The ITO, Ward-6(3), Surat V. Shri Pritesh R. Doshi, Surat

ITA 839/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6334 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H P MEENA SRDR
• Assessee Lawyers: SAPNESH SHETH
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AT SURAT CAMP, AHMEDABAD BEFORE SHRI T.K. SHARMA, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.839 & 1213/AHD/2008 ASSESSMENT YEAR: 2004-05 DATE OF HEARING:24.5.10 DRAFTED:25.5.10 INCOME TAX OFFICER, WARD- 6(3), ROOM NO.616, 6 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT SHRI PRITSH RAMESHCHANDRA DOSHI, PROP. OF PARAS GEMS, 301, RATNA KUNJ, GIYA SHERI, MAHIDHARPUA, SURAT PAN NO.AYPD4339B V/S . V/S . M/S. PRITESH R DOSHI, PROP. OF PARAS GEMS, 301, RATNA KUNJ, GIYA SHERI, MAHIDHARPURA, SURAT PAN NO.AYPD4339B INCOME TAX OFFICER, WARD-6(3), SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY : SHRI SAPNESH SHETH, AR REVENUE BY:- SHRI H.P.MEENA, SR-DR O R D E R PER D.C.AGRAWAL, ACCOUNTANT MEMBER:- THIS IS AN APPEAL FILED BY REVENUE RAISING FOLLOWI NG GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5,4 4,367/- ON ACCOUNT OF DIFFERENCE OF INTEREST INCOME ADDED BY THE A.O. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS D OING BUSINESS OF TRADING IN POLISHED DIAMONDS AND PROCESSING DIAMONDS ON JOB WORK BASIS. DURING THE ITA NO.839/AHD/2008 A.Y. 2004-05 ITO WD-6(3) SRT V. M/S PITESH R DOSHI PAGE 2 COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER DISCOVERED DIFFERENCE OF RS.5,44,367/- RECEIPTS AS PER TDS CER TIFICATES AND THE AMOUNT SHOWN IN PROFIT & LOSS A/C. EXPLANATION FURNISHED B Y ASSESSEE WAS REJECTED. THE AO ACCORDINGLY ADDED THE SUM OF RS.5,44,367/- A S INCOME FROM OTHER SOURCES TO THE TOTAL INCOME OF THE ASSESSEE. 3. LD. CIT(APPEALS), SURAT OBSERVED THAT ASSESSEE C REDITED NET AMOUNT OF INTEREST IN ITS PROFIT & LOSS A/C. AS PER TDS CERTI FICATES INTEREST INCOME RECEIVED BY THE ASSESSEE WAS RS.6,40,227/-, WHEREAS ASSESSEE HAS CREDITED A SUM OF RS.95,860/- IN THE PROFIT & LOSS A/C. ACCORDING TO LD. CIT(APPEALS) ASSESSEE HAS TAKEN UNSECURED LOAN FROM VARIOUS PARTIES ON WH ICH IT HAS PAID INTEREST. THAT IS WHY, ONLY NET AMOUNT OF INTEREST HAS BEEN C REDITED. A COPY OF INTEREST ACCOUNT WAS PRODUCED BEFORE HIM. 4. LD. SR-DR SUBMITTED THAT NO EXPLANATION HAS BEEN FURNISHED BEFORE ASSESSING OFFICER. THEREFORE LD. CIT(APPEALS) WAS LEGALLY INCORRECT TO ALLOW THE RELIEF TO THE ASSESSEE. 5. LD. AR FOR THE ASSESSEE ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(APPEALS). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE REST ORE THE MATTER TO THE FILE OF ASSESSING OFFICER. THE ASSESSEE WILL PRODUCE THE DETAILS OF INTEREST PAID TO VARIOUS PARTIES AND SHOW THAT SUCH PAYMENTS OF INTE REST WAS FOR BUSINESS PURPOSES. AO WILL VERIFY THE SAME AND ALLOW THE CR EDIT TO THE EXTENT OF INTEREST PAID BY THE ASSESSEE IS FOUND TO BE FOR BUSINESS PU RPOSES. ONLY THAT AMOUNT OF DEFICIENCY AS PER TDS CERTIFICATES NOT EXPLAINED , AND FOUND CREDITED IN THE PROFIT AND LOSS A/C. WILL BE SUBJECTED TO TAX. AS A RESULT, APPEAL FILED BY THE REVENUE BUT FOR STATISTICAL PURPOSES IS ALLOWED. NOW WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO.12 13/AHD/2008. 7. THIS APPEAL IS FILED BY ASSESSEE RAISING FOLLOWI NG GROUNDS:- ITA NO.839/AHD/2008 A.Y. 2004-05 ITO WD-6(3) SRT V. M/S PITESH R DOSHI PAGE 3 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX(APP EALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS.3,01,950/- AS ALLEGED INTEREST ON ADVANCES. 8. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS ADVANCED LOAN TO 13 PARTIES OUT OF WHICH CONFIRMATION IN RESPECT OF 4 P ARTIES WERE NOT FILED AS UNDER:- 1. SURESH B SHAH RS. 9,00,000/- 2. NIRUBEN S SHAH RS. 7,00,000/- 3. SURESH BAPNA RS.10,00,000/- 4. N.S.KOTHARI & CO. RS. 7,55,000/- THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY ADDITION @ 9% ON THE ABOVE ADVANCE BE NOT SUBJECTED TO TAX. NO EXPLANATION WAS FURNISHED BY THE ASSESSEE BEFORE THE AO. 9. LD. CIT(APPEALS) CONFIRMED DISALLOWANCE AS INTER EST BEARING FUNDS WERE USED BY ASSESSEE TO ADVANCE INTEREST FREE LOANS. 10. LD. AR SUBMITTED THAT ENTIRE SUM WAS NOT ADVANC ED FOR FULL YEAR BUT IT WAS LENT FOR PART OF THE YEAR. HE FAIRLY CONCEDED THAT MONEY WAS NOT ADVANCED FOR BUSINESS PURPOSES AND HE CANNOT ESTABL ISH THE NEXUS OF INTEREST FREE FUND WITH THE ASSESSEE WITH INTEREST FREE ADVA NCES GIVEN BY THE ASSESSEE. 11. LD. SR-DR ON THE OTHER HAND RELIED ON THE ORDER OF CIT(APPEALS) IN RESPECT OF THIS GROUND. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT ONCE THE ASSESSEE HAS NOT PROVED THAT INTEREST FREE ADVANCES ARE GIVEN FOR BUSINESS PURPOSES AND THERE IS NO NEXUS BETWEEN THE INTEREST FREE CAPITAL AVAILABLE WITH ITA NO.839/AHD/2008 A.Y. 2004-05 ITO WD-6(3) SRT V. M/S PITESH R DOSHI PAGE 4 THE ASSESSEE AND INTEREST FREE ADVANCE GIVEN BY IT HEN THIS DISALLOWANCE OF INTEREST WOULD BE PROPER. IT WAS FURTHER FAIRLY CL ARIFIED BY LD. AR THAT INTEREST FREE CAPITAL AVAILABLE WITH THE ASSESSEE IS VERY ME AGRE BEING ABOUT RS.5 TO RS.6 LAKH. BUT WE UPHOLD THE CONTENTION OF LD. AR T HAT DISALLOWANCE OF INTEREST FOR WHOLE YEAR WOULD NOT BE JUSTIFIED. AO WILL CALC ULATE THE INTEREST FOR THE PERIOD FROM WHICH ADVANCES WERE ACTUALLY GIVEN AND DISALLOW THE INTEREST WITH RESPECT TO THAT PERIOD ONLY NOT FOR WHOLE YEAR. AS A RESULT APPEAL FILED BY ASSESSEE IS PARTLY ALLOWED. 12. IN THE RESULT, APPEAL FILED BY REVENUE IS ALLOWED F OR STATISTICAL PURPOSES AND THAT OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28/05/2010 SD/- SD/- (T.K.SHARMA) (D. C.AGRAWAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, DATED : 28/05/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD