PRITESH M GALA, MUMBAI V. ITO 14(2)(3), MUMBAI

ITA 3317/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92685 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: BURZIN R DARUWALLA
• Keywords: Proportionate interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 3317/M/2013 ( / ASSESSMENT YEAR : 2009 - 10 MR. PRITESH M. GALA, 411/413, GROUND FLOOR, SANJEEV CHS, J.S.S. ROAD, CHIRABAZAR, MUMBAI - 400 002 / VS. THE ITO 14(2)(3), MUMBAI ./ ./ PAN/GIR NO. : AOUPS 2232J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI BURZIN R. DARUWALLA / RESPONDENT BY : SHRI PREMANAND J. / DATE OF HEARING : 01 . 0 6 .2015 / DATE OF PRONOUNCEMENT : 01 .0 6 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS IS AN APPEAL BY THE ASSESSEE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 25 , MUMBAI DT. 2 7 . 2 .2012 PERTAINING TO ASSESSMENT YEAR 2009 - 10. ITA. NO. 3317/M/2013 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF INTEREST. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN PAPER, FILMS AND PAPER PRODUCTS. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 17,59,976/ - BEING INTEREST PAID TO BANK. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS/ADVANCES TO M/S. JAIHIND RS. 45 LAKHS AND TO SHRI JAYESH D. SATRA RS. 9 LAKHS. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NEGATIVE CAPITAL BALANCE IN THE BALANCE SHEET AND HAS TAKEN INTEREST BEARING SECURED LOAN FROM CENTRAL BANK OF INDIA. THE AO WAS OF THE FIRM BELIEF THAT THE ADVANCES GIVEN TO M/S. JAIHIND AND SHRI JAYESH D SATRA ARE OUT OF THE INTEREST BEARING FUNDS ON WHICH THE ASSESSEE HAS NOT CHARGED ANY INTEREST. THE AO WAS CONVINCED THAT RS. 54 LAKHS HAVE BEEN UTILIZED BY THE ASSESSEE OUT OF INTEREST BEARING BANK LOANS FOR NON BUSINESS PURPOSES. THE AO ACCORDINGLY COMPUTED THE PROPORTIONATE INTEREST ON SUCH DIVERSION AND COMPUTED THE DISAL LOWANCE AT RS. 9,72,000/ - . 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED THAT THE IMPUGNED AMOUNTS WERE GIVEN FOR SUPPLY FROM THESE TWO PARTIES. THE ADVANCES WERE GIVEN FOR BUSINESS PURPOSES THERE FORE THERE IS NO REASON FOR PROPORTIONATE OF INTEREST. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT THERE IS NO EVIDENCE OF PURCHASES FROM THESE TWO PARTIES . THE LD. CIT(A) FURTHER OBSERVED THAT M/S. JAIHIND PAPER MART IS RELATED CONCERN TO THE ASSESSEE THUS IT CAN BE SEEN THAT INTEREST FREE FUND OF RS. 45 LAKHS HAVE BEEN TRANSFERRED TO SISTER CONCERN. AFTER OBSERVING THE ITA. NO. 3317/M/2013 3 OUTSTANDING AMOUNT OF M/S. JAIHIND PAPER MART, THE LD. CIT(A) FOUND THAT THE AMOUNT OUTSTANDING IS INCREASING YEAR AFTER YEAR. THE LD. CIT(A) WAS ALSO CONVINCED THAT THE ASSESSEE IS TRANSFERRING INTEREST BEARING FUNDS TO ITS RELATED PARTIES, LD. CIT(A) CONFIRMED THE FINDINGS OF THE AO. 5 . AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL DREW OUR ATTENTION TO THE INVOICES OF JAIHIND PAPER MART BROUGHT ON OUR RECORD IN THE FORM O F A PAPER BOOK. IT IS THE SAY OF THE LD. COUNSEL THAT ASSESSEE DID PURCHASE PAPER FROM JAI HIND PAPER MART AS EVIDENCED FROM THE INVOICES. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE CONS IDERED THE RIVAL SUBMISSIONS, CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS ADVANCED RS. 54 LAKHS TO TWO PARTIES OUT OF WHICH RS. 45 LAKHS HAS BEEN ADVANCED TO ITS RELATED PARTY. IT IS ALSO AN UNDISPUTED FACT THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT PURCHASED PAPER FROM THESE TWO PARTIES. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE IS HAV ING NEGATIVE CAPITAL BALANCE IN HIS BALANCE SHEET WHICH MEANS THAT THE ADVANCES HAVE BEEN GIVEN OUT OF THE BORROWED CAPITAL. THE INVOICES REFERRED TO BY THE LD. COUNSEL PERTAIN TO FINANCIAL YEAR 2012 - 13 RELEVANT TO ASSESSMENT YEAR 2013 - 14 WHEREAS WE ARE I N ASSESSMENT YEAR 2009 - 10. THUS IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE HAS BEEN DIVERTING INTEREST BEARING FUNDS TO ITS SISTER CONCERNS ITA. NO. 3317/M/2013 4 THEREBY USING THE MONEY FOR NOT BUSINESS PURPOSES. WE, THEREFORE, DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 1 ST JUNE, 2015 . SD/ - SD/ - ( JOGINDER SING H ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 1 ST JUNE , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI