Sh. Kastoori Lal, Kaithal V. Pr. CIT, Karnal

ITA 820/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6741 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Assessment record; Notional interest; Revised return
• Section: 143(3); 54B; 54F; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.820/CHD/2016 (ASSESSMENT YEAR : 2012-13) KASTOORI LAL VS. THE PR.C.I.T. , PROP.M/S HARYANA AGRO SERVICES, KARNAL. VPO DHAND, TEHSIL PUNDRI, DISTT. KAITHAL (HARYANA). PAN: AACPL8575F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURJEET SINGH RESPONDENT BY : SMT.CHANDER KANTA, DR DATE OF HEARING : 12.10.2017 DATE OF PRONOUNCEMENT : 28.10.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL FILED BY THE ASSESSEE HAS BEEN PREFERRE D AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX, KARNAL (HEREINAFTER REFERRED TO AS PR.CIT) D ATED 12.5.2016 RELATING TO ASSESSMENT YEAR 2012-13, PASS ED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). 2. BRIEF STATED, THE ASSESSEE HAD FILED HIS RETURN OF INCOME DECLARING INCOME OF RS.26,61,844/- PLUS RS.2 LACS AGRICULTURAL INCOME WHICH WAS ASSESSED U/S 143(3) O F THE ACT AND ADDITION OF RS.5 LACS WAS MADE ON AGREED BA SIS TO COVER UP LEAKAGE ON REVENUE SIDE. THEREAFTER THE L D. PR.CIT, ON PERUSAL OF THE ASSESSMENT RECORD NOTICED SEVERAL ERRORS IN THE ORDER OF THE ASSESSING OFFICER AND AC CORDINGLY INITIATED PROCEEDINGS FOR REVISING THE ORDER OF THE ASSESSING OFFICER U/S 263 OF THE ACT. DUE REPLIES WERE FILED BY THE 2 ASSESSEE DURING THE REVISIONARY PROCEEDINGS ON ALL ISSUES RAISED AND AFTER CONSIDERING WHICH THE LD.CIT(APPEA LS) ACCEPTED ASSESSEES CONTENTION ON CERTAIN ISSUES WH ILE HE REJECTED THE CONTENTIONS OF THE ASSESSEE ON THE FOL LOWING ISSUES: 1) THE ISSUE OF NON CHARGING OF INTEREST ON LOANS GIVEN TO SMT.SANGEETA THAKARAL AND SHRI RAJESH GROVER DESPITE HAVING DEBITED INTEREST IN HIS PROFI T & LOSS ACCOUNT. 2) ON CLAIMING EXEMPTION U/S 54B TO THE EXTENT OF RS.4,36,755/-, ON THE CAPITAL GAIN EARNED BY THE ASSESSEE ON ACCOUNT OF SALE OF AGRICULTURAL LAND, S INCE THE INVESTMENT MADE IN PURCHASE OF AGRICULTURAL LAN D FOR THE PURPOSES OF CLAIMING THE SAID EXEMPTION, WA S BEYOND THE PERMISSIBLE DATE. HE, THEREFORE, HELD THE ASSESSMENT ORDER TO BE ERRONEOUS SO FAR AS BEING PREJUDICIAL TO THE INTERE ST OF THE REVENUE ON THE ABOVE TWO ISSUES AND SET ASIDE THE ASSESSMENT ORDER DIRECTING THE ASSESSING OFFICER TO FRAME FRESH ASSESSMENT . 3. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US RAISING FOLLOWING GROUNDS OF APPEA L: 1. BECAUSE THE ACTION FOR INITIATION OF THE 'REVISION PROCEEDINGS'(U/S 263) IS BEING CHALLENGED ON FACTS &LAW, WHILE THE BASIS FOR INITIATION IS ON 5 ISSUES OUT OF WHICH 3 STANDS SATISFIED HENCE THE INITIATION/CONCLUSION ITSELF IS AN UNREASONABLE ACTION. 2. BECAUSE THE REVISION ACTION FOR DIRECTING AN ESTIM ATED ADDITION OF RS.33,560/-TOWARDS INTEREST FREE LOAN, TO THE DAUGHTER, SON IN LAW IS BEING CHALLENGED ON FAC TS & LAW, WHILE THE 'MATERIAL FACTS' CONTAINING 'MATERI AL PARTICULARS' ARE PART OF ASSESSMENT RECORDS. 3 3. BECAUSE THE REVISION ACTION FOR DIRECTING ASSESSMEN T 'AFRESH' FOR AN AMOUNT OF RS.4,36,755- OF LAND PURCHASE TREATED AS BEYOND TIME LIMIT, IS BEING CHALLENGED ON FACTS & LAW, WHILE THE 'MATERIAL FACT S' CONTAINING 'MATERIAL PARTICULARS' ARE PART OF ASSESSMENT RECORDS. 4. NO ARGUMENTS IN SUPPORT OF GROUND NO.1 WERE RAIS ED BEFORE US AND THE SAME IS, THEREFORE, TREATED AS DI SMISSED. 5. GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST TH E ACTION OF THE LD.PR.CIT IN HOLDING THE ASSESSMENT O RDER ERRONEOUS ON ACCOUNT OF NON CHARGING OF INTEREST ON LOANS AND ADVANCES GIVEN TO SMT.SANGEETA THAKRAL AND SHRI RAJESH GROVER. 6. BRIEFLY STATED, THE LD.PR.CIT, ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, FOUND THAT WHILE THE ASSESSE E HAD DEBITED INTEREST OF RS.32,625/- IN THE PROFIT AND L OSS ACCOUNT, HE HAD GIVEN INTEREST FREE LOANS AND ADVA NCES TO THE FOLLOWING PERSONS: 1) SMT. SANGEETA THAKRAL = RS.79,695/- 2) SHRI RAJESH GROVER = RS.2 LACS WHEN CONFRONTED WITH THE SAME, THE ASSESSEE SUBMITTED THAT THE SAID TWO PERSONS WERE HIS REAL D AUGHTER AND SON-IN-LAW AND BEING CLOSE RELATIVES NO INTERES T HAD BEEN CHARGED. THE LD.PR.CIT HELD THAT SINCE THERE WAS NO BUSINESS RELATION WITH THE SAID TWO PERSONS INTERES T @ 12% OUGHT TO HAVE BEEN CHARGED ON THESE TWO LOANS AND T HE ORDER OF THE ASSESSING OFFICER WAS, THEREFORE, ERRO NEOUS HAVING NOT CHARGED THE SAID INTEREST. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THERE WAS NO CONCEPT UNDER THE INCOME TAX ACT OF BR ING TO 4 TAX ANY NOTIONAL INTEREST AND HAVING NOT CHARGED AN Y INTEREST FROM THE SAID TWO PERSONS, ANY NOTIONAL IN TEREST COULD NOT HAVE BEEN SUBJECTED TO TAX IN THE CASE OF THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE ASSESS EE HAD ENOUGH OWN INTEREST FREE FUNDS AND THE PRESUMPTION IN SUCH CASES WAS THAT THE LOANS HAD BEEN ADVANCED OUT OF INTEREST FREE FUNDS. THE LD. COUNSEL FOR THE ASSES SEE DREW OUR ATTENTION TO THE BALANCE SHEET AND POINTED OUT THEREFROM THAT THE ASSESSEE HAD OWN OPENING CAPITAL OF 31.61 LACS AND CLOSING CAPITAL OF 28.21 LACS WHILE SAID LOANS AND ADVANCES IN ALL AMOUNTED TO ONLY RS.2.79 LACS. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION O F THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BR IGHT ENTERPRISES (P) LTD. VS. CIT (2016) 381 ITR 107 IN THIS REGARD. 8. THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.PR.CIT. 9. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S, PERUSED THE DOCUMENTS TO WHICH OUR ATTENTION WAS DR AWN. WE FIND MERIT IN THE CONTENTION OF THE LD.COUNSEL F OR THE ASSESSEE. THE VERY DOCUMENT ON THE BASIS OF WHICH THE LD.PR.CIT FOUND AN ERROR IN THE ORDER OF THE ASSESS ING OFFICER I.E. BALANCE SHEET OF THE ASSESSEE, ITSELF SHOWS THAT THE ASSESSEE HAD ENOUGH OWN INTEREST FREE FUNDS FOR THE PURPOSE OF MAKING THE IMPUGNED ADVANCES. THE SAID F ACT HAS NOT BEEN CONTROVERTED BY THE LD.DR BEFORE US. FURTHER THE HON'BLE JURISDICTIONAL HIGH COURT IN A NUMBER O F CASES 5 HAS HELD THAT WHERE THERE ARE ENOUGH OWN FUNDS AVAI LABLE WITH THE ASSESSEE THE PRESUMPTION IN SUCH CASES IS THAT THE INTEREST FREE ADVANCE HAS BEEN GIVEN OUT OF THE SAM E. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE FOLLOWING CASES HAS LAID DOWN THE AFORESAID PROPOSITION: 1. BRIGHT ENTERPRISES PVT. LTD. VS. CIT, JALANDHAR (2016) 381 ITR 107 2. CIT VS. KAPSONS ASSOCIATES ITA NO.354 OF 2013 (O&M) DATED 4.8.2015. THE SAID PROPOSITION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS CIT, LUDHIANA C.A.NO.514 OF 2008 DATED 05.11.2015 WHEREI N IT WAS HELD AS UNDER: INSOFAR AS THE LOANS TO DIRECTORS ARE CONCERNED, IT COULD NOT BE DISPUTED BY THE REVENUE THAT THE ASSESSEE HAD A CREDIT BALANCE IN THE BANK ACCOUNT WHEN THE SAID ADVANCE O F RS. 34 LAKHS WAS GIVEN. REMARKABLY, AS OBSERVED BY THE CIT (APPEAL) IN HIS ORDER, THE COMPANY HAD RESERVE/SURPLU S TO THE TUNE OF ALMOST 15 CRORES AND, THEREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILISE THOSE FUNDS FOR GI VING ADVANCE TO ITS DIRECTORS. 10. CLEARLY THEREFORE NO ADDITION/DISALLOWANCE ON A CCOUNT OF INTEREST WAS CALLED FOR IN THE PRESENT CASE. I N VIEW OF THE SAME, WE HOLD THAT THERE WAS NO ERROR IN THE OR DER OF THE ASSESSING OFFICER VIS--VIS NON CHARGING OF INT EREST ON ADVANCES MADE. THE ORDER OF THE LD.PR.CIT IS, THERE FORE, DIRECTED TO BE SET ASIDE ON THIS ACCOUNT. GROUND NO.2 RAISED BY THE ASSESSEE, THEREFORE, STAN DS ALLOWED. 11. GROUND NO.3 RAISED BY THE ASSESSEE IS VIS--VIS THE ACTION OF THE LD.PR.CIT IN HOLDING THAT THE ALLOWAN CE OF CLAIM OF EXEMPTION UNDER SECTION 54B OF THE ACT ON AN AMOUNT OF RS.4,36,755/- ON ACCOUNT OF AGRICULTURAL LAND 6 PURCHASED BEING BEYOND THE PRESCRIBED TIME LIMIT WA S ERRONEOUS. 12. BRIEFLY STATED, THE LD.PR.CIT FOUND THAT THE AS SESSEE HAD SOLD AGRICULTURAL LAND AND CLAIMED DEDUCTION ON ACCOUNT OF INVESTMENT IN HOUSE PROPERTY UNDER SECTI ON 54F OF THE ACT FOR RS.87,68,793/- AND HAD CLAIMED DEDUC TION UNDER SECTION 54B ON ACCOUNT OF PURCHASE OF AGRICUL TURAL LAND AMOUNTING TO RS.3,18,89,884/-, BUT PROOF OF T HE SAME HAD NOT BEEN SUBMITTED. 13. DURING THE PROCEEDINGS BEFORE THE LD.PR.CIT THE ASSESSEE SUBMITTED THAT HE HAD PURCHASED AGRICULTUR AL LAND ON 28.12.2009, 9.5.2010 AND 4.4.2011 WHICH WAS ALL WITHIN TWO YEARS OF THE DATE OF SALE OF ORIGINAL ASSET WHI CH WAS ON 29.5.2009. THE LD.PR.CIT HELD THAT HAVING SOLD THE LAND ON 29.5.2009 THE ASSESSEE OUGHT TO HAVE INVESTED THE A MOUNT FOR PURCHASE OF AGRICULTURAL LAND BY 31.7.2010, TH E DATE OF FILING OF RETURN FOR ASSESSMENT YEAR 2010-11, FOR T HE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 54B OTH ERWISE HE SHOULD HAVE KEPT THE UNUTILIZED AMOUNT IN A SEPA RATE CAPITAL GAIN ACCOUNT AND FURNISHED PROOF OF THE SAM E AT THE TIME OF FILING OF RETURN OF INCOME. THE LD.PR.CIT THEREAFTER HELD THAT THE PURCHASE OF AGRICULTURAL LAND MADE BY HIM ON 4.4.2011 WAS BEYOND THE PERMISSIBLE DATE AND, THERE FORE, THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM EXEMPTION ON ACCOUNT OF THE SAME. ON THIS ACCOUNT HE HELD THE ORDER OF T HE AO ERRONEOUS SO AS TO CAUSE PREJUDICE TO THE REVENUE F OR THE 7 PURPOSES OF EXERCISING REVISIONARY POWERS U/S 263 O F THE ACT. 14. BEFORE US, LD. COUNSEL FOR THE ASSESSEE CONTEN DED THAT THE AFORESAID TRANSACTIONS PERTAINED TO ASSESSMENT YEAR 2010-11 AND COULD NOT HAVE BEEN BROUGHT TO TAX IN T HE IMPUGNED ASSESSMENT YEAR I.E. 2012-13, AT ALL AND, THEREFORE, THERE WAS NO ERROR IN THE ORDER OF THE A SSESSING OFFICER ON THIS ACCOUNT. ALTERNATIVELY, THE LD.COU NSEL FOR THE ASSESSEE CONTENDED THAT THE SAID INVESTMENT WAS WITHIN THE PRESCRIBED TIME AS PER THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JA GRITI AGGARWAL (2011) 339 ITR 610 (P&H). LD.COUNSEL STAT ED THAT AS PER THE SAID DECISION THE TIME LIMIT FOR FILING RETURN COULD BE TAKEN UPTO THE LIMIT PRESCRIBED FOR FILING REVISED RETURN U/S 139(4) OF THE ACT, WHICH BEING ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E. UP TO 31.3 .2012 AND THE INVESTMENT HAVING BEEN MADE ON 4.4.2011, IT WAS WELL WITHIN THE PRESCRIBED TIME LIMIT AND, THEREFOR E, ALSO THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OF FICER. 15. THE LD. D.R., ON THE OTHER HAND, RELIED UPON TH E ORDER OF THE LD.PR.CIT. 16. WE HAVE HEARD BOTH THE PARTIES. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS NOT DISPUTED THAT THE CAPITAL GAIN AROSE IN THE ASSESSM ENT YEAR 2010-11 SINCE THE ORIGINAL ASSET WAS SOLD UNDISPUTE DLY ON 29.5.2009. THEREFORE, THE ISSUE OF CLAIM OF EXEMPT ION OF THE SAID CAPITAL GAIN RELATES TO THAT YEAR ONLY AND NOT THE 8 IMPUGNED ASSESSMENT YEAR. FOR THIS REASON ALONE WE HOLD THAT THERE IS NO ERROR IN THE ORDER OF THE ASSESSIN G OFFICER ON THIS ISSUE AT ALL. EVEN THE LD.PR.CIT, WE FIND, IN THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT, HAS HELD THAT THE EXEMPTION GRANTED ON AGRICULTURAL LAN D PURCHASED ON 4.4.2011 BE CONSIDERED FOR TAX PURPOSE BY THE ASSESSING OFFICER UNDER SECTION 45 OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR (EMPHASIS SUPPLIED BY US). THEREFORE, EVEN AS PER THE LD.PR.CIT ALSO THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER FOR THE IMPUGNE D YEAR ON THIS ACCOUNT. IN VIEW OF THE ABOVE, WE HOLD THAT TH E CLAIM OF EXEMPTION OF CAPITAL GAIN UNDER SECTION 54B DOES NO T ARISE IN THE IMPUGNED YEAR AT ALL SINCE THE TRANSACTION O F TRANSFER OF ORIGINAL ASSET DOES NOT PERTAIN TO THE IMPUGNED YEAR AT ALL. THEREFORE, WE HOLD THAT IS-A-VIS THE CLAIM OF EXEMPTION UNDER SECTION 54B THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.3 RAISE D BY THE ASSESSEE, THEREFORE, STANDS ALLOWED. 17. IN EFFECT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH