Sh. Bhupinder Singh, Ludhiana V. ACIT, Ludhiana

ITA 593/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80838 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.593 /CHD/2013 ASSESSMENT YEAR : 2007-08 SH.BHUPINDER SINGH, VS. THE A.C.I.T., PROP.M/S BHUPINDER SINGH & CO., CIRCLE V, 9, INDRA MARKEKT, GILL ROAD, LUDHIANA. LUDHIANA. PAN: AMSPS5890C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK GOYAL RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 16.07.2014 DATE OF PRONOUNCEMENT : 05.08.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, LUHIANA DAT ED 25.3.2013 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF IN COME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 2,70,416/- MADE BY T HE ASSESSING OFFICER BY DISALLOWING INTEREST OF RS.2,70,416/- OUT OF TOTAL INTEREST PAID BY THE APPELLANT UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 196 1. 2. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDE RING THE FACT THAT AMOUNTS OUTSTANDING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE, IN FACT, BUSINESS TRANSACTIONS OF THE ASSESSEE AND TO WHICH, THE PROVISIONS OF SECTION 36 (1)(III) ARE NOT APPLICABLE. 3. THAT THE WORTHY CIT (A) HAS ALSO ERRED IN CONFIR MING THE ADDITION OF RS. 62,562/- WHICH WAS MADE BY THE ASSESSING OFFICER BY DISALLOWING 1/5 TH OF THE EXPENSES FOR PERSONAL USE OF THE APPELLANT OUT OF T OTAL EXPENSES OF 2 RS.3,12,811/- INCURRED BY HIM IN RESPECT OF RS.58,5 30/- AS CAR EXPENSES, RS.38,990/- AS TELEPHONE EXPENSES AND RS.2,15,291/- AS CAR DEPRECIATION. 4. THAT THE AFORESAID ADDITION HAS BEEN CONFIRMED B Y THE WORTHY CIT (A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DURING THE YEAR UNDER CONSIDERATION HAD ADVANCED INTEREST FREE LOANS AMOUNTING TO RS.24,71,209/- TO M/S MAHAVIR STEEL, R S.4 LACS TO ANKIT MITTAL AND RS.1 LAC TO M/S HARJIT INTERNATION AL. THE PLEA OF THE ASSESSEE WAS THAT THE SAID ADVANCES WERE MADE I N THE COURSE OF CARRYING ON THE BUSINESS. AS THE ASSESSEE HAD FAI LED TO PRODUCE ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM, THE ADVANCES WERE DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1 (P&H)]. TH E ASSESSING OFFICER HAD COMPUTED THE DISALLOWANCE DAY-WISE AS P ER THE CHART AT PAGE 3 OF THE ASSESSMENT ORDER AND COMPUTED THE DIS ALLOWANCE AT RS.2,70,416/-. 4. THE CIT (APPEALS) HAD UPHELD THE ORDER OF THE AS SESSING OFFICER VIS-A-VIS THE DISALLOWANCE OF INTEREST UNDE R SECTION 36(1)(III) OF THE ACT. 5. SHRI ASHOK GOYAL APPEARED FOR THE ASSESSEE AND S HRI J.S.NAGAR PUT IN APPEARANCE ON BEHALF OF THE REVENU E AND PUT FORWARD THEIR CONTENTIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN HE PRESENT GROUND OF APPEAL IS AGAINST DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT. THE CASE OF THE ASSESSEE IS THAT IT HAD MADE CERTAIN PURCHASES FROM M/S MAHAVIR 3 STEEL IN THE PRECEDING YEAR AND DURING THE YEAR UND ER CONSIDERATION IT HAD PAID OUTSTANDING AMOUNT AND HA D FURTHER MADE CERTAIN ADVANCES TO THE SAID CONCERN FOR THE BUSINE SS PURPOSES. HOWEVER, NO PURCHASES WERE MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND IN THE SUCCEEDING YEAR. T HOUGH THE ASSESSEE HAD MADE PURCHASES FROM THE SAID CONCERN I N THE EARLIER YEAR AND THE PAYMENTS AGAINST THE SAID PURCHASES WE RE MADE DURING THE YEAR UNDER CONSIDERATION BUT THEREAFTER SUBSTAN TIAL AMOUNTS WERE ADVANCED TO THE SAID CONCERN WITHOUT CHARGING ANY INTEREST. ON THE OTHER HAND, THE ASSESSEE HAD BORROWED MONEY AT INTEREST. IN VIEW OF THE FACT THE ASSESSEE OF HAVING NOT ESTA BLISHED BUSINESS EXPEDIENCIES FOR MAKING ADVANCE TO THE SAID CONCERN , WE FIND NO MERIT IN THE PLEA OF THE LEARNED A.R. FOR THE ASSES SEE THAT THE SAID ADVANCES WERE MADE FOR BUSINESS EXPEDIENCIES. 7. FURTHER THE ASSESSEE HAD MADE ADVANCE OF RS.4 LA CS TO ANKIT MITTAL, AND RS.1 LAC TO M/S HARJIT INTERNATIONAL. THE PLEA OF THE ASSESSEE WAS THAT IT HAD NOT CHARGED ANY INTEREST O N THE SAID ADVANCES AS THE ADVANCE TO M/S ANKIT MITTAL WAS MAD E FOR BUSINESS PURPOSES AND LATER ON NO PURCHASES WERE MADE FROM T HE SAID CONCERN. THE ASSESSEE HAD FAILED TO BRING ON RECO RD ANY EVIDENCE TO PROVE ITS CASE AND IN THE ABSENCE OF THE SAME, W E FIND NO MERIT IN THE CLAIM OF THE ASSESSEE. REJECTING THE SAME WE UPHOLD THE DISALLOWANCE OF RS.2,70,416/- UNDER SECTION 36(1)(I II) OF THE ACT IN VIEW OF THE RATIO LAID DOWN BY THE PUNJAB & HARY ANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA). THE GROUN D OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSEE ARE DISMISSED. 8. THE ISSUE IN GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST THE PART DISALLOWANCE OF EXPENDITURE FOR PERSONAL USE O UT OF CAR 4 EXPENSES, TELEPHONE EXPENSES AND CAR DEPRECIATION. THE ASSESSING OFFICER AND THE CIT (APPEALS) HAD DISALLO WED 1/5 TH OUT OF THE TOTAL EXPENDITURE. HOWEVER, WE RESTRICT TH E SAID DISALLOWANCE TO 1/10 TH OF THE TOTAL EXPENSES. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS PARTLY A LLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF AUGUST, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 5 TH AUGUST, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH