The ACIT, Circle-7, Ahmedabad V. Shri Krishnavtar J.Kabra,huf, Ahmedabad

ITA 3168/AHD/2010

• Counselvise Citation: 316820514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 3168/AHD/2010 ASSESSMENT YEAR :2005-06 ASSTT. COMMISSIONER OF INCOME TAX, CIR-7, AHMADABAD. V/S . KRISHNAVTAR J. KABRA (HUF), PROP. OF KRISHNA CORPORATION, 3, RAJESH APARTMENT, B/H. NAV GUJARAT COLLEGE, ASHRAM ROAD, AHMADABAD. PAN NO. A AD HK0462R (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI O. P. BATHEJA, SR. D.R. /BY RESPONDENT SHRI SAKAR SHARMA, A.R. /DATE OF HEARING 10.10.2013 /DATE OF PRONOUNCEMENT 25.10.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF REVENUE WHICH HA S EMANATED FROM THE ORDER OF CIT(A)-I, AHMEDABAD, DATED 16.09.2010 FOR ASSESSMENT YEAR 2005-06. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER: 1. THE LD. COMMISSIONER OF INCOME TAX (A)-I, AHMAD ABAD HAS ERRED IN LAW AND ON FACTS IN SETTING ASIDE THE DISALLOWAN CE OF RS.2,99,900/- MADE ON ACCOUNT OF INTEREST PAYMENT D EBITED IN P & L A/C. AND DIRECTING THE AO TO EXAMINE THE ASSESS EES CONTENTION THAT HE WAS TRADING IN SHARES AND BY MIS TAKE CLOSING STOCK OF SHARES WERE SHOWN AS INVESTMENT. 2. THE LD. COMMISSIONER OF INCOME TAX (A)-I HAS ERR ED IN LAW AND ON FACTS IN DECIDING THE CASE IN A MANNER OF SETTIN G ASIDE THE ISSUE INVOLVED, AS HE DID NOT CONFIRM, ENHANCE, RED UCE OR ANNUL ITA NO. 3168/AHD/10 A.Y. 05-06 PAGE 2 THE ASSESSMENT AS PER THE REQUIREMENT OF SEC.251 W. E.F. 01.06.2001. 2. BOTH THE GROUNDS RAISED BY THE REVENUE ARE AGAIN ST SETTING ASIDE THE DISALLOWANCE OF RS.2,99,900/- MADE ON ACCOUNT OF IN TEREST PAYMENT DEBITED IN P&L ACCOUNT. THE A.O. OBSERVED THAT THE ASSESSEE F ILED THE RETURN OF INCOME ON 25.08.2005 AT LOSS OF RS.3,02,945/-. THE A.O. F URTHER OBSERVED THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE D URING THE YEAR. IT WAS FOUND THAT THERE WERE INTEREST PAYMENTS TO VARIOUS FAMILY MEMBERS AND ALSO INTEREST RECEIPT FROM SHRI KRISHNAVTAR J. KABRA (IN D.) AND THE NET AMOUNT HAS BEEN SHOWN AS EXPENDITURE IN THE P&L ACCOUNT. THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT FOR BUSINESS PURPOSE . THEREFORE, THE A.O. GAVE THE SHOW CAUSE NOTICE ON THIS ISSUE, WHICH WAS REPLIED BY THE ASSESSEE AND CONSIDERED BY THE A.O. ON PAGE NOS. 2 TO 6. HE ANALYZED THE BALANCE SHEET AS ON 31.03.2005 AND CONCLUDED THAT THE APPLI CATION OF LOANS AND ADVANCES WERE UTILIZED NOT FOR BUSINESS PURPOSE BUT FOR INVESTMENT ONLY. THEREFORE, HE DISALLOWED PROPORTIONATE INTEREST EXP ENDITURE SUCH AS CREDIT WAS GIVEN TO THE INTEREST INCOME SHOWN BY THE ASSES SEE FOR THE PERIOD UNDER CONSIDERATION AND THE DISALLOWANCE WAS MADE ONLY ON NET AMOUNT AT RS.2,99,900/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAS DIRECTED THE A.O. TO RE-CALCULATE THE DISALLOWANCE OF EXPENDITURE AS PER DISCUSSION MADE BY THE LD. CIT(A) ON PAGE NO.3 IN PARAGRAPH NO. 8 ON THE BASIS OF FINDING GIV EN FOR A.Y. 2004-05 AND ITA NO. 3168/AHD/10 A.Y. 05-06 PAGE 3 DIVERTED TO VERIFY THIS POINT AND PASSED A SPEAKING ORDER ON THIS ISSUE AND CLOSING STOCK OF SHARE MISTAKENLY HAD BEEN SHOWN AS INVESTMENT. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY ARGUED THAT THERE IS NO PROVISION IN THE ACT TO SET ASIDE THE C ASE BY LD. CIT(A). HE CAN CONFIRM, ENHANCE, REDUCE OR ANNUL THE ASSESSMENT U/ S. 251 OF THE IT ACT AND THERE IS NO MISTAKE OF SHOWING CLOSING STOCK OF SHA RE AS INVESTMENT. AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT FILED THE COP Y OF THE ORDER OF THE CO- ORDINATE A BENCH, ITAT, AHMEDABAD IN ASSESSEES O WN CASE FOR A.Y. 04-05 IN ITA NO. 2474/AHD/2010 AND ARGUED THAT THE REVENU ES APPEAL WAS DISMISSED ON IDENTICAL ISSUE BY THE HONBLE BENCH. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS OF THE CASE. THE IDENTICAL ADDITION MADE BY THE A.O. IN A .Y. 04-05 ON WHICH CIT(A) HAS DIRECTED THE A.O. TO REWORK OUT THE DISALLOWANC E AS MANNER INDICATED IN THE ORDER OF THE CIT(A). THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE LEARNED CIT(A) IN THE IM PUGNED ORDERS DIRECTED THE AO TO WORK OUT THE TOTAL INTEREST FREE FUNDS AVAILABLE AT THE PARTICULAR TIME WHEN THE ADVANCES WERE GIVEN TO THE AFORESAID PARTIES AND EXAMINE AS TO WHETHER SUCH FUNDS WERE S UFFICIENT TO LEND THE MONEY WITHOUT CHARGING ANY INTEREST. IN THE EVE NT THE FUNDS WERE SUFFICIENT TO MAKE SUCH INTEREST FREE ADVANCES, NO INTEREST SHOULD BE DISALLOWED. HOWEVER, IF INTEREST FREE FUNDS AVAILAB LE WERE LESS THAN THE INTEREST FREE ADVANCES, THEN PROPORTIONATE DISA LLOWANCE OF INTEREST SHOULD BE MADE IN THE LIGHT DECISION IN TH E CASE OF TORRENT FINANCIERS LTD. 73 TTJ 624. THE LEARNED DR APPEARIN G BEFORE US ITA NO. 3168/AHD/10 A.Y. 05-06 PAGE 4 MERELY CONTENDED THAT THE ID. CIT(A) COULD NOT SET ASIDE THE MATTER TO THE AO. HOWEVER, WE FIND THAT THE ID. CIT(A) HAS NOT SET ASIDE THE MATTER BUT MERELY DIRECTED THE AO TO WORK OUT THE D ISALLOWANCE OF INTEREST IN THE MANNER INDICATED ABOVE. WE DO NOT F IND ANY INFIRMITY IN THIS APPROACH OF THE AO IN DIRECTING TO QUANTIFY THE DISALLOWANCE OF INTEREST IN TERMS OF HIS DIRECTIONS. SINCE THE REVE NUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW, WE ARE NOT INCLINED TO INTERFERE WITH THE FIN DINGS OF THE LEARNED CIT(A) IN THESE TWO APPEALS. THEREFORE, GROUND NO.1 IN THESE TWO APPEALS IS DISMISSED.' THE ISSUE IS IDENTICAL AND THE CIT(A) GAVE THE DIRE CTION TO RE-COMPUTE THE DISALLOWANCE AND NOT HAD SET ASIDE THE ORDER OF THE A.O. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE REVE NUES APPEAL. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 25.10.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) ,