Ita/232/2012 Of Commissioner Of Income Tax Ldh v. Satish Bala Malhotra & Ors

I N THE HI GH COURT OF PUNJAB AND HARYANA ATCHANDI GARH --I TA 232 2012 ( O&M) -Dat e of deci si on: 11. 08. 2016 Commi ssi oner of I ncome Tax ( Cent r al ) , Ludhi ana . . . Appel l ant Ver sus Smt . Sat i sh Bal a Mal hot r a and ot her s . . . Respondent s CORAM: HON’ BLE MR. JUSTI CE S. J. VAZI FDAR, CHI EF JUSTI CEHON’ BLE MR. JUSTI CE DEEPAK SI BAL Pr esent : -Mr . Raj esh Kat och, Advocat e,f or t he appel l ant . Mr . Pankaj Jai n, Seni or Advocat e,wi t h Mr . Sachi n Bhar dwaj , Advocat e,Mr . Di vya Sur i , Advocat e,and Mr . Gaur av Mi t t al , Advocat e,f or t he r espondent s. * * * * S. J. VAZI FDAR, C. J. Thi s i s an appeal agai nst t he or der of t he Tr i bunalper t ai ni ng t o t he assessment year 2006- 2007. 2.The assessee was one Ashok Kumar Mal hot r a who car r i edon busi ness i n t he f i r m name and st yl e of M/ s Moder n Publ i sher sas t he sol e pr opr i et or t her eof .The t hr ee r espondent s ar e hi shei r s. 3.Quest i ons( i ) t o ( v) r ai sed i n t he appeal do notsur vi ve i n vi ew of an or der of t he ear l i er Di vi si on Bench oft hi s Cour t dat ed 28. 10. 2013. These quest i onsr el at e t o t hei ssuer egar di ng t he del et i on of an addi t i on on account ofdeemed di vi dend wi t h r espect t o an amount r ecei ved by t hedeceased assessee f or t he sal e of an i mmovabl e pr oper t y.TheDi vi si on Bench hel d t hat t her e was no r eason t o di f f er wi t h t heAmodh Sharma2016.08.29 12:12I attest to the accuracy andopi ni on of t he Tr i bunal and t hat t he Tr i bunal had r i ght l yauthenticity of this documentchandigarh del et ed t he addi t i on.Not i ce of mot i on was i ssued onl y i nr espect of quest i ons ( vi ) , ( vi i ) and ( vi i i ) whi ch r ead asunder : - “ ( vi ) Whet her t he Hon’ bl e I TAT i sj ust i f i ed i n del et i ng t he addi t i on ofRs. 34, 00, 000/ - made on account ofpr opor t i onat e di sal l owance of i nt er estexpendi t ur e, accept i ng t he submi ssi onof t he assessee t hat hewas havi ngi nt er est f r ee capi t al bef or e anyi nt er est f r ee advance was made andt hat t her e i s not hi ng on r ecor d by anyof t he aut hor i t i es bel ow t hat t heassessee had used t he i nt er est bear i ngf unds f or ot her t han busi nesspur poses, wher eas t he assessee hadsubmi t t ed t hat l oan r ai sed by t heassessee has been used f or t he pur poseof busi ness, i gnor i ng t he speci f i cf i ndi ng of t he AO t hat t he cl ai ms oft he assessee t hat i nt er est bear i ngf unds wer e not di ver t ed as i nt er estf r ee l oan and t hat advances wer e gi vendur i ng t he cour se of busi ness, wer ef act ual l y i ncor r ect ? ( vi i )Whet her t he Hon’ bl e I TAT i sj ust i f i ed i n del et i ng t he addi t i on ofRs. 34, 00, 000/ - made on account ofpr opor t i onat e di sal l owance of i nt er estexpendi t ur e, accept i ng t he submi ssi onof t he assessee t hat he was havi ngi nt er est f r ee capi t al bef or e anyi nt er est f r ee advance was made andt hat t her e i s not hi ng on r ecor d by anyof t he aut hor i t i es bel ow t hat t heassessee had used t he i nt er est bear i ngf unds f or ot her t han busi nesspur poses, wher eas t he assessee hadsubmi t t ed t hat l oan r ai sed by t heassessee has been used f or t he pur poseof busi ness, i gnor i ng t hespeci f i cf i ndi ng of t he Ld. CI T( A) t hat t heonus of pr ovi ng t hat f unds advancesf r ee of i nt er est t o si st er concer nsdur i ng t he year wer e on account ofcommer ci al expedi ency, was on t heassessee and mer el y gi vi ng of t hemoney t o t he si st er concer n does notpr ove t he commer ci al expedi ency, unl ess i t i s shown t hat t he amount shave been used commer ci al l y even byt he si st er concer ns? unl ess i t i s shown t hat t he amount shave been used commer ci al l y even byt he si st er concer ns? ( vi i i ) Whet her t he or der ofHon’ bl e I TAT i s per ver se as t he samehas been passed compl et el y i gnor i ngt he speci f i c f i ndi ngs of t he AO andt he Ld. CI T( A) on t he i ssue ofi nt er est f r ee l oans t o t he si st erconcer ns?” 4.I n our vi ew, a subst ant i al quest i on of l aw does notar i se. The exer ci se ent ai l ed onl y an appr eci at i on of f act s. Wedo not f i nd t he concl usi on of t he Tr i bunal on f act s t o beper ver se or absur d. 5.The r espondent - assessee f i l ed a r et ur n of i ncome on31. 10. 2006. On 15. 12. 2008, t he Assessi ng Of f i cer passed anassessment or der under Sect i on 144 of t he I ncome Tax Act , 1961( i n shor t t he Act ) . The assessee chal l enged t he same bef or e t heCI T ( Appeal s) . On 22. 01. 2009, a sear ch was car r i ed out underSect i on 132 of t he Act at t he assessee’ s pr emi ses.On23. 11. 2009, t he assessee f i l ed a r et ur n of i ncomeunder Sect i on 153 A. Ther e was no di f f er ence bet ween t he t wor et ur ns. 6.On 26. 02. 2010, t he CI T ( Appeal s) passed an or der i nt he assessee’ s appeal agai nst t he assessment or derdat ed 15. 12. 2008. On 29. 12. 2010, a f ur t her assessment or der waspassed under Sect i on 153 A of t he Act . Thi s was i n r el at i on t ot he r et ur n f i l ed under Sect i on 153 A on 23. 11. 2009. Theassessee chal l enged t hi s or der bef or e t he CI T ( Appeal s) by wayof an appeal whi ch was di sposed oft hr ough or derdat ed 11. 08. 2011. Thi s or der essent i al l y conf i r med t he or derdat ed 26. 02. 2010 by whi ch t he assessee’ s appeal agai nst t heor i gi nal assessment or der had been di sposed of . The CI T ( Appeal s) gr ant ed l i mi t ed r el i ef t o t heassessee. The assessee accor di ngl y f i l ed t wo appeal s agai nstt he t wo or der s of t he CI T ( Appeal s) .The appel l ant - depar t mental so f i l ed t wo appeal s agai nst t he sai d or der s of t heCI T ( Appeal s) t o t he ext ent of t he r el i ef s gr ant ed t o t heassessee. Ther e wer e accor di ngl y f our appeal s bef or e t heTr i bunal and cor r espondi ngl y f our appeal s bef or e t hi s Cour t .7.Thi s br i ngs us back t o t he above quest i ons r ai sed i nt he appeal .The Assessi ng Of f i cer di sal l owed t he deduct i onunder Sect i on 33( 1) ( i i i ) i n r el at i on t o i nt er est pai d by t heassessee. Secur ed l oans of ` 15. 32 cr or es wer e out st andi ng as on31. 03. 2006. Thi s appeal per t ai ns t o t he assessment year2006- 2007. The assessee had admi t t edl y advanced l oans of` 11. 19 cr or es t o hi s si st er concer ns. He, however ,char gedi nt er est i n r espect of t he l oans t o t wo si st er concer nsaggr egat i ng t o ` 3. 82 cr or es. No i nt er est was char ged i n r espectoft he l oans t o si x ot her si st er concer ns aggr egat i ng t o` 7. 37 cr or es. As r ecor ded by t he Assessi ng Of f i cer , t heassessee pai d var i ous amount s of i nt er est of whi ch i nt er est ofan amount of` 46. 63 l acs i s r el evant i n t hi s appeal . The sai damount of` 46. 63 l acs was pai d as i nt er est dur i ng t heaccount i ng year f r om t he assessee’ s over dr af t account . TheAssessi ng Of f i cer di sal l owed i nt er est on a pr opor t i onat e basi s.8.The assessee est abl i shed t hat he had capi t alof` 12. 69 cr or es,r ecei ved an i nt er est f r ee l oan f r om hi s wi f e i nt he sum of ` 1. 18 cr or es and ear ned pr of i t of ` 11. 11 cr or es f ort he assessment yeari n quest i on. He had accor di ngl y cont endedt hat he had suf f i ci ent f r ee r eser ves f r om whi ch he advanced t heamount of ` 7. 37 cr or es t o hi s si st er concer ns f r ee of i nt er est .I f t he assessee est abl i shed t he same, he woul d be ent i t l ed t o succeed. The CI T ( Appeal s) , however , di smi ssed t he appealexcept t o t he ext ent of t he i nt er est f r ee l oans made t o cer t ai nsi st er concer ns. The assessee succeeded i n r espect of t he l oanst o cer t ai n si st er concer ns as t he CI T ( Appeal s) f ound t hat hehad made out a case of commer ci al expedi ency. 9.The Tr i bunal , however , di d not consi der t he i ssue ofcommer ci alexpedi ency havi ng come t o t he concl usi on t hat t heassessee i n any event had est abl i shed t hat t he i nt er est f r eel oans wer e made f r om t he f r ee r eser ves avai l abl e t o hi m. Had wedeci ded t hi s i ssue i n f avour of t he r evenue, i t woul d have beennecessar y t o r emand t he mat t er t o t he Tr i bunal t o consi der t hecase of commer ci alexpedi ency bot h on behal f of t he r evenue aswel l as on behal f of t he assessee. However , as we ar e i nagr eement wi t h t he deci si on of t he Tr i bunal on t he f i r st i ssue,i t i s not necessar y t o r emand t he mat t er . 10.The Tr i bunal af t er consi der i ng t hese f act s came t ot he concl usi on t hat t he assessee had i nt er est f r ee capi t al f r omwhi ch he was ent i t l ed t o make an i nt er est f r ee advance t o hi ssi st er concer ns. I t was al so r i ght l y obser ved t hat t her e wasnot hi ng on r ecor d t o show t hat t he assessee had used t hei nt er est bear i ng f undsf orot her t han busi ness pur poses.Mr . Kat och, l ear ned counselappear i ng on behal fof t heappel l antwas al so unabl e t o est abl i sh t he same. Fur t her , evenbef or e us, i t has not been est abl i shed t hat t he assessee di dnot have suf f i ci ent i nt er est f r ee capi t al t o t he ext ent of` 7. 37 cr or es whi ch i s t he amount advanced by hi m f r ee ofi nt er est .Nor was our at t ent i on i nvi t ed t o any mat er i al t oi ndi cat e t hat i t i s t he i nt er est bear i ng l oan whi ch was i n t ur nadvanced f r ee of i nt er est t o t he assessee’ s si st er concer ns. 11.Thi s exer ci se by t he Tr i bunalwas one of appr eci at i onof f act s.We ar e unabl e t o hol d t hat t he same was absur d orper ver se. 12.The f i ndi ngsof t he CI T ( Appeal s) i n t he or derdat ed 26. 02. 2010wer e conf i r med i n t he or derof t heCI T ( Appeal s) dat ed 11. 08. 2011. The or der dat ed 11. 08. 2011mer el y conf i r med t he f i ndi ngs and t he deci si on i n t he or derdat ed 26. 02. 2010. Mr . Kat och, t her ef or e, r el i ed upon t heobser vat i onsand f i ndi ngs of t he CI T ( Appeal s)i n t he or derdat ed 26. 02. 2010. The CI T ( Appeal s) not ed t he assessee’ scont ent i on t hat he had hi s own capi t al and i nt er est f r ee l oansand pr of i t s.I t was, however ,obser ved t hat a per usal of t hebal ance- sheet showed t hat t he capi t alof t he assessee i ncl udedt he pr of i t ear ned dur i ng t he year and t hat , t her ef or e, bot h t hecl osi ng capi t al and t he pr of i t ear ned dur i ng t he year coul d notbe consi der ed as bei ng avai l abl e separ at el y f or advanci ng t hei nt er est f r ee l oans. Even assumi ng t hat t o be so, i t woul d makeno di f f er ence. Thi s i s f or t he r eason t hat even ot her wi se t heassessee had suf f i ci ent amount s avai l abl e t o hi m t o advance t hei nt er est f r ee l oan of` 7. 37 cr or es. As ment i oned ear l i er , t heassessee had avai l abl e wi t h hi m ` 11. 78 cr or es on account ofcapi t al i t sel f . Mor eover , he al so had an i nt er est f r ee l oan of` 1. 18 cr or es f r om hi s wi f e. 13.The CI T ( Appeal s) al so obser ved t hat t he assessee hadnot r ebut t ed t he Assessi ng Of f i cer ’ s cont ent i on t hat he hadal so made i nvest ment out of hi s capi t al dur i ng t he year whi chexceeded t he capi t al of t he assessee.However , Mr . Kat och wasunabl e t o i nvi t e our at t ent i on t o any par t of t he r ecor d whi chest abl i shed t hi s asser t i on.He mer el y r el i ed upon t heobser vat i on. Fur t her , t he nat ur e of t hi s i nvest ment i s al so notAmodh Sharma2016.08.29 12:12I attest to the accuracy andi ndi cat ed. Nor i s t her e anyt hi ng t o i ndi cat e t hat suchauthenticity of this documentchandigarh i nvest ment was made out of t he capi t al . Ther e i s no co- r el at i onof t he i nvest ment made and t he i nt er est bear i ng l oan and t hecapi t al avai l abl e t o t he assessee.I n t hese ci r cumst ances,t heTr i bunal ’ s appr eci at i on of t he f act s t o t he cont r ar y cannot behel d t o be absur d or per ver se. 14.I n our vi ew, t her ef or e, t he quest i ons sought t o ber ai sed ar e not subst ant i al quest i ons of l aw. 15.The appeal i s, t her ef or e, di smi ssed. ( S. J. VAZI FDAR)CHI EF JUSTI CE 11. 08. 2016 AmodhWhet her speaki ng/ r easonedWhet her r epor t abl e √Yes/ NoYes/ No√ ( DEEPAK SI BAL)JUDGE