M/s Satluj Motors,, Mandi v. ITO,, Sunder Nagar

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 711/CHD/2010 ASSESSMENT YEAR: 2006-07 M/S SATLUJ MOTORS VS. THE ITO MANDI (H.P.) SUNDER NAGAR PAN NO.ABBFS1352H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.GULERIA RESPONDENT BY: SMT. SARITA KUMARI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) SHIMLA DATED 8.4.2010 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS ERRED IN MAKING THE ADDITION / CONFIRMATION THE ADDITION OF RS. 10 22 000/- U/S 68 OF THE INCOME TA X ACT 1961. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS ERRED IN MAKING / CONFIRMING THE ADDITION OF RS. 2 2 49 538/- BEING THE AMOUNT OF INTEREST CHARGED ON THE DEBIT BALANCES OF THE PARTNERS. 3. THE LD. AR FOR THE ASSESSEE WITH REGARD TO THE A DDITION OF RS. 10 22 000/- IN RESPECT OF CASH CREDITS U/S 68 OF TH E INCOME TAX ACT WAS AGGRIEVED TO THE EXTENT OF RS. 1 LAC. THE PLEA OF THE LD. AR IN THIS REGARD WAS THAT ADDITION OF RS. 10 22 000/- WAS MADE ON AC COUNT OF CASH CREDITS OF FOUR DIFFERENT PARTIES. IN RESPECT OF SHRI AMAR SINGH THERE WERE TWO DIFFERENT CREDIT ENTRIES FOR WHICH PEAK WAS TAKEN. HOWEVER IN RESPECT OF SHRI VARINDER KUMAR THERE WERE ALSO TWO CREDIT ENT RIES AND THE PEAK OF RS. 3 LAC WAS NOT CONSIDERED FOR MAKING THE ADDITIO N. THE LD. AR HAS FURNISHED ON RECORD THE WRITTEN SUBMISSIONS AND MAD E THE PRAYER IN CONNECTION WITH THE AFORESAID ADDITION ON ACCOUNT O F UNEXPLAINED CASH CREDIT IS THAT THE SAME SHOULD BE RESTRICTED TO RS. 9 22 000/- AS AGAINST RS. 10 22 000/- MADE IN THE CASE. THE LD. DR PLACED RE LIANCE ON THE ORDER OF THE AUTHROTIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U NDER APPEAL ADDITION OF RS. 10 22 000/- WAS MADE ON ACCOUNT OF CASH CRE DITS RECEIVED FROM FOUR DIFFERENT PERSONS DURING THE YEAR. IN RESPECT OF THE CASH CREDIT RAISED FROM SHRI AMAR SINGH THE AMOUNT WAS RECEIVED ON T WO DIFFERENT DATES I.E. 29.5.2005 AND 3.10.2005 AND THE ADDITION WAS R ESTRICTED TO THE PEAK AMOUNT OF CASH CREDIT. FURTHER CREDIT OF RS. 3 LA C WAS RECEIVED ON 3.6.2005 FROM SHRI VARINDER KUMAR WHICH WAS REPAID ON 23.6.2005 AND THEREAFTER A SUM OF RS. 1 LAC WAS RECEIVED ON 28.9. 2005 WHICH WAS REPAID ON 1.10.2005. THE LIMITED PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT THE BENEFIT OF PEAK MAY BE ALLOWED IN RESPECT OF THE CA SH CREDIT RECEIVED FROM 3 SHRI VARINDER KUMAR. THE SAID BENEFIT WAS NOT ALLO WED BY THE ASSESSING OFFICER AS THE TWO AMOUNTS WERE APPEARING IN SEPARA TE LEDGER ACCOUNTS MAINTAINED IN THE NAME OF SHRI VARINDER KUMAR. WE FIND NO MERIT IN THE SAID ADDITION OF RS. 1 LAC AGAINST WHICH BENEFIT OF THE PEAK AMOUNT IS TO BE ALLOWED. ACCORDINGLY WE DIRECT THE ASSESSING O FFICER TO DELETE THE ADDITION OF RS. 1 LAC AND BALANCE ADDITION OF RS. 9 22 000/- STANDS CONFIRMED. 5. THE SECOND GROUND OF APPEAL RAISED BY THE ASSESS EE IN RESPECT OF CHARGING OF THE INTEREST ON THE DEBIT BALANCE OF TH E PARTNER AND THE ALLEGED ADVANCE MADE TO THE SISTER CONCERN OF THE PARTNERS. 6. THE LD. AR OF THE ASSESSEE POINTED OUT THAT BOTH THE OPENING AND CLOSING BALANCES OF THE PARTNERS WAS CREDIT BALANCE S AND ACCORDINGLY THERE WAS NO OCCASION TO CHARGE ANY INTEREST ON THE SAID ALLEGED DEBIT BALANCES. THE ASSESSEE HAS FURNISHED ON RECORD THE COPY OF TR ADING AND PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS FAILED TO FURNISH ON RECORD THE BALANCE SHEET. HOWEVER THE SUMMARY OF THE PARTNERS CAPITA L ACCOUNT ON 31.3.2006 WAS FURNISHED AT PAGE 7 OF THE PAPER BOOK ALONGWITH THE LIST OF SUNDRY DEBTORS SECURITY DEPOSITS AND BANK BALANCES . THE PERUSAL OF THE PARTNERS CAPITAL ACCOUNT REVEALS THAT BOTH THE PART NERS SHRI VARINDER GULERIA AND SHRI M.S. GULERIA HAD OPENING AND CLOSI NG CREDIT BALANCES. EVEN THE WITHDRAWALS MADE DURING THE YEAR WERE LESS THAN THE OPENING BALANCES OF THE PARTNERS. IN THE CIRCUMSTANCES TH ERE IS NO MERIT IN THE ANY ADDITION BEING MADE IN RESPECT OF THE DEBIT BAL ANCES OF THE PARTNERS. HOWEVER THE BALANCE SHEET FOR THE YEAR HAS NOT BE EN FILED BEFORE US. WE DIRECT THE ASSESSING OFFICER TO VERIFY THE STAND OF THE ASSESSEE IN THIS REGARD AND DECIDE THE ISSUE IN LINE WITH OUR OBSERV ATIONS HEREIN ABOVE. 4 7. THE SECOND ASPECT OF THE ISSUE IS THE INTEREST C HARGED ON THE ADVANCES MADE TO HIM TRADING CORPORATION AND HIM EN GINEERING WORKS BOTH BEING THE BUSINESS CONCERNS OF THE PARTNERS. THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE PAID INTEREST TO THE BAN K AND DEPOSITS TOTALING RS. 29 85 355/- AS AGAINST INTEREST RECEIVED RS. 12 16 870/-. THE ASSESSEE WAS FOUND NOT TO HAVE CHARGED ANY INTEREST ON THE S AID ADVANCES MADE TO THE TWO CONCERNS. IT WAS ALSO FOUND BY THE ASSESSI NG OFFICER THAT THE SAID DIVERSION OF FUNDS TO THE TWO BUSINESS CONCERNS WE RE NOT FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. FURTHER THE ASSESSIN G OFFICER OBSERVED THAT CASH INTRODUCED FROM THE WITHDRAWALS FORM C.C. ACCO UNT WAS DIVERTED TO THE ABOVE SAID CONCERNS AND ACCORDINGLY THE ASSESS ING OFFICER COMPUTED THE INTEREST ATTRIBUTABLE TO SUCH NON INTEREST BEAR ING ADVANCES. THE SAID ADDITION WAS UPHELD BY THE CIT(A). THE ASSESSEE I S AGGRIEVED BY THE SAID ADDITION. HOWEVER THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE HIS CASE AND NEGATE THE FINDINGS OF THE ASSESSING OFFICER IN THIS REGARD. THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN ABHISHEK INDUSTRIES VS. [CIT 286 ITR 1 (P&H)] HAVE LAID DOWN THE RATIO THAT WHERE THE ASSESSEE IS UNABLE TO PROVE THE ONUS CAST UPON THE ASSESSEE TO ESTABLISH ITS CASE OF ADVANCING INTEREST FREE FU NDS AVAILABLE WITH IT FOR MAKING ADVANCES ON WHICH NO INTEREST WAS CHARGED. THE ASSESSEE BEFORE US HAS FAILED TO ESTABLISH ITS CASE AND ALSO IN VIE W OF THE FINDINGS OF THE ASSESSING OFFICER THAT THE AMOUNTS RELATING TO CC L IMIT HAD BEEN UTILIZED FOR MAKING THE AFORESAID INTEREST FREE ADVANCES W E ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN THIS REGARD. ACCO RDINGLY WE UPHOLD THE DISALLOWANCE OF RS. 1 21 093/- + RS. 40 266/- TOTA LING RS. 1 61 359/-. WE FIND NO MERIT IN THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE THAT THE INTEREST DISALLOWED IN THE HANDS OF THE SISTER CONC ERNS BE ALLOWED IN THEIR RESPECTIVE HANDS AS THE PARTNERS ARE OWNING THE SAI D BUSINESS WERE 5 INDEPENDENT ASSESSEES. REJECTING THE SAME WE PAR TLY ALLOW THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF FEBRUARY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD FEBRUARY 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR