GHANSHYAM TA, Jaipur V. ACIT, Ajmer

ITA 34/JPR/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5126 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DR DHK
• Assessee Lawyers: AJAY SOMANI
• Keywords: Gift
• Section: 142(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 34/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 SHRI GHANSHYAM TAK PROP. M/S. PINKY MARBLE, NAYA BAZAR NAYI BASTI, GULABBARI, AJMER CUKE VS. THE ACIT CIRCLE- 2 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAKPT 0456 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI AJAY SOMANI, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA, ADDL CIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25/07/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26 /07/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A), AJMER DATED 06-11-2015 FOR THE ASSESSMENT Y EAR 2010-11 RAISING THEREIN FOLLOWING GROUND:- (I) THAT THE LD. CIT(A), AJMER HAS ERRED IN LAW A ND THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 2,47,500/- BY WAY OF ASSUMED INTEREST ON ADVANCES DESPITE PERSONA L CAPITAL OF RS. 1.48 CRORE OF THE APPELLANT. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED THE RETURN OF INCOME ON 12-10-2010 DECLARING TOTAL INCOME AT RS. 46,60,520/- AND THE ITA NO. 34/JP/2016 SHRI GHANSHYAM TAK VS. ACIT (2), AJMER . 2 SAME WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE NOTICES WERE ISSUED TO T HE ASSESSEE U/S 143(2) AND 142(1) ALONGWITH QUESTIONNAIRE. IN COMPLIANCE O F NOTICES , THE LD. AR OF THE ASSESSEE ATTENDED THE HEARING AND FURNISHED NECESSARY DETAILS BEFORE THE AO. THE BOOKS OF ACCOUNT, BILLS AND VOUC HERS WERE VERIFIED BY THE AO ON CHECK TEST BASIS. THE AO OBSERVED THAT TH E ASSESSEE IS A MINE OWNER AND IS ENGAGED IN THE BUSINESS OF MARBLE TRAD ING. STONE IS EXTRACTED AND SOLD IN THE MARKET BY THE ASSESSEE. DURING THE COURSE OF INSPECTION OF THE RECORD, THE AO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE HAD ADVANCED LOAN OF RS. 8,00,000/- AND RS. 4,50,000/- TO HIS WIFE AND SON RESPECTIVELY. FURTHER THE AO NOTICE THAT THE ASSESS EE HAD ADVANCED A SUM RS. 2.00 LACS EACH TO SHRI HILESHI NUTRA AND SHRI P ARAJI RESPECTIVELY. THE AO THROUGH QUESTIONNAIRE DATED 20-06-2012 BEARING O RDER SHEET DATED 22- 11-12 AND 4-12-2012 ASKED THE ASSESSEE ABOUT THE PU RPOSE OF GIVING LOANS TO THESE PERSONS AND WHETHER ANY INTEREST WAS CHARG ED AND OFFERED FOR TAX. THE ASSESSEE VIDE HIS SUBMISSION DATED 12-12-2012 S TATED THAT THE AMOUNT OF RS. 8.00 LACS TO HIS SON SHRI CHANDRA KANI SAINI AND RS. 4.50 LACS TO HIS WIFE MRS. LALITA WERE GIVEN ON 16-07-2008 BY WA Y OF GIFT. IT IS NOTICED THAT THE RECIPIENTS DID NOT CONSENT THE REC EIPT OF GIFTS AND THE AMOUNTS REMAINED OUTSTANDING DEBITED IN THEIR ACCOU NT INSTEAD OF DEBITED ITA NO. 34/JP/2016 SHRI GHANSHYAM TAK VS. ACIT (2), AJMER . 3 TO CAPITAL ACCOUNT FOR THE INTENDED GIFT AND NO INT EREST HAD BEEN CHARGED ON THIS AMOUNT. THE CAPITAL BALANCE OF THE ASSESSEE IS AROUND 1.5 CRORES AND DEBIT ORIGINALLY PLANNED ON CAPITAL ACCOUNT DID NOT HAVE BUSINESS CONNECTION. AS REGARDS GIVING OF LOAN OF RS. 2.00 L ACS EACH TO SHRI HILESHI NUTRA AND SHRI PARAS JI, THE ASSESSEE CONTENDED THA T BOTH THE PARTIES ARE IN PERSONAL RELATIONSHIP AND THEY WERE GIVEN ADVANCES OUT OF CAPITAL BALANCE OF RS. 1.5 CRORES AND NO INTEREST HAD BEEN PAID TO ANY PERSON FOR MAKING ADVANCE. THE AO WAS NOT CONVINCED WITH THE SUBMISSI ON OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAD OVERDRAFT ACCO UNT WITH LIMITS OF 35 LAKHS AND ASSESSEE HAD PAID INTEREST OF RS. 3,06,75 0/- ON AMOUNT OF LOAN TO THE BANK AND THE ASSESSEE HAD NOT WORKED OUT INT EREST FREE FUNDS FROM WHICH THE ADVANCES TO THE PERSONS COVERED U/S 40A(2 )(B) AND OTHERS SHRI HILESHI NUTRA AND SHRI PARAS JI. THE AO FURTHER OBS ERVED THAT THE ASSESSEE HAD NOT FURNISHED DOCUMENTARY EVIDENCES PR OVING THAT INTEREST FREE FUNDS WERE AVAILABLE WITH HIM. THE ASSESSEE HA D GIVEN A GENERAL REPLY THAT ADVANCES OUT OF CAPITAL BALANCE OF RS. 1 .5 CRORES WERE ADVANCED. IT IS NOTED BY THE AO THAT WHEN THE AMOUN T OF GIFT WAS NOT ACCEPTED BY HIS WIFE AND SON AND THEN THE SAME SHOU LD BE RETURNED TO HIS CAPITAL ACCOUNT. THUS THE AO DID NOT ACCEPT THE CON TENTION OF THE ASSESSEE FOR THE REASON THAT NO PRUDENT BUSINESSMAN WILL PAY INTEREST ON BANK ITA NO. 34/JP/2016 SHRI GHANSHYAM TAK VS. ACIT (2), AJMER . 4 WHEN EXCESS MONEY IS LYING IDLE IN HIS ACCOUNT. THU S THE AO HELD THAT THE ASSESSEE HAD DIVERTED THE INTEREST BEARING FUNDS TO HIS RELATIVE AND OTHERS AND THE ASSESSEE SHOULD HAVE CHARGED INTEREST ON AD VANCES AND OFFERED FOR TAX. CONSIDERING THE ABOVE FACTS, INTEREST @ 15% ON TOTAL ADVANCES OF RS. 16.50 LACS WAS CHARGED WHICH WAS WORKED OUT TO RS. 2,47,500/- AND THUS THE AO ADDED THE SAME TO TOTAL INCOME OF THE A SSESSEE. 2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ACTION OF THE AO BY OB SERVING AS UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN S UBMISSION CAREFULLY. THE ASSESSEE'S MAIN ARGUMENT IS THAT THE ASSESSEE HAS NOT UTILIZED ANY INTEREST BEARING BORROWED FUND FOR GIVING INTEREST FREE ADVANCES. ACCORDING TO ASSESSE E, THE ASSESSEE HAS UTILIZED HIS OWN FUNDS FOR GIVING INTE REST FREE ADVANCE OF RS. 16,50,000/-.EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS, TH E ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY FUND FLOW STATEMENT TO SHOW THAT THE INTEREST BEARING BORROWED FUNDS WE RE UTILIZED ONLY FOR BUSINESS PURPOSES AND INTEREST FR EE ADVANCES HAVE BEEN GIVEN ONLY OUT OF HIS OWN FUNDS. IN THE ABSENCE OF ANY FUND FLOW STATEMENT, THE ARGUMENT OF THE APPELLANT THAT THE INTEREST FREE ADVANCES WERE GIVE N OUT OF HIS OWN FUNDS AND NOT OUT OF INTEREST BEARING BORRO WED FUNDS, CANNOT BE ACCEPTED. THE ASSESSEE HAS CLAIMED THE INTEREST OF RS. 3,06,750/- AS EXPENDITURE. HENCE, T HE ONUS IS ON THE ASSESSEE TO PROVE THAT THE INTEREST BEARING FUNDS WERE UTILIZED ONLY FOR BUSINESS PURPOSES. AS THE APPELLA NT HAS FAILED TO SHOW THAT THE INTEREST BEARING FUNDS WERE UTILIZED ONLY FOR BUSINESS PURPOSES AND NOT FOR GIVING INTER EST FREE ADVANCES, THEREFORE, I AM OF THE CONSIDERED VIEW TH AT THE AO WAS FULLY JUSTIFIED IN DISALLOWING THE INTEREST ATT RIBUTABLE TO ITA NO. 34/JP/2016 SHRI GHANSHYAM TAK VS. ACIT (2), AJMER . 5 THE FUNDS UTILIZED FOR GIVING INTEREST FREE ADVANCE S. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS HER EBY CONFIRMED. 2.3 NOW THE ASSESSEE IS BEFORE ME WITH THE PRAYER T O DELETE THE DISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS. 2,47,500/- CONFIRMED BY THE LD. CIT(A). 2.4 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT HON'BLE SUPR EME COURT IN THE CASE OF HERO CYCLES (P) LTD. VS. CIT (CENTRAL), LUDHIANA, 3 79 ITR [2015] 347 HAS HELD THAT ONCE THE NEXUS BETWEEN THE EXPENDITUR E AND PURPOSE OF BUSINESS IS ESTABLISHED, THE REVENUE AUTHORITY CANN OT DISALLOW THE CLAIM. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PRO FIT AND THAT THE REVENUE AUTHORITIES MUST PUT THEMSELVES INTO THE SH OES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. IN THI S CASE, THE ASSESSEE HAS CLAIMED THAT THE ADVANCE HAS BEEN MADE FROM THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE I.E. FROM HIS OWN CAPIT AL. THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES (P) LTD. VS. CIT (SUPRA) HAS OBSERVED THAT THE ASSESSEE HAD DEMONSTRATED THAT ON THE DATE WHEN THE LOAN WAS GIVEN, THERE WAS A CREDIT BALANCE IN THE A CCOUNT OF THE ASSESSEE ITA NO. 34/JP/2016 SHRI GHANSHYAM TAK VS. ACIT (2), AJMER . 6 FROM WHERE THE LOAN WAS GIVEN BUT NO SUCH FINDINGS ARE ON RECORD IN THIS CASE. THEREFORE, IN THE INTEREST OF JUSTICE AND EQU ITY, I RESTORE THIS ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THE ASSESSEE W AS HAVING SUFFICIENT CREDIT BALANCE IN ITS ACCOUNT WHEN THE LOAN WAS GIV EN. IF THE SAME IS FOUND IN ORDER, THE ASSESSEE'S CLAIM SHALL BE ALLOW ED. HENCE, GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOS ES AS INDICATED ABOVE. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 /07/2016 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 /07/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI GHANSHYAM TAK, AJMER 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 2, AJMER 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 34/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR