SHRI SRI NARAIN DUSAD, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, JAIPUR

ITA 699/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2230 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA CIT DHK
• Keywords: Gift

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. 699/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 SRI NARAIN DUSAD, PROP.- DUSAD ELECTRICALS, H-29, TULSI MARG, BANIPARK, JAIPUR (RAJ)- 302016 CUKE VS. A.C.I.T., CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABIPD 5079 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA JHA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/01/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 04/01/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 19/06/2017 FOR THE A. Y. 2012-13. THE ONLY ISSUE INVOLVED IN THE APPEAL IS AGAINST CONFIRMING THE DISALLOWANCE OF RS. 2,52,271/- MADE BY THE ASSESSING OFFICER OUT OF INT EREST CLAIMED BY THE ASSESSEE FOR THE REASON THAT THERE WAS A DIVERSION O F INTEREST BEARING FUNDS FOR NON INCOME YIELDING AVENUES. ITA 699/JP/2017_ SRI NARAIN DUSAD VS ACIT 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF ELECTRICAL ISOLATORS, ELECTRICAL PANELS AND OTHER E LECTRICAL ITEMS. THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,20,280/- WAS FILED ON 28/09/2012. THE CASE WAS SELECTED FOR SCRUTINY. THE AS SESSING OFFICER DISALLOWED THE INTEREST EXPENSES TO THE EXTENT OF RS . 2,52,571/- OUT OF THE TOTAL EXPENSES DEBITED BY THE ASSESSEE IN THE P&L A CCOUNT AT RS. 16,20,557/-. THE MAIN REASON FOR DISALLOWANCE WAS THAT TOTAL ASSETS SIDE OF ASSESSEES PERSONAL BALANCE SHEET WAS RS. 1,69,54 ,675/- WHILE INVESTMENT IN THE PROPRIETORSHIP CONCERN WAS ONLY RS . 1,43,12,217/- AND IN THE OPINION OF THE ASSESSING OFFICER, THE BALANCE AMOUNT WAS UTILIZED FOR NON-BUSINESS PURPOSES. ACCORDINGLY, HE DISALLOWED TH E INTEREST TO THE EXTENT OF RS. 2,52,571/-. 3. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE BY HO LDING AS UNDER: 3.3.2 DETERMINATION : 1. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELL ANT HAS CLAIMED INTEREST EXPENSES OF RS. 16,20,557/- AGAINST AN INCOME OF RS . 5,37,356/- ON ACCOUNT OF INTEREST INCOME UNDER THE HEAD INCOME F ROM OTHER SOURCES. IT WAS EXPLAINED BY THE APPELLANT BEFORE THE AO THAT T HE UNSECURED LOANS TAKEN IN ITS INDIVIDUAL CAPACITY WERE TRANSFERRED T O ITS BUSINESS ENTITIES AND WERE USED FOR THE PURPOSES OF ITS BUSINESS ONLY . HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPLANATION SUBMITTED BY THE APPELLANT AND HAS DISALLOWED A SUM OF RS. 2,52,571/- OUT OF THE ABOVE INTEREST CLAIMED BY NOTING THAT AS PER PERSONAL BALANCE SHEET, THE TOTA L ASSETS OF THE APPELLANT WERE STATED AT RS. 1,69,54,675/-, OUT OF WHICH ONLY A SUM OF RS. ITA 699/JP/2017_ SRI NARAIN DUSAD VS ACIT 3 1,43,12,217/- WAS INVESTED INTO PROPRIETORSHIP BUSINESS AND THERE FORE THE AO HAS CONCLUDED THAT THE APPELLANT HAS DIVERTED IT S INTEREST BEARING FUNDS FOR NON-INCOME YIELDING ASSETS AND CONSEQUENT LY, THE AO HAS COMPUTED THAT THE APPELLANT HAD INVESTED ONLY 84.41 % OF ITS INTEREST BEARING FUNDS FOR BUSINESS PURPOSES AND REST OF THE FUNDS WERE DIVERTED FOR NON-BUSINESS PURPOSES AND ACCORDINGLY, THE AO H AS MADE AN ADDITION OF RS. 2,52,571/- THEREOF. (II) DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMI TTED BY THE APPELLANT THAT THE AO HAS REACHED TO A WRONG CONCLUSION THAT OUT O F TOTAL ASSETS, IT HAD INVESTED ONLY 84.41% FOR BUSINESS PURPOSES. IT WAS FURTHER SUBMITTED THAT DURING THE LAST FOUR YEARS, THE INVESTMENT OF THE A PPELLANT FOR BUSINESS PURPOSE WAS MORE THAN AMOUNT BORROWED ON INTEREST A ND HENCE THERE WAS NO CASE OF DIVERSION OF INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. IT WAS FURTHER SUBMITTED THAT OUT OF TOTA L LIABILITIES OF RS. 1,69,54,675, IT HAD ITS OWN CAPITAL OF RS. 51,01,64 4 AND IT WAS ASSUMED BY THE AO THAT ALL THE FUNDS UTILIZED BY THE APPELLANT WERE INTEREST BEARING WHICH IS CONTRARY TO THE FACTS. IT WAS SUBMITTED TH AT THE DISALLOWANCE SO MADE BY THE AO IS WRONG AND REQUESTED THAT THE SAME MAY BE DELETED. (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT AS PER PERSONAL BALANCE SHEET OF THE APPELLANT AS ON 31.03.2012, THE CAPITA L OF THE APPELLANT WAS RS. 51,01,644/- AND THE UNSECURED LOANS WERE TO THE TUNE OF RS. 1,09,50,000/- AND THE BALANCE SHEET TALLIED AT RS. 1,69,54,675/-. IT IS ALSO NOTED THAT AS ON 31.03.2012, THE APPELLANT HAS AN I NVESTMENT OF RS. 1,43,12,217/- IN ITS PROPRIETORSHIP CONCERNS. THE C ONTENTION OF THE APPELLANT THAT THE UNSECURED LOANS RAISED BY THE AP PELLANT IN ITS INDIVIDUAL CAPACITY WERE TRANSFERRED TO ITS BUSINESS ENTITIES AND WERE USED FOR THE PURPOSES OF THE APPELLANT HAS BEEN EXAMINED VERY CA REFULLY WITH THE ITA 699/JP/2017_ SRI NARAIN DUSAD VS ACIT 4 MATERIAL PLACED ON RECORD. IT IS NOTED THAT DURING THE FY 2009-10, THE APPELLANT HAS GIVEN GIFTS OF RS. 10 LAC AND 5 LAC T O SMT. SUNITA KHANDELWAL AND SMT. TARA PRAKASH MEHARWAL AND THE S AME WERE REDUCED FROM ITS CAPITAL. HOWEVER, DURING THE YEAR UNDER CO NSIDERATION, THE APPELLANT HAS PURCHASED LAND AT PALI ON 07.04.2011 FOR A CONSIDERATION OF RS. 18.50 LAC AND AT SARNA DUNGAR ON 18.08.2011 FOR A CONSIDERATION OF RS. 10.50 LACS INITIALLY, AFTER WITHDRAWING THE MON EY FROM ITS PROPRIETARY CONCERNS BUT DURING THE YEAR UNDER CONSIDERATION, T HE APPELLANT HAS RECEIVED FRESH LOANS TO THE TUNE OF RS. 33,33,800/- . FURTHER, IN THE PERSONAL BALANCE SHEET OF THE APPELLANT AS ON 31.03 .2012, THE LAND WAS SHOWN AT RS. 20,19,350/- I.E. THE LAND PURCHASED DU RING THE YEAR UNDER CONSIDERATION WAS NOT A BUSINESS ASSET. IT IS ALSO NOTED THAT THE AMOUNT OF RS. 29 LAC WAS NOT REDUCED FROM ITS CAPITAL AS IS E VIDENT FROM ITS CAPITAL ACCOUNT FOR THE FY 2011-12. THESE FACTS CLEARLY EST ABLISH THAT INTEREST BEARING FUNDS WERE USED FOR NON BUSINESS PURPOSES A LSO I.E. NOT USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OF THE APPELLANT AS CLAIMED BY IT. THEREFORE, LOOKING TO THE TOTALITY O F FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE AO AS RECORDED IN THE ASSESSMENT ORDER AND THUS THE DISALLOWANCE OF RS. 2,52,571/- MADE BY THE AO OUT OF INTEREST EXPENSES OF RS. 16,20,557/- IS HEREBY SUSTAINED. HENCE, THIS GROUND OF APPEAL IS H EREBY REJECTED. 4. BOTH THE SIDES WERE HEARD ON THIS ISSUE. THE FACTU AL ASPECTS OF THE CASE ARE ALSO PERUSED. IT IS NOTICED THAT FROM THE PERSONAL BALANCE SHEET PLACED AT PAGE NO.25 OF THE PAPER BOOK AS ON 31/3/2 012 THAT THE ASSESSEE WAS HAVING OWN CAPITAL OF MORE THAN RS.51.00 LACS AND UNSECURED LOAN WAS ONLY OF RS.1,09,50,000/-.OUT OF THIS FUND, THE A SSESSEE HAS INVESTED ITA 699/JP/2017_ SRI NARAIN DUSAD VS ACIT 5 RS. 1,43,12,217/- IN THE PROPRIETORSHIP CONCERN. TH US, IT IS CLEAR FROM THESE FACTS THAT THE ASSESSEE HAS INVESTED MORE THAN THE BORROWED AMOUNT FOR THE BUSINESS OF PROPRIETORY CONCERN. THUS, IT CANNOT BE HELD THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS FOR PE RSONAL PURPOSE. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES, THE BENCH IS OF THE VIEW THAT THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) WAS NOT JUSTI FIED. HENCE, THE SAME IS DIRECTED TO BE DELETED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/01/2018. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04 TH JANUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SRI NARAIN DUSAD, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, CIRCLE- 3, 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. 699/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR