Patel Jayantilal Bhavanbhai & Co., Patan V. The Income tax Officer.Ward-1, Patan

ITA 689/AHD/2012

• Counselvise Citation: 68920514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: A P SANDESARA

Judgement Text

, , , , SMC, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, SMC BENCH . .. . . .. . , ! ! ! ! BEFORE SHRI G.C. GUPTA, VICE-PRESIDENT ITA NO.689/AHD/2012 [ASSTT.YEAR : 2008-2009] PATEL JAYANTILAL BHAVANBHAI & CO. C/O. ASHOK G. DESAI TAX CONSULTANT B-203, KHEM PLAXA ADARSH VIDHYALAYA ROAD PATAN (N.G.) 384265. PAN : AACFP 0134 G /VS. ITO, WARD-(1) PATAN. ( (( (#$ #$ #$ #$ / APPELLANT) ( (( (%&#$ %&#$ %&#$ %&#$ / RESPONDENT) '() * + !/ ASSESSEE BY : SHRI A.P SANDESARA -. * + !/ REVENUE BY : SHRI D.K. MISHRA, JR.DR ./ * )01/ DATE OF HEARING : 27 TH NOVEMBER, 2013 234 * )01/ DATE OF PRONOUNCEMENT : 6.12.2013 !5 / O R D E R THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF THE CIT(A), GANDHI NAGAR, DATED 23.12.2011. 2. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE IS AS UNDER: ITA NO.689/AHD/2012 -2- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, LEARNED CIT (APPEALS) ERRE D IN ENHANCING THE ADDITIONS TO RS.1,56,876 BY DISALLOWING INTEREST CLAIMED UNDER SECTION 36(1 )(I II) OF THE ACT. ACTION OF THE LEARNED CIT (APPEALS) IS WITHOUT JURISDICTION AND NOT SUSTAINABLE AS PER LAW . 1.2 THAT LEARNED CIT (APPEALS) FAILED TO BRING ON RECORD ANY MATERIAL OR FINDINGS TO ESTABLISH THAT APPELLANT HAD ADVANCED FUNDS BORROWED FROM PARTNERS TO ADVANCE THE SAME TO OTHER PARTIES, FOR NON-BUSINESS PURPOSE, AT LOWER INTEREST RATES. 1.3 THAT LEARNED CIT (APPEALS) WAS OUGHT TO HAVE CONSIDER THE DULY EXPLAINED FACTS THAT APPELLANT HA D AS A PRUDENT BUSINESS-MAN PARKED ITS TEMPORARILY AVAILABLE FUNDS WITH SOME PANICS ON WHICH IT EARNED INTEREST. HAD, APPELLANT KEPT THE SAID FUNDS IN ITS CURRENT BANK ACCOUNT IT WOULD HAVE NOT RECEIVED ANY INTEREST AT ALL. HENCE, CONTENTION OF THE LEARNED C IT (APPEALS) THAT APPELLANT HAD INVESTED BORROWED FUND S FROM PARTNERS TO ADVANCE THE SAME TO CONCERNS AT LOWER RATE OF INTEREST, IS WITHOUT PROPER APPRECIAT ION OF FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE INTEREST AMOUNTING TO ` 1,56,876/- HAS BEEN DISALLOWED BY THE CIT(A) ON THE PLEA THAT THE ASSESSEE HAS PAID INTER EST TO ITS PARTNERS CAPITAL AT THE RATE OF 12% PER ANNUM AND HAS CHARGED INTEREST AT THE RATE OF 6% FROM THREE PARTIES TO WH OM THE AMOUNT WAS ADVANCED. HE SUBMITTED THAT THE BUSINESS OF TH E ASSESSEE IS SEASONAL BUSINESS OF PURCHASE AND SALE OF AGRICULTU RE PRODUCE, AND THEREFORE, WHENEVER THERE WAS AN IDLE MONEY AVA ILABLE WITH THE ASSESSEE, IT WAS DEPOSITED WITH THESE PARTIES O N TEMPORARY BASIS, AND THERE WAS FREQUENT ENTRIES OF DEPOSITS A ND WITHDRAWALS ITA NO.689/AHD/2012 -3- WITH THESE PARTIES AND THE ASSESSEE CHARGED 6% PER ANNUM INTEREST FROM THESE PARTIES. HE REFERRED TO THE CO PIES OF THE ACCOUNTS OF THESE PARTIES FILED IN THE COMPILATION FILED BEFORE THE TRIBUNAL, WHICH SHOW HUGE FLUCTUATION OF BALANCES D URING THE YEAR. IN THE ACCOUNT OF M/S.PATEL BHAVANBHAI KHODI DAS & CO., THERE WAS A CREDIT BALANCE OF ` 16,42,711/- AS ON THE OPENING DATE OF THE ACCOUNTING PERIOD AND THE CLOSING WAS SHOWED A DEBIT BALANCE OF ` 21,09,343/-. HE SUBMITTED THAT IT IS NOT A CASE OF DIVERSION OF BORROWED MONEY TO INTEREST FREE LOAN A DVANCED BY THE ASSESSEE. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE AS SESSEE HAS NOT PLACED ANY EVIDENCE ON RECORD TO PROVE THAT ITS BUS INESS WAS SEASONAL IN NATURE, AND THEREFORE, THE DISALLOWAN CE OUT OF INTEREST CLAIM OF THE ASSESSEE WAS RIGHTLY MADE BY THE AO AND CONFIRMED BY THE CIT(A). HE RELIED ON THE ORDERS O F THE AO AND THE CIT(A). 5. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJO INDER SUBMITTED THAT THE AO IN THE ASSESSMENT ORDER HAS A DMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF AGRICULTURE PROD UCE, WHICH IS ESSENTIALLY SEASONAL BUSINESS, AND THEREFORE, THE ARGUMENTS OF THE LEARNED DR SHOULD NOT SUSTAINED. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A), AND COPIES OF VARIOUS ACC OUNT OF ITA NO.689/AHD/2012 -4- PARTIES, AND ACCOUNT STATEMENT OF THE ASSESSEE, AS FILED IN THE COMPILATION BEFORE ME. I FIND THAT THE AO HIMSELF HAS ADMITTED THAT THE ASSESSEE IS DEALING WITH THE PURCHASE AND SALE OF AGRICULTURE PRODUCE, WHICH IS APPARENTLY SEASONAL B USINESS. I FIND THAT THE ASSESSEE HAS PRUDENTLY USED ITS MONEY NOT IMMEDIATELY REQUIRED IN THE BUSINESS OF PURCHASE AND SALE OF AG RICULTURAL PRODUCE AND BY DEPOSITING THE SAME WITH DIFFERENT P ARTIES, AND HAS EARNED 6% PER ANNUM INTEREST THEREON. IT IS NO T A CASE OF DIVERSION OF FUNDS BY THE ASSESSEE. I FIND THAT TH ERE ARE NUMBER OF ENTRIES OF DEPOSITS AND WITHDRAWALS IN THE ACCOU NT OF THREE PARTIES, COPIES OF WHICH HAS BEEN FILED IN THE COMP ILATION BEFORE THE TRIBUNAL. THE OPENING AND CLOSING BALANCE IN T HE ACCOUNT OF THESE PARTIES HAS A HUGE DIFFERENCE. I FIND THAT C IT(A) HAS NOT GIVEN ANY VALID REASON FOR CONFIRMING THE ADDITION MADE BY THE AO. THE ASSESSEE HAS TRIED TO MAKE BEST USE OF THE IDLE MONEY FOR SHORT PERIOD, WHENEVER POSSIBLE, AND IT IS NOT A CASE OF DIVERSION OF BORROWED MONEY TO THE THIRD PARTY. IN THESE FACTS OF THE CASE, I FIND THAT NO CASE OF DISALLOWANCE OF IN TEREST COULD BE MADE OUT BY THE REVENUE, AND THE ISSUE IS DECIDED I N FAVOUR OF THE ASSESSEE, AND THE GROUND OF THE APPEAL OF THE A SSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- ( . .. . . .. . /G.C. GUPTA) /VICE-PRESIDENT