PADMAVATI OIL (I) LTD, MUMBAI V. ACIT RG 9(2), MUMBAI

ITA 1349/MUM/2010

• Counselvise Citation: 134919914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VISHWAS MEHANDALE
• Keywords: Business expenditure; Opportunity of being heard; Additional evidence; Set aside
• Section: 143(3)

Judgement Text

1 ITA NO. 1349/MUM/2010 (ASST YEAR 2005-06) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI C CC C BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P M JAGTAP, P M JAGTAP, P M JAGTAP, P M JAGTAP, AM AM AM AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 134 134 134 1349 99 9/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2005 2005 2005 2005- -- -06 0606 06) )) ) M/S PADMAVATI OIL (I) LTD 1 GURUKRUPA NADIADWALA COLONY NO.2 MALAD WEST MUMBAI VS THE ASST COMMR OF INCOME TAX RANGE 9(2, MUMBAI ( (( ( APPELLANT APPELLANT APPELLANT APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AABC6362J AABC6362J AABC6362J AABC6362J A SSESSEE BY SHRI VISHWAS MEHANDALE REVENUE BY SHRI PARTNASARATHI NAIK PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 2.12.2009 OF THE CIT(A)-IX, MUMBAI RELATING TO ASSE SSMENT YEAR 2005-06. 2 THE ASSESSEE HAS RAISED THE FOLLOWING REVISED ROU NDS IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,76,117/- WITHOUT CONSIDERING THE COMMENTS OF THE AO IN THE R EMAND REPORT AND THE DETAILS SUBMITTED BEFORE HIM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF RS.31,04,517/- WITHOUT CONSIDERING THE COMMENTS OF THE AO IN THE R EMAND REPORT AND THE DETAILS SUBMITTED BEFORE HIM. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,10,60,408/- OUT OF INDIRECT EXPENSES WITHOUT CONSIDERING THE CO MMENTS OF THE AO IN THE REMAND REPORT AND THE DETAILS SUBMITTED BEFORE HIM. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,31,79,740/- OUT THE UNSECURED LOANS WITHOUT APPRECIATING THAT T HE SAID LOANS WERE OBTAINED FROM LOCAL CO-OP BANKS AND ALSO WITHOUT C ONSIDERING THE COMMENTS OF THE AO IN THE REMAND REPORT AND THE LOA N CONFIRMATIONS FILED BEFORE HIM. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES 2 ITA NO. 1349/MUM/2010 (ASST YEAR 2005-06) OVER AND ABOVE 12% WITHOUT APPRECIATING THAT, THE I NTEREST WAS PAID TO BANKS AD CO-OP BANKS AND THE APPELLANTS HAD NO CONT ROL OVER THE RATE OF INTEREST. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE. CIT-A- 20, MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,368/- IN RESPECT OF BONUS DEBITED TO ACCOUNTS WITHOUT APPREC IATING THAT THE SAID AMOUNT WAS ACTUALLY PAID DURING THE YEAR AND THAT T HE SAME WAS A LEGITIMATE BUSINESS EXPENDITURE. 7. THE APPELLANTS CRAVE LEAVE TO ADD, AMEND OR WITHDRA W THE GROUNDS OF APPEALS. 2.1 THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 1 43(3) R.W.S 144 OF THE ACT AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES: SUBSIDY 15,00,000 SHARE APPLICATION MONEY 5,40,000 INTEREST DISALLOWED U/S 36(1)(III) (RS.31,04,517 + RS.1,76,117/-) 32,80,634 DISALLOWANCE OUT OF INDIRECT EXPENSES 1,10,60,408 UNSECURED LOANS 1 ,31,79,740 BONUS DISALLOWED 2,368 2.2 THE ASSESSEE FILED ITS APPEAL BEFORE THE CIT(A ) AND THE CIT(A) HAS DELETED THE ADDITION ON ACCOUNT OF SUBSIDY OF RS. 15 LACS, SHARE APPLICATION MONEY OF RS.5,40,000/- AND CONFIRMED THE REST OF THE DISALLO WANCE/ADDITIONS. THE ASSESSEE CHALLENGED BEFORE US THE DISALLOWANCE OF INTEREST, INDIRECT EXPENSES AND UNSECURED LOANS. 3 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESS EE FILED THE RELEVANT RECORDS IN SUPPORT OF ITS CLAIM. HE HAS REFERRED THE IMPUG NED ORDER OF THE CIT(A) AND SUBMITTED THAT THE CONFIRMATION LETTERS FILED BY TH E ASSESSEE WITH RESPECT TO THE UNSECURED LOANS WERE FORWARDED TO THE ASSESSING OFF ICER FOR HIS COMMENTS. THE ASSESSING OFFICER FILED HIS REMAND REPORT; BUT THE CIT(A) DID NOT CONSIDER THE REMAND REPORT AND CONFIRMED THE DISALLOWANCE/ADDITI ONS. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT WHEN THE ASSESSEE HAS F ILED THE CONFIRMATION LETTER 3 ITA NO. 1349/MUM/2010 (ASST YEAR 2005-06) FROM THE CO-OPERATIVE BANK WITH RESPECT TO THE UNSE CURED LOANS AS WELL AS INTEREST ON THE SAID UNSECURED LOAN, THEN THE DISAL LOWANCE OF THE CLAIM OF THE ASSESSEE IS IN TOTALLY DISREGARD TO THE EVIDENCES F ILED BY THE ASSESSEE. THUS, THE LD AR HAS PLEADED THAT ON THE BASIS OF THE EVIDENCE S FILED BY THE ASSESSEE, THE MATTER IS REQUIRED FRESH ADJUDICATION. 3.1 HE HAS REFERRED TO THE PAPER BOOK AND SUBMITTE D THAT THE ASSESSEE HAS FILED THE RELEVANT RECORDS BEFORE THE CIT(A) AS EVI DENT FROM THE PARTICULARS OF THE PAPER FILED BEFORE THE CIT(A) AT PAGE 5 OF THE PAPE R BOOK. HE HAS FURTHER SUBMITTED THAT THE CIT(A) DID NOT ADMIT THE EVIDE NCES FILED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FILED TWO SETS OF CONF IRMATIONS REGARDING THE UNSECURED LOANS FROM THE CO-OPERATIVE BANK. THE LD AR HAS SUBMITTED THAT DUE TO TIME GAP, THE ASSESSEE OBTAINED FRESH CONFIRMAT ION LETTERS FROM THE CO- OPERATIVE BANK WITH RESPECT TO THE UNSECURED LOAN A ND INTEREST ON THESE UNSECURED LOANS. 3.2 AS REGARDS THE OTHER EXPENSES, THE LD AR HAS SU BMITTED THAT DUE TO SOME PRACTICAL DIFFICULTIES AND SHORTAGE OF TIME, THE AS SESSEE COULD NOT FILE ALL THE VOUCHERS FOR VERIFICATION AND THE REASONS EXPLAINED BY THE ASSESSEE WAS NOT ACCEPTED BY THE LOWER AUTHORITIES. HE HAS FURTHER P OINTED OUT THAT THE PERCENTAGE OF THE EXPENSES TO THE TURNOVER/SALES IS VERY NOMINAL AND THEREFORE, THE SAME IS REQUIRED TO BE ACCEPTED. 3.3 THE LD DR, ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE DID NOT FILE THE EVIDENCE/MATERIAL IN SUPPORT OF THE CLAIM OF THE AS SESSEE; THEREFORE, THE 4 ITA NO. 1349/MUM/2010 (ASST YEAR 2005-06) ASSESSING OFFICER DISALLOWED THE VARIOUS EXPENSES A S WELL AS THE CLAIM OF UNSECURED LOANS. HE FURTHER SUBMITTED THAT THE ONU S IS ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES BY PRODUCING THE RELEVANT EVI DENCES. WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS CAST ON IT; THEREF ORE, THE ASSESSING OFFICER IS JUSTIFIED IN DISALLOWING THE EXPENSES. HE HAS RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. SINCE THE ASSESSMENT WAS PASSE D EX-PARTE U/S 143(3) R.W.S 144; THEREFORE, THE ASSESSEE FILED CERTAIN EVIDENCE S BEFORE THE CIT(A), WHICH WERE FORWARD TO THE ASSESSING OFFICER FOR HIS COMME NTS. WE FIND THAT THE ASSESSING OFFICER, IN THE REMAND REPORT HAS NOT GIV EN ANY CONCRETE FINDING OF FACTS AND LEFT ALL THE ISSUES ON THE DISCRETION OF THE CIT(A) WITHOUT EVEN EXPRESSING HIS OWN OPINION. THEREFORE, WE FIND TH AT THE REMAND REPORT IS TOTALLY NON-SPEAKING ON THE ISSUE FORWARDED FOR THE COMMENT OF THE ASSESSING OFFICER. THE CIT(A) DID NOT DECLINE TO ADMIT THE ADDITIONAL EVIDENCES IN THE SHAPE OF CONFIRMATION LETTER FILED BY THE ASSESSEE. THE REA SON FOR INCLINED TO ADMIT THE ADDITION EVIDENCE BY THE CIT(A) IS RECORDED AS TH E ASSESSEE FILED TWO DIFFERENT SETS OF CONFIRMATION LETTERS. SINCE BOTH THESE LETT ERS WERE FILED BEFORE THE CIT(A) AND THE CONTENTS OF THE LETTERS ARE SUBSTANTIALLY I DENTICAL; THEREFORE, THERE IS NO CONTRADICTION ABOUT THE MATERIAL FILED. WHEN BOTH T HE SETS OF CONFIRMATIONS LETTERS WERE ON RECORD, THEN IT SHOULD NOT BE A REA SON FOR NOT ADMITTING THE ADDITIONAL EVIDENCE. 4.1 SINCE THE MATTER HAS NOT BEEN PROPERLY EXAMINED BY THE ASSESSING OFFICER AS THE ASSESSMENT HAS BEEN FRAMED U/S 144 AND EVEN DURING THE REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS NOT GIVEN AN Y FINDING; THEREFORE, UNDER 5 ITA NO. 1349/MUM/2010 (ASST YEAR 2005-06) THESE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FI LE OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) A ND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRES H AFTER EXAMINING THE RELEVANT RECORDS RELIED UPON BY THE ASSESSEE. NEEDLES TO SAY , THE ASSESSING OFFICER SHOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. 5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 30 TH ,DAY OF JUNE 2011. SD/- SD/- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:30 TH , JUNE 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI