YASH SYNTHETICS P.LTD, MUMBAI V. ITO WD 13(3)(4), MUMBAI

ITA 841/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: R C JAIN
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.841/M/2017 ASSESSMENT YEAR: 2013-14 M/S. YASH SYNTHETICS P. LTD., OFF NO.2, 2 ND FLOOR, SHAH TRADE CENTRE, RANI SATI MARG, MALAD EAST, MUMBAI 400 097 PAN: AAACY 0426B VS. ITO WD 13(3)(4), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI R.C. JAIN, A.R. REVENUE BY : SHRI V.VIDHYADHAR, D.R. DATE OF HEARING : 12.07.2018 DATE OF PRONOUNCEMENT : 03.08.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 02.11.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2013-14. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) -21, MUMBAI ERRED IN CONFIRMING THE ADDITION OF RS.14,15,700/- U/S. 36(1)(III) MADE BY THE LEARNED ASSESSING OFFICER RELATING TO ADVANCES MADE FOR PURCHASE OF PROPERTY WITHOUT APPRECIATING THE FACT THAT THERE I S NO DIRECT NEXUS OF BORROWED FUNDS UTILISED FOR ADVANCES MADE AND THE ASSESSEE C OMPANY WAS HAVING ITS OWN CAPITAL AND RESERVES MORE THAN SUFFICIENT TO COVER THE AMOUNT OF ADVANCES MADE FOR PURCHASE OF PROPERTY. ITA NO.841/M/2017 M/S. YASH SYNTHETICS P. LTD. 2 2. THE APPELLANT CRAVES LEASE TO ADD, AMEND, ALTER, MODIFY ALL OR ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.14,15,700/- BY LD. CIT( A) AS MADE BY THE AO UNDER SECTION 36(1)(III) OF THE ACT RELATING TO ADVANCES MADE FOR PURCHASE OF PROPERTY WITHOUT APPR ECIATING THE FACT THAT THERE IS NO DIRECT NEXUS OF BORROWED FUNDS UTILISED FOR ADVANCES MADE AND THE ASSESSEE COMPANY WAS HAVING ITS OWN SUFFICIENT FUNDS AVAILABLE WITH IT. 4. THE FACTS IN BRIEF ARE THAT DURING ASSESSMENT PR OCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS ADVANCED MONEY FOR THE PURPOSE OF PURCHASE OF PROPERTY OUT OF BORROWED FUN DS. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 15.01.2016 SUBMITTING THEREIN THAT THE INVESTMENTS BY WAY OF ADVANCE WAS MADE OUT OF OWN FUNDS AND NO BORROWED FUNDS WERE USED FOR THIS PURPOSE. AGAIN A SHOW CAUSE NOTI CE WAS ISSUED ON 26.02.2016 CALLING UPON THE ASSESSEE TO EX PLAIN AS TO WHY THE DISALLOWANCE AS PER PROVISO TO SECTION 3 6(1)(III) ACT SHOULD NOT BE MADE BECAUSE THE IS NOT PUT TO USE WH ICH WAS REPLIED BY THE ASSESSEE BY SUBMITTING THAT THE DISA LLOWANCE IF ANY SHOULD BE RESTRICTED TO INTEREST AMOUNT ATTRIBU TABLE TO THE ADVANCE GIVEN DURING THE YEAR OF RS.18,45,000/- FOR T HE PURCHASE OF PROPERTY. THE REPLY OF THE ASSESSEE DI D NOT FIND FAVOUR WITH THE AO AND HE DISALLOWED A SUM OF RS.14,1 5,700/- BEING 13.25% ON THE ADVANCE FOR PROPERTY OF RS.1,06,84,527/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ITA NO.841/M/2017 M/S. YASH SYNTHETICS P. LTD. 3 5. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) DISMISSE D THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 7. I HAVE CONSIDERED THE SUBMISSIONS CAREFULLY. IT IS CL EAR THAT MONEYS HAVE BEEN ADVANCED ON WHICH NO INTEREST IS CHARGED. THOUGH THE DIVERSION OF LOANS ARE EXPLAINED AS ADVANCE AGAINST PURCHASE OF FLATS, THERE IS IN REALITY NO PURCHASE OF FLATS. THE SAME IS NOT FOR A NY BUSINESS PURPOSE. FURTHER, BY ITS OWN ADMISSION, THE FUNDS H AVE BEEN ROUTED THROUGH CASH CREDIT ACCOUNT AND THUS BORROWED FUNDS HAVE BEEN USED. THE CASH CREDIT BORROWINGS HAVE GONE UP FROM RS 149 LAKHS TO RS.175 LAKHS. THE FINANCE COSTS ARE MAINLY IN RESPE CT OF BANK INTEREST AND BANK CHARGES. EVEN THOUGH THERE ARE INVESTMENTS , NO DISALLOWANCE U/S 14A ARE COMPUTED AND OFFERED BY TH E APPELLANT. IN THESE CIRCUMSTANCES, DIS-ALLOWANCE OF INTEREST EXPE NDITURE UPHELD. THE GROUNDS OF APPEAL ARE DISMISSED. 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THE CONFIRMATION OF DISALLOWANCE BY THE LD. CIT(A) IS TO TALLY WRONG AND AGAINST THE STATUTE AND THE DECISIONS OF THE VA RIOUS JUDICIAL FORUMS. THE LD. A.R. SUBMITTED THAT THE A DVANCE GIVEN FOR THE PURCHASE OF PROPERTY WAS STARTED IN T HE EARLIER YEAR AND DURING THE YEAR ONLY RS.18,44,000/- WAS PAI D. WHEREAS IN THE EARLIER YEAR THE ASSESSMENT WAS FRAM ED UNDER SECTION 143(3) IN SCRUTINY PROCEEDINGS AND THE ISSU E WAS CONSIDERED AND ALLOWED WITHOUT THERE BEING ANY DISA LLOWANCE ON THIS COUNT. THE LD. A.R. DREW OUR ATTENTION TO THE PAGE NO.14 OF THE PAPER BOOK TO POINT OUT THAT THE ADVAN CE AS ON 31.03.2012 WAS RS.88,39,527/- VIS--VIS RS.10684,527/- A S ON 31.03.2013. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS OWN SUFFICIENT FUNDS AVAILABLE WITH IT TO MAKE THE INVESTMENT IN THE SAID PROPERTIES BY REFERRING TO THE PAGE NO.8 OF THE PAPER BOOK CORROBORATING THAT ASSESSEES OWN FUNDS WERE RS.26.51 CRORE WHEREAS ADVANCE FOR THE PROPERTY GIV EN WAS ONLY RS.1.06 CRORES AND THEREFORE THE PRESUMPTION HAS TO BE ITA NO.841/M/2017 M/S. YASH SYNTHETICS P. LTD. 4 DRAWN THAT THE INVESTMENT WAS MADE OUT OF OWN FUNDS AND NOT OUT OF INTEREST BEARING FUNDS BORROWED BY THE A SSESSEE. FINALLY, THE LD. A.R. PRAYED THAT THE ADDITION SO MAD E DESERVED TO BE DELETED. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORD ER OF AUTHORITIES BELOW: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS GIVEN ADVANCE FOR PROPERTY WH ICH WAS RS.1.06 CRORE AS ON 31.03.2013 AND THE ASSESSEES OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES WERE RS.2 6.51 CRORES. THE ASSESSEE HAS TAKEN UP THIS PLEA BEFORE BOTH THE AUTHORITIES BELOW THAT INTEREST FREE OWN FUNDS AVAI LABLE WITH THE ASSESSEE WERE MORE THAN THE INVESTMENTS IN THE PROPERTIES/ADVANCES AND THE PRESUMPTION HAS TO BE D RAWN THAT THE INVESTMENT WAS MADE OUT OF OWN FUNDS AND N OT OUT OF INTEREST BEARING FUNDS. WE FIND MERIT IN THE CONTE NTIONS OF THE ASSESSEE THAT THE PRESUMPTION HAS TO BE DRAWN IN SU CH CASE. THE CASE OF THE ASSESSEE IS ALSO SUPPORTED BY A SER IES OF DECISIONS BY THE JURISDICTIONAL HIGH COURT LAYING D OWN THE RATIO THAT WHERE THE ASSESSEES OWN FUNDS ARE MORE THAN T HE INVESTMENTS, THEN THE PRESENT PRESUMPTION HAS TO BE DRAWN THAT ASSESSEES OWN INTEREST FREE FUNDS WERE INVEST ED IN THE SAID INVESTMENTS. WE, THEREFORE, DO NOT CONCUR WIT H THE CONCLUSION DRAWN BY THE LD. CIT(A) AND ACCORDINGLY SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. ITA NO.841/M/2017 M/S. YASH SYNTHETICS P. LTD. 5 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.08.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 03.08.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.