Shri Purshottam B. Pitroda, Ahmedabad V. The ACIT, Range -12, Ahmedabad

ITA 351/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8674 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Commercial expediency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO. 351/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) SHRI PURSHOTTAM B. PITRODA, PROP. OF J.P. FABRICATORS, OPP: AMBALAL ESTATE, N.H.NO.8, GHODASAR, AHMEDABAD - 380050 # VS. THE ACIT RANGE 12 AHMEDABAD. $ # % & # PAN/GIR NO. : ABWPM 6274 B ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI TUSHAR P. HEMANI, A.R. ($'*) / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. + ,*-. / DATE OF HEARING 14/06/2017 /012*-. / DATE OF PRONOUNCEMENT 22/08/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, AHMEDABAD DA TED 26/11/2013, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER), FOR THE ASSESSMENT YE AR (AY) 2009-10, ON THE FOLLOWING GROUNDS: I. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN PARTY CONFIRMING THE ACTION OF LEARNED AO IN DIS ALLOWING INTEREST EXPENDITURE U/S.36(1)(III) OF THE ACT OUT OF TOTAL ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 2 - DISALLOWANCE OF RS.14,21,569/- MADE U/S.36(1)(III) OF THE ACT BY THE LEARNED AO. II. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS O F THE CASE IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.3,06,008/- AS INCOME FROM HOUSE PROPERTY CHARGEA BLE TO TAX U/S.22 OF THE ACT. III. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING RS.8 6,808/- BEING 1/10 TH OF THE TOTAL MOTOR CAR EXPENDITURE AFTER HOLDING T HAT SUCH ENTIRE EXPENDITURE HAS NOT BEEN INCURRED FOR THE PU RPOSE OF BUSINESS OF THE APPELLANT. IV. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.13,57,776/- U/S.14A OF THE ACT BY APPLYING RULE 8D OF THE IT RULES. V. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATING THAT TO THE EXTENT OF INTE REST WHICH IS HELD TO BE FINALLY DISALLOWED U/S. 36(1)(III) OF TH E ACT CANNOT ONCE AGAIN BE TAKEN INTO COMPUTATION WHILE QUANTIFYING T HE DISALLOWANCE U/S.14A OF THE ACT. VI. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS W ITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHE R ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IM PUGNED ORDER. VII. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED AO IN CHARGING INTEREST U /S.234B/C/D OF THE ACT. VIII. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LEARNED AO IN INITIATING PENALTY PROC EEDINGS U/S.271(1)(C) OF THE ACT. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 3 - 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE RETURN OF INCOME FOR ASST. YEAR 2009-10 WAS FI LED BY THE ASSESSEE DECLARING TOTAL LOSS AT RS.2,33,64,882/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961. T HE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S.143(2) OF THE AC T AND SAME WAS COMPLIED WITH. THEREFORE, NOTICE U/S.142(1) OF THE ACT WAS ISSUED ON 30/08/2010. THE BOOKS OF ACCOUNTS WERE MAINTAINED O N MERCANTILE SYSTEM AND AUDITED U/S.44AB OF THE I.T. ACT. AUDITO R REPORT IS OBTAINED AND KEPT ON RECORD. 2.2 IT IS OBSERVED THAT THE ASSESSEE HAS PAID THE I NTEREST FOR THE PURPOSE OF OBTAINING BUSINESS FUNDS FOR THE BUSINESS AND UT ILIZED IN BUSINESS AS WELL AS FOR OTHER PURPOSES AND FOR PERSONAL PURPOSE S. THE INVESTMENT IN PROPERTY LAND, AND OTHER LOAN AND ADVANCES GIVEN TO VARIOUS PERSONS FOR PERSONAL RELATIONS AND NO BUSINESS INTEREST OR ANY COMMERCIAL EXPEDIENCY IS INVOLVED OR DERIVED, THEREFORE, INTEREST CHARGEA BLE THEREON CANNOT BE CONSIDERED AS INTEREST FOR THE BUSINESS PURPOSE U/S .36(1)(III) OF THE I.T. ACT. HENCE, THE INTEREST TO THE EXTENT RS.14,21,569 /- WAS NOT CONSIDERED FOR THE BUSINESS PURPOSE AND SAME WAS DISALLOWED BY THE LD. AO. SUBSEQUENTLY, CONFIRMATION BY THE LOWER AUTHORITIES HELD THAT THE ASSESSEE WAS NOT ENTITLED TO GET DEDUCTION OF INTER EST PAYABLE ON THE ABOVE GIVEN AS LOAN/ADVANCES OF THE PERSONS AS DISC USSED ABOVE AND THEREFORE, THE INTEREST TO THE EXTENT OF RS.14,21,5 69/- AND SAME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 4 - 2.3 DURING THE YEAR UNDER CONSIDERATION, IT WAS OBS ERVED THAT THE ASSESSEE HAVE FOUR HOUSE PROPERTY FOR WHICH NO PROP ERTY INCOME WAS DISCLOSED. THEREFORE, THE ASSESSEE WAS ASKED TO DET AILS OF PROPERTY AND INCOME DERIVED FROM THEM. IN RESPONSE TO THIS LETTE R ASSESSEE STATED THAT THERE ARE THREE RESIDENTIAL PROPERTIES AND OTHER PR OPERTY IS OUT HOUSE AT SHILAJ FOR LABOUR. ONE RESIDENTIAL PROPERTY IS USED BY PROPRIETOR. OTHER PROPERTY ARE USED BY HIS DAUGHTER AND SON. SO THERE IS NO ADDITION AS NOTIONAL INCOME. THE VALUE OF THE ALL THE SAID PROP ERTIES IS RS.48,57,897/- AS PER BALANCE SHEET. THE CONTENTION OF THE ASSESSE E IS SEEN AND IT WAS OBSERVED THAT THE PROPERTY INCOME WAS TAXED AT RS.3 ,06,008/- IN THE ASST.YEAR 2007-08. KEEPING IN SAME VIEW, THE PROPER TY INCOME IS TAXED AT RS.3,06,008/- AS PER ASST.YEAR 2007-08. THEREFOR E ADDITION OF RS.3,06,008/- WAS MADE TO THE TOTAL INCOME OF THE A SSESSEE. 2.4 DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAS CLAIMED DEPRECIATION OF RS.8,86,075/- RESPECT OF 12(TWELEVE ) MOTOR CAR. THESE MOTOR CARS WERE USED FOR BUSINESS PURPOSE AS WELL A S FOR PERSONAL PURPOSE. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLA IN WHY DEPRECIATION ON MOTOR CAR UTILIZED FOR PERSONAL PURPOSE SHOULD N OT BE DISALLOWED. THEY HAVE STATED OUT OF 12 MOTOR CARS, 9 MOTOR CARS ARE UTILIZED FOR EMPLOYEES AND AT SITE WORK ONLY THREE CARS WERE UTI LIZED FOR PERSONAL USE. THE ASSESSEE HAS CLAIMED RS.8,68,075/- SUCH TYPE OF DISALLOWANCE @ OF 20% WAS MADE IN ASST. YEAR 2008-09 IN APPEAL BEFORE THE CIT(A), CONFIRM THE ADDITION OF DISALLOW @ 10% ONLY AS AGAI NST 20% DISALLOWED. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 5 - CONSIDERING THE VIEW OF THE LEARNED CIT(A), AHMEDAB AD 10% OF THE TOTAL DEPRECIATION OF RS.8,86,075/- CONSIDER FOR PE RSONAL USE AND BALANCE WAS ALLOWED FOR BUSINESS PURPOSE. THEREFORE, DEPREC IATION OF RS.86,808/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. 2.5 DURING THE YEAR UNDER CONSIDERATION, IT IS OBSE RVED THAT THE ASSESSEE HAS EARNED/DERIVED THE INCOME FROM DIVIDEN D OF RS.4,60,736/- AND AGRICULTURE INCOME RS.5,82,903/-. THEREFORE, TH E ASSESSEE WAS ASKED TO FURNISH DETAILS OF EXPENDITURE AND ALSO PROPOSED FOR DISALLOWANCE OF EXPENDITURE INCURRED FOR EARNING EXEMPTED INCOME U/ S.14A OF THE I.T. ACT. SO FAR AGRICULTURE INCOME IS CONCERNED NO EXPE NSES IS DEBITED IN P&L ACCOUNT AND ALL THE EXPENDITURE ARE INCURRED ON PERSONAL WITHDRAWAL AND OUT OF AGRICULTURE INCOME. AS REGARD THE EXPENDITURE FOR DIVIDEND INCOME AND AGRICULTURE INCOME, THE ASSESSEE HAS FURNISHED WORKING OF EXPEN DITURE AND PROPONENTS DISALLOWANCE AS UNDER: A. SECTION 14-A WITH RULE 8D WORKING IN RESPECT OF SHA RES 1. NILL EXP. 2.A. INTEREST 6,58,35,083 B. A.W. VALUE OF INTEREST 31/03/08 RS.54,74,27 3 RS.54,74,273 RS.1,09,48,546/2 54,74,273 C. AVERAGE TOTAL ASSETS 31/03/2008 RS. 83,0 8,29,375 31/03/2009 RS.1,49,18 ,62,519 AVERAG TOTAL RS.2,32,26, 91,894/2 1,16,13,45,947 ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 6 - AXB 6,58,35,083 54,74,273 = 3,10,329 C 1,16,13,45,947 3,10,329 3. RS. 54,74,273 EA.50 ADD. 27,371/- TOTAL RS. 3,37,720 B. DISALLOWANCE U/S.14-A IN RESPECT OF AGRICULTURE LAN D 1. NILL EXP. 2.A . INTEREST 6,58,35,083.00 B. A.W. VALUE OF INTEREST 31/03/08 RS.1,65,35,55 7 RS.1,65,35,557 RS.3,30,71,114/2 1,65,35,557.00 C. AVERAGE TOTAL ASSETS 31/03/2008 RS. 83,08 ,29,375 31/03/2009 RS.1,49,18, 62,519 AVERAGETOTAL RS.2,32,26,91 ,894/2 1,16,13,45,947 AXB 6,58,35,083 1,65,35,557/- = 9,37,378.00 C 1,16,13,45,947 9,37,378.00 3. RS. 1,65,35,557 EA.50 ADD. 82,678.00 TOTAL RS. 10,20,056.00 IN VIEW OF THE PROVISION OF SECTION 14A, THE EXPEND ITURE CLAIMED AT RS.3,37,720/- AND RS.10,20,056/- CANNOT BE CONSIDER ED FOR THE BUSINESS PURPOSE AND ALLOWABLE. THEREFORE, THE AMOUNT OF RS. 13,57,720/- (RS.3,37,720/- AND RS.10,20,056/-) IS CONSIDERED AS EXPENDITURE FOR EARNING EXEMPTED INCOME AND SAME IS THEREFORE DISAL LOWED U/S.14A OF THE I.T. ACT. ADDITION OF RS.13,57,776/- WAS MADE. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 7 - 3. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 4. NOW APPELLANTS APPEAL IS BEFORE US. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. A PAPER BOOK WAS FILED BY THE ASSESSEE. PARTLY CONFIR MING THE ACTION OF LEARNED AO IN DISALLOWING INTEREST EXPENDITURE U/S. 36(1)(III) OF THE ACT OUT OF TOTAL DISALLOWANCE OF RS.14,21,569/-. AO MAD E DISALLOWANCE OF RS.14,21,569/- U/S.36(1)(III) ON THE COUNT THAT ASS ESSEE HAD DIVERTED INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. L EARNED CIT(A), AFTER REFERRING TO CIT(A)'S ORDER FOR A.Y.07-08 (PARA 12, PGS.9-23 @18 OF CIT(A)'S ORDER), HELD THAT DISALLOWANCE U/S 36(L)(I II) IS TO BE MADE IN RESPECT OF ONLY FOUR PARTIES (APPEARING ON PG.23 OF CIT(A)'S ORDER) AFTER CONSIDERING FINDINGS OF CIT(A) AND ITAT (PGS.22-23 OF CIT(A)'S ORDER). COORDINATING BENCH OF ITAT, IN ASSESSEE'S OWN CASE FOR A.Y. 2007-08, HAS BEEN KIND ENOUGH TO SET-ASIDE THE ISSUE WITH RE GARD TO DISALLOWANCE U/S.36(L)(III) TO AO WITH A DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW. PARA 5 TO 5.2, PGS.12-16 OF ITAT'S ORDER IN ITA NO.3513/AHD/2010 & 428/AHD/2011 (A.Y. 2007-08) SAME IS REPRODUCED AS UNDER: 5. NEXT ISSUE IS WITH REGARD TO THE PARTIAL CONFIR MATION OF ACTION OF ASSESSING OFFICER IN DISALLOWING INTEREST EXPENDITU RE U/S.36(L)(III) OUT OF TOTAL DISALLOWANCE OF RS.74,36,118/-. THE ASSESSING OFFICER HAS MADE THIS ADDITION BY OBSERVING AS UNDER:- ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 8 - 'THE ASSESSEE HAS CLAIMED THE INTEREST EXPENDITURE OF RS.3,51,12,087/- PAID TO BANK AND RS.43,58,684/- PA ID TO OTHERS AND RS.21,37,580/- PAID TO BANK (GEC). ON AN ANALYS IS OF THE BALANCE SHEET IT IS SEEN THAT THE ASSESSEE HAD MADE HUGE PERSONAL INVESTMENT IN LANDS AND OTHER PERSONAL ASSETS. THE INVESTMENT TOTAL RS.3,81,23,670/-. FURTHER THE ASSESSEE HAS MA DE LOANS AND ADVANCES TOTALING RS.8,10,47,890/-. ON GOING THROUG H THE LIST OF ADVANCES MADE IT IS SEEN THAT NO INTEREST WAS CHARG ED ON ADVANCES TOTALING RS.3,62,37,518/-. THE FIXED ASSET S WORTH RS.38,95,50,105/-, CLOSING STOCK OF RS.46,00,000/- AND CASH AND BANK BALANCES AND SUNDRY DEBTORS OF RS.8,44,54,566/ - ENTIRELY GOBBLED UP TO THE UNSECURED LOANS AND CAPITAL OF TH E ASSESSEE THAT IS THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THUS IT IS APPARENT THAT THE INTEREST-BEARING BORROWINGS TA KEN BY THE ASSESSEE HAVE BEEN USED UP FOR MAKING PERSONAL AND NOT BUSINESS INVESTMENT AND INTEREST FREE ADVANCES BY T HE ASSESSEE. THUS THE BORROWINGS HAVE BEEN PUT TO NOT BUSINESS P URPOSES PRODUCED. THUS RS.7,43,61,188/- OF THE INTEREST BEA RING BORROWINGS HAVE BEEN PUT TO NOT BUSINESS PURPOSES. THE ABOVE AMOUNT ALSO INCLUDES THE INTEREST FREE ADVANCES MAD E TO M/S. KETAN CONSTRUCTION COMPANY. THE INTEREST FREE ADVAN CES MADE TO M/S.KETAN CONSTRUCTION COMPANY CANNOT EFFECTIVEL Y GUIDED BY COMMERCIAL EXPEDIENCY AS M/S.KETAN CONSTRUCTION CO. IS ONE OF THE MEMBERS OF THE JVC I.E. A PART OF THE ASSESSEE HIMSELF AND HENCE IT CAN CONCLUSIVELY BE HELD THAT NO COMMERCIA L EXPEDIENCY IS INVOLVED. THE ASSESSEE HAS NOT FILED ANY EVIDENC E ON RECORD TO PROVE THAT THE INTEREST FREE ADVANCES WERE MADE BY HIM FOR THE BUSINESS PURPOSES AND AS A MATTER OF COMMERCIAL EXP EDIENCY. THUS IT CAN BE INFERRED FROM THE FACT OF THE CASE T HAT THE BORROWINGS HAVE NOT BEEN USED FOR THE PURPOSES OF B USINESS OF THE ASSESSEE AND HENCE THE CLAIM OF INTEREST ON THE SE BORROWINGS HAVE TO BE REGULATED IN TERMS OF SECTION 36(1)(III) OF THE ACT. SINCE THE INTEREST PAID ON THIS AMOUNT IS NOT FOR T HE PURPOSES OF BUSINESS, THE SAME IS DISALLOWED UNDER SECTION 36(1 )(III) OF THE ACT AS THE CAPITAL BORROWED TO THIS EXTENT IS NOT C APITAL BORROWED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. THE A SSESSEE HAS PAID INTEREST AT THE RATE OF 8 TO 12%. THUS THE AVE RAGE RATE OF INTEREST AT WHICH INTEREST HAS BEEN PAID BY THE ASS ESSEE IS 10%. THUS THE INTEREST DISALLOWANCE UNDER SECTION 36(1) (III) OF THE IT ACT IS MADE AT THE RATE OF 10%. HENCE INTEREST AT T HE RATE OF 10% ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 9 - ON THE ADVANCES GIVEN BY THE ASSESSEE WORK OUT TO R S.74,36,118/- . THEREFORE, DISALLOWANCE UNDER SECTION 36(1)(III) OF RS.74,36,118/- IS MADE AND INCLUDED IN THE TOTAL IN COME COMPUTATION. SUPPORT FOR PICKING THIS DISALLOWANCE UNDER SECTION 36(1)(III) IS DERIVED FROM THE DECISION OF THE HONO URABLE SUPREME COURT GIVEN IN THE CASE OF SA BUILDERS LTD. REPORTE D IN 288 ITR 1(SC). FURTHER RELIANCE IS ALSO PLACED ON THE DECIS IONS REPORTED IN 254 ITR 248 (KER) AND 318 ITR 210 (KER.) AND ON 25 TTJ (COCH.) 131. THE ASSESSEE HAS NOT RAISED ANY MATERI AL TO FULFIL THE CRITERIA OF COMMERCIAL EXPEDIENCY. 5.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE AS SESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED PARTIAL REL IEF, WHICH HAS BEEN OPPOSED BEFORE US BY THE ASSESSEE BY RAISING VARIOU S LEGAL AND FACTUAL ARGUMENTS. ON THE OTHER HAND, LD. DEPARTMENTAL REPR ESENTATIVE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 5.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSING OFFICER OBSER VED THAT ASSESSEE HAS MADE 'LOANS AND ADVANCES' OF RS.8,10,47,890/-, WHER EAS THE ASSESSEE HAS INCURRED SUBSTANTIAL INTEREST EXPENDITURE @ 8% TO 12% DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS CONCLUDED THAT RS.7,43,61,188/- OUT OF INTEREST BEARING FUNDS HAVE BEEN PUT TO NON- BUSINESS PURPOSES; HENCE, BY APPLYING AVERAGE INTER EST OF 10%, THE ASSESSING OFFICER DISALLOWED INTEREST OF RS.74,36,1 18/- U/S.36(L)(III) OF THE ACT. ACCORDING THE LD. AUTHORIZED REPRESENTATIV E, THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THE FACT THAT THE TOTAL LOANS AND ADVANCES OF RS.8,10,47,890/- COULD BE DIVIDED INTO THREE CATEGORIES; I.E. (I) LOAN ON WHICH INTEREST HAS BEEN CHARGED AM OUNTING TO RS.4,39,34,142/-, (II) ADVANCE INCOME-TAX/TDS/OTHER S AMOUNTING TO RS.1,14,21,350/- AND (III) BUSINESS ADVANCES AMOUNT ING TO RS.2,56,92,398/-. WITH REGARD TO ADVANCES OF RS.4,3 9,34,142/-, THE ASSESSEE SUBMITTED THAT ON THIS AMOUNT THE INTEREST WAS CHARGED; THEREFORE, QUESTION OF DISALLOWING INTEREST WOULD N OT ARISE. TO SUBSTANTIATE THIS CLAIM OF THE ASSESSEE, LEGERS OF THE PARTIES WERE PLACED AT PAGE NO.209 TO 212 OF THE PAPER BOOK. THE CIT(A) IN HIS ORDER STATED THAT THE DETAILS CALLED FOR IN RESPECT OF INTEREST CHARGED FROM SUCH PARTIES HAVE NOT BEEN FURNISHED WHICH IS FACTUALLY INCORRECT, WHICH THE DETAILS OF THE SAME WAS PROVIDED IN PAGE NO.125 OF THE PAPER-BOOK. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 10 - WITH REGARD TO THE ADVANCE INCOME-TAX/TDS/OTHERS AG GREGATING TO RS.1,14,21,350/-, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE SAME DO NOT FALL WITHIN THE AMBI T OF ADVANCES FOR NON-BUSINESS PURPOSES. REGARDING BUSINESS ADVANCES OF RS.2,56,92,398/-, THE BUSINESS PURPOSES FOR WHICH T HE SAME HAVE BEEN ADVANCED WERE CLARIFIED AS PER THE DETAILS GIVEN IN PAGE NO.248 TO 266 OF THE PAPER-BOOK. NO INTEREST CAN BE DISALLOWED IN RESPECT OF FUNDS ADVANCED FOR BUSINESS PURPOSES OUT OF COMMERCIAL EX PEDIENCY. OUT OF THE TOTAL BUSINESS ADVANCES OF RS.2,56,92,398/-. TH E CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DISALLOW INTEREST ON THE A DVANCES OF RS.1,72,98,112/- ON THE GROUND THAT SUCH ADVANCES A RE FOR NON-BUSINESS PURPOSES. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT THE DETAILS OF INTEREST FREE FUNDS HAD ALREADY BEEN FUR NISHED BEFORE THE LOWER AUTHORITIES VIDE LETTER DATED 11.12.2009, WHI CH WAS PLACED AT PAGE NO.129 & 130 OF THE PAPER BOOK. IN VIEW OF AFO RESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER O F THE CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE SAME AS PER FACTS AND LAW, AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS CLARIFIED THAT THE ONLY FOUR PARTIES, IN RESP ECT OF WHICH DISALLOWANCE HAS BEEN CONFIRMED BY CIT(A) FOR THE YEAR UNDER CON SIDERATION, HAD BEEN ADVANCED FUNDS BY THE ASSESSEE IN A.Y. 2007-08 AS W ELL. THE SAID FACT IS EVIDENT FROM REPRODUCED PORTION OF CIT(A)'S ORDER O F A.Y. 2007-08 IN THE ORDER OF CIT(A) FOR THE YEAR UNDER CONSIDERATIO N. THUS, IN ALL FAIRNESS, THIS ISSUE ALSO DESERVES TO BE SET-ASIDE TO AO IN THE LARGER INTEREST OF JUSTICE. 5.2 CONFIRMING ADDITION OF RS.3,06,008/- AS INCOME FROM HOUSE PROPERTY U/S.22. SIMILAR ADDITION HAS CONFIRMED BY ITAT IN ASSESSEE'S OWN CASE FOR A.Y. 07-08. PARA 7 TO 7.2, PGS.16-17 O F ITAT'S ORDER IN ITA NO.3513/AHD/2010 & 428/AHD/2010, SAME IS REPRODUCED AS UNDER: ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 11 - 7. NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS .5,05,432/- AS INCOME FROM HOUSE PROPERTY CHARGEABLE TO TAX U/S.22 OF THE ACT. THE ASSESSING OFFICER MADE THE ADDITION OF RS.5,05,432/- U/S.22 O F THE ACT, BY OBSERVING AS UNDER:- '13. ON VERIFICATION OF THE BALANCE SHEET IT IS SEE N THAT THE ASSESSEE IS IN POSSESSION OF RESIDENTIAL PROPERTIES /COMMERCIAL PROPERTIES WHICH ARE AS UNDER:- BUILDING A/C DEV KUTIR 2877345 BUILDING A/C HARIOM 2002523 BUILDING A/C LUWARA 288115 BUILDING A/C SAMRPAN 2252751 BUILDING A/C SHILAJ 602000 NEW VAISHALI SOCIETY (LAND) 650908 NEW VAISHALI SOCIETY (BUILDING) 5110232 THE ASSESSEE IS OCCUPYING THE VAISHALI SOCIETY BUNG LOW AND USING THE SAME AS HIS RESIDENTIAL PREMISES. THUS TH E VAISHALI SOCIETY BUNGLOW IS HIS SELF OCCUPIED PROPERTY. ALL OTHER PROPERTIES ARE BEING USED BY OTHER PERSONS. NO PROP ERTY INCOME HAS BEEN DECLARED BY THE ASSESSEE FROM THESE PROPER TIES. BOTH SECTION 23(2)(A) AND SECTION 23(2)(B) ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. THE ANNUAL V ALUE OF THE PROPERTY IS THEREFORE TO BE DETERMINED AS PER THE P ROVISIONS OF SECTION 23(1)(A) OF THE IT ACT. THE INVESTMENT MADE IN THE PROPERTY IS RS.80,22,734/- AND APPLYING THE INTERES T PERCENTAGE OF 9% THE YIELD OF THE PROPERTY WORKS OUT TO RS.7,2 2,046/-, THE ANNUAL VALUE OF THE PROPERTY IS THEREFORE ADOPTED A T RS.7,22,046/-. THE ASSESSEE IS ENTITLED TO DEDUCTIO N/S 24 OF RS.2,16,613/-. THE TAXABLE ANNUAL VALUE THEREFORE W ORKS OUT TO RS.5,05,432/-. ACCORDINGLY PROPERTY INCOME OF THE A SSESSEE IN RESPECT OF THE ABOVE PROPERTIES IS COMPUTED AT RS.5 ,05,432/-. 7.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE AS SESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 12 - 7.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAS MADE OUT A CLEAR CASE, AS INDICATED ABOVE, AS TO WHY THE INCOME OF THE UNOCCU PIED HOUSE PROPERTIES OF THE ASSESSEE ARE CHARGEABLE TO TAX AN D THE CIT(A) HAS ALSO RIGHTLY UPHELD THE ORDER OF THE ASSESSING OFFICER, WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. WITH THE ABOVE OBSERVATIONS, WE DISMISS THIS GROUND OF APPEAL. 5.3 CONFIRMING DISALLOWANCE OF RS.86,808/- IS CONCE RNED. LD. AR HAS NOT PRESSED THIS GROUND. THEREFORE, THIS GROUND IS DISMISSED. 5.4 CONFIRMING THE ADDITION OF RS.13,57,776/- U/S.1 4A. AO MADE DISALLOWANCE OF RS.13,57,776/- U/S.14A WHICH CAME T O BE CONFIRMED BY CIT(A) AS WELL. AO AND CIT(A) FAILED TO APPRECIATE THAT AS AGAINST INVESTMENTS OF RS.2,20,09,830/- (I.E. SHARES RS.54, 74,273 + AGRICULTURAL LAND RS.1,65,35,557/- (PG.13 OF ASST. ORDER), INTER EST-FREE FUNDS IN THE FORM OF PROPRIETORS CAPITAL AND RESERVES & SURPLUS AGGREGATE TO RS.20,21,55,550/- (PGS.5 OF P/B) WHICH IS ALMOST 9. 18 TIMES OF INVESTMENTS. HENCE, IN LIGHT OF SUBSTANTIAL INTERES T FREE-FUNDS, DISALLOWANCE W.R.T. INTEREST COMPONENT DESERVES TO BE DELETED IN VIEW OF EARLIER YEARS ORDER OF THE ITAT SAME IS REPRODUCED AS UNDER: 8. NEXT ISSUE IS WITH REGARD TO THE DISALLOWANCE O F RS,L,48,866/- BEING 1/5 TH OF DEPRECIATION CLAIMED ON CARS AND RS.1,48,866/- BEING AD-HOC DISALLOWANCE IN RESPECT OF OTHER VEHICLE EXPENDITUR E. THE ASSESSING OFFICER FOUND THAT ASSESSEE OWNED 12 CARS AND CONCL UDED THAT FIVE CARS MUST BE USED BY FAMILY MEMBERS OF THE ASSESSEE FOR PERSONAL USE. THE ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 13 - ASSESSING OFFICER DISALLOWED RS.1,48,866/- BEING 1/ 5 TH OF DEPRECIATION ON SUCH FIVE VEHICLE. THE ASSESSING OFFICER FURTHER DISALLOWED AN EQUIVALENT AMOUNT OF RS.1,48,866/- ON AD-HOC BASIS ON ACCOUNT OF FUEL AND REPAIRING EXPENSES SINCE NO MATERIAL WAS AVAILA BLE FOR DETERMINING THE SAME. THESE ADDITIONS WERE CONFIRMED BY CIT(A) IN APPEAL. 8.1 HAVING CONSIDERED THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THESE ADDITIONS HAVE BEEN BE MADE MERE LY ON THE BASIS OF ASSUMPTION OF INVOLVEMENT OF PERSONAL ELEMENT IN M OTOR CAR; WHEREAS THE ASSESSEE'S CLAIM WAS THAT SUCH EXPENDITURE H AD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSE SSEE. UNDER THESE FACTS AND CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT WOULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 1/8 TH ON BOTH THE COUNTS. WE ORDER ACCORDINGLY. RELIANCE IS ALSO FURTHER PLACED ON FOLLOWINGS: CIT VS. TORRENT POWER LTD. 363 ITR 474 (GUJ.) CIT VS. SUZLON ENERGY LTD. 354 ITR 630 (GUJ.) CIT VS. GUJARAT POWER CORPORATION LTD. 352 ITR 58 3 (GUJ) CIT VS. HITACHI HOME & LIFE SOLUTIONS (I). LTD. (20 14) 41 TAXMANN.COM 540 (GUJ) CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 3 40 (BOM) MUNJAL SALES CORPORATION VS. CIT 298 ITR 298 (SC) RESPECTFULLY, FOLLOWING THE ITAT ORDER AND ABOVE JU DGMENTS NO PART OF THE INTEREST DESERVES TO BE DISALLOWED U/S.14A. 5.5 REST OF THE GROUNDS ARE GENERAL IN NATURE. ITA NO. 351/AHD /2014 SHRI PURSHOTTAM B. PITRODA VS. ACIT ASST.YEAR 2009-10 - 14 - 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 22 / 0 8 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/08/2017 PRITI YADAV, SR.PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-I, AHMEDABAD 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 17/08/2017 (DICTATION-PAD 8 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/08/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 18/08/2017 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/08/2017 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER