The ACIT, Circle-6, Ahmedabad V. Smt. Vimlaben S.Glal, Ahmedabad

ITA 97/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72923 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 28-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 13-01-2011
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Notional interest

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 97/AHD/2011 A.Y. 2003-04 ACIT, CIRCLE-6, AHMEDABAD VS SMT. VIMLABEN S. GALA AHMEDABAD PAN: AAZPG9741R (APPELLANT) (RESPONDENT) REVENUE BY : SH. O.P. BATHEJA, SR.D.R. ASSESSEE(S) BY : SH. RAJIV SAHAI / // / DATE OF HEARING : 28/01/2014 !'# / DATE OF PRONOUNCEMENT : 30/01/2014 $% $% $% $%/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XI, AHMEDABAD DATED 02.11.2010. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS 12,09,587/- ON ACCOUNT OF UNDISCLOSED INTEREST INCOME. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS OF RS 91, 91,000/- DURING THE YEAR. THE ASSESSING OFFICER WAS OF THE OPINION THA T NO PRUDENT BUSINESSMAN OR PERSON WILL ADVANCE LOAN WITHOUT CHA RGING INTEREST ITA NOS.97/AHD/2011 SMT. VIMLABEN S. GALA VS. ACIT, CIR.-6, AHD FOR A.Y. 2003-04 - 2 - THEREON MINIMUM AS THAT BY BANKS. ONE CAN ADVANCE INTEREST FREE LOAN TO ANYBODY UP TO A CERTAIN LIMITS AND NOT AS GIVEN BY THE ASSESSEE IN CRORES. THE ASSESSING OFFICER, THEREFORE, ESTIMATE D INTEREST INCOME AT THE RATE OF 12% PER ANNUM ON LOAN OF RS 91,91,000/- AND MADE ADDITION OF RS 12,09,587/- AS UNDISCLOSED INTEREST INCOME TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SU BMITTED THAT IT HAD TOTAL CAPITAL OF RS 2,15,03,458/- WHICH WAS FAR IN EXCESS OF THE ALLEGED INTEREST FREE ADVANCE OF RS 91,91,000/-. FURTHER, IT WAS SUBMITTED THAT ON PERUSAL OF CAPITAL ACCOUNT FILED ALONG WITH RETU RN OF INCOME, IT CAN BE SEEN THAT NO INTEREST EXPENSE WAS CLAIMED BY THE AS SESSEE. THUS, IT WAS SUBMITTED THAT NO ADDITION OF NOTIONAL INTEREST AT THE RATE OF 12% PER ANNUM CAN BE MADE TO THE INCOME OF THE ASSESSEE. 5. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSE E ON THE GROUND THAT NO INTEREST EXPENDITURE WAS INCURRED DURING THE YEA R AND THAT INTEREST FREE ADVANCE WAS GIVEN OUT OF OWN FUNDS. 6. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 8. THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER O F THE LD. CIT(A). 9. WE FIND THAT THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH REQUIRES AN ASSESSEE TO MAKE MAXIMUM PROFIT. FURTHER, IN TH E INCOME TAX ACT, WHAT IS CHARGEABLE TO TAX IS THE REAL INCOME AND NO T THE INCOME WHICH ASSESSEE COULD HAVE EARNED BUT NOT ACTUALLY EARNED. IN THE INSTANT CASE, ITA NOS.97/AHD/2011 SMT. VIMLABEN S. GALA VS. ACIT, CIR.-6, AHD FOR A.Y. 2003-04 - 3 - NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVEN UE TO SHOW THAT ANY INCOME WAS REALLY OR ACTUALLY EARNED BY THE ASSESSE E IN RESPECT OF ADVANCE OF RS 91,91,000/- IN QUESTION. WHAT THE AS SESSING OFFICER HAS BROUGHT TO TAX IS NOT THE REAL INCOME EARNED BY THE ASSESSEE BUT THE NOTIONAL INCOME WHICH THE ASSESSEE COULD HAVE EARNE D IN THE OPINION OF THE ASSESSING OFFICER. 10. FURTHER, WE FIND THAT JURISDICTIONAL GUJARAT HI GH COURT IN THE CASE OF CIT VS. ARIHANT AVENUE & CREDIT LIMITED, TAX APPEAL NO. 204 OF 2012 VIDE ORDER DATED 16.08.2012 HELD THAT WHERE NO INTEREST WAS CHARGED ON INTEREST FREE LOAN TO SISTER CONCERNS, T HERE WAS NO INCOME TO BE CHARGED AS NOTIONAL INCOME ON ACCRUAL BASIS. FU RTHER, IT WAS NOT THE CASE OF THE REVENUE THAT INTEREST BEARING BORROWED MONEY WAS GIVEN AS INTEREST FREE ADVANCE TO THOSE PARTIES. IN THE PRE SENT CASE ALSO, WE FIND THAT IT IS NOT IN DISPUTE THAT NO INTEREST EXPENDIT URE IS CLAIMED BY THE ASSESSEE. THEREFORE, THE DECISION OF THE HONBLE G UJARAT HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE THEREFORE CONFIRM THE ORDER OF THE LD. CIT(A AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 30 TH JANUARY, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 30/01/2014 GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA, SR. P , SR. P , SR. P , SR. P. .. .S SS S. .. .