Suresh Bhagwandas Ahuja, Sangli V. Assistant Commissioner of Income-tax, Circle - 2, Sangli

ITA 364/PUN/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8491 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 19-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Sale consideration of property below Jantri Value; Depreciation
• Section: 143(3); 50C; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.364/PUN/2018 / ASSESSMENT YEAR : 2013-14 SURESH BHAGWANDAS AHUJA, M/S. VIJAY TEXTILES, GURMUKH NIWAS, DR. GORDE PATH, NEAR DR. GAIKWAD HOSPITAL, MIRAJ, DIST. SANGLI. PAN : AAZPA0325R ....... / APPELLANT / V/S. ACIT, CIRCLE-2, SANGLI. / RESPONDENT ASSESSEE BY : SHRI M. K. KULKARNI. REVENUE BY : SHRI S. P. WALIMBE / DATE OF HEARING : 17.08.2021 / DATE OF PRONOUNCEMENT : 17.08.2021 / ORDER PER INTURI RAMA RAO, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 1, KOLHAPUR (CIT(A) FOR SHORT) DATED 04.12.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. BRIEFLY, THE FACTS OF THE CASE ARE AS UNDER :- THE APPELLANT IS AN INDIVIDUAL RUNNING A WHOLESALE BUSINESS IN SAREES IN THE NAME OF HIS PROPRIETARY CONCERN, M/S. VIJAY TEXTILES. THE ASSESSEE FILED E-RETURN FOR THE ASSESSMENT YEAR 2013-14 ON 19.09.2013 DECLARING TOTAL INCOME OF RS.69,58,120/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, SANGLI (THE ASSESSING OFFICER) VIDE ORDER DATED 22.03.2016 PASSED U/S 143(3) OF THE 2 ITA NO.364/PUN/2018 INCOME TAX ACT, 1961 (THE ACT) AT A TOTAL INCOME OF RS.77,78,610/- AFTER MAKING THE FOLLOWING ADDITIONS :- (I) ADDITION U/S 37(1) OF THE I.T. ACT RS.5,39,080/- (II) ADDITION U/S 50C OF THE I.T. ACT RS.45,000/- (III) ADDITION ON ACCOUNT OF AGRIL. EXPENSES RS.79,335/- (IV) ADDITION ON ACCOUNT OF DEPRECIATION RS.66,583/- (V) DISALLOWANCE U/S 37(1) OF THE I.T. ACT 90,492/- 3. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A) CONTESTING THE ADDITION OF DISALLOWANCE OF INTEREST OF RS.5,39,080/- AND ADDITION ON ACCOUNT OF AGRICULTURAL INCOME. THE LD. CIT(A) HAD CONFIRMED THE DISALLOWANCE OF INTEREST FOLLOWING HIS ORDER IN EARLIER ASSESSMENT YEARS WITHOUT DEALING WITH THE SUBMISSION OF THE APPELLANT THAT NO DISALLOWANCE OF INTEREST IS WARRANTED, INASMUCH AS, INTEREST FREE FUNDS AVAILABLE WERE MORE THAN THE ADVANCES GIVEN FOR NON-BUSINESS PURPOSES SINCE THE INTEREST FREE FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING THE ADVANCES. THE LD. CIT(A) DELETED THE ADDITION ON ACCOUNT OF DISALLOWANCE OF AGRICULTURAL EXPENSES. 4. BEING AGGRIEVED BY THE ORDER THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST, THE APPELLANT IS BEFORE US IN THE PRESENT APPEAL. 5. IT IS CONTENDED BEFORE US THAT THE SUBMISSION OF THE APPELLANT THAT INTEREST FREE FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING INTEREST FREE ADVANCES HAD NOT BEEN DEALT WITH BY EITHER THE ASSESSING OFFICER OR THE LD. CIT(A). HE ALSO DRAWN OUR ATTENTION TO THE FINANCIAL STATEMENTS FILED IN THE PAPER BOOK AT PAGE NO.3 TO DEMONSTRATE THAT THE INTEREST FREE FUNDS ARE AVAILABLE AT RS.1,71,21,752/- AS AGAINST THE ADVANCE MADE OF RS.55,60,000/-. HE FURTHER SUBMITTED THAT MERE FACT THAT THE ASSESSEE HAD AGREED FOR DISALLOWANCE OF INTEREST IN RESPECT OF THE PARTIES NO.3 TO 8 CANNOT BE FORM THE 3 ITA NO.364/PUN/2018 BASIS FOR MAKING ADDITION AS THERE CAN BE NO ESTOPPELS AGAINST THE SETTLED POSITION OF LAW. 6. ON THE OTHER HAND, LD. SR. DR PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES TO THE DISALLOWANCE OF INTEREST ON THE GROUND THAT THE INTEREST BEARING FUNDS HAVE DIVERTED FOR THE PURPOSE OF MAKING THE ADVANCES ON WHICH NO INTEREST IS EARNED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE MADE THE FOLLOWING INTEREST FREE ADVANCES TO THE FOLLOWING PARTIES :- SR. NO. NAMES LOAN AMOUNT INTEREST AMOUNT 1 BHARATKUMAT B AHUJA 700000 105000 2 A V HERO 50000 7500 3 M B DHERE 10000 497 4 GIRISH ENTERPRISES 200000 30000 5 LAXMI SAREES 1000000 2466 6 KISHOR WARIK 100000 81 37 7 GIRISH BACHANI 1500000 184932 8 DHANANJAY GADADWAR 2000000 200548 TOTAL 539080 8. IT IS CONTENDED BEFORE US THAT THE ABOVE ADVANCES WERE MADE OUT OF OWN FUNDS NOT OUT OF THE BORROWED FUNDS. THEREFORE, THERE IS NO WARRANT TO DISALLOW ANY PART OF THE INTEREST EXPENDITURE CLAIM. HOWEVER, THE APPELLANT EXPRESSED NO OBJECTION FOR DISALLOWANCE OF INTEREST IN RESPECT OF PARTIES AT SL. NO. 3 TO 8. EVEN THE LD. CIT(A) CONFIRMED THE ADDITION. FROM PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, IT IS EVIDENT THAT THE APPELLANT MADE A CATEGORICAL STATEMENT THAT NO INTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING THE ABOVEMENTIONED ADVANCES. THIS SUBMISSION HAD NOT BEEN DEALT WITH BY THE LOWER AUTHORITIES. ON PERUSAL OF THE BALANCE SHEET PLACED AT PAGE NO.3 OF THE PAPER BOOK, IT IS EVIDENT THAT THE INTEREST FREE BEARING FUNDS WERE AVAILABLE TO THE EXTENT OF RS.1,71,21,752/- AS AGAINST THE 4 ITA NO.364/PUN/2018 TOTAL ADVANCES MADE OF RS.55,60,000/-. IT IS SETTLED POSITION OF LAW THAT WHEN THE INTEREST FREE FUNDS AVAILABLE WERE MORE THAN THE AMOUNT OF ADVANCES ON WHICH NO INTEREST WERE CHARGED THERE IS NO WARRANT FOR DISALLOWING ANY AMOUNT OF THE INTEREST EXPENDITURE CLAIM AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 AND CIT VS. GUJARAT RECLAIM & RUBBER PRODUCTS LTD., 383 ITR 236. THIS PROPOSITION WAS ALSO APPROVED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD., 102 TAXMANN.COM 52 (SC) AND MUNJAL SALES CORPORATION VS. CIT, (2008) CTR (SC) 105. IT IS EQUALLY SETTLED POSITION OF LAW THAT THERE CAN BE NO ESTOPPEL AGAINST THE LAW. THEREFORE, THE MERE FACT THAT THE ASSESSEE HAD AGREED FOR THE ADDITION CANNOT FORM THE BASIS FOR MAKING THE ADDITION. THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE REVERSED. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF AUGUST, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 17 TH AUGUST, 2021. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-1, KOLHAPUR. 4. THE PR. CIT-1, KOLHAPUR. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.