Shree Fibre Pvt. Ltd., Vadodara V. The ITO, Ward - 2(1)(3), Baroda

ITA 2836/AHD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1436 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-04-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 13-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR; TUSHAR HEMANI SR
• Section: 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER SHREE FIBER PVT. LTD. NR. RAILWAY CROSSING , AT- VEGA, TA: DABHOL , DIST:- BARODA PAN: AAJCS2460E (APPELLANT) VS THE ITO, WARD-2(1)(3), BARODA (RESPONDENT) REVENUE BY: SHRI SHYAM PRASAD, SR. D.R. ASSESSEE BY: SHRI TUSHAR HEMANI, SR . A.R. & SHRI P.B. PARMAR, A.R. DATE OF HEARING : 09-06-2021 DATE OF PRONOUNCEMENT : 25-06-2 021 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2014-15, ARISES FRO M ORDER OF THE CIT(A)-2, VADODARA DATED 20-09-2017, IN PROCEEDING S UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL IS DIRECTED AGAINS T THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES CLAIMED ON CASH CREDIT ACCOUNT OF RS. 39,94,130/-. ITA NO. 2836/AHD/2017 ASSESSMENT YEAR 2014-15 I.T.A NO. 2836/AHD/2017 A.Y. 2014-15 PAGE NO SHREE FIBER PVT. LTD. VS. ITO 2 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLA RING TOTAL INCOME AT RS. NIL WAS FILED ON 25 TH SEP, 2014. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 28 TH AUGUST, 2015. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 39,94,130/- ON CAS H CREDIT ACCOUNT MAINTAINED WITH CENTRAL BANK OF INDIA. THE ASSESSI NG OFFICER OBSERVED THAT ASSESSEE HAD MADE ADVANCE TO ITS SISTER CONCERN SHR EEJI KRUPA SPINNERS PVT. LTD. IN F.Y. 2011-12 OF RS. 2,30,50,000/- OUT OF I NTEREST BEARING BORROWED FUND. ON QUERY, THE ASSESSEE EXPLAINED THAT THE AF ORESAID AMOUNT WAS ADVANCED TO ITS SISTER CONCERN IN F.Y. 2011-12 OUT OF THE MIXED FUND AS IN THE CASH CREDIT ACCOUNT SALE PROCEEDS WAS ALSO DEPO SITED IN F.Y. 2011-12. IT WAS ALSO EXPLAINED THAT ASSESSEE WAS HAVING SUFFICI ENT INTEREST FREE FUNDS ALONG SALE PROCEED AS ON 31 ST MARCH, 2011. THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE AND HE W AS OF THE VIEW THAT ASSESSEE HAS WITHDRAWN FUNDS FROM THE CASH CREDIT A CCOUNT AND UTILIZED THE SAME FOR GIVING ADVANCES TO ITS SISTER CONCERN, THE REFORE, INTEREST EXPENSES TO THE AMOUNT OF RS. 39,94,130/- CLAIMED ON CASH CREDI T ACCOUNT WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REI TERATING THE FACTS STATED BY THE ASSESSING OFFICER. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS AT TH E OUTSET THE LD. COUNSEL HAS SUBMITTED THAT THE IMPUGNED AMOUNT ON L OAN WAS ADVANCED TO THE SISTER CONCERN OF THE ASSESSEE DURING THE F.Y. 2011-12 AND THE SIMILAR I.T.A NO. 2836/AHD/2017 A.Y. 2014-15 PAGE NO SHREE FIBER PVT. LTD. VS. ITO 3 ISSUE OF ADDITION OF INTEREST PAYMENT ON THE IDENTI CAL FACTS HAS BEEN ADJUDICATED BY THE CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF ASSESSEE ITSELF VIDE ITA NO. 515/AHD/2016 DATED 4-08-2016 IN FAVOUR OF THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH NOT TO CONTROVERT THESE UNDISPUTED FACTS THAT THE ISSUE CONTESTED IN THE AP PEAL HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE AFORESAID DEC ISION OF THE ITAT AHMEDABAD FOR ASSESSMENT YEAR 2011-12. 