M/s. Aakash Enterprise, Jalgaon V. ITO, Ward 2(3), Jalgaon

ITA 435/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2961 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Source of fund; Notional interest
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 435/PN/2013 $& ' !(' / ASSESSMENT YEAR : 2009-10 M/S. AAKASH ENTERPRISE, NATH PLAZA, NAVI PETH, JALGAON 425001 PAN : AAKFA6905A ....... / APPELLANT )& / V/S. INCOME TAX OFFICER, WARD 2(3), JALGAON / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI B.C. MALAKAR / DATE OF HEARING : 09-11-2015 / DATE OF PRONOUNCEMENT : 06-01-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, NASHIK DATED 26-1 2-2012 FOR THE ASSESSMENT YEAR 2009-10. IN APPEAL, THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON TWO GROUNDS : 2 ITA NO. 435/PN/2013 A.Y. 2009-10 I. CONFIRMING ADDITION OF RS.67,50,000/- AS UNEXPLAINED ADVANCES U/S. 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). II. ADDITION OF RS.2,28,345/- ON ACCOUNT OF NOTIONAL INTEREST ON ADVANCES GIVEN DURING THE COURSE OF BUSINESS. 2. THE FACTS OF THE CASE AS EMANATING FROM THE RECORDS ARE: THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS, DEALING IN LPG AND RETAIL TRADING AT JALGAON. TH E ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30-09-2009 DECLARING TOTAL INCOME AS RS. NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S. 143 (2) WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF SCRUTINY ASSESSM ENT THE ASSESSING OFFICER OBSERVED THAT IN BALANCE SHEET THE ASSE SSEE HAS SHOWN LOANS AND ADVANCES TO THE TUNE OF RS.1,82,57,320/-. ALL THE LOANS AND ADVANCES WERE FOUND TO BE OLD EXCEPT ADVANCE S AGAINST PROPERTY OF RS.95,00,000/-. ON FURTHER SCRUTINY OF ACCOUNT S IT WAS FOUND THAT THE ADVANCES AS ON 31-03-2008 WERE TO THE TUNE OF RS.27,50,000/-. THUS, THE BALANCE RS.67,50,000/- WERE ADVAN CES TAKEN DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UN DER APPEAL. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. DURING THE ASS ESSMENT PROCEEDINGS THE ASSESSEE COULD NOT SUBSTANTIATE THE AFO RESAID ADVANCES. THE ASSESSING OFFICER MADE ADDITION OF RS.67,50,00 0/- U/S. 68 OF THE ACT. FURTHER DURING THE COURSE OF SCRUTINY ASSESSMENT THE A SSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ADVANCED INTERES T FREE LOANS TO THE FOLLOWING PERSONS: 3 ITA NO. 435/PN/2013 A.Y. 2009-10 I. BEENAKUMAR BADANI RS.1,50,000/- II. SANJAY B. SATANA RS.2,00,000/- III. SEVAK BASANTANI RS.7,51,061/- IV. SHARDA KHADSE RS.18,00,000/- WHEREAS, THE ASSESSEE FIRM HAD TAKEN LOAN FROM THE BANK@ 15%. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS DIV ERTED INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSE TO THE AFORESAID P ERSONS. THE ASSESSING OFFICER CHARGED INTEREST @ 13% ON THE SAID LOANS AND THUS MADE ADDITION OF RS.3,77,130/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 20-12-2011, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) T HE ASSESSEE FURNISHED CERTAIN DOCUMENTS AND EXPLANATION TO SUBSTANTIATE LOANS AND ADVANCES. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT CONVINCED WITH THE EXPLANATION FURNISHED A ND REJECTED THE SAME. IN SO FAR AS NOTIONAL INTEREST ON IN TEREST FREE LOANS IS CONCERNED THE ASSESSEE CHALLENGED THE ADDITION ON MERITS AND ALSO MADE AN ALTERNATE PLEA THAT THERE WERE SOME ARITHMETICA L ERRORS IN DETERMINATION OF INTEREST ON DEBIT BALANCES. ACCORDING TO THE ASSESSEE THE PARTY WISE INTEREST @ 13% COMES TO RS.2,28,345/-. T HERE IS DIFFERENCE OF RS.1,48,785/- IN THE INTEREST COMPUTED BY THE ASSESSING OFFICER AND THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE ALTERNATE PLEA OF THE ASSESSEE AND GRANTE D RELIEF OF RS.1,48,785/-. AGAINST THE FINDINGS OF THE COMMISSIONER OF IN COME TAX (APPEALS) THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 4 ITA NO. 435/PN/2013 A.Y. 2009-10 3. SHRI PRAMOD SHINGTE APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE A SSESSING OFFICER MADE ADDITIONS WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. IN APPEAL BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS) THE ASSESSEE GAVE EXPLANATION ALONG WITH CONFIRMATIONS AND THE COPY OF AGREEMENTS WITH VARIOUS PERSONS FROM WHOM ADVANCES WER E RECEIVED. THE LD. AR SUBMITTED THAT THE ADVANCES WERE RECEIVED FRO M VARIOUS PARTIES THROUGH BROKERS FOR SALE OF SHOPS/OFFICES IN THE C OMMERCIAL COMPLEX KNOWN AS NATH PLAZA. THERE ARE 39 SHOPS IN SHOPPING COMPLEX. THE ASSESSEE HAS SOLD 20 SHOPS OUT OF TOTAL 39 SHOPS. THE SHOPS ARE SOLD TO FARMERS THROUGH BROKER. THE ASSESSE E COULD NOT PRODUCE THE DETAILS OF THE PURCHASERS BEFORE THE ASSESS ING OFFICER AS THE DETAILS WERE AVAILABLE WITH THE BROKER WHO WAS NOT A VAILABLE AT THE RELEVANT PERIOD OF TIME. MOREOVER, THE BUSINESS TRANSACT IONS AT JALGAON WERE DONE THROUGH TELEPHONIC INSTRUCTIONS SINCE ONE OF TH E PARTNERS OF THE ASSESSEE WAS BUSY WITH ASSEMBLY ELECTION AND THE O THER PARTNER IS STAYING AT BOMBAY. THE DETAILS OF PARTIES, AGREEMENTS AN D THE CONFIRMATIONS FURNISHED BY THE ASSESSEE WERE FORWARDED B Y THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSING OFFICE R FOR VERIFICATION AND COMMENTS. THE ASSESSING OFFICER WITHOUT CON DUCTING PROPER ENQUIRY OR VERIFICATION BRUSHED ASIDE THE EVIDENCES FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER OUGHT TO HAVE CONDU CTED PROPER ENQUIRY BEFORE REJECTING THE DOCUMENTS. IN SUPPORT OF H IS SUBMISSIONS, THE LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCO ME-TAX VS. ORISSA CORPORATION P. LTD. REPORTED AS 159 ITR 78 (SC) AN D THE DECISION OF TRIBUNAL IN THE CASE OF VISHNU JAISWAL VS. COMMISSIONER OF I NCOME TAX (APPEALS) REPORTED AS 137 ITD 259 (TM) (LUCK.). THE LD. AR FURTHER 5 ITA NO. 435/PN/2013 A.Y. 2009-10 SUBMITTED THAT THE ASSESSEE HAS DISCHARGED HIS ONUS BY GIVING THE DETAILS, THE DEPARTMENT HAS FAILED TO MAKE ENQUIRIES FROM TH E CONCERNED PERSONS. 4. IN RESPECT OF THE SECOND ADDITION ON ACCOUNT OF NOTIO NAL INTEREST ON INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. THE LD . AR SUBMITTED THAT THERE IS NO CONCEPT OF NOTIONAL INTEREST UNDER THE PROVISIONS OF INCOME TAX ACT. THE ASSESSEE HAD GIVEN INTEREST FREE LO ANS FROM ITS OWN NONINTEREST BEARING FUNDS. IN SUPPORT OF HIS SUBMISSIO NS, THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH C OURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. RELIANCE UTILITIES AND POWER LTD. REPORTED AS 313 ITR 340 (BOM). 5. ON THE OTHER HAND SHRI B.C. MALAKAR REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE CO MMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD. DR SUBMITTED THAT IN PROCEEDINGS BEFORE THE ASSESSING OFFICER, THE ASSESSEE DID NOT GIVE DETAILS OF THE PERSONS FR OM WHOM ADVANCES WERE RECEIVED. THE ASSESSING OFFICER HAD NO OT HER OPTION BUT TO MAKE ADDITION ON THE BASIS OF INFORMATION AVAILABLE BEFORE HIM. EVEN BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS NOT FULLY SUBSTANTIATED SOURCE OF ADVANCES. THE COMM ISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS GIVEN CATEGORIC FINDIN GS THAT THE AGREEMENTS PLACED ON RECORD BY THE ASSESSEE ARE ON A PLAIN PAPER, THEY ARE NEITHER REGISTERED NOR NOTARIZED AND THE ADVANCES HAVE BEEN RECEIVED IN CASH. EVEN BEFORE THE TRIBUNAL THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THE SHOPS AGAINST WHICH THE ADVANCE S WERE RECEIVED BY THE ASSESSEE HAVE BEEN ALLOTTED TO THE PERSONS FROM WHOM ADVANCES 6 ITA NO. 435/PN/2013 A.Y. 2009-10 WERE ACCEPTED. THE ASSESSEE HAS NOT BEEN ABLE TO PRO VE THE CREDITWORTHINESS OF THE ALLEGED BUYERS. IT HAS BEEN STA TED THAT THE AMOUNT HAS BEEN PAID BY THE FARMERS FROM THE COMPENSA TION RECEIVED. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RECORDED A FI NDING THAT THE AMOUNT OF COMPENSATION IS MUCH LESS THAN THE AMOUNT OF ADVANCE PAID THE AGREEMENT VALUE. THE ASSESSEE HAS PLACED ON R ECORD ONLY PHOTOCOPY OF THE DOCUMENTS AND THE ORIGINAL DOCUMENTS W ERE NOT PRODUCED BY THE ASSESSEE EITHER BEFORE THE ASSESSING O FFICER OR BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) FOR VERIFICATION. TH E ASSESSEE HAS FAILED TO DISCHARGE ITS INITIAL BURDEN OF PROVING THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENES S OF THE TRANSACTION. IN SO FAR AS CHARGING OF NOTIONAL INTEREST O N LOANS AND ADVANCES BY THE ASSESSEE, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW FROM THE RECORDS THAT THE ASSES SEE WAS HAVING OWN FUNDS FOR ADVANCING SUCH LOANS. THEREFORE, THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-T AX VS. RELIANCE UTILITIES AND POWER LTD. (SUPRA) WILL NOT APPLY IN THE FACTS OF THE PRESENT CASE. THE LD. DR PRAYED FOR DISMISSING THE AP PEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR HAS PLACED RELIANCE. IN APPEAL, THE ASSESSEE HAS IMPUGNED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITIO N OF RS.67,50,000/- U/S. 68 OF THE ACT AND ADDITION OF RS.2,28,345/ - BEING NOTIONAL INTEREST CHARGED ON ADVANCES GIVEN DURING THE C OURSE OF BUSINESS. 7 ITA NO. 435/PN/2013 A.Y. 2009-10 7. WITH REGARD TO THE ADDITION OF RS.67,50,000/- THE LD. AR HAS SUBMITTED THAT THE SAID AMOUNT IS THE ADVANCE/BOOKING A MOUNT RECEIVED FROM VARIOUS PERSONS/FARMERS AGAINST BOOKING OF SHOPS IN THE COMMERCIAL COMPLEX NATH PLAZA. THE ASSESSEE HAS PLACED ON RECORD THE COPY OF AGREEMENTS WITH THE CONCERNED PERSONS/PAR TIES FROM WHOM THE ALLEGED ADVANCES OR BOOKING AMOUNTS WERE RECEIVED. UNDISPUTEDLY, THESE AGREEMENTS WERE NEVER PRODUCED BEFORE THE ASSE SSING OFFICER. THE ASSESSEE HAS PLACED ON RECORD THE SAID DOCUMENTS IN THE FORM OF PAPER BOOK BEFORE US. A PERUSAL OF THE SAME SHOWS THA T THEY ARE IN VERNACULAR LANGUAGE (MARATHI). A CURSORY LOOK OF THE AGREE MENTS SHOWS THAT THE AGREEMENTS ARE ON PLAIN PAPER AND NONE OF THE AGREEMENTS ARE EITHER REGISTERED OR NOTARIZED. EVEN THE DETAILS OF THE P ERSONS WHO HAVE WITNESSED THE ALLEGED AGREEMENTS ARE NOT GIVEN. THE AGR EEMENTS ARE OSTENSIBLY EXECUTED IN THE YEAR 2008, BUT THE SHOPS H AVE NOT BEEN ALLOTTED TO THE SAID PERSONS TILL DECEMBER, 2012 WHEN THE IMPUGNED ORDER WAS BEEN PASSED. THE LD. AR HAS NOT PLACED ON RE CORD A COPY OF SALE AGREEMENT IN RESPECT OF ANY OF THE SHOPS EVEN AFTER SEVEN YEARS OF THE AFORESAID AGREEMENTS TO SUBSTANTIATE THAT THE SHOPS WERE ULTIMATELY REGISTERED IN THE NAME OF THE PERSONS FROM WHOM ADVANCES WERE TA KEN. THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS G IVEN A FINDING THAT THE DETAILS OF THE BROKERS THROUGH WHOM TH E SHOPS WERE SOLD OR AGREED TO BE SOLD WAS NOT FURNISHED. THE ASSESS EE HAS FURTHER FAILED TO PROVIDE ANY EVIDENCE TO PROVE THE SOURCE OF CAS H ADVANCES RECEIVED FROM THE ALLEGED BUYERS. THE AMOUNT OF COMPENS ATION WHICH IS SAID TO BE SOURCE OF FUNDS IS MUCH LESS THAN THE AMOUN T OF ADVANCES RECEIVED OR THE AGREEMENT VALUE OF THE SHOPS. ALL THE TR ANSACTIONS IN RESPECT OF ADVANCES FOR BOOKING SHOPS ARE IN CASH. THE LD. AR HAS NOT CONTROVERTED ANY OF THE ABOVE FINDINGS OF THE COMMISSIONER OF INCOME 8 ITA NO. 435/PN/2013 A.Y. 2009-10 TAX (APPEALS). THE DOCUMENTS PLACED ON RECORD DOES NOT INSPIRE CONFIDENCE TO ACCEPT THE EXPLANATION FURNISHED BY THE ASS ESSEE TO SUBSTANTIATE THE SOURCE OF ADVANCES OF RS.67,50,000/-. W E FIND THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) WELL REASONED AND DETAILED ON THE ISSUE. ACCORDINGLY, THE FIRST GROUND RA ISED IN THE APPEAL BY ASSESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. 8. IN THE SECOND GROUND THE ASSESSEE HAS ASSAILED THE ADDITION OF RS.2,28,345/- BEING NOTIONAL INTEREST ON ADVANCES GIVEN DUR ING THE COURSE OF BUSINESS. QUA THIS ADDITION THE ASSESSEE HAS M ADE TWO FOLD SUBMISSIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) : (I) TO DELETE THE ADDITION IN TOTO AS THERE IS NO CONCEPT OF NO TIONAL INTEREST IN THE PROVISIONS OF INCOME TAX ACT; (II) THE SECOND/ALTERNATE PRAYER WAS WITH REGARD TO RECTIFICATION OF ARITHMETICAL ERRORS ON ACCOU NT OF DETERMINATION OF INTEREST ON DEBIT BALANCES. ACCORDING TO THE ASSESSEE THERE WAS DIFFERENCE OF RS.1,48,785/- IN THE COMPUTATION OF INTEREST BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APP EALS) ACCEPTED THE ALTERNATE SUBMISSIONS AND GRANTED RELIEF TO THE EXTENT OF RS.1,48,785/-. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSES SEE NEVER RAISED ANY PLEA THAT THE ASSESSEE WAS HAVING SUFFI CIENT OWN INTEREST FREE FUNDS FOR ADVANCING INTEREST FREE LOANS. THIS PLEA OF SUFFICIENT FUNDS WAS RAISED BY THE ASSESSEE FOR THE FIRST TIM E BEFORE THE TRIBUNAL. HOWEVER, THE ASSESSEE HAS NOT SUBSTANTIATED ITS PLEA FROM THE RECORDS. IN THE ABSENCE OF ANY SUCH EVIDENCE, THE RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMIS SIONER OF INCOME-TAX VS. RELIANCE UTILITIES AND POWER LTD. (SUPRA) IS M ISPLACED. THE ASSESSEE COULD NEITHER SHOW AVAILABILITY OF SUFFICIENT INTER EST FREE 9 ITA NO. 435/PN/2013 A.Y. 2009-10 FUNDS FOR ADVANCING SUCH LOANS NOR THE ASSESSEE HAS BEE N ABLE TO SHOW THAT LOANS HAVE BEEN GIVEN FOR BUSINESS PURPOSES. THERE FORE, IN VIEW OF THE FACTS OF THE CASE, WE DO NOT FIND ANY MERIT IN THE CO NTENTIONS OF THE LD. AR OF THE ASSESSEE. ACCORDINGLY, SECOND GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS ALSO DISMISSED BEING DEVOID OF ANY MERIT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 06 TH DAY OF JANUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 06 TH JANUARY, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, NASHIK 4. ' / THE CIT-II, NASHIK 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE