The ACIT, Circle-1, Ahmedabad V. Shri Sanjay C.Agarwal, Ahmedabad

MA 13/AHD/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 4668 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, AHMEDABAD. VS. SHRI SANJAY C. AGARWAL, 2 ND FLOOR, SARTHAK AVENUE, NR. FUN REPUBLIC, SATELLITE, AHMEDABAD. (APPELLANT) .. (RESPONDENT) REVENUE BY :- SHRI P. R. GHOSH, DR ASSESSEE BY:- SHRI DHIREN SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS A MISCELLANEOUS APPLICATION FILED BY THE REVENUE ARISING OUT OF THE ORDER OF THE TRIBUNAL IN ITA NO.1309/AHD /2005 FOR ASST. YEAR 2001-02 PRONOUNCED ON 10 TH JULY, 2009. 2. THE AO HAD REFERRED TO PARA 5 OF THE TRIBUNALS ORDER AND POINTED OUT THAT AN ACTUAL ERROR HAS CREPT IN IN THE ORDER OF THE TRIBUNAL. IT IS MENTIONED IN THE ORDER OF THE TRIBUNAL THAT NO ADVA NCES WERE GIVEN TO M/S INDRAPURI OWNERS ASSOCIATION AND INDRALOK OWNE RS ASSOCIATION TOTALING TO RS.2,91 CRORES AND THEREFORE ITS FINDIN G THAT ASSESSEE HAD ITS INTEREST-FREE CAPITAL WAS INCORRECT. THE OBJECTION OF THE DEPARTMENT IN THE MISCELLANEOUS APPLICATION IS AS UNDER :- M.A. NO.13/AHD/2010 ARISING OUT OF ITA NO.1309/AHD/2005 ASST. YEAR :2001-02 2 FROM THE BALANCE SHEET OF THE ASSESSEE AS AT 31/03 /2001, IT IS SEEN THAT THE ASSESSEE HAS CAPITAL OF RS_1,40,97,583/- AND AS SETS IN SHARE PURCHASE ACCOUNT OF RS.1,04,10,761/-. THE ASSESSEE IS ALSO THE PROPRIETOR OF M/S. AGARWAL BUILDER, A CONSTRUCTION FIRM. PERUS AL OF THE BALANCE SHEET OF M/S. AGARWAL BUILDER (INCLUDED IN THE RETU RN SEPARATELY) SHOWS THAT THE PROPRIETORSHIP FIRM HAS OUTSTANDING LOANS (ASSETS) FORWARDED TO M/S. INDRALOK OWNERS' ASSOCIATION (RS 1.48.53.766/- ) M/S INDRAPURI OWNERS' ASSOCIATION (RS.1,42,75,157/-). THEREFORE, A TOTAL OF RS,2,91,28,923/- HAS BEEN GIVEN AS ADVANCES FROM TH E ASSESSEE'S FIRM TO THE TWO ENTITIES. THUS, THE OBSERVATION OF THE HON' BLE ITAT THAT THE ASSESSEE HAS NOT FORWARDED ANY SUCH ADVANCES IS FAC TUALLY INCORRECT. FURTHER, THE PROFIT AND LOSS ACCOUNT OF AGARWAL BUI LDERS DOES NOT SHOW ANY RECEIPTS ON ACCOUNT OF INTEREST FROM THESE TWO ENTITIES AND THEREFORE, IT IS CLEAR THAT THE ADVANCE FORWARDED ARE INTEREST FREE ADVANCES. THE BALANCE SHEET OF M/S. AGARWAL BUILDERS SHOW FRE SH BORROWINGS OF RS.48.97 LACS. AS AGAINST THIS, THERE IS AN INCREAS E IN LOANS AND ADVANCES OF RS,46.34 LACS. FURTHER, THE PERUSAL OF DETAILS O F LOANS AND ADVANCES AS AT 31/03/2001 AND 31/03/2000 IN DETAIL SHOWS THAT T HERE IS AN INCREASE IN THE LOAN FORWARDED TO INDRAPURI OWNERS' ASSOCIATION OF RS.42.76 LACS AND TO INDRALOK OWNERS' ASSOCIATION OF RS 48.71 LAC S. THEREFORE, FRESH ADVANCES OF RS.91.48 LACS HAVE BEEN MADE TO THESE T WO ENTITIES, WITH IS PRIMARILY SHOWS OUT OF LOANS BORROWED BY THE FIRM. THEREFORE, THIS IS A CLEAR CASE OF APPLICATION OF SEC.14A. 3. THE ABOVE FACTS REVEAL THAT THERE IS FACTUAL ERR OR IN THE DECISION OF THE ITAT. THE ABOVE MISTAKE IS A MISTAKE APPARENT FROM THE RECORDS AND THEREFORE IT IS REQUESTED THAT THE HON'BLE TRIBUNAL MAY KINDLY RECTIFY THE MISTAKE AND PASS NECESSARY ORDER ACCORDINGLY. COPIE S OF BALANCE SHEET OF SHRI SANJAY AGARWAL AND THAT OF HIS PROPRIETARY CONCERN M/S. AGARWAL BUILDERS ARE ENCLOSED. 3. THE LD. DR SUBMITTED THAT THERE IS A FACTUAL MIS TAKE WHICH HAS CREPT IN IN THE ORDER OF THE TRIBUNAL AND IT IS GOI NG TO AFFECT THE FINAL DECISION IF IT IS CORRECTED. ACCORDING TO HIM THE A O HAD DISALLOWED PART OF THE INTEREST PAID BY THE ASSESSEE FOR RS.50,11,9 46/- AS ITS INTEREST BEARING FUNDS WERE DIVERTED IN ADVANCES TO THESE TW O SOCIETIES FREE OF INTEREST. THE TRIBUNAL MENTIONED THAT NO SUCH ADVAN CES WERE GIVEN BUT IN FACT THESE ADVANCES WERE GIVEN AS IS APPARENT FROM BALANCE SHEET OF 3 AGARWAL BUILDERS WHICH CONTAINED ON THE DEBIT SIDE TOTAL ADVANCES OF RS.3.90 CRORES AS ON 31.3.2001. THE LD. DR SUBMITTE D THAT THE FACTUAL ERRORS SO CREPT IN IN THE ORDER OF THE TRIBUNAL SHO ULD BE RECTIFIED AND DECISION BE CHANGED ACCORDINGLY. 4. THE LD. AR ON THE OTHER HAND SUBMITTED THAT THER E IS NO ISSUE OF ANY DISALLOWANCE UNDER SECTION 36(1)(III). THE ISSUE WA S ONLY WITH RESPECT TO DISALLOWANCE OF INTEREST WITH RESPECT TO SECTION 14 A. HE REFERRED TO THE ORDER OF AO WHICH MENTIONED THAT HE IS REFERRING TO DISALLOWANCE. IN PARTICULAR HE REFERRED TO PARA 2 AND PARA 4 OF THE TRIBUNALS ORDER WHEREIN IT IS POINTED OUT THAT ASSESSEE HAD MADE INVESTMENT OF RS.1,04,10,761/- WHICH IS INVESTMENT IN SHARES. THE AO HAS ALSO REFE RRED TO THE REPLY FILED BY THE ASSESSEE ACCORDING TO WHICH SUCH INVESTMENTS ARE COMING FROM EARLIER YEARS AND WERE EXPLAINED AS ARISING OUT OF CAPITAL ACCOUNTS. THE CAPITAL ACCOUNT WAS RS.1.76 CRORES AT THE BEGINNING OF THE YEAR AND RS.1.04 CRORES AT THE END OF THE YEAR. SINCE THE IN VESTMENT IN SHARES ACCORDING TO THE AO RESULTED IN NIL INCOME THEN PAR T OF INTEREST PAID BY ASSESSEE WAS CONSIDERED ON THE PRESUMPTION THAT INV ESTMENTS IN SHARES WERE DONE OUT OF INTEREST BEARING FUNDS. 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THOUGH A FACTUAL ERR OR HAS CREPT IN IN THE ORDER OF THE TRIBUNAL, AS THE TRIBUNAL HAS CONSIDER ED THE FINAL BALANCE SHEET OF SHRI SANJAY AGARWAL WHICH DID NOT INDICATE ANY INVESTMENT IN THE INDRALOK OWNERS ASSOCIATION AND INDRAPURI OWNE RS ASSOCIATION SOCIETIES, HOWEVER, INDIVIDUAL BALANCE SHEET OF AGA RWAL BUILDERS DID INDICATE INVESTMENTS IN INDRALOK OWNERS ASSOCIATIO N AND INDRAPURI OWNERS ASSOCIATION, EVEN AFTER MAKING THIS CORRECT ION WHAT WE NOTICE IS THAT THERE WAS NO FRESH INVESTMENT IN THIS YEAR IN SHARES. THE INVESTMENT 4 WAS MADE IN EARLIER YEARS AND THE TRIBUNAL CONSIDER ED THAT THEY WERE ARISING OUT OF CAPITAL OF ASSESSEE EXISTING IN THOS E YEARS. IN THIS REGARD THE TRIBUNAL HAS OBSERVED AS UNDER :- THE ASSESSEE HAS AMPLY DEMONSTRATED THAT IT HAS MA DE MAJOR INVESTMENT IN SHARES IN ASSESSMENT YEAR 1998-99, OU T OF HIS CAPITAL WHICH REMAINED MORE THAN THE INVESTMENT IN SHARES. IF THE AO HAD ANY DOUBT, HE COULD HAVE EXAMINED THE BANK ACCOUNT AND FOUND OUT WHETHER ANY NEW INTEREST BEARING BORROWINGS HAVE BE EN INVESTED IN PURCHASE OF SHARES. HAVING NOT DONE AND HAVING BASE D ITS DECISION ON A WRONG PRESUMPTION, LD. CIT(A) WAS JUSTIFIED IN DE LETING THE SAME. ONCE A FINDING IS GIVEN THAT INVESTMENT IN SHARES O UT OF THE CAPITAL OF THE ASSESSEE IN ASST. YEAR 1998-99 IS MADE THEN QUESTIO N OF HOLDING THIS YEAR THAT INVESTMENT IN SHARES WAS MADE OUT OF INTEREST BEARING BORROWED FUNDS WOULD NOT ARISE AND, THEREFORE, THERE WILL NO T BE ANY QUESTION OF MAKING ANY DISALLOWANCE. THUS EVEN IF CORRECTIONS I S MADE, THE DECISION OF THE TRIBUNAL WILL NOT ALTER AS FINDING ON THE SP ECIFIC ISSUE HAS BEEN GIVEN AS ABOVE. 6. IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF LD. DR THAT THERE IS GOING TO BE A CHANGE IN THE DECISION OF THE TRIBUNAL. IN ANY CASE, THIS WOULD AMOUNT TO REVIEW THE ORDER OF THE TRIBUNAL WHICH IS NOT PERMISSIBLE. 7. IN THE RESULT, MISC. APPLICATION FILED BY THE RE VENUE IS REJECTED. ORDER WAS PRONOUNCED IN OPEN COURT ON 16/7/2010 SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 16/7/2010 5 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD