ITO, New Delhi V. Ashok Kamal, Rewari

ITA 5262/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77725 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI GUPTA
• Assessee Lawyers: Y KAKKAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A: NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 5262/DEL/2011 (ASSESSMENT YEAR: 2008-09) ITO, WARD 1, VS. ASHOK KAMAL REWARI PROP. M/S. BHARAT TRADING CO. DEL HI ROAD, REW ARI 123 401. (PA N ACUPK1538M) (APPELLANT) (RESPONDENT) ASSESSEE BY :MISS. Y. KAKKAR, DR REVENUE BY :SHRI RAVI GUPTA, CA ORDER PER I. C. SUDHIR, JUDICIAL MEMBER: THE REVENUE HAS QUESTIONED ACTION OF TH E LD. CIT(A) ON THE FOLLOWING GROUNDS :- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT IN DELETING THE ADDITION OF RS. 12,00,000/ - MADE ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT IN GIVING RELIEF OF RS. 79,391/- OUT OF AD DITION OF RS. 88,634/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 3 6(1)(III). 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT IN GIVING RELIEF OF RS. 61,563/- OUT OF A DDITION OF RS. 92,168/- MADE ON ACCOUNT OF DISALLOWANCE OF 1/5 TH OF TELEPHONE ITA NO.5262/DEL/2011 2 EXPENSES AND VEHICLE EXPENSES/DEPRECIATION FOR PER SONAL USE AND 1/5 TH OF SHOP EXPENSES BEING PARTLY VOUCHED OR NOR FULL Y VERIFIABLE. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL MADE AVAILABLE ON RECORD. 3. GROUND NO. 1 THE ASSESSEE ENGAGED IN TH E BUSINESS OF TRADING OF TRACTORS AND SPARE PARTS, HAD RETURNED TOTAL INCOME OF RS.. 3,41,470/-. THE AO OBSERVED THAT THE ASSESSEE HAD SHOWN INTEREST FR EE UNSECURED LOAN OF RS. 12 LACS FROM HIS DAUGHTER MS. SHEETU KAMAL. THE AO DID NOT CONCUR WITH THE EXPLANATION OF THE ASSESEE, IN ABSENCE OF PRODUCING THE ACCOUNT COPY AND BANK STATEMENT OF THE CREDITOR BEFORE HIM AND MADE ADDITION OF THE AMOUNT OF RS. 12 LACS. THE LD. CIT(A) HAS DELET ED THE ADDITION WHICH HAS BEEN QUESTIONED BY THE REVENUE BEFORE THE TRIBU NAL. 4. LD. DR HAS PLACED RELIANCE ON THE ASSTT. OR DER. SHE SUBMITTED THAT THE ASSESEE HAS THOROUGHLY FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE GENUINENESS OF THE CLAIMED UNSECURED LOAN OF RS. 12 LACS FROM HIS DAUGHTER IN ABSENCE OF PRODUCING HER BEFORE THE AO FOR VERIF ICATION OF THE CLAIM. SHE POINTED OUT FURTHER THAT COPY OF CONFIRMATION OF TH E CREDITOR MS. KAMAL SHEETU MADE AVAILABLE AT PAGE NO. 15 OF THE PAPER B OOK UNDER THE CERTIFICATE THAT IT WAS FURNISHED BEFORE THE AO IS DATED 29.6.2011 WHEREAS THE ASSESSMENT ORDER HAS BEEN PASSED ON 16.12.2010. THE ASSESSEE HAS ITA NO.5262/DEL/2011 3 THUS GIVEN A WRONG CERTIFICATE. SHE ALSO PLACED REL IANCE ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF GUDUTHUR BROT HERS. V. INCOME TAX OFFICER, SPECIAL CIRCLE, BANGALORE. 40 ITR 298 (SC) SHE SUBMITTED FURTHER THAT EVEN CASH FLOW STATEMENT WERE NOT FILED BEFORE THE AUTHORITIES BELOW TO SHOW THE HOUSE HOLD EXPENSES TO ESTABLISH THE CREDI TWORTHINESS OF THE CREDITOR. IN THIS REGARD, SHE PLACED RELIANCE ON TH E FOLLOWING DECISIONS :- 1. 356 ITR 117 2. COMMISSIONER OF INCOME TAX. V. UNITED COMME RCIAL AND INDUSTRIAL CO. PVT. LIMITED. 187 ITR 596 3. SUMATI DAYAL. V. COMMISSIONER OF INCOME T AX. 214 ITR 801 5. THE LD. AR ON THE OTHER HAND TRIED TO JUST IFY THE FIRST APPELLATE ORDER WITH THIS SUBMISSION THAT THE ASSESEE HAD FURNISHED ALL THE NECESSARY EVIDENCE IN SUPPORT TO ESTABLISH THE GENUINENESS OF THE CLAIMED UNSECURED LOAN. 6. CONSIDERING THE ABOVE SUBMISSIONS WE FIND TH AT TO ESTABLISH THE GENUINENESS OF THE CLAIMED INTEREST FREE UNSECURED LOAN OF RS. 12,000/- FROM HIS DAUGHTER MS. SHEETU KAMAL, THE ASSESSEE H AD FURNISHED PHOTOCOPY OF PASSPORT OF MS. SHEETU KAMAL AN NRI, BANK ACCOUNT WITH THE STATEMENT THAT SHRI ANKUR KAPOOR HER HUSBAND WAS W ORKING AS GENERAL MANAGER IN STANDARD CHARTERED BANK AT DUBAI AND HAD TRANSFERRED RS. 1180350/- FROM HIS SALARY ACCOUNT TO THE CITY BANK NRI ACCOUNT OF HIS WIFE ITA NO.5262/DEL/2011 4 SMT. SHEETU KAMAL ON 23.1.2008. THEREAFTER SMT. SH EETU KAMAL HAD GIVEN A LOAN OF RS. 12 LACS TO HER FATHER , THE ASSESSEE, VIDE CHEQUE DATED 5.2.2008. THIS LOAN HAS BEEN REPAID BY THE ASSESSEE ON 31.10.2008. IT HAS BEEN ALSO MENTIONED IN THE FIRST APPELLATE ORDER T HAT AO HAD ASKED THE ASSESSEE TO PRODUCE SMT. SHEETU KAMAL FOR EXAMIN ATION ON 13.12.2010 VIDE NOTICE DATED 3.12.2010. SHE COULD NOT PRESEN T ON 13.12.2010 DUE TO HER PREOCCUPATION WHICH WAS INFORMED TO THE AO. THE AO THEREAFTER NEVER GAVE ANOTHER OPPORTUNITY TO PRODUCE HER AND PASS TH E ASSESSMENT ORDER WITHIN THREE DAYS I.E. 16.12.2010. COPY OF ACCOUNT STATEMENT OF SMT. SHEETU KAMAL WAS ALSO FURNISHED BEFORE THE AO. CONS IDERING THESE MATERIAL ASPECTS OF THE FACTS, WE ARE OF THE VIEW THAT LD. C IT(A) HAS RIGHTLY ACCEPTED THE CLAIMED INTEREST FREE UNSECURED LOAN OF RS. 12 LAC BY THE ASSESSEE FROM HER DAUGHTER SMT. SHEETU KAMAL KEEPING IN VIEW THAT HER HUSBAND WHO IS WORKING AS GENERAL MANAGER IN DUBAI WHO HAD TRANSFE RRED RS. 11,80,350/- TO HER FROM HIS SALARY ACCOUNT TO THE SAID BANK NRI ACCOUNT OF HIS WIFE SMT. SHEETU KAMAL. WE THUS DO NOT FIND REASON TO INTER FERE WITH THE FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD. GROUND NO. 1 IS ACCORDINGLY REJECTED. GROUND NO. 2 7. IN THIS GROUND THE RELIEF OF RS. 79,391/- G IVEN BY THE LD. CIT(A) OUT OF THE ADDITION OF RS. 88,634/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT HAS BEEN QUESTIONED BY TH E REVENUE. THE RELATED ITA NO.5262/DEL/2011 5 FACTS ARE THAT THE AO NOTED THAT INTEREST FREE ADVA NCES OF RS. 84,021/- AND RS. 2,69,375/- RESPECTIVELY WERE GIVEN TO SHRI MAYA NK KAMAL, SON AND SHRI RAJNEESH KHANNA, WHEREAS INTEREST OF RS. 7,26,577/ - WAS DEBITED ON THE LOANS TAKEN BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE BALANCE OF SHRI RAJNEESH KHANNA WAS VERY OLD AND HAD EXPIRE D ALSO. THE AO DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE AND HELD THAT THE LOANS GIVEN TO THE ABOVE PERSONS WERE NOT FOR BUSINESS PURPOSE AND DISALLOWED INTEREST @15% PER ANNUM ON THE BALANCES OF SHRI MAYANK KAMAL AND SHRI RAJNEESH KHANNA AMOUNTING TO RS. 48,228/- AND RS. 40,406/- R ESPECTIVELY U/S 36(1)(III) OF THE ACT. 8. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT SHIR RAJNEESH KHANNA HAS SINCE EXPIRED THEREFORE THE RECOVERY OF EVEN PRINCI PAL AMOUNT IS NOT POSSIBLE AND IT HAS BECOME BAD DEBT AND THEREFORE Q UESTION OF CHARGING INTEREST DOES NOT ARISE. IT WAS SUBMITTED THAT ASSE SSEE HAD INTEREST FREE UNSECURED LOAN OF RS. 48,50,000/- FROM THE RELATIVE S AND THEREFORE DISALLOWANCE OF INTEREST ON THE SMALL AMOUNT GIVEN TO THE SON OF THE ASSESSEE IS NOT JUSTIFIED. IT WAS SUBMITTED THAT IN ANY CASE APPLICATION OF INTEREST AT THE RATE OF 15% IS VERY HIGH, WHEN THE BANK RATE IS 11% ONLY. IT WAS SUBMITTED FURTHER THAT THERE IS CALCULATION MIS TAKE OF DISALLOWANCE OF INTEREST IN THE CASE OF SHRI MAYANK KAMAL AS INTERE ST @15% ON RS. 84,021/- COMES TO RS. 12,603/- AND NOT RS. 48,228/- AS MADE IN THE ASSESSMENT ITA NO.5262/DEL/2011 6 ORDER. THE LD. CIT(A) ACCEPTED THE SUBMISSION OF TH E ASSESSEE REGARDING SHRI RAJNEESH KHANNA ON THE BASIS THAT WHEN HE IS N O MORE THERE FORE THE RECOVERY OF PRINCIPAL ITSELF IS IN DOUBT. WHEN THE DEBT ITSELF HAS BECOME BAD, THE QUESTION OF CHARGING INTEREST DOES NOT ARISE. H E ACCORDINGLY DELETED THE INTEREST CHARGED ON THIS ACCOUNT. REGARDING INTERE ST FREE LOAN GIVEN TO SHRI MAYANK KAMAL SON OF THE ASSESSEE, LD. CIT(A) DID NO T AGREE WITH THE SUBMISSION OF THE ASSESSEE IN ABSENCE OF THE EVIDEN CE THAT THE LOAN WAS GIVEN FOR BUSINESS PURPOSE. HE DID NOT CONCUR WITH THE ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE WAS HAVING INTEREST FREE FUND. HE HOWEVER DIRECTED THE AO TO CALCULATE THE INTEREST @ 11% (B ANK RATE + INTEREST FREE LOAN GIVEN TO SHRI MAYANK KAMAL) AND HAS THUS GIVEN PART RELIEF TO THE ASSESSEE. 9. IN SUPPORT OF THE GROUND THE LD. DR SUBMITT ED THAT THE LD. CIT(A) WHILE DELETING THE ADDITION OF RS. 40,406/-, THE IN TEREST FREE LOAN GIVEN TO SHRI RAJNEESH KHANNA, HAS FAILED TO APPRECIATE THAT IT WAS NOT FOR THE BUSINESS PURPOSE HENCE THE LOAN AMOUNT DUE TO DEMIS E OF SHRI KHANNA IN THE MEANWHILE CANNOT BE ALLOWED THE SAME AS BAD DEB T. IN THIS REGARD THE LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS 1. A MURALI AND CO. P. LTD. VS ACIT (2013) 357 IT R 580 (MADRAS) 2. GAUTAM CABLE INDUSTRIES VS. DCIT (2010) 321 IT R 440 (DELHI) 3. PUNJAB STANLESS STEEL INDS. VS. CIT (2010) 32 4 ITR 396 (DELHI) ITA NO.5262/DEL/2011 7 10. LD. AR ON THE OTHER HAND SUBMITTED THAT T HERE WAS SUFFICIENT INTEREST FREE UNSECURED LOAN OF RS. 48 ,50,000/- AV AILABLE WITH THE ASSESSEE DURING THE PERIOD. HENCE SMALL AMOUNT GIVEN TO THE ABOVE PERSONS SHOULD NOT HAVE BEEN DISALLOWED ESPECIALLY WHEN THE AO HAD FAILED TO ESTABLISH NEXUS BETWEEN BORROWED AMOUNT ON WHICH THE ASSESSEE HAD PAID INTEREST AND INTEREST FREE AMOUNT GIVEN AS A LOAN TO THE ABO VE PERSON. 11. CONSIDERING THE ABOVE SUBMISSION AS WELL AS HAVING GONE THROUGH THE DECISIONS RELIED UPON WE FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT WHEN SUFFICIENT INTERESTFREE UNSECURED LOAN AMOUNTING TO RS. 40,50,000/- WAS AVAILABLE WITH THE ASSESSEE DURING THE PERIOD, DISALLOWANCE IN QUESTION ON GIVING INTEREST FREE L OAN TO THE ABOVE SAID PERSONS CANNOT BE MADE IN ABSENCE OF ESTABLISHMENT OF NEXUS BETWEEN THE BORROWED AMOUNT TAKEN ON INTEREST BY THE ASSESS EE AND THE INTEREST FREE LOAN GIVEN BY THE ASSESSEE TO THE ABOVE SAID T WO PERSONS. WE THUS DO NOT FIND ANY GRIEVANCE TO THE REVENUE AGAINST TH E ACTION TAKEN BY THE LD. CIT(A) IN DELETING THE LOAN AMOUNT ADVANCED TO SHRI RAJNEESH KHANNA . THE SAME IS UPHELD. WE ARE RESTRICTING OU R DECISION TO THE EXTENT OF RELIEF GIVEN BY THE LD. CIT(A) ONLY BECA USE THE ASSESSEE HAS NOT QUESTIONED THE DISALLOWANCE UPHELD BY THE LD. C IT(A) ON THE INTEREST FREE LOAN GIVEN TO SHRI MAYANK KAMAL. GROU ND NO. 2 IS ACCORDINGLY REJECTED. ITA NO.5262/DEL/2011 8 GROUND NO. 3 12. THE AO MADE DISALLOWANCE OF 1/5 TH TELEPHONE EXPENSES OF RS. 81,377/- , SHOP EXPENSES OF RS. 31,280/-. HE ALSO D ISALLOWED 1/5 TH OF THE DEPRECIATION AND THE EXPENSES CLAIMED ON VEHICLES. ALL THESE DISALLOWANCES HAVE BEEN MADE BY THE AO ON ACCOUNT O F PERSONAL USER OF THE TELEPHONE, SHOP, VEHICLE AND DEPRECIATION ON TH E VEHICLE. LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE ON VEHICLE ON ACC OUNT OF DEPRECIATION ON VEHICLE IN FULL. HE HAS ALSO DELETE D THE DISALLOWANCE MADE OUT OF SHOP EXPENSES ON THE BASIS THAT THE AO HAS NOT MADE ANY CASE ON THIS ISSUE. HE HAS HOWEVER RESTRICTED THE D ISALLOWANCE OF EXPENSES ON TELEPHONE, PETROL AND DIESEL EXPENSES O F VEHICLE AS WELL AS ON MAINTENANCE BY MAKING DISALLOWANCE @ 10% OF THE CLAIMED EXPENSES INSTEAD OF 20% MADE BY THE AO. LD. AR SUBM ITTED THAT IN SUBSEQUENT YEAR THE REVENUE HAS NOT QUESTIONED SAME RELIEF GIVEN BY THE LD. CIT(A) . HE SUBMITTED FURTHER THAT THE AO H AD EXAMINED THE BOOKS OF ACCOUNT AND NO SPECIFIC DEFECT WAS FOUND T HEREIN. 13. SINCE THE LD. DR HAS NOT BEEN ABLE TO IM PROVE THE CASE OF THE DEPARTMENT ON THE ISSUE AND THE SOLE CONTENTION OF THE LD. DR REMAINED THAT THE EXPENSES CLAIMED BY THE ASSESEE WERE NON- VERIFIABLE. SINCE THE REVENUE COULD NOT IMPROVE ITS CASE BEFORE THE TRIBU NAL, WE DO NOT FIND ITA NO.5262/DEL/2011 9 REASON TO INTERFERE IN THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPHELD. GROUND NO. 3 IS ACCORDINGLY REJECTED. IN THE RESULT APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16 TH MAY, 2014. SD/- SD/- (T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER J UDICIAL MEMBER DATE 16 TH MAY, 2014 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT