TRILOK CHAND,KOTA vs. ACIT, JAIPUR

PER SHRI KUL BHARAT, JM.

This appeal filed by the Assessee is directed against the order of the Ld.

CIT(A)-4, Jaipur, dated 21-01-2016 pertaining to the Assessment Year 2011-12.

The Assessee has raised the following grounds of appeal:-

“1.(a) That the Ld. CIT(A) has erred in law in upholding the action of the Ld. Assessing Officer in not dropping the proceedings under section 153A/143(3) of the Income Tax Act, 1961, since no search was conducted in the case the assessee, who was not available at the address searched upon.

(b) Without prejudice to Ground No. 1(a): That the Ld. CIT(A) has erred in law in confirming the action of the Ld. Assessing Officer in disturbing the past assessment even though nothing incriminating was found during the course of search.

(c) Without prejudice to Ground Nos. (a) and 1 (b): That the Ld. CIT(A) has erred in law in upholding the action of the Ld. Assessing Officer in proceeding with the assessment under section

2 ITA No. 342/JP/2016. Shri Trilok Chand, Kota.

153A/143(3) of the Act, 1961, without first meeting the objections raised by the assessee.”

ground that reads as under:-

“Without prejudice to Ground No. 1: That the Ld. CIT(A) has erred on facts ;and in the circumstances of the case and in law in upholding the disallowance of interest to the extent of Rs. 1,79,990/- out of the disallowance of Rs. 2,16,500/- made by the Ld. AO due to interest-free advances given by the assessee to M/s Shubh Packers, a partnership firm in which the assessee is a partner.”

case of Lila Ram Group, Kota. Subsequently, a notice u/s 153A of the Act was

issued on 15.01.2013 for the Assessment Year 2011-12. In response thereto the

assessee filed a return declaring total income of Rs.3,08,010/-. Subsequently, the

assessment was framed u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961. While

framing the assessment, the AO made addition on account of out of interest

expenses of Rs. 2,16,500/- and assessed income of Rs. 5,24,510/- as against Rs.

3,08,010/-. Against this, the assessee preferred an appeal before Ld. CIT(A), who

after considering the submissions, partly allowed the appeal. Thereby, the Ld.

CIT(A) confirmed the disallowance of Rs. 1,79,990/- and deleted the rest of the

disallowance.

153A r.w.s. 143(3) of the Income Tax Act, on ground that, since no search was

conducted in the case the assessee, who was not available at the address searched

3 ITA No. 342/JP/2016. Shri Trilok Chand, Kota.

upon, no incriminating material was found during the course of search and the

without first meeting the objections raised by the assessee.

5.1 Ld. Counsel for the assessee in respect of all these grounds reiterated the

submissions as made in the written submissions. The written submissions of the

assessee are reproduced as under:-

“In the Assessment Order passed under section 153A, read with section 143(3) of the Income Tax Act, 1961, the ld. AO has disallowed interest to the extent of Rs. 2,16,500/-. This disallowance has been made due to interest- free advances given by the assessee to M/s Shubh Packers, a partnership firm in which the assessee is a partner.

The ld. CIT (Appeals) has deleted the disallowance to the extent of Rs. 36,510/- and has confirmed the remaining sum of Rs. 1,79,990/-.

The submissions made by the assessee before the ld. AO, vide letter, dated 05.04.2013, and were brushed aside by the Ld. AO on an erroneous reasoning.

Similarly, the submissions made by the assessee before the ld. CIT (A) on 06.12.2015 were rejected, based on an improper appreciation of law/ facts.

A perusal of the material referred to above will clearly show the disallowance of interest was not called for.

It is, therefore, prayed that the disallowance of interest confirmed to the extent of Rs. 1,79,990/- by the Ld. CIT(A) may kindly be deleted.”

5.2 On the contrary, Ld. Departmental Representatives supported the order of the

authorities below.

4 ITA No. 342/JP/2016. Shri Trilok Chand, Kota.

5.3 We have heard the rival contentions, perused the material available on record

and gone through the order of the authorities below. After considering the

submissions of the asseseee, we are of the view that ground raised in the present

appeal are devoid of any merit as the assessee was provided sufficient opportunity,

even law does not envisage that no search can be carried out in the absence of the

assessee. We therefore, dismissed all these grounds.

The Addition ground is on merit against the confirming the disallowance of interest

to the extent of Rs. 1,79,990/-.

6.1 Ld. Counsel for the assessee submitted that authorities below failed to

appreciate the fact in right perspective. Therefore, he submitted that the addition so

sustained may be deleted.

6.2 Per contra Ld. D/R supported the order of the Assessing Officer.

6.3 We have heard the rival contentions, we find that Ld. CIT(A) after considering

the submissions as given finding on fact in para 3.2.2 as under:-

“3.2.2 I have duly considered assessee’s submission and carefully gone through assessment order passed by the AO. Ld. AR of the assessee has not controverted the findings given by the AO that interest free advances to M/s Subh Packers were given out of interest free funds available with the assessee. However, on perusal of assessee’s alternative peal/submission, it is also seen that assessee has got interest free fund of Rs. 3,30,000/= in 2 accounts (Ashok Tejwani & Sheela Devi Mukhija), accordingly, assessee is entitled for allowance of proportionate interst to be calculated @ 12% pa on this which will translate into Rs. 36,510/=. In view of these facts and also respectfully following the decision of Hon’ble Gujarat High Court in case of Kajal Export (Supra), AO is directed to allow interest of Rs. 36,510/=.

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Accordingly, interest disallowance of Rs. 179,990/= u/s 40A(2)(b) of the Act is hereby confirmed. Assessee’s appeal in Gr No 2 is partly allowed.”

The contention, of the assessee is that the advances were made out of business

expediency. We are of the view that merely stating that advances were given for

business expediency would not make the expenses allowable. The assessee is

required to demonstrate the nexus between the business and advances so given.

Therefore, we do not see any reason to interfere into the finding of the Ld.

CIT(A) same is hereby affirmed. Thus, Additional Ground raised in this appeal is

rejected.

Order pronounced in the open court on Monday, the 23th day of October 2017.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 23/10/2017. Pooja आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

6 ITA No. 342/JP/2016. Shri Trilok Chand, Kota.