREFOR E, THE BUSINESS PURPOSE OF THIS ADVANCE WAS NOT PROVED. IN CASE TRISHUL COAL SERVICES PVT. LTD. AND LINKSON MOVER S, THE ASSESSEE COULD NOT PROVE THE BUSINESS CONSIDERATI ON. THEREFORE, THE ORDER OF THE LEARNED CIT(A) IS TOTALL Y JUSTIFIED. SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 6 7. HAVING HEARD BOTH THE SIDES AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND FROM THE ORDER OF THE LEARNED CIT(A) THAT THE ASSESSEE HAS GIVEN INTEREST FRE E LOANS TO MAHAVIR GLOBAL COAL PVT. LTD. AND MAHAVIR TRADERS. IN RESPECT OF BOTH THESE PARTIES, THE ASSESS EE HAS CONTENDED BEFORE US AND PRODUCED THE EVIDENCE THAT WH EN THE ADVANCE WAS GIVEN TO THESE PARTIES BY THE CONCERNS OF THE ASSESSEE, THE ASSESSEE HAS NO BUSINESS TRANSACTION IN THE YEAR UNDER CONSIDERATION BUT IN THE SUBSEQUENT YEA R THE ASSESSEE HAS MADE THE BUSINESS TRANSACTION WITH THE SE PARTIES. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE HAS GIVEN ADVANCE OF RS. 4006500/- FO R BUSINESS PURPOSES AND NO FURTHER ADVANCE WAS GIVEN AND RS. 30 LACS WERE RECEIVED BACK IN THIS YEAR AND BALANCE AMOUNT OF RS. 10,06,500/- WAS ADJUSTED BY ISSUE OF I NVOICE OF FREIGHT IN THE FINANCIAL YEAR 2005-06. THE PARTY IS NOT SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 7 RELATED WITH THE ASSESSEE. THEREFORE, BOTH THESE ADVAN CES WERE GIVEN FOR BUSINESS PURPOSES. WE ARE OF THE VIEW THAT THE ASSESSEE HAS BUSINESS RELATION WITH THIS PARTY IN T HE SUBSEQUENT YEAR. THEREFORE, IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NO BUSINESS RELATION BU T IN THE SUBSEQUENT YEAR THE ASSESSEE HAS BUSINESS RELATION, THEREFORE, THERE IS NO REASON TO DISALLOW THE INTERES T. THEREFORE, WE DELETE THE SAME IN CASE OF MAHAVIR GLOBAL COAL PVT. LTD. AS SUCH, THE AUTHORITIES BELOW WERE NO T JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 3,66,092 /-. WE, THEREFORE, DELETE THE SAME. IN RESPECT OF MAHAVIR TRAD ERS, TRISHUL COAL SERVICES AND LINKSON MOVERS, THE ASSESSEE HAS GIVEN ADVANCE BUT THE BUSINESS WAS NOT MATERIALISED. THEREFORE, THE ADVANCE GIVEN TO THEM WAS RETURNED BACK BUT BEFORE US THE ASSESSEE COULD NOT PROVE THAT THE ASSESSEE HAS ANY BUSINESS RELATION WITH THIS PARTY. SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 8 THEREFORE, IF THE ASSESSEE HAS GIVEN THE ADVANCE IN HI S INDIVIDUAL CAPACITY, IT IS NOT FOR BUSINESS PURPOSES . WE ALSO RELY UPON THE FINDINGS GIVEN IN THE CASE OF Y.P.SING HANIA BY THE ITAT IN THE ASSESSEES OWN CASE FOR THE REASONS MENTIONED THEREIN WHICH READ AS UNDER :- SIMILARLY, HON'BLE CIT(A) HELD THAT THE OTHER ADVA NCES ARE APPARENTLY GIVEN FOR BUSINESS CONSIDERATION AS EMERGES FROM DOCUMENTS AND DETAILS FILED EXCEPT IN TWO CASES I.E. Y.P. SINGHANIA & HITESH BINDAL. FURTHER IT WAS HELD BY CIT(A) THAT ADVANCE TO HITESH BINDAL BE ING SON OF ASSESSEE WAS FOR NON BUSINESS PURPOSES BUT A S THE ASSESSEE HAS SUBSTANTIAL CAPITAL THE SAME HAS T O BE TREATED AS MADE OUT OF SUCH INTEREST FREE FUNDS AND ACCORDINGLY DISALLOWANCE MADE WAS DIRECTED TO BE DELETED. HOWEVER, INTEREST PAID TO Y.P. SINGHANIA W AS TREATED AS FOR NON-BUSINESS PURPOSE AND SAME WAS CONFIRMED. SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 9 AS REGARDS THE INTEREST OF RS. 6 LACS ON ADVANCES T O Y.P. SINGHANIA WAS CONFIRMED BY HON'BLE CIT(A) WHICH WAS ACCEPTED BY US AND NO FURTHER APPEAL WAS FILED THE SAME MAY BE CONTINUED TO BE ADDED TO HONOUR THE NEX T YEARS ORDER OF APPEAL AUTHORITIES. WE, THEREFORE, CONFIRM THE SAME. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 5 OCTOBER, 2016 SD/- SD/- (O.P. MEENA) (D.T. G ARASIA) ACCOUNTANTMEMBER JUDICIAL MEMB ER 5.10.2016 DN/- SMT. GEETA DEVI BINDAL ITA NO. 233/IND/2014 10