M/s Vikalpl Deria (HUF), Hoshagabad V. The ACIT 1(1), Bhopal

ITA 406/IND/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66723 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 22-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: H P VERMA
• Keywords: Notional interest
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS. 406/IND/2012 A.Y. 2003-04 M/S VIKALP DERIA (HUF) DERIA LINE BABAI DISTT. HOSHANGABAD PAN AAEHV-4818H :: APPELLANT VS ASSTT.COMMISSIONER OF INCOME TAX 1(1), BHOPAL :: RESPONDENT ITA NOS. 332/IND/2012 A.YS. 2003-04 ASSTT.COMMISSIONER OF INCOME TAX 1(1), BHOPAL :: APPELLANT VS M/S VIKALP DERIA (HUF) DERIA LINE BABAI DISTT. HOSHANGABAD :: RESPONDENT 2 ITA NO. 407/IND/2012 A.Y. 2005-06 M/S VIKALP DERIA (HUF) DERIA LINE BABAI DISTT. HOSHANGABAD PAN AAEHV-4818H :: APPELLANT VS ASSTT.COMMISSIONER OF INCOME TAX 1(1), BHOPAL :: RESPONDENT ITA NO. 333/IND/2012 A.Y. 2005-06 ASSTT.COMMISSIONER OF INCOME TAX 1(1), BHOPAL :: APPELLANT VS M/S VIKALP DERIA (HUF) DERIA LINE BABAI DISTT. HOSHANGABAD :: RESPONDENT ASSESSEE BY SHRI H.P. VERMA AND SHRI ASHISH GOYAL REVENUE BY SHRI R.A. VERMA DATE OF HEARING 23.10.2012 DATE OF PRONOUNCEMENT 29.10.2012 3 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS APPEALS FOR THE A.YS. 2003-04 AND 2005-06, RESPECTIVELY, ON IDENTICAL GROUNDS. FIRST WE SHALL TAKE UP THE APPEALS FOR TH E A.Y. 2003-04 WHEREIN THE FIRST AND SECOND GROUNDS RAISED BY THE ASSESSEE ARE THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE ASSESSMENT ORDER IS BAD IN LAW, NOT SUSTAINABLE, BA RRED BY LIMITATION, CONTRARY TO MATERIAL AND LAW, WITHOUT J URISDICTION AND ILLEGAL, THEREFORE, LIABLE TO BE QUASHED. THESE GRO UNDS WERE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, TH EREFORE, DISMISSED AS NOT PRESSED. 2. THE NEXT GROUND RAISED PERTAINS TO SUSTAINING TH E ADDITION OF RS. 88,219/- ON ACCOUNT OF UNDISCLOSED INTEREST TO THE FAMILY MEMBERS WHEREAS THE REVENUE HAS CHALLENGED THE DELE TION OF ADDITION OF RS.14,69,549/- MADE ON ACCOUNT OF UNDIS CLOSED INTEREST TO FAMILY MEMBERS BY THE LEARNED CIT(A). 3. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI H.P. VERMA, ALONG WITH SHRI ASHISH GOYAL, DEFENDED THE IMPUGNED ORDER TO THE EXTENT THE RELIEF WAS GRANTED TO THE ASSESSEE A ND ON THE APPEAL OF THE REVENUE CONTENDED THAT THE REMAINING ADDITION OF 4 RS. 88,219/- ON ACCOUNT OF INTEREST TO FAMILY MEMBE RS SHOULD ALSO HAVE BEEN DELETED WHEREAS SHRI R.A. VERMA, LEA RNED SR. DR CHALLENGED THE DELETION AND SUPPORTED THE SUSTENANC E OF REMAINING ADDITION. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF AR E THAT THE ASSESSEE IS MAINLY ENGAGED IN AGRICULTURAL OPERATIO N. AS PER THE OBSERVATION OF THE LEARNED ASSESSING OFFICER, THE A SSESSEE DID NOT RECEIVE INTEREST ON LOANS FROM SHRI KALPTARU JAIN ( RS. 2 LACS), M/S VAISHNAV PROPERTY CONSULTANT (RS. 4 LACS) AND R ACHNA JAIN (RS. 8 LACS) (TOTAL RS. 15 LACS) BY FURTHER OBSERVI NG THAT THE ASSESSEE DEBITED INTEREST IN COMPUTATION OF INCOME AND COULD HAVE EARNED INTEREST FROM THESE THREE PARTIES, ACCO RDINGLY, THE LEARNED ASSESSING OFFICER APPLIED THE INTEREST RATE OF 12% ON THE TOTAL AMOUNT OF RS. 15 LACS AND THUS ADDED RS. 1,68 ,000/- TO THE INCOME OF THE ASSESSEE. THE LEARNED ASSESSING OFFIC ER FURTHER OBSERVED THAT THE ASSESSEE ADVANCED AMOUNT OF RS.1, 27,31,337/- TO VARIOUS FAMILY MEMBERS AND SHOWED RS.2,45,000/- TO HAVE BEEN EARNED FROM SUCH LOANS. THE ASSESSING OFFICER WAS OF THE VIEW THAT LESSER INTEREST WAS CHARGED AND IT SHOULD HAVE CHARGED AT THE RATE OF 12% BECAUSE THE ASSESSEE PAID INTERE ST @ 12% TO 5 SHRI VIKALP DERIYA AND THUS HE COMPUTED INTEREST AT RS.15,57,760/- ON THE TOTAL LOANS OF RS.1,27,31,337 /-. THUS THE DIFFERENCE WAS ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. THE STAND OF THE ASSESSEE IS THAT NO NOTIONAL INTEREST COULD BE ADDED TO THE INCOME OF THE ASSESSEE FOR WHICH HE PLACED R ELIANCE ON THE DECISIONS LIKE S.A. BUILDERS LTD.(2007) 158 TAXMAN 74 (SC), R.D. JOSHI; 251 ITR 332 (MP), TIN BOOKS CO.; 260 ITR 637 (DEL). THE LEARNED ASSESSING OFFICER HAS NOWHERE MENTIONED THA T THE ASSESSEE UTILISED INTEREST BEARING BORROWED FUNDS F OR ADVANCING INTEREST FREE LOANS OR LOANS AT THE LESSER RATE TO THE FAMILY MEMBERS. EVEN IN THE IMPUGNED ORDER, THERE IS A FI NDING THAT THE INTEREST BEARING FUNDS WERE NOT UTILISED BY THE ASSESSEE AND THE ASSESSEE EITHER GAVE OWN FUNDS OR ON WHICH NO I NTEREST WAS CHARGED. IT IS ALSO NOT THE CASE THAT THE ASSESSEE ACTUALLY EARNED SUCH INCOME. IN SUCH A SITUATION, NO NOTIONAL INTER EST WAS JUSTIFIED AND THE CONSEQUENT ADDITION WAS NOT REQUI RED TO BE MADE. THE LEARNED CIT(A) HAS ALREADY DISCUSSED CERT AIN JUDICIAL PRONOUNCEMENTS WHEREIN IT WAS LAID DOWN THAT ADDITI ON ON THE BASIS OF NOTIONAL INCOME/INTEREST INCOME CANNOT BE MADE. SUCH DECISIONS HAVE BEEN MENTIONED AT PAGE 6 OF THE IMPU GNED ORDER LIKE CIT VS. MOTOR CREDIT COM. PVT. LTD. 127 ITR 52 (MAD.); CIT 6 VS. ASIAN HOTELS; 323 ITR 470(DEL) AND KESHRICHAND JAISUKHLAL; 248 ITR 47. THERE IS AN OBSERVATION IN THE IMPUGNE D ORDER THAT SO FAR AS INTEREST PAYMENT OF RS.88,219/- TO SHRI V IKALP DERIYA IS CONCERNED, THE ASSESSEE WAS HAVING ADEQUATE CASH BA LANCES AND THERE WAS NO BUSINESS NECESSITY OR COMPULSION TO BO RROW FROM VIKALP DERIYA. NO EXPLANATION WAS ADDUCED BY THE AS SESSEE AT ANY STAGE REGARDING SUCH INTEREST PAYMENT, MEANING THEREBY THAT THIS AMOUNT WAS NOT INCIDENTAL TO THE BUSINESS OF T HE ASSESSEE AND SUCH TRANSACTION WAS ACCOMMODATIVE TRANSACTION TO REDUCE PROFIT. IN VIEW OF THESE FACTS, WE FIND NO JUSTIFI CATION TO INTERFERE WITH THE STAND OF THE LEARNED CIT(A), THEREFORE, GR OUND NO. 2 (A.Y. 2003-04) AND GROUND NO. 3 (A.Y. 2005-06) IN THE APP EAL OF THE ASSESSEE ARE DISMISSED. THE GROUND NO. 2 WITH REGAR D TO ADDITION OF RS. 1,68,000/- (A.Y. 2003-04) RAISED BY THE REVE NUE IS ALSO WITHOUT ANY BASIS AND HAVING NO MERIT AS SUCH, THER EFORE, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 4. THE LAST GROUND RAISED BY THE ASSESSEE PERTAI NS TO SUSTAINING THE ADDITION OF RS.7,69,658/- AGAINST RS . 19,13,795/- WITH REGARD TO AGRICULTURAL INCOME WHEREAS THE REVE NUE IS AGGRIEVED BY THE ADDITION OF RS.11,44,137/- DELETED BY THE LEARNED CIT(A) ON ACCOUNT OF INCOME OF ALLEGED UNEX PLAINED 7 SOURCES. THE CRUX OF ARGUMENTS ON BEHALF OF THE AS SESSEE IS THAT THE TOTAL ADDITION MADE ON ACCOUNT OF AGRICULTURAL INCOME/ALLEGED UNEXPLAINED SOURCES SHOULD HAVE BEEN DELETED WHEREA S THE REVENUE IS AGGRIEVED BY THE PART RELIEF GRANTED TO THE ASSESSEE BY LEARNED CIT(A). 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND C AREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. W E HAVE ALSO PERUSED THE SYNOPSIS FURNISHED BY THE ASSESSEE, A C OPY OF WHICH WAS PROVIDED TO THE LEARNED SENIOR DR ALSO. BEFORE COMING TO ANY CONCLUSION, WE ARE SUMMARISING HEREUNDER THE AC CEPTANCE OF YEARWISE AGRICULTURAL INCOME AND THE REFERENCE THER EOF AVAILABLE IN THE PAPER BOOK FILED BY THE ASSESSEE :- A.YRS. LAND HOLDING(ACRES) AGRICULTUR AL INCOME (IN RS.) SALE OF NEELGIRI TREES RETAIL SALE OF GRAINS AUCTIO N SALE OF VEGETA BLES P.B. REF. OWN SIKMI 1999- 2000 41.63 166.44 1780612 PG 53 2000- 2001 38.00 260.91 1865692 245600 166656 336647 503303 85690 PGS 54-57 2002-03 38.00 254.91 2038485 PG 62 2003-04 (IMPUGNED A.Y. 38.00 254.91 26,03,798 3,84,235 2,87,863 97,560 PGS 10-16 2004-05 38.00 214.69 28,04,370 PG 5 OF A.Y. 05-06 2005-06 (IMPUGNED A.Y. 38.54 158.77 17,12,793 5,53,605 1,26,784 79,578 PG 5 OF A.Y. 05-066 8 4.2 IF THE AFORESAID TABLE IS ANALYSED, UNCONTROVER TEDLY THE CLAIM OF THE ASSESSEE WITH REGARD TO AGRICULTURAL INCOME OF RS.20,97,123/- WAS ACCEPTED BY THE ASSESSING OFFICE R HIMSELF THAT TOO IN AN ORDER PASSED U/S 143(3) OF THE ACT W HEREIN OWN LAND HAS BEEN SHOWN AT 38 ACRES WHEREAS 206.96 ACRE S HAS BEEN SHOWN AS SIKMI (ON LEASE) MEANING THEREBY THE AGRIC ULTURAL INCOME WAS ACCEPTED. THE CLAIM OF AGRICULTURAL EXP ENSES WAS ALSO REDUCED. THE ASSESSEE HAS ALSO PRODUCED THE AC COUNTS OF SIKMI KIRAYA KHATA IN ITS PAPER BOOK WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. KHASRA PANCHSALA/KHAT AUNI HAS ALSO BEEN PRODUCED. THE ASSESSEE HAS ALSO PRODUCED SOME VOUCHERS FOR PURCHASING FERTILIZERS (PAGES 153 TO 1 65). FOR A.Y. 2003-04 THE ASSESSEE HAS CLAIMED TO HAVE LAND HOLDI NG OF 262.51 ACRES (224.51 ON SIKMI AND 38 ACRES ON LAND) WHEREI N THE AGRICULTURAL INCOME WAS SHOWN AT RS. 26,03,798/-. FOR THE A.Y. 1999-00 THE TOTAL AGRICULTURAL INCOME HAS BEEN SHOW N AT RS.17,80,612/- OUT OF 166.44 ACRES OF SIKMI AND 41. 63 OWN LAND. IN THE IMPUGNED YEAR, THE ASSESSEE HAS SHOWN RS. 37 ,35,135/- FROM SALE THROUGH MANDI SAMITI AND RS.3,84,235/- FR OM SALE OF NEELGIRI (EUCLYPTUS) AND RS. 2,87,863/- AS RETAIL S ALE TO THE FARMERS AND RS.97,560/- FROM SALE OF VEGETABLES. TH E ASSESSEE 9 ALSO CLAIMED TO HAVE EXPENDED RS. 19,00,995/- AS AG RICULTURAL EXPENSES. THE ASSESSING OFFICER ESTIMATED THE AGRIC ULTURAL INCOME AT RS. 6,000/- PER ACRE AGAINST THE CLAIM OF RS. 9,920/- PER ACRE BY THE ASSESSEE WHEREAS THE LEARNED CIT(A) ACCEPTED THE SALE WHICH WAS MADE THROUGH MANDI SAMITI BUT DID N OT ACCEPT THE RECEIPT OF RS.7,69,658/- (RS. 3,84,235/- FOR SA LE OF EUCALYPTUS TREES AND RS.2,87,863/- RETAIL SALE TO F ARMERS) AND ACCEPTED THE EXPENSES CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE. WE FIND THAT FOR THE A.Y. 1998-99 THE CLA IM OF THE ASSESSEE WAS ACCEPTED FOR SHOWING AGRICULTURAL INCO ME AT RS.20,97,123/- THAT TOO U/S 143(3) AND THE ASSESSEE SHOWED AGRICULTURAL INCOME OF RS.17,80,612/- (A.Y. 1999-00 ) OUT OF 43.63 ACRES (OWN LAND) AND 166.44 ACRES (SIKMI LAND) (PAP ER BOOK PAGE 53). LIKEWISE FOR THE A.Y. 2000-01 THE AGRICULTURA L PRODUCE WAS SHOWN AT RS. 68,65,692/- AND RS.2,45,600/- OUT OF S ALE OF NEELGIRI GREES, RS. 1,66,656/- AND RS.3,36,647/- (T OTAL RS.5,03,303/- OUT OF RETAIL SALE OF GRAINS) AND RS. 85,690/- FROM SALE OF VEGETABLES. IF THE COMPARATIVE FIGURES OF D IFFERENT ASSESSMENT YEARS SUBMITTED BY THE ASSESSEE AND OTHE R DECISIONS FROM THE DEPARTMENT AS WELL FROM THE TRIBUNAL ARE A NALYSED, WE FIND THAT CLAIMING THE AGRICULTURAL INCOME AT RS.9, 920/- PER ACRE 10 IS NOT EXCESSIVE. FOR THE A.Y. 2005-06 THE ASSESSE E WAS HAVING TOTAL AGRICULTURAL LAND HOLDING OF 197.3 ACRES (38. 54 OWN AND 158.77 ON SIKMI). THE ASSESSEE HAS SHOWN INCOME AT RS.17,12,793/- WHICH COMES TO RS.8,678/- PER ACRE W HICH IS ALSO QUITE REASONABLE ESPECIALLY WHEN THE LAND IS FULLY IRRIGATED AND THE WATER IS CLAIMED TO BE AVAILABLE FROM TAWA DAM (NARMADA BELT AND THERE WAS TUBE WELL WATER ALSO. THE SIKMI LAND WAS ALSO CLAIMED TO BE IRRIGATED. DURING HEARING IT WAS CLAI MED BY THE ASSESSEE THAT LAND IN HOSHANGABAD BELT IS FERTILE. THE LEARNED COUNSEL ALSO INVITED OUR ATTENTION TO THE DECISION IN THE CASE OF MOOLCHAND GULABCHAND FOUZDAR, HOSHANGABAD, (PAPER B OOK NO. 278 TO 281) WHEREIN THE AGRICULTURAL INCOME FROM 76 .5 ACRES WAS ACCEPTED AT RS.11,44,440/- WHICH COMES TO RS.14,960 /- PER ACRE, WHICH CLEARLY SUPPORTS THE CLAIM OF THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSING OFFICER HIMSELF HAS TREATED 30% AS AGRICULTURAL EXPENSES (BACKSIDE OF PAGE 278 OF PAPER BOOK) AND FOR THE A.Y. 1998-99 THE AVERAGE AGRICULT URAL INCOME NOTED BY THE LEARNED CIT(A) COMES TO RS. 8,561/- PE R ACRE. OUR ATTENTION WAS INVITED TO VARIOUS PAGES OF THE PAPER BOOK RIGHT FROM 118 TO 131 CONSISTING OF SALARY, HARVESTER REN T, TRACTOR RENT, GOBAR KHAD, GUDAI, FERTILIZERS AND OTHER EXPENSES, ETC. THE 11 CERTIFICATE ISSUED BY THE REVENUE PATWARI INDICATES THE INCOME FROM AGRICULTURE. THE DETAILS OF AGRICULTURAL PRODU CE AND MANDI RECEIPTS ARE AVAILABLE AT PAGES 81 TO 84, 114 AND 1 15 AND 85 TO 111. THE TOTALITY OF FACTS AND CLAIM OF TAKING THE LAND ON LEASE (SIKMI) WHEREIN THE LIST OF PERSONS FROM WHOM SUCH LAND WAS TAKEN IS ALSO AVAILABLE AT PAPER BOOK PAGE 39 EVIDE NCING THAT 224.51 ACRES LAND WAS AVAILABLE WITH THE ASSESSEE. IN VIEW OF THESE FACTS, IT CAN BE SAFELY CONCLUDED THAT THE CL AIM OF AGRICULTURAL INCOME OUT OF THE CLAIMED EXTENT OF LA ND IS QUITE REASONABLE, ESPECIALLY WHEN NO CONTRARY EVIDENCE WA S BROUGHT ON RECORD BY THE REVENUE, THEREFORE, THE APPEALS OF TH E ASSESSEE FOR THE A.YS. 2003-04 AND 2005-06 ARE PARTLY ALLOWED WH EREAS APPEALS OF THE REVENUE ARE DISMISSED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY AL LOWED AND THAT OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2012. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 29 TH OCTOBER, 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2323 12