Smt. Pritam Kaur Kahlon, Ludhiana V. ACIT, Ludhiana

ITA 289/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77132 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.289 /CHD/2014 ASSESSMENT YEAR : 2007-08 SMT.PRITAM KAUR KAHLON VS. THE A.C.I.T., PROP.KAHLON INTERNATIONAL, CIRCLE I, C-26, FOCAL POINT, LUDHIANA. LUDHIANA. PAN: ADDPK7556M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI RAJINDER SINGH, DR DATE OF HEARING : 13.05.2014 DATE OF PRONOUNCEMENT : 29.05.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, LUDHIANA DA TED 23.1.2014 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF IN COME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL : 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS), LUDHIANA HAS ERRED IN DISMISSING THE APPEAL FILED BY THE APPELLA NT AND CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER AND THERE WE RE VALID REASONS FOR NON-ATTENDING THE PROCEEDINGS BEFORE CIT(A) ON 22.1 .2014. 2. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,68,6377- OUT OF INTEREST DEBITED TO PROFIT AND LO SS ACCOUNT ON ACCOUNT OF INTEREST FREE LOANS TO M/S BHARAT INTERNATIONAL AND M/S GAGAN TRACTOR INDUSTRIES U/S 36 (1)(III) OF THE ACT AS PER PARA 5 .3 OF THE ORDER. 3. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERIN G THAT INTEREST FREE LOAN TO M/S BHARAT INTERNATIONAL AND M/S GAGAN TRAC TOR INDUSTRIES WAS 2 ADVANCED OUT OF INTEREST FREE LOANS RECEIVED BY THE FIRM FROM S. GURPREET SINGH AND JASHANDEEP SINGH AND INTEREST FR EE AMOUNT RECEIVED WAS MORE THAN THE INTEREST FREE LOANS ADVANCED. 4. THAT WITHOUT PREJUDICE TO ABOVE SUBMISSION, IT IS S UBMITTED THAT THE WORTHY CIT (A) HAS NOT CONSIDERED THAT THE ASSESSIN G OFFICER WAS NOT JUSTIFIED TO CALCULATE AND DISALLOW INTEREST ON OPE NING BALANCE OF RS. 7,65,000/- NOT GIVEN DURING THE YEAR UNDER CONSIDER ATION TO M/S BHARAT INTERNATIONAL. 5. THAT THE WORTHY CIT (A) HAS ALSO NOT CONSIDERED THA T THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE O F CIT VS ABHISHEK INDUSTRIES LTD. 286 ITR 1 IS NOT APPLICABLE IN THIS CASE. 6. THAT THE WORTHY CIT (A) WAS NOT JUSTIFIED TO UPHOLD ADDITION OF RS.1,25,250/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT LIABILITY OF THE APPELLANT TO PAY THE SAID AMOUNT HAS CEASED AS PER PARA 6.3 OF HIS ORDER. 7. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERIN G THAT THE AMOUNT OF RS.1,25,250/- WAS NOT PAID DUE TO DISPUTE WITH THE PARTY ON ACCOUNT OF NOT SUPPLYING THE GOODS ACCORDING TO THE SPECIFICAT ION AND, AS SUCH, APPELLANT WAS LEGALLY AND COMMERCIALLY BOUND TO PAY THE AMOUNT AS AND WHEN THE DISPUTE IS SETTLED. 8. THAT THE LD. CIT (A) HAS ALSO ERRED IN CONFIRMING T HE ADDITION OF RS. 7,661 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F NOT SHOWING CLOSING STOCK OF PACKING MATERIAL AS PER PARA 7.3. OF THE O RDER. 9. THAT THE WORTHY CIT (A) HAS ALSO ERRED IN MAKING DI SALLOWANCE OF RS. 9,8857- BEING 1/6 TH OF THE FOLLOWING EXPENSES FOR PERSONAL USE:- TELEPHONE EXPS. RS.39,605/-0 CAR REPAIR RS. 9,190/- CAR DEPRECIATION RS.11,068/- 10. NOTWITHSTANDING THE ABOVE SAID GROUND OF APPEAL, IT IS SUBMITTED THAT DISALLOWANCE OF RS.9,885/- IS EXCESSIVE. 11. THAT NO PROPER/REASONABLE OPPORTUNITY WAS AFFORDED TO HEAR THE CASE. 12. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. THE GROUND NOS.1, 8 AND 11 ARE NOT PRESSED AND T HE SAME ARE DISMISSED AS NOT PRESSED. 4. THE GROUND NOS.2 TO 5 ARE AGAINST DISALLOWANCE O F INTEREST UNDER SECTION 36(1)(III) OF THE ACT AT RS.1,38,637/-. 5. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESS EE HAD BORROWED FUNDS ON INTEREST AND IN TURN HAD MADE INTEREST FRE E ADVANCES TO ITS SISTER CONCERN. THE ASSESSING OFFICER THEREAFTER COMPUTED DISALLOWANCE ON 3 SUCH INTEREST FREE ADVANCES MADE BY THE ASSESSEE AS TABULATED AT PAGE 6 OF THE ASSESSMENT ORDER, RESULTING IN ADDITION OF R S.1,68,637/-. 6. THE CIT (APPEALS) IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK IND USTRIES LTD. [286 ITR 1 (P&H)] UPHELD THE ADDITION MADE BY THE ASSESS ING OFFICER UNDER SECTION 36(1)(III) OF THE ACT. 7. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE PERUSAL OF THE BA LANCE SHEET WOULD REFLECT THAT THE ASSESSEE HAD INTEREST FREE ADVANCE S I.E. THE AMOUNT RECEIVED FROM S/SHRI JASHANDEEP SINGH, GURPARGAT SI NGH AND GURPREET SINGH, WHICH WERE SHOWN AS UNSECURED LOANS AND THE SAID AMOUNT WAS ADVANCED TO THE SISTER CONCERNS OF THE ASSESSEE IN WHICH THE SAID PERSONS WERE THE PARTNERS. IN OTHER WORDS, THE MONEY BELO NGING TO THE PARTNERS OF THE SISTER CONCERN WERE ADVANCED TO THE SISTER C ONCERNS THOUGH ROUTED THROUGH THE ASSESSEE. 8. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD MADE INTEREST FREE ADVANCES TO ITS SIS TER CONCERNS M/S BHARAT INTERNATIONAL AND M/S GAGAN TRACTOR INDUSTRI ES. THE ASSESSEE, ON THE OTHER HAND, HAD BORROWED CERTAIN FUNDS ON INTER EST AND DURING THE YEAR UNDER CONSIDERATION EXPENSES OF RS.6,63,564/- WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE EXPLANATION OF THE ASSE SSEE REGARDING THE INTEREST FREE ADVANCES MADE TO SISTER CONCERNS WAS THAT THE PARTNERS OF M/S BHARAT INTERNATIONAL I.E. S/SHRI GURPARGAT SING H AND GURPREET SINGH AND ALSO THE PARTNERS OF M/S GAGAN TRACTOR INDUSTRI ES I.E. SHRI JASHANDEEP HAD MADE INTEREST FREE ADVANCES ON WHICH NO INTEREST HAD 4 PAID. THE PERUSAL OF THE BALANCE SHEET PLACED BY T HE ASSESSEE ALONGWITH ANNEXURE AT PAGES 1 TO 11 REFLECT THAT THE ASSESSEE HAD SHOWN UNSECURED LOANS TO SHRI JASHANDEEP SINGH OF RS.7,81,506/-, SH RI GURPARGAT SINGH AT RS.7 LACS AND SHRI GURPREET SINGH AT RS.2 ACS AND H AD MADE INTEREST FREE ADVANCES TO M/S BHARAT INTERNATIONAL OF RS.3,50,000 /- DURING THE YEAR AND OPENING BALANCE OF RS.7,65,000/-. FURTHER RS.5 0,000/- WAS ADVANCED TO M/S GAGAN TRACTOR INDUSTRIES. IN THE ENTIRETY O F THE ABOVE SAID FACTS AND CIRCUMSTANCES, THE ASSESSEE HAD ESTABLISHED NEX US BETWEEN INTEREST FREE ADVANCES MADE AND INTEREST FREE FUNDS AVAILABL E WITH HER, WE FIND NO MERIT IN ANY DISALLOWANCE TO BE MADE UNDER SECTION 36(1)(III) OF THE ACT. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELE TE THE ADDITION OF RS.1,68,637/-. THE GROUND OF APPEAL NOS.2 TO 5 RAI SED BY THE ASSESSEE ARE THUS ALLOWED. 10. THE ISSUE IN GROUND NOS.6 AND 7 IS AGAINST DISA LLOWANCE OF RS.1,25,250/-. THE ASSESSEE IN THE LIST OF SUNDRY CREDITORS HAD SHOWN SUM OF RS.1,25,250/- AS DUE AGAINST M/S QUALITY AUT O WORKS. THE PLEA OF THE ASSESSEE WAS THAT SINCE THE GOODS WERE NOT A S PER THE SPECIFICATION THE PARTIES WERE ASKED TO TAKE BACK THE GOODS AND H ENCE THE PAYMENT AGAINST THE GOODS PURCHASED REMAINED UN-PAID. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE REGARDING ANY DISPUTE AGAINST THE SAID PARTIES AND AS THERE WAS NO LIKELIHOOD OF THIS LIABILITY BEING DISCHARGED, THE SAID AMOUNT OF RS.1,25,250/- WAS INCOME OF THE ASSESSEE. WE FIND NO MERIT IN THE SAID ADDITION AS THE ASSESSEE HAS RECOGNIZED LIABILITY O F RS.1,25,250/- IN ITS BOOKS OF ACCOUNT AND THE PROVISIONS OF SECTION 41(1 ) OF THE ACT IN SUCH CIRCUMSTANCES ARE NOT ATTRACTED. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE SAID ADDITION OF RS.1,25,250/-. THE G ROUNDS OF APPEAL NOS.6 AND 7 RAISED BY THE ASSESSEE ARE THIS ALLOWED. 5 11. THE ISSUE IN GROUND NOS.9 AND 10 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF 1/6 TH OUT OF TELEPHONE EXPENSES, CAR REPAIR AND CAR DEPRECIATION FOR PERSONAL USE. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES, WE RESTRICT THE SAID DISALLOWANCE TO 1/10 TH AND ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RECOMPU TE THE ADDITION IN THE HANDS OF THE ASSESSEE. THE GROUNDS OF APPEAL NOS.9 AND 10 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH MAY, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH