Sanjay Sadhuram Wadhwani, Yavatmal V. Asst.Commissioner of Income Tax Wardh Circle, Wardha

ITA 389/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3908 (ITAT-NAGPUR)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHARDHA NICHHAL ACIT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.389/NAG/2012 (AY: 2007-08) SANJAY SADHURAM WADHWANI, WADHWANI COMPLEX, NETAJI CHOWK, YAVATMAL. PAN:AAEPW6982H VS. ASST. COMMISSIONER OF INCOME TAX WARDHA CIRCLE, WARDHA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P. DEWANI RESPONDENT BY : SMT. SHARDHA NICHHAL (ACIT) DATE OF HEARING: 15.03.2013 DATE OF PRONOUNCE MENT : 03.04.2013 O R D E R PER R.K. GUPTA (JM): THIS IS AN APPEAL BY ASSESSEE RELATING TO AY 2007-0 8. FIRST ISSUE IS AGAINST MAKING THE ADDITION OF RS. 8 ,71,731/- U/S 2(22)(E) OF THE ACT. DURING THE ASSESSMENT PROCEEDING THE AO NOTED THAT ASSESSEE HAS TAKEN LOAN FROM M/S SAGAR WINE MANUFACTURING & MARK ETING PRIVATE LIMITED OF RS. 16,36,302/-. IT WAS STATED THAT THIS IS AN INTE REST FREE LOAN TAKEN BY ASSESSEE. HOWEVER THE AO FURTHER NOTED THAT NET CREDIT BALANC E IN SAID ACCOUNT IS RS. 8,71,731/-. IT WAS EXPLAINED BEFORE AO, FURTHER THA T THE TRANSACTION BETWEEN ASSESSEE AND THE COMPANY ARE IN NATURE OF BUSINESS TRANSACTION UNDER MUTUAL CURRENT ACCOUNT AND NOT IN THE NATURE OF LOAN OR AD VANCE, THEREFORE, PROVISION OF SECTION 2(22)(E) ARE NOT ATTRACTED. IT WAS ALSO SUB MITTED THAT ASSESSEE IS NOT A SHARE-HOLDER IN INDIVIDUALS CAPACITY AS ASSESSEES HUF IS SHARE-HOLDER, THEREFORE, ALSO PROVISION OF SECTION 2(22)(E) ARE NOT ATTRACTE D. THE AO NOTED THAT IN FACT ASSESSEE IS SHARE-HOLDER AS CONFIRMED BY THE COMPAN Y. HOWEVER, A CLARIFICATION FROM THE COMPANY WAS FILED IT WAS EXPLAINED THAT TH E ASSESSEE IS NOT A SHARE- 2 ITA NO.389/NAG/2012 SANJAY SADHURAM WADHWANI HOLDER BUT HUF OF THE ASSESSEE IS SHARE-HOLDER. TO ESTABLISH THIS FACT ASSESSEE FILED HIS BALANCE-SHEET AS WELL AS BALANCE-SHEET OF HUF. HOWEVER, AO WAS NOT SATISFIED AS IN HIS VIEW THE ASSESSEE CHANGED HIS S TAND FROM TIME TO TIME AND THEREFORE, PROVISION OF SECTION 2(22)(E) ARE ATTRAC TED, ACCORDINGLY HE MADE ADDITION OF THE NET CREDIT BALANCE OF RS. 8,71,731/ -. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING TH E MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVE TO SUCCEED ON THIS ISSUES. IT IS SEEN THAT CONFIRMATION FROM COMPANY WAS FILED, WHEREIN IT WAS CLARIFIED THAT ASSESSEE IS NOT A SHARE-HOLDER BUT ASSESSEES HUF IS SHARE-HOL DER. COPY OF BALANCE-SHEET IN CASE OF AN INDIVIDUAL AND IN CASE OF HUF IS PLACED ON RECORD AND IT IS SEEN THAT IN THE BALANCE-SHEET OF HUF THE SHARE OF THE COMPANY A RE SHOWN. COMPANY HAS ALSO CERTIFIED THAT SHARE BELONGS TO HUF AND NOT TO INDIVIDUAL. SINCE ASSESSEE IS NOT A SHARE-HOLDER, THEREFORE PROVISION OF SECTION 2(22)(E) ARE NOT ATTRACTED AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN CASE O F BHAUMIK COLOUR PRIVATE LIMITED 118 ITD (1). THIS DECISION OF THE SPECIAL B ENCH HAVE BEEN AFFIRMED BY THE HONBLE BOMBAY HIGH COURT IN CASE OF UNIVERSAL MEDICARE PRIVATE LIMITED 324 ITR 263. THEREFORE, WE HOLD THAT PROVISION OF SECTI ON 2(22)(E) ARE NOT ATTRACTED ON THE FACTS OF THE PRESENT CASE, THEREFORE, THE AD DITION MADE ON THIS ACCOUNT IS DELETED. SECOND ISSUE RELATES TO CONFIRMING THE ADDITION OF RS. 59,375/- OUT OF INTEREST PAID BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDING, THE AO NOTED TH AT INTEREST FREE ADVANCES WERE GIVEN BY THE ASSESEE OUT OF HIS BORRO WED FUNDS ON WHICH INTEREST WAS PAID BY ASSESSEE, THEREFORE HE DISALLOW A SUM O F RS. 59,375/-. THE CIT(A) HAS CONFIRMED THE ACTION OF THE AO. IT WAS SUBMITTED BEFORE THE TRIBUNAL THAT THE INTER EST FREE ADVANCES GIVEN BY ASSESSEE ARE COVERED BY HIS OWN FUNDS AVAI LABLE WITH THE ASSESSEE WHICH ARE MUCH MORE WITH THE ASSESSEE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF RELIANCE UTILI TIES AND POWER LIMITED 313 ITR 340, ON THE OTHER HAND, LD. DR PLACED RELIANCE ON THE ORDER OF CIT(A). 3 ITA NO.389/NAG/2012 SANJAY SADHURAM WADHWANI AFTER CONSIDERING THE SUBMISSION AND PERUSING THE M ATERIAL ON RECORD IT IS SEEN THAT ASSESSEE HAS MUCH MORE FUNDS WITH HIM ON WITH NO INTEREST WAS PAID. THE AMOUNT ADVANCED BY THE ASSESSEE ON WH ICH INTEREST WAS NOT CHARGED, COVERS BY THE AMOUNT AVAILABLE WITH ASSESS EE, THEREFORE, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF RE LIANCE UTILITIES (SUPRA) DISALLOWANCE OF INTEREST WAS NOT JUSTIFIED. ACCORDI NGLY WE DELETE THE ADDITION OF RS. 59,375/-. NEXT ISSUE IS IN RESPECT TO CHARGING OF INTEREST U/ S 234A, 234B, 234C & 234D OF INCOME TAX ACT, 1961 WHICH IS CONSEQ UENTIAL IN NATURE. THE AO, THEREFORE IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE. WE ORDERED ACCORDINGLY. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF APRIL 2013. SD/- SD/- (D. KARUNAKARA RAO) (R.K. GUPTA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : DATE : 3 RD APRIL, 2013 SK COPY TO: 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE DCIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR NAGPUR, BENCH, ITAT, NAGPUR. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI