Hema Kedia, Hyd, Hyderabad V. ITO, Ward-7(3), Hyd, Hyderabad

ITA 656/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6178 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Source of fund
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 656/HYD/2016 ASSESSMENT YEAR: 2010-11 SMT. HEMA KEDIA, HYDERABAD [PAN: ADOPK5513F] VS INCOME TAX OFFICER, WARD-7(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT SUMAN MALIK, DR DATE OF HEARING : 01-02-2017 DATE OF PRONOUNCEMENT : 08-02-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 12-02-2016 DECIDED EX-PARTE . ASSESSEE IS AGGRIEVED AND RAISED THE FOLLOWING GROUNDS WHICH ARE MATERIAL FOR DECIDING T HE APPEAL: 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS. 6 LAKHS U/S. 69A OF THE I.T. ACT WITHOUT CONSIDERING THE WRITTEN SUBMISSIONS FILED. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS. 3,90,000/-. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE LOAN TAKEN WAS IN VESTED IN THE BUSINESS ACTIVITY OF THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING INTEREST CLAIMED. I.T.A. NO. 656/HYD/2016 HEMA KEDIA :- 2 - : GROUND NOS. 1 & 5 ARE GENERAL IN NATURE. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND IS I N THE BUSINESS OF TRADING OF NON-EDIBLE OILS ETC., AND IS R UNNING THE BUSINESS IN THE NAME AND STYLE OF M/S. TANAY AGRO FO OD PRODUCT. IN THE COURSE OF SCRUTINY ASSESSMENT, ASSESSING OFFICE R (AO) HAS NOTICED THAT THERE WAS AN ADVANCE OF RS. 32 LAKHS REC EIVABLE FROM M/S. KOLOUR SPINTEK LTD. WHEN ENQUIRED, ASSESSEE SU BMITTED THAT THE SAID AMOUNT WAS ADVANCED FOR INVESTMENT IN SHARES I N THAT COMPANY DURING THE PERIOD 2004-05 TO 2008-09. AO AD DRESSED A LETTER REQUESTING FOR A CLARIFICATION TO THE SAID COMPA NY AND IN REPLY THEY HAVE SENT A BALANCE SHEET ON 31-03-2010 WHICH SHO WED THE BALANCE AT RS. 26 LAKHS. ASSESSEE SUBMITTED A LETTER STATING THAT THE AMOUNT OF RS. 32 LAKHS DEBITED TO THE SAID COMPANY IS CORRECT AND ACCURATE AND THE AMOUNTS WERE GIVEN DURING THE YEAR S 2004- 05 TO 2008-09. HOWEVER, AO TREATED THE DIFFERENCE OF RS. 6 LAKHS AS UNEXPLAINED MONEY OF ASSESSEE U/S. 69A OF THE A CT FOR THE YEAR UNDER CONSIDERATION. IN ADDITION TO THAT, AO ALSO CONS IDERED THAT ASSESSEE HAS ADVANCED SO MUCH AMOUNT WITHOUT CHARGING ANY INTEREST. SINCE ASSESSEE CLAIMED INTEREST OF RS. 12,72 ,539/- TO STATE BANK OF HYDERABAD, ON OD A/C, CORRESPONDING AMO UNT OF RS. 3,90,000/- AT 15% OF ADVANCE OF RS. 26 LAKHS WAS DIS ALLOWED. 3. BEFORE THE LD.CIT(A) ASSESSEE CONTENDED THAT THE PROV ISIONS OF SECTION 69A HAS NO APPLICATION AS ASSESSEE HAS SH OWN MORE AMOUNT AS INVESTED. FURTHER, IT WAS CONTENDED THAT THE A MOUNT DOES NOT PERTAIN TO THE YEAR. HOWEVER, LD.CIT(A) DISMI SSED THE GROUND AFFIRMING THE ACTION OF AO IN MAKING THE ADDI TION. LIKE- WISE, CIT(A) ALSO CONFIRMED THE DISALLOWANCE SO MADE OUT OF THE I.T.A. NO. 656/HYD/2016 HEMA KEDIA :- 3 - : INTEREST PAYABLE RELATING TO THE ADVANCE SO MADE TO THE SAID COMPANY. ACCORDINGLY, ON BOTH THE ISSUES, LD.CIT(A) CONFIRMED THE ACTION OF THE AO. HENCE THE PRESENT APPEAL. 4. LD. COUNSEL CONTENDED THAT ASSESSEE HAS ADVANCED TH E AMOUNT IN EARLIER YEARS WHICH WAS ALSO ACCEPTED BY T HE AO. FURTHER, ASSESSEE HAS ADVANCED MORE AMOUNT THAN WHAT WAS CONFIRMED BY THE SAID PARTY. HENCE, NO AMOUNT CAN BE BROUGHT TO TAX UNDER THE PROVISIONS OF SECTION 69 OR 69A. WITH R EFERENCE TO THE INTEREST ALSO IT WAS SUBMITTED THAT AMOUNT WAS UTILISE D FOR THE PURPOSE OF INVESTMENT IN SHARES FROM OUT OF HER SOURC ES AND NO AMOUNT OF BORROWED AMOUNT TAKEN FOR THE PURPOSE OF BUSI NESS WAS DIVERTED. HENCE, THE DISALLOWANCE OF INTEREST ALSO D OES NOT ARISE. 5. LD.DR, HOWEVER, RELIED ON THE ORDERS OF THE AO AND CIT(A). 6. I HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES AND THE PAPER BOOK FILED. AS FAR AS TH E ADDITION OF RS. 6 LAKHS IS CONCERNED, THE SAME CANNOT BE SUSTAINED AS THE PROVISIONS OF SECTION 69A HAS NO APPLICATION TO THE FAC TS OF THE CASE. THE PROVISIONS OF SECTION 69A ARE AS UNDER: UNEXPLAINED MONEY, ETC. SEC.69A. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUND T O BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND SU CH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF AC COUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EX PLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION OF THE MONEY, BULLION, JEWELL ERY OR OTHER VALUABLE ARTICLE, OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE MONEY AND THE VALUE OF THE BULLION, JEWELLERY O R OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FI NANCIAL YEAR. I.T.A. NO. 656/HYD/2016 HEMA KEDIA :- 4 - : 6.1. AS CAN BE SEEN FROM THE ABOVE PROVISION, ONLY W HEN ASSESSEE IS FOUND TO BE OWNER OF ANY MONEY ETC. WHICH IS NOT R ECORDED IN THE BOOKS OF ACCOUNT AND ASSESSEE OFFERS NO EXPLANATION, THEN, THE SAME WILL BE DEEMED TO BE INCOME OF ASSESSEE FOR SUC H FINANCIAL YEAR. HOWEVER, IN THE PRESENT CASE, THE AMOUNT WAS REC ORDED IN THE BOOKS OF ACCOUNT AS AN ADVANCE OF RS. 32 LAKHS. IF THE OTHER PARTY CONFIRMS ONLY RS. 26 LAKHS, AO AT BEST COULD HA VE ASKED FOR RECONCILIATION OF THE AMOUNT OF THE DIFFERENCE. HOWEV ER, THE PROVISIONS OF SECTION 69A DO NOT APPLY TO AN AMOUNT WHI CH IS ALREADY RECORDED IN THE BOOKS OF ACCOUNT. ACCORDING LY, AOS ACTION CANNOT BE UPHELD. MOREOVER, THE ADVANCE ALSO AS STATED BY ASSESSEE IS NOT MADE DURING THE YEAR. HENCE, NO ADDI TION CAN BE MADE IN THE IMPUGNED ASSESSMENT YEAR. ON THESE REASON S, I AM SATISFIED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS NOT ACCORDING TO THE PROVISIONS OF THE ACT AND FACTS. HENCE GROUND NO. 2 RAISED BY ASSESSEE IS ALLOWED. AO IS DIRECTED TO DELETE THE AMOUNT. 6.2. COMING TO THE ISSUE OF DISALLOWANCE OF INTEREST, IT IS NOTICED FROM THE BALANCE SHEET FOR THE YEAR PLACED ON RECORD TH AT THE BORROWINGS HAVE INCREASED FROM RS. 99,58,733/- AS O N 31-03-2009 TO RS. 1,02,96,791/- AS ON 31-03-2010. HOWEVER, AS STATED BY ASSESSEE, THE AMOUNT OF RS. 32 LAKHS WAS ADVANCED PR IOR TO MARCH, 2009. IF AO HAS TO DISALLOW ANY INTEREST FOR DIVERTIN G FUNDS ON WHICH INTEREST WAS BEING PAID, THEN, IT IS THE AOS DUT Y TO ESTABLISH THE NEXUS OF BORROWED FUNDS TO THAT OF FUNDS WHICH ARE ADVANCED. NOTHING WAS BROUGHT ON RECORD. MOREOVER, ASSESSEE A DMITS THAT SHE ADVANCED AN AMOUNT OF RS. 32 LAKHS, HOWEVER, THE DISALLOWANCE WAS MADE ONLY ON RS. 26 LAKHS WHICH WA S CONFIRMED I.T.A. NO. 656/HYD/2016 HEMA KEDIA :- 5 - : THE OTHER PARTY. THE AO HAS NEITHER VERIFIED THE FACTS OF THE CASE NOR APPLIED THE CORRECT PROVISIONS OF THE LAW. WHEN A SKED ABOUT THE NATURE OF ADVANCES AND SOURCE OF FUNDS WITH THE D ATES, LD. COUNSEL COULD NOT FURNISH ANY INFORMATION, AS IT PERTAI NS TO EARLIER YEARS. IN VIEW OF THAT, I AM OF THE OPINION THAT THIS ISSUE REQUIRES RE-EXAMINATION BY THE AO. KEEPING THAT IN MIND, I SET A SIDE THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE TO THE FILE OF AO TO EXAMINE WHETHER ASSESSEE HAS DIVERTED ANY BORROWED F UNDS ON WHICH INTEREST WAS CLAIMED FOR ADVANCING THE ABOVE AM OUNTS AND IN CASE THE NEXUS IS ESTABLISHED, THEN HE IS FREE TO DI SALLOW THE AMOUNT OF INTEREST. HE IS ALSO DIRECTED TO KEEP IN M IND WHETHER ANY SUCH DISALLOWANCE WAS MADE IN EARLIER YEARS, AS ASSESSEE SEEMS TO BE FILING RETURNS REGULARLY. ACCORDINGLY, TH E ISSUE INVOLVED IN GROUND NOS. 3 & 4 IS RESTORED TO THE FILE OF AO FOR FRESH CONSIDERATION AS PER THE FACTS OF THE CASE. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH FEBRUARY, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 8 TH FEBRUARY, 2017 TNMM I.T.A. NO. 656/HYD/2016 HEMA KEDIA :- 6 - : COPY TO : 1. SMT. HEMA KEDIA, HYDERABAD. C/O. SRI S. RAMA RAO , ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-7(3), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-3, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.