I.T.O Wd - 5(2),Kol., Kolkata V. M/s Polar Industries Ltd., Kolkata

ITA 1789/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78414 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 05-12-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JDIT
• Assessee Lawyers: MANISH TIWARI
• Keywords: Opportunity of being heard; Notional interest; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] ITA NO.1789/KOL/2012 ASSESSMENT YEAR : 2001-02 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-5(2), -VS- M/S.POLAR INDUSTRIES LT D., KOLKATA KOLKATA. (PAN : AABCP 7240 D) FOR THE APPELLANT SHRI SANJAY MUKHERJEE, JDIT, SR.DR FOR THE RESPONDENT SHRI MANISH TIWARI DATE OF HEARING : 15.07.2014 DATE OF PRONOUNCEMENT : 17. 07.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF LD. C.I.T.(A)- CENTRAL-II, KOLKATA DATED 04/07/2012 AND PERTAINS T O ASSESSMENT YEAR 2001-02. 2. THE GROUNDS OF APPEAL IN THIS APPEAL READ AS UN DER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD.CIT(A)ERRED IN LAW IN DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INT EREST PAYMENT TO THE EXTENT OF RS.34,18,026/- WITHOUT APPRECIATING THE FACT THAT T HE GENUINITY AND NECESSITY OF THE CLAIM COULD NOT BE ESTABLISHED BY THE ASSESSEE IN S PITE OF REQUISITION DURING THE ASSESSMENT PROCEEDINGS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) ERRED IN LAW IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF NOTIONA L INTEREST ON ADVANCE TO TUNE OF RS.7,62,917/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION ABOUT LOSING INTEREST ON THIS ADVANCE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) ERRED IN LAW IN DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF DEF ERRED REVENUE EXPENDITURE OF RS.54,44,881/- WITHOUT APPRECIATING THE FACT THAT N O DETAILS WERE FURNISHED BY THE ASSESSEE TO VERIFY THE GENUINENESS OF THE CLAIM BY THE ASSESSEE DURING THE ASSESSMENT STAGE. 4 .THAT THE APPELLANT CRAVES LEAVE TO ADD, DELETE O R MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. APROPOS GROUND NO.1 DISALLOWANCE OF INTEREST : ON THIS ISSUE THE AO OBSERVED THAT ON VERIFICATION OF POINT NO.B-5 OF NOTES ON T HE A/C ATTACHED WITH THE BALANCE ITA.NO.1789/KOL/2012 M/S.POL AR INDUSTRIES LTD.. A.YR.2001-02 2 SHEET AND P/L A/C. IT HAD GATHERED THAT DURING THE YEAR THE ASSESSEE DEBITED A SUM OF RS.34,18,026/- TO ITS P/L A/C. AS PER REQUISITION P OINT NO.27 THE ASSESSEE WAS ASKED TO SUBMIT FROM THE NOTES ON A/CS. (B-5) IT HAD GATH ERED THAT HE HAS DEBITED RS.34,18,026/- AS INTEREST FROM HIS P/L A/C IN THE REGARD FURNISH (I) WHAT WAS THE BASIS OF THIS CALCULATION AND (II) WHAT WAS THE NECESSITY OF THIS DEDUCTION. BUT TILL TODAY I.E. 31.03.04 THE A.R. OF THE ASSESEE DID NOT FURNISH AN Y DETAILS IN THIS REGARD. SO THE GENUINITY AND NECESSITY OF THE CLAIM CANNOT BE ESTA BLISHED BY THE ASSESSEE IN SPITE OF REQUISITION. NOT ONLY THAT IT CAN BE MENTIONED HERE THAT IN SPITE OF GETTING TIME OF NEARLY FIVE MONTHS THE ASSESSEE WAS UNABLE TO FURNI SH ANY DETAILS IN THIS REGARD. HENCE THE FULL AMOUNT IS DISALLOWED UNDER THIS HEAD. 4. UPON ASSESSEES APPEAL IN THIS REGARD THE LD. CI T(A) DELETED THE ADDITION HOLDING AS UNDER :- ON PERUSAL OF LETTER DATED 03.03.2004, IT IS OBSER VED THAT THE APPELLANT HAD FURNISHED AN EXPLANATION ABOUT THE CHARGING OF INTEREST TO THE P & L ACCOUNT. ACCORDING TO THE APPELLANT, THEREAFTER, NO FURTHER EXPLANATION WAS C ALLED FOR BY THE AO. ON PERUSAL OF SCHEDULE-20 OF THE P&L ACCOUNT, IT IS OBSERVED THAT IN THE PRECEDING ASSESSMENT YEAR ALSO THE APPELLANT HAD CLAIMED INTEREST ON ACCOUNT OF DEBENTURES AND TERM LOAN AND SAME WAS ALLOWED TO HIM. IN THE YEAR UNDER CONSIDERATION , THE VARIOUS TERM LOAN AND DEBENTURES HAD BEEN RESCHEDULED IN A MANNER THAT TH E RATE OF INTEREST HAD BEEN REDUCED TO 13.5%. IN ITEM NO.5 ON NOTES ON ACCOUNT, THE TAX AUDITOR MADE A SPECIFIC NOTE OF THIS ITEM AND STATED AS TO HOW INTEREST OF RS.34,18 ,026/- WAS CALCULATED AND DEBITED TO THE P&L ACCOUNT. I FIND NO REASON THAT THE GENUINIT Y OR THE NECESSITY OF THE CLAIM MADE BY THE APPELLANT COULD BE DOUBTED BECAUSE THE AFORE SAID AMOUNT OF INTEREST WAS CLAIMED BY THE APPELLANT ON ACCOUNT OF DEBENTURES AND TERM LOANS WHICH WAS ALSO CLAIMED AND ALLOWED TO THE APPELLANT IN THE EARLIER ASSESSMENT YEARS. IN VIEW OF ABOVE, I FIND NO REASON FOR DISALLOWANCE OF ENTIRE AMOUNT OF INTERES T. THE AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE BY HIM. THE GROUND NO.1 IS ALLOWE D. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE ABOVE ADDITION WAS MADE BY THE AO ON THE GROUND THA T THE ASSESSEE HAS NOT FURNISHED ANY INFORMATION. HOWEVER, THE LD. CIT(A) HAS GRANTE D RELIEF TO THE ASSESSEE ON THE PLEA THAT LETTER DATED 03.03.2004 WAS GIVEN TO THE AO GIVING NECESSARY DETAIL. THE LD. CIT(A) HAS MENTIONED THE MATTER SET OUT IN THE SAID LETTER. HOWEVER, NOWHERE IN THE ORDER OF THE LD. CIT(A) MENTIONED THAT THE LD. CIT( A) HAS MADE ANY FACTUAL ITA.NO.1789/KOL/2012 M/S.POL AR INDUSTRIES LTD.. A.YR.2001-02 3 VERIFICATION OF THE CONTENTS THEREIN. IN OUR CONSID ERED OPINION IF THE AO HAS NOT MADE NECESSARY EXAMINATION THE LD. CIT(A) IS BOUND TO MA KE EXAMINATION HIMSELF. WE NOTE THAT HONBLE APEX COURT IN THE CASE OF KAPOORCHAND SHRIMAL VS CIT 131 ITR 451 HAS HELD THAT IT IS THE DUTY OF THE APPELLATE AUTHO RITY TO CORRECT THE LACUNAE IN THE ORDERS OF THE AUTHORITIES BELOW AND IF IT IS REQUIRED TO R EMIT THE ISSUE TO THEM.. IN THESE CIRCUMSTANCES WE REMIT THIS ISSUE TO THE FILE OF TH E AO. THE AO IS DIRECTED TO EXAMINE THE VERACITY OF THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD. NEEDLESS TO ADD THE ASSESSEE MAY BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 6. APROPOS GROUND NO.2 : NOTIONAL INTEREST ON ADVAN CE : ON THIS ISSUE THE AO NOTED THAT A SUM OF RS.7,62,917/- WAS LYING WITH M/ S. SHEFFIELD APPLIANCES LTD. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAS MADE ADVAN CE TO M/S.SHEFFIELD APPLIANCES LTD. IN THE EARLIER YEARS AND BALANCE AMOUNT WAS LY ING WITH THEM. HOWEVER THE AO WAS NOT SATISFIED. HE MADE AN ADDITION OF NOTIONAL INTEREST ON THE ABOVE ADVANCE @12% AND ADDED RS.7,62,917/- TO THE INCOME OF THE A SSESSEE. 7. UPON ASSESSEES APPEAL THE LD. CIT(A) HELD THAT THERE WAS NO QUESTION OF CHARGING NOTIONAL AND HELD THAT IT IS ALSO AN ACCEP TED PRINCIPLE THAT TRADING ADVANCE DID NOT CARRY ANY INTEREST. HENCE THE LD. CIT(A) DELETE D THE ADDITION. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE ASSESSEE HAS MADE ADVANCE TO THE SAID PARTY AND HAS MADE PURCHASES FROM THE SAME. THE ADVANCE MADE WAS SUBSEQUENTLY ADJUSTED ALSO. IN THESE CIRCUMSTANCES WE AGREE WITH THE LD. CIT(A) IN HOLDING THAT NO NOTIONAL INT EREST WAS LIABLE TO BE CHARGED. WE NOTE THAT IT IS NOT THE CASE OF THE AO THAT THE ADV ANCE MADE BY THE ASSESSEE WAS NOT TRADE ADVANCE BUT LOAN ADVANCED. IT IS ALSO A SETTL ED LAW THAT IT IS THE REAL INCOME THAT IS TAXABLE AND NOT NOTIONAL INCOME. IN THESE CIRCUM STANCES WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 9. APROPOS GROUND NO.3 ADDITION ON ACCOUNT OF DEFE RRED REVENUE EXPENDITURE : IN THIS CASE THE AO HAS MADE A DISALLOWANCE OF RS.5 4,44,881/- ON ACCOUNT OF DEFERRED ITA.NO.1789/KOL/2012 M/S.POL AR INDUSTRIES LTD.. A.YR.2001-02 4 REVENUE EXPENDITURE ON THE GROUND THAT NO DETAIL WA S FURNISHED BY THE ASSESSEE. THE LD. CIT(A) DELETED THE ADDITION BY GIVING A FINDING THAT THE SAID AMOUNT WAS ALREADY ADDED BACK BY THE ASSESSEE IN THE COMPUTATION OF IN COME. THEREFORE THERE WAS NO NEED TO MAKE DISALLOWANCE AGAIN. 10. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION AND GAVE A FINDING THAT DISALLOWANCE ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE OF RS.54,44,881/- WAS ALREADY ADDED BACK BY THE ASSESSEE IN THE COMPUTATION OF INCOME. IN THESE CIR CUMSTANCES THE DISALLOWANCE MADE BY THE AO HAS RESULTED IN DOUBLE DISALLOWANCE, WHIC H CANNOT BE SUSTAINED. IN THESE CIRCUMSTANCES WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE S TANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 17.07.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 17.07.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.POLAR INDUSTRIES LTD., PODDAR POINT (8 TH FLOOR), 113-PARK STREET, KOLKATA- 700016. 2 I.T.O., WARD-5(2), KOLKATA. 3 . CIT(A)-CENTRAL-II, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA.NO.1789/KOL/2012 M/S.POL AR INDUSTRIES LTD.. A.YR.2001-02 5