M/S KHANDWA INDUSTRIES PVT. LTD., Indore V. THE JCIT, Range (HQ), Indore

ITA 885/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5694 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MOURYA
• Assessee Lawyers: S N AGRAWAL

Judgement Text

KHANDWA INDUSTRIES ITA 885/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO.885/IND/2016 ASSESSMENT YEAR: 2011--12 M/S KHANDWA INDUSTRIES PVT. LTD KHANDWA PAN AADCK 41403G :: APPELLANT VS ACIT KHANDWA :: RESPONDENT REVENUE BY SHRI R.P.MOURYA ASSESSEE BY SHRI SN AGRAWAL & PANKAJ MOGRA ! ' #$ DATE OF HEARING 6.10.2016 %&'( #$ DATE OF PRONOUNCEMENT 6.10.2016 * O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-22, NEW DELHI, CAMP AT IN DORE, DATED 14.6.2016. KHANDWA INDUSTRIES ITA 885/IND/2016 2 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED THE RETURN OF INCOME ON 16.9.2011. THE ASSESSEE DERI VES INCOME TRADING OF COTTON BAIL, COTTON SEEDS, COTTON O IL AND COTTON CAKE, PRESSING AND GINNING WORK. DURING THE CO URSE OF ASSESSMENT IT WAS NOTICED THAT THE ASSESSEE COMPANY HAS BORROWED SUBSTANTIAL AMOUNT OF INTEREST BEARING FUND S FROM THE BANK, MPFC, FAMILY MEMBERS AND OTHERS. HOWEVER, THE AMOUNT OF RS.5470704/- WAS SHOWN UNDER THE HEAD LOAN AND ADVANCE AS UNDER :- NAME OF THE PARTY AMOUNT RS. SHRI VIKAS SHARMA 51065 SHRI SANDEEP GUPTA 319639 SHRI CHROKRISHNA SHARMA 100000 QUICK & INSTANT FOOD 2360000 ANGEL COMMODITIES BROKING PVT. LTD. 500000 RAVINDRA VISHNOI 501000 UMESHKUMAR HARIPRAKASH 1500000 KHANDWA INDUSTRIES ITA 885/IND/2016 3 INDIAN KEOS DEVELOPERS P. LTD. 120000 SHRI VENKETESH SALES 19000 TOTAL 5470704 THE ASSESSEE HAS INTEREST FREE FUNDS TO THE TUNE OF RS.40569653/- AS ON 31.3.2011 IN FORM OF SHARD CAPITAL AND SHARE RESERVE/SHARE PREMIUM. BREAK UP OF THE SAME IS AS UNDER :- PARTICULARS AMOUNT RS. SHARE CAPITAL 7350000 RESERVE & SURPLUS 33219653 TOTAL 40569653 THE ASSESSEE HAS TAKEN SECURED LOANS OF RS.85694127/- WHICH ALSO INCLUDES AN AMOUNT OF RS. 25000000/- AS DEBITED BY THE BANK AS ON 31.3.2011 FOR PREPARATION OF FIXED DEPOSIT FOR SEVEN DAYS. HENCE, EFFECTIVE AMOUN T OF LOAN AS TAKEN BY THE ASSESSEE WAS OF RS. 60694127/- AND RS.50621508/- TAKEN FROM DIFFERENT PERSONS. THUS, KHANDWA INDUSTRIES ITA 885/IND/2016 4 EFFECTIVE AMOUNT OF LOANS AS RECEIVED BY THE ASSESSEE WAS OF RS.111315635/-. THE ASSESSEE HAS INVESTED FOLLOWING AMOUNT IN THE BUSINESS ASSETS TO THE TUNE OF RS.161307992/-. BREAKUP OF THE SAME IS AS UNDER :- NATURE OF BUSINESS ASSETS AMOUNT RS. FIXED ASSETS (GROSS VALUE) 58253310 INVENTORIES 73134395 SUNDRY DEBTORS 29920287 CASH & BANK BALANCES INCLUDES FIXED DEPOSITS OF RS.25000000/-. HENCE, NO CONSIDERED AMOUNT OF LOAN WAS ALSO REDUCED NIL 161307992 IN VIEW OF THE ABOVE, IT IS CLEAR THAT NO INTEREST BE ARING FUNDS WERE DIVERTED BY THE ASSESSEE FOR NON-BUSINESS PURPOSES. THUS, DISALLOWANCE OUT OF INTEREST AS PAID BY THE ASSESSEE AS MADE IN THE ASSESSMENT YEAR 2010-11 WAS KHANDWA INDUSTRIES ITA 885/IND/2016 5 FACTUALLY NOT CORRECT. THE ASSESSEE HAS SUFFICIENT AMOUN T OF INTEREST FREE FUNDS WITH IT. THEREFORE, CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER H AS DISALLOWED THE INTEREST @ 12% ON THE AMOUNT OF LOANS AN D ADVANCES WHICH COMES TO RS.65,648/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LEARNED CIT (A) CONFIRMED THE SAME. NOW THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS USED INTEREST BEARING FUNDS FOR THE BUSINESS OF THE ASSESSEE AND THE ASSESSE E HAS NOT DIVERTED INTEREST BEARING FUNDS FOR NON-BUSIN ESS PURPOSES AS AGAINST THE LOAN OF RS.17254063/- AND AMOUNT OF RS.2469392/- WAS INVESTED BY THE ASSESSEE TOWARDS FIXED ASSETS, INVENTORY AND SUNDRY LOANS AND ADVANCES. THE ASSESSEE WAS MAINTAINING CURRENT ACCOUNT WITH BANK OF INDIA AND THE ASSESSEE MAINTAINED INTEREST KHANDWA INDUSTRIES ITA 885/IND/2016 6 FREE FUNDS AND THE INTEREST FREE FUNDS WERE DEPOSITE D. THE AMOUNT OF INTEREST FREE FUNDS AS AVAILABLE WITH THE ASS ESSEE WAS RS.40569653/- IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM, THEREFORE, IT MAY BE ALLOWED. 4. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS OWN FUNDS AND BORROWED FUNDS FROM COMMON HOTCHPOTCH FUND IN WHICH THE INDIVIDUAL FUNDS LOSE T HEIR IDENTITY. THE TOTAL BORROWED FUND IS RS.136315653/- AND IF SHARE CAPITAL AND RESERVE AND SURPLUS IS ADDED THEN THE TOTAL COMES TO RS.176885288/-, THEREFORE, 77% OF THE ASSESSEES TOTAL FUNDS ARE BORROWED. THEREFORE, THE LE ARNED CIT(A) WAS OF THE VIEW THAT THE INTEREST BEARING FREE ADVANCE WAS FROM BORROWED FUNDS. BUT WE HAVE ALREADY HELD FOR THE ASSESSMENT YEAR 2010-11 THAT THE ASSESS EE KHANDWA INDUSTRIES ITA 885/IND/2016 7 HAS RECEIVED SHARE CAPITAL OF RS.72 LACS BESIDES SHARE PREMIUM OF RS.2.88 CRORES. THE ASSESSEE HAD SUFFICIEN T BALANCE BUT THE ASSESSEE COULD NOT PROVE BEFORE US THA T WHY THE ASSESSEE HAS GIVEN INTEREST BEARING FUNDS TO 9 PERSONS, THEREFORE, WE ARE OF THE VIEW THAT THE LEARNE D CIT(A) IS JUSTIFIED IN HIS ACTION, BUT WE ARE OF THE VIEW THAT THE ASSESSEE WAS HAVING BUSINESS RELATION WITH SOME OF THE PARTIES, THEREFORE, IN THE INTEREST OF JUSTICE, WE D ISALLOW RS.3,56,484/- AND BALANCE AMOUNT IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 6 TH OCTOBER, 2016. SD/- SD/- ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 28 OCTOBER, 2016. DN/ KHANDWA INDUSTRIES ITA 885/IND/2016 8