M/S Krish Construction, Ranchi V. DCIT,circle-1, Ranchi

ITA 74/RAN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6386 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 15-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Source of fund; Proportionate interest
• Section: 37; 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI E-COURTAT KOLKATA BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI S.S. GODARA, JM ITA NO.74/RAN/2019 ASSESSMENT YEAR:2015-16 M/S KRISH CONSTRUCTION, RANCHI KTE 4, KRISH TOWER, SINGH MORE, HATIA, RANCHI-834003. / V/S . DCIT, CIRCLE-1, RANCHI PAN NO.AAKFK6755G /APPELLANT .. /RESPONDENT /BY APPELLANT NONE /BY RESPONDENT SHRI N. S. KHALKHO, JCIT, SR. DR /DATE OF HEARING 01-09-2020 /DATE OF PRONOUNCEMENT 16-09-2020 /O R D E R PER S. S. GODARA: THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2015-16 ARISES AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS), RANCHIS ORDER DATED 11.12.2018 PASSED IN CASE NO.CIT(A), RANCHI/10289/2017-18 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; (IN SHORT THE ACT). CASE CALLED TWICE. NONE APPEARS AT ASSESSEES BEHEST. IT IS ACCORDINGLY PROCEEDED EX PARTE. THE CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING PROPORTIONATE BANK INTEREST OF RS.7,28,315/- IN ITA NO.74/RAN/2019 ASSESSMENT YEAR:2015-16 M/S KRISH CONSTRUCTION, RANCHI PAGE 2 THE COURSE OF ASSESSMENT FRAMED ON 22.12.2017 AND UPHELD IN THE CIT(A)S LOWER APPELLATE DISCUSSION READING AS UNDER: GROUND NO.(III): - 5.1 THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER: 4.2 ALSO PROPORTIONATE BANK INTEREST DEBITED IN THE PROFIT AND LOSS ACCOUNT IS DISALLOWED TO THE EXTENT OF SUSPICIOUS INVESTMENT. THE SAME IS DISCUSSED BELOW: - BANK INTEREST DEBITED IN P/L ACCOUNT RS.20,28,733/- INVESTMENT IN UNLISTED EQUITY SHARES OF MS. J.K. SHIKHA CONSTRUCTION PVT. LTD. RS.1,25,00,000/- SECURED LOAN FROM ALLAHABAD BANK RS.1,53,21,766/- THUS, PERCENTAGE OF INVESTMENT VIS--VIS SECURED LOAN OR PERCENTAGE OF DIVERSION OF INTEREST- BEARING FUND IN MAKING INVESTMENT FOR NON-BUSINESS PURPOSE (1,25,00,000/1,53,21,766) * 100= 81.58% THUS, 81.58% OF BANK INTEREST OF RS.20,28,733/- WHICH IS RS.16,55,040/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY, AS IT COULD NOT BE ESTABLISHED WHETHER BANK INTEREST DEBITED TO THE EXTENT OF 81.58% WAS ACTUALLY EXPENDED OR INCURRED FOR BUSINESS PURPOSE. HENCE, AN AMOUNT OF RS. 16,55,040/- (81.58% OF RS.20,28,733/-) IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD 'BUSINESS INCOME' OF THE ASSESSEE DURING THE GIVEN YEAR WITHIN THE PROVISIONS OF SECTION 37 OF THE I.T. ACT, 1961. ALSO, PENALTY PROCEEDINGS US 271(1)(C) OF THE IT ACT, 1961 ARE SEPARATELY INITIATED ON ACCOUNT OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME.' 5.2 THE RELEVANT PORTION OF THE WRITTEN SUBMISSION IS REPRODUCED HEREUNDER: - 8 SOURCE OF FUND OF RS. 55,00,600/- INVESTMENT IN EQUITY SHARE OF J.K SHIKHA CONSTRUCTION PVT. LTD. : SIR, OUR CLIENT HAS PURCHASE EQUITY SHARE FROM J.K. SHIKHA CONSTRUCTION PVT. LTD. OF RS. 55,00,000 AND SHARE WAS ALLOTMENT ON 20.08.2014. SIR, OUR CLIENT HAS MAIN BUSINESS IS DEVELOPMENT OF FLATS AND APARTMENT AND REAL ESTATE AND KRISH CONSTRUCTIONS BUSINESS IS GOING ON REGULAR BASIS AND TURNOVER IS SATISFACTORY AND ADVANCE RECEIVED FROM CUSTOMERS AGAINST SALE OF FLAT AND ALSO CC WITH ALLAHABAD BANK. OUR CLIENT HAS INVESTED RS.55,00,000/- IN EQUITY SHARE OF J. K. SHIKHA ITA NO.74/RAN/2019 ASSESSMENT YEAR:2015-16 M/S KRISH CONSTRUCTION, RANCHI PAGE 3 CONSTRUCTION PVT. LID. OUT OF ABOVE AMOUNT RS.13,00,000/- UTILIZED FROM ALLAHABAD BANK C/C A/C NO.10368 FOR PURCHASE OF EQUITY SHARE FROM J.K. SHIKHA CONSTRUCTION PVT. LTD. AND RS.42,00,000/- INVESTED IN EQUITY SHARE OF J.K SHIKHA CONSTRUCTION PVT. LID FROM SBI C/ A NO .31508786360 IN THE NAME OF KRISH CONSTRUCTION. 9 DETAILS OF WORKING INTEREST ON DISALLOWANCE SOURCE OF FUND FOR THE INVESTMENT FOR RS. 55,00,000/- : SIR, LD. DCIT DISALLOW PROSPONATE INTEREST [1,25,00,000 =81.58%/1,53,21,766]X 100 = 81.58%] DEBITED IN P/L A/C RS.20,28,733/- ON THE GROUND OF UTILIZED OF PURCHASE OF EQUITY SHARE FROM J.K. SHIKHA CONSTRUCTION PVT. LTD ON C/C A/C FROM ALLAHABAD BANK. SIR, OUR CLIENT HAS UTILIZED ONLY RS.13,00,000/- FROM ALLAHABAD BANK CIC A/C AND RS. 42,00,000/- SBI C/A NO. 31508786360 IN THE NAME OF KRISH CONSTRUCTION. SIR, THE ABOVE TRANSACTION ARE MADE THROUGH BOTH THE BANK A/C AND COPY OF LEDGER ENCLOSED HEREWITH FOR CROSS EXAMINATION OF THE TRANSACTIONS. 5.3 IN THIS REGARD, AS CAN BE SEEN FROM THE ABOVE, DURING THE YEAR ONLY RS.55,00,000/- WAS INVESTED AND THE REMAINING RS.70,00,000/- WAS ACTUALLY TRANSFERRED BY THE APPELLANT IN THE A.Y. 2013-14 AS LOAN WHICH WAS CONVERTED AS A SHARE PURCHASE CONSIDERATION DURING THE YEAR. FURTHER, AS PER THE PROFIT & LOSS ACCOUNT FOR THE A.Y. 2013-14, THERE IS NO CLAIM OF BANK INTEREST AT ALL, WHICH ESTABLISHES THAT NON-INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR THE INVESTMENT OF RS.70,00,000/- IN THAT YEAR. THEREFORE, THE INTEREST PROPORTIONATE TO THE INVESTMENT OF RS.55,00,000/- CAN ONLY BE DISALLOWED. THE APPELLANT HAS UTILIZED THE FUNDS OF THE BUSINESS TO THE EXTENT OF RS.55,00,000/- DURING THE YEAR FOR MAKING INVESTMENT AND THEREFORE, INTEREST ON THE SAID AMOUNT DIRECTLY AND INDIRECTLY CLAIMED IN THE PROFIT & LOSS ACCOUNT IS NOT AN ALLOWABLE EXPENDITURE. THEREFORE, PROPORTIONATE DISALLOWANCE IS WORKED OUT AS UNDER: 55,00,000/ 1,53,21,766 X 100 = 35.90% 35.90% OF RS.20,28,733/- = RS.7,28,315/- THEREFORE, OUT OF THE TOTAL DISALLOWANCE OF RS.16,55,040/-, THE DISALLOWANCE TO THE EXTENT OF INTEREST OF RS.7,28,315/- IS HEREBY CONFIRMED AND THE REMAINING AMOUNT OF RS.9,20,725/- IS HEREBY DELETED. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 3. IT IS CLEAR WITH THE ABLE ASSISTANCE OF LEARNED DEPARTMENTAL REPRESENTATIVE THAT BOTH THE LEARNED LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE ASSESSEES PROPORTIONATE INTEREST ON ACCOUNT OF DIVERSION OF INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. WE THUS SEE NO MERIT IN ASSESSEES SOLE SUBSTANTIVE GRIEVANCE. THE SAME IS DECLINED. ITA NO.74/RAN/2019 ASSESSMENT YEAR:2015-16 M/S KRISH CONSTRUCTION, RANCHI PAGE 4 4. THIS ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16/09/2020. SD/- SD/- (J. SUDHAKAR REDDY) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER KOLKATA; DATE: 16/09/2020 RS / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- M/S KRISH CONSTRUCTION, RANCHI 2. /RESPONDENT- DCIT, CIRCLE-1, RANCHI 3. / CONCERNED CIT 4. - / CIT (A) 5. , / DR, ITAT, 6. [ / GUARD FILE. //TRUE COPY// BY ORDER/ , SR. PRIVATE SECRETARY