SHAKTI MALT PVT. LTD.,JAIPUR vs. INCOME TAX OFFICER, WARD-4-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC ’SMC’, JAIPUR Jh fot; iky jkWo] U;kf;d lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 172/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2012-13. cuke M/s. Shakti Malt Pvt. Ltd., The Income Tax Officer, Vs. A-131, 9-D Road, Ward 4(2), Vishwakarma Industrial Area, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AADCS 1216 Q vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : None jktLo dh vksj ls@ Revenue by : Smt. Chanchal Meena (Addl. CIT)

lquokbZ dh rkjh[k@ Date of Hearing : 12.10.2020. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/10/2020.

vkns'k@ ORDER PER VIJAY PAL RAO, JM :

This appeal by the assessee is directed against the order dated 13.11.2018 of ld. CIT (A)-2, Jaipur arising from the order passed under section 154 of the IT Act for the assessment year 2012-13. The assessee has raised the following grounds :-

“ 1. That in the facts and circumstances of the case, the order passed by learned Assessing Officer (Income-tax Officer, Ward- 4, Jaipur), u/s 154 of Income Tax Act, 1961 making disallowance of Rs. 3,15,3000/- and same being upheld by learned CIT (Appeals)-2, Jaipur, is bad in law as well as on facts and same needs to be cancelled.

2 ITA No. 172/JP/2019 M/s. Shakti Malt Pvt. Ltd., Jaipur.

2(a) That ld. Assessing Officer has erred in making disallowance of Rs. 3,14,300/- out of interest, on the ground that Appellant Company has purchased an industrial land for Rs. 40 lacs and paid Rs. 2.65 lacs for registration, which is not correct statement of facts. Ld. CIT (A) has also erred in upholding the same.

(b) Full facts of the purchase of land was submitted and copy of Lease Deed was also filed before the ld. Assessing Officer, during the assessment proceeding and such Purchase of Land has no relevance to borrowed funds.

Therefore, no mistake apparent on the face of record and such type of disallowance cannot be made by way of rectification and passing the order u/s 154. The disallowance made is incorrect and not in accordance with the law and the same needs to be deleted.

The hearing of the appeal is concluded through Video Conference due to prevailing

condition of COVID 19 pandemic.

hearing. The ld. D/R has submitted that the assessment was completed under

section 143(3) of the IT Act and thereafter there was an audit objection regarding

non disallowance of the interest expenditure in respect of the investment made by

the assessee of Rs. 40,00,000/- + registration charges of Rs. 2,65,000/- for

purchase of land which is shown in the Balance Sheet as addition in the capital

3 ITA No. 172/JP/2019 M/s. Shakti Malt Pvt. Ltd., Jaipur.

assets. Since this land was not used for business purposes during the year under

consideration, therefore, the interest expenditure claimed by the assessee of Rs.

79,40,422/- was proportionately to be disallowed. The AO accordingly passed an

order under section 154 of the IT Act whereby interest of Rs. 3,15,300/- was

disallowed in respect of the cost of acquisition of the land during the year under

consideration. She has relied upon the orders of the authorities below.

orders passed by the AO as well as impugned order of the ld.CIT (A), it is noted that the assessee company filed its return of income on 25th September, 2012 declaring

total income of Rs. 12,10,219/-. The AO completed the scrutiny assessment under section 143(3) on 8th January, 2015 at the total income of Rs. 12,99,720/-.

Thereafter, the AO has passed the impugned order dated 19.09.2015 under section

154 of the IT Act whereby interest of Rs. 3,15,300/- was disallowed on account of

the cost of acquisition of Rs. 42,65,000/- of the land purchased by the assessee

during the year under consideration. The ld. CIT (A) has confirmed the order of the

AO while passing the impugned order in para 2.3 as under :-

“ 2.3. I have perused the facts of the case, the rectification order and the submissions of the appellant. It is seen that assessee has purchased a piece of land this year and as per Assessing Officer borrowed funds were utilized for purchasing it. Interest to the extent of borrowed funds used for the same was not disallowed. Accordingly, Assessing Officer passed order under section 154 of the I.T. Act, 1061 and disallowed a sum of Rs. 3,15,300/-. The assessee contended that

4 ITA No. 172/JP/2019 M/s. Shakti Malt Pvt. Ltd., Jaipur.

it is acquired out of its own funds not borrowed funds and that a debatable issue cannot be taken up under section 154 of the Act. The record shows that assessee has cash credit account and unsecured loans which according to assessee were utilized for business. Own capital and profit were used for acquiring of assets. However, in absence of direct nexus, this plea cannot be accepted.”

Thus it is clear that the assessee has contended before the ld. CIT (A) that the said

land was acquired by the assessee out of its own funds and not borrowed funds.

Further, the issue of disallowance of interest on account of purchase of land is a

debatable issue and cannot be a subject matter of section 154 of the IT Act. The ld.

CIT (A) considered the fact that the assessee has availed cash credit limit on which

the interest was paid during the year under consideration but no loan was taken by

the assessee for purchase of land in question. Therefore, when the total borrowed

funds of Rs. 5.92 crores is less than the total expenditure on the current assets of

Rs. 7.43 crores then it becomes a matter of scrutiny to find out whether the

borrowed fund has been utilized by the assessee for purchase of land in question.

Prima facie, it appears that the assessee has made investment during the year in the

current assets which is more than the borrowed funds, therefore, the borrowed

funds was utilized by the assessee for the current assets and not for the acquisition

of the land in question. Further, while passing the order under section 154 of the

Act, the AO has not issued any notice to the assessee and without giving an

opportunity of hearing to the assessee the disallowance is made. Thus in the facts

and circumstances of the case, the disallowance made by the AO on account of

5 ITA No. 172/JP/2019 M/s. Shakti Malt Pvt. Ltd., Jaipur.

proportionate interest expenditure is highly arbitrary and not justified. The same is

deleted.

Order is pronounced in the open court on 13/10/2020.

Sd/- (fot; iky jkWo ½ (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member

Jaipur Dated:- 13/10/2020. Das/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत