DEVU TOOLS P.LTD, MUMBAI V. ITO WD 8(1)(3), MUMBAI

ITA 2240/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55575 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Opportunity of being heard; Additional evidence; Corroborative evidences
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOOD (A. M) ITA NO.2240/MUM/2010(A.Y. 2004-05) M/S. DEVU TOOLS PVT. LTD. GALA NO.2/3, RAMKRISHAN YADAV COMPUND, LT NAGAR, SAKINAKA, MUMBAI 72. PAN:AAACD 8770H (APPELLANT) VS. THE ITO WARD 8(1)(3), AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (RESPONDENT) APPELLANT BY : SHRI KIRAN MEHTA RESPONDENT BY : SHRI C.G.K.NAIR DATE OF HEARING : 22/09/2011 DATE OF PRONOUNCEMENT : 28/09 /2011 ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 2/2/2010 OF CIT(A)-16 MUMBAI RELATING TO A.Y 2004-05. GROUND N O.1 RAISED BY THE ASSESSEE READS AS FOLLOWS: 1. THE LEARNED CIT(A) ERRED IN MAKING DISALLOWANCE OF INTEREST OF RS.1,33,082/- PLEA THAT INTEREST BEARING FUNDS WERE USED TO GIVE INTEREST FREE ADVANCES. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE AND EXPORT OF MOULDS AND DIES FOR PLASTIC INJECTION MOULDING. ON PERUSAL OF THE BALANCE SHEET, THE AO NOTICED THAT THE ASSESSEE HAD BORROWED FUNDS ON WHICH IT PAID INTEREST AND ALSO GIVEN INTEREST FREE ADVANCES TO ONE OF ITS DIRECTORS. THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PRO- RATA INTEREST DEBITED IN THE P&L ACCOUNT SHOULD NOT BE DISALLOWED. ITA NO.2240/MUM/2010(A.Y. 2004-05) 2 ACCORDING TO THE AO THE AUTHORIZED REPRESENTATIVE V IDE LETTER DATED 3/10/2006 SUBMITTED THAT THE PROPORTIONATE DISALLO WANCE OF INTEREST WOULD BE RS. 1,33,,082/- WHICH CAN BE CONSIDERED FOR DISA LLOWANCE OUT OF INTEREST DEBITED TO THE P&L ACCOUNT. THE AO THEREFORE, DIS ALLOWED THE AFORESAID SUM AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. 3. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT IT HAD INTEREST FREE FUNDS OF RS. 2.45 CRORES IN THE FORM OF EQUITY CAPITAL RESE RVES AND THE SAME WAS SUFFICIENT TO TAKE CARE OF INTEREST FREE ADVANCES G IVEN BY IT TO ITS DIRECTORS AND, THEREFORE, DISALLOWANCE OF INTEREST SHOULD NOT BE MADE. THE CIT(A) HOWEVER HELD THAT THE COUNSEL FOR THE ASSESSEE HAD ADMITTED BEFORE THE AO THAT THE SUM OF RS.1,32,082/- MAY BE DISALLOWED VI DE LETTER DATED 3/10/06. THE CIT(A), THEREFORE, WAS OF THE VIEW THAT WHEN TH E ASSESSEE ITSELF HAD ACCEPTED TO THE ADDITION THE SAME CANNOT BE DISPUTE D BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO SUCH ADMISSION BY THE ASSESSEE IN ITS LETTER DATED 3/10/ 2006 FILED BEFORE THE AO. THE ASSESSEE HAD ONLY GIVEN DETAILS OF INTEREST AND NEVER ACCEPTED ANY DISALLOWANCE OF INTEREST. TO VERIFY THE FACTS ASSE SSMENT RECORDS WERE PRODUCED BY THE LD. D.R ON DIRECTIONS BY THE BENCH. THE LETTER DATED 3/10/06 WAS PERUSED AND IT DOES NOT CONTAIN ANY ADM ISSION REGARDING DISALLOWANCE OF INTEREST. IN VIEW OF THE ABOVE THE ORDER OF THE CIT(A) IS SET ASIDE. THE ISSUE WITH REGARD TO AVAILABILITY OF IN TEREST FREE FUNDS IS DIRECTED TO BE DECIDED AFRESH BY THE AO IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCES UTILITIES & POWER LTD., 313 ITR 340. ITA NO.2240/MUM/2010(A.Y. 2004-05) 3 6. GROUND NO.2 RAISED BY THE ASSESSEE READS AS FOLL OWS: 2. THE LEARNED CIT(A)-16 ERRED IN SUSTAINING AN A DDITION OF RS. 8,25,244/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 ON THE PLEA OF NON GENUINE PURCHASE. 7. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO I SSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO M/S. PRECISION TRADING COMPANY FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES TO THE EXTENT OF RS. 8,25,244/-. IN RESPONSE TO THE SAID NOTICE M/S. PR ECISION TRADING COMPANY IN A LETTER DATED 11/7/06 INFORMED THE AO THAT THEY HAD NOT DEALT WITH THE ASSESSEE DURING THE PREVIOUS YEAR. WHEN THIS WAS C ONFRONTED TO THE ASSESSEE BY THE AO TO THE ASSESSEE, THE ASSESSEE SU BMITTED VIDE ITS LETTER DATED 8/8/2006 THAT ASSESSEE HAD MADE PAYMENTS THRO UGH CHEQUES AND FILED COPIES OF THE BANK STATEMENT. THE AO HELD TH AT THE ASSESSEE DID NOT FILE ANY SUPPORTING EVIDENCE SUCH AS COPIES OF BILLS ISS UED BY M/S. PRECISION TRADING COMPANY, TRANSPORTATION BILLS ETC. HE HELD THAT MERE FILING OF BANK STATEMENT WOULD NOT PROVE THE GENUINENESS OF THE TR ANSACTION. HE, THEREFORE, TREATED THE PURCHASES AS NOT GENUINE AND ADDED SUM OF RS. 8,25,244/- TO THE TOTAL INCOME. 8. BEFORE CIT(A) THE ASSESSEE CLAIMS TO HAVE FILED BILLS AND CHALLANS AND PURCHASE ORDER AS WELL AS COPY OF CARRIAGE INWARD A CCOUNT. THE SAME ARE AVAILABLE AT PAGE NO.6 TO 32 OF THE ASSESSEES PAPE R BOOK. THE CIT(A) HOWEVER IN HIS ORDER HAS NOT MADE ANY REFERENCE TO THESE DOCUMENTS AND UPHELD THE ADDITION MADE BY THE AO. 9. BEFORE US LD. COUNCEL FOR THE ASSESSEE SUBMITTED THAT IN THE LIGHT OF THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE CIT( A), THE GENUINENESS OF THE PURCHASES STAND ESTABLISHED. TO A QUERY FROM THE B ENCH AS TO WHETHER ANY APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WA S FILED BEFORE THE CIT(A), ITA NO.2240/MUM/2010(A.Y. 2004-05) 4 THE LD. COUNSEL FOR THE ASSESSEE ANSWERED IN THE NE GATIVE. WE HOWEVER FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS CERTIFIED IN THE PAPER BOOK THAT THE COPIES OF BILLS, CHALLANS AND PURCHASE ORDER AS WEL L AS CARRIAGE INWARD ACCOUNT WERE FILED BEFORE THE CIT(A). WE ACCEPT TH IS CERTIFICATION AS TRUE AND SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION IN THE LIGHT OF THE ADDITIONAL EVIDEN CE FILED BY THE ASSESSEE BEFORE THE CIT(A). THE AO WILL CONSIDER THE ADDITI ONAL EVIDENCE AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E, DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE GROUND OF APPEAL OF THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 28 TH DAY OF SEPT., 2011. SD/- SD/- (T.R.SOOD ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 28 TH SEPT.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RD BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.2240/MUM/2010(A.Y. 2004-05) 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER