Manoj Kumar Agrawal, Sultanpur V. DCIT, Sultanpur

ITA 315/ALLD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94944 (ITAT-ALLAHABAD)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SINGH
• Assessee Lawyers: PRAVEEN GODBOLE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH ALLAHABAD BEFORE SHRI P.K. BANSAL , ACCOUNTANT MEMBER ITA NO. 31 5 /ALLD/201 2 ASSESSMENT YEAR: 200 8 - 0 9 MANOJ KUMAR AGRAWAL VS. DY.CIT, CIRCLE, SULTANPUR. LUCKNOW ROAD, SULTANPUR. PAN: ACUPG 0992R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAVEEN GODBOLE, A.R. . REVENUE BY : SHRI A.K. SINGH , DR. DATE OF HEARING: 05 .08.2015 ORDER PER : P.K. BANSAL , A CCOUNTANT MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - III , LUCKNOW DATED 24.02.2012 FOR ASSESSMENT YEAR 200 8 - 0 9 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE DISALLOWANCE OF INTEREST OF RS.2,73,542/ - MADE BY THE ASSESSING OFFICER AND PARTLY CONFIRMED BY THE CIT(A). 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.8,03,095/ - TOWARDS THE PAYMENT OF INTEREST ON UNSECURED LOA N AMOUNTING TO RS.68,76,751/ - TAKEN FROM THE FAMILY MEMBER AND HUF. THE ASSESSING OFFICER CALCULATED THE WORKING CAPITAL EMPLOYED IN THE BUSINESS AT RS. 87,13,975/ - EMPLOYED IN THE BUSINESS ON THE HIGHER SIDE MORE THAN THE LEGITIMATE NEED S OF THE BUSINESS. THE ASSESSING OFFICER COMPUTED THE AVERAGE MONTHLY PURCHASE AT RS.28,17,466/ - AND MONTHLY DEBTORS AT RS.3,65,675/ - AND THUS TO THE VIEW THAT THE WORKING CAPITAL REQUIRED FOR THE BUSINESS IS RS.63,71,686/ - . THE ASSESSEE HAS EMPLOYED MORE WORKING CAPITAL BY RS.23,42,289/ - AND THEREFORE DISALLOWED A SUM OF RS.2,73,542/ - . 4. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) PARTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. I HEARD THE RIVAL SUBMISSION AND CAREFULLY CONSIDER THE SAME ALONG WITH THE ORDE R OF THE TAX AUTHORITIES BELOW. I SURPRISED TO SEE THE BASIS OF DISALLOWANCE OF THE INTEREST BY THE ASSESSING OFFICER . I T IS NOT DENIED BY THE REVENUE THAT THE FUNDS BORROWED BY THE ASSESSEE WERE BORROWED FOR THE PURPOSE OF THE BUSINESS. SECTION 36(1)(III) ALLOWED THE DEDUCTION IN RESPECT OF THE INTEREST INCURRED 3 BY THE ASSESSEE ON THE CAPITAL BORROWED FOR THE PURPOSE OF THE BUSINESS. A SECTION NOWHERE EMPOWERS THE ASSESSING OFFICER TO RE - COMPUTE THE REQUIREMENT OF THE CAPITAL OF THE BUSINESS. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT UTILIZED THE CAPITAL BORROWED FOR THE PURPOSE OF THE BUSINESS. THE REVENUE BY DISALLOWING THE INTEREST IN MY OPINION TRIED TO RE WRITE PROVISION OF SECTION 36(1)(III) AS IF THE ASSESSING OFFICER IS THE LAW MAKE R AND HE HAS BEEN DEPUTED BY THE DEPARTMENT TO RECOMPUTE THE INCOME TAX ACT SOMETHING WHICH IS NOT IN HIS POWER THE ASSESSING OFFICER MUST BE AWARE OF THAT HIS POWERS ARE LIMITED FOR MAKING THE DISALLOWANCE ONLY IF THE RELEVANT PROVISION OF THE INCOME TAX ARE NOT COMPLIED WITH BY THE ASSESSEE. ONCE, THE ASSESSEE HAS BORROWED THE CAPITAL, I.E., FOR THE PURPOSE OF THE BUSINESS THE ASSESSING OFFICER DOES NOT HAVE ANY BUSINESS TO RE - CALCULATE HOW MUCH CAPITAL HAS LEGITIMATELY TO BE INVESTED BY THE ASSESSEE IN A BUSINESS CARRIED ON BY HIM. IN MY OPINION, IT IS CLEAR CUT CASE OF IMPOSING THE COST ON THE AO BY MAKING SUCH DISALLOWANCE. THE ASSESSING OFFICER HAS TRIED TO HARASS ASSESSEE BUT SINCE THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT REQUESTED FOR THE IMPOSIT ION OF THE COST I THEREFORE ARE NOT IMPOSING THE COST. IN VIEW OF THE CLEAR CUT PROVISION OF SECTION 36(1)(III) I SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4 6. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 / 9 /201 5 . SD/ - ( P.K. BANSAL ) ACCOUNTANT MEMBER DATED: 2/9 /201 5 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR