A.C.I.T Cir - 3,Asansol, Asansol v. Riten Basak, Burdwan

ITA 1745/KOL/2013 | 2008-2009
Pronouncement Date: 28-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 174523514 RSA 2013
Assessee PAN ADAPB9422E
Bench Kolkata
Appeal Number ITA 1745/KOL/2013
Duration Of Justice 3 year(s) 3 month(s) 23 day(s)
Appellant A.C.I.T Cir - 3,Asansol, Asansol
Respondent Riten Basak, Burdwan
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 28-09-2016
Date Of Final Hearing 21-09-2016
Next Hearing Date 21-09-2016
Assessment Year 2008-2009
Appeal Filed On 04-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI JUDICIAL MEMBER ITA NO.1745/KOL/2013 ASSESSMENT YEARS:2008-09 ACIT CIRCLE-3 PARMAR BUILDING 54 G.T. ROAD (WEST) ASANSOL-713304 / V/S . RITEN BASAK RAMBANDH P.O. BURNPUR DIST. BURDWAN [ PAN NO. ADAPB 9422 E ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI PRABAL CHOUDHURY JCIT SR-DR /BY RESPONDENT SHRI U.DASGUPTA ADVOCATE /DATE OF HEARING 21-09-2016 /DATE OF PRONOUNCEMENT 28-09-2016 /O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-ASANSOL DATED 18.02.2013. ASSESSMENT WAS FRAMED BY DCIT CIRCLE-3 ASANSOL U/S 143(3) OF THE INCOME TAX ACT 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.12.2010 FOR ASSESSMENT YEAR 2008-09. SHRI PRABAL CHOUDHURY LD. SR. DEPARTMENTAL REPRESE NTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI U. DASGUPTA LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. 2. AT THE OUTSET IT IS NOTICED THAT REVENUES APPE AL IS BARRED BY LIMITATION FOR 28 DAYS AND CONDONATION PETITION HAS BEEN FILED EXPLAI NING THE REASONS FOR CONDONATION OF ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 2 DELAY. LD. AR OF THE ASSESSEE DID NOT OBJECT FOR CO NDONING THE DELAY. HENCE WE CONDONE THE DELAY AND ADMIT THE REVENUES APPEAL FO R HEARING. 3. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR RS.1 35 417/- U/S 14A ON ACCOUNT OF SHARE OF PROFIT EARNED FROM THE PARTNERSHIP FIRM U/S 10(2 A) OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE AN INDIVID UAL IS ENGAGED IN THE PROPRIETARY BUSINESS OF TRADING OF SCRAP GROCERY & VEGETABLES ETC. THE ASSESSEE WAS ALSO PARTNERS IN TWO PARTNERSHIP FIRMS. DURING THE YEAR HAS RECEI VED SHARE OF PROFIT FROM TWO PARTNERSHIP FIRMS M/S D.H. BILMORIA & SONS FOR RS .96 072/- AND S.H. & C BILMORIA FOR RS.1 01 553/- WHICH WAS CLAIMED AS EXEMPTED INC OME U/S 10(2A) OF THE ACT. THE ASSESSEE HAS NOT DISALLOWED ANY EXPENSE IN RESPECT OF THE AFORESAID EARNED INCOME BY VIRTUE OF PROVISION OF SEC. 14A R.W.S RULE 8D OF TH E IT RULES 1962. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE BALANCE SHEET OF ASSESSEE SHOWN THE LOAN LIABILITY OF RS.1 24 00 978/- ON WHICH INT EREST EXPENSE OF RS.5 41 800/- WAS CLAIMED IN THE PROFIT AND LOSS A/C OF ASSESSEE. THE AO FURTHER OBSERVED THAT ASSESSEE HAS MADE INVESTMENT IN THE ABOVE STATED PARTNERSHIP FIRM FOR RS.40 98 266/- AND RS.12 54 147/- RESPECTIVELY. ACCORDINGLY AO WAS O F VIEW THAT BORROWED FUND HAS BEEN INVESTED IN THE PARTNERSHIP FIRMS WHICH ARE GE NERATING TAX FREE INCOME IN THE HANDS OF ASSESSEE. THEREFORE THE PROVISION OF U/S. 14A R.W.S RULE 8D OF THE IT RULE ARE APPLICABLE TO THE ASSESSEE BUT NO EXPENSES HAS BEEN DISALLOWED. ACCORDINGLY THE AO DISALLOWED THE EXPENSE IN TERMS OF RULE 8D OF TH E IT RULE AS UNDER:- RULE 8D(2)(I) NIL RULE 8D(2)(II) RS.1 08 655 RS. 8D(2)(III) RS. 26 762 RS.1 35 417 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT NO EXPENDITURE FOR EARNING THE SHARE OF PROFIT HAS BEEN INCURRED BY ASSESSEE. THEREFORE NO SUCH DISALLOWANCE IS WARRAN TED. THE LD. CIT(A) CALLED FOR REMAND REPORT FROM THE AO WHEREIN IT WAS STATED THA T ASSESSEE HAS NOT GIVEN ANY FLOW ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 3 CHART SHOWING THAT THE INVESTMENT IN THE FIRM HAS N OT BEEN MADE OUT OF BORROWED FUND. IN THE ABSENCE OF ANY CLEAR-CUT INFORMATION THE PR OVISION OF SEC. 14A R.W.S RULE 8D OF THE IT RULE ARE APPLICABLE TO THE ASSESSEE. HOWE VER LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5. EXAMINING THE MATTER IT IS NOTED THAT THE FOCU S OF ACT OF ASSESSING OFFICER IS DISALLOWANCE OF INTEREST ON ACCOUNT OF DIVERSIO N OF FUNDS. INTEREST IS ALLOWED AS A DEDUCTION U/S. 36(1)(III). THE SETTLE JUDICIAL POSITION ON THE MATTER IS THAT IF COMMERCIAL EXPEDIENCY IS NOT ESTABLISHED THEN DISAL LOWANCE CAN BE MADE OUT OF INTEREST CLAIMED U/S 36(1)(III). THE POINT THAT WAS TO BE EXAMINED IS WHETHER THE FUNDS WERE DIVERTED FOR PURPOSES WHICH ARE NOT COMMERCIAL EXPEDIENT. IN ABSENCE OF SUCH A FINDING NO DISALLOWANCE CAN BE MA DE. THE DECISION REPORTED IN SA BUILDERS VS. CIT(APPEAL ) & AIR [2007] 288 I TR 1 IS RELIED UPON TO ARRIVE AT IN THIS DECISION. DECISION LIKE JCIT VS. ITC LTD. [2008] 299 ITR (AT) 341 (KOL (SB) ALSO SUPPORT THE VIEW. 6. LOOKING THROUGH ANOTHER ANGLE IT IS TO BE CONSID ERED THAT EXEMPTION U/S. 10(2A) IN HANDS OF PARTNER IS AN INCOME TAXED IN TH E HANDS OF FIRM. THEREFORE THE FUNDS DIVERTED IS TO EARN INCOME IN HANDS OF FI RM. THE FIRM HAS EARNED INCOME AND PAID TAX. THEREFORE APPLYING SECTION 14A IN THIS CASE IS NOT CORRECT. THE ADDITION OF RS.1 35 417/- IS DELETED AND THE GR OUND IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US LD. DR VEHEMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LD. AR RELIED ON THE ORDER OF LD. CIT(A). L D. AR BEFORE US SUBMITTED PAPER BOOK WHICH IS RUNNING PAGES FROM 1 TO 45 AND SUBMIT TED THAT AO HAS INVOKED THE PROVISION OF SEC. 14A OF THE ACT WITHOUT RECORDING THE SATISFACTION. HE ALSO SUBMITTED THAT THERE WAS NO FRESH INVESTMENT MADE DURING THE YEAR THEREFORE NO DISALLOWANCE U/S. 14A OF THE ACT IS REQUIRED. FURTHER LD. AR STATED THAT IN SUPPORT OF ASSESSEES CLAIM HAS SUBMITTED ITS INVESTMENT SCHEDULE WHICH IS PLAC ED ON PAGES 34 OF THE PAPER BOOK AND THE INTEREST INCOME EARNED DURING THE YEAR UNDE R CONSIDERATION IS EXCEEDING THE INTEREST EXPENSE. THEREFORE NO DISALLOWANCE IS REQ UIRED TO BE MADE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT AO HAS MADE THE DISALLOWANCE U/S 14A OF THE ACT ON THE PRESUMPTION IS THAT BORROWED FUND HAS BEEN UTILIZED IN THE INVESTMENT MADE BY THE ASSESSEE IN THE PARTNERSHIP FIRM. HOWEVER LD. CIT(A) ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 4 DELETED THE ADDITION MADE BY AO BY OBSERVING THAT A O HAS NOT BROUGHT ANY FINDING ON RECORD THAT THE BORROWED FUND HAS BEEN DIVERTED FOR THE PURPOSE WHICH ARE NOT COMMERCIAL EXPEDIENT. HOWEVER FROM THE SUBMISSION OF LD. AR WE FIND THAT THE ASSESSEE HAS FAILED TO GIVE ANY WORKING AT THE TIME OF ASSESSMENT TO SHOW THAT NO EXPENDITURE HAS BEEN INCURRED IN THE EARNING OF SHA RE OF PROFIT FROM THE PARTNERSHIP FIRM. THEREFORE THE AO HAD NO OPTION BUT TO MAKE TH E DISALLOWANCE AS PER RULE 8D OF THE IT RULE. IT IS ALSO OBSERVED THAT THE AO DERIVE D HIS SATISFACTION BY OBSERVING AS UNDER:- EXAMINATION OF AUDITED ACCOUNT COMPUTATION SHEET AND DETAIL FILED IN COURSE OF HEARING SHOWS THAT THE ASSESSEE BEING PARTNER HA S RECEIVED SHARE PROFIT FROM M/S D. H. BILMORIA 7 SONS FOR RS.96 072/- AND FROM M/S S.H C. BILMORIA FOR RS.1 01 553/ AND CLAIMED THE SAME AS EXEMPTED INCOM E. THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE IN THIS RESPECT. THE ASS ESSEE WAS ASKED TO EXPLAIN AS TO WHY NECESSARY DISALLOWANCE U/S. 14A READ WITH RULE 8D SHOULD NOT BE MADE. THE ASSESSEE SUBMITTED REPLY ON 08/10/2010 S TATING SEC. 14A DOES NOT APPLY FOR THE ASSESSEE. FROM THE ABOVE IN REJOINDER LD. AR OF ASSESSEE ARG UED THAT THE AO HAS NOT RECORDED SATISFACTION IS NOT CORRECT. HOWEVER FROM THE PERU SING THE FINANCIAL STATEMENT OF ASSESSEE WE FIND THAT INTEREST EXPENSE CLAIMED BY A SSESSEE ARE LESS THAN THE INTEREST INCOME. THEREFORE IN SUCH CASES THE DISALLOWANCE I S REQUIRED TO BE MADE WITH REGARD TO NET INTEREST EXPENSE CLAIMED BY ASSESSEE. IN THI S CONNECTION WE RELY IN THE ORDER OF ITAT AHMEDABAD BENCHES IN THE CASE OF KARNAVATI PETROCHEM PVT. LTD. VS. DCIT IN ITA NO.2228/AHD/2012 FOR AY 2008-09 DATED 05.07.2013 THE RELEVANT OPER ATIVE PORTION OF THE SAID ORDER IS REPRODUCED BELOW:- THEREFORE IN LIGHT OF THE ABOVE DISCUSSION I AM OF THE OPINION THAT THERE WAS NO NEXUS THAT COULD BE ESTABLISHED WITH THE AMOUNTS INCURRED BY THE ASSESSEE FOR EARNING THE TAX FREE INCOME. THE APPELLANT IS A LSO HAVING NET POSITIVE INTEREST INCOME WHICH CANNOT BE PART FOR THE DISALL OWANCE IN VIEW OF THE BASIS OF THE DECISIONS OF KOLKATA BENCH OF ITAT IN CASE O F TRADE APARTMENT LTD AND THE DECISION OF MUMBAI TRIBUNAL IN CASE OF MORGAN S TANLEY INDIA SECURITIES PRIVATE LIMITED. AT THE SAME TIME THE APPELLANT IS INCURRING ADMINISTRATIVE EXPENSES TO MAINTAIN THE ABOVE INVESTMENTS. IN VIEW OF THE ABOVE THE AMOUNT OF RS.47940/- WHICH IS 0.5% OF AVERAGE INVESTMENT O F RS.94 45 400/- IS TAKEN AS THE DISALLOWANCE U/S. 14A. IN VIEW OF THE FACTS OF THE CASE AND THE DECISION IN THE CASES (SUPRA) AND FOLLOWING THE DECISION OF MY PREDECESSORS THE DISALLOWANCE MADE BY THE A.O US/S 14A OF THE IT ACT 1961 CANNOT BE FULLY SUSTAINED. IN THESE CIRCUMSTANCES THE A.O IS DIREC TED TO DELETE THE ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 5 DISALLOWANCE MADE BY HIM OF RS.15 08 803/- AND RS.7 140/- ON AMOUNT OF INTEREST UNDER SECTION 14A OF THE ACT HOWEVER LD. AR OF ASSESSEE HAS NOT ADVANCED ANY AR GUMENT REGARDING THE DISALLOWANCE OF RULE 8D(2)(III) OF THE IT RULE FOR RS.26 762/- THEREFORE SAME IS CONFIRMED. HENCE THIS GROUND OF REVENUES APPEAL I S PARTLY ALLOWED. 8. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS REGAR DS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS.52 LAKH ON ACCOUNT OF UNEXPLAINED NATURE OF SOURCE OF DEPOSIT U/S. 68 OF THE ACT. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUND THAT CERTAIN AMOUNT OF MONEY WAS DEPOSITED IN THE BANK A/C OF ASSESSEE AND AO TREATED THE SAME AS UNEXPLAINED CASH CREDIT US. 68 OF THE ACT WHICH WA S DELETED BY LD. CIT(A). 10. AT THE OUTSET WE FIND THAT THE REMAND REPORT O F THE AO HAS CONFIRMED THAT THE VARIOUS LOANS WERE GIVEN BY THE ASSESSEE ON DIFFERE NT DATES TO CERTAIN PARTIES AS DETAILED BELOW:- THIRD GROUND ADDITION OF RS.52 00 000/- ON A/C O F CASH CREDIT U/S. 68 OF THE IT ACT 1961 IN RESPONSE THIS OFFICE LETTER NO. AC IT/CIR- 3/ASL/ADAPB9422E/2012-13/1103 DATED 08.10.2012 THE ASSESSEE HAS SUBMITTED A WRITTEN SUBMISSION ON 1710.2013 WHEREI N THE ASSESSEE HAS DEPOSED THAT ALL THE TRANSACTIONS ARE MADE THROUGH A/C PAYEE CHEQUES AND REFLECTED IN HIS BOOKS OF A/C AS WELL AS BANK STATE MENT. THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.52 00 000/- ON ACCOUNT O F CASH CREDIT CONSIDERING THE INFORMATION AVAILABLE ON RECORD. THE ASSESSING OFFICER IN THE BODY OF THE ORDER HAS MENTIONED THAT THE ASSESSEE WAS ASKED TO SUBMIT DETAILS OF UNSECURED LOAN INCLUDING SQUARED UP LOANS WITH NAME ADDRESS PAN ASSESSING OFFICER JURISDICTION DATE AMOUNT CHEQUE NO. NO. BANK ADD RESS DATE OF CREDIT AND PURPOSE AND HOW UTILIZED THE LOAN AMOUNT TO PROVE T HE GENUINENESS CREDITWORTHINESS AND IDENTIFICATION OF LOAN CREDITO R. THE ASSESSING OFFICER HAS DISCUSSED IN THE BODY OF THE LETTER THAT THE ASSESS EE WAS FAILED TO PROVIDE THE BASIC INFORMATION LIKE IDENTIFICATION AND CREDITW ORTHINESS OF THE LOAN CREDITORS DURING THE ASSESSMENT PROCEEDINGS. HOWEVER BASED ON THE INFORMATION VIZ. LOAN CONFIRMA TIONS AND BANK STATEMENTS RECEIVED FROM YOUR OFFICE ALONG WITH TH E LETTER UNDER REFERENCE I.E. ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 6 SUBMISSION MADE BY THE ASSESSEE BEFORE YOUR HONOUR IT IS EVIDENT THAT ASSESSEE HAS GIVEN SHORT-TERM ADVANCES TO 3 (THREE) PARTIES AS PER TABLE BELOW:- SL. NO NAME OF THE PARTY DATE OF ADVANCE CHEQUE NO. & BANK AMOUNT DATE OF REPAYMENT CHEQUE NO. & BANK AMOUNT 1 VISHNU IRON & STEELCO. 01.10.07 147194 SBI BURNPUR RS.9 LAC 17.10.07 316043 OBC CITY CENTRE BR. RS 9 LAC 2 -DO- 03.10.07 147195 SBI BURNPUR RS.15.50 LAC 17.10.07 316042 OBC CITY CENTRE BR. RS.15.50 LAC 3 SUBHASISH ACHARYYA 16.11.08 147198 SBI BURNPUR RS.3 LAC 04.03.08 MODE OF PAYMENT NOT VERIFIABLE RS.3 50 LAC 4 -DO- 22.01.08 478392 SBI BURNPUR RS.50 000 5 JOHAL & CO. (WINE SALES) PVT. LTD. 24.04.07 8001 BOI BURNPUR RS.25 LAC 24.06.07 184848 AXIS BANK ASANSOL RS.15 LAC 24.06.07 184848 AXIS BANK ASANSOL RS.10 LAC AS PER THE ABOVE TABLE IT IS EVIDENT THAT IN CASE OF SL. NO. 3 & 4 MODE OF PAYMENT IS NOT VERIFIABLE. ON GOING THROUGH THE ASS ESSMENT ORDER AND INFORMATION AVAILABLE ON RECORD IT IS EVIDENT THAT THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER BASED ON INFORMATION AV AILABLE ON RECORD. FROM THE ABOVE IT IS CLEAR THAT THE AMOUNT OF LOAN GIVEN BY ASSESSEE TO CERTAIN PARTIES WERE RETURNED WITHIN SAME FINANCIAL YEAR FROM THOSE PARTIES. AS SUCH THE PROVISIONS OF SEC. 68 OF THE ACT ARE NOT APPLICABLE IN THE INSTAN T CASE. HENCE WE FIND NO REASON TO INTERFERE WITH THE FINDINGS ARRIVED BY THE LD. CIT( A). UNDER THE CIRCUMSTANCES THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 11. IN THE RESULT REVENUES APPEAL STANDS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 28/09/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 28/09/2016 / KOLKATA ITA NO.1745/KOL/2013 A .Y. 2008-09 ACIT CIR-3 ASL VS. RITEN BASAK PAGE 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT CIRCLE-3 PARMAR BUILDIG 54 G. T ROAD (WEST ) AS ANSOL-713304 2. /RESPONDENT-RITEN BASAK RAMBANDH PO BURNPUR DIST . BURDWAN 3. '# % / CONCERNED CIT ASANSOL 4. % - / CIT (A) ASANSOL 5. &'( ))'# '# / DR ITAT KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ /TRUE COPY/ / '#