GAURIKA MAULTITRADE P.LTD, MUMBAI V. ITO 7(1)(1), MUMBAI

ITA 10/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0220 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 02-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.10/M/2017 ASSESSMENT YEAR: 2012-13 M/S. GAURIKA MULTITRADE PVT. LTD., 108, GUPTA BHAVAN, AHMEDABAD STREET, CARNAC BUNDER, MASJID, MUMBAI 400 009 PAN: AADCG 7159E VS. ITO 7(1)(1), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ANIL THAKRAR, A.R. REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 12.06.2017 DATE OF PRONOUNCEMENT : 04.07.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.02.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2012-13. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE TRADING OF IRON AND STEEL. IT HAD A TURNOVER OF RS.3.54 CRO RES DURING THE RELEVANT PREVIOUS YEAR BUT HAD DECLARED A NET PROFIT OF ONLY RS.0.51 LAKH. IT HAD DEBITED AN AMOUNT OF RS.13.13 LAKHS UNDER THE HEAD INTERES T EXPENSES TO OTHERS' WHICH WAS EXPLAINED TO HAVE BEEN PAID TO CENTRAL BANK OF INDIA FOR THE LOAN TAKEN FROM IT. ON THE OTHER HAND, IT HAD RECEIVED ONLY RS .0.38 LAKH OF INTEREST ON ITS BANK DEPOSITS. ITS BALANCE SHEET SHOWED RS.3.5 CROR ES BY WAY OF 'SECURED BANK OVERDRAFT' AND RS.0.78 CRORE BY WAY OF TRADE PAYABL ES. ON THE OTHER HAND, IT SHOWED AN ADVANCE OF RS.3.01 CRORES MADE OUT TO M/S . JAIN STEEL CORPORATION ITA NO.10/M/2017 M/S. GAURIKA MULTITRADE PVT. LTD. 2 (HEREINAFTER REFERRED TO AS 'JSC'), WHICH WAS FOUND TO BE THE PROPRIETORSHIP CONCERN OF ONE OF THE DIRECTORS OF THE ASSESSEE VIZ . SHRI PRAVIN M. JAIN. SENSING THAT THIS MIGHT BE A CASE OF DIVERSION OF INTEREST- BEARING BORROWALS TO THE DIRECTOR'S PROPRIETORSHIP CONCERN ON AN INTEREST-FR EE BASIS, THE AO SOUGHT AN EXPLANATION. THE ASSESSEE CONTENDED THAT THE ORIGIN AL AMOUNT ADVANCED TO JSC VIZ. RS.3.25 CRORES (WHICH WAS LATER REDUCED TO RS. 3.01 CRORES) WAS A SIMPLE BUSINESS ADVANCE. THE AO THEN SOUGHT TO KNOW THE ST ATUS OF THAT BUSINESS ADVANCE BY ASKING FOR THE NEXT YEAR'S LEDGER ACCOUN T OF JSC. ON PERUSING IT, THE AO REALIZED THAT THERE WERE NO TRANSACTIONS OF PURC HASE AND SALE OF IRON AND STEEL BETWEEN THE ASSESSEE AND THE JSC, NOT JUST IN THE RELEVANT PREVIOUS YEAR BUT ALSO DURING THE FOLLOWING PREVIOUS YEAR. ON EXA MINING THE BOOKS OF ACCOUNT AND THE BANK BOOK OF THE ASSESSEE, THE AO T HEN NOTICED THAT THE OVERDRAFT LIMIT OF RS.3.5 CRORES (BEARING AN INTERE ST RATE OF 14.25%) WAS SANCTIONED TO THE ASSESSEE BY THE BANK ON 29TH DECE MBER 2011 AND AN AMOUNT OF RS.3.25 CRORES OUT OF THAT WAS DIVERTED TO JSC O N THE VERY SAME DAY. IN FACT, THERE HAVE BEEN NO SALE AND PURCHASE TRANSACTIONS B ETWEEN THE ASSESSEE AND JSC NOT JUST DURING THE RELEVANT PREVIOUS YEAR (VIZ . FY 201112) BUT ALSO DURING THE NEXT TWO YEARS (VIZ. FYS 2012-13 AND 2013-14). IN FACT, THE LOAN ACCOUNT WAS FINALLY SETTLED ONLY ON 27TH MARCH 2014. THIS W OULD CONCLUSIVELY DEMONSTRATE THAT WHAT WAS GIVEN BY THE ASSESSEE TO JSC WAS NOT A BUSINESS ADVANCE BUT A LOAN. ACCORDINGLY, THE AO DISALLOWED UNDER SECTION 36(1)(III) OF INCOME TAX ACT, 1961 AN AMOUNT OF RS.11.25 LAKHS AS INTEREST AT THE RATE OF 14.25% FOR THE PERIOD OF 92 DAYS DURING THE RELEVAN T PREVIOUS YEAR THAT THE LOAN OF RS.3.25 CRORES HAD BEEN TAKEN FROM THE BANK AND DIVERTED TO JSC. 3. DURING THE COURSE OF HEARING, THE LD. A.R. HAS F AIRLY SUBMITTED THAT ASSESSEE COULD NOT REMAIN PRESENT BEFORE THE LD. CI T(A) AND THE LD. CIT(A) HAS PASSED THE ORDER IN ABSENCE OF THE ASSESSEE AND NOW ASSESSEE WANTED TO PURSUE THIS APPEAL. ITA NO.10/M/2017 M/S. GAURIKA MULTITRADE PVT. LTD. 3 4. THEREFORE, IN THE INTEREST OF JUSTICE, I RESTORE THIS MATTER TO THE FILE OF THE LD. CIT(A). ASSESSEE IS DIRECTED TO REMAIN PRESENT BEFORE THE LD. CIT(A) ON THE RECEIPT OF THIS ORDER WITHIN TWO MONTHS. THE L D. CIT(A) IS DIRECTED TO DECIDE THE APPEAL, AFTER GIVING DUE OPPORTUNITY OF HEARING, AS PER LAW. 5. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.07.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 05.07.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.