Shri Sandeep Nanavati, Surat V. The ACIT., Circle-5, Surat

ITA 2773/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1893 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJA RAM SAH
• Assessee Lawyers: PRAKRUTI R UPADHYAY
• Keywords: Notional interest; Condonation of delay; TDS
• Section: 143(3); 154

Judgement Text

ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, A HMEDABAD BEFORE SHRI G. D.AGARWAL ,V P. AND SHRI MUKULKUMAR SHRAWAT ITA NO. 2773 /AHD/2010 (ASSESSMENT YEAR: 2004-05) SHRI SANDEEP NANAVATI C-5 KRISHNA NAGAR SOCIETY, OPP. CHOKSHI WADI, NEW RANDER ROAD, SURAT. (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAOPN 1000D APPELLANT BY : MS. PRAKRUTI R. UPADHYAY RESPONDENT BY : DR. RAJA RAM SAH, SR. D.R. ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKULKUMAR SHRAWAT JUDICIAL MEMBER. THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS)-III, SURAT DATED 23-10-2007. AT THE OUTSE T IT HAS BEEN INFORMED BY THE REGISTRY THAT THIS APPEAL HAS BEEN FILED BELATEDLY. IN THIS REGARD A CONDONATION APPLICATION HAS BEEN MOVE D FROM THE SIDE OF THE APPELLANT. PRAYER FOR CONDONATION OF DELAY IS AS UNDER:- THAT AN APPEAL ORDER OF LD. C.I.T.(A)-III, SURAT F OR A.Y. 2004-05 WAS PASSED ON 23-10-2007 AND THEREAFTER THE SAME WA S SERVED ON ME SOMEWHERE IN BETWEEN 23-10-2007 AND 19-11-200 7. HENCE SECOND APPEAL IS REQUIRED TO BE FILED ON OR B EFORE 18-01- 2008, WHICH IS FILED ON 28-09-2010 IN THE OFFICE OF THE ITAT., ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 2 AHMEDABAD. THUS, THERE IS A DELAY OF ABOUT 33 MONTH S IN FILING OF THE SAID APPEAL. I HAD FILED A RECTIFICATION PETITION AGAINST THE SA ID APPEAL ORDER OF LD. CIT (A)-III, SURAT ON 21-11-2007 AS THERE WAS A N APPARENT MISTAKE IN NOT CONSIDERING WRITTEN SUBMISSION AND P ERSONAL REPRESENTATION OF MY ITP WHILE DECIDING THE APPEAL. I WAS VERY MUCH HOPEFUL IN GETTING SUCCESS IN RECTIFICATION PR OCEEDINGS. BUT THE LD. CIT (A)-III, SURAT HAS REJECTED THE SAID RE CTIFICATION APPLICATION, RECENTLY ONLY ON 06-09-2010 ON THE GRO UND THAT HE HAS NO POWER TO RECALL OF THE ORDER OF HIS PREDECES SOR. 2. REASONS ASSIGNED IN THE PETITION APPEARS TO BE G ENUINE BECAUSE THE ASSESSEE HAS MOVED AN APPLICATION UNDER SECTION 154 BEFORE THE LD. C.I.T.(A) WITH THE HOPE TO GET RELIEF IN RESPEC T OF AN EX-PARTE DECISION , HOWEVER UNDER WRONG ADVICE, HE HAS WAITE D FOR THE DECISION ON THE RECTIFICATION APPLICATION INSTEAD OF FILING A SECOND APPEAL BEFORE THE TRIBUNAL. CONSIDERING THE BONAFIDES OF THE ASS ESSEE AND THE EVIDENCES PLACED ON RECORD WE ARE OF THE VIEW THAT THERE WAS SUFFICIENT CAUSE TO GRANT CONDONATION OF DELAY. FOLLOWING A L ANDMARK DECISION OF HONBLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST KATIJI AND OTHERS 167 ITR-471 (SC) WHEREIN CERT AIN GUIDELINES HAVE BEEN LAID DOWN SUCH AS THAT REFUSING TO CONDON E THE DELAY CAN RESULT IN A MERITORIOUS CASE BEING THROWN OUT AT TH E VERY THRESHHOLD AND THEREFORE, THE CAUSE OF JUSTICE COULD BE DEFEAT ED. THE HONBLE COURT HAS ALSO SAID THAT WHEN SUBSTANTIAL JUSTICE A ND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE C AUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED. ALSO PLACING REL IANCE ON AUDO CENTRE VS. STATE OF U.P. AND OTHERS 278 ITR 291 (ALL) AND VOLTAS LIMITED 241 ITR 471 (AP). WE HEREBY CONDONE THIS DELAY AND DECI DE THIS APPEAL ON MERITS HEREUNDER. ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 3 3. GROUNDS RAISED BY THE ASSESSEE IN RESPECT OF THE IMPUGNED ADDITIONS ARE GROUND NO.2 AND 3 REPRODUCED BELOW:- 2. LD. CIT (A)-III, SURAT HAS ERRED IN LAW AND ON FACTS TO CONFIRM ADDITION ON ACCOUNT OF INTEREST FOR RS.1,02 ,269/- MADE BY THE ACIT,CIRCLE-5, SURAT WITHOUT ANY LEGAL AND VALI D GROUND. 3. LD. CIT(A)-III, SURAT HAS ERRED IN LAW AND ON F ACTS TO CONFIRM ACS LUMP-SUM AND AD-HOC DISALLOWANCE ON AC COUNT OF TRAVELING EXPENSES, TELEPHONE EXPENSES, PETROL EXPE NSES AND VEHICLE EXPENSES AMOUNTING TO RS.63,046/-. 4. IN RESPECT OF THESE TWO ADDITIONS LD. A.R. HAS V EHEMENTLY OPPOSED THE MANNER IN WHICH AN EX-PARTE DECISION WA S TAKEN BY LD. C.I.T. (A). IT WAS ALLEGED THAT WRITTEN SUBMISSIONS WERE SUBMITTED BEFORE THE LD. C.I.T. (A) HOWEVER, THOSE WERE IGNOR ED AND AN ADVERSE VIEW WAS TAKEN WITHOUT CONSIDERING THE EXPLANATION AS ALSO THE EVIDENCES PLACED BEFORE THE FIRST APPELLATE AUTHORI TY. IN RESPECT OF THE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST FEW POINTS HAVE BEEN MENTIONED BEFORE US ARE SUMMARIZED AS FOLLOWS:- FOR INTEREST PAID ON LOANS: NO NEW LOANS ARE TAKEN DURING YEAR UNDER APPEAL. A UDIT REPORTS FOR A.Y. 04-05 (PB PG.22) AND FOR A.Y. 03-04 (PB PG .48) ARE ATTACHED AS PROOFS. THE INTEREST RATE WAS SAME IN PAST YEAR(S) ALSO, I. E. 24% AND WAS ALLOWED AS DEDUCTION. IN A.Y. 03-04, ASSESSMENT WAS MADE U/S. 143(3) AND THIS EXP. WAS ALLOWED IN 1 ST APPEAL. REFER ASSESSMENT ORDER FOR A.Y. 03-04 (PB PG.9 PARA-6) AND ORDER OF LD. CIT (A) FOR A.Y. 03-04 (PB PG. 16 3 RD PARA ONWARDS). ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 4 INTEREST IS PAID TO ALL DEPOSITORS VIDE A/C. PAYEE CHEQUE. ALSO TDS PROVISIONS THEREON ARE COMPILED (PB PG.27). THI S FACT IS STATED BY THE AO IN ASSESSMENT ORDER PG. 3, 1 ST PARA. ALL DEPOSITORS ARE ASSESSED TO TAX AND SHOWN THESE INTEREST INCOME THEIR ROI(S). NONE OF THE DEPOSITORS ARE RELATIVES OF APPELLANT. BOTH THE DECISIONS RELIED UPON BY THE AO ARE IN FAV OUR OF THE APPELLANT AS INTEREST PAYMENT IS MADE FOR THE PURPO SE OF BUSINESS, DURING THE COURSE OF REGULAR BUSINESS ACT IVITY, NONE OF THE RECIPIENTS ARE RELATIVES OF THE APPELLANT AND T HERE IS NO EVIDENCE WITH THE A.O. THAT SUCH PAYMENT IS MADE FO R PERSONAL PURPOSES OR IS BOGUS. CASE LAWS RELIED UPON BY APPELLANT ARE ON PB PG.12 AND 13, PARA 2.4 OF SUBMISSION BEFORE LD. CIT (A). FOR NOTIONAL INTEREST ON ADVANCES:- APPELLANTS OWN CAPITAL BALANCE IS RS.44,71,477.82 AND INTEREST FREE LOANS RECEIVED ARE RS.2,45,739/-; WHEREAS INTE REST FREE ADVANCES ARE ONLY RS.3,16,911/-. MADHU INDUSTRIES L TD. V. ITO (2001) 37 ITCL 325 (AHD.); JUDGMENT GIVEN BY HON. J UDGE/VP SHRI G.D. AGRAWAL. ALL ARE CLOSE RELATIVES/FRIENDS OF THE APPELLANT. NONE OF THESE ARE NEW ADVANCES (PB PG.19). LAST YEAR ASSESSMENT WAS MADE U/S. 143(3) AND NO SU CH INTEREST WAS TAXED. THERE ARE NO PROVISIONS UNDER THE ACT TO LEVY TAX O N NOTIONAL INTEREST INCOME. (CASE LAW). 5. ON PERUSAL OF THE ABOVE SUBMISSIONS IT IS APPARE NT THAT ALL THOSE SUBMISSIONS HAVE NOT BEEN CONSIDERED BY LD. C.I.T. (A). TO ADJUDICATE THIS GROUND PROPERLY AND IN JUDICIOUS MANNER IT IS NECESSARY TO INVESTIGATE SOME OF THE POINTS SUCH AS WHETHER ANY NEW LOANS HAVE BEEN TAKEN DURING THE YEAR UNDER CONSIDERATION AND WHETHER IN THE PAST SAME RATE OF INTEREST WAS ALLOWED AS DEDUCTION AND WHETHER THE PROVISIONS OF TDS HAVE CORRECTLY BEEN FOLLOWED AND RESPECTIVE INTEREST ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 5 HAS BEEN ASSESSED IN THE HANDS OF THOSE PARTIES. IT IS ALSO NECESSARY TO INVESTIGATE THE POSITION OF THE ASSESSEES OWN C APITAL AVAILABLE FOR ADVANCE OF INTEREST FREE LOAN TO THE CONCERNED PART IES. SINCE THE FIRST APPELLATE AUTHORITY HAS NOT EXAMINED ALL THESE EVID ENCE AND ALSO NOT TAKEN INTO CONSIDERATION THE PAST HISTORY OF THE CA SE, HOWEVER DECIDED THE ISSUE IN A CRYPTIC MANNER THEREFORE, WE DEEM IT PROPER AND JUSTIFIABLE TO REMAND BOTH THE GROUNDS BACK TO THAT STAGE TO BE DECIDED. NEEDLESS TO MENTION AFTER PROVIDING AN ADEQUATE OPP ORTUNITY OF HEARING TO THE APPELLANT. 6. WITH THESE REMARKS BOTH THE GROUNDS BEING SET AS IDE TO THE STAGE OF LD. C.I.T. (A). THEREFORE, THE GROUNDS MAY BE TR EATED AS ALLOWED FOR STATISTICAL PURPOSE ONLY. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 28/02 /2011. SD/- SD/- (G. D. AGARWAL) (MUKUL KUMAR SHRAWAT) VICE PRESIDENT. JUDICIAL M EMBER. AHMEDABAD. DATED:28/02/2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - ITA.NO.2773/AHD/201 0 ASSTT. YEAR. 2004-0 5 6 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.