Prem Chand Gupta, Prop., Sonepat V. ITO, Ward- 3, Sonepat

ITA 3220/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7434 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A; 37(1); 143(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3220/DEL/2018 ASSESSMENT YEAR: 2014-15 PREM CHAND GUPTA, PROP., VS. ITO, WARD-3, ASSAM TRADING CO., SONEPAT SUBZI MANDI, SONIPAT HARYANA 131001 (PAN: ADQPG0366F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SUSHIL WADHWA, CA REVENUE BY : SH. SL ANURAGI, SR. DR. ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 22.3.2018 OF THE LD. CIT(A), ROHTAK PERTAINING TO ASSESSMENT YEAR 2014- 15 ON THE FOLLOWING GROUNDS:- 1. THAT ON FACTS AND IN CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) ROHTAK HAS ERRED IN UPHOLDING THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS 4,57,532/- OUT OF TOTA L INTEREST OF RS 12,31,796/- PAID TO SONIPAT URBAN COOPERATIVE BANK ON CASH CREDIT LIMIT ALLEGING THAT THE APPELLANT HAD NOT GIVEN THE FREE ADVANCES FOR BUSINESS PURPOSES AND ALSO NO BENEFIT HAS BEEN DERIVED FROM THIS ADVANCES FOR BUSINESS PURPOSES WITHOUT CONSIDERING THAT THE APPELLANT HAD GIVEN 2 THE NON INTEREST BEARING LOAN/ADVANCES OUT OF HIS OWN FUND. 2. THAT ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ROHTAK HAS ERRED IN UPHOLDING THE DISALLOWANCE ALLEGING THAT THE APPELLANT HAS NOT PREPARED SEPARATE ACCOUNT FOR BEARING FUND AND NON- BEARING FUND WITHOUT CONSIDERING THE APPELLANT SUBMISSION THAT THE NON-INTEREST BEARING LOAN WAS GIVEN OUT OF HIS OWN FUND. 3. THAT ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ROHTAK HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS 32,313/- U/S 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF INCOME TAX RULE 1962 ALLEGING THAT NO EXPLANATION WAS FURNISHED AS TO WHY THE INTEREST EXPENSES RELATING TO THE DIVIDEND INCOME BE NOT DISALLOWED. 4. THAT ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ROHTAK HAS ERRED IN UPHOLDING AN ADHOC ADDITION OF RS 24061/- EQUIVALENT TO 10% OUT OF VARIOUS EXPENSES OF RS 2,40,610/-. 5. THAT THE APPELLANT TAKE LIBERTY TO ALTER, AMEND , VARY ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE F ILED HIS RETURN OF INCOME ON 27.11.2014, DECLARING TAXABLE INCOME OF R S.3,65,210/- THROUGH E-FILING, FOR THE AY 2014-15. THE RETURN OF THE ASSESSEE WAS 3 PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT ACT). THE CASE OF THE ASSESSEE SELECTED FOR SCRUTINY UNDER CA SS AND ACCORDINGLY, STATUTORY NOTICES U/S. 143(2) OF THE ACT WAS ISSUED ON 28.8.2015. THE AUDITED BALANCE SHEET ALONGWITH TRADING / P&L ACCOU NT AND OTHER RELEVANT DOCUMENTS WERE OBTAINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREAFTER, NOTICE U/S. 142(1)/ 143(2 ) ALONGWITH DETAILED QUESTIONNAIRE ISSUED AND INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 8,78,530/- BY MAKING VARIOUS ADDITIONS VIDE ORD ER DATED 25.11.2016 PASSED U/S. 143(3) OF THE ACT. AGAINST THE ASSESSM ENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGN ED ORDER DATED 22.3.2018 HAS PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL. 3. DURING THE HEARING, LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT LD. CIT(A) HAS WRONGLY SUSTAINED THE DISALLOWANCE OF P ROPORTIONATE INTEREST OF RS 4,57,532/- OUT OF TOTAL INTEREST OF RS 12,31, 796/- PAID TO SONIPAT URBAN COOPERATIVE BANK ON CASH CREDIT LIMIT ALLEGIN G THAT THE ASSESSEE HAD NOT GIVEN THE FREE ADVANCES FOR BUSINESS PURPOS ES AND ALSO NO BENEFIT HAS BEEN DERIVED FROM THIS ADVANCES FOR BUSINESS PU RPOSES WITHOUT CONSIDERING THAT THE APPELLANT HAD GIVEN THE NON IN TEREST BEARING LOAN/ADVANCES OUT OF HIS OWN FUND. IT IS FURTHER S UBMITTED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ROHTAK HAS WRO NGLY CONFIRMED THE DISALLOWANCE ALLEGING THAT THE ASSESSEE HAS NOT PREPARED SEPARATE ACCOUNT FOR BEARING FUND AND NON-BEARING FUND WITHO UT CONSIDERING THE ASSESSEE SUBMISSION THAT THE NON-INTEREST BEARING L OAN WAS GIVEN OUT OF 4 HIS OWN FUND. HOWEVER, THE ASSESSEE HAS USED THE I NTEREST FREE FUNDS AVAILED AS UNSECURED LOANS FROM FRIENDS AND ASSOCIA TES TO PROVIDE INTEREST FREE LOANS AND ADVANCES DURING THE YEAR, WHICH DID NOT WARRANT ANY ADDITION U/S. 36(1)(III) OF THE ACT. HE FURTHER STA TED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO WRONGLY UPHELD THE DISALLOWANCE OF RS 32,313/- U/S 14A OF THE INCOME TAX ACT READ WITH R ULE 8D OF INCOME TAX RULE 1962 ALLEGING THAT NO EXPLANATION WAS FURNISHE D AS TO WHY THE INTEREST EXPENSES RELATING TO THE DIVIDEND INCOME B E NOT DISALLOWED AND ALSO ERRED IN UPHOLDING AN ADHOC ADDITION OF RS 240 61/- EQUIVALENT TO 10% OUT OF VARIOUS EXPENSES OF RS 2,40,610/-. IT W AS SUBMITTED THAT ASSESSEES WON FUNDS AT THE BEGINNING AND AT CLOSE YEAR WERE MORE THAN THE AMOUNT OF INTEREST FREE LOANS AND INVESTMENT S. HOWEVER, HE SUBMITTED THAT BOTH THE LOWER AUTHORITIES COULD NOT SPECIFY A SINGLE DISCREPANCY IN THE VOUCHERS OTHER THAN STATING A G ENERAL STATEMENT, THEREFORE, THE DISALLOWANCE CANNOT STAND SCRUTINY A ND WAS LIABLE TO BE DELETED. IN SUPPORT OF HIS CONTENTION, HE FILED A PAPER BOOK CONTAINING PAGES 1 TO 53 AND RELIED UPON FEW CASES ON THE DECI SION WHERE NO DISALLOWANCE IN CASE OF SUFFICIENT OWN FUNDS AND IN TEREST FREE FUNDS I.E. BRIGHT ENTERPRISES VS. CIT ITA NO. 224 OF 2013 (P&H ) DECIDED ON 24.7.2015; WOODMAN TRADING CO. PVT. LTD. VS. ITO, ( ITAT, RAJKOT) ITA NO. 552/2008 DECIDED ON 31.12.2010; YOGENDRA KHANDE LWAL VS. ACIT ITA NO. 906/2012 (ITA JAIPR) DECIDED ON 17.1.2018; CIT VS. VIJAY SOLVEX LTD., ITA NO. 147 OF 2004 (RAJ.), DECIDED ON 10.12.2014; KISSAN FATS LTD. VS. DCIT, LUDHIANA ITA NO. 779 OF 2016, ITAT, CHANDIGAR H DECIDED ON 5 28.11.2016. ON THE ADDITION U/S. 14A R/W RULE 8D I N CASE OF SUFFICIENT FUNDS AND INTEREST FREE FUNDS ARE AVAILABLE AND WHE RE DISALLOWANCE U/S. 14A R/W RULE 8D CANNOT BE MORE THAN EXEMPT INCOME , HE RELIED UPON THE CASE LAW OF HDFC BANK LTD. VS. DCIT, BOMBAY DECIDED ON 25.2.106; BENNET COLEMAN & CO. LTD. VS. ACIT (ITAT, MUMBAI) D ECIDED ON 8.1.2018; FUTURE CORPORATE RESOURCES LTD. VS. DCIT; ITA NO. 4658 OF 2015 DECIDED ON 26.7.2017; PEST CONTROL INDIA PVT. LTD. VS. DCIT, ITA NO. 5048 OF 2016 (ITAT, MUMBAI) AND ON THE ADDITION OF NO ADHOC DISALLOWANCE IS PERMISSIBLE, HE RELIED UPON THE CAS E LAW OF VIJAY INFRASTRUCTURE LTD. VS. ACIT, ITA NO. 254 OF 2015 ( ITAT, LUCKNOW) DECIDED ON 30.10.2015. IN VIEW OF ABOVE, HE REQU ESTED THAT ADDITIONS IN DISPUTE MAY BE DELETED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT HE HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS ESPECIALLY THE IMPUGNED ORDER AND THE CASE LAWS CITED BY THE LD. C IT(A) ON EACH ISSUE THEREIN. I FIND THAT ASSESSEE HAS NOT GIVEN INTERE ST FREE ADVANCES FOR BUSINESS PURPOSE, AND THAT NO BENEFIT HAS BEEN DERI VED FROM THIS ADVANCE FOR BUSINESS PURPOSE AND THAT ASSESSEE HAS NOT PREP ARED SEPARATE ACCOUNT FOR USE OF INTEREST BEARING FUNDS AND NON INTEREST BEARING FUNDS. HENCE, IN MY OPINION, THE ADDITION OF PROPORTIONAT E INTEREST OF RS. 4,57,532/- OUT OF TOTAL INTEREST OF RS. 12,31,796/- WAS RIGHTLY SUSTAINED 6 BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFE RENCE ON MY PART, HENCE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUND RAISED BY THE ASSESSEE. 5.1 AS REGARDS ADDITION OF RS. 32,313/- U/S. 14A R/ W RULE 8D IS CONCERNED, I NOTE THAT IT WAS THE ASSESSEES EXPLAN ATION THAT RS. 5,65,000/- WAS INVESTED IN THE SHARE OF SONEPAT URB AN COOPERATIVE BANK OUT OF ITS OWN FUNDS FOR GETTING THE FACILITY OF CA SH CREDIT, IS NOT SUFFICIENT EXPLANATION TO SHOW THAT THIS INVESTMENT WAS MADE O UT OF NON-INTEREST BEARING FUNDS. AS THE AO WAS NOT SATISFIED WITH THE WORKING AND EXPLANATION OF THE ASSESSE, HE HAS RIGHTLY CALCULAT ED THE DISALLOWANCE IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D OF THE I. T. RULES. HENCE, THE DISALLOWANCE MADE WAS RIGHTLY SUSTAINED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHO LD THE ACTION OF THE LD. CIT(A) AND REJECT THE GROUND RAISED BY THE ASSE SSEE. 5.2 APROPOS ADDITION OF ADHOC ADDITION OF RS. 24,0 61/- EQUIVALENT TO 10%, OUT OF VARIOUS EXPENSES OF RS. 2,40,610/- IS C ONCERNED, I FIND THAT AO HAS MADE REASONABLE DISALLOWANCE OF 10% EXPENDIT URE INCURRED ON STAFF WELFARE, MISC. AND VEHICLE EXPENSES, BECAUSE THE VOUCHERS WERE HANDMADE AND THE EXPENDITURE COULD NOT BE FULLY SUB STANTIATED AS REQUIRED UNDER THE PROVISIONS OF SECTION 37(1) OF T HE ACT, HENCE, THIS ADDITION WAS RIGHTLY SUSTAINED BY THE LD. CIT(A), W HICH DOES NOT NEED ANY INTERFERENCE ON MY PART, THEREFORE, I UPHOLD THE AC TION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUND RAISE D BY THE ASSESSEE. IT IS 7 ALSO NOTED THAT THE CASE LAWS CITED BY THE LD. COUN SEL OF THE ASSESSEE ON DISTINGUISHED FACTS AND DO NOT SUPPORT THE ASSESSEE S CLAIM. HOWEVER, THE CASE LAWS RELIED UPON BY THE LD. DR WHICH ARE M ENTIONED IN THE IMPUGNED ORDER ARE APPLICABLE IN THE CASE OF THE AS SESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 16-01-2019. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE:16/01/2019 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES