Income Tax Appellate Tribunal - Jaipur
Babu Lal Singodia, Jaipur vs Ito, Jaipur on 11 December, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER
vk;dj vihy la-@ITA No. 234/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2011-12
Sh. Babu Lal Singodia cuke Income Tax Officer,
M/s Singodia Distributors, Vs. Ward 7(3),
Near Basant Cinema, Moriza Road, Jaipur.
Choumu, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS7678A
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Shrawan Kumar Gupta (Ad.)
jktLo dh vksj ls@ Revenue by : Smt. Punam Rai (D.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 11/10/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 11/12/2017
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 16.01.2017 of CIT(A), Jaipur for the assessment year 2011-12. The Assessee has raised the following grounds:-
"1. That the impugned assessment order u/s 143(3) dated 02.01.2014 is bad in law and on facts of the case for want of jurisdiction and for various other reasons and hence the same may kindly be quashed.
2 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO
2. Rs 10,54/-: The ld CIT(A) has grossly erred in law as well as on the facts of the case in sustaining the disallowance of Rs. 14,054/- on account of Vehicle Expenses. Hence the disallowance so made by the AO and partly confirmed by the CIT(A) is being absolutely, contrary to the provisions of law and facts of the case and not in conformity with the law, hence the same kindly be deleted in full.
3. Rs. 1,53,469/-: The ld CIT(A) has grossly erred in law as well as on the facts of the case in confirming the disallowance of Rs. 1,53,469/- on account of interest on the loan of funds given to the sister concern. Hence the disallowance so made by the AO and confirmed by the CIT(A) is being absolutely, contrary to the provisions of law and facts of the case and not in conformity with the law, hence the same may kindly be deleted in full.
4. Rs. 7,518/-: The ld CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs. 7,518/- on account of commission income due to difference in 26AS and shown by the assessee. Hence the disallowance so made by the AO and confirmed by the CIT(A) is being absolutely, contrary to the provisions of law and facts of the case and not in conformity with the law, hence the same may kindly be deleted in full.
5. The ld. AO erred in law as well as on the facts of the case in charging of interest u/s 234B,234C& 234D as consequential in nature. The appellant totally denies it liability of charging of any such interest. Hence the interest so charged, being contrary to the provisions of law and facts may kindly be deleted in full.
6. The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing."
2. At the time hearing, the learned counsel assessee as stated at bar that the assessee does not press that grounds no. 1 and 4 and the same may be dismissed as not pressed. The ld. DR has raised no objection is 3 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO these grounds of the assessee's appeal are dismissed as not pressed. Accordingly the grounds no. 1 and 4 of the assessee's appeal are dismissed being not pressed.
3. Ground No. 2 is regarding disallowance of vehicle expenses. The assessee engaged in the business of trading/dealership of Oswal soap, godfrey, Philip and other MFG products. During the course of assessment proceedings, the AO noted that the assessee has debited the expenses of Rs. 1,40,542/- on account of vehicle running and maintenance expenses. Apart from these the other expenses are insurance Rs. 43,124/-, staff welfare Rs. 25,505/-, salary expanses Rs. 6,60,000/- and godown rent Rs. 60,000/- etc. The AO has further noted that no bills or supporting documents are being maintained by the assessee in this regard though the expenses incurred are in cash payment. Accordingly, the AO asked the assessee as to why these expenses should not be disallowed. The Assessing Officer further observed that the assessee has not submitted any clarification to substantiate his claim and accordingly the AO made disallowance of Rs. 90,000/-. On appeal the ld. CIT(A) deleted the disallowance made by the AO in respect of the expenses on account of insurance, staff welfare, salary expenses and Godown rent etc. however, the ld. CIT(A) has held that the personal element in respect of vehicle 4 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO expenses cannot be ruled out and accordingly restricted disallowance to 10% of vehicle expenses amounting to Rs. 14,054/-.
4. I have heard the ld. AR as well as DR and considered the relevant material on record, the assessee has not produced the supporting evidence in respect of the vehicle expenses and further expenses were incurred in cash and no log books regarding the use of the vehicle was maintained by the assessee. Accordingly in the facts and circumstances of the case the disallowance restricted by the ld. CIT(A) to 10% of the vehicle expenses is just and proper and does not require any interference. Hence, this ground of the assessee's appeal is dismissed.
5. Ground No. 3 is regarding disallowance of interest on advance given to the sister concern. During the course of assessment proceeding the AO noted that the assessee has claimed interest payment of Rs. 8,24,998/-. This expenses was debited on account of interest payment on cash credit limit or overdraft from ICICI Bank. The AO further noted that the assessee has given loan sister concern M/s Subhash Enterprises, which was outstanding to the extent of Rs. 5,61,000/- at the end of the year and no interest was charged on such loan. The AO was not satisfied with the reply of the assessee and made disallowance of Rs. 1,53,469/- on account of proportionate net interest on the loan given to the sister 5 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO concern. The assessee challenged the action of the AO before the ld. CIT(A) and contended that the assessee is having its own interest free funds of Rs. 1,12,25,617/- out of which Rs. 21,97,568/- is assessee's own capital and Rs. 3,20,000/- interest free loans and balance is current liability as on 31.03.2011. The ld. CIT(A) has not accepted this contention of the assessee and given a finding that the interest bearing funds from overdraft account with ICICI Bank have been utilized by the assessee for giving interest free advance to the sister concern. Therefore, the interest paid on the withdrawal from ICICI Bank to the extent of funds used for advancing the interest free advance would be expenditure not for business purpose. Accordingly, the ld. CIT(A) has upheld the disallowance made by the AO on this account.
6. Before the Tribunal the ld. AR of the assessee has submitted that the authorities below have ignored the fact that the assessee is a businessman dealing in trading of general items and there is sufficient fund comprising of capital of the proprietor in the opening balance of Rs. 19,62,915/- and further profit of Rs. 5,39,381/- has been earned during the year under consideration for giving advance to the sister concern of Rs. 5,61,000/-. Therefore, it is not the case of diversion of borrowed funds as there is nothing on record to show that the borrowed fund was used or 6 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO diverted as advance to the sister concern. Thus, the ld. AR has submitted that when the assessee's own fund is sufficient to give advance then no disallowance is called for. He has relied upon the following decisions:-
• Munjal Sales Corporation vs CIT 298 ITR 298 (SC) • JCIT vs. Beekay Engineering Corporation 325 ITR 384 • CIT vs. Hotel Savera 148CTR 585 (Mad)
7. On the other hand, the ld. DR has submitted that the assessee has not established that the advance was given for commercial expediency and further the ld. CIT(A) has given finding that the assessee has used the borrowed fund for giving the advance to the sister concern. He has relied upon the authorities below.
8. I have considered the rival submissions as well as relevant material on record. Though the assessee has availed the cash credit facility as well as overdraft facility from ICICI Bank on which interest of Rs. 8,24,998/- was paid during the year under consideration however, neither the Assessing Officer nor the ld. CIT(A) has verified this fact that when the assessee is having its own sufficient funds to give advance to the sister concern then without establishing a direct nexus between the borrowed fund and advance no disallowance on account of interest is called for. It is not in dispute that the assessee's own fund is more sufficient to met the 7 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO requirement of advance to sister concern. If the assessee's capital and profit during the year is taken into consideration the same is more than the loan given to the sister concern. Therefore, having regard to the fact that the assessee's own capital and profit during the year amounting more than Rs. 25,00,000/- then, a presumption can be raised that the advance given the assessee of Rs. 5,61,000/- is from its own fund and not from borrowed fund. Accordingly the disallowance made by the AO is deleted.
9. Ground No. 5 is regarding charging of interest u/s 234B, 234C & 234C which is consequential in nature and does not require any specific finding.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 11/12/2017.
Sd/-
¼ fot; iky jko ½ (VIJAY PAL RAO) U;kf;d lnL; @Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/12/2017 *Santosh vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Sh. Babu Lal Singodia M/s Singodia Distributors, Near Basant Cinema, Moriza Road, Choumu, Jaipur.
2. izR;Fkh@ The Respondent- The ITO, Ward 7(3), Jaipur.
3. vk;dj vk;qDr@ CIT 8 ITA 234/JP/17_ Sh. Babu Lal Singodia vs. ITO
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 234/JP/17) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar