Appeal details
Counselvise Citation
4122714 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-10-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2000-2001
Appeal Filed On
10-01-2014
Judgement Text
RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T.A. NOS. 41 TO 44/IND/2014 A.YS. 2000-01 TO 2002-03 & 2005-06 DCIT-3(1), INDORE :: APPELLANT VS MISS RAGINI SANGHI, INDORE PAN AMJPS 1362 M :: RESPONDENT C.O. NOS. 8 TO 10/IND/2014 ARISING OUT OF I.T.A. NOS. 41 TO 43/IND/2014 A.YS. 2000-01 TO 2002-03 MISS RAGINI SANGHI, INDORE PAN AMJPS 1362 M :: APPELLANT VS DCIT-3(1), INDORE :: RESPONDENT DEPARTMENT BY SHRI R.A. VERMA ASSESSEE BY SHRI S.N. AGRAWAL & SHRI PANKAJ MOGRA DATE OF HEARING 21.09.2015 DATE OF PRONOUNCEMENT 26.10.2015 O R D E R PER SHRI D.T. GARASIA, JM THE APPEALS FILED BY THE REVENUE AND CROSS-OBJECTI ONS FILED BY THE ASSESSEE ARE AGAINST THE COMMON ORDER OF LD. CIT(A) -I, INDORE, DATED 11.10.2013. REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEALS: RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT( A) :- 1. ERRED IN HOLDING THE REOPENING OF ASSESSMENT U/S. 1 48 OF THE I.T. ACT, 1961 FOR A.Y. 2000-01 AS INVALID FOR WANT OF PROPER SATISFACTION RECORDED BY THE JCIT/ADDL. CIT AS PER THE PROVISIONS OF SECTION 151(2) OF THE I.T. ACT, 1961 WHEREAS THE JCIT CONCERNED HAD PROPERLY RECORDED HIS SATISFACTION. 2. ERRED IN DELETING THE ADDITION OF RS. 12,76,500, RS . 12,42,000 , RS. 12,42,000 AND RS. 8,28,000/- RESPECTIVE MADE BY THE AO ON ACCOUNT ,OF INTEREST ON INTEREST FREE LOAN GIVEN TO FATHER OF THE ASSESSEE BY RELYING UPON THE DECISIONS FOR A.Y. 200 3-04 & 2004- 05 IN THE SAME CASE BECAUSE THE ASSESSEE WAS DOING MONEY LENDING BUSINESS AND SHE COULD NOT ADDUCE ANY BUSIN ESS EXIGENCY FOR SUCH A HUGE ADVANCE THAT TOO FOR SUCH CONTINUOUS LONG PERIOD. 2.1 FAILED TO APPRECIATE THAT EACH ASSESSMENT YEAR IS A DIFFERENT YEAR AND THE PRINCIPLE OF RES JUDICATA DOES NOT APP LY IN INCOME TAX MATTERS. 3. ERRED IN DELETING THE ADDITION OF RS. 5,13,407/-, RS. 4,24,125/-, RS. 2,83,951/- MADE BY THE AO IN A.Y. 2000-01, 2001 -02 & 2002- 03 ON ACCOUNT OF DIFFERENCE IN INTEREST PAID AND CH ARGED BY RELYING UPON THE DECISION FOR A.Y. 2003-04 & 2004-0 5 IN THE SAME CASE BECAUSE THE ID. CIT(A) FAILED TO APPRECIATE TH E FACT THAT THE ASSESSEE WAS DIVERTING HER INTEREST BEARING FUNDS T OWARDS LOW INTEREST EARNING ADVANCES WHEREAS SHE WAS PAYING HU GE INTEREST ON THE LOAN AND BORROWINGS MADE BY HER. 3.1 FAILED TO APPRECIATE THAT SUCH ASSESSMENT YEAR IS A DIFFERENT YEAR AND THE PRINCIPLE OF RES JUDICATA DOES NOT APP LY IN INCOME TAX MATTER. 4. ERRED IN DELETING THE ADDITION OF RS. 3,43,539/-, RS. 4,37,468/-, RS. 3,68,646/- AND RS. 3,51,135/- MADE BY THE AD. I N A.Y. 2000-01, 2001-02, 2002-03 & 2005-06 ON ACCOUNT OF INTEREST RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 3 DISALLOWED IN EARLIER YEARS ON UNEXPLAINED UNSECURE D LOANS BY RELYING UPON THE DECISIONS FOR A.Y. 2003-04 & 2004- 05 IN THE SAME CASE BECAUSE THE ID. CIT(A) FAILED TO APPRECIA TE THE FACT THE ASSESSEE COULD NOT PROVE THE IDENTITY, CREDITWORTHI NESS AND GENUINENESS OF THE CREDITORS IN EARLIER YEARS WHERE IN ADDITION WAS MADE ON THAT ACCOUNT. 4.1 FAILED TO APPRECIATE THAT EACH ASSESSMENT YEAR IS DIFFERENT YEAR AND THE PRINCIPLE OF RES JUDICATA DOES NOT APP LY IN INCOME-TAX MATTERS. WHEREAS, IN THE CROSS-OBJECTIONS, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE INITIATION OF RE-ASSESSMENT PRO CEEDINGS. 2. SHORT FACTS OF THE CASE AS NOTED BY THE AO ARE A S UNDER: ON VERIFICATION OF RECORDS, IT WAS NOTICED FROM P& L ACCOUNT AND BALANCE SHEET ATTACHED WITH THE RETURNS OF INCOME THAT ASSESSEE HAS PAID /CREDITED THE INTEREST @ 16 TO 19% PER ANN UM TO HERE FRIENDS AND RELATIVES ON THEIR DEPOSITS ,WHERE AS O N THE OTHER HAND THE INTEREST FREE LOAN OF RS. 6900000/- WAS GI VEN TO SHRI SHARAD KUMAR SANGHI ( FATHER OF ASSESSSEE ) . THE I NTEREST ON BORROWED FUND AMOUNTING TO RS. 2059507 /- HAS BEEN DEBITED BY THE ASSESSEE FROM HER INCOME. IF THE SAME RATE OF I NTEREST 18.5% (I. E. 16 +19/2) IS CONSIDERED ON THIS LOAN OF RS. 6900000 /- (AS PAID BY THE ASSESSE ON THE BORROWING TO HER FRIENDS AND RELATIVES ) THE INCOME BY WAY OF INTEREST OF RS. 1276500/- HAS BEEN SUPPRESSED. IN VIEW OF ABOVE FACTS, A NOTICE U/S 148 DATED 28.0 3.2007 HAS BEEN ISSUED ALONG