Shri Mukeshkumar Ratilal Modi, Mehsana V. The Income Tax Officer, Patan Ward-3, Mehsana

ITA 3262/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9612 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D V SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER ./ ITA NO. 3262/AHD/2015 / ASSESSMENT YEAR: 2011-12 MUKESHKUMAR RATILAL MODI, C/O. RATILAL & CO., BAZAR, KUKARWADA, TAL. VIJAPUR, DIST. MEHSANA .. APPELLAN T PAN : ABWPM 1623 J VS INCOME TAX OFFICER, PATAN WARD-3, MEHSANA .. RESPONDENT ASSESSEE(S) BY : SHRI ANIL KSHATRIYA , AR REVENUE BY : SHRI D .V. SINGH , DR / DATE OF HEARING 08/01/2016 /DATE OF PRONOUNCEMENT 03/02/2016 / O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), GANDHINAGAR, AHMEDABAD DATED 28.09.2015 FOR ASSESSMENT YEAR 2011 -12. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. ON THE FACTS AND IN LAW AS WELL AS IN THE CIRCUMSTA NCES OF THE CASE OF THE APPELLANT, THE LD. CIT(APPEALS) HAS GROSSLY ERRED IN CONFIRMING DISALLOWANCE OF RS.3,22,037/- O N ACCOUNT OF SUNDRY CREDITORS, WHEN THERE IS NO JUSTI FICATION FOR MAKING IMPUGNED DISALLOWANCE. THE SAME DESERVE S TO BE DELETED. 2. ON THE FACTS AND LAW AS WELL AS IN THE CIRCUMSTANCE S OF THE CASE OF THE APPELLANT, THE LD. CIT(APPEALS) HAS GRO SSLY ERRED (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 2 IN CONFIRMING DISALLOWANCE OF RS.83,673/- ON ACCOUN T OF INTEREST, WHEN THERE IS NO JUSTIFICATION FOR MAKING IMPUGNED DISALLOWANCE. THE SAME DESERVES TO BE DELETED. 3. THE FIRST ISSUE IS WITH REGARD TO THE DISALLOWAN CE OF RS.3,22,037/- ON ACCOUNT OF SUNDRY CREDITORS. DURIN G THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOT ICED THAT IN THE ASSESSEES BOOKS OF ACCOUNTS, THERE APPEARED AN AMOUNT OF RS.3,22,037/- IN THE NAME OF M/S UNITED LINER AGENC Y INDIA (P) LTD UNDER THE HEAD 'SUNDRY CREDITORS. THE ASSESSIN G OFFICER MADE AN ADDITION OF ENTIRE AMOUNT OF RS.3,22,037/-, WHICH WAS CONFIRMED BY THE CIT(A) ON APPEAL. 3.1 ACCORDING TO ASSESSEE, M/S. UNITED LINER AGENCY INDIA (P) WAS A CARGO AGENT FUNCTIONING ON BEHALF OF THE ASSE SSEE. THE NAME OF THE ABOVE PARTY NAMELY M/S UNITED LINER AGE NCY INDIA PVT. LTD. APPEARS UNDER THE HEAD 'SUNDRY CREDITORS' IN THE ASSESSEE'S BALANCE SHEET AS ON 31/03/2011. COMPLETE DETAIL OF SUNDRY CREDITORS WAS PROVIDED IN DETAILED GROUP SUM MERY OF SCHEDULE- 2. AS PER COPIES OF LEDGER ACCOUNT FILED ON RECORD, THE ASSESSEE HAS CREDITED A SUM OF RS. 3,22,037/- AS DE TENTION CHARGES TO THE ACCOUNT OF THE AFORESAID PARTY ON 01 .02.2007. THE SAID BALANCE OUTSTANDING AS ON 31.03.2007 HAS BEEN CARRIED FORWARD FURTHER AS ON 01.04.2010 AS OPENING BALANCE . THE (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 3 ASSESSEE SUBMITTED THAT, THERE BEING NO FURTHER TRA NSACTION ON ACCOUNT OF INTERNAL DISPUTE AND SETTLEMENT OF CLAIM OF THE PARTY, THE VERY SAME AMOUNT HAS BEEN APPEARING IN THE PART Y'S LEDGER ACCOUNT AS CLOSING CREDIT BALANCE AS ON 31.03.2011. THUS, THIS BEING AN OLD ACCOUNT SHOWING OPENING CREDIT BALANCE IN THE PREVIOUS YEAR AND THERE BEING NO OTHER TRANSACTION, THE SAME OLD BALANCE AS ON 31.03.2011 WAS CARRIED FORWARD AS ON 11.04.2011 IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THUS, THER E WAS NO NEW CREDIT/LIABILITY OF THE ASSESSEE IN THE PREVIOUS YE AR RELEVANT TO ASSESSMENT YEAR 2011-12. THEREFORE, AS PER THE NORM AL PROVISIONS OF THE ACT THERE IS NO JUSTIFICATION FOR MAKING IMPUGNED ADDITION ON ACCOUNT OF OLD CREDIT BALANCE OF THE CR EDITOR FOR THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF APPE LLATE PROCEEDINGS, THE ASSESSEE SUBMITTED A WRITTEN SUBMI SSION DATED 28.05.2015. ACCORDING TO AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE LD. CIT (A) HAS ALSO NOTED THAT 'THER E BEING NO FURTHER TRANSACTION ON ACCOUNT OF INTERNAL DISPUTE AND SETTLEMENT OF CLAIM OF THE PARTY, THE VERY SAME AMOUNT IS APPE ARING IN THE PARTY'S LEDGER ACCOUNT AS CLOSING CREDIT BALANCE AS ON 31/03/2011. THUS, THIS BEING AN OLD ACCOUNT SHOWING OPENING CREDIT BALANCE IN THE PREVIOUS YEAR AND THERE BEING NO OTHER TRANSACTION, THE SAME OLD BALANCE AS ON 31/03/2011 IS CARRIED (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 4 FORWARD AS ON 01/04/2011 IN THE BOOKS OF ACCOUNT OF ASSESSEE. THUS, THERE IS NO CREDIT/LIABILITY OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO A.Y.2011-12.' WHEREAS, IN PAGE NO .6 OF APPELLATE ORDER, THE CIT(A) CAME TO THE CONCLUSION THAT NO EV IDENCE WHATSOEVER HAS BEEN PRODUCED BEFORE HIM BY THE ASSE SSEE IN SUPPORT OF THE CLAIM MADE. IN THIS REGARD THE STAN D OF THE ASSESSEE HAS BEEN THAT HE HAS SUBMITTED A PAPER BOO K DULY INDEXED CONTAINING TOTAL 89 PAGES AND HAS CATEGORIC ALLY SUBMITTED THAT IN THE NORMAL PROVISIONS OF THE ACT, SO THERE WAS NO JUSTIFICATION OF MAKING IMPUGNED ADDITION ON ACCOUN T OF OLD CREDIT BALANCE OF THE CREDITOR CONCERNED FOR THE YEAR UNDE R CONSIDERATION. IN VIEW OF ABOVE, I AM OF THE VIEW T HAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE IMPUGNED ADDITIO N MADE BY THE ASSESSING OFFICER OF RS.3,22,037/- ON ACCOUNT OF SU NDRY CREDITORS FOR THE REASONS AS DISCUSSED ABOVE. THE ASSESSING O FFICER IS HEREBY DIRECTED TO DELETE THE SAME ACCORDINGLY. 4. THE NEXT ISSUE IS WITH REGARD TO THE DISALLOWANC E OF RS.83,673/- ON ACCOUNT OF INTEREST. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.83,673/- BY DISALLOWING ENTIRE INTEREST EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT. TH E ASSESSING OFFICER NOTICED THAT THERE WAS A DEBIT BALANCE OF R S.2 LAKH IN THE NAME OF M/S. SUKUN BUSINESS. HE FURTHER NOTED THAT NO INTEREST (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 5 WAS DISCLOSED IN THE P&L ACCOUNT, WHEREAS THE ASSES SEE HAD DEBITED INTEREST OF EXPENSE OF RS.83,673/- IN THE P ROFIT & LOSS ACCOUNT. THEREFORE, HE DISALLOWED THE ENTIRE INTERE ST EXPENSE CLAIMED BY THE ASSESSEE, HOLDING THAT THE ASSESSEE HAS NEITHER CHARGED NOR RECEIVED INTEREST ON LOAN AND ADVANCE O F RS.2 LAKH. HOWEVER, ACCORDING TO THE ASSESSEE HE HAS SHOWN INT EREST INCOME OF RS.79,637/- AS APPEARING UNDER THE HEAD INDIREC T INCOME IN THE PROFIT & LOSS ACCOUNT. FURTHER, THE ASSESSEE CL AIMED TO HAVE SUBMITTED THE DETAILS OF THE SAME BEFORE THE ASSESS ING OFFICER, WHICH READS AS UNDER:- SR. NO. NAME OF PARTY AMOUNT OF INTEREST REMARKS 1 M/S. PRECISION ELECTRICAL STAMPING RS.7,780/ - PAID ON ACCOUNT OF DELAYED PAYMENTS ON ELECTRICAL STAMPING, AS PER TERMS AND CONDITIONS OF INVOICES. 2 M/S. PRIYANKA ELECTRICAL STAMPING R S.68,207/ - - DO - 3 THE KARMAL VIVIDH SAHAKARI MANDALI LTD RS.8,675/ - ON ACCOUNT OF DELAYED PAYMENT OF COTTON PURCHASED IN 2006-07 TOTAL RS.84,662/ - 4.1 THUS, THE INTEREST LIABILITY IN REGARDS OF THE ABOVE PARTIES WAS CLAIMED TO BE GENUINE AND INCURRED DURING THE C OURSE OF BUSINESS AND THERE WAS NO ELEMENT OF BORROWING MONE Y FOR NON- BUSINESS PURPOSES. THE ASSESSEE HAS DEDUCTED TAX AT SOURCE (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 6 ATTRIBUTED TO THE INTEREST CREDITED TO THEIR LEDGER ACCOUNTS. THEREFORE, THE LD. AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIF IED IN DISALLOWING THE ENTIRE CLAIM OF INTEREST EXPENSE OF RS.83,673/-, WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPE R PERSPECTIVE. ACCORDING TO THE AUTHORIZED REPRESENTATIVE, THE ASS ESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS ON MERCANTILE BASIS, WHICH ARE SUBJECTED TO AUDIT BY THE CHARTERED ACCOUNTANTS AND THE RETURN OF INCOME IS ACCOMPANIED WITH SUCH TAX AUDIT REPOT U/S 44AB OF THE ACT. HE FURTHER SUBMITTED THAT, AS PER THE DETAILS FURNISHED, THE INVESTMENT IN M/S SUKUN BUSINESS WAS MADE ON 14,07.2008, BY A/C PAYEE CHEQUE NO. 383966 DRAWN ON HDFC BANK, AND THERE WAS NO NEW TRANSACTION IN THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT, AS PER P& L A/C, THE ASSESSEE HAS ALREADY CREDITED AN AMOUNT OF RS.79,63 7/- AS INTEREST INCOME, THEREFORE, THE ASSESSING OFFICER'S ASSUMPTION OF NON-CHARGING OF INTEREST ON LOANS & ADVANCES WAS NO T CORRECT. THE INTEREST EXPENSES WERE ON ACCOUNT OF INTEREST ATTRI BUTABLE TO DELAYED PAYMENTS FOR PURCHASE OF GOODS AND PACKING MATERIAL; AND NO PERSONAL ELEMENT WAS INVOLVED AND THE SAME W AS CLAIMED WHICH IS DEDUCTABLE U/S.36(L)(III) OF THE ACT. WIT HOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SUBMITTED THAT THE ASSESSE E HAS PAID (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 7 INTEREST TO THE AFORESAID THREE PARTIES ONLY, WHOSE NAMES APPEAR IN THE AUDITED BALANCE SHEET OF THE ASSESSEE UNDER THE HEAD CURRENT LIABILITIES WHICH ARE TRADING LIABILITIES WHOM THE ASSESSEE HAS PAID INTEREST IN THE PREVIOUS YEAR AND HAS PAID IN THE PAST AS WELL. SUCH CLAIM IN THE PAST HAS BEEN ACCEPTED AS G ENUINE IN THE PAST COMPLETED ASSESSMENTS. IN THIS BACKGROUND, IT WAS SUBMITTED THAT THE ASSESSEE WAS ALREADY HAVING SUFF ICIENT INTEREST FREE FUNDS TO THE EXTENT OF RS. 2,86,73,849/-, IN T HE FORM OF SUNDRY CREDITORS'. THE ENTIRE INTEREST FREE FUNDS WHEN CONSIDERED, THE INTEREST FREE AMOUNT OF RS. 2 LAKH ALLEGEDLY TREATED AS INVESTMENT WITH M/S SUKUN BUSINESS DOESN 'T EXCEED THE TOTAL OF INTEREST FREE FUNDS AS STATED ABOVE. T HEREFORE, THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDE D THAT NO DISALLOWANCE COULD BE MADE. IN THE PRESENT CASE, T HE ASSESSEE HAS PAID INTEREST ONLY TO THREE PARTIES AS STATED A BOVE. THE SAME IS NOT ON ACCOUNT OF ANY SHARAFI BORROWING BUT IT I S A TRADING LIABILITY CRYSTALLIZED DURING THE COURSE OF BUSINES S AND HAS BEEN ACCEPTED IN THE PAST AS WELL AS CLAIMED BY THE ASSE SSEE. THE ASSESSEE HAS ALSO COMPLIED WITH TDS PROVISIONS. THE ASSESSING OFFICER, WHILE DISALLOWING INTEREST, HAS NOT ESTABL ISHED NEXUS BETWEEN INTEREST FREE CREDITORS-LIABILITY AND ALLEG ED ADVANCE GIVEN TO THE AFORESAID PARTIES. THEREFORE, THE AUTHORIZED REPRESENTATIVE (SMC) ITA NO. 3262/AHD/2015 MUKESHKUMAR RATILAL MODI VS. ITO AY 2011-12 8 FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE IN QUESTION WAS NOT JUSTIFIED. TAKING INTO CONSIDERATION ALL FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS OF THE LD . AUTHORIZED REPRESENTATIVE, I DEEM IT PROPER TO SET ASIDE THE O RDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK T O THE FILE OF THE CIT(A) FOR DECIDING THIS ISSUE AFRESH IN THE LIGHT OF AFORESAID SUBMISSIONS OF THE LD. AUTHORIZED REPRESENTATIVE. I ORDER ACCORDINGLY. SINCE I AM RESTORING THIS PRELIMINARY ISSUE TO THE FILE OF CIT(A) AS DISCUSSED ABOVE, I AM REFRAINING TO CO MMENT ON THE MERIT OF CASE AT HAND. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3RD FEBRUARY, 2016 AT AHMEDABAD. SD/- (SHAILENDRA K. YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 03/02/2016 BIJU T., PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' ' # / CONCERNED CIT 4. ' ' # ( ) / THE CIT(A) 5. &'( ! , ' ! , / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE. / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) !', / ITAT, AHMEDABAD