ITO, Ludhiana V. M/s Pardeep Traders, Ludhiana

MA 105/CHANDI/2007

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 7684 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 11 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1995-1996
• Appeal Filed On: 27-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM MISC APPLICATION NO. 105/CHD/2007 ARISING OUT OF ITA NO. 721/CHANDI/1998 ASSESSMENT YEAR: 1995-96 I.T.O. II(2), LUDHIANA V. PARDEEP TRADERS, MANDI KESAR GANJ, LUDHIANA APPELLANT BY: SHRI AKHILESH GUPTA RESPONDENT BY: NONE DATE OF HEARING: 02.12.2011 DATE OF PRONOUNCEMENT: 14.03.2012 ORDER D K SRIVASTAVA: THE MISC APPLICATION FILED BY THE D EPARTMENT READS AS UNDER:- IN THIS CASE ADDITION ON ACCOUNT OF PROPORTIONATE INTEREST WAS MADE AT RS. 18,845/- ON ACCOUNT OF LOANS AND ADVANCES GI VEN TO SHRI GURCHARANJEET SINGH AT RS. 1,00,000/- AND SHRI DEEP AK JAIN AT RS. 1,73,000/- TREATING THE NON BUSINESS LOANS. THE AD DITION WAS DELETED BY THE WORTHY CIT(A), LUDHIANA. THE APPEAL WAS ALSO F ILED BY THE DEPARTMENT BEFORE THE HON'BLE TRIBUNAL, CHANDIGARH BENCH, CHAN DIGARH. THE HON'BLE ITAT, CHANDIGARH BENCH, CHANDIGARH CONFORMED THE OR DER OF THE LD. CIT(A), LUDHIANA. THE DECISION IS AGAINST THE DEPA RTMENT WHICH NEEDS TO BE RECTIFIED. IN THIS REGARD, IT IS SUBMITTED THAT IN RECENT JUD GMENT DATED 01.09.2006, THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT-I, LUDHIANA V. ABHISHEK INDUSTRIES LTD, LUDHIANA IN IT A NO. 110 OF 2006 DATED 4.8.2006 HAS HELD THAT ONCE IT IS BORN OUT FR OM THE RECORD THAT THE ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABIL ITY TO PAY TAX IS BEING INCURRED AND ON THE OTHER HAND CERTAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS ARE OTHERS WITHOUT CARRYING ANY INT EREST AND WITHOUT ANY BUSINESS PURPOSE, THE INTEREST TO THE EXTENT THE AD VANCE HAD BEEN MADE WITHOUT CARRYING ANY INTEREST IS TO DISALLOWED U/S 36(1)(III) OF THE ACT. SUCH BORROWINGS TO THE EXTENT CANNOT POSSIBLY B E HELD F OR THE PURPOSE OF BUSINESS BUT FOR SUPPLEMENTING THE CASH DIVERTED WI THOUT DERIVING ANY BENEFIT OUT OF IT. ACCORDINGLY, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE BORROWINGS TO THE EXTENT THOSE ARE DIVERTED TO THE SISTER CONCERNS ARE OTHER PERSONS WITHOUT IN TEREST. MISC APPLICATION NO. 105/CHD/2007 ARISING OUT OF ITA NO. 721/CHD/1998 PARDEEP TRADERS, LUDHIANA 2 IN VIEW OF THE JUDGMENT OF THE HON'BLE PUNJAB & HA RYANA HIGH COURT PASSED IN THE CASE OF CIT-I, LUDHIANA V. ABHISHEK I NDUSTRIES LTD, LUDHIANA IN ITA NO. 110 OF 2006 DATED 4.8.2006, IT IS REQUES TED TO KINDLY AMEND THE ORDER PASSED IN ITA NO. 721/CHANDIGIARH/98 DATED 13 .2.2004. 2. BRIEFLY STATED THE FACTS OF THE CASE A RE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.1995 RETURNING ITS TOTAL INCOME AT RS. 84,000/- AS AGAINST WHICH THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 13.2.1997 ASSESSING THE TOTAL INCOME AT RS. 1,27,845/-. WHILE COMPLETING T HE ASSESSMENT A SUM OF RS. 18,845/- WAS DISALLOWED BEING PROPORTIONATE INTERES T RELATABLE TO INTEREST FREE ADVANCES GIVEN TO SHRI GURSHARNJIT SINGH (RS. 16,25 0/-) AND TO SHRI DEEPAK JAIN (RS. 2,595/-). DISALLOWANCE OF INTEREST MADE BY TH E AO WAS CHALLENGED BEFORE THE LD. CIT(A) UPON WHICH THE LD. CIT(A) HELD THAT THE ADVANCES GIVEN TO SHRI GURSHARANJIT SINGH WERE MOTIVATED BY BUSINESS EXPED IENCY AND THAT THE ADVANCES TO SHRI DEEPAK JAIN WERE GIVEN OUT OF INTEREST-FRE E ADVANCES AVAILABLE WITH THE ASSESSEE. 3. ON APPEAL BY THE DEPARTMENT, THE TRIBUNAL CONFIR MED THE ORDER OF THE LD. CIT(A) WITH THE FOLLOWING OBSERVATIONS:- WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED TH E MATERIAL ON RECORD. IN T HIS CASE, IT HAS CATEGORICALLY BEEN ESTABLISHE D THAT GURSHARANJIT SINGH WAS NOT A RELATIVE OF ANY OF THE PARTNERS OF THE FI RM AND THE AMOUNT ADVANCED TO HIM WAS FOR THE PURCHASE OF LAND AND TH E SAME FACT WAS NEVER DISPUTED BY THE DEPARTMENT. FURTHER THE AO HAS ALS O NOT BROUGHT SUFFICIENT MATERIAL ON RECORD TO SUGGEST THAT THE ADVANCE MADE TO GURSHARANJIT SINGH WAS MEANT FOR NON-BUSINESS PURPOSES. WE HAVE CONSI DERED THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE FOR MAKING A DVANCES TO GURSHARANJIT SINGH AND DEEPAK JAIN, WHICH WAS MADE AT ALMOST END OF THE YEAR. THE AO WAS ALSO NOT AUTHORITIES BELOW LE TO ESTABLISH A NY NEXUS BETWEEN THE AMOUNT ADVANCED AND THE BORROWED FUNDS. WE ARE, TH EREFORE, OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY DEL ETED THE ADDITION MADE BY THE AO AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND UPHELD THE SAME. 4. NOTICE OF HEARING WAS SENT TO THE ASSESSEE. HOWE VER, NOBODY HAS ENTERED APPEARANCE ON BEHALF OF THE ASSESSEE ON THE DATE OF HEARING. PERUSAL OF THE CASE FILE SHOWS THAT THE MATTER WAS LISTED FOR HEARING O N MORE THAN A DOZEN OF OCCASIONS IN THE PAST BUT THE ASSESSEE NEVER TURNED UP FOR HEARING. IN THIS VIEW OF THE MATTER, THE MISC APPLICATION FILED BY THE DE PARTMENT IS BEING DISPOSED OFF EXPARTE QUA THE ASSESSEE, ON MERITS. 5. WE HAVE HEARD THE LD. DR AND ALSO PERUSED THE MA TERIALS PLACED BEFORE US. IN THE ORDER DATED 26 TH DEC 2011 IN JASPAL SINGH V. ITO, ITA NO. 908/CHD/2 011, IT HAS BEEN HELD BY THIS TRIBUNAL THAT THE PROCEEDINGS U/S 154 CANNOT BE TAKEN ON THE BASIS OF SUBSEQUENT DECISIONS OF THE HON'BLE JU RISDICTIONAL HIGH COURT / HON'BLE SUPREME COURT UNLESS THE FOUNDATIONAL FACTS NECESSA RY FOR APPLYING THEM ARE SELF MISC APPLICATION NO. 105/CHD/2007 ARISING OUT OF ITA NO. 721/CHD/1998 PARDEEP TRADERS, LUDHIANA 3 EVIDENT AND APPARENT FROM RECORD. IT HAS ALSO BEEN HELD THAT THE CONCLUDED MATTERS CANNOT BE REOPENED OR REVIEWED ON THE BASIS OF SUBSEQUENT DECISIONS. IT HAS BEEN FURTHER HELD THAT NO INQUIRY OR INVESTIGAT ION CAN BE MADE U/S 154 JUST WITH A VIEW TO APPLY THE DECISIONS OF HON'BLE JURIS DICTIONAL HIGH COURT/THE HON'BLE SUPREME COURT. 6. TURNING TO THE FACTS OF THE CASE IT IS SEEN THAT THE AO HAS DISALLOWED A SUM OF RS. 18,845/- OUT OF INTEREST. A SUM OF RS. 16,2 50/- HAS BEEN DISALLOWED BEING INTEREST RELATABLE TO THE INTEREST-FREE FUNDS GIVEN TO SHRI GURSHARANJIT SINGH. THE LD. CIT(A) HAS DELETED THE AFORESAID DISALLOWANCE O N THE GROUND THAT ADVANCE TO SHRI GURSHARANJIT SINGH WAS GIVEN OUT OF BUSINESS E XPEDIENCY. THE AFORESAID FINDING OF FACT CANNOT BE REVIEWED OR EXAMINED IN T HE PROCEEDINGS U/S 154 ON THE BASIS OF SUBSEQUENT DECISION OF THE HON'BLE JURISDI CTIONAL HIGH COURT IN CIT V. ABHISHEK INDUSTRIES, 286 ITR 1 (P&H). THEREFORE TH E AFORESAID JUDGMENT HAS NO APPLICATION IN SO FAR AS IT RELATES TO DELETION OF DISALLOWANCE OF INTEREST AMOUNTING TO RS. 16,250/- BEING THE AMOUNT OF INTEREST RELATA BLE TO THE INTEREST-FREE ADVANCE GIVEN TO SHRI GURSHARANJIT SINGH. 7. AS REGARDS THE REMAINING DISALLOWANCE OF RS. 2,5 95/- BEING INTEREST ON THE AMOUNT OF INTEREST-FREE ADVANCE GIVEN TO SHRI DEEPA K JAIN, THE DISALLOWANCE CAN BE MADE/SUSTAINED ONLY IF A FINDING OF FACT IS RECO RDED THAT INTEREST-FREE ADVANCE WAS NOT GIVEN TO SHRI DEEPAK JAIN OUT OF BUSINESS E XPEDIENCY. SUCH A FINDING CANNOT BE RECORDED IN PROCEEDINGS FOR RECTIFICATION U/S 154. 8. IN VIEW OF THE FOREGOING, THE MISC. APPLICATION FILED BY THE DEPARTMENT IS DISMISSED. PER SUSHMA CHOWLA, JM THE ACCOUNTANT MEMBER SHRI D.K. SRIVASTAVA HAS PROP OSED THE DRAFT ORDER IN THE PRESENT M.A.NO.105/CHD/2007. ON GOING THROUGH THE DRAFT ORDER PROPOSED BY THE ACCOUNTANT MEMBER THOUGH I AM IN AGREEMENT WITH THE RESULT OF DISMISSAL OF THE MISCELLANEOUS APPLICATION MOVED BY THE REVENUE, HOWEVER, I DO NOT PRESCRIBE TO THE VIEW EXPRESSED BY MY COLLEAGUE VIDE PARA NOS.4 TO 7 OF THE PROPOSED ORDER AND, THEREFORE, I PROPOSE MY ORDER AS UNDER: 2. ON THE APPOINTED DATE OF HEARING I.E. 2.12.2011 THE LEARNED COUNSEL FOR THE ASSESSEE MOVED AN APPLICATION FOR A DJOURNMENT AS HE WAS AWAY TO TIRUPATI ON THE SAID DATE. THE ADJOURN MENT WAS REFUSED BY THE BENCH AND THE MATTER WAS HEARD IN VIEW OF TH E PROPOSITIONS MADE BY THE LEARNED D.R. FOR THE REVENUE. MISC APPLICATION NO. 105/CHD/2007 ARISING OUT OF ITA NO. 721/CHD/1998 PARDEEP TRADERS, LUDHIANA 4 3. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE TRI BUNAL, UNDER WHICH THE ADDITION ON ACCOUNT OF PROPORTIONATE INTE REST ON INTEREST FREE ADVANCES WAS DELETED BY THE TRIBUNAL, UPHOLDIN G THE ORDER OF THE CIT (APPEALS). THE GRIEVANCE OF THE REVENUE WAS TH AT IN VIEW OF THE RECENT JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT, LUDHIANA VS. ABHISHEK INDUSTRIES, LUDH IANA IN ITA NO.110 OF 2006 DATED 4.8.2006 THE ORDER OF THE TRIB UNAL NEEDS AMENDMENT. THE POWERS OF THE TRIBUNAL UNDER SECTIO N 254(2) OF THE ACT ARE LIMITED TO RECTIFY ONLY SUCH MISTAKES WHICH ARE APPARENT FROM RECORD. THE ISSUE IN THE PRESENT APPEAL WAS DECIDE D ON THE GROUND THAT THE ADVANCE TO ONE PARTY WAS MADE FOR THE PURC HASE OF LAND. HOWEVER, THE ADVANCE TO OTHER PARTY WAS MADE AS AN INTEREST FREE LOAN BUT NONE OF THE INTEREST BEARING FUNDS WERE UT ILIZED FOR THE ABOVE SAID PURPOSES. THE TRIBUNAL VIDE PARA 4 OF THE ORD ER DATED 13.2.2004 HAD HELD THAT THE ADVANCES MADE TO THE PERSON FOR P URCHASE OF LAND WAS FOR THE PURPOSE OF BUSINESS AND HENCE NO DISALL OWANCE OF INTEREST IS WARRANTED OUT OF THE SAME. IN RESPECT OF OTHER ADVANCES WHICH WERE MADE AT THE END OF THE YEAR, THE ADVANCES WERE FOR BUSINESS PURPOSES AND THERE WAS NO MERIT IN THE DISALLOWANCE . 4. THE REVENUE VIDE THIS MISCELLANEOUS APPLICATION HAS FAILED TO CONTROVERT THE FINDINGS OF THE TRIBUNAL IN THE CASE AND HAS FAILED TO PINPOINT ANY DEFECT IN THE ORDER OF THE TRIBUNAL AN D CONSEQUENTLY THE PROVISIONS OF SECTION 254(2) OF THE ACT ARE NOT ATT RACTED IN THE PRESENT CASE. IN VIEW THEREOF THE MISCELLANEOUS APPLICATIO N MOVED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 14.03.2012 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBEER ACCOUNTANT MBMER CHANDIGARH: THE 14.03.2012 SURESH MISC APPLICATION NO. 105/CHD/2007 ARISING OUT OF ITA NO. 721/CHD/1998 PARDEEP TRADERS, LUDHIANA 5 COPY TO: 1. THE APPELLANT, I.T.O 2. THE RESPONDENT, PARDEEP TRADERS, LUDHIANA 3. THE CIT(A), LUDHIANA 4. THE LD. CIT, LUDHIANA 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH