M/s. Aswani Associates, Pune V. Assistant Commissioner of Income-tax, Central Circle -2 (2), Pune

ITSSA 65/PUN/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3765 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 21-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Commercial expediency
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / IT(SS)A Nos.65 & 66/PUN/2019 िनधाᭅरण वषᭅ / Assessment Years: 2015-16 & 2016-17 M/s. Aswani Associates, Office No.1, SP Heights, Bombay Pune Road, Kasarwadi, Pune-411034. PAN : AAMFA4202C Vs. ACIT, Central Circle-2, Pune. Appellant Respondent आदेश / ORDER PER S. S. GODARA, JM: These assessee’s twin appeals for assessment years 2015-16 and 2016-17 arise against the CIT(A)-12, Pune’s order dated 27.01.2019 passed in case no.PN/CIT(A)-12/10401, 10403/2017- 18; respectively involving proceedings u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case files perused. 2. We note during the course of hearing that the assessee’s former appeal IT(SS)A No.65/PUN/2019 raises its sole substantive grievance that both the learned lower authorities have erred in law Assessee by : Shri Kunal Jangaria Revenue by : Shri Naveen Gupta Date of hearing : 13.06.2022 Date of pronouncement : 28.06.2022 IT(SS)A Nos.65 & 66/PUN/2019 2 and on facts in invoking section 36(1)(iii) interest disallowance of Rs.83,39,455/- during the course of assessment framed on 18.12.2017 and affirmed in the CIT(A)’s lower appellate discussion as under :- “5.2 I have considered the materials placed before me. On pursual of the details it is observed that assessee has incurred interest expenses to the tune of Rs. 83,39,455/- on availing overdraft facility from PMC Bank Ltd to the tune of Rs. 4.90 crores and a secured loan from M/s Abhaykumar Lea-Fin & Invst Pvt. Ltd to the tune of Rs. 60 lakhs. The assessing officer was of the opinion that the two of the partners had withdrawn more than their capital contribution resulting in each of them having a net debit capital account balances. Further, the Assessing Officer was of the opinion that these withdrawals were not for purpose of the business of the appellant. Therefore, he argued that the withdrawals by the partners was sourced from the overdraft facility and loans and consequently disallowed the interest expenses u/s 36(1)(iii). In turn the appellant argued that the overdraft as well as the secured loan taken were for the purpose of buying a properties for the purposes of appellant’s business. 5.3 On pursual of the overdraft facility with M/s PMC Bank, it is observed that, contrary to what the appellant stated, it is the appellant who has given land as mortgage to secure the overdraft facility. Further, business prudence dictates that overdraft facilities are availed for working capital requirements only and not for buying long term assets. Furthermore, on pursual of the Profit and Loss Account it is observed that the appellant earned income on account of sale of TDR, Bank Dividend, Interest and Rental Income. Hence, the appellant has not been able to explain convincingly that the availing overdraft facility was for the working capital requirements of the appellant, as none of the income earned has any correlation to the availing of overdraft facility and loans. Therefore, it is not understandable for what purposes the overdraft facility has been availed by the appellant except to draw the conclusion that the money from the overdraft facility and loan has been utilized by the partners for their personal interest. Hence, the Assessing Officer was right in treating the interest expenses debited in the P&L A/c as not for the purpose of business of the appellant and disallowed the same u/s 36(1)(iii) of the Income Tax Act. In view of the above this ground of the appeal of the appellant is dismissed.” 3. We have given our thoughtful consideration to vehement rival stands regarding correctness of impugned interest disallowance. IT(SS)A Nos.65 & 66/PUN/2019 3 There is hardly any dispute that both the learned lower authorities hold the assessees to have failed in proving its overdraft limit’s utilization wholly and exclusively for the purpose of the business. Faced with this situation, we are of the opinion that the instant issue is more of proving assessee’s commercial expediency than that of any substantive adjudication since it involves a mixed question of law and facts. We therefore restore the assessee’s instant sole substantive grievance back to the Assessing Officer to be decided afresh in light of the former’s detailed evidence; if any, within three effective opportunities of hearing. Ordered accordingly. This sole substantive grievance as well the former main appeal IT(SS)A No.65/PUN/2019 is accepted for statistical purposes. 4. Coming to the assessee’s latter appeal IT(SS)A No.66/PUN/2019, case file suggests at the outset that it has filed a petition dated 14.04.2021 of having availed settlement benefit under “Direct Tax Vivad Se Vishwas Act, 2020” by filing Form No.3 dated 10.02.2021. The Revenue is fair enough is not disputing all these intervening developments in principle. We thus dismiss the assessee’s instant second appeal IT(SS)A No.66/PUN/2019 as withdrawn in very terms. Ordered accordingly. 5. To sum up, the assessee’s first and foremost appeal IT(SS)A No.65/PUN/2019 is allowed for statistical purposes and latter IT(SS)A Nos.65 & 66/PUN/2019 4 appeal IT(SS)A No.66/PUN/2019 is dismissed as withdrawn in above terms. A copy of this common order be placed in the respective case files. Order pronounced on this 28 th day of June, 2022. Sd/- Sd/- (DR. DIPAK P. RIPOTE) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 28 th June, 2022. Sujeet (DOC) आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT Central, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.