Shri Dinesh Kumar Goor, Sehore V. The ITO -3(1), Sehore

ITA 59/Ind/2023

AI Insights

The case involves M/s. Ganesh Dal and Besan Mills, a partnership firm engaged in trading and manufacturing of gram and pulses, which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the AO's disallowance of Rs. 1,69,898 as interest expenditure. The AO had disallowed the interest on the grounds that the advances were interest-free and not incurred for business purposes. The Tribunal, however, found that the assessee had charged and accounted for interest on advances, particularly a significant amount to Smt. Manisha, and thus the disallowance was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130726 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-05-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: POOJA SUREKHA

Judgement Text

Page 1 of 4 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.421/Ind/2022 (Assessment Year:2017-18) M/s. Ganesh Dal and Besan Mills 60/1, Fawara Chowk Ujjain Vs. ITO 1(2) Ujjain (Appellant / Assessee) (Respondent/ Revenue) PAN: AACFM 1543J Assessee by Ms. Pooja Surekha, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 25.05.2023 Date of Pronouncement 29.05.2023 O R D E R Per Vijay Pal Rao, JM: This appeal by the assessee is directed against the order dated 28.10.2022 of Ld. Commissioner of Income Tax (Appeals) (in short Ld. CIT(A), National Faceless Appeal Centre, Delhi for Assessment Year 2017- 18. The assessee has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law the Commissioner of Income Tax (Appeals), where an appeal is filed before the Tribunal against the order of Commissioner (Appeals) erred in disallowing Interest of Rs. 1,69,898/- 2. The Appellant prays that the disallowance of Rs. 1,69,898/- made in respect of Interest payment be deleted. ITA No.421/Ind/2022 Ganesh Dal and Besan Mills Page 2 of 4 Page 2 of 4 3. The Appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal. 2. The assessee is a Partnership firm engaged in the business of trading and manufacturing of gram (Chana), pulses (Chana Dal) and Besan. The assessee filed its return of income on 26.10.2017 declaring total income of Rs. 3,57,220/-. In the scrutiny assessment the AO made addition of Rs. 1,69,898/- on account of disallowance of interest and treated the same as not expenditure incurred for the business purpose as the assesse have given interest free advances. The assessee challenged the action of the AO before the Ld. CIT(A) but could not succeed as appeal of the assessee was dismissed for want of any submission. 3. Before the Tribunal the Ld. AR of the assessee has referred to the audit report and schedule-E to show that the assessee has taken loans and advances totalling to Rs.20,05,545/- out of which a sum of Rs.19,15,079/- was advance to one Smt. Manisha. Thus, the Ld. AR has submitted major amount was advanced to one person from whom the assessee has charged the interest @15%. She has referred to the ledger account of Smt. Manisha at page no.45 of the paper book and submitted that for the year under consideration the assessee has charged interest of Rs.1,75,892/-. She has then referred to the profit and loss account at page no.33 of the paper book and submitted that the assessee has duly taken into account in the interest income. Once the assessee has earned the interest on the said amount then the disallowance made by the AO is not justified. 4. On the other hand, Ld. DR has submitted that all these details and records were not produced by the assessee before the authorities below therefore, the Ld. AO was justified in making the disallowance. He has relied upon the orders of the authorities below. 5. We have considered the rival submission as well as relevant material on record. The AO has made the disallowance of Rs.1,69,898/- on account of interest paid on loan despite substantial capital and cash in hand ITA No.421/Ind/2022 Ganesh Dal and Besan Mills Page 3 of 4 Page 3 of 4 available with the assessee. Thus, the grounds for disallowance made by the AO, appearas to be that the borrowed fund were not utilized for the business purpose. 6. Before the Tribunal the Ld. AR of the assessee has pointed out from the audit report and particularly from the Schedule-E to the balance sheet as well as profit and loss account that the assessee has charged interest @15% on the advances to Mrs. Manisha wife of Shri shiv Kumar Agarwal. The AO has recorded the fact that incompliance of the notice the assessee uploaded the audit report and summery of cash flow chart and other documents. Therefore, once audit report and other details were available with the AO then the AO should have considered the relevant facts available on record before making disallowance of interest expenditure. Accordingly, when the assessee has already charged interest of Rs.1,75,892/- which was also reduced from interest payment as per the profit and loss account then the disallowance made by the AO without considering crucial and relevant facts is not justified. Hence in the facts and circumstances of the case the disallowance made by the AO on account of interest expenditure is deleted. 7. In the result, appeal of assessee is allowed. Order pronounced in the open court on 29.05.2023. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 29.05.2023 Patel/Sr. PS ITA No.421/Ind/2022 Ganesh Dal and Besan Mills Page 4 of 4 Page 4 of 4 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore