Sh. Anil Kumar Gupta, Prop. M/s. RAjdhani Yarn Mills, Jammu V. The Dy. Commissioner of Income-tax, Jammu

ITA 506/ASR/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80618 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 04-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SSH S K BANSAL; TARUN BANSAL S
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (SMC). BEFORE SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.506(ASR)/2014 ASSESSMENT YEAR:2008-09 PAN :ABCPG8949D SH. ANIL KUMAR GUPTA, VS. DY.COMMR. OF INCOME TAX , PROP. M/S. RAJDHANI YARN MILLS, CIRCLE-2, SANT MARKET, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:S/SH.S.K.BANSAL & TARUN BANSAL, ADVOCA TES RESPONDENT BY: SH.TARSEM LAL, DR DATE OF HEARING:17/09/2014 DATE OF PRONOUNCEMENT:13/10/2014 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 26.05.2014 FOR THE ASSESSMENT YEAR 200 8-09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER UNDER APPEAL IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED IN LA W IN CONFIRMING THE ADDITION OF RS.1,56,000/- ON ACCOUNT OF INTERES T ON THE ALLEGED GROUND THAT INTEREST FREE LOANS HAVE BEEN A DVANCED FROM BANK LOAN WHEN IN FACT LOANS ADVANCED ARE NOT OF AN Y AMOUNT TAKEN ON LOAN FROM THE BANK. 3. THAT EVEN ASSUMING BUT NOT ADMITTING, THAT ON AC COUNT OF ADVANCEMENT OF INTEREST FREE LOANS INTEREST OF RS.1 ,56,000/- IS NOT ALLOWABLE EVEN THEN THE DISALLOWANCE OF INTERES T SHALL ONLY RESULT IN REDUCING THE INTEREST DEBITED TO PROFIT & LOSS ACCOUNT AND NO TAX CAN BE IMPOSED ON SUCH DISALLOWED INTERE ST. THE LD. ITA NO.506(ASR)/2014 2 CIT(A) THEREFORE, HAS NOT BEEN JUSTIFIED IN CONFIR MING THE ACTION OF THE AO IN CHARGING TAX ON THE AMOUNT OF R S.1,56,000/- 4. THAT WITHOUT PREJUDICE TO GROUND NO.2 IT IS ALSO SUBMITTED THAT THE LD. CIT(A) IN ANY CASE AFTER HOLDING INTEREST OF RS.1,56,000/- IS DISALLOWABLE HAS ERRED IN LAW IN N OT ACCEPTING THAT DEDUCTION U/S 80(I)(B) ON THE INTEREST OF RS.1 56000/- DISALLOWED IS AVAILABLE IN VIEW OF ORDER OF THE HON BLE ITAT IN SUN PHARMA CASE. 5. ANY OTHER GROUND WHICH MAY BE URGED AND ALLOWED AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM TH E ORDER OF THE AO ARE REPRODUCED AS UNDER: 4.1. INTEREST FREE ADVANCES GIVEN TO SISTER CONCER NS: THE ASSESSEE IN HIS CONCERN M/S. RAJDHANI YARN MILLS, IGC, SAMBA, H AS GIVEN INTEREST FREE LOAN TO HIS SISTER CONCERN M/S. RAJDHANI INDUS TRIES, AMOUNTING TO RS.13,00,000/- DURING THE YEAR UNDER CONSIDERATION. ON THE OTHER SIDE, THE ASSESSEE HAS DEBITED BANK INTEREST OF RS.6,95,3 09/- & OTHER INTEREST OF RS.4,632/- IN THE P & L ACCOUNT. SINCE THE ASSES SEE HAS NOT CHARGED ANY INTEREST ON THE LOANS GIVEN BY HIM TO HIS SISTE R CONCERN, THE ASSESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 07. 12.2010 TO EXPLAIN WHY INTEREST @ 12% P.A. ON THE LOAN GIVEN TO M/S. R AJDHANI INDUSTRIES MAY NOT BE CHARGED AND TREATED AS INCOME . THE A/R OF THE ASSESSEE FILED THE REPLY STATING THAT REGARDING THE LOAN ADVANCED TO M/S. RAJDHANI INDUST RIES, IT IS SUBMITTED THAT IT HAS BEEN PAID OUT OF EXCESS CASH AVAILABLE WITH THE ASSESSEE AND NOT FORM ANY LOAN TAKEN FROM BANKS. 4.2. THE SUBMISSION OF THE ASSESSEE ALONGWITH THE FACTS OF THE CASE ON THIS ISSUE HAS BEEN CONSIDERED AND THE SAME IS NOT ACCEPTED AS THE ASSESSEE ONE SIDE GIVING INTEREST FREE LOANS TO HIS SISTER CONCERN AND ON THE OTHER HAND IS PAYING HEAVY INTEREST TO BANK & O THERS. AS THE ASSESSEE IS PAYING INTEREST ON LOANS TAKEN BY HIM A ND IN VIEW OF THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. ABHISHEK INDUSTRIES LTD; REPORTED IN 286 ITR 1. INT EREST OF RS.1,56,000/- BEING 12% OF RS.13,00,000/- IS CHARG ED AND ADDED TO THE INCOME OF THE ASSESSEE. SINCE THE INTEREST INCO ME OF RS.1,56,000/- HAS NOT BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKIN G, THEREFORE, DEDUCTION U/S 80IB IS NOT ALLOWABLE ON INTEREST INC OME OF ITA NO.506(ASR)/2014 3 RS.1,56,000/-. PENALTY PROCEEDINGS U/S 271(1)(C) AR E INITIATED SEPARATELY FOR CONCEALING THE TRUE PARTICULARS OF I NCOME AS I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED THE TRUE PARTICULARS OF HIS INCOME. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE MR. S.K. BANSAL , ADVOCATE INVITED OUR ATTENTION AT PAGES 3 & 4 OF LD. CIT(A)S ORDER FROM WHERE IT IS CLEAR THAT THE AMOUNT HAS BEEN ADVANCED BY THE ASSESSEE FROM THE SELF CASH AND HENCE ADDITION OF INTEREST ON ADDITION OF ADVANCE OF RS. 10,00,000/- IS NOT JUSTIFIED. THE POSITION OF BANK BALANCE AS ON 4.1.2008 AND ON 5.1.2008, AS REPRODUCED BY THE LD. CIT(A) IN HIS ORDER AT PAGE 3 IS REPRODU CED HEREUNDER: S.NO. DATE NATURE OF TRANSACTION AMOUNT CASH BALANCE IN BANK 1 04.01.2008 OPENING CREDIT BALANCE IN BANK RS.1072310/- AMOUNT GIVEN TO M/S. KAYTEX FABRICS PVT. LTD. AMRITSAR. 150000.00 922310.00 2 05.01.2008 OPENING CASH =922310.00 ADD CASH DEPOSITED=100000.00 TOTAL= 1022310.00 AMOUNT GIVEN TO M/S. RAJDHANI INDUSTRIES 1000000.00 77690.00 THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT NO INT EREST HAS BEEN DISALLOWED ON 04.01.2008 & 05.01.2008. HE RELIED UPON THE DECI SION OF THE HONBLE ITA NO.506(ASR)/2014 4 SUPREME COURT, IN THE CASE OF S.A. BUILDERS REPORT ED IN 288 ITR 1 VS. CIT AND THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CA SE OF M/S. SUN PHARMA. 5. THE LD. DR, ON THE OTHER HAND, ARGUED THAT THE A SSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE BUSINESS PURPOSE IN THE PRES ENT CASE AND ALSO THE ASSESSEE HAS NOT ACCEPTED FULL STATEMENT OF THE BA NK ACCOUNT AND ONLY BANK ACCOUNT AS ON 0.01.2008 AND 05.01.2008 HAS BEEN SUB MITTED FROM WHICH THE CLAIM OF THE APPELLANT CANNOT BE ALLOWED. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE FACTS OF THE CASE. THE FACTS IN THE PRESENT CASE ARE THAT THE ASSESSEE OUT OF HIS CONCERN M/S. RAJDHANI YARN MILLS HAS GIVEN INTEREST FREE LOAN TO SISTER CONCERN M/S. RAJDHANI INDUSTRIES AMOUNTING TO RS.13,00,000/- AND HAVE DEBITED BANK INTEREST OF RS.6,95,309/- APART FROM OTHER INTEREST OF RS. 4,632/-. THE EXPLANATION OF THE ASSESSEE IS THAT THE LOAN HAS BE EN PAID OUT OF EXCESS CASH AVAILABLE WITH THE ASSESSEE AND NOT FROM ANY LOAN T AKEN FROM THE BANK. FROM THE SAID EXPLANATION OF THE ASSESSEE, IT IS OB VIOUS THAT THE ASSESSEE HAS SUBMITTED BANK BALANCE STATEMENT, WHICH IS PART OF LD. CIT(A)S ORDER AT PAGE -3 FOR TWO DAYS I.E. 04.01.2008 & 05.01.2008. THERE IS NOTHING ON RECORD TO PROVE THAT EXCESS CASH IS AVAILABLE ON TH E SAID DATES AND THE LOAN HAS BEEN GIVEN TO M/S. RAJDHANI INDUSTRIES. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE MATTER REQUIRES FRESH ADJUDICATION AN D ACCORDINGLY, IN THE INTEREST OF NATURAL JUSTICE, THE MATTER IS SET ASID E TO THE FILE OF THE AO, WHO ITA NO.506(ASR)/2014 5 WILL EXAMINE THE CASH BOOK, BANK STATEMENT AND BOOK S OF ACCOUNT OF THE ASSESSEE AND IF EXCESS AMOUNT IS AVAILABLE WITH TH E ASSESSEE AS SELF CASH THEN THE BUSINESS EXPEDIENCY HAS TO BE EXAMINED AND ACCORDINGLY THE AO IS DIRECTED TO DECIDE THE ISSUE DENOVO BUT AFTER AFFOR DING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO IS FURTHER D IRECTED TO CONSIDER THE DECISIONS OF VARIOUS COURTS OF LAW RELIED UPON BY T HE ASSESSEE, ESPECIALLY THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF M /S. SUN PHARMA, WHICH SHALL BE PROVIDED BY THE ASSESSEE IN THE COURSE OF HEARING BEFORE THE AO. THE ASSESSEE IS DIRECTED TO CO-OPERATE IN THE ASSES SMENT PROCEEDINGS AND ACCORDINGLY THE AO WILL DECIDE THE ISSUE DENOVO, AS DIRECTED HEREINABOVE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 506(ASR)/2014 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH OCTOBER, 2014. SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 13TH OCTOBER, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. ANIL KUMAR GUPTA, JAMMU. 2. THE DCIT, CIR.2, JAMMU 3. THE CIT(A), JAMMU 3. THE CIT, JAMMU. 4. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL