Smt. Sumeena Nayyar, Ludhiana V. ITO, Ludhiana

ITA 766/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63985 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 766/CHD/2012 (ASSESSMENT YEAR : 2007-08) SMT.SUMEENA NAYYAR, VS. THE INCOME TAX OFFIICER, 6A, (EXTN), IAA, WARD-V(3), LUDHIANA. LUDHIANA. PAN: AAACH4689P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI AKHILESH GUPTA, DR DATE OF HEARING : 11.10.2012 DATE OF PRONOUNCEMENT : 17.10.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 21.05.2012 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: I. THAT THE LEARNED CIT(A)-II HAS ERRED IN CONFIRMI NG AN DISALLOWANCE OF INTEREST OF RS.3,20,000/- ON ALLEGE D INTEREST FREE ADVANCES OF RS.32,00,000/-. 2. THAT THE LEARNED CIT(A)-II HAS IGNORED THE FACT THA T THE ADVANCES ARE OLD ONES AND NO DISALLOWANCE WAS MADE IN THE PA ST. 3. THAT IT HAS BEEN IGNORED THE FACTS THAT THERE WAS H UGE CAPITAL OF THE PROPRIETOR AMOUNTING TO RS.1,86,15,5 50/- AS ON 01.04.2006 AND INTEREST FREE ADVANCE DEPOSITS RS.32 ,93,415/- AS ON 01.04.2006. 4. THAT IN ANY CASE THE DISALLOWANCE IS AGAINST THE LA W AND THE FACTS OF THE CASE. 2 5. THAT THE LEARNED CIT(A)-II HAS ERRED IN DISALLOWING 1/6 OF THE CAR EXPENSES , CAR DEPRECIATION, TELEPHONE E XPENSES & MOBILE EXPENSES IGNORING THE PAST HISTORY OF THE CA SE. 6. THAT IN ANY CASE THE DISALLOWANCES FAR TOO EXCESSIV E. 7. THAT THE APPELLANT CRAVES LEAVE FOR PERMISSION TO A DD, AMEND OR ALTER ANY GROUND OF APPEAL AT THE TIME OF HEARIN G 3. THE ISSUE RAISED IN GROUND NOS.1 TO 4 IS AGAINST THE DISALLOWANCE OF INTEREST EXPENDITURE TO THE EXTENT OF RS.3,20,00 0/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E AS AN INDIVIDUAL IS CARRYING ON THE BUSINESS OF MANUFACTURE AND SALE OF HOSIERY GOODS AS SOLE PROPRIETOR. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE ADVANC ED RS.30 LACS TO M/S AMCO INTERNATIONAL AND RS.2 LACS TO M/S CHANDIGARH MEDICINE TRADERS. THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THER E WAS NO BUSINESS TRANSACTION WITH THE SAID CONCERN DURING THE YEAR U NDER CONSIDERATION. FURTHER THE ASSESSEE HAD RECEIVED UNSECURED LOANS F ROM FRIENDS AND RELATIVES AND HAD ALSO RAISED SECURED LOANS FROM TH E BANKS, ON WHICH INTEREST OF RS.3,37,501/- AND RS.7,00,010/- RESPECT IVELY WAS PAID. THE ASSESSING OFFICER PLACING RELIANCE ON THE RATIO LAI D DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK IND USTRIES [286 ITR 1(P&H)] DISALLOWED RS.3,20,000/- UNDER SECTION 36(1 )(III) OF THE ACT. THE SAID DISALLOWANCE WAS UPHELD BY THE CIT (APPEAL S). 5. THE ASSESSEE IS IN APPEAL AGAINST THE SAME AND H ENCE THE PRESENT GROUNDS OF APPEAL BY THE ASSESSEE. THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD ARE THAT THE SAID LOANS ADVANCED BY TH E ASSESSEE WERE ADVANCED IN THE EARLIER YEARS AND NOT DURING THE YE AR UNDER CONSIDERATION. THE NEXT CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE WAS THAT NO INTEREST WAS CHARGED ON THE SAID ADVAN CE MADE IN THE EARLIER YEARS OR EVEN IN THE YEAR UNDER APPEAL. IT WAS FUR THER POINTED OUT THAT 3 THE ASSESSEE AS A SOLE PROPRIETOR HAD TOTAL CAPITAL OF RS.1,86,15,550/- AS ON 1.4.2006 AND INTEREST FREE DEPOSITS OF RS.32,93, 415/- AS ON 1.4.2006 AND THE ABOVE SAID ADVANCE MADE BY THE ASSESSEE OF RS.32 LACS, INTEREST FREE, WAS OUT OF CAPITAL BALANCE AND NO DISALLOWANC E OF INTEREST WAS WARRANTED IN SUCH CIRCUMSTANCES. 6. HOWEVER, THE LEARNED D.R. FOR THE REVENUE STRESS ED THAT THE MONEY ADVANCED BY THE ASSESSEE WAS OUT OF COMMON KITTY FU NDS AND CONSEQUENTLY THE PRINCIPLES LAID DOWN BY THE HON'BL E PUNJAB & HARYANA HIGH COURT IN ABHISHEK INDUSTRIES (SUPRA) WAS SQUAR ELY APPLICABLE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE VIDE GROUND NOS. 1 TO 4 BY THE ASSESSEE IS AG AINST THE DISALLOWANCE OF INTEREST RELATABLE TO THE INTEREST FREE ADVANCE MADE BY THE ASSESSEE IN COMPARISON TO THE INTEREST BEING PAID TO THE BANKS AND TO CERTAIN PARTIES. THE CLAIM OF THE ASSESSEE IS THAT AS A SOLE PROPRIE TOR OF HIS BUSINESS SHE HAD SUFFICIENT FUNDS TOTALING RS.1.86 CRORES ON ACC OUNT OF CAPITAL BALANCE IN THE PROPRIETARY CONCERN AND INTEREST FRE E DEPOSITS OF RS.32,93,415/-, WHICH WERE AVAILABLE WITH THE ASSES SEE AS ON 1.4.2006 I.E. ON THE START OF THE YEAR UNDER APPEAL. 8. THE NEXT CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE WAS THAT THESE ADVANCES WERE MADE IN THE EARLIER YEARS AND N O DISALLOWANCE OF INTEREST EXPENDITURE WAS EVER MADE IN THE HANDS OF THE ASSESSEE. WE FIND FROM THE PERUSAL OF THE RECORD I.E. COPY OF AC COUNT FURNISHED BY THE ASSESSEE OF THE SAID PARTY M/S AMCO INTERNATIONAL A T PAGE 12 OF THE PAPER BOOK THAT THE SAID AMOUNT WAS ADVANCED TO THE SAID PARTY DURING THE FINANCIAL YEAR 2005-06 AND THE SAME IS CONTINUI NG TILL THE YEAR UNDER CONSIDERATION AND EVEN THEREAFTER. SIMILARLY, THE COPY OF ACCOUNT OF M/S CHANDIGARH MEDICINE TRADERS IS PLACED AT PAGE 13 OF THE PAPER BOOK IN 4 WHICH LEDGER ACCOUNT FROM FINANCIAL YEARS 2004-05 A ND 2006-07 IS PLACED. THE MONEY HAS BEEN ADVANCED BY THE ASSESSE E IN THE EARLIER YEARS AND NO DISALLOWANCE WHATSOEVER HAS BEEN MADE ON ACCOUNT OF INTEREST RELATABLE TO SAID INTEREST FREE ADVANCES. FURTHER EVEN OTHERWISIE THE ASSESSEE AS A SOLE PROPRIETOR HAD SUFFICIENT FU NDS TO MAKE THE ABOVE SAID ADVANCES AND THERE WAS NO MERIT IN DISALLOWING THE INTEREST UNDER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. T HE TOTAL CAPITAL BALANCE O THE ASSESSEE AVAILABLE IN THE SOLE PROPRIETARY CO NCERN IS ABOUT RS.1.86 CRORES AND INTEREST FREE ADVANCES ARE RS.32.33 LACS , AGAINST WHICH THE INTEREST FREE ADVANCE OF RS.32 LACS HAS BEEN MADE B Y THE ASSESSEE, IN THE EARLIER YEARS, IN WHICH NO DISALLOWANCE OUT OF INTE REST EXPENDITURE HAD BEEN MADE. IN VIEW OF THE ABOVE SAID FACTS AND CIR CUMSTANCES OF THE CASE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.3,20,000/-. THE GROUND NOS.1 TO 4 OF APPEAL RAI SED BY THE ASSESSEE ARE THUS ALLOWED. 9. THE ISSUE IN GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OUT OF CAR EXPENSES, CAR DEPRECIATION, TELEPHONE EXPENSES AND MOBILE EXPENSES, FOR PERSONAL USE. THE AUTHORI TIES BELOW HAD DISALLOWED 1/6 TH OUT OF THE SAID EXPENDITURE. WE DIRECT THE ASSESS ING OFFICER TO DISALLOW 1/10 TH OUT OF THE SAID EXPENDITURE FOR PERSONAL USE BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF OCTOBER, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17 TH OCTOBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5