Rass Healthcare Private Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 1125/PUN/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4227 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KUSAI GOAWALA
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , ! ' , # $ BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 1125/PUN/2016 #& ' (' / ASSESSMENT YEAR : 2007-08 M/S. RASS HEALTHCARE PRIVATE LIMITED. O-410, 4 TH FLOOR, NECLEUS NO.1, CHURCH ROAD, PUNE- 411 001. PAN : AAACR8228E .... / APPELLANT & / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -10, PUNE. / RESPONDENT ASSESSEE BY : SHRI KUSAI GOAWALA REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 03.10.2018 / DATE OF PRONOUNCEMENT : 05.10.2018 ) / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(APPEALS)- 4, PUNE DATED 17.03.2016 FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT ASSESSEE-CO MPANY IS DEALING IN PHARMACEUTICAL GOODS. ASSESSEE FILED RETURN OF INCOME DEC LARING TOTAL 2 ITA NO. 1125/PUN/2016 A.Y.2007-08 INCOME AT NIL FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION. IN THE SCRUTINY ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSE SSEE CLAIMS OF RS.28,72,831/-ON ACCOUNT OF INTEREST PAID ON LOANS BORROWE D FOR THE PURPOSE OF BUSINESS. ASSESSEE HAS SHOWN A SINGLE TRANSAC TION OF SALE AND PURCHASE AND THAT TOO, ON 30 TH MARCH, 2007 (PURCHASE) AND 31 ST MARCH, 2007 (SALE). THE SALE TRANSACTION ON THE LAST DAY OF THE Y EAR WAS ENTERED INTO WITH ONE OF THE SISTER CONCERNS OF THE ASSESSEE VIZ. M /S.BRIOCIA PHARMA (I) PVT. LTD. THERE WAS NO OTHER BUSINESS ACCOUNT UNDERT AKEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT OFFICE PREMISES WAS PURCHASED BY THE ASSESSEE BY UTILIZING THE SAID INTEREST BEARING LOANS AND THEREFORE, CLAIM OF EXPENDITURE ON ACCOUNT OF INTEREST SHOULD BE ALLOWED. AFTER CONSIDERING THE ASSESSEES SUBMISSION, ASSESSING OFFICER PROCEEDED TO MAKE ADDITION OF RS.28,72,831/- U/S.37 OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT). THE ASSESSING OFFICER HELD THAT UNSECURED LOANS TAKEN BY THE ASSESSEE WAS FOR THE PURPOSE OF BUSINESS OF ASSESSEE. A SSESSING OFFICER ALSO NOTED THAT THE SAID OFFICE PREMISES AT NO. 1, CHURCH ROAD, PUNE WAS USED BY SISTER CONCERNS NAMELY, M/S. PHARMALINKS AGENCY (I) PVT . LTD. AND M/S. BIOSTAR PHARMACEUTICALS PVT. LTD. 3. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). DURING FIRST APPELLATE PROCEEDINGS, ON THE ADDITIO N OF RS.28,72,831/- , ASSESSEE SUBMITTED THAT THE UNSECURED LO ANS WERE USED FOR THE ACQUISITION OF OFFICE PREMISES AT CHURCH ROAD, PUNE A ND ASSESSEES CLAIM RELATES TO THE SAID UNSECURED LOANS. HOWEVER, CIT(A) H ELD THAT OFFICE PREMISES UTILIZED BY SISTER CONCERNS, IS NOT BUSINESS ASS ET OF THE ASSESSEE. REGARDING APPLICABILITY OF THE PROVISIONS OF SECTION 57 OF THE ACT, CIT(A) HELD THAT THE SAID PROVISION SHOULD BE APPLICABLE IN CA SE ASSESSEE 3 ITA NO. 1125/PUN/2016 A.Y.2007-08 EARNED ANY INCOME FROM THE SAID OFFICE PREMISES. THE CIT(A) FURTHER HELD THAT THE SINGLE PURCHASE AND SALE ON THE LAST DAYS OF TH E FINANCIAL YEAR IS NOTHING BUT TO SHOW THAT BUSINESS WAS CARRIED OUT BY T HE ASSESSEE AND THEREFORE, ALLOWING ANY EXPENDITURE U/S.37 OF THE ACT WAS DENIED. THE SOLITARY TRANSACTION WITH THE SISTER CONCERNS WAS ALSO NO T CONSIDERED AS REASONABLE BUSINESS TRANSACTION. THE CIT(A) HELD THAT CLAIM ING SUCH EXPENDITURE IN THE FACTUAL MATRIX OF BUSINESS TRANSACTION IS NOT BONA-FIDE ONE AND ASSESSEE HAS FAILED TO PROVIDE ANY EVIDENCES BEFO RE THE ASSESSING OFFICER TO DEMONSTRATE THAT THERE WAS ANY PURCHASE OF FU RNITURE AND FIXTURE FOR THE OFFICE PREMISES INVOLVING BANKING TRANSACTIONS. THE CI T(A) IS THE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES LTD. REPORTED AS 31 3 ITR 340 IS NOT APPLICABLE IN THE CASE OF ASSESSEE WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSEE HAS OWN AS WELL AS BORROWED FUNDS, A PRESUMPT ION CAN BE MADE THAT ADVANCES FOR NON BUSINESS PURPOSES HAVE BEEN MAD E OUT OF ITS OWN FUNDS PROVIDE THAT INTEREST FREE FUNDS WERE SUFFICIENT TO ME ET THE INVESTMENT. BUT IN THE CASE OF ASSESSEE, THERE WAS OWN FU NDS TO THE EXTENT OF RS.23,93,733/- AS ON 31.03.2017 WHEREAS THE BORROWED FUNDS WERE RS.3,73,50,009/-. THE CIT(A), ACCORDINGLY, CONFIRMED THE DISALLOWA NCE OF RS.28,72,831/-. 4. AGGRIEVED WITH THE ORDER OF CIT(A), ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ORDER OF ASSESSING O FFICER DISALLOWING INTEREST AMOUNTING TO RS.6,89,709/-. 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS ERRED IN CONFIRMING THE VIEW OF THE ASSESSING OFFICER THAT T HE APPELLANT WAS NOT CARRYING ON ANY BUSINESS. 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS ERRED ON RELYING ON THE JUDGMENT OF CIT VS. RELIANCE UTILIT IES LD. 313 ITR 340 4 ITA NO. 1125/PUN/2016 A.Y.2007-08 ALTHOUGH THE SAME WAS NOT RELEVANT TO THE FACTS AND LAW APPLICABLE TO THE APPELLANT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PR OCEEDINGS. 5. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION S MADE BEFORE THE ASSESSING OFFICER AND CIT(A). 6. LD. DR FOR THE REVENUE HEAVILY PLACED RELIANCE ON THE ORDERS OF ASSESSING OFFICER AND CIT(A). 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDERS O F AUTHORITIES BELOW. AT THE TIME OF HEARING, WE ASKED THE LD. COUNSEL T O JUSTIFY THE FIGURE OF RS.6,89,709/- MENTIONED IN THE GROUNDS. IN RESPONSE TO THE SAME, LD. COUNSEL STATED THAT THE FIGURE IS ERRONEOUSLY MENTIONED OTHERWISE AND RS.28,72,831/- IS THE CORRECT FIGURE FOR CONSIDERATION. ON PE RUSAL OF THE FACTS AS NARRATED IN THE PRECEDING PARAGRAPHS, WE FIND TH AT THE ORDERS OF ASSESSING OFFICER AND CIT(A) ARE NOT CLEAR AS TO THE APPLICA TION OF THE BORROWED FUNDS DURING THE YEAR UNDER CONSIDERATION. THE FACTS RELATING TO ACQUISITION OF THE OFFICE PREMISES BY UTILIZING UNSECURED LOANS ARE ALSO NOT BROUGHT ON THE RECORDS. THE FACTS RELATING TO THE OFFICE PREMISES USED FOR BUSINESS PURPOSE AND THE NATURE OF TRANSACTIONS ON PUR CHASE AND SALE INVOLVING THE SISTER CONCERNS ARE ALSO NOT CLEARLY DEMONS TRATED IN THE SAID ORDERS OF ASSESSING OFFICER AND CIT(A). THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE MUST BE REMANDED TO THE FILE OF ASSESSING OFFICER FOR WANT OF FACTS. ASSESSING OFFICER IS DIRECTED TO PASS A SPEAKING ORD ER NARRATING ALL ASPECTS I.E. I) THE DETAILS OF UNSECURED LOANS ; II) INTEREST INCO ME OF RS.28,72,831/- CLAIMED AS INTEREST EXPENDITURE; III) APPLICATION O F THE SAID UNSECURED LOAN FOR BUSINESS PURPOSE ; IV) DETAILS OF INCOME E ARNED BY ASSESSEE OUT OF OFFICE PREMISES AND TAXATION OF THE SAME; V ) DETAILS OF EMI, 5 ITA NO. 1125/PUN/2016 A.Y.2007-08 IF ANY, IMPOSED ON ASSESSEE WHILE GRANTING LOANS TO ASSESS EE VI) DEDUCTION OF TDS AS PER RULES ETC. THESE FACTS SHOULD BE BROUGHT ON RECORD IN THE SET ASIDE PROCEEDINGS. AFTER CONSIDERING THESE FACTS, ASSESSING OFFICER SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AND STATU TE. THE ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUNDS RAISED BY ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 05TH DAY OF OCTOBER, 2018. SD/- SD/- ( ! ' /VIKAS AWASTHY) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; !' / DATED : 05 TH OCTOBER, 2018. SB ) * +#,-! .!(, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-4, PUNE. 4. THE PR. CIT-3, PUNE. 5. %&' () , * () , + +,- , / DR, ITAT, B BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.