The ACIT, Mehsana Circle, Mehsana V. Ramchandra Leasing and Finance Ltd., Visnagar

ITA 430/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9149 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 10-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: K I THAKKAR
• Keywords: Capital asset

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI R V EASWAR VICE-PRESIDENT] [AND SHRI P K BANSAL ACCOUNTANT MEMBER] ITA NO.430/AHD/2005 [ASSESSMENT YEAR:- 2001-02] THE ASSISTANT COMMISSIONER OF INCOME- TAX, MEHSAN CIRCLE, MEHSANA V/S RAMCHANDRA LEASING AND FINANCE LTD., GAYATRI COMPLEX, STATION ROAD, VISNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY :- SMT. NEETA SHAH RESPONDENT BY:- SHRI K I THAKKAR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A ) DATED 05- 11-2004 FOR ASSESSMENT YEAR 2001-02, BY TAKING THE FOLLOWING EFFECTIVE GROUND OF APPEAL:- THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE IN DIRECTING TO DELETE THE ADDITION MADE ON ACCOUNT OF THE CHARGEABLE INTEREST OF RS.44,90,805/-. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE AO FOUN D THAT AN AMOUNT OF RS.2,28,90,805/- HAS BEEN SHOWN AS ADV ANCES IN THE BALANCE-SHEET. HE ACCORDINGLY ISSUED A NOTICE TO TH E ASSESSEE CALLING FOR THE DETAILS OF PERSONS TO WHOM LOANS / ADVANCES WERE GIVEN BY THE ASSESSEE. NO DETAILS WERE FILED BEFORE THE AO. THE AO TOOK THE VIEW THAT NO PRUDENT PERSON WHO IS ENGA GED IN THE BUSINESS OF LEASING AND FINANCE WILL ADVANCE A SUM OF RS.2,48,90,805/- FREE OF INTEREST TO ANY PERSON. HE , THEREFORE, 2 CALCULATED THE INTEREST AT THE RATE OF 18% CHARGEAB LE ON THE SAID AMOUNT AND WORKED OUT THE INTEREST INCOME AT RS.44, 80,345/- AND ADDED THE SAME IN THE RETURNED INCOME OF THE ASSESS EE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT( A) DELETED THE ADDITION BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE FACTS OF THE CASE. IT IS SEEN THAT NONE OF THE AMOU NT OF LOAN OR ADVANCES WERE ADVANCED BY THE APPELLANT DURING THE CURRENT Y EAR. AS PER THE DETAILS FILED BY THE APPELLANT IT HAD ITS OWN FUND TO THE EXTENT OF RS.3,39,75,705/- WHICH WAS MUCH MORE THAN THE TOTAL LOANS AND ADVANCES OF RS.2,28,90,805/-. THE APPELLANT HAD NOT PAID ANY INTEREST ON THE FUNDS AVAILABLE WITH IT AND OUT OF THE ABOVE INTEREST FREE FUNDS IT HAD ADVANCED THE LOANS AND ADVANCES TOTALING TO RS.2,48,90,805/-. FOLLOWING THE DECISION OF ITATS AS CITED ABOVE AND ELIDE UPON BY THE APPELLANT, I HOLD THAT NO AMOUNT OF INTEREST CALCUL ATED ON NOTIONAL BASIS IS REQUIRED TO BE ADDED IN THE CASE OF THE AP PELLANT. HENCE, THE ADDITION OF RS.44,80,345/- IS DELETED. 3 THE LEARNED DR BEFORE US VEHEMENTLY CONTENDED TH AT THE ONUS IS ON THE ASSESSEE TO PROVE THAT NO INTERE ST INCOME HAS ACCRUED TO IT. THE AO HAS ASKED FOR THE EXPLANATION AND THE DETAILS OF LOANS AND ADVANCES BUT NO SUCH DETAILS W ERE FILED BEFORE THE AO. EVEN THE ASSESSEE DID NOT SUBMIT THE NAMES OF THE PERSONS, ADDRESSES AND PA NUMBERS, TO WHOM THE LOAN S AND ADVANCES WERE GIVEN SO THAT THE AO COULD HAVE EXAMI NED WHETHER IT IS FOR THE PURPOSE OF BUSINESS OR NOT. T HE ASSESSEE HAS SHOWN RS.20 LACS AS ADVANCES AGAINST THE STOCK OF H IRE PURCHASE. EVEN NO DETAILS FOR THE SAME WERE FILED. NO PRUDENT BUSINESSMAN LIKE THE ASSESSEE WOULD ADVANCE THE MONEY WITHOUT I NTEREST FOR A LONG TIME. EVEN THE ASSESSEE DID NOT EXPLAIN THE CI RCUMSTANCES UNDER WHICH THE ADVANCES WERE GIVEN FOR OFFICE PREM ISES, SHARES, CAPITAL ASSETS AND STOCK ON HIRE PURCHASE. THE ASSE SSEE HAD SUBMITTED SOME DETAILS FOR THE FIRST TIME BEFORE TH E CIT(A). 3 THEREFORE, IN THE INTEREST OF JUSTICE, MATTER BE SE T-ASIDE AND RESTORED TO THE FILE OF THE AO FOR FRESH EXAMINATIO N. 4 THE LEARNED AR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) AND REFERRED TO THE BALANCE-SHE ET FILED ALONG WITH THE RETURN. IT WAS CONTENDED THAT THE ASSESSEE WAS HAVING SHAREHOLDERS FUNDS TO THE EXTENT OF RS.3,39,44,750/ -. UNSECURED LOANS WERE ONLY RS.6,23,275/-. THE ASSESSEE HAS THE INTEREST INCOME TO THE EXTENT OF RS.3,53,441/-. THE ASSESSEE HAD PAID THE INTEREST DURING THE YEAR OF RS.1,18,493/-. ON A QUE RY FROM THE BENCH WHY THE INTEREST RECEIPT HAS BEEN ACCOUNTED F OR ON CASH BASIS, THE LEARNED AR COULD NOT EXPLAIN THE REASONS . RELIANCE WAS PLACED ON THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF TORRENT FINANCIERS V ACIT [2001] 73 TTJ (AHD) 624 AND THAT OF THE DELHI BENCH IN THE CASE OF ALLEN BRADELY INDIA LTD. V DCIT [2002] 74 TTJ (DEL) 604 . 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD. WE NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS ADVANCED THE SUM OF RS.2,28,90,805/- AS ADVANCE S DETAILED AS UNDER:- LOANS AND ADVANCES (UNSECURED, UNLESS OTHERWISE STATED, CONSIDERED GOO D) LOAN TO DIRECTOR 5,74,143 LOANS AND ADVANCES 54,71,662 ADVANCES FOR OFFICE PREMISES 14,20,000 ADVANCES FOR PURCHASE OF SHARES 1,27,50,000 ADVANCES FOR CAPITAL ASSETS 26,75,000 ---------------- TOTAL 2,28,90,805 4 THE AO ASKED FOR THE REASONS WHY THESE ADVANCES HAV E BEEN GIVEN. EVEN THE AO HAS ASKED FOR THE NAMES, ADDRESS ES ALONG WITH PA NUMBERS OF THE PARTIES TO WHOM THE ADVANCES WERE GIVEN. THE ASSESSEE DID NOT SUBMIT ANY DETAILS BEFO RE THE AO. UNDER THE CIRCUMSTANCES, THE AO PRESUMED AS IF THE ASSESSEE HAS ADVANCED THESE LOANS / ADVANCES NOT FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY CHARGED THE INTEREST AT THE RATE OF 18% AMOUNTING TO RS.44,80,345/- AND ADDED THE SAME IN T HE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT BEFORE THE CIT(A ), THE CIT(A) NOTED THAT THE ASSESSEE WAS HAVING THE INTER EST FREE FUNDS TO THE EXTENT OF RS.3,39,75,705/- BY WAY OF SHAREHO LDERS FUNDS. THEREFORE, HE TOOK THE VIEW THAT NO INTEREST CAN BE CALCULATED ON NOTIONAL BASIS AND DELETED THE ADDITION OF RS.44,80 ,345/-. THIS IS NOT A CASE IN WHICH THE AO HAD DISALLOWED THE INTER EST PAID BY THE ASSESSEE ON THE LOANS PRESUMING AS IF THE LOANS WERE NOT TAKEN FOR THE PURPOSE OF BUSINESS. WE NOTED FROM TH E ASSESSMENT ORDER THAT THE AO HAS MADE THE ADDITION PRESUMING A S IF THE ASSESSEE HAD EARNED THE INTEREST AT THE RATE OF 18% ON THE LOANS AND ADVANCES AMOUNTING TO RS.2,48,90,805/- AMOUNTIN G TO RS.44,80,345/-. INCOME-TAX IS IMPOSABLE ON REAL INC OME. UNTIL AND UNLESS THE ASSESSEE HAS NOT EARNED INCOME, IN O UR OPINION, NO TAX CAN BE IMPOSED ON THE ASSESSEE. THE ONUS IS ON THE REVENUE TO PROVE THAT THE INCOME HAS ARISEN OR ACCRUED TO T HE ASSESSEE OR THE ASSESSEE HAS RECEIVED THE INCOME. THERE IS NO E VIDENCE BEING BROUGHT ON RECORD WHICH PROVES THAT THE ASSESSEE HA S EARNED THE INCOME DURING THE YEAR FROM THE ADVANCES MADE BY TH E ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A) DELETING THE IMPUGNED ADDIT ION. 5 6 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-09-2009 SD/- SD/- (R V EASWAR) VICE-PRESIDENT (P K BANSAL) ACCOUNTANT MEMBER DATE : 04-09-2009 COPY OF THE ORDER FORWARDED TO : 1. RAMCHANDRA LEASING AND FINANCE LTD., GAYATRI COM PLEX, STATION ROAD, VISNAGAR 2. THE ACIT, MEHSANA CIRCLE, MEHSANA 3. THE CIT CONCERNED 4. THE CIT(A)-XXI, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR, ITAT, AHMEDABAD