The ITO, Ward-4(3), Ahmedabad V. M/s. Hynoup Food & Oil Indus.Ltd., Ahmedabad

ITA 1293/AHD/2008

• Counselvise Citation: 129320514 RSA 2008
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-01-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 10-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S V AGARWAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.1293/AHD/2008 ASSESSMENT YEAR: 1995-96 INCOME TAX OFFICER WARD-4(3), AHMEDABAD / V/S . HYNOUP FOOD AND OIL INDS. LTD., MARUTI HOUSE, OPP. AIR INDIA, ASHRAM ROAD, AHMEDABAD PAN NO.AAACH5534M / APPELLANT .. / RESPONDENT / BY APPELLANT SHRI S.K. GUPTA, CIT-DR / BY RESPONDENT SHRI S.V. AGARWAL, AR / DATE OF HEARING 31-01-2012 / DATE OF PRONOUNCEMENT 31-01-2012 !' !' !' !' / // / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF LD. COMMISSIONER OF INC-TAX (APPEALS)-VIII, AHMEDABAD DATED 02-01-20 08 FOR THE ASSESSMENT YEAR 1995-96. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE ACTS OF THE CASE IN GIVING RELIEF OF RS.19,73,013/- OUT OF THE TOTAL DISALLOWA NCE OF INTEREST OF RS.27,55,058/- U/S. 36(1)(III). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 2. THE BRIEF FACTS IN THE GROUND OF THE REVENUE ARE THAT THE ASSESSING OFFICER OBSERVED THAT IN APPEAL AGAINST THE ORIGINA L ASSESSMENT ORDER DATED 20-03-1998 DETERMINING INCOME OF RS.1,02,440/- THE ITAT AHMEDABAD B ITA NO.1293/AHD/2008 A.Y. 1995-96 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 2 BENCH VIDE ITS ORDER DATED 31-01-2006 IN ITA NO.3721 & 3647/AHD/2001 SET ASIDE THE ISSUE OF DISALLOWANCE OF INTEREST ON BORR OWED FUNDS OF RS.27,55,058/- AND DISALLOWANCE OF PAYMENT TO PROJE CT CONSULTANT OF RS.1,92,733/- TO THE AO FOR FRESH CONSIDERATION. TH E AO GAVE OPPORTUNITIES TO THE ASSESSEE TO FURNISH DETAILS ON WHICH THE ASSESS EE RELIED UPON FOR DECIDING THE ISSUES SET ASIDE AND RELEVANT ACCOUNTS, MATERIA LS, PROOFS IN SUPPORT OF ITS CLAIM, BUT THE ASSESSEE DID NOT FURNISH DETAILS. TH E AO DECIDED THE ISSUE AS IN THE ORIGINAL ASSESSMENT ORDER. IN THE ORIGINAL ASSE SSMENT, THE AO HAD OBSERVED IN PARA-14, THAT INTEREST BEARING FUNDS OB TAINED BY THE ASSESSEE HAVE BEEN ADVANCED TO VARIOUS PARTIES FREE OF INTER EST AND THE ASSESSEE HAS PAID HUGE INTEREST ON BORROWED FUNDS OF RS.1,75,50, 638/-. THE ASSESSEE HAD REPLIED BEFORE THE AO THAT IT HAD RECEIVED INTEREST ON THE LOANS ADVANCED TO HYSAFE INVESTMENTS PVT. LTD., K.V. PATEL & CO., M.B . STOCK HOLDINGS PVT. LTD., MRUBHEE STOCK HOLDINGS PVT. LTD., SNEHBHAR STOCK HO LDINGS PVT. LTD. AND HYTASIUM MAGNETIC LTD. IT WAS OBSERVED THAT THE ASS ESSEE HAS NOT CHARGED INTEREST ON THE FUNDS ADVANCED TO 15 PARTIES AS UND ER:- 1. NARESH P SETDH 8. PARI T.N. SHROF 2. M.B. CORPORATION 9. HINDUSTAN MOTORS 3. RONAK R GANDHI 10. MARUTI ROAD WAYS 4. SAVILAL SHAH 11. MARKETING & MANAGEMENT SE RVICES 5. SACHIN R GANDHI 12. MRUBHEE EXPORTS-IMPORTS 6. SAUMIN R GANDHI 13. PARI L.T. SHROFF 7. NILU INVESTMENT 14. B.A. PATEL 15. N.K. OIL MILLS PVT. LTD. IN RESPONSE TO QUERRY BY THE ASSESSING OFFICER AS T O WHY INTEREST ATTRIBUTABLE TO ADVANCES TO THE ABOVE PARTIES SHOULD NOT BE DISA LLOWED U/S.36(1)(III) OF THE ACT THE ASSESSEE STATED THAT THE FUNDS BORROWED FRO M BANKS AND OTHER PARTIES HAVE BEEN UTILIZED FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY AND FOR MAKING PAYMENTS TO SUPPLIERS OR FOR WORKING CAPITAL OF THE COMPANY. THE ASSESSEE DID NOT EXPLAIN THE NEXUS OF LOANS BORROWE D AND FUNDS UTILIZED FOR THE PURPOSE OF BUSINESS. THE CONTENTION OF THE ASSE SSEE THAT THE FUNDS WERE ADVANCED TO M.B. CORPORATION IN THE EARLIER YEARS F OR PURCHASE OF OFFICE BUILDING WAS NOT SUPPORTED BY ANY EVIDENCE AND AO D ISALLOWED THE INTEREST ATTRIBUTABLE TO THE INTEREST FREE ADVANCES MADE TO THE ABOVE PARTIES. ITA NO.1293/AHD/2008 A.Y. 1995-96 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 3 3. BEFORE THE LD. CIT(A) THE AR SUBMITTED THAT ADVA NCE TO PARI L.T. SHROF WAS FOR THE PURPOSE OF BUSINESS. FURTHER INTEREST O F RS.19,,73,013/- RELATING TO ADVANCE TO M.B. CORPORATION HAS ALREADY BEEN ADDED IN THE SUBSEQUENT YEAR I.E. A.Y. 1996-97. M.B. CORPORATION WAS A NON-TRADI NG CORPORATION AND THE ASSESSEE HAD CONTRIBUTED FUNDS OF RS.1,11,35,000/- TO M.B. CORPORATION FOR ACQUISITION OF LAND FOR ITS OFFICE PREMISES TO BE K NOWN AS MARUTI TOWER, AS PER BOARD RESOLUTION PASSED BY THE ASSESSEE-COMPANY ON 7TH SEPTEMBER, 1992, A COPY OF WHICH HAS BEEN FILED. IT WAS SUBMIT TED BEFORE LD. CIT(A) THAT IT WAS NOT A LOAN GIVEN TO THAT PARTY BUT INVESTMENT M ADE TO PURCHASE OFFICE BUILDING AND THE ASSESSEE HAS RECEIVED RS.79,24,795 /- AS INTEREST FOR FINANCIAL YEARS 1993-94 TO 1995-96 FROM M.B. CORPORATION AND HAS BEEN SHOWN AS INCOME AS PART OF TOTAL INTEREST OF RS.1,85,15,316/ - IN A.Y. 1996-97, BY CLAIMING NET INTEREST PAYMENT OF RS.2,03,16,973/- AND THE AS SESSEE HAS CLAIMED TDS OF RS.79,248/- IN THE STATEMENT OF INCOME FOR A.Y. 1996-97. THE INTEREST INCOME HAS BEEN OFFERED FOR THREE YEARS IN THE YEAR OF RECEIPT I.E. A.Y. 1996- 97. THEREFORE, THE DISALLOWANCE OF INTEREST CORRESP ONDING TO ADVANCE MADE TO M.B. CORPORATION SHOULD NOT BE MADE. CONSIDERING TH E SAID SUBMISSIONS OUT OF THE DISALLOWANCE OF RS.27,55,058/- THE AMOUNT OF RS.19,73,013/- WHICH IS INTEREST CORRESPONDING TO ADVANCE MADE TO M.B CORPO RATION WAS DELETED BY LD. CIT(A). 4. LD. DR APPEARING FOR THE REVENUE ARGUED THAT THE ASSESSEE SUBMITTED THE ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A) AND L D. CIT(A) WITHOUT ADMITTING THE SAME HAD DECIDED THE ISSUE EVEN WITHOUT TAKING THE REMAND REPORT FROM THE ASSESSING OFFICER. THEREFORE THE DECISION OF TH E LD. CIT(A) IS AGAINST THE RULE 46A OF INCOME-TAX RULES, 1962 AND AGAINST THE NATURAL JUSTICE. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSES SEE ARGUED THAT LD. CIT(A) HAD BEEN PROVIDED VARIOUS DETAILS WHICH HAVE BEEN ADMITTED BY HIM AND HE HAS DECIDED THE ISSUE WITHIN HIS CONCURRENT JURISDICTION. ITA NO.1293/AHD/2008 A.Y. 1995-96 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ARGUMENTS OF LD. AR ARE NOT FOUND CONVINCING. T HEREFORE, AS ARGUED BY LD. CIT-DR AND ON PERUSAL OF THE ORDER OF LD. CIT(A ), THE ASSESSEE HAD FILED THE ADDITIONAL EVIDENCES WHICH AS A MATTER OF FACT SHOULD HAVE BEEN ADMITTED BY THE LD. CIT(A) BY FOLLOWING THE PROCEDURE UNDER RULE 46A OF THE IT RULES, 1962. MOREOVER, LD. CIT(A) IS NOT JUSTIFIED IN DECI DING THE ISSUE WITHOUT TAKING THE REMAND REPORT OF THE ASSESSING OFFICER. THIS DE CISION OF LD. CIT(A) IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. THEREFORE , IN THE CIRCUMSTANCES AND FACTS OF THE PRESENT CASE, THE MATTER IS REMANDED B ACK TO THE FILE OF LD. CIT(A) WHO IS DIRECTED TO FOLLOW THE PROCEDURE AS LAID DOW N UNDER RULE, 46A OF THE I.T RULES, 1962 AND DECIDE THE ISSUE BY TAKING A REMAND REPORT FROM THE AO BUT BY PROVIDING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. # !' $!%& 31 / 01 /201 2 * + , - THIS ORDER PRONOUNCED IN OPEN COURT ON 31/01/ 201 2. SD/- SD/- ( BHAVNESH SAINI ) ( B.P. JAIN ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) $!%&- 31/01/2012 /!! - DKP* !' !' !' !' 001 001 001 001 21 21 21 21 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. %%05 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 19, 0005, 05, /!! / DR, ITAT, AHMEDABAD 6. ,<= ># / GUARD FILE. BY ORDER/ !' , /TRUE COPY/ ?// %@ 05, /!! -