Gold Finch Jewellery Ltd., Ahmedabad V. The DCIT, Circle-2(1)(1), Ahmedabad

ITA 347/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0968 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMA PRASAD
• Keywords: Set aside
• Section: 143(3); 14A; 201; 13

Judgement Text

PAGE 1 OF 6 , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE , SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO S . 347 - 348 /AHD/2018 / ASSTT. YEAR S : (2013 - 2014 & 2014 - 15) GOLD FINCH JEWELLERY LTD. , G - 5, PARISEEMA COMPLEX , NR.SWAGAT CROSS ROADS , C.G. ROAD , AHMEDABAD . PAN: AAACG6992L VS . D.C. I. T , CIRCLE - 2(1) , AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI ASEEM THAKKAR , A.R REVENUE BY : SHRI UMA PRASAD , SR . DR / DATE OF HEARING : 11 / 10 / 201 9 / DATE OF PRONOUNCEMENT: 16 /12 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL S HAVE BEEN FILED AT THE INSTANCE OF THE AS SESSEE AGAINST THE SEPARATE ORDER S OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - 2 , AHMEDABAD [ LD. CIT (A) IN SHORT] , DATED 19 / 12 / 2017 & 21/12/2017 ARI SING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 23 / 03 / 201 6 & 12/12/2016 RELEVANT TO ASSESSMENT YEAR S (A . Y S ) 2013 - 14 & 2014 - 15 RESPECTIVELY . FIRST , WE TAKE UP THE ITA NO. 347/AHD/2018, AN APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2013 - 14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO S.347 - 348 /AHD/2018 ASSTT. YEAR S 2013 - 14 & 2014 - 15 PAGE 2 OF 6 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,40,000/ - MADE BY THE ASSESSING OFFICER U/S.36(1) (III) OUT OF INTEREST EXPENSES ON EST IMATE BASIS. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED I CONFIRMING THE DISALLOWANCE OF RS.1,09,722/ - MADE BY THE ASSESSING OFFICER OUT OF LABOUR EXPENSES. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF APPEAL. 2. T HE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CO NFIRMING THE DISALLOWANCE OF 8, 40 , 000 / - UNDER SECTION 36(1)(III) OF THE ACT OUT OF THE INTEREST EXPENSES ON ESTIMATED BASIS . 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE TRADING AND MANUFACTURI NG OF GOLD & DIAMOND ORNAMENTS . THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS DIVERTED INTEREST - BEARIN G FUND FOR 70 LACS FOR NON - BUSINESS PURPOSES. ACCORDINGLY THE AO WORKED OUT THE AMOUNT OF INTEREST OF 8, 40,000 / - BEING 12% ON THE AMOUNT OF 70 LACS AND DISALLOWED THE SAME BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR BEFORE US SUBMITTED THAT THE TRIBUNAL IN THE OW N CASE OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2012 - 13 IN ITA NO. 1076/AHD/2016 V IDE ORDER DATED 1 MARCH 2019 HAS DELETED THE ADDITION IN THE IDENTICAL FACTS AND CIRCUMSTANCES. ITA NO S.347 - 348 /AHD/2018 ASSTT. YEAR S 2013 - 14 & 2014 - 15 PAGE 3 OF 6 6. ON THE CONTRARY, THE LEARNED DR VEHEMENTLY SUP PORTED THE ORDER OF THE AUTH ORI TIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOTE THAT THE ITAT IN THE OWN CASE OF THE ASSESSEE (SUPRA) INVOLVING IDENTICAL FACTS AND CIRCUMSTANCES DELETED THE AD DITION MADE BY THE AUTHORITIES BELOW. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE OWN FUND OF THE ASSESSEE EXCEEDS THE ADV ANCES GIVEN WITHOUT ANY INTEREST. THE NECESSARY DETAILS OF THE OWN FUND OF THE ASSESSEE AND THE ADVANCE WITHOUT INTEREST STANDS AS UNDER: NET OWNED FUNDS : RS. 13.33CRORES INTEREST - FREE ADVANCE : RS. 70LACS THEREFORE, WE ARE OF THE VIEW THAT NO DISALLOW ANCE OF INTEREST EXPENSES ON ACCOUNT OF DIVERSION OF THE FUND IS WARRANTED. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGEMENT OF HON BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 WHEREIN IT WAS HELD AS UNDER: - THE PRINCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST - FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED C ONSIDERING THE FINDING OF FACT BOTH BY THE CIT(A) AND TRIBUNAL . 31.1 SIMILARLY, WE ALSO RELY ON THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD REPORTED IN 366 ITR 505 (BOM). THE RELEVANT EXTRACT OF THE ORDER IS REPRODU CED BELOW: WHERE ASSESSEE'SCAPCIT (A)L, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN TAX - FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST - FREE FUND S AVAILABLE WITH ASSESSEE AND NO DISALLOWANCE WAS WARRANTED U/S 14A. 31.2 SIMILARLY, WE ALSO FIND SUPPORT FROM THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF UTI BANK LTD. REPORTED IN 32 TAXMANN.COM 370 WHERE THE HEADNOTE READS AS UNDER : IF THERE ARE SUFFICIENT INTEREST FREE FUNDS TO MEET TAX FREE INVESTMENTS, THEY ARE PRESUMED TO BE MADE FROM INTEREST FREE FUNDS AND NOT LOANED FUNDS AND NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A . IN VIEW OF THE ABOVE PROPOSITION, WE HOLD THAT NO DISALLOWANCE OF INTEREST EXPENSE CLAIMED BY THE ASSESSEE CAN BE MADE ON ACCOUNT OF INVESTMENTS AS DISCUSSED ABOVE. HENCE, WE REVERSE THE ORDER OF THE AUTHORITIES BELOW. THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY HIM. HE NCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO S.347 - 348 /AHD/2018 ASSTT. YEAR S 2013 - 14 & 2014 - 15 PAGE 4 OF 6 7.1 R ESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING OF THE ITAT IN THE EARLIER YEAR AS DISCUSSED ABOVE AS THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES. LEAR NED DR HAS ALSO NOT CONTROVERTED THE ARGUMENT OF THE LEARNED AR AT THE TIME OF HEARING. HENCE, WE SET ASIDE THE FINDING OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SU STAINING THE DISALLOWANCE OF 1, 09 , 722 / - ON ACCOUNT OF LABOUR EXPENSES. 9. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S CLAIMED LABOUR EXP ENSES OF 4, 38 , 889 / - WHICH WERE PAID TO THE 9 PARTIES. HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS NOT FURNISHED THE BASIS OF CALCULATING THE LABOUR CHARGES RATE PAID TO THE LABOURERS. THE AO ALSO FOUND THAT THERE WAS ALSO THE DISALLOWANCE OF THE LABOUR CHARGES IN THE IMMEDIA TE PRECEDING ASSESSMENT YEAR. ACCORDINGLY, THE AO MADE THE DISALLOWANCE OF 1, 09 , 722 / - BEING 25% OF THE TOTAL LABOUR CHARGES. 10. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED AR BEFORE US SUBMITTED THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 12 - 13 IN ITA NO. 1076/AHD/2016 V IDE ORDER DATED 1 MARCH 2019 HAS DELETED THE ADDITION IN THE IDENTICAL FACTS AND CIRCUMSTANCES. 12. ON THE CONTRARY, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. ITA NO S.347 - 348 /AHD/2018 ASSTT. YEAR S 2013 - 14 & 2014 - 15 PAGE 5 OF 6 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOTE THAT THE ITAT IN THE OWN CASE OF THE ASSESSEE (SUPRA) INVOLVING IDENTICAL FACTS AND CIRCUMSTANCES DELETED THE ADDITION MADE BY THE AUTHORITIES BELOW. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 33. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES, WE HAVE DELETED THE ADD ITION MADE BY THE AUTHORITIES BELOW IN ITA NUMBER 1075/A/16 VIDE PARAGRAPH NUMBER 16 OF THIS ORDER. THEREFORE, THE SAME REASONING WILL ALSO BE APPLIED FOR THE IMPUGNED ISSUE UNDER CONSIDERATION. 33.1 IN ADDITION TO THE ABOVE, WE ALSO NOTE THAT THE AD - HOC DISALLOWANCE IS NOT ALLOWED WHEN ASSESSEE HAS SUBMITTED ALL THE SUPPORTING DOCUMENTS RELATED TO LABOUR CHARGES SUCH AS PAN, ADDRESS, NATURE OF WORK DONE AND JUSTIFICATION OF THE RATE CHARGED. THE REVENUE WAS EXPECTED TO POINT OUT THE SPECIFIC DEFECT IN THE DETAILS FILED BY THE ASSESSEE BEFORE RESORTING TO MAKING THE AD HOC DISALLOWANCE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. H ENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 14. R ESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING OF THE ITAT IN THE EARLIER AS DISCUSSED ABOVE AS THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES. LEARNED DR HAS ALSO NOT CONTROVERTED THE ARGUMENT OF THE LEARNED AR A T THE TIME OF HEARING. HENCE, WE SET ASIDE THE FINDING OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. 15. NOW COMI NG TO THE ITA NO. 348/AHD/2018 AN APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2014 - 15 . T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,71,554/ - MADE BY THE ASSESSING OFFICER OUT OF LABOUR EXPENSES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF APPEAL. ITA NO S.347 - 348 /AHD/2018 ASSTT. YEAR S 2013 - 14 & 2014 - 15 PAGE 6 OF 6 16. T HE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CI T (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE FOR THE AMOUNT OF L ABOUR EXPENSES OF RS. 2,71,554/ - . 17. A T THE OUTSET WE NOTE THAT, THE IDENTICAL ISSUE HAS ALREADY BEEN ADJUDICATED BY US IN FAVOUR OF THE ASSESSEE IN ITA 347/ AHD/2018 FOR THE ASSESSMENT YEAR 2013 - 14 V IDE PARAG RAPH NUMBER 13 OF THIS ORDER. FOR THE DETAILED DISCUSSION, PLEASE REFER THE RELEVANT PARAGRAPH. RESPECTFULLY FOLLOWING THE SAME WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO DELETE THE AD DITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. 18. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. O RDER PRONOUNCED IN THE COURT ON 16 /12 / 2019 AT AHMEDABAD. - S D - - S D - (MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 16 / 12 /2019 M ANISH