Shri Prafulbhai @ Rohitbhai J.Shah, Surat V. The ACIT., Cent.Circle-1, Surat

ITA 868/AHD/2007

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76861 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 12-06-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 26-02-2007
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Search and seizure; Notional interest
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.868/AHD/2007 A.YS. 2004-05 SHRI PRAFULBHAI @ ROHITBHAI J. SHAH., PROP. NAVKAR & SAVITA ENTERPRISE2/4456, SHIVDAS ZAVERI NI SHERI, SAGRAMPURA, SURAT. PAN: AHPPS 8642A VS ACIT-CENTRAL CIRCLE-I, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.P. GUPTA, CIT-DR., ASSESSEE(S) BY : SHRI S.N. SOPARKAR, A.R. / DATE OF HEARING : 12/06/2014 / DATE OF PRONOUNCEMENT: 20/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED CIT(A)-II, AHMEDABAD DATED 22.12.2006. 2. AT THE OUTSET, WE HAVE BEEN INFORMED THAT VIDE A N ORDER DATED 17.01.2014 IN MA NO.155/AHD/2013 (ARISING OUT OF IT A NO.868/AHD/2007, A.Y. 2004-05) ITAT D BENCH AHMED ABAD IN ASSESSEES OWN CASE HAS HELD THAT INADVERTENTLY THE TRIBUNAL HAS DISMISSED GROUND NO.5 FOR THE REASON THAT THE SAME WAS NOT PRESSED DURING THE COURSE OF HEARING. SINCE, IT WAS AN INAD VERTENT OBSERVATION; HENCE, THROUGH THE SAID MA ORDER THE GROUND NO.5 WA S DIRECTED TO BE ITA NO.868/AHD/2007 SHRI PRAFULBHAI @ ROHITBHAI J. SHAH VS. ACIT CENT RAL CIRCLE-I, SURAT. A.Y. 2004-05 - 2 - FIXED FOR HEARING IN DUE COURSE. IN VIEW OF THE SAI D DIRECTION, THIS GROUND NO.5 IS NOW FIXED FOR HEARING BEFORE US, FOR READY REFERENCE REPRODUCED BELOW: LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO AD D NOTIONAL INTEREST ON ALLEGED LOANS. LEARNED CIT(A) HAS ERRED IN NOT DELE TING ADDITION HIMSELF BUT DIRECTING TO RECALCULATE SUCH INTEREST. 3. FURTHER WE HAVE ALSO BEEN INFORMED THAT FOR A.Y. 2005-06 THE REVENUE AS WELL AS ASSESSEE, BOTH WERE IN APPEAL BE ARING ITA NO.868/AHD/2007 (ASSESSEES APPEAL) AND ITA NO.994/ AHD/2007 (REVENUES APPEAL) AND VIDE ORDER DATED 15 TH JUNE, 2012, THE GROUND OF THE REVENUE WAS DISMISSED. THE GROUND OF THE REVENU E WAS AS UNDER: (III) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO DELETE THE ADDITION OF RS.51,54,777/- MADE BY THE ASSESSING OF FICER ON ACCOUNT INTEREST ACCRUED ON SUCH CASH LOANS PAID AGAINST SECURITY CH EQUES. 3.1 THE DECISION IN RESPECT OF THE SAID GROUND OF T HE REVENUE WAS AS UNDER: 2.3 WE HAVE CONSIDERED THE ORDER OF THE AUTHORITY BELOW AND SUBMISSION OF THE ASSESSEE AND ALSO GONE THROUGH THE B BENCH DECISION (SUPRA) IN ASSESSEES CASE FOR A.Y. 2006-07. THE AO HAD NOT BR OUGHT ON RECORD ANY EVIDENCE TO SUBSTANTIATE THAT THE ASSESSEE HAD CHAR GED INTEREST ON CASH LOAN. THERE WAS DISCLOSURE ON ACCOUNT OF CASH LOAN BY THE ASSESSEE AT RS.1.41 CRORE FOR THE BLOCK PERIOD. THE AO HAS PRESUMED DATE FOR CALCULATION OF INTEREST AS DATE OF SEARCH. IT APPEARS THAT THERE WAS NO NOTING ON SEIZED MATERIAL ABOUT CHARGING OF INTEREST AND NO EVIDENCE HAD BEEN GATHE RED BY THE AO FROM THE LOANEE. IN ABSENCE OF ANY CONCLUSIVE EVIDENCE, THE ADDITION CANNOT BE SUSTAINED. THE AO MADE ADDITION ON CONJUNCTURE AND SURMISES. THEREFORE, REVENUES APPEALS IN A.Y. 2003-04 & 04-05 ON THIS I SSUE, ARE DISMISSED. 3.2 WE HAVE ALSO BEEN INFORMED THAT IN THE PAST FOR A.Y. 2006-07 IN ASSESSEES OWN CASE ITAT B BENCH AHMEDABAD IN ITA NO.2656/AHD/2009 VIDE AN ORDER DATED 28.07.2011 THA T VERY ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER: 7. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E RECORD, WE FIND THAT SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF T HE ACT WAS CARRIED OUT BY THE REVENUE AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ITA NO.868/AHD/2007 SHRI PRAFULBHAI @ ROHITBHAI J. SHAH VS. ACIT CENT RAL CIRCLE-I, SURAT. A.Y. 2004-05 - 3 - ASSESSEE. DURING THIS SEARCH OPERATION ASSESSEE MAD E A DISCLOSURE OF RS.2.76 CRORES FOR THE BLOCK PERIOD FROM 1998-99 TO 2004-05 OUT OF WHICH AN AMOUNT OF RS.1.41 CRORES PERTAINED TO ASST . YEAR 2004-05 WHICH IS NOT IN DISPUTE. THIS DISCLOSURE MADE BY TH E ASSESSEE HAS ALSO BEEN ACCEPTED BY THE REVENUE AND THE TAXES DUE HAVE BEEN PAID BY THE ASSESSEE. THE FACT THAT AGAINST THE DISCLOSURE OF R S.1.41 CRORES MADE FOR ASST. YEAR 2004-05 THE ASSESSEE HAS SHOWN RECOVERY OF RS.51.81 LACS DURING THE YEAR UNDER APPEAL IN RESPECT OF THE BUSI NESS CHEQUES FOUND DURING THE SEARCH AND AGAINST WHICH LOANS WERE ADMI TTED TO HAVE BEEN ADVANCED TO VARIOUS PARTIES BY THE ASSESSEE HAS ALS O BEEN ACCEPTED BY THE AO. THE ONLY DISPUTE BEFORE US THAT ASSESSEE HA S NOT SHOWN ANY INTEREST INCOME AGAINST THE AFORESAID LOANS WHILE T HE AO HAS CHARGED INTEREST @ 18% ON THESE LOANS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS NOTIONAL INTEREST INCOME. THE CA SE OF THE REVENUE THAT ADVANCES TO THE TUNE OF RS.1.41 CRORES WERE LYING W ITH ASSESSEE'S CLIENTS AND INTEREST MUST HAVE BEEN CHARGED ON THOSE ADVANC ES WAS, HOWEVER, NOT SUBSTANTIATED BY ANY EVIDENCE BROUGHT ON RECORD . IF THE ASSESSEE DECIDED NOT TO CHARGE INTEREST IN ORDER TO SAFEGUAR D THE PRINCIPAL AMOUNT AND ENSURE ITS RECOVERY THEN HIS PRUDENCE AS A BUSINESSMAN CANNOT BE QUESTIONED BY THE AO WITHOUT BRINGING ANY MATERIAL ON RECORD TO DISPROVE SUCH CONTENTION OR TO ESTABLISH THAT SUCH INTEREST INCOME HAD ACTUALLY ARISEN OR ACCRUED TO THE ASSESS EE. IN VIEW OF THIS AND IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECOR D BY THE AO TO SHOW THAT INTEREST INCOME WAS EARNED BY THE ASSESSE E ON THE SAID ADVANCES I.E. BUSINESS CHEQUES, IN OUR CONSIDERED O PINION THERE WAS NO JUSTIFICATION IN MAKING ANY ADDITION ON ACCOUNT OF NOTIONAL INTEREST @ 18% ON THE SAID ADVANCES. THIS VIEW OF OURS GETS SU PPORT FROM THE CASE LAWS RELIED ON BY THE ID. COUNSEL OF THE ASSESSEE. THE ADDITION OF RS.15,74,828/- MADE ON ACCOUNT OF NOTIONAL INTEREST INCOME WAS RIGHTLY DELETED BY ID. CIT(A). THEREFORE, THE ORDER PASSED BY HIM IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 3.3 SINCE IN THE PAST THIS ISSUE OF ADDITION OF NOT IONAL INTEREST STOOD DECIDED IN FAVOUR OF THE ASSESSEE, THEREFORE, THE I MPUGNED GROUND OF THE ASSESSEE HAS TO BE DECIDED ACCORDINGLY IN TERMS OF THE DECISION OF THE RESPECTED CO-ORDINATE BENCHES, CITED SUPRA. RESULTA NTLY, THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 4. AS FAR AS THE FINAL VERDICT OF THE APPEAL AS A W HOLE IS CONCERNED, THE SAME SHALL NOT CHANGE AS PRONOUNCED VIDE PARAGR APH 29 OF THE ORDER ITA NO.868/AHD/2007 SHRI PRAFULBHAI @ ROHITBHAI J. SHAH VS. ACIT CENT RAL CIRCLE-I, SURAT. A.Y. 2004-05 - 4 - DATED 15 TH JUNE, 2012 EXCEPT THAT GROUND NO.5 OF THE ASSESSEE S APPEAL STANDS ALLOWED. SD/- SD/- (N.S. SAINI) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 20/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD