M/s. Lall Construction Co., New Delhi V. Addl. CIT, New Delhi

ITA 4709/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4039 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GULSHAN GABA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI R .K. PANDA , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 4 709 /DEL/201 5 A.Y. 20 0 8 - 09 LALL CONSTRUCTION CO. AA - 105 SHALIMAR BAGH NEW DELHI 110 088 PAN: AACFL0648M VS . A CIT, CIRCLE 19 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. GULSHAN GABA , CA RESPONDENT BY SHRI AMIT JAIN, S R.D.R. DATE OF HEARING 0 9 .01.2018 DATE OF PRONOUNCEMENT 15.01.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER P RESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 18/03/15 PASSED BY LD.CIT(A) - 12, CIVIC CENTRE, NEW DELHI FOR ASSESSMENT YEAR 2008 - 09 ON THE FOLLOWING GROUNDS OF APPEAL: L. THE LD. CIT(APPEALS) HAS, IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 BY THE LD. AO. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN UPHOLDING THE ORDER PASSED UNDER SECTION ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 2 OF 7 143(3) OF THE INCOME TAX ACT, 1961 FOR DISALLOWING A SUM OF RS. 3,59,934/ - ON ACCOUNT OF INTEREST ON LOANS PAID BY THE ASSESSEE. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN DISALLOWING INTEREST ON LOAN OF RS. 3,59,934/ - ON THE GROUND THAT INTEREST FREE ADVANCE HAVE BEEN GIVEN TO SISTER CONCERN WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARD. 4. THAT THE EXPLANATIONS FILED AND THE MATERIALS AVAILABLE ON RECORDS HAVE NOT BEEN PROPERLY CONSIDERED AND LEGALLY INTERPRETED. THE ADDITION MADE CANNOT BE JUSTIFIED WITH THE MATERIAL ON RECORD. SUCH ACTION OF ASSESSING AUTHORITY IS IN VIOLATION OF RULES OF NATURAL JUSTICE. 5. THAT THE APPELLANT CRAVES YOUR HON OR'S LEAVE TO ADD, ALTER, MODIFY, CHANGE, SUBSTITUTE, WITHDRAW ANY OF THE GROUNDS OF APPEAL AT ANY STAGE OF APPELLANT PROCEEDINGS. 2. BRIEF FACTS OF THE CASE ARE AS UNDER . A SSESSEE FILED ITS RETURN OF INCOME ON 30/09/08 DECLARING TOTAL INCOME AT RS.59,9 3,440/ - . THE RETURN FILED BY ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) AND THE CASE WAS SELECTED FOR SCRUTINY. NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT W ERE ISSUED ALONG WITH QUESTIONNAIRE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVES OF ASSESSEE APPEARED BEFORE ASSESSING OFFICER AND FILED REQUISITE DETAILS AS CALLED FOR , WHICH WERE EXAMINED . BOOKS OF ACCOUNT PRODUCED WERE CHECKED ON TEST CHECK BASI S AND THE CASE WAS DISCUSSED. 2.1. DURING THE ASSESSMENT PROCEEDINGS LD.AO OBSERVED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF GOVERNMENT CONTRACTS, RAILWAY WORK AND OTHER CONSTRUCTION WORK. LD.AO PASS ED ASSESSMENT ORDER MAKING ADDITION I N THE HANDS OF THE ASSESSEE IN RESPECT OF THE FOLLOWING ITEMS: ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 3 OF 7 1 . DISALLOWANCE OUT OF INTEREST - RS. 3,59,934/ - PAID TO RELATIVES 2 . DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES RS. 27 , 3 72/ - 3 . DISALLOWANCE OUT OF HUTMENT EXPENSES RS. 69,587/ - . 2.2. ASSESSEE HOWEVER WHI LE FILING APPEAL AGAINST THE ASSESSMENT ORDER BEFORE LD.CIT(A) RAISED GROUND ON DISALLOWANCE IN RESPECT OF INTEREST EXPENSES ON UNSECURED LOANS TAKEN FROM DIFFERENT PARTIES , AS IT WAS MORE THAN THE PRESCRIBED LIMIT OF 12% PER ANNUM. LD. CIT (A) CONFIRM ED THE ADDITION MADE BY LD.AO. 2.3. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 3. LD.AR SUBMITTED THAT ASSESSEE HAD TAKEN UNSECURED LOANS AMOUNTING TO RS.100, 60,236/ - FROM RELATIVES AND FRIENDS WHICH WERE OUTSTANDING AS ON 31/ 03/08. IT WAS SUBMITTED THAT DURING THE YEAR ASSESSEE HAD PAID INTEREST OF RS. 14,12,015/ - ON THOSE UNSECURED LOANS AT THE RATE OF INTEREST RANGING FROM 15% TO 18%, AND LD. AO HAS DISALLOWED THE INTEREST OF RS. 3,59, 93 4/ - OUT OF THE TOTAL INTEREST PAID OF RS .14,12,0 15 / - ON THE GROUND THAT THE RATE OF INTEREST PAID TO DIFFERENT PARTIES IS MORE THAN THE PRESCRIBED LIMIT OF 12% PER ANNUM. 3.1 . LD. AR SUBMITTED THAT A DETAILED CHART REGARDING THE INTEREST PAID TO DIFFERENT PARTIES HAS BEEN REPRODUCED IN THE ORDER PASSED BY LD.CIT(A) , V IDE ASSESSEE S SUBMISSIONS BEFORE THE 1 ST APPELLATE AUTHORITIES. LD.A.R. SUBMITTED THAT ASSESSEE HAS ALSO TAKEN LOAN F ROM BANK FOR WHICH IT IS PAYING INTEREST AT THE RATE OF 12.25% WHICH WERE SUBSEQUENTLY INCREASED TO 13.75% IN THE SUBSEQUENT ASSESSMENT YEARS. HE SUBMITTED THAT AGAINST LOAN TAKEN FROM ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 4 OF 7 FRIENDS AND RELATIVES ASSESSEE HAS NOT PROVIDED ANY SECURITY BY WAY OF EQUITABLE MORTGAGE OF ANY MOVABLE PROPERTY OR PERSONAL GUARANTEES OR PLEDGE WHICH COVER AT LEAST TWICE THE AMOUNT OF LOAN , WHEREAS LOAN S TAKEN FROM BANKS HAS TO BE SUFFICIENTLY SECURED BY WAY OF ANY MORTGAGE OF PROPERTIES. H E SUBMITTED THAT BANKS ON AN Y DEFAULT OF PAYMENT WOULD LEVY INTEREST OF 2% WHEREAS THERE IS NO SUCH CONDITION ON ANY LOAN TAKEN FROM FRIENDS AND RELATIVES. LD.A.R. TRIED TO JUSTIFY THE ADDITIONAL INTEREST PAID TO FRIENDS AND RELATIVES , AS IT HAS BEEN OBTAINED WITHOUT THERE BEING AN Y COLLATERAL SECURITIES. LD.A.R. ALSO SUBMITTED THAT IN THE SUBSEQUENT ASSESSMENT YEARS THERE HAS BEEN NO DISALLOWANCE IN RESPECT OF INTEREST PAID ON UNSECURED LOANS TAKEN FROM FRIENDS AND RELATIVES. HE HAS SUBMITTED BEFORE US ASSESSMENT ORDER IS PASSED FOR ASSESSMENT YEARS 2009 - 10 AND 11 - 12 , WHICH CONTAINS ANNEXURE OF PARTIES FROM WHOM LOANS HAVE BEEN OBTAINED. HE THUS SUBMITTED THAT THE DISALLOWANCE OF RS.3,59,934/ - MAY BE DELETED. 3.2 . LD. DR ON THE CONTRARY P LACED RELIANCE UPON THE ORDERS PASSED BY AUTHORITIES BELOW. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4.1 . ON PERUSAL OF THE ASSESSMENT ORDER PASSED FOR THE SUBSEQUENT ASSESSMENT YEARS ADMITTEDLY THERE IS NO ADDITION IN RESPECT OF DISALLOWANCE OF INTEREST ON UNSECURED LOANS. IT IS ALSO OBSERVED THAT THE PARTIES FROM WHOM THE LOANS HAVE BEEN TAKEN IN THE SUBSEQUENT ASSESSMENT YEARS ARE SAME VIS - A - VIS T HE YEAR UNDER CONSIDERATION. IT IS ALSO OBSERVED THAT LD. AO PARTLY ACCEPTED THE INTEREST PAID TO ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 5 OF 7 SOME OF THE FRIENDS AND RELATIVES AGAINST THE LOAN TAKEN. HE HAS ALSO NOT PROVIDED ANY REASON AND THE BASIS OF DISALLOWANCE OF RS. 3,5 9,934 / - MADE AGAINST THE PARTIES PROPORTIONATELY. WE AGREE WITH THE ARGUMENTS ADVANCED BY LD.A.R. THAT LOANS OBTAINED FROM FRIENDS AND RELATIVES DO NOT CONTAIN ANY COLLATERAL SECURITY AND THEREFORE GENERALLY A HIGH RATE OF INTEREST IS LEVIED ON SUCH LOANS WHEREAS ANY LOAN FROM B ANKS NEEDS TO BE SUBSTANTIATED WITH COLLATERAL SECURITIES. FURTHER THE BANK INTEREST IN THE SUBSEQUENT YEAR ON THE LOANS TAKEN BY ASSESSEE HAS SUBSTANTIALLY INCREASED TO 13.5%. 4.2 . CONSIDERING THE OVERALL FACTS IN THE PRESENT CASE WE DELETE THE DISALLOWAN CE MADE BY LD. AO. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED. 5. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PASSED IN THE O PEN C OURT ON 1 5 T H J ANUARY, 2018. S D / - S D / - ( R .K. PANDA ) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 5 T H JANUARY, 2018 *MV ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 6 OF 7 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI ITA 4709/DEL/2015 AY:2008 - 09 LALL CONSTRUCTION CO., NEW DELHI VS. ACIT PAGE 7 OF 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 10 .01.18 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11 .01.18 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER