Chadha Motors, Ludhiana v. ACIT, C-2, Ludhiana

ITA 1569/CHANDI/2018 | 2014-2015
Pronouncement Date: 28-02-2020 | Result: Partly Allowed

Appeal Details

RSA Number 156921514 RSA 2018
Assessee PAN AAAFC9807B
Bench Chandigarh
Appeal Number ITA 1569/CHANDI/2018
Duration Of Justice 1 year(s) 2 month(s) 16 day(s)
Appellant Chadha Motors, Ludhiana
Respondent ACIT, C-2, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2020
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-02-2020
Date Of Final Hearing 20-02-2020
Next Hearing Date 20-02-2020
Last Hearing Date 04-12-2019
First Hearing Date 02-09-2019
Assessment Year 2014-2015
Appeal Filed On 12-12-2018
Judgment Text
A IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH ! ' # $ %! BEFORE SHRI SANJAY GARG JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA ACCOUNTANT MEMBER ./ ITA NO. 1569/CHD/2018 / ASSESSMENT YEAR : 2014-15 CHADHA MOTORS TRANSPORT NAGAR LUDHIANA. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2 LUDHIANA. ./ PAN NO: AAAFC 9807 B / APPELLANT / RESPONDENT / ASSESSEE BY: SHRI PARIKSHIT AGGARWAL CA ! / REVENUE BY: SHRI ARVIND SUDARSHAN JCIT-DR ' #$ / DATE OF HEARING : 20/02/2020 %&'($ / DATE OF PRONOUNCEMENT: 28/02/2020 / ORDER PER: ANNAPURNA GUPTA ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I LUDHIANA [IN SHORT CIT(A)] DATED 22/10 /2018 U/S 250(6) OF THE INCOME TAX ACT 1961 (HEREINAFTER REF ERRED TO AS THE ACT) FOR THE A.Y. 2014-15. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-1 LUDHIANA HAS ERRED IN CONFIRMING THE ADDITION OF RS . 53 57 352/- MADE U/S 36(1)(III) OF THE INCOME TAX ACT 1961 BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF LESS INTEREST CHARG ED FROM THE ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 2 PARTNERS WITHOUT ANY BASIS AND WITHOUT GIVING ANY REASONS IN HIS ORDER. THEREFORE ADDITION CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1 LUDHIANA IS ILLEGAL UNC ALLED FOR UNWARRANTED AND NEEDS TO BE DELETED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS)-1 LUDHIANA HAS ERRED IN CONFIRMING THE ADDITION OF RS . 1 24 954/- MADE U/S 36(1)(III) OF THE INCOME TAX ACT 1961 BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF LESS INTEREST CHARG ES FROM MR. VIKAS CHAIL WITHOUT ANY BASIS AND WITHOUT GIVING ANY REA SONS IN HIS ORDER. THEREFORE ADDITION OF RS. 1 24 954/- CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1 LUDHIANA IS ILLEGAL UNCALLED FOR UNWARRANTED AND NEEDS TO BE DELETED. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS)-1 LUDHIANA HAS ERRED IN CONFIRMING THE ADDITION OF RS . 5 90 000/- MADE U/S 68 OF THE INCOME TAX ACT 1961 BY THE LEAR NED ASSESSING OFFICER ON ACCOUNT OF LOAN RECEIVED FROM SMT. BINDU KHEMKA AT RS. 5 00 000/- AND INTEREST PAID TO SMT. BINDU KHEMKA A T RS. 84 000/- AND COMMISSION PAID TO SHRI AMIT KALIA AT RS. 6 000 /- WITHOUT ANY BASIS AND WITHOUT GIVING ANY REASONS IN HIS ORDER WHEREAS IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE CREDITORS P ROVED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 1 LUDHIANA AS WELL AS BEFORE THE LEARNED ASSESSING OFFICER. THEREFORE ADDITION OF RS. 5 90 000/- MADE BY THE L EARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS)-1 LUDHIANA IS ILLEGAL UNCALLED FOR UNWA RRANTED AND NEEDS TO BE DELETED. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS)-1 LUDHIANA HAS ERRED IN CONFIRMING THE ADDITION OF RS . 1 00 83 240/- MADE U/S 68 OF THE INCOME TAX ACT 1961 BY THE LEAR NED ASSESSING OFFICER ON ACCOUNT OF LOAN RECEIVED FROM VARIOUS PA RTIES AT RS. 96 00 000/- AND INTEREST PAID ON LOANS TO VARIOUS P ARTIES AT RS. 4 40 000/- AND COMMISSION PAID AT RS. 42 840/- WIT HOUT ANY BASIS AND WITHOUT GIVING ANY REASONS IN HIS ORDER WHEREA S IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE CREDITORS P ROVED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 1 LUDHIANA AS WELL AS BEFORE THE LEARNED ASSESSING OFFICER. THEREFORE ADDITION OF RS. 1 00 83 240/- MADE BY TH E LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS)-1 LUDHIANA IS ILLEGAL UNCALL ED FOR ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 3 UNWARRANTED AND NEEDS TO BE DELETED. 5. THAT THE APPELLANT CRAVES TO LEAVE OR TO AMEND T HE GROUND OF APPEALS BEFORE OR AT THE TIME OF HEARING. 2. LD.COUNSEL FOR THE ASSESSEE TOOK UP GROUNDS NO. 1 AND 2 OF THE APPEAL TOGETHER POINTING OUT THAT THEY RELATE D TO THE SAME ISSUE OF DISALLOWANCE OF INTEREST EXPENSES MADE U/S 36(1)(III) OF THE ACT VIS A VIS DEBIT BALANCE IN THE ACCOUNT OF T HE PARTNERS OF THE ASSESSEE FIRM AND ON LOAN ADVANCED RESPECTIVE LY AND STATED THAT HIS ARGUMENTS AGAINST BOTH THE DISALLOWANCES WAS THE SAME. 3. DRAWING OUR ATTENTION TO THE FACTS OF THE CASE THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSES SEE BEING A PARTNERSHIP FIRM HAD PAID INTEREST ON DEBIT BALANCE IN THE CAPITAL ACCOUNT OF TWO PARTNERS SHRI K.K. CHADHA AND SHRI S UMESH CHADHA @12% OF THE OUTSTANDING AMOUNT. SIMILARLY IT WAS P OINTED OUT THAT THE ASSESSEE HAD GIVEN LOAN/ADVANCE TO ONE SHR I VIKAS CHAIL AND CHARGED INTEREST THEREON @ 12%. IT WAS POINTED OUT THAT THE ASSESSING OFFICER (A.O.) NOTED THAT THE ASSESSEE HA D BORROWED UNSECURED LOANS FROM VARIOUS PARTIES AT AN INTEREST RATE RANGING FROM 12% TO 18%. ACCORDINGLY HE NOTED THAT THE AVE RAGE RATE OF INTEREST PAID BY THE ASSESSEE WAS 15% AND HE HELD T HAT THE ASSESSEE HAD USED BORROWED FUNDS FOR THE PURPOSE OF MAKING THESE ADVANCES TO PARTNERS AND OTHERS AND ACCORDIN GLY THE INTEREST RATE CHARGED ON THEM SHOULD HAVE BEEN 15%. THEREFORE THE A.O. DISALLOWED THE DIFFERENCE OF THE INTEREST ACTUALLY CHARGED ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 4 I.E. @12% AND THE INTEREST THAT SHOULD HAVE BEEN C HARGED I.E @15% WHICH AMOUNTED IN ALL TO RS. 54 82 306/- U/ S 36(1)(III) OF THE ACT. THE LD. CIT(A) UPHELD THE SAME. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE AO HAS MISAPPRECIATED THE FACTS OF THE CAS E WHILE MAKING THE DISALLOWANCE SINCE THE ASSESSEE IN FACT HAD P AID INTEREST ON ITS UNSECURED LOANS AT AN AVERAGE RATE OF 10% AND N OT 15% AS COMPUTED BY THE A.O. AND THEREFORE HAVING CHARGED INTEREST AT A HIGHER RATE @ 12% ON THE IMPUGNED DEBIT BALANCE IN THE PARTNERS CAPITAL ACCOUNT AND ADVANCES MADE THERE WAS NO REA SON FOR MAKING ANY DISALLOWANCE OF INTEREST IN THE PRESENT CASE. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE FIRM FOR THE I MPUGNED YEAR PLACED AT PAPER BOOK PAGE NOS. 59 TO 73 AND POINTED OUT FROM THE BALANCE SHEET FOR THE IMPUGNED YEAR PLACED AT P APER BOOK PAGE NO. 59 THAT THE TOTAL UNSECURED LOANS TAKEN BY THE ASSESSEE DURING THE YEAR AMOUNTED TO RS. 10 35 05 000/- WHI LE THE INTEREST PAID ON UNSECURED LOANS AS REFLECTED IN TH E SCHEDULE OF FINANCIAL EXPENSES AT PAPER BOOK PAGE NO. 62 WAS RS . 1 02 85 680/-. THE LD. COUNSEL CONTENDED THAT IT IS EVIDENT THAT THE ASSESSEE HAD PAID INTEREST AT AN AVERAGE RATE O F APPROXIMATELY 10% ON THE UNSECURED LOANS TAKEN. HE THEREAFTER REFERRED TO THE ASSESSMENT ORDER AT PARA 3.9 WHERE THE A.O. HAD WORKED OUT THE AVERAGE RATE OF INTEREST CHARGED BY THE ASSESSEE ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 5 ON THE UNSECURED LOANS AND POINTED OUT THAT THE A.O . HAD CALCULATED AVERAGE RATE BY AVERAGING INTEREST RATES PAID BY IT ON ITS UNSECURED LOANS OF 12% TO 18%[( 12 + 18)/2]. TH E LD. COUNSEL POINTED OUT THAT THE METHOD ADOPTED BY THE A.O. WAS INCORRECT AND AS FACTUALLY POINTED OUT THE ASSESSEE HAD PAID INTEREST AT LOWER RATE AS COMPARED TO THAT CHARGED ON THE DEBIT BALANCE OF THE PARTNERS CAPITAL ACCOUNT AND THE ADVANCES MADE . HE THEREFORE PLEADED THAT THERE WAS NO REASON FOR MAKING ANY DIS ALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. 5. THE LD DR THOUGH WAS UNABLE TO CONTROVERT THE F ACTUAL CONTENTIONS OF THE ASSESSEE HOWEVER RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE DO CUMENTS TO WHICH OUR ATTENTION WAS DRAWN. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FACTS OF THE CASE OCCASION NO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. IN THE FACTS OF THE PRESENT CASE AS POINTED OUT BY TH E LD COUNSEL FOR THE ASSESSEE THE ASSESSEE WE FIND HAS PAID INTERES T ON UNSECURED LOANS DURING THE IMPUGNED YEAR AT AN AVERAGE RATE O F 10% WHICH IS DEMONSTRATED FROM THE FACTS AND FIGURES OF UNSEC URED LOAN AND INTEREST PAID THEREON REFLECTED IN THE FINANCIAL ST ATEMENTS OF THE ASSESSEE WHICH ARE DULY AUDITED. THIS FACT THE REV ENUE HAS BEEN ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 6 UNABLE TO CONTROVERT BEFORE US. SINCE THE BASIC PR EMISE WITH THE REVENUE FOR MAKING DISALLOWANCE IN THE PRESENT CASE U/S 36(1)(III) OF THE ACT WAS THAT THE ASSESSEE HAD CHARGED LESS I NTEREST ON THE ADVANCES MADE TO ITS PARTNERS AND OTHERS AS OPPOSED TO THAT PAID ON BORROWINGS MADE BY IT THE SAME DOES NOT SURVIVE SINCE THE ASSESSEE HAS DEMONSTRATED THAT IT HAD ACTUALLY PAID LESS INTEREST ON BORROWINGS AND CHARGED MORE FROM THE PARTNERS AN D OTHERS. IN VIEW OF THE ABOVE THE DISALLOWANCE MADE U/S 36(1)( III) OF THE ACT WE HOLD AMOUNTING TO RS. 53 57 352/- AND RS. 1 24 954/- IS NOT SUSTAINABLE AND THE SAME IS DIRECTED TO BE DELE TED. ACCORDINGLY GROUNDS NO. 1 AND 2 OF THE APPEAL ARE ALLOWED. 7. LD.COUNSEL FOR THE ASSESSEE THEREAFTER TOOK UP GROUND NOS. 3 AND 4 OF THE APPEAL TOGETHER STATING THAT THEY RE LATED TO THE SAME ISSUE OF ADDITION MADE U/S 68 OF THE ACT BY T REATING LOANS RECEIVED BY THE ASSESSEE AMOUNTING IN ALL TO RS. 1. 01 CRORES INTEREST PAID THEREON AMOUNTING TO RS. 5.24 LACS AN D COMMISSION PAID THEREON AMOUNTING TO RS. 48 800/- AS INGENUIN E AND UNEXPLAINED. IT WAS POINTED OUT THAT THE IMPUGNED A DDITION U/S 68 RELATED TO UNSECURED LOANS TAKEN FROM THE FOLLOWING SEVEN DIFFERENT ENTITIES INCLUDING INDIVIDUALS AND PRIVAT E COMPANY. S. NO. NAME OF THE PARTY UNSECURED LOAN TAKEN BY THE ASSESSEE INTEREST PAID BY THE ASSESSEE COMMISSION PAID TO BROKER TOTAL CAN CREDIT TO BE DISALLOWED U/S 68 01 SUNIL KUMAR MITTAL 20 00 000/- 1 20 000/- 12 000/- 21 32 000/- 02 SUDESH RAM BATTA 7 00 000/- 63 000/- 6 300/- 7 69 300/- ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 7 03 PURAN CHAND SACHDEV 25 00 000/- 1 13 400/- 11 340/- 26 24 740/- 04 LAKHVINDER SINGH DSOR 4 00 000/- 12 000/- 1 200/- 4 13 200/- 05 V.R. FINVEST PVT. LTD. 30 00 000/- 90 000/- 9 000/- 30 99 000/- 06 NIDHI SACHDEVA 10 00 000/- 42 000/- 3 000/- 10 45 000/- TOTAL 1 00 83 240/- 07 BINDU KHEMKA 5 00 000/- 84 000/- 6 000/- 5 90 00 0/- THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSMENT ORDER AND POINTED OUT THAT THE A.O. HAD MADE THE IMPUGNED ADDITION FOR THE REASON THAT THE SUMMONS I SSUED TO THE SAID PARTY HAD REMAINED UNSERVED AND THE ASSESSEE H AD NOT BEEN ABLE TO PRODUCE THEM BEFORE THE A.O. AND IN SOME CA SES THE ASSESSEE HAD NOT SUBMITTED EVEN THE COPY OF INCOME TAX RETURNS OR THE PAN DETAILS AND THE BANK DETAILS OF THESE PA RTIES. THE A.O. THEREFORE HAD HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THE IDENTITY OF THE GIVERS OF UNSECURED LOANS AND A LSO THE GENUINENESS AND CREDITWORTHINESS OF THE GIVERS AND ACCORDINGLY HAD MADE THE ADDITION U/S 68 OF THE ACT. THE LD. CO UNSEL FOR THE ASSESSEE POINTED OUT THAT BEFORE THE LD. CIT(A) TH E ASSESSEE HAD FILED ALL RELEVANT DETAILS I.E. ITRS BANK STATEMEN TS OF THE LOAN GIVERS AND CONFIRMATIONS AND THE EVIDENCES HAD BEEN SENT TO THE AO FOR HIS COMMENTS WHO HAD DISMISSED THE SAME FOR THE REASON THAT EITHER THE BANK STATEMENTS WERE INCOMPLETE OR BANK STATEMENTS HAD NOT BEEN PROVIDED OR WERE UNREADABLE . OUR ATTENTION WAS DRAWN TO THE REMAND REPORT OF THE A.O . PLACED AT PAPER BOOK PAGE NOS. 23 TO 33 POINTING OUT THE FIND INGS OF THE A.O. IN THIS REGARD VIS A VIS EACH OF THE LOAN GIVE RS. THE LD. ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 8 COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL RELEVAN T DETAILS HAD BEEN FILED BEFORE THE A.O. AS WELL AS BEFORE THE LD . CIT(A) INCLUDING THE BANK STATEMENTS OF THE PARTIES SHOWIN G THAT THE IMPUGNED TRANSACTIONS HAD TAKEN PLACE THROUGH BANK ING CHANNELS. OUR ATTENTION WAS DRAWN TO THE SAID DOCUMENTS PLACE D AT PAPER BOOK PAGE NOS. 84 TO 145. THE LD. COUNSEL THEREFOR E CONTENDED THAT ALL THE BANK STATEMENTS WERE THERE BEFORE THE A.O. ALONGWITH OTHER RELEVANT DOCUMENTS PROVING THE IDENTITY GENU INENESS AND CREDITWORTHINESS OF THE PARTIES AS MENTIONED IN THE PAPER BOOK FILED BEFORE US AND THEREFORE THE ADDITION MADE NE EDED TO BE DELETED. 8. THE LD. DR ON THE OTHER HAND RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAR EFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D THAT THE LD. CIT(A) HAS UPHELD THE ADDITION MADE BY THE A.O. ON ACCOUNT OF THE IMPUGNED SEVEN LOAN CREDITORS HOLDING THEM TO B E INGENUINE PRIMARILY FOR THE REASON THAT THE BANK STATEMENTS S UBMITTED OF THESE PARTIES SHOWING TRANSACTIONS WERE EITHER UNRE ADABLE OR INCOMPLETE OR WERE NOT SUBMITTED AT ALL. THE REVENU E THEREFORE WAS OF THE VIEW THAT THE EXPLANATION OF THE ASSESSE E THAT THE TRANSACTIONS HAD HAD TAKEN PLACE THROUGH BANKING CH ANNELS REMAINED UNSUBSTANTIATED. SINCE THE ASSESSEE HAS DE MONSTRATED ITA 1569/CHD/2018 CHADHA MOTORS VS ACIT 9 BEFORE US THAT THE BANK STATEMENTS OF ALL THE LOAN GIVERS WAS FILED TO THE REVENUE AUTHORITIES AND IS THEREFORE AVAILA BLE WE CONSIDER IT FIT TO RESTORE THE ISSUE BACK TO THE A.O. TO CON SIDER THE BANK STATEMENTS OF ALL THE LOAN DEPOSITORS ALONGWITH OTH ER EVIDENCES FILED AND ADJUDICATE THE ISSUE AFRESH THEREAFTER IN ACCORDANCE WITH LAW. ACCORDINGLY GROUND NO. 3 AND 4 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY 2020. SD/- SD/- ' # $ %! (SANJAY GARG) (ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER )& / DATED: 28/02/2020 *RANJAN &* + - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' . / CIT 4. ' . ( )/ THE CIT(A) 5. /0 1 $ 1 23405 / DR ITAT CHANDIGARH 6. 046# / GUARD FILE &* ' / BY ORDER / ASSISTANT REGISTRAR