M/s. Liberty Phosphate Ltd., Baroda V. The ACIT., Circle-1(2), Baroda

ITA 2684/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89443 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 28-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Rectification of order
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, VP AND RAJPAL YADAV, JM ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 LIBERTY PHOSPHATE LTD., 74.75, GIDC, NANDESAN, DIST. BARODA. VS ASSTT. CIT, CIR-1(2), BARODA. (APPELLANT) (RESPONDENT) PA NO._AAACL 3600N APPELLANT BY SHRI SUNIL TALATI, AR RESPONDENT BY SHRI B. L. YADAV, SR. DR DATE OF HEARING: 14/5/2015 DATE OF PRONOUNCEMENT: 15/5/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 15 TH SEPTEMBER, 2011 PASSED FOR AY 2003-04. THE GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(A) HAS ER RED IN NOT RECTIFYING THE MISTAKE APPARENT FROM THE RECORD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28.11.2003 DECLARING TOTAL INCOME AT N IL. CASE OF THE ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 2 ASSESSEE WAS TAKEN FOR SCRUTINY AND NOTICE UNDER SE CTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE HAD GIVEN INTEREST FREE LOANS AND ADVANCES OF RS.1,85,63,883/- TO ITS GROUP CONCERNS/ ASSOCIATE CONCERNS. THE LD. AO HAS MADE A DISALLOWANCE OF INT EREST EXPENDITURE AMOUNTING TO RS.41,78,032/-. THE AO HAS PASSED ASSESSMENT ORDER UNDER SECTION 143(3) ON 28.3.2006. THE ASSESSEE MOVED AN APPLICATION DATED 22.2.2007 UNDER SECTION 154 BEFORE THE AO. IT CONTENDED THAT OUT OF TOTAL ADVANCES OF RS.1 ,85,63,883/- ONLY RS.51,72,836/- REPRESENT INTEREST FREE ADVANCES TO GROUP CONCERNS BUT THE AO CONSIDERED THE ENTIRE AMOUNT THAT INTERE ST FREE ADVANCES TO SISTER CONCERNS AND MADE ADDITION ON ACCOUNT OF INTEREST RS.41,78,032/- INSTEAD OF RS.11,64,211/-. THE LD. A O HAS PASSED RECTIFICATION ORDER. HE DELETED THE DISALLOWANCE OF RS.30,13,821/- VIDE ORDER DATED 13 TH MARCH, 2007. 3. THE ASSESSEE HAD CHALLENGED THE ASSESSMENT ORDER DATED 28.3.2006 PASSED UNDER SECTION 143(3) IN AN APPEAL BEFORE THE CIT(A) BEARING NO.CAB/1-78/06-07. THIS HAS BEEN DEC IDED ON 12 TH JULY, 2007. IN THIS APPEAL ASSESSEE HAD CHALLENGED DISALLOWANCE OF ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 3 INTEREST EXPENSES UNDER GROUND NO.4, THE AMOUNT UND ER CHALLENGE RS.4178,032/-. THE APPEAL WAS INSTITUTED ON 28.4.20 06 I.E. MUCH PRIOR TO THE RECTIFICATION ORDER PASSED BY AO. THE LD. CIT(A) HAS DECIDED THIS ISSUE AS UNDER :- 12. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S OBSERVED THAT THE APPELLANT ITSELF HAS ADMITTED AT PARA (III)(A) THAT ONLY A SOME OF RS.51,72,836/- IS THE AMOUNT OF ADVANCE NOT DIRECT LY RELATED TO MANUFACTURING BUSINESS AND GRANTED BY WAY OF FINANC IAL ASSISTANCE TO GROUP CONCERNS. IT IS NOTED THAT RS.49,13,324/- BEING LC DISCOUNTI NG CHARGES AND INTEREST ON DEVELOPMENT OF RS.64,30,074/- BEING BANK CHARGES IS NOT INTEREST IS FOUND TO BE REASONABLE. AS REGARDS THE APPELLANTS ARGUMENT THAT ITS OWN INTEREST FREE FUNDS FAR IN EX CESS OF THE LOANS/ADVANCES MADE TO THE ASSOCIATE CONCERNS DURIN G THE YEAR, IT IS OBSERVED THAT IT HAS FORCE PARTICULARLY IN VIEW OF THE ITAT DECISION IN THE CASE OF TORRENT FINANCIERS (SUPRA). UNDER THE C IRCUMSTANCES, IT IS HELD THAT THE INTEREST IN RESPECT OF RS.51,72,836/- ADVANCED TOWARDS FINANCIAL ASSISTANCE OF GROUP CONCERNS AND ADMITTED LY NOT DIRECTLY RELATED TO THE APPELLANTS MANUFACTURING BUSINESS W ORKED OUT ON PROPORTIONATE BASIS IS CLEARLY DISALLOWABLE. AS REG ARDS THE INTEREST IN RELATION TO THE REST OF THE FUNDS, THE SAME IS ALLO WED IN VIEW OF THE FACT OF AVAILABILITY OF OWN FUNDS WITH THE APPELLANT. TH E ASSESSING OFFICER IS DIRECTED TO RE-WORK THE DISALLOWANCE ACCORDINGLY . 4. THE ASSESSEE MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT BEFORE THE LD. CIT(A) ON 23.08.2007. IT PLEADED THAT LD. CIT(A) HAS FAILED TO CONSIDER THE ISSUE, WHETHER ANY DISALLOW ANCE ON ACCOUNT OF INTEREST HAS TO BE MADE BECAUSE ASSESSEE HAD ADVANC ED THE MONEY ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 4 TO SISTER CONCERNS WITHOUT CHARGING INTEREST OUT OF INTEREST FREE FUNDS. THE LD. CIT(A) HAS REJECTED THE APPLICATION OF THE ASSESSEE VIDE IMPUGNED ORDER DATED 15.09.2011. THE LD. FIRST APPE LLATE AUTHORITY HAS OBSERVED AS UNDER :- 3. I HAVE CONSIDERED THE MATTER. FROM MY LEARNED PREDECESSORS ORDER (PARA 12), IT IS DIFFICULT TO INFER THAT A MI STAKE APPARENT FROM RECORD HAS OCCURRED AS CONTENDED BY THE APPELLANT. MY LEARNED PREDECESSOR ACKNOWLEDGED THE DECISION BY THE ITAT, AHMEDABAD IN THE CASE OF TORRENT FINANCIERS, STILL IT WAS HELD B Y HIM IN THE VERY NEXT LINE THAT INTEREST IN RESPECT OF RS.51,72,836/- ADV ANCED TOWARDS FINANCIAL ASSISTANCE TO GROUP CONCERNS AND ADMITTED LY NOT DIRECTLY RELATED TO APPELLANTS MANUFACTURING BUSINESS WORKE D OUT ON PROPORTIONATE BASIS WAS CLEARLY DISALLOWABLE. THE B ENEFIT OF INTEREST FREE FUNDS WAS ALLOWED BY CIT(A)-I, BARODA, MY LEAR NED PREDECESSOR IN RESPECT OF REST OF THE FUNDS. DUE TO THIS BEING NOT A CASE OF PRIMA FACIE MISTAKE APPARENT FROM RECORD, APPLICATION U/S 154 IS REJECTED. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES W E HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE W ITH REGARD TO THE PROPOSITION THAT THE POWER OF RECTIFICATION UNDER S ECTION 154 OF THE IT ACT CAN BE EXERCISED ONLY WHEN THE MISTAKE WHICH IS SOUGHT TO BE RECTIFIED IS AN OBVIOUS AND PATENT MISTAKE WHICH AP PARENT FROM THE RECORD AND NOT A MISTAKE WHICH REQUIRES TO BE ESTAB LISHED BY ARGUMENTS AT A LONG DRAWN PROCESS ON REASONING OF P OINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONS. THE PERUSAL OF THE ORDER OF CIT(A) DATED 12 TH JULY, 2007 PASSED ON THE QUANTUM APPEAL OF THE ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 5 ASSESSEE (EXTRACTED SUPRA) WE FIND AN INHERENT CONT RADICTION. THE LD. FIRST APPELLATE AUTHORITY HAS OBSERVED THAT AS FAR AS THE ARGUMENT OF THE ASSESSEE THAT ITS OWN INTEREST FREE FUNDS ARE F AR IN EXCESS OF THE LOANS/ADVANCES MADE TO THE ASSOCIATE CONCERNS DURIN G THE YEAR IS CONCERNED, IT HAS A FORCE IN VIEW OF THE ITATS DEC ISION, BUT THEREAFTER ALL OF A SUDDEN, THE LD. FIRST APPELLATE AUTHORITY JUMPED TO THE SECOND FOLD OF REASONING THAT THE ADVANCES WERE NOT MADE F OR BUSINESS PURPOSES. THE FIRST APPELLATE AUTHORITY, FIRST ACCE PTED THE CONTENTION OF ASSESSEE THAT IF ADVANCES TO THE SISTER CONCERNS WERE MADE OUT OF INTEREST FREE FUNDS THEN THERE IS A MERIT IN ITS CO NTENTION THAT NO DISALLOWANCE WOULD BE MADE BUT LD. CIT(A) DID NOT C ONCLUDE THIS POINT ULTIMATELY IN THE ORDER. THE LD. CIT(A) HAS LEFT IT AS IT IS. TO OUR MIND IT IS AN APPARENT MISTAKE WHICH OUGHT TO HAVE BEEN RE CTIFIED. WE REMIT THIS ISSUE TO THE FILE OF CIT(A) WITH THE DIRECTION THAT LD. FIRST APPELLATE AUTHORITY SHALL DEAL WITH THIS ISSUE ON MERIT AND R ECORD A FINDING, WHETHER ASSESSEE HAS ADVANCED THE LOANS TO SISTER C ONCERNS OUT OF INTEREST FREE FUNDS OR NOT ?. THE OBSERVATION MADE BY US WILL NOT IMPAIR OR INJURE THE CASE OF REVENUE AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATION OF THE ASSESSEE. ITA NO.2684/AHD/2011 ASST. YEAR 2003-04 6 6. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2015 SD/- SD/- (G. D. AGRAWAL) VICE PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 14/5/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 15/5/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: