M/s.Muthoot Estate Investments, Trivandrum V. The ACIT, Trivandrum

ITA 290/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96710 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Keywords: Revision of order; Assessment record
• Section: 143(3); 263

Judgement Text

ITA NO. 290/C/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & GEORGE GEORGE.K , JM ITA NO . 290/COCH/2015 (ASST YEAR 2010 - 11 ) M/S MUHOO T ESTATE INVESTMENTS PUNNEN ROAD TRIVANDUM VS THE ASST COMMR OF INCOME TAX CIRCLE 1(2) TRIVAN DRUM ( APP LICANT ) (RESPONDENT) PAN NO. AAEFM0923A ASSESSEE BY SHRI R SREENIVASAN REVENUE BY SHRI SHANTAM BOSE, CIT - DR DATE OF HEARING 15 TH SEPT 2015 DATE OF PRONOUNCEMENT 16 TH SEPT 2015 OR D ER PER GEORGE GEORGE.K JM : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT , TRIVANDRUM DATED 31 ST MARCH 2015 PASSED U/S 263 OF THE ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE GROUNDS RAISED READ AS UNDER: 1. THE COMM I SS I ONE R O F INC O M E TAX IS NOT JUS TIFIED IN I NVO K I NG T H E PROVISIONS O F S ECT I O N 263 F O R TH E REASON THAT ORDER PA SS ED B Y T H E ASSESSING OFFICER IS ERRONEOU S AND P R E J UDIC IA L TO THE INTEREST OF THE R EVENUE . ITA NO. 290/C/2015 2 2. T H E COMMISS I ONER O F INCOME TA X GROSSLY FAILED TO A PPRE C I A TE T H E CARDINAL FACT THA T THE ENTIR E B O RR O W E D FUN D S FR OM THE BANK H AVE BEEN UTILIZED FOR THE SPE C IFIC PUR P OSE O F INV E STING IN THE MAIN LINE OF TH E BUSINES S , N A MEL Y IMMOVABLE PROPERLY BY THE APPELLANT FIRM. 3. THE COMMISSIONER OF IN C O M E TAX ALSO FAILED TO APPR E CIA TE THE FURTH E R FACT THAT MISMATC H BETW E EN INTE RE ST PAID TO DEPO S I TORS A N D I N TER E S T R ECEIVED FROM T HE PARTNE R S IS ONLY DUE TO THE FACT THA T THE APP EL L A N T WAS FOLLOWING THE C AS H S Y ST EM OF ACCOUNTING. THE I N TE RES T P A I D A N D RECEIVED ARE ONLY ON AC T UAL B ASI S A ND NOT ON ACCRUAL B AS I S. 4. THE COMMISS I O N E R OF INCOME T A X A L SO F A I LE D T O APPR ECIA TE THE F AC T T H A T A LL THE SE MAT T E RS HAVE BEEN CONSIDERED BY THE AS SESSING OF FI C E R DURING THE ASSESSME NT PR OC EE D IN GS THOUGH N OT SPECI F IC AL LY N O T E D BY HIM . 5. THE C O MM IS S I ONER OF I N C OME T AX ALSO DID NOT CONSIDER T HE J UDGMEN T O F T H E JURI SD ICTI O NAL H IGH COURT IN T H E A PPE L L AN T S SI STER C O NCERN ' S CASE , NAME L Y MIS. MUTHOO T F IN ANC E CO RPO R A TION FIL ED DURING T H E C OU R S E OF HEARING . 3 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE A SSESSEE FIRM IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND FINANCING. FOR THE RELEVANT ASSESSMENT YEAR, T HE RETURN OF INCOME WAS FILED ON 14 TH OCT 2010 DECLARING A TOTAL LOSS OF RS. 37,59,91,607/ - . THE ASSESSMENT U/S 143(3) WAS COMPLETED ON ARRIVING AT A T OTAL LOSS OF RS.37,59, 62,202/ - . 4 SUBSEQUENTLY, THE CIT PASSED ORDER U/S 263 OF THE ACT FOR THE REASON THAT THE AO HAS NOT EXAMINED WHETHER THE AMOUNT OF RS.25,58,891/ - BEING INTEREST PAID ON BANK LOAN/OVERDRAFT ARE TO BE DISALLOWED , SINCE THE MAJOR SHA RE OF BUSINESS WORKING CAPITAL WAS WITHDRAWN BY THE PARTNERS THEMSELVES FOR INVESTING ITA NO. 290/C/2015 3 IN THEIR SISTER CONCERNS. THE RELEVANT DIRECTIONS WHILE SETTING ASIDE THE ASSESSMENT ORDER DATED 21.12.2012 READ AS UNDER: 11 IN THE INSTANT CASE, THE ORDER OF THE A O IS ERRONEOUS AND PREJUDICIAL AS THE AO HAS FAILED TO EXAMINE ISSUES OF ALLOWING INTEREST ON BANK LOAN/OVERDRAFT AND THE ISSUE OF DIVERSION OF FUNDS. UNDER THE CIRCUMSTANCES I SET ASIDE THE ORDER TO THE AO OR FRESH VERIFICATION OF THE ISSUE OF ALLOWING INTERE ST ON BANK LOAN/OVERDRAFT AMOUNTING TO RS. 25,58,891/ - AND THE ISSUE OF DIVERSION OF FUNDS. 5 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER DOES NO T SUFFER FROM ANY INFIRMITY WARRANTING ANY INTERFERENCE U/S 263 OF THE ACT. FURTHER THE LD COUNSEL PLACED RELIANCE ON GROUNDS OF APPEAL. 6 ON THE OTHER HAND, THE LD DR SUPPORTED THE ORDER OF THE CIT. 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF THE ASSESSMENT RECORDS AND THE ASSESSMENT ORDER, IT IS NOT DISCERNIBLE THAT THE AO HAD EXAMINED THE ISSUE WHETHER THE INTEREST PAID ON BANK LOAN/OVERDRAFT AMOUNTING TO RS. 25,58,891/ - ARE TO BE DISALLOWED FOR THE REASONS THAT THERE IS A DIVERSION OF BORROWED FUNDS. SINCE THE AO FAILED TO EXAMINE THIS ISSUE NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR IN THE ASSESSMENT ORDER, WE ARE OF THE VIEW THAT THE CIT IS JUSTIFIED IN INVOKING THE REVISIONARY JURISDICTION U/S 263 OF THE ACT. MOREOVER, WE NOTICE THAT THE CIT HAS DIRECTED THE AO TO EXAMINE THE MATTER AFRESH . THE ASSESSEE IS AT LI BERTY TO POINT ITA NO. 290/C/2015 4 OUT BEFORE THE AO THAT THERE IS NO DIVERSION OF BORROWED FUNDS OTHER THAN FOR THE PURPOSE OF BUSINESS. THEREFORE, T HE DIRECTIONS OF THE CIT BEING OPEN, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT DATED 31.3.2015. IT IS ORDERED ACCORDINGLY. 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF SEPT 2015 . SD/ - SD/ - ( B P JAIN ) (GEORGE GEORGE .K ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 16 TH SEPT 2015 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN