Sh. Sushil Kumar Bansal, Amritsar. V. The Income Tax Officer, Amritsar.

ITA 641/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7871 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: PADAM BHAL LD
• Keywords: Salary income; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.641(ASR)/2016 ASSESSMENT YEAR:2012-13 SH. SUSHIL KUMAR BANSAL, C/O BANSAL SWEETS HOUSE, LAWRANCE ROAD, AMRITSAR. PAN: AAMPB-4646D VS. INCOME TAX OFFICER, WARD 5(4), AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. PADAM BHAL (LD. CA) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 01.08.2017 DATE OF PRONOU NCEMENT: 11.08.2017 ORDER PER N. K. CHOUDHRY: THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE ON FEE LING AGGRIEVED AGAINST THE ORDER DT.18.10.2016 PASSED IN A PPEAL NO.67/2015-16 BY THE CIT(A)-2, AMRITSAR. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX(AP PEAL)-2, AMRITSAR HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,07,393/- ON ACCOUNT OF DISALLOWANCE OF INTEREST @ 9% ON RS.23,0 4,376/-. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL)-2, AMRITSAR HAS GROSSLY ERRED IN TREATING INTEREST BEARING INVE STMENTS AS INTEREST FREE ADVANCES GIVEN BY ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 2 THAT THE RETURN DECLARING TAXABLE INCOME OF RS.5,65,45 1/- WAS FILED ON 29 TH SEP. 2012, THROUGH E-FILING FOR THE ASST. YEAR:2012-13 AND THEREAFTER, THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT AND THE CASE WAS SELECTED FOR SCRUTI NY UNDER COMPULSORY SCRUTINY. THE ASSESSING OFFICER DISALLOWED THE AM OUNT OF RS.18,17,117/- ON PROPORTIONATE INTEREST @ 9% ON A CCOUNT OF RS.4,84,752/- OUT OF INTEREST U/S 36(1)(III) OF THE I. T. ACT. FINALLY, THE ASSESSING OFFICER PREFERRED THE DISALLOWAN CE BY OBSERVING AS UNDER: THE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE ACCOU NT, WHICH PROVE THAT THE ADVANCES WERE MADE BY THE ASSESSEE OUT OF HIS I NTEREST FREE FUNDS AVAILABLE WITH HIM. HOWEVER, AS PER BALANCE SHEET, TOTAL INTEREST BEARING AND NON-INTEREST BEARING FUNDS OF THE ASSESSEE HAS BEEN EXAMINED. AS PER BALANCE SHEET, THE ASSESSEE HAS TOTAL FUNDS OF RS.4 ,56,02.92/-, OUT OF WHICH FUNDS TO THE TUNE OF RS.1,54.88,455/- ARE INTEREST BEARING FUNDS AND THE BALANCE RS.3,01.13,367/- ARE NON-INTEREST BEARING F UNDS, WHICH ARE IN THE RATIO OF 34:66. THE ASSESSEE HAS ADVANCED AN AMOUNT OF RS.2,01,90,185/- ON WHICH NO INTEREST HAS BEEN CHARGED. THEREFORE, O N THE SAME RATIO (I.E. RATIO OF INTEREST BEARING FUNDS AND NON INTEREST BE ARING FUNDS 34:66), THE PROPORTIONATE INTEREST @ 9% IS DISALLOWED U/S 36(I) (III) OF THE IT ACT, WHICH COMES TO RS.6,17,820/-, CALCULATION OF WHICH ARE AS UNDER:- INTEREST @ 9% ON THE AMOUNT OF RS.2,01,90,185/- =18 ,17,117/- 34% (INT. BEARING FUNDS) OF RS.18,17,117/- =6,17,820/- TOTAL DISALLOWANCE OUT OF INTEREST COMES TO RS.6,17 ,820/-, BUT THE SAME IS RESTRICTED UPTO THE TOTAL BALANCE INTEREST EXPENSES OF RS.484752/-. HENCE, A DISALLOWANCE OUT OF INTEREST IS MADE AT RS.484752/- U/S 36(I)(III) OF THE IT ACT. (DIS, U/S 36(1)(III) RS.484752/- 4. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE ASSE SSING OFFICER, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. C IT(A) AND THE LD. ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 3 CIT(A) PARTLY CONFIRMED THE DISALLOWANCE, HOWEVER, REST RICTED THE DISALLOWANCE OF INTEREST @ 9% OF RS.23,04,376/- OR RS.2,07,393/- AS AGAINST THE DISALLOWANCE OF RS.4,84,752/-. 5. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE L D. CIT(A) THE ASSESSEE PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF HIS CASE SUBMITTED THAT THE ASSESSEE IS A PARTNER IN THE TWO FIRMS NAMELY M/S BANSAL SWEETS SHOP, CHANDIGARH AND M/S. BANSAL SWEET HO USE, AMRITSAR AND ALSO EARNED SALARY INCOME FROM M/S BANSAL S WEETS HOUSE, AMRITSAR AND ASSESSEE HAD DEBITED BALANCE WITH M/S BANSAL S WEET SHOP, CHANDIGARH AND THE SAID FIRM CHARGED INTEREST O F RS.8,07,920/- ON THE DEBIT BALANCE @ 15% PER ANNUM. FURTHER, THE A SSESSEE IS A PARTNER WITH M/S BANSAL SWEETS HOUSE, AMRITSAR AND RECEIV ED INTEREST @ 9% ON HIS CAPITAL AMOUNTING TO RS.6,89,860/-. THE LD. AR FURTHER SUBMITTED THAT THE AMOUNT ADVANCE TO M/S. BANSAL SWEET HOUSE WAS NOT INTEREST FREE BUT IT WAS CARRYI NG INTEREST AT THE 9% AND ASSESSEE HAD RECEIVED THE INTEREST AMOUNTING T O RS.6,89,860/- AS IS APPARENT FROM THE ORDER OF LD. CIT (A) ITSELF AT PAGE 6-7 OF HIS ORDER. HE SUBMITTED THAT WHILE CALCULATING T HE INTEREST FREE ADVANCES, THE LD. CIT(A) INCLUDED THIS AMOUNT IN THE I NTEREST FREE ADVANCES WHEREAS THE FACT IS THAT THIS AMOUNT WAS CARRYING INTEREST AND IF THIS AMOUNT IS EXCLUDED FROM THE INTEREST FREE ADVAN CES, THE NET ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 4 INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE VIS--VIS INTEREST FREE ADVANCES WILL BE MUCH MORE AND THEREFORE, RELYING UPON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE O F BRIGHT ENTERPRISES PVT. LTD. VS. CIT, THE LD. AR SUBMITTED THA T APPEAL MAY BE ALLOWED. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORD ER PASSED BY THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH WITH THE MATERIAL PLACED ON RECORD, WE FIND THAT FINDING OF LD . CIT(A) THAT THE AMOUNT OF 98,05,088/- WAS GIVEN INTEREST FREE IS NOT CO RRECT AS ASSESSEE HAD RECEIVED AN INTEREST ON THIS ADVANCE TO THE EXTENT OF RS. 6,89,860/- WHICH FACT IS VERIFIABLE FROM THE ORDER OF LD. CIT(A) ITSELF AT PAGE 6 & 7 OF THE ORDER AND IF WE EXCLUDE THIS AMOUNT FROM THE I NTEREST FREE ADVANCES AS NOTED BY LD. CIT(A), THE NET INTEREST FREE ADVANCES WILL BE LESS THAN THE AMOUNT OF INTEREST FREE FUNDS AVAILABLE W ITH THE ASSESSEE, THEREFORE, RELYING UPON THE JUDGMENT PASSED BY THE HON BLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF BRIGHT ENTERPRISES PVT . LTD. VS. CIT, WE ARE INCLINED TO SET ASIDE THE ORDER PASSED BY LD. CIT (A) BEING UNREASONABLE, ILLOGICAL AND PERVERSE. ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 5 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.0 8.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11.08.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER