SHRI KRISHNA ENTERPRISES, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 80/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9799 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHLA JCIT DHK
• Keywords: Proportionate interest

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA -@ ITA NO. 80/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 SHRI KRISHNA ENTERPRISES, GROUND FLOOR, NEW ANAJ MANDI, SRIMADHOPUR, SIKAR (RAJ). C UKE VS. I.T.O., WARD 4(2), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AAXFS 9389 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY: SHRI VEDANT AGARWAL (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.K. MAHLA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25/09/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/09/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 06/11/2017 OF LD. CIT(A)-2, JAIPUR FOR THE A.Y. 2013-14. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. LOWER AUTHORITIES GROSSLY ERRED IN MAKING AND CONFIRMING LUMP SUM DISALLOWANCE OF RS. 81,991/- ON ACCOUNT OF PALDARI (LABOUR) EXPENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. LOWER AUTHORITIES GROSSLY ERRED IN MAKING AND CONFIRMING DISALLOWANCE OF RS. 60,000/- ON ACCOUNT OF INTEREST PAYMENT. ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 2 2. GROUND NO. 1 OF THE APPEAL IS REGARDING DISALLOWANCE MADE ON ACCOUNT OF PALDARI (LABOUR EXPENSES). THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF GRAIN, PULSES, SPICES ETC.. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAS CLAIMED PALDARI (LOAD AND UNLOADING LABOUR EXPENSES) OF RS. 4,09,953/-. THE A.O. FURTHER NOTED THAT ALL THE EXPENSES WERE CLAIMED THROUGH CASH AND SUPPORTED BY SELF-MADE VOUCHERS, THUS THE A.O. OBSERVED THAT POSSIBILITY OF REVENUE LEAKAGE CANNOT BE RULED OUT AND CONSEQUENTLY 20% OF THESE EXPENSES OF RS. 4,09,953/- AMOUNTING TO RS. 81,991/- WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BUT COULD NOT SUCCEED. 3. BEFORE THE TRIBUNAL, THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE A.O. HAS MADE AD HOC DISALLOWANCE WITHOUT DOUBTING THE GENUINENESS AND REASONABLENESS OF THE EXPENSES INCURRED BY THE ASSESSEE. HE HAS FURTHER CONTENDED THAT DURING THE YEAR UNDER CONSIDERATION MORE THAN 55,000 BAGS WERE HANDLED THROUGH THE LABOURERS AND THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF LOADING AND UNLOADING AND OTHER WORK CARRIED OUT BY THE LABOURERS IS NOT EXCESSIVE BUT REASONABLE. THUS, THE LD AR HAS SUBMITTED THAT SUCH AD HOC ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 3 DISALLOWANCE MADE BY THE A.O. AND UPHELD BY THE LD. CIT(A) IS UNJUSTIFIED AND BE DELETED. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT SUPPORTED THE CLAIM OF EXPENDITURE BY ANY VERIFIABLE EVIDENCE. THE ENTIRE EXPENDITURE HAS BEEN INCURRED IN CASH AND SUPPORTED BY ONLY SELF- MADE VOUCHERS. THEREFORE, 20% OF THE DISALLOWANCE IS REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE A.O. HAS MADE AD HOC DISALLOWANCE OF 20% OF THE EXPENDITURE ON ACCOUNT OF PALDARI/LOADING, UNLOADING, PACKAGING OF ITEMS IN PARA 3 AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS CLAIMED THE PALDARI EXPENSES OF RS. 4,09,953/-. FROM THE EXAMINATION OF BOOKS OF ACCOUNT, IT IS FOUND THAT ALL PALDARI EXPENSES CLAIMED THROUGH CASH AND EXPENSES INCURRED ON SELF MADE INTERNAL VOUCHERS. POSSIBILITY OF REVENUE LEAKAGE CANT BE RULE OUT NOR THE SAME HAS BEEN DENIED. I THEREFORE, CONSIDER IT FAIR AND REASONABLE TO MAKE A DISALLOWANCE OF PALDARI EXPENSES @ 20% OF TOTAL EXPENSES CLAIMED RS. 4,09,953/- WHICH COME OUT RS. 81,991/- AND SAME ADDED IN THE TOTAL INCOME OF THE ASSESSEE. THUS, IT IS CLEAR THAT THE A.O. HAS ONLY DOUBTED THE REVENUE LEAKAGE IN RESPECT OF THESE EXPENSES BUT HAS NOT EXAMINED WHETHER THE CLAIM OF THE ASSESSEE IS BOGUS OR EXCESSIVE HAVING REGARD TO THE FACT THAT MORE THAN ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 4 55,000 BAGS OF AGRICULTURAL PRODUCE HAS BEEN HANDLED BY THE LABOURERS DURING THE YEAR UNDER CONSIDERATION. ONCE THE EXPENDITURE IS NOT FOUND TO BE EXCESSIVE AND IT IS INEVITABLE EXPENDITURE IN THIS TRADE OF THE ASSESSEE THEN AN AD HOC DISALLOWANCE IS NOT JUSTIFIED. AS REGARDS THE PAYMENT OF THE EXPENSES IN CASH, IT IS PERTINENT TO NOTE THAT THESE PAYMENTS ARE MADE TO THE LABOURERS AT THE SPOT AND ON DAILY BASIS THEN IT CANNOT BE A REASON FOR DISALLOWANCE. SIMILARLY, PAYMENT MADE TO THE LABOURERS DOING LOADING AND UNLOADING WORK CAN BE SUPPORTED ONLY BY SELF-MADE VOUCHERS AS THE LABOURERS ARE NOT KEEPING ANY VOUCHERS. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AD HOC DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS WARRANTED AND THE SAME IS HEREBY DELETED. 6. GROUND NO. 2 OF THE APPEAL IS REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST ON ACCOUNT OF INTEREST FREE ADVANCES TO THE SISTER CONCERN. THE A.O. NOTED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS. 2,65,812/- AND ALSO GIVEN INTEREST FREE LOAN AND ADVANCES OF RS. 5.00 LACS TO M/S HARI AGRO, IN WHICH THE ASSESSEE IS A PARTNER. THE A.O. APPLIED INTEREST RATE @ 12% ON RS. 5.00 LACS AND DISALLOWED THE INTEREST EXPENDITURE OF RS. 60,000/- ON THIS COUNT AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 5 7. BEFORE THE TRIBUNAL, THE LD. AR OF THE ASSESSEE THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUND TO ADVANCE RS. 5.00 LACS TO THE SISTER CONCERN, THEREFORE, THE DISALLOWANCE MADE BY THE A.O. IS NOT JUSTIFIED. HE HAS REFERRED TO THE BALANCE SHEET OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE IS HAVING MORE THAN 14 LACS AS CAPITAL AND THEREFORE, THE ADVANCE OF RS. 5.00 LACS GIVEN TO THE SISTER CONCERN IS OUT OF THE ASSESSEES OWN FUND AND NOT FROM BORROWED FUND. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAM KISHAN VERMA (2016) 132 DTR 107 (RAJ). 8. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE IS HAVING UNSECURED LOAN OF RS. 5,21,000/- ON WHICH THE ASSESSEE HAS PAID INTEREST. A SIMILAR AMOUNT HAS BEEN GIVEN AS ADVANCE FREE TO THE SISTER CONCERNED, THEREFORE, THE A.O. HAS RIGHTLY MADE THE DISALLOWANCE BY APPLYING 12% INTEREST RATE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE A.O. HAS MADE DISALLOWANCE OF INTEREST IN PARA 4 AS UNDER: ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS CLAIMED THE INTEREST EXPENSES OF RS. 2,65,812/- IN THE PROFIT AND LOSS ACCOUNTS. FROM THE EXAMINATION OF BOOKS OF ACCOUNT, IT IS FOUND THAT ASSESSEE HAS GIVEN THE INTEREST FREE LOAN & ADVANCES RS. 5,00,000/- TO M/S HARI AGRO. ASSESSEE HAS BEEN ASKED TO SUBMIT THE JUSTIFICATION ABOUT IT. A/R EXPLAINED THAT NO ANY INTEREST CHARGED ON IT. THE HARI AGRO INDUSTRIES ARE ANOTHER FIRM OF PARTNERS OF SHREE KRISHNA ENTERPRISES. SO THAT THEY HAVE NOT CHARGED ANY INTEREST ON LOAN. JUSTIFICATION OF A/R IS NOT ACCEPTABLE. SO INTEREST EXPENSES DISALLOWED RS. 60,000/- (12% ON RS. 5,00,000/-) AND SAME ADDED IN THE TOTAL INCOME OF THE ASSESSEE. THUS, THE A.O. HAS MADE DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE TO THE SISTER CONCERN BY ADOPTING 12% INTEREST RATE AND NO FINDING HAS BEEN GIVEN BY THE A.O. THAT THE ASSESSEE HAS UTILIZED THE BORROWED FUND FOR THE PURPOSE OF GIVING THE ADVANCES. THERE IS NO DISPUTE THAT THE ASSESSEE IS HAVING ITS CAPITAL OF RS. 14,40,948/-, THEREFORE, PRESUMPTION CAN BE RAISED THAT INTEREST FREE ADVANCE GIVEN TO THE SISTER CONCERN IS OUT OF THE ASSESSEES OWN FUND AND NOT FROM THE BORROWED FUND. FURTHER IT IS ALSO NOT THE CASE OF THE A.O. THAT UNSECURED LOAN SHOWN IN THE BALANCE SHEET WAS TAKEN ONLY FOR THE PURPOSE OF GIVING THE INTEREST FREE ADVANCE DURING THE YEAR UNDER CONSIDERATION. WHEN THE A.O. HAS NOT GIVEN THE FINDING THAT THE BORROWED FUND IS USED FOR GIVING ADVANCES AND EVEN IT IS NOT A FINDING OF THE A.O. THAT LOAN WAS TAKEN DURING THE YEAR THEN THE DISALLOWANCE MADE BY THE A.O. IS NOT JUSTIFIED AND THE SAME IS DELETED. ITA 80/JP/2018 SHRI KRISHNA ENTERPRISES VS ITO 7 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2019 SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 TH SEPTEMBER, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI KRISHNA ENTERPRISES, SIKAR. 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O., WARD 4(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 80/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR