Sharda Commercial Co. Ltd., Howrah V. ITO, Ward - 1(1), Kolkata, Kolkata

ITA 1657/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75040 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2011
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: S K TULSIYAN
• Keywords: Opportunity of being heard; Notional interest; Commercial expediency
• Section: 143(3); 133(6)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' ' ' ' / I.T.A NO. 1 657/KOL/2011 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR: 2006-07 SHARDA COMMERCIAL CO. LTD. VS. INCOME-TAX OFFIC ER, WD-1(1), KOLKATA. (PAN: AAECS4746A)) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 27.12.2013 DATE OF PRONOUNCEMENT: 30.01.2014 FOR THE APPELLANT: SHRI S. K. TULSIYAN FOR THE RESPONDENT: SHRI P. K. CHAKRABORTY, JCI T, SR. DR / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO. 231/CIT(A)-I/WD-1(1)/08-09 DATED 25.08.2011. ASSES SMENT WAS FRAMED BY ITO, WARD-1(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 12.12. 2008. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF BOGUS SUNDRY CRED ITORS AMOUNTING TO RS.99,84,733/-. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 1 A ND 2: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WELL AS ON THE FACTS IN CONFIRMING THE ADDITIONS OF RS.9984733/- ON THE ALLEGED GROUND OF BOGUS SUNDRY CREDITORS OF F.Y. 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05. 2. THAT THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WE LL AS ON THE FACTS IN NOT TAKING COGNIZANCE OF THE REPLY RECEIVED FROM THE SUNDRY CR EDITORS IN RESPONSE TO NOTICE U/S. 133(6) OF THE I. T. ACT, 1961, AND MERELY ON THE BA SIS OF SUSPICIOUS, SURMISES AND CONJECTURE, CONFIRM THE ADDITIONS MADE ON THIS ACCO UNT, WHICH IS UNJUSTIFIED AND NOT TENABLE IN LAW. 2 ITA NO. 1657/K/2011 SHARDA COMMERCIAL CO. LTD., AY:2006-07 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF IRON AND STEEL TRADING. DURING THE COURSE OF SCRUTINY ASSESSMENT A O REQUIRED THE ASSESSEE TO FILE THE DETAILS OF SUNDRY CREDITORS AS REFLECTED IN BALANCE SHEET TOTA LLING TO RS.99,84,733/-. THE ASSESSEE FILED THE DETAILS OF SUNDRY CREDITORS ALONG WITH THEIR PO STAL ADDRESSES. IN ORDER TO VERIFY THE GENUINENESS OF THE SUNDRY CREDITORS NOTICES U/S. 1 33(6) OF THE ACT WAS ISSUED BY THE AO. THE NOTICES RETURNED BACK BY THE POSTAL DEPARTMENT AS U NSERVED WITH THE REMARK ADDRESSEE NOT KNOWN. THE AR OF THE ASSESSEE COMPANY WAS AGAIN R EQUESTED TO SUPPLY THE ADDRESSES AND INCOMPLIANCE TO SAME, THE SUNDRY CREDITORS REPLIES WERE RECEIVED THROUGH POST. AS PER AO, HE NOTICED FROM THESE REPLIES OF THE SUNDRY CREDITORS THAT ALL THE ENVELOPES AND PRINTING FORMAT OF THE REPLIES WERE MADE IN A SIMILAR MANNER AND RESEM BLES AS IF ALL THE REPLIES WERE SENT BY A SINGLE PERSON. THE ASSESSEE ON FURTHER ENQUIRY FIL ED COPY OF LEDGER ACCOUNTS AND COPY OF THEIR INCOME TAX ACKNOWLEDGMENT BEFORE THE AO TO PROVE TH AT THESE ARE GENUINE SUNDRY CREDITORS. BUT THE AO WAS NOT SATISFIED AND HE MADE ADDITION O F THIS BOGUS SUNDRY CREDITORS. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DECIDE D THE ISSUE EX PARTE. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL, IT IS NOTICED THAT THE ORDER OF CIT( A) IS EX PARTE AND CIT(A) IS NOT SUPPOSED TO PASS EX PARTE ORDER BUT TO DECIDE ON MERITS AND MATERIAL AVAILABLE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE FIN D THAT THE CIT(A) HAS NOT GONE THROUGH THE DETAILS PROPERLY. HE JUST SIMPLY INFLUENCED BY TH E ASSESSMENT ORDER. FIRST OF ALL IT IS A FACT THAT THESE SUNDRY CREDITORS ARE OUTSTANDING AS ON 31.03. 2006 AND THESE SUNDRY CREDITORS ARE ON ACCOUNT OF SUPPLY OF MATERIALS I.E. IRON AND STEEL. THE ASSESSEE HAS ALSO FILED CONFIRMATIONS, DETAILS OF SUNDRY CREDITORS, DETAILS OF PURCHASES M ADE FROM FY 2005-06 RELATING TO THIS AY 2006-07. EVEN NOW BEFORE US ASSESSEE HAS FILED COM PLETE DETAILS OF SUNDRY CREDITORS WHICH ARE OUTSTANDING AS ON DATE. ADMITTEDLY, THESE SUNDRY C REDITORS ARE OUTSTANDING OUT OF THE PURCHASES MADE. THE ASSESSEE SUBMITTED THE TRANSACTION WITH THOSE SUNDRY CREDITORS WERE MADE IN THE FY 2003-04 AND THEREAFTER THERE WAS NO FURTHER BUSINES S WITH THOSE PARTIES AND THOSE SUNDRY CREDITORS WERE OUTSTANDING DUE TO DISPUTES. ONCE IT IS A FACT THAT THESE SUNDRY CREDITORS ARE OUTSTANDING AND ASSESSEE HAS NOT WRITTEN OFF THOSE CREDITORS, THESE CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE. ALL THE PARTIES HAVE CONFIRMED TH ESE SUNDRY CREDITORS U/S. 133(6) OF THE ACT AS NOTICES WERE ISSUED BY THE AO AS REPLIED BY THESE S UNDRY CREDITORS. ONCE THIS IS THE POSITION, 3 ITA NO. 1657/K/2011 SHARDA COMMERCIAL CO. LTD., AY:2006-07 THE SUNDRY CREDITORS CANNOT BE CONSIDERED AS BOGUS OR CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE. HENCE, WE DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASSESSEES APPEAL. 5. THE SECOND ISSUE IN REGARD TO THE ORDER OF CIT(A ) CONFIRMING THE ADDITION OF RS.2,11,200/- BEING INTEREST ON LOAN TO SISTER CONC ERN M/S. GANESH COMMERCIAL CO. AS WELL AS BUSINESS TRANSACTION WITH M/S. GANESH COMMERCIAL CO . ON ACCOUNT OF SUNDRY DEBTOR OF RS.3,55,975/-. WE FIND THAT THE AO HAS MADE THIS A DDITION BY CHARGING INTEREST OF RS.2,11,200/- ON A LOAN DEBTOR OF RS.17.60 LAC RECE IVABLE FROM M/S. GANESH COMMERCIAL CO. AS APPEARING AS OPENING BALANCE OF THE RELEVANT PREVIO US YEAR IN ITS BALANCE SHEET. AS THIS WAS OUTSTANDING AMOUNT, THE AO WAS OF THE VIEW THAT ON THIS AMOUNT ASSESSEE SHOULD HAVE CHARGED INTEREST. SIMILARLY, THE ASSESSEE COMPANY HAS SHOW N THE SAID PARTY AS SUNDRY DEBTOR FOR AN AMOUNT OF RS.3,55,975/- AS RECEIVABLE. THE ASSESSE E BEFORE THE AO CONTENDED THAT LOANS AND ADVANCES GIVEN TO M/S. GANESH COMMERCIAL CO., THE L OAN DEBTOR, IS A SISTER CONCERN OF THE ASSESSEE COMPANY AND NO INTEREST HAS BEEN CHARGED O N THE SAME. HENCE, AO CHARGED INTEREST @ 12% OF THE LOAN AMOUNT. AGGRIEVED, ASSESSEE PREFER RED APPEAL BEFORE CIT(A) AND HE DECIDED THE APPEAL EX PARTE BY STATING THAT THE ASSESSEE FA ILED TO PRODUCE BOOKS OF ACCOUNT AND DOCUMENTARY EVIDENCES CALLED FOR. AGGRIEVED, ASSES SEE CAME IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE COMPANY HAS NOT CHARGED I NTEREST ON THIS LOAN FOR THE REASON THAT DURING THE RELEVANT PREVIOUS YEAR THERE WAS A BUSIN ESS TRANSACTION TAKEN BETWEEN THE ASSESSEE COMPANY AND THIS LOAN DEBTOR M/S. GANESH COMMERCIAL CO., A SISTER CONCERN, AND ON THAT BASIS THE ASSESSEE HAS NOT CHARGED INTEREST. ONCE THERE IS COMMERCIAL EXPEDIENCY, THE ASSESSEE IS NOT SUPPOSED TO CHARGE INTEREST ON LOAN DEBTOR. HONBL E SUPREME COURT IN THE CASE OF S. A. BUILDER VS. CIT (2007) 288 ITR 1 (SC ) HAS HELD THE COMMERC IAL EXPEDIENCY AS UNDER: I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND ALSO THE ORDER OF THE A.O. AS SEEN FROM THE DETAILS FURNISHED BY THE APPELLANT THE AMOUNTS WERE ADVANCED TO WARRAN INDUSTRIAL LTD. (SIL) IN VIEW OF COMMERCIAL EXPEDIENCY. THE DECREASE IN ADVANCE NOTICED BY THE AO WAS ON ACCOUNT OF ADJUSTM ENTS MADE FOR THE DEBIT NOTICES RAISED BY WIL. THE AMOUNT OF ADVANCE WAS ADJUSTED TO THE EXPENDITURE ON BEHALF OF WIL. THE HONBLE ITAT IN THE CASE OF THE APPELLANT ON THE SAME ISSUE FOR THE EARLIER ASSESSMENT YEAR 1994-95, 1995-96 AND 1996-97 DECIDE D THAT IMPOSITION OF NOTIONAL INTEREST FOR ADVANCES MADE TO WIL IN THE SAME MANAG EMENT OF THE APPELLANT COMPANY DOES NOT WARRANT DISALLOWANCES AND UPHELD THE APPEL LANTS CONTENTION IN APPELLANTS FAVOUR. RELYING ON THE DECISION OF THE HONBLE ITA T AND ALSO THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF S. A. BUILDERS LTD. VS. CIT (APPEALS) 4 ITA NO. 1657/K/2011 SHARDA COMMERCIAL CO. LTD., AY:2006-07 (2007) 288 ITR (SC) 1, I DIRECT THE A.O. TO DELETE THE DISALLOWANCE. THIS GROUND OF APPEAL IS ALLOWED. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE CLAIM OF ASSESSEE. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.01.2 014 SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JANUARY, 2014 ./ #01 2 JD.(SR.P.S.) PRONOUNCED BY SD/- (A.P. GEORGE) SD/- (M. SINGH) AM JM 3 *4 5 4%6- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT SHARDA COMMERCIAL CO. LTD., 31, G. T. R OAD, (N), HOWRAH-711 101. 2 *+() / RESPONDENT ITO, WARD-1(1), KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 4:; *# / DR, KOLKATA BENCHES, KOLKATA +4 */ TRUE COPY, #