ACIT, Trivandrum V. M/S ENGLISH INDIA CLAYS LTD, Trivandrum

ITA 248/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64776 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 10-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2011
• Court: TRIBUNAL
• Department Lawyers: R KRISHNA IYER
• Assessee Lawyers: B SAJJIVE
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NO. 248 & 107/COCH/2011 ASSESSMENT YEAR: 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TRIVANDRUM. VS. M/S. ENGLISH INDIAN CLAYS LTD., VELI, TRIVANDRUM. [PAN: AAACE 5011C] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) REVENUE BY SHRI B.SAJJIVE, JR. DR REVENUE BY SHRI R. KRISHNA IYER, CA DATE OF HEARING 11/09/2012 DATE OF PRONOUNCEMENT 14/09/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE ORDERS PASSED BY LD CIT(A)-1, TRIVANDRUM AND THEY RELATE TO THE ASSE SSMENT YEARS 2005-06 AND 2007- 08. SINCE ONE OF THE ISSUES URGED IN THESES APPEAL S WAS IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. 2. THE COMMON ISSUE URGED IN BOTH THE APPEALS R ELATE TO THE DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT AGAINST THE EXEMPTED DIVIDEND INCOME. WE NOTICE THAT THE DECISION OF HONBLE KERALA HIGH COURT ON THE VE RY SAME ISSUE RENDERED IN THE CASE OF CIT VS. DHANALAKSHMY BANK LTD (344 ITR 259) WAS NOT CONSIDERED BY THE LD CIT(A) WHILE DISPOSING THIS ISSUE IN BOTH THE YEARS. HOWE VER, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS TO BE EXAMINED AFRESH AT THE END OF AO IN ACC ORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT REFERRED SUPRA. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS UNDER CON SIDERATION AND RESTORE THE SAME TO I.T.A. NO. 248 & 107 /COCH/2011 2 THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE IS SUE AFRESH IN BOTH THE YEARS IN ACCORDANCE WITH THE DECISION OF JURISDICTIONAL HIGH COURT REFERRED SUPRA. 3. THE OTHER ISSUE URGED IN THE APPEAL OF THE R EVENUE RELATING TO THE ASSESSMENT YEAR 2007-08 RELATES TO THE CLAIM OF BAD DEBT OF 87 ,95,749/- (RS.71,98,000/-+ RS.15,97,749/-) AND RS.11,66,942/-, WHICH WERE ALLO WED BY LD CIT(A). THE AO DISALLOWED RS.71,98,000/- ON THE GROUND THAT THE DE MURRAGE CHARGES PAID BY THE ASSESSEE IS PENAL IN NATURE AND ALSO ON THE GROUND THAT IT IS A PRIOR PERIOD EXPENDITURE. THE SUM OF RS.15,97,749/- WAS DISALLOWED FOR WANT O F SUPPORTING DOCUMENTS. THE BALANCE AMOUNT OF RS.11,66,942/- WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THAT THE SAID AMOUNT WAS OFFERED TO TAX IN EARLIER YEAR. THE LD CIT(A), HOWEVER DELETED THESE ADDITIONS BY ACCEPTING THE CO NTENTIONS OF THE ASSESSEE. 4. BEFORE US THE LD A.R SUBMITTED THAT THE SUM OF RS.71,98,000/- WAS INCURRED ON THE DIRECTION OF THE HONBLE HIGH COURT OF DELHI AS INTEREST AND DEMURRAGE CHARGES AND FURTHER IT WAS SUBMITTED THAT IT CANNOT BE CONSIDER ED AS A PRIOR PERIOD EXPENDITURE. HE FURTHER SUBMITTED THAT THE DEMURRAGE CHARGES CANNOT BE CONSIDERED AS PENAL IN NATURE. HE FURTHER SUBMITTED THAT THE ASSESSEE, THOUGH MADE PROVISION IN THE EARLIER YEARS, THE SAID PROVISION WAS NOT CLAIMED AS EXPENDITURE AND T HE SAME WAS ADDED TO THE TOTAL INCOME IN THE COMPUTATION STATEMENT. WITH REGARD T O THE OTHER TWO DISALLOWANCES, THE LD A.R SUBMITTED THAT THE EVIDENCES ARE AVAILABLE I N SUPPORT OF THE SAID CLAIMS. 5. THE LD D.R, HOWEVER, SUBMITTED THAT THE EVID ENCES HAVE NOT BEEN EXAMINED BY THE AO. WE NOTICE THAT THE AO HAS MADE THE DISALLO WANCES FOR WANT OF EVIDENCES AND PROPER EXPLANATIONS. IT IS NOT CLEARLY BORNE OUT O F THE RECORD AS TO WHETHER THE LD CIT(A) DID EXAMINE THE RELEVANT EVIDENCES. IN ANY CASE, IN OUR VIEW, THESE ADDITIONS REQUIRE FRESH EXAMINATION AT THE END OF THE AO. WE ALSO MAKE IT CLEAR THAT THE DEMURRAGE CHARGES CANNOT BE CONSIDERED PENAL IN N ATURE, AS IT HAS NOT BEEN PAID FOR VIOLATION OF ANY LAW. SUBJECT TO THIS VIEW, SINCE THESE ADDITION REQUIRE EXAMINATION AT THE END OF THE AO, WE SET ASIDE THE ORDER OF LD CIT (A) ON THESE ISSUES AND RESTORE THEM TO THE FILE OF THE ASSESSING OFFICER WITH THE DIREC TION TO EXAMINE THEM AFRESH BY DULY I.T.A. NO. 248 & 107 /COCH/2011 3 CONSIDERING THE EVIDENCES AND EXPLANATIONS THAT MAY BE FURNISHED BY THE ASSESSEE, WITHOUT BEING INFLUENCED BY THE OBSERVATIONS MADE B Y LD CIT(A). THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVEN UE ARE TREATED AS ALLOWED. PRONOUNCED ACCORDINGLY ON 14-09-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 14TH SEPTEMBER, 2012 GJ COPY TO: 1. M/S. ENGLISH INDIAN CLAYS LTD., VELI, TRIVANDRUM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE.