ACIT, Sonepat V. The Meham Co-op Sugar Mills Ltd., Sonepat

ITA 2319/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2279 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 25-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 29-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R D GUPTA
• Keywords: Opportunity of being heard
• Section: 43B

Judgement Text

I.T.A. NO.2318 & 2319 /DEL/09 1/8 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO.2318 & 2319 /DEL/2009 ASSESSMENT YEAR : 2006-07 ACIT, SONEPAT CO-OPERATIVE SUGAR MILLS, SONEPAT. V. SONEPAT AND MEHAM CO-OPERATIVE SUGAR MILLS, ROHTAK. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJIT KUMAR JAIN, SR. DR. RESPONDENT BY : SHRI R.D. GUPTA, ADVOCATE. ORDER PER A.K. GARODIA, AM: BOTH THESE APPEALS ARE REVENUES APPEALS DIRECTED A GAINST TWO SEPARATE ORDERS OF LD CIT(A), ROHTAK BOTH DATED 16.3.2009 FO R ASSESSMENT YEAR 2006-07 IN TWO DIFFERENT CASES OF TWO DIFFERENT ASSESSES. S INCE THE ISSUE INVOLVED IS SIMILAR, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST ISSUE INVOLVED IS REGARDING DELETION O F DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTERES T FREE ADVANCES GIVEN BY THESE TWO ASSESSES. THE AMOUNT OF DISALLOWANCE IS R S.21,25,718/- IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD. AND RS.4,16.655/ -IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. . I.T.A. NO.2318 & 2319/DEL/09 2/8 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE ADVANCES TO VARIOUS PARTIES AMOUN TING TO RS.177.14 LAKHS IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD. AND RS.34.72 LAKHS IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. THE ASSESS ING OFFICER HAS DISALLOWED INTEREST PAYMENT TO THE EXTENT OF 12% OF SUCH INTER EST FREE ADVANCES AND THE DISALLOWANCES MADE BY THE ASSESSING OFFICER WAS RS. 21,25,718/- IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD. AND RS.4,16,655 /- IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. BOTH THE ASSESSES CAR RIED THE MATTER IN APPEAL BEFORE LD CIT(A) WHO HAS DELETED THESE DISALLOWANCE S IN BOTH THE CASES ON THE BASIS THAT INTEREST FREE ADVANCES WERE GIVEN AS ADV ANCE FOR SUPPLY AND IN SIMILAR CIRCUMSTANCES, IN THE CASE OF OTHER SIMILAR COOPERA TIVES, SIMILAR DISALLOWANCES WERE DELETED. NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION REN DERED IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. IN I.T.A. NO.2906/DEL/ 2008 DATED 24.7.2009. HE SUBMITTED A COPY OF THIS TRIBUNAL DECISION. OUR AT TENTION WAS DRAWN TO PARA NO.12 & 13 OF THIS TRIBUNAL DECISION. 5. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD AND THE TRIBUNAL DECISION CITED BY THE LD AR OF THE ASSESSEE. IN THE PRESENT CASE ALSO, THE FACTS ARE SIMILAR. A DVANCES WERE GIVEN BY THE PRESENT ASSESSES TO VARIOUS PARTIES FOR SUPPLIES OF MACHINES AND ITS PARTS. SINCE THE FACTS IN THE PRESENT CASES ARE IDENTICAL, WE FI ND NO GOOD REASON TO TAKE A CONTRARY VIEW IN THE PRESENT CASES. RELEVANT PARA O F THIS TRIBUNAL DECISION ARE PARA NO.12 & 13 WHICH ARE REPRODUCED BELOW:- 12. GROUND NO.3: IN THIS GROUND OF APPEAL, THE GR IEVANCE OF REVENUE IS THAT CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITI ON OF RS.8,26,177/-. THE . I.T.A. NO.2318 & 2319/DEL/09 3/8 ASSESSEE HAS MADE ADVANCES OF RS,.68,84,811/- FOR S UPPLY OF MACHINES AND ITS PARTS. THE ASSESSING OFFICER HAS CALCULATED THE INTEREST ON THIS AMOUNT AND MADE DISALLOWANCE OF RS.8,26,177/-. LD CIT(A) HAS DELETED THE DISALLOWANCE ON THE GROUND THAT SUPPLIERS DO NO T SUPPLY THE MATERIAL WITHOUT GETTING THE ADVANCE PAYMENT. ACCORDING TO THE ASSESSEE THIS WAS A PRACTICE IN THE LINE ITS BUSINESS. LD CIT(A) DO NOT SEE ANY LOGIC FOR CALCULATING AN INTEREST ON THIS AMOUNT AND TREATING AT AS AN INCOME OF ASSESSEE. 13. ON THE DUE CONSIDERATION OF FACTS AND CIRCUMSTA NCES, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) B ECAUSE ASSESSEE HAS MADE ADVANCE PAYMENT FOR PROCURING MACHINERY AND IT S PARTS. IF IT IS NOT SETTLED BETWEEN THE VENDOR AND VENDEE FOR CHARGING OF INTEREST ON SUCH ADVANCE AMOUNT HOW ASSESSING OFFICER CAN CONSTRUE T HAT ASSESSEE SHOULD HAVE CHARGED THE INTEREST ON THE ADVANCE PAY MENT. ASSESSEE HAS NOT LEND THE MONEY TO SUCH SUPPLIER FOR THEIR USE R ATHER IT HAS GIVEN THE MONEY FOR THE MACHINERIES. THE ASSESSING OFFICER H AS NOT MADE OUT ANY CASE THAT INTEREST BEARING FUNDS WERE USED BY THE A SSESSEE FOR NON BUSINESS PURPOSES. IN VIEW OF THE ABOVE, THE GROUND OF APPEAL RAISED BY THE REVENUE IS REJECTED. 7. RESPECTFULLY FOLLOWING THE PRECEDENT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE IN BOTH THESE CASES. GROUND NO.1 OF THE RE VENUE IS REJECTED IN BOTH THE CASES. 8. THE SECOND ISSUE INVOLVED IN BOTH CASES IS REGAR DING DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIRS AND MAINTENANCE OF PLANT AND MACHINERY EXPENSES. THE DISALLOWANCE WAS MADE B Y THE ASSESSING OFFICER OF RS.25 LAKHS IN THE CASE OF MEHAM COOPERATIVE SUG AR MILLS LTD. AND RS.15 LAKHS IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILL S LTD. . I.T.A. NO.2318 & 2319/DEL/09 4/8 9. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD. THAT THE ASSESSEE HAS DEBITED RS.85.09 LAKHS UNDER THE HEADS REPAIRS AND MAINTENA NCE OF PLANT AND MACHINERY EXPENSES. THE ASSESSING OFFICER HAS NOTED THAT OUT OF THESE EXPENSES, MAJOR AMOUNT WAS SPENT ON FABRICATION. THE ASSESSING OFF ICER HAS FURTHER NOTED THAT NO MEASURING BOOK WAS PREPARED AND PRODUCED FOR EXA MINATION FOR JUSTIFICATION OF THESE EXPENSES, THE SAME CANNOT BE JUSTIFIED. AF TER MAKING THESE OBSERVATIONS, IT WAS HELD BY HIM THAT RS.25 LAKHS I S DISALLOWED OUT OF THESE EXPENSES. SIMILARLY, IN THE CASE OF SONEPAT COOPERA TIVE SUGAR MILLS LTD. IT IS NOTED BY THE ASSESSING OFFICER IN PARA BNO.8 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DEBITED RS.76.72 LAKHS UNDER THE HEAD REPAIRS AND MAINTENANCE OF PLANT & MACHINERY EXPENSES. AFTER MAKING SIMILAR O BSERVATIONS, IN THIS CASE, THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS.15 LAK HS. IN BOTH THESE CASES, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A). LD CIT(A) HAS DELETED THIS DISALLOWANCE IN BOTH THE CASES BY HOLDING THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE WITHOUT POINTING OUT EVEN A S INGLE VOUCHER OR ITEM OF EXPENDITURE WHICH IS NOT GENUINE OR IS NOT HAVING N EXUS WITH THE BUSINESS OF THE ASSESSEE. IT IS HELD BY HIM THAT THE ADDITION IS M ADE PURELY ON AD HOC BASIS AND WITHOUT APPLICATION OF MIND. IT IS ALSO HELD BY HI M THAT HOW THE MEASURING BOOKS ARE RELATED WITH REPAIRS & MAINTENANCE OF PLANT & M ACHINERY EXPENSES IS NOT CLEAR. LD CIT(A) HAS DELETED THIS DISALLOWANCE IN B OTH THE CASES AND NOW THE REVENUE IS IN APPEAL BEFORE US. 10. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFF ICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT ANY PART OF THIS AMOUNT O F EXPENSES INCURRED BY THESE TWO ASSESSES UNDER THE HEAD REPAIRS & MAINTENANCE O F PLANT & MACHINERY IS BOGUS EXPENSES OR CAPITAL EXPENSES OR EXPENSES NOT CONNECTED WITH BUSINESS. . I.T.A. NO.2318 & 2319/DEL/09 5/8 UNDER THESE FACTS, WE FEEL THAT SUCH AD HOC DISALLO WANCE IS WITHOUT ANY BASIS AND CANNOT BE SUSTAINED AND HENCE WE CONFIRM THE OR DER OF THE LD CIT(A) ON THIS ISSUE. 12. THERE IS NO GROUND LEFT IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD, THE REVENUE HAS RAISED TWO MORE GROUNDS, WHICH READ AS UNDER:- GROUND NO.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.33,15,357/- ON ACCOUNT OF INTEREST DEBITED TO P&L A/C BUT NOT PAID TO THE FINANCIER IGNORING PROVISIONS OF SECTION 43B OF THE IT ACT, 1961. GROUND NO.4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.2,98,625/-ON ACCOUNT OF DISALLOWANCE OF INTEREST WITHOUT GIVING CONCRETE REASONS, WHEREAS THE ASSESSING OFFICER HAS CORRECTLY DISALLOWED THE AMOU NT OF RS.2,98,625/- ON ACCOUNT OF NO JUSTIFICATION FOR GIVING A HUGE AMOUN T AS AN ADVANCE TO THE PARTIES AND FOR COMPUTER FOR SUCH A LONG PERIOD OF SO MANY YEARS WITH INTEREST AND THEREFORE AN INTEREST OF RS.2,98,625/- WAS DISALLOWED ON THE BASIS OF CHARGEABLE INTEREST @ 12% ON RS.24,88,545/ -. 13. REGARDING GROUND NO.3, THE FACTS ARE THAT THE A SSESSING OFFICER HAS ASKED THE ASSESSEE TO FURNISH DETAILS OF PAYMENTS COVERED U/S 43B OF THE IT ACT. THE ASSESSING OFFICER HAS NOTED THAT ON PERUSAL OF DETA ILS FILED BY THE ASSESSEE, IT IS FOUND THAT THE ASSESSEE HAS NOT PAID THE INTEREST A CCRUED TO THE FINANCIAL INSTITUTION TILL THE DATE OF FILING OF RETURN OF IN COME BUT DEBITED THE SAME TO P&L . I.T.A. NO.2318 & 2319/DEL/09 6/8 A/C. IT IS NOTED BY THE ASSESSING OFFICER THAT THE AMOUNT OF RS.30 LAKHS WAS THE AMOUNT OF INTEREST PAYABLE TO HARYANA STATE AGRICUL TURAL MARKETING BOARD AND RS.3,15,357/- WAS THE INTEREST PAYABLE ON SDF LOANS . IT IS HELD BY THE ASSESSING OFFICER THAT U/S 43B, DEDUCTION IS ALLOWABLE ON ACT UAL PAYMENT AND SINCE THE ASSESSEE HAS NOT MADE THE PAYMENT OF THESE TWO INTE REST TILL THE DATE OF FILING OF RETURN OF INCOME, ADDITION OF RS.33,15,357/- IS MAD E U/S 43B OF THE ACT. BEING AGGRIEVED, THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A). LD CIT(A) HAS DELETED THIS DISALLOWANCE ON THE BASIS OF TRIBU NAL DECISION DATED 9.2.2009 OF I BENCH OF DELHI TRIBUNAL IN ASSESSEES OWN CASE FO R ASSESSMENT YEAR 2001-02 AND 2002-03. NOW THE REVENUE IS IN APPEAL BEFORE U S. 14. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT T HIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AND 2002-03. LD DR OF THE REVENUE SUBMITTED THAT THE COPY OF THE TRIBUNAL ORDER IS NOT MADE AVAILABL E BY THE LD AR OF THE ASSESSEE AND HENCE THE MATTER MAY BE RESTORED TO TH E FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF THE SAID TRIBUNAL DECISION FOLLOWED BY THE LD CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD CIT(A) HAS DEL ETED THIS DISALLOWANCE ON THE BASIS OF TRIBUNAL DECISION DATED 9.2.2009 OF I BENC H OF DELHI TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 AND 20 02-03., I.T.A. NO. IS ALSO NOT MENTIONED BY THE LD CIT(A) AND LD AR OF THE ASS ESSEE HAS NOT FURNISHED BEFORE US A COPY OF THE SAID TRIBUNAL DECISION FOLL OWED BY THE LD CIT(A). UNDER THESE FACTS, WE FEEL IT PROPER THAT THE MATTER SHOU LD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SHOULD FURNISH A COPY OF THE TRIBUNAL DECI SION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 & 2002-03. THE ASSESSE E SHOULD ALSO EXPLAIN BEFORE THE ASSESSING OFFICER AS TO HOW THE FACTS IN THE PRESENT YEAR ARE SIMILAR TO THE FACTS IN ASSESSMENT YEAR 2001-02 AND 2002-03 A ND THEREAFTER THE ASSESSING . I.T.A. NO.2318 & 2319/DEL/09 7/8 OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW. THE ASSESSING OFFICER SHOULD ALSO CONSIDER THE AMENDMENT IN SECTION 43B AFTER 1. 4.2002. IF IT IS FOUND THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 2001-02 AND 20-02-03 AND THE FACTS AND PROVISIONS O F SECTION 43B ARE SIMILAR IN THE PRESENT YEAR, THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER STANDS DELETED OTHERWISE, THE ASSESSING OFFICER SHOULD PASS NECESS ARY ORDER AS PER LAW. WITH THESE OBSERVATIONS, WE RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION AS PER ABOVE DISCUSSIO N AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. REGARDING GROUND NO.4, THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.7 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS GIVEN ADVANCES OF RS.24,88,545/- TO THE DEALER OF BAGASSE , DEALER OF MOLASSES AND ADVANCE AGAINST COMPUTER. IT IS OBSERVED BY THE AS SESSING OFFICER THAT SINCE THE ASSESSEE IS SELLING BAGASSE AND MOLASSES AND THERE IS NO JUSTIFICATION FOR THE ASSESSEE TO GIVE ADVANCES TO THEM. REGARDING ADVANC E FOR COMPUTER, IT IS HELD BY HIM THAT THERE WAS NO JUSTIFICATION FOR GIVING A HUGE AMOUNT AS AN ADVANCE FOR COMPUTER FOR SUCH A PERIOD OF SO MANY YEARS. BY MAK ING THESE OBSERVATIONS, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF INTERE3S T ON SUCH ADVANCES AND THE SAME WAS WORKED OUT AT THE RATE OF 12% AT RS.12,98, 625/-. BEING AGGRIEVED, THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT( A). BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED INTEREST EVEN ON ADVANCE OF RS.18,73,540/- FOR COMPUTER. LD CIT(A) HAS DELETED THE DISALLOWANCE ON ADVANCE FOR COMPUTER AND CONFIRMED THE DISALLOWANCE OF INTEREST WITH REGARD TO OTHER TWO ADVANCES. NOW, THE REVENUE IS IN APPEAL B EFORE US. 17. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DISALLOWANCE OF INTEREST WAS MADE BY THE . I.T.A. NO.2318 & 2319/DEL/09 8/8 ASSESSING OFFICER WITH REGARD TO THREE ADVANCES OUT OF WHICH, LD CIT(A) HAS DELETED THE DISALLOWANCE OF INTEREST ON ADVANCE OF RS.18,734,540/- FOR COMPUTER. HENCE, THE DISALLOWANCE OF INTEREST ON THE REMAININ G TWO ADVANCES HAVE BEEN CONFIRMED BY LD CIT(A). WITH REGARD TO DISALLOWANCE OF INTEREST ON ADVANCES TO COMPUTER, IT IS STATED BY THE ASSESSING OFFICER THA T THIS ADVANCE IS OF HUGE AMOUNT GIVEN FOR A LONG PERIOD. WE ARE OF THE CONSI DERED OPINION THAT THIS CANNOT BE THE BASIS TO HOLD THAT THIS IS NOT A BUSINESS AD VANCE AND INTEREST BEARING FUNDS WERE DIVERTED FOR NON BUSINESS PURPOSES. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THIS ADVANCE IS IN FACT NOT FOR COMPUTER AND CONSIDERING THESE FACTS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IN THE CASE OF SONEPAT COOPERATIVE SUGAR MILLS LTD. I.E. I.T.A. NO.2318/DE L/2009 IS DISMISSED AND THE APPEAL IN THE CASE OF MEHAM COOPERATIVE SUGAR MILLS LTD. I.E. IN I.T.A. NO.2319/DEL/2009 STANDS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 20. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH DECE MBER, 2009. SD/- SD/- (GEORGE MATHAN) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 4 .12.2009. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).