KRISHNA KEJRIWAL, MUMBAI V. DCIT CIR 9(3), MUMBAI

ITA 7274/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1551 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 24-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JM & SHRI R.K. PANDA, A M I.T.A. NO. 7274/MUM/08 (ASSESSMENT YEAR 2005-06) SHRI KRISHNA KEJRIWAL 88/B, GOVT. INDUSTRIAL ESTATE, KANDIVALI (W), MUMBAI-67 PAN:ADZPK3811B VS. DY. CIT, CIRCLE 9(3) AAYAKAR BHAVAN, MUMBAI-400 020 APPELLANT RESPONDENT APPELLANT BY: SHRI SAMEER DALAL RESPONDENT BY: SHRI AMARDEEP O R D E R DATE OF HEARING: 04.11.2009 DATE OF ORDER: 30.11.2009 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 23 RD OCTOBER, 2008 OF THE CIT(A) CENTRAL-I, MUMBAI RELA TING TO ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IN ITS ONLY GROUNDS OF APPEAL HAS CHAL LENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE OF INTE REST OF RS. 2 LAKHS ON ESTIMATE BASIS OUT OF THE TOTAL INTEREST PAID AT RS .24,12,052. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS GIVEN LOAN TO M/S. GOODLUCK ELECTRONICS PVT. LTD. (GEPL) (ORIGINALLY KNOWN AS WESTERN REMSONS INDUSTRIES LTD.) AMOUNTING TO RS.59 ,94,013. HE OBSERVED THAT THE ASSESSEE IS A DIRECTOR IN THE SAI D COMPANY AND INTEREST CHARGED FROM THE SAID COMPANY AMOUNTING TO RS.1,41, 358 WORKED OUT TO 2.36%. HE OBSERVED THAT THE ASSESSEE HAS ALSO BORR OWED FUNDS ON WHICH IT IS PAYING INTEREST @ 12% PER ANNUM. HE OBSERVED THAT BORROWED FUNDS HAVE BEEN UTILISED FOR GIVING LOANS AND INVESTING I N SHARES. HOWEVER, THE EXACT MOVEMENT OF THE PARTICULAR FUND WHETHER BORRO WED OR OWN FUNDS I.T.A. NO. 7274/MUM/08 SHRI KRISHNA KEJRIWAL ================= 2 CANNOT BE FOUND IN ABSENCE OF FULL DETAILS OR COMPL IANCE BY THE ASSESSEE. HE CALCULATED THE AMOUNT OF INTEREST AT RS.7,19,282 BEING THE INTEREST @ 12% PER ANNUM ON THE OUTSTANDING LOAN OF RS.59,94,0 13. THUS THERE IS A DIFFERENCE BETWEEN THE INTEREST PAID ON BORROWED FU NDS AND THE INTEREST CHARGED FROM THE ADVANCE GIVEN TO THE PARTIES AT RS .5,77,924. THE ASSESSING OFFICER THEREAFTER DISALLOWED AN AMOUNT O F RS.2 LAKHS ON ESTIMATE BASIS ON ACCOUNT OF LESS INTEREST CHARGED BY THE ASSESSEE ON BORROWED FUNDS ADVANCED TO M/S. GEPL. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSESSE E HAS PAID INTEREST ON LOAN AT RS.24,12,052 AND HAS EARNED INT EREST INCOME FROM THE AMOUNT ADVANCED BY HIM AT RS.42,15,579. THUS THERE IS A NET INCOME OF RS.18,03,527 WHICH HAS BEEN OFFERED TO TAX. ACCORD INGLY IT WAS SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAK ING THE DISALLOWANCE AT RS. 2 LAKHS. 5. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE ARGU MENTS ADVANCED BEFORE HIM. HE OBSERVED THAT LOAN HAS BEE N GIVEN TO A COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR AND THE RATE OF AT WHICH THE LOAN HAS BEEN GIVEN IS AT 2.36% ONLY WHEREAS THE ASSESSEE HA S OBTAINED LOAN ON WHICH INTEREST IS PAID @ 12%. HE HELD THAT THERE IS NO JUSTIFICATION ON THE PART OF THE ASSESSEE AS TO WHY LOAN HAS BEEN ADVANC ED AT SUCH A LOW RATE OF INTEREST. HE ACCORDINGLY UPHELD THE ACTION OF T HE ASSESSING OFFICER. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS EARNED SURPLUS INTEREST OF RS.18,03,527 WHICH H AS BEEN OFFERED TO TAX. REFERRING TO PAPER BOOK PAGE 20, HE SUBMITTED THAT THE ASSESSEE HAS GIVEN LOAN OF RS.59,94,013 TO M/S. GEPL OUT OF WHICH AN A MOUNT OF RS.36,83,045 WAS GIVEN BEFORE 31.3.1998 AND THE BALANCE OF RS.23 ,55,968 WAS GIVEN AFTER 4 TH APRIL, 1998. HE SUBMITTED THAT THE INTEREST @ 6% HAS BEEN RECEIVED ON THE AMOUNT ADVANCED AFTER 4 TH APRIL, 1998 AND NO INTEREST HAS BEEN RECEIVED ON THE LOAN OF RS.36,38,045 DUE TO FI RE OCCURRED AT FACTORY OF M/S. GEPL ON 26 TH JANUARY,2004 IN WHICH THE FACTORY PREMISES AND MACHINERY WERE DESTROYED AND THERE IS NO HOPE FOR R ECOVERY OF THE I.T.A. NO. 7274/MUM/08 SHRI KRISHNA KEJRIWAL ================= 3 AMOUNT. REFERRING TO PAPER BOOK PAGE 21, HE SUBMIT TED THAT THE ASSESSEE HAS RECEIVED INTEREST @ 12% FROM M/S. REMSONS INDUS TRIES LTD. AMOUNTING TO RS.40,73,426 OUT OF WHICH THE ASSESSEE HAS PAID INTEREST OF RS.24,12,052 TO FOUR PERSONS AND THERE IS STILL A S URPLUS. HE FURTHER SUBMITTED THAT ALL THE LOANS WERE TAKEN AND GIVEN D URING THE YEAR 1998 AND THERE WAS NO DISALLOWANCE IN THE PAST. REFERRI NG TO THE COPY OF THE ASSESSMENT ORDER 2001-02 PASSED U/S/. 143(3) HE SUB MITTED THAT THERE IS NO DISALLOWANCE ON ACCOUNT OF INTEREST. HE ACCORD INGLY SUBMITTED THAT THE DISALLOWANCE OF INTEREST BE DELETED. 7. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE OR DER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND FROM PAPER BOOK PAGE 20 THAT THE ASSESSEE HAS STATED BEFORE THE ASSESSING O FFICER VIDE LETTER DATED 26 TH OCTOBER, 2007 THAT IT HAS ADVANCED RS.59,94,013 TO M/S. GEPL OUT OF WHICH AN AMOUNT OF RS.36,38,045 HAS BEEN ADVANCED B EFORE 31.3.1998 AND AN AMOUNT OF RS.23,55,958 ADVANCED AFTER 4.4.19 98. IN THE SAID LETTER IT HAS BEEN FURTHER MENTIONED THAT THE ASSESSEE HAS RECEIVED INTEREST @ 6% AT RS.23,55,968 I.E., LOAN GIVEN AFTER 4 TH APRIL, 1998 AND NO INTEREST HAS BEEN RECEIVED ON ACCOUNT OF RS.36,38,045 ADVANCED BEFORE 31.3.1998 BECAUSE OF DESTRUCTION OF FACTORY PREMISES AND PLAN T AND MACHINERY DUE TO FIRE. HOWEVER, WE FIND IN THE PAPER BOOK PAGE 2 1 THE ASSESSEE HAS MENTIONED THAT IT HAS RECOVERED INTEREST @ 12% FROM REMSONS INDUSTRIES LTD. OF RS.40,73,426 OUT OF WHICH IT HAS PAID THE S UM OF RS.24,12,052 TO VARIOUS PARTIES. THUS THE ABOVE STATEMENTS ARE CO NTRADICTORY TO EACH OTHER. WE FURTHER FIND THE SUBMISSIONS OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT IT HAS RECEIVED INTEREST @ 12% FROM R EMSONS INDUSTRIES LTD. AND PAID INTEREST @ 12% TO DIFFERENT PARTIES R EMAINS TO BE VERIFIED SINCE THE ASSESSING OFFICER HAS BROUGHT ON RECORD T HAT THE INTEREST CHARGED FROM THE ABOVE PARTIES IS AT 2.36% ONLY. S INCE THERE IS APPARENT CONTRADICTIONS IN THE SUBMISSIONS MADE BY THE ASSES SEE IN THE PAPER BOOK I.T.A. NO. 7274/MUM/08 SHRI KRISHNA KEJRIWAL ================= 4 AS WELL AS BEFORE US AND THE FINDINGS GIVEN BY THE ASSESSING OFFICER, THEREFORE, WE IN THE INTEREST OF JUSTICE DEEM IT PR OPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH ADJUDICATION OF THE ISSUE. THE ASSESSING OFFICER SHALL GIVE DUE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE H OLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2009. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH NOVEMBER, 2009 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A) CENTRAL-I, MUMBAI, (4) THE CIT CENTRAL-I, MUMBAI, (5) THE DR, A BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO