BHAGWAT PRASAD KHANDELWAL, Kota V. ADD. CIT, Kota

ITA 314/JPR/2011

• Counselvise Citation: 31423114 RSA 2011
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA

Judgement Text

1 ITA 314-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 314/JP/2011 ASSTT. YEAR : 2006-07. SHRI BHAGWAT PRASAD KHANDELWAL, VS. THE ADDL. CIT, RANGE-1, PROP. M/S. RAJASTHAN ISPAT UDYOG, KOTA. 41-B, ROAD NO. 2, IPIA, KOTA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV SOGANI RESPONDENT BY : SHRI D.K. MEENA DATE OF HEARING : 15.11.2011 DATE OF PRONOUNCEMENT : 22.11.2011 ORDER DATED : 22/11/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. FIRST GROUND OF THE ASSESSEE IS AGAINST CONFIRMI NG DISALLOWANCE OF INTEREST OF RS. 2,81,130/-. 3. THE AO OBSERVED THAT ASSESSEE HAS ADVANCED INTER EST FREE LOANS OF RS. 20,05,000/- TO M/S. RITESH STEELS PVT. LTD. AND RS. 22,91,500/- TO M/S. AKASH STEEL PVT. LTD. IN VIEW OF THE AO, THE ASSESSEE HAS DIVERTED INTEREST BEARI NG FUND TO NON-INTEREST BEARING ADVANCE. THEREFORE, HE MADE A DISALLOWANCE OF RS. 2,81,130/- OUT OF INTEREST. WHILE 2 HOLDING SO, RELIANCE WAS PLACED ON VARIOUS CASES ME NTIONED IN THE ORDER OF LD. CIT (A) AT PAGE 1. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE AO. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE. IT IS SEEN THAT ASSESSEE HAS A OPEN ING CAPITAL OF RS. 49.82 LACS AS ON 1 ST APRIL, 2005. SINCE BANK ADVANCE MENTIONED IN THE O RDER OF THE AO WAS LESS THEN OPENING CAPITAL, THEREFORE, IN OUR VIEW THE DISALLOWANCE WA S NOT JUSTIFIED AS NO INTEREST HAS BEEN PAID BY ASSESSEE ON THE OPENING BALANCE ON ACCOUNT OF CAPITAL. IN CASE OF BRITANIA INDUSTRIES LTD., 280 ITR 526 (CAL.), THE HONBLE CA LCUTTA HIGH COURT HAS HELD THAT WHEN ASSESSEE HAD BORROWED FUNDS AS WELL AS OWN FUNDS, T HERE WOULD BE PRESUMPTION THAT THE AMOUNT OF ADVANCE WAS MADE OUT OF THE OWN FUNDS OF THE ASSESSEE AND NOT FROM THE BORROWED CAPITAL. THEREFORE, DISALLOWANCE OF INTER EST WAS HELD AS NOT JUSTIFIED. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF SHRI SATISH KATTA DECIDED IN ITA NO. 370/JP/2008 AND IN ITA NO. 1532/JP/2008. THESE ORDERS WERE PAS SED ON 31.7.2008 AND 9.9.2009, COPIES OF THE ORDERS ARE PLACED ON RECORD. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DELETE THE IMPUGNED ADDITION MADE BY THE AO WHICH I S CONFIRMED BY LD. CIT (A). 5. SECOND ISSUE IS AGAINST CONFIRMING THE ADDITION OF RS. 97,673/- OUT OF VEHICLE RUNNING EXPENSES, TELEPHONE EXPENSES AND STAFF WELF ARE EXPENSES. 6. THE AO DISALLOWED THE VEHICLE RUNNING EXPENSES A T RS. 38,309/-. THE LD. CIT (A) RESTRICTED IT TO RS. 25,627/-. SIMILARLY ON ACCOUN T OF TELEPHONE EXPENSES, THE AO DISALLOWED RS. 56,564/-. THE LD. CIT (A) RESTRICTED IT TO RS. 25,627/- @ 20% OF THE TOTAL EXPENSES CLAIMED. OUT OF STAFF WELFARE EXPENSES, T HE AO DISALLOWED RS. 15,482/-. THE LD. CIT (A) CONFIRMED THE SAME. 3 7. AFTER CONSIDERING THE SUBMISSIONS AND ORDERS OF THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT DISALLOWANCE ON ACCOUNT OF EXPENSES A RE ON HIGHER SIDE. IT IS A MATTER OF FACT THAT THERE IS NO DOUBT ABOUT ALLOWABILITY OF E XPENSES BUT THEY ARE DISALLOWED IN PART FOR THE REASON THAT ASSESSEE COULD NOT LEAD PROPER EVIDENCE. KEEPING IN MIND THE QUANTUM OF EXPENSES AND THE BUSINESS ACTIVITY OF THE ASSESS EE, WE ARE OF THE VIEW THAT IF VEHICLE EXPENSES ARE DISALLOWED AT RS. 15,000/- ON ACCOUNT OF TELEPHONE EXPENSES IF IT IS DISALLOWED AT RS. 20,000/- AND OUT OF STAFF WELFARE EXPENSES IF THE DISALLOWANCE IS RESTRICTED TO RS. 10,000/-, THAT WILL MEET THE ENDS OF JUSTICE. IN THIS WAY TOTAL DISALLOWANCE ARE SUSTAINED AT RS. 45,000/- AGAINST RS. 95,673/- SUSTAINED BY LD. CIT (A). THIS GROUND OF THE ASSESSEE IS ALLOWED IN PART. 8. NEXT ISSUE IS AGAINST CONFIRMING THE DISALLOWANC E OF RS. 2.00 LACS OUT OF CARTAGE AND FREIGHT EXPENSES. 9. THE AO DISALLOWED RS. 2.00 LACS ON ADHOC BASIS O UT OF RS. 48,08,224/-. THE LD. CIT (A) CONFIRMED THE SAME. 10. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THIS DISALLOWANCE IS WITHOUT ANY BASIS. ALL T HE EXPENSES ARE ON ACCOUNT OF FREIGHT AT KOTA AND JAIPUR. ALL THE VOUCHERS ARE MAINTAINED. NO DISALLOWANCE WAS MADE IN PAST FOR SUBSEQUENT YEARS AS STATED BY LD. A/R DURING THE AP PELLATE PROCEEDINGS. THEREFORE, WE ARE OF THE VIEW THAT WITHOUT ASSIGNING ANY COGENT REASO N DISALLOWANCE MADE BY AO WAS NOT JUSTIFIED. IT IS ALSO A MATTER OF FACT THAT IN EAR LIER YEAR THE ASSESSEE CLAIMED THESE EXPENSES AT 1.22% OF THE TOTAL TURNOVER WHEREAS IN THE YEAR UNDER CONSIDERATION THESE ARE 0.94% OF THE TOTAL TURNOVER. IN VIEW OF THESE FACTS AND CIR CUMSTANCES, WE HOLD THAT DISALLOWANCE WAS NOT JUSTIFIED. ACCORDINGLY THE SAME IS DELETED . 4 11. FOURTH GROUND IS AGAINST IN NOT ADJUDICATING TH E GROUND RELATING TO INTEREST INCOME ON FDR AT RS. 4,000/-. 12. NO ARGUMENT WAS ADVANCED BY LD. A/R IN THIS RES PECT. THEREFORE, THIS GROUND IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 14. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 .11.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/ COPY FORWARDED TO :- SHRI BHAGWAT PRASAD KHANDELWAL, KOTA. THE ADDL. CIT, RANGE-1, KOTA. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 314/JP/2011) BY ORDER, AR ITAT JAIPUR.