Jyoti Limited, Vadodara V. DCIT, Circle-1(1)(2), Baroda

ITA 1120/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9935 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-04-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Period of limitation; TDS; Set aside
• Section: 143(2); 68; 263

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO.1120 /AHD/2018 ASSTT.YEAR : 2013-14 JYOTI LIMITED NANUBHAI AMIN MARG INDUSTRIAL AREA, BARODA PAN : AAACJ 4909 N VS DCIT, CIR.1(1)(2) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI MANISH SHAH, AR REVENUE BY : SHRI VINOD TANWANI, CIT-DR / DATE OF HEARING : 22/07/2021 /DATE OF PRONOUNCEMENT : 27/07/2021 O R D E R PER RAJPAL YADAV, VICE-PRESIDENT: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.PR.CIT-1, VADO DARA DATED 14.03.2018 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 196 1 FOR THE ASSTT.YEAR 2013-14. 2. ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL, WHICH HOWEVER REVOLVE AROUND A SINGLE ISSUE I.E. THE LD.PR.CIT HA S ERRED IN SETTING ASIDE THE ASSESSMENT ORDER BY INVOKING PROVISION OF SECTI ON 263, AND DIRECTING THE LD.AO TO MAKE A FRESH ASSESSMENT ORDER AND PROP OSING AN ADDITION OF RS.2,68,76,432/- ON ACCOUNT OF INTEREST PAID TO LOAN CREDITORS. ITA NO.1120/AHD/2018 - 2 - 3. FACTS IN NUTSHELL ARE THAT THE ASSESSEE IS A MAN UFACTURER OF VARIOUS TYPES OF ENGINEERING GOODS. IT HAS FILED RETURN O F INCOME DECLARING TOTAL LOSS AT (-)RS.48,79,66,620/- ON 27.9.2013. THEREA FTER, CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUANCE NO TICE UNDER SECTION 143(2) OF THE ACT. DURING THE SCRUTINY ASSESSMENT , IT WAS NOTICED BY THE AO THAT ASSESSEE HAS RECEIVED UNSECURED LOANS FROM COMPANIES FROM KOLKATA, MUMBAI, THANE, SURAT AND KERALA ETC. FOR RS.49,93,00,000/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE GENUINENESS O F THE LOAN TRANSACTIONS, IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS. ASSESSEE EXPLAINED THAT ALL THE LOANS WERE TAKEN TH ROUGH BANKING CHANNEL, NAMES AND ADDRESS AND PANS OF ALL THE PART IES WERE MENTIONED IN FORM NO.3CD REPORT, AND THEREFORE, THE ADDITION PROPOSED DID NOT COME UNDER THE PURVIEW OF SECTION 68 OF THE ACT. THE LD.AO DID NOT SATISFY WITH EXPLANATION OF THE ASSESSEE, AND HELD THAT SINCE THE ASSESSEE HAS NOT PROVED THREE LIMBS OF PROVISIONS VIZ. IDENT IFY OF THE DEPOSITORS, GENUINENESS OF THE TRANSACTIONS AND CREDIT-WORTHINE SS OF THE DEPOSITORS, HE TREATED THE UNSECURED LOANS OF RS.49,58,00,000/- AS UNEXPLAINED INCOME AND ADDED THE SAME TO THE TOTAL INCOME OF TH E ASSESSEE UNDER SECTION 68 OF THE ACT. THEREAFTER THE LD.PR.CIT-I SOUGHT TO REVISE THE ASSESSMENT ORDER BY INVOKING REVISIONARY POWER UNDE R SECTION 263 OF THE ACT. IN THE IMPUGNED ORDER, THE LD.PR.CIT OBSE RVED THAT UNSECURED LOAN TO THE TUNE OF RS.49,58,00,000/- WAS FOUND TO BE NON-GENUINE AND TREATED IT AS UNEXPLAINED INCOME AND ADDED TO THE T OTAL INCOME OF THE ASSESSEE UNDER SECTION 68, BUT INTEREST PAID ON THE SAID LOAN HAS BEEN ERRONEOUSLY ALLOWED AS AN EXPENSES. IT IS FURTHER OBSERVED ONCE THE LOAN HAS BEEN FOUND TO BE NON-GENUINE, NO INTEREST EXPEN SES COULD BE HELD TO BE ALLOWABLE ON SUCH LOAN, AND THEREFORE, ORDER OF THE AO WAS ERRONEOUS ITA NO.1120/AHD/2018 - 3 - AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO T HAT EXTENT. HE SET ASIDE THE ASSESSMENT ORDER, AND DIRECTED THE AO TO FRAME ASSESSMENT AFRESH AFTER PROPER ENQUIRIES/ VERIFICATION. DISSATISFIE D WITH ORDER OF THE LD.CIT, THE ASSESSEE IS NOW BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE REITE RATED SUBMISSIONS, AS WERE MADE BEFORE THE REVENUE AUTHORITIES. HE SUBMI TTED THAT BEFORE THE LD.AO, THE ASSESSEE HAS PLEADED THAT THE COMPANY HA S PAID INTEREST ON THE DEPOSITS AND TDS ON SUCH DEPOSITS HAS BEEN PAID WITH TAX AUTHORITY. HE FURTHER SUBMITTED THAT ALL THE MATERIALS WERE PL ACED BEFORE THE AO WHILE FRAMING THE ASSESSMENT, AND AFTER CAREFUL EXA MINATION OF THE SAME, THE LD.AO PASSED A REASONED ASSESSMENT ORDER, AND T HEREFORE NO ROOM FOR THE LD.CIT TO EXERCISE HIS POWER UNDER SECTION 263 AND DIRECT THE AO TO REVISE THE ASSESSMENT ORDER IN ACCORDANCE WITH H IS FINDING IN THE IMPUGNED ORDER. ON THE OTHER HAND, THE LD.DR SUPPO RTED THE IMPUGNED ORDER. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE TH ROUGH THE RECORDS CAREFULLY. SECTION 263 OF THE INCOME TAX ACT HAS DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO T AKE NOTE OF THIS SECTION. IT READS AS UNDER: 263(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. ITA NO.1120/AHD/2018 - 4 - [EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,- (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-T AX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS O F AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTIO N 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAY S TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UND ER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER O F ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION S HALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN S UCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSE QUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONT AINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBUNAL, T HE HIGH COURT OR THE SUPREME COURT. EXPLANATION.- IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO ITA NO.1120/AHD/2018 - 5 - SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEED ING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 6. ON A BARE PERUSAL OF THE SUB SECTION-1 WOULD REV EAL THAT POWERS OF REVISION GRANTED BY SECTION 263 TO THE LEARNED COMM ISSIONER HAVE FOUR COMPARTMENTS. IN THE FIRST PLACE, THE LEARNED COMMI SSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER TH IS ACT. FOR CALLING OF THE RECORD AND EXAMINATION, THE LEARNED COMMISSI ONER WAS NOT REQUIRED TO SHOW ANY REASON. IT IS A PART OF HIS AD MINISTRATIVE CONTROL TO CALL FOR THE RECORDS AND EXAMINE THEM. THE SECOND F EATURE WOULD COME WHEN HE WILL JUDGE AN ORDER PASSED BY AN ASSESSING OFFICER ON CULMINATION OF ANY PROCEEDINGS OR DURING THE PENDEN CY OF THOSE PROCEEDINGS. ON AN ANALYSIS OF THE RECORD AND OF TH E ORDER PASSED BY THE ASSESSING OFFICER, HE FORMED AN OPINION THAT SUCH A N ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BY THIS STAGE THE LEARNED COMMISSIONER WAS NOT REQUIRED THE ASSIS TANCE OF THE ASSESSEE. THEREAFTER THE THIRD STAGE WOULD COME. TH E LEARNED COMMISSIONER WOULD ISSUE A SHOW CAUSE NOTICE POINTI NG OUT THE REASONS FOR THE FORMATION OF HIS BELIEF THAT ACTION U/S 263 IS REQUIRED ON A PARTICULAR ORDER OF THE ASSESSING OFFICER. AT THIS STAGE THE OPPORTUNITY TO THE ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISSION ER HAS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARING THE AS SESSEE, HE WILL PASS THE ORDER. THIS IS THE 4TH COMPARTMENT OF THIS SECT ION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASSESSING O FFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE ORDER. 7. A PERUSAL OF ORDER OF THE AO AND THE IMPUGNED OR DER OF THE LD.CIT, WOULD CERTAINLY MAKE OUT A PRIME FACIE CASE IN FAVOUR OF THE ITA NO.1120/AHD/2018 - 6 - LD.COMMISSIONER, AS THE AO HAS NOT APPLIED HIS MIND NOR HE ENQUIRED INTO THE ISSUE AND VERIFIED/EXAMINED THE RECORD OF THE CASE PROPERLY. WE FIND THAT THE FACTUM OF ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT ON THE LOAN TAKEN BY THE ASSESSEE TREATING THE SAME AS UNEXPLAINED AND NON-GENUINE HAS NOT BEEN DISPUTED B EFORE US BY THE ASSESSEE, NOR THE ISSUE OF ADDITION WAS CONTESTED B Y THE ASSESSEE FURTHER ON MERIT. THE ISSUE, THEREFORE, BEFORE US IS ABOUT ALLOWANCE OF INTEREST EXPENSES MADE BY THE ASSESSEE ON THE ALLEGED LOANS WHICH OUGHT TO HAVE BEEN DISALLOWED BY THE AO. THE LD.CIT OBSERVED THA T WHEN LOAN DEPOSITS WERE FOUND TO BE NON-GENUINE, REMAINED UNE XPLAINED AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE, THEN THERE WOULD NOT BE ANY QUESTION ALLOWING THE ALLEGED INTEREST EXPEN DITURE THEREON, AND THEREFORE, THERE WAS A FAILURE ON THE PART OF THE A O WITH REGARD TO EXAMINATION/VERIFICATION OF THE ISSUES, WHICH RENDE RED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE. AFTER PERUSAL OF IMPUGNED ORDER, WE ARE O F THE VIEW THAT THE REASON FOR INVOCATION OF REVISIONARY POWER BY THE L D.CIT IS OBVIOUS AND SPECIFIC BECAUSE THERE IS AN INHERENT LACK OF EXAMI NATION/VERIFICATION OF THE RECORD AT THE END OF THE AO WHILE FINALIZING TH E ASSESSMENT. ON ONE HAND, THE LD.AO IS TREATING THE ALLEGED LOAN DEPOSI TS AS NON-GENUINE AND ADDING THE SAME TO THE INCOME UNDER SECTION 68 OF T HE ACT, BUT ON OTHER HAND, WITHOUT PROPER VERIFICATION, ALLOWED THE INTE REST PAYMENT ALLEGEDLY MADE TO THE LOAN DEPOSITORS, THAT WOULD R ENDER THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. INTEREST PAID TO CREDITORS AGAINST UNSECURED LOANS IS ALLOWA BLE ONLY WHEN LOAN DEPOSITED BY THE CREDITOR WITH THE ASSESSEE ARE EST ABLISHED. THEREFORE, THE CONCLUSION OF THE AO WHILE FINALIZING THE ASSES SMENT IS CONTRADICTORY ITA NO.1120/AHD/2018 - 7 - IN ITSELF, WHICH RENDER THE ASSESSMENT ORDER ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LD.CIT IS THERE FORE JUSTIFIED IN EXERCISE OF HIS POWER UNDER SECTION 263, WHICH WE UPHOLD AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2021 SD/- SD/- (WASEEM AHMED) ACCOUNTANT MEMBER (RAJPAL YADAV) VICE-PRESIDENT