Shri Sandeep Gupta, Ludhiana V. ITO, Ludhiana

ITA 777/CHANDI/2016

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9799 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTALDR
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 777/CHD/2016 ASSESSMENT YEAR: 2010-11 SHRI SANDEEP GUPTA, VS THE ITO, PROP. SANGAM STEELS, WARD V(4), 660-661, SATSANG ROAD, LUDHIANA. OVERLOCK ROAD,MILLER GANJ, LUDHIANA. PAN: AEZPG2897Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARW AL RESPONDENT BY : SHRI S.K.MITTAL,DR DATE OF HEARING : 19.07.2016 DATE OF PRONOUNCEMENT : 22.07.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2, LUDHIANA DATED 30.03.2 016 FOR ASSESSMENT YEAR 2010-11. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 3. ON GROUND NOS. 1, 2 AND 3, ASSESSEE CHALLENGED T HE DISALLOWANCE OF INTEREST OF RS. 5,55,616/- UNDER SE CTION 36(1)(III) OF THE INCOME TAX ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF IRON AND STEEL COIL, SHE ETS ETC. DURING THE YEAR UNDER CONSIDERATION. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD GIVEN ADVANCE OF RS. 50 LACS TO M/S AM AN 2 ALLOYS PVT. LTD. ON WHICH NO INTEREST WAS CHARGED. THE ASSESSEE WAS ASKED TO EXPLAIN THE ABOVE ADVANCE. T HE ASSESSEE SUBMITTED THAT THIS ADVANCE WAS FOR BUSINE SS PURPOSES BUT THE PARTY HAD NOT SUPPLIED THE MATERIA L TO HIM EVEN AFTER REPEATED REQUESTS. IT WAS SUBMITTED THA T THE AMOUNT WAS HARDLY GET BACK TO THE ASSESSEE. THE AS SESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHETHER ANY P URCHASE HAD BEEN MADE DURING THE YEAR OR EARLIER OR LATER Y EARS. THE ASSESSEE FAILED TO EXPLAIN THE BUSINESS EXPEDIENCY FROM M/S AMAN ALLOYS PVT. LTD. THE ASSESSING OFFICER OBSERV ED THAT ON ONE HAND ASSESSEE HAD DEBITED BANK INTEREST OF R S. 50,40,731/- TO THE PROFIT & LOSS ACCOUNT IN THE YEA R UNDER APPEAL AND ON THE OTHER HAND, ASSESSEE HAD BEEN GIV ING INTEREST FREE ADVANCE TO M/S AMAN ALLOYS PVT. LTD. WITHOUT ANY COMMERCIAL EXPEDIENCY. THE ASSESSING OFFICER, THEREFORE, DISALLOWED 12% OF THE PROPORTIONATE INTE REST OF RS. 50 LACS AND MADE THE ABOVE ADDITION UNDER SECTION 3 6(1)(III) OF THE ACT BY PLACING RELIANCE UPON DECISION OF HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHI SHEK INDUSTRIES LTD. 286 ITR 1. THE ASSESSEE'S WRITTEN SUBMISSION IS REPRODUCED IN THE IMPUGNED ORDER ON W HICH ASSESSING OFFICER ALSO FILED COMMENTS. THE LD. CIT (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER AND DI SMISSED THE APPEAL OF THE ASSESSEE ON THE SAME REASONING. 4. AFTER CONSIDERING RIVAL SUBMISSIONS, I DO NOT FI ND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. THOUGH ASSES SEE HAS FAILED TO PROVE ANY BUSINESS EXPEDIENCY FOR GIVING INTEREST FREE ADVANCE TO M/S AMAN ALLOYS PVT. LTD. BUT LD. C OUNSEL FOR 3 THE ASSESSEE REFERRED TO THE SUBMISSIONS MADE BEFOR E AUTHORITIES BELOW IN WHICH IT WAS EXPLAINED THAT AS ON 01.04.2009, THE ASSESSEE HAD CAPITAL OF RS. 1.29 CR . THIS FACT IS SUPPORTED BY THE BALANCE SHEET OF THE ASSES SEE, COPY OF WHICH IS FILED AT PAGE 8 OF THE PAPER BOOK AND A FTER ADDING THE PROFIT AND OTHER ADDITIONS, CAPITAL OF THE ASSE SSEE WOULD COME AT THE END OF THE YEAR AT RS. 1.30 CRORES. TH IS AMOUNT IS SUFFICIENT TO COVER UP THE INTEREST FREE ADVANCE GIVEN TO M/S AMAN ALLOYS PVT. LTD. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE ASSESSEE BY JUDGEMENT OF HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF KAPSON ASSOCIATES 381 ITR 204 IN WHICH IT WAS HELD THAT, WHEN ASSESSEE HAVING SUFFICIENT INTEREST FREE ADVANCES TO COVER INTEREST FREE ADVANCE, NO DISALLOWANCE SHOULD BE MADE UNDER SECTI ON 36(1)(III) OF THE INCOME TAX ACT. IT MAY ALSO BE NOTED HERE THAT THE JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA) HAS BEEN OVER-RULED BY HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. 379 ITR 347. 5. CONSIDERING THE ABOVE DISCUSSION, I SET ASIDE TH E ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION . GROUND NOS. 1 TO 3 OF THE APPEAL OF THE ASSESSEE ARE ALLOW ED. 6. ON GROUND NO. 4, ASSESSEE CHALLENGED THE ADDITIO N OF RS. 97,815/-. THE ASSESSING OFFICER NOTED THAT IN THE PROFIT & LOSS ACCOUNT, UNDER THE HEAD REBATE & DISCOUNT AN AMOUNT OF RS. 2,96,324/- HAS BEEN CLAIMED AS EXPEND ITURE, HOWEVER, DETAILS CALLED FOR SHOW THAT RS. 75,244/- HAS BEEN 4 CLAIMED AS DIFFERENCE OF PURCHASE BILL OF DECEMBER, 2008 BUT DEBITED IN THE FINANCIAL YEAR UNDER APPEAL. IT WAS , THEREFORE, NOT ALLOWABLE DEDUCTION IN ASSESSMENT YEAR UNDER AP PEAL. THE ADDITION OF RS. 75,244/- WAS ACCORDINGLY MADE. THE ASSESSING OFFICER FURTHER FOUND THAT DISCOUNT OF RS . 22,571/- HAS BEEN CLAIMED TWICE AGAINST THE SAME BI LL. THIS WAS ALSO ADDED AND RESULTANTLY TOTAL ADDITION OF RS . 97,815/- WAS MADE. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW THAT ADDITION OF RS. 75,244/- HAS BEEN CORRECTLY MA DE BY THE AUTHORITIES BELOW. IF IT WAS A DIFFERENCE OF PURCH ASE OF DECEMBER,2008 AS PER EXPLANATION OF THE ASSESSEE, T HE SAME SHOULD HAVE BEEN DEBITED TO THE ACCOUNT OF PRECEDIN G ASSESSMENT YEAR 2009-10. THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THIS MISTAKE WAS DISCOVERED IN ASSES SMENT YEAR UNDER APPEAL. THIS GROUND IS NOT TENABLE BECA USE THE DIFFERENCE IS STATED TO BE OF PURCHASE BILL. WHEN PURCHASE BILL HAS BEEN ENTERED INTO THE BOOKS OF ACCOUNT OF EARLIER YEAR, ENTIRE AMOUNT SHOULD BE CONSIDERED IN THAT YE AR ONLY. IT WAS, THEREFORE, CORRECTLY NOT ALLOWED AS DEDUCTI ON ON ACCOUNT OF EXPENDITURE BECAUSE IT WAS NOT WHOLLY AN D EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES IN ASSES SMENT YEAR UNDER APPEAL. THE ADDITION OF RS. 75,244/- IS, THEREFORE, CONFIRMED. HOWEVER, AS REGARDS ADDITION OF RS. 22,571/- STATED TO HAVE BEEN CLAIMED TWICE BY THE A SSESSEE AGAINST THE SAME BILL, LD. COUNSEL FOR THE ASSESSEE REFERRED TO 5 THE COPY OF THE ACCOUNT OF M/S J.S.W. STEEL LTD. (P B-34) WHICH SHOWS THAT THIS AMOUNT WAS CLAIMED TWICE AGAI NST THE TWO DIFFERENT BILLS. COPIES OF TWO BILLS NO. 01559 85 AND 0155986 HAVE BEEN FILED IN THE PAPER BOOK AT PAGE 4 1 AND 42 OF THE PAPER BOOK. IT WOULD, THEREFORE, SHOW TH AT DISCOUNT OF RS. 22,571/- HAS BEEN CLAIMED TWICE AGA INST TWO BILLS. THEREFORE, IT IS NOT AN AMOUNT CLAIMED TWIC E. THE ADDITION OF RS. 22,571/- IS ACCORDINGLY, DELETED. 9. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 22 ND JULY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD