M/s W.A Shah Enterprises P Ltd., Kanpur V. Dy. Commissioner of Income Tax-VI, Kanpur

ITA 401/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4717 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 401/LKW/2014 ASSESSMENT YEAR: 2008 - 09 M/S W.A. SHAH ENTERPRISES PVT. LTD. 14/124, JYO TIMANI, M.G. MARG KANPUR V. DY. CIT RANVE VI KANPUR T AN /PAN : AAACW1404F (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. ABHINAV MEHROTRA, ADVOCATE RESPONDENT BY: SHRI. AMIT NIGAM, D.R. DATE OF HEARING: 19 02 201 6 DATE OF PRONOUNCEMENT: 26 02 201 6 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS: - 1 . THAT THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING DISA LLOWANCE OF INTEREST ON ESTIMATED BASIS IN THE RATIO OF MAXIMUM CASH IN HAND AS REDUCED BY CASH I N HAND REQUIRED IN THE BUSINESS AND MAXIMUM CASH IN HAND IN THE BOOKS ON A FLAT BASIS AS DONE BY THE A.O. 2 . THAT THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS F URTHER ERRED IN LAW AS WELL AS ON FACTS IN NOT APPRECIATING THE FACTS OF THE CASE AND WRITTEN SUBMISSIONS FILED DURING THE COURSE OF APPELLATE AND ASSESSMENT PROCEEDINGS. : - 2 - : 3 . THAT THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS FURTHER ERRED IN LAW AS WELL AS O N FACTS IN NOT APPRECIATING THAT THERE WAS SUBSTANTIAL OPENING CASH IN HAND AND THEREFORE THERE WAS NO NEXUS BETWEEN THE CASH IN HAND AND BORROWED FUNDS FROM BANK. 4 . THAT IN ANY CASE THE DISALLOWANCE AND THE BASIS UPON WHICH THE SAME HAS BEEN DONE IS HIGHLY EXCESSIVE LOOKING TO THE FACTS OF THE CASE. 2 . THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED FROM THE BALANCE SHEET THAT CASH IN HAND AS ON 31.3.2008 I S DECLARED AT RS.49,31 ,714/ - AGAINST RS.59,21,922/ - DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR KEEPING HUGE CASH IN HAND IN THE LIGHT OF THE FACT THAT THE ASSESSEE WAS AVAILING CASH LIMIT OF MORE THAN RS.62,34,064/ - FROM BANK OF BARODA. IN RESPONSE THERETO, THE ASSESSEE STATED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF SANDALWOOD OIL AND CHIPS WHICH INVOLVES PURCHASING OF WOOD FROM VARIOUS DISTRICT FORESTS. SUCH PURCHASES ARE MADE THROUGH AUCTIONS , WHICH R EQUIRE LIQUIDITY OF CASH AS SOON AS THE AUCTION TAKES PLACE WHICH IS HELD IN SOUTHERN INDIA. THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND IN APPEAL THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION. 3 . NOW THE ASSESS EE IS IN APPEAL BEFORE US AND DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE BALANCE SHEET WHEREFROM IT IS EVIDEN T THAT THE ASSESSEE WAS HAVING SUFFICIENT SHARE CAPITAL RESERVE AND SURPLUS OF RS.1,08,54,032. 52 BESIDES SHARE CAPITAL OF RS.24,18,300/ - . THEREFORE , AVAILABILITY OF CASH CANNOT BE HELD TO BE OUT OF FUNDS OBTAINED FROM BANK ON INTEREST. OUR : - 3 - : ATTENTION WAS ALSO INVITED TO THE JUDGMENTS OF THE HONBLE APEX COURT IN THE CASE OF HERO CYCLES (P) LTD. VS . CIT (CENTRAL) IN CIVIL APPEAL NO.514 OF 2008 , IN WHICH IT HAS BEEN HELD THAT NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT AND THAT THE INCOME TAX AUTHORITIES MUST PU T THEMSELVES IN THE SHO E S OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOU LD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. 4 . OUR ATTENTION WAS ALSO INVITED TO THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RADICO KHAITAN LTD., 274 ITR 354 (ALL D) IN WHICH IT HAS BEEN HELD THAT IF THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, ADVANCEMENT OF FUND OUT OF IT COULD NOT BE TREATED TO BE ADVANCEMENT OUT OF BORROWED FUNDS AND NO CORRESPONDING DISALLOWANCE IS POSSIBLE. 5 . KEEPING IN VIEW THE TOTALITY O F THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND TH AT WHERE SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE, THE R ETENTION OF CASH IN HAND SHOULD NOT BE DOUBTED FOR NON - BUSINESS PURP OSES. WE ACCORDINGLY HOLD THAT THE LOWER AUTHORITIES HA VE WRONGLY MADE DISALLOWANCE ON ACCOUNT OF R ETENTION OF CASH IN HAND . WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE IMPUGNED ADDITION. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION ED PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH JJ: 1902 FEBRUARY, 2016 : - 4 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR