DCIT 5(2), MUMBAI V. MOVIES N MORE (INIDA) P. LTD, MUMBAI

ITA 1677/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8675 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 04-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Keywords: Opportunity of being heard
• Section: 68

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER & SHRI B.R. JAIN, ACCOUNTANT MEMBER I.T.A.NO. 1677/MUM/2010 ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF I.T. 5(2), MUMBAI. VS. M/S MOVIES N MORE (INDIA) PVT. LTD., 401, TRADE WORLD, B WING, KAMLA CITY, KAMLA MILL COMPOUND, LOWER PAREL, MUMBAI 400 013. PAN: AADCM 4804 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVIN VARMA. RESPONDENT BY : SHRI RAJKUMAR SINGH. DATE OF HEARING: 09-10-2012. DATE OF PRONOUNCEMENT: 09-10-2012. O R D E R PER B.R.JAIN, AM: THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 30-12-2009 OF LD. CIT(A)-9, MUMBAI RAISES THE FOLLOWING GROUND S: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,36,530/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES IGNORING I THE F ACTS THAT ASSESSEE DID NOT PRODUCE SUPPORTING PAPERS JUSTIFYING THE EX PENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF NET IN TEREST EXPENSES OF RS.47,74,7 16/- WITHOUT APPRECIATING THE FACT THAT THE INTEREST EXPENSES ARE BORNE FOR NON BUSINESS PURPOSE.. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING / DISALLOWANCE OF RS.6 ,00,000/- UNDER THE PROVISIONS OF SECTION 40(A)(IA) IGNORING THE FACTS THAT THERE WAS A SHORTFALL ON TDS DEDUCTED FROM M/S SHANKAR SALES PR OMOTION P LTD. AND HENCE DISALLOWED U/S 40(A)(IA). ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 2 OF 8 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5 6,25,000!- BEING UNACCOUNTED INTEREST RECEIPT WITHOUT APPRECIATING T HE FACT THAT INTEREST RECEIPT FROM CINEYUG FILMS P LTD WAS NOT R EFLECTED IN THE STATEMENT SHOWING NAMES OF PARTIES FROM WHOM INTERE ST WAS RECEIVED. 5. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3, 20,00,000!- U/S 68.OF THE L.T. ACT IGNORING THE DECISION OF V.I.S.P .(P) V/S CIT 136 TAXMAN 482 (M/P.) & NEMI CHAND KOTHARI V/S CIT 136 TAXMAN 213 (GAUH). 6. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CI T(A) BE SET ASIDE AND THE ORDER OF THE A.O. BE RESTORED. 2. IN GROUND NO.1 BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIMED ADMINISTRATIVE EXPENSES AMOUNTING TO RS.11,82,653/- . NO SUPPORTING PAPER JUSTIFYING THE EXPENSES WAS PRODUCED. IN ABSE NCE OF ANY INFORMATION, 20% OF THE ADMINISTRATIVE EXPENSES BEI NG RS.2,36,530/- STOOD DISALLOWED. THE LD. CIT(A) DELETED THE DISALL OWANCE CONSIDERING THAT THE SAME HAS BEEN MADE ON ADHOC BASIS. 3. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE ASSESSEES CLAIM BEFORE THE LD. CIT(A) WAS THAT HE HAS LAID SUFFICIENT DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM OF EXPENS ES. THE LD. CIT(A), HOWEVER, DID NOT CARRY OUT FACTUAL VERIFICA TION HIMSELF. THE AO HAS ALLOWED ESTIMATED DEDUCTION OF EXPENSES WITH RE LATION TO INCOME WHICH WAS IN CONFORMITY WITH THE DECISION OF THE HO N'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. S.P. NAYAK AND RAMESH M. (234 ITR 94) (KER). SINCE THE RESPONDENT ASSESSEE CLAIMED THAT T HE DOCUMENTARY EVIDENCE IS AVAILABLE, BUT THE SAME WAS NOT VERIFIE D BY EITHER OF THE AUTHORITIES BELOW, WE, THEREFORE, SET ASIDE THE ORD ER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE ASSESSING AUTHORIT Y FOR MAKING FACTUAL ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 3 OF 8 VERIFICATION AND TAKE DECISION AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING EFFECTIVE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 4. IN GROUND NO.2 IN APPEAL, THE ASSESSING AUTHORIT Y DISALLOWED NET INTEREST EXPENSES OF RS.47,74,716/- AS THE SAME WER E FOUND INCURRED FOR NON BUSINESS PURPOSES. 5. LD. CIT(A) FOUND THAT THE INTEREST EXPENSES INCU RRED BY THE APPELLANT ON BORROWED FUNDS ARE RS.1,63,53,630/-. I N THE CURRENT YEAR APPELLANT CREDITED RS.71,51,309/- ON ACCOUNT OF INC OME FROM BORROWED FUNDS TO THE PROFIT & LOSS ACCOUNT. HE HAS ALSO REC EIVED RS.92,02,332/- AS INTEREST THAT STANDS CREDITED TO THE INTEREST AC COUNT. THE ASSESSEE ITSELF IS SHOWN TO HAVE DISALLOWED AN AMOUNT OF RS. 23,42,565/- ON THE GROUND THAT THESE EXPENSES RELATE TO FUNDS USED FOR INVESTMENTS. ACCORDING TO THE LD. CIT(A) IF THE INCOME OF THE AS SESSEE FROM OPERATION FEES IS TAKEN INTO CONSIDERATION, THEN AS SESSEE CAN BE SAID TO HAVE EARNED INTEREST INCOME OF RS.23,76,593/-. SINC E THERE WAS NO EVIDENCE THAT THE ASSESSEE HAS NOT USED BORROWED FU NDS FOR THE PURPOSE OF BUSINESS, HE FOUND NO JUSTIFICATION IN A SSESSING OFFICERS HOLDING THAT THE ASSESSEE INCURRED NET INTEREST EXP ENSES OF RS.47,74,716/- FOR NON BUSINESS PURPOSES. 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. BOTH PARTIES ADMIT THAT THE ISSUE UNDER CONSIDERATION HAS NOT BE EN CONSIDERED BY THE AUTHORITIES BELOW IN RIGHT PERSPECTIVE AND SAME REQUIRES VERIFICATION OF FACTS AFRESH. THAT BEING SO, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE ASSESSI NG AUTHORITY FOR ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 4 OF 8 EXAMINATION AND VERIFICATION OF FACTS AND CLAIM OF THE ASSESSEE AFRESH AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AF TER AFFORDING EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 7. AS REGARDS GROUND NO.3, LD. CIT(A) DELETED THE D ISALLOWANCE OF RS.6 LACS U/S.40(A)(IA) OF THE ACT OUT OF INTEREST EXPENSES CLAIMED BY THE ASSESSEE. THE REASONING TAKEN BY THE LD. CIT(A) FOR DELETING THE DISALLOWANCE IS THAT THE ASSESSEE HAS DEDUCTED TDS AS PER CERTIFICATE ISSUED BY THE ITO TDS, WARD 59(3), KOLKATA AND THE AMOUNTS THEREOF ALSO STOOD DEPOSITED BY THE ASSESSEE. 8. THE LD. DR PLACED ON RECORD A LETTER DATED 5-10- 2012 STATING THAT THE REVISED CERTIFICATE OF TDS THAT HAS BEEN P LACED ON RECORD BY THE ASSESSEE BEFORE THE APPELLATE TRIBUNAL WAS, IN FACT, WAS NOT PLACED ON RECORD OF THE ASSESSING AUTHORITY. IN THESE CIRC UMSTANCES, THE AFFIDAVIT DATED 17-05-2012 FILED BY THE ASSESSEE UN DER LETTER DATED 9-7-2012 WITH THE TDS CERTIFICATE THAT DEDUCTION FO R LOW RATE ISSUED BY THE I. T. DEPTT. TO M/S SHANKAR SALES PROMOTION PVT . LTD., FORMED PART OF ACCOUNTING RECORDS OF THE COMPANY AND WAS PRODUC ED BEFORE THE DCIT (5), MUMBAI, FOR HIS VERIFICATION, IS APPARENT LY CONTRADICTORY AND AS SUCH THERE IS NO JUSTIFICATION FOR THE ORDER OF THE LD. CIT(A) IN ALLOWING THE GROUND ON THAT PREMISE. 9. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE LD. CIT(A) IS NOT SHOWN TO HAVE VERIFIED THE FACT AS TO WHETHER THE CERTIFICATE OF TDS ON THE BASIS OF WHICH RELIEF IS SHOWN TO HAVE BEEN GIVEN IS FACTUALLY A CORRECT AND RELIABLE DOCUMENT OR NOT. WE, ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 5 OF 8 THEREFORE, SET ASIDE HIS ORDER AND REMIT THE MATTER BACK TO THE ASSESSING AUTHORITY SO THAT REASONABLE OPPORTUNITY BE AFFORDED TO THE ASSESSEE TO ESTABLISH THAT THE CERTIFICATE ON THE B ASIS OF WHICH THE CREDIT IS SOUGHT WAS, IN FACT, CORRECT AND GENUINE CERTIFICATE ISSUED BY THE INCOME TAX DEPARTMENT TO M/S SHANKAR SALES PROM OTION PVT. LTD., AND THEREAFTER ADJUDICATE THE ISSUE AFRESH IN ACCOR DANCE WITH LAW. 10. IN GROUND NO.4 IN APPEAL BOTH THE PARTIES FAIRL Y ADMIT THAT THE FACTS HAVE NOT BEEN VERIFIED BY THE AUTHORITIES BEL OW BEFORE ADJUDICATING THE ISSUE NOR ALL THE ARGUMENTS MADE B Y THE ASSESSEE HAVE BEEN CONSIDERED IN RIGHT PERSPECTIVE. PARTIES, THEREFORE, HAVE AGREED THAT THIS ISSUE ALSO NEEDS TO BE SET ASIDE A ND REMITTED TO THE FILE OF THE ASSESSING AUTHORITY FOR ADJUDICATION AF RESH AFTER APPRECIATING CORRECT FACTS AND TAKE DECISION IN ACCORDANCE WITH LAW. WE DIRECT ACCORDINGLY. 11. IN GROUND NO.5 IN APPEAL, LD. CIT(A) DELETED TH E ADDITION OF RS.3,20,00,000/- MADE U/S 68 OF THE ACT IN RESPECT OF FOLLOWING SIX PERSONS: SR. NO. NAME AMOUNT 1 EMERALD COMMERCIAL LTD. 45,00,000 2 JACKSON INVESTMENT LTD. 40,00,000 3 KHOOBSURAT LTD. 20,00,000 4 RISORGIMENTO INDUSTRIAL CO.LTD. 20,00,000 5 SHRI NIDHI TRADING CO. LTD. 35,00,000 6 SUN METAL CASTING LLC 1,60,00,000 TOTAL 3,20,00,000 12. HEARD PARTIES WITH REFERENCE TO MATERIAL ON REC ORD. THE LD. CIT(A) DID NOT CONSIDER EACH OF THE AFORESAID CASH CREDIT INDIVIDUALLY, ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 6 OF 8 NOR DID HE FIND WITH RESPECT OF SUCH CREDIT AS TO W HETHER NATURE AND SOURCE THEREOF U/S. 68 HAS BEEN EXPLAINED TO THE SA TISFACTION OF THE ASSESSING AUTHORITY. ADMITTED THE FIRST APPELLATE A UTHORITY WAS UNDER OBLIGATION TO DECIDE ISSUE IN RESPECT OF EACH AND E VERY CREDITOR SEPARATELY. THIS VIEW FINDS SUPPORT FROM THE JUDGME NT RENDERED BY HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RATHORE R.S. (1995) 212 ITR 390 (RAJ). THE PARTIES ALSO FAIRLY A DMIT THAT FACTUAL VERIFICATION WITH RESPECT TO THE GENUINENESS OF THE SHARE CAPITAL AND EXPLANATION OF NATURE AND SOURCE OF EACH OF THE CAS H CREDIT HAS NOT BEEN CONSIDERED IN THE RIGHT PERSPECTIVE BY THE AUT HORITIES BELOW. WE, THEREFORE, ON THE CONCESSION BEING GRANTED BY THE P ARTIES, SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BA CK TO THE ASSESSING AUTHORITY SO THAT THE FACTUAL VERIFICATION IS DONE AFRESH AND DECISION TAKEN IN ACCORDANCE WITH LAW AFTER AFFORDING REASON ABLE AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, APPEAL STANDS ALLOWED FOR STATIS TICAL PURPOSES ONLY AS ANNOUNCED IN THE OPEN COURT IN THE PRESENCE OF P ARTIES ON 09-10-2012. SD/- SD/- (B.R.MITTAL) (B.R.JAIN) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI: 09/10/2012. P/-* ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 7 OF 8 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. ITA NO.1677 OF 2010 M/S MOVIES N MORE (INDIA) PVT.LTD. PAGE 8 OF 8