Niraj Cargo Movers Pvt.Ltd.,, Ahmedabad v. The Income tax Officer,Ward-5(2),, Ahmedabad

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI T.K. SHARMA JM AND D.C.AGRAWAL AM M/S NIRAJ CARGO MOVERS (P) LTD. 38 HIRABHAI MARKET KANKARIA ROAD AHMEDABAD. V/S . INCOME-TAX OFFICER WD-5(2) AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAKAR SHARMA AR RESPONDENT BY:- SMT. NEETA SHAH SR.DR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CON FIRMING THE ACTION OF AO IN ADDING RS.3 43 127/- ON ACCOUNT OF INTEREST NOT CHANGED ON LOAN TO PROGRESSIVE CARS PRIVATE LTD. TH E FUNDS WERE PROVIDED OUT OF INTERNAL ACCRUALS & CAPITAL OF THE COMPANY. UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION. 2. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND FA CTS IN NOT CONSIDERING AND GROSSLY IGNORING VARIOUS EXPLANATIO NS SUBMISSIONS AND EVIDENCES PLACED ON RECORD BY THE A PPELLANT IN ITS PROPER PERSPECTIVE AND FURTHER ERRED IN NOT APP RECIATING THE VIEW POINT OF THE APPELLANT. THIS ACTION OF BOTH TH E LOWER AUTHORITIES IS IN CLEAR BREACH OF PRINCIPLES OF NAT URAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. ITA NO.207/AHD/08 ASST. YEAR :2004-05 2 3. LEVY OF INTEREST U/S 234A/B/C OF THE ACT IS NOT JUS TIFIED. 4. INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS DISALL OWANCE OF RS.3 43 127/- ON ACCOUNT OF INTEREST EXPENSES. THE AO OBSERVED THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRAN SPORTATION. IT GAVE LOANS TO ITS SISTER CONCERN I.E. PROGRESSIVE CARS ( P) LTD. ON WHICH NO INTEREST WAS CHARGED WHEREAS ASSESSEE HAD INCURRED HUGE INTERESTS ON LOANS OBTAINED FROM THE DIRECTORS AND THEIR RELATIV ES. AS THE INTEREST- BEARING FUNDS WERE UTILIZED FOR GIVING INTEREST-FRE E LOANS THE AO DISALLOWED PROPORTIONATE INTEREST OF RS.3 43 127/-. LD. CIT(A) CONFIRMED THE ADDITION BY FOLLOWING HIS ORDER FOR ASST. YEAR 2003-04. 3. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THA T THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL INITA NO.480/AHD/2007 FOR ASST. YEAR 2003-04 WHEREIN THE TRIBUNAL HAS DELETED THE ADDITION BY HOLDING THAT THERE WAS NO A DVANCE OF FUNDS DURING THE YEAR. IN THIS REGARD WE REFER TO PARA 11 FROM T HAT ORDER AS UNDER :- 11. HEAD BOTH THE PARTIES AND PERUSED THE RECORD. THE LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BE FORE THE AUTHORITIES BELOW. FROM THE COPY OF ACCOUNT OF PROGRESSIVE CARS (P) LTD. FOR THE YEAR ENDED 31.3.2003 (PAGE 6 OF PB) IT IS SEEN THAT THERE WAS AN OPENING BALANCE OF RS.20 00 953/- WHICH INDICATES THAT THE AMOUNT WAS NOT ADVANCED DURING THE ASST. YEAR UNDER CONSIDERATION. THE LD. AR OF THE ASSESSEE CONTENDED THAT OUT OF THE ABOVE OPENING BA LANCE RS.12 00 000/- WERE ADVANCED IN ASST. YEAR 2002-03 AND THE BALANCE WAS ADVANCED IN ASST. YEAR 2001-02 OR EARLIER YEARS. THE LD. AR OF THE ASSESSEE FURTHER 3 CONTENDED THAT NO DISALLOWANCE OF INTEREST WAS MADE IN EARLIER ASSESSMENTS. HE ALSO CONTENDED THAT THE AUTHORITIES BELOW HAVE NOT ESTABLISHED THAT THE SAID ADVANCE WAS GIVEN OUT OF BORROWED FUNDS ON WHICH THE ASSESSEE PAID INTEREST. NONE OF THESE SUB MISSIONS OF THE LD. AR OF THE ASSESSEE COULD BE CONTROVERTED BY THE LD. DR . IN THE DECISION IN THE CASE OF CIT VS. SRIDEV ENTERPRISES (192 ITR 165 (KA R) CIT VS. RADICO KHAITAN LTD. 274 ITR 354 (ALL) AND ESCORTS LTD. VS. ACIT 104 ITR 427 (DEL-G BENCH) RELIED ON BY THE LD. AR OF THE ASSES SEE IT IS HELD THAT NO DISALLOWANCE OF INTEREST COULD BE MADE WHEN THERE I S NO ADVANCE OF FUNDS DURING THE YEAR AND AMOUNT SO ADVANCED REPRESENTS O NLY OPENING BALANCE. IN THE INSTANT CASE ON HAND SINCE THE AMOU NT IN QUESTION WAS THE OPENING BALANCE BY FOLLOWING THE AFORESAID DECISIO NS WE HOLD THAT NO DISALLOWANCE OF INTEREST COULD BE MADE SINCE THERE IS NO ADVANCE OF FUNDS DURING THE ASST. YEAR UNDER CONSIDERATION. 4. WE HAVE HEARD THE LD. DR ALSO. 5. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL WE DELETE THE ADDITION. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 30/4/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 30/4/2010 4 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD