Dy. Commissioner of Income Tax, Circle-1(2), Hyderabad V. Candid Industries Limited (formerly known as Futuretech Industries Ltd), Hyderabad

ITA 1205/Hyd/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5987 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 19-01-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 12-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Business expenditure
• Section: 143(3); 153A; 142(2A); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 1205/HYD/2017 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD VS CANDID INDUSTRIES LIMITED, (FORMERLY KNOWN AS FUTURETECH INDUSTRIES LIMITED) , HYDERABAD [PAN: AAACE4493Q] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR DATE OF HEARING : 19-01-2021 DATE OF PRONOUNCEMENT : 04-02-2021 O R D E R PER BENCH : THIS REVENUES APPEAL FOR AY.2011-12 ARISES FROM THE CIT(A)-1, HYDERABADS ORDER DATED 25-11-2016 PASSED IN APPEAL NO.0049/ CIT(A)-1/ HYD/ 2014-15/ 2016-17 IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 [ IN SHORT, THE ACT]. 2. AT THE OUTSET, WE NOTICE THAT THIS REVENUES AP PEAL SUFFERS FROM DELAY OF 142 DAYS STATED TO BE ATTRIBUTABLE TO THE PCIT, VISAKHAPATNAM HOLDING THE ADDITIONAL CHARGE OF P CIT-1, HYDERABAD THE MATTER HAVING ESCAPED HIS ATTENTION ITA NO. 1205/HYD/2017 :- 2 -: INADVERTENTLY DUE TO WORK PRESSURE. THE ASSESSEE IS EQ UALLY FAIR IN NOT DISPUTING ALL THESE AVERMENTS. THE DELAY O F 142 DAYS IS CONDONED IN LARGER INTEREST OF JUSTICE AND ON ACCOU NT OF CIRCUMSTANCES BEYOND THE REVENUES CONTROL THEREFORE. 3. THE REVENUE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL: 1. THE LEARNED CIT (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF FINANCIAL CHARGES OF RS.5,05,73,510/- CLAIMED BY THE ASSESSEE. 2. THE LEARNED CIT (APPEALS) OUGHT TO HAVE CONSIDER ED THAT SAID FINANCIAL CHARGES WERE INCURRED FOR ARRANGING FINAN CE TO ASSOCIATE ENTERPRISES THROUGH ACCOMMODATION BILLS FOR PURCHAS ES AND SALES TO GROUP CONCERNS AND SUBSEQUENTLY BY DISCOUNTING THE SAME AND NOT FOR BUSINESS PURPOSES OF THE ASSESSEE. 3. THE LEARNED CIT (APPEALS) OUGHT TO HAVE NOTED TH AT AUTHORITIES RELIED UPON IN THE ORDER OF CIT(A) WERE ALL RENDERE D IN A DIFFERENT FACTUAL CONTEXT AND THE SAID AUTHORITIES ARE NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE MODUS OPERANDI IS RAI SING ACCOMMODATION BILLS, DISCOUNTING THE SAME AND ARRAN GING FINANCE TO ASSOCIATE CONCERNS. 4. THE LEARNED CIT (APPEALS) OUGHT TO HAVE FURTHER APPRECIATED THAT SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN ASSESSEE'S OWN CASE FOR A.Y. 2006-07 AND A.Y. 2007-08 WAS SUST AINED BY THE PREDECESSOR CIT(A) AND ON APPEAL BY THE ASSESSEE, H ON'BLE ITAT VIDE ORDER IN ITA NO. 1459 & 1460/HYD/2014 DATED 31/01/2 017 HAS RESTORED THE MATTER TO THE FILE OF AO FOR CERTAIN V ERIFICATION. 4. BOTH THE LEARNED REPRESENTATIVES TAKE US TO THE CIT(A )S CORRESPONDING DETAILED DISCUSSION DELETING THE IMPUGN ED FINANCE CHARGES DISALLOWANCE AS UNDER: 5. ONLY GROUND: DISALLOWANCE OF RS.5,05,73,510/- T OWARDS BANK CHARGES: 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT ASSESSEE HAD MADE PURCHASES OF RS.713,25,25,959/- AND SALES OF RS.720,49,69,995/-. THE P&L ACCOUNT (UNDER 'SCHEDULE 12') UNDER 'ADMINISTRATIVE AND SELLING EXPENSES' CLEARLY INDICATES TOWARDS THE NATURE OF A CTIVITY. THE ACTUAL ITA NO. 1205/HYD/2017 :- 3 -: PURPOSE FOR THE ASSESSEE COMPANY WAS PROVIDING ACCO MMODATION BILLS FOR PURCHASE AND SALES TO ITS GROUP COMPANIES . THIS WAS FURTHER CONFIRMED BY THE FACT, WHEN ONE LOOKS AT THE ABNORM AL FINANCIAL CHARGES OF RS.5,05,73,510/- PAID BY THE ASSESSEE CO MPANY DURING THE F.Y.2010-11. THE DETAILS OF FINANCIAL CHARGES W ERE MAINLY TOWARDS BILL DISCOUNTING CHARGES AND THE CORRESPOND ING INTEREST PAID TO THE BANKS FOR THE SAME. BY INDULGING INTO THE AB OVE ACTIVITY OF PROVIDING ACCOMMODATION BILLS AND SUBSEQUENTLY DISC OUNTING THE SAME, THE ASSESSEE COMPANY WAS LENDING THE MONIES T O THE GROUP CONCERNS. THUS, THE UNDERLINE PICTURE OF THE OVERALL ACTIVITY OF THE COMPANY THAT EMERGES WAS THAT BY SHOWING THESE ACTI VITIES OF PURCHASE AND SALES THE COMPANY WAS ACTUALLY INDULGI NG IN ARRANGING FINANCES FOR ITS GROUP COMPANIES BY WAY OF BILLS DI SCOUNTING AND SUBSEQUENTLY TRANSFER THE FUNDS EITHER TO THE GROUP CONCERNS OR AS PER THEIR INSTRUCTIONS. THEREBY IT WAS CLEAR THAT THE FINANCIAL CHARGES SO INCURRED AND CLAIMED BY THE ASSESSEE COMPANY WERE NOT FOR THE BU SINESS PURPOSE BUT FOR PROVIDING FINANCE FOR THE GROUP COMPANIES. AS THIS ACTIVITY OF BILL DISCOUNTING WAS NOT DONE WITH THE INTENTION OF IMPROVING ITS OWN BUSINESS BUT WAS CARRIED OUT ONLY TO MAKE GOOD TO T HE FINANCIALS OF THE GROUP COMPANIES, THE ASSESSING OFFICER TREATED THE SAME AS NOT EXPENDED FOR THE BUSINESS PURPOSES AND DISALLOWED T HE INCOME OF RS.5,05,73,510/-. 5.2 BEFORE ME, THE APPELLANT SUBMITTED THAT IT HAD DEBITED AN AMOUNT OF RS.5,05,73,510/- TOWARDS BANK DISCOUNTING CHARGE S DURING THE COURSE OF BUSINESS ACTIVITY AND WERE INCURRED EXCLU SIVELY FOR THE PURPOSE OF TRADING ACTIVITY AND NOT FOR ANY UNRELAT ED ACTIVITY. APPLICANT SUBMITTED ANNUAL REPORT, TAX AUDIT REPORT , DETAILS OF FINANCE CHARGES FOR RS.5,05,73,510/-, COPIES OF LETTER OF C REDITS, DETAILS OF RECEIPTS AND UTILIZATION OF LC PROCEEDINGS, PARTY W ISE BREAKUP OF PURCHASES FOR RS.713,25,25,959/- AND PARTY WISE BRE AKUP OF SALES OF RS.720,49,69,995/-. APPLICANT STATED THAT PROPER LE DGER ACCOUNTS HAVE BEEN MAINTAINED WITH RESPECT TO EACH OF THE TR ADE CREDITOR IN ITS BOOKS OF ACCOUNT. BEFORE ME, THE APPLICANT SUBMITTED THAT THE FINANCI AL CHARGES WERE INCURRED ON A LETTER OF CREDIT GRANTED BY VARI OUS FINANCIAL INSTITUTIONS, THE LETTER OF CREDIT PROCEEDS WERE UT ILIZED FOR PAYMENTS TO VARIOUS TRADE CREDITORS AND FOR THESE SERVICES, THE AMOUNTS CHARGED BY THE BANKS WERE SHOWN UNDER THE HEAD 'FINANCIAL C HARGES'. APPLICANT SUBMITTED THAT THE PRESENT ISSUE OF DISAL LOWANCE OF FINANCIAL CHARGES HAD ALREADY COVERED IN ITS OWN GR OUP CASE OF M/S. GLOBAL FORGINGS LTD FOR A.Y. 2010-11 WHEREIN THE HO N'BLE ITAT VIDE ITA NO. 1269/HYD/2014 HAS DISMISSED THE APPEAL OF T HE REVENUE ITA NO. 1205/HYD/2017 :- 4 -: AND UPHELD THE ORDER OF THE CIT (A) WHEREIN THE DIS ALLOWANCE OF FINANCIAL CHARGES WAS DELETED. APPLICANT ALSO CITED THE FOLLOWING CASE LAWS IN ITS SUPPORT: 1. DECISION OF ITAT, HYDERABAD BENCH 'B' IN THE CASES OF DCIT C-2(3) VS M/S. GLOBAL FORGINGS LTD IN ITA NO. 543 & 1269/HYD/14 DT 26.11.2014 2. CIT VS ALEMBIC GLASS INDUSTRIES LTD 103 ITR 715 (GU J.) 3. DECISION OF ITAT, BANGALORE IN THE CASES OF ITA NO. 711/1154/6ANG/2003, 45/BANG/2004 FOR 1998-9 9, 1997-98, M/S. BELLARY STEELS & ALLOYS LTD, BANGALOR E VS JCIT, HUBLI. FOLLOWING THE ABOVE ORDERS OF HON'BLE ITAT, I ALLOW THE CLAIM OF THE APPLICANT. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE REVENUES SOLE SUBSTANTIVE GRIEVANCE THAT SINCE THE ASS ESSEE IS PROVIDING MERE ACCOMMODATION BILLS AND SUBSEQUENTLY DISCOUNTING THE SAME THEREBY LENDING ITS NAME TO THE GROUP CONCERNS, THE IMPUGNED FINANCIAL CHARGES OF RS.5,05, 73,510/- HAD BEEN RIGHTLY DISALLOWED IN THE ASSESSING OFFICER S ASSESSMENT ORDER DT.14-03-2014. CASE FILE SUGGESTS TH AT THE INSTANT ISSUE OF THE ASSESSEE BEING TREATED AS MERE NAME LENDER FOR ITS GROUP CONCERN IS NO MORE RES INTEGRA . THIS TRIBUNALS CO-ORDINATE BENCHS DECISION DT.31-01-2017 IN ITA NOS.1459 & 1460/HYD/2014 PERTAINING TO AYS.2006-07 & 2007-08 HAS DEALT WITH THE SAME AS UNDER: 2. AS STATED, THE ONLY ISSUE FOR CONSIDERATION IS THE DISALLOWANCE OF 50% OF FINANCIAL CHARGES CLAIMED BY ASSESSEE. IN AY.2006-07, ASSESSEE CLAIMED FINANCIAL CHARGES BY WAY OF LC DIS COUNTING TO AN EXTENT OF RS. 83,89,594/- UNDER THE HEAD FINANCIAL CHARGES. ON THE REASON THAT ASSESSEE WAS DIVERTING THE FUNDS OBTAIN ED FROM THIS TO ADVANCE AS LOANS TO SISTER CONCERNS WITHOUT INTERES T, AO DISALLOWED 50% OF THE CHARGES AS NOT PERTAINING TO ASSESSEES BUSINESS. SIMILARLY, IN AY. 2007-08, ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 88,55,691/- TOWARDS FINANCIAL CHARGES; OUT OF WHI CH FOR THE SAME REASONS, 50% OF THE AMOUNT WAS DISALLOWED. EVEN THO UGH ASSESSEE ITA NO. 1205/HYD/2017 :- 5 -: SUBMITTED THAT THE ENTIRE FUNDS OBTAINED FROM THE B ANKS BY WAY OF LC DISCOUNTING WAS USED FOR PAYING CREDITORS AND NO PART OF THE AMOUNT WAS DIVERTED TOWARDS ADVANCES TO OTHER CONCE RNS, LD. CIT(A) DID NOT ACCEPT AS SIMILAR DISALLOWANCE WAS CONSIDER ED BY THE CIT U/S. 263 IN AY. 2008-09 AND FURTHER HE RELIED ON TH E ORDERS FOR AY. 2008-09. HIS ORDER IN AY. 2006-07 IS AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, REMAND REPORT OF THE AO AND COMMENTS OF ADDL.CIT AND THE A SSESSMENT ORDER. THE APPELLANTS SUBMISSIONS THAT SINCE IDENTICAL ISSUE WAS DEALT IN THE A.Y.2008-09 AND THE AMOUNT OF EXPENDITURE INCURRED TOWARDS THE FINA NCIAL CHARGES WAS ALLOWED AS BUSINESS EXPENDITURE CANNOT BE ACCEPTED SINCE THE A SSESSMENT PROCEEDINGS FOR EACH YEAR ARE INDEPENDENT. THE ASST. ORDER OR THE DECIS ION TAKEN WITH RESPECT TO AY 2006-07 OR AY 2007-08 SHOULD NOT HAVE ANY IMPACT OR RELATION WITH THE ASST. ORDER FOR THE A.Y. 2008-09. THOUGH THE AO HAD NOT SUBMIT TED DETAILED REPORT REGARDING FINANCIAL CHARGES FOR AY. 2006-07, 2007-08 AND 2008 -09 AS PER THE REQUEST OF THE CIT(APPEALS)-II, HYDERABAD, VIDE HER LETTER DATED 1 9-6-2012MENTIONED IN PARA 303 OF THIS ORDER, THE REPORT OF THE AO DATED 15-6-2014 IS EXHAUSTIVE AND VERY MUCH RELEVANT AND ADEQUATE ON THE ISSUE OF FINANCIAL CHA RGES. HENCE, I FULLY AGREE WITH THE AO REGARDING THE DISALLOWANCE OF 50% OF THE AMO UNT OF FINANCIAL CHARGES DEBITED I.E. RS. 41,94,797, BEING INTEREST RELATED TO THE BORROWED FUNDS UTILIZED FOR THE PURPOSE OTHER THAN BUSINESS AND ALSO AGREE WITH THE REPORT OF THE AO DATED 15- 6-2012. THE CASE-LAW CITED BY THE APPELLANT ARE AL SO DIFFERENT FROM THE FACTS OF THE APPELLANT AND HENCE, THE APPELLANT SUBMISSION CANNO T BE ACCEPTED. THEREFORE, I CONFIRM THE ADDITION. 2.1. SIMILAR ORDER WAS PASSED IN AY. 2007-08 ALSO. HENCE, THE PRESENT APPEALS. 3. FOR THE SAKE OF RECORD, THE GROUNDS RAISED BY AS SESSEE ARE EXTRACTED AS UNDER: 1. THE LEARNED CIT(A) ERRED IN BOTH FACTS AND LAW WHILE PASSING THE ORDER FOR THE A.Y 2006-07. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE TOWARDS INTEREST RS.41,94,797/- MADE BY ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(3), HYDERABAD BASING ON SUSPICION AND SURMISES WHICH IS NOT CORRECT. 3. THE LEARNED CIT (A) ERRED IN NOT APPRECIATING TH E FACT THAT THE FINANCIAL CHARGES ON DISCOUNTING LC'S WAS INCURRED FOR THE BUSINESS P URPOSE ONLY. 4. THE LEARNED CIT (A) ERRED IN NOT CONSIDERING THE EXPLANATIONS AND SUBMISSIONS MADE BY THE APPELLANT COMPANY. 5. THE LEARNED CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT THE NET PROCEEDS OF THE DISCOUNTED LCS WERE UTILIZED FOR PAYMENT TO THE CREDITOR PARTIES ONLY. ITA NO. 1205/HYD/2017 :- 6 -: 6. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH E FACT THAT SPECIAL AUDIT U/S 142(2A) WAS CONDUCTED IN THE CASE OF ASSESSEE FOR T HE YEAR UNDER CONSIDERATION AND NO ADVERSE FINDING WAS MADE BY THE SPECIAL AUDITOR. HENCE, NO ADDITION CAN BE MADE TO THE INCOME OF THE APPELLANT. 7. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH E ORDERS OF HYDERABAD ITAT IN THE CASE OF BARTRONICS INDIA LIMITED VS. ACIT 1( 3) WHEREIN IT IS HELD THAT NO ADDITION CAN BE MADE TO THE INCOME OF THE ASSESSEE IF NO ADVERSE FINDING IS MADE IN THE SPECIAL AUDIT CONDUCTED U/S 142(2A) OF THE ACT. 8. THE ASSESSEE MAY ADD, ALTER, AND SUBSTITUTE ANY OTHER GROUNDS TO THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3.1. LD. COUNSEL REFERRING TO THE PAPER BOOKS FILED , SUBMITTED THAT ASSESSEE WAS CONTENDING THAT LC DISCOUNTING CHARGES ARE PAID TO THE BANKS AND WAS PART OF THE BUSINESS EXPENDITURE AND NO PART OF THE AMOUNT WAS DIVERTED AS ADVANCE TO SISTER CONCERNS, THE FACT OF WHICH WAS NOT CONTRADICTED BY THE REVENUE. IT WAS FURTHER SUBMITTED THAT AO IN THE POST SEARCH ASSESSMENTS U/S. 153A HAS ALL OWED SIMILAR CLAIMS IN AYS. 2004-05 & 2005-06. IT WAS SUBMITTED THAT THE CLAIM IN AY. 2005-06 WAS TO AN EXTENT OF RS. 1,30,69,614/- A ND THE SAME AMOUNT WAS ALLOWED IN THE POST SEARCH SCRUTINY ASSE SSMENTS. FURTHER, IT IS ALSO SUBMITTED THAT IN AY. 2008-09, AO HAS ALLOWED THE AMOUNT AND EVEN THOUGH 263 PROCEEDINGS WERE INITIAT ED IN THAT YEAR ALSO, THE LD. CIT DID NOT TAKE UP ANY ISSUE ON DISA LLOWANCE OF FINANCIAL CHARGES. LD. COUNSEL REFERRED TO THE ORD ERS IN THE AY. 2008- 09, WHEREIN AO AFTER DETAILED EXAMINATION OF THE CL AIM HAS DISALLOWED ONLY AN AMOUNT OF RS. 3,07,808/- PERTAIN ING TO DISCOUNTING CHARGES PAID TO M/S. DPJ VINIYOG PVT. L TD., ON THE REASON THAT ASSESSEE COULD NOT FURNISH ANY EXPLANATION. IT WAS FURTHER SUBMITTED THE LD.CIT INITIATED PROCEEDINGS U/S. 263 ON THE REASON THAT MBB TRANSACTIONS STATED IN THE DETAILS PERTA IN TO THIRD PARTY AND AO WAS WRONG IN ALLOWING THE EXPENDITURE. THE ITAT VIDE ITS ORDER DT. 26-03-2014 IN ITA NO. 1099/HYD/2013 HAS CONSIDERED THAT M/S. MBB TRANSACTIONS ARE NOT THIRD PARTY TRANSACTI ONS BUT MULTI- BRANCH BANK TRANSACTIONS AND ON THAT BASIS, PROCEED INGS ARE HELD TO BE BAD IN LAW, THEREBY IT WAS SUBMITTED THAT THERE WAS NO DISALLOWANCE OF FINANCIAL CHARGES IN EITHER EARLIER YEARS OR IN LATER YEARS AND DISALLOWANCE OF 50% OF FINANCIAL CHARGES ON ADHOC BASIS FOR THE IMPUGNED YEARS IS NOT CORRECT. 4. IT WAS FURTHER SUBMITTED THAT THE CO-ORDINATE BE NCH IN THE CASE OF M/S. BARTRONICS INDIA LTD., IN ITA NO. 2188/HYD/ 2011 DT. 31-05- 2012 HELD THAT WHEN THERE IS A SPECIAL AUDIT IN THE PART ICULAR YEAR AND SPECIAL AUDITOR HAS NOT REPORTED ANY DISALLOWAN CE, AO IS NOT CORRECT IN DISALLOWING THE AMOUNT IGNORING THE SPEC IAL AUDIT REPORT. IT WAS SUBMITTED THAT THERE WAS A SPECIAL AUDIT IN AY. 2007-08 AND SO ITA NO. 1205/HYD/2017 :- 7 -: THE DISALLOWANCE IN THAT YEAR NOT RECOMMENDED BY TH E SPECIAL AUDITOR IS ALSO BAD IN LAW. IT WAS FAIRLY SUBMITTED THAT T HERE IS NO SPECIAL AUDIT IN AY. 2006-07 AND THE GROUNDS PERTAINING TO THAT, PARTICULARLY GROUND NOS. 6 & 7 DOES NOT APPLY. 5. LD.DR, HOWEVER, SUBMITTED THAT THERE IS NO RESJU DICATA INVOLVED AND EACH YEAR HAS TO BE CONSIDERED ON ITS OWN. SIN CE THE AO AND CIT(A) EXAMINED AND CONFIRMED THE DISALLOWANCE AT 5 0%, THE SAME IS TO BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE DOCUMENTS PLACED ON RECORD. AS FAR AS THE FACTS ARE CONCERNED, IT WAS SUBMITTED THAT FINANCIAL CHARGES AROSE ONLY ON DISC OUNTING OF LCS, WHICH WAS INCURRED FOR THE PURPOSE OF BUSINESS. EVE N THOUGH AO HAS NOTED THAT ASSESSEE IS DIVERTING FUNDS FOR INTEREST FREE ADVANCES TO SISTER CONCERNS, NO SUCH NEXUS WAS ESTABLISHED NOR DETAILS OF FUNDS UTILISED FOR NON-BUSINESS PURPOSES WERE PLACED ON R ECORD BY THE AO. HE HAS ADHOCLY DISALLOWED 50% OF THE AMOUNT WITHOUT ESTABLISHING THAT FUNDS ARE DIVERTED FOR NON-BUSINESS PURPOSES. AS SEEN FROM THE CONTENTIONS OF ASSESSEE, IT IS THE SUBMISSION THAT THESE FINANCIAL CHARGES HAVE ARISEN ONLY BECAUSE OF DISCOUNTING OF THE BILLS AND FUNDS ARE UTILISED FOR PAYMENT TO THE CREDITORS. TH IS CONTENTION OF ASSESSEE WAS NEITHER EXAMINED BY THE AO NOR BY THE CIT(A), EVEN THOUGH ASSESSEE IS INSISTING ON THIS. AS SEEN FROM THE ORDERS IN EARLIER YEARS AND ALSO IN AY. 2008-09 AND 2009-10, THE FINANCIAL CHARGES ARE ALLOWED AS SUCH IN SCRUTINY PROCEEDINGS , THAT TOO IN POST SEARCH PROCEEDINGS IN AYS. 2004-05 AND 2005-06. THI S MEANS THAT THE FINANCIAL CHARGES ARE UTILISED FOR THE PURPOSE OF BUSINESS ONLY. WE ARE PRIMA-FACIE SATISFIED THAT THE FINANCIAL CHA RGES CANNOT BE DISALLOWED. HOWEVER, AO HAS NOT GIVEN ANY FINDING W HETHER THE FUNDS ARE REALLY DIVERTED TO SISTER CONCERNS, OUT O F THE FUNDS AVAILED DUE TO DISCOUNTING OF BILLS. THEREFORE, FOR THE LIM ITED PURPOSE OF VERIFICATION, THE ISSUE IS RESTORED TO THE FILE OF THE AO. IN CASE ASSESSEE HAS NOT DIVERTED ANY OF THE FUNDS SO OBTAI NED FOR ADVANCING INTEREST FREE TO ITS SISTER CONCERNS, NO AMOUNT OF FINANCIAL CHARGES SHOULD BE DISALLOWED. AO IS DIRECTED TO EXAMINE THI S ASPECT AND IF FUNDS ARE NOT DIVERTED AS STATED BY ASSESSEE, ALLOW THE FULL CLAIM OF FINANCIAL CHARGES. ACCORDINGLY, THE GROUNDS ON THIS ISSUE ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 6. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE TH AT THE ASSESSING OFFICERS CONSEQUENTIAL COMPUTATION DT.2 9-12- 2017 IN SAID AY.2007-08 HAS DULY ACCEPTED THE ASSES SEES IDENTICAL FINANCIAL CHARGES CLAIM. THERE IS NO DISTIN CTION ON ITA NO. 1205/HYD/2017 :- 8 -: FACTS FORTHCOMING IN THE CASE FILE. WE THUS FOLLOW THE J UDICIAL CONSISTENCY IN THESE FACTS AND CIRCUMSTANCES AND UPHOLD THE CIT(A)S ORDER DELETING FINANCIAL CHARGES DISALLOWA NCE. 7. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 04-02-2021 TNMM ITA NO. 1205/HYD/2017 :- 9 -: COPY TO : 1.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD. 2.CANDID INDUSTRIES LIMITED, SURVEY NO.308, PLOT NO .1B/2, SRI VENKATESHWARA CO-OP. INDL. ESTATE, JEEDIMETLA, HYDERABAD. 3.CIT(APPEALS)-1, HYDERABAD. 4.PR.CIT-1, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.