JYOTI STEELS,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 653/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2007-08 cuke M/s Jyoti Steel, Income Tax Officer, Vs. 28, Shankar Nagar, Road No. 1, Ward 4(2), V.K.I. Area, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACFJ 7289 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Ashish Sharma (Adv). jktLo dh vksj ls@ Revenue by : Smt. Poonam Rai, (DCIT). lquokbZ dh rkjh[k@ Date of Hearing : 31/01/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31/01/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the assessee against the order dated 19/04/2016 passed by the ld CIT(A)-2, Jaipur for the A.Y. 2007-08. The only issue involved in this appeal is against upholding levy of penalty U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) of Rs. 75,104/- by the ld. CIT(A). 2. Briefly stated facts of the case are that the assessee firm filed its return of income on 30/10/2007 declaring total income of Rs. 1,90,420/-.

ITA 653/JP/2016_ 2 M/s Jyoti Steel Vs ITO

Assessment was completed on 29/10/2009 at a total income of Rs.

5,13,545/- after giving benefit of setting off of brought forward business

loss and unabsorbed depreciation. An addition of Rs. 2,23,125/- was made

on account of disallowance of interest expenses. The assessee preferred an

appeal before the ld. CIT(A), which has been dismissed vide its order dated

02/02/2012. It is observed that one of the partner having credit balance in

the capital account. However, at the year end, there was debit balance of

Rs. 16,81,098/- and Shri Sudesh Sharma, one of the partner of the firm

withdrawn Rs. 21,00,000/- on 17/05/2006 and this amount was given out

of the loan received from M/s Shree Prithvi Steels Rolling Mills Pvt. Ltd., on

which the interest was paid @ 15%. The Assessing Officer disallowed the

claim of interest of Rs. 2,23,125/-. The Assessing Officer denied the claim

of interest @ 15% out of interest payment of Rs. 2,72,751/-. The partner

was having always debit balance in his account, thus, the interest bearing

funds were utilized for non-business purposes by the partner through over

drafting.

and also perused the material available on the record. The ld. CIT(A) has

confirmed the levy of penalty of Rs. 75,104/- on the addition of Rs.

2,23,125/- on account of diverging the interest bearing funds for non-

ITA 653/JP/2016_ 3 M/s Jyoti Steel Vs ITO

business purposes by the partner. The relevant portion of the order of the

ld. CIT(A) is reproduced as under:-

“2.3 I have perused the facts of the case, the penalty order and the" submissions of the appellant. The appeal is against the levy of penalty of Rs 75,104/- relating to an addition of Rs 2,23,125/- on account of diversion of interest bearing funds. The addition was confirmed by the CIT(A)2, Jaipur and no further appeal was filed before the Tribunal and the Assessing Officer opined that this was a case of concealment of income by furnishing inaccurate particulars of income. During the penalty proceedings, the assessee had stated that it was the settled business policy of the firm, mutually decided by the partners neither to pay interest on credit balances nor to receive interest on the debit balance of the capital. The CIT(A) had sustained the addition as the appellant firm had failed to explain the business expediency of advancing such a hefty amount to the partner and the purpose of withdrawing by the partner was purely personal and no commercial expediency could be explained by the appellant. In the proceedings before me, the appellant has stated that it is mutually decided since inception that no interest was to be charged on these balances. It has further been submitted that even in the previous year this has been accepted and no addition made on this count has been made.

ITA 653/JP/2016_ 4 M/s Jyoti Steel Vs ITO

The addition has been made as interest was not charged on the debit balance in the partners account. It was noticed that that during the year the partner has withdrawn a sum of Rs.21,00,000/- and the source from the same as per assessees own confirmation filed, is from interest bearing loan taken by the firm from M/s. Shri Prithvi Steel Rollings Mill Ltd., on which an interest of 15 % has been paid. Further, the purpose of withdrawal was claimed to be purely personal and no commercial expediency could be explained. The CIT(A) also held that the commercial expediency of the withdrawal could not explained for the hefty withdrawal. Thus, it is clear that there has been furnishing of inaccurate particulars of income leading to concealment of income. A clear diversion of interest bearing funds for personal use has been clearly brought out. In view of the above, the penalty levied is confirmed.” During the course of hearing, the ld AR of the assessee was unable to

controvert the finding recorded by the ld. CIT(A). It was well established

that the assessee has borrowed fund on the interest @ 15% from M/s

Prithivi Steel Rolling Mill Ltd., which has been withdrawn by one of the

partner and there was no commercial expediency established for

overdrawal of the account by the partner, thus it was very well established

that the interest bearing funds were utilized for non-business purposes of

the assessee. Therefore, the assessee has furnished inaccurate particulars

ITA 653/JP/2016_ 5 M/s Jyoti Steel Vs ITO of income for the relevant assessment year. Keeping in view of the totality

of the facts and circumstances of the case, I sustain the order of the ld.

CIT(A) and dismiss the assessee’s appeal.

Order pronounced in the open court on 31/01/2017. Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31st January, 2017

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