DCIT, Trivandrum V. M/s,Quilon Radio services, Trivandrum

ITA 171/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69063 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 03-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKARAN, AM I.T.A. NO. 171/COCH/2013 ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), TRIVANDRUM. VS. M/S. QUILON RADIO SERVICES, QRS BUILDING, M.G. ROAD, PULIMOODU JN., TRIVANDRUM. [PAN: AAAFQ 0563E] (REVENUE-APPELLANT) (ASSESSEE -RESPONDENT) REVENUE BY SMT. LATHA V. KUMAR, JR. DR ASSESSEE BY SHRI ANIL D. NAIR, ADV. DATE OF HEARING 03/09/2013 DATE OF PRONOUNCEMENT 13/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 7.1.2010 PASSED BY LD CIT(A), TRIVANDRUM AND IT RELATES TO THE ASSESSM ENT YEAR 2008-09. 2. THE REVENUE IS ASSAILING THE DECISION OF LD CIT( A) IN PARTIALLY DELETING THE DISALLOWANCE MADE FROM INTEREST EXPENDITURE DUE TO DIVERSION OF INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. 3. THE FACTS RELATING TO THE SAID ISSUE ARE DISCUSS ED IN BRIEF. THE ASSESSEE IS A DEALER IN HOUSEHOLD ARTICLES. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS BY ADV ANCING INTEREST FREE FUNDS TO THE FOLLOWING PERSONS:- ABHIMANYU GANESH 8,64,601 AJITH RAGHAVAN 3,24,909 HINDU NADAR URAVU MURAI SANGHAM 1,20,000 ARAS DURAISWAMY NADAR & SONS 26,73,711 I.T.A. NO. 171/COCH/2013 2 THE AO COMPUTED THE INTEREST EXPENDITURE RELATABLE TO THE ABOVE FUNDS AT RS.4,77,986/- AND DISALLOWED THE SAME. IN THE APPELLATE PROCEEDI NGS, THE LD CIT(A) CONFIRMED THE DISALLOWANCE RELATING TO FUNDS GIVEN TO ABHIMANYU G ANESH AND AJITH RAGHAVAN AND DELETED THE BALANCE AMOUNT RELATING TO THE REMAINING TWO AD VANCES. IN THIS REGARD, THE ASSESSEE HAD SUBMITTED BEFORE LD CIT(A) THAT THE ADVANCES ST ANDING IN THE NAME OF HINDU NADAR URAVU MURAI SANGHAM AND ARAS DURAISWAMY NADAR & SON S WERE EXISTING IN THE EARLIER YEARS ALSO. HENCE, THE LD CIT(A), BY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEVI ENTERPRIES (19 91)(192 ITR 165)(KAR), HELD THAT THE REVENUE IS NOT ENTITLED TO CHANGE ITS STAND, WHEN I T DID NOT MAKE ANY SUCH DISALLOWANCE IN THE EARLIER YEAR. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. THE LD A.R SUBMITTED THAT THE ASSESSEE IS HAVING CAPITAL BALANCE OF ABOUT RS.3.97 CRORES AND THE FIRM IS NOT PAYING ANY INTEREST THEREON. F URTHER THESE TWO BALANCES WERE BROUGHT FORWARD FROM EARLIER YEARS ACCOUNT, WHEREIN NO SUCH DISALLOWANCE WAS MADE. HE ALSO SUBMITTED THAT THERE IS NO PROOF TO SHOW THAT THE A SSESSEE HAS ADVANCED INTEREST FREE FUNDS TO THESE TWO CONCERNS. FURTHER BOTH THESE ACCOUNTS HAVE CURRENT ACCOUNT TYPE TRANSACTIONS CONSISTING OF BOTH DEBIT AND CREDIT EN TRIES. ACCORDINGLY, HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANC E RELATING TO THESE TWO ADVANCES. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE A SSESSEE HAS FAILED TO SHOW THAT THE ADVANCES GIVEN TO THESE TWO CONCERNS WERE SOURCED O UT OF INTEREST BEARING FUNDS. THE LD D.R, BY PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.V.I.BABY & CO. (254 ITR 248), CONTENDED THAT THE AO WAS JUSTIFIED IN MAKING THIS DISALLOWANCE. SHE FURTHER CONTENDED THAT THE ASSES SEE HAS FAILED TO DEMONSTRATE ABOUT THE COMMERCIAL EXPEDIENCY IN MAKING THESE ADVANCES AS H ELD BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS. CIT (288 ITR 1). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE ADMITTED FACTS ARE THAT THE ADVANCES TO HINDU NADAR URAVU MU RAI SANGHAM AND ARAS DURAISWAMY NADAR & SONS WERE MADE IN THE EARLIER YEARS AND FUR THER THE AO DID NOT MAKE ANY DISALLOWANCE OF INTEREST EXPENDITURE IN THOSE YEARS . HENCE, WE NOTICE THAT THE LD CIT(A) HAS GRANTED RELIEF ON THAT GROUND. HOWEVER, IT IS NOT KNOWN WHETHER THE ASSESSMENT OF EARLIER YEARS WERE COMPLETED U/S 143(3) OR WHETHER THE RETURN OF INCOME OF THE ASSESSEE I.T.A. NO. 171/COCH/2013 3 WAS ACCEPTED U/S 143(1) OF THE ACT. IN OUR VIEW, TH E RATIO OF THE DECISION LAID DOWN BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEVI ENTERPRISES (SUPRA) MAY APPLY, ONLY IF THE AO HAS APPLIED HIS MIND ON THE VERY SAM E ISSUE IN THE EARLIER YEARS AND TAKEN A PARTICULAR STAND. WE MAY CAUTION HERE THAT THE AO IS VERY MUCH ENTITLED TO CHANGE THE STAND IN VIEW OF THE SUBSEQUENT CHANGE IN LAW OR IN VIEW OF SUBSEQUENT LEGAL DECISIONS. IT IS ALSO SETTLED PROPOSITION OF LAW THAT THE PRINCIPLE OF RESJUDICATA SHALL NOT APPLY TO INCOME TAX PROCEEDINGS. HENCE, EACH CASE REQUIRES TO BE EXAMI NED ON THE BASIS OF LAW AND FACTS PREVAILING ON THE RELEVANT DATE AND ACCORDINGLY, IN OUR VIEW, ONE CANNOT LAY DOWN STATIC PROPOSITION ON ANY ISSUE. IN THE INSTANT CASE, AS S TATED EARLIER, THE FACTS RELATING TO EARLIER YEARS WERE NOT BROUGHT ON RECORD AND HENCE, WE ARE UNABLE TO AGREE WITH THE VIEW EXPRESSED BY LD CIT(A). 7. WE NOTICE THAT THE LD CIT(A) HAS GIVEN A FIN DING THAT THESE ADVANCES HAVE BEEN GIVEN IN THE EARLIER YEARS. HOWEVER, THE LD CIT(A) IS RECOGNIZING THE CAPITAL BALANCE AS ON 1.4.2007 TO HOLD THAT THE ASSESSEE WAS HAVING SUFFI CIENT BALANCE OF INTEREST FREE FUNDS. IN OUR VIEW, THE LD CIT(A) SHOULD HAVE EXAMINED THE FU ND POSITION OF THE ASSESSEE AS ON THE DATE OF GIVING OF THE IMPUGNED ADVANCES. 8. HOWEVER, THE STAND OF THE ASSESSEE IS THAT T HESE TWO ACCOUNTS HAVE CURRENT ACCOUNT TYPE RUNNING TRANSACTIONS CONSISTING OF BOTH DEBITS AND CREDITS. IF IT IS TO BE SO, WE ARE UNABLE TO UNDERSTAND AS TO HOW THE AO HAS QUANTIFIE D THE AMOUNT OF ADVANCE GIVEN TO THESE TWO CONCERNS. BOTH THE PARTIES HAVE FAILED TO FURN ISH COPIES OF ACCOUNT OF BOTH THE PARTIES. HENCE, WE ARE UNABLE TO EXAMINE THIS ASPECT OF THE SUBMISSIONS MADE BY THE ASSESSEE. 9. IN THE ABSENCE OF PROPER DETAILS, THE TRIBUN AL IS UNABLE TO EXPRESS ANY OPINION ON THIS ISSUE. ACCORDINGLY, IN OUR VIEW, THIS ISSUE REQUIR ES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE IS SUE AFRESH BY DULY CONSIDERING THE DISCUSSIONS MADE SUPRA. THE ASSESSEE IS ALSO DIREC TED TO FURNISH NECESSARY INFORMATION/EXPLANATIONS THAT MAY BE CALLED FOR BY THE AO. I.T.A. NO. 171/COCH/2013 4 10. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 13- 11-2013. SD/- SD/- (N.R.S.GANESAN) (B. R.BASKARAN) JUDICIAL MEMBER ACCOUNTA NT MEMBER PLACE: KOCHI DATED: 13TH NOVEMBER, 2013 GJ COPY TO: 1. M/S. QUILON RADIO SERVICES, QRS BUILDING, M.G. R OAD, PULIMOODU JN., TRIVANDRUM. 2.THE DEPUTY/ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), TRIVANDRUM. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDRU M. 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN