Shree Pushkar Construction Co., Ahmedabad V. The Income Tax Officer, Ward-5(2)(4), Ahmedabad

ITA 3020/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5318 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: BIREN SHAH WITH G M THAKOR
• Keywords: Proportionate interest; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 234B; 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHREE PUSHKAR CONSTRUCTION CO. AHMEDABAD PAN: ABMFS4283N (APPELLANT) VS THE IT O , WARD - 5(2)(4) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI LALIT P. JAIN , SR. D . R. ASSESSEE BY: SHRI BIREN SHAH WITH G.M. THAKOR DATE OF HEARING : 15 - 10 - 2 018 DATE OF PRONOUNCEMENT : 24 - 10 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A. Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 5, AHMEDABAD DATED 09 - 09 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN LAW AND ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS), AHMEDABAD - 5 [HEREINAFTER REFERRED TO AS 'CIT(A)'], IS BAD IN LAW AND DESERVES TO BE CANCELLED, AS HE HAS PASSED AN ORDER WITHOUT CONSIDERING AND APPRECIATING THE FACTS OF CASE OF APPELLANT. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE INTEREST EXPENDITURE AMOUNTING TO I T A NO . 3020 / A HD/2 0 16 A SS ESSMENT YEAR 2012 - 13 I.T.A NO. 3020 /AHD/20 16 A.Y. 2012 - 13 PAGE NO SHREE PUSHKAR CONSTRUCTION COMPANY VS. IT O 2 RS. 7,71,108/ - , WHICH WAS MADE BY APPLYING 12% RATE OF INTEREST ON AMOUNT UTILISED IN GIVING ADVANCES OF RS. 69,17,856/ - . 3. WITHOUT PREJUDICE TO THE ABOVE, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED NOT APPRECIATING THAT EVEN IF THE LD. ASSESSING OFFICER HAD TO MAKE DISALLOWANCE OF ANY INTEREST, IT SHOULD HAVE BEEN CALCULATED IN PROPORTION TO FUNDS UTILIZED FOR THE SAID ADVANCES AND THE TOTAL FUNDS AVAILABLE WITH THE APPELLANT. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) H AS GROSSLY ERRED IN UPHOLDING THE LEVY OF INTEREST U/S. 234B OF THE ACT, WHEN NO SUCH INTEREST IS CHARGEABLE IN THE APPELLANT'S CASE. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT (A) HAS GROSSLY ERRED IN NOT ENTERTAINING THE GROUND AGAINST THE INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C). 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING INCOME OF RS. 1 , 10 , 04 , 8880/ - WAS FILED ON 30 TH SEP, 2012. SUBSEQ UENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 8 TH AUGUST, 2013. THE ISSUE IN APPEAL I S PERTAINED TO DISALLOWANCE OF INTEREST EXPENDITURE TO THE AMOUNT OF RS . 7 , 71 , 108/ - BY APPLYING 12% INTEREST ON AMOUNT UTIL IZED FOR GIVING ADVANCES OF RS. 69 , 17 , 856/ - . O N VERIFICATION OF LOAN AND ADVANCES SHOWN IN THE BALANCE SHEET , THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN LOAN AND ADVANCES AGGREGATING TO THE AMOUNT OF RS. 1 , 90 , 63 , 565/ - ADVANCED TO VARIOUS PART IES AND THE ASSESSEE HAS NOT CHARGED INTEREST FROM SOME OF THE PARTIES . HE HAS STATED THAT THE ASSESSEE HAS DEBITED INTEREST EXPENSES TO THE AMOUNT OF RS. 90 , 60 , 061/ - IN THE PROFIT AND LOSS A/C . THEREFORE THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HA S MISUSED THE BORROWED FUND DEPLOYED AS LOAN AND ADVANCES WITH VARIOUS PARTIES WITHOUT CHARGING INTEREST. THE ASSESSEE WAS ASKED TO EXPLAIN WHY NOT PROPORTIONATE INTEREST OUT OF TOTAL INTEREST DEBITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT SHOUL D NOT BE DISALLOWED. THE ASSESSEE EXPLAINED THAT ADVANCES TO THE AMOUNT OF RS. 69 , 17 , 856/ - WERE ADVANCED TO THE GROUP CONCERN ENGAGED IN THE SAME LINE OF BUSINESS MANAGED BY THE FAMILY MEMBERS OF THE PARTNERS OF THE FIRM. IT WAS ALSO SUBMITTED THAT THESE ENTITIES PROVIDE ADVANCE TO EACH OTHER AS PER THE BUSINESS EXPEDIENCY AND CLAIMED THAT SOME MONEY HAS BEEN ADVANCED TO SUCH ENTITIES OUT OF INTEREST FREE FUND. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE I.T.A NO. 3020 /AHD/20 16 A.Y. 2012 - 13 PAGE NO SHREE PUSHKAR CONSTRUCTION COMPANY VS. IT O 3 ASSESSEE STATING THAT THE ASSE SSEE HAS NEITHER FURNISHED ANY SATISFACTORY REPLY NOR JUSTIFY THAT THE SAID LOAN AND ADVANCES WERE MADE FOR THE PURPOSE OF BUSINESS ONLY. CONSEQUENTLY, THE PROPORTIONATE INTEREST EXPENSES ON SUCH LOAN AND ADVANCE AMOUNTING TO RS. 7 , 71 , 1108/ - WAS DISAL LOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSSEE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) CONFIRMED THE DISALLOWANCE MADE BY THE ASS ESSING OFFI CE R . THE RELEVANT FINDINGS OF THE LD. CIT(A) IS REPRO DUCED AS UNDER: - DECISION: 4.3. THE AO HAS NOTICED THAT ASSESSEE HAS SHOWN LOAN AND ADVANCES AGGREGATING OF RS.1,90,63,565/ - GIVEN TO THE VARIOUS PARTIES OUT OF WHICH ASSESSEE HAS NOT CHARGE INTEREST FROM SOME PARTIES WHEREAS THE ASSESSEE HAS DEBITED INTE REST EXPENSES AGGREGATING OF RS.90,60,061/ - . THE AO HAS FOUND THE REPLY OF THE ASSESSEE UNSATISFACTORY AND THEREFORE DISALLOWED THE PROPORTIONATE INTEREST ON THE INTEREST FREE LOAN ADVANCES. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS SUBMITTED THAT THE ENTITIES TO WHOM LOANS AND ADVANCES ARE GIVEN ENGAGED IN THE SAME LINE OF BUSINESS OF THE ASSESSEE FIRM AND MANAGED BY THE FAMILY MEMBERS OF THE PARTNERS OF THE FIRM AND THESE ENTITIES GIVE MONEY TO EACH OTHER WHEN THEY ARE IN NEED. IT IS FURTHER SUBM ITTED THAT IF THE ASSESSEE RECEIVED ANY SUCH ADVANCE FROM ANY OF THESE ENTITIES THE SAME SHALL ALSO BE INTEREST FREE FUNDS. IT IS ALSO SUBMITTED THAT CERTAIN LOANS AND ADVANCES ARE GIVEN TO PERSONS WITH WHOM THE FIRM HAS BUSINESS RELATIONS OR ARE CONNECTED WITH PERSONS WITH WHOM THE FIRM HAS BUSINESS RELATIONS. IT IS ALSO SUBMITTED THAT SAID ADVANCES WERE MADE OUT OF INTEREST FREE FUNDS AND THE ASSESSEE HAS INTEREST FREE FUND OF RS.6,10,31,921/ - WHICH IS FAR IN ACCESS OF INTEREST FREE ADVANCES OF RS.69.18 L AKHS. THE APPELLANT HAS RELIED UPON SEVERAL JUDGMENTS AS REPRODUCED IN THE PRECEDING PARAS OF THIS ORDER. 4.4. THE FACTS OF THE CASE AND THE SUBMISSIONS ARE CONSIDERED. IN THE JUDGMENT OF RELIANCE UTILITIES & POWER LTD., IT IS HELD THAT IF THERE IS INTERES T FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN, IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUNDS AVAILABLE. THIS DECISION IS BASED ON FINDING OF FACT BY THE TRIBUNAL THAT THERE WERE SUFFICIENT INTEREST FREE FUNDS AVAILABLE IN THAT CASE. THE REAL ENQUIRY IS WHETHER THERE ARE INTEREST FREE AVAILABLE ON THE ASSET SIDE AND IN THE ABSENCE OF SUFFICIENT PROOF OF AVAILABLE INTEREST FREE FUNDS NO SUCH PRESUMPTION CAN BE DRAWN. AS THE ASSESSEE FAILED TO PROVE THE SAME, THE AO HAS RIGHTLY MADE THE ADDITION. HENCE THE GROUND OF APPEAL IS DISMISSED. 4.5. THE APPELLANT HAS ALSO SUBMITTED THAT EVEN IF SOME DISALLOWANCES WAS TO BE MADE ON THIS ISSUE NO DISALLOWANCE SHOULD HAVE BEEN MADE IN RESPECT OF THE FUNDS UTILIZED FOR THE ABOVE REFERRED ADVANCES AND ONLY PROPORTIONATE DISALLOWANCE COULD HAVE BEEN MADE. THE ABOVE CONTENTION OF THE APPELLANT CANNOT BE BE ACCEPTED AS THE APPELLANT HAS FAILED TO SHOW THE NEXUS OF FUNDS WH ICH ARE EMPLOYED FOR INTEREST FREE ADVANCES. IN THE ABSENCE OF THE ABOVE, THE PLEA OF THE APPELLANT IS REJECTED. 5. GROUND NO.4 RELATES TO CHARGING OF INTEREST U/S.234A, 234B, 234C AND 234D OF THE ACT. LEVY OF INTEREST IS CONSEQUENTIAL AND MANDATORY. HENCE, THIS GROUND IS DISMISSED. I.T.A NO. 3020 /AHD/20 16 A.Y. 2012 - 13 PAGE NO SHREE PUSHKAR CONSTRUCTION COMPANY VS. IT O 4 5. WE HAVE HEARD THE BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE CLAIMED THAT ENTITIES TO WHOM THE LOANS AND ADVANCES GIVEN WERE ENGAGED IN THE SAME LINE OF BUSINESS AND MANAGED BY THE FAMILY MEMBERS OF THE PARTNERS AND T HESE ENTITI ES PROVIDE MONEY TO EACH OTHER WHEN THEY ARE IN NEED AS PER BUSINESS EXIG E NCY. IT IS ALSO CLAIMED THAT SUCH ADVANCES HAS BEEN MADE OUT OF INTEREST FREE FUND AND SUCH INTEREST FREE FUND OF THE ASSESSEE WAS TO THE AMOUNT OF RS. 6 , 10 , 31 , 921/ - FAR IN EXCESS OF INTEREST FREE ADVANCES OF RS . 6 9. 18 LA KHS . AFTER PERUSAL OF THE ABOVE MATERIAL FACTS WE OBSERVE THAT THERE WE RE NO CLEAR CUT FINDING GIVEN BY THE ASSESSING OFFICER THAT ASSESSEE HA D NOT ADVANCED THESE LOANS AND ADVANCES OUT OF THE INTEREST FREE FUN D AS CLAIMED BY THE ASSSESSEE. THEREFORE WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE THE IMPUGNED ISSUE DE NOVO AFTER EXAMIN ATION OF TH E MATERIAL FURNISHED BY THE ASSESSEE AND AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. T HEREFORE , THE CASE OF THE ASSES EE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH AS DIRECTED ABOVE . ACCORDINGLY, THIS GROUND OF APPEAL OF TH E ASSSESSEE IS ALLOWED FOR STA T ISTI CAL PURPOSES . 6. GROUND NO. 1 IS GENERAL AND IT DOES NOT REQUIRE ANY ADJUDICATION. GROUND NO . 4 IS DISMISSED AS CHARGING OF INTEREST U/S. 234B OF THE ACT IS MANDATORY AS PER LAW . GROUND NO. 5 AGAINST INITIAT I ON O F PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS ALSO DISMISSED AS THIS GROUND OF APPEAL IS PREMATURE AT THIS STAGE. 7. IN THE RESULT, THE GROUNDS OF APPEAL 2 &3 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE GROUNDS OF APPEAL 4 &5 ARE DISMISSED. . ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 4 - 10 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 24 /10 /2018 I.T.A NO. 3020 /AHD/20 16 A.Y. 2012 - 13 PAGE NO SHREE PUSHKAR CONSTRUCTION COMPANY VS. IT O 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,