Sh. Charanjeet Singh Chadha, Ludhiana V. JCIT, Ludhiana

ITA 655/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8984 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K MUKHI
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 655/CHD/2016 ASSESSMENT YEAR : 2010-11 SHRI CHARANJEET SINGH CHADHA, VS THE JCIT, 317-A, VTC HOUSE, RANGE - VI, INDUSTRIAL AREA-A, MOHALI. LUDHIANA. PAN: AALPC5807A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MUKHI RESPONDENT BY : SHRI SUSHIL KUMAR,CIT-DR DATE OF HEARING : 09.11.2016 DATE OF PRONOUNCEMENT : 11.11.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-3 LUDHIANA DATED 04.03.2016 FOR ASSESSMENT YEAR 2010-11. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. GROUND NOS. 1 AND 4 ARE GENERAL AND NEED NO ADJUDICATION. 2 4. ON GROUND NO.2, ASSESSEE CHALLENGED THE DISALLOWANCE OF COMMISSION OF RS. 3,04,400/- PAID T O SHRI SARABJEET SINGH. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, IT IS OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 21,79,784/- TO THE PROFIT & LO SS ACCOUNT UNDER THE HEAD COMMISSION. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF COMMISSION PAID AND NATURE OF SERVICES RENDERED. THE ASSESSEE SUBMITTE D THE DETAILS OF COMMISSION PAID AND SUBMITTED THAT TDS H AS BEEN DEDUCTED AND PAID TO THE GOVERNMENT ACCOUNT. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF PARTIES FO R WHOM THE COMMISSION AGENTS HAVE WORKED, ALONGWITH DETAILS OF SALES MADE TO THEM AND THE CONFIRMATION OF THE PARTIES TO WHOM COMMISSION IS PAID. THE ASSESS EE COULD NOT SUBMIT EVIDENCE OF SERVICES RENDERED OR CONFIRMATION IN RESPECT OF COMMISSION PAID TO ONE PERSON NAMELY SHRI SARABJIT SINGH TO WHOM COMMISSIO N HAS BEEN PAID AMOUNTING TO RS. 3,04,400/-. ACCORDINGLY, THE COMMISSION PAID TO THE AFORESAID PERSON WAS DISALLOWED AND ADDED TO THE INCOME OF TH E ASSESSEE. 5. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ASSESSING OFFICER HAS FAILED TO CONSIDER THE F ACT THAT COPY OF THE INCOME TAX RETURN FILED BY SHRI SARABJIT SINGH AND DETAILS OF COMMISSION WERE FILED AT ASSESSMENT STAGE. THE INCOME TAX RETURN AND 3 COMPUTATION CHART DULY REFLECTED THAT COMMISSION INCOME HAS BEEN DULY INCLUDED IN THE TOTAL INCOME DECLARED BY SHRI SARABJIT SINGH AND AS SUCH, THE CO PY OF INCOME TAX RETURN SUBMITTED SUFFICE THE REQUIREMENT OF CREDIT WORTHINESS OF SHRI SARABJIT SINGH. 6. THE LD. CIT(APPEALS), HOWEVER, NOTED THAT ASSESS EE DID NOT SUBMIT ANY EVIDENCE OF SERVICES RENDERED OR CONFIRMATION IN RESPECT OF SHRI SARABJIT SINGH TO W HOM THE ABOVE COMMISSION HAVE BEEN PAID. DURING THE APPELLATE PROCEEDINGS, ASSESSEE FILED COPY OF THE I TR AND COMPUTATION OF INCOME OF SHRI SARABJIT SINGH REGARD ING COMMISSION PAID BUT NO APPLICATION HAVE BEEN FILED FOR ADMISSION OF ADDITIONAL EVIDENCE. THIS GROUND WAS, ACCORDINGLY, DISMISSED. 7. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF T HE VIEW NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT CO PY OF THE ITR AND COMPUTATION OF INCOME OF SHRI SARABJ IT SINGH ONLY WERE FILED BEFORE LD. CIT(APPEALS) AT AP PELLATE STAGE WHICH PROVES THAT SHRI SARABJIT SINGH RENDERE D SERVICES FOR THE ASSESSEE AND COMMISSION HAVE BEEN PAID GENUINELY TO HIM. THE CONTENTION OF LD. COUNSEL FO R THE ASSESSEE HAS NO MERIT BECAUSE THE ASSESSEE PLEADED THAT COMMISSION WAS PAID TO SHRI SARABJIT SINGH FOR THE SERVICES RENDERED FOR THE BUSINESS OF THE ASSESSEE. 4 HOWEVER, ASSESSEE HAS NOT PRODUCED ANY EVIDENCE BEF ORE THE AUTHORITIES BELOW REGARDING AS TO WHAT SERVICES HAVE BEEN RENDERED BY SHRI SARABJIT SINGH FOR THE BUSINE SS OF THE ASSESSEE. NO CONFIRMATION FROM SHRI SARABJIT S INGH WAS FILED BEFORE THE AUTHORITIES BELOW. ONLY INCOM E TAX RETURN AND COMPUTATION OF INCOME OF SHRI SARABJIT SINGH WAS FILED TO SHOW THAT HE HAS DECLARED THE COMMISSION INCOME IN HIS RETURN OF INCOME ON WHICH TDS HAS BEEN DEDUCTED BUT THIS WILL NOT SERVE THE PURPOSE BECAUSE FIRSTLY THE ASSESSEE DID NOT FILE A NY REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE LD. CIT(APPEALS) AND FURTHER, MERELY SHOWING COMMISSION INCOME BY SHRI SARABJIT SINGH WOULD NOT PROVE THAT HE INDEED RENDERED SERVICE FOR THE ASSESSEE. IN THE ABSENCE OF ANY COGENT AND RELEVANT EVIDENCE ON RECO RD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF AUTHORITIES BELOW. THERE IS NO MERIT IN GROUND NO. 2 OF APPEAL OF THE ASSESSEE. SAME IS, ACCORDING LY, DISMISSED. 8. ON GROUND NO. 3, ASSESSEE CHALLENGED THE DISALLOWANCE OF RS. 1,46,585/- ON ACCOUNT OF INTERE ST FOR DIVERSION OF FUNDS FOR NON BUSINESS PURPOSES. AS P ER ASSESSMENT ORDER, IT WAS REVEALED THAT ASSESSEE HAD GIVEN AN ADVANCE OF RS. 9,21,542/- TO M/S CHARANJIT SINGH & SONS (HUF). THE ASSESSEE WAS ASKED TO EXPL AIN THE PURPOSE OF ADVANCE GIVEN TO HUF AND WHETHER INTEREST IS CHARGED. THE ASSESSEE WAS ASKED TO EXP LAIN 5 WHY INTEREST ON SUCH FUNDS DIVERTED FOR NON BUSINES S PURPOSES SHOULD NOT BE DISALLOWED. IT WAS SUBMITTE D BY THE ASSESSEE THAT NO INTEREST HAS BEEN CHARGED BECA USE THE FUNDS HAVE BEEN GIVEN OUT OF OWN CAPITAL. THE ASSESSEE'S ARGUMENTS WERE NOT ACCEPTED BECAUSE THE ASSESSEE HAS BORROWED FUNDS ON WHICH IT HAS BEEN PA ID TO THE EXTENT OF RS. 20,23,973/-. IT WAS, THEREFOR E, CLEAR THAT ASSESSEE HAS DIVERTED ITS INTEREST BEARING FUN DS FOR NON BUSINESS PURPOSES. THUS, THE PART OF THE BORROW ED FUNDS ARE BEING UTILIZED FOR NON BUSINESS PURPOSE, THEREFORE, CORRESPONDING AMOUNT OF INTEREST BEING P AID AND CLAIMED BY ASSESSEE AS EXPENSES WAS DISALLOWED. THE ASSESSING OFFICER MADE THE ABOVE ADDITION. 9. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ABOVE ADDITION IS MADE FOR DISALLOWANCE OF INT EREST WITHOUT CONSIDERING THE FACTS OF THE CASE. THE ASS ESSING OFFICER HAS FAILED TO CONSIDER THAT THE ASSESSEE HA S UNSECURED LOAN OF RS. 27,92,213/- AND CAPITAL OF RS . 1,12,16,727/- AS ON 31.03.2010 WHICH ARE MORE THAN THE AMOUNT ADVANCED I.E. RS. 9,21,542/-. THE ASSES SEE HAS NOT PAID ANY INTEREST ON UNSECURED LOANS AND TH E CAPITAL OF THE ASSESSEE ALSO REPRESENTS NON INTERES T BEARING FUNDS. THEREFORE, ADDITION IS UNJUSTIFIED. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT CONTENTIO N OF THE ASSESSEE AND CONFIRMED THE ADDITION. 6 10. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF THE VIEW ADDITION IS WHOLLY UNJUSTIFIED. THE LD. COUNSE L FOR THE ASSESSEE FILED COPY OF THE LEDGER ACCOUNT OF SH RI CHARANJIT SINGH & SONS, HUF TO SHOW THAT ON 01.04.2009, THERE WAS DEBIT OPENING BALANCE OF RS. 15,21,542/- AND DURING THE YEAR UNDER CONSIDERATION , ASSESSEE HAS RECEIVED RS. 9 LACS. IN BETWEEN THE Y EAR, ASSESSEE HAS ALSO ADVANCED A SUM OF RS. 3 LACS TO T HE AFORESAID HUF. THEREFORE, THE DEBIT BALANCE AT THE END OF THE YEAR WAS RS. 9,21,542/-. IT IS, THEREFORE, CLEAR THAT THE SUBSTANTIAL AMOUNT WAS DEBIT BALANCE ON 1 ST DAY OF THE FINANCIAL YEAR I.E. ON 01.04.2009 AND LO ANS HAVE BEEN ADVANCED TO THE AFORESAID HUF IN THE PRECEDING ASSESSMENT YEAR. THE ASSESSEE HAS RECEIV ED RS. 9 LACS IN THE YEAR UNDER CONSIDERATION OUT OF T HE DEBIT BALANCE. THERE IS ONLY ONE ADVANCE OF RS. 3 LACS GIVEN TO THIS HUF IN THE YEAR UNDER CONSIDERATION. HOWEVER, ASSESSEE HAS SUFFICIENT CAPITAL AND UNSECU RED LOANS ON WHICH NO INTEREST HAVE BEEN PAID. THEREFO RE, THESE AMOUNTS ARE SUFFICIENT TO COVER NON-BUSINESS ADVANCE GIVEN TO THE AFORESAID HUF. 10(I) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CA SE OF KAPSON ASSOCIATES 381 ITR 204 HELD THAT, WHEN ASSESSEE HAVING SUFFICIENT INTEREST FREE ADVANCES T O COVER INTEREST FREE ADVANCES, NO DISALLOWANCE OUT OF INTE REST UNDER SECTION 36(1)(III) BE MADE. 7 11. CONSIDERING TOTALITY OF THE FACTS AND CIRCUMSTA NCES AND THE ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. WE, ACCORDI NGLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELET E THE ADDITION OF RS. 1,46,585/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH NOVEMBER, 2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD