SAGAR CORPORATION, MUMBAI V. ACIT CIR 33(3), MUMBAI

ITA 3184/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1912 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 13-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 234B; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.3184/MUM/2019 ( / ASSESSMENT YEAR: 2013-14) M/S. SAGAR CORPORATION 2401-2402, CHALLENGER NO.1 KANDIVALI (W), MUMBAI-400 101. / VS. A CIT C IRCLE 33(3) 607, 6 TH FLOOR, C-12, PRATYAKSHKAR BHAVAN BKC, BANDRA (E), MUMBAI-400 051. PAN/TAN: AAKFS - 6767 - Q ( !$% /APPELLANT ) : ( &$% / RESPONDENT ) ASSESSEE BY : SHRI VIMAL PUNMIYA LD. AR REVENUE B Y : SHRI T.S. KHALSA-LD. SR. DR / DATE OF HEARING : 24/06/2021 / DATE OF PRONOUNCEMENT : 01/07/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-45, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-45/AC-33(3) /ITA-390/2016-17 DATE D 28/04/2016 ON FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.8,42,922/- O N ACCOUNT OF DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. 2 2. THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT 1961. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE INITIATI ON OF THE PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. AS EVIDENT, IN GROUND NO.1, THE ASSESSEE IS AGGRIEV ED BY CONFIRMATION OF DISALLOWANCE U/S.36(1)(III) FOR RS.8.42 LACS. REST OF GROUNDS ARE EITHER PREMATURE OR CONSEQUENTIAL AND HENCE, DISMISSED. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER- BOOK. OUR ADJUDICATION TO THE SUBJECT MATTER OF APP EAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3. THE MATERIAL FACTS ARE THAT THE ASSESSEE BEING R ESIDENT FIRM WAS ASSESSED U/S 143(3) ON 18/03/2016 WHEREIN IMPUGNED DISALLOWANCE WAS MADE. THE DISALLOWANCE STEM FROM THE FACT THAT DURI NG ASSESSMENT PROCEEDINGS, IT WAS NOTED BY LD. AO THAT ONE OF THE PARTNERS OF THE FIRM I.E., SHRI ASHOK KUMAR BAGIA HAD NEGATIVE OPENING A S WELL AS CLOSING CAPITAL BALANCE OF RS.44.80 LACS & RS.71.47 LACS RE SPECTIVELY. THE FIRM DEBITED INTEREST EXPENSE OF RS.66.39 LACS. ACCORDIN GLY FORMING A BELIEF THAT INTEREST BEARING FUNDS WERE UTILIZED FOR DRAWI NGS AND SINCE NO INTEREST WAS CHARGED ON PARTNERS DRAWINGS, LD.AO P ROCEEDED TO MAKE DISALLOWANCE U/S.36(1)(III). THE SAME WAS COMPUTED AT RS.8.46 LACS IN PARA-4 OF THE ASSESSMENT ORDER. THE ACTION OF LD. A O, UPON CONFIRMATION BY LD. CIT(A), IS IN FURTHER CHALLENGE BEFORE US. T HE LD. CIT(A), INTER-ALIA, OPINED THAT THERE WAS DIVERSION OF BUSINESS FUNDS F OR NON-BUSINESS PURPOSE WHICH JUSTIFY DISALLOWANCE U/S 36(1)(III). 4. UPON PERUSAL OF ASSESSEES FINANCIAL STATEMENTS AS PLACED ON RECORD, WE FIND THAT THE ASSESSEE FIRM HAS TWO PART NERS VIZ. SHRI ASHOK KUMAR BAGLA & SMT. KIRAN BAGLA. ON AGGREGATE BASIS, THE PARTNERS 3 HAVE POSITIVE BALANCES DURING AYS 2011-12, 2012-13 & 2013-14. IN FACT, THE CAPITAL BALANCES HAVE IMPROVED FROM RS.14.62 LA CS DURING AY 2012- 13 TO RS.15.58 LACS DURING AY 2013-14 WHICH WOULD S HOW THAT THERE IS AN INCREASE IN PARTNERS CAPITAL BALANCES DURING TH IS YEAR AS AGAINST THE ALLEGATION OF LD. AO THAT BUSINESS FUNDS WERE USED FOR DRAWINGS. AS PER PARTNERSHIP DEED, THE ASSESSEE HAS NEITHER PAID INT EREST ON PARTNERS CREDIT BALANCE NOR CHARGED INTEREST ON DRAWINGS. TH ERE IS NO DIVERSION OF FUNDS FOR NON-BUSINESS PURPOSE WHICH IS EVIDENT FRO M ASSESSEES BALANCE SHEET AS PLACED ON RECORD. EVEN OTHERWISE, SHARE OF PROFIT OF RS.42.29 LACS HAVE ACCRUED TO SHRI ASHOK BAGLA AT Y EAR END WHICH COULD BE ASSUMED TO HAVE ARISEN UNIFORMLY THROUGHOU T THE YEAR. THEREFORE, IN OUR OPINION, LOWER AUTHORITIES HAVE E RRED IN INVOKING THE PROVISIONS OF SEC.36(1)(III) ON THE FACTS AND CIRCU MSTANCES OF THE CASE. BY DELETING THE IMPUGNED ADDITION, WE ALLOW GROUND NO.1. 5. THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON 01 ST JULY, 2021 SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 01/07/2021 SR.PS, JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. !$% / THE APPELLANT 2. &$% / THE RESPONDENT 3. , ( ! ) / THE CIT(A) 4. , / CIT CONCERNED 5. - (. , !. , / DR, ITAT, MUMBAI 6. /01 / GUARD FILE 4 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.