Shri. Appaswami Infrastructure, Nagpur V. Income Tax Officer- Ward-1(4), Nagpur

ITA 60/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1820 (ITAT-NAGPUR)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR M BHUSARI
• Assessee Lawyers: R V LOYA
• Keywords: Notional interest
• Section: 40A(3); 143(3)

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI RAJENDRA , A M ITA NO. 60 / N AG / 20 1 2 ( ASSESSMENT YEAR S : 200 7 - 0 8 ) SHRI APPASWAMI INFRASTRUCTURE, C/O M.S.LOYA BAGRI & CO., CHATTERED ACCOUNTANTS, GANDHIBAG, NAGPUR. VS. ITO WARD - 1(4) , NAGPUR - 440 001 PAN/GIR NO. : A B CES 5667 E ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. R.V.LOYA /REVENUE BY : DR. M. BHUSARI DATE OF HEARING : 30 TH JAN ., 201 3 DATE OF PRONOU NCEMENT : 8 TH FEB. ,201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH IS APPEAL HA S BEEN PREFERRED BY THE ASSESSEE BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER OF LEANED CIT (A) - I , NAGPUR (MAHARASHTRA) RELATING TO THE ASSESSMENT YEAR 200 7 - 0 8 , WHICH HA S BEEN HEARD THROUGH E - COURT, MUMBAI . 2 . THE ASSESSEE HAS THE FIRST ISSUE IN ITS APPEAL IN REGARD TO CORNING THE ADDITION OF RS. 6,30 ,000/ - AS NOTIONAL INTEREST INCOME. 3 . DURING THE ASSESSMENT PROCEEDING, THE AO NOTICED THAT THE ASSES SEE HAS SHOWN DEBIT BALANCE IN RESPECT OF FIVE PARTIES AT RS. 52,50,000/ - . THE AO NOTED THAT ON THIS DEBIT BALANCE THE ASSESSEE ITA NO . 60 /20 1 2 2 HAS NOT CHARGED ANY INTEREST FROM THEM. THEREFORE, HE CHARGED AN INTEREST AT THE RATE OF 12% ON THE DEBIT BALANCE ON FIVE PARTIES . 3.1 IT WAS SUBMITTED BEFORE LEANED CIT(A) THAT ADVANCE TO THE FIVE PARTIES WERE GIVEN FOR PURCHASE OF PROPERTIES. THEREAFTER CONFIRMATION OF THE PARTIES WAS FILED. IT WAS ALSO CONFIRMED BY THE TWO PARTIES THAT THEY HAVE PAID BACK THE AMOUNT TO THE ASSE SSEE, HOWEVER, THE CONFIRMATION OF THREE PARTIES COULD NOT BE OBTAINED. AFTER CONSIDERING THE SUBMISSION, LEARNED CIT(A) FOUND THAT THOUGH THE ASSESSEE HAS ADVANCED MONEY TO FIVE PARTIES FOR THE PURCHASE OF LAND AND DEAL WAS NOT MATERIALIZED. CERTAIN ADDIT IONAL EVIDENCES HAVE BEEN FILED IN SUPPORT OF THESE CASES. THE REMAND REPORT WAS ALSO SOUGHT, HOWEVER, LEARNED CIT(A) WAS OF THE VIEW THAT THE ASSESSEE COULD NOT POINT OUT AS TO WHY THEY COULD NOT FILE BEFORE THE AO ORIGINALLY, THEREFORE, HE CONFIRMED THE ADDITION OF R S. 6,30,000/ - . 