ITO 15(1)(2), MUMBAI v. PRAKASH AUTOMOBILES, MUMBAI

ITA 1710/MUM/2009 | 2005-2006
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 171019914 RSA 2009
Bench Mumbai
Appeal Number ITA 1710/MUM/2009
Duration Of Justice 1 year(s) 1 month(s) 29 day(s)
Appellant ITO 15(1)(2), MUMBAI
Respondent PRAKASH AUTOMOBILES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-05-2010
Date Of Final Hearing 30-04-2010
Next Hearing Date 30-04-2010
Assessment Year 2005-2006
Appeal Filed On 16-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI T.R. SOOD (AM) ITA NO.1710/MUM/2009 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER WARD 15(1)(2) MATRU MANDIR ROOM NO.119 MUMBAI-400 007. ..( APPELLANT ) VS. M/S. PRAKASH AUTOMOBILES 10-P DEMELLO ROAD WADI BUNDER MUMBAI-400 010. ..( RESPONDENT ) P.A. NO. (AAGFP 7598 G) APPELLANT BY : SHRI SUMEET KUMAR RESPONDENT BY : SHRI JA YANT R. BHATT O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 6.1.2009 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS OF AUTOMOBILES FILED RETURN DECL ARING TOTAL ITA NO.1710/M/09 A.Y:05-06 2 INCOME OF RS.1 54 750/-. DURING THE COURSE OF ASSESSMENT P ROCEEDING IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE DEBITED INTEREST OF RS.7 89 929/- ON CASH CREDIT ACCOUNTS RS.4 63 313/- ON TERM LOAN AND ON HUNDI LOANS RS.1 22 034/- TOTALLING TO RS.13 75 276/-. THE ASSESSING OFFICER FURTHER OBSERVED THAT AS PER BALANCE SHEET THE ASSESSEE HAS SHOWN OUTSTANDING LOANS NAMELY HUNDI LOANS RS.8 50 000/- C.C ACCOUNT WITH MAHANAGAR BANK RS.58 45 424/- AND TERM LOAN WITH MAHANAGAR BANK RS.3 1 68 285/- AGGREGATING TO RS.98 63 709/-. IN THE ABSENCE OF ANY DETAILS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS NOT CHA RGED INTEREST ON THE SUNDRY DEBTORS WHEREAS A HUGE AMOUNT OF INTEREST HAS BEEN CLAIMED ON THE LOANS AS ABOVE HENCE THE ASSESSEE H AS NOT UTILISED INTEREST BEARING LOANS FOR THE PURPOSE OF BUSIN ESS AND DIVERTED FOR OTHER PURPOSES I.E. IN THE NAME OF SUNDRY DEBTORS A ND ACCORDINGLY HE DISALLOWED THE ENTIRE INTEREST CLAIM OF RS.13 75 276 /- AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER AFTER MAKI NG SOME OTHER DISALLOWANCE/ADDITION COMPLETED THE ASSESSMENT AT AN INCOME OF RS.24 07 030/- VIDE ORDER DATED 31.12.2007 PASSED U/S.1 43(3) OF THE INCOME TAX ACT 1961(THE ACT). ON APPEAL THE LD. CIT( A) WHILE OBSERVING THAT THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.13 75 276/- WAS MADE ON PRESUMPTION ONLY AND THAT T OO WITHOUT APPRECIATING THE FACTS THAT ALL THE SUNDRY DEBTORS ARE TRADE DEBTORS AND ITA NO.1710/M/09 A.Y:05-06 3 FUNDS HAVE NOT BEEN DIVERTED TOWARDS ANY LOAN OR ADVA NCE DELETED THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE AD DITION OF INTEREST OF RS.13 75 276/- IN SPITE OF THE FACT THA T ASSESSEE FAILED TO DISCHARGE THE ONUS RESTING ON HI M TO EXPLAIN THE NEXUS BETWEEN THE LOAN TAKEN AND ITS UTILIZATION FOR THE PURPOSE OF BUSINESS PLACING REL IANCE ON THE DISCUSSION OF CIT VS. ABHISHEK INDUSTRIES LTD. (P&H) 286 ITR 1. RS.33 24 719/- ON ACCOUNT OF INTEREST RECEIVED ON BANK FDRS IGNORING THE FACT THAT AS PER CLAUSE 18 AND 2 6 OF THE JOINT BANK GUARANTEE SCHEME (JBGS) ASSESSEE WAS FULLY EMPOWERED TO RETAIN 50% OF INTEREST. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUST IFIED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.13 75 276/- . HE THEREFORE SUBMITS THAT THE DISALLOWANCE OF INTEREST MADE BY THE ASSE SSING OFFICER BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE LD. CIT(A) FURTHER SUBMITS THAT IN THE BALANCE SHEET THE AMOUNT OF SUNDRY DEBTORS IS RS.1 30 66 762/- WHICH REPRESENT TRADE DEBTO RS TO WHOM THE SALE OF PETROL AND DIESEL ETC. WAS MADE AND AT THE END OF THE YEAR ITA NO.1710/M/09 A.Y:05-06 4 THE AMOUNT WAS NOT REALISED FROM THEM. THESE ARE NORM AL BUSINESS TRANSACTIONS AND THERE IS NO DIVERSION OF INTEREST BEARIN G FUNDS FOR NON-BUSINESS PURPOSES. HE FURTHER SUBMITS THAT THE DETAIL S OF SUNDRY DEBTORS IS A PART OF BALANCE SHEET WHICH WAS DULY FILED WITH THE RETURN ALONGWITH THE AUDITED BALANCE SHEET. HE THEREFORE SU BMITS THAT IN VIEW OF THE DETAILS OF SUNDRY DEBTORS WHICH ARE ONLY FOR BUSINESS PURPOSES THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETIN G THE DISALLOWANCE OF INTEREST OF RS.13 75 276/- AND HIS ORDER BE UPHELD. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL P ARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND TH AT IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER IN THE FIRST PARA OF ASSE SSMENT ORDER THAT THE ASSESSEE HAS FILED RETURN OF INCOME ALONG WITH CO MPUTATION OF INCOME P&L ACCOUNT AND BALANCE SHEET AUDIT REPORT U/S .44AB IN FORM NO.3CB. AT THE TIME OF HEARING IT HAS BEEN STATED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE DETAIL OF SUNDRY DEBTORS AND A DVANCES TOTALLING TO RS.1 30 66 762/- WAS FILED ALONG WITH TA X-AUDIT REPORT. WE FURTHER FIND THAT IT HAS BEEN OBSERVED BY THE LD. CIT (A) THAT ALL THE DEBTORS ARE TRADE DEBTORS HENCE IT CANNOT BE PRESUMED THAT INTEREST BEARING LOANS HAS BEEN DIVERTED TOWARDS INTEREST FREE DEPOSITS OR ADVANCES. IT HAS BEEN FURTHER OBSERVED BY THE LD. CIT( A) THAT THE SUNDRY DEBTS ARE DUE TO BUSINESS TRANSACTIONS I.E. SALE OF P ETROL AND DIESEL HENCE THERE IS NO POSSIBILITY OF DIVERSION OF FU NDS. IN THE LIGHT ITA NO.1710/M/09 A.Y:05-06 5 OF THE ABOVE THE LD. CIT(A) OBSERVED THAT IT IS FOUND BEYOND DOUBT THAT THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE INTEREST E XPENDITURE OF RS.13 75 276/- ON PRESUMPTION ONLY AND THAT TOO WITH OUT APPRECIATING THE FACT THAT ALL THE SUNDRY DEBTORS ARE TRADE DEBTORS AND FUNDS HAVE NOT BEEN DIVERTED TOWARDS ANY LOAN OR ADVANCE WHICH IS NOT HAVING BURDEN OF INTEREST. IN THE ABSENCE OF ANY CONTRARY MATE RIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT TH E SUNDRY DEBTORS SHOWN BY THE ASSESSEE ARE NOT FOR THE PURPOSES OF BUSINESS WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF INTEREST OF RS.13 75 276/- MADE BY THE ASSESSING OFFICER. THE GROUND TAKEN BY THE REVENUE IS THEREFOR E REJECTED. 7. WITH REGARD TO THE SECOND PART OF THE GROUND AS REP RODUCED ABOVE WE FIND THAT THE SAME DOES NOT ARISE FROM THE ORDER OF THE LD. CIT(A) AND HENCE THE SAME IS ALSO REJECTED. 8. IN THE RESULT THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.5.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 14.5.2010. JV. ITA NO.1710/M/09 A.Y:05-06 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 30.4.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 3.5.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 14.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 17.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER