The ACIT, Central Circle-3,, Surat v. M/s. Patel Somabhai Maganlal & Co.,, Surat

ITA 3748/AHD/2007 | 2006-2007
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 374820514 RSA 2007
Assessee PAN AADEP1184B
Bench Ahmedabad
Appeal Number ITA 3748/AHD/2007
Duration Of Justice 2 year(s) 7 month(s) 2 day(s)
Appellant The ACIT, Central Circle-3,, Surat
Respondent M/s. Patel Somabhai Maganlal & Co.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-04-2010
Date Of Final Hearing 27-04-2010
Next Hearing Date 27-04-2010
Assessment Year 2006-2007
Appeal Filed On 28-09-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL A-BENCH AHMEDABAD. BEFORE: SHRI G.D. AGARWAL VICE PRESIDENT AND SHRI BHAVNESH SAINI JUDICIAL MEMBER ITA NO.3748/AHD/2007 (ASSESSMENT YEAR 2006-2007) THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-3 SURAT. M/S. PATEL SOMABHAI MAGANLAL & CO.. 5/687 HARIPURA BHAVANI VAD SURAT. (APPELLANT) VERSUS (RESPONDENT) PAN:AADEP 1184 B FOR THE ASSESSEE: SHRI P.M. MEHTA ADVOCATE FOR THE REVENUE: SHRI. GOVIND SINGHAL SR. DR ORDER PER G.D. AGARWAL VICE-PRESIDENT: THIS IS REVENUES APPEAL AGAINST ORDER OF THE CIT(A)-II AHMEDABAD DA TED 05-07-2007. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING E FFECTIVE GROUND IN THE MEMO OF APPEAL. 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING TO DELETE THE ADDITION OF RS.13 98 220/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST WIT HOUT CONSIDERING THE FACT THAT THE INTEREST BEARING FUNDS WERE NOT U TILIZED FOR THE PURPOSE OF BUSINESS. 2. AT THE TIME OF HEARING BEFORE US IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THIS ISSUE IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR ASS ESSMENT YEARS 2000- 01 TO 2005-06. COPY OF THE ORDER IS PLACED BEFORE US. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE AUTHORI TIES BELOW. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLA CED BEFORE US. WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE INTER EST MAINLY ON THE GROUND THAT THE ASSESSEE WAS KEEPING SUBSTANTIAL CA SH IN HAND. ON THE 2 ITA NO.3748/AHD/2007 (ASSESSMENT YEAR 2006-2007) SIMILAR FACTS THE INTEREST WAS DISALLOWED IN THE EA RLIER YEARS WHICH WAS DELETED BY THE LD. COMMISSIONER OF INCOME TAX(APPEA LS) AND ON APPEAL THE ITAT VIDE ITS ORDER DATED 18-09-2009 IN ITA NOS . 4296 TO 4300/AHD/2007 SUSTAINED THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX(APPEALS). THE RELEVANT FINDING OF THE ITAT REA DS AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. THE SHORT ISSUE INVOLVED IN THIS GROUND OF APPEAL IS TH AT INTEREST EXPENDITURE ON AMOUNT BORROWED WERE DISALLOWED ON T HE GROUND THAT AMOUNT BORROWED WERE KEPT AS CASH WITH THE ASS ESSEE AND THE SAME WAS IN THE OPINION OF THE LEARNED ASSESSING OF FICER NOT UTILISED FOR THE BUSINESS PURPOSES OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE DIS ALLOWANCE OBSERVING THAT ASSESSEES BUSINESS WAS ALSO CONSIST ING OF TRANSFER OF MONEY. DUE TO THIS BUSINESS THE ASSESSEE WAS RE QUIRED TO HAVE SUFFICIENT CASH ALWAYS SO THAT IT CAN MAKE PAYMENT OF AMOUNT ON DUE DATE. THUS IN THE OPINION OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) CASH POSSESSED BY THE ASSESSEE WAS ITS BUSINESS ASSET AND THEREFORE INTEREST PAID ON BORR OWED CAPITAL FOR THAT CASH WAS BUSINESS EXPENDITURE OF THE ASSESSEE. WE FIND THAT GENUINENESS AND REASONABLENESS OF PAYMENT OF INTERE ST IS NOT IN DISPUTE. THE ONLY DISPUTE WAS THAT THE BORROWED FUN DS WERE UTILISED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE OR NOT. WE FIND THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT DISPU TE THE FINDING OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT THE ASSESSEES NATURE OF BUSINESS REQUIRED IT TO POSSES S CASH BALANCE OF SUFFICIENT AMOUNT OF ALL THE MATERIAL TIME AS THE M AKING OF TIMELY PAYMENT WAS THE ESSENCE OF BUSINESS TRANSACTION OF THE ASSESSEE. WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE BORROWED FUNDS WERE UTILISED BY THE ASSESSEE FOR ANY OTHER P URPOSES THAN ITS BUSINESS. THE ASSESSEE MAY BE IMPRUDENT IN HOLDING LARGE AMOUNT OF CASH BUT WHEN THE CASH WAS POSSESSED FOR BUSINES S PURPOSES IT WOULD CONSTITUTE BUSINESS ASSET OF THE ASSESSEE AND THE BORROWINGS CONNECTED THEREWITH HAD TO BE HELD AS FOR BUSINESS PURPOSES. WE THEREFORE DO NOT FIND ANY ERROR IN THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN DELETING THE DISALLOWANCE OF INTEREST OF EXPENDITURE. THEREFORE THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 3 ITA NO.3748/AHD/2007 (ASSESSMENT YEAR 2006-2007) 3. SINCE THE FACTS ARE IDENTICAL WE RESPECTFULLY F OLLOWING THE ABOVE DECISION OF ITAT IN ASSESSEES OWN CASE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) AND REJECT GROU ND NO.1 OF THE REVENUES APPEAL. 4. GROUND NO.2 OF THE REVENUES APPEAL READS AS UND ER: 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING TO DELETE THE ADDITION OF RS.11 25 000/- MADE BY THE A SSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDITS WITHOUT CONS IDERING THE FACT THAT THE GENUINENESS OF SUCH DEPOSITS WERE NOT PROV ED BY THE ASSESSEE. 5. AT THE TIME OF HEARING BEFORE US IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE ASSESSEE HAS FURNISHED THE COMPLET E DETAILS OF THE CREDITORS BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND NOT BEFORE THE ASSESSING OFFICER. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ADMITTED THE FRESH EVIDENCE BUT DID NO T ALLOW ANY OPPORTUNITY TO THE ASSESSING OFFICER. THIS IS VIOL ATION OF RULE 46A OF THE INCOME TAX RULES. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ON THIS POINT S HOULD BE SET ASIDE AND MATTER SHOULD BE RESTORED TO THE FILE OF THE AS SESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND POINTED OUT THAT THE ASSESSEE HAS FURNISHED BEFORE THE ASSESSING OFFICER THE CONFIRMATION OF ALL THE CREDITORS XEROX COPIES OF THE BANK PASS-BO OKS AND THE ACKNOWLEDGEMENT AND COMPUTATION OF INCOME OF THE CR EDITORS. BEFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ONLY EV IDENCE RELATING TO THE AGRICULTURAL INCOME OF THE CREDITORS WAS PRODUC ED. HOWEVER ALL THE CREDITORS ARE ASSESSED TO INCOME TAX AND IN THE CON FIRMATION THEIR PERMANENT ACCOUNT NUMBER WAS DULY MENTIONED MOREOV ER IN THE COMPUTATION OF INCOME THE AGRICULTURAL INCOME DISCL OSED BY THEM WAS DULY MENTIONED. THEREFORE SO FAR ASSESSEE IS CONC ERNED IT HAS DULY DISCHARGED THE BURDEN OF PROVING THE CASH CREDIT. 4 ITA NO.3748/AHD/2007 (ASSESSMENT YEAR 2006-2007) 6. IN SUPPORT OF THIS CONTENTION HE HAS PRODUCED BE FORE US THE COPY OF THE LETTER DATED 09-03-2007 ALONGWITH WHICH THE CON FIRMATION AND THAT DETAILS OF THE CREDITORS WERE PRODUCED BEFORE THE ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE ASSESSEE HAS FURNISHED BEFORE THE ASSESSING OFFICER THE CONFIRMA TION OF THE CREDITORS IN WHICH THEIR PERMANENT ACCOUNT NUMBER WAS MENTIONED. XEROX COPY OF THEIR BANK PASS BOOKS AS WELL AS ACKNOWLEDGMENT OF FILING OF INCOME TAX RETURN AND THE COPY OF COMPUTATION OF INCOME OF THE CREDITORS WERE FURNISHED BEFORE ASSESSING OFFICER. BEFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE FURNISHED FURTHER EVIDENCES TO PROVE THE AGRICULTURAL INCOME OF THE CREDITORS. HOWEVER IN OUR OPINION ONCE THE CREDITORS ARE ASSESSED TO INCOME TAX AND THEIR PERMANENT ACCOUNT NUMBERS AND COPY OF COMPUTATION WERE FURNISHED BEFO RE THE ASSESSING OFFICER IN WHICH AGRICULTURAL INCOME WAS DISCLOSED THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING THE CASH CREDIT WHIC H LAY UPON HIM. WHILE TAKING THIS VIEW WE DERIVE SUPPORT FROM THE DECISION OF HON'BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS. ORISSA CORPORATION P. LIMITED. 159 ITR 78. IN THIS CASE H ON'BLE APEX COURT HELD AS UNDER: THAT IN THIS CASE THE ASSESSEE HAD GIVEN THE NAME S AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE O F THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENU E APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE O F THE ASSESSEE DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO F IND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVAN CE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE T HE SO CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES THE ASSE SSEE COULD NOT DO ANY THING FURTHER. IN THE PREMISES IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BUR DEN THAT LAY ON 5 ITA NO.3748/AHD/2007 (ASSESSMENT YEAR 2006-2007) HIM THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSI ON WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. 7. THE RATIO OF ABOVE DECISION WOULD BE SQUARELY AP PLICABLE TO THE CASE OF THE ASSESSEE BECAUSE IN THE ASSESSEES CASE ALSO THE ASSESSEE HAS FURNISHED THE CONFIRMATION OF THE CREDITORS ALONGWI TH THEIR PERMANENT ACCOUNT NUMBER. THE ASSESSEE FURTHER PRODUCED THE COMPUTATION OF INCOME OF THE CREDITORS AS WELL AS ACKNOWLEDGEMENT OF THEIR FILING OF THE RETURN. THEREAFTER THE REVENUE DID NOT EXAMINE TH E SOURCE OF INCOME OF THE CREDITORS EITHER FROM THEIR RECORD OR FROM ISSU ING SUMMONS TO THEM. 8. THUS SO FAR ASSESSEE IS CONCERNED IT HAS DULY DISCHARGED THE ONUS OF PROVING THE CASH CREDIT CREATED WHICH LAY UPON H IM. THEREFORE IN OUR OPINION THE LD. COMMISSIONER OF INCOME TAX(APPEALS ) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOR UNEX PLAINED CASH CREDIT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPEAL IS REJECTED. 9. IN THE RESULT THE REVENUES APPEAL IS DISMISSED . THIS ORDER IS PRONOUNCED IN OPEN COURT ON 30 TH APRIL 2010. SD/- SD/- (BHAVNESH SAINI) (G.D. AGARWAL) JUDICIAL MEMBER VIC E PRESIDENT AHMEDABAD; DATED: 30/04/2010 [ ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT AHMEDABAD BENCHES AHMEDABAD.