3.2 AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FOUND THAT THIS IS NOT A CASE OF DISALLOWANCE OF INTEREST BUT IT IS A CASE OF CHARGING NOTIONAL INTEREST. THERE IS NO PROVISION IN LAW FOR CHARGING N OTIONAL INTEREST. THEREFORE, ONLY ON THIS REASON, THE ADDITION IS LIABLE TO BE DELETED. WE FURTHER NOTED THAT THE CONFIRMATIONS WERE FILED BEFORE THE LEARNED CIT(A) AND REMAND REPORT WAS SOUGHT FROM THE AO. THEREFORE, THERE WAS NO REASON NOT TO ADMIT THE A DDITIONAL EVIDENCES AND CONSIDER THEM. SINCE THERE IS NO DISPUTE THAT THE ADVANCE WAS GIVEN FOR PURCHASE OF LAN D AND THE SAME WAS NOT MATERIALIZED AND THE AMOUNT WAS RECEIVED BACK, NO INTEREST WAS ITA NO . 60 /20 1 2 3 RECEIVED BY THE ASSESSEE ON THE ADVANCE S GIVEN. THEREFORE, FOR THIS REASON ALSO, NO ADDITION IS WARRANTED. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 6,30,000/ - MADE AND CONFIRMED BY THE LOWER AUTHORITIES. 4 . THE SECOND ISSUE IS RELATING TO CONFIRMATION OF ADDITION OF RS. 9,38,000/ - UNDER SECTION 40A(3) . 4.1 THE AO NOTED THAT THE ASSESSEE HAS PAID VARIOUS AMOUNTS IN CASH CONSISTING PAYMENT OF RS. 20,000/ - AND ABOVE. IN HIS VIEW, THE PROVISION S OF SECTION 40A(3) ARE APPLICABLE. THEREFORE, HE MADE ADDITION OF RS. 9,38,000/ - . 4.2 IN APPEAL, LEARNED CIT(A) FOUND THAT RULE 6DD PROVIDES THAT THE CIRCUMSTANCES UNDER WHICH CASH PAYMENT CAN BE MADE. HOWEVER, HE FOUND THAT THE EXCEPTION CLAUSE IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE . PLACING RELIANCE ON THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF I DEAL TANNERY VS. CIT, 117 ITR 34 (ALL.) , LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO . 4.3 BEFORE THE TRIBUNAL, IT WAS SUBMITTED THAT THE ASSESSEE HAS TO PURCHASE MATERIAL IN CASH AND PARTIES WERE NOT ACCEPTING CHEQUES , THEREFORE, IN THESE CIRCUMSTANCES , CERTAIN PAYMENTS W ERE MADE IN CASH. ACCORDINGLY, THE CASE OF THE ASSESSEE FALLS UNDER RULE 6DD OF THE RULES. 4.4 LEARNED DR. PLACED RELIANCE ON THE ORDER OF LEARNED CIT(A). ITA NO . 60 /20 1 2 4 4.5 AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FOUND THAT HEAVY ADVANCES HAVE BEEN RECEIVED AND SIMULTANEOUSLY HEAVY ADVANCES HAVE BEEN MADE BY THE ASSESSEE AND IT CANNOT BE SAID THAT PARTIES WERE NOT WILLING TO ACCEPT THE CHEQUES. NEITHER ANY CONFIRMATION WAS FILED FROM RESPECTIVE PARTIES SHOWING THAT THEY WERE NOT WILLING TO ACCEPT CHEQUES NOR THERE IS ANY OTHER MATERIAL ON RECORD. THEREFORE, WE ARE OF THE VIEW THAT ADDITION MADE AND CONFIRMED BY THE LOWER AUTHORITIES IS JUSTIFIED. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTED. 5 . REMAINING IS SUE IS AGAINST CONFIRMING THE ADDITION OF RS. 20,00,000/ - TAKEN FROM ONE SHRI K.M.MOGHE . 5.1 DURING THE ASSESSMENT PROCEEDING, IT WAS FOUND THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH ONE SHRI K.M.MOGHE. THIS AGREEMENT WAS ENTERED ON 7TH JULY, 200 6, FALLS UNDER ASSESSMENT YEAR 2007 - 0 8, WHICH IS THE YEAR UNDER CONSIDERATION AND AS PER THIS AGREEMENT IT WAS SUBMITTED THAT A SUM OF RS. 20,00,000/ - WAS PAID IN CASH AT THE TIME OF AGREEMENT. RS.9 LAKHS WAS PAID BY CHEQUE ON 7 - 7 - 2006 AND FURTHER RS. 11 LAK HS WAS TO BE PAID FROM TIME TO TIME AS PER PROGRESS OF CONSTRUCTION BEFORE POSSESSION OF THE ABOVE SAID APARTMENT. ACCORDINGLY, THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE AMOUNT OF RS. 20 LAKHS SHOULD NOT BE ADDED AS THE SAME HAS NOT BEEN SHOWN. IT WAS EXPLAINED THAT IN FACT, NO AMOUNT OF RS. 20 LAKHS WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION BUT THE SAME WAS ITA NO . 60 /20 1 2 5 RECEIVED ON 5 - 4 - 2007 . COPY OF THE LEDGER ACCOUNT OF SHRI K.M.MOGHE FOR SUBSEQUENT YEAR WAS ALSO FILED. IT WAS FURTHER SUBMITTED THAT IN F ACT THE AGREEMENT HAS BEEN CANCELLED AND THE ENTIRE AMOUNT TAKEN FROM SHRI MOGHE HAS BEEN RETURNED IN SUBSEQUENT YEAR. COPY OF LEDGER ACCOUNT WAS ALSO FILED. A COPY OF RECEIPT OF THE AMOUNT SIGNED BY THE PARTNER OF THE FIRM WAS ALSO FILED. HOWEVER, THE AO WAS NOT SATISFIED. IN HIS VIEW, THE ASSESSEE HAS RECEIVED A SUM OF RS. 20 LAKHS DURING THE YEAR UNDER CONSIDERATION AS MENTIONED IN THE AGREEMENT. THEREFORE, HE MADE THE ADDITION. 5.2 IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) WAS THAT THE ADDITION HAS BE EN MADE BY THE AO ON PROTECTIVE BASIS ON THE REASON THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH SHRI K.M.MOGHE, WHEREIN IT WAS MENTIONED THAT AN AMOUNT OF RS. 20 LAKHS RECEIVED IN CASH. HOWEVER, NO DATE IS MENTIONED AGAINST THE AMOUNT OF RS. 20 LAK HS ALONG WITH RS.9 LAKHS RECEIVED FROM SHRI K.M.MOGHE, WAS RETURNED ON 8 - 1 - 2008. COPY OF THE ACCOUNT WAS ALSO FILED. IT WAS STATED THAT ALL THE DETAILS WITH THE CONFIRMATION OF SHRI K.M.MOGHE HAS BEEN FILED. IT WAS FURTHER STATED THAT SHRI K.M.MOGHE HAS S HOWN THIS AMOUNT AS INCOME FOR ASSESSMENT YEAR 2008 - 09. AN ADDITION OF RS. 25 LAKHS HAS BEEN MADE BY THE AO WHILE PASSING THE ORDER UNDER SECTION 143(3) . IT WAS ALSO SUBMITTED THAT AN ADDITION OF RS. 20 LAKHS WAS ALSO MADE FOR ASSESSMENT YEAR 2007 - 08 IN THE HANDS OF SHRI K.M.MOGHE AND LEARNED CIT(A) HAS CONFIRMED THE SAME IN CASE OF SHRI K.M.MOGHE. ACCORDINGLY, IT WAS SUBMITTED THAT THE SAME AMOUNT HAS ITA NO . 60 /20 1 2 6 ALREADY BEEN ASSESSED, THEREFORE, THERE IS NO POINT TO CONFIRM THE ADDITION IN THE HANDS OF THE ASSESSEE. HO WEVER, LEARNED CIT(A) WAS NOT SATISFIED. THEREFORE, HE CONFIRMED THE ADDITION OF RS. 20 LAKHS MADE BY THE AO UNDER SECTION 69. 5.3 LEARNED AR REITERATED THE CONTENTIONS RAISED BEFORE THE LOWER AUTHORITIES. ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF THE AO AS WELL AS LEARNED CIT(A). 5.4 AFTER CONSIDERING THE ORDER OF THE AO AND LEARNED CIT(A) AND THE SUBMISSION OF BOTH THE PARTIES, WE FOUND THAT THIS ADDITION HAS NO LEGS TO STAND. FIRSTLY, THERE IS NO DISPUTE THAT THE AMOUNT OF RS. 20LAKH S WAS RECEIVED ON ACCOUNT OF CONSTRUCTION OF FLAT. SHRI K.M.MOGHE HAS MADE ADVANCE OF RS. 20 LAKHS IN CASH AND FURTHER RS. 9 LAKHS BY CHEQUE . H E HAS FILED CONFIRMATION ALSO. IN THE CONFIRMATION, IT HAS BEEN STATED THAT THIS AMOUNT WAS PAID IN CASH ON 5 - 4 - 200 7. IT IS FURTHER SEEN THAT SHRI MOGHE HAS SURRENDERED THIS AMOUNT FOR ASSESSMENT YEAR 2008 - 09 , WHICH IS SUBSEQUENT YEAR TO THE YEAR UNDER CONSIDERATION. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) . COPY OF WHICH IS PLACED IN THE COMPILATION AT PAG E 29 ONWARDS. IT IS FURTHER SEEN THAT A REMAND REPORT WAS SOUGHT BY LEARNED CIT(A) FROM THE AO, COPY OF WHICH IS PLACED AT PAGES 41 TO 43 AND IN RESPECT TO ADDITION OF RS. 20 LAKHS, THE AO HAS STATED THAT ON THE BASIS OF FURNISHING A COPY OF AGREEMENT, THE ADDITION MADE BY THE AO MAY BE DELETED, IF CONSIDERED. IT SHOWS THAT THE AO WAS SATISFIED THAT NO ADDITION CAN BE ITA NO . 60 /20 1 2 7 MADE IN THE HANDS OF THE ASSESSEE. IT IS ALSO A MATTER OF FACT THAT THE ADDITION OF RS. 20 LAKHS WAS MADE BY THE AO IN HAND OF SHRI K.M.MOGHE F OR ASSESSMENT YEAR 2007 - 08 AND ALSO FOR ASSESSMENT YEAR 2008 - 09 , WHE RE SHRI K.M.MOGHE HIMSELF HAS SHOWN RS .20 LAKHS PLUS RS. 5 LAKHS AS HIS INCOME. A SPECIFIC AMOUNT CANNOT BE ADDED TWICE I.E. ONCE IN THE HANDS OF THE PERSON, WHO HAS ADVANCED THE SAME AND S ECONDLY IN THE HANDS OF THE PERSON, WHO HAD RECEIVED THE ADVANCE. IN THE PRESENT CASE, SHRI K.M.MOGHE HAS ADMITTED GIVING ADVANCE OF RS. 20 LAKHS TO THE ASSESSEE, THEREFORE, IN THE HANDS OF THE ASSESSEE NO ADDITION CAN BE MADE. FOR THIS REASON ALONE, THE AD DITION IS LIABLE TO BE DELETED. HOWEVER, IT IS FURTHER SEEN THAT ON SECOND APPEAL IN CASE OF MR. K.M.MOGHE, THE TRIBUNAL HAS CONFIRMED THE ADDITION OF RS. 20 LAKHS FOR ASSESSMENT YEAR 2007 - 08 . FOR THIS REASON ALSO, ADDITION CANNOT BE MADE IN THE HANDS OF TH E ASSESSEE. 5.5 IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE ADDITION OF RS. 20 LAKHS IN THE HANDS OF THE ASSESSEE . 6 . IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE E - COURT ON THIS 8 TH DAY OF FEB , 201 3 . - 201 3 SD/ - SD/ - ( ) ( RAJENDRA ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 8 / 02 / 201 3 . /PKM , PS ITA NO . 60 /20 1 2 8 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A ) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI