Shri Shantilal Ghewarchand Begani, Surat V. The Dy. Commissioner of Income Tax, Circle-1(1)(1), Surat

ITA 2728/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2121 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: BHARAT P JHAVERI
• Keywords: Reasonable cause; Commercial expediency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2728/AHD/2016/SRT / ASSESSMENT YEAR: 2013-14 SHRI SHANTILAL GHEWARCHAND BEGANI, 8-9, SANT TUKARAM SOCIETY 1, NR. CANAL, BHATAR ROAD, SURAT. [PAN: ACTPB 1369A] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), SURAT. ( / APPELLANT) ( !' /RESPONDENT) / ASSESSEE BY : SHRI BHARAT P. JHAVERI, ADVOCATE /REVENUE BY : SHRI J.K. CHANDNANI, SR. D.R /DATE OF HEARING : 26-04-2018 /DATE OF PRONOUNCEMENT : 26-04-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT (CIT (A) FOR SHORT) DATED 19.08.2016 FOR THE ASSESSMENT YEAR (A.Y) 2013-14 PA SSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN PARTLY CONFI RMING THE ADDITION MADE BY THE ASSESSING OFFICER OUT OF RS. 2,15,000/- ON ACCOUNT OF LOAN GIVEN TO PARTIES FREE OF INTEREST. 2 ITA NO.2728/AHD/2016/SRT (A.Y: 2013-14) SHRI SHANTILAL GHEWARCHAND BEGANI 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW YOUR APPELLANT PRAYS THAT THE ADDITION MADE BY THE ASSESSING OFFIC ER AND PARTLY ALLOWED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE FULLY ALLOWED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBU NAL. FIRST OF ALL, WE MAY POINT OUT THE BOTH THE PARTIES ARE AGREED TO THE FA CT THAT THE AMOUNT STATED BY THE ASSESSEE IN GROUND NO.1 IS NOT CORRECT AND THE ACTUAL AMOUNT OF DISALLOWANCE AFTER ORDER OF LD. CIT(A) COMES TO RS. 2,15,000/- PERTAINING TO ADVANCE/LOAN GIVEN TO M/S. BALAJI POLYESTER PVT. LT D. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSING OF FICER (AO) HAS DISALLOWED INTEREST EXPENSES OF RS. 4,22,952/- I.E. , @ 12% P.A ON UNSECURED LOANS WITHOUT BRINGING OUT ANY ADVERSE MATERIAL AGA INST THE ASSESSEE. THE LD. AR SUBMITTED THAT THERE IS NO PROVISION IN LAW WHICH EMPOWER THE ASSESSEE TO ADD NOTIONAL INCOME FOR NOT CHARGING OF INTEREST ON INTEREST FREE UNSECURED LOANS GIVEN BY HIM AND INTEREST EXPENDITU RE ACTUALLY INCURRED BY THE ASSESSEE CANNOT BE DISALLOWED ON THIS ALLEGATIO N OF NON-CHARGING INTEREST. THE LD. AR FURTHER SUBMITTED THAT THE LD. CIT(A) DELETED THE ADDITION IN RESPECT OF OUTSTANDING BALANCE OF RS. 14,24,597/ - DUE FROM M/S. MAHALAXMI INFRACON PVT. LTD. BUT CONFIRM THE DISALL OWANCE ON AMOUNT OF LOAN OF RS. 21,00,000/- DUE FROM M/.S BALAJI POLYESTER P VT. LTD. WHICH COMES TO RS. 2,15,000/- WITHOUT ANY REASONABLE CAUSE AND BAS IS. THEREFORE, IMPUGNED ADDITION MAY KINDLY BE DELETED. THE LD. A R SUBMITTED THAT THE ASSESSEE HAS SUFFICIENT CAPITAL TO ADVANCE SUCH LOA N ON INTEREST FREE BASIS BUT THE AUTHORITIES BELOW WERE NOT AGREE WITH HIS E XPLANATION AND LD. CIT(A) 3 ITA NO.2728/AHD/2016/SRT (A.Y: 2013-14) SHRI SHANTILAL GHEWARCHAND BEGANI CONFIRMED THE SAME BY HOLDING THAT SUCH GENERIC ARG UMENTS, ESPECIALLY WHEN THE ASSESSEE HAS MISERABLY FAILED TO ESTABLISH THE NEXUS AND COMMERCIAL EXPEDIENCY WHICH IS NOT A POINT FOR CONSIDERATION F OR MAKING SUCH KIND OF DISALLOWANCE. THE LD. AR SUBMITTED THAT IMPUGNED A DDITION MAY KINDLY BE DELETED. 4. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) STRONGLY SUPPORTED THE ACTION OF THE AO AND FIRST A PPELLATE ORDER AND SUBMITTED THAT ON THE ONE HAND INSTEAD OF MAKING RE TURNING UNSECURED LOANS ON WHICH ASSESSEE IS PAYING INTEREST, THE ASSESSEE IS DIVERTING THESE FUNDS AS INTEREST FREE UNSECURED LOAN THEN THE AO WAS RIG HT IN MAKING DISALLOWANCE OF INTEREST PAYMENT ON ACCOUNT OF INTE REST FREE LOAN/ADVANCES WHICH HAS BEEN ADVANCED WITHOUT ANY BUSINESS EXPEDI ENCY AND NEXUS WITH THE BUSINESS OF THE ASSESSEE. 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FIRST OF ALL, WE MAY POINT OUT THAT AS PER CAPITAL ACCOUNT OF THE AS SESSEE FOR AY 2013-14 THE TOTAL CAPITAL IS RS. 3,15,68,140/- AND DETAILS OF C APITAL USED ON ASSETS INCLUDES AMOUNT OF RS. 1,12,98,738/- ON WHICH ASSES SEE IS EARNING INTEREST AND ALSO INCLUDES RS. 82,53,607/- AS LOAN/ADVANCE G IVEN AT BUSINESS RELATION THE BALANCE SHEET FOR F.Y 2012-13 PERTAINING TO AY 2013-14 SHOWS THAT ASSESSEE HOLDS SHARES OF M/S. BALAJI PLOYESTERS PVT . LTD. OF RS. 36,50,000/- AND LOAN OF RS. 21,00,000/- HAS ALSO BEEN GIVEN TO THE SAME COMPANY. AS PER DETAILS OF INTERESTS RECEIVED DURING F.Y 2012-1 3 SHOWS THAT ASSESSEE HAS 4 ITA NO.2728/AHD/2016/SRT (A.Y: 2013-14) SHRI SHANTILAL GHEWARCHAND BEGANI RECEIVED RS. 10,07,860/- INTEREST AND INTEREST EXPE NSES AS SHOWN FOR THE SAME PERIOD WAS RS. 8,68,926/- WHICH IS LESSER THAN THE AMOUNT OF INTEREST EARNED. FROM THE COPY OF ASSESSMENT ORDER FOR AY 2 012-13, IT IS DISCERNABLE THAT THE AO MADE DISALLOWANCE OF EXCESS OF INTEREST PAYMENT OVER THE INTEREST RECEIVED OF RS. 1,39,919/- WHEREAS IN THE PRESENT YEAR THE AMOUNT OF INTEREST RECEIVED IS HIGHER THAN INTEREST PAYMENT T HUS FINDINGS OF AO IN THE EARLIER YEAR DOES NOT SUPPORT DISALLOWANCE UPHELD B Y THE LD. CIT(A) FOR PRESENT A.Y. AS WE HAVE ALREADY NOTED ABOVE THAT T HE ASSESSEE HAS GIVEN INTEREST FREE LOAN/ADVANCES TO SISTER CONCERN/COMPA NY OUT OF HIS OWN AVAILABLE FUNDS/CAPITAL AND THE AMOUNT OF INTEREST EARNED IS MORE THAN THE AMOUNT OF INTEREST PAID. THEREFORE, WE DECLINED TO ACCEPT THE CONTENTION AND BASIS OF AO FOR MAKING DISALLOWANCE OUT OF INTEREST PAYMENT AND CLAIMED BY THE ASSESSEE AS THE NET RESULT OF INTEREST EARNING LOANS/ADVANCES AND INTEREST BEARING LOANS/ADVANCES TAKEN BY THE ASSESS EE IS SURPLUS/INCOME FROM INTEREST IN THE HANDS OF THE ASSESSEE WHICH HA S BEEN OFFERED TO TAX. THE AO HAS NOT BROUGHT ANY ALLEGATION OR MATERIAL O N RECORD TO ESTABLISH THAT THE ASSESSEE HAS TAKEN INTEREST BEARING LOANS/ADVAN CES AND THE SAME WAS ADVANCED AS INTEREST FREE LOAN/ADVANCE IN THE SISTE R CONCERN WITHOUT ANY COMMERCIAL EXPEDIENCY. THUS, DISALLOWANCE MADE BY T HE AO AND UPHOLD BY THE LD. CIT(A) ON ACCOUNT OF INTEREST FREE LOAN TO M/S. BALAJI POLYESTER PVT. LTD. IS DIRECTED TO BE DELETED. ACCORDINGLY, GROUN DS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 5 ITA NO.2728/AHD/2016/SRT (A.Y: 2013-14) SHRI SHANTILAL GHEWARCHAND BEGANI 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH APRIL, 2018. / SURAT ; DATED : 26 TH APRIL, 2018 EDN ! $ / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. # ( ) / THE CIT (A) - 1, SURAT; 4. PRL. CIT-1, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. / BY ORDER, // TRUE COPY// ) / ASSISTANT REGISTRAR , / ITAT, SURAT SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER