ITO 9(2)-1, MUMBAI V. RAMANLAL R. JAIN, MUMBAI

ITA 4118/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7175 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: R U JAIN
• Keywords: Notional interest
• Section: 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D: MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SHRI R.S. PADVEKAR (JM) ITA NO. 4118/MUM/2009 (ASSTT. YEAR : 2006-07) INCOME-TAX OFFICER 9(2)-1, APPELLANT AAYAKAR BHAVAN, R.NO.22, 2 ND FLR M.K. ROAD, MUMBAI- 400 020 V/S. MR. RAMANLAL R JAIN, RESPONDENT AH /2, SHAKTI HOUSE, CAMA INDUSTRIAL ESTATE, GOREGAON (E), MUMBAI-63 PAN : - AABCN0057A APPELLANT BY :MR. T.T. JACOB RESPONDENT BY :MR. R.U. JAIN : O R D E R : PER R.S. PADVEKAR, J.M IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE ORDE R OF THE LD CIT(A)- IX, MUMBAI DATED 21.4.2009 FOR THE A.Y. 2006-07 BY TAKING THE FOLLOWING EFFECTIVE GROUND : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.27,71.3 41/- MADE ON ACCOUNT OF INTEREST ON ADVANCE GIVEN BY THE ASSESSEE WHICH SHOULD HAVE BEEN CHARGED TO TAX ON ACCRUAL BASIS AS ASSESSEES SUBST ANTIAL SOURCE OF INCOME WAS ON ACCOUNT OF INTEREST RECEIVED ON LOAN . 2. THE ASSESSEE IS IN THE MANUFACTURING AND EXPORT OF THE WRITING INSTRUMENTS. HE ALSO DEALS IN THE TRADING OF THE S AID MATERIAL. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSES SMENT WAS COMPLETED U/S. 143(3). IT WAS NOTICED BY THE A.O THAT THE ASSESSE E HAD ADVANCED INTEREST ITA NO. 4118/MUM/2009 2 FREE LOANS OF RS. 4,54,26,825/- TO THIRTY (30) PERS ONS. IT WAS FURTHER NOTICED BY THE A.O THAT THE ASSESSEE HAS CHARGED THE INTERE ST ON SOME OTHER ADVANCES, BUT SO FAR AS THE THIRTY PERSONS WERE CON CERNED, NO INTEREST WERE CHARGED. THE A.O, THEREFORE, WORKED OUT THE INTERE ST INCOME BY TAKING THE RATE AT 5% WHICH, AS PER THE A.O WAS THE INTEREST RATE OF THE BANK ON THE FIXED DEPOSIT, AND ACCORDINGLY, WORKED OUT INTEREST TO THE EXTENT OF RS. 22,71,334/- AND MADE ADDITION TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE ISSUE BEFORE THE CIT(A) WHO DELETED THE ADDITION. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD COUNSEL SUB MITTED THAT IN ASSESSEES OWN CASE IN THE IMMEDIATE PRECEDING YEARS I.E. A.Y. 2003-04, 2004-05 AND 2005-06, IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD COUNSEL REFERRED TO THE COPY OF THE TRIBUNAL ORDER PASSED IN ITA NO. 5136/MUM/2006 AND ITA NO. 1584 & 5169/MUM/2007 DT. 25.8.2009. WE HAVE ALSO HEARD THE LD. D.R. AS SUBMITTED BY THE LD CO UNSEL, THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE AND ADDITION MADE BY THE A.O IN RESPECT OF NOTIONAL INTEREST WHICH WA S DELETED BY THE LD CIT(A) AND THE ORDER OF THE LD CIT(A) HAVE BEEN CONFIRMED BY THE TRIBUNAL AND OPERATIVE PART OF THE TRIBUNAL ORDER IS AS UNDER : 5. THE LD DR PLACED RELIANCE ON THE ORDER OF THE A O AND ON THE OTHER HAND, THE LD COUNSEL OF THE ASSESSEE PLACED RELIANC E ON THE ORDER OF THE CIT(A). IT WAS FURTHER SUBMITTED THAT THE AO HAS A DDED NOTIONAL INTEREST EVEN IN CASES WHERE NO INTEREST WAS CHARGE D IN THE PRECEDING YEAR AND IN THE CASES WHERE THE PARTIES WERE NEW. IT WAS FURTHER SUBMITTED THAT THE RATE OF INTEREST EVEN IN THE PRE CEDING YEAR WAS LESS THAN 12% WHICH HAS BEEN ACCEPTED BY THE AO WHILE C OMPLETING THE ASSESSMENT U/S 143(3). IT WAS FURTHER SUBMITTED T HAT THE AO ESTIMATED IN TAKING NOTIONAL INTEREST AT 12% FOR AY 2003-04 WHEREAS IN AY 04-05 AND 05 06, THE AO HAS ESTIMATED THE INTERE ST @ 5%. IT WAS ALSO SUBMITTED THAT THE AO WAS WRONG IN CALCULATING NOTIONAL INTEREST ON THE CLOSING BALANCE. ATTENTION OF THE BENCH WAS DR AWN ON THE ANNEXURE B ENCLOSED IN THE ORDER OF THE AO WHERE DETAILS OF INTEREST IS PLACED. IT WAS FURTHER SUBMITTED THAT WHERE LOWER RATE OF INTE REST HAS BEEN ACCEPTED IN EARLIER YEAR NO ADDITION CAN BE MADE IN SUBSEQUENT YEAR BY ITA NO. 4118/MUM/2009 3 CHARGING HIGHER RATE OF INTEREST. RELIANCE WAS PLA CED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF SRIDEV ENTERPRI SES IN 192 ITR 165. IT WAS ALSO SUBMITTED THAT IN VIEW OF THE DECISION OF THE APEX COURT IN THE CASE OF A RAMAN & CO REPORTED IN 67 ITR 11, ONL Y REAL INCOME CAN BE ASSESSED. 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE FINDING S OF THE LD CIT(A). THE FINDING OF THE LD CIT(A) ARE FINDING OF FACTS WHICH NETHER COULD BE INTROVERTED BY THE LD DR NOR ANY OTHER MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH OTHERWISE. THE SUPREME COURT IN THE C ASE OF A RAMAN & CO (SUPRA), HAS HELD LONG BACK THAT ONLY REAL INCOME C AN BE ASSESSED. 6.1 IN THE PRESENT CASE, THERE IS NO DISPUTE THAT T HE ASSESSEE HAS NOT BORROWED ANY MONEY FOR THE PURPOSE OF ADVANCING LOA NS TO VARIOUS PARTIES. THIS IS NOT THE CASE OF THE AO THAT THE A SSESSEE HAS BOOKED LOWER INTEREST IN THE BOOKS OF ACCOUNT WHEREAS HAS CARRIED MORE INTEREST OTHERWISE. EVEN AS PER THE PROVISIONS OF LAW, NOTI ONAL INTEREST CANNOT BE CHARGED. IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD CIT(A), W E CONFIRM HIS ORDER. 3. WE, THEREFORE, DO NOT FIND REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS YEAR ALSO AS THE ORDERS OF THE LD C IT(A) IN THE PRECEDING YEARS HAVE BEEN CONFIRMED BY THE TRIBUNAL. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF MARCH, 2010. SD/- SD/- (J. SUDHAKAR REDDY) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 30TH DAY OF MARCH, 2010. ITA NO. 4118/MUM/2009 4 :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- IX, MUMBAI 4.THE CIT - IX, MUMBAI 5.THE DR, D BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. ITA NO. 4118/MUM/2009 5 US DATE INITIALS 1. DRAFT DICTATED ON 25/3/10 --------------- S R.P.S. 2. DRAFT PLACED BEFORE AUTHORITY 26/3/10 --------- ----- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----