Omwati Goval, Bhopal V. DCIT1(1) ,Bhopal, Bhopal

ITA 323/Ind/2020

AI Insights

The case involves an appeal by the late Smt. Omwati Goyal against the order of the Commissioner of Income-Tax (Appeals)-1, Bhopal, which upheld the disallowance of interest expenditure claimed by the assessee. The disallowance was initially made by the Deputy Commissioner of Income-Tax, Bhopal, during a scrutiny assessment under section 143(3) of the Income-tax Act, 1961, for the Assessment Year 2010-11. The primary contention was whether the interest paid on a loan from Citi Bank, amounting to Rs. 8,88,630, was deductible, given that the assessee had also advanced a loan to Shri Prahlad Das Goyal without charging interest, which was viewed as a diversion of funds for non-business purposes by the tax authorities.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 135715 (ITAT-INDORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-11-2022
• Assessment Year: misc
• Appeal Filed On: 01-02-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 13

Judgement Text

आयकरअपील यअ धकरण,इंदौर यायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.323/Ind/2020 Assessment Year: 2010-11 Late Smt. OmwatiGoyal, (L/H Jyoti Goyal), Bhopal बनाम/ Vs. DCIT 1(1) Bhopal (Appellant / Assessee) (Respondent / Revenue) PAN: ABAPG 6410 F Assessee by Shri S.S. Deshpandey, AR Revenue by ShriAshishPorwal, Sr. DR Date of Hearing 09.11.2022 Date of Pronouncement 20.12.2022 आदेश/O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 04.09.2020passed by learned Commissioner of Income-Tax (Appeals)-1, Bhopal[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 13.03.2013 passed by learned DCIT-1(1), Bhopal[“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year[“AY”] 2010-11, the assessee has filed this appeal on following effective ground: “(1) That on the facts and in the circumstances of the case of the assessee the learned Honorable Commissioner of Income-tax Appeals-I, Bhopal was not justified in confirming disallowance of interest of Rs. 8,88,630/- paid to CITI Bank holding the same to be related to the funds advanced to PD Goyal.” OmwatiGoyal ITA No.323/Ind/2020 Assessment year 2010-11 Page 2 of 5 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Briefly stated the facts leading to preset appeal are such thatthe assessee-individual submitted her return of income at a total income of Rs. 79,030/- which was assessed by Ld. AO by way of scrutiny assessment u/s 143(3) at a total income of Rs. 1,70,61,685/- after making certain additions. Aggrieved, the assessee filed first-appeal to Ld. CIT(A) and got part relief. Still aggrieved, the assessee has now come in this appeal before us assailing the order of Ld. CIT(A). 4. The sole grievance of assessee in present-appeal before us is the disallowance of interest expenditure of Rs. 8,88,630/- claimed by assessee as deduction, made by Ld. AO and upheld by Ld. CIT(A). 5. The position of case in the nutshell is such that while completing scrutiny-assessment, the Ld. AO observed that the assessee has takena loan of Rs. 71,40,439/- from Citi Bank on one hand and given a loan of Rs. 77,33,731/- to ShriPrahlad Das Goyal on other hand. Ld. AO further observed that while the assessee has paid interest of Rs. 8,88,630/- to Citi Bank and claimed the same as deduction, she has not charged any interest from ShriPrahlad Das Goyal and thus there is a diversion of funds for non- business purpose. Framing such a view, the Ld. AO disallowed the deduction of interest of Rs. 8,88,630/-. During first-appeal, the assessee made submissions to Ld. CIT(A) but however theLd. CIT(A) was not impressed and hence confirmed the action of Ld. AO. 6. During hearing, the Ld. AR straightaway carried us to the Balance- Sheet as on 31.03.2009 and 31.03.2010, placed at Paper Book Page No.14 and Page No. 11 respectively. Inviting our attention to the liabilities side of Balance-Sheets, the Ld. AR pointed out that the outstanding loan of Citi Bank as on 31.03.2009 and 31.03.2010 was Rs. 73,46,479/- and 71,40,439/- respectively. Then carrying us to the asset side of Balance- OmwatiGoyal ITA No.323/Ind/2020 Assessment year 2010-11 Page 3 of 5 Sheets, the Ld. AR submitted that the loan given to ShriPrahlad Das Goyal as on 31.03.2009 and 31.03.2010 was Rs. 19,37,230/- and 77,33,730/- respectively. In short, the Ld. AR demonstrated that during the current-year, the loan from Citi bank has decreased from Rs. 73,46,479/- to Rs. 71,40,439/- (or it can be said to be almost same), but the loan given to ShriPrahlad Das Goyal has increased from Rs. 19,37,230/- to 77,33,730/-. Thus, according to Ld. AR, a major portion of loan is given to ShriPrahlad Das Goyal during the current year itself but no loan has been taken from Citi Bank in current year. Ld. AR submitted that in such a scenario it is totally wrong, absurd and baseless on the part of lower authorities to draw a conclusion that the assessee has used loan taken from Citi bank for advancing loan to ShriPrahlad Das Goyal. For the sake of completeness, Ld. AR further drew our attention to a summarized account copy of Citi Bank Loan A/c, placed at Page No. 13 of the Paper-Book, which clearly reveals that there is only opening balance, interest, repayments and closing balance; there is no fresh loan taken from Citi bank during current-year. Inviting our attention to other components in the Balance-Sheet, the Ld. AR further submitted that the assessee has sufficient capital balance and interest-free advances received from other parties which have been utilized for giving loan to ShriPrahlad Das Goyal. With such submissions, Ld. AR argued that the lower authorities have drawn wrong inference against assessee without taking due care of the financials of assessee. The Ld. AR therefore requested to delete the disallowance made by Ld. AO. 7. Ld. DRsupported the orders of lower authorities and argued that the disallowance must be upheld. 8. We have considered the rival submissions of both sides and perused the material held on record. On a careful consideration of the documents referred to by Ld. AR, we find sufficient weightage in his submission. We observe that during the year, there is a no increase in the loan taken from Citi bank (in fact, there is a slight decrease), but on the other hand a major OmwatiGoyal ITA No.323/Ind/2020 Assessment year 2010-11 Page 4 of 5 portion of loan to ShriPrahlad Das Goyal has been given during the year. Thus, the conclusion that loan taken from Citi bank has been given to ShriPrahlad Das Goyal does not have strength. Further, we also find that the assessee has her own capital and enough interest-free advances received from parties, which were also available for giving loan. Ld. DR could not rebut these factual submissions made by Ld. AR. Taking into account these aspects, we observe that the assessee could not be said to have used the loan of Citi bank for giving loan to ShriPrahlad Das Goyal. Being so, we are of the view that the lower authorities have wrongly disallowed the interest deduction claimed by assessee. We therefore direct the Ld. AO to delete the disallowance. The assessee succeeds in its ground. 9. In the result, this appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 20/12/2022. Sd/- Sd/- (CHANDRA MOHAN GARG) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 20.12.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 13.12.22 OmwatiGoyal ITA No.323/Ind/2020 Assessment year 2010-11 Page 5 of 5 2. Date of typing & draft order placed before the Dictating Member 13.12.22 3. Date on which the approved draft comes to the Sr. P.S./P.S. 13.12.22 4. Date on which the approved draft is placed before other Member 13.12.22 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order