BABU LAL SINGODIA, Jaipur V. ITO, Jaipur

ITA 234/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1867 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PUNAM RAI DCIT DHK
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 234/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 SH. BABU LAL SINGODIA M/S SINGODIA DISTRIBUTORS, NEAR BASANT CINEMA, MORIZA ROAD, CHOUMU, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 7(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS7678A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SHRAWAN KUMAR GUPTA (AD.) JKTLO DH VKSJ LS@ REVENUE BY : SMT. PUNAM RAI (D.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/10/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/12/2017 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 16.01.2017 OF CIT(A), JAIPUR FOR THE ASSESSMENT YEA R 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE IMPUGNED ASSESSMENT ORDER U/S 143(3) D ATED 02.01.2014 IS BAD IN LAW AND ON FACTS OF THE CASE F OR WANT OF JURISDICTION AND FOR VARIOUS OTHER REASONS AND HENC E THE SAME MAY KINDLY BE QUASHED. ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 2 2. RS 10,54/-: THE LD CIT(A) HAS GROSSLY ERRED IN L AW AS WELL AS ON THE FACTS OF THE CASE IN SUSTAINING THE DISALLOWANC E OF RS. 14,054/- ON ACCOUNT OF VEHICLE EXPENSES. HENCE THE DISALLOWA NCE SO MADE BY THE AO AND PARTLY CONFIRMED BY THE CIT(A) IS BEING ABSOLUTELY, CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE AND NOT IN CONFORMITY WITH THE LAW, HENCE THE SAME KINDLY BE D ELETED IN FULL. 3. RS. 1,53,469/-: THE LD CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOW ANCE OF RS. 1,53,469/- ON ACCOUNT OF INTEREST ON THE LOAN OF FU NDS GIVEN TO THE SISTER CONCERN. HENCE THE DISALLOWANCE SO MADE BY T HE AO AND CONFIRMED BY THE CIT(A) IS BEING ABSOLUTELY, CONTRA RY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE AND NOT IN CONFORMITY WITH THE LAW, HENCE THE SAME MAY KINDLY BE DELETED IN FU LL. 4. RS. 7,518/-: THE LD CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 7,518/- ON ACCOUNT OF COMMISSION INCOME DUE TO DIFFERENCE IN 2 6AS AND SHOWN BY THE ASSESSEE. HENCE THE DISALLOWANCE SO MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS BEING ABSOLUTELY, CONTRA RY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE AND NOT IN CONFORMITY WITH THE LAW, HENCE THE SAME MAY KINDLY BE DELETED IN FU LL. 5. THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING OF INTEREST U/S 234B,234C& 234D AS CONSEQU ENTIAL IN NATURE. THE APPELLANT TOTALLY DENIES IT LIABILITY O F CHARGING OF ANY SUCH INTEREST. HENCE THE INTEREST SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS MAY KINDLY BE DELETED I N FULL. 6. THE APPELLANT PRAYS YOUR HONORS INDULGENCE TO AD D, AMEND OR ALTER ALL OR ANY OF THE GROUNDS OF THE APPEAL ON OR BEFORE THE DATE OF HEARING. 2. AT THE TIME HEARING, THE LEARNED COUNSEL ASSESSE E AS STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS THAT GROUNDS NO. 1 AND 4 AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. DR HAS RAI SED NO OBJECTION IS ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 3 THESE GROUNDS OF THE ASSESSEES APPEAL ARE DISMISSE D AS NOT PRESSED. ACCORDINGLY THE GROUNDS NO. 1 AND 4 OF THE ASSESSEE S APPEAL ARE DISMISSED BEING NOT PRESSED. 3. GROUND NO. 2 IS REGARDING DISALLOWANCE OF VEHICL E EXPENSES. THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING/DEALERS HIP OF OSWAL SOAP, GODFREY, PHILIP AND OTHER MFG PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS DEB ITED THE EXPENSES OF RS. 1,40,542/- ON ACCOUNT OF VEHICLE RUNNING AND MA INTENANCE EXPENSES. APART FROM THESE THE OTHER EXPENSES ARE INSURANCE R S. 43,124/-, STAFF WELFARE RS. 25,505/-, SALARY EXPANSES RS. 6,60,000/ - AND GODOWN RENT RS. 60,000/- ETC. THE AO HAS FURTHER NOTED THAT NO BILL S OR SUPPORTING DOCUMENTS ARE BEING MAINTAINED BY THE ASSESSEE IN T HIS REGARD THOUGH THE EXPENSES INCURRED ARE IN CASH PAYMENT. ACCORDINGLY, THE AO ASKED THE ASSESSEE AS TO WHY THESE EXPENSES SHOULD NOT BE DIS ALLOWED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E HAS NOT SUBMITTED ANY CLARIFICATION TO SUBSTANTIATE HIS CLAIM AND ACC ORDINGLY THE AO MADE DISALLOWANCE OF RS. 90,000/-. ON APPEAL THE LD. CIT (A) DELETED THE DISALLOWANCE MADE BY THE AO IN RESPECT OF THE EXPEN SES ON ACCOUNT OF INSURANCE, STAFF WELFARE, SALARY EXPENSES AND GODOW N RENT ETC. HOWEVER, THE LD. CIT(A) HAS HELD THAT THE PERSONAL ELEMENT I N RESPECT OF VEHICLE ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 4 EXPENSES CANNOT BE RULED OUT AND ACCORDINGLY RESTRI CTED DISALLOWANCE TO 10% OF VEHICLE EXPENSES AMOUNTING TO RS. 14,054/-. 4. I HAVE HEARD THE LD. AR AS WELL AS DR AND CONSID ERED THE RELEVANT MATERIAL ON RECORD, THE ASSESSEE HAS NOT PRODUCED T HE SUPPORTING EVIDENCE IN RESPECT OF THE VEHICLE EXPENSES AND FUR THER EXPENSES WERE INCURRED IN CASH AND NO LOG BOOKS REGARDING THE USE OF THE VEHICLE WAS MAINTAINED BY THE ASSESSEE. ACCORDINGLY IN THE FACT S AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE RESTRICTED BY THE LD. CIT (A) TO 10% OF THE VEHICLE EXPENSES IS JUST AND PROPER AND DOES NOT RE QUIRE ANY INTERFERENCE. HENCE, THIS GROUND OF THE ASSESSEES APPEAL IS DISM ISSED. 5. GROUND NO. 3 IS REGARDING DISALLOWANCE OF INTERE ST ON ADVANCE GIVEN TO THE SISTER CONCERN. DURING THE COURSE OF A SSESSMENT PROCEEDING THE AO NOTED THAT THE ASSESSEE HAS CLAIMED INTEREST PAYMENT OF RS. 8,24,998/-. THIS EXPENSES WAS DEBITED ON ACCOUNT OF INTEREST PAYMENT ON CASH CREDIT LIMIT OR OVERDRAFT FROM ICICI BANK. THE AO FURTHER NOTED THAT THE ASSESSEE HAS GIVEN LOAN SISTER CONCERN M/S SUB HASH ENTERPRISES, WHICH WAS OUTSTANDING TO THE EXTENT OF RS. 5,61,0 00/- AT THE END OF THE YEAR AND NO INTEREST WAS CHARGED ON SUCH LOAN. THE AO WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND MADE DISALLOWANC E OF RS. 1,53,469/- ON ACCOUNT OF PROPORTIONATE NET INTEREST ON THE LOAN G IVEN TO THE SISTER ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 5 CONCERN. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE IS HAVING IT S OWN INTEREST FREE FUNDS OF RS. 1,12,25,617/- OUT OF WHICH RS. 21,97,5 68/- IS ASSESSEES OWN CAPITAL AND RS. 3,20,000/- INTEREST FREE LOANS AND BALANCE IS CURRENT LIABILITY AS ON 31.03.2011. THE LD. CIT(A) HAS NOT ACCEPTED THIS CONTENTION OF THE ASSESSEE AND GIVEN A FINDING THAT THE INTERE ST BEARING FUNDS FROM OVERDRAFT ACCOUNT WITH ICICI BANK HAVE BEEN UTILIZE D BY THE ASSESSEE FOR GIVING INTEREST FREE ADVANCE TO THE SISTER CONCERN. THEREFORE, THE INTEREST PAID ON THE WITHDRAWAL FROM ICICI BANK TO THE EXTEN T OF FUNDS USED FOR ADVANCING THE INTEREST FREE ADVANCE WOULD BE EXPEND ITURE NOT FOR BUSINESS PURPOSE. ACCORDINGLY, THE LD. CIT(A) HAS UPHELD THE DISALLOWANCE MADE BY THE AO ON THIS ACCOUNT. 6. BEFORE THE TRIBUNAL THE LD. AR OF THE ASSESSEE H AS SUBMITTED THAT THE AUTHORITIES BELOW HAVE IGNORED THE FACT THAT TH E ASSESSEE IS A BUSINESSMAN DEALING IN TRADING OF GENERAL ITEMS AND THERE IS SUFFICIENT FUND COMPRISING OF CAPITAL OF THE PROPRIETOR IN THE OPENING BALANCE OF RS. 19,62,915/- AND FURTHER PROFIT OF RS. 5,39,381/- HA S BEEN EARNED DURING THE YEAR UNDER CONSIDERATION FOR GIVING ADVANCE TO THE SISTER CONCERN OF RS. 5,61,000/-. THEREFORE, IT IS NOT THE CASE OF DI VERSION OF BORROWED FUNDS AS THERE IS NOTHING ON RECORD TO SHOW THAT THE BORR OWED FUND WAS USED OR ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 6 DIVERTED AS ADVANCE TO THE SISTER CONCERN. THUS, TH E LD. AR HAS SUBMITTED THAT WHEN THE ASSESSEES OWN FUND IS SUFFICIENT TO GIVE ADVANCE THEN NO DISALLOWANCE IS CALLED FOR. HE HAS RELIED UPON THE FOLLOWING DECISIONS:- MUNJAL SALES CORPORATION VS CIT 298 ITR 298 (SC) JCIT VS. BEEKAY ENGINEERING CORPORATION 325 ITR 384 CIT VS. HOTEL SAVERA 148CTR 585 (MAD) 7. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE ADVANCE WAS GIVEN FOR COMM ERCIAL EXPEDIENCY AND FURTHER THE LD. CIT(A) HAS GIVEN FINDING THAT THE A SSESSEE HAS USED THE BORROWED FUND FOR GIVING THE ADVANCE TO THE SISTER CONCERN. HE HAS RELIED UPON THE AUTHORITIES BELOW. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH THE ASSESSEE HAS AVAILED THE CASH CREDIT FACILITY AS WELL AS OVERDRAFT FACILITY FROM ICICI BANK ON WHICH INTE REST OF RS. 8,24,998/- WAS PAID DURING THE YEAR UNDER CONSIDERATION HOWEVE R, NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) HAS VERIFIED T HIS FACT THAT WHEN THE ASSESSEE IS HAVING ITS OWN SUFFICIENT FUNDS TO GIV E ADVANCE TO THE SISTER CONCERN THEN WITHOUT ESTABLISHING A DIRECT NEXUS BE TWEEN THE BORROWED FUND AND ADVANCE NO DISALLOWANCE ON ACCOUNT OF INTE REST IS CALLED FOR. IT IS NOT IN DISPUTE THAT THE ASSESSEES OWN FUND IS MORE SUFFICIENT TO MET THE ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 7 REQUIREMENT OF ADVANCE TO SISTER CONCERN. IF THE AS SESSEES CAPITAL AND PROFIT DURING THE YEAR IS TAKEN INTO CONSIDERATION THE SAME IS MORE THAN THE LOAN GIVEN TO THE SISTER CONCERN. THEREFORE, HA VING REGARD TO THE FACT THAT THE ASSESSEES OWN CAPITAL AND PROFIT DURING T HE YEAR AMOUNTING MORE THAN RS. 25,00,000/- THEN, A PRESUMPTION CAN BE RA ISED THAT THE ADVANCE GIVEN THE ASSESSEE OF RS. 5,61,000/- IS FROM ITS O WN FUND AND NOT FROM BORROWED FUND. ACCORDINGLY THE DISALLOWANCE MADE BY THE AO IS DELETED. 9. GROUND NO. 5 IS REGARDING CHARGING OF INTEREST U /S 234B, 234C & 234C WHICH IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC FINDING. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2017. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/12/2017 *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SH. BABU LAL SINGODIA M/S SINGODIA DISTRIBUTORS, NEAR BASANT CINEMA, MORIZA ROAD, CHOU MU, JAIPUR. 2. IZR;FKH @ THE RESPONDENT- THE ITO, WARD 7(3), JAIPUR. 3. VK;DJ VK;QDR @ CIT ITA 234/JP/17_ SH. BABU LAL SINGODIA VS. ITO 8 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 234/JP/17) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR