Shri Girish Kumar Tayal, Indore V. The Addl. CIT Range-5, Indore

ITA 267/IND/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61999 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 07-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE; R P MANDOVARA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.267 & 268/IND/2012 A.YS. 2007-08 & 2008-09 GIRISH KUMAR TAYAL, INDORE PAN AATPT 3581 G :: APPELLANT VS ADDL. CIT, RANGE-5, INDORE :: RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE AND SHRI R.P. MANDOVARA RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 13 .07.2012 DATE OF PRONOUNCEMENT 1 8 .07.2012 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER BOTH THESE APPEALS ARE BY THE ASSESSEE ON IDENTICAL GROUNDS WHEREIN THE ASSESSEE IS AGGRIEVED BY THE IMPU GNED ORDER DATED 22.2.2012 PASSED BY THE LEARNED FIRST APPEL LATE AUTHORITY, BHOPAL FOR ASSESSMENT YEARS 2007-08 AND 2008-09. THE FIRST GROUND PERTAINS TO DISALLOWANCE OF DEDUCTION OF RS. 23,17,678/- AND RS. 16,17,857/- RESPECTIVELY U/S 80IB OF THE ACT. 2. DURING HEARING OF THESE APPEALS, THE LD. COUNSEL FO R THE ASSESSEE, SHRI S.S. DESHPANDE, ALONG WITH SHRI R.P . MANDOVRA, CONTENDED THAT IDENTICALLY FOR EARLIER ASSESSMENT YEARS, THE TRIBUNAL REMANDED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICAT ION FOR WHICH OUR ATTENTION WAS INVITED TO VARIOUS PAGES OF THE PAPER BOOK. IT WAS PRAYED THAT BOTH THESE APPEALS MAY ALSO BE SENT TO THE FILE OF THE ASSESSING OFFICER. ON THE 3 OTHER HAND, THE LEARNED SENIOR DR, SHRI R.A. VERMA, DEFENDED THE ORDER BY SUBMITTING THAT IT MAY NOT BE SENT BACK. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GINNIN G AND PRESSING OF RAW COTTON AND IS A PROPRIETOR OF M/S PRAD EEP COTEXT INDUSTRIES, SENDHWA. IN ITS RETURN, THE ASSES SEE CLAIMED DEDUCTION OF RS.23,17,678/- (ASSESSMENT YEAR 2007-08) AND RS.20,71,565/- (ASSESSMENT YEAR 2008-09) U/S 80IB OF THE ACT BY NETTING EXPENDITURE OF INTER EST AND RECEIPTS OF INTEREST. THE ASSESSEE WAS ASKED TO JUSTIF Y THE CLAIM OF DEDUCTION. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE OF NETTING OF INTEREST AND ALLOWE D DEDUCTION OF RS.15,27,084/- (ASSESSMENT YEAR 2007-08) AND RS.4,53,708/- (ASSESSMENT YEAR 2008-09) BY EXCLUDI NG INTEREST RECEIVED ON LOANS AND ADVANCES WHICH RESULTE D 4 INTO REDUCTION OF CLAIM OF DEDUCTION FROM RS.38,44,7 62/- TO RS.15,27,084/- (ASSESSMENT YEAR 2007-08) AND FROM RS.20,71,565/- TO RS.4,53,708/- (ASSESSMENT YEAR 2008 - 09) AND THE DIFFERENCE OF THE RESPECTIVE ASSESSMENT Y EAR WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WE FIND THAT WHILE COMING TO THIS CONCLUSION, THE ASSESSING OFFI CER FOLLOWED THE DECISION FROM HONBLE APEX COURT IN TH E CASE OF PANDIAN CHEMICALS LIMITED; 262 ITR 278 AND THE INDO RE BENCH OF THE TRIBUNAL IN DESIGN AUTO SYSTEM LIMITED (ITA NO. 897/IND/99). THE AGGRIEVED ASSESSEE PREFERRED APPE AL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY WHEREIN T HE ASSESSEE WAS ASKED TO EXPLAIN THE NEXUS OF INTEREST RECEIVED AND INTEREST PAID. HOWEVER, THE LEARNED CIT (A) AFFIRMED THE ASSESSMENT ORDER AS IS EVIDENT IN PARA 4.1 TO PARA 4.1.10 OF THE IMPUGNED ORDER. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS ALSO FILED WRITTEN SUBMISSIONS. 5 4. ON PERUSAL OF RECORD, WE FIND THAT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 (ITA NO. 759/IND/2006) (PAPER BOOK PAGES 29 TO 47), ASSESSMENT YEAR 2004-05 (ITA NO. 414/IND/2008) PAPER BOOK PAGE S 48 TO 57, ASSESSMENT YEAR 2005-06 (ITA NO. 213/IND/2009), PAPER BOOK PAGES 58 TO 69 AND FOR THE ASSESSMENT YEAR 2006-07) ITA NO. 277/IND/2009 PAPER BOOK PAGES 69 TO 73, THE TRIBUNAL DIRECTED THE ASSESS EE TO PROVE THE NEXUS OF FUNDS BORROWED AND USED FOR ADVANCI NG BEFORE THE ASSESSING OFFICER. IN VIEW OF THESE FACTS , KEEPING IN VIEW THE PRINCIPLE OF NATURAL JUSTICE AND ALSO NO GRIEVANCE IS CAUSED TO EITHER SIDE, WE REMAND THIS ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N THAT THE ASSESSEE HAS TO ESTABLISH THE NEXUS OF INTEREST RECEIV ED AND PAID. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE T HE NATURE OF INTEREST EARNED FROM FUNDS ADVANCED AND ALSO T HE NATURE OF INTEREST PAID. BROADLY, WE ARE IN AGREEMENT WITH 6 THE PROPOSITION THAT GINNING AND PRESSING IS AN ACTIVI TY OF MANUFACTURING. HOWEVER, SO FAR AS EARNING OF INTEREST IS CONCERNED, THERE SHOULD BE DIRECT AND PROXIMATE NEXUS WITH THE BUSINESS ACTIVITY. THEREFORE, ON THE ISSUE OF INTEREST, WE REMAND TO THE FILE OF THE ASSESSING OFF ICER. FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT, THERE MUST B E DIRECT NEXUS BETWEEN THE ACTIVITY/BUSINESS AND IS S HOULD BE DERIVED FROM THE BUSINESS ACTIVITY OF THE ASSESS EE. HOWEVER, WITHOUT GOING INTO MUCH DELIBERATION WE REM AND THE ISSUE OF INTEREST FOR WHICH THE ASSESSEE HAS TO E XPLAIN THE NEXUS TO THE FILE OF THE ASSESSING OFFICER TO D ECIDE ON MERIT AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUBSTANTIATE ITS CLAIM. 5. THE NEXT GROUND PERTAINS TO DISALLOWANCES OUT OF OI L MILL HAMMALI, PRESSING EXPENSES, GINNING LUDAI EXPENSE S AND KAPAS FREIGHT AND HAMMALI. 7 6. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE TURNOVER OF THE ASSESSEE IS ABOUT RS. 46.19 C RORES AND RS.51.88 CRORES, RESPECTIVELY, THEREFORE, ANY RE ASONABLE LIMIT CAN BE DISALLOWED. ON THE OTHER HAND, THE LEARNE D SENIOR DR DEFENDED THE IMPUGNED ORDER. 7. AFTER HEARING THE RIVAL SUBMISSIONS, SO FAR AS THE DISALLOWANCE OF EXPENSES OF RS.2,50,000/- OUT OF OIL MILL, HAMMALI AND PRESSING EXPENSES AND JUDAI EXPENSES OF RS. 1,50,000/- (TOTAL RS.4 LACS.) ARE CONCERNED, WE FIND T HAT THESE WERE DISALLOWED OUT OF RS.25.35 LACS FOR THE R EASON THAT THESE WERE NOT SUPPORTED BY VERIFIABLE DOCUMENTS AND WERE BASED ON SELF MADE VOUCHERS. THE HAMMALI CHARGES WERE DISALLOWED ON THE GROUND THAT THERE WAS STEEP INCREASE APPROXIMATELY IT WAS 4 TIMES IN SUCH EXPENSES IN COMPARISON TO PRECEDING YEAR THOUGH THERE WAS INCREASE OF QUANTITY OF PURCHASE BY ABOUT 2 TIMES ONLY AND EVEN TH E SELF MADE VOUCHERS WERE NOT SIGNED BY THE PAYEES. ID ENTICAL 8 IS THE SITUATION FOR THE ASSESSMENT YEAR 2008-09, THER EFORE, ON THIS ISSUE, THE STAND OF THE LEARNED CIT(A) IS AFFI RMED. FINALLY, BOTH THE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 JULY, 2012 SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 18 TH JULY,2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-1313