Sh. Makhan Lal, Dhuri V. JCIT, Ludhiana

ITA 842/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9025 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Opportunity of being heard; Commercial expediency
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 842/CHD/2016 ASSESSMENT YEAR: 2011-12 SHRI MAKHAN LAL, VS THE JCIT, PROP. M/S SHRI GURU NANAK HARVESTORS RANGE IV, NEAR KAKKARWAL CHOWK, LUDHIANA. DHURI PAN: AAKPL8618F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 06.10.2016 DATE OF PRONOUNCEMENT : 19.10.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 22.04.20 16 FOR ASSESSMENT YEAR 2011-12. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO.1, ASSESSEE CHALLENGED THE ADDITION OF RS. 30,000/- UNDER SECTION 68 OF THE ACT ON ACCOUNT OF LOAN OF RS. 2 LACS RECEIVED FROM SMT. ASHA RANI. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THERE IS A DEPOSIT OF RS. 2 L ACS IN THE 2 BANK ACCOUNT OF SMT. ASHA RANI AND ON THE SAME DATE I.E. 21.02.2011, A SUM OF RS. 2 LACS WAS ADVANCED AS LOA N TO THE ASSESSEE. THE ASSESSEE WAS DIRECTED TO EXPLAIN THE SOURCE OF DEPOSIT OF RS. 2 LACS. THE ASSESSEE SUBMI TTED THAT SMT. ASHA RANI IN HER RETURN OF INCOME HAD SHO WN CASH SURRENDER OF RS. 1,70,000/- DURING ASSESSMENT YEAR 2011-12 AND PAID THE TAXES THEREON. THIS AMOUNT WA S SOURCE OF DEPOSIT OF CASH BUT ASSESSEE FAILED TO EX PLAIN SOURCE OF THE REMAINING AMOUNT OF RS. 30,000/- THER EFORE, ADDITION OF RS. 30,000/- WAS MADE UNDER SECTION 68 OF THE ACT. 4. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT ASSESSEE PRODUCED COPY OF THE INCOME TAX RETURN, COMPUTATION CHART AND BANK STATEMENT OF SMT. ASHA R ANI BEFORE ASSESSING OFFICER WHICH SUGGESTED THAT CREDI TOR WAS HAVING CREDIT WORTHINESS AND HAS GIVEN GENUINE LOAN TO THE ASSESSEE. SHE IS REGULARLY ASSESSED TO TAX THEREFO RE, ADDITION IS UNJUSTIFIED. THE LD. CIT(APPEALS), HOW EVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE WITH REGARD T O SMT. ASHA RANI HAVING OPENING BALANCE AS WELL AS HAVING SOURCE FROM ISTRI DHAN AND CONFIRMED THE ADDITION. 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW ADDITION IS UNJUSTIFIED. PB-20 IS ACCOUNT OF SMT. ASHA RANI IN THE BOOKS OF THE ASSESSEE SHOWING OPENING D EBIT BALANCE ON 01.04.2010 IN A SUM OF RS. 21,17,208/-. THERE ARE VARIOUS TRANSACTIONS RANGING FROM RS. 10 LACS T O RS. 7,000/- THROUGH BANKING CHANNEL ON VARIOUS DATES AN D AT 3 END OF YEAR THERE IS DEBIT BALANCE OF RS. 15,17,058 /-. IT WOULD ALSO SHOW ASSESSEE WAS RECEIVING AMOUNTS AGAI NST DEBIT BALANCE, WHICH HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER MADE ADDI TION IN RESPECT OF ENTRY OF DATED 21.02.2011 IN WHICH ASSES SEE RECEIVED RS. 2 LACS FROM SMT. ASHA RANI THROUGH BAN KING CHANNEL. COPY OF HER BANK STATEMENT IS FILED AT PAG E 22-27 OF THE PAPER BOOK. PRIOR TO DEPOSIT ON 21.02.2011 OF RS. 2 LACS, THERE IS A CREDIT ENTRY OF RS. 3,95,410.82 ON 19.02.2011. THEREFORE, SMT. ASHA RANI WAS HAVING SUFFICIENT BANK BALANCE IN HER ACCOUNT TO GIVE EVEN THE ENTIRE AMOUNT IN QUESTION AS LOAN TO THE ASSESSEE. COPY OF HER INCOME TAX RETURN IS ALSO FILED IN WHICH ASSESS EE HAS SURRENDERED CASH AMOUNT OF RS. 1,70,000/-. THESE F ACTS WOULD SHOW THAT SMT. ASHA RANI WAS PERSON OF MEANS AND HAS A SOURCE TO GIVE THE BALANCE AMOUNT OF RS. 30, 000/- ALSO. THE ASSESSEE, THEREFORE, HAS BEEN ABLE TO EX PLAIN THAT GENUINE LOAN WAS RECEIVED FROM SMT. ASHA RANI. ADDITION IS, THEREFORE, UNWARRANTED. I, THEREFORE, SET ASIDE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION OF RS. 30,000/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 6. ON GROUND NO. 2, ASSESSEE CHALLENGED THE ADDITIO N OF RS. 3,49,910/- UNDER SECTION 68 OF THE ACT ON ACCOU NT OF LOAN TAKEN FROM SHRI MAKHAN LAL, HUF. PERUSAL OF DOCUMENTS SHOW THAT ON 02-03-2011 THERE WAS CREDIT ENTRY OF RS. 3,49,910/- IN BANK ACCOUNT OF HUF AND SUBSEQUENTLY ON 04.03.2011, A SUM OF RS. 3,75,000/- WAS ADVANCED AS LOAN TO THE ASSESSEE. THE ASSESSEE SUB MITTED 4 THAT IN THE RETURN OF INCOME OF SHRI MAKHAN LAL, HU F OF ASSESSMENT YEAR 2011-12, IT HAS SHOWN COMMODITY PRO FIT OF RS. 3,49,910/- AND PAID THE TAXES THEREON AND THIS COMMODITY WAS EARNED THROUGH M/S LUDHIANA COMFIN SERVICES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE BROKER OF M/S LUDHIANA COMFIN SERVICES AND HIS BANK STATEMENT ALONGWITH BOOKS OF ACCOUNT TO VERIFY GENUINENESS OF THE COMMODITY PROFIT, BUT ASSESSEE F AILED TO DO SO, THEREFORE, ABOVE ADDITION WAS MADE UNDER SEC TION 68 OF THE ACT. 7. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(APPEA LS) AND IT WAS SUBMITTED THAT THE ASSESSEE HAS SUBMITTE D COPY OF THE INCOME TAX RETURN, COMPUTATION CHART AND BAN K STATEMENT OF SHRI MAKHAN LAL, HUF ALONGWITH COPY OF ACCOUNT OF COMMODITY PROFIT EARNED BY THE HUF, THER EFORE, BURDEN UPON ASSESSEE TO PROVE IDENTITY, CREDIT WORT HINESS OF THE HUF HAVE BEEN PROVED. THE ASSESSEE RELIED U PON CERTAIN DECISIONS IN SUPPORT OF HIS CONTENTION, HOW EVER, LD. CIT(APPEALS) DID NOT ACCEPT THE CONTENTION OF THE A SSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF TH E ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E REFERRED TO PB-30 WHICH IS COPY OF THE ACCOUNT OF SHRI MAKHA N LAL, HUF IN THE BOOKS OF THE ASSESSEE TO SHOW THERE WAS A DEBIT BALANCE OF RS. 21,83,060/- AND THERE WERE OTHER TRANSACTIONS WHICH HAVE NOT BEEN DOUBTED BY THE ASS ESSING 5 OFFICER. COPY OF THE BANK ACCOUNT OF SHRI MAKHAN L AL, HUF IS FILED TO SHOW THAT COMMODITY PROFIT IS RECEIVED IN A SUM OF RS. 3,49,910/-. THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT AUTHORITIES BELOW HAVE RELIED UPON O RDER OF THE LD. CIT(APPEALS) IN THE CASE OF JAWAHAR LAL, PR OPRIETOR OF M/S SHAHI RAM JAWAHAR LAL IN WHICH THE TRIBUNAL HAS SET ASIDE ORDERS OF AUTHORITIES BELOW AND DELETED T HE ADDITION. HOWEVER, I FIND THAT IN THE CASE OF SHRI JAWAHAR LAL, SMC BENCH FOLLOWED THE ORDER OF DIVISION BEN CH IN THE CASE OF THE SAME ASSESSEE, SHRI JAWAHAR LAL, IN WHICH THE CONCERNED PERSONS WERE PRODUCED BEFORE ASSESSIN G OFFICER IN THE REMAND PROCEEDINGS, THEREFORE, THIS DECISION WILL NOT HELP THE ASSESSEE. THE LD. COUNSEL FOR TH E ASSESSEE IN THE ALTERNATE CONTENTION SUBMITTED THAT ASSESSEE IS WILLING TO PRODUCE THE BROKER BEFORE ASSESSING OFFI CER. IN THIS VIEW OF THE MATTER, I AM OF THE VIEW SINCE THE ENTIRE MATTER IS DEPENDANT UPON VERIFICATION OF THE COMMOD ITY PROFIT RECEIVED BY THE CREDITOR THROUGH M/S LUDHIAN A COMFIN SERVICES LTD. THEREFORE, PRODUCTION OF THE B ROKER IS NECESSARY FOR FINAL ADJUDICATION OF THE ISSUE. 8(I) I, THEREFORE, SET ASIDE THE ORDERS OF AUTHORIT IES BELOW AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFF ICER WITH DIRECTION TO THE ASSESSEE TO PRODUCE THE BROKER M/S LUDHIANA COMFIN SERVICES LTD. BEFORE ASSESSING OFFI CER ALONGWITH THEIR BANK ACCOUNT FOR EXAMINATION BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREAFT ER, SHALL PASS THE ORDER IN ACCORDANCE WITH LAW BY GIVING REA SONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6 9. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ADDITI ON OF RS. 1,52,529/- UNDER SECTION 36(1)(III) OF THE ACT. BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT ASS ESSEE HAD ADVANCED INTEREST FREE ADVANCES TO THE FOLLOWIN G TWO CONCERNS FOR NON BUSINESS PURPOSE : I) M/S SHIVA PROTEIN PRODUCTS P.LTD. = RS.1 2 LACS ON 01.04.2010 II) SMT. KANTA RANI = RS. 25 LACS ON 28.0 3.2011 = RS. 25 LACS ON 29.03.2011 = RS. 25 LACS ON 30.03.2011 TOTAL = RS. 87 LACS 10(I). THE ASSESSING OFFICER RELYING UPON JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES 286 ITR 1, DISALLOWED PROPORTIO NATE INTEREST AMOUNTING TO RS. 1,52,529/- UNDER SECTION 36(1)(III) OF THE ACT. 11. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN AGRICULTURAL IMPLEMENTS AND HAS CAPITAL AMOUNTING T O RS. 1.04 CRORES AT THE BEGINNING OF THE YEAR WHICH CLEARLY SHOWS THAT ASSESSEE HAS HIS OWN INTEREST FREE FUNDS . FURTHER, THE ASSESSEE HAS OFTEN TRANSFERRED INTERES T FREE LOANS FOR SMOOTH RUNNING OF THE BUSINESS. THE ASSE SSEE RELIED UPON DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF S.A.BUILDERS 288 ITR 1. THE LD. CIT(APPEALS), H OWEVER, 7 DID NOT FIND ANY COMMERCIAL EXPEDIENCY OR ANY NEXUS BETWEEN INTEREST FREE LOAN/ADVANCES AND BUSINESS AC TIVITIES OF THE ASSESSEE, THUS, CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 12. AFTER HEARING RIVAL CONTENTIONS, I AM OF THE VI EW ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESSEE HAS F ILED COPY OF THE ACCOUNT OF SMT. KANTA RANI IN THE PAPER BOOK AT PAGE 46 WHICH SHOWS THAT ON 01.04.2011, THERE IS A DEBIT BALANCE OF RS. 75 LACS AND THEREAFTER, THERE ARE TH REE OTHER TRANSACTIONS OF PAYMENT AND RECEIPT AND THEN ON 31.03.2012 INTEREST WAS RECEIVED @ 12% AT RS. 6,53, 245/- WHICH WAS ALSO DEBIT CLOSING BALANCE AS ON 31.03.20 12. IT WOULD MEAN THAT THE ENTIRE AMOUNT OF LOAN WAS SQUAR ED UP IN SUBSEQUENT YEAR ON WHICH ASSESSEE CHARGED INTERE ST AS WELL. THE LOAN WAS GIVEN TO SMT. KANTA RANI AT FAG END OF THE FINANCIAL YEAR ON 28.03.2011, 29.03.2011 AND 30.03.2011 THEREFORE, NO INTEREST COULD BE CHARGED IN ASSESSMENT YEAR UNDER APPEAL. THE DISALLOWANCE TO T HAT EXTENT IS, THEREFORE, WHOLLY UNJUSTIFIED. FURTHER T HE COPY OF THE CAPITAL ACCOUNT OF THE ASSESSEE IS FILED AT PAG E 14 OF THE PAPER BOOK WHICH SHOWS THAT ASSESSEE HAS CAPITA L OF RS. 1,12,57,230/- AND HAS ALSO OTHER UNSECURED LOAN S WHICH ARE SUFFICIENT TO ADVANCE INTEREST FREE LOANS TO THESE PERSONS. THE ASSESSEE CHARGED MORE INTEREST AS AGAI NST ADDITION MADE BY ASSESSING OFFICER. THEREFORE, THIS DISALLOWANCE IS UNJUSTIFIED. 8 12(I) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CA SE OF KAPSON ASSOCIATES 381 ITR 204 HELD THAT WHEN ASSESSEE HAVING SUFFICIENT INTEREST FREE ADVANCES TO COVER I NTEREST FREE ADVANCES, NO DISALLOWANCE UNDER SECTION 36(1)( III) SHOULD BE MADE. SAME VIEWS TAKEN BY HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. 379 ITR 347 IN WHICH THE JUDGEMENT RELIED UPON BY ASSESSING OFFICE R IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA) HAVE BEEN O VER- RULED. I AM, THEREFORE, OF THE VIEW THAT DISALLOWA NCE OF INTEREST IS WHOLLY UNJUSTIFIED. I SET ASIDE THE OR DERS OF AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 13. ON GROUND NOS. 4 AND 5, ASSESSEE CHALLENGED TH E ADDITION OF RS. 65,000/- ON ACCOUNT OF HOUSEHOLD EX PENSES. THE ASSESSEE HAS WITHDRAWALS OF RS. 1,75,000/- FOR FAMILY OF FOUR PERSONS INCLUDING TWO CHILDREN WHO WERE STU DENTS DURING THIS PERIOD. THE ASSESSEE EXPLAINED THAT HE WAS RESIDING IN HIS OWN HOUSE WHICH IS UPPER PORTION OF HIS SHOP. THE ASSESSING OFFICER, HOWEVER, ESTIMATED HO USEHOLD EXPENSES AT RS. 2,40,000/- AND GIVING BENEFIT OF RS . 1,75,000/- MADE ADDITION OF RS. 65,000/-. THE LD. CIT(APPEALS), CONFIRMED THE ADDITION. 14. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW ADDITION IS EXCESSIVE IN NATURE. THE LD. COUNSEL F OR THE ASSESSEE FILED CHART OF HOUSEHOLD WITHDRAWALS. IN ASSESSMENT YEAR 2009-10, ASSESSEE HAS HOUSEHOLD WITHDRAWALS OF RS. 1,36,000/- IN WHICH NO ADDITION HAVE 9 BEEN MADE UNDER SECTION 143(3) OF THE ACT. IN ASSE SSMENT YEAR 2010-11, SIMILAR WITHDRAWALS OF RS. 1,36,000/- HAVE BEEN SHOWN AND RETURN IS PROCESSED UNDER SECTION 14 3(1) OF THE ACT. 15. CONSIDERING EXPLANATION OF THE ASSESSEE THAT HE IS RESIDING IN HIS OWN HOUSE, UPPER THE SHOP AND HAS S IMPLE LIVING, THEREFORE, ASSESSING OFFICER MADE EXCESSIVE ESTIMATE OF HOUSEHOLD EXPENSES. CONSIDERING HISTORY OF THE ASSESSEE IN EARLIER YEARS, IT WOULD BE REASONABLE AND PROPER TO SUSTAIN ADDITION OF RS. 25,000/- IN ALL AS AGAINST ADDITION OF RS. 65,000/- MADE BY THE AUTHORITIES BELOW. THE ORDERS OF AUTHORITIES BELOW ARE, THEREFORE, MODIFIED TO TH E ABOVE EXTENT AND ADDITION IS RESTRICTED TO RS. 25,000/- I N ALL. THIS GROUND IS PARTLY ALLOWED. 16. ON GROUND NO. 6, ASSESSEE CHALLANGED THE ADDI TION OF RS. 43,031/- ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES BEING 1/6 TH OF THE TOTAL EXPENSES OF RS. 2,58,187/-. THE ASSESSING OFFICER CONSIDERED THE E XPENSES DEBITED UNDER THE HEAD TELEPHONE, CAR AND OBSERVED THAT THESE FACILITIES HAVE BEEN USED BY THE FAMILY MEMBE RS. HE, THEREFORE, DISALLOWED 1/6 TH OF THE EXPENSES. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ASSESSEE IS LIVING IN THE UPPER PORTION OF HIS HOUSE, THEREFORE, HAS NOT USED VEHICLE/TELEPHONE FOR PERSONAL USE. THE LD. CIT(AP PEALS), HOWEVER, CONFIRMED THE ADDITION. 10 17. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF TH E VIEW ADDITION IS EXCESSIVE IN NATURE. THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS. 8,76,890/- AND IS RESIDING IN U PPER PORTION OF THE SHOP. THEREFORE, CAR COULD NOT BE U SED EXCESSIVELY FOR PERSONAL PURPOSE. THEREFORE, THE A DDITION IS RESTRICTED TO 1/10 TH OF THE TOTAL AMOUNT CLAIMED AS EXPENSES INSTEAD OF 1/6 TH MADE BY THE AUTHORITIES BELOW. THE ORDERS OF AUTHORITIES BELOW ARE, THEREFORE, MOD IFIED AND ADDITION IS RESTRICTED TO DISALLOWANCE OF 1/10 TH OF THE EXPENSES CLAIMED BY ASSESSEE ON THIS HEAD. THIS GR OUND IS PARTLY ALLOWED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 19 TH OCTOBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH