DCIT, Central Circle - 2, Hyderabad V. M/s Ambience Properties Ltd., Secunderabad

ITA 21/HYD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6620 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: RAJIV DAVE
• Keywords: Search and seizure; Source of fund; Proportionate interest
• Section: 142(1); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMB ER ITA NO.21/HYD/2011 : A SST. YEAR: 2007-08 DCIT, CENTRAL CIR-2, HYDERABAD. VS M/S. AMBIENCE PROPERTIES LTD., S.D. ROAD, SECUNDERABAD. (PAN: AABCA 7248 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KVN CHARYA, DR RESPONDENT BY : SHRI RAJIV DAVE O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE CIT (A)-I, HYDERABAD DATED 27-10-2010 AND IT PER TAINS TO THE ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT I N THE BUSINESS PREMISE OF THE ASSESSEE COMPANY ON 9-1`0-20076. ACCORDING LY, NOTICE UNDER SECTION 153A OF THE ACT DATED 18-12-02008 WAS ISSU ED TO THE ASSESSEE COMPANY FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08. IN RESPONSE TO THE NOTICE THE ASSESSEE COMPANY HAS FILED ITS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 16-1-2009 BY ADMITTING TOTAL INCOME OF RS.1,04,54,829/- AND SUBSEQUENTLY NOT ICE UNDER SECTION ITA NO.21/HYD/2011 AMBICA PROPERTIES LTD .,SECUNDERABAD. ========================= 2 143(2) DATED 7-8-2009 AND UNDER SECTION 142(1) DATED 9-10-2009 WAS ISSUED TO THE ASSESSEE COMPANY WHERE CERTAIN INFORMATION W AS CALLED FOR THE PURPOSE OF ASSESSMENT. AFTER ANALYZING THE TOTAL IN VESTMENT MADE BY THE ASSESSEE, THE ASSESSING OFFICER CAME TO THE CONCLUSION T HAT THE ASSESSEE COMPANY HAD UTILIZED RS.8,98,13,500/- FROM OUT O F THE BORROWED FUND TOWARDS INVESTMENT IN THE EQUITY SHARES O F THE SISTER CONCERNS AND SUBSIDIARY AND HE WAS THEREFORE OF THE VIEW THAT PROPORTIONATE INTEREST CHARGED ON THE BORROWED FUNDS W OULD NOT QUALIFY FOR DEDUCTION UNDER SECTION 36(I)(III) OF THE ACT AND T HE ASSESSING OFFICER WORKED OUT THE PROPORTIONATE INTEREST AT RS.32,33,286 /- AND DISALLOWED THE SAME WHILE COMPLETING THE ASSESSMENT. AGGRIEVED AGA INST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) AFTER D ISCUSSING ELABORATELY IN HIS ORDER DIRECTED THE ASSESSING OFFICER TO DISALLOW IN TEREST PROPORTIONATELY ONLY ON RS.50 LAKHS FOR THE LOAN TAKE N FROM PLATINUM PROPERTIES ON 30-3-2007 WHICH IS DIRECTLY LINKED WITH T HE INVESTMENT IN SOME OF THE EQUITY SHARES AND INTEREST DISALLOWANCE IS NO T CALLED FOR IF THE CUSTOMER ADVANCE OF RS.84 LAKHS IS DULY REFLECTED IN T HE ACCOUNT BY THE ASSESSEE. ACCORDINGLY, HE ALLOWED THE APPEAL OF THE A SSESSEE IN PART. AGGRIEVED BY THE FINDINGS AND THE DECISION OF THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT (A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.32,33,286/- MADE UNDER THE HEAD DISALLOWANCE OF INTEREST ON BORROWED F UNDS AND HE SHOULD NOT HAVE CONSIDERED THE PLEA OF THE ASSESSEE THAT T HE TRANSACTIONS ARE TO BE INTERLINKED TO DAY TO DAY BASIS. IT IS FURTHER CONTENDED THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THAT IT IS THE TAX AVOIDANCE TECHNIQUE FOLLOWED BY THE ASSESSEE COMPANY BY IN VESTING THE ITA NO.21/HYD/2011 AMBICA PROPERTIES LTD .,SECUNDERABAD. ========================= 3 BORROWED FUNDS IN EQUITY SHARES OF SISTER CONCERN. IT IS FU RTHER SUBMITTED THAT THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSE SSING OFFICER TO VERIFY THE NEXUS BETWEEN THE UNSECURED LOANS OBTAINED B Y THE ASSESSEE COMPANY WHICH WAS PLACED FOR INVESTING THE SHARES OF THE SISTER CONCERN. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE BY PASSING A SPEAKING ORDER AFTER GETTING A REMAND REPOR T FROM THE ASSESSING OFFICER. IT IS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS TAKEN THE FINANCIAL POSITION OF THE COMPANY AS ON LAST DAY OF THE FINANCIAL YEAR I.E., 31-3-2007 TO SUBSTANTIATE HIS CONT ENTION THAT UNSECURED LOAN OBTAINED BY THE ASSESSEE COMPANY WAS UTILIZ ED FOR INVESTING IN EQUITY SHARES OF SISTER CONCERNS. THE BALANCE SHEET IS ONLY A STATEMENT OF THE FINANCIAL POSITION OF THE COMPANY AS ON A GIVEN DATE. THE FINANCIAL POSITION OF THE COMPANY CHANGES EACH DAY I N THE LIGHT OF THE TRANSACTIONS THAT TAKES PLACE THROUGH OUT THE YEAR A ND THE IMPORTANT ASPECT IS LIMITED TO WHETHER THE UNSECURED LOAN ON WHICH INTEREST WAS PAID WAS UTILIZED FOR INVESTING IN THE SHARES OF THE COM PANY. THE ASSESSEE HAS ALREADY SUBMITTED THE STATEMENT WHICH DIRECTLY CORRELATES WITH THE INVESTMENT MADE WITH THE SOURCE OF FUND. TH E BANK STATEMENT SUBMITTED CORROBORATES THESE CONTENTIONS. AS PER THE SAID BANK STATEMENT, AGGREGATE INVESTMENT IN SHARES OF GROUP COMP ANIES MADE DURING THE RELEVANT ASSESSMENT YEAR OF RS.8,98,13,500/- WAS MADE FROM (1) REFUND OF LOAN GIVEN BY THE COMPANY I.E. M /S PLATINUM PROPERTIES PVT. LTD/. AT RS.4,00,00,000/-, M/S SONAR SHELTERS LIMITED AT RS.3,00,00,000/- AND DAKSHIN SHELTERS PVT. LIMITED AT RS.1,30,00,000 (II) RECEIPT FROM CUSTOMERS AS ADVANCE MR. SUDHIR AT RS.8 4,00,000 AND ITA NO.21/HYD/2011 AMBICA PROPERTIES LTD .,SECUNDERABAD. ========================= 4 (III) UNSECURED LOAN RECEIVED FROM PLATINUM PROPERTIES PVT. LIMITED I.E. PLATINUM PROPERTIES PVT. LTD., AT RS.50,00,000/-. IT IS FURTHER CONTENDED THE ASSESSING OFFICER CANNOT TAKE THE FINANCIAL POSITION O F 31 ST MARCH AS THE BASIS FOR DISALLOWING INTEREST AND HE HAS NOT ESTABLI SHED THAT THE UNSECURED RECEIVED DURING THE YEAR WAS UTILIZED FOR MAK ING INVESTMENTS IN GROUP COMPANIES. IN FACT, THE ASSESSEE HAS DURING THE ASSESSMENT PROCEEDINGS, INTERLINKED THE TRANSACTION OF INVESTMENT M ADE BY IT WITH THE SOURCE OF FUND FROM WHICH SUCH INVESTMENT WAS MADE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSIN G OFFICER IS NOT CORRECT IN TAKING THE FINANCIAL POSITION OF 31 ST MARCH AS THE BASIS FOR DISALLOWING THE INTEREST. HOWEVER, THE ASSESSING OFFICER A PPEARS TO HAVE NOT VERIFIED, DURING THE COURSE ASSESSMENT PROCEEDINGS, WHE THER THE UNSECURED LOANS RECEIVED BY THE ASSESSEE COMPANY DURING TH E YEAR UNDER CONSIDERATION WERE UTILIZED FOR MAKING INVESTMEN TS IN GROUP COMPANIES ON TRANSACTION TO TRANSACTION BASIS. THE ASSESSIN G OFFICER HAS SIMPLY FOLLOWED THE YEAR ENDING FINANCIAL POSITION OF THE ASSESSEE COMPANY WITHOUT INTER-LINKING THE TRANSACTION MADE BY THE ASSESSEE COMPANY WITH THE SOURCE OF FUNDS FROM WHICH SUCH INVESTMENT S WERE MADE. IN VIEW OF THE ABOVE, IN THE INTEREST OF JUSTI CE, WE FEEL IT PROPER AND JUST TO RESTORE THE ENTIRE ISSUE TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH CONSIDERATION WITH DIRECTION TO VERIFY THE INTER -LINKAGE BETWEEN THE TRANSACTION OF INVESTMENT MADE BY THE ASSESSEE COMPANY WITH THE SOURCE OF FUNDS FOR WHICH SUCH INVESTMENT WAS MADE. ITA NO.21/HYD/2011 AMBICA PROPERTIES LTD .,SECUNDERABAD. ========================= 5 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 30-6-2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/-30-06-2011. COPY FORWARDED TO: 1. 2. DCIT, CENTRAL CIRCLE-2, HYDERABAD. M/S. AMBIENCE PROPERTIES LIMITED, 810 TO 818, SWAPNALO K COMPLEX, 92/93, S.D. ROAD, SECUNDERABAD. 3. 4. 5. JMR* CIT (A)-I, HYDERABAD. CIT, AP, HYDERABAD. THE DR, ITAT, HYDERABAD.