The ITO, Ward-2(3), Surat V. M/s. Kothiship Breaking Industries, Surat

ITA 2725/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60480 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 01-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

ITA NO.2 725/AHD/2011 ASSESSME NT YEAR 2005- 06 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, A HMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO.2725 /AHD/2009 (ASSESSMENT YEAR: 2005- 06) INCOME TAX OFFICER, WARD 2(3), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) VS. M/S. KOTHISHIP BREAKING INDS., GROND FLOOR, DAMANWALA COMPLEX, OPP.RAJKUMAR THEATER, UDHNA DARWAJA, SURAT. (RESPONDENT) PAN: AACFK 8184D BY REVENUE : MR.SANJAY DHARIWAL, SR.D.R. BY ASSESSEE : MR.MEHUL SHAH. ( )/ ORDER DATE OF HEARING : 23-5-2012 DATE OF PRONOUNCEMENT : 31-5-2012 PER: SHRI ANIL CHATURVEDI,A.M. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT (A)- II, SURAT DATED 30-6-2009 FOR THE ASSESSMENT YEAR 2 005-06. 2. THE ONLY EFFECTIVE GROUND TAKEN BY THE REVENUE R EADS AS UNDER:- ITA NO.2 725/AHD/2011 ASSESSME NT YEAR 2005- 06 . 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.24,79,083/- ON ACCOUNT OF D ISALLOWANCE OF INTEREST ON THE UNSECURED LOANS, WHICH WERE TREATED AS IN- GENUINE IN EARLIER YEAR I.E. IN A.Y. 2004-05. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHIP BREAKING. IT FILED ITS RETURN OF INCOME ON 17-10-20 05 DECLARING TOTAL INCOME AT RS.2,55,890/-.THE CASE WAS TAKEN UP FOR S CRUTINY. DURING THE COURSE OF SCRUTINY THE A.O. NOTICED THAT THE AS SESSEE HAD DEBITED RS.65,45,493/- ON ACCOUNT OF PAYMENT OF INTEREST ON UNSECURED LOANS. IT WAS FURTHER OBSERVED BY HIM THAT FOR A.Y. 2004-0 5 THE UNSECURED LOAN RAISED BY THE ASSESSEE AMOUNTING TO RS. 2,35,7 5,000/- WERE TREATED AS CASH CREDIT U/S. 68 OF THE ACT AND WERE ADDED TO TOTAL INCOME. THE INTEREST WHICH WAS CLAIMED IN THE CURRE NT YEAR WAS ON THE AFORESAID LOANS. THE A.O. WAS OF THE VIEW THAT SINCE THE LOANS HAVE BEEN TREATED AS CASH CREDIT AND ADDED TO THE A SSESSEES TOTAL INCOME, THE INTEREST ON SAME CANNOT BE ALLOWED AS D EDUCTION. HE ACCORDINGLY DISALLOWED INTEREST OF RS.24,79,083/-. AGGRIEVED BY THE DECISION OF THE A.O., THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT IN THE A PPELLATE PROCEEDINGS THE UNSECURED LOAN OF RS.2,35,75,000/- WHICH WAS TREATED AS UNSECURED U/S. 68 HAS BEEN ACCEPTED AS GENUINE A ND THE ADDITION HAS BEEN DELETED. HE ACCORDINGLY URGED THAT THE INT EREST OF RS.24,79,083/- BE ALLOWED. CIT (A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE UNSECURED LOANS WERE SATISFACTORI LY EXPLAINED AND THEREFORE, DELETED THE ADDITION OF INTEREST BE DELE TED BY HOLDING IT TO ITA NO.2 725/AHD/2011 ASSESSME NT YEAR 2005- 06 . 3 BE A LEGITIMATE BUSINESS EXPENDITURE AND DIRECTED T HE A.O. TO DELETE THE ADDITION OF RS.24,79,083/-. AGGRIEVED BY THIS D ECISION OF CIT (A), THE DEPARTMENT IS NOW IN APPEAL BEFORE US. 5. AT THE OUTSET LD. A.R. SUBMITTED THAT THE HONBL E ITAT IN ASSESSEES OWN CASE IN ITA NO.2018/AHD/2008 ORDER D ATED 21-3-2012 BY RELYING ON THE DECISION OF ROHINI BUILDERS 256 I TR 360 HAS HELD THAT NO ADDITION U/S. 68 WAS MADE. IT FURTHER HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY ESTABLISHING THE IDENTIT Y, CREDITWORTHINESS OF THE LOAN CREDITORS AS WELL AS THE GENUINENESS OF THE TRANSACTION BY FURNISHING DOCUMENTS SUCH AS RETURN OF INCOME, BANK STATEMENTS, AFFIDAVITS AND CONFIRMATIONS. IN VIEW OF THESE CIRC UMSTANCES, IT DELETED THE ADDITION. FURTHER THE DEPARTMENT HAD NO T PREFERRED ANY APPEAL FOR ASSESSMENT YEAR 2004-05 BEFORE THE ITAT AGAINST THE DELETION OF RS.2,35,75,000/-. IT WAS THEREFORE URGE D THAT WHEN THE LOAN HAS BEEN TREATED AS GENUINE, THE INTEREST PAID ON T HE SAME CANNOT BE DISALLOWED. THE LD. A.R. THEREFORE URGED THAT THE I NTEREST BE ALLOWED. 6. THE LD. D.R. AGREED WITH THE CONTENTIONS OF A.R. AND DID NOT DISPUTE THE ARGUMENTS PUT FORTH BY A. R.. 7. WE HAVE HEARD RIVAL CONTENTIONS PERUSED THE DOCU MENTS ON RECORDS. IT IS AN UNDISPUTED FACT THAT THE UNSECUR ED LOAN OF RS.2,35,75,000/- WHICH WAS RAISED IN A.Y. 2004-05 A ND WHICH WERE TREATED AS UNEXPLAINED U/S. 68 OF THE ACT WAS DELET ED BY THE CO- ORDINATE BENCH OF ITAT BY HOLDING IT TO BE GENUINE AND DELETED THE ITA NO.2 725/AHD/2011 ASSESSME NT YEAR 2005- 06 . 4 ADDITION. SINCE THE LOAN IS TREATED AS GENUINE THER E CANNOT BE DISALLOWANCE OF INTEREST. IN VIEW OF THESE CIRCUMST ANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A) AND WE A CCORDINGLY UPHOLD THE ORDER OF CIT (A). 8. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 31- 5 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) II, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.2 725/AHD/2011 ASSESSME NT YEAR 2005- 06 . 5 1.DATE OF DICTATION 23 - 5 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 24 / 5 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 28 -5 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 5 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 5 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3 1 - 5 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..