Dulichand Ramnarayan Agrawal, Nandurbar V. ITO, Ward 3(3), Dhule

ITA 425/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93871 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR P SINGH

Judgement Text

] IQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO.425/PN/2013 !# $ %$ / ASSESSMENT YEAR : 2008-09 DULICHAND RAMNARAYAN AGRAWAL, LIGHT BAZAR, NAVAPUR, DISTRICT NANDURBAR-425418 PAN NO.AABFD6721E . / APPELLANT V/S ITO, WARD-3(3), DHULE . / RESPONDENT / APPELLANT BY : NONE / DEPARTMENT BY : SHRI B.C. MALAKAR P. SINGH & / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-11-2012 OF THE CIT(A)-I, NASHIK RELATING TO AS SESSMENT YEAR 2008-09. 2. THIS APPEAL WAS FIRST FIXED FOR HEARING ON 20-03-2015. HOWEVER, SINCE NOBODY APPEARED ON BEHALF OF THE ASSESSEE ON THA T DATE THE CASE WAS ADJOURNED TO 08-07-2015 BY ISSUE OF NOTICE THROUGH RPAD. ALTHOUGH THE NOTICE WAS DULY SERVED ON THE ASSESSEE (ACKNOWLEDGEMENT PLACED ON RECORD), NONE APPEARED ON BE HALF OF THE / DATE OF HEARING : 08.07.2015 / DATE OF PRONOUNCEMENT: 10.07.2015 2 ITA NO.425/PN/2013 ASSESSEE NOR ANY PETITION SEEKING ADJOURNMENT OF THE CA SE WAS ALSO FILED, THEREFORE, THIS APPEAL IS BEING DECIDED ON THE BASIS OF M ATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTA L REPRESENTATIVE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CLOTH, BLACK JIGGERY AND BUR A SUGAR ETC. IT FILED ITS RETURN OF INCOME ON 13-10-2008 DECLARING TOTAL INCOME OF RS.4,740/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AO CALLED FOR CERTAIN DETAILS FROM THE ASSESSEE. HE OBSERVED THAT ASSESSEE HAS DEBITED SHOP EXPENSES OF RS.7,579/- AND PRINTING CHAR GES OF RS.720/-. SINCE THE VOUCHERS WERE NOT FULLY VERIFIABLE HE M ADE ADDITION OF RS.2,500/- OUT OF THE TOTAL EXPENSES OF RS.8,299/ -. SIMILARLY, OUT OF THE MOBILE EXPENSES OF RS.22,093/,- THE AO DISALLOWED ON ADHOC BASIS AN AMOUNT OF RS.6,600/- BEING PE RSONAL IN NATURE. THE AO FURTHER NOTED THAT AN AMOUNT OF RS.1,14,6 00/- IS APPEARING AS ADVANCE AGAINST NAVAPURA SERVO CENTRE. W HEN ASKED BY THE AO AS TO WHETHER INTEREST HAS BEEN CHARGED ON TH IS AMOUNT, IT WAS EXPLAINED THAT THE ADVANCE HAS BEEN GIVEN TO THE ABOVE PERSON VIZ., SMT. ANITA, WIFE OF MR. RAJENDRA AGRAWAL, PROPRIETOR OF NAVAPU RA SERVO CENTRE, WHO IS A RELATIVE OF THE PARTNER OUT OF PARTNERS OWN FUNDS. THE INTEREST PAID BY THE FIRM TO PARTNERS IS EQUAL TO 6% INSTE AD OF 12% ALLOWABLE TO THEM. HENCE, NO INTEREST IS CHARGED CONSIDER ING THE FACT THAT ADVANCE WAS GIVEN TO THE ABOVE FIRM FOR SHORT PERIOD. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE FIRM HAS RAISED AN AMO UNT OF RS.11,76,102/- WHICH ARE INTEREST BEARING LOANS. FURTHER, IN TEREST AMOUNT OF RS.26,545/- HAS BEEN DEBITED TO THE PROFIT AND LOSS 3 ITA NO.425/PN/2013 ACCOUNT. SINCE ON THE ONE HAND FIRM HAS REDUCED THE PR OFIT BY DEBITING THE INTEREST AND ON THE OTHER HAND THE INTERES T FREE ADVANCE HAS BEEN GIVEN, THEREFORE, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PART AMOUNT OF INTEREST DEBITED TO PROFIT AND LOS S ACCOUNT SHOULD NOT BE DISALLOWED. THE ASSESSEE AGREED FOR ADDITI ON OF THE SAME BUT SUBJECT TO NON-LEVY OF PENALTY. SINCE THE INTER EST @12% COMES TO RS.18,400/- CONSIDERING THE OPENING BALANCE OF RS.1,90,625/- WITH THE ABOVE PERSON, THE AO DISALLOWED AN AMOUNT OF RS.18,400/- OUT OF THE TOTAL INTEREST OF RS.26,545/-. IN AP PEAL THE LD.CIT(A) UPHELD THE ADDITION MADE BY THE AO. 5. THE ASSESSEE HAS NOT CHALLENGED THE DISALLOWANCE OF SHO P EXPENSES AND TELEPHONE EXPENSES. HOWEVER, THE ASSESSE E HAS CHALLENGED BEFORE US THE DISALLOWANCE OF INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT AT RS.18,400/- WHICH HAS BEEN SUSTAINED BY THE CIT(A) BY RAISING THE FOLLOWING GROUNDS : 1. THE CIT(A)-I, NASHIK ERRED IN CONFIRMING THE DISA LLOWANCE OF INTEREST OF RS.18,400/- BY STATING THAT THE ASSESSEE DIVER TED THE BORROWED FUNDS FOR NON BUSINESS PURPOSE SINCE THE ASSESSEE FIRM HAD P ARTNERS OWN FUNDS FOR THE PURPOSE OF ADVANCING LOAN TO RELATIVE O F THE PARTNERS, WITHOUT INTEREST. 2. AS PER DECISION OF MUMBAI HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. 313 ITR 240 (MUMBAI) THE D ISALLOWANCE OF INTEREST MADE BY THE AO AND CONFIRMED BY THE CIT(A)- I, NASHIK MAY PLEASE BE HELD AS INCORRECT. 3. THE APPELLANT CRAVES LEAVE TO ALTER/ADD/AMEND/DE LETE ANY OF GROUNDS OF APPEAL. 6. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AND HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OF RS.1,90,625/- WHICH IS EVIDENT FROM THE OPENING BALANCE ON THIS ACCOUNT AND THE CLOSING BALANCE IS RS.1,14,600/-. THERE IS ALSO NO DISPUTE TO THE FA CT THAT THE 4 ITA NO.425/PN/2013 PERSON TO WHOM LOAN HAS BEEN GIVEN IS A CLOSE RELATIVE OF THE PARTNERS AND THERE IS NO COMMERCIAL TRANSACTION BETWEEN THE ASSE SSEE AND SMT. ANITA. IT IS ALSO A FACT THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSEE HAS AGREED FOR THE DISALLOWANC E OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE GIVEN TO THE SAID PERS ON. IT IS ALSO A FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE BEFORE TH E LOWER AUTHORITIES THAT ASSESSEE HAS SUBSTANTIAL INTEREST FREE FUNDS OF ITS OWN WHICH WERE GENERATED IN THE COURSE OF THE RELEVANT FINANC IAL YEAR OUT OF WHICH THE INTEREST FREE ADVANCE HAS BEEN GIVEN. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) UPHOLD ING THE DISALLOWANCE MADE BY THE AO. THE SAME IS ACCORDINGLY UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-07-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; ! DATED : 10 TH JULY, 2015. LRH'K &'(!)*+%) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # # $ ( ) , ' / THE CIT(A)-I, NASHIK 4. # # $ , ' / THE CIT-I, NASHIK 5. ()* ++,- , # ,- , IQ.KS / DR, ITAT, B PUNE; 6. */0 1 / GUARD FILE. &# , / BY ORDER , ( + //TRUE COPY// ( + //TRUE COPY// 234 +5 ,6 / SR. PRIVATE SECRETARY # ,-, IQ.KS / ITAT, PUNE