Raman Malhotra, Ludhiana v. ACIT, Ludhiana

ITA 889/CHANDI/2016 | 2008-2009
Pronouncement Date: 28-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 88921514 RSA 2016
Assessee PAN ABIPM4873C
Bench Chandigarh
Appeal Number ITA 889/CHANDI/2016
Duration Of Justice 1 month(s) 23 day(s)
Appellant Raman Malhotra, Ludhiana
Respondent ACIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 28-09-2016
Assessment Year 2008-2009
Appeal Filed On 05-08-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER ITA NO.889/CHD/2016 ASSESSMENT YEAR : 2008- 2009 SHRI RAMAN MALHOTRA VS THE ACIT M/S HAPPY ENTERPRISES (INDIA) CIRCLE 1 E-95 FOCAL POINT LUDHIANA. LUDHIANA. PAN : ABIPM4873C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGA RWAL RESPONDENT BY : SHRI MANJIT SINGH DR DATE OF HEARING : 26.09.2016 DATE OF PRONOUNCEMENT : 28.09.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-I LUDHIANA DATED 30.05.2016 FOR ASSESSMENT YEARS 2008-09. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 3. GROUND NO. 1 IS GENERAL AND NEED NO ADJUDICATION . 4. ON GROUND NO. 2 ASSESSEE CHALLENGED THE ADDITION OF RS. 12 81 800/- UNDER SECTION 2(22)(E) OF THE INCOM E TAX ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE IS A SHAREH OLDER 2 AND DIRECTOR WITH SHAREHOLDING OF 28.6% IN M/S MANA N STEEL INVESTMENT LTD. A COMPANY IN WHICH THE PUBLI C ARE NOT SUBSTANTIALLY INTERESTED. THE ASSESSING OFFICE R FURTHER NOTICED THAT PERUSAL OF THE COPY OF ACCOUNT OF HIS PROPRIETORSHIP CONCERN THAT M/S HAPPY ENTERPRISES I N THE BOOKS OF M/S MANAN STEEL INVESTMENT LTD. REVEALED T HAT ASSESSEE HAD PURCHASED THE MATERIAL FROM THE SAID CONCERN. ALONGWITH PURCHASES IN THE SAME ACCOUNT ASSESSEE HAS RECEIVED THE PAYMENT AMOUNTING TO RS. 12 81 800/- ON VARIOUS DATES FROM THE COMPANY. THE SE LOANS AND ADVANCES HAVE BEEN RECEIVED BY THE PROPRIETORSHIP FROM THE COMPANY OVER AND ABOVE THE SALES FROM THE COMPANY RESULTING IN AN INCREASE IN THE C REDIT BALANCE. MOREOVER PAYMENT BY CHEQUE AMOUNTING TO RS. 7 10 000/- HAS BEEN MADE BY ASSESSEE TO THE COMPANY . THE ASSESSING OFFICER THEREFORE ASKED THE ASSESSE E AS TO WHY THE SAID LOANS/ADVANCES BE NOT TREATED AS DIVID END UNDER SECTION 2(22)(E) OF THE ACT. THE ASSESSEE EX PLAINED THAT THE COMPANY HAD NOT GIVEN ANY LOAN TO THE ASSE SSEE BUT ALL THE TRANSACTIONS WERE RELATED TO NORMAL COU RSE OF BUSINESS OF SALES AND PURCHASES WHICH COULD NOT BE CONSIDERED AS DEEMED DIVIDEND. THE ASSESSING OFFIC ER WAS HOWEVER IN DISPUTE WITH THE EXPLANATION OF TH E ASSESSEE AND MADE THE ADDITION. 5. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEF ORE LD. CIT(APPEALS) AND RELIED UPON CERTAIN DECISIONS HOWEVER THE LD. CIT(APPEALS) NOTED THAT ALONGWITH THE 3 PURCHASES ASSESSEE HAS RECEIVED PAYMENT OF RS. 12 81 800/- FROM THE SAID COMPANY WHICH RESULTED IN INCREASE IN CREDIT BALANCE. THE CONTENTION OF THE ASSESSEE THAT IT IS NOT A LOAN AND ADVANCE BUT IS I N THE COURSE OF NORMAL BUSINESS OF PURCHASE AND SALES REMAINED UNSUBSTANTIATED THEREFORE ADDITION WAS CONFIRMED AND THIS GROUND OF APPEAL WAS DISMISSED. 6. AFTER HEARING RIVAL SUBMISSIONS I AM OF THE VIE W MATTER REQUIRES RE-CONSIDERATION. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE BALANCE SHEET OF THE ASSES SEE AND M/S MANAN STEEL INVESTMENT LTD. TO SHOW THAT IN THE BOOKS OF ACCOUNT M/S MANAN STEEL INVESTMENT LTD IS A CREDITOR AND IN THE BOOKS OF THE COMPANY THE ASSES SEE IS A DEBTOR. HE HAS ALSO FILED COPY OF THE ACCOUNT OF COMPANY TO SHOW THAT THERE WAS A HUGE OPENING BALAN CE AND THEIR SALES AND PURCHASES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN CASE MATTER IS REMANDED TO THE ASSESSING OFFICER HE WOULD BE IN A POSITION TO FIL E THE EVIDENCE OF SALES AND PURCHASES IN ORDER TO PROVE T HAT TRANSACTIONS WITH THE COMPANY WERE IN NORMAL COURSE OF BUSINESS. THE LD. DR ALSO SUGGESTED THAT THIS FACT SHOULD BE EXAMINED BY THE ASSESSING OFFICER. THE LD. COUN SEL FOR THE ASSESSEE ALSO RELIED UPON CERTAIN JUDGEMENTS TO SHOW THAT WHEN TRANSACTIONS WERE COMMERCIAL IN NATURE S AME WOULD NOT FALL WITHIN THE AMBIT OF PROVISIONS OF SE CTION 2(22)(E) OF THE ACT AND RELIED UPON DECISION OF DEL HI HIGH COURT IN THE CASE OF CIT V RAJ KUMAR 318 ITR 462 4 DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF DC IT V LAKRA BROTHERS 106 TTJ 250 AND DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS A MRIK SINGH 231 TAXMAN 731. 6(I) SINCE ASSESSEE HAD BEEN PLEADING BEFORE THE AUTHORITIES BELOW THAT IT WAS DOING SALES AND PURCH ASES WITH THE COMPANY THEREFORE IT MAY NOT BE A CASE O F ADVANCE OR LOAN WITHIN THE MEANING OF SECTION 2(22) (E) OF THE ACT. HOWEVER THIS PLEA OF THE ASSESSEE WAS NO T SUBSTANTIATED BEFORE LD. CIT(APPEALS) AS PER THE FI NDINGS IN THE IMPUGNED ORDER. IT MAY ALSO BE NOTED HERE T HAT LD. COUNSEL FOR THE ASSESSEE DID NOT DISPUTE APPLICABIL ITY OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN THE CA SE OF THE ASSESSEE. THEREFORE IN ORDER TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO PROVE THAT IT IS A N ORMAL BUSINESS TRANSACTION OF SALE AND PURCHASE I AM OF THE VIEW MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER I S ET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THIS IS SUE TO THE FILE OF ASSESSING OFFICER WITH DIRECTION TO RE- DECIDE THIS ISSUE AFTER GIVING REASONABLE SUFFICIENT OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIREC TED TO PRODUCE ADEQUATE EVIDENCES OF SALES AND PURCHASES B EFORE ASSESSING OFFICER TO PROVE THAT SAID TRANSACTION WA S IN NORMAL COURSE OF BUSINESS. THE ASSESSING OFFICER SHALL RE-DECIDE THIS ISSUE STRICTLY IN ACCORDANCE WITH LA W. 5 7. IN THE RESULT THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. ON GROUND NO. 3 ASSESSEE CHALLENGED THE ADDITIO N OF RS. 67 642/- UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE ABOVE AMOUNT ON AC COUNT OF INTEREST ON CAR LOAN DEBITED TO PROFIT & LOSS AC COUNT WHICH WAS CAPITAL ASSET. THE ASSESSING OFFICER NOT ED THAT ASSESSEE HAD GIVEN ADVANCE OF RS. 12 20 960/- TO HI S WIFE AND DEBITED THE ABOVE INTEREST ON ACCOUNT OF INTERE ST PAID ON BORROWED FUNDS. THE ASSESSING OFFICER RELYING UPON DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD. MADE THE AB OVE ADDITION. THE LD. CIT(APPEALS) CONFIRMED THE ADDIT ION. 9. AFTER CONSIDERING RIVAL CONTENTIONS I AM OF THE VIEW ADDITION IS UNCALLED FOR IN THE MATTER. THE ASSESS EE PLEADED BEFORE THE AUTHORITIES BELOW THAT ASSESSEE IS NOT PAYING ANY INTEREST ON WORKING CAPITAL LIMIT BUT WA S PAYING INTEREST ON CAR LOAN WHICH IS A CAPITAL ASSE T. THE ASSESSEE ALSO PLEADED THAT ASSESSEE HAS INTEREST FR EE LOAN OF RS. 26 24 635/- AS ON 31.03.2008. COPY OF THE B ALANCE SHEET IS FILED AT PAGE 1 OF THE PAPER BOOK. THE AF ORESAID AMOUNT IS THEREFORE MORE THAN THE AMOUNT GIVEN TO WIFE OF THE ASSESSEE ON INTEREST FREE. THE DECISION IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA) HAVE ALREADY BEEN OV ER- RULED BY HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD. 379 ITR 347 IN WHICH IT WAS HELD THAT WHEN ASSESSEE HAVING CREDIT BALANCE IN THE BANK ACCOUNT AT THE 6 TIME OF ADVANCE NO DISALLOWANCE OF INTEREST ON BORROWINGS. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KAPSON ASSOCIATES 381 ITR 204 HELD THAT ASSESSEE HAVING SUFFICIENT INTEREST FREE ADVANCES TO COVER INTEREST FREE ADVANCE NO DISALLOWANCE UNDER SECTIO N 36(1)(III) OF THE ACT. 10. IN THIS VIEW OF THE MATTER IT IS CLEAR THAT AS SESSEE HAS MORE INTEREST FREE ADVANCES AS COMPARED TO INTE REST FREE ADVANCE GIVEN TO HIS WIFE SMT. NANDITA MALHOTR A AND THAT ASSESSEE PAID INTEREST ON CAR LOAN ONLY DISAL LOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT IS NOT JUSTIFIED. I ACCORDINGLY SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION OF RS. 67 642/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL M EMBER DATED : 28 TH SEPTEMBER 2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT DR ASSISTANT REGISTRAR ITAT/CHD