Keyur Harishbhai Shah, Ahmedabad v. The Income tax Officer,Ward-10(2),, Ahmedabad

ITA 2108/AHD/2009 | 2003-2004
Pronouncement Date: 12-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 210820514 RSA 2009
Assessee PAN ACKPS8862L
Bench Ahmedabad
Appeal Number ITA 2108/AHD/2009
Duration Of Justice 2 year(s) 5 month(s) 10 day(s)
Appellant Keyur Harishbhai Shah, Ahmedabad
Respondent The Income tax Officer,Ward-10(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 12-12-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 12-12-2011
Date Of Final Hearing 05-12-2011
Next Hearing Date 05-12-2011
Assessment Year 2003-2004
Appeal Filed On 02-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD . .!'#$ % & BEFORE SHRI MUKUL KR.SHRAWAT JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ./ I.T.A. NO.2108/AHD/2009 ( ( ) ( ) ( ) ( ) / / / / ASSESSMENT YEAR : 2003-04) KAYUR HARISHBHAI SHAH 903-904 SHAKUNTAL APTS OPP.C.N.VIDYALAYA AMBAWADI AHMEDABAD ( ( ( ( / VS. THE INCOME TAX OFFICER WARD-10(2) AHMEDABAD * % ./+ ./ PAN/GIR NO. : ACKPS 8862 L ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI R.T.SHAH ./*- 1 0 / RESPONDENT BY : SHRI SAMIR TEKRIWAL SR.D.R. (2 1 3% / / / / DATE OF HEARING : 05/12/2011 4') 1 3% / DATE OF PRONOUNCEMENT : 12/12/2011 5 / O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XVI AHMEDABAD DATED 15/04/2009 AND THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS:- 2. GROUND NO.1 READS AS UNDER: (1) IN THE FACTS OF THE CASE AND IN LAW DISALLOWANCE OF INTEREST OF RS.753277/- BE DELETED. ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.147 R.W.S. 143(3) OF THE I.T. ACT 1961 DATED 20/12/2007 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS S TATED TO BE IN SHARAFFI BUSINESS. AT THE OUTSET IT IS WORTH TO MENTION TH AT THIS FACT WAS IN DISPUTE BECAUSE ON ONE HAND THE ASSESSEE HAS SUBMITTED BEFO RE THE REVENUE AUTHORITIES THAT IN THE NAME OF RAHIL ASSOCIATES TH E ASSESSEE HAS DONE SHARAFFI BUSINESS. IN RESPECT OF THE IMPUGNED ADDITION IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PAID IN TEREST VARYING FROM 9% TO 15% TO VARIOUS PERSONS AND THEREUPON CLAIMED TOT AL INTEREST PAYMENT OF RS.7.53 LACS; AS DEBITED TO PROFIT & LOSS ACCOU NT. ON THE OTHER HAND AS NOTED BY THE ASSESSING OFFICER THE ASSESSEE HAS ADVANCED RS.80.43 LACS AND RS.2.40 LACS TO HITECH FORMS PVT.LTD.( TOT ALLING TO RS.82.83 LACS) ON WHICH NO INTEREST INCOME WAS SHOWN. THE EXPLAN ATION OF THE ASSESSEE WAS THAT DUE TO FIRE AT THE PREMISES OF TH E SAID COMPANY THE ASSESSEE WAS NOT IN A POSITION TO RECOVER THE INTER EST. THE SAID COMPANY HAS EVEN NOT CREDITED THE INTEREST IN ITS ACCOUNTS IN THE NAME OF THE ASSESSEE. ACCORDING TO THE ASSESSEE EVEN THE RECO VERY OF THE ADVANCE WAS UNDER DOUBT HENCE THE INTEREST WAS TREATED AS IRRECOVERABLE. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCED AN D DISALLOWED THE CLAIM OF INTEREST AS PER THE FOLLOWING OBSERVATION: - THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSIDER ED BUT THE SAME ARE NOT ACCEPTABLE IN VIEW OF DISCUSSIONS MADE IN FORGOING PARAGRAPHS AS ALSO IN THE FACTS AND CIRCUMSTANCES O F THIS CASE. THEREFORE KEEPING IN VIEW THE PROVISION OF SECTION 37 OF THE ACT TOTAL INTEREST PAYMENT OF RS.7.53 LAKHS ARE DISALLO WED KEEPING IN VIEW THE FACT THAT YOU HAVE NOT CHARGED ANY INTERES T ON AN AMOUNT OF RS.82.83 LAKHS REPRESENTING DEPOSIT AND ADVANCES MADE BY YOU ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 3 - AS ON 31/03/2003 ON WHICH NO INTEREST WAS CHARGED B Y YOU WHICH @ 12% COMES TO RS.9.93 LAKHS WHICH EXCEEDS THE AMOU NT PAID BY YOU TOWARDS INTEREST OF RS.7.53 LAKHS. PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME/CONCEALING PARTICU LARS OF INCOME IS ALSO BEING INITIATED SEPARATELY U/S.274 R.W.S.2 71(1)(C) OF THE ACT. 3. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY WHO HAS AFFIRMED THE ACTION OF THE ASSESSING OFFICER PRIMA RILY ON THE GROUND THAT THE BORROWED FUNDS WERE DIVERTED TO M/S.HITECH FORM PVT.LTD. ON WHICH NO INTEREST WAS CHARGED. THE LEARNED CIT(APPEALS) HAS ALSO RECORDED THAT THE ASSESSEE HAS SHOWN INTEREST IN THE PAST FR OM THE SAID COMPANY SOMEHOW FOR THE YEAR UNDER CONSIDERATION NO INTERE ST WAS SHOWN EVEN ON ACCRUAL BASIS. SINCE THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED HENCE THE ASSESSEE IS FURTHER IN APPEAL. 4. FROM THE SIDE OF THE APPELLANT LD.AR MR.R.T.SHA H APPEARED AND PLEADED THAT THE CASE IS COVERED BY THE DECISION OF HON'BLE SUPREME COURT PRONOUNCED IN THE CASE OF S.A. BUILDERS LTD. VS. CIT(APPEALS) & ANOTHER [2007] 288 ITR 1 (SC). 5. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE LD.DR MR. SAMIR TEKRIWAL APPEARED AND SUPPORTED THE ORDER OF THE AS SESSING OFFICER PRIMARILY ON THE GROUND THAT THE ASSESSEE WAS NOT I N SHARAFFI BUSINESS AS HELD BY LD.CIT(A) AND THAT THE ASSESSEE SHOULD HAVE SHOWN THE INTEREST ON ACCRUAL BASIS. THE LD.DR HAS ALSO PLEADED THAT EVEN THE FIRE DID NOT TAKE PLACE IN THE YEAR UNDER CONSIDERATION BUT THE SAID ACCIDENT TOOK PLACE ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 4 - FEW YEARS BACK THEREFORE IT WAS WRONG ON THE PART OF THE ASSESSEE NOT TO DISCLOSE THE INTEREST INCOME ON ACCRUAL BASIS. 6. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE EXAMINED THE SHORT COMPILATION FILED BEFORE US. AS FAR AS THE FIRST DISPUTE IN RESPECT OF THE NATURE OF BUSINESS IS CONCERNED WE HAVE NOTICED THAT ON NUMBER OF OCCASI ONS THROUGH WRITTEN SUBMISSIONS IT WAS EXPLAINED TO THE REVENUE AUTHORI TIES THAT THE ASSESSEE HAS CARRIED OUT THE SHARAFFI BUSINESS IN THE NAME OF RAHIL ASSOCIATES AS A PROPRIETOR OF THE SAID CONCERN. BUT IT REMAINED I N CONTROVERSY. FACTS HAVE ALSO REVEALED THAT THE IMPUGNED AMOUNT WAS ADV ANCED TO M/S.HITECH FORMS PVT.LTD. IN THE PAST INTEREST INC OME WAS ADMITTEDLY SHOWN BY THE ASSESSEE. FACTS OF THE CASE HAVE REVE ALED THAT FOR A.Y. 2000-01 INTEREST INCOME OF RS.6 29 783/- FOR A.Y. 2001-02 RS.8 32 474/- AND FOR A.Y. 2002-03 INTEREST OF RS.1 1 12 190/- WAS DISCLOSED. FACTS HAVE ALSO REVEALED THAT AFTER THE SAID ASSESSMENT YEARS NO INTEREST INCOME WAS DISCLOSED BY THE ASSESSEE. THE MAIN REASON ASSIGNED FOR NON-CHARGING OF INTEREST WAS THE ACCID ENT OF FIRE WHICH TOOK PLACE IN THE PAST AND AFTER THAT THE ASSESSEES CON TENTION WAS THAT THE FINANCIAL POSITION OF THE SAID COMPANY WAS BAD. AC CORDING TO ASSESSEE EVEN THE PRINCIPAL OUTSTANDING AMOUNT WAS DOUBTFUL. IT HAS ALSO BEEN STATED THAT EVEN THE SAID COMPANY HAS NOT ACCOUNTED FOR ANY INTEREST LIABILITY IN ITS BOOKS OF ACCOUNT. THE LEARNED CIT (APPEALS) HAS REPRODUCED SOME OF THE SALIENT FEATURES IN THE FOLL OWING MANNER:- ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 5 - 3. THE BRIEF FACTS OF THE CASE ARE THAT THE APPEL LANT IS A PARTNER WITH M/S.AKSHAT CONSTRUCTION AND M/S.AKSHAT DEVELOP ERS. THE APPELLANT IS PROPRIETOR OF RAHIL ASSOCIATES THE BUS INESS OF WHICH IS STATED TO BE SHARAFI BUSINESS. THE ASSESSING OFFICER OBSERVED THAT INTEREST BEARING LOANS HAVE BEEN DIVERTED BY T HE APPELLANT FOR NON BUSINESS PURPOSES & ACCORDINGLY RE OPENED THE A SSESSMENT EARLIER PASSED U/S.143(1) AFTER RECORDING THE FOLLO WING REASONS:- .. . 4.. REASONS FOR NOT CHARGING INT. ON ADVANCES TO HI TE CH FORMS PVT.LTD. (1) HI TECH FORMS PVT.LTD. HAS NOT CREDITED BY NOT PASS ING ANY ENTRY OF INTEREST IN ITS BOOKS OF ACCOUNTS ON ACCOU NT OF FIRE IN THE FACTORY IN 1999 FEBRUARY 2002 AUGUST AND SUFFE RED LOSSES VIDE PAGE 16 & 17 OF THE PAPER BOOK REP. LETTER DT. 10.12.2007 ADDRESSED TO A.O. (2) HI TECH FORMS PVT.LTD. HAS TOTAL UNSECURED LOANS OF RS.1 05 62 707/- AS ON 31.03.2003 OUT OF WHICH APPE LLANTS BALANCE IS RS.67661287- AS PER COMPANYS BOOKS OF A CCOUNTS. THE COMPANY SUFFERED LOSS OF RS.1 44 71 367- AS ON 31.03.2003 PER COMPANYS PROFIT AND LOSS A/C. (3) THE COMPANY HAS SECURED LOANS OF RS.4160868/- AGAIN ST CAR STOCK LAND AND BUILDING ETC. (4) THE COMPANY HAD ADJUSTED INTEREST OF RS.13701297- O N DEPOSITS AS ON 31.03.2002 WHERE AS THE COMPANY HAS ADJUSTED INTEREST OF RS.29909/- ONLY AS ON 31.03.2003 ON ACC OUNT OF FINANCIAL LOSSES IN BUSINESS AS WELL AS ON ACCOUNT OF FIRES. (5) THE COMPANY HI TECH FORMS PVT.LTD. HAVING NOT PASSE D ENTRY OF INTEREST IN ITS BOOKS OF ACCOUNTS. APPELLANT HA S NO ALTERNATIVE AND MORE PARTICULARLY CONSIDERING THE F INANCIAL LOSSES OF THE COMPANY REASONABLY EXPECTED THAT THE COMPANY WILL NOT BE ABLE TO PAY INTEREST AND THEREFORE THE APPELLANT HAS ALSO NOT PASSED ANY ENTRY OF INTEREST DEBITING HI T ECH FORMS PVT.LTD. IT IS A REASONABLE AND RATIONAL DECISION ON THE PART ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 6 - OF APPELLANT AS THE APPELLANT FOUND TROUBLE FOR REC OVERY OF THE DEPOSITS OF RS.6766128/- AS ON 31.03.2003. THE REC OVERY OF CAPITAL ITSELF WAS IN DOUBT AND THEREFORE THE APPEL LANT HAS RIGHTLY NOT CHARGED INTEREST ON ACCOUNT OF HI TECH FORMS PVT.LTD. (6) THE APPELLANT ON FURTHER ENQUIRY FOUND THAT COMPANY HAS SUFFERED LOSS OF RS.1541621/- AS PER BOOKS IN A.Y. 2004-05 AND THERE WAS BROUGHT FORWARD LOSS OF RS.3196520/- AS ON 31.03.2004. 7. IN THE LIGHT OF THE ABOVE FACTS WE ARE OF THE V IEW THAT THE MATTER REQUIRES RECONSIDERATION DUE TO THE FOLLOWING REASO NS. FIRST THE CONTROVERSY WHETHER THE ASSESSEE IS IN SHARAFFI BUSINESS OR NOT HAS FIRST TO BE RESOLVED AFTER DUE INVESTIGATION OF THE RECO RDS OF RAHIL ASSOCIATES A PROPRIETORSHIP CONCERN OF THE ASSESSEE MAINTAINE D BY THE ASSESSEE. SECOND THE ALLEGATION OF THE ASSESSING OFFICER THAT BORR OWED FUNDS WERE ADVANCED TO M/S.HITECH FORMS PVT.LTD. HAS TO BE EST ABLISHED FROM THE RECORDS OF THE ASSESSEE. THIRD THE ASSESSEE HAS CLAIMED THAT THE LOAN WAS ADVANCED ON ACCOUNT OF COMMERCIAL EXPEDIENCY AN D IN SUPPORT PLACED RELIANCE ON S.A.BUILDERS LTD. 288 ITR 1 (SC) . HOWEVER THE BASIS FOR CLAIM OF COMMERCIAL EXPEDIENCY HAS NOT BEEN EXP LAINED TO THE REVENUE AUTHORITIES. FOURTH THE ASSESSEE HAS PLEADED THE NON-ACCRUAL OF INCOME WAS ON ACCOUNT OF FINANCIAL HARDSHIP OF THE SAID CONCERN. THERE IS NO DOUBT THAT IF NO INCOME HAS MATERIALIZED NO TAX ON HYPOTHETICAL INCOME CAN BE LEVIED AS HELD IN THE CASE OF STATE B ANK OF TRAVANCORE VS. CIT REPORTED AS 158 ITR 102(SC). FIFTH THE CORREC T FINANCIAL POSITION IS YET TO BE EXAMINED BY THE ASSESSING OFFICER BY CALL ING FOR THE ACCOUNTS OF THE SAID COMPANY. SIXTH THE A.O. HAS ALSO TO EXAMINE WHETHER THE ASSESSEE HAD SUFFICIENT NON-INTEREST BEARING FUNDS AND WHETHER THOSE ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 7 - WERE UTILIZED FOR THE SAID ADVANCE AS CLAIMED. SEVENTH ON WHAT BASIS THE ASSESSEE HAS PRESUMED THAT THE ACCRUAL OF INCOME WA S DOUBTFUL AND IN SUPPORT WHAT EVIDENCE WAS IN HIS POSSESSION. 8. ON THE BASIS OF THESE OBSERVATIONS WE ARE OF TH E VIEW THAT THE ASSESSING OFFICER SHALL INVESTIGATE AFRESH THE FACT S OF THE CASE AND THEREUPON DECIDE DE NOVO THE ISSUE AS PER LAW. THIS GROUND THEREFORE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURP OSES. 9. GROUND NOS.2 & 3 READ AS UNDER: (2) IN THE FACTS OF THE CASE AND IN LAW THE APPELL ANT ALL ALONG TREATED AS CARRYING ON SHARAFFI BUSINESS AND ASSESS ED AS SUCH AND IN VIEW OF CONSIDERING RULES OF CONSISTENCY LOSS OF RS.697808/- DECLARED IN RETURN OF INCOME BE TREATED AS LOSS FRO M BUSINESS AND DISALLOWANCE OF INTEREST OF RS.753277/- BE DELETED. (3) THE CIT(A) XVI/ABD HAS ERRED IN TREATING BUSIN ESS LOSS OF RS.697808/- AS LOSS UNDER THE HEAD OTHER SOURCES FOR THE FIRST TIME AND DISALLOWED INTEREST OF RS.753277/- ON THE GROUND THAT THE APPELLANT HAS NOT EARNED ANY INCOME AS IN PAST. TH E CIT(A) XVI/ABD HAS ERRED IN NOT CONSIDERING THE S.C. DECIS ION REPORTED IN 115 ITR PAGE 519 522 IN THE CASE OF CIT VS. RAJ ENDRAPRASAD MOODY. 9.1. PARTIES APPEARING BEFORE US ARE IN AGREEMENT T HAT THE GROUNDS AS REPRODUCED ABOVE ARE MERELY AN ARGUMENT IN SUPPORT OF GROUND NO.1 AS DECIDED HEREINABOVE. SINCE THESE GROUNDS HAVE NOT RAISED ANY LEGAL ISSUE THEREFORE DISMISSED BEING INFRUCTUOUS. ITA NO2108/AHD/ 2009. KAYUR HARISHBHAI SHAH VS. ITO ASST.YEAR - 2003-04 - 8 - 10. GROUND NO.4 READS AS UNDER: (4) BROUGHT FORWARD BUSINESS LOSS OF RS.378105/- A ND BROUGHT FORWARD DEPRECIATION LOSS OF RS.187273/- CLAIMED BE ALLOWED TO BE CARRIED FORWARD. 10. 1. ON PERUSAL OF THE ASSESSMENT ORDER IT IS APPARENT THAT THERE WAS NO DISCUSSION OF BROUGHT FORWARD BUSINESS LOSS. EVEN WHILE COMPUTING THE TOTAL ASSESSED INCOME OF THE ASSESSEE THE ASSESSING OFFICER HAD NOT MADE ANY REFERENCE OF BROUGHT FORWA RD BUSINESS LOSSES. THIS FACT STILL REMAINED UNASCERTAINED HENCE REQUIR ES TO BE EXAMINED AFRESH AS PER THE ASSESSMENT RECORD THEREFORE RESTO RE IT BACK TO THE ASSESSING OFFICER TO BE DECIDED DENOVO AS PER LAW. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED THAT TOO FOR STATISTICAL PURPOSES. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 12 / 12 /2011 63..( .(../ T.C. NAIR SR. PS 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-XVI AHMEDABAD 5. 7 >> >/ // / + + + + ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD