G.S SETHI & COMPANY,JALANDHAR vs. INCOME TAX OFFICER WARD-1 (5), JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

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G.S. Sethi & Co. Vs. ITO- Ward 1(5), 19/1Madhuban Colony, Basti Jalandhar. Bawa Khel Rajnagar, Jalandhar. [PAN:AAGFG2468L] (Respondent) (Appellant)

Appellant by Sh. Nikhil Goyal, Adv. Respondent by Sh. RadheyShyam Jaiswal, Sr.DR

Date of Hearing 12.12.2022 Date of Pronouncement 20.12.2022

ORDER Per:Anikesh Banerjee, JM:

The instant appeal of the assessee is directed against the order of the ld.

Commissioner of Income Tax (Appeals),NFAC, Delhi,[in brevity the ‘CIT(A)’] bearing appeal DIN & Order No.ITBA/NFAC/S/250/2021-22/1036390339(1), date

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of order 14.10.2021, the order passed u/s 250of the Income Tax Act 1961, [in

brevity the Act] for A.Y. 2013-14.The impugned order was emanated from the

order of the ld. Income Tax Officer Ward-1(5),Jalandhar, (in brevity the AO) order

passed u/s 143(3)of the Act date of order 30.12.2019. The assessee taken the

following grounds which are extracted as below: “1. That on the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest u/s 36(1 )(iii) to the extent of Rs. 25,87,115/-. 2. The order passed by the Learned CIT(A) is bad in law as the same has been passed without complying with the directions issued by the Hon’ble ITAT Bench, Chandigarh. 3. That the Ld. CIT(A) erred in passing an order u/s 250 of the Income Tax Act, 1961 without appreciating facts of the case on record. 4. The Learned CIT(A) has gravely erred in law and facts of the case in misconstruing the scope and ambit of the provisions of section 36(1)(iii) of the Act and therein making disallowance of interest to the extent of Rs. 25,87,115/-. 5. That the appellant craves leave to add, amend, alter, or delete the grounds of appeal before the appeal is finally heard

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or disposed of appeal before the appeal is finally heard or disposed of.”

the funds as advanced to the partner which is without charging the interest. The

grievance of the assessee is that the assessee utilised the fund from his trading

fund. The overdraft account was not any nexus for advancement the partner.

Accordingly, the proportionate interest in relation to the advance paid was added

back with the total income of the assessee. The assessee debited interest expenses

amount of Rs.39,69,660/- on account of bank overdraft in P & L a/c. From copy of

the bank statement i.e., Hindu Cooperative Bank, providing by the assessee to the

ld. AO that the rate of interest charged 15.5%. Hence, applying the same rate on

advance paid amount of Rs.2.14,07,203.77/-,which is working out to

Rs.33.18,117/-. Theamount of Rs.33,18117/- was added back with the total income

of the assessee u/s 36(1)(iii) of the Act. The assessment order was framed as per

direction of the ITAT, Chandigarh Bench bearing ITA No. 813/Chd/2017 date of

order 13.07.2018. Later on, the assessee’s jurisdiction was changed and the

assessment was completed by the jurisdictional AO at Jalandhar. The aggrieved

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assessee filed an appeal against the order of the ld. AO before the ld. CIT(A). After

considering the submission of the assessee the ld. CIT(A) has re-calculated the

partner’s current account on basis of transfer of amount. In the order, the ld CIT(A)

had tried to depict the direct nexus between trading receipt and the amount transfer

to partner’s account- as advance. The amount of addition was recalculated very

efficiently by the ld. CIT(A) and restricted to Rs. 25,87,115/-. The appeal of the

assessee was partly allowed. The addition was restricted to Rs.25,87,115/-.

no nexus with the overdraft amount. There is direct nexus with advance

paid&amount of the trading receipt. So, the addition u/s 36(1)(iii) is abrogated.

3.1 He further arguedthat the recalculation of the ld. CIT(A) had denied the

reasonable opportunity to rebut by the assessee. Accordingly, the natural justice

was denied.

no. 31 to 34, para 5.7.1 to 5.8.1 which is extracted as below:-

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record. After a thoughtful consideration it is observed that the re-calculation made

by the ld. CIT(A) is very logical and had considered the transactions among

overdraft account, trading account& the partner’s capital account. In respect to this

recalculation, the ld. Counsel for the assessee was unable to submit any calculation

to rebut before the Bench to establish its fact. But from the order of the ld. CIT(A)

it is clear that this issue was not be allowed to rebut the assessee during hearing.

So, the assessee should get a reasonable opportunity to peruse the issue for

substantiate its claim. Reasonable opportunity of hearing was denied. In view of

these discussions, as also bearing in mind the entirety of the case, we deem it fit

and proper to remit the matter back to the ld. CIT(A), for adjudication de novo in

accordance with the law and by way of a speaking order. The assessee should

cooperate with the revenue authority during the hearing. Ordered, accordingly.

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allowed for statistical purposes.

Order pronounced in the open court on 20.12.2022

Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.