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE AMOUNT OF LOAN OF RS. 2,30 ,50,000/- WAS ADVANCED TO THE SISTER CONCERN OF THE ASSESSEE NAMELY M/S. SHRE EJI KRUPA SPINNERS PVT. LTD. IN THE F.Y. 2011-12 AND THE IDENTICAL ISSUE ON SIMILAR FACT IN RESPECT OF PAYMENT OF INTEREST WAS EXAMINED AND ADJUDICATED BY THE CO-ORDINATE BENCH OF THE ITAT AS REFERRED SUPRA. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE REFERRED DECISION AND THE RELEVANT PART OF THE DECISION OF THE C-ORDINATE BENCH IS DISCUSSED AS UN DER:- 7. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ASSESSMENT ORDER WOULD REVEAL THAT THE AO HAS N OT CONSIDERED INCREASE IN FINANCIAL COST AS A POINT TO DOUBT THE BOOKS OF ACCOUNTS OF THE ASSESSE E. THIS ISSUE HAS BEEN CONSIDERED FOR THE FIRST TIME BY THE ID.CIT(A). BUT THE LD.CIT(A) HAS NOT IS SUED ANY SHOW CAUSE NOTICE TO THE ASSESSEE BEFORE DELIBERATING ON THIS ASPECT. IT IS PERTINENT TO MENTION THAT THE BOOKS OF ACCOUNTS CAN ONLY BE REJECTED IF IT IS DEMONSTRATED THAT IT IS DIFFICULT FOR THE AO TO DEDUCE TRUE INCOME FROM THE ACCOUNTS . THERE SHOULD BE A DISALLOWANCE OUT OF FINANCIAL COS T, IF THE ASSESSEE HAS USED INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSE. BUT THAT CANNOT BE AN ISSUE WHICH WOULD AUTHORIZE THE LD.CTT(A) TO DOUBT THE BOOK RESULTS. WHERE IS HINDRANCE IN TH E PASSAGE OF THE LD.CIT(A) TO COMPUTE THE TRUE INCOME OF THE ASSESSEE ? THIS ASPECT HAS BEEN CONSI DERED BY THE LD.CTT(A) WITH AN ANGLE THAT ONCE BOOK RESULTS ARC REJECTED, THEN THE LOSS CLAIMED BY THE ASSESSEE AT RS.99,33,822/- WILL NOT BE AVAILABLE. OTHERWISE, EVEN AFTER MAKING ADDITION OF RS.38,17,633/- THE RESULTANT INCOME OF THE ASSESSEE WOULD BE IN NEGATIVE, BECAUSE IT WILL BE S ET OFF AGAINST THE ALLEGED LOSS SHOWN BY THE ASSESSEE IN THE RETURN. CONSIDERING ALL THESE ASPEC TS, I AM OF THE VIEW THAT LD.CTT(A) FAILED TO FOLLOW THE PROCEDURE, AND THEREFORE, HIS ORDER IS N OT SUSTAINABLE ON THIS ISSUE. APART FROM THE ABOVE, THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE HAS ONLY ONE BANK ACCOUNT, WHICH IS FOR THE PURPOSE OF BUSINESS. IT HAS DEPOSITED ALL ITS SALE PROCEEDINGS IN THIS VERY ACCOUNT. SALES DURING THE YEAR UNDER CONSIDERATIO N WERE AGGREGATING TO RS.2,82,06,868/-. HE ALSO POINTED OUT THAT THE ASSESSEE HAS SUFFICIENT I NTEREST FREE FUNDS. THE DETAILS ARE PLACED ON PAGE NO. 67 OF THE PAPER BOOK. THE ASSESSEE HAS SHOWN IN TEREST FREE FUNDS OF RS.41,75,403/-. HAD AN OPPORTUNITY WAS GRANTED TO THE ASSESSEE. IT COULD H AVE EXPLAINED ITS POSITION WITH REGARD TO THE I.T.A NO. 2836/AHD/2017 A.Y. 2014-15 PAGE NO SHREE FIBER PVT. LTD. VS. ITO 4 AVAILABILITY OF INTEREST FREE FUNDS AND THE SALE PR OCEEDS DEPOSITED IN THIS ACCOUNT. THEREFORE, IN MY OPINION, THE ORDER OF THE LD.CIT(A) IS NOT SUSTAINA BLE. I ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION OF RS.38,17,633/- MADE BY THE LD. CIT( A). RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF ON THE SIMI LAR ISSUE AND IDENTICAL FACTS AS SUPRA, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-06-2021 SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD : DATED 25/06/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,