Sh. Kewal Chaudhary, Jalandhar V. The Asstt. Commissioner of Income-tax, Jalandhar

ITA 283/ASR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0624 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISHRA
• Assessee Lawyers: D S CHHABRA
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 283(ASR)/2012 ASSESSMENT YEAR: 2007-08 SH. KEWAL CHOWDHARY C/O M/S ACTION BATTERIES, C-105, FOCAL POINT, JALANDHAR. PAN: ABEPC-7971M VS. ASST. CIT, RANGE-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. D. S. CHHABRA (ADV .) RESPONDENT BY: SH. A.N.MISHRA (DR) DATE OF HEARING: 22.06. 2016 DATE OF PRONOUNCEMENT : 29.06.2016 ORDER PER T.S.KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), JALANDHAR DATED 25.04.2012, FOR ASST. YEAR: 2007-08. 2. THE ONLY ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE ADDITI ON OF RS.3,43,673/- ON ACCOUNT OF NOTIONAL INTEREST ALLEGEDLY CHARGEABL E ON INTEREST FREE ADVANCES MADE BY ASSESSEE. 3. THE APPEAL WAS EARLIER DISMISSED BY HONBLE ITAT VIDE ORDER DATED 20.03.2014 AND THE ASSESEE HAD FILED APPEAL BEFORE HONBLE PUNJAB & HARYANA HIGH COURT WHICH HAS REMANDED THE ISSUE BAC K TO THE OFFICE OF ITA NO.28 3 (ASR)/2012 ASST. YEARS: 2007-08 2 TRIBUNAL FOR RE-ADJUDICATION OF THE SAME AND THEREF ORE, THE ASSESSEE IS AGAIN BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFI CER AND LEARNED CIT(A) HAD MADE THE DISALLOWANCE FOR NOTIONAL INTER EST CALCULATED @ 12% ON INTEREST FREE LOAN TO FAMILY MEMBERS AND HAD REL IED UPON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES. THE LEARNED AR SUBMITTED THAT ASSESSEE WAS RUNNING BUSINESS AND HAD OWN CAPITAL TO THE TUNE OF RS.2,13,98,456/- AND DURING THE YEAR HAD EARNED SUBSTANTIAL AMOUNT O F RS.1,23,87,990/- AND THEREFORE, THE ASSESSEE WAS HAVING SUFFICIENT F UNDS OUT OF WHICH THE ASSESSEE COULD HAVE ADVANCED INTEREST FREE LOANS. R ELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: (I) MUNJAL SALES CORPORATION VS. CIT (2008) 298 ITR 298 (SC), (II) HERO CYCLES PVT. LTD. VS. CIT 379 ITR 347 (P&H ) 5. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIE D UPON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS FACT THAT ASSESSEE HAD DECLARED NET INCOME OF RS.1,24,44,951/- AS IS APPAR ENT FROM THE ASSESSMENT ORDER DATED 15.05.2008. THE ASSESSEE HAD ALSO OPENING CAPITAL TO THE TUNE OF RS.1,38,75,782/- AS IS APPAR ENT FROM (PB-PAGE 10). THE PROPRIETOR HAD ALSO INTRODUCED CERTAIN AMOUNTS AND HAD WITHDRAWN CERTAIN AMOUNTS DURING THE YEAR FROM HIS CAPITAL AC COUNT AND THE NET CAPITAL AVAILABLE ON 31.3.2007 WAS RS. 2,13,98,456/ - OUT OF THIS AMOUNT ITA NO.28 3 (ASR)/2012 ASST. YEARS: 2007-08 3 THE ASSESSEE HAD ADVANCED TO FAMILY MEMBERS ONLY AN AMOUNT OF RS.28,63,942/-. THEREFORE, THE FACT IS CLEAR THAT A SSESSEE HAD SUFFICIENT FUNDS OF HIS OWN FROM WHICH THE ASSESSEE COULD HAVE ADVANCED THE AMOUNT AS INTEREST FREE LOAN. THE HONBLE SUPREME C OURT OF INDIA IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT VIDE ORDER DA TED 5 TH NOV. 2015 HAS HELD AS UNDER: INSOFAR AS THE LOANS TO DIRECTORS ARE CONCERNED, IT COULD NOT BE DISPUTED BY THE REVENUE THAT THE ASSESSEE HAD A CREDIT BALAN CE IN THE BANK ACCOUNT WHEN THE SAID ADVANCE OF RS.34 LAKHS WAS GI VEN. REMARKABLY, AS OBSERVED BY THE CIT(APPEALS) IN HIS ORDER, THE COMP ANY HAD RESERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AND , THEREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILIZE THOSE F UNDS FOR GIVING ADVANCE TO ITS DIRECTORS. 7. WE FIND THAT HONBLE SUPREME COURT HAS LAID DOWN THE RATIO THAT IF THERE WERE SUFFICIENT OWN FUNDS IN THE FORM OF CAPI TAL AND RESERVES AND SURPLUS THE ASSESSEE COMPANY CAN UTILIZE THESE FUND S FOR GIVING ADVANCES TO ITS DIRECTORS AND IN THE PRESENT CASE INSTEAD OF DIRECTORS THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO ITS FAMILY MEMBE RS. 8. IN VIEW OF THE ABOVE, WE FIND JUSTIFICATION IN T HE ARGUMENT OF LEARNED AR, THEREFORE, THE APPEAL FILED BY ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:29.06.2016. /PK/ PS. ITA NO.28 3 (ASR)/2012 ASST. YEARS: 2007-08 4 COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER