JYOTI STEELS, Jaipur V. ITO, Jaipur

ITA 653/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5614 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Keywords: Depreciation; Commercial expediency; Unabsorbed depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 653/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S JYOTI STEEL, 28, SHANKAR NAGAR, ROAD NO. 1, V.K.I. AREA, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 4(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACFJ 7289 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ASHISH SHARMA (ADV). JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI, (DCIT). LQUOKBZ DH RKJH[K@ DATE OF HEARING : 31/01/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/01/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 19/04/2016 PASSED BY THE LD CIT(A)-2, JAIPUR FOR TH E A.Y. 2007-08. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AGAINST UPHOL DING LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) OF RS. 75,104/- BY THE LD. CIT(A). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM FILED ITS RETURN OF INCOME ON 30/10/2007 DECLARING TOTAL INCO ME OF RS. 1,90,420/-. ITA 653/JP/2016_ M/S JYOTI STEEL VS ITO 2 ASSESSMENT WAS COMPLETED ON 29/10/2009 AT A TOTAL IN COME OF RS. 5,13,545/- AFTER GIVING BENEFIT OF SETTING OFF OF B ROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION. AN ADDITION OF R S. 2,23,125/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHICH HAS BEEN DISMISS ED VIDE ITS ORDER DATED 02/02/2012. IT IS OBSERVED THAT ONE OF THE PARTNER HAVING CREDIT BALANCE IN THE CAPITAL ACCOUNT. HOWEVER, AT THE YEAR END, THERE WAS DEBIT BALANCE OF RS. 16,81,098/- AND SHRI SUDESH SHARMA, ONE OF THE PARTNER OF THE FIRM WITHDRAWN RS. 21,00,000/- ON 17/05/2006 AND THIS AMOU NT WAS GIVEN OUT OF THE LOAN RECEIVED FROM M/S SHREE PRITHVI STEELS ROLLING MILLS PVT. LTD., ON WHICH THE INTEREST WAS PAID @ 15%. THE ASSESSING OFF ICER DISALLOWED THE CLAIM OF INTEREST OF RS. 2,23,125/-. THE ASSESSING O FFICER DENIED THE CLAIM OF INTEREST @ 15% OUT OF INTEREST PAYMENT OF RS. 2,7 2,751/-. THE PARTNER WAS HAVING ALWAYS DEBIT BALANCE IN HIS ACCOUNT, THUS, THE INTEREST BEARING FUNDS WERE UTILIZED FOR NON-BUSINESS PURPOSES BY THE PARTNER THROUGH OVER DRAFTING. 3. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON THE RECO RD. THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PENALTY OF RS. 75,104/- ON TH E ADDITION OF RS. 2,23,125/- ON ACCOUNT OF DIVERGING THE INTEREST BEA RING FUNDS FOR NON- ITA 653/JP/2016_ M/S JYOTI STEEL VS ITO 3 BUSINESS PURPOSES BY THE PARTNER. THE RELEVANT PORTI ON OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER:- 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE PENA LTY ORDER AND THE' SUBMISSIONS OF THE APPELLANT. THE APPEAL IS AGAINST THE LEVY OF PENALTY OF RS 75,104/- RELATING TO AN ADDITION OF RS 2,23,125/- ON ACCOUNT OF DIVERSION O F INTEREST BEARING FUNDS. THE ADDITION WAS CONFIRMED BY THE CIT(A)2, JAIPUR AND NO FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL AND THE ASSESSING OFFICER OPINE D THAT THIS WAS A CASE OF CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. DURING THE PENALTY PROCEEDINGS, THE ASSESSEE HAD STATED THAT I T WAS THE SETTLED BUSINESS POLICY OF THE FIRM, MUTUALLY D ECIDED BY THE PARTNERS NEITHER TO PAY INTEREST ON CREDIT B ALANCES NOR TO RECEIVE INTEREST ON THE DEBIT BALANCE OF THE CAPITAL. THE CIT(A) HAD SUSTAINED THE ADDITION AS TH E APPELLANT FIRM HAD FAILED TO EXPLAIN THE BUSINESS EXPEDIENCY OF ADVANCING SUCH A HEFTY AMOUNT TO THE PARTNER AND THE PURPOSE OF WITHDRAWING BY THE PARTNER WAS PURELY PERSONAL AND NO COMMERCIAL EXPEDIENCY COULD BE EXPLAINED BY THE APPELLANT. IN THE PROCEEDINGS BEFORE ME, THE APPELLANT HAS ST ATED THAT IT IS MUTUALLY DECIDED SINCE INCEPTION THAT NO INTEREST WAS TO BE CHARGED ON THESE BALANCES. IT HAS FURTHER BEEN SUBMITTED THAT EVEN IN THE PREVIOUS YE AR THIS HAS BEEN ACCEPTED AND NO ADDITION MADE ON THIS COUNT HAS BEEN MADE. ITA 653/JP/2016_ M/S JYOTI STEEL VS ITO 4 THE ADDITION HAS BEEN MADE AS INTEREST WAS NOT CHAR GED ON THE DEBIT BALANCE IN THE PARTNERS ACCOUNT. IT WAS NOTICED THAT THAT DURING THE YEAR THE PARTNER HAS WITHDRAWN A SUM OF RS.21,00,000/- AND THE SOURCE FROM THE SAME AS PER ASSESSEES OWN CONFIRMATION FILED, IS FROM INTEREST BEARING LOAN TAKEN BY THE FIRM FROM M /S. SHRI PRITHVI STEEL ROLLINGS MILL LTD., ON WHICH AN I NTEREST OF 15 % HAS BEEN PAID. FURTHER, THE PURPOSE OF WITHDRAWAL WAS CLAIMED TO BE PURELY PERSONAL AND NO COMMERCIAL EXPEDIENCY COULD BE EXPLAINED. THE CIT(A) ALSO HELD THAT THE COMMERCIAL EXPEDIENCY OF THE WITHDRAWAL COULD NOT EXPLAINED FOR THE HEFTY WITHDRAWAL . THUS, IT IS CLEAR THAT THERE HAS BEEN FURNISHING OF INACCURATE PARTICULARS OF INCOME LEADING TO CONCEAL MENT OF INCOME. A CLEAR DIVERSION OF INTEREST BEARING FU NDS FOR PERSONAL USE HAS BEEN CLEARLY BROUGHT OUT. IN VIEW O F THE ABOVE, THE PENALTY LEVIED IS CONFIRMED. DURING THE COURSE OF HEARING, THE LD AR OF THE ASSE SSEE WAS UNABLE TO CONTROVERT THE FINDING RECORDED BY THE LD. CIT(A). I T WAS WELL ESTABLISHED THAT THE ASSESSEE HAS BORROWED FUND ON THE INTEREST @ 15% FROM M/S PRITHIVI STEEL ROLLING MILL LTD., WHICH HAS BEEN WITH DRAWN BY ONE OF THE PARTNER AND THERE WAS NO COMMERCIAL EXPEDIENCY ESTAB LISHED FOR OVERDRAWAL OF THE ACCOUNT BY THE PARTNER, THUS IT WA S VERY WELL ESTABLISHED THAT THE INTEREST BEARING FUNDS WERE UTILIZED FOR NO N-BUSINESS PURPOSES OF THE ASSESSEE. THEREFORE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS ITA 653/JP/2016_ M/S JYOTI STEEL VS ITO 5 OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. KEEPING IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I SUSTA IN THE ORDER OF THE LD. CIT(A) AND DISMISS THE ASSESSEES APPEAL. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/01/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 ST JANUARY, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S JYOTI STEEL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 4(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 653/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR