ACIT Cir.-2,, Jalgaon v. Kalpi Finance Pvt. Ltd.,, Jalgaon

ITA 997/PUN/2009 | 1993-1994
Pronouncement Date: 31-01-2011

Appeal Details

RSA Number 99724514 RSA 2009
Assessee PAN AADCK5767E
Bench Pune
Appeal Number ITA 997/PUN/2009
Duration Of Justice 1 year(s) 5 month(s) 11 day(s)
Appellant ACIT Cir.-2,, Jalgaon
Respondent Kalpi Finance Pvt. Ltd.,, Jalgaon
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 31-01-2011
Assessment Year 1993-1994
Appeal Filed On 19-08-2009
Judgment Text
. IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI G.S. PANNU AM I.T.A. NO. 997 TO 999/PN/2009 A.Y. 1993-94 TO 1995-96 ASSTT. CIT CIR. 2 JALGAON APPELLANT VS. KALPI FINANCE PVT. LTD. 153 POLAN PETH JALGAON PAN AADCK 5767 E RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE RESPONDENT BY: SHRI VIPIN GUJARATHI ORDER PER SHAILENDRA KUMAR YADAV JM THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF CIT(A)-II NASIK IDENTICA LLY DATED 29-5-2009 FOR A.Y. 1993-94 TO 1995-96 RAISING CERTA IN COMMON GROUNDS. ALL THESE APPEALS PERTAIN TO THE S AME ASSESSEE AND RAISE CERTAIN COMMON GROUNDS. THEY WER E THEREFORE HEARD TOGETHER AND ARE BEING DISPOSED OF F BY THIS COMMON ORDER FOR THE SAKE CONVENIENCE. I.T.A. NO. 997/PN/2009 FOR A.Y. 1993-94 2. GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1 38 470/- MADE ON ACCOUNT OF INTEREST PAID. ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 50 000/- MADE ON ACCOUNT OF SALARY PAID. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 2 00 000/- MADE ON ACCOUNT OF UNEXPLAINED CREDIT IN THE NAME OF SHRI ASSOCIATES BOMBAY. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE FINANCE BUSINESS. IT HAD FILED ITS RETURN OF INCOM E ON 13-1-1994 DECLARING TOTAL INCOME OF RS. 18 200/-. T HE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143( 3) OF THE ACT AFTER MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINE D CASH CREDIT RS. 2 00 000/- DISALLOWANCE OF INTEREST RS. 1 38 470/- AND DISALLOWANCE OF PART SALARY OF RS. 50 000/-. AS REGARDS THE GROUND NO. 1 WITH RESPECT TO DISALLOWANCE OF RS. 1 38 470/- OUT OF INTEREST PAID THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE CHARGED INTEREST AT 13% ON THE LOANS GIVEN WHILE INTEREST IS PAID AT 12% ON LOAN RECEIVED. THE ASSE SSING OFFICER ARRIVED AT THE AMOUNT OF INTEREST PAID AS UNDER ON THE BASIS OF RATE OF INTEREST PAID AND CHARGED I.E. RS. 7 95 025 /- X 12/13 = 7 33 870/-. THE ASSESSING OFFICER THEREFORE DISALL OWED INTEREST PAID AND CLAIMED AS EXPENDITURE AT RS. 8 7 2 340/- IN EXCESS OF THE INTEREST EXPENDITURE ARRIVED AT BY HI M AT RS. 7 33 870/- I.E. RS. 1 38 470/-. 3.1. ON APPEAL AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE THE CIT (A) ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 3 DELETED THE ADDITION MADE ON ACCOUNT OF INTEREST OF RS. 1 38 470/- WHICH HAS BEEN OPPOSED BY THE REVENUE BE FORE US. 3.2. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PART IES. IT IS AN UNDISPUTED FACT THAT THE BUSINESS OF THE ASSESSE E IS THAT OF FINANCE COMPANY. THE ASSESSEE HAS ADVANCED LOANS T O VARIOUS PERSONS INCLUDING SISTER CONCERNS. THE SISTER CONC ERNS HAVE INFORMED THE ASSESSEE THAT THEIR FINANCIAL POSITION IS BAD AND HENCE THEY WERE NOT IN A POSITION TO PAY THE INTERE ST. THE ASSESSEE NOTED THAT THE RECOVERY OF INTEREST IS DOU BTFUL AND HENCE DID NOT ACCOUNT FOR THE INTEREST WHICH IS NOT LIKELY TO BE RECOVERED. THE ASSESSEE CLAIMED THAT THE PROVISIO N SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES WHEREAS INCOMES WHICH ARE UNCERTAIN AND DOUBTFUL SHOULD NOT BE PROV IDED FOR. THE ASSESSEE HAS RELIED ON VARIOUS DECISIONS FOR TH E PROPOSITION THAT THE DISALLOWANCE OF INTEREST IS NO T JUSTIFIED. IT IS SETTLED LAW THAT WHERE NEXUS BETWEEN INTEREST BE ARING FUNDS AND FUNDS ADVANCED TO SISTER CONCERNS WITHOUT INTER EST IS NOT ESTABLISHED BY THE ASSESSING OFFICER THEN NON-INTER EST BEARING ADVANCES ARE TO BE TREATED FROM OUT OF INTEREST FRE E FUNDS. IN THIS VIEW OF THE MATTER THE CIT(A) WAS JUSTIFIED I N DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTERES T OF RS. 1 38 470/- AND HENCE WE ARE NOT INCLINED TO INTERFE RE WITH THE REASONED FINDING GIVEN BY HIM. ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 4 4. WITH REGARDS TO DISALLOWANCE OUT OF SALARY RS. 5 0 000/- THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S NOT FILED DETAILS OF THE EMPLOYEES TO WHOM THE SALARY WAS PAI D. HE ACCORDINGLY DISALLOWED PART OF THE SALARY STATING T HAT THERE IS SUBSTANTIAL INCREASE IN THE AMOUNT OF SALARY PAID D URING THE YEAR UNDER APPEAL COMPARED TO THE EARLIER YEAR WHER EAS THE BUSINESS OF THE ASSESSEE INCREASED MARGINALLY COMPA RED TO EARLIER YEARS. ON APPEAL THE CIT(A) HAS DELETED T HE ADDITION MADE ON ACCOUNT OF SALARY WHICH HAS BEEN OPPOSED BE FORE US BY THE DEPARTMENT. 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. IT IS AN ESTABLISHED PRIN CIPLES OF LAW THAT IT IS FOR THE BUSINESSMAN TO DECIDE WHAT EXPEN DITURE IS TO BE INCURRED AND HOW BUSINESS IS TO BE CARRIED OUT. UNLESS IT IS PROVED THAT THE SALARIES WERE PAID FOR NON-BUSINESS PURPOSES IT CANNOT BE DISALLOWED. IN THIS VIEW OF THE MATTE R THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCO UNT OF SALARY AND HENCE WE ARE NOT INCLINED TO INTERFERE W ITH THE REASONED FINDING GIVEN BY HIM. 5. THE GROUND NO. 3 RELATES TO DELETION OF ADDITION OF RS. 2 00 000/- MADE ON ACCOUNT OF UNEXPLAINED CREDIT IN THE NAME OF SHRI ASSOCIATES BOMBAY. THE ASSESSING OFF ICER MADE THE ADDITION U/S 68 OF THE ACT STATING THAT THE CRE DIT IS NOT ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 5 PROVIDED BY THE ASSESSEE. ON APPEAL THE CIT(A) DE LETED THE IMPUGNED ADDITION WHICH HAS BEEN OPPOSED BEFORE US BY THE REVENUE. 5.1. AFTER TAKING INTO CONSIDERATION THE RIVAL SUBM ISSIONS AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THE A SSESSING OFFICER SHOULD NOT HAVE DOUBTED THE LOAN OBTAINED B Y ACCOUNT PAYEE CHEQUE PARTICULARLY IN VIEW OF THE AFFIDAVIT OF THE CREDITOR CONFIRMING THE LOAN. THE ASSESSEE HAD ALSO PRODUCED ADDRESS OF THE CREDITOR. THE ASSESSING OFFICER REJECTED TH E AFFIDAVIT FILED BY THE CREDITOR BASED ON THE REASONING THAT T HE LETTER SENT TO THE CREDITOR HAS BEEN RETURNED UNSERVED WITH THE REMARKS LEFT. THIS SHOWS THAT THE CREDITOR WAS AVAILABLE AT THE ADDRESS GIVEN BY THE ASSESSEE AT THE RELEVANT TIME. THE ASSESSING OFFICER IS DUTY BOUND TO CONFRONT THE CON TENTS OF THE AFFIDAVIT WITHOUT WHICH HE IS NOT BOUND TO REJECT THE AFFIDAVIT STRAIGHTAWAY. IT IS WELL ESTABLISHED THAT THE AFFI DAVIT HAS EVIDENTIARY VALUE AND THE SAME CANNOT BE BRUSHED AS IDE. ADMITTEDLY THE LOAN WAS ACCEPTED BY AN ACCOUNT PAY EE CHEQUE THROUGH BANKING CHANNEL. IN THIS VIEW OF TH E MATTER THE CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGNED A DDITION AND HENCE WE ARE NOT INCLINED TO INTERFERE WITH THE REA SONED FINDING GIVEN BY HIM. ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 6 ITA NO. 998/PN/2009 FOR A.Y. 1994-95 6. IN THIS APPEAL GROUNDS NO. 1 AND 2 RELATE TO DE LETION OF ADDITION OF RS. 1 41 512/- ON ACCOUNT OF SALARY AND RS. 5 32 819/- ON ACCOUNT OF INTEREST NOT CHARGED ON LO ANS GIVEN TO SISTER CONCERNS. SIMILAR ISSUES WERE CONSIDERED BY US IN REVENUES APPEAL FOR A.Y 1993-94 (SUPRA). FACTS BE ING SIMILAR SO FOLLOWING THE REASONING GIVEN IN PRECEDING PARAG RAPHS WHILE DEALING WITH THE APPEAL OF THE REVENUE FOR A.Y. 199 3-94 BOTH THESE GROUNDS ARE DECIDED AGAINST THE REVENUE AND I N FAVOUR OF THE ASSESSEE. ITA NO. 999/PN/2009 FOR A.Y. 1995-96 7. IN THIS APPEAL GROUNDS NO. 1 RELATES TO DELETION OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED LOAN AND GR OUND NO. 2 RELATES TO DELETION OF ADDITION MADE ON ACCOUNT O F INTEREST PAID TO JAYESH G. SONI. GROUNDS NO. 3 AND 4 RELATE TO DELETION OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED LOANS FR OM SATYANARAYAN KHATOD AND BAWA INTERNATIONAL. SIMILA R ISSUES WERE CONSIDERED BY US WHILE DEALING WITH THE REVENU ES APPEAL FOR A.Y. 1993-94. FOR THE DETAILED REASONING GIVEN IN THE PRECEDING PARAGRAPHS WHILE DEALING WITH THE REVENUE S APPEAL FOR A.Y. 1993-94 WE HOLD THAT THE CIT(A) WAS JUSTIF IED IN DELETING THE IMPUGNED ADDITIONS AND HENCE WE ARE NO T INCLINED TO INTERFERE WITH THE REASONED FINDING GIVEN BY HIM . GROUNDS NO. 5 AND 6 RELATE TO DELETION OF ADDITION OF RS. 5 32 432/- ON ACCOUNT OF INTEREST NOT CHARGED ON LOANS GIVEN TO S ISTER ITA NO. 997 TO 999/PN/2009 KALPI FINANCE A.Y. 1993-94 TO 1995-96 7 CONCERNS AND RS. 35 000/- ON ACCOUNT OF SALARY INTE REST. SIMILAR ISSUES WERE CONSIDERED BY US IN REVENUES A PPEAL FOR A.Y 1993-94 (SUPRA). 8. FACTS BEING SIMILAR SO FOLLOWING THE REASONING GIVEN IN PRECEDING PARAGRAPHS WHILE DEALING WITH THE APPEAL OF THE REVENUE FOR A.Y. 1993-94 BOTH THESE GROUNDS ARE DEC IDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. ACCORDINGLY WE ARE NOT INCLINED TO INTERFERE WITH THE REASONED FINDING GIVEN BY HIM ON ALL THESE ISSUES. 9. IN THE RESULT ALL THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2011. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 31 ST JANUARY 2011. ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (4) CIT(A)-II NASIK (5) CIT I NASIK (5) THE D.R. PUNE BENCH A PUNE TRUE COPY BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL PUNE BENCHES PUNE