ACIT, UDAIPUR v. Shri Vishal Kumar Sharma, UDAIPUR

ITA 409/JODH/2013 | 2008-2009
Pronouncement Date: 08-04-2014 | Result: Dismissed

Appeal Details

RSA Number 40923314 RSA 2013
Assessee PAN AAXPK0583D
Bench Jodhpur
Appeal Number ITA 409/JODH/2013
Duration Of Justice 9 month(s) 24 day(s)
Appellant ACIT, UDAIPUR
Respondent Shri Vishal Kumar Sharma, UDAIPUR
Appeal Type Income Tax Appeal
Pronouncement Date 08-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 04-03-2014
Date Of Final Hearing 04-03-2014
Next Hearing Date 04-03-2014
Assessment Year 2008-2009
Appeal Filed On 14-06-2013
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K. SAINI ACCOUNTANT MEMBER. ITA NO.409/JODH/2013 (A.Y. 2008-09) ACIT CIRCLE-2 VS. SHRI VISHAL KU MAR SHARMA UDAIPUR. 13-D KALA JI GAURA JI UDAIPUR. PAN NO. AAXPK 0583 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH DEVPURA. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 04/03/2014. DATE OF PRONOUNCEMENT : 08/04/2014. O R D E R PER N.K. SAINI A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 28/03/2013 OF LD. CIT(A) UDAIPUR. THE FOLLOWING G ROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN:- 1. DIRECTING THE AO TO CONSIDER DISALLOWANCE OF INT EREST AS PART OF TRADING ADDITION IN PRESENT APPEAL ORDER U/S 154 DE SPITE THE CLEAR CUT 2 DIRECTION IN EARLIER MAIN APPEAL ORDER REGARDING DI SALLOWANCE OF INTEREST BEING SEPARATE FROM TRADING ADDITION. 2. GIVING DIRECTION OF TELESCOPING THE DISALLOWANCE OF INTEREST WITH TRADING ADDITION DESPITE THE FACT THAT THE ADDITIO N SO PARTLY SUSTAINED IN THE MAIN APPEAL ORDER BY THE LD. CIT(A) WAS TRAD ING ADDITION & NOT THE N.P. ADDITION. THAT THE APPELLANT CRAVES TO ADD AMEND ALTER DEL ETED OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 2 FROM THE ABOVE GROUNDS IT APPEARS THAT THE ONLY G RIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO THE DIRECTION GIVEN BY THE LD. CIT(A) TO THE ASSESSING OFFICER TO CONSIDER THE DISALLOWAN CE OF INTEREST AS PART OF TRADING ADDITION. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM ANNEXURE-D OF FORM- 3CD THAT THE ASSESSEE ADVANCED RS.25 18 117/- TO HI S MOTHER SMT. S.R. SHARMA AND RS. 35 85 434/- TO M/S. SHREENATH TRAVEL LERS IN WHICH THE ASSESSEE WAS A PARTNER BUT NO INTEREST HAD BEEN CH ARGED ON THOSE ADVANCES. THE ASSESSING OFFICER DISALLOWED PROPORT IONATE INTEREST OF RS. 7 32 426/- ON THE INTEREST FREE LOAN OF RS. 61 03 551/- GIVEN TO THE MOTHER AND PARTNERSHIP CONCERN. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE INTEREST FREE ADVANCES WERE OUT OF INTEREST FREE 3 FUNDS AVAILABLE IN HAND AND PROPRIETARY FIRM M/S. S HREENATH TRAVELLERS SERVICES. IT WAS STATED THAT THE INTEREST FREE FUN DS OF RS. 1 99 32 695/- WERE AVAILABLE WITH THE ASSESSEE DETAILS OF THOSE FUNDS HAS BEEN GIVEN AT PAGES 10 & 11 OF THE APPELLATE ORDER DATED 31/12/20 12 FOR THE COST OF REPETITION THOSE ARE NOT REPRODUCED HEREIN. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE DELETED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER BY OBSERVING IN PARA 3.1(II) AT PAGE 11 OF THE ORDER D ATED 31/12/2012 AS UNDER:- (II) BESIDES AVAILABILITY OF INTEREST FREE FUND I T IS NOTICED THAT IN THE YEAR UNDER PETITION NO ADVANCES HAVE BEEN GIVEN TO M/S. SHRINATH TRAVELLERS AS OUT OF THE DEBIT BALANCE STOOD RS. 41 75 671/- AT T HE PRECEDING YEAR ENDING ON 31/03/2007 RS. 590237/- IS RECEIVED RESULTING A T THE YEAR ENDING ON 31/03/2008 DEBIT BALANCE STOOD OF RS. 35 85 434/-. LIKEWISE IN PROP. FIRM M/S. STS EVIDENT FROM THE DETAILS AVAILABLE AT ANNE XURE-E IN A/C OF SMT. SUSHILA SHARMA AFTER HAVING SET OFF THE AMOUNT RECE IVED AMOUNT AT THE YEAR END STOOD CREDIT RS. 14 41 455/-. IN THIS RES PECT IT IS FURTHER TO CLARIFY THAT RS. 11 90 401/- HAS BEEN B/F FROM THE PRECEDIN G ASSESSMENT YEAR 2007- 08 AND RS. 13 27 716/- (170000X8) HAS BEEN DEBITED ON ACCOUNT OF DEPOSITED IN HER TERM LOAN INSTALLMENTS EFFECTIVE F ROM AUGUST 2007 WITH PUNJAB NATIONAL BANK. THIS WAY TOTAL OUTSTANDING S TOOD AT RS. 2518117/-. IT IS ALSO AN IMPORTANT FACT THAT ALL INTEREST BEAR ING FUNDS RS. 235.35 LACS HAVE BEEN TAKEN FOR BUSINESS PURCHASES FROM NON BAN KING FINANCE COMPANIES AND HAVE BEEN UTILIZED FOR THE PURPOSE JU STIFIED FROM THE BALANCE SHEET. THERE IS NO NEXUS BETWEEN THE INTEREST BEAR ING FUNDS AND NON INTEREST BEARING ADVANCES. WHEREAS IT IS WELL SETT LED LAW THAT NEXUS IS MUST FOR SUCH DISALLOWANCES. HENCE THE ASSUMPTION OF LD .AO IS SQUARELY INCORRECT THAT INTEREST BEARING FUND DIVERTED TO NON INTEREST BEARING ADVANCES GIVEN. THUS IT IS JUSTIFIED THAT INTEREST FREE ADVANCES HA VE BEEN OUT OF INTEREST FREE 4 FUND AVAILABLE IN THE HAND OF APPELLANT SELF AND HI S PROP. FIRM M/S STS RESULTING INFERENCE OF LD. AO DISALLOWANCE OF INTER EST RS. 7 32 426/- IS ENTIRELY BEING PRESUMPTIVE HELD WRONG AND BAD IN LA W. SUBSEQUENT TO THE APPELLATE ORDER DATED 31/12/2012 THE ASSESSEE MOVED AN APPLICATION UNDER SECTION 154 OF THE I.T. ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) STATING THEREIN THAT THERE WAS SOME MISTAKE IN THE APPELLATE ORDER DATED 31/12/2012. T HE MISTAKE POINTED OUT BY THE ASSESSEE WAS AS UNDER:- THE DISALLOWANCE OF INTEREST MADE ON ADVANCES/LOA NS GIVEN OUT OF INTEREST BEARING ADVANCES/LOANS IS REQUIRED TO BE MADE SEPAR ATELY AS IT CANNOT BE TELESCOPED WITH THE TRADING ADDITION. THE A.O. IS DIRECTED TO CONSIDER THE ADDITION SEPARATELY WHILE GIVING EFFECT TO THIS ORD ER. THE ASSESSEE SUBMITTED TO THE LD. CIT(A) THAT THE INTEREST EXPENSES OF RS. 29.21 LAC WERE CLAIMED AND DEBITED UNDER BUS OPERATING TRADING ACCOUNT AND NOT UNDER PROFIT & LOSS ACCOUNT. IT WA S FURTHER STATED THAT THE ASSESSING OFFICER DETERMINED THE TRADING RESULT S BY MAKING ENHANCEMENT IN THE GROSS PROFIT AND THE SAME HAD BE EN CONFIRMED IN THE APPEAL. IT WAS FURTHER STATED THAT THE INTEREST EX PENSES HAD BEEN CONSIDERED AS PART AND PARCEL OF THE TRADING OF BUS AND THE TRADING RESULTS FROM BUS OPERATION HAS BEEN DECIDED BY ENHANCING TH E GROSS PROFIT FURTHER ADDITION ON ACCOUNT OF DISALLOWANCE OF INTE REST WAS NOT REQUIRED TO BE MADE SEPARATELY. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT 5 JODHPUR BENCH IN THE CASE OF MOHD. ASLAM VS. ITO ( 2005) 94 TTJ (JODHPUR) 282 AND RISHAB CONSTRUCTION (P) LTD. VS. ACIT (TW DEC. 2007/P8). IN SUPPORT OF THE CONTENTION THAT THE I NTEREST EXPENSES HAD ALREADY BEEN CONSIDERED WHILE PREPARING BUS OPERATI NG ACCOUNT THE ASSESSEE FILED A COPY OF SUCH ACCOUNT WHICH WAS ALR EADY FILED ALONG WITH THE RETURN OF INCOME AND HAD BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE ENHANCING THE GROSS PROFIT FROM BUS OPERATING BUSINESS. 6 . THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD CONSIDERED THE INTEREST EXPENSES WHILE PREPARING THE BUS OPERATING EXPENSES AND AS THE TRADING RESULTS OF THE ASSESSEE FROM BUS OPERATING HAD BEEN DECIDED BY ENHANCING THE GROSS PROFIT IT COULD BE SAID THAT THE DISALLOW ANCE ON ACCOUNT OF EXPENSES WAS NOT REQUIRED TO BE MADE BECAUSE SUCH D ISALLOWANCE HAD BEEN TAKEN CARE OF IN THE ENHANCED GROSS PROFIT AND NO SEPARATE DISALLOWANCE IS REQUIRED TO BE MADE. ACCORDINGLY THE APPELLATE ORDER DATED 31/12/2012 FOR MAKING SEPARATE ADDITION ON AC COUNT OF DISALLOWANCE OF INTEREST WAS RECTIFIED AND THE ASSE SSING OFFICER WAS DIRECTED NOT TO MAKE ANY SEPARATE DISALLOWANCE ON A CCOUNT OF INTEREST. NOW THE DEPARTMENT IS IN APPEAL. 6 7 . LEARNED D.R. REITERATED THE CONTENTS MENTIONED IN THE GROUNDS OF APPEAL AND STATED THAT THE LD. CIT(A) WAS NOT JUSTI FIED IN DIRECTING THE ASSESSING OFFICER NOT TO MAKE ANY DISALLOWANCE ON A CCOUNT OF INTEREST. 8 . IN HIS RIVAL SUBMISSIONS LEARNED COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND STRO NGLY SUPPORTED THE IMPUGNED ORDER. 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESSEE DEBI TED INTEREST EXPENSES IN THE TRADING ACCOUNT UNDER THE HEAD BUS OPERATING E XPENSES. THE ASSESSING OFFICER DID NOT ACCEPT THE GROSS PROFIT D ECLARED BY THE ASSESSEE IN TRADING ACCOUNT AND ENHANCED THE GROSS PROFIT. THEREFORE ANY EXPENSES WHICH WERE DEBITED IN THE TRADING ACCOUNT HAD BEEN TAKEN CARE OF IN THE GROSS PROFIT ENHANCED BY THE ASSESSING OF FICER THEREFORE NO SEPARATE DISALLOWANCE WAS CALLED FOR ON ACCOUNT OF INTEREST. MOREOVER THE LD. CIT(A) HAS ALSO DELETED THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER ON THIS BASIS THAT INTEREST FREE FUNDS AVAI LABLE WITH THE ASSESSEE WERE MORE THAN THE INTEREST FREE FUNDS ADVANCES GIV EN. IN VIEW OF THE 7 AFORESAID DISCUSSION AND CONSIDERING THE TOTALITY O F THE FACTS WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 10 . IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMIS SED. (ORDER PRONOUNCED IN THE COURT ON 08 TH APRIL 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH APRIL 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR ITAT JODHPUR.