Income Tax Officer, Ward-3(2), Hyderabad V. Real Agro Industries Private Limited , Medchal

ITA 2143/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5237 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V RAJITHA
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Proportionate interest; Additional evidence; Notional interest; TDS
• Section: 40A(3); 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 2143 /HYD/201 8 ASSESSMENT YEAR: 20 13 - 14 INCOME - TAX OFFICER, WARD 3( 2 ), HYDERABAD. VS. REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL. PAN AA ECR 5140 D (APPELLANT) (RESPONDENT) REVENUE BY : S MT. V. RAJITHA ASSESSEE BY : SHRI C.P. RAMASWAMI DATE OF HEARING : 02 - 0 5 - 201 9 DATE OF PRONOUNCEMENT : 15 - 0 5 - 201 9 O R D E R PER S. RIFAUR RAHMAN, A.M. : T H IS APPEAL OF THE REVENUE IS DIR ECTED AGAINST THE ORDER OF CIT(A) 3 , HYDERABAD, DATED 1 0 /0 8 /201 8 FOR AY 20 13 - 14 . 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE COMPANY , ENGAGED IN MANUFACTURING OF BISCUITS AND CAKES, FILED ITS RETURN OF INCOME FOR THE AY 20 13 - 14 ON 26/09/2013 DECLARING A TOTAL LOSS OF 64,42,368/ - . THE AO COMPLETED THE ASSESSMENT U/S 143(3) BY ASSESSING TOTAL INCOME OF RS. 54,06,315/ - BY MAKING FOLLOWING ADDITIONS : 1. ADDITION OF RS. 8,02,911/ - TOW ARDS REIMBURSEMENT OF EXPENDITURE AND SCRAP SALE NOT DECLARED AS INCOME. 2. ADDITION OF RS. 46,19,934/ - TOWARDS RECONCILIATION OF CONVERSION CHARGES. 3. DISALLOWANCE OF INTEREST RS. 19,43,704/ - PAYABLE TO BRITANNIA INDUSTRIES. 4. ADDITION OF RS. 3,21,206/ - TOWARDS VIOLATION OF PROVISIONS OF SECTION 40A(3). 2 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . 5. DISALLOWANCE OF RS. 9,05,145/ - TOWARDS PRODUCTION INCENTIVE U/S 40(A)(IA). 6. DISALLOWANCE OF RS. 1,53,545/ - TOWARDS CONSULTANCY CHARGES. 7. DISALLOWANCE OF RS. 31,02,238/ - TOWARDS NOTIONAL INTEREST ON INVESTMENT IN LAND AND CURRENT WIP. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFO RE THE CIT(A), THE ASSESSEE SUBMI TTED GROUND - WISE AS UNDER: 4.1 AS REGARDS ADDITION OF RS 3,42,421/ - , THE ASSESSEE SUBMITTED THAT THE LEARNED A.O. GROSSLY ERRED IN MAKING AN ADDITION OF UNCLAIMED EXPENDITURE OF RS.3,42,421/ - (FULLY REIMBURSED AND N O T DEBITED TO P&L ACCOUNT). IT WAS SUBMITTED THAT THIS AMOUNT RELATES TO UNLOADING CHARGES AND T HIS AMOUNT WAS FULLY REIMBURSED BY BRITANNIA IND USTRIES LTD. THE A.O. FELT THAT THE ASSESSEE 'NEED NOT PAY' SUCH UNLOADING CHARGES. FIRSTLY, WE F IND THAT THIS AMOUNT IS NOT DEBITED TO THE P & L ACCOUNT. THEREFORE, THE ADDITION OF THE SAME HAS TO BE DELETED . 4.2 AS REGARDS THE ADDITION OF RS. 4,60,490/ - , THE ASSESSEE SUBMITTED THAT THIS ADDITION HAS TO BE SPLIT INTO TWO AMOUNTS OF RS.2,27,026 / - AND RS.2,33,414/ - . THE SUM OF RS.2,26,076/ - WAS ALREADY I NCLUDED UNDER SALE OF PRODUCTS AS PRESENTED IN THE PROFIT AND LOSS ACCOUNT VIDE SCHEDULE 3,1 AT PAGE 20 O F THE PAPER BOOK. THE BALANCE AMOUNT OF RS.2,33,414/ - WAS CAPITALIZED BY REDUCING THE ERECTION CHARGES (VIDE PAGE 19 OF THE PAPER BOOK). DETAILED EXPLANATION I N THIS REGARD WAS FILED BY LETTER DATED 28.03.2016 AT PAGES 101 ONWARDS IN THE PAPER BOOK. THE CO NCLUSION OF THE A O VIDE PARA 3 OF THE I MPUGNED ORDER IS FACTUALLY I NCORRECT. CONSEQUENTLY, THE A SSESSEE SUBMIT TED THAT THIS ARBITRARY ADDITION HAS TO BE DELETED. 3 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . 4.3 AS REGARDS THE ADDITION OF RS. 46,19,934/ - , THE ASSESSEE SUBMITTED THAT AO GROSSLY ERRED IN ADDING A SUM OF RS.46,19,934 / - TREATING THE LOAN AMOUNT RECEIVED FROM M / S. B R I TANNIA INDUSTRIES LTD. AS CONVERSION CHARGES WHEN THE CONVERSION CHARGES WERE FULLY AC COUNTED FOR. FURTHER, IT WAS SUBMITTED THAT MERE WRONG DEDUCTION OF THE TAX AT SOURCE U/S. 1 94C DOES NOT MAKE A LOAN AMOUNT INTO CONVERSION CHARGES . ASSESSEE ALSO SUBMITTED THAT T HE LEARNED A.O. FAILED TO APPRECIATE THAT M / S. BR I TANN I A INDUSTRIES LIMITED CONFIRMED THE LOAN DISBURSED AS SUCH AND LATER RECOVERY OF THE LOAN AGAINST CONVERSION CHARGES DOES NOT CONVERT SUCH JOAN AMOUNT I NTO CONVERSION CHARGES. CONSEQUENTL Y , HE ERRED I N MAKING THIS ADDITION AGA I NST L AW AND FACTS ON RECORD. 4.4 AS REGARDS THE DISALLOWANCE OF A SUM OF RS,19,43,704/ - , THE ASSESSEE SUBMITTED THAT T HE A. O. CONVENIENTLY IGNORED AL L THE EXPLANATION AND WRITES THAT NO EXPLANATION AS GIVEN WHICH IS FACTUALLY FALSE. IN THIS CONNECTION, ASSESSEE REFERRED TO SCHEDULE 2 .3 OF THE F I NAL ACCOUNTS (AT PAGE 16 OF THE PAPER BOOK) OF LONG TERM BORROWINGS. THE LAST ITEM IN THAT SCHEDULE NAMELY 'OTHER LONG - TERM LOANS - (D) FROM OTHERS - M/S. BRITANNIA INDUSTRIES LIMITED (RS. 2,00,00,000/ - AND THE CORRESPONDING FIGURE FOR THE IMMED IATELY PRECEDING YEAR WAS RS.2,37,21,469/ - ). DESPITE SUCH OVERWHELMING EVIDENCE BEING BROUGHT ON RECORD, THE A. O . CLOSE D HIS EYES AND MA DE AN ARBITRARY ADDITION OF RS.19,43 , 704/ - , WHICH DESERVES TO BE DELETED. 4.5 AS REGARDS THE DISALLOWANCE OF RS. 3,21,206/ - , THE ASSESSEE SUBMITTED THAT THE EXPENDITURE INCURRED FOR PURCHASE OF SAND WAS ON CAPITAL ACCOUNT, FORMING PART OF CONSTRUCTION EXPENSES AND, THEREFORE, IT DOES NOT FALL WITHIN THE MISCHIEF OF SECTION 40A(3). T HE COPY OF THE LEDGER ACCOUNT IS AVAILABLE AT PAGES 66 AND 67 OF THE PAPER BOOK. IT WAS SUBMITTED THAT AS IT IS NOT DEBITED TO THE P&L ACCOUNT, THE ADDITION DESERVES TO BE DELETED. 4 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . 4.6 AS REGARDS THE ADDITION OF RS.9,05,145 / - U / S.40A(3) , THE ASSESSEE SUB MITTED THAT T HE CASH EXPENSES I NCURRED ARE ONLY PRODUCTION INCENTIVES PAID TO WORKERS BESIDES NORMAL WAGES. COMPLETE BREAK UP OF LABOURER - WISE PAYMENTS WAS FURNISHED TO THE A.O. FOR THE MONTHS OF OCTOBER 2012 TO MARCH 2013, COPY OF LEDGER ACCOUNT AND BREAK - UP OF ALL THE 6 MONTHS I NCENTIVES ARE AVAILABLE AT PAGES 45 TO 63 OF THE PAPER BOOK, BESIDES THE EXPLANATION OFFERED TO THE A. O . VIDE PARA 8 OF THE LETTER DATED 28 MARCH 2016 (PAGE 104). IT WAS SUBMITTED THAT N ONE OF THE PAYMENTS WOULD BE LIABLE FOR TDS A S T HE NUMBER OF LABOURERS ELIGIBLE FOR INCENTIVES ALSO VARY FROM MONTH TO MONTH. MINIMUM I NCENTIVE PAID WAS RS. 1100 / - AND THE MAXIMUM, RS.3, 100/ - . CONSEQUENTLY, THE CASH PAYMENTS OF THE INCENTIVES ARE NOT HIT BY SECTION 40A(3) AND HENCE THE ADDITION OF R S.9, 0 5 ,145 / - HAS TO BE DELETED AS UNWARRANTED . 4.7 AS REGARDS THE ADDITION OF RS. 1 ,53,545/ - , THE ASSESSEE SUBMITTED THAT THE AO WRONGLY ASSUMED THAT IT WAS PAID FOR GETTING THE AUTHORISED SHARE CAPITAL IN CREASED. AS EXPLAINED BY THE A SSESSEE BEFORE THE A. O . , THIS IS THE AGGREGATE OF PROFESSIONAL AND CONSULTANCY CHARGES TO DIFFERENT PERSONS FOR ADVICE ON CALIBRATION C HARGES TO EQUIPMENTS, PF CONSULTANCY, CMA DATA PREPARATION ETC. WHEREVER APPLICABLE TAX WAS DEDUCTED AT SOURCE. ASSESSEE SUBMITTED THAT WITHOUT REFERRING TO ACTUAL FACTS, THE AO ADDED THE SUM ARBITRARILY, HENCE, IT HAS TO BE DELETED. 4.8 AS REGARDS ADDIT ION OF RS. 31,02,238/ - , THE ASSESSEE SUBMITTED THAT T HERE I S NO DEBIT OF I NTEREST I N THE P &. L ACCOUNT I N THIS REGARD. IT WAS SUBMITTED THAT D ETAILED EXPLANATION WAS FILED I N THIS REGARD VIDE LETTER DATED 28 MARCH 2016 (PLEASE REFER TO PAGES 101 TO 105). THE A. O . GIVES UNSOLICITED ADVICE TO THE A SSESSEE ON HOW TO RUN HIS BUSINESS , WHICH I S DEPRECATED BY THE HON'BLE APEX COURT IN MANY 5 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . CASES I NCLUDING THAT OF S.A BUILDERS 288 ITR 1 (SC). THIS 'INVENTED' EXPENDITURE ADDED OF A SUM OF RS.31,02,238/ - DESERVES T O BE DELETED. 4.9 IN THE LIGHT OF THE ABOVE SUBMISSIONS BASED ON THE EXHAUSTIVE DOCUMENTARY EVIDENCE (INCLUDED IN THE PAPER BOOK AND FILED BEFORE THE A.C. DURING THE ASSESSMENT PROCEEDINGS), IT WAS SUBMITTED THAT THE APPEAL BE ALLOWED ON ALL GROUNDS. 5 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: THE VARIOUS GROUNDS I.E. GROUNDS 2 TO 9 HAVE BEEN DISCUSSED IN THE WRITTEN S UBMISSIONS F ILED BY THE APPELLANT ON 07.08.2018 WHICH HAS BEEN EXTRACTED S UPRA. PRIOR TO THAT A PAPER BOOK WAS F ILED BY THE APPELLANT IN WHICH IT WAS CERTIFIED THAT THE DOCUMENTS W ERE FILED BEFORE THE AO, AND IT WAS FURTHER CERTIFIED THAT NO ADDITIONAL EVIDENCE WAS INCLUDED. FROM THE GROUND WISE SUBMISSIONS F I LED IN THIS OFFICE AND SEEN ALONG WITH THE PAPER BOOK (WHICH HAS BEEN REFERRED TO ABOVE), THE ADDITIONS MADE BY THE AO ON VAR IOUS GROUNDS IS NOT MERITED. AFTER CONSIDERATION OF THE FACTS AND CIRCUMSTANCES INVOLVED, IT IS OPINED THAT NO ADDITION IS REQUIRED WITH REFERENCE TO GROUNDS NO 2, 3,4,5,6,7,8, & 9. HENCE, GROUNDS NO.2, 3, 4, 5, 6, 7, 8, & 9 IN APPEAL ARE ALLOWED. 6 . AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED ON BOTH LAW AND FACTS OF THE CASE. 2. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 3,42,412/ - MADE BY THE ASSESSING OFFICER OF UN LOADING CHARGES REIMBURSED BY BRITANNIA INDUSTRIES TREATING THEM AS UNACCOUNTED AND UNRECOGNIZED INCOME BY THE ASSESSEE, WHEN THE UNLOADING CHARGES SPEND BY THE COMPANY BRITANNIA INDUSTRIES? 3. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMS TANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS 6 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . NO MERIT IN THE ADDITION OF RS. 4,.60,490/ - MADE BY THE ASSESSING OFFICER TREATING THE SALE OF SCRAP AS INCOME REJECTING THE ASSESSEE'S CLAIM THAT THE SAME IS CAPITALIZED FOR WHEN IT IS SOLD IT SHOULD BE A REVENUE RECEIPT? 4. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THE RE IS NO MERIT IN THE ADDITION OF RS. 46,19,934/ - MADE BY THE ASSESSING OFFICER TREATING THE DIFFERENCE IN GROSS RECEIPTS BEING THE DIFFERENCE BETWEEN THE ACTUAL INCOME OF RS. 16,06,75,100/ - AND RS. 15,60,55,166/ - ADMITTED BY THE ASSESSEE, WHEN THE BRITANN IA INDUSTRIES ITSELF SHOWN AS ADVANCE IN ANTICIPATION OF CHARGES PAYABLE FOR THE MONTHS DECEMBER TO MARCH, 2013? 5. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 19,43,704/ - WHEN THE SAME FOUND IN THE LEDGER ACCOUNTS OF MIS BRITANNIA INDUSTRIES? 6. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBM ISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 3,21,206/ - MADE BY THE ASSESSING OFFICER AS THE ASSESSEE VIOLATED THE PROVISIONS OF SECTION OF 40(A)(3) OF THE 1.1. ACT, 1961? 7. WHETHER THE CIT (APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 9,05,145/ - MADE BY THE ASSESSING OFFICER WHEN THE ASSESSEE FAILE D TO FURNISH THE REQUIRED DETAILS AS REQUESTED ? 7. WHETHER THE CIT (APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 9,05,145 / - MADE BY THE ASSESSING OFFICER WHEN THE ASSESSEE FAILED TO FURNISH THE REQUIRED DETAILS AS REQUESTED? 8. WHETHER THE CIT(APPEALS) IS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMIT TED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 1,53,5451 - BEING CONSULTANCY CHARGES MADE BY THE ASSESSING OFFICER WHEN THE ASSESSEE FAILED TO FURNISH THE REQUIRED DETAILS AS REQUESTED? 7 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . 9. WHETHER T HE CIT (APPEALS) IS CORRECT I N THE FACTS AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITION OF RS. 9,12,4121 - MADE TOWARDS INTEREST PAYMENT CLAIMED ON DEAD INVESTMENT AND RS. 21,89,916 / - BEING THE PROPORTIONATE INTEREST TO BE DISALLOWED? 10. WHETHER THE CIT(A) IS CORRECT IN THE FACT S AND CIRCUMSTANCES OF THE CASE, BASING ON THE SUBMISSIONS MADE AND PAPER BOOK SUBMITTED BY THE ASSESSEE, HOLDING THAT THERE IS NO MERIT IN THE ADDITIONS WITHOUT GIVING AN OPPORTUNITY TO THE AO TO COUNTER THE FRESH SUBMISSIONS MADE/EVIDENCE FILED BEFORE THE AO ?. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE AO, IS PLACED IN PAPER BOOK. WE NOTICED THAT ALL THE INFORMATION RELATING TO THE ADDITIONS ARE PLACED BEFORE THE AO AND THE AO HAS NOT CONSIDERED OR OVERLOOKED , BUT, MADE ADDITION. LD. CIT(A) HAS CONSIDERED T HE SAME GROUND - WISE AND GAVE PROPER EXPLANATION BEFORE DELET ING THE ADDITIONS AND THE REVENUE HAS NOT BEEN ABLE TO REBUT THESE FINDINGS WITH ANY EVIDENCE TO THE CONTRARY . THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND ACCORDINGLY UPHOLDING THE SAME, ALL GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESUL T, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 T H MAY , 201 9 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 15 TH MAY , 201 9 . KV 8 ITA NO. 2143 /HYD/201 8 REAL AGRO INDUSTRIES PVT. LTD., MEDCHAL . COPY TO: - 1) ITO, WARD 3 (2), ROOM NO. 707, 7 TH FLOOR, SIGNATURE TOWERS, OPP. BOTANICAL GARDENS , HYDERABAD . 2) M/S REAL AGRO INDUSTRIES, RM AUTO PARTS INDIA PVT. LTD., SY. NO. 21/A, 363/A, 363/AA, RAJA BOLLARUM VILLAGE, MEDCHAL, RANGA REDDY DISTRICT, - 501 401. 3) CIT(A) 3 , HYDERABAD. 4) PR. CIT 3 , HYD . 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE