M/s. Amit Goyal Enterprises (P) Ltd., New Delhi V. ITO, New Delhi

ITA 6726/DEL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2984 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 11-02-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: ABHISHEK ANAND
• Keywords: Principle of natural justice; Proportionate interest; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-6726/DE L/2015 (ASSESSMENT YEAR-2012-13) AMIT GOYAL ENTERPRISES (P.) LTD., C/O-M/S RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI-110049. PAN: AAFCA7358H (APPELLANT) VS ITO, WARD-2(3), NEW DELHI (RESPONDENT) ASSESSEE BY SH. ABHISHEK ANAND, ADV. REVENUE BY SH. MANOJ KUMAR CHOPRA, SR.DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 07.10.2015 OF CIT(A)-I, NEW DELH I PERTAINING TO 2012-13 AY ON THE FOLLOWING GROUNDS:- 1. THAT HAVING REGARD TO THE FACT AND CIRCUMSTANCES O F THE CASE, LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE ACTION OF LD.AO IN MAKING AGGREGATE ADDITION OF RS.10,08,629/ - ON ACCOUNT OF PROPORTIONATE INTEREST ON ESTIMATE/NOTIONAL BASIS. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACT ION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD.AO IN MAKING AGGREGATE ADDITION OF RS.10,08,629/- ON ACCOUNT OF PROPORTIONATE INTEREST IS BAD IN LAW, AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE. 3. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE RETURNED AN INCOME OF RS.78,039/- WHICH WAS SELECTED FOR SCRUTINY ASSESSM ENT UNDER CASS. THE ASSESSEE WAS STATED TO BE ENGAGED IN THE BUSINESS O F TRADING OF ELECTRONIC ITEMS & RETAIL COUNTER. ADDITION ON ACCOUNT OF PROPORTION AL DISALLOWANCE OF INTEREST WAS DATE OF HEARING 11.02.2016 DATE OF PRONOUNCEMENT 03.03.2016 I.T.A .NO.-6726/DEL/2015 PAGE 2 OF 4 MADE IN REGARD TO ADVANCING OF FOLLOWING LOANS AMOU NTING TO RS. 1,38,36,061/- TO THE FOLLOWING THREE COMPANIES:- (I) M/S AMIT GOYAL BUILDCON PVT. LTD. RS.47,77,718 /- (II) M/S GOYAL ELECTROWORLD RS.19,36,093/- (III) OM PRAKASH JINDAL RS.71,22,250/- 2.1. CONSIDERING THE EXPLANATION FILED THE AO HELD AS UNDER:- THE REPLY FILED BY THE ASSESSEE IS CONSIDERED AND NOT FOUND ACCEPTABLE. THE ASSESSEE ITSELF HAS ADMITTED THAT THE AMOUNT OF RS.72 LACS IS NOT LOCKED INTO FUNDED ASSETS. MOREOVER, THERE IS NO D ENYING TO THE FACT THAT THE AMOUNTS ADVANCED TO THE PARTY MR. OM PRAKASH JI NDAL HAS CLEAR NEXUS WITH THE INTEREST BORROWED FUNDS. IT IS IMPOS SIBLE TO BELIEVE THAT SOMEBODY WILL PART HIS OWN FUNDS WITHOUT ANY INTERE ST/CONSIDERATION AND WILL KEEP ON PAYING INTEREST ON LOAN RAISED FRO M THE BANKS. 3. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL B EFORE THE CIT(A). BEFORE THE SAID AUTHORITY, VARIOUS DECISIONS WERE RELIED UPON IN SUPPORT OF THE PRAYER THAT THE ADDITION WAS WRONGLY MADE ON FACTS. 3.1. THE SUBMISSIONS WERE NOT ACCEPTED HOLDING THAT NO COMMERCIAL EXPEDIENCY WAS DEMONSTRATED BY THE ASSESSEE. FOR READY-REFERE NCE, THE FACTUAL FINDING IS REPRODUCED HEREUNDER:- 1 HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN THAT THE APPELLAN T HAS ALLOWED INTEREST BEARING FUNDS TO ITS SISTER CONCERNS AND ONE SH. OM PRAKASH JINDAL OF RS.1,38,36,061/-. IT IS ALSO SEEN THAT APPELLANT HA S BORROWED RS.1,93,95,181/- FROM SBI AS CASH CREDIT FACILITY A ND HAS PAID INTEREST OF RS.43,03,372/-. IT IS OBSERVED BY THE AO THAT OUT O F THE AMOUNT BORROWED FROM SBI, THE APPELLANT HAS UTILIZED RS.12 1 LACS FOR PURCHASE OF ASSETS AND THE REMAINING AMOUNT OF RS.72,00,000/ - WAS NOT UTILIZED FOR ANY SPECIFIC PURPOSES. THE CONTENTION OF THE AP PELLANT THAT THERE IS NO CONCEPT OF NOTIONAL INCOME AND INTEREST PAYMENT CAN NOT BE DISALLOWED. HOWEVER, IT IS SEEN THAT THERE IS A CLEAR NEXUS BET WEEN THE AMOUNT BORROWED BY THE APPELLANT AND INTEREST FREE ADVANCE GIVEN TO SH. OM PRAKASH JINDAL TO THE EXTENT OF RS.71,22,250/-. THE INTEREST FREE LOANS GIVEN TO AMIT GOYAL BUILDCON PVT. LTD. OF RS.47,77, 718/- CLAIMED TO BE FOR DEVELOPMENT OF THE PROPERTY OWNED BY THE SAID C OMPANY FOR FUTURE BUSINESS OF THE APPELLANT COMPANY. HOWEVER, DUE TO RECESSION IN THE MARKET THE SAME COULD NOT BE ADJUDICATED. THE APP ELLANT HAS ALSO ADVANCED MONEY OF RS.19,36,093/- TO M/S GOYAL ELECT ROWORLD A PROPRIETARY CONCERN OF SH. AMIT GOYAL AND NO INTERE ST HAS BEEN CHARGED ON THIS ADVANCE. THE APPELLANT HAS NOT EXPLAINED AS WHAT WAS THE BUSINESS EXPEDIENCY FOR GIVING LOANS TO M/S GOYAL E LECTROWORLD WITHOUT CHARGING INTEREST. THE APPELLANT HAS ALSO CLAIMED THAT LOAN WAS GIVEN TO I.T.A .NO.-6726/DEL/2015 PAGE 3 OF 4 SH. O.P. JINDAL FOR PURCHASE OF SOME PROPERTY. HOWE VER, DUE TO THE RECESSION IN THE MARKET THE APPELLANT COMPANY LOST INTEREST IN THE SAID PROPERTY, IN THIS REGARD, THE APPELLANT HAS NOT SUB MITTED ANY DOCUMENT OR AGREEMENT WITH SH. O.P. JINDAL WHICH COULD ESTAB LISH THE NEXUS BETWEEN THE PURCHASE OF PROPERTY AND LOAN GIVEN TO SH. O.P. JINDAL. THERE IS NO CONFIRMATION FROM SH. O.P. JINDAL AND T HE PROPERTY FOR WHICH LOAN WAS GIVEN TO SH. O.P. JINDAL, THEREFORE, IT IS ESTABLISHED THAT AMOUNT TO THE EXTENT OF RS.72,00,000/- BORROWED FROM STATE BANK OF INDIA WAS DIVERTED FOR NON-BUSINESS PURPOSES IN THE FORM OF L OAN GIVEN TO SH. OP. JINDAL. THERE IS A CLEAR NEXUS BETWEEN THE INTEREST BEARING FUNDS DIVERTED FOR NON-BUSINESS PURPOSES. HENCE, THE DISA LLOWANCE OF INTEREST @ 14% ON THE AMOUNT OF RS.72,04,499/- (1,93,95,181 - 1,21,90,682) WHICH COMES TO RS.10,08,629/- IS JUSTIFIED AND SAME IS CONFIRMED. THE APPELLANT HAS PLACED RELIANCE ON VARIOUS CASE LAWS IN SUPPORT OF ITS CONTENTION. HOWEVER, THE FACTS OF THE CASE LAWS CIT ED BY THE APPELLANT ARE NOT IDENTICAL WITH THE FACTS OF THE APPELLANT'S CASE. HENCE, THE SAME ARE NOT APPLICABLE APPELLANT 4. STILL AGGRIEVED THE ASSESSEE IS BEFORE THE ITAT. THE LD. AR RELIES UPON THE SUBMISSIONS MADE BEFORE THE TAX AUTHORITIES TO STAT E THAT THE ADDITION HAS WRONGLY BEEN MADE ON FACTS. THE LD. SR. DR RELIES UPON THE ORDERS OF THE TAX AUTHORITIES. 5. A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD SH OWS THAT THE ASSESSEE INSTEAD OF PLACING NECESSARY FACTS IN SUPPORT OF IT S CLAIM HAS PLACED RELIANCE ON CERTAIN DECISIONS IN ORDER TO CANVASS THAT THE ISSU E WAS COVERED IN ITS FAVOUR. RATIO DECIDENDI OF A DECISION OPERATES ON CERTAIN S ET OF FACTS. BEFORE A DECISION CAN BE RELIED UPON, IT IS NECESSARY TO ESTABLISH TH AT FACTS ARE PARI MATERIA . NO SUCH EFFORT HAS BEEN MADE TO ESTABLISH COMMERCIAL EXPEDIENCY. IN THE FACTS OF THE PRESENT CASE, THE REVENUE HAS ESTABLISHED A CLE AR NEXUS BETWEEN THE AMOUNTS BORROWED FOR BUSINESS PURPOSES AND THE INTEREST FRE E ADVANCE MADE THEREFROM TO SH. OM PRAKASH JINDAL. THE ASSESSEE HAS STATED THA T IT IS FOR ACQUIRING CERTAIN PROPERTY WHICH DID NOT FRUCTIFY. HOWEVER NO EVIDEN CE IN SUPPORT OF THE SAID CLAIM IS FOUND TO HAVE BEEN PLACED ON RECORD. SIMILARLY FOR THE LOANS ADVANCED TO SH. AMIT GOYAL & M/S GOYAL ELECTROWORLD, THE ASSESSEE H AS CLAIMED BUSINESS EXPEDIENCY. NO EVIDENCE IN SUPPORT OF THE SAID CLA IM HAS BEEN BROUGHT ON RECORD. ACCORDINGLY AFTER HEARING THE SUBMISSIONS OF THE PA RTIES BEFORE THE BENCH WHERE I.T.A .NO.-6726/DEL/2015 PAGE 4 OF 4 THE LD. AR STATES THAT NECESSARY EFFORT MAY NOT HAV E BEEN PLACED ON RECORD. CONSIDERING THE OVERALL FACTUAL MATRIX, IT APPEARS THAT INSTEAD OF DEMONSTRATING ITS CLAIM ON FACTS, THE ASSESSEE HAS INFACT RELIED ON D ECISIONS. THE DECISIONS SHALL COME INTO PLAY ONLY AFTER THE FACTS HAVE BEEN THRA SHED OUT. IN THE FACTS OF THE PRESENT CASE THE SAID EFFORT IS FOUND TO BE MISSING . ACCORDINGLY CONSIDERING THE OVERALL FACTUAL MATRIX AND THE PLEADINGS OF THE PAR TIES IN THE INTERESTS OF SUBSTANTIAL JUSTICE IT IS CONSIDERED APPROPRIATE TO PROVIDE THE ASSESSEE AN OPPORTUNITY TO PLACE ON RECORD EVIDENCE IN SUPPORT OF ITS CLAIM. THE IMPUGNED ORDER IS ACCORDINGLY SET ASIDE AND RESTORED THE ISS UE BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO THE ASSESSEE TO PLACE ON RECO RD WHATSOEVER EVIDENCES IT HAS IN SUPPORT OF ITS CLAIM. THE OPPORTUNITY SO PROVID ED SHOULD NOT BE ABUSED AS FAILING WHICH THE CIT(A) WOULD BE AT LIBERTY TO PAS S A SPEAKING ORDER IN ACCORDANCE WITH LAW. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03 RD OF MARCH, 2016. SD/- (DIVA SINGH) JU DICIAL MEMBER DATED: 03/03/2016 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSIS TANT REGISTRAR ITAT NEW DELHI