WITH REASONS FOR REOPENING OF ASS ESSMENT TO THE ASSESSEE FOR ASSESSMENT OF INCOME ESCAPING ASSE SSMENT U/S 147 OF THE INCOME TAX ACT,1961.IN RESPONSE TO THIS NOTICE ASSESSEE FILED A REFRESH RETURN ON 27.04.2007 DECLA RING TOTAL INCOME OF RS. 1201970/- VIDE ACKNOWLEDGEMENT NUMBER 003010100002 WHICH IS SAME AS OF ORIGINAL RETURN . RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 4 ASSESSEE HAS FILED OBJECTIONS AGAINST THE REASONS O F REOPENING OF CASE VIDE HER LETTER DATED 02.11.2007 RECEIVED ON 1 3.11.2007. THE SAME HAS BEEN DISPOSED OFF ON 14.11.2007 THROU GH A SPEAKING ORDER AS PER GKN DRIVE SHAFT. AGAIN NOTICE S U/S 143(2) AND 142(1) HAS BEEN ISSUED . THE CASE HAS BEEN ATTE NDED BY SHRI P. BANSAL, BOOKS OF ACCOUNTS PRODUCED HAS BEEN VERIFIED ON TEST CHECK BASIS . ASSESSEE HAS ALSO FILED RETURN S UBMISSION ON 13.11.2007 AND 20.11.2007 WHICH HAVE BEEN PLACED ON RECORDS. INTEREST EXPENDITURE ON INTEREST FREE LOAN TO SHRI SHARAD KUMAR SANGHI :- DURING THE COURSE OF ASSESSMENT PROCEEDI NGS IT IS CONFIRMED THAT THE ASSESSEE HAS ADVANCED ON AMOUNT OF RS. 6900000/- TO SHRI SHARAD KUMAR SANGHI , WHO IS FATH ER OF THE ASSESSE WITHOUT CHARGING INTEREST UPON THE SAME .HO WEVER IT IS NOTICED THAT ASSESSEE IS ENGAGED IN THE MONEY LENDI NG BUSINESS AND HAS PAID AN INTEREST @ 18.5% ON UNSECURED LOANS . THERE IS NO CORRELATION/BIFURCATION HAS BEEN SUBMITTED BY TH E ASSESSEE FOR THE APPLICATION OF FUNDS. IN THIS CIRCUMSTANCES, IT IS DIFFICULT TO CORRELATE WHETHER ,INTEREST BEARING FUNDS OR OWN CA PITAL HAVE BEEN USED FOR GIVING INTEREST FREE LOAN OF RS. 6900 000/- TO SHRI SHARAD KUMAR SANGHI .KEEPING IN VIEW OF THIS, OUT O F THE INTEREST PAYMENT IN MONEY LENDING BUSINESS , INTEREST ATTRIB UTABLE TO RS.6900000/- AS INTEREST FREE ADVANCE IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE . THE NORMAL RATE OF INT EREST PAID ON UNSECURED LOAN IS APPROXIMATELY 18.5 % PER ANNUM AN D THE DISALLOWANCE ON THIS ACCOUNT COMES TO RS. 1276500/- . THIS AMOUNT OF RS. 1276500/- IS DISALLOWED OUT OF INTERE ST PAYMENT AND ADDED TO THE INCOME OF THE ASSESSEE AS THIS IS NOT AN ALLOWABLE DEDUCTION U/S 36(1)(III) OF THE INCOME TA X ACT ,1961. DIFFERENCE IN INTEREST RATES :-ON PERUSAL OF THE R ECORDS IT IS FOUND THAT ASSESSE HAS PAID INTEREST AT THE RATE BETWEEN 15-19% PER ANNUM ON UNSECURED LOANS . HOWEVER, SHE HAS CHARGED INTEREST @ 12-16% PER ANNUM ONLY. THE INTEREST HAS BEEN CHA RGED AT LOWER RATE FROM THE GROUP CONCERNS AND RELATIVES. T HE ASSESSEE HAS ADOPTED A COLORABLE DEVICE PAYING HIGHER RATE O F INTEREST AND CHARGING LOWER RATE OF INTEREST AND BY THIS SHE HAS REDUCED HER TAXABLE INCOME AND EVADED DUE TAXES. IN GENERAL, TH E DIFFERENCE IN CHARGING THE RATE OF INTEREST OR PAYING HIGHER R ATE OF INTEREST IS 7%. ON PERUSAL OF LIST OF INTEREST PAID DURING THE YEAR FURNISHED BY THE ASSESSEE, IT IS APPEARING THAT IN MOST OR MAJO RITY OF CASES RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 5 INTEREST RATE IS 19% THEREFORE INTEREST MUST HAVE B EEN CHARGED @ 19%. SIMILARLY, FROM THE DETAILS OF INTEREST RECEIV ED FURNISHED IT IS APPARENT THAT MOST OF THE INTEREST INCOME IS @ 12 % THEREFORE INCOME OF RS. 880127/- IS PRESUMED TO BE @ 12% AND SAME IS INCREASED BY 7% OF DIFFERENCE OR LOWER INTEREST TO RS.1393534/-. THEREFORE AN AMOUNT OF RS.513407/- IS DISALLOWED OU T OF INTEREST PAYMENT AND ADDED TO THE INCOME OF THE ASSESSEE AS BEING NON BUSINESS EXPENDITURE. INTEREST DISALLOWED IN EARLIER YEARS :- DURING THE ASSESSMENT PROCEEDINGS FOR THE AY 2003-04,THE THEN AO ADDED RS . 3685000/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS OU T OF THE UNSECURED LOANS AND ALSO DISALLOWED THE INTEREST PA YMENT OF RS.351135/- ON THIS UNSECURED LOANS . IT IS EVIDENT FROM THE LIST OF UNSECURED LOANS CREDITORS THAT ASSESSEE HAS SHOWN I NTEREST PAYMENT TO THE SAME PERSONS DURING THIS AY 2002-03 ALSO, THEREFORE, THE INTEREST PAYMENT TO THIS PARTIES IS DISALLOWED THIS YEAR ALSO .TOTAL, INTEREST PAYMENT TO SUCH PARTY IS AS UNDER NAME OF THE DEPOSITORS RATE OF INTEREST (% P.A.) INTEREST PAID (RS.) JYOTSANA SINGH 19 13630 VIKRAMADITYA RANA 18 47798 BRIJRAJKUMARI JHALA 18 28500 MRS. VEENU KUNWAR 19 27261 MRS. SHARDA J MOOJI 15 33478 MRS. SHOBA KUMAR 16 15000 ARUN SINGH DEO 19 19000 MRS. VINDYESHWARI KUMARI 19 23247 RANJIT KAUR SIDDU 17 37273 ANAR KUMARI JHALA 18 28500 KAVITA KUMARI SINGH DEO 19 9500 K RAJENDRA SINGH 18 60408 TOTAL 343595 IN VIEW OF THE ABOVE INTEREST PAID TO PARTIES ENUME RATED ABOVE OF RS. 343595/- IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 6 3. MATTER CARRIED TO LD. CIT(A) AND LD. CIT(A) HAS ALLOWED THE APPEALS BY OBSERVING AS UNDER: 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE GR OUNDS OF APPEAL AND SUBMISSIONS OF APPELLANT. 5. IN THE CASES FOR AY 2000-01 , 2001-02 & 2002-03 CASES WERE REOPENED AFTER PROCESSING U/S 143(1) OF THE INCOME TAX ACT. IN AY 2000-01 THE NOTICE OF REOPENING ITSELF MENTIONS THA T NECESSARY SATISFACTION OF THE COMMISSIONER OF INCOME TAX I , INDORE WAS OBTAINED BEFORE ISSUING NOTICE U/S 148. BUT AS PER PROVISIONS OF SECTION 151(2) OF THE INCOME TAX ACT , IN SUCH CAS ES , SATISFACTION OF JOINT COMMISSIONER OF INCOME TAX IS REQUIRED AN D NOT THAT OF COMMISSIONER. THEREFORE , RELYING ON THE DECISIONS , AS REFERRED TO BY APPELLANT IN CASE OF SPLS SIDDHARTH LTD. (DE LHI HIGH COURT) ORDER DATED 14.09.2011 AND GHANSHYAM K. KHABRANI 34 6 ITR 443 (BOM) REOPENING U/S 148 IS HELD INVALID FOR AY 2000-01. HOWEVER, FOR AY 2001-02 & AY 2002-03 , THE NOTICE U /S 148 DO NOT SPECIFY THE AUTHORITY WHOSE SATISFACTION WAS TA KEN BEFORE ISSUE OF NOTICE . APPELLANT HAS NOT GATHERED SUCH D ETAILS . HENCE DECISIONS REFERRED ABOVE WILL NOT APPLY FOR THOSE T WO YEARS 6. I DO NOT AGREE WITH OTHER ARGUMENT OF APPELLANT THAT ALL INFORMATION WAS AVAILABLE BEFORE AO WHILE PROCESSIN G U/S 143(1) AND NOTHING NEW WAS BROUGHT ON RECORD WHILE REOPENI NG U/S 147 . IN SEVERAL DECISIONS IT IS HELD THAT PROCESSING IS NOT ASSESSMENT AND THERE IS ONLY ARITHMETICAL CHECKING OF THE RETU RN IN PROCESSING AND HENCE REOPENING IS HELD PERFECTLY VALID AFTER P ROCESSING IN CASES OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SC) 291 ITR 500. 7. NON CHARGING OF INTEREST ON ADVANCES OF RS. 69 L AKH GIVEN TO APPELLANTS FATHER SHRI SHARAD KUMAR SANGHI AND CHA RGING OF LOWER RATES OF INTEREST ON ADVANCES IN COMPARISON T O RATE OF INTEREST PAID ON UNSECURED LOAN COULD BOTH FORM VAL ID GROUND FOR REOPENING. SUFFICIENCY OF REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDGE AS HELD IN CASE OF RAYMOND WOOLE N MILLS & ANR. (SC) 236 ITR 34. HENCE REOPENING IN CASES FOR AY 2001-02 AND AY 2002-03 IS HELD VALID. 8. IN FACT ON BOTH COUNTS , I.E. , FOR EXTENDING IN TEREST FREE LOANS TO FATHER SHRI SHARAD KUMAR SANGHI AND FOR CHARGING LE SSER INTEREST RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 7 RATES ON ADVANCES IN COMPARISON TO RATE OF INTEREST PAID ON UNSECURED LOANS , ADDITIONS WERE MADE IN APPELLANTS CASE FOR AY 2003-04 AND 2004-05 AND BASED ON SUCH ADDITIONS THE CASES FOR EARLIER YEARS WERE REOPENED. WHILE SUCH REOPENING W AS DONE EARLIER THE ORDER OF LD. CIT(A)-I, INDORE FOR BOTH AY 2003-04 AND AY 2004-05 WAS PASSED ON 23.11.2007 AND 24.12.2007 RESPECTIVELY IN WHICH ALL THE GROUNDS RAISED NOW WE RE DECIDED IN FAVOUR OF APPELLANT. WHILE GROUND NO. (2) , (3) AND (5) OF PRESENT APPEAL IS COVERED BY GROUND NO. (1) AND (2) IN AY 2 004-05 IN FAVOUR OF APPELLANT AND GROUND NO. (4) OF PRESENT A PPEAL IS COVERED BY GROUND NO. (2) OF APPEAL FOR AY 2003-04 IN FAVOUR OF APPELLANT. I DO NOT FIND ANY REASON TO DIFFER FROM FINDINGS OF LD. CIT(A)-I , INDORE FOR AY 2003-04 AND AY 2004-05. RE LYING ON AFORESAID DECISION, GROUND NO. (2) TO (5) OF APPEAL ARE ALLOWED FOR AY 2000-01. 9. AS A RESULT , GROUND NO. (1) TO (5) OF APPEAL AR E ALLOWED AY 2000-01, GROUND NO. (1) TO (2) OF APPEAL ARE DISMIS SED FOR AY 2001-02 AND AY 2002-03 WHILE GROUND NO. (3) TO (7) ARE ALLOWED FOR AY 2001-02 AND AY 2002-03. GROUND NO. (1) TO (3 ) ARE ALLOWED FOR AY 2005-06. 10. AS A RESULT , THE APPEALS FOR AY 2000-01 AND AY 2005-06 ARE ALLOWED WHILE APPEALS OF AY 2001-02 AND AY 2002-03 ARE PARTLY ALLOWED . 4. LD. DR HAS RELIED ON THE ORDERS OF THE AO. 5. DURING THE COURSE OF HEARING, LD. AR OF THE ASSE SSEE HAS SUBMITTED THE WRITTEN SUBMISSIONS, WHICH READ AS UNDER: GROUND NOS. 2 & 2.1 2.1]. IN THE SAID GROUND THE DEPARTMENT HAS CHALLEN GED THE RELIEF ALLOWED BY LD. CIT(A) VIDE HIS ORDER DT. 11.10.2013 IN DELETING THE ADDITION OF RS. 12,76,500/- MADE BY LD. A.O. IN RES PECT OF INTEREST FREE LOAN GIVEN BY THE ASSESSEE TO HER FATHER SHRI SHARAD KUMAR SANGHI ON MERITS OF THE CASE AND ALSO BY RELYING UP ON THE APPELLATE RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 8 ORDER PASSED BY HIS PREDECESSORS IN THE CASE OF ASS ESSEE HERSELF FOR THE A.Y. 2003-04 AND 2004-05. 2.2] THAT THE ASSESSING OFFICER WHILE PASSING THE A SSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS NOT CORRELATED THE FUNDS UTILIZED FOR ADVANCING THE AMOUNT TO SHRI SHARAD KU MAR SANGHI INTEREST FREE. HENCE, THE ASSESSING OFFICER HAS DIS ALLOWED AN AMOUNT OF RS 12,76,500/- BEING 18.5% OF RS 69,00,000/- OUT OF INTEREST PAID BY HOLDING THAT INTEREST BEARING FUNDS WERE DIVERTE D WITHOUT INTEREST. 2.3] THAT THE ASSESSEE HAD ADVANCED AMOUNT TO SHRI SHARAD KUMAR SANGHI IN THE YEAR 1999-00. COPY OF ACCOUNT O F SHRI SHARAD KUMAR SANGHI IN THE BOOK OF THE ASSESSEE IS ENCLOSE D ON PAGE 22 OF THE PAPER BOOK . THAT ON PERUSAL OF THE SAID ACC OUNT YOUR HONOUR WILL FIND THAT ENTIRE AMOUNT OF INTEREST FR EE FUNDS OF RS 69,00,000/- WERE ADVANCED BY THE ASSESSEE IN THE YE AR 1999-00 FROM HER BANK ACCOUNT WITH STATE BANK OF INDORE, SI YAGANJ BRANCH, INDORE. COPY OF BANK ACCOUNT IN THE BOOKS OF ASSESS EE IS ENCLOSED ON PAGE 24 TO 26 OF THE PAPER BOOK. THAT ON PERUSAL OF THE BANK ACCOUNT CORRELATING IT WITH THE AMOUNT ADVANCED BY THE ASSESSEE TO SHRI SHARAD KUMAR SANGHI YOUR HONOUR WILL APPRECIA TE THAT THE ENTIRE AMOUNT AS RECEIVED BY THE ASSESSEE FROM M/S RAGINI PRIYA TRUST WAS UTILIZED FOR ADVANCING IT TO HER FATHER S HRI SHARAD KUMAR SANGHI. COPY OF ACCOUNT OF RAGINI PRIYA TRUST IN TH E BOOK OF THE ASSESSEE IS ALSO ENCLOSED ON PAGE 23 OF THE PAPER B OOK 2.4] THAT AS DISCUSSED IN PARA 2.3 OF THIS LETTER, THE ASSESSEE HAD UTILIZED HER INTEREST FREE FUNDS AS LYING WITH M/S RAGINI PRIYA TRUST FOR ADVANCING AMOUNT TO HER FATHER SHRI SHARA D KUMAR SANGHI. HENCE, NO INTEREST BEARING FUNDS WERE UTILIZED BY T HE ASSESSEE FOR ADVANCING THE AMOUNT TO SHRI SHARAD KUMAR SANGHI. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 9 2.5] THAT ON FACTS WHEN THE ASSESSEE HAS PROVED DIR ECT NEXUS OF THE SOURCE UTILIZED FOR ADVANCING THE AMOUNT INT EREST FREE IN THAT CASE THERE IS NO JUSTIFICATION FOR MAKING ANY DISAL LOWANCE OUT OF INTEREST PAID. 2.6] THAT IN THE CASE OF ASSESSEE HERSELF , LD. CIT (A) VIDE HER ORDER DATED 24.12.2007 PASSED FOR THE ASSESSMENT YE AR 2004-05 BEING IT NO. 597/06-07/193 HAS DELETED THE SIMILAR ADDITION. XEROX COPY OF THE ABOVE APPELLATE ORDER IS ENCLOSED ON PA GE 31 TO 34 OF THE PAPER BOOK. 2.7] THE HON'BLE ITAT INDORE BENCH VIDE ITS ORDER D T. 30.01.2014 IN THE CASE OF MISS PRIYA SANGHI, SISTER OF THE ASSESSEE IN ITA NO. 337/IND/2013 AND CO NO. 82/IND/2013 FOR THE A.Y. 2000-01 HAS DELETED THE ADDITION SO MADE BY THE A.O . ON SIMILAR FACTS. COPY OF SAID ORDER IS AVAILABLE ON PAGE 73 T O 86 OF THE PAPER BOOK. [ RELEVANT PARA 5 , PAGE 10 OF THE ITAT ORDER ] . 2.8] THAT IN VIEW OF THE ABOVE AND CONSIDERING THE FACTS OF THE CASE IT IS SUBMITTED THAT LD. CIT(A) HAS RIGHTLY DE LETED THE DISALLOWANCE OF RS 12,76,500/- MADE BY THE A.O. OU T OF INTEREST PAID. YOUR HONOUR IS THEREFORE REQUESTED TO APPROVE THE ORDER OF LD. CIT(A). GROUND NOS. 3 AND 3.1 3.1]. IN THE SAID GROUND THE DEPARTMENT HAS CHALLEN GED THE RELIEF ALLOWED BY LD. CIT(A) VIDE HIS ORDER DT. 11.10.13 I N DELETING THE ADDITION OF RS.5,13,407/- MADE BY LD. A.O. ON A/C O F DIFFERENCE IN RATE OF INTEREST PAID BY THE HER AND RATE OF INTERE ST AS CHARGED BY HER ON MERITS OF CASE AND ALSO BY RELYING UPON THE APPELLATE ORDER PASSED BY HIS PREDECESSORS IN THE CASE OF ASSESSEE HERSELF FOR THE A.Y. 2003-04 AND 2004-05. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 10 3.2] THAT LD. A.O. HAS DISALLOWED AN AMOUNT OF RS 5 ,13,407/- OUT OF INTEREST PAID ON LOANS BY HOLDING THAT THE A SSESSEE HAD PAID HIGHER RATE OF INTEREST TO OUTSIDE PARTIES BUT INTE REST CHARGED FROM SISTER CONCERNS IS AT LOWER RATE. 3.3.1] THAT ON THE BASIS OF TOTAL FUNDS AVAILABLE W ITH THE ASSESSEE EFFECTIVE RATE OF INTEREST PAID COMES @ 7.21% CAL CULATED AS UNDER:- OPENING BALANCE CLOSING BALANCE AVERAGE BALANCE CAPITAL 15194217 17596237 16395227 SECURED LOAN 379678 150339 265009 UNSECURED LOAN 10743528 13056 076 11899802 26377423 30802652 28560038 INTEREST PAID 2059507 EFFECTIVE RATE OF INTEREST 2059507 / 28560038*100 = 7.21% 3.3.2] THAT EFFECTIVE RATE OF INTEREST PAID ON THE AMOUNT OF SOURCE OF FUNDS COMES TO 7.21% ONLY WHEREAS THE ASSESSEE H AS CHARGED INTEREST FROM ALL THE PARTIES WHICH VARIES BETWEEN 12% TO 16%. THAT OUT OF TOTAL INTEREST RECEIVED OF RS 880127/-, AN A MOUNT OF RS 483317/- RECEIVED FROM SHRI SHARAD SANGHI AT 16% AN D BALANCE AMOUNT OF INTEREST AS RECEIVED INCLUDES THE AMOUNT OF INTEREST RECEIVED FROM PARTNERSHIP FIRM AND ON FDRS. THUS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING INTEREST O UT OF INTEREST PAID. 3.3.3] THAT LD. CIT(A) VIDE HIS ORDER DT 24.12.2007 IN THE CASE OF ASSESSEE HERSELF FOR THE A.Y. 2004-05 HAS CONSIDERE D THE AVERAGE RATE OF INTEREST BY CONSIDERING THE SECURED AND UNS ECURED LOAN AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. COPY OF THE SAID ORDER IS ENCLOSED ON PAGE 31 TO 34 OF THE PAPER BOO K. 3.3.4] THE HON'BLE ITAT INDORE BENCH VIDE ITS ORDER DT. 30.01.2014 IN THE CASE OF MISS PRIYA SANGHI, SISTER OF THE ASSESSEE IN ITA NO. 337/IND/2013 AND CO NO. 82/IND/2013 FOR THE A.Y. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 11 2000-01 HAS DELETED THE ADDITION SO MADE BY THE A.O . ON SIMILAR FACTS. COPY OF SAID ORDER IS AVAILABLE ON PAGE 73 T O 86 OF THE PAPERBOOK. [ RELEVANT PARA 6 TO 8 , PAGE 11 TO 13 O F THE ITAT ORDER]. 3.3.4] THAT IN VIEW OF THE ABOVE, IT IS SUBMITTED T HAT THAT DISALLOWANCE OF RS 5,13,407/- MADE BY THE ASSESSING OFFICER OUT OF INTEREST PAID WAS NOT CORRECT AND HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). 3.4.1] THAT THE ASSESSING OFFICER HAS ALSO FAILED T O PROVE THE NEXUS FOR DIVERSION OF THE HIGHER INTEREST BEARING FUNDS FOR LOW INTEREST RATE. 3.4.2] THAT AS PER SUB- CLAUSE (III) OF SUB- SECTIO N (1) OF SECTION 36 READS AS UNDER:- (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFES SION 3.4.3] THAT FROM THE LANGUAGE OF PROVISION OF SECTI ON 36(1)(III), THE AMOUNT BORROWED FOR THE PURPOSES OF BUSINESS IS AN ALLOWABLE DEDUCTION WITHOUT ANY HITCH. THAT IN THE PRESENT CA SE ALSO THE ASSESSEE HAS ADVANCED INTEREST FREE DEPOSIT DURING THE COURSE OF BUSINESS ITSELF. HENCE, THERE IS NO JUSTIFICATION F OR MAKING DISALLOWANCE OUT OF INTEREST PAID. 3.4.4] THAT HON'BLE APEX COURT IN THE CASE OF CIT VS ASSOCIATED FIBRE & RUBBER INDUSTRIES (P) LIMITED RE PORTED IN 236 ITR 471 HAS HELD THAT ( REFER PARA 3):- 3. WE DO NOT FIND ANY MERIT IN THIS APPEAL. WE FIND THAT THE REASONING OF THE TRIBUNAL IS CORRECT. EVEN THOUGH THE MACHINE RY HAS NOT BEEN ACTUALLY USED IN THE BUSINESS AT THE TIME WHEN THE ASSESSMENT WAS MADE, THE SAME HAS BEEN TREATED AS BUSINESS ASSET A ND IT WAS RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 12 PURCHASED ONLY FOR THE PURPOSES OF THE BUSINESS. IN THE CIRCUMSTANCES, THE INTEREST PAID ON THE AMOUNT BORR OWED FOR PURCHASE OF SUCH MACHINERY IS CERTAINLY A DEDUCTIBL E AMOUNT. CONSEQUENTLY, THE VIEW TAKEN BY THE TRIBUNAL IS COR RECT. 3.4.5] THAT HONBLE APEX COURT IN THE CASE OF S.A. BUILDER S LIMITED REPORTED IN 288 ITR 1 HAS HELD THAT ( REFER PERMEABLE):- IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORR OWED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION U/S 36(1)(III) OF THE INCOME- TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUD ENT BUSINESS- MAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDI TURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IT IS WAS INCURRED ON GROUN DS OF COMMERCIAL EXPEDIENCY. 3.4.6] THAT IN VIEW OF THE ABOVE AND AS PER CLEAR L ANGUAGE OF PROVISION OF SECTION 36(1)(III), IT IS SUBMITTED TH AT DISALLOWANCE OF RS 513407/- MADE OUT OF INTEREST PAID WAS RIGHLY BEEN DELETED BY THE LD. CIT(A). 3.5.1] THAT IN THE ASST. ORDER PASSED THE A.O HE HA S ALSO FAILED TO PROVE THE NEXUS FOR DIVERSION OF THE HIGHER RATE OF INTEREST BEARING FUNDS FOR LOW RATE OF INTEREST. MORESO, WHEN THE AS SESSEE HAS INTEREST FREE CAPITAL OF RS 1,75,96,237/- AS ON 31. 03.2000. 3.5.2] THAT WHEN THE ASSESSEE HAS HUGE AMOUNT OF IN TEREST FREE FUND WITH HER IN THAT CASE THE ASSESSING OFFICER HA S NOT JUSTIFIED IN MAKING DISALLOWANCE OUT OF INTEREST PAID WITHOUT PR OVING THE DIRECT NEXUS OF DIVERSION OF HIGHER RATE OF INTEREST BEARI NG FUNDS FOR LOW RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 13 RATE OF INTEREST. 3.5.3] FOR THIS PREPOSITION WE WANT TO RELY UPON TH E FOLLOWING DECISIONS:- S.NO. NAME OF DECISION CITATION / APPEAL NO. 01. CIT V/S PREM HEAVY ENGINEERING WORKS PVT. LTD. 285 ITR 554 (ALL) 02. CIT V/S RADICO KHAITAN LTD. 274 ITR 354 (ALL) 03. CIT V/S TIN BOX CO. 260 ITR 637 (DEL) 04. D&H SECHERON ELECTRODES P. LTD. V/S CIT 142 ITR 528 (MP) 05. DCIT V/S INDUSTRIAL CABLES (I) LTD. 100 TTJ 748 (CHD) 06. DCIT V/S ASSAM INDUSTRIAL DEV. CORP. LTD. 87 TTJ 1067 (GAU) 07. MALWA COTTON SPINNING MILLS V/S ACIT 83 TTJ 72 (CHD.)(TM) 08. R.D. JOSHI V/S CIT 251 ITR 332 (MP) 3.6] THE LD CIT(A) VIDE HIS ORDER DT 24-12-2007 IN THE CASE OF THE ASSESSEE HER SELF HAS DELETED THE SIMILAR DISAL LOWANCES MADE BY THE AO IN THE ASST YEAR 2004-05. COPY OF ORDER AS P ASSED FOR THE ASST YEAR 2004-05 IS FILED ON PAGE 31 TO 34 OF THE PAPER BOOK 3.7] THAT IN VIEW OF THE ABOVE IT IS SUBMITTED THAT DISALLOWANCE OF RS 513407/- MADE OUT OF INTEREST PAID WAS RIGHLY BEEN DELETED BY THE LD. CIT(A). YOUR HONOUR IS REQUESTED TO APPROVE THE SAID ORDER PASSED BY THE LD. CIT(A) GROUND NOS. 4 AND 4.1 4.1]. IN THE SAID GROUND THE DEPARTMENT HAS CHALLEN GED THE RELIEF ALLOWED BY LD. CIT(A) VIDE HIS ORDER DT. 11.10.2013 IN DELETING THE ADDITION OF RS. 3,43,595/- MADE BY LD. A.O. ON THE AMOUNT OF LOAN ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSME NT YEAR 2003- 04. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 14 4.2] THE ASSESSING OFFICER GROSSLY ERRED IN DISALLO WING THE AMOUNT OF INTEREST ON LOAN ON THE BASIS OF ADDITION MADE IN THE SUBSEQUENT ASSESSMENT YEAR I.E. IN THE ASST YEAR 20 03-04 AND NOT IN ANY PRIOR ASSESSMENT YEAR. THUS, THE AO WAS GROS SLY ERRED IN DISALLOWING THE AMOUNT OF INTEREST OF RS 343595/-. THE DISALLOWANCE OUT OF INTEREST PAID AS MADE BY THE AO WAS RIGHTLY BEEN DELETED BY THE CIT(A). 4.3] THAT THE ASSESSEE HAS DISPUTED THE ADDITION MA DE IN RESPECT OF LOAN IN THE ASST YEAR 2003-04. HENCE, TH E SAID DISALLOWANCE OUT OF INTEREST PAID IS CONSEQUENTIAL TO THE OUTCOME OF THE APPEAL FILED FOR THE ASST YEAR 2003-04. THE LD. CIT(A)-I VIDE HER ORDER DT. 23.11.2007 FOR THE A.Y. 2003-04 HAS DELET ED THE ENTIRE ADDITION MADE U/S 68 IN RESPECT OF LOANS TAKEN BY T HE ASSESSEE. COPY OF ORDER AS PASSED FOR THE ASST YEAR 2003-04 I S ENCLOSED ON PAGE 30-A TO 30-F OF PAPER BOOK. THAT AS PER OUR RE CORDS IT SEEMS THAT THE ORDER PASSED BY THE LD. CIT(A) WAS ACCEPTE D BY THE DEPARTMENT AND NO SECOND APPEAL WAS FILED BEFORE TH E HONBLE BENCH . 4.4] THAT IN VIEW OF THE ABOVE WHEN THE ADDITION MA DE ON ACCOUNT OF ALLEGED UNEXPLAINED LOANS TAKEN U/S 68 H AS ALREADY BEEN DELETED BY THE LD. CIT(A), CONSEQUENT THERETO IT IS SUBMITTED THAT ADDITION MADE ON ACCOUNT OF INTEREST WAS RIGHTLY BE EN DELETED BY THE LD. CIT(A). YOUR HONOUR IS REQUESTED TO APPROVE THE SAID ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH PARTIES AND PERUSED THE ORDERS OF LOWER AUTHORITIES. WE FIND THAT FOR THE ASSESSME NT YEAR 2000-01, 2001-02 AND 2002-03, THE CASE WAS REOPENED AFTER PROCESSING U/S 143(1) OF THE I.T. ACT. IN 2000-01, THE NOTICE OF REOPENING ITSELF MEN TION THAT NECESSARY RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 15 SATISFACTION OF CIT, INDORE WAS OBTAINED BEFORE ISS UING NOTICE U/S 148 OF THE I.T. ACT. BUT, AS PER PROVISIONS OF SECTION 151(2) OF THE I.T. ACT, IN SUCH CASES, SATISFACTION OF JCIT IS REQUIRED AND NOT TO THAT OF CIT. WE FIND THAT LD. CIT(A) HAS RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. SPLS SIDDHARTHA LTD., 345 ITR 223 (DEL) WHEREIN IT WAS H ELD THAT REOPENING IS INVALID AS SANCTION WAS TAKEN FROM CIT INSTEAD OF J CIT. WE FIND THAT SIMILAR VIEW HAS BEEN TAKEN IN CASE GHANSHYAM K KHABRANI, 3 46 ITR 443 (BOM) WHEREIN IT WAS HELD AS UNDER: ' SECTION 151 REQUIRES A SANCTION TO BE TAKEN FOR THE ISSUANCE OF A NOTICE UNDER SECTION 148 IN CERTAIN CASES. IN THE PRESENT CASE, AN ASSESSMENT HAD NOT BEEN MADE UNDER SECTION 143(3) OR SECTION 1 47 FOR A.Y. 2004- 05. HENCE, UNDER SUB SECTION 2 OF SECTION 151, NO N OTICE CAN BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFICER WHO IS BE LOW THE RANK OF JOINT COMMISSIONER AFTER THE EXPIRY OF 4 YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR UNLESS THE JOINT COMMISSIONER IS SA TISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. THE EXPRESSION 'JOINT COMMISS IONER' IS DEFINED IN SECTION 2(28C) TO MEAN A PERSON APPOINTED TO BE A J OINT COMMISSIONER OF INCOME TAX OR AN ADDITIONAL COMMISSIONER OF INCO ME TAX UNDER SECTION 117(1). THERE IS MERIT IN THE CONTENTION RAISED ON BEHALF O F THE ASSESSEE THAT THE REQUIREMENT OF SECTION 151(2) COULD HAVE ONLY BEEN FULFILLED BY THE SATISFACTION OF THE JOINT COMMISSIONER THAT THIS IS A FIT CASE FOR THE ISSUANCE OF A NOTICE UNDER SECTION 148. SECTION 151 (2) MANDATES THAT THE SATISFACTION HAS TO BE OF THE JOINT COMMISSIONE R. THAT EXPRESSION HAS A DISTINCT MEANING BY VIRTUE OF THE DEFINITION IN S ECTION 2(28C). THE COMMISSIONER OF INCOME TAX IS NOT A JOINT COMMISSIO NER WITHIN THE MEANING OF SECTION 2(28C). RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 16 THERE IS NO STATUTORY PROVISION HERE UNDER WHICH A POWER TO BE EXERCISED BY AN OFFICER CAN BE EXERCISED BY A SUPERIOR OFFICE R. WHEN THE STATUTE MANDATES THE SATISFACTION OF A PARTICULAR FUNCTIONA RY FOR THE EXERCISE OF A POWER, THE SATISFACTION MUST BE OF THAT AUTHORITY. WHERE A STATUTE REQUIRES SOMETHING TO BE DONE IN A PARTICULAR MANNER, IT HAS TO BE DONE IN THAT MANNER. ONCE THE COURT HAS COME TO THE CONCLUSION T HAT THERE WAS NO COMPLIANCE OF THE MANDATORY REQUIREMENTS OF SECTION 147 AND 151(2), THE NOTICE REOPENING THE ASSESSMENT CANNOT BE SUSTA INED IN LAW. - COMMISSIONER OF INCOME TAX VS. SPL'S SIDDHARTHA LTD . (ITA NO.836 OF 2011 DECIDED ON 14 SEPTEMBER 2011) FOLLOWED. ' 7. WE HAVE VERIFIED THE NOTE FILED DURING COURSE OF HEARING AND WE FIND THAT CIT HAS GIVEN THE PERMISSION/SATISFACTION AND APPRO VAL WAS NOT GRANTED BY THE JCIT, THEREFORE, WE RESPECTFULLY FOLLOWING THE ABOV E DECISIONS HOLD THAT REOPENING FOR ASSESSMENT YEAR 2000-01 IS INVALID. S O FAR AS THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2005-06 ARE CONCERNED, T HESE ARE RELATED TO EXTENDING INTEREST FREE LOANS TO FATHER SHRI SHARAD KUMAR SANGHI AND FOR CHARGING LESSER INTEREST ON ADVANCE IN COMPARISON T O RATE OF INTEREST PAID ON UNSECURED LOANS. THE ADDITIONS WERE MADE FOR ASSESS MENT YEARS 2003-04 & 2004-05. BASED ON THESE ADDITIONS, THE EARLIER YEAR S WERE REOPENED. LD. CIT(A) HAS PASSED ORDER FOR ASSESSMENT YEARS 2003-0 4 & 2004-05 AND IT WAS DECIDED IN FAVOUR OF THE ASSESSEE. LD. CIT(A) HAS F OLLOWED THE ORDER OF LD. CIT(A) FOR EARLIER ASSESSMENT YEARS AND HE HAS ALLO WED THE APPEALS IN FAVOUR OF THE ASSESSEE. 8. HAVING GONE THROUGH THE SUBMISSION OF THE ASSESS EE AND ORDER OF THE LD. CIT(A), WE FIND THAT LD. CIT(A) HAS RELIED UPON THE ORDERS OF THE LD. CIT(A) RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 17 FOR EARLIER YEARS BUT WE FIND THAT THE ISSUES IN CO NTROVERSY ARE COVERED BY THE DECISION OF TRIBUNAL IN THE CASE OF MISS PRIYA SANG HI, SISTER OF THE ASSESSEE IN ITA NO.337/IND/2013 & CO NO.82/IND/2013, WHEREIN TH E SIMILAR ADDITIONS WERE DELETED. THE COPY OF THE SAID DECISION IS ON PAGE 7 1 TO 86 OF THE PAPER BOOK. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ABOVE ADDITIONS. THE ORDER OF THE LD. CIT(A) IS CONFIRMED. FOR READY REFERENCE, WE REPRODUCE THE OR DER (SUPRA) OF THE TRIBUNAL: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND F OUND FROM RECORD THAT THE DISALLOWANCE OF INTEREST OF RS. 5,7 8,000/- WAS MADE BY THE ASSESSING OFFICER OUT OF TOTAL INTEREST PAID BY HOLDING THAT THE ASSESSEE HAS DIVERTED HER INTEREST BEARING FUND WIT HOUT INTEREST TO SHRI SHARAD KUMAR SANGHI. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAD ADVANCED AMOUNT TO SHRI SHARAD KUMAR SANGHI IN THE YEAR 1999- 00. COPY OF ACCOUNT OF SHRI SHARAD KUMAR SANGHI IN THE BOOK OF THE ASSESSEE IS AVAILABLE ON PAGE 57 OF THE PAPER BOOK. THAT ON PERUSAL OF THE SAID ACCOUNT, WE FIND THAT ENTIRE AMOUNT OF INT EREST FREE FUNDS OF RS. 34,00,000/- WERE ADVANCED BY THE ASSESSEE IN TH E YEAR 1999-2000 FROM HER BANK ACCOUNT WITH STATE BANK OF INDORE, SI YAGANJ BRANCH, INDORE. COPY OF BANK ACCOUNT IN THE BOOKS OF THE AS SESSEE IS ALSO AVAILABLE ON PAGE 58 AND 59 OF THE PAPER BOOK. ON P ERUSAL OF THE BANK ACCOUNT AND CORRELATING IT WITH THE AMOUNT ADVANCED BY THE ASSESSEE TO SHRI SHARAD KUMAR SANGHI, WE FOUND THAT THE ENTI RE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S. RAGINI PRIYA TRU ST WAS UTILIZED FOR ADVANCING IT TO SHRI SHARAD KUMAR SANGHI. 5. THUS, THE ASSESSEE HAD UTILIZED HER INTEREST FR EE FUNDS AS LYING WITH M/S. RAGINI PRIYA TRUST FOR ADVANCING AM OUNT TO HER FATHER RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 18 SHRI SHARAD KUMAR SANGHI. HENCE, NO INTEREST BEARIN G FUNDS WERE UTILIZED BY THE ASSESSEE FOR ADVANCING THE AMOUNT T O SHRI SHARAD KUMAR SANGHI. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE ACTION OF ASSESSING OFFICER FOR DISALLOWING THE INTEREST EXPE NDITURE. 6. BEFORE PARTING WITH THE MATTER, IT IS PERTINENT TO MENTION THAT IN THE COURSE OF FIRST ROUND OF APPEAL BEFORE THE C IT(A) VIDE ORDER DATED 31.12.2007, THE LD. CIT(A) HAS DELETED THE DI SALLOWANCE OF NOTIONAL INTEREST, HOWEVER, REVENUE WAS NOT IN APPE AL AGAINST THIS ORDER OF CIT(A). THE ASSESSING OFFICER HAS ALSO MAD E DISALLOWANCE OF INTEREST OF RS. 5,19,930/- BY HOLDING THAT THE ASSE SSEE HAS DIVERTED HIS HIGHER RATE OF INTEREST BEARING FUNDS FOR LOW RATE OF INTEREST. IN THE ASSESSMENT ORDER, A.O. HAS OBSERVED THAT THE ASSESS EE HAD PAID INTEREST RANGING FROM 16 % TO 18 % P. A. WHEREAS SH E HAD CHARGED INTEREST RANGING 12 TO 16%. THAT DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE HAS RECEIVED INTEREST OF RS. 11,24,737 /- AND HAS PAID INTEREST OF RS. 14,73,135/-. HOWEVER, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 5,19,930/- BEING 147313 5/17*6% PERCENT INTEREST AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE. THE ASSESSING OFFICER WHILE DISALLOWING THE PROPORTIONA TE INTEREST, TREATED THE AVERAGE RATE OF INTEREST AT 17 % AND RESTRICTED THE CLAIM OF INTEREST AT 11 % AND THEREBY DISALLOWED 6% OF INTEREST WHICH CALCULATED COMES TO RS. 519930/-. 7. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESEN TATIVE THAT THE EFFECTIVE RATE OF INTEREST PAID ON THE AMOUNT O F FUNDS BORROWED BY THE ASSESSEE WORKED OUT AT 5.30 %, WHEREAS THE ASSE SSEE HAS CHARGED INTEREST FROM ALL THE PARTIES, WHICH VARIES BETWEEN 12 % TO 16 %. FOR THIS PURPOSE, OUR ATTENTION WAS INVITED TO T HE FOLLOWING WORKINGS :- RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 19 THAT ON THE BASIS OF TOTAL FUNDS AVAILABLE WITH TH E ASSESSEE EFFECTIVE RATE OF INTEREST PAID COMES @ 5.30 % CALC ULATED AS UNDER :- OPENING BALANCE CLOSING BALANCE AVERAGE BALANCE CAPITAL 1,76,66,681 1,93,32,231 1,84,99,456 UNSECURED LOAN 90,24,186 95,21,585 92,72,886 2,66,90,867 2,88,53,816 2,77,72,342 INTEREST PAID 14,73,135 EFFECTIVE RATE OF INTEREST 1473135/27772342*100 = 5,30 % 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FO UND FROM RECORD THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2000 -01 WAS REOPENED ON THE BASIS OF FINDINGS OF ASSESSING OFFI CER IN THE ASSESSMENT YEAR 2004-05 REGARDING DIVERSION OF INTE REST BEARING FUNDS FOR NON-BUSINESS PURPOSES. AGAINST THE FINDINGS FOR ASSESSMENT YEAR 2004-05, THE ASSESSEE APPEALED BEFORE CIT(A) WHO DE LETED DISALLOWANCE OF INTEREST VIDE ORDER DATED 31.12.200 7. SIMILAR ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEA R 2000-01 WAS UNDER CONSIDERATION. IT WAS SUBMITTED BY THE LD. AU THORIZED REPRESENTATIVE THAT REVENUE HAS NOT FILED ANY APPEA L AGAINST THE SAID ORDER OF CIT(A) FOR ASSESSMENT YEAR 2004-05. LD. SE NIOR DR HAS NOT CONTROVERTED SAID ASSERTION OF LD. AUTHORIZED REPRE SENTATIVE. ON MERITS, WE FOUND THAT SINCE THE EFFECTIVE RATE OF I NTEREST PAID BY THE ASSESSEE WORKS OUT TO BE 5.30 %, THE RATE OF INTERE ST THE ASSESSEE HAS CHARGED FROM ALL THE PARTIES TO WHOM ADVANCE WAS GI VEN VARIES BETWEEN 12 % TO 16 %, THERE WAS NO JUSTIFICATION FO R THE ASSESSING OFFICER TO MAKE ADDITION BY OBSERVING THAT THE ASSE SSEE HAS CHARGED LOWER RATE OF INTEREST FROM PARTIES TO WHOM ADVANCE S WERE GIVEN. RAGINI SANGHI ITA NOS.41 TO 44/IND/2014 AND CO NOS.8 TO 10/IND/20 14 20 9. AS WE HAVE ALREADY DECIDED THE MERITS OF ADDITION/DISALLOWANCE, WE ARE NOT INCLINED TO GO IN THE TECHNICAL ISSUE DECIDED BY CIT(A) FOR QUASHING THE REASSESSMENT PRO CEEDINGS. 10. IN THE RESULT, THE APPEAL OF THE REVENUE HAS BE COME ACADEMIC, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE I S ALLOWED. 9. WE, RESPECTFULLY FOLLOWING THE ABOVE AND CONSIDE RING THE FACTS/SUBMISSIONS AS DISCUSSED ABOVE, DISMISS THE A PPEALS OF THE REVENUE AS WELL AS CROSS-OBJECTIONS FILED BY THE ASSESSEE. 10. FINALLY, THE APPEALS OF THE REVENUE AND CROSS-O BJECTIONS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26.10.201 5. SD/ (B.C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 26.10.2015 !VYS! COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR, INDORE
