ACIT, JODHPUR V. M/s. Sainik Motors, JODHPUR

ITA 250/JODH/2011

• Counselvise Citation: 25023314 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Notional interest
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 250/JODH/2011 (A.Y. 2007-08) THE A.C.I.T. VS. M/S SAINIK MOTORS, CENTRAL CIRCLE-2 CHOPASANI ROAD JODHPUR JODHPUR. PAN NO. AARFS7799F (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.A. JOSHI, D.R. ASSESSEE BY : SHRI RAJENDRA JAIN DATE OF HEARING : 28/11/2013. DATE OF PRONOUNCEMENT : 28/11/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 17/03/2011 OF LD. CIT (A), JODHPUR. FIRST ISSUE IN THIS APPEAL RELATES TO DELETION OF ADDITION OF RS. 1,49,590/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED ON OLD BALANCES. 2. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT TH E ASSESSEE FILED RETURN OF INCOME DECLARING A LOSS OF RS. 5,39,910/- ON 31/10/ 2007. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE 2 ASSESSING OFFICER NOTICED THAT THE ASSESSEE PAID IN TEREST OF RS. 13,56,500/- @ 9% TO THE FINANCIAL CREDITORS AND RS. 5,77,357/- @ 13% TO THE BANKS. HE ALSO OBSERVED THAT THERE WERE FAMILY DEBTORS OF RS. 23,8 5,174/-, ON WHICH, NO INTEREST WAS CHARGED. THE ASSESSING OFFICER BY CONS IDERING THIS FACT THAT THE ASSESSEE WAS PAYING INTEREST TO ITS CREDITORS @ 9% TO 13%, WAS OF THE VIEW THAT AN AVERAGE RATE OF 11% WAS TO BE CHARGED ON TH E FAMILY DEBTORS. HE ACCORDINGLY, HELD THAT INTEREST AND EXPENDITURE TO THE TUNE OF RS. 2,62,370/- WAS UNREASONABLE AND DISALLOWABLE. THE SAME WAS ADD ED TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND SUBMITTED THAT THE ASSESSEE WAS HAVING INTEREST FREE FUNDS OF RS. 49,50,000/- RECEIVED FROM SISTER CONCERN M/S O.S. MOTORS, WHICH WAS GIVEN AS LOAN/ADVANCES TO THE FAMILY MEMBERS AND SISTER CONCERNS IN THE EARLIER Y EARS WHEREIN NO INTEREST HAD BEEN DISALLOWED BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. THEREFORE, CONSIDERING THE P RINCIPLE OF CONSISTENCY AS HAS BEEN HELD BY THE I.T.A.T. JODHPUR BENCH IN THE CASE OF ACIT VS. TIRUPATI MICRO TECH P. LTD. IN I.T.A. NO. 202/JU/2006 ORDER DATED 19/1/2007, THE DISALLOWANCE WAS NOT CALLED FOR. 4. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, OBSERVED THAT THE BALANCE SHEET FOR THE YEAR ENDED ON 31/1/2005 REVEALED THAT THE ASSESSEE HAD DISCLOSED LOAN AND ADVANCES O F RS. 12,27,549/- IN THE NAME OF M/S SAINIK AUTO MOBILES AND HAD TAKEN A LO AN OF RS. 23 LACS FROM 3 M/S O.S. MOTORS PVT. LTD. ON WHICH NO INTEREST WAS PAID. HE FURTHER OBSERVED THAT IN THE BALANCE SHEET FOR THE YEAR ENDED 31/3/2 006 UNDER THE HEAD LOANS AND ADVANCES, A SUM OF RS. 13,59,824/- WAS DISCLOSE D AND IN THE LIABILITY SIDE, IN LOAN ACCOUNT FROM M/S O.S. MOTORS PVT. LTD., A S UM OF RS. 44 LACS WAS SHOWN. HE FURTHER OBSERVED THAT THE ASSESSEE HAD GI VEN ADVANCES OF RS. 23,85,174/- IN THIS YEAR WHEREAS, AS ON 31/3/2006, THE SAME WAS TO THE TUNE OF RS. 13,59,824/- AS SUCH A SUM OF RS. 10,25,350/- WAS GIVEN IN THE FINANCIAL YEAR UNDER CONSIDERATION AND THERE WAS NO EVIDENCE TO PROVE THAT THE ADVANCES IN THIS YEAR WERE GIVEN OUT OF INTEREST FR EE LOANS. HE, THEREFORE, SUSTAINED THE DISALLOWANCE OF INTEREST @ 11% ON THE AMOUNT OF RS. 10,25,350/- AND THE REMAINING DISALLOWANCE WAS DELE TED BY OBSERVING THAT NO DISALLOWANCE OF INTEREST WAS REQUIRED TO BE MADE IN RESPECT OF THE OLD BALANCES BECAUSE THE ASSESSING OFFICER HAD SCRUTINI ZED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 U/S 143(3) OF THE ACT. NOW THE DEPARTMENT IS IN APPEAL. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE PRESENT CASE, IT APPEARS THAT THE ASSESSING OFFICER DISALLOWED THE NOTIONAL INTEREST BY IGNORING THIS FACT THAT ALL THE INTEREST FREE ADVANCES WERE NOT GIVEN IN THIS YEAR ONLY. ON THE CONTRARY, THE LD. CIT(A) APPRECIATED THE FACTS IN R IGHT PERSPECTIVE AND SUSTAINED THE DISALLOWANCE IN RESPECT OF THE INTERE ST FREE ADVANCES, WHICH WERE GIVEN IN THE FINANCIAL YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER 4 CONSIDERATION AND DELETED THE DISALLOWANCE IN RESPE CT OF OLD BALANCES BECAUSE THE ASSESSING OFFICER HIMSELF HAD CONSIDERE D THOSE ADVANCES OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WHI LE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEARS 2005 -06 AND 2006-07, IN OUR OPINION, THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE IS BASED ON FACTUAL MATRIX, THEREFORE, IT DOES NOT REQUIRE ANY INTERFER ENCE. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF T HE DEPARTMENTAL APPEAL. 6. THE NEXT ISSUE VIDE GROUND NO.2 RELATES TO DELET ION OF ADDITION OF RS. 9,92,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNSECURED LOAN. 7. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICE D THAT THE ASSESSEE HAD SHOWN UNSECURED LOAN OF RS. 9,92,000/- IN THE NAME OF M/S MMFS LTD.. HE ISSUED ENQUIRY LETTER U/S 133(6) OF THE ACT BUT THE SAME WAS RETURNED BACK BY THE POSTAL AUTHORITY ON ACCOUNT OF INCOMPLETE ADDRE SS. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SUBMISSION OF THE ASSESSEE WAS THAT THE SAID AMOUNT WAS VERY OLD AND TAKEN PRIOR TO FINANCIAL YEAR 1998-99. IN SUPPORT OF THE SAME, THE ASSESSEE FILED COPY OF LEDGE ACCOUNT OF ALL THE YEARS. HOWEVER, THE ASSESSING OF FICER MADE THE ADDITION SINCE NO CONFIRMATION WAS FILED. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE PROVISIONS OF SECTION 68 OF THE ACT WAS NOT APPLICABLE AS THE CREDIT IN THE NAME OF M/S MMFS LTD. WAS APPEARI NG IN THE BOOKS OF THE 5 ASSESSEE SINCE LONG BACK AND COPIES OF LEDGER ACCOU NT FOR THE ASSESSMENT YEARS 1999-2000 TO 2007-08 WERE FILED BEFORE THE AS SESSING OFFICER. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. PARMESHWAR BOHRA REPORTED IN 301 ITR 440. 10. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAD SHOWN CASH CREDIT PR IOR TO FINANCIAL YEAR 1998-99 AND IT HAD SHOWN OPENING BALANCE TO THE TUN E OF RS. 9,92,000/-, WHICH CONTINUED TILL THE END OF THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. HE FURTHER OBSERVED THAT NO CREDIT HAD BEEN TAKEN IN THE YEAR UNDER CONSIDERATION FROM THE SAID CONCE RN, THEREFORE, NO ADDITION U/S 68 OF THE ACT BEING CASH CREDIT WOULD BE MADE. HE, THEREFORE, DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. NOW THE DEP ARTMENT IS IN APPEAL. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CA SE, IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS HAVING OLD CREDIT BALANCE AMOUNTIN G TO RS. 9,92,000/- IN THE NAME OF M/S MMFS LTD.. SINCE 1998-99 AND UP TO THE YEAR UNDER CONSIDERATION. IN ALL THE EARLIER YEARS, THE ASSES SING OFFICER ACCEPTED THE SAID CREDIT AS GENUINE BECAUSE NO SUCH DISALLOWANCE WAS MADE IN THE EARLIER YEARS AND SINCE THE CASH CREDIT OF RS. 9,92,000/- W AS NOT RECEIVED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, THEREFORE , THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED PARTICUL ARLY WHEN THE SAME HAD 6 BEEN ACCEPTED IN THE EARLIER YEARS. WE, THEREFORE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 12. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. (ORDER PRONOUNCED IN THE COURT ON 28.11.2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28.11.2013 RANJAN* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.