Sqny Granites, Sivakasi V. DCIT, Madurai

ITA 1307/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96250 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: V RAJASEKARAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , ! ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1307/MDS/2015 ! # $# / ASSESSMENT YEAR : 2009-2010 M/S. SQNY GRANITES, NO.74, VELAYUTHAM ROAD, SIVAKASI 626 123. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III, MADURAI [PAN ABFFS 5604J ] ( / APPELLANT) ( /RESPONDENT) %& ' ( / APPELLANT BY : SHRI. V. RAJASEKARAN, C.A. )*%& ' ( /RESPONDENT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT. ' + / DATE OF HEARING : 05.10.2015 ,-$ ' + / DATE OF PRONOUNCEMENT : 16.10.2015 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER :- THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI IN ITA NO.594/14- 15, PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2009-2010. ITA NO.1307/MDS/2015 :- 2 -: 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND RAISED ONLY ONE SUBSTANTIVE GROUND OF CHARGING INTEREST ON AMOUNT ADVANCED TO SISTER CONCERN BY THE ASSESSING OFFICER AND SUBSEQUENTLY F URTHER ENHANCED BY THE COMMISSIONER OF INCOME TAX (APPEALS). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF MINING AND TRADING OF GRANITE AT SIVAKA SI. THERE WAS SEARCH OPERATIONS U/S.132 OF THE ACT ON GROUP CONCE RN M/S. SONY FIREWOKS PRIVATE LIMITED ON 21.10.2008 AND ALSO RES IDENTIAL PREMISES OF THE DIRECTORS. SIMULTANEOUSLY, THE INCOME TAX D EPARTMENT CONDUCTED SURVEY U/S.133A IN THE BUSINESS PREMISES AND FACTORIES OF THE GROUP CONCERN AND IMPOUNDED BOOKS OF ACCOUNTS, DOCUMENTS, AND OTHER INCREMENTING MATERIALS. THE LD. ASSESSING OF FICER HAS ISSUED NOTICE U/S.153C R.W.S153A (A) DATED 30.11.2009 TO T HE ASSESSEE FIRM TO FILE THE RETURN OF INCOME WITHIN SPECIFIED TIME. 4. THE ASSESSEE FIRM HAS FILED RETURN OF INCOME ADMITT ING A LOSS OF D11,08,565/- ON 31.08.2010. IN THE ASSESSMENT P ROCEEDINGS, A QUESTIONNAIRE WAS ISSUED AND THE LD. AR APPEARED BE FORE THE ASSESSING AUTHORITIES FROM TIME TO TIME AND FILED DETAILS AND ALSO GAVE SUBMISSIONS IN RESPECT OF SEIZED MATERIAL AND OTHE R MOVABLE AND IMMOVABLE PROPERTIES OWNED BY THE ASSESSEE. THE LD . ASSESSING ITA NO.1307/MDS/2015 :- 3 -: OFFICER EXAMINED ENTRIES IN BOOK OF ACCOUNTS AND CO NSIDERED THE EXPLANATIONS FILED ALONGWITH THE EVIDENCE AND RECO RDED THE STATEMENTS. FURTHER, AO HAS FOUND ON PERUSAL OF BA LANCE SHEET OF THE ASSESSEE AN ADVANCE OF D45,25,000/- GIVEN TO SISTE R CONCERN M/S. SQNY STONES P. LIMITED ON WHICH NO INTEREST WAS CH ARGED AND CALCULATED INTEREST ON SUCH ADVANCES AT THE RATE O F 6% AT D2,71,500/- AND ADDED TO THE RETURNED INCOME AND ASSESSED THE TOTAL INCOME AS D(-) 8,31,065/-. AGGRIEVED BY THE ORDER OF THE ASS ESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS), CHENNAI. 5. THE LD. AUTHORISED REPRESENTATIVE HAS ARGUED THAT A S PER AGREEMENT NIL PERCENTAGE OF INTEREST IS PAYABLE BY THE SISTER CONCERN M/S. SQNY STONES (P) LTD AS ON 31.03.2009 AND RELIE D ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS EXXON MOBIL LUBRICANTS (P) LTD 236 CTR 498, WHEREIN IT WAS HELD THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT IN AUGUST, 2002 WITH RETROSPECTIV E EFFECT FROM 1 ST JANUARY, 2002 AND THE LIABILITY TO MAKE PAYMENT THE RE UNDER HAD ARISEN AND ACCRUED IN AUGUST, 2002, WHEN THE AGREE MENT WAS EXECUTED AND THEREFORE, THE LIABILITY OF THE ASSESS EE TO PAY FOR PERIOD JANUARY 2002 TO MARCH, 2002 AROSE AND CRYSTALLIZED IN AUGUST, 2002 AND THE HONBLE HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEE FOR THE ITA NO.1307/MDS/2015 :- 4 -: ASSESSMENT YEAR 2003-2004 AND ALSO ON THE DECISION S OF SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (2000) 162 CTR 325 AND NON SUCH TEA ESTATE LTD VS. CIT (1975) 98 ITR 1 89 . IN THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS FILED A COP Y OF THE AGREEMENT AND EXPLAINED THAT THE ASSESSEE FIRM HAS ADEQUATE INTEREST FREE FUNDS RECEIVED FROM OTHER SISTER CONCERNS AND UTILIZED T O PAY ANOTHER SISTER CONCERN AND NO INTEREST IS CHARGED OR CRYSTALLIZED IN FINANCIAL YEAR 2008-09. THE LD. CIT(A) HEARD THE SUBMISSIONS AND P ERUSED THE VARIOUS DOCUMENTS INCLUDING AGREEMENT AND CONSIDER ED THE CASE IN THE DIFFERENT PROSPECTIVE TO ENHANCE THE INCOME OF THE ASSESSEE BY FURTHER DISALLOWANCE AND HELD THE RATE OF INTEREST CHARGED BY THE ASSESSING OFFICER @ 6% IS ON THE LOWER SIDE AS NO B ORROWING COULD BE MADE AT SUCH RATE OF INTEREST AND THERE IS NO RATIO NALITY OF PERCENTAGE CONSIDERED FOR DISALLOWANCE. IN COMPARISON TO INT EREST RATE PAYABLE @12.5 % TO BANK FOR ADVANCES AND ENHANCED THE PERCE NTAGE OF INTEREST FROM 6% TO 12.5% AND RELIED UPON THE DECI SION OF THE JURISDICTIONAL HIGH COURT OF MADRAS AND OTHER HIG H COURTS AND TRIBUNAL MADE AN ADDITIONAL DISALLOWANCES OF INTERE ST D2,94,125/-. AGGRIEVED BY THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE FILED AN APPEAL BEFORE THE TRIBU NAL. ITA NO.1307/MDS/2015 :- 5 -: 6. BEFORE THE TRIBUNAL, LD. COUNSEL SUBMITTED THAT THE FIRM HAS ADEQUATE LIQUIDITY OF FUNDS AND THERE ARE NO CONTIN GENT LIABILITIES PAYABLE. THE LD. ASSESSING OFFICER WITHOUT CONSIDE RING THE TERMS OF AGREEMENT ON ADVANCE HAS UNILATERALLY ESTIMATED THE INTEREST RATE AT 6% ON D45.25 LAKHS ADVANCED TO THE SISTER CONCERN M/S.SQNY STONES PRIVATE LIMITED AND MADE DISALLOWANCE OF D2,71,500/ . FURTHER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) EXERCISING PO WERS ERRED IN ENHANCING THE INTEREST RATE FROM 6% TO 12.5% WHICH IS PRACTICALLY NOT POSSIBLE FOR ANY BUSINESS ENTITIES TO CONSIDER INTE REST WHEN THERE IS NO ACTUAL RECEIPTS AND MADE ADDITIONAL INTEREST DISALL OWANCE OF D2,94,125/- AND TOTAL AGGREGATING TO D5,65,625/-. T HE LD. AUTHORISED REPRESENTATIVE ARGUED THAT ON PERUSAL OF BALANCE SH EET AT PAGE NO.3. OF PAPER BOOK, THE CURRENT LIABILITIES ARE D1.57 CR ORES COMPARED TO CURRENT ASSETS INCLUDING ADVANCE TO SISTER CONCERN D68.77 LAKHS. THE LD. AUTHORISED REPRESENTATIVE ALSO DEMONSTRATED BEF ORE US BY REFERRING TO AGREEMENT AT PAGE 21 WERE NO INTEREST IS PAYABL E ON ADVANCE AND FILED WRITTEN SUBMISSIONS WITH INCOME TAX PARTICULA RS AND LEDGER ACCOUNTS COPIES OF THE SISTER CONCERN SHOWN UNDER CURRENT LIABILITIES M/S. CHINDIA GRANITES (P) LTD AND M/S. AAA TRADE AG ENCIES TO PROVE THAT ADEQUATE INTEREST FREE FUNDS ARE AVAILABLE. TH E LD. CIT(A) HAS OVERLOOKED THE BALANCES AVAILABLE WITH THE ASSESSEE AND CHARGED ITA NO.1307/MDS/2015 :- 6 -: INTEREST BASED ON THE BANK RATE AT 12.5% WHICH IS N OT ACCEPTABLE. FURTHER, THE LD. AR RELIED ON THE TRIBUNAL DECISIO N OF M /S. S.P. JAISWAL ESTATES (P) LTD VS. ACIT, IN ITA NOS.488 & 525/KOL/ 2011, DATED 31.05.2012 AND M/S. KAJAL EXPORTS VS. ITO IN ITA NO .496 & 497/AHM/2010, DATED 12.04.2013 AND PRAYED FOR DELETION OF ADDITIONS. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND VEHEMENTLY ARGUED THAT THE ASSESSEE HAS NOT SUBMITTED THE INFORMATIO N BEFORE THE ASSESSING OFFICER NOR IN APPELLATE PROCEEDINGS, HEN CE, THE APPEAL OF THE ASSESSEE BE DISMISSED. 8. AFTER HEARING THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES, AND ALSO PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES, THE LD. AR HAS SUBSTANTIATED HIS CLAIM FOR DELETION OF INTEREST WITH ARGUMENTS AND FILED PAPER BOOK AND LE DGER ACCOUNT COPIES OF SISTER CONCERNS WHO HAS ADVANCED AMOUNT TO ASSESSEE WHICH WERE UTILIZED FOR ADVANCING TO M/S. SQNY STON ES P. LTD AND RELIED ON CASE LAWS. IT IS A FACT THAT MATERIAL EV IDENCE FILED WAS VERY MUCH CRUCIAL FOR ASSESSMENT PURPOSE. ON PERUSAL O F BALANCE SHEET THE SURPLUS FUNDS ARE AVAILABLE COMPARING CURRENT L IABILITIES AT D1.57 CRORES AGAINST THE ADVANCE SHOWN TO SISTER CONCERN IN CURRENT ASSETS AT ITA NO.1307/MDS/2015 :- 7 -: D68.77 LAKHS, AND GOES TO PROVE THE SOURCE IS BONA FIDE AND GENUINE. THE LD. DEPARTMENTAL REPRESENTATIVE OBJECTED TO THE SUBMISSIONS. WE ARE OF THE OPINION THAT THE INFORMATION SUBMITTED B Y THE ASSESSEE FIRM IS TO BE VERIFIED AND EXAMINED BY THE LOWER AUTHORI TIES. HENCE, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) AND RESTORE THE ISSUE BACK TO THE ASSESSING OFFICER FOR VERIFICATION AND GENUINENESS OF THE CLAIM. THE ASSESSING OFFICER S HALL PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AN D DECIDE THE ISSUE AFRESH. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO/1307/MDS/2015 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, 16TH DAY OF OCTOBER, 2015, AT CHENNAI. SD/- SD/- ( ) ( . ) (CHANDRA POOJARI) (G. PAVAN KUMAR) / ACCOUNTANT MEMBER ! /JUDICIAL MEMBER / CHENNAI 3 / DATED:16.10.2015 KV 4 ' )!+56 76$+ / COPY TO: 1 . %& / APPELLANT 3. 8+ () / CIT(A) 5. 69: )!+! / DR 2. )*%& / RESPONDENT 4. 8+ / CIT 6. :;# < / GF