ACIT 18(2), MUMBAI V. PRINCE MARKETING, MUMBAI

ITA 7913/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA NO . 7 913 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 20 0 8 - 0 9 ) ACIT 18(2), MUMBAI - 400 012 VS. M/S PRINCE MARKETING, RUBY HOUSE, B WING, 4 TH FLOOR, J.K. SAWANT MARG, DADAR, MUMBAI - 400 028 PAN/GIR NO. : A A A FP 8313 M ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI DEEPAK KUMAR SINHA /ASSESSEE BY : MISS MRUGAKHI K. JOSHI DATE OF HEARING : 6 TH NOVEMBER DATE OF P RONOUNCEMENT : 8 TH NOVEMBER , 2013 O R D E R PER N.K.BILLAIYA , A.M : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 29, MUMBAI, DATED 13 - 9 - 2011, PERTAINING TO A.Y. 2008 - 09. 2 . THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE R EVENUE IS THAT THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS. 18,67,500/ - . 3 . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS ADVANCED LOANS TO THE FOLLOWING PARTIES : - I) JAYA NT S CHHEDA RS.1,26,50,000/ - II) HEENA P. CHHEDA RS.1,50,00,000/ - III) M/S BHAVI HOMES PVT. LTD. RS. 3,46,00,000/ - ITA NO. 7913 /1 1 2 THE AO FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST PAID AT RS. 25,55,175/ - . THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS CHAR GED INTEREST AT THE RATE OF 12% FROM THESE PARTIES, WHEREAS THE ASSESSEE HAS PAID INTEREST AT THE RATE OF 15% PER ANNUM ON ITS BORROWINGS. THE ASSESSEE WAS ASKED TO JUSTIFY THE PAYMENT OF HIGHER RATE OF INTEREST ON LOANS TAKEN BY IT VIS - - VIS CHARGING OF L OWER RATE OF INTEREST ON LOANS GIVEN BY IT. THE ASSESSEE EXPLAINED THAT TWO PERSONS ARE PARTNERS OF THE ASSESSEE, WHO HAVE SUFFICIENT CREDIT BALANCE IN THEIR ACCOUNT. THE ASSESSEE HAS CHARGED 12% INTEREST BECAUSE THE SAME RATE OF INTEREST IS PAID ON THE CR EDIT BALANCE OF PARTNERS. THE ASSESSEE FURTHER EXPLAINED THAT IT IS PAYING INTEREST AT THE RATE OF 10.75% TO FEDERAL BANK AND 12 TO 15% TO OUTSIDERS. THE AO WAS NOT CONVINCED BY ASSESSEES SUBMISSIONS. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE FIRM H AS NOT USED THE BORROWED FUND FOR THE PURPOSE OF ITS BUSINESS, AND HAVE DIVERTED THE SAME TO THE PERSONS, WHO INCLUDED THE PERSONS COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE EXCESSIVE INTEREST OF 3% AMOUN TING TO RS. 18,67,500/ - . 4 . THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE AO. IT WAS CONTENDED THAT THE LOAN GIVEN TO M/S BHAVI HOMES PVT. LTD. HAS BEEN EXAMINED IN SCRUTINY ASSESSMENT IN A.Y. 2006 - 07 AN D 2007 - 08, WHEREIN NO ADVERSE INFERENCE HAS BEEN DRAWN REGARDING THE REASONABLENESS OF THE INTEREST. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE CIT(A) WAS ITA NO. 7913 /1 1 3 CONVINCED THAT THE DIFFERENTIAL DISALLOWANCE OF 3% INTEREST MADE BY THE AO CANNOT BE SUSTAINED FOR THE REASONS ELABORATELY DISCUSSED BY THE CIT(A) IN PARA 5 AT PAGE 3 OF HIS ORDER AND ACCORDINGLY DELETED THE ADDITION OF RS. 18,67,500/ - . 5 . BEFORE US, LEARNED DR STRONGLY SUPPORTED THE FINDINGS OF THE AO. LEARNED DR STRONGLY CONTENDED THAT THE AO HAS DISALLOWED THE INTEREST UNDER SECTION 36(1)(III) OF THE ACT, WHEREAS THE CIT(A) , WHILE ALLOWING THE APPEAL OF THE ASSESSEE , HAS CONSIDERED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 6 . PER CONTRA , LEARNED COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 7 . WE HAVE CAREFULLY PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE RELEVANT MATERIAL EVIDENCES BROUGHT ON RECORD BEFORE US. A PERUSAL OF THE STATEMENT OF ACCOUNTS OF THE ASSESSEE SHOWS THAT THERE IS NO FRESH BORROWING BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE SECURED LOAN FROM FEDERAL BANK OF INDIA IS FOR SPECIFIC PURPOSES AND, THEREFORE, COULD NOT HAVE BEEN USED BY THE ASSESSEE FOR ANY OTHER PURPOSES. WE FIND THAT THE UNSECURED LOANS, WHICH WERE OUTSTANDING AS ON 31 - 3 - 2007 AT RS. 1,84,14,929/ - HAS COME DOWN TO RS. 1,53,19,787/ - AS ON 31 - 3 - 2008. SIMILARLY, THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE AS ON 31 - 3 - 2007 WERE AT RS. 7,00,11,207/ - , WHICH HAVE COME DOWN TO RS. 6,31,92,255/ - AS O N 31 - 3 - 2008. EVEN IN THE ASSESSMENT ORDER, THE AO HAS NOT POINTED OUT AS TO WHETHER ANY FRESH BORROWINGS WERE MADE BY THE ASSESSEE DURING THE YEAR AS THE ITA NO. 7913 /1 1 4 LOANS TAKEN BY THE ASSESSEE ARE BROUGHT FORWARD LO ANS FROM EARLIER ASSESSMENT YEARS AND THE LOANS GIVE N TO THE PARTNERS AND THE THIRD PARTY I.E. M/S BHAVI HOMES PVT. LTD., CANNOT BE SAID TO HAVE BEEN GIVEN OUT OF THE BORROWED FUNDS DURING THE YEAR UNDER CONSIDERATION. WE ALSO HAVE THE BENEFIT OF THE ASSESSMENT ORDER S FOR IMMEDIATELY PRECEDING YEAR S I.E. A. Y S . 2006 - 07 AND 2007 - 08, EXHIBITED AT PAGES 30 TO 50 OF THE PAPER BOOK. WE DO NOT FIND ANY ADVERSE INFERENCE DRAWN IN RESPECT OF THIS ISSUE IN THE PRECEDING SCRUTINY ASSESSMENT PROCEEDINGS. AS THE FACTS REMAINED THE SAME AND THE LAW HAS NOT CHANGED, THERE FORE, WE FAIL TO UNDERSTAND AS TO WHY THE RULE OF CONSISTENCY HAS NOT BEEN FOLLOWED BY THE AO. AS THE AO HAS GROSSLY FAILED IN MAKING OUT A CASE OF DIVERSION OF FRESH FUNDS FOR NON - BUSINESS PURPOSES AND AS THE EARLIER BORROWINGS HAVE BEEN ACCEPTED FOR THE PURPOSE OF BUSINESS, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING S OF THE CIT(A) AND ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. 8 . RESULTANTLY , APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/ 11 / 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K .BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 08 /11/ 2013 /PKM , PS ITA NO. 7913 /1 1 5 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI