M/s. Kashiram Atmaram, Surat V. The ACIT, Circle-2, Surat

ITA 3461/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6572 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 10-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: M J SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.3461/AHD/2007 [ASSTT. YEAR : 2004-2005] M/S.KASHIRAM ATMARAM 3/1940, SIDDHI SHERI SALABATPURA, SURAT. VS. ACIT, CIR.2 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.J. SHAH REVENUE BY : SHRI H.P. MEENA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT DATED 13.06.2007 ARISING OUT OF THE ORDER OF THE AS SESSING OFFICER PASSED UNDER SECTION 143(3) THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL OF THE ASS ESSEE READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN NOT PROPERLY APPRECI ATING VARIOUS FACTUAL AND LEGAL ASPECTS OF THE CASE WHILE UPHOLDING THE ADDITION OF RS.2,88,797/- AS DISALLOWANCE OF NOTION AL INTEREST EXPENSES. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSING OFFICER DISALLOWED RS.2,88,797/- ON THE GROUND THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE TO THE FOL LOWING PARTIES: 1. HIBO TEX PVT. LTD. RS.25,25,289/- 2. KIRITKUMAR NAVNITLAL RS. 2,97,752/- RS.28,23,041/- ITA NO.3461/AHD/2007 -2- HE HAS STATED THAT THE ASSESSEE VIDE REPLY DATED 18 -9-2006 FURNISHED BEFORE THE ASSESSING OFFICER, HAS POINTED OUT THAT THE ASSESSEE HAD INTEREST FREE DEPOSITS OF RS.35,12,826/- FROM VARIO US PERSONS. THAT THE AO HIMSELF HAS NOTED THE INTEREST FREE DEPOSIT OF R S.20,92,324/-, BUT STILL HE MADE DISALLOWANCE ON THE ENTIRE SUM OF RS.28,23, 041/-. HE STATED THAT SINCE THE INTEREST FREE DEPOSIT WAS MORE THAN THE INTEREST BEARING LOAN, THERE WAS NO CASE FOR DISALLOWANCE OF INTEREST. 4. THE LEARNED DR, ON THE OTHER HAND RELIED UPON TH E ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AS PER THE FINDING RECORDED BY THE AO, THE ASSESSEE HAS CLAIMED DEDUCTION FOR INTEREST AMOUNTING TO RS.12,75,493/- IN THE BOOKS OF DARSHAN PROCESSORS. HE ALSO NOTICED THAT IN THE BOOKS OF DARSHARN PROCESSORS, THE ASSESSEE H AS GIVEN INTEREST FREE ADVANCE OF RS.28,23,041/- HOWEVER, THERE WERE INTE REST FREE DEPOSITS ALSO AMOUNTING TO RS.20,92,324/- FROM THE FOLLOWING PERSONS: NAME OF THE PARTY CLOSING BALANCE (RS.) DARSHAN INDUSTRIES 17,41,530 HITENDRAKUMAR NAVNITLAL HUF 1,80,255 KIRITKUMAR NAVNITLAL HUF 73,139 NAVALGAURI NAVNITLAL 20,262 PURNIMABEN HITENDRAKUMAR 15,080 ASHABEN BHARATKUMAR 12,049 KAMINIBEN KIRITKUMAR 24,306 DHRUV HITENDRAKUMAR 14,415 VATSAL KIRITKUMAR 11,288 TOTAL 20,92,324/- ITA NO.3461/AHD/2007 -3- THAT THE ASSESSEE HAS CONTENDED THAT THE TOTAL INTE REST FREE ADVANCE WAS RS.35,12,826/-, THE DETAILS OF WHICH WERE GIVEN AT PAGE NO.74 AND 75 OF THE ASSESSEES PAPER BOOK. FROM THE PERUSAL OF WHI CH, WE FIND THAT CERTAIN INTEREST FREE DEPOSITS WERE IN THE BOOKS OF M/S.KASHIRAM ATMARAM. THE ASSESSING OFFICER HAS MENTIONED ONLY DEPOSITS WHICH WERE IN THE BOOKS OF DARSHAN PROCESSORS. THOUGH TH E ASSESSING OFFICER HAS MENTIONED THE INTEREST FREE DEPOSITS RECEIVED B Y THE ASSESSEE AS WELL AS INTEREST FREE DEPOSITS PAID BY THE ASSESSEE, AS DISCLOSED IN THE BOOKS OF DARSHAN PROCESSORS, HOWEVER, HE COMPUTED THE DISALL OWANCE ON THE ENTIRE INTEREST FREE ADVANCES. IN OUR OPINION, WHEN THER E WAS INTEREST FREE AMOUNT RECEIVED AS WELL AS PAID BY THE ASSESSEE, TH E DISALLOWANCE OF INTEREST SHOULD HAVE BEEN ONLY ON THE NET AMOUNT I. E. INTEREST FREE ADVANCE MINUS INTEREST FREE DEPOSITS. AS PER THE F INDINGS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, WE FIND THAT THE INTEREST FREE ADVANCE GIVEN BY THE ASSESSEE WAS RS.28,23,041/- WH ILE INTEREST FREE DEPOSITS RECEIVED BY THE ASSESSEE WAS RS.20,92,324/ -. THEREFORE, INTEREST SHOULD HAVE BEEN CALCULATED ON THE ADVANCE OF RS.7, 30,717/- I.E. RS.28,23,041/- MINUS RS.20,92,324/-. WE THEREFORE DIRECT THE ASSESSING OFFICER TO WORK OUT THE DISALLOWANCE ON THE SUM OF RS.7,30,717/-. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 20-05-2011