M/s Neeraj Kumar & Sons, Sangrur V. ITO, Sangrur

ITA 329/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57626 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: ASHOK KUMAR GOYAL
• Keywords: Depreciation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 329/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S NEERAJ KUMAR &SONS, V ITO, WARD-1, CLUB ROAD, SANGRUR. SANGRUR. PAN: AABHN-8475M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK KUMAR GOYAL DEPARTMENT BY: SHRI AKHILESH GUPTA DATE OF HEARING : 06.02.2012 DATE OF PRONOUNCEMENT : 10.02.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 21.01.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT') FOR THE ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE WORTHY CIT(A) PATIALA HAS ERRED IN CONFIRMING THE FINDING OF THE AO WITH REGARD TO THE DISALLOWANCE OF INTEREST ON INTEREST FREE ADVANCES TO M/S NAV DURGA RICE MILLS & NEERAJ KUMAR IN HIS INDIVIDUAL STATUS. 2. THAT THE FINDING OF THE CIT(A) WITH REGARD TO TH E DIVERSION OF FUNDS FOR NON-BUSINESS PURPOSE ON SUCH ADVANCES IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE CASE. 3. THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.21,422/- BEING THE EXPENSES ON 2 ACCOUNT OF TELEPHONE, DEPRECIATION AND CAR RUNNING EXPENSES. 4. THAT THE APPELLANT CARVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. IN GROUND NO. 1&2, THE ASSESSEE CONTENDED THAT CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO WIT H REGARD TO THE DISALLOWANCE OF INTEREST ON INTEREST FREE AD VANCES TO M/S PRABHAT FERTILIZERS AND CHEMICALS AND TO M/S NA V DURGA RICE MILLS AND NEERAJ KUMAR, IN HIS INDIVIDUA L STATUS. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, SPECIFIC QUERY WAS RAISED BY THE BENCH AS TO THE APPLICABILI TY OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF M/S ABHISHEK INDUSTRIES 286 ITR 1 (P&H) TO THE FACTS OF THE PRESENT CASE. HOWEVER, THE LD. 'AR' FAILED TO DISL ODGE THE RULING LAID DOWN THEREIN. 5. WE HAVE CAREFULLY PERUSED THE FACT SITUATION OF THE CASE, RIVAL SUBMISSIONS AND THE ORDER PASSED BY THE AO AS WELL AS THE CIT(A). WE ARE OF THE CONSIDERED OPINI ON THAT THE ASSESSEE HAS FAILED TO ADDUCE EVIDENCES OF THE NON- APPLICABILITY OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES(SUPRA) TO TH E FACTS OF HIS CASE. 6. THE FINDINGS OF THE LD. CIT(A), AS CONTAINED IN PARA 5.1 TO 5.3 ARE REPRODUCED HEREUNDER : 5.1 THE AO IN HIS ASSESSMENT ORDER AT PARA 4 HAS MENTIONED THAT APPELLANT HAS SHOWN ADVANCES TO ONE M/S PARBHAT FERTILIZERS & CHENICALS OF RS.9,50,000/ - IN 3 THE MONTH OF MARCH 2007, TO M/S NAVDURGA RICE MILLS OF RS.32,87,550/- DURING THE YEAR UNDER QUESTION. THE AO FURTHER MENTIONED THAT APPELLANT HAD ALSO MADE TRANSACTIONS WITH ONE SHRI NIRAJ KUMAR BANSAL (INDL .). THE APPELLANT WAS ASKED TO PROVE THE COMMERCIAL EXPEDIENCY FOR ADVANCING SUCH LOANS FOR WHICH NO SATISFACTORY REPLY WAS GIVEN BY THE APPELLANT. THE AO THEREFORE, PROCEEDED TO CALCULATE INTEREST ON SUCH ADVANCES ACCORDING TO THE DURATION/PERIOD OF TRANSACTION AND ADDED THE SAME TO THE INCOME OF THE APPELLANT. 5.2 BEFORE ME, THE COUNSEL FOR THE APPELLANT ATTEND ED AND ARGUED THAT APPELLANT HAD MADE INTEREST FREE ADVANCES TO M/S PARBHAT FERTILIZERS & CHEMICALS FOR RS.9,50,000/- IN THE MONTH OF MARCH 2007, FOR A VER Y SHORT PERIOD AS HE WAS A CLOSE BUSINESS FRIEND AND ADVANCES TO M/S NAVDURGA RICE MILLS WAS MADE BECAUSE IT WAS A SISTER CONCERN IN WHICH HE WAS A PARTNER IN INDIVIDUAL CAPACITY AND FURTHER THE AMOU NT WAS RECEIVED BACK FROM NIRAJ KUMAR IN HIS INDIVIDUA L CAPACITY. THE COUNSEL FOR THE APPELLANT HAS SUBMITT ED COPIES OF ACCOUNTS IN THESE CASES BY STATING THAT ADVANCES WERE FOR A SHORT PERIOD THEREFORE, NO INTE REST WAS CHARGED UNDER SOCIAL OBLIGATION. THE MAJOR ENTR IES WERE ADVANCED FROM MID OF JAN.,2007. THE FUNDS ADVANCED TO M/S NAVDURGA RICE MILLS IN WHICH THE APPELLANT IS A PARTNER WERE UTILIZED TO CLEAR BANK LIMIT AND ELECTRIC BILLS TO PULL THEM OUT OF FINANCIAL CR IES. SIMILAR IS THE POSITION IN THE CASE OF NIRAJ KUMAR 9IND.) TO WHEN THE AMOUNT ADVANCED WAS UTILIZED IN THE BUSINESS OF THE FIRM IN WHICH HE IS A PARTNER. IN SUPPORT OF HIS SUBMISSIONS HE PLACED RELIANCE ON THE DECISI ON OF HON'BLE APEX COURT IN THE CASE OF S.A.BUILDERS LTD. V CIT (288 ITR 1) (S.C), HON'BLE DELHI HIGH COURTS DECIS ION IN THE CASE OF CIT V DALMIA CEMENT (P) LTD. BOMBAY (20 02) 254 ITR 377 AND FURTHER OF JURISDICTIONAL HIGH COUR T IN 4 THE CASE OF MARUDHAR CHEMICALS & PHARMACEUTICALS (P ) LTD. 319 ITR 75. 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND RIV AL SUBMISSIONS. AFTER CAREFUL CONSIDERATION, I FIND NO FORCE IN THE ARGUMENTS OF THE COUNSEL FOR THE APPELLANT A S HE COULD NOT PROVE ANY COMMERCIAL EXPEDIENCY FOR GIVIN G INTEREST FREE ADVANCE TO ABOVE MENTIONED FIRMS AND PERSONS. THE CASE LAWS CITED BY THE COUNSEL FOR THE APPELLANT ALSO DO NOT HELP THE APPELLANT AND ARE DIFFERENT ON FACTS. THEREFORE, I HOLD THAT AO IS FU LLY JUSTIFIED IN COMING TO THE CONCLUSION THAT APPELLAN T HAS DIVERTED FUNDS FOR NON-BUSINESS PURPOSES. HENCE, GROUND RAISED BY THE APPELLANT IS NOT ACCEPTED AND ADDITION IS SUSTAINED. 7. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). CONSE QUENTLY, THE FINDINGS OF THE LD. CIT(A) ARE UPHELD AND GROUNDS O F APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 8. IN GROUND NO.3, THE ASSESSEE CONTENDED THAT CIT( A) ERRED IN CONFIRMING THE ADDITION OF RS.21,422/- BEI NG THE EXPENSES ON ACCOUNT OF TELEPHONE, DEPRECIATION AND CAR RUNNING EXPENSES. 9. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND FOUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE FACTUM OF USE OF SUCH FACILITIES, PURELY FOR THE PURPOSE OF B USINESS. CONSEQUENTLY, THE DISALLOWANCE MADE BY THE AO AND U PHELD BY THE CIT(A) IN THE MATTER IS UPHELD. CONSEQUENTL Y, GROUND RAISED BY THE ASSESSEE IS DISMISSED. 5 10. GROUND NO. 4 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEB.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 TH FEB.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH