M/s. Kapsons Electrostampings, Jalandhar V. The Dy. Commissioner of Income-tax, Jaandhar city

ITA 548/ASR/2011

• Counselvise Citation: 54820914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K VATTA
• Keywords: Rule of consistency; Agreed addition; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.548(ASR)/2011 ASSESSMENT YEAR:2006-07 PAN :AACFK7756K M/S. KAPSON ELECTRO STAMPINGS, VS. THE DY. COMMR. OF INCOME TAX, SURANAUSSI, JALANDHAR. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. S.K.VATTA, CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING: 17/12/2012 DATE OF PRONOUNCEMENT:19/12/2012 ORDER PER BENCH ; THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER OF CIT(A), JALANDHAR, DATED 20.09.2011 FOR THE ASSE SSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN V IEW NO INTEREST BEARING DEPOSITS HAVE BEEN ACCEPTED/TAKEN BY THE A SSESSEE DURING THE YEAR UNDER ASSESSMENT AND IN THE IMMEDI ATELY PAST YEARS AND IN VIEW OF THE ADMITTED FACTS ON RECORD T HAT THE ASSESSEE FIRM HAD INTEREST FREE DEPOSITS IF RS.3605 LACS. AND IN VIEW OF THE CLEAR FINDINGS, OBSERVATIONS AN D DECISION ARRIVED AT PARA 205 AND 206 OF THE WORTHY CIT(A)S AT PAGE 12, 12 & 14 OF HIS OWN ORDERS IN THE ASSESSMENT YEAR 20 07-08, HELD IN FAVOUR OF THE ASSESSEE ITSELF ON EXACTLY THE SAM E FACTS AND ITA NO.548(ASR)/2011 2 CIRCUMSTANCES, FOR WHICH EVEN THE DEPARTMENT DID NO T FILE ANY APPEAL TO HONBLE ITAT, THE WORTHY CIT(A) WAS JUSTI FIED TO SUSTAIN DISALLOWANCE OF RS.1,76,400/- IN RESPECT OF INTEREST FREE ADVANCE TO SISTER CONCERN 2. THE FACTS NARRATED IN THIS CASE ARE NOT DISPUTED BY BOTH THE PARTIES. THEREFORE, THERE IS NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE STATE THAT THE ISSUE IN DISPUTE IS REGARDING DISALLOWANCE OF INTER EST ON DEPOSITS AMOUNTING TO RS.1,76,400/- MADE BY THE LD. CIT(A), JALANDHAR VIDE HIS ORDER DATED 20.09.2011 ON AN AVERAGE OF OUTSTANDING AMOUNTS AT THE BEGINNING AND THE END OF THE YEAR (RS.16.95 LACS AND RS.12.45 LACS) I N RESPECT OF KAPSONS CEMENT (P) LIMITED. HE STATED THAT ON IDENTICAL FAC TS AND CIRCUMSTANCES, THE LD. CIT(A) FOR THE A.Y. 2007-08 HAS ALLOWED THE BEN EFIT TO THE ASSESSEE.. BUT IN THE PRESENT ASSESSMENT YEAR I.E. 2006-07, HE HA S PARTLY SUSTAINED THE ADDITION AND MADE DISALLOWANCE OF RS.1.76 LACS OUT OF INTEREST ON DEPOSITS IN RESPECT OF INTEREST FREE ADVANCE TO ASSOCIATE CONCE RN ON AN AVERAGE OF THE BALANCE AT THE BEGINNING AND CLOSING OF THE YEAR DE SPITE SIMILAR OBSERVATIONS AND FINDINGS IN PARA 2.5 OF HIS ORDER FOR THE A.Y. 2006-07 WHICH WAS IDENTICAL AND ON SIMILAR FACTS AND OBSERVATIONS IN PARA 2.5 & 2.6 OF HIS OWN ORDER FOR THE ASSESSMENT YEAR 2007-08 DISREGARDING THE PRINCIPLE AND RULE OF CONSISTENCY FOLLOWED BY HIM. FINALLY, HE STATED THA T THE ADDITION IN DISPUTE ITA NO.548(ASR)/2011 3 HAS WRONGLY BEEN MADE BY THE LD. CIT(A) INSPITE OF THE FACT THAT THE MONEY HAS BEEN USED FOR COMMERCIAL EXPEDIENCY. 4. ON THE CONTRARY, THE LD. DR RELIED UPON THE ORDE R PASSED BY THE CIT(A) AND ARGUED THAT THE ASSESSEE HAS AGREED BEFO RE THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDER ABOUT THE ADDITION IN DI SPUTE. THEREFORE, THE PRESENT APPEAL FILED BY THE ASSESSEE MAY BE DISMISS ED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE WITH US AND WE ARE OF THE CONSIDERED OPIN ION THAT THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND G AVE BENEFIT OF RS.7,53,991/- OUT OF DISALLOWANCE OF RS.9,30,391/- AND MADE THE ADDITION IN DISPUTE I.E. RS.1,76,400/- ON AGREED ADDITION WHICH CLEARLY MENTIONED IN PARA 4.2 OF THE IMPUGNED ORDER. WE HAVE ALSO GONE THROUG H THE IMPUGNED ORDER PASSED BY THE LD. CIT(A), WHO HAS PASSED THE IMPUGN ED ORDER ON THE BASIS OF HIS OWN ORDER PASSED FOR THE A.Y. 2007-08 DATED 12. 08.2010. BUT LASTLY, THE ASSESSEE HAS AGREED THAT INTEREST EXPENDITURE IN RE SPECT OF THIS ADVANCE ADMITTEDLY NOT INCURRED FOR THE PURPOSE OF BUSINESS AND THE LD. CIT(A) HAS RIGHTLY SUSTAINED THE INTEREST ON THE AMOUNT OF RS. 14.70 LACS @ 12% P.A. ON THE AMOUNT WORKED OUT TO RS.1,76,400/-. FOR THE SAK E OF CONVENIENCE, THE RELEVANT PART OF PARA 4, 4.1 & 4.2. IS REPRODUCED A S UNDER: 4. I HAVE CONSIDERED THE SUBMISSIONS CAREFULLY. T HE ISSUE OF DISALLOWANCE OF INTEREST ON ACCOUNT OF DEBIT BLANCE IN THE CAPITAL ACCOUNTS OF THE PARTNERS WAS DISCUSSED IN THE CIT(A )S ORDER ITA NO.548(ASR)/2011 4 DATED 12.8.2010 IN THE APPELLANTS CASE FOR THE A.Y . 2007-08 IN APPEAL NO.324/09-10/CIT(A)/JAL. IN THE ASSESSMENT O RDER US/ 143(3) FOR THE A.Y.2007-08 THE AO HAD DISALLOWED IN TEREST ON ACCOUNT OF DEBIT BALANCE IN THE ACCOUNT OF THE PAR TNERS, CITING THE SAME ARGUMENTS AS TAKEN IN THE ORDER UNDER APPE AL. THE ASSESSEES APPEAL ON THIS ISSUE WAS ALLOWED BY THE CIT(A) THE FOLLOWING OBSERVATIONS: 2.2.. 2.3. 2.4. 2.5 2.6 2.7.. 4.1. FROM THE AFORESAID OBSERVATIONS IT IS CLEAR TH AT ALL THE REASONS FOR MAKING THE DISALLOWANCE WHICH HAVE BEEN TAKEN IN THE PRESENT ORDER UNDER APPEAL, WERE CONSIDERED BEF ORE ALLOWING RELIEF TO THE APPELLANT IN THE A.Y. 2007-08. THE DR AWINGS OF THE PARTNERS DURING THE RELEVANT PREVIOUS YEAR 2005-06 ARE LESSER THAN THE AMOUNT OF PROFIT CREDITED TO THEIR ACCOUNT S, IMPLYING THAT THE DRAWINGS WERE OUT OF THE CURRENT YEARS PR OFIT. HENCE, FOLLOWING THE CIT(A)S ORDER IN THE APPELLANTS CAS E FOR THE A.Y. 2007-08, IT IS HELD THAT DISALLOWANCE OF INTER EST ON ACCOUNT OF DEBIT BALANCE IN THE ACCOUNT OF THE PARTNERS IS NOT WARRANTED. 4.2. HOWEVER, I SEE THAT THE LD. AR FOR THE APPELLA NT HAS NOT ADDRESSED THE ISSUE OF DISALLOWANCE ON INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE GIVEN TO SISTER CONCERNS. IN THE EARLIER ASSESSMENT YEARS AS NOTED ABOVE IN THE EXTRACT OF THE APPELLATE ORDER FOR A.Y.2007-08-THE AO HAD HELD THAT THE INTE REST FREE ADVANCE GIVEN TO THE SISTER CONCERNS STOOD ON A DIF FERENT FOOTING FROM THE DEBIT BALANCE IN THE PARTNERS ACCOUNTS. T HOUGH THE SAID ADVANCE HAS BEEN REDUCING, AND HAS REDUCED IN THE RELEVANT PREVIOUS YEAR ALSO, THE AO HAD DISALLOWED INTEREST IN RESPECT OF SUCH ADVANCE IN THE EARLIER ASSESSMENT YEARS ON THE FACTS OF THE MATTER, WHICH WAS AGREED TO BY THE APPELLANT; IMPLY ING THAT INTEREST EXPENDITURE IN RESPECT OF THESE ADVANCES WAS ADMITTEDLY NOT INCURRED FOR THE PURPOSE OF BUSINESS . THE SAME FACTS CONTINUE DOWN TO THE PRESENT ASSESSMENT YEAR UNDER APPEAL. HENCE, I HOLD THAT NOTWITHSTANDING THE FACT THAT NO FRESH ITA NO.548(ASR)/2011 5 INTEREST FREE ADVANCE WAS TAKEN IN THE RELEVANT PRE VIOUS YEAR, DISALLOWANCE OF INTEREST EXPENDITURE IN RESPECT OF THE INTEREST FREE ADVANCES IS JUSTIFIED. THE AVERAGE OF THE ADV ANCES OUTSTANDING AT THE BEGINNING AND THE END OF THE YEA R, AS PER THE APPELLANTS SUBMISSIONS, WORKS OUT TO RS.14.70 LACS . INTEREST @ 12% P.A. ON THIS AMOUNT WORKS OUT TO RS.1,76,400/-. IN VIEW OF THE PAST HISTORY OF THE CASE, I UPHOLD THE DISALLOW ANCE OF INTEREST EXPENDITURE OF RS.1,76,400/- OUT OF THE DI SALLOWANCE OF RS.9,30,391/- MADE BY THE AO. ASSESSEE GETS RELIEF OF RS.7,53,991/-. THE GROUND OF APPEAL ARE PARTLY ALLO WED. 5.1. KEEPING IN VIEW THE AFORESAID DISCUSSIONS BY T HE LD. CIT(A) WE ARE OF THE CONSIDERED VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) BECAUSE THE ASSESSEE WAS AGREED FOR THE ADDITION IN DISPUTE. ACCORDINGLY, WE UPHOLD THE ORD ER OF THE LD. CIT(A) BY DISMISSING THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH DECEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19TH DECEMBER; 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KAPSONS ELECTRO STAMPINGS SURANAU SSI, JALANDHAR. 2. THE DCIT, R-I, JALANDHAR. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER ITA NO.548(ASR)/2011 6 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.