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2015 (5) TMI 192 - DELHI HIGH COURT

2015 (5) TMI 192 - DELHI HIGH COURT - TMI - Addition on account of interest @ 2% on advances - Held that:- there was nothing to show that the assessee had, in fact, received interest or that the company to whom the loan was given had, in fact, paid interest to the assessee. There was also nothing on record to show that the alleged interest was not reflected in the accounts. The only finding recorded was that the assessee “ought to” have charged interest. Referring to an earlier decision of the G .....

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e made the subject matter of tax, the only reference he made was to Section 144 of the said Act. However, we are clear that Section 144 does not at all apply to the present proceedings because the present proceedings originate from an assessment under Section 143(3) of the said Act. The addition on account of a notional income on advances is deleted. - Decided in favour of assessee. - W. P. (C) 6265/2013 and 6326/2013 - Dated:- 30-4-2015 - Badar Durrez Ahmed And Sanjeev Sachdeva,JJ. For the Peti .....

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me Tax under Section 264 of the Income Tax Act, 1961. In W.P.(C) 6265/2013, the assessee had filed his return of income declaring a loss of income of ₹ 32,934/- on 25.09.2009. The assessment under Section 143(3) was completed on 12.12.2011, by the Assessing Officer at an income of ₹ 18,99,070/- as against the above mentioned loss. In the assessment order, the addition of ₹ 19,32,000/- on account of notional interest earned on advances given to Smart Tourist Private Limited was .....

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sment records of the assessee. In his petition reproduced ante, in clause (ii) and (iv) the appellant has raised objections on the addition of ₹ 19,32,000/-, on account of notional income on advances. In clause (i), (iii), (v), (vi), (vii) and (viii) the assessee has raised general legal objections I observations which are not required to be separately addressed and will be considered while discussing factual issues. 5.2 The only issue involved is on the addition of ₹ 19,32,0001- on .....

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. has stated as under in the assessment order for A.Y. 2008-09: " The assessee has given Loan & Advances ofRs.1,61,00,000/- to M/s Smart Tourist Pvt. Ltd on 09.04.2007. There is no explanation why the assessee has given loan to the above concern out of its funds and no interest has been charged for this loan. In the absence of any explanation, evidence regarding identities of the parties and purpose of the loans, notional interest at 12% per annum is charged on the loan amount given. Su .....

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de on the basis of findings given in the assessment of earlier year i.e. A.Y. 2008-09. The assessee's main contention is that since the assessment in 2009-10 on this issue is based on order for earlier assessment of A.Y. 2008-09, this assessment should also be set aside u/s 264 as the earlier assessments were set aside u/s 264. In this connection, I have carefully perused the order u/s 264 dated 16.03.2012 of my Ld. Predecessor. The assessment of A.Y. 2008· ')9 was set aside by th .....

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.w.s. 153A r.w.s. 264 have been concluded by the Assessing Officer on 08.03.2013 and he has again made the addition stating as under:- "10. The assessee during the year, has given loan and advances of ₹ 1,61,00,00/- to M/s Smart Tourist Pvt. Ltd on 09.04.2007. The assessee during the re-assessment proceedings, as filed a copy of ledger account of the assessee and in the said ledger account a remarks has been made that confirmation being enclosed, but ongoing through the entire annexur .....

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given. Penalty proceedings U/s 271(l)(c) of the Income Tax Act is initiated for concealment of income and for furnishing of inaccurate particulars " 5.6 The assessee's main argument that order u/s 143(3) for 2009-10 may be set aside on the grounds that earlier orders on the same lines have been set aside has no force behind it. Firstly, the earlier orders were set aside by my Ld. Predecessor after considering many issues, and the impugned issue was only one of the issue. Even on this i .....

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opinion that the Assessing Officer was justified in making this addition and therefore, I refuse to interfere in the orders of the Assessing Officer on this issue. 5.7 In view of the above discussion, I am satisfied that this is not an appropriate case for interference in exercise of revisional powers u/s 264. Accordingly, the revision application u/s 264 filed by the assessee is hereby rejected. 4. On going through the reasoning adopted by the Commissioner of Income Tax, it appears that the on .....

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65/2013 to Smart Tourist Private Limited and to not charge anything in return. The explanation sought to be given by the petitioner in both these cases was that the advances were made in the course of their business and it is not at all necessary that an advance given by a businessman at all times must have an element of interest also. There are various other considerations which come into the calculations when a businessman advances money to another. It is not at all necessary that interest mus .....

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was a concrete finding that something was received by the petitioner from the said Smart Tourist Private Limited and other persons similarly situated, nothing can be added by way of notional income. A reference was made to the decision of the Guwahati High Court in B and A Plantations and Industries Ltd. v Commissioner of Income -Tax: 242 ITR 22. The relevant portion of that decision reads as under:- As regards the addition of notional interest the assessee made an interest free advance of S .....

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) and the Tribunal. 16. In this case there is no finding when the assessee had in fact received the interest or that the Jorhat Investments Ltd., had in fact paid the interest to the assessee and the interest was not reflected in the accounts. The finding is that the assessee ought to have charged interest. 17. The facts in the instant case are more or less identical with the case of Highways Construction Co. Pvt. Ltd. v CIT [1993] 199 ITR 702, wherein this court held (page 708) : "There is .....

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granted interest-free loan, or should have insisted on payment of interest. If the assessee had not bargained for interest, or had not collected interest, we fail to see how the Income Tax authorities can fix a notional interest as due, or collected by the assessee. Our attention has not been invited to any provision of the Income Tax Act empowering the Income Tax authorities to include in the income, interest which was not due or not collected. In this view, we answer question No. (ii) in the n .....

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