The ACIT, 1 (2), V. The Bhaskar Exxoils Ltd,

ITA 146/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2930 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: S S DESH

Judgement Text

PAGE 1 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAACB5809M I.T.A.NO. 145/IND/2009 A.Y. : 2005-06 ACIT BHASKAR INDUSTRIES LIMITED, 1(2), BHOPAL VS 6-DWARAKA SADAN, PRESS COMPLEX, M.P.NAGAR, BHOPAL. APPELLANT RESPONDENT PAN NO. : AAACB6091M I.T.A.NO. 146/IND/2009 A.Y. : 2005-06 ACIT BHASKAR EXXOILS LIMITED, 1(2), BHOPAL VS 6-DWARAKA SADAN, PRESS COMPLEX, M.P.NAGAR, BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI V.K.KARAN, SR. DR RESPONDENTS BY : SHRI S.S.DESHPANDE, C. A. DATE OF HEARING : 04.05.2010 PAGE 2 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED O R D E R PER V.K. GUPTA, A.M. THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN BOTH THESE APPEALS, THE ISSUE INVOLVED IS REGARD ING THE DECISION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 25 LAKHS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROPORTIONAT E INTEREST ON INTEREST FREE ADVANCE TO RELATED CONCERNS. 4. FOR THE SAKE OF READY REFERENCE, WE SHALL NARRATE T HE FACTS OF APPEAL IN I.T.A.NO. 145/IND/2009/ 5. THE FACTS, IN BRIEF, ARE THAT THE A.O. ANALYZED THE BALANCE SHEET OF THE ASSESSEE COMPANY AND NOTED THAT THERE WAS MI S-CLASSIFICATION OF HEADS, E.G. SUNDRY CREDITORS WERE SHOWN AS UNSECURE D LOAN AND LOANS AND ADVANCES GIVEN BY THE ASSESSEE WERE SHOWN UNDER THE GROUPS OF SUNDRY DEBTORS. THE A.O. FURTHER FOUND THAT THERE WERE SE VERAL ACCOUNTS IN THE NATURE OF LOANS AND ADVANCE TO THE GROUP CONCERNS, WHICH WERE ALSO SHOWN AS SUNDRY DEBTORS. THE A.O., THEREAFTER REQUI RED THE ASSESSEE TO PAGE 3 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED JUSTIFY ITS CLAIM OF ALLOWANCE OF INTEREST EXPENSES TO THE TUNE OF RS. 4,88,51,810/-. THE A.O. ALSO REQUIRED THE ASSESSEE TO SUBMIT FUND FLOW STATEMENT, ESPECIALLY WITH RESPECT TO ADVANCES GIVE N TO RELATED GROUP CONCERNS. THE ASSESSEE SUBMITTED THAT INTEREST EXPE NDITURE, IN THE YEAR UNDER CONSIDERATION , HAD GONE DOWN SUBSTANTIALLY A S COMPARED TO EARLIER YEAR AND THE ASSESSEE WAS ALSO HAVING CAPITAL, RESE RVES AND INTEREST FREE ADVANCES FROM GROUP CONCERNS. IT WAS ALSO STATED TH AT ADVANCES TO GROUP CONCERNS WERE PURELY OF TEMPORARY NATURE. THE A.O., HOWEVER, NOTED THAT THE ASSESSEE HAD NOT GIVEN EXACT DETAILS OF FUND FL OW RELATING TO INTEREST FREE ADVANCES TO THE RELATED CONCERNS AND IN VIEW O F THE FACT THAT THE ASSESSMENT WAS GETTING TIME BARRED, HE MADE AN AD H OC DISALLOWANCE OF RS. 25 LAKHS OUT OF TOTAL INTEREST EXPENDITURE AS I NCURRED FOR NON BUSINESS PURPOSES. AGGRIEVED BY THIS, THE ASSESSEE CARRIED T HE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSESSEE MAINLY REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. AND ALSO STATED TH AT TRADING RESULTS WERE BETTER AS COMPARED TO THE EARLIER YEARS. IT WA S ALSO PLEADED THAT THE FUNDS FROM THE FINANCIAL INSTITUTIONS WERE TAKEN FO R SPECIFIC PURPOSES, HENCE, THE SAME COULD NOT BE UTILIZED FOR GIVING AD VANCE TO GROUP CONCERNS. THE LD. CIT(A) HELD THAT THE A.O. HAD NOT AT ALL MADE OUT A CASE OF DISALLOWANCE AS THE ACTION OF THE A.O. APPE ARED TO BE ARBITRARY MAINLY BECAUSE THE ASSESSMENT WAS GETTING BARRED BY LIMITATION. THE LD. PAGE 4 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED CIT(A) ALSO HELD THAT UNLESS THERE WAS A CLEAR CASE OF DIVERSION OF FUNDS DULY ESTABLISHED BY THE ASSESSING OFFICER, THE ADDI TION COULD NOT BE MADE. THE LD. CIT(A) ALSO HELD THAT INTEREST OF RS. 1,82,49,083/- HAD BEEN PAID TO THE FINANCIAL INSTITUTION OF BORROWING S FOR SPECIFIC PURPOSES, HENCE, THERE COULD NOT BE ANY DIVERSION OF SUCH FUN DS. ACCORDINGLY, THE LD. CIT(A) DELETED THE ADDITION. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT PRESENT THE BALANCE SHEET IN A CORRECT MANN ER AND JUST TO HIDE THE REAL STATE OF AFFAIRS. IT WAS ALSO CONTENDED THAT T HE ASSESSEE DID NOT GIVE THE REQUIRED DETAILS OF FUND FLOW STATEMENT, SO AS TO ENABLE THE A.O. TO ESTABLISH THE NEXUS BETWEEN INTEREST BEARING FUNDS , BEING UTILIZED FOR MAKING INTEREST FREE ADVANCES TO GROUP CONCERNS. 7. THE LD. SR. DR ALSO CONTENDED THAT IF THE ORDER OF THE A.O. WAS NOT AS SCIENTIFIC IN THE GIVEN CIRCUMSTANCES, THE O RDER OF THE LD. CIT(A) WAS ALSO NOT CORRECT IN LAW AS WHATEVER SHORTCOMING S WERE NOTED BY THE LD. CIT(A) IN THE ASSESSMENT ORDER, COULD HAVE BEEN CORRECTED BY HIM AS THE LD. CIT(A) WAS HAVING POWERS CO-TERMINUS WITH T HAT OF THE A.O. 8. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE FACTS REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A) AND ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS :- PAGE 5 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED 1. 142 ITR 528 (MP) 2. 251 ITR 332 (MP) 3. 148 CTR 58 (MADRAS) 9. THE LEARNED COUNSEL CONTENDED THAT AS PER THESE JUD ICIAL DECISIONS, IT WAS INCUMBENT UPON THE A.O. TO ESTABL ISH THE FACT THAT INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INT EREST FREE ADVANCES. THE LEARNED COUNSEL FURTHER CONTENDED THAT CASH BOO K AND ALL THE DETAILS WERE FILED BEFORE THE A.O. HENCE, IT WAS NOT CORREC T TO SHOW THAT THE ASSESSEE DID NOT DISCHARGE ITS OBLIGATION TO CLAIM INTEREST EXPENDITURE. 10. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 11. IT IS NOTED THAT THE ASSESSEE HAS NOT SHOWN THE SUN DRY CREDITORS/LOAN TO GROUP CONCERNS UNDER THE PROPER H EADS. IT IS ALSO NOTED THAT THE ASSESSEE HAS INCURRED AN INTEREST EXPENDIT URE TO THE TUNE OF RS. 4.89 CRORES, WHEREAS THE LD. CIT(A) HAS TAKEN COGN IZANCE OF THE INTEREST PAID OF RS. 1.83 CRORES PAID TO FINANCIAL INSTITUTI ONS ONLY, WHICH MEANS THE ASSESSEE IS HAVING OTHER INTEREST BEARING BORRO WED FUNDS TO A SUBSTANTIAL EXTENT. IT IS ALSO NOTED THAT THE A.O. HAS MENTIONED THAT DUE TO MIS-CLASSIFICATION IN THE BALANCE SHEET, THE A.O. W AS NOT IN A POSITION TO FIND OUT EXACT AMOUNT OF LOANS AND ADVANCES GIVEN T O GROUP CONCERNS WITHOUT INTEREST. WE FURTHER FIND THAT EVEN SUCH DE TAILS HAVE NOT BEEN PAGE 6 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED FILED BEFORE THE CIT(A) NOR THE LD. CIT(A) HAS MADE ANY EFFORTS TO FIND OUT SUCH DETAILS. WE ALSO FIND THAT THE FUND FLOW S TATEMENT DEMANDED BY THE ASSESSING OFFICER HAS NOT BEEN FURNISHED BY TH E ASSESSEE NOR ANY DETAILS HAVE BEEN FURNISHED TO ESTABLISH THE PRIMA FACIE NEXUS BETWEEN THE INTEREST FREE FUNDS BEING UTILIZED FOR INTEREST FREE ADVANCES. WE ARE ALSO OF THE VIEW THAT CAPITAL, RESERVES AND OTHER I NTEREST FREE FUNDS IN THE LIABILITIES SIDE OF THE BALANCE SHEET CANNOT BE SAI D TO BE FREELY AVAILABLE TO THE ASSESSEE, UNLESS THESE ARE IN THE FORM OF LIQUI D ASSETS, SUCH AS CASH AND BANK BALANCES, WHICH HAVE BEEN ACTUALLY UTILIZED BY THE ASSESSEE IN MAKING OF SUCH ADVANCES, HENCE, THE FACT THAT THE A SSESSEE WAS HAVING RESERVES AND OWN FUNDS DOES NOT RENDER ANY ASSISTAN CE TO THE CAUSE OF THE ASSESSEE. WE ARE FURTHER OF THE VIEW THAT ULTIMATEL Y, THE A.O. HAS TO ESTABLISH THAT ASSESSEE IS NOT ENTITLED FOR ALLOWAN CE OF AN EXPENDITURE, HOWEVER, THE SAME CAN BE ESTABLISHED ONLY WHEN THE ASSESSEE FURNISHES THE REQUIRED DETAILS AND IF THE ASSESSEE FAILS TO D O SO, THEN, IN OUR HUMBLE OPINION AN ADVERSE INFERENCE CAN BE DRAWN AGAINST T HE ASSESSEE. WE ARE FURTHER OF THE VIEW THAT THE FACTS OF THE CASE DEMA ND THAT THIS ASPECT SHOULD BE EXAMINED IN DEPTH, SO AS TO ARRIVE AT PRO PER CONCLUSION. HENCE, WE RESTORE THIS ISSUE TO THE FILE OF A.O. TO EXAMIN E THE SAME AFRESH AND TAKE A VIEW THEREON AS PER LAW. IT IS NEEDLESS TO M ENTION THAT THE A.O. SHALL GRANT AN ADEQUATE OPPORTUNITY OF HEARING TO T HE ASSESSEE, WHO SHALL PAGE 7 OF 7 - I.T.A.NOS. 145 & 146/IND/2009 BHASKAR INDUSTRIES LIMITED PROVIDE THE REQUISITE DETAILS SO AS TO ENABLE THE A .O. TO COMPLETE THE PROCEEDINGS EXPEDITIOUSLY. THUS, THIS GROUND OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES IN BOTH THE APPEAL S. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH MAY, 2010. CPU* 4555