The ACIT,(OSD) Circle-9, Ahmedabad V. M/s. N.G. Corporation, Ahmedabad

ITA 2411/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89692 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGHSR
• Assessee Lawyers: S N DIVATIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND S.S. GODARA JUDICIAL MEMBER I.T.A. NO. 2411/AHD/2010 (ASS TT. YEAR 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, (OSD), CIRCLE-9, AHMEDABAD. PAN AACFN 5397 D VS M/S. N.G. CORPORATION 10 TH FLOOR, ASTRON TECH PARK, S.G. HIGHWAY, AHMEDABAD. (APPELLANT) (RESPONDENT) BY REVENUE SHRI V.K. SINGH,SR.D.R. BY ASSESSEE SHRI S.N.DIVATIA, A.R. / DATE OF HEARING : 22-06-2015 / DATE OF PRONOUNCEMENT: 25/06/2015 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT (A)- XV, AHMEDABAD DATED 1-2-2010 FOR ASSESSMENT YEAR 20 07-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF ORGANIZER AND DEVELOPMENT OF REAL ESTAT E PROJECTS. THE ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 2 ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2007-0 8 ON 29-10-2007 DECLARING TOTAL INCOME OF RS.47,44,290/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.1 43 (3) OF THE ACT VIDE ORDER DATED 24-12-2009 AND THE TOTAL INCOME WA S DETERMINED AT RS.1,45,90,590/-. AGGRIEVED BY THE ORDER OF A.O., A SSESSEE CARRIED THE MATTER BEFORE CIT (A) WHO VIDE ORDER DATED 18-5-201 0 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY TH E AFORESAID ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. (1) THE LD. CIT (A)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.15,04,001/- MA DE BY THE ASSESSING OFFICER U/S. 41(1) AS CESSATION OF LIABIL ITY. (2) THE LD. CIT (A)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.82,42,294/- MA DE BY THE ASSESSING OFFICER AS ESTIMATED INTEREST ON DIVERSIO N OF FUNDS. 4. GROUNDNO.1 IS WITH RESPECT TO THE DELETION OF AD DITION MADE U/S. 41(1). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT UNDER THE HEADING OF LOANS AND ADVANCES THE ASSESSEE WAS SHOWING RS.15,04,001/- AGAINST ASWAMEGH MEDOWS BOOK ING. THE ASSESSEE WAS ASKED TO GIVE THE DETAILS OF THE SAME AND ALSO TO EXPLAIN AS TO HOW THE BALANCES WERE OUTSTANDING FROM A SCHE ME THAT WAS CANCELLED LONG BACK. IN RESPONSE TO WHICH THE ASSE SSEE FILED THE NAMES OF THE PERSONS BUT DID NOT FURNISH THE ADDRESS OF T HE PARTIES, CONFIRMATIONS ETC. THE A.O. NOTED THAT IT WAS 15 YE ARS SINCE THE MONEY WAS PAYABLE AND SINCE THE PARTIES WERE NOT INSISTIN G FOR PAYMENT AND THE ASSESSEE ALSO HAD NOT MADE ANY PAYMENT, THE LIA BILITY HAS CEASED TO EXIST AND THEREFORE HE CONSIDERED RS.15,04,001/- AS INCOME OF THE ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 3 ASSESSEE. AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A) WHO AFTER CON SIDERING THE SUBMISSIONS DELETED THE ADDITION BY HOLDING AS UNDE R :- 7. DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. AR INFORMED THAT THE NAMES AND ADDRESSES OF PERSONS WH O HAD MADE A BOOKING WITH THE APPELLANT BUT THE SCHEME GOT CAN CELLED WERE FURNISHED TO THE A.O. VIDE LETTER DATED 23-11-2009. COPY OF THIS LETTER WITH ITS ENCLOSURES WAS SUBMITTED. THE RELEV ANT ENCLOSURE SHOWING THE NAMES AND ADDRESSES IS ENCLOSED AS ANN EXURE-1 OF THIS ORDER. IT WAS ARGUED BY THE AR THAT RS.15,04,001 WAS NOT C LAIMED AS DEDUCTION OR EXPENSE IN THE RETURN OF ANY EARLIER Y EAR AND FOR MAKING ADDITION U/S. 41(1) THAT WAS MANDATORY. HON BLE ITAT BENCH B AHMEDABAD DECISION DATED 30-10-2009 IN THE CASE OF GOVINDBAI C. PATEL VS. DCIT IN ITA NO.1675/AHD/2009 WAS CITED IN SUPPORT WHEREIN IT HAS BEEN HELD THAT WHERE THE ASS ESSEE HAS INCURRED A TRADING LIABILITY AND THIS LIABILITY HAS BEEN ALLOWED AS A DEDUCTION IN EARLIER YEAR AND SOMETHING HAS LATER O N BEEN RECOVERED IN RESPECT OF SUCH LIABILITY OR SUCH LIAB ILITY HAS EITHER BEEN REMITTED OR HAS CEASED TO EXIST THEN SECTION 4 1(1) COMES INTO OPERATION. HONBLE ITAT UPHELD THE DELETION OF ADDITION U/S. 41(1) BY CIT (A) ON THE GROUND THAT ONLY THAT LIABI LITY CAN BE ADDED OR TAXED WHICH HAS CEASED BUT WHICH HAS BEEN ALLOWED AS A DEDUCTION IN ANY EARLIER YEAR. 8. AFTER GOING THROUGH RIVAL SUBMISSIONS THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.15,04,001 MADE U/S. 41(1) BECAUSE THE ISSUE IS COVERED BY HONBLE ITAT BENCH B AHMEDABAD DECISION IN THE CASE OF GOVINDBHAI C. PATEL MENTIONED IN THE PR ECEDING PARAGRAPH. HOWEVER, THE ADDITION OF RS.1,00,000/- I S UPHELD AS IT WAS CONFIRMED DURING THE APPELLATE PROCEEDINGS BY T HE LD. AR THAT DEDUCTION OF THIS AMOUNT ON ACCOUNT OF PURCHAS E OF ESCALATORS HAD BEEN TAKEN IN EARLIER YEARS AND THE APPELLANT WAS DISPUTING THE PAYMENT TO BHARAT BIJLEE BUT NO PROOF S COULD BE SUBMITTED EVEN DURING THE APPELLATE PROCEEDINGS. 6. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT (A) THE REVENUE IS NOW IN APPEAL BEFORE US. ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 4 7. BEFORE US THE LD. D.R. SUPPORTED THE ORDER OF TH E A.O. ON THE OTHER HAND, THE LD.AR REITERATED THE SUBMISSIONS MA DE BEFORE THE A.O. AND THE CIT (A) ALSO PLACED THE RELIANCE ON THE ORD ER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MIRAA PROCESSORS PVT. LTD., (2012) 22 TAXMANN.COM 120 (GUJ) AND THE DECISION IN THE CASE OF CIT VS. NITIN S. GARG (2012) TAXMANN.COM 59 (GUJ.) AND THUS SUPPORTE D THE ORDER OF THE CIT (A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT GROUN D IS WITH RESPECT TO ADDITION U/S. 41(1) OF THE ACT. WE FIND THAT THE CI T (A) WHILE DELETING THE ADDITION HAS NOTED THAT THE ISSUE IN THE PRESEN T CASE WAS COVERED BY THE DECISION OF AHMEDABAD BENCH TRIBUNAL IN THE CASE OF SHRI GOVINDBHAI C. PATEL VS. DCIT IN ITA NO.1675/AHD./20 09 FOR ASSESSMENT YEAR 2005-06 ORDER DATED 30-10-2009. BEFORE US THE REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPOR T NOR COULD POINT OUT ANY FALLACY IN THE ORDER OF CIT (A). WE THEREFORE F IND NO REASON TO INTERFERE WITH THE ORDER OF CIT (A). THUS THIS GRO UND OF THE REVENUE IS DISMISSED. 9. GROUND NO.2 IS WITH RESPECT TO THE ADDITION ON A CCOUNT OF INTEREST. 10. ASSESSING OFFICER ON PERUSING THE BALANCE SHEET NOTICED THAT THE UNSECURED LOAN RECEIVED BY THE ASSESSEE WAS DIVERTE D FOR THE PERSONAL USE OF THE PARTNERS BY ALLOWING THEM TO WITHDRAW TH E CAPITAL FROM THE FIRM. HE ALSO NOTICED THAT ASSESSEE HAS INCURRED IN TEREST CHARGES OF RS.15,64,570/- AS AGAINST WHICH THE INTEREST THAT W AS CHARGED TO PARTNERS WORKED OUT TO 2.4% AS AGAINST 9% TO 24% PA ID BY THE ASSESSEE ON SOME OF THE LOANS TAKEN BY IT. HE WAS O F THE VIEW THAT HAD THE FUNDS BEEN DEPOSITED WITH BANK THE ASSESSEE COU LD HAVE EARNED INTEREST AT 12% AND BY ADVANCING AMOUNT TO THE PARNERS THERE WAS L OSS ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 5 TO ASSESSEE. HE THEREAFTER, WORKED OUT THE INTEREST ON THE MONTHLY BALANCES OF THE PARTNERS, BEING THE INTEREST THAT C OULD HAVE EARNED BY THE ASSESSEE, AND ADDED RS.82,42,294/- TO THE INCOM E OF THE ASSESSEE. 11. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSE E CARRIED THE MATTER BEFORE THE CIT (A) WHO VIDE HIS ORDER DATED 1-2-2010 DELETED THE ADDITION BY HOLDING AS UNDER:- 11. AFTER GOING THROUGH RIVAL SUBMISSIONS I FIND T HAT THE CONCLUSION DRAWN BY THE A.O. IS NOT SUPPORTED BY FA CTS THE AO HAS NOT GIVEN ANY ACCOUNT OF INTEREST BEARING AND N ON-INTEREST BEARING FUNDS, HE HAS TAKEN TOTAL OF DEPOSITS, LOAN S FROM SISTER CONCERNS AND OTHER LOANS FIGURE TOTALING TO RS.7,59 ,36,553 AS LOAN AMOUNT, WITHOUT MENTIONING FRESH LOAN ACQUIRED DURI NG THE YEAR OR RATE OF INTEREST ON A PARTICULAR LOAN. IN THIS B ACKGROUND THE ARGUMENT OF THE A.R. THAT OUT OF THIS NON-INTEREST BEARING FUNDS WERE AVAILABLE OF RS.6,64,08,881/- SUPPORTS THE CAS E OF THE APPELLANT WITH RESPECT TO WITHDRAWALS. FURTHER DURI NG THE YEAR NO WITHDRAWALS HAD BEEN MADE BY THE PARTNERS AND NEITH ER ANY LOANS WERE TAKEN BY THE APPELLANT FIRM. NO EFFECTIVE INTEREST DEDUCTION HAS BEEN TAKEN BY THE APPELLANT FIRM AS INTEREST DE BITED OF RS.15,38,484/- IN THE P & L ACCOUNT HAS BEEN CREDIT ED IN THE P & L ACCOUNT AND HAS BEEN DEBITED TO THE THREE PARTNERS ACCOUNT IN THEIR PROFIT SHARING RATIO WHICH IS AVAILABLE IN PA RA 4.3 OF THE ASSESSMENT ORDER ITSELF. THE A.O. IS THEREFORE, DIR ECTED TO DELETE THE ADDITION OF RS.82,42,294/-. 12. AGGRIEVED BY THE AFORESAID ORDER OF CIT (A), TH E REVENUE IS NOW IN APPEAL BEFORE US. 13. BEFORE US, THE LD. DR SUPPORTED THE ORDER OF TH E A.O. ON THE OTHER HAND, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. AND THE CIT (A) AND SUPPORTED THE ORDER OF THE CIT (A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT GROUN D IS WITH RESPECT TO ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 6 ADDITION ON ACCOUNT OF NOTIONAL LOSS TO ASSESSEE. W E FIND THAT THE CIT (A) WHILE DELETING THE ADDITION HAS NOTED THAT THE CONCLUSION OF THE A.O. OF DIVERSION OF FUNDS BY THE ASSESSEE IS NOT SUPPOR TED BY FACTS AND HAS FURTHER GIVEN A FINDING THAT DURING THE YEAR NO WIT HDRAWALS HAVE BEEN MADE BY THE PARTNERS AND NEITHER ANY LOANS WERE TAK EN BY THE ASSESSEE AND NO EFFECTIVE INTEREST DEDUCTION HAS BEEN CLAIME D BY THE ASSESSEE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF THE CIT (A). IN VIEW OF THE AFORESAID, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A ) AND THUS THIS GROUND OF THE REVENUE IS DISMISSED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON , THE 2015 AT AHMEDABAD. SD/- SD/- (S.S. GODARA) JUDICIAL MEMBER ( ANIL CHATURVEDI) ACCOUNTANT MEMBER AHMEDABAD. DATED 25 /6/2015 PATKI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! () / THE CIT(A) XV, AHMEDABAD 5. $%& '', , )*++ / DR, ITAT, AHMEDABAD 6. &,- . / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) ! '#$, &' / ITAT, AHMEDABAD ITA NO. 2411 / AHD/2010 ASSESSMENT YEAR 2007-08 7 1. DATE OF DICTATION- 22-6-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23-6-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P .S./P.S. 23-6-2015. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT: 25-6-2015 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 25- 06-2015 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER