DY.CIT, Circle-1(1), Hyderabad V. M/s Arani Agro Oil Industries Limited, Hyderabad

ITA 1869/HYD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6219 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 06-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Double taxation relief; Additional evidence; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA.NO.1869/HYD/2012 ASSESSMENT YEAR 2008-2009 DCIT, CIRCLE-1(1) HYDERABAD. VS. M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. PAN AADCA3601M (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. SUMAN MALIK FOR ASSESSEE : -NONE- DATE OF HEARING : 06.02.2017 DATE OF PRONOUNCEMENT : 10.02.2017 ORDER PER G. PAVAN KUMAR, J.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-V, HYDERABAD IN ITA.NO.195/DCIT 1(1)/CIT(A)-V/2012-2013 DATED 31.10.2012 PASSED UNDER SECTION 143(3) AND 250 OF THE I.T. ACT, 1961. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS.45,68,919 ON THE BASIS OF EVIDENCE PRODUCED BEFORE HIM ON THE ISSUE OF INTEREST EXPENDITURE STATED TO BE RELATING TO BANKS. 2. THE LD. CIT(A) OUGHT TO HAVE AFFORDED AN OPPORTUNITY TO THE ASSESSING OFFICER BEFORE ALLOWING RELIEF AS PROVIDED UNDER RULE 46 OF THE I.T. RULES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN THE BUSINESS OF REFINING AND SALE OF 2 ITA.NO.1869/HYD/2012 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. EDIBLE OILS AND HAS FILED THE RETURN OF INCOME ON 29.09.2008 WITH TOTAL INCOME OF RS.4,80,62,828 AND THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) ON 16.02.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED. IN COMPLIANCE TO THE NOTICE, THE LD. A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME BEFORE THE ASSESSING OFFICER AND SUBMITTED DETAILS AS CALLED FOR. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COMPANY HAS CLAIMED BAD DEBTS WRITTEN OFF RS.1,39,40,448 AND OUT OF THE SAID BAD DEBTS AN AMOUNT OF RS.5,32,680 PERTAINS TO THE EX-DIRECTOR OF THE COMPANY UNDER THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, THE COMPANY COULD NOT COMPLY THE CONDITIONS FOR ALLOWING THE BAD DEBTS AS SUCH AMOUNT SHOULD HAVE BEEN CONSIDERED AS INCOME IN EARLIER YEARS. HENCE, THE SAID AMOUNT OF RS.5,32,680 IS DISALLOWED. SIMILARLY AN AMOUNT OF RS.62,429 WAS DISALLOWED WHICH WAS PAID TO M/S. NCS INDUSTRIES LTD., WITHOUT DEDUCTING THE TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND THE LAST ADDITION MADE BY THE ASSESSING OFFICER WITH RESPECT TO FINANCE CHARGES PAID RS.2,22,67,326 IN THE NATURE OF INTEREST ON DELAYED PAYMENT ON PURCHASE OF RAW MATERIAL FROM SUPPLIERS LOCATED OUTSIDE INDIA IN SINGAPORE AND MALAYSIA. THE A.O. DEALT WITH THE PROVISIONS OF SECTION 195 OF THE ACT. THE ASSESSEE FILED LETTER DATED 28.12.2010 AND EXPLAINED THAT THE PROVISIONS OF SECTION 40(A)(IA) SHALL NOT APPLY TO SUCH PAYMENTS. THE ASSESSING OFFICER ALSO REFERRED TO THE DTAA WITH SINGAPORE & MALAYSIA IN RESPECT OF THE CONTRACTS ENTERED BY THE ASSESSEE COMPANY. BUT, THE ASSESSING OFFICER IS OF THE OPINION THAT THE INTEREST IS TAXABLE IN INDIA AND IS LIABLE TO TDS IRRESPECTIVE OF THE FACT THAT THE LETTER OF CREDIT WAS PROVIDED BY THE LOCAL BANK AND WITH THESE OBSERVATIONS, THE ASSESSING OFFICER 3 ITA.NO.1869/HYD/2012 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. DISALLOWED RS.2,22,67,326 AND PASSED ORDER UNDER SECTION 143(3) OF THE ACT DATED 31.12.2010. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. A.R. OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) CONSIDERED THE FACTS AND FINDINGS OF THE ASSESSING OFFICER DEALT AT PAGE 3 TO 5 OF ORDER IN RESPECT OF DTAA AGREEMENT WITH SINGAPORE & MALAYSIA AND OBSERVED THAT OUT OF INTEREST DISALLOWANCE OF RS.2,22,67,326, THE LD. CIT(A) FOUND RS.1,93,35,710 PERTAINS TO INTEREST PAYMENTS TO BANKS FOR PROVIDING LC AND THE REMAINING AMOUNT RS. 29,31,616 WAS PAID TO THE OTHER SUPPLIERS. FURTHER, THE LD. CIT(A) HAS DEALT ON THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF NON-APPLICABILITY OF TDS PROVISIONS AS PER THE DTAA AND FORWARDED COPY OF THE WRITTEN SUBMISSIONS TO THE ASSESSING OFFICER TO SUBMIT HIS COMMENTS. THE ASSESSING OFFICER VIDE LETTER DATED 22.06.2012 HAS FORWARDED A REPORT STATING THAT ASSESSEE COMPANY HAS FURNISHED INTEREST INVOICES FROM THE SUPPLIERS AMOUNTING TO RS.29,31,616 AND ALSO COMMERCIAL INVOICE, BANK STATEMENT, BANK ADVICE AND LETTER OF CREDIT FOR RS.1,93,35,710. THE ASSESSING OFFICER FURTHER STATED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON RS. 29,31,616 AND HAS NOT FURNISHED SUPPORTING DOCUMENTS TO THE EXTENT OF RS.53,19,139 OUT OF THE TOTAL INTEREST PAYMENTS OF RS.1,93,35,710. THE LD. CIT(A) HAS REFERRED TO THE REPORT SUBMITTED BY THE ASSESSING OFFICER AT PAGE NO.7 OF HIS ORDER. THE ASSESSEE WAS ALSO PROVIDED AN OPPORTUNITY TO MAKE COMMENTS ON THE REPORT. THE ASSESSEE WHILE SUBMITTING HIS COMMENTS ON THE REMAND REPORT HAS SUBMITTED THE DETAILS OF COPIES OF COMMERCIAL INVOICE, BANK STATEMENT, BANK ADVICE AND 4 ITA.NO.1869/HYD/2012 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. LETTER OF CREDIT. THE ASSESSEE IN APPELLATE PROCEEDINGS HAS SUBMITTED THE EVIDENCE OF COMMERCIAL INVOICES, BANK STATEMENT, BANK ADVICE AND LETTER OF CREDIT TOWARDS INTEREST PAYMENT OF RS.45,68,978 OUT OF THE TOTAL INTEREST PAYMENT OF RS.53,19,138 AND THE LD. CIT(A) HAS ALLOWED THE RELIEF TO THE EXTENT OF RS.45,68,978 AND THE REMAINING RS.7,50,160 WAS CONFIRMED AND WHEREAS IN RESPECT OF THE PAYMENTS OF RS.29,31,616 PAID TO THE SUPPLIERS, THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSEE COMPANY HAD NOT DEDUCTED TDS AND HAS AFFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE SAID ADDITION AND PARTLY ALLOWED THE APPEAL. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, LD. D.R. SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF TO THE EXTENT OF RS.46,68,919 BASED ON THE EVIDENCE PRODUCED IN RESPECT OF INTEREST EXPENDITURE BY THE ASSESSEE AND THE ASSESSING OFFICER WAS NOT PROVIDED THE SAID INFORMATION IN THE COURSE OF ASSESSMENT PROCEEDINGS AND WAS DEPRIVED TO VERIFY THE CLAIM AND ALSO VIOLATION OF PROVISIONS OF RULE 46A IN RESPECT OF ADDITIONAL EVIDENCE FILED BEFORE THE CIT(A) AND PRAYED FOR SETTING ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 5. PER CONTRA, LD. A.R. OF THE ASSESSEE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD. D.R. IS THAT THE CIT(A) HAS GRANTED RELIEF IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH FRESH EVIDENCE OF COMMERCIAL INVOICE, BANK 5 ITA.NO.1869/HYD/2012 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. STATEMENT, BANK ADVICE AND LETTER OF CREDIT FOR RS.45,68,978 IN ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER WAS DEPRIVED AN OPPORTUNITY TO VERIFY AND EXAMINE THE GENUINENESS OF THE TRANSACTION. WE FIND THE LD. CIT(A) THOUGH HAS CALLED FOR THE REMAND REPORT BUT HAS NOT FORWARDED THE COPY OF THE SUBMISSIONS ON REPORT FILED BY THE ASSESSEE IN THE COURSE OF APPELLATE PROCEEDINGS PERTAINING TO THE CLAIM OF RS.45,68,978 AND ASSESSING OFFICER WAS DEPRIVED TO EXAMINE THE EVIDENCE FILED, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER SHOULD BE PROVIDED AN OPPORTUNITY TO VERIFY AND VOUCH THE GENUINENESS OF THE TRANSACTION CLAIMED BY THE ASSESSEE. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND COMPLY THE PROVISIONS OF RULE 46A OF I.T. RULES AND REMIT THE DISPUTED ISSUE FOR THE LIMITED PURPOSE TO THE FILE OF THE ASSESSING OFFICER FOR THE VERIFICATION AND THE ASSESSEE SHOULD BE PROVIDED AN OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER ON MERITS. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.2017. SD/- SD/- (B. RAMAKOTAIAH) (G. PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 10 TH FEBRUARY, 2016 VBP/- 6 ITA.NO.1869/HYD/2012 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. COPY TO 1. DCIT, CIRCLE-1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. ARANI AGRO OIL INDUSTRIES LTD., FLAT NO.305-B, PANCOM BUSINESS CENTRE, AMEERPET, HYDERABAD. 3. CIT(A)-V, HYDERABAD. 4. CIT-1, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE.