TEEJ IMPEX P. LTD, MUMBAI V. DCIT 8(3)(1), MUMBAI

ITA 2570/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9022 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Keywords: Commercial expediency; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM ITA NO. 2570 /MUM/201 7 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. TEEJ IMPEX PVT.LTD. 302, DEVKRUPA BUILDING 28, RAICHUR STREET, MASJID BUNDER MUMBAI 400 009 VS. DCIT - 8(3)(1) ROOM NO.615, AAYAKAR BHAWAN M.K.ROAD, MUMBAI 400 020 PAN/GIR NO. AABCT9976A (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI BHUPENDRA SHAH REVENUE BY SHRI SACHCHIDANAND DUBE DATE O F HEARING 02 / 05 /2019 DATE OF PRONOUNCEMENT 05 / 07 /2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 2570/MUM/2017 FOR A.Y. 2012 - 13 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 14, MUMBAI I N APPEAL NO. CIT(A) - 14/IT - 84/15 - 16 DATED 07/03/2017 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 30/03/2015 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 8(3)(1), MUMBA I (HEREINAFTER REFERRED TO AS LD. AO). ITA NO .2570/MUM/2017 M/S. TEEJ IMPEX PVT. LTD. 2 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHDOLING THE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL IN THE SUM OF RS 5,28,85,963/ - IN THE FACTS AND CIRCUMSTANCES O F THE CASE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF VANASPATI GHEE, BUTTER OILS, COAL, WHEAT, SOYA SEEDS, MOULDE, PALM FATTY ACIT, OILS AND OTHER COMMODITIES. THE LD AO OBSERVED THAT THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCES TO CERTAIN PARTIES TO THE TUNE OF RS 213,13,92,056/ - . THE ASSESSEE HAD PAID INTEREST ON ITS BORROWED FUNDS TO THE TUNE OF RS 11,73,91,613/ - AND RECEIVED INTEREST IN THE SUM OF RS 6,45,05,650/ - . THE NET INTEREST DEBITED IN THE PROFIT AND LOSS ACCOUNT WAS RS 5,28,85,963/ - . ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, THE LD AO OBSERVED THAT ASSESSEE DOES NOT HAVE SUFFICIENT OWN FUNDS IN ITS KITTY TO GIVE INTEREST FREE ADVANCES. THE ASSESSEE WAS CONFRONTED IN THIS REGARD. THE ASSESSEE SUBMITTED THE DETAILS OF ADVANCES GIVEN TO VARIOUS PARTIES WHICH INCLUDES INTEREST BEARING AS WELL AS INTEREST FREE LOANS AND ADVANCES. THE LD AO OBSERVED THAT THE ASSESSEE HAD DIVERTED ITS INTEREST BEARING FUNDS FOR NON - BUSIN ESS PURPOSES AND ACCORDINGLY RESORTED TO MAKE DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT AS THE ASSESSEE HAD ALSO NOT ESTABLISHED THE COMMERCIAL EXPEDIENCY IN GIVING INTEREST FREE ADVANCES TO CERTAIN PARTIES. ACCORDINGLY THE LD AO DISALLOWED THE NE T INTEREST DEBITED IN THE SUM OF RS 5,28,85,963/ - AS BEING THE AMOUNT ON WHICH BORROWED FUNDS WERE DIVERTED FOR NON - BUSINESS PURPOSES BY THE ASSESSEE. WE FIND THAT THE LD CITA OBSERVED THAT THE ASSESSEE HAD RECEIVED LOAN FROM TWO PARTIES I.E M/S ANIK INDU STRIES AND M/S MAHADEO SHAHRA AND SONS AND HAD PAID INTEREST TO THEM IN THE SUMS OF RS 11,40,02,948/ - AND RS 27,98,800/ - RESPECTIVELY. THE LD CITA OBSERVED THAT THE ASSESSEE HAD NOT FILED ANY EVIDENCE AS TO HOW THE BORROWED FUNDS WERE USED FOR THE PURPOS E OF ITA NO .2570/MUM/2017 M/S. TEEJ IMPEX PVT. LTD. 3 BUSINESS AND THAT NO FUND FLOW OR CASH FLOW STATEMENT WAS SUBMITTED TO SUBSTANTIATE THE CLAIM THAT INTEREST IS PAID ONLY FOR THE PURPOSE OF BUSINESS. HE OBSERVED THAT SINCE INTEREST BEARING AND INTEREST FREE LOANS WERE GIVEN BY THE ASSESSEE , THE NEX US OF INTEREST BEARING LOAN WITH THE BUSINESS PURPOSES SHOULD BE ESTABLISHED, WHICH REMAINS UNPROVED BY THE ASSESSEE. ACCORDINGLY HE UPHELD THE ACTION OF THE LD AO. BEFORE US, THE LD AR ARGUED THAT THE OWN FUNDS AVAILABLE WITH THE ASSESSEE WAS RS 137.65 CRORES AS AGAINST BORROWED FUNDS OF RS 88.31 CRORES. BUT WE FIND FROM THE BALANCE SHEET AS ON 31.3.2012, WE FIND THAT THE ASSESSEE IS HAVING A NEGATIVE NET WORTH OF RS 38 CRORES. HENCE IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE WAS NOT HAVING SUFFI CIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS FOR GIVING INTEREST FREE ADVANCES. HOWEVER, THE LD AR SUBMITTED THAT THE ASSESSEE WAS HAVING CERTAIN TRADE PAYABLES AND ADVANCES FROM CUSTOMERS WHICH ARE INTEREST FREE FUNDS AND HENCE I T HAD TO BE PRESUMED THAT THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCES OUT OF THESE FUNDS. BUT THESE FACTS AND FIGURES ARE NOT EMANATING FROM THE RECORDS OF THE LOWER AUTHORITIES. HENCE WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO THE FILE OF LD AO FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW. THE ASSESSEE IS GIVEN LIBERTY TO FILE FRESH EVIDENCES, IF ANY, IN SUPPORT OF ITS CONTENTIONS. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 4. THE SECOND ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE U/S 41(1) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS . WE FIND THAT THE LD AO ON PERUSAL OF DETAILS OF SUNDRY CREDITORS, OBSERVED THAT CERTAIN SUNDRY CREDITORS WERE ITA NO .2570/MUM/2017 M/S. TEEJ IMPEX PVT. LTD. 4 OUTSTANDING FOR A PERIOD OF MORE THAN TWO YEARS. THE LIST OF THOSE CREDITORS ARE REFLECTED IN PAGE 3 OF THE ASSESSMENT ORDER AS UNDER: - RUCHI GOLD - RS 34,91,896 RUCHI OIL & VANASPATI - RS 52,29,421 MAHAVEER SALES - RS 8,06,884 MAHADEV SAHENA - RS 1,69,38,029 DEEPTI PROPERTIES - RS 32,40,000 ---------------------- - RS 2,97,06,230 5.1. THE LD AO OBSERVED THAT THE ASS ESSEE HAD SUBMITTED THAT THE ABOVE SUNDRY CREDITORS ARE RELATED TO BUSINESS AND THE ACCOUNTS COULD NOT BE SETTLED DUE TO SOME DISPUTE AND THE SAME WILL BE PAID AS AN WHEN THE DISPUTE IS SETTLED. THE LD AO DISREGARDED THESE CONTENTIONS OF THE ASSESSEE AND ADDED THE SAME AS CESSATION OF LIABILITY U/S 41(1) OF THE ACT. THE LD CITA OBSERVED THAT THE ASSESSEE HAD CONTENDED THAT THERE WAS DOUBLE ADDITION TO THE TUNE OF RS 30 LACS (IN RESPECT OF SUNDRY CREDITOR RUCHI GOLD) AS THE SAME WAS ADDED IN ASST YEAR 2011 - 12 ALSO BY THE LD AO. THE LD CITA DIRECTED THE LD AO TO VERIFY THE SAME AND DELETE THE SUM OF RS 30 LACS IF IT HAS BEEN ALREADY ADDED IN ASST YEAR 2011 - 12. HE HOWEVER, UPHELD THE ADDITION MADE IN RESPECT OF REMAINING 4 PARTIES OF THEIR RESPECTIVE SUMS A S ABOVE AND RUCHI GOLD IN THE SUM OF RS 4,91,896/ - U/S 41(1) OF THE ACT. BEFORE US, THE LD AR HAD RAISED AN AMENDED GROUND WHEREIN IT WAS STATED THAT THE AFORESAID SUNDRY CREDITORS INCLUDES UNSECURED LOANS RECEIVED FROM 2 PARTIES VIZ MAHADEV (RS 1,69,38 ,029/ - ) AND DEEPTI PROPERTIES (RS 32,40,000/ - ) , IN RESPECT OF WHICH, NO DEDUCTION OR BENEFIT WAS CLAIMED BY THE ASSESSEE IN THE EARLIER YEARS. HENCE HE ARGUED THAT THE PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE INVOKED TO THAT EXTENT. HE ALSO DREW THE ATTENTION OF THIS BENCH TO PAGE 39 OF THE PAPER BOOK CONTAINING DETAILS OF ADVANCES FROM CUSTOMERS TO THE TUNE OF RS 12,82,38,925/ - WHICH INCLUDED THESE TWO ITA NO .2570/MUM/2017 M/S. TEEJ IMPEX PVT. LTD. 5 SUMS OF RS 1,69,38,029/ - AND RS 32,40,000/ - BUT WITH SOME VARIANCE IN NAMES. WHEN THIS WAS P UT TO LD AR, HE STATED THAT THE LD AO HAD WRONGLY MENTIONED THE NAME OF M/S MAHADEV SHAHRA & SONS AS MAHADEV SAHENA IN HIS ORDER. HOWEVER, HE FAIRLY ADMITTED THAT LET THIS ENTIRE ISSUE BE SET ASIDE TO THE FILE OF LD AO FOR DENOVO ADJUDICATION AS THE FAC TS ARE NOT PROPERLY PRESENTED BEFORE THE LOWER AUTHORITIES BY THE ASSESSEE. WE FIND LOT OF FORCE IN THIS ARGUMENT OF THE LD AR AND DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIRPLAY, TO REMAND THIS ISSUE TO THE FILE OF LD AO FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW. THE LD AO IS AT LIBERTY TO RE - EXAMINE THE DETAILS FILED BY THE ASSESSEE, IF ANY, IN THIS REGARD AND ALSO TO EXAMINE, IF THE AFORESAID CREDITORS INCLUDE LOAN CREDITORS TO THE TUNE OF RS 1,69,38,029/ - AND RS 32,40,000/ - , THEN OBVIOUSLY THE ASSESSEE WOULD NOT HAVE DERIVED ANY BENEFIT OR DEDUCTION IN THE EARLIER YEARS AND IN SUCH A SCENARIO, THE PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE INVOKED THEREON. HOWEVER, THE SAID FACTS ARE TO BE PROVED BY THE ASSESSEE BEFO RE THE LD AO IN THE SECOND ROUND OF PROCEEDINGS. WE DISPOSE OF THIS ISSUE ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 07 /201 9 SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 05 / 07 / 2019 KARUNA , SR.PS ITA NO .2570/MUM/2017 M/S. TEEJ IMPEX PVT. LTD. 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//