Shri Bhanubhai J. Sangani, Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-4(1)(2), Ahmedabad

ITA 601/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8312 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 10-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWANI DATES OF HEARING
• Keywords: Rule 8D
• Section: 14A; 13

Judgement Text

SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SM C BENCH, AHMEDABAD [ CORAM : PRAMOD KUMAR, VP ] ITA NO . 601 / AHD / 2017 ASSESSMENT YEAR : 2012 - 13 BHANUBHAI J . SANGANI ............. APPELLANT 1, SAMARTHYABUNGLOWS, THALTEJU AHMEDABAD 3800015 [ PAN : ACTPS6291G ] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4 ( 1 )( 2 ) AHMEDABAD ....... RESPONDENT APPEARANCES BY PARIN SHAH FOR THE APPELLANT VINOD TANWANI FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : DECEMBER 20 TH , 2019 DATE OF PRONOUNCING THIS ORDER : MARCH 12 TH , 2020 O R D E R PER PRAMOD KUMAR, VP : 1 . BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT ( A ) S ORDER DATED 6 TH DECEMBER 2016, IN THE MATTER OF ASSESSMENT UNDER SECTION 143 ( 3 ) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2012 - 13 2 . IN THE FIRST GROUND OF APPEAL THE ASSESSEE APPELLANT HAS RAISED THE FOLLOWING GRIEVANCE :- SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 2 OF 6 1 . THE LD . CIT ( A ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL . HEOUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISEDBY THE APPELLANT BEFORE HIM . I . DISALLOWANCE OF INTEREST EXPENSES U / S . 36 ( I )( III ) OF THE I . T . ACT - RS . 4,86,033 /- 1 . THE LD . CIT ( A ) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES U / S . 36 ( I )( III ) OF THE ACT OF RS . 4,86,033 /- EVEN THOUGH THE APPELLANT HAS DULY FULL FILLED ALL THE CONDITIONS U / S . 36 ( 1 )( II ) OF THE ACT . 2 . THE LD . CIT ( A ) AND THE LD . A . O ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY CONSIDER THE WRITTEN SUBMISSION FILED BY APPELLANT ALONG WITH VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY APPELLANT . 3 . T HE RELEVANT MATERIAL FACTS ARE LIKE THIS . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT WHILE THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS . 7,86,033 /- ON ACCOUNT L INTEREST PAYMENT, THE ASSESSEE HAS ALSO EXTENDED INTEREST FREE LOANS OF RS . 45 LAKHS TO SAMAR THYA INFRASTRUCTURE, AND OF RS . 8 . 12 LAKHS TO SANDEEP KANUBHAI PATEL . IT WAS, INTER ALIA, CONTENDED THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS, IN FORM OF CAPITAL, AND, AS SUCH, FOLLOWING HON BLE BOMBAY HIGH COURT S JUDGMENT IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD ( 313 ITR 340 ) , IT HAS TO BE ASSUMED THAT THE LOANS WERE ADVANCED OUT OF INTEREST FREE FUNDS . THE ASSESSING OFFICER REJECTED THIS PLEA BY OBSERVING THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE FACT THAT NO INTEREST BEARING FU NDS WERE DIVERTED AND NO DAY TO DAY FUND FLOW HAS BEEN SUBMITTED . HE THUS DISALLOWED INTEREST OF RS . 4,86,033 /-. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE THE TRIBUNAL . 4 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 5 . IN MY CONSIDERED VIEW, THE LEGAL POSITION IS QUITE CLEAR AND UNAMBIGUOUS . AS LONG AS THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE, IN EXCESS OF INTEREST FREE LOANS ADVANCED THE PRESUMPTION HAS TO BE THAT THE ASSESSEE HAS USED THE INTEREST FREE FUNDS FOR THE SAID PURPOSES . SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 3 OF 6 THAT S WHAT HON BLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF RELIANCE UTILITIES ( SUPRA ) , AND HON BLEJURISDICTIONAL HIGH COURT HAS ALSO FOLLOWED THE SAME PATH . I, THEREFORE, UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS . 4,86,033 . THE ASSESSEE GETS THE RELIEF ACCORDINGLY . 6 . GROUND NO 1 IS THUS ALLOWED . 7 . IN GROUND NO 2, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : - II . DISALLOWANCE U / S . 57 OF THE I . T . ACT RS . 4,79,740 /- 1 . THE LD . CIT ( A ) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE U / S . 57OF THE ACT OF RS . 4,79,740 /- AS MADE BY THE LD . A . O EVEN THOUGH SIMILAR DISALLOWANCE MADE IN EARLIER ASSESSMENT YEAR 2011 - 12 MADE BY THE LD . A . O HAS BEEN DELETED BY THE CIT ( A ) VIDE APPELLATE ORDER NO . CIT ( A )- 9 / 377 / DCIT . CIR . 8 / 14 - 15 DATED 02 . 09 . 2015 WHILE RELYING UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS OF THE HON'BLE SUPREME COURT, JURISDICTIONAL GUJARAT HIGH COURT AND OTHER HIGH COURTS . 2 . THE LD . CIT ( A ) AND THE LD . A . O ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY CONSIDER THE WRITTEN SUBMISSION FILED BY APPELLANT ALONG WITH VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY APPELLANT . 8 . SO FAR AS THIS DISALLOWANCE IS CONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS 13 ,65,082 /- IN COMPUTATION OF INCOME FROM OTHER SOURCES OUT OF THIS CLAIM, THE ASSESSING OFFICER DISALLOWED RS 4,79,740 /- ON THE GROUND THAT NEXUS HAS NOT BEEN PROVED . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT ( A ) BUT WITHOUT ANY SUCCESS . HE DISMISSED THE APPEAL WITH RATHER CRYPTIC OBSERVATIONS AS FOLLOWS :- 5 . 2 I HAVE CONSIDERED THE ASSESSMENT ORDER, FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT . DURING APPELLANT PROCEEDINGS, THE APPELLANT HAS JUST REITERATED THE AR GUMENTS MADE BEFORE THE AO DURING ASSESSMENT PROCEEDINGS . HE HAS NO BROUGHT ANYTHING ON RECORD TO SHOW HOW THE AMOUNT OF RS . 4,79,740 /- HAD BEEN EXPENSED FOR SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 4 OF 6 THE PURPOSE OF BUSINESS . THE ADDITION OF THE AMOUNT OF RS . 4,79,740 /- IS THEREFORE CONFIRMED . GROU ND OF APPEAL NO 2 IS DISMISSED . 9 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 10 . I FIND THAT THERE IS NO NET INTEREST EXPENDITURE, INASMUCH AS INTEREST INCOME IS FAR IN EXCESS OF INTEREST EXPENDITURE DISALLOWANCE IN RESPECT OF INTEREST UNDER RULE 14D ( 2 ) ( II ) SHOULD HAVE BEEN NIL, AS AGAINST RS . 1,37,432 /- ACTUALLY DISALLOWANCE, SO FAR AS DISALLOWANCE OF RS . 47,580 /- , BEING . 05 % OF AVERAGE VALUE OF INVESTMENT UNDER RULE 14D ( 2 )( III ) IS CONCERNED, I SEE NO INFIRMITY IN THE SAME . I, THEREFORE, RESTRICT THE DISALLOWANCE TO RS . 47,580 /-. THE ASSESSEE GETS PARTIAL RELIEF ACCORDINGLY . 11 . GROUND NO 2 IS THUS PARTLY ALLOWED . 12 . IN GROUND NO 3, THE APPELLANT HAS RAISED THE FOLLOWING GRIEVANCE : - III . DISALLOWANCE U / S . 14A OF THE I . T . ACT - RS . 1,85,012 /- 1 . THE LD . CIT ( A ) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE U / S . 14A OF THE ACT OF RS . 1,85,012 /- AS MADE BY THE LD . A . O EVEN THOUGH SIMILAR DISALLOWANCE MADE IN EARLIER ASSESSMENT YEAR 2011 - 12 MADE BY THE LD . A . O HAS BEEN DELETED BY THE CIT ( A ) VIDE APPELLATE ORDER NO . CIT ( A )- 9 / 377 / DCIT . CIR . 8 / 14 - 15 DATED 02 . 09 . 2015 WHI LE RELYING UPON THE DECISION OF HON'BLE AHMEDABAD TRIBUNAL IN THE CASE OF ITO VS . KARNAVATI PETROCHEM PVT . LTD . 2 . THE LD . CIT ( A ) AND THE LD . A . O ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY CONSIDER THE WRITTEN SUBMISSION FILED BY APPELLANT ALONG WITH VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY APPELLANT . THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND, ALTER OR MODIFY ANY OF THE GROUNDS S TATED HEREINABOVE E ITH ER BEFORE OR AT THE TIME OF HEARING . 13 . TO ADJUDICATE ON THIS APPEAL, ONLY A FEW FACTS NEED TO BE TAKEN NOTE OF . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHILE THE ASSESSEE HAS DISCLOSED SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 5 OF 6 INCOME EXEMPT FROM TAX - I . E . SHARE OF PROFIT AND INTEREST INCOME FROM PARTNERSHIP FIRM, THE ASSESSEE DID NOT OF FER ANY DISALLOWANCE UNDER SECTION 14A . HE THUS PROCEED TO COMPUTE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D, AMOUNTING TO RS . 1,85,012 /-. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS . THE ASSESSEE IS NO T SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 14 . AGGRIEVED BY THE STAND OF THE CIT ( A ) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE ME . 15 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 16 . I FIND THERE IS NO DISCUSSIONS ON MERITS EITHER IN THE ORDER OF THE ASSESSING OFFICER OR THE CIT ( A ) , AND BOTH OF THESE AUTHORITIES HAVE DEALT WITH THE ISSUE ONE THE BASIS OF SWEEPING GENERALIZATIONS AND VAGUE REASONING . IN THIS VIEW OF THE MATTER, I THIS VIEW OF THE MATTER, I CONSIDER IT APPROPRIATE TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER BY WAY OF A REASONED ORDER, IN ACCORDANCE WITH THE LAW, AND AFTER GIVING YET ANOTHER OPPORTUNITY OF HEARING TO THE ASSESSEE . ORDERED, ACCORDINGLY . 17 . IN VIEW OF THE DISCUSSIONS ABOVE, THIS ISSUE STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER IN THE TERMS INDICATED ABOVE . 18 . GROUND NO 3 IS THUS ALLOWED FOR STATISTICAL PURPOSES . 19 . IN THE RESULT, APPEAL IS PARTLY ALLOWED . IN THE TERMS INDICATED ABOVE . ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - PRAMOD KUMAR ( VICE PRESIDENT ) AHMEDABAD, DATED THE 12 TH OF MARCH , 2020 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE SHRI BHANUBHAI J . SANGANI ITA NO. 601/AHD/2017 PAGE 6 OF 6 BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD