PHULCHAND EXPORTS PVT. LTD., MUMBAI V. DCIT, CENTRAL CIRCLE 3(3), MUMBAI

ITA 2555/MUM/2022

AI Insights

The case involves M/s Phulchand Exports Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-51, Mumbai, concerning the assessment year 2015-16. The primary contention was regarding the disallowance of Rs. 24,56,796 under section 36(1)(iii) of the Income Tax Act, 1961, which was confirmed by the CIT(A). The disallowance was based on the grounds that interest-bearing funds were used for making interest-free advances. The ITAT noted that similar issues had been previously examined in the assessee's own cases for A.Y. 2014-15, where it was found that the assessee had sufficient own and interest-free funds to cover the advances. Consequently, the ITAT decided to remand the matter back to the AO for a fresh assessment, directing a thorough examination in line with previous Tribunal decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123303 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-12-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 03-10-2022
• Other Referred Cases: ITA No. 3184/Mum/2018, ITA No. 4370/Mum/2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 2555/Mum/2022 (A.Y. 2015-16) M/s Phulchand Exports Pvt. Ltd. 2 nd Floor, Electric Mansion, West Wing, Appasahab Marathe Marg, Worli, Mumbai-400025. PAN: AAACP2529C ...... Appellant Vs. Dy.CIT, CC-3(3), Room No. 1923, 19 th Floor, Air India Building, Nariman Point, Mumbai-400021. ..... Respondent Appellant by : Sh. Satish Jain, Adv. Respondent by : Sh. K.C. Salvamani, CIT-DR Date of hearing : 20/12/2022 Date of pronouncement : 13/01/2023 ORDER PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals)-51, Mumbai (for short ‘CIT(A)’) dated 25.08.2022 under section 250) of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2015-16. The assessee has raised the following grounds of appeal: 2 ITA No. 2555/Mum/2022-M/s Phulchand Exports Pvt. Ltd. “1. Ld. CIT (A) erred in confirming an addition of Rs. 24,56, 796/- under sec.36(1)( on the basis addition has already been upheld by the CIT(A) in appeal against original order without appreciating the fact that capital and free reserves of the appellant are much higher to the interest free advances made by the appellant and hence no disallowance out of interest was called for. 2. Ld. CIT(A) erred in retaining the addition U/s.36(1)(iii) as per original order U/s.143(3) without appreciating to the fact that Hon'ble ITAT in appellate order for A.Y.2014-15 deleted a similar disallowance and Ld. CIT(A) in appellate order against original order followed its order for A.Y.2014-15, which stood disapproved by Hon Tribunal. 3. Appellant pray that addition made be deleted.” 2. Brief facts of the case are that assessee filed return u/s139(1) on 30-09- 2015 declaring total loss at Rs. 4,29,23,218/-. Thereafter assessee revised its return u/s 139(5) on 08-10-2015 declaring total loss at Rs. 4, 29, 23,218/- under normal provisions and book loss of Rs. 11, 95,38,862/- under the provisions of MAT. The case was selected for scrutiny and assessed at loss of Rs. 3, 64, 09,916/- under the normal provisions and book loss of Rs. 11, 54, 82,350/- under the provisions of MAT. Assessee main business is trading and export of iron ore, metal and commodities. 3. Throughout the assessment order no description of disallowance /additions made by AO has been discussed and quantified. It astonishes that in an order of 2 pages without even describing the head of disallowance/addition AO straight away assessed income under the normal provisions and u/s 115JB. 4. We have gone through the non-speaking, dumb and blind order of AO, order of Ld. CIT (A) and submissions of the assessee along with paper-book. The issue under contest pertains to disallowance of Rs. 24, 56,796/- u/s 36(1)(iii) on this disallowance stand of the revenue is that interest bearing funds has been 3 ITA No. 2555/Mum/2022-M/s Phulchand Exports Pvt. Ltd. invested in interest free advances. The similar issue has been examined by the ITAT in assessee own case vide ITA No. 3184/Mum/2018 (AY 2014-15) and they found that assessee has ample own funds and interest free funds to provide interest free advances and loans. Hence, they deleted the additions. Similar issue again examined by ITAT for AY 2015-16 with reference to assessment order passed u/s 143(3) vide ITA No. 4370/Mum/2019 wherein they restore the matter back to the AO to verify the position of assessee’s own fund along with interest free advances received vis-a-vis interest free advances and loans given. 5. In views of the matter, we are of the considered view that issue is required to be decided by the AO afresh by passing speaking order by considering the direction given by the Tribunal in assessee’s own case in A.Y. 2015-16 whereby they have restored the matter back to the AO. So the impugned order passed by Ld. CIT (A) is set-aside and matter is remanded back to the AO to decide afresh. 6. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 13 th day of January, 2023. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 13/01/2023 SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. 4 ITA No. 2555/Mum/2022-M/s Phulchand Exports Pvt. Ltd. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai