ACIT, Jaipur V. M/S SHRI MAHALAXMI BIDI TRADING CO., Jaipur

ITA 643/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87500 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Assessee Lawyers: T C JAIN
• Keywords: Opportunity of being heard; Commercial expediency

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 643/JP/2012 ASSTT. YEAR- 2009-10 PAN NO. AAJFS 8821 N THE A.C.I.T., M/S SHRI MAHALAXMI BIDI TRADING CIRCLE-2, JAIPUR. VRS. COMPANY, BULLION TRADING, HA LDIYON KA RASTA, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- MRS. NEENA JEPH. ASSESSEE BY :- SHRI T.C. JAIN. DATE OF HEARING : 13/11/2014 DATE OF PRONOUNCEMENT : 09/ 01/2015 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 13/04/2012 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR TH E A.Y. 2009-10. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE AD DITION OF RS. 1,42,15,809/- MADE BY THE ASSESSING OFFICER AS THE ASSESSEE COULD NOT ESTABLISH NEXUS BETWEEN BORROWED FUNDS AND BUSINESS PURPOSES. 2. THE LEARNED ASSESSING OFFICER OBSERVED THAT TOTAL INTEREST PAID BY THE ASSESSEE DURING THE YEAR AT RS. 2,78,90,623/ -, WHICH WAS RS. 2,46,37,464/- FOR THE IMMEDIATE PRECEDING YEAR. THIS AMOUNT INCLUDED ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 2 RS. 30,19,687/- AS INTEREST PAID FOR BANKING CHARGE S AND COMMISSION, RS. 1,36,74,814/- AS INTEREST PAID TO PARTNERS AND RS. 1,11,96,122/- AS INTEREST ON OTHER DEPOSITS. HE FURTHER OBSERVED THA T LOANS HAD INCREASED FROM RS. 3.2 CRORES TO RS. 4.12 CRORES. H E GAVE THE COMPARATIVE CHART OF THE FUND AVAILABLE WITH THE ASS ESSEE, WHICH IS REPRODUCED AS UNDER:- S. N O. ON 31/03/2008 (RS.) ON 31/08/2009 (RS.) 1. CASH IN HAND 52,05,360/ - 15,96,311 2. CURRENT ACCOUNT WITH BANKS 14, 62,99,131/ - 13,40,12,620/ - 3. FIXED DEPOSITS 4,00,00,000/ - 5,00,00,000/ - 4. SUNDRY DEBTORS NIL NIL TOTAL 19,15,04,491/ - 18,56,08,931/ - BORROWED FUNDS 3,20,84,771/ - 4,12,08,200/ - THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE ON PAYMENT OF INTEREST WITHOUT ANY NEED O F THE COMPANY FOR BUSINESS PURPOSES, WHICH WAS REPLIED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, THE LEARNED ASSES SING OFFICER CONCLUDED AS UNDER:- 1. THE PLEA OF THE ASSESSEE THAT NO FRESH LOANS HAV E BEEN RAISED IS WRONG; THE SAME WAS RS. 3,20,84,771/- AT TH E END OF THE F. YEAR 2007-08, WHICH INCREASED TO RS. 4,12,08,200/- DURING THE PERIOD IN QUESTION. DESPIT E HAVING RAISED THE LOANS OF RS. 91,23,429/- AND THE ASSESSEE STILL SUBMITS THAT HE HAS NOT RAISED ANY L OAN DURING THE PERIOD. ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 3 2. THE CASES ON WHICH THE ASSESSEE HAS RELIED HIS SUBMISSION DO NOT HAVE THE FACTS SIMILAR TO THAT OF THE ASSESSEE. HERE THE ASSESSEE IS RAISING LOANS AND PA YING THE INTEREST ON DESPITE HAVING EXCESSIVE FUNDS WITH IT WHERE AS THE CASES WON WHICH HE HAS QUOTED IN SUPPORT OF HIS CONTENTION ARE REGARDING THE LOANS RAISED BY THE ASSESSEE TO GIVE THE LOANS TO THE SUBSIDIARY COMPAN IES AND CLAIMING THE EXPENDITURE OF INTEREST FOR THE PA YMENTS OF LOANS, WHEREAS IN THIS CASE THE LOANS HAVE BEEN T AKEN DESPITE HAVING THE CASH SURPLUS WHICH IS MORE THAN FOUR TIMES THE LOANS RAISED. 3. THE DEBTORS FOR THE YEAR IN QUESTION AND THE LAST TWO PRECEDING YEARS ARE NIL AND THEREBY ALL THE PROCEED S OF THE SALES MADE DURING THE YEAR AMOUNTING TO RS. 154 .7 CRORES HAVE BEEN REALIZED BY THE END OF THE YEAR. THE CLAIM OF THE ASSESSEE OF INTEREST PAID HAS TO BE ALLOWED KEEPING IN VIEW THE PROVISIONS OF SECTION 36(1)(III) AND THE ONUS OF IS ON THE ASSESSEE TO ESTABLISH WITH THE FACTS AN D FIGURES THAT THE BORROWED FUNDS ON WHICH THE INTEREST HAS BEEN CLA IMED HAS BEEN UTILIZED FOR THE PURPOSE OF THE BUSINESS AND W HEN THE FACTS AND FIGURES ARE NOT GIVEN OR NOT TO THE SATISFACTIO N OF THE A.O., THE AMOUNT CANNOT BE ALLOWED AS DEDUCTION. FURTHER, THERE ARE NO LOANS FROM THE BANKS AND THE ASSESSEE HAS CLAIMED HUGE DEDUCTION OF RS. 30,19,687/-. THE EXPLA NATION GIVEN THE ASSESSEE IN THE POINT NO. 3 CLEARLY STATE S THAT ALL THESE EXPENSES ARE NOT INCIDENTAL TO THE BUSINESS E.G. GI VING THE REFUND OF THE DD CHARGES TO THE PARTIES FOR MAKING PAYMENTS ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 4 THROUGH DD, WHEREAS HE IS HIMSELF PAYING THE DD CHA RGES TO THE BANKS. NO BANK CHARGES ANY AMOUNT FOR THE CLEARANCE OF THE CHEQUES OR PAYMENTS THROUGH RTGS. THE ASSESSEE HAS AL SO FAILED TO PROVE THE BUSINESS EXIGENCY OF THE EXPENS ES FOR THE BUSINESS PURPOSE. THEREFORE HE MADE ADDITION OF RS. 1,42,15,809/- IN T HE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A ), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT NO NEW LOAN WAS T AKEN BY THE ASSESSEE BUT CAPITAL OF RETIRING PARTNERS HAD BEEN SHOWN AS UNSECURED LOANS, THEREFORE, LOAN AMOUNT INCREASED COMPARED TO PRECEDING YEAR, ACTUALLY NO LOAN WAS TAKEN BY THE COMPANY. SHE FURTH ER OBSERVED THAT BOTH THE DISALLOWANCES ON IDENTICAL FACTS NAMELY INT EREST ON UNSECURED LOAN AND BANK CHARGES AND COMMISSION PAID TO THE BA NK WERE THE SUBJECT MATTER OF ADJUDICATION BY THE HONBLE ITAT J AIPUR B BENCH, JAIPUR IN THE CASE OF ASSESSEE FOR A.Y. 2008-09 VID E ITS ORDER DATED 13/1/2012 IN ITA NO. 769/JP/2011. THE HONBLE ITAT GA VE FINDING IN FAVOUR OF THE ASSESSEE ON BOTH THE ISSUES BY OBSERV ING THAT THE INCREASE IN BORROWINGS WAS DUE TO THE CREDIT BALANCE OF THE TWO RETIRED PARTNERS AS UNSECURED LOANS. IT WAS ALSO OBSERVED TH AT THE ASSESSEE HAD PLACED ALL ITS CARDS AND ITS BALANCE SHEETS, WH ICH DID NOT INDICATE ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 5 ANY ASSETS WHICH WERE NOT FOR THE PURPOSE OF BUSINESS . THEREFORE, THE FACTS OF THE CASE WERE COVERED BY THE FINDING OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS. SIMILARLY, REGARDING THE BANK CHARGES AND COMMISSION THE HONBLE ITAT FOUND THE EXPLANATION OF THE ASSESSEE ACCEPTABLE AND ALLOWED THE CLAIM. SINCE THE FACTS OF THE CASE ARE IDENTICAL FOR A.Y. 2008-09 UNDER THE YEAR UNDER CON SIDERATION, THE LEARNED ASSESSING OFFICER HAD FAILED TO BRING ANY N EW EVIDENCE OR ARGUMENT OR JUDICIAL PRONOUNCEMENT TO CONTROVERT TH E FINDING OF HONBLE ITAT, JAIPUR BENCH, JAIPUR IN CASE OF ASSESS EE ON SAME FACTS THE MATTER IS COVERED BY THE FINDING OF THE HONBLE ITAT. ACCORDINGLY, SHE DELETED THE ADDITION. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED D .R. VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSES SING OFFICER. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON ASSESSEES OWN CASE FOR A.Y. 2008-09 WHERE IDENTI CAL ISSUE HAS BEEN DECIDED BY THE HONBLE ITAT, JAIPUR B BENCH, JAIPUR IN FAVOUR OF THE ASSESSEE IN BOTH THE COUNTS. HE FURTHER SUBM ITTED THAT THERE IS NO FRESH BORROWING DURING THE YEAR BUT CAPITAL OF RE TIRING PARTNERS WERE SHOWN AS UNSECURED LOANS FROM THE PRECEDING YEARS, T HEREFORE, CASE IS ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 6 COVERED BY THE ORDER OF THE HONBLE ITAT. THUS, HE P RAYED TO CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ISSUE IS IDENTICAL TO A .Y. 2008-09, WHICH HAS BEEN DECIDED BY THE COORDINATE BENCH IN ITA NO. 769/JP/2011 FOR A.Y. 2008-09 IN ASSESSEES OWN CASE. THE OPERATIVE P ORTION OF THE COORDINATE BENCH IS REPRODUCED AS UNDER:- 13. WE HAVE ALSO PERUSED THE BALANCE SHEET. THERE IS INCREASE IN PARTNERS CURRENT ACCOUNTS TO THE EXTEN T OF RS.8 CRORES. THERE IS INCREASE IN CURRENT LIABILITIE S & PROVISIONS TO BE EXTENT OF RS.26 CRORES. PAGE 38 OF PAPER BOOK SHOWED THAT FIXED DEPOSITS ARE BEING TAKEN IN T HE LAST TWO MONTHS OF THE FINANCIAL YEAR AND ARE ENCASH ED IN THE MONTH OF APRIL. IT APPEARS THAT SUCH DEPOSITS A RE TAKEN TO HELP THE BANK AUTHORITIES TO SHOW THE DEPOS ITS AS ON THE LAST DAY OF THE FINANCIAL YEAR. 14. THE HONBLE APEX COURT IN THE CASE OF S.A. BUIL DERS (SUPRA) HAS OBSERVED AS UNDER: WE AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH COURT IN CIT V. DALMIA CEMENT (B) LTD. [2002] 254 ITR 377 THAT ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF), THE REVENUE CANNOT JUSTIFI ABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINES SMAN ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 7 OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT. THE INCOME-TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POI NT BUT THAT OF A PRUDENT BUSINESSMAN. AS ALREADY STATE D ABOVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS. 15. THE A.O. FROM THE BOOKS OF ACCOUNT COULD HAVE N OTICED AS TO WHETHER THERE ARE SUBSTANTIAL SURPLUSES DURING TH E YEAR. THE ASSESSEE HAS PLACED ALL HIS CARDS AND BALA NCE SHEETS DO NOT INDICATE ANY ASSET WHICH IS NOT FOR TH E PURPOSE OF BUSINESS. HENCE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF INTEREST. 16. IN RESPECT OF BANK CHARGES AND COMMISSION, THE ASSESSEE HAS EXPLAINED THE NATURE OF EXPENSES AND DETAILS HA VE BEEN PERUSED BY THE LD. CIT (A). WE THEREFORE FEEL T HAT LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.42,96,440/-. BY RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINAT E BENCH ON SIMILAR AND IDENTICAL FACTS, WE CONFIRM THE ORDER OF THE LE ARNED CIT(A). ITA 643/JP/2012 ACIT VS. M/S SHRI MAHALAXMI BIDI TRADING CO. 8 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2015. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 09 TH , JANUARY, 2015 * RANJAN COPY FORWARDED TO :- 1. THE ACIT, CIRCLE-2, JAIPUR. 2. M/S SHRI MAHALAXMI BIDI TRADING COMPANY, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 643/JP/2012) BY ORDER, AR ITAT JAIPUR.