N.H. CONSTRUCTIONS PVT. LTD.,PANCHKULA V. DCIT, PANCHKULA CIRCLE, PANCHKULA

ITA 1278/CHANDI/2019

AI Insights

N.H. Constructions Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals) which upheld various disallowances and additions made by the Assessing Officer for the assessment year 2014-15. The main issues revolved around the disallowance of interest expenditure related to interest-free advances, additions under Section 68 for unexplained loans, and disallowances for unvouched expenses. The Tribunal examined the financial records, including the balance sheet and loan confirmations, and found that the assessee had sufficient interest-free funds and had substantiated the loans with adequate documentation, leading to the decision to allow the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35607 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: B.M. MONGA; ROHIT KAURA; ADVOCATES
• Keywords: Notional interest
• Section: 143(2); 68; 133(6)

Judgement Text

"आयकर अपील य अ\u000bधकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 1278/CHD/2019 \rनधा\u0011रण वष\u0011 / Assessment Year: 2014-15 N.H. Constructions Pvt. Ltd., 1704, Sector 21, Panchkula. Vs The DCIT, Panchkula Circle, Panchkula. \u0016थायी लेखा सं./PAN NO: AACCN4086A अपीलाथ\u001a/Appellant \u001b\u001cयथ\u001a/Respondent Assessee by : Shri B.M.Monga & Shri Rohit Kaura, Advocates Revenue by : Dr. Ranjit Kaur, Addl.CIT, Sr.DR Date of Hearing : 29.01.2025 Date of Pronouncement : 18.03.2025 PHYSICAL HEARING O R D E R PER RAJ PAL YADAV, VP The assessee is in appeal before the Tribunal against the order of the ld.Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 14.06.2019 passed in assessment year 2014-15. The assessee has taken five grounds of appeal, out of which ground No. 1 and 5 are general grounds which do not call for recording of any specific finding. ITA No.1278/CHD/2019 A.Y.2014-15 2 2. In Ground No.2 assessee has pleaded that ld. CIT(A) has erred in upholding the disallowance of interest expenditure amounting to Rs.2,22,780/-. 3. The brief facts of the case are that assessee company at the relevant time was engaged in construction of roads and other development activities. It has filed its return of income electronically on 20.11.2014 declaring total income of Rs.1,24,51,890/-. The case of the assessee was selected for scrutiny assessment and a notice under Section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed that assessee has advanced a sum of Rs.7,82,243/- to three individuals, namely; Nitin Bansal Rs.3,75,125/-, Sunny Bansal Rs.4,55,618/- and Hunny Bansal Rs.9,51,500/-. According to the AO, the assessee did not charge interest on these loans. He further observed that assessee has been availing cash credit limit from the bank and is paying interest on the same. Hence, without visualizing the status of the funds available with the assessee, ld. AO has ITA No.1278/CHD/2019 A.Y.2014-15 3 calculated an interest income on these loans @ 12.50% and made the disallowance out of the interest expenditure. 4. The appeal to the CIT(A) did not bring any relief to the assessee. 5. With the assistance of ld. Representative, we have gone through the record carefully. On page 8 of the Paper Book, assessee has placed copy of the Balance Sheet as on 31.03.2014. A perusal of this Balance Sheet would reveal that assessee has reserve and surplus of Rs.3,25,01,530/-. It has share capital of Rs.20 lacs. Thus, the surplus funds available with the assessee are much more higher than interest free advance given by it. If the assessee has sufficient amount of interest free funds which can take care of any interest free loans to others, then notional interest income on such loans not to be computed which is to be disallowed out of interest expenditure. In other words, AO cannot disallow the claim of interest expenditure by believing that interest bearing funds must have been given advance by the assessee without charging interest. The assessee has sufficient ITA No.1278/CHD/2019 A.Y.2014-15 4 surplus funds which can take care of any such advance. Hence, second ground is allowed and the disallowance out of interest expenditure amounting to Rs.2,22,780/- is deleted. 6. In Ground No.3 assessee has pleaded that ld. CIT(A) has erred in upholding the addition of Rs.47,64,800/- which was added by the AO with the aid of Section 68 of the Income Tax Act. We find that assessee has taken a loan of Rs.47,64,800/- from four individuals namely, Deepak Rawa Rs.25 lacs, Harish Rs.5 lacs, Sarika Rana Rs. 5 lacs, Kanta Rani Garg Rs.12,64,000/-. According to the AO, assessee failed to submit requisite details for fulfilling the conditions enumerated under Section 68, hence AO made the addition. 7. Before ld. CIT(A), assessee has submitted copy of PAN number of each creditor, copy of the Bank Statement and copy of loan confirmation. Such details have been entertained by the CIT(A) under Rule 46A of the Income Tax Act. A Remand Report was called for from the AO. The report of the AO has been reproduced in paragraph ITA No.1278/CHD/2019 A.Y.2014-15 5 No. 4.3 on page No.5 of the CIT(A)’s order. The assessee, thereafter rebutted the report of the AO and complete details have been tabulated by the CIT(A) on page No. 7 to 9 of the impugned order. The ld. CIT(A), however, did not accept the claim of the assessee and recorded the finding in paragraph No. 4.5. The CIT(A) was of the view that assessee could not furnish any evidence in support of identity, credit worthiness and genuineness of unsecured loans. 8. With the assistance of ld. Representative, we have gone through the record carefully. A perusal of Section 68 would contemplate that where any sum is found credited in the books of the assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO satisfactory, the sum so credited may be charged to Income Tax as income of the assessee of that previous year. Thus, in order to fulfil the requirements of Section 68, an assessee is required to prove the identity of the creditor, his credit worthiness to ITA No.1278/CHD/2019 A.Y.2014-15 6 advance such loans to the assessee and genuineness of the transactions. A perusal of the detail submitted by the assessee in a tabular form and reproduced by the CIT(A) on page 7 to 9 would indicate that assessee has fulfilled all the ingredients. It has submitted the copy of Permanent Account Number of each individual that would prove his identity as well as status of the creditor that he/she is an income tax assessee. In order to prove credit worthiness, assessee has filed copy of the ITR. Assessee has filed banking details exhibiting the amount received by it. The AO called for information under Section 133(6) of the Income Tax Act. All the creditors have responded to the letter of AO and submitted the requisite details. They have confirmed that they have given loan to the assessee. Thus, we fail to appreciate as to how assessee failed to prove identity, credit worthiness and genuineness of the transaction as observed by the CIT(A). The assessee has discharged its complete onus and no addition deserves to have been made with the help of Section 68 of the Income Tax Act. Therefore, we allow this ground of appeal and delete the disallowance. ITA No.1278/CHD/2019 A.Y.2014-15 7 GROUND NO. 4 9. In this ground, the grievance of the assessee is that CIT(A) has erred in upholding the addition of Rs.8,51,776/-. The finding of the AO on this issue read as under : “4. Disallowance on account of Unvouched Expenses During the course of assessment proceedings, books/vouchers were test checked basis and it is observed that following expenses to following extent were found unvouched. and not supported by proper bills/vouchers: 1. Purchase expenses Rs. 4,85,093/- 2. Staff Welfare Expenses Rs.3 66 683/- Total Rs. 8,51,776/- In this context, the AR of the assessee was asked to show caused why an amount of Rs. 8,51,776/ be not disallowed being unvouched expenses. No reply has been filed by the AR of the assessee in this regard. Accordingly disallowance of Rs. 8,51,776/ is being made to the returned income of the assessee on account of unvouched expenses. (Addition of Rs. 8,51,776/-) 10. The appeal to the CIT(A) did not bring any relief to the assessee. 11. The assessee is a construction company. It has filed its return of income declaring income of more than Rs.1.24 Crore. A perusal of this finding would not indicate which bill/voucher was not reliable and when the AO has confronted the assessee, he cannot make disallowance out ITA No.1278/CHD/2019 A.Y.2014-15 8 of Staff Welfare Expenses in this manner. For such a big organization and engaged in construction activities, some expenditure must have been incurred by the assessee. Those details were submitted. Its accounts are audited. The disallowance cannot be made in a sweeping manner as made by the AO without pin pointing a specific error in any particular bill/voucher. Hence, this disallowance is not sustainable and accordingly deleted. 12. In the result, appeal of the assessee is allowed. Order pronounced on 18.03.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क\u0002 \u0003ितिलिप अ\tेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड\u001c फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "