JAYMIN RAMJI MAHESHWARI,NASHIK vs. INCOME TAX OFFICER,

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ITA 2739/PUN/2016Status: DisposedITAT Pune16 May 2018AY 2012-135 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found the CIT(A)'s order to be defective for ignoring relevant legal propositions and settled case law. The Tribunal remanded both issues to the Assessing Officer for fresh adjudication after considering the facts and legal precedents.

What were the facts?

The assessee's appeal concerned the disallowance of interest on unsecured loans and an addition on account of an unsecured loan. The assessee claimed sufficient interest-free funds were available to cover interest-free advances, and that an error in submitting loan details had occurred.

What were the issues?

Whether interest expenditure is allowable when interest-free funds are available to cover interest-free advances, and whether an unsecured loan addition is valid despite a bona fide error in submitting supporting documentation.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI D. KARUNAKARA RAO, AM

For Appellant: Shri Subodh L. Ratnaparkhi
For Respondent: Shri Pankaj Garg
Hearing: 14.05.2018Pronounced: 16.05.2018

आदेश / ORDER

PER D. KARUNAKARA RAO, AM

This appeal filed by assessee is directed against the order of Commissioner of Income Tax (Appeal)-1, Nashik dated 09.09.2016 for assessment year 2012-13.

2 ITA No.2739/PUN/2016 A.Y.2012-13

2.

The assessee has raised following grounds in appeal:

“1. The Hon. CIT (A) erred in confirming the addition of Rs.11,07,656/-, made by disallowing interest on unsecured loans for the reason that appellant had advanced interest free loans and advances to other parties, not appreciating that appellant had sufficient interest free funds available to support the interest free loans and advances and further that several advances were given in the course of business of the appellant. 2. The Hon. CIT(A) erred in confirming addition of Rs.5,00,000/- on account of unsecured loan received from Shri Purushottam Ravji Nasit, in spite of the appellant adequately discharging the onus to support the said cash credit and further adequately clarifying the inadvertent error in submission of data during asst. proceedings. 3. Your appellant craves leave to add, alter, amend, delete and/or vary any of the above grounds of appeal at any time before the decision of the appeal.”

3.

Before us, the Ld. Counsel for the assessee requested to remand all the

issues for fresh adjudication to the file of Assessing Officer and decide the

matter after considering the documents placed before the CIT(A)/AO at the

relevant point of time. Referring to the issue of addition Rs.11,07,656/-, the

Ld. Counsel demonstrated before us that the assessee had sufficient interest

free funds to the tune of Rs.1.60 crores which includes own capital

Rs.37,05,483/- and also the interest free unsecured loans received from (i)

Jayaben J Patel (ii) Jindal & Co. and (iii) SM Auto Sampling Pvt. Ltd. The

details of Para 2.3 containing the Salient points are relevant in this regard.

The assessee paid interest of Rs.11,07,656/- on the unsecured loan of Rs.

1,07,65,087/-. Per contra, the Assessing Officer noted that the unsecured loan

was mainly used for giving interest free loans/advances to the parties to the

extent of Rs.1,59,88,605/- and disallowed the interest expenditure of

Rs.11,07,656/-. The CIT(A) confirmed the same without going into the settled

legal proposition on the issue of presumption as laid down by the Hon'ble

Bombay High Court in the case of CIT Vs. Reliance Utilties & Power Ltd.

reported as 313 ITR 340.

3 ITA No.2739/PUN/2016 A.Y.2012-13

4.

On the other hand, Ld. DR for the Revenue relied on the order of

Assessing Officer and the CIT(A) dutifully.

5.

After hearing both the parties, on the issue of disallowance of interest on

unsecured loans of Rs.11,07,656/-, I find the order of CIT(A) is defective/ not

a speaking order to the extent of ignoring the relevant legal proposition as laid

down by the Hon'ble Jurisdictional High Court in the case of CIT Vs. Reliance

Utilties & Power Ltd (supra.) and the said decision was completely ignored by

the CIT(A) in adjudicating this issue. I cannot confirm the disallowance of

Rs.11,07,656/- made by the Assessing Officer in view of the undisputed fact of

existence of interest free loans amounting to Rs. 1.60 Crores.

6.

Therefore, I am of the view, this matter is remanded to the file of

Assessing Officer with direction to consider the facts properly as well as settled

legal proposition as laid down by the Hon'ble Jurisdictional High Court in the

case of CIT Vs. Reliance Utilties & Power Ltd. (supra.) and decide the issue

afresh after considering the same and passed a speaking order on this issue.

The Assessing Officer shall grant reasonable opportunity of being heard to the

assessee in accordance with set principles of natural justice. Thus, ground

No. 1 raised in appeal by assessee is allowed for statistical purposes.

7.

Similarly regarding second issue i.e. disallowance of unsecured loan of

Rs. 5,00,000/- made by Assessing Officer/CIT(A) without considering the

details of fact furnished by assessee before them. I find that the assessee

submitted the following details:

“3. Addition on account of unsecured loan raised - Rs. 5,00,000/- (Ground no. 2)

4 ITA No.2739/PUN/2016 A.Y.2012-13

3.1 The appellant during the year under appeal (July 2011) received unsecured loan of Rs.5,00,000/- from one Shri. Purushottam Ravji Nasit. According to the ld. AO, the cheque details of unsecured loan received as per the bank account of Purushottam Ravji Nasit and as per ledger extract furnished by the appellant did not mated. The books of account of the appellant reflected receipt of two cheques of Rs. 2,50,000/- bearing cheque nos. 389431 and 389432, whereas as per the bank account of Shri. Purushottam Ravji Nasit only one cheque bearing cheque no. 044899 was paid to the appellant. 3.2 The appellant submits that while submitting details of unsecured loan raised from Shri. Purushottam Ravji Nasit, the appellant committed a bona-fide error. The appellant by mistake submitted the details of the other unsecured loan party, Meena Nalin in the place of Shri. Purushottam Ravji Nasit from whom also Rs.5,00,000/- was received as loan by a single cheque in July 2011 only. 3.3. The appellant submits that only one cheque of Rs.5,00,000/- was received from Purushottam Ravji Nasit as unsecured loan and the same is deposited into Punjab National Bank account of the appellant. 3.4 In respect of the said loan, the appellant has submitted the following evidences in asst./appeal proceedings. Copies enclosed at Pg. nos. of paper book.

(i) Confirmation of loan from Purushottam Ravji Nasit 48 (ii) Acknowledgement for filing ITR 49 (iii) Bank Statement of the loan party 51 & 52 (iv) Balance sheet as at 31.03.2012 showing 53 Loan given to the appellant

The appellant also furnished confirmation from Meena Nalin Vyas, bank statement and acknowledgement of filing return of income for A Y 2012-13 in support of the fact that the cheque details were erroneously interchanged. The said documents are enclosed at pg nos. 54 to 57 of paperbook.”

In view of the above, I find there is a prima facie case for the

assessee if what is submitted is true. Jumbling of cheque No.389432 &

389431 and payments added to the confusion, which led to the wrong

conclusion of the Assessing Officer. Although the assessee filed explanation

about the payments before CIT(A), he simply ignored the same before

confirming the addition mechanically.

5 ITA No.2739/PUN/2016 A.Y.2012-13

8.

In my view, explanation given by the assessee appears to be valid subjected to the verification by the Assessing Officer in the remand proceedings. Therefore, I am of the view, this matter is remanded to the file of Assessing Officer with direction to consider the explanation filed by assessee for fresh adjudication after examining the facts relevant to this issue. Accordingly, ground No. 2 raised in appeal by assessee is allowed for statistical purposes.

9.

In the result, appeal of the assessee is partly allowed for statistical purpose.

Order pronounced on 16th day of May, 2018.

Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 16th May, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

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