Hakim Rai Daya Nand, Shahabad v. ITO, Kurukshetra

ITA 444/CHANDI/2011 | 2007-2008
Pronouncement Date: 30-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 44421514 RSA 2011
Assessee PAN AAAFH5684F
Bench Chandigarh
Appeal Number ITA 444/CHANDI/2011
Duration Of Justice 1 year(s) 3 month(s) 1 day(s)
Appellant Hakim Rai Daya Nand, Shahabad
Respondent ITO, Kurukshetra
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 30-07-2012
Date Of Final Hearing 25-07-2012
Next Hearing Date 25-07-2012
Assessment Year 2007-2008
Appeal Filed On 29-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R. SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.444 /CHD/2011 (ASSESSMENT YEAR:2007-08) HAKIM RAI DAYA NAND VS. THE INCOME TAX OFFICER 265A NEW SABZI MANDI WARD 3 KAITHAL SHAHABAD. CAMP AT KURUKSHETRA. PAN: AAAFH5684F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.ANEJA RESPONDENT BY : SMT.JAISHREE SHARMA DR DATE OF HEARING : 25.07.2012 DATE OF PRONOUNCEMENT : 30.07.2012 O R D E R PER SUSHMA CHOWLA J.M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS) KARNAL DATED 28.01.2011 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED U/S 143(3) OF INCOME TAX ACT 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THE ADDITION IN INCOME OF RS.620391/- BY DISALLOWING INTEREST PAID IGNORING THE FACT OF ADVANCES MADE FOR COMMERCIAL EXPEDIENCY IS UNJUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WITHOUT PREJUDICE TO THE ABOVE THE ADDITION IN INCOME BY DISALLOWING INTEREST PAID TO PARTNERS OF RS.139592/- IS UNJUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEARNED COMMISSIONER OF I.TAX APPEALS HAS ERRED IN CONFIRMING THE SAME. 2 3. THE ASSESSEE IN THE PRESENT APPEAL HAS RAISED AL TERNATE GROUNDS OF APPEAL VIDE GROUND NOS. 1 AND 2 OF THE APPEAL. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMMISSION AGENT AND ALSO DEALING IN PURCHASE AND SALE OF POTA TO AND ONION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THOUGH THE ASSESSEE HAD PAID INTEREST TO THE TUNE O F RS.6 20 391/- TO THE BANK ITS PARTNERS AND TO THE CREDITORS BUT NO INT EREST WAS CHARGED FROM THE PARTIES/PERSONS TO WHOM LOANS HAD BEEN ADVANCED . THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT THE ADVANCE S WERE MADE TO ZAMINDARS OF DIFFERENT VILLAGES WHO BROUGHT THEIR AGRICULTURE PRODUCE FOR SALE ON COMMISSION BASIS. THE ASSESSEE CLAIMED THAT NO INTEREST WAS CHARGED FROM THE SAID PARTIES. THE ASSESSING OFFIC ER VIDE PARA 3.2 OF THE ASSESSMENT ORDER NOTED THAT IN NUMBER OF CASES TO WHOM ADVANCES HAD BEEN MADE THERE WERE NO TRANSACTION DURING THE YEAR AND THE OPENING BALANCES HAD BEEN SHOWN AS CLOSING BALANCES . THE ASSESSING OFFICER FURTHER GAVE A FINDING THAT IN NUMBER OF CA SES THE LOANS HAD BEEN GIVEN DURING THE YEAR WITHOUT ANY BUSINESS PUR POSE IN THE ABSENCE OF ANY TRANSACTION OF AGRICULTURE PRODUCE WHATSOEVE R. THE NAMES OF SUCH PARTIES ARE ENLISTED IN PARA 3.2 AT PAGE 2 OF THE A SSESSMENT ORDER. THE ASSESSING OFFICER TABULATED THE LIST OF PARTIES AS PER ANNEXURE-A AND COMPUTED THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES LTD. [205 CTR 304 (P&H)] AT RS.7 43 261/- WHICH WAS RESTRICTED TO THE INTEREST DEBITED BY THE ASSESSEE AT RS.6 20 391/-. 5. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD THA T THE INTEREST FREE ADVANCES WERE MADE TO THE FARMERS FOR BUSINESS PURP OSE. THE PLEA OF THE 3 ASSESSEE REGARDING NEXUS BETWEEN THE FUNDS BORROWED AND THE AMOUNT ADVANCED TO THE FARMERS WERE ALSO REJECTED BY THE C IT (APPEALS) IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD BY THE ASSESSEE. THE ASSESSEE HAD FURTHER CLAIMED THAT THE INTEREST EXPE NDITURE DEBITED BY THE ASSESSEE ALSO INCLUDE INTEREST PAID TO THE PARTNERS ON THEIR CAPITAL WHICH HAS BEEN DISALLOWED. THIS PLEA OF THE ASSESSEE WAS ALSO REJECTED BY THE CIT (APPEALS). 6. THE ASSESSEE IS IN APPEAL AGAINST THE DISALLOWAN CE OF RS.6 20 391/- AND HAS ALSO RAISED ALTERNATE PLEA THAT THERE IS NO MERIT IN DISALLOWING INTEREST PAID TO THE PARTNERS OF RS.1 39 592/-. 7. SHRI K.C.ANEJA APPEARED FOR THE ASSESSEE AND SMT .JAISHREE SHARMA DR PUT IN APPEARANCE ON BEHALF OF THE REVENUE AND P UT FORWARD THEIR CONTENTIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE ADVANCES MADE BY THE ASSESSEE SHOWN AS SUNDRY CREDITORS IN ITS BALAN CE SHEET. THE SAID ADVANCES WERE ; A) ON ACCOUNT OF BROUGHT FORWARD CR EDIT BALANCES IN THE ACCOUNTS OF VARIOUS PARTIES AND B)OTHER ADVANCES M ADE DURING THE YEAR. THE LIST OF PARTIES TOTALING NUMBER 155 IS TABULATE D IN ANNEXURE-A BY THE ASSESSING OFFICER WHICH IS ATTACHED TO THE ASSESSM ENT ORDER. THE PERUSAL OF THE SAID LIST REFLECTS ADVANCES MADE IN VARIOUS DENOMINATION TO THE SAID PARTIES. THE PLEA OF THE ASSESSEE WITH REGARD TO THE SAID ADVANCES WERE THAT IT HAD GIVEN THE SAID ADVANCES T O THE AGRICULTURISTS FOR BRINGING THEIR PRODUCE TO THE ASSESSEE AND WAS IN THE LINE OF BUSINESS OF COMMISSION AGENT BEING CARRIED ON BY THE ASSESSE E. HOWEVER WE FIND THAT BESIDES MAKING THIS PLEA BEFORE THE AUTHORITIE S BELOW AND EVEN BEFORE US THE ASSESSEE HAS FAILED TO PRODUCE ANY E VIDENCE TO ESTABLISH 4 ITS CLAIM. UNDOUBTEDLY THE ASSESSEE IS ENGAGED I N THE BUSINESS OF COMMISSION AGENCY BUT THE FACTS AND CIRCUMSTANCES O F THE CASE WHEREIN THE ADVANCES WERE OUTSTANDING IN THE ACCOUNTS OF CR EDITORS AS OPENING BALANCES AND NO TRANSACTION BEING CARRIED ON DURING THE YEAR UNDER CONSIDERATION DOES NOT ESTABLISH THE CLAIM OF THE ASSESSEE THAT IT HAD ADVANCED THE SAID LOANS IN THE COURSE OF CARRYING O N ITS BUSINESS ACTIVITIES. FURTHER THE ASSESSING OFFICER HAS ENLI STED NUMBER OF PARTIES TO WHOM ADVANCES HAD BEEN MADE DURING THE YEAR ITSE LF AND THERE WERE NO BUSINESS TRANSACTIONS WITH THE SAID PARTIES DURI NG THE YEAR. IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD TO ESTABLISH ITS CLAIM OF BUSINESS EXIGENCY WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE. 9. THE LEARNED A.R. FOR THE ASSESSEE HAD PLACED RE LIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN S.A .BUILDERS VS. CIT (2006) [206 CTR (SC) 631] WHICH IS MISPLACED IN TH E FACTS OF THE CASE IN THE ABSENCE OF ANY BUSINESS EXIGENCY BEING ESTAB LISHED BY THE ASSESSEE. THE LEARNED A.R. FOR THE ASSESSEE HAS FU RTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TR IBUNAL IN ITA NO.2689/DEL/09 FOR ASSESSMENT YEAR 2006-07 AND WE F IND THAT THE FACTS OF THE PRESENT CASE BEFORE US ARE AT VARIANCE WITH THE FACTS BEFORE THE DELHI BENCH OF THE TRIBUNAL AND THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IS NOT APPLICABLE TO CASE OF THE AS SESSEE. 10. THE NEXT PLANK OF ARGUMENT OF THE LEARNED A.R. FOR THE ASSESSEE THAT THE PRINCIPLES OF CONSISTENCY WERE TO BE FOLLO WED I.E. SIMILAR ADVANCES WERE SHOWN IN THE EARLIER YEARS AND NO DIS ALLOWANCE WAS MADE OUT OF THE INTEREST EXPENDITURE BEING RELATABLE TO THE INTEREST ON SUCH INTEREST FREE ADVANCES. THE LEARNED A.R. FOR THE A SSESSEE WHEN POINTED OUT FAIRLY CONCEDED THAT THE RETURNS OF INCOME IN THE EARLIER YEARS WERE PROCESSED UNDER SECTION 143(1) OF THE ACT AND NO AS SESSMENT WAS 5 COMPLETED UNDER SECTION 143(3) OF THE ACT. IN VIEW THEREOF WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE VIS--VIS RULE OF CONSISTENCY AND THE RELIANCE PLACED BY THE LEARNED A.R. FOR THE ASSESSE E ON THE VARIOUS DECISIONS IN THIS REGARD IS THUS MISPLACED. 11. THE SECOND ASPECT OF THE ISSUE RAISED BEFORE US IS IN RELATION TO THE INTEREST PAID TO THE PARTNERS TOTALING RS.1 39 591/ - WHICH AS PER THE LEARNED A.R. FOR THE ASSESSEE IS PART OF THE TOTAL INTEREST EXPENDITURE OF RS.6 20 391/-. WE ARE OF THE VIEW THAT THE ASSESSE E IS ENTITLED TO THE INTEREST PAID TO THE PARTNERS IRRESPECTIVE OF THE I NTEREST FREE ADVANCES MADE BY IT. CONSEQUENTLY THE ASSESSEE IS ENTITLED TO RELIEF OF RS.1 39 591/- SUBJECT TO VERIFICATION BY THE ASSES SING OFFICER AS THE NECESSARY DETAILS OF THE TOTAL EXPENDITURE OF RS.6 20 391/- ARE NOT AVAILABLE ON RECORD. ACCORDINGLY WE DIRECT THE AS SESSING OFFICER TO VERIFY THAT IN CASE THE TOTAL EXPENDITURE OF RS.6 2 0 391/- DEBITED UNDER THE HEAD INTEREST EXPENDITURE INCLUDES INTEREST PAID TO THE PARTNERS OF RS.1 39 591/- THEN BALANCE OF RS.4 80 800/- IS TO BE DISALLOWED IN THE HANDS OF THE ASSESSEE. THUS GROUND NO.1 RAISED BY THE ASSESSEE IS DISALLOWED. THE ALTERNATE PLEA IN GROUND NO.2 IS A LLOWED SUBJECT TO VERIFICATION. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 30 TH JULY 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH 6