Govind Narayan Agarwal, JODHPUR v. ACIT, JODHPUR

ITA 571/JODH/2013 | 2009-2010
Pronouncement Date: 11-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 57123314 RSA 2013
Assessee PAN AALPA3402D
Bench Jodhpur
Appeal Number ITA 571/JODH/2013
Duration Of Justice 3 month(s) 29 day(s)
Appellant Govind Narayan Agarwal, JODHPUR
Respondent ACIT, JODHPUR
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 31-03-2014
Assessment Year 2009-2010
Appeal Filed On 13-12-2013
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. 571/JODH/2013 (A.Y. 2009-10) GOVIND NARAYAN AGARWAL VS. ACIT CIRCLE-3 PLOT NO. 4 ALFOO BUILDING JODHPUR. 1 ST A ROAD SARDARPURA JODHPUR. PAN NO. AALPA 3402 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 31/03/2014. DATE OF PRONOUNCEMENT : 11/04/2014. O R D E R PER N.K. SAINI A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 15/10/2013 OF LD. CIT(A) JODHPUR. THE FOLLOWING G ROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE LD. CIT(A) HAS ERRED IN SUSTAINING ADDITION FOR NOTIONAL INTEREST AMOUNTING TO RS. 3 20 177/-. THE DISALLOWANCE SO S USTAINED IS BAD IN LAW AND BAD ON FACTS. 2 2. THE ORDER PASSED BY LD. CIT(A) HAS ERRED IN SUST AINING THE DISALLOWANCE OF RS. 66 109/- OUT OF EXPENSES CLAIME D ON ACCOUNT OF PETROL TELEPHONE SHOP EXPENSES AND CAR EXPENSES. THE ADDITION SO SUSTAINED IS BAD IN LAW AND BAD ON FACTS. 3. THE LD. CIT(A) HAD ERRED IN SUSTAINING DISALLOWA NCE OF RS. 8 470/- ON ACCOUNT OF MCX PENALTY. 4. THE LD. CIT(A) HAS ERRED IN SUSTAINING RS. 700/- ON ACCOUNT OF CASH DISCREPANCY CHARGES. 5. THE INTEREST CHARGED U/S 234B & 234C IS BAD IN L AW AND BAD ON FACTS. 6. THE APPELLANT CRAVES LIBERTY TO ADD AMEND ALTE R AND MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFOR E YOUR HONOUR. 2 GROUND NO. 6 IS GENERAL IN NATURE SO IT DOES NOT REQUIRE ANY COMMENTS ON OUR PART. GROUND NOS. 3 & 4 WERE NOT P RESSED SO THESE ARE DISMISSED AS NOT PRESSED. VIDE GROUND NO. 1 THE G RIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION OF R S. 3 20 177/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NOTIONAL INTER EST. 3. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICE D THAT THE ASSESSEE HAS DEBITED INTEREST OF RS. 10 43 314/-. HE FURTHE R NOTICED THAT THE ASSESSEE HAD GIVEN ADVANCES OF RS. 11 09 125/- RS. 10 59 388/- AND RS. 1 52 080/- TO SHRI AJAY ROONGTA SHRI AAKASH SI NGHAL & SHRI RAJ KUMAR AGARWAL RESPECTIVELY. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD PAID INTEREST ON BANK LOAN/CREDITORS. HE WAS OF THE VIEW THAT IF THE ASSESSEE WOULD HAVE NOT GIVEN ADVANCES TO THOSE PER SONS HE WOULD HAVE 3 STAYED AWAY FROM THE INTEREST LIABILITY. THE ASSES SEE SUBMITTED TO THE ASSESSING OFFICER THAT THE ADVANCES WERE GIVEN TO T HE FAMILY MEMBERS AND IN SOME CASES INTEREST HAD NOT BEEN PAID TO THE CREDITORS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NEIT HER PROVE THE NEXUS OF INTEREST FREE ADVANCES TO OTHERS OR OF INTEREST FRE E ADVANCE WITH HIS OWN CAPITAL. HE THEREFORE DISALLOWED INTEREST EXPEND ITURE TO THE EXTENT OF RS. 3 20 177/- @ 15% ON THE ADVANCES MADE WITHOUT INTEREST. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JU STIFIED IN MAKING SUCH DISALLOWANCE AS THERE WAS NO DIRECT NEXUS OF HAVING DIVERTED ANY INTEREST BEARING FUNDS INTO THOSE INTEREST FREE ADVANCES. I T WAS FURTHER STATED THAT THERE COULD NOT BE ANY ADDITION FOR NOTIONAL I NTEREST AND TAX COULD BE LEVIED ONLY ON THE REAL INCOME WHICH THE ASSESS EE HAD REALLY EARNED. IT WAS FURTHER STATED THAT THE CAPITAL OF THE ASSES SEE AND THE INTEREST FREE FUNDS AVAILABLE ADEQUATELY COVERED THE SAID INTERE ST FREE ADVANCES AND THEREFORE NO DISALLOWANCE WAS JUSTIFIED. IT WAS S UBMITTED THAT THE ENTIRE BORROWINGS WHICH HAD NOT BEEN MADE BY THE AS SESSEE HAD BEEN USED FOR THE PURPOSE OF BUSINESS AND THEREFORE INT EREST ON SUCH BORROWINGS COULD NOT BE DISALLOWED. IT WAS POINTED OUT THAT IN THE A.Y. 4 2007-08 ALSO SUCH ADDITION FOR NOTIONAL INTEREST W ITH REGARD TO ADVANCE IN THE NAME OF SHRI AJAY ROONGTA WAS DELETED BY THE LD. CIT(A). 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT IT WAS NOT THE CASE OF IMPO SITION OF SOME NOTIONAL INCOME AS BEING EMPHASIZED BY THE ASSESSEE BUT THI S WAS A CASE WHERE THE ASSESSING OFFICER FOUND THAT CERTAIN PART OF IN TEREST EXPENDITURE WAS REQUIRED TO BE DISALLOWED FOR NOT BEING WHOLLY AND EXCLUSIVELY RELATED TO BUSINESS AS SUCH CLAIM WAS REDUCING THE CORRECT TAX LIABILITY OF ASSESSEE. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE MADE ADVA NCES WHICH HAD NOT BEEN PROVED TO BE RELATED TO THE BUSINESS FOR THE R EASON THAT NO NEXUS HAD BEEN ESTABLISHED BY MATERIAL EVIDENCE BETWEEN T HE BUSINESS NEEDS AND ADVANCEMENT OF INTEREST FREE LOANS. THE LD. CI T(A) WAS OF THE VIEW THAT HAD THE ASSESSEE INSTEAD OF PROVIDING INTEREST FREE LOANS TO THOSE PERSONS UTILIZED THE AMOUNT/FUNDS IN DISCHARGING TH E BANK LOAN THE ASSESSEE COULD HAVE SAVED SUBSTANTIAL AMOUNT OF INT EREST EXPENDITURE. THE LD. CIT(A) ALSO OBSERVED THAT NO JUSTIFICATION WHATSOEVER HAD BEEN GIVEN FOR NOT CHARGING INTEREST FROM THE ALLEGED PE RSONS AND EVEN IF IT WAS PRESUMED THAT CASH BALANCE WAS AVAILABLE FOR INTERE ST FREE LENDING SUCH BORROWINGS ON INTEREST FROM BANK OR OTHER ITSELF CO ULD BE CONSTRUED AS TAKEN FOR NON-BUSINESS AND FOR SUPPLEMENTING THE CA SH DIVERTED FOR NON- 5 BUSINESS PURPOSE. AS REGARDS TO THE SUBMISSIONS O F THE ASSESSEE THAT A SIMILAR DISALLOWANCE MADE IN THE CASE OF SHRI AJAY ROONGTA FOR THE A.Y. 2007-08 HAD BEEN DELETED BY THE LD. CIT(A) IT WAS OBSERVED THAT THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY TO ARRIVE AT A CONCLUSION THAT THERE WAS NO EXPEDIENCY IN SUCH TRANSACTION B UT IN THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER ASKED THE ASSE SSEE TO ESTABLISH THE BUSINESS EXPEDIENCY BUT THE ASSESSEE COULD NOT EST ABLISH THE SAME. THEREFORE FACT OF THE CASE FOR THE A.Y. 2007-08 ON THIS ISSUE WAS DISTINGUISHABLE AND DID NOT HELP THE CAUSE OF THE A SSESSEE. THE LD. CIT(A) ACCORDINGLY CONFIRMED THE ACTION OF THE AS SESSING OFFICER IN DISALLOWING THE INTEREST OF RS. 3 20 177/-. REFERE NCE WAS MADE TO THE FOLLOWING CASE LAWS:- 1. CIT VS. ABHISHEK INDUSTRIES LTD. (2006) 286 ITR 1 (P & H) 2. K. SOMASUNDARAM AND BROTHERS VS. CIT (1998) 238 ITR 393 (MAD.) 3. CIT VS. M.S. VENKATESWARAN 222 ITR 163. (MAD.) 4. CIT VS. P. GANU RAO AND SONS (1990) 185 ITR 248 (MAD.) 5. CIT VS. I. BABY & CO. (2002) 254 ITR 248 (KERALA ) 6. CIT VS. MOTOR GENERAL FINANCE LTD. (2002) 254 IT R 449 (DELHI) 7. CIT VS. H.R. SUGAR FACTORY P. LTD. (1991) 187 IT R 363 (ALL.) 8. S.A. BUILDERS LTD. VS. CIT (2004) 269 ITR 535 9. CIT VS. SARAYA SUGAR MILLS P. LTD. (1993) 201 IT R 181 (ALL.) 10. PHALTAN SUGAR WORKS LTD. VS. CWT (1994) 208 ITR 989 (BOM.) 6 11. PHALTAN SUGAR WORKS LTD. VS. CIT (1995) 215 IT R 582 (BOM.) 12. ELMER HAVELL ELECTRICS VS. CIT (2005) 277 ITR 549 (DELHI) 13. CIT VS. SUJANNI TEXTILES P. LTD. (1997) 225 ITR 560 (MAD.) NOW THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THERE WAS NO DIRECT NEXUS OF HAVING DIVERTED ANY INTEREST BEARIN G FUNDS INTO THE INTEREST FREE ADVANCES. THEREFORE ADDITION FOR NO TIONAL INTEREST WAS NOT JUSTIFIED. IT WAS FURTHER STATED THAT ADVANCE TO S HRI AJAY ROONGTA WAS OLD ADVANCE SIMILAR ADDITION MADE IN THE A.Y. 2007-08 WAS DELETED BY THE THEN LD. CIT(A) AND NO APPEAL WAS FILED AGAINST SUC H ORDER BY THE DEPARTMENT. THEREFORE THE ADDITION SUSTAINED BY T HE LD. CIT(A) MAY BE DELETED. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. MUNJAL SALES CORPORATION VS. CIT (2008) 298 ITR 305 (SC) 2. SHAHIBAG ENTREPRENEURS VS. ITO 50 ITD 113 (AHD.) 3. RAJ KUMAR SINGH & CO. VS. DCIT 51 ITD 628 (ALL.) 4. SARVARAYA TEXTILES LTD. VS. DCIT 54 ITD 612 (HYD .) 5 BABULAL SUKHALAL & CO. VS. ITO 27 TAXMAN 263 (PUN E) 6. GUJARAT NARMADA VALLEY FERTILIZERS VS. DCIT 108 TAXMAN 213 (AHD.) 7. OSWAL INDUSTRIES VS. ACIT 109 TAXMAN 279 (MUM.) 8. VARINDER AGRO CHEMICALS LTD. VS. ACIT 120 TAXMAN 150 (CHD.) 9. ACIT VS. SHIVALIK LOHA MILLS (P.) LTD. 123 TAXMA N 276 (CHD.) 7 10. B & A PLANTATIONS AND INDUSTRIES LTD. 242 ITR 22 (GAU.) 11. CIT VS. HOTEL SAVERA 148 CTR (MAD.) 585. 12. ITO VS. ASSANDAS & SONS 18 TTJ 199 (BOM) 13. UNITED AGENCIES VS. ITO 37 TTJ 374 (AHD.) 14. ASHOK BROTHERS VS. ITO 76 TTJ (HYD) 427 15. SMT. TARA DEVI VS. ITO 68 TTJ 361 (JD.) 16. ITO VS. NARESH FABRICS 75 TTJ 386 (JD) 17. KRISHI YANTRALAYA VS. IAC 24 CTR 19 (CAL.)(TRIB .) 18. ITO VS. SVS OIL MILLS 14 TTJ 306 (MAD.) 19. WOOLCOMBERS OF INDIA LTD. VS. CIT 23 CTR 204 (C AL.) 20. CIT VS. GOPIKRISHNA MURALIDHAR XLVII ITR 469 (A P) 21. KESARLAL CHANDALAL VS. ITO 11 TTJ 544 (JP) 7 . IN HIS RIVAL SUBMISSIONS LEARNED D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE ONE OF THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT A SIMILAR DISALLOWANCE MADE ON ACCOUNT OF ADVA NCE TO SHRI AJAY ROONGTA WAS DELETED BY THE LD. CIT(A) IN THE A.Y. 2007-08 AND NO APPEAL WAS FILED BY THE DEPARTMENT. IT WAS ALSO STATED TH AT THE ADVANCE GIVEN TO SHRI AJAY ROONGTA WAS THE OLD ADVANCE HOWEVER IT IS NOT CLEAR AS TO WHETHER THE ASSESSING OFFICER HAS CONSIDERED THIS F ACT WHILE MAKING THE 8 DISALLOWANCE. THE ANOTHER CONTENTION OF THE LEARNE D COUNSEL FOR THE ASSESSEE WAS THAT THE INTEREST FREE ADVANCE WERE GI VEN OUT OF INTEREST FREE FUNDS AND THE CAPITAL OF THE ASSESSEE WAS ALRE ADY AVAILABLE BUT THESE FACTS ARE ALSO NOT CLEAR FROM THE MATERIAL A VAILABLE ON THE RECORD. WE THEREFORE DEEM IT APPROPRIATE TO SET ASIDE THI S ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH I N ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 9 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE S USTENANCE OF DISALLOWANCE OF RS. 66 109/- OUT OF THE VARIOUS EXP ENSES. 10 . FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD DEBITED RS. 75 180/- RS. 1 51 423/- RS. 27 75 1/- RS. 24 639/- AND RS. 3 82 103/- UNDER THE HEADS PETROL EXPENSES TEL EPHONE EXPENSES SHOP EXPENSES CAR EXPENSES AND DEPRECIATION ON CAR RESPECTIVELY. THE ASSESSING OFFICER POINTED OUT THAT ALL THOSE EXPENS ES WERE NOT PROPERLY VOUCHED OR WERE BACKED UP WITH SELF MADE VOUCHERS O NLY. THE ASSESSING OFFICER SAW THE POSSIBILITY OF INVOLVEMENT OF PERSO NAL ELEMENT IN THOSE 9 EXPENSES. HE THEREFORE DISALLOWED 1/6 TH OF THE EXPENSES WHICH RESULTED INTO DISALLOWANCE OF RS. 1 10 182/-. 11 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE EXPENSES WERE INCURRED FOR T HE BUSINESS PURPOSES AND LOOKING TO THE AGE OF THE ASSESSEE ABOUT 73 YEA RS THERE COULD BE NO PERSONAL EXPENSES AS SUCH ADDITION COULD NOT BE MAD E. IT WAS FURTHER STATED THAT SIMILAR ADHOC DISALLOWANCE OUT OF THE EXPENSES WAS MADE FOR THE A.Y. 2007-08 HOWEVER THE SAME WAS DELETED BY THE THEN LD. CIT(A). 12. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD NOT MAINT AINED ANY LOG BOOK OR CALL REGISTER TO SUBSTANTIATE THE CLAIM OF USE OF T ELEPHONE AND VEHICLE. THEREFORE INVOLVEMENT OF PERSONAL ELEMENT IN THOSE EXPENSES COULD NOT BE TOTALLY RULED OUT. THE LD. CIT(A) FURTHER OBSE RVED THAT A SENIOR CITIZEN WOULD NOT USE CAR TELEPHONE ETC. FOR HIS B USINESS PURPOSE WAS NOT A VALID ARGUMENT. AT THE SAME TIME HE FOUND THAT THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC INSTANCE OF UNVOUC HED EXPENSES NOR HAD GIVEN ANY JUSTIFIABLE BASIS FOR MAKING THE 1/6 TH DISALLOWANCE OUT OF THOSE EXPENSES. THE LD. CIT(A) WAS OF THE VIEW THAT IT W OULD BE FAIR AND JUSTIFIABLE TO DIRECT THE ASSESSING OFFICER TO MAKE DISALLOWANCE @ 1/10 TH 10 AS AGAINST 1/6 TH MADE BY HIM. ACCORDINGLY DISALLOWANCE WAS RESTRI CTED TO RS. 66 109/-. NOW THE ASSESSEE IS IN APPEAL. 13. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT A SIMILAR DISALLOWANCE MADE IN THE A.Y. 2007-08 WAS DELETED B Y THE THEN LD. CIT(A) AND NO FURTHER APPEAL WAS PREFERRED BY THE D EPARTMENT. 14. IN HIS RIVAL SUBMISSIONS LEARNED D.R. SUPPORTED T HE ORDER OF THE ASSESSING OFFICER. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS NOTICED THAT THE LD. CIT(A) HIMSELF CAT EGORICALLY STATED THAT THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECI FIC INSTANCE OF UNVOUCHED EXPENSES NOR HAD GIVEN ANY JUSTIFIABLE BA SIS FOR MAKING 1/6 TH DISALLOWANCE OUT OF THOSE EXPENSES. IN OUR OPINION THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 1/ 10 TH OF THE EXPENSES PARTICULARLY WHEN A SIMILAR DISALLOWANCE MADE IN TH E A.Y. 2007-08 WAS DELETED AND NO APPEAL WAS PREFERRED BY THE DEPARTME NT AS WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE. DURI NG THE COURSE OF HEARING LEARNED D.R. COULD NOT CONTROVERT THE SAID CONTENTION OF THE 11 LEARNED COUNSEL FOR THE ASSESSEE. WE THEREFORE AR E OF THE VIEW THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) WAS NOT JU STIFIED. ACCORDINGLY THE SAME IS DELETED. 16. AS REGARDS TO GROUND NO. 5 RELATING TO CHARGING OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORDINGLY. 17 . IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 11 TH APRIL 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 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.