DCIT, Circle-6(1), Hyd, Hyderabad V. IVRCL SEW Prasad Hyderabad JV, Hyd, Hyderabad

ITA 1076/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6351 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1076/HYD/2015 ASSESSMENT YEAR: 2007-08 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 6(1), HYDERABAD. VS. M/S IVRCL SEW PRASAD JV, HYDERABAD. PAN AABFI 7879 J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. SRINIVAS ASSESSEE BY : SHRI V. RAGHAVENDRA RAO DATE OF HEARING 01-08-2016 DATE OF PRONOUNCEMENT 05-08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 2, HYDE RABAD, DATED 11 TH JUNE, 2015 FOR AY 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS IN THE BUSINESS OF EXECUTION OF CIVIL CONTRACTS FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 29/10/2007 WITH RETURNED INCOME OF RS . NIL. THE ASSESSMENT WAS COMPLETED U/S 143(3) DETERMINING THE TAXABLE INCOME AT RS. 19,16,41,701/- BY MAKING ADDITIONS/DI SALLOWANCES, INTER-ALIA, DISALLOWANCE OF INTEREST OF RS. 2,03,80 ,927/-. 2.1 ASSESSEE RECEIVED MOBILIZATION ADVANCE FROM IR RIGATION DEPARTMENT OF ANDHRA PRADESH FOR CARRYING OUT CONTR ACT WOKS ON WHICH IT CHARGES INTEREST @ 8%. INTEREST ON MOBILIZ ATION ADVANCE IS 2 ITA NO. 1076/H/15 IVRCL SEW PRASAD HYDERABAD JV HYD. RECOVERED BY IRRIGATION DEPARTMENT THROUGH RA BILLS . DURING THE COURSE OF SCRUTINY PROCEEDINGS, ASSESSEE FURNISHED PARTICULARS OF MOBILIZATION ADVANCE GIVEN TO SUBCONTRACTORS AND IN TEREST COLLECTED THEREON. FROM DETAILS FURNISHED IT WAS OBSERVED THA T THE FOLLOWING AMOUNTS WERE ADVANCED TO ONE OF ITS SUBCONTRACTOR I NTEREST FREE. NAME OF SUB- CONTRACTORS MOBILISATION ADVANCE GIVEN RECOVERED NET MOB. ADVANCE RATE OF INTEREST IVRCL INFRASTRUCTURES & PROJECTS LTD. 166309312 87436967 78872345 0% IVRCL INFRASTRUCTURES & PROJECTS LTD. 88452270 8425840 80026430 0% TOTAL 254761582 95862807 158898775 2.2 REFERRING TO THE ABOVE, THE AO OBSERVED THAT IN TEREST BEARING FUNDS OF ASSESSEE ARE GIVEN INTEREST FREE TO ONE OF ITS SUBCONTRACTORS, THEREBY REDUCING TAXABLE PROFIT OF ASSESSEE COMPANY . AS PER PROVISIONS OF SUB SECTION (III) OF SECTION 36 OF IN COME TAX ACT INTEREST PAID ON CAPITAL BORROWED CAN BE ALLOWED AS DEDUCTIO N ONLY IF LOAN AMOUNT IS UTILIZED FOR THE PURPOSE OF BUSINESS. IN THE PRESENT CASE ASSESSEE UTILIZED INTEREST BEARING OUT OF BUSINESS OF JOINT VENTURE AND FOR PURPOSE OF BUSINESS OF ITS SUBCONTRACTOR. THE A O TREATING INTEREST FREE ADVANCE MADE BY ASSESSEE TO SUBCONTRACTOR AS F UNDS UTILIZED OUTSIDE BUSINESS OF ASSESSEE INTEREST ON FUNDS ADVA NCED @ 8% WHICH WORKS OUT TO RS 2,03,80,927/- IS DISALLOWED AND ADD ED BACK TO TAXABLE INCOME OF ASSESSEE. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). 4. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE DISALLOWANCE MADE BY THE AO BY OBSERVIN G AS UNDER: 7.2 THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF TH E APPELLANT, FACTS, ISSUES AND CIRCUMSTANCES OF THE C ASE WERE DULY PERUSED. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES 3 ITA NO. 1076/H/15 IVRCL SEW PRASAD HYDERABAD JV HYD. OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT BR OUGHT OUT SUPRA, GROUND NO. 4 IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN ALLOWING INTEREST EXPEN DITURE WHEN INTEREST BEARING FUNDS ARE NOT UTILIZED FOR BUSINE SS PURPOSE OF ASSESSEE. 3. THE LD. CIT(A) OUGHT TO HAVE GIVEN HIS FINDINGS OR REASONS FOR ALLOWING SUCH EXPENDITURE. 6. THE LD. DR SUBMITTED BEFORE US THAT THE LD. CIT( A) OUGHT TO HAVE GIVEN HIS FINDINGS OR REASONS FOR ALLOWING INT EREST EXPENDITURE DISALLOWED BY THE AO. HE, THEREFORE, PRAYED THAT TH E ORDER OF THE CIT(A) MAY BE SET ASIDE AND RESTORE ISSUE BACK TO C IT(A) FOR A REASONING ORDER. 7. LD. AR, ON THE OTHER HAND, RELIED ON THE ORDER O F THE CIT(A). 8. AFTER HEARING THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT TH E ORDER OF CIT(A) IS NOT IN ACCORDANCE WITH SECTION 250(6) WHICH REQUIRES THAT THE ORDER OF CIT(A) DISPOSING OFF THE APPEAL SHALL BE IN WRITING AND SHALL STATE POINTS FOR DETERMINATION, DECISIONS THEREON AND THE REASONS FOR THE DECISION. THE LD. CIT(A) MERELY GOING THROUGH THE SUBMISSION S OF THE ASSESSEE ALLOWED THE GROUND OF APPEAL OF THE ASSESS EE. THUS, THE ORDER OF THE LD. CIT(A) SUFFERS FROM LEGAL INFIRMIT Y AND CANNOT BE SUSTAINED IN LAW. THE LD. CIT(A) SHALL HAVE TO RECO RD REASONS FOR DECISION WHILE ALLOWING OR DISMISSING THE APPEAL. T HE LD. CIT(A), HOWEVER, DID NOT RECORD ANY REASONS WHILE ALLOWING THE GROUND OF APPEAL OF ASSESSEE. WE, THEREFORE, SET ASIDE THE OR DER OF THE LD. CIT(A) AND RESTORE THE ISSUE TO HIS FILE WITH A DI RECTION TO RE-DECIDE THE SAME AFRESH BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LD. CIT(A) SHALL P ASS THE ORDER ON MERITS BY GIVING REASONS FOR DECISION IN THE APPELL ATE ORDER. 4 ITA NO. 1076/H/15 IVRCL SEW PRASAD HYDERABAD JV HYD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 5 TH AUGUST, 2016 KV COPY TO:- 1) DCIT, CIRCLE 6(1), 7 TH FLOOR, D BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S IVRCL SEW PRASAD JV, 6-3-871, SNEHALATHA, GREENLANDS ROAD, BEGUMPET, HYDERABAD. 3) CIT(A) - 2, HYDERABAD 4) PR. CIT - 2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.