M/s chadha Super Cars (P) Ltd, V. Addl. CIT, Ludhiana

ITA 872/CHANDI/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1766 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 13-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: KULDEEP SINGH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # , . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 872/CHD/2014 / ASSESSMENT YEAR : 2011-12 M/S CHADHA SUPER CARS (P)LTD. G.T. ROAD LUDHIANA ADDL. CIT, RANGE V AAYKAR BHAWAN RISHI NAGAR LUDHIANA ./ PAN NO: AABCC6944R / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. KULDEEP SINGH # ! ' / REVENUE BY : SMT. CHANDRAKANTA $ % ! &/ DATE OF HEARING : 27/09/2018 '()* ! &/ DATE OF PRONOUNCEMENT : 16/11/2018 ')/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-II, LUDHIANA DT. 05/09/2014. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX ( APPEALS)-LL, LUDHIANA HAS ERRED IN CONFIRMING THE DISALLOWANCE U/S 36(1 )(III) OF THE INCOME TAX ACT, 1961 OF RS. 720000/- ON ACCOUNT OF INVESTMENT MADE BY TH E COMPANY IN SHARES OF M/S RENNY STEEL CASTING (P) LTD. AND M/S RENNY STRIPS ( P) LTD. WITHOUT CONSIDERING THE REPLY FILED BY APPELLANT DURING THE COURSE OF P ROCEEDINGS, WHEREAS THE ABOVE SAID ADVANCES WAS NOT MADE FROM THE BORROWED FUNDS. THEREFORE, DISALLOWANCE OF RS. 720000/- MADE U/S 36(1) (III) O F THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, LU DHIANA MAY BE DELETED. 2. THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS)-LL , LUDHIANA HAS ERRED IN MAKING THE DISALLOWANCE OF RS. 30000/- U/S 36(1) (III) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ADVANCE GIVEN TO SH. DALJIT S. PURI W HICH WAS MADE FROM THE CURRENT ACCOUNT AND NOT FROM THE BORROWED FUNDS AND FOR THE BUSINESS PURPOSES. AS THE LD. COMMISSIONER OF INCOME TAX (AP PEALS)-LL, LUDHIANA CONFIRM THE DISALLOWANCE UNDER SECTION 36(1) (III) OF THE I NCOME TAX ACT, 1961 WITHOUT CONSIDERING THE REPLY FILED BY THE APPELLANT DURING THE COURSE OF PROCEEDINGS. THEREFORE, DISALLOWANCE MADE U/S 36(1) (III) OF THE INCOME TAX ACT, 1961 BY THE LD COMMISSIONER OF INCOME TAX (APPEALS)-LL, LUDHIAN A MAY BE QUASHED 2 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-LL, LUDHIANA HAS ERRED IN MAKING THE DISALLOWANCE OF RS. 30000/-U/S 36(1) (III) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ADVANCE GIVEN TO SMT. PROMILA PURI WH ICH WAS MADE FROM THE CURRENT ACCOUNT AND NOT FROM THE BORROWED FUNDS AND FOR THE BUSINESS PURPOSES. AS THE LD. COMMISSIONER OF INCOME TAX (AP PEALS)-LL, LUDHIANA CONFIRM THE DISALLOWANCE UNDER SECTION 36(1) (III) OF THE I NCOME TAX ACT, 1961 WITHOUT CONSIDERING THE REPLY FILED BY THE APPELLANT DURING THE COURSE OF PROCEEDINGS. THEREFORE, DISALLOWANCE MADE U/S 36(1) (III) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-LL, LUDHIA NA MAY BE QUASHED. 4 THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -LL, LUDHIANA HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 126628/ - U/S 36 (1) (III) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ADVANCE GIVEN TO M/S RA HUL SALES. WHEREAS, THE AMOUNT WAS ADVANCED OUT OF THE CURRENT ACCOUNT AND NOT FROM THE BORROWED FUNDS. AS THE-LD. COMMISSIONER OF INCOME TAX (APPEA LS)-!!, LUDHIANA CONFIRM THE DISALLOWANCE U/S 36(1)(III) OF THE INCOME TAX ACT,1 961 WITHOUT CONSIDERING THE REPLY FILED BY THE APPELLANT DURING THE COURSE OF PROCEED INGS. THEREFORE, DISALLOWANCE OF RS. 1266628/- MADE UNDER SECTION 36(1)(III) OF T HE INCOME TAX ACT,1961 BY THE LD. CIT(A)-II, LUDHIANA MAY BE QUASHED. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE HAS MADE INVESTMENTS IN THE SHARES OF THE COMPANY NAMELY R.S. CASTINGS P VT. LTD. AND R.S. STRIPS OF RS. 60,00,000/-. IN ADDITION THE ASSESSEE HAS GIVEN ADV ANCES TO THE PERSONS NAMELY SHRI. DALJEET AND SMT. PRAMILA OF RS. 2,50,000/- EA CH AND OF RS.44,67,207/- TO ONE CONCERN NAMELY ROHIT SALES. 4. THE ASSESSING OFFICER DISALLOWED THE PROPORTIONA TE INTEREST @12% ON THE ADVANCES GIVEN TO THESE PARTIES MENTIONED ABOVE ADD ITION ON THE GROUNDS THAT THE ENTIRE MONEY IN A BUSINESS ENTITY COMES FROM A COMMON KITTY. THE ASSESSING OFFICER HELD THAT THE MONIES RECEIVED AS SHARE CAPI TAL, AS TERM LOAN AS WORKING CAPITAL AS SALES PROCEEDINGS DO NOT HAVE DIFFERENT COLOR. WHATEVER ARE THE RECEIPTS IN THE BUSINESS THAT HAVE THE COLOR OF BUS INESS RECEIPTS AND HAVE NO SEPARATE IDENTIFICATION OF THE SOURCE. 5. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE RELYIN G ON THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V S. ABHISHEK INDUSTRIES LTD. 286 ITR 1. 6. BEFORE US, LD. AR RELIED ON THE JUDGMENT OF SUPR EME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT C.A NO. 514/2008 (201 5) SUPREME COURT, WHILE THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE LOWER A UTHORITIES. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT AS P ER THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF HERO CYCL ES(P) LTD. VS. CIT CIVIL APPEAL NO. 514 OF 2008 (2015) CCH0097ISCC DT. 05/11 /2015, ACIT VS. OMAX BIKES LTD., (2016) 156 ITD 566 (CHD. TRIB.), DCIT VS. SIN DHU REALTORS PVT. LTD. (2016) 45 ITR 3 448 (DELHI TRIB) NO DISALLOWANCE IS WARRANTED WHERE IN THE ASSESSEE HAD SUFFICIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL, RESERVE AND SURPLUS, NON INTEREST BEARING FUNDS, THE PRESUMPTION WOULD BE THAT THE INTEREST FREE FUNDS ARE UTILIZED FOR NON INTEREST BEARING INVESTMENTS OR EXPENSES AND INTERE ST BEARING BORROWINGS ARE UTILIZED FOR PURPOSE OF THE BUSINESS . 8. SINCE IN THE INSTANT CASE, THE ASSESSEE HAS OWN FUNDS TO THE TUNE OF RS. 78,35,750/- IN THE FORM OF SHARE CAPITAL AND RS. 6, 00,74,901/- IN THE FORM OF GENERAL RESERVES WHICH IS MORE THAN THE INTEREST FR EE LOANS ADVANCED WHICH IS TO THE TUNE OF RS. 1,09,67,207/-, THEREFORE, THE ADDIT ION OF RS. 63,00,000/- MADE BY THE LD. ASSESSING OFFICER UNDER SECTION 36(1)(III) IS CONSIDERED TO BE NOT IN CONSONANCE WITH THE ESTABLISHED JUDICIAL PRONOUNCEM ENTS, AND THEREFORE HEREBY DIRECTED TO BE DELETED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 16/11/2018 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH 6. 38 :%/ GUARD FILE