The ITO, Ward-1(1), Surat V. M/s. Center Point Gems Pvt.Ltd., Surat

ITA 2570/AHD/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9684 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Additional evidence; Corroborative evidences
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I R.P. TOLANI , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ITO, WARD 1(1), ROOM NO. 111, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) VS M/S. CENTER POINT GEMS PVT. LTD., 102, NISHIT DIAMOND COMPLEX, HAT FALIA HARIPURA, SURAT - 395301 PAN: AACCC8064F (RESPONDENT) REVENUE BY : MS. SONIA KUMAR , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 22 - 11 - 2 016 DATE OF PRONOUNCEMENT : 23 - 12 - 2 016 / ORDER P ER : AMARJIT SINGH, ACC OUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2008 - 09 , AR IS ES FROM ORDER OF THE CIT(A) - 9, MUMBAI DATED 29 - 06 - 2011 IN APPEAL NO. CIT(A)9/5(1)(3)/195/2010 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2570 / A HD/20 11 A SS ESSMENT YEAR 200 8 - 09 I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 2 2. THE A SSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - 9, MUMBAI HAS ERRED IN DELETING THE ADDITION OF RS.64,90,699/ - ON ACCOUNT OF OUTSTANDING FOREIGN BANK INTEREST WHICH WAS DEBITED IN P & L A/C. WITHOUT GIVING ANY OPPORTUNITY TO EXAMINE THE ADDITIONAL EVIDENCE OR DOCUMENT OR TO CROSS EXAMINE THE WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLATE, AS REQUIRED U/S. 46A(1) OF THE I.T. ACT. 2. ON THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - 9, MUMBAI HAS ERRED IN RESTRICTED THE ADDITION ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES FROM 50% TO 20% A WITHOUT APPRECIATING THE FACT THAT ALL THE EXPENSES ARE MADE IN CASH AND NO CORROBORATIVE BILL OR E VIDENCE HAS BEEN PRODUCED BY THE ASSESSEE. FURTHER, ASSESSEE FAILED TO DISCHARGE ONUS CASH UPON HIM TO PROVE THE GENUINENESS OF THE EXPENSES AND WHETHER THE SAME HAD BEEN INCURRED FOR THE PURPOSE OF BUSINESS. 3. IN THIS CASE, RETURN OF INCOME DECLARING I NCOME OF RS. 10 , 54 , 380/ - WAS FILED ON 30 TH SEPTEMBER, 2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING O FFICER NOTICE D THAT THE ASSESSEE HAD DEBITED P & L A/C BY RS. 1 , 53 , 33 , 980/ - UNDER THE HEAD OUTSTANDING INTE REST. IN THIS CONNECTION, THE A SSESSING O FFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF PARTIES TO WHOM THIS INTEREST WA S PAYABLE AND WHEN THE SAME TO BE PA ID. THE ASSESSEE EXPLAINED THE ASSESSING O FFICER THAT THIS INTEREST PERTAIN S TO THE BUYERS CREDIT LOAN FINANCED BY FOREIG N BANKS THROUGH AXIS BANK AND INTEREST WAS PAYABLE TO THE FOREIGN BANKS. IN THIS CONNECTION, THE ASSESSEE HAS SUBMITTED CERTIFICATE ISSUED BY THE AXIS BANK ALONG WITH LIST OF BUYERS CREDIT TRANSACTIONS FUNDED BY THE FOREIGN BANKS AND INTEREST PAID ON THE SE TRANSACTION S . HOWEVER , THE ASSESSEE FAILED TO FURNISH THE WORKING OF OUTSTANDING INTEREST DEBITED TO THE P & L A/C I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 3 AND THE RATE OF INTEREST CHARGED ON BUYERS CREDIT BY THE FOREIGN BANKS. BECAUSE OF NON - SUBMITTING OF THE DETAILS BY THE ASSESSEE , THE AS SESSING O FFICER HAS WORKED OUT THE INTEREST PAYABLE AS ON 31 ST MARCH, 2008 TO THE AMOUNT OF RS. 9 4 ,7 6 ,137/ - . THE ASSESSING O FFICER ALSO STATED THAT ASSESSEE HAS ALREADY CLAIMED AN INTEREST OF RS. 6 , 32 , 856/ - IN THE P & L A/C SEPARATELY, THEREFORE, THE BAL ANCE AMOUNT OF INTEREST PAYABLE AFTER REDUCING RS. 6 , 32 , 856/ - COMES TO RS. 88 , 43 , 281/ - WHICH WAS ALLOWABLE TO THE ASSESSEE AS OUTST ANDING INTEREST. IN VIEW OF THE FACTS THE ASSESSING O FFICER STATED THAT ASSESSEE HAS CLAIMED OUTSTANDING INTEREST TO THE AM OUNT OF RS. 1 , 53 , 33 , 908/ - WHICH WAS FOUND TO BE EXCESS BY AN AMOUNT OF RS. 64 , 90 ,699 / - , THEREFORE, THE AMOUNT OF RS. 64 , 90 , 699/ - HAS BEE N DISALLOWED ON ACCOUNT OF EXCESS CLAIM OF OUTSTANDING INTEREST. 4. AGGR IEVED AGAINST THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HELD THAT ASSESSING O FFICER WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE WHICH ARISES DUE TO FLUCTUATION IN FOREIGN EXCH ANGE. THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - 3.2 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE APPELLA NT. THE INTEREST DISALLOWED BY THE ASSESSING OFFICER IS RELATED TO FLUCTUATION IN FOREIGN EXCHANGE. THE FACTS OF THIS CASE ARE SQUARELY COVERED BY THE FACTS OF THE SUPREME COURT DECISION IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PRIVATE LIMITED WHEREIN THE HON'BLE APEX COURT HAS HELD THAT 'LOSS' SUFFERED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF THE BALANCE SHEET IS AN ITEM I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 4 EXPENDITURE UNDER SECTION 37(1) OF THE INCOME - TAX ACT, 1961. IN THIS DECISION THE HON'BLE SUPREME COURT HAS CONFIRMED THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PRIVATE LIMITED 294 ITR 451. THE PRINCIPLE DECIDED BY THE BOMBAY HIGH COURT IN THE CASE OF PADAMJEE PULP AND PAPER MILLS LTD VS C.I.T 210 IT R ALSO SUPPORTS THE CLAIM OF THE APPELLANT. FURTHER MORE, THE APPELLANT HAS FURNISHED FULL WORKING OF INTEREST AND CERTIFICATE ISSUED BY THE AXIS BANK LTD IN SUPPORT OF THIS CLAIM. THEREFORE CONSIDERING THE ENTIRE FACTS AND CASE LAWS, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE WHICH ARISES DUE TO FLUCTUATION IN FOREIGN EXCHANGE.. SINCE THIS LOAN WAS TAKEN FOR PURCHASE AND SALE OF DIAMONDS; THEREFORE THE INTEREST EXPENDITURE IS ALLOWABLE AS REVENUE E XPENDITURE U/S. 37(1) ACT. THIS GROUND OF APPEAL IS ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT LD. COMMISSIONER OF INCOME TAX(A) HAD DECIDED THIS ISSUE WITHOU T PROVIDING OPPORTUNITY TO THE ASSESSING O FFICER TO EXAMINE THE ADDITIONAL DOCUMENTS AND EVIDENCES AND ALSO NOT PROVID ED OPPORTUNITY FOR REBUTTAL OF ADDITIONAL E VIDENCES UNDER RULE 4 6A OF THE I.T. RULE. H E FURTHER CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE FAILED TO PROVIDE THE NECESSARY WORKING OF OUTSTANDING INTEREST PAYABLE ALONG WITH SUPPORTING EVIDENCE S BEFORE THE ASSESSING O FFICER. HE FURTHER STATED THAT THE ASSESSEE PROVIDED ADDITIONAL EVIDENCES BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) AND THE CASE HAS BEEN DECIDED IN VIOLATION OF RULE 46A OF THE ACT . NOBODY ATTENDED THE HEARING FROM THE SIDE OF ASSESSEE. HOWEVER, THERE IS WRITTEN SUBMISSION FILED BY THE LD. COUNSEL OF ASSESSEE VIDE DATED 1 ST JUNE, 2016 RELATING TO BANK TRANSACTIO NS INFORMATION BUT WITHOUT FULLY ELABORATING THE NATURE OF TRANSACTIONS AND SUPPORTING DETAILS . I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 5 6. WE HAVE PERUSED THE MATERIAL AS PER RECORD. W E NOTICED THAT IN THIS CASE DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE A SSESSING O FFICER HAS ASKED T HE ASSESSEE TO FURNISH THE WORKING OF OUTSTANDING INTEREST DEBITED IN THE P & L A/C ALONG WITH RATE OF INTEREST CHARGED ON THE BUYERS CREDIT BY THE FOREIGN BANKS. THE ASSESSEE FAILED TO FURNISH THIS INFORMATION WHICH RESULTED IN WORKING OF THE INTEREST MADE B Y THE ASSESSING O FFICER ON THE BASIS OF AVAILABLE INFORMATION. WE FIND THAT BEFORE THE LD . COMMISSIONER OF INCOME TAX(A), T HE ASSESSEE HAS FILED PAPER BOOK SHOWING THE WORKING OF INTEREST ALONG WITH CERTIFICATE ISSUED BY THE AXIS BANK BUT THE LD. COMMISSIONER OF INCOME TAX(A) HAS NOT P ROVIDED ANY OPPORTUNITY TO THE ASSESSING O FFICER TO EXAMINE THE EVIDENCES OR DOCUMENTS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) ACCORDING TO THE PROVISION OF RULE 46A(3). IN THIS CONNECTION, WE REPRODUC E HEREWITH THE PROVISION OF RULE 46A . '(I) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODU CED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY: - (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVEN TED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT V.' OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 6 (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB - RULE (I) U NLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION, (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT A NY EVIDENCE PRODUCED UNDER SUB - RULE (I) UNLESS THE INCOME - TAX OFFICER HAS BEEN ALLOWED A REASONABLE 7 ITA NO.6O4/DEL./2OIA OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS - EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRE CT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSE SSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (I) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271.' 6.1 IN VIEW OF THE ABOVE FACTS AND LEGAL FINDINGS, WE FIND IT AP PROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO D ECIDE TH E MATTER AFRESH AFTE R PROVIDING PROPER OPPORTUNITY TO THE ASSESS EE. GROUND NO. 2 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER HAS NOTICED THAT ASSESSEE HAS DEBITED VARIOUS EXPENSES UNDER THE HEAD SALARY, EMPLOYEE FOOD AND BEVERAGE EXPENSES, TRAVELLING EXPENSES, REGISTRY & POSTAGE, TELEPHONE & PRINTING EXPENSES. IN THIS CONNECTION, THE ASSESSING O FFICER ASKED THE ASSESSEE TO FURNISH THE NAME S AND ADDRESSES OF THE EMPLOYEES I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 7 ALONG WITH THE DETAILS OF SALARIES PAID TO THEM . HE WAS ALSO ASKED TO PRODUCE THE SALARY REGISTER FOR V ERIFICATION. THE ASSESSEE FAILED TO FURN ISH THE INFORMATION BEFORE THE ASSESSING OFFICER. AS A RESULT, THE ASSESSING O FFICER DISALLOWED 50% OF THESE EXPENSES FOR WANT OF SUPPORTING DOCUMENTARY EVID ENCES. 8. AGGRIEVED AGAINST THE ORDER O F THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS DECIDED THAT IT WOULD BE APPROPRIATE AND JUSTIFIED TO DISALLOW 20% OF THE V ARIOUS EXPENSES AS AGAINST 50% DISALLOWANCES MADE BY THE ASSESSING O FFICER. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. D.R. CONTENDED THAT IN THIS CASE THE ASSESSEE FAILED TO FURNISH THE INFORMATION AND SUPPORTING EVIDENCES OF THESE EXPENSES. H OWEVER, THE COMMISSIONER OF INCOME TAX(A) HAS ADMITTED THE ADDITIONAL EVIDENCES WITHOUT ANY OPPORTUNITY TO THE ASSESSING O FFICER TO EXAMINE AND VERIFY THE SAID ADDITIONAL EVIDENCES BEFORE DECIDING THE APPEAL OF THE APPEAL. NEITHER ANYBODY ATTENDED ON BEHA LF OF THE ASSESSEE NOR ANY WRITTEN SUBMISSION WAS MADE DURING THE COURSE OF APPELLATE PROCEEDINGS. 9. WE HAVE PERUSED THE SUBMISSION AND MATERIAL ON RECORD. WE FIND THAT ON THIS ISSUE ALSO THE LD. COMMISSIONER OF INCOME TAX(A) HAD DECIDED THE CASE AFTER CONSIDERING THE ADDITIONAL EVIDENCES WITHOUT PR OVIDING ANY OPPORTUNITY TO THE ASSESSING O FFICER TO VERIFY AND EXAMINE THE ADDITIONAL EVIDENCES BEFORE DECIDING THE APPEAL. I.T.A NO. 2570 /AHD/20 11 A.Y. 2008 - 09 PAGE NO ITO VS. M/S. CENTER POINT GEMS PVT. LTD. 8 9.1 IN VIEW OF THESE FACTS AND LEGAL FINDINGS AS STATED SUPRA IN THIS ORDER , WE AL SO SET ASIDE THIS ISSUE TO ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AFTER PROVIDING PROPER OPPORTUNITY TO THE ASSESSEE . 10. IN THE RE SULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OU RT ON 23 - 12 - 201 6 SD/ - SD/ - ( R.P. TOL ANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 23 /12 /2016 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CO NCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,