ITO, Ludhiana V. M/s Jodha Ram Tarlok Chand, Ludhiana

ITA 262/CHANDI/2012

• Counselvise Citation: 26221514 RSA 2012
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 262/CHD/2012 ASSESSMENT YEAR: 2008-09 ITO, WARD-II(4), V M/S JODHA RAM TARLOK CHAND , RISHI NAGAR, KESAR GANJ ROAD, LUDHIANA. LUDHIANA. PAN: AAAFJ-7941-B & CO NO. 17/CHD/2012 IN ITA NO.262/CHD/2012 ASSESSMENT YEAR: 2008-09 M/S JODHA RAM TARLOK CHAND, ITO, WARD-II(4) , KESAR CHAND, RISHI NAGAR LUDHIANA. LUDHIANA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK KUMAR GOYAL DEPARTMENT : SHRI MANJEET SINGH DATE OF HEARING : 11.09.2012 DATE OF PRONOUNCEMENT : 25.09.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE, IS DIRECTED AGAINS T THE ORDER DATED 15.12.2011 PASSED BY THE LD. CIT(A) LUDHIANA U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN CONFIRMING 2 THE RATE OF INTEREST OF LOAN GIVEN TO SH. SUBASH CH ANDER WITHOUT BUSINESS PURPOSE TO THE EXTENT OF 12% AS AGAINST 15% MADE BY THE A.O. AS THE ASSESSEE HAS PAID INTEREST AT THE RATES VARYING FRO M 12% TO 18%. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION AMOUNTING TO RS.30,00,000/- MADE BY THE A.O. AS THE ASSESSEE FAILED TO GIVE THE SOURCE OF DEPOSITS IN T HE CURRENT ACCOUNT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN NOT COMPLYING TO SUB RULE (2) OF RULE 46A WHILE ADMITTI NG THE ADDITIONAL EVIDENCE AND FURTHER ERRED IN NOT GIVING ANY OPPOR TUNITY TO THE ASSESSING OFFICER AND THUS IGNORING SUB RULE (3) OF RULE 46A OF THE INCOME TAX RULES; IGNORING THE DECISION OF THE JURISDICTIONAL BENCH OF THE HON'BLE ITAT, CHANDIGARH IN THE CASE OF SMT. SURINDER KAUR DATED 29.07.2011 PASSED IN ITA NO.596/CHD/2011. 4. THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF A.O. BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN CROSS OBJECTIONS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CONTRAVENTION OF INSTRUCTIONS ISSUED BY THE CBDT CANNOT BE THE SUBJECT MATTER OF APPEAL. 2 THAT THE LD. CIT WAS NOT JUSTIFIED IN CON FIRMING THE ADDITION ON INTEREST FREE ADVANCE @ 12%. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, NONE ATTENDED ON BEHALF OF THE ASSESSEE APPELLANT. HOWEV ER, THE LD. 'DR' PLACED RELIANCE ON THE ORDER PASSED BY THE AO. LD. 'AR' HAD FILED WRITTEN SUBMISSIONS IN THE MATTER AN D THE SAME HAS BEEN PERUSED AND CONSIDERED. 5. IN GROUND NO.1, REVENUE CONTENDED THAT CIT(A) ER RED IN LAW AND ON FACTS, IN CONFIRMING THE RATE OF INTERES T OF LOAN GIVEN TO SHRI SUBHASH CHANDER, WITHOUT BUSINESS PUR POSE 3 TO THE EXTENT OF 12% AS AGAINST 15% MADE BY THE AO, AS THE ASSESSEE HAD PAID INTEREST AT THE RATE VARYING FROM 12% TO 18%. 6. WE HAVE CAREFULLY PERUSED THE ORDER PASSED BY TH E AO, AS WELL AS WRITTEN SUBMISSIONS MADE BY THE APPELLAN T. THE AO, MADE AN ADDITION OF RS.1,01,208/- ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT, ON THE BASIS THAT ASSESSEE FIRM HAD GIVEN INTEREST FREE ADVANCES TO SHRI SUBHASH CHANDER, TO THE TUNE OF RS.7,00,000/- AND H AD ALSO RAISED INTEREST BEARING LOANS, WHICH MEANT THA T THE INTEREST PAID WAS NOT WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS. THE AO, PLACED RELIANCE ON THE DECISI ON OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V ABHI SHEK INDUSTRIES 286 ITR 1 (P&H). IT WAS SUBMITTED BEFOR E THE CIT(A) THAT ADDITION OF NOTIONAL INTEREST IS NOT JU STIFIED. THE PARTNERS HAD CREDIT BALANCE OF RS.39,50,970/- IN TH EIR PERSONAL ACCOUNTS. IT IS, FURTHER, STATED BY THE A PPELLANTS THAT THERE WERE SUNDRY CREDITORS TO THE TUNE OF RS.39,46,902/- AGAINST SUNDRY DEBTORS OF RS.5,46,79 5/-. NO INTEREST OF WHAT-SO-EVER NATURE WAS PAID ON THE EXC ESS INTEREST-FREE CREDITORS TO THE TUNE OF RS.34,00,105 /- WHICH ARE QUITE SUFFICIENT TO COVER THE INTEREST-FREE LOA N OF RS.7,00,000/-. THE FINDINGS OF LD. CIT(A) ARE CONTA INED IN PARA 9 OF ASSESSMENT ORDER, UNDER REFERENCE, WHEREB Y PARTIAL RELIEF HAS BEEN GRANTED TO THE ASSESSEE. T HE FINDINGS OF LD. CIT(A), AS CONTAINED IN PARA 9 OF APPELLA TE ORDER, ARE 4 REPRODUCED HEREUNDER : 9 I HAVE CONSIDERED THE FACTS OF THE CASE AND IT IS APPARENT THAT THE APPELLANT HAS ACCEPTED THAT THERE WAS NO B USINESS PURPOSE IN ADVANCING INTEREST FREE LOAN TO SH. SUBHASH CHANDER . IT IS ALSO A FACT THAT THE ASSESSEE FIRM HAS RAISED INTEREST BEARING FUNDS TO MEET ITS' CAPITAL REQUIREMENTS APART FROM HAVING FUNDS FROM P ARTNERS' CAPITAL ACCOUNT AND INTERNAL ACCRUALS. IN THE CIRCUMSTANCES THE RATIO OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. ABHISHEK INDUSTRIES LIMITED WOULD BE APPLICABLE AS ALL THE F UNDS OF THE BUSINESS BELONG TO A COMMON KITTY AND HAD THIS INTEREST FREE LOAN NOT BEING GIVEN, THE ASSESSEE COULD HAVE REDUCED THE INTEREST BURDEN BY RETURNING THE LOAN. AS SUCH ADDITION MADE BY THE AO IS CONFIRMED TO THE EXTENT OF 12% AND NOT 15% AS THE ASSESSEE HAS PAID INTEREST ON LOANS RAISED @ 12%. THE AO IS DIRECTED TO GIVE CORRESPONDING REL IEF OF 3%. 7. THE FINDINGS OF THE CIT(A) ARE QUITE FAIR AND REASONABLE, ON APPRECIATION OF THE MATERIAL ON RECO RD AND FACTUAL MATRIX OF THE CASE. THEREFORE, WE DO NOT F IND ANY GROUND TO INTERFERE WITH SUCH FINDINGS. CONSEQUENT LY, GROUND NO.1 OF APPEAL OF THE REVENUE IS DISMISSED. 8. IN GROUND NO.2, REVENUE CONTENDED THAT CIT(A) ER RED IN LAW AND ON FACTS IN DELETING THE ADDITION, AMOUNTIN G TO RS.30 LACS MADE BY THE AO, AS THE ASSESSEE FAILED T O GIVE THE SOURCE OF DEPOSIT IN CURRENT ACCOUNT. 9. WE HAVE CAREFULLY PERUSED THE WRITTEN SUBMISSION S, FILED BY THE APPELLANT AND THE ORDER PASSED BY THE AO IN THE MATTER. THE AO, MADE AN ADDITION OF RS.30,00,000/- AS CASH DEPOSITED IN THE SAME BANK ACCOUNT OF THE APPE LLANT, ALLEGED TO HAVE BEEN MAINTAINED WITH THE HDFC BANK. IT WAS SUBMITTED BEFORE THE AO THAT ASSESSEE DID NOT M AINTAIN ANY SAVING BANK ACCOUNT IN ANY BANK IN THE ENTIRE C OUNTRY. 5 A COPY OF THE APPELLANTS DD ACCOUNT NO. 02592790000 446, WHERE DEPOSITS WERE MADE, WAS SUBMITTED BEFORE THE AO. IN THIS ACCOUNT, THE ASSESSEE DEPOSITED RS.1,33,60,000 /- IN CASH DURING THE RELEVANT PERIOD, A CASH DEPOSIT ON DIFFERENT DATES ALSO INCLUDED THE AMOUNT OF RS.30,00,000/-. THE ASSESSEE HAS FILED CONFIRMATORY LETTER FROM THE BAN K THAT NO SAVING BANK ACCOUNT HAS BEEN MAINTAINED WITH THE HD FC. THE AO, AS CONTENDED BY THE ASSESSEE, WRONGLY INFER RED THAT AIR INFORMATION IS INTERNAL SOURCE OF DEPARTMENT AN D CONSIDERING IT, AS PRIMARY SOURCE OF EVIDENCE ON RE CORD, ITS AUTHENTICITY IS ESTABLISHED, UNLESS ANY EVIDENCE ST ATING THAT THERE WAS MISTAKE IN FILING AIR BY THE BANK IS REPR ODUCED. IT WAS ARGUED BY THE ASSESSEE THAT NO OPPORTUNITY W AS PROVIDED BY THE AO, IN THE MATTER AND THE ADDITION HAS BEEN MADE ON SURMISES AND CONJECTURES. LD. CIT(A) FORWA RDED SUBMISSION FILED BY THE APPELLANT, TO THE AO FOR CO MMENTS AND FURTHER DIRECTED HIM TO PROVE BY EVIDENCE THAT THE ASSESSEE HAD MAINTAINED A SAVING BANK ACCOUNT WITH HDFC BANK, WHEREIN RS.30,00,000/- IN CASH HAVE BEEN DEPO SITED. CERTIFICATE FILED BY THE ASSESSEE FROM HDFC BANK CE RTIFYING THAT ASSESSEE HAD NO SAVING BANK ACCOUNT WITH HDFC BANK WAS ALSO SENT TO THE AO FOR HIS COMMENTS. THE AO, WAS FURTHER ASKED TO FURNISH HIS COMMENTS AS TO ON WHAT BASIS, EVIDENCE PRODUCED BY THE ASSESSEE, IN THE FORM OF R EGULAR BOOKS OF ACCOUNT, HAD BEEN REJECTED AND AN ADDITION OF RS.30,00,000/- WAS MADE. THE AO, IN HIS REMAND REP ORT DATED 17.10.2011 DID NOT OFFER ANY COMMENTS ON SPEC IFIC ISSUES RAISED, BUT, ONLY REITERATED THE OBSERVATION OF THE AO 6 AS TO THE IMPORTANCE OF AIR INFORMATION, BEING IN T HE NATURE OF PRIMARY EVIDENCE REQUIRING NO FURTHER PROOF. IN VIEW OF SUCH FACTUAL MATRIX OF THE CASE, LD. CIT(A) DELETED THE ADDITION. FINDINGS OF THE CIT(A) ARE CONTAINED IN PARA 6 OF THE ORDER WHICH ARE REPRODUCED HEREUNDER: 6. I HAVE CONSIDERED THE FACTS OF THE CASE, IT IS QUITE APPARENT THAT THE AIR INFORMATION IN POSSESSION OF THE DEPARTMENT IS INCORRECT TO THE EXTENT THAT THE ASSESSEE INSTEAD OF HAVING A SAVING BANK A CCOUNT HAD A CC ACCOUNT WITH HDFC BANK. THE CASH DEPOSITS MADE BY T HE ASSESSEE IN THE SAID CC ACCOUNT TO THE TUNE OF RS. 1.33 CRORES IN C ASH DURING THE ENTIRE ASSESSMENT YEAR HAVE BEEN EXPLAINED BY THE ASSESSEE ON THE BASIS OF COUNTER SALES AS RECORDED IN THE BOOKS OF ACCOUNT. THE AO DESPITE BEING GIVEN AN OPPORTUNITY DURING THE APPELLATE PROCEEDIN GS TO VERIFY THE CASH DEPOSITS VIZ-A-VIZ THE BOOKS OF ACCOUNTS CHOSE NOT TO OFFER COMMENTS ON THE SAME. THE AO ALSO DID NOT CONTROVERT THE CLAIM OF T HE APPELLANT THAT THE BOOKS OF ACCOUNTS DING CASH BOOK AND LEDGER HAD BEEN PRODUCED DURING ASSESSMENT PROCEEDINGS TO PROVE THE ACCOUNTA BILITY OF CASH DEPOSITS IN THE CC ACCOUNT OF THE ASSESSEE WITH THE HDFC BANK. THE VIEW OF THE AO THAT AIR 'INFORMATION CONSTITUTES PR IMARY EVIDENCE AND IT WAS ASSESSEES RESPONSIBILITY TO PROVE THAT IT WAS WRONG, IS ABSOLUTELY WRONG. IN THE CIRCUMSTANCES THE ADDITION MADE BY TH E AO IS DIRECTED TO BE DELETED. 10. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD AND FOUND THAT ADDITIONS CANNOT BE MADE ON THE BASIS OF SURMISES, CONJECTURE S AND UNPROVED AUTHENTICITY OF DOCUMENTS. THEREFORE, FIND INGS OF THE CIT(A) IN THE MATTER ARE UPHELD AND GROUND OF A PPEAL OF THE REVENUE IS DISMISSED. 11. IN GROUND NO.3 REVENUE CONTENDED THAT CIT(A) ER RED IN LAW AND ON FACTS IN NOT COMPLYING TO RULE 46A(2) OF THE 7 INCOME TAX RULES, 1962, WHILE ADMITTING ADDITIONAL EVIDENCE AND, FURTHER, ERRED IN NOT GIVING OPPORTUNITY TO TH E AO. 12. WE HAVE PERUSED THE CONTENTION MADE BY THE REVE NUE IN THE GROUND AND FOUND THAT THE SAME RUN CONTRARY TO THE FACTUAL MATRIX OF THE CASE. LD. CIT(A) HAS PROVIDE D OPPORTUNITY TO THE ASSESSEE IN THE FORM OF FORWARDI NG THE SUBMISSION TO THE AO, FOR HIS COMMENTS. THE AO, CH OSE NOT TO FILE ANY COMMENT OR EVIDENCE TO SUPPORT HIS CONT ENTIONS, HENCE, IT CANNOT BE SAID THAT NO OPPORTUNITY WAS GR ANTED TO THE AO. THE REVENUE HAS FAILED TO SPECIFY THE EVIDE NCE FILED BEFORE THE CIT(A), WHICH WAS CONSIDERED CONTRARY TO RULE 46A OF THE INCOME TAX RULES,1962. FURTHER, THE REV ENUE HAS FAILED TO SPECIFY THE ISSUE, WHEREIN CIT(A) ACT ED CONTRARY TO THE LEGISLATIVE INTENT, AS CONTAINED UNDER RULE 46A OF THE RULES. IN VIEW OF THIS, GROUND OF APPEAL OF THE RE VENUE IS DISMISSED. 13. GROUND NOS. 4 & 5 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION. ACCORDINGLY, THE SAME ARE D ISMISSED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. CO NO. 17/CHD/2012 15. IN THE CROSS OBJECTION, ASSESSEE HAS RAISED TWO GROUNDS. IN GROUND NO.1, IT HAS BEEN POINTED OUT B Y THE APPELLANT THAT CIT(A) ERRED IN LAW IN HOLDING THAT CONTRAVENTION OF INSTRUCTIONS ISSUED BY THE CBDT CA NNOT BE THE SUBJECT MATTER OF APPEAL BEFORE HIM. NEEDLESS TO SAY THAT SUCH INSTRUCTIONS FALL UNDER THE DOMAIN OF ADMINISTRATIVE INSTRUCTIONS FOR THE PURPOSE OF PICK ING-UP 8 CASES FOR SCRUTINY ON CERTAIN OBJECTIVE CRITERIA. THE APPELLATE JURISDICTION OF THE CIT(A), INCLUDING THE APPELLATE JURISDICTION OF THE TRIBUNAL, CANNOT BE ARROGATED U PON THE CONCERNED APPELLATE AUTHORITY ON THE FOUNDATION OF INFERENCES, ANALOGY OR ANY LOGIC, UNLESS STATUTORIL Y SPECIFIED IN THE RELEVANT PROVISIONS OF THE ACT. THEREFORE, STATUTORY JURISDICTION IS NOT INHERENT IN NATURE BUT PROVIDED SPECIFICALLY BY THE LEGISLATURE. IN VIEW OF THIS, THE CONTENTIONS OF THE ASSESSEE CANNOT BE ACCEPTED. FIN DINGS OF THE CIT(A) ARE UPHELD AND GROUND RAISED IN THE C.O. BY THE ASSESSEE IS DISMISSED. 16. IN VIEW OF OUR FINDINGS IN PARA 7, WHILE ADJUDI CATING APPEAL OF THE REVENUE, THIS GROUND OF CO IS DISMISS ED. 17. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH SEPT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH