ILESH AMRRUTLAL GADHIA, MUMBAI V. DCIT-CC-4(2), MUMBAI

ITA 552/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6040 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K GUBGOTRA J
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 234B; 14A; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO.552/MUM/2019 ( ASSESSMENT YEAR: 2014-15) ILESH AMRUTLAL GADHIA, 201, 2 ND FLOOR, VYAPAR BHAVAN, 368/370, NARSI NATH STREET, MASJID BUNDER (WEST), MUMBAI- 400009. VS. D.C.I.T. CENTRAL CIRCLE-4(2), ROOM NO. 1918, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. PAN/GIR NO.AJHPG 8596 P (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI MAYUR KISNADWALA (CA) REVENUE BY SHRI R.K. GUBGOTRA (JCIT-DR) DATE OF HEARING 04/02/2020 DATE OF PRONOUNCEMENT 14/02/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 05/11/2018 OF LD. CIT(A)-52, MUMBAI FOR THE A.Y. 20 14-15 IN THE MATTER OF ORDER PASSED U/S 153C R.W.S. 143(3) OF THE INCOM E TAX ACT, 1961 (IN SHORT, THE ACT). FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTE REST ON BILL DISCOUNTING AMOUNTING TO RS. 23,09,013/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A OF RS. 9,46,477/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN LEVYING INTEREST U/S 234A OF THE AC T. TA NO. 552/MUM/2019 ILESH AMRUTLAA GADHIA VS DCIT 2 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN LEVYING INTEREST U/S 234B AND 234C OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND PERTAINING TO INITIATION OF PENALTY U/S 271(1)(C) IS PREMATURE IN NATURE. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE PROPRIETORY BUSINESS OF TRADING IN STEEL IN THE NAM E OF BALAJI TRADING CO. THE ASSESSEE E FILED ITS RETURN OF INCOME ON 2 9/11/2014 DECLARING TOTAL INCOME OF RS. 11,84,830/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O. THAT THE A SSESSEE HAD DEBITED A SUM OF RS. 23,09,013/- IN THE P&L ACCOUNT BEING I NTEREST ON BILL DISCOUNTING. FURTHER, IT WAS OBSERVED THAT THE ASSE SSEE HAS GIVEN LOANS AND ADVANCES TO THE TUNE OF RS. 34,21,12,038/- TO T HE RELATED PARTIES. THE ASSESSEE WAS ASKED BY THE A.O. TO FURNISH THE S OURCE OF FUNDS. HOWEVER, THE ASSESSEE FAILED TO SUBMIT EXPLANATION IN THIS REGARD, THEREFORE, THE A.O. PROCEEDED TO DISALLOW THE INTER EST PAYABLE ON BILL DISCOUNTING AMOUNTING TO RS. 23,09,013/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AFTER OBSERVING AS UNDER: 6.2 IN COURSE OF THE APPELLATE PROCEEDINGS, THE A SSESSEE SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED IN HIS FAVOUR BY THE FAA FOR A.Y. 2010- 11 AND THIS HAS ALSO BEEN UPHELD BY THE HON'BLE ITA T IN ITA NO. 3860/MUM/2016 DATED 30.01.2018. HOWEVER, IT IS OBSE RVED THAT FOR THE SAID YEAR I.E. 2010-11, THE FAA HAD CLOSELY EXA MINED THE TA NO. 552/MUM/2019 ILESH AMRUTLAA GADHIA VS DCIT 3 DEPLOYMENT OF FUNDS WHICH WERE AVAILABLE TO THE ASS ESSEE ON BILL DISCOUNTING AND THEREAFTER, HAD CONCLUDED THAT THE SAID FUNDS HAVE BEEN USED SOLELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. HOWEVER, FOR THE RELEVANT YEAR, IT IS OBSERVED THAT THE AUDITOR IN THE TAX AUDIT REPORT HAS ADVERSELY COMMENTED THAT THE D ETAILS IN RESPECT OF THE LOANS RECEIVED/REPAID DURING THE YEA R HAVE NOT BEEN PROVIDED BY THE ASSESSEE. THEREFORE, THE CHART SUBM ITTED BY THE ASSESSEE TO THE AO, OF UTILIZATION OF THE FUNDS WHI CH WERE AVAILABLE TO THE ASSESSEE ON ACCOUNT OF BILL DISCOUNTING, CAN NOT BE FULLY VERIFIED. THIS IS BECAUSE THE ASSESSEE CLAIMS THAT SUBSTANTIAL PORTION OF THE FUNDS AVAILABLE TO HIM ON ACCOUNT OF BILL DI SCOUNTING WERE USED FOR REPAYMENT OF LOANS WHICH IS UNVERIFIABLE S INCE, THE NECESSARY DETAILS HAVE NOT AT ALL BEEN PROVIDED IN THE TAX AUDIT REPORT. IT IS ALSO OBSERVED THAT THE ASSESSEE CLAIM S THAT FUNDS OF RS. 1 CRORE MADE AVAILABLE TO IT ON ACCOUNT OF BILL DIS COUNTING HAVE BEEN UTILIZED FOR REPAYMENT OF LOAN TO M/S. P.G. MERCANT ILE. HOWEVER, FROM THE BALANCE SHEET IT IS OBSERVED THAT LOANS AN D ADVANCES HAVE BEEN GIVEN TO M/S. P.G. MERCANTILE OF RS. 3.73 CROR ES AS AGAINST THE CLAIM MADE BY THE ASSESSEE OF HAVING RECEIVED LOANS FROM THE SAID PARTY AND PART OF WHICH IS CLAIMED TO HAVE BEEN REP AID. THUS, THE CONTENTION OF THE ASSESSEE THAT FOR THE RELEVANT YE AR, THE FUNDS WHICH WERE AVAILABLE TO IT ON ACCOUNT OF BILL DISCO UNTING HAVE BEEN DEPLOYED SOLELY FOR THE PURPOSE OF ITS BUSINESS IS FOUND TO BE NOT CORRECT. THEREFORE, NO INFIRMITY IS FOUND IN THE AC TION OF THE AO IN MAKING THE SAID DISALLOWANCE OF INTEREST OF RS. 23, 09,013/- ON ACCOUNT OF BILL DISCOUNTING. ACCORDINGLY, GROUND NO . 2 OF THE APPEAL IS DISMISSED. 4. THE LD AR APPEARING ON BEHALF OF THE ASSESSEE ON LY PRESS GROUND WITH REGARD TO DISALLOWANCE OF INTEREST U/S 36(1)(I II) OF THE ACT. THE OTHER GROUNDS WERE NOT PRESSED BY THE LD AR. 5. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE SIMILAR DISALLOWANCE OF INTEREST IN THE A. Y. 2010-11 WAS APPEALED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE LD. CIT(A) VIDE ITS ORDER DATED 04/03/2016 AFTER GIVING DETAILED FI NDING REACHED TO THE TA NO. 552/MUM/2019 ILESH AMRUTLAA GADHIA VS DCIT 4 CONCLUSION THAT THE ASSESSEE HAS USED BORROWED FUND S FOR THE PURPOSE OF BUSINESS, THEREFORE, THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST. THE REVENUE APPROACHED TO THE TRIBUNAL AND THE TRIB UNAL VIDE ITS ORDER DATED 30/01/2018 HAS CONFIRMED THE FINDING OF THE L D. CIT(A) TO THE EFFECT THAT THE FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS, THEREFORE, UPHOLDING ORDER OF THE LD. CIT(A) DELETING THE DISA LLOWANCE OF INTEREST. HOWEVER, IN THE INSTANT CASE BEFORE ME, A DETAILED FINDING HAS BEEN GIVEN BY THE LD. CIT(A) WITH REFERENCE TO THE OBSER VATION OF TAX AUDITOR IN THEIR REPORT TO THE EFFECT THAT THE FUNDS AVAILA BLE WITH THE ASSESSEE ON ACCOUNT OF BILL DISCOUNTING LIMIT FROM BANK WERE US ED FOR REPAYMENT OF LOANS WHICH IS UNVERIFIABLE SINCE NECESSARY DETAILS HAVE NOT BEEN PROVIDED BY THE ASSESSEE. CERTAIN MORE CONTRADICTIO N WAS FOUND BY THE LD. CIT(A) TO THE EFFECT THAT THE FUNDS WERE USED F OR REPAYMENT OF LOAN TO M/S P.G. MERCANTILE WHEREAS THE LD. CIT(A) HAS O BSERVED THAT AS PER THE BALANCE SHEET LOAN AND ADVANCES HAVE BEEN GIVEN TO M/S P.G. MERCANTILE OF RS. 3.73 CRORES AS AGAINST CLAIM MADE BY THE ASSESSEE OF HAVING RECEIVED LOANS FROM THE SAID PARTY AND PART OF WHICH IS CLAIMED TO HAVE BEEN REPAID. AFTER HAVING ALL THESE OBSERVA TION, THE LD. CIT(A) HAS UPHELD THE ORDER OF THE A.O. DISALLOWING INTERE ST OF RS. 23,09,013/- ON ACCOUNT OF BILL DISCOUNTING FACILITY AVAILED FRO M THE BANK. HOWEVER, THE TRIBUNAL IN ITS ORDER DATED 30/01/2018 FOR THE A.Y. 2010-11 HAS CONFIRMED THE FINDING OF THE LD. CIT(A). HOWEVER, F ACTS IN THE YEAR UNDER CONSIDERATION ARE DIFFERENT WHEREIN DIVERSION OF FU NDS FOR NON BUSINESS TA NO. 552/MUM/2019 ILESH AMRUTLAA GADHIA VS DCIT 5 PURPOSES WAS CONFIRMED BY THE LD. CIT(A). HOWEVER, THE LD AR PLACED BEFORE ME A STATEMENT SHOWING THAT THE FUND RELEASE D BY THE BANK AGAINST THE BILL DISCOUNTING LIMIT WAS UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND ISSUING CHEQUE TO M/S UTKAR SH STEEL CORPORATION AND GEETA MERCANTILE PVT. LTD. THUS, IT WAS THE SUB MISSION OF THE ASSESSEE THAT THE A.O. AND THE LD. CIT(A) HAS NOT P ROPERLY APPRECIATED UTILIZATION OF BORROWED FUNDS FOR THE PURPOSE OF BU SINESS. IT WAS ALSO CONTENTION OF THE LD AR THAT THE ASSESSEE HIMSELF H AS ON ITS OWN, DISALLOWED SUBSTANTIAL INTEREST OF RS. 83,50,646/- AND CLAIMED NET INTEREST ATTRIBUTABLE TO THE FUNDS USED FOR THE PUR POSE OF BUSINESS. THEREFORE, IN THE SUBSTANTIAL INTEREST OF JUSTICE, WE SET ASIDE THIS MATTER BACK TO THE FILE OF THE A.O. FOR EXAMINING THE UTIL IZATION OF FUNDS OUT OF THE BILL DISCOUNTING LIMIT FOR THE PURPOSE OF BUSIN ESS OR OTHERWISE AND FOR DECIDING THE ISSUE AFRESH AS PER LAW AFTER PROVIDIN G REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IN ALLOWED IN PART FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2020 SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 14/02/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. TA NO. 552/MUM/2019 ILESH AMRUTLAA GADHIA VS DCIT 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//