ITO, Ward - 8(1), Kolkata, Kolkata V. Shri Bharat Jain, Kolkata

ITA 397/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70411 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-03-2012
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS SRDR
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Unexplained expenditure; Proportionate interest
• Section: 14A; 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI ABRAHAM.P.GEORGE, ACCOUNTANT MEMBER ITA NO. 397 / KOL / 2012 ASSESSMENT YEAR :2007-08 ITO WARD-8(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 5 TH FLOOR, R. NO. 12A, KOLKATA 700069 V/S . SHRI BHARAT JAIN 25A, BALLYGUNGE CIRCULAR ROAD, KOLKATA 700019 [ PAN NO.ACVPJ 6636Q ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SMT. RANU BISWAS, SR-DR /BY RESPONDENT SHRI SOUMITRA CHOWDHURY, AR /DATE OF HEARING 06-11-2013 /DATE OF PRONOUNCEMENT 21-11-2013 / // / O R D E R PER BENCH:- THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, KOLKATA IN APPEAL NO.466 /CIT(A)-VIII/KOL/09-10 DATED 08-02-2010. THE ASSESSMENT WAS FRAMED BY ITO VIDE HER ORDER DATED 31-12-2009 FOR THE ASSESSMENT YEAR 2007-08 U/S 143( 3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF INTEREST ON LOAN UTILIZED FOR THE PURPOSE OTHER THAN THE BUSINESS. F OR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1:- ITA NO.397/KOL/2012 A.Y.2007 -08 ITO WD-8(1) KOL V. SH BHARAT JAIN PAGE 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. COMMISSIONER OF INCOME TAX (A)-VIII, KOLKATA WAS JU STIFIED IN LAW IN DELETING THE ADDITION MADE ON PAYMENT OF INTEREST O N LOAN UTILIZED FOR THE PURPOSE OTHER THAN HIS BUSINESS. 3. BRIEFLY STATED FACTS ARE THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXAMINED THE BOOKS OF ACCOUN T OF THE ASSESSEES PROPRIETARY CONCERN M/S. BENZ TRADERS AND NOTICED T HAT IT HAS DEBITED A SUM OF RS.17,09,041/- ON ACCOUNT OF INTEREST PAID ON LO AN TAKEN. THE ASSESSEE WAS REQUESTED TO EXPLAIN THE UTILIZATION OF LOAN TA KEN. IN RESPONSE TO QUERY, THE ASSESSEE REPLIED THAT MORE THAN 65% LOAN TAKEN WAS USED FOR THE PURPOSE OF BUSINESS AND THE BALANCE LOAN WAS ADVANCED TO OT HER PARTIES ON WHICH INTEREST WAS EARNED. AS THE ASSESSEE COULD NOT CO-R ELATE, THE ASSESSING OFFICER DISALLOWED 50% OF THE AMOUNT CLAIMED ON AD HOC BASIS AT RS.8,54,521/-.. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA-5.1 OF HIS APPELLATE ORDER BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE SUBMISSION MADE BY THE AR OF THE APPELLANT, CAREFULLY CONSIDERED THE JUDGMENTS OF TH E HONBLE SUPREME COURT AND THE JURISDICTIONAL HIGH COURT RELIED UPON BY THE APPELLANT, PERUSED THE IMPUGNED ASSESSMENT ORDER AND THE MATER IALS AVAILABLE ON RECORDS AND FOUND THAT THERE IS AMPLE FORCE IN THE ARGUMENT OF THE AR. THE AO HAS NOT CORRECTLY APPRECIATED/UNDERSTOOD THE FACTS THAT THE APPELLANT ACQUIRED THE LOAN HAD ADVANCED THE SAME T O THE DIFFERENT COMPANIES TO THE EXTENT 64% OF SUCH AMOUNT AND BALA NCE AMOUNT ADVANCED TO OTHER NON-CORPORATE CONCERNS FOR EARNIN G INTEREST INCOME AS A PART OF THE BUSINESS ACTIVITY OF IT AS HAS BEE N REGULARLY DOING/SHOWING AND NO AMOUNT WAS BEING USED FOR THE PURPOSE OTHER THAN THE BUSINESS PURPOSES IN THE RELEVANT ASSESSME NT YEAR AS APPREHENDED BY THE AO. IT IS SEEN THAT THIS POSITIO N OF UTILIZATION OF BORROWED FUNDS HAD BEEN CLEARLY EXPLAINED TO THE AO DURING THE ASSESSMENT PROCEEDINGS VIDE ITS SUBMISSION. IT IS A LSO SEEN THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT T HE BORROWED FUND ENTIRELY NOT USED FOR BUSINESS PURPOSES. HOWEVER, T HE AO HAS CONCLUDED THAT THE AMOUNT GIVEN ONLY TO THE COMPANI ES ARE FOR BUSINESS PURPOSES AND THE AMOUNT GIVEN TO NON-CORPORATE PART IES ARE USED FOR NON-BUSINESS PURPOSES AND THAT MADE THE IMPUGNED PR OPORTIONATE DISALLOWANCE OF INTEREST PAID. THE ANALYSIS OF THE FURNISHED DETAILS OF ITA NO.397/KOL/2012 A.Y.2007 -08 ITO WD-8(1) KOL V. SH BHARAT JAIN PAGE 3 WORKING OF LOAN TAKEN, UTILIZED FOR ADVANCEMENT AND INTEREST EARNED THERE FROM CLEARLY EXPLAINED THE POSITION AND ENDOR SED THE ARGUMENT OF THE AR OF THE APPELLANT. IN VIEW OF THE ABOVE FINDING, DISCUSSION AND CONSID ERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLL OWING THE DECISION OF THE CITED CASE LAWS, THE AO IS DIRECTED TO ALLOW TH E ENTIRE INTEREST CLAIM OF THE APPELLANT BEING ALLOWABLE EXPENSES U/S.36(1) (III) OF THE I.T. ACT. THUS, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED . AGAINST THE ALLOWANCE OF INTEREST, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE NOTED THE FACTS THAT DURING FINANCIAL YEAR ENDING ON 31 ST MARCH, 2007, ASSESSEE HAS TAKEN FRESH LOAN OF RS.3 8.20 LAKHS AND REPAID A SUM OF RS.65.16 LAKHS DURING THE FINAN CIAL YEAR 2006-07 RELEVANT TO AY 2007-08. THE ASSESSEE RECOVERED A SUM OF RS.3 6.69 LAKHS FROM THE BORROWERS AND ACCORDINGLY LOAN ADVANCE CAME DOWN TO RS.91.73 LAKHS. AS THE ASSESSEE HAS TAKEN FRESH LOAN OF RS.38.20 LAKHS + LOAN ALREADY TAKEN AT RS.36.69 LAKHS WERE UTILIZED FOR REPAYMENT OF LOANS . ON BALANCE, THE ASSESSEE HAS EARNED INTEREST IN AY 2007-08 AT RS.13 ,81,071/- AS AGAINST THE PAYMENT OF INTEREST AT RS.30,90,112/-. THIS BALANCE AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT AT RS.17,09,041/-, IT MEANS THAT ASSESSEE HAS INVESTED THE ENTIRE FUNDS TAKEN THROUGH LOAN EITHER IN BUSIN ESS OR IN ADVANCING INTEREST BEARING LOANS, WHICH WAS SUBJECT-MATTER OF PROCEEDI NGS U/S. 263 OF THE ACT BEFORE CIT-III, KOLKATA. CIT-III, KOLKATA ISSUED SH OW-CAUSE NOTICE NO. CIT, KOL- III/U/S 263/2011-12/4172 DATED 21.10.2011 AND THE R ELEVANT PORTION OF THE SHOW-CAUSE NOTICE REPRODUCED AS UNDER: THE ASSESSMENT IN YOUR CASE WAS COMPLETED U/S. 143 (3) ON 31.12.2009 ON A TOTAL INCOME OF RS.17,94,830/- AGAINST RETURNE D INCOME OF RS.7,59,950/-. A PERUSAL OF THE ACCOUNTS OF M/S. BENJ TRADERS SHOW S THAT YOU HAVE OBTAINED LOANS & ADVANCES OF RS.2,36,55,140/- FOR T HE PURPOSES OF YOUR BUSINESS. OUT OF SUCH SUM YOU HAVE FORWARDED LOAN OF RS.91,72,508/- TO VARIOUS PARTIES AND INVESTED A SUM OF RS.94,31,4 49/- IN SHARES OF ITA NO.397/KOL/2012 A.Y.2007 -08 ITO WD-8(1) KOL V. SH BHARAT JAIN PAGE 4 VARIOUS COMPANIES AS APPEARING IN THE SCHEDULE 2 O F THE BALANCE SHEET. YOU HAVE PAID AN INTEREST OF RS.30,90,112/ - AGAINST THE LOAN TAKEN AS STATED ABOVE. HOWEVER, THE LOAM AMOUNT OF RS.2,36,55,140/- WAS NOT USED FOR THE PURPOSE OF YOUR BUSINESS BUT F OR INVESTMENT ONLY. HENCE, PROPORTIONATE INTEREST SHOULD HAVE BEEN DISA LLOWED AS PER SECTION 14A OF THE I. T. ACT. THE CLAIM OF INTEREST PAID AS PER THE PROFIT & LOSS A/C IS RS.30,90,112/-, BUT IN THE ASSESSMENT ORDER, IT IS MENTIONED AS RS. 17,09,041/- BY MISTAKE. THE NET INTEREST PAID IS MENTIONED AS RS. 30,90,112/- AND AT THE SAME TIME RS.13,81,071/- IS SHOWN AS INTEREST RECEI VED DURING THE YEAR. ACCORDINGLY, A CLARIFICATION SHOULD HAVE BEEN SUBMI TTED. FINALLY, THIS WAS EXPLAINED BEFORE CIT-III, WHO HAS DROPPED THE PROCEEDINGS VIDE ORDER NO. CIT-III/DCIT/HQ-3/263/974/2011-12/64 61 DATED 15-03-2012. 5. FROM THE ABOVE FACTS AND CIRCUMSTANCES WE COULD NOT FIND THAT INTEREST BEARING FUNDS WERE UTILISED FOR THE PURPOSE OF INTE REST FREE ADVANCES AS CLAIMED BY AO IN HIS ASSESSMENT ORDER. THE REVENUE NOW BEFORE US COULD NOT POINT OUT THAT HOW AND WHERE THE INTEREST BEARING L OANS ARE INVESTED IN INTEREST FREE ADVANCES. THE FACTS NARRATED ABOVE ARE VERY CL EAR. IN SUCH CIRCUMSTANCES, WE CONFIRM THE ORDER OF CIT(A) ON TH IS ISSUE AND THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION OF PAYMENT MADE FROM SOME UND ISCLOSED SOURCE U/S 68 OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2:- 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. COMMISSIONER OF INCOME TAX (A)-VIII, KOLKATA WAS JU STIFIED IN LAW IN DELETING THE ADDITION MADE U/S. 68 ON PAYMENTS MADE FROM SOME UNDISCLOSED SOURCES. 7. BRIEFLY STATED FACTS ARE THAT THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON HIS TOUR ETC., AT RS.6,97,627/- BUT AFTER GOING THR OUGH THE DETAILS OF BANK, IT WAS OBSERVED THAT AMOUNT DISCLOSED AS EXPENDITURE WAS O NLY RS.5,92,266/-, ITA NO.397/KOL/2012 A.Y.2007 -08 ITO WD-8(1) KOL V. SH BHARAT JAIN PAGE 5 THEREFORE THE ASSESSING OFFICER ADDED A SUM OF RS.1 ,05,361/- BEING UNEXPLAINED EXPENDITURE U/S. 68 OF THE ACT. AGGRIEV ED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO DELETED THE ADDITION BY OB SERVING IN PARA-5.2 AS UNDER:- 5.2 GROUND NO.3 & 4: IN THESE GROUNDS OF APPEAL, THE APPELLANT OBJECTED TO THE ACTION OF THE AO IN DISALLOWING RS .1,05,361/- BEING PAID TO CREDIT CARD A/C ON ACCOUNT OF BUSINESS TOUR UNDE RTAKEN BY THE APPELLANT AS A DIRECTOR BY TREATING THE SAME AS EXP ENDITURE MADE OUT OF UNDISCLOSED SOURCES U/S. 68. IT IS SEEN THAT THE INFORMATION RECEIVED FROM AIR D ETAILS WHICH TRANSPIRED THAT RS.6,97,627/- HAD BEEN EXPENDED THROUGH CITI B ANK CARD BUT FROM THE RESPECTIVE LEDGER THE DEBIT FOR THE YEAR 2 006-07 STOOD AT RS.5,92,265.72. SO, A DIFFERENCE OF R.1,05,361/- WA S OBSERVED. BEING NOT SATISFIED WITH THE EXPLANATION OF THE APPELLANT , THE AO MADE THE IMPUGNED ADDITION FOR THE DIFFERENCE AMOUNT OF RS.1 ,05,361. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT IS SUBMITTED TH AT THE DIFFERENCE OF RS.1,05,361/- IS CAUSED DUE TO CASH-BASIS TREATMENT SHOWN IN AIR WHILE RECONCILIATION STATEMENT IS DRAWN WHEREIN NO SUCH D IFFERENCE AS OBSERVED BY THE AO WOULD BE SEEN AS THE SAME IS REC ONCILED. THE RECONCILIATION STATEMENT WITH THE SUPPORTING DOCUME NTS WAS FURNISHED FOR HIS VERIFICATION. ON VERIFICATION, IT IS FOUND THAT THE CHEQUE OF RS.1,18,268.20/- ISSUED ON 31.3.2006 WAS PRESENTED ON 17 TH APRIL, 2007 AND A CHEQUE FOR RS.12,907.19 ISSUED ON 28.3.2007 W AS PRESENTED ON 7.4.07 AND THUS AFTER TAKING INTO ACCOUNT THESE TRA NSACTIONS THERE REMAINS NO DIFFERENCE WHICH COULD BE CONSIDERED FOR ANY ADDITION. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED AND THUS, THE AO IS DIRECTED TO DELETE TH E ADDITION MADE ON THIS ACCOUNT. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE AND FIND THAT LD. SR-DR C OULD NOT CONTROVERT THE FINDINGS OF CIT(A), WHICH IS BASED ON RECONCILIATIO N STATEMENT SUBMITTED BEFORE HIM. FURTHER, THE SUM OF RS.1,05,361/- IS CA USED DUE TO CASH BASIS TREATMENT SHOWN IN AIR, WHEREIN RECONCILIATION STAT EMENT IS DRAWN AND THERE IS NO SUCH DIFFERENCE OCCURS. ONCE THE AMOUNT IS R ECONCILED THEN THERE IS NO ITA NO.397/KOL/2012 A.Y.2007 -08 ITO WD-8(1) KOL V. SH BHARAT JAIN PAGE 6 SCOPE FOR FURTHER ADDITION. HENCE, CIT(A) HAS RIGH TLY DELETED THE ADDITION AND WE CONFIRM THE SAME. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 10. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013 (ABRAHAM.P. GEORGE) (MAHAVIR SINGH ) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 21 /11/2013 ) **+ **+ **+ **+ ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '.'*/ 0 / CONCERNED CIT 4. 0- / CIT (A) 5. +34 ***/, */ , / DR, ITAT, KOLKATA 6. 478 9: / GUARD FILE. BY ORDER/ , ;/< '= */ , )