ACIT,, Ludhiana v. M/s Vira Auto Components Pvt. Ltd.,, Ludhiana

ITA 820/CHANDI/2009 | 2006-2007
Pronouncement Date: 31-03-2011 | Result: Dismissed

Appeal Details

RSA Number 82021514 RSA 2009
Assessee PAN AAACR7883H
Bench Chandigarh
Appeal Number ITA 820/CHANDI/2009
Duration Of Justice 1 year(s) 7 month(s) 20 day(s)
Appellant ACIT,, Ludhiana
Respondent M/s Vira Auto Components Pvt. Ltd.,, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-03-2011
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2006-2007
Appeal Filed On 10-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA AM AND MS. SUSHMA CHOWL A JM ITA NO. 820/CHANDI/2009 ASSESSMENT YEAR: 2006-07 A.C.I.T. CIRCLE 1 LUDHIANA V. M/S VIRA AUTO COMP ONENTS PVT LTD C-33 PHASE II FOCAL POINT LUDHIANA PAN: AAACR 7883 H APPELLANT BY: SMT. JAISHREE SHARMA RESPONDENT BY: SHRI ASHWANI KUMAR ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 15.5.2009 ON THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 22 47 519/- MADE BY THE AO U/S 68 OF THE INCOME-TAX ACT BY IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE IDENT ITY AND CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTION DURING THE ASSESSMENT PROCEEDINGS. 2 THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 4 51 882/- MADE BY THE AO U/S 43(1) OF INCOME-TAX A CT ON ACCOUNT OF CAPITALIZATION OF INTEREST ON FUNDS USED FOR CONST RUCTION OF BUILDING WHICH WAS NOT PUT TO USE DURING THE YEAR. 3 THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AN D THAT OF THE AO BE RESTORED. 2. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. 3. APROPOS THE FIRST GROUND TAKEN BY THE DEPARTMENT IT WAS SUBMITTED BY THE LEARNED DR THAT THE IMPUGNED SUM WAS CREDITED IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER APPEAL AS SHARE APPLICATION MONE Y RECEIVED FROM DR. YARTINDER SINGHAL. IT WAS FURTHER STATED THAT THE ASSESSEE HA D FAILED TO ESTABLISH THE CREDIT WORTHINESS OF THE SHARE APPLICANT AND THE GENUINENE SS OF THE TRANSACTION AND THEREFORE THE AO WAS JUSTIFIED IN TREATING THE IMPUGNED SUM A S UNEXPLAINED U/S 68. IN SUPPORT OF THE AFORESAID GROUND OF APPEAL THE LEARNED DR RELI ED UPON THE JUDGMENT IN REPORTED 51 DTR 74 (DEL) CIT V. P. MOHANAKALA 291 ITR 278 (S. C) AND SUCH CHAIN CHITS PVT LTD V. CIT 321 ITR 471 (P & H). THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE HOWEVER SUPPORTED THE ORDER PASSED BY THE LD. CIT(A ). 4. PERUSAL OF THE ORDER PASSED BY THE LD. CIT(A) SH OWS THAT THE IMPUGNED SUM WAS RECEIVED BY THREE DIFFERENT CHEQUES (ALL ACCOUNT PA YEE) AND THROUGH BANKING CHANNELS FROM DR. YARTINDER SINGHAL A PRACTICING MEDICAL P ROFESSIONAL IN THE U.S.A. THE LD. CIT(A) HAS TAKEN A VIEW THAT THE ASSESSEE HAS ESTABLISHED NOT ONLY THR IDENTITY OF THE SHARE APPLICANT BUT ALSO THE GENUINENESS OF THE TRANSACTI ON. THE VIEW TAKEN BY THE LD. CIT(A) IS QUITE REASONABLE ON THE FACTS OF THE CASE. THE IMPU GNED SUM HAS BEEN RECEIVED FROM DR. YARTINDER SINGHAL WHO IS A CLOSE RELATIVE OF ONE OF THE DIRECTORS IN ASSESSEE-COMPANY. HE IS A MEDICAL PROFESSIONAL IN THE U.S.A. THE IMPUGNE D SUM WAS RECEIVED BY ACCOUNT PAYEE CHEQUES THROUGH NORMAL BANKING CHANNELS. THE DEPART MENT HAS NOT REBUTTED ANY OF THE AFORESAID FINDINGS RECORDED BY THE LD. CIT(A). IN O UR OPINION THE VIEW TAKEN BY THE LD. M/S VIRA AUTO COMPONENTS PVT LTD LUDHIANA 820/CHANDI/2009 2 CIT(A) IS QUITE REASONABLE AND COGENT. IN THIS VIEW OF THE MATTER THE ORDER PASSED BY THE LD. CIT(A) IN THIS BEHALF IS CONFIRMED. GROUND NO. 1 IS DISMISSED. 5. APROPOS GROUND NO. 2 THE LD. CIT(A) HAS DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL AND PERUSED THE RELEVANT RECORD. IT IS THE CONTENTION OF THE LD. C OUNSEL THAT NO SPECIFIC LOANS HAD BEEN RAISED BY THE APPELLANT FOR THE CONSTRUCTION O F THE BUILDING WHICH WAS UNDER CONSTRUCTION. THE LD. COUNSEL HAS GIVEN A CATEGORI CAL STATEMENT THAT NO INTEREST HAS BEEN INCURRED ON THE FUNDS USED FOR CONSTRUCTIO N OF THE BUILDING AS NO PART OF THE BORROWED FUNDS HAD BEEN UTILISED FOR THE CONSTR UCTION OF THE BUILDING. IT IS NOT SHOWN IF THE APPELLANTS OWN SHARE CPITAL OR INTERN AL ACCRUALS WERE NOT SUFFICIENT FOR INVESTMENT IN THE CONSTRUCTION OF BUILDING IN Q UESTION WHICH IS OTHERWISE FOR THE PURPOSE OF BUSINESS. FURTHER IT IS NOT A CASE WHERE INTEREST-FREE ADVANCES HAVE BEEN MADE BY THE APPELLANT TO RELATED PARTIES ETC. FOR MAKING THE DISALLOWANCE AS MADE BY THE AO KEEPING IN VIEW THE PROVISIONS OF SECTION 43(1) OF ACT IT WAS NECESSARY TO PROVE THE NEXUS BETWEEN INTEREST-BEARING BORROWED FUNDS AND THE INVESTMENT IN QUESTION. SUCH NEXUS SOMEHOW HAS NOT BEEN ESTABLISHED. IN THE ABSENCE OF THE SAME INTEREST C OULD NOT BE CAPITALIZED JUST ON THE PRESUMPTION THAT THESE FUNDS HAD BEEN INVESTED IN THE CONSTRUCTION OF BUILDING AS DONE BY THE AO. KEEPING IN VIEW THE AB OVE DISCUSSED POSITION THE DISALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE AND THE SAME IS DELETED. 6. THE DEPARTMENT HAS NOT REBUTTED ANY OF THE AFORE SAID FINDINGS RECORDED BY THE LD. CIT(A). THE ASSESSEE HAS NOT TAKEN ANY LOAN FOR THE CONSTRUCTION OF THE BUILDING AND THEREFORE THERE WAS NO QUESTION OF CAPITALIZING THE INTEREST. IN OUR OPINION THE VIEW TAKEN BY THE LD. CIT(A) IS QUITE REASONABLE ON THE FACTS OF THE CASE. HIS ORDER IS THEREFORE CONFIRMED. GROUND NO. 2 TAKEN BY THE DE PARTMENT IS DISMISSED. ORDER PRONOUNCED ON MARCH 2011 (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE MARCH 2011 SURESH COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE LD. CIT 5. THE D.R INCOME-TAX DEPARTMENT CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH