Sunil Kumar, Hansi v. ITO, Hisar

ITA 1246/DEL/2010 | 2006-2007
Pronouncement Date: 10-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 124620114 RSA 2010
Assessee PAN ABBPJ4274B
Bench Delhi
Appeal Number ITA 1246/DEL/2010
Duration Of Justice 1 year(s) 10 month(s) 22 day(s)
Appellant Sunil Kumar, Hansi
Respondent ITO, Hisar
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 10-02-2012
Date Of Final Hearing 08-02-2012
Next Hearing Date 08-02-2012
Assessment Year 2006-2007
Appeal Filed On 19-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO.1246/DEL/2010 ASSESSMENT YEAR : 2006-07 SUNIL KUMAR PROP. M/S S.K. TRADERS OUTSIDE BARSI GATE UMRA GATE BARSI GATE ROAD HANSI. PAN : ABBPJ4274B VS. ITO WARD 4 HISAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. JAIN AND SHRI SACHIN JAIN ADVOCATES REVENUE BY : MRS. ANUSHA KHURANA SR.DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 12 TH JANUARY 2010 FOR ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM TR ADING OF SCRAP AND IS ENGAGED IN THE BUSINESS OF PURCHASING SICK IN DUSTRIAL UNITS AND SELLING THE SCRAP ETC. THE RETURN OF INCOMES WAS FILED ON 27 TH OCTOBER 2006 AT AN INCOME OF ` 1 07 940/- AND THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED VIDE IMPUGNED ASSESSMENT ORDER DATED 31 ST DECEMBER 2008 AT A TOTAL INCOME OF ` 32 38 545/- BY MAKING VARIOUS ADDITIONS MAINLY OF A SUM OF ` 27 23 644/- O N ACCOUNT OF INTEREST BEING NOT ALLOWABLE. THE OTHER MAIN ADDITI ON IS A DISALLOWANCE ITA NO.1246/DEL/2010 2 OF ` 3 22 433/- MADE U/S 36(1) (III) OF THE ACT. TH E GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT LEARNED CIT (A) AS UNJUSTIFIED IN SUSTAINING ADDITION OF RS.27 23 644/- AS ASSESSEE HAS NOT PUT FORWARD CLAIM OF DEDUCTION UNDER S.36(1)(III) OF INCOME TAX ACT 1961 OF THE INTEREST PAID ON BORROWED FUNDS BY DEBIT TO THE RELEVANT P& L ACCOUNT BUT CAPITALIZED IN THE ACCOUNTS. 2. THAT LEARNED CIT (A) WAS UNJUSTIFIED IN SUSTAINING ADDITION OF RS.27 23 644/- HOLDING THAT LOANS ON WHICH INTEREST OF RS.27 23 644/- HAS BEEN PAID ARE BOGUS AS LOWER AUTH ORITIES HAVE PREJUDGED THAT LOANS ARE BOGUS. 3. THAT LEARNED CIT (A) WAS UNJUSTIFIED IN SUSTAINING ADDITION OF RS.27 23 644/- AS LEARNED ASSESSING OFFICER HAS NOT EXAMINED CONSIDERED DECIDED AND ESTABLISHED THAT MONEY BORROWE D BY ASSESSEE ON INTEREST WAS ADVANCED TO PARTIES FREE OF I NTEREST AND NOT AS A MEASURE OF COMMERCIAL EXPEDIENCY. LEA RNED CIT (A) OUGHT TO HAVE HELD THAT ADDITION OF RS.27 23 644/- I S CONTRARY TO LAW AS THE INTEREST PAID ON BORROWED FUNDS WAS AS A MEASUREY COMMERCIAL EXPEDIENCY AND THE SAME WAS NOT E VEN CLAIMED AS A DEDUCTION IN TERMS OF SECTION 36(1)(III) OF THE ACT. 4. THAT LEARNED CIT (A) ERRED IN DISMISSING GROUND N O.1 BY OBSERVING THAT ON 22.09.2009 THIS GROUND WAS WITHDRAWN . OBSERVATION IS INCORRECT AS THIS GROUND WAS NEVER WITHD RAWN AND IN THIS GROUND MAIN QUESTION WAS HIGHLY ARGUED AGITATE D CONTESTED AND PRESSED AND LEARNED CIT (A) EXAMINED IM PUGNED ADDITIONS OF RS.27 23 644/- AND DECIDED THE SAME ON M ERITS. 5. THAT LEARNED CIT (A) WAS UNJUSTIFIED IN SUSTAINING DISALLOWANCE OF INTEREST PAID TO BANK OF RS.3 22 433/- UNDER S.36(1)(III) OF THE ACT AS ALLEGED FUNDS OF RS.2.44 C RORE STOOD INVESTED IN BUSINESS AND AS SUCH WERE NOT WITH ASSESSE E. 6. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS UNJUSTIFIED IN RESTRICTING CAR EXPENSES AT 1/5 TH OF TOTAL EXPENSES. 7. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS UNJUSTIFIED IN RESTRICTING TELEPHONE EXPENSES AT 1/5 TH OF TOTAL EXPENSES. 8. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS UNJUSTIFIED IN SUSTAINING ADDITION OF RS.24 000/- MADE BY LEARNED ASSESSING OFFICER CONSIDERING THAT HOUSEHOLD EXPENSES SHOWN BY ASSESSEE ARE LOW. ITA NO.1246/DEL/2010 3 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSEE DENIES ITS LIABILITY TO PAY INTEREST CHA RGED UNDER S. 234B OF INCOME TAX ACT 1961 AT RS.3 40 948/ - WHICH IS EXCESSIVE. APPELLANT CRAVES LEAVE TO ADD/ALTER OR MODIFY ANY OF TH E GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING. 3. GROUND NOS. 1 TO 4 INVOLVES ONE ISSUE I.E. REGARDIN G DISALLOWANCE OF A SUM OF ` 27 23 644/-. IT HAS BEEN M ENTIONED IN THE ASSESSMENT ORDER THAT A SEARCH OPERATION U/S 132 (1) WAS C ARRIED OUT AT THE BUSINESS/RESIDENTIAL PREMISES OF ONE SHRI MOHAN LA L MITTAL RESIDENT OF 1185 URBAN ESTATE HISAR AND DURING THE C OURSE OF SUCH SEARCH CERTAIN DOCUMENTS WERE FOUND ONE OF WHICH WAS A DIARY MARKED AS DOCUMENT NO.A-18 WHICH WAS SEIZED FROM THE R ESIDENTIAL PREMISES OF SHRI MOHAN LAL MITTAL AND IN WHICH THE EN TRIES REGARDING MONEY LENDING BUSINESS BEING RUN BY THE SAID SHRI MOHAN LAL MITTAL WERE RECORDED AND IN THE DIARY IT WAS FOUND THAT THE LOANS OF ` 21.04 LAC WERE ARRANGED BY SHRI MOHAN LAL MITTAL FOR THE ASSESSEE THROUGH S/SHRI/SMT. CHANCHAL RANI MOHAN LAL PREM CHAND & SONS SHASHI BALA SUNDER LAL ASHA RANI SUDHA RANI AND TELU RAM . THE DETAILS OF SUCH LOANS IS ALSO DESCRIBED IN ASSESSMENT ORDER AT PAGE 3 W HICH IS AS UNDER:- I) SHRI MOHAN LAL : RS.2 12 518/- II) SMT. SHASHI BALA : RS.2 05 078/- III) SMT. SUDHA RANI : RS.2 05 078/- IV) SHRI SUNDER LAL : RS.2 05 078/- V) SHRI TELU RAM : RS.2 05 078/- VI) SMT. ASHA RANI : RS.2 05 078/- VII) SMT. CHANCHAL RANI : RS.1 48 763/- VIII) PREM CHAND & SONS HUF : RS.5 12 695/- 4. IT WAS NOTICED BY THE ASSESSING OFFICER THAT AFOREMEN TIONED LOANS WERE RAISED BY THE ASSESSEE IN THE PRECEDING YEARS THEREFORE RECOURSE TO THE PROCEEDINGS U/S 147 IS BEING TAKEN IN T HE RELEVANT YEARS. THEN LEARNED ASSESSING OFFICER REFERRED TO THE ADMISSION OF SHRI MOHAN LAL MITTAL BEFORE THE SETTLEMENT COMMISSI ON AND OBSERVED ITA NO.1246/DEL/2010 4 THAT THAT DOES NOT PROVIDE IMMUNITY TO THE ASSESSEE FROM TAXATION ON THE UNDISCLOSED INCOME. HOWEVER THE ASSESSING OFFICER O BSERVED THAT INTEREST PAID BY THE ASSESSEE ON THE AFOREMENTIONED OPEN ING BALANCE OF LOANS AMOUNTING TO ` 2 27 924/- BEING @ 12% PER A NNUM IS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. IT IS ALSO NO TED BY THE ASSESSING OFFICER THAT IN THE SCHEDULE OF FIXED ASSETS THE ASSESSEE HAS SHOWN OPENING BALANCE OF LAND AT ` 1 17 00 000/- AN D ADDED INTEREST OF ` 27 23 644/- AND IN THIS MANNER WDV OF THE LAN D IS SHOWN AT ` 1 44 23 644/- AND THE AMOUNT OF ` 27 23 644/- BEING INTEREST HAS BEEN CAPITALIZED. THE ASSESSING OFFICER ALSO NOTICED THAT TH E AFORESAID AMOUNT OF ` 27 23 644/- INCLUDE THE AFOREMENTIONED INTEREST OF ` 2 27 924/- BEING INTEREST @ 12% ON THE AFOREMENTIONE D DEPOSITS RELATING TO SHRI MOHAN LAL MITTAL. AFTER REFERRING TO THESE FACTS THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE ON THE ONE H AND HAS RAISED HUGE INTEREST BEARING LOANS AND CLAIMED TO HAVE PAID SIZEABLE INTEREST OF ` 27 LAC CONVERSELY INTEREST-FREE ADVANCE S OF ` 2 44 46 255/- WHICH HAVE BEEN GIVEN TO AS MANY AS 12 INDIVIDUALS MENTIONED IN SCHEDULE E OF THE AUDIT REPORT OUT OF WHICH MAIN LOAN OF ` 1 15 00 000/- HAS BEEN GIVEN TO M/S AMTEK DEALER PVT. LTD. KOLKATA AND ` 87 LAC TO MEHANTI MACS TRADE PVT. LTD. ON INQUIR Y FROM THE ASSESSEE IT WAS SUBMITTED THAT THESE WERE ADVANCES IN THE WAKE O F PURCHASE OF SICK UNIT BY THE ASSESSEE AND THOSE FUNDS WERE RAISED ON IN TEREST BY THE ASSESSEE FROM RELATIVES AND FRIENDS. IT WAS SUBMITTED THAT THE INTEREST ON THE INTEREST BEARING FUNDS HAS BEEN CAPITAL IZED THEREFORE NO ADVERSE INFERENCE SHOULD BE DRAWN FOR INTEREST FREE ADVANCES. THEREAFTER THE ASSESSING OFFICER OBSERVED THAT THE SICK UNIT NAMELY BHIWANI COLD ROLLING MILL BHIWANI STATED TO BE PURC HASED BY THE ASSESSEE FOR A SUM OF ` 8.4 CRORE IN FINANCIAL YEAR 2003 -04 WAS NOT SHOWN IN THE BALANCE SHEET FOR WHICH IT WAS THE CONTEN TION OF THE ASSESSEE THAT THE SCRAP ARISING OUT THAT UNIT WAS SOLD DURI NG ASSESSMENT YEARS 2004-05 2005-06 AND 2006-07 AND FOR A SUM OF ` ITA NO.1246/DEL/2010 5 7 90 35 780/- AND THE BALANCE LAND WORTH ` 1.17 CRO RE WAS LEFT WHICH HAS BEEN SHOWN IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER IN PARA 3.2 ADMITTED THE POSITION THAT THE SAID INTEREST OF ` 27 23 644/- HAS BEEN CAPITALIZED BUT H E DISALLOWED THIS AMOUNT ON THE GROUND THAT LOANS IN QUESTION WHICH HAV E BEEN LISTED ABOVE WERE BOGUS AND THE SUFFICIENT FUNDS WERE AVAILAB LE WITH THE ASSESSEE OF ` 2.44 CRORE FOR ADVANCING IT TO OTHERS. TH EREFORE INTEREST CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE ALTHOUGH CAPITA LIZED. THOSE OBSERVATIONS OF THE ASSESSING OFFICER WILL BE NECESSARY TO UNDERSTAND THE PRESENT ISSUE AND ARE REPRODUCED BELOW:- 3.2 ON BEING CONFRONTED THE ASSESSEES COUNSEL ARGU ED AT THE TIME OF FINAL HEARING THAT THE INTEREST OF RS.27 23 64 4/- ON INTEREST BEARING FUNDS WAS NOT DEBITED TO THE P&L ACCOUNT AND IT WAS ADDED TO THE VALUE OF LAND AT RS.1 17 00 000/- A ND WDV OF THE LAND THUS BECOME AT RS.1 44 23 644/-. IT WAS FU RTHER ARGUED THAT SINCE THE INTEREST OF RS.27 23 644/- HAS NOT BEEN DEBITED TO P&L ACCOUNT HENCE IT CANT BE DISALLOWED. I N THIS REGARD IT MAY BE MENTIONED THAT THERE IS NO DENYING THE FACT THAT THE ALLEGED INTEREST ON THESE LOANS HAS BEEN CAPITALI ZED YET IT MAY BE MENTIONED THAT WHEN THE LOANS IN QUESTION ITSELF HAVE BEEN ESTABLISHED AS BOGUS AS DISCUSSED IN PARA- 2 ABOVE (LOANS RAISED THROUGH SHRI MOHAN LAL MITTAL) AND THERE WAS ALSO SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSEE AT RS.2.44 CRORE TO ADVANCE IT TO OTHERS THE INTEREST CLAIMED ON THEM IS NOT A T ALL ALLOWABLE. WHATEVER ADDITION HAS BEEN MADE IN THE LAN D ACCOUNT THAT HAS BEEN MADE OUT OF THE UNDISCLOSED INCOME OF THE ASSESSEE. AS THE VALUE OF THE LAND HAS BEEN INFLA TED BY THE VALUE OF INTEREST ON THESE ALLEGED LOANS RESULTANTLY V ALUE OF THE ASSETS SIDE HAS BEEN INFLATED WITH THE CORRESPONDING FIGURE RESULTING INTO CREATION OF CAPITAL WITHOUT PAYME NT OF TAX. ACCORDINGLY THE ALLEGED INTEREST OF RS.27 23 644 /- ALTHOUGH CAPITALIZED IS HEREBY ADDED TO THE INCOME OF THE ASSESSEE AS VALUE OF ASSETS HAS BEEN INFLATED BY THE A LLEGED INTEREST. IN VIEW OF THE ABOVE DISCUSSION I AM SATISFIED THAT THE ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICU LARS OF INCOME AMOUNTING TO RS.27.23 LAC HENCE IT IS A FIT CAS E FOR INITIATION OF PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE INCOME TAX ACT 1961 WHICH ARE BEING INITIATED SEPARATELY. (EMPHASIS OURS ) ITA NO.1246/DEL/2010 6 5. LEARNED CIT (A) REFERRED TO THE VARIOUS DOCUMENTS FILED BY THE ASSESSEE WITH THE ASSESSING OFFICER AND CALLED FOR REMAND R EPORT. AFTER CONSIDERING ALL THESE SUBMISSIONS LEARNED CIT (A) VIDE LETTER DATED 25 TH SEPTEMBER 2009 THE TEXT OF WHICH HAS BEEN REPRODUC ED IN THE ORDER OF CIT (A) HAS DIRECTED THE ASSESSING OFFICER TO MAKE THOROUGH INQUIRIES INTO THE LOANS OBTAINED BY THE ASSESSE E FROM SHRI MOHAN LAL MITTAL AND TO SUBMIT THE REPORT. AFTER CO NSIDERING ALL THESE SUBMISSIONS LEARNED CIT (A) HAS CONFIRMED THE ADDITION OF ` 27 23 644/- BY OBSERVING THAT THE PROCEEDINGS OF IT A T ARE GOVERNED BY PREPONDERANCE OF PROBABILITIES. HE OBSERVED THAT LOA NS ON WHICH INTEREST HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ARE FOUND TO BE BOGUS THOUGH THOSE LOANS PERTAINS TO ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. IT WILL BE RELEVANT TO REPRODUCE THE FOLLOWING OBSERVATIONS OF CIT (A):- THE PROCEEDINGS UNDER THE IT ACT ARE GOVERNED BY THE RULE OF PREPONDERANCE OF PROBABILITY. THE LOANS ON WHICH INTEREST HAS BEEN DISALLOWED BY THE ASSESSING OFFICER HAVE BEEN FOUND BOGUS; ALTHOUGH THESE LOANS PERTAIN TO THE ASSESSM ENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION YET SINCE THE SAME HAVE BEEN FOUND AS BOGUS THE DISALLOW ANCE OF INTEREST OF RS.27 23 644/- MADE BY THE ASSESSING OFFIC ER IS CONFIRMED. EVEN OTHERWISE THE APPELLANT HAS HIMSELF W ITHDRAWN THE GROUND OF APPEAL PERTAINING TO THIS ITEM AS NOTED ABO VE. THE GROUND OF APPEAL IS DISMISSED. THE PURPOSE OF BRINGING THE ABOVE FACTS ON RECORD WAS TO EMPHASIZE THAT THE APPELLANT IS ROTATING ITS OWN MONEY IN THE FORM OF ADVANCES ETC. ETC. AS NOTED ABOVE. THE GENUI NENESS OF THESE ADVANCES APPEARS QUESTIONABLE. THE ASSESSING O FFICER MAY TAKE PROPER ACTION ON THE LINES THE FINDING HAS BEE N GIVEN BY HIM IN THE REMAND REPORT FOR THE RELEVANT ASSESSMENT YEAR. 6. IT MAY BE MENTIONED HERE THAT IN CIT (A)S ORDER IN PARA 3 IT HAS BEEN MENTIONED THAT THE ASSESSEE HAS WITHDRAWN THE GROUN D RELATING TO ADDITION OF RS.27 23 644/-. IT IS THE CASE OF THE LEARNED AR THAT THE ASSESSEE HAS NEVER WITHDRAWN THE GROUND. HE SUBMITTED TH AT THE ITA NO.1246/DEL/2010 7 ADDITION ITSELF IS PATENTLY WRONG HENCE THERE IS NO QU ESTION OF WITHDRAWING THE GROUND. HE ALSO SUBMITTED THAT ACCOR DING TO WELL ESTABLISHED LAW THERE IS NO ESTOPPLE AGAINST LAW THERE FORE THESE OBSERVATIONS OF CIT (A) SHOULD BE IGNORED. ON THE OTH ER HAND THE LEARNED DR SUBMITTED THAT THIS GROUND HAVING BEEN WIT HDRAWN BEFORE CIT (A) THE ASSESSEE DOES NOT HAVE RIGHT TO RAISE THIS GR OUND. 7. AFTER CAREFUL CONSIDERATION OF THE ISSUE WE ARE OF THE OPINION THAT THE ASSESSEE HAS RIGHT TO PRESS THIS GROUND AS ACCORDI NG TO WELL ESTABLISHED LAW THERE IS NO ESTOPPLE AGAINST LAW. MOR EOVER LEARNED CIT (A) HAS NOT UPHELD DISALLOWANCE MERELY FOR WITHDR AWAL OF THE GROUND BUT HAS UPHELD ON MERITS. THEREFORE WE PROCE ED TO CONSIDER THE DISALLOWANCE ON MERITS AFTER HEARING BOTH THE PAR TIES. 8. AFTER NARRATING THE FACTS PLEADING ON GROUND NOS. 1 TO 4 IT WAS THE SUBMISSIONS OF THE ASSESSEE THAT ADDITION HAS WRONGLY BE EN MADE BY THE ASSESSING OFFICER AND IT HAS WRONGLY BEEN SUSTAINE D BY THE CIT (A). IT IS THE CASE OF THE LEARNED AR THAT THE IMPUG NED AMOUNT OF INTEREST HAS NEVER BEEN CLAIMED BY THE ASSESSEE AS AN EXPE NDITURE THEREFORE THE QUESTION OF DISALLOWANCE THEREOF DOES N OT ARISE AT ALL. HE SUBMITTED THAT THE ASSESSING OFFICER IN THE ASSESSMENT OR DER ITSELF HAS ADMITTED THAT THIS AMOUNT IS CAPITALIZED. HAVING ADMITTED SO LD. ASSESSING OFFICER COULD NOT HAVE ADDED THAT AMOUNT TO T HE INCOME OF THE ASSESSEE FOR EXTRANEOUS CONSIDERATIONS. HE THEREFORE PLEADED THAT THE ADDITION SHOULD BE DELETED. HE SUBMITTED TH AT THE LOANS WHICH HAVE BEEN LISTED ABOVE WERE OBTAINED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 FOR WHICH THE ASSESSMENT PROCEEDINGS WERE R EOPENED AND THE ASSESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER VIDE ORDER DATED 23 RD DECEMBER 2011 PASSED U/S 143/148 OF THE INCOME TAX ACT AND THE ASSESSING OFFICER HAS ACCEPTED ALL THESE LOANS AS GENUINE EXCEPT LOAN RELATED TO PREM CHAND & SONS HU F FOR WHICH THE ITA NO.1246/DEL/2010 8 ASSESSEE HAD FILED AMPLE EVIDENCE. HE THEREFORE STAT ED THAT THE GROUNDS ON WHICH THE ADDITION HAS BEEN MADE BY THE ASSE SSING OFFICER AND SUSTAINED BY LEARNED CIT (A) ITSELF DOES NOT EXIST A S THOSE LOANS RELATING TO SHRI MOHAN LAL MITTAL HAVE NOT BEEN FOU ND TO BE BOGUS. IN THIS MANNER IT WAS SUBMITTED BY THE LEARNED AR THAT T HE ADDITION SHOULD BE DELETED. 9. ON THE OTHER HAND IT WAS VEHEMENTLY PLEADED BY T HE LEARNED DR THAT THE LOANS RELATING TO MOHAN LAL MITTAL WERE FOU ND TO BE BOGUS AND THEREFORE THE INTEREST PAID BY THE ASSESSEE WAS ALSO CONSI DERED DISALLOWABLE AND LEARNED CIT (A) HAS RIGHTLY UPHELD T HE DISALLOWANCE AND HIS ORDER ON THIS ISSUE SHOULD BE CONFIRMED. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE POSITION THAT THE AFOREMENTIONED AMOUNT OF INTEREST HAS NOT BEEN CLAIMED BY THE ASSESSEE I N THE PROFIT & LOSS ACCOUNT AND HAS BEEN CAPITALIZED TO THE LOAN AC COUNT HAS NOT BEEN CONTROVERTED EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT (A). IF IT IS SO THE SUSTENANCE OF DISALLOWANCE CANNOT BE UPHELD. WHEN AN EXPENDITURE IS NOT CLAIMED IT CANNOT BE DISALLOWE D. THE DISALLOWANCE IN THE PRESENT CASE HAS BEEN MADE BY THE A SSESSING OFFICER ON IRRELEVANT CONSIDERATIONS. THE ADDITION IF ANY TO BE MADE UNDER THE PROVISIONS OF INCOME-TAX ACT HAS TO BE SUBSTAN TIATED BY THE PROVISIONS OF THE ACT. THE LOANS WHICH HAVE BEEN MADE THE BASIS TO DISALLOW THE INTEREST ARE NOT RELATING TO THE YEAR UN DER CONSIDERATION. IF THOSE LOANS HAVE NOT BEEN ADDED BY THE ASSESSING OFFIC ER DURING THE YEAR UNDER CONSIDERATION. THE INTEREST THOUGH PAID/C REDITED BY THE ASSESSEE TO THE ACCOUNT OF THE PARTIES HAS NOT BEEN DEBIT ED TO THE PROFIT & LOSS ACCOUNT AND IT HAS NOT BEEN CLAIMED AS AN EXPENDITURE. IT IS CAPITALIZED TO LAND ACCOUNT. THEREFORE NO DISALL OWANCE ON THIS ACCOUNT IS CALLED FOR AT ALL. LEARNED CIT (A) HAS ER RONEOUSLY OBSERVED ITA NO.1246/DEL/2010 9 THAT THE PROCEEDINGS UNDER IT ACT ARE GOVERNED BY TH E RULE OF PREPONDERANCE OF PROBABILITIES. HERE IN THE PRESENT CASE THE FACTS ARE CLEAR THAT THE IMPUGNED EXPENDITURE HAS NOT BEEN CLA IMED BY THE ASSESSEE. UNLESS IT IS CLAIMED IT CANNOT BE DISALLOWED UN DER ANY CIRCUMSTANCES. THEREFORE THE DISALLOWANCE IS DELETED AND GROUND NOS.1 TO 4 OF THE ASSESSEE ARE ALLOWED. 11. APROPOS GROUND NO.5 THIS ISSUE HAS BEEN DISCUSSED BY T HE ASSESSING OFFICER IN PARA 4 OF THE ASSESSMENT ORDER. THE A SSESSEE CLAIMED A CONSOLIDATED SUM OF ` 3 22 433/- ON ACCOUNT OF INTEREST PAID BY HIM WHICH COMPRISED OF ` 22 661/- AS INTEREST ON CA R LOAN AND ` 2 99 772/- AS INTEREST PAID TO BANK. THE ASSESSING OFFIC ER DISALLOWED SUCH AMOUNT ON THE GROUND THAT THE ASSESSEE HAD SUFFICIEN T FUNDS OF ` 2.44 CRORE AND NO PLAUSIBLE EXPLANATION HAS BEEN FURN ISHED BY THE ASSESSEE TO OBTAIN INTEREST BEARING FUNDS AND SINCE THE ASSE SSEE WAS HAVING ENORMOUS FUNDS OF ` 2.44 CRORE WHICH HAVE BEE N ADVANCED TO THE PARTIES WITHOUT CHARGING INTEREST THE INTEREST HA S BEEN HELD TO BE DISALLOWABLE BY LD. ASSESSING OFFICER. LEARNED CIT (A) HAS SUSTAINED THIS DISALLOWANCE VIDE PARA 4 OF HIS ORDER. HE OBSERVE D THAT DURING THE APPEAL PROCEEDINGS THE COUNSEL OF THE ASSESSEE COULD NOT OFFER AN EXPLANATION AS TO WHY THE LOANS WERE TAKEN WHEN THE A SSESSEE WAS HAVING SUFFICIENT FUNDS AT ITS DISPOSAL. IT IS IN THIS MA NNER LEARNED CIT (A) HAS UPHELD THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVE D HENCE IN APPEAL. 12. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASING AND SELLING SCRAP AFTER PURCHASING SICK UNIT. FOR THIS PURPOSE IT HAS TO RAISE VARIOUS LOANS TO MAKE PAYME NTS. HE SUBMITTED THAT THE AMOUNT OF ` 2.44 CRORE STATED TO B E ADVANCED BY THE ASSESSEE AS INTEREST FREE FUNDS WAS GIVEN IN THE COURSE OF BUSINESS OF THE ASSESSEE. HE SUBMITTED THAT IT IS NOT EVEN THE CA SE OF THE ITA NO.1246/DEL/2010 10 ASSESSING OFFICER THAT THE AMOUNT BORROWED BY THE ASSESSEE WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HE SU BMITTED THAT THE ONLY OBJECTION OF THE ASSESSING OFFICER IS THAT DESPI TE THE ASSESSEE HAVING LARGE INTEREST FREE FUNDS THERE WAS NO NEED TO BORROW THE FUNDS ON INTEREST. HE THEREFORE SUBMITTED THAT THE DISALL OWANCE HAS WRONGLY BEEN MADE BY THE ASSESSING OFFICER AND IT HAS WR ONGLY BEEN SUSTAINED BY THE CIT (A). 13. ON THE OTHER HAND THE LEARNED DR RELYING UPON THE ORDER OF THE ASSESSING OFFICER AND CIT (A) PLEADED THAT THE DISALLOWA NCE HAS RIGHTLY BEEN SUSTAINED BY THE CIT (A) AND HIS ORDER IN THIS REG ARD SHOULD BE UPHELD. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE FIND SUBSTANCE IN T HE ARGUMENTS SUBMITTED BY THE COUNSEL THAT IT IS NOT EVEN THE CASE O F THE ASSESSING OFFICER THAT THE AMOUNT BORROWED BY THE ASSESSEE WAS NOT UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THE ONLY OBJE CTION UPON WHICH THE DISALLOWANCE HAS BEEN MADE IS THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AND THERE WAS NO NEED TO BORROW THE AMOUNT ON INTEREST. IN OUR OPINION THE CRITERIA TO ALLOW INTEREST U/S 36(1)(III) IS THAT THE AMOUNT BORROWED SHOULD BE UTIL IZED FOR THE PURPOSE OF BUSINESS. THE AMOUNT HAS NOT BEEN SHOWN TO BE UTILIZED FOR ANY PURPOSE OTHER THAN THE BUSINESS OF THE ASSESSEE. THERE FORE WE SEE NO JUSTIFICATION IN SUSTAINING THIS DISALLOWANCE THE REFORE THE DISALLOWANCE SUSTAINED BY THE CIT (A) IS DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 15. IN GROUND NOS.6 AND 7 THE ASSESSEE HAS AGITATED THE DISALLOWANCE ON ACCOUNT OF CAR EXPENSES AND TELEPHONE EXPENSES. LEARNED ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 6 O F THE ITA NO.1246/DEL/2010 11 ASSESSMENT ORDER WHEREIN HE HAS OBSERVED THAT CAR RUNNING AND MAINTENANCE EXPENSES WERE CLAIMED AT ` 71 292/-. AND DEPRECIATION OF CAR WAS CLAIMED AT ` 68 902/-. THUS TOTAL EXPENSES CL AIMED IN RESPECT OF CAR WERE ` 1 40 194/-. HE DISALLOWED 1/4 TH THEREOF AMOUNTING TO ` 35 050/-. SIMILARLY TELEPHONE EXPENSES HAVE BEEN DE ALT WITH BY THE ASSESSING OFFICER IN PARA 7 OF THE ORDER AND HE FOUND T HAT TOTAL EXPENSES CLAIMED BY THE ASSESSEE ON THAT ACCOUNT WERE ` 2 5 067/- AND 1/4 TH HAS BEEN DISALLOWED ON ACCOUNT OF PERSONAL USER AMOUNT ING TO ` 6 270/-. LEARNED CIT (A) HAS CONFIRMED THE DISALLOWA NCE ON THE GROUND THAT PERSONAL USER CANNOT BE RULED OUT. HOWEVER HE HAS RESTRICTED THE DISALLOWANCE FROM 1/4 TH TO 1/5 TH . THE ASSESSEE IS STILL AGGRIEVED HENCE IN APPEAL. 16. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IT W AS PLEADED BY THE LEARNED AR THAT THE DISALLOWANCES SHOULD NOT BE MA DE IN RESPECT OF DRIVERS SALARY AND DEPRECIATION. ON THE OTHER HAND THE LEARNED DR HAS RELIED UPON THE ORDER OF THE CIT (A). AFTER CAR EFUL CONSIDERATION OF THE SUBMISSIONS OF BOTH THE PARTIES WE ARE OF THE OPINI ON THAT AS PERSONAL USER OF THE CAR AND TELEPHONE CANNOT BE RULE D OUT THE ENTIRE EXPENSES CANNOT BE CONSIDERED TO BE INCURRED FOR THE P URPOSE OF BUSINESS AND PROFESSION OF THE ASSESSEE. HOWEVER WE ARE OF THE OPINION THAT THE DISALLOWANCE IS STILL ON THE HIGHER SI DE. THEREFORE WE RESTRICT BOTH THE DISALLOWANCES TO 1/6 TH THEREOF AND THESE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. 17. APROPOS GROUND NO.8 THE ASSESSEE HAD DEBITED A SUM O F 96 000/- ON ACCOUNT OF HOUSEHOLD WITHDRAWALS AND BY O BSERVING THAT ` 50 000/- WAS ALSO PAID BY THE ASSESSEE TOWARDS THE LIC THAT INDICATES THE STANDARD OF LIVING OF THE ASSESSEE. HE ESTIMATED THE HOUSEHOLD EXPENSES OF THE ASSESSEE AT ` 10 000/- PER MONTH AND THU S THE ITA NO.1246/DEL/2010 12 DIFFERENCE OF ` 24 000/- WAS ADDED TO THE INCOME OF THE ASSESSEE. LEARNED CIT (A) HAS CONFIRMED THE DISALLOWANCE. 18. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IT I S THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE IS LIVING IN SELF OWNED HOU SE AND HE IS NOT MEMBER OF ANY CLUB. THE ASSESSEE IS ALSO NOT HOLDI NG ANY CREDIT CARD FACILITY. THE SIZE OF THE FAMILY IS CONSISTING OF SELF WIFE AGED MOTHER TWO SONS AND TWO DAUGHTERS. ALL THE CHILDREN OF THE ASSESSEE ARE STUDENTS OF SD MODERN PUBLIC SCHOOL HANSI. THE W IFE OF THE ASSESSEE IS EXISTING ASSESSEE AND SHE HAS ALSO WITHDRAWN A SUM O F ` 36 000/- AND THUS THE TOTAL WITHDRAWAL OF THE ASSESSEE INCLUDING THE WITHDRAWALS OF THE WIFE IS A SUM OF ` 1 32 000/- AND THEREFORE THE ADDITION SHOULD NOT BE UPHELD. 19. ON THE OTHER HAND THE LEARNED DR RELYING UPON THE ORDER OF ASSESSING OFFICER AND CIT (A) CONTENDED THAT THE ASSESSING OFFICER HAS BEEN VERY REASONABLE IN ESTIMATING THE HOUSEHOLD EXPEN SES OF THE ASSESSEE AND THEREFORE THE ADDITION SHOULD BE UPHELD. 20. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE ASSESSING OFFICER HAS ESTI MATED THE EXPENSES OF THE ASSESSEE AT ` 1 20 000/-. THE ASSESSING OFFI CER HAS NOT REFERRED TO THE WITHDRAWALS MADE BY THE WIFE OF THE ASSESSEE. IF THOSE WITHDRAWALS ARE KEPT IN MIND THEN THE ESTIMATE MADE BY THE ASSESSING OFFICER IN RESPECT OF HOUSEHOLD EXPENSES OF THE A SSESSEE ARE MORE THAN ` 10 000/- PER MONTH. THEREFORE THE PRE SENT ADDITION IS NOT CALLED FOR AND HENCE IS DELETED. THIS GROUND OF TH E ASSESSEE IS ALLOWED. 21. GROUND NO.9 RELATES TO INTEREST U/S 234B. THE LEA RNED AR FAIRLY ADMITTED THAT THIS IS MANDATORY AND CONSEQUENTIAL TO T HE ASSESSED ITA NO.1246/DEL/2010 13 INCOME. ACCORDINGLY IT IS HELD THAT 234B IS CHARGEA BLE TO THE ASSESSED INCOME OF THE ASSESSEE. HOWEVER AS SOME RELIEF HAS BEEN GRANTED TO THE ASSESSEE THE ASSESSING OFFICER WILL RE-CALCULATE INTER EST U/S 234B ON THE INCOME COMPUTED AFTER GIVING EFFECT TO THIS O RDER. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED IN THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.20 12. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 10/02/2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES