DCIT CORPORATE CIRCLE 1(1), CHENNAI V. ALINA PRIVATE LIMITED, CHENNAI

ITA 2919/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4145 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 16-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M. SANJIV ADITYA
• Keywords: Set aside
• Section: 201; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBE R ./ ITA NO. 2919 /CHNY/2018 / ASSESSMENT YEAR: 201 5 - 1 6 DY . COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE - 1 (1) , CHENNAI . VS. M/S. ALIN A PVT. LTD., 5 SEETHA NAGAR MAIN ROAD, NUNGAMBAKKAM, CHENNAI 600 0 1 4. [PAN : AAFCA 9114P ] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI AMOL B. KIRTANE , ADDL. C IT /RESPONDENT BY : SH RI M. SANJIV ADITYA, CA / DATE OF HEARING : 09 .0 5 .2019 / DATE OF PRONOUNCEMENT : 09 .0 5 .2019 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) - 1 , CHENNAI, IN ITA NO. 9 2 / CIT(A) - 1 /17 - 18 DATED 31 .0 7 .2018 FOR THE ASSESSMENT YEAR (AY) 20 1 5 - 1 6 . 2. M/S. ALINA PVT. LTD. , THE ASSESSEE , IS ENGAGED IN THE MANUFACTURING AND EXPORT OF LEATHER GOODS. WHILE MAKING THE ASSESSMENT FOR AY 2015 - 16, INTER ALIA , THE ASSESSING OFFICER (A O) NOTICED FROM NOTE - 26 OF NOTES TO FINANCIAL STATEMENT THAT RS. 74.76 LAKHS HAS NOT BEEN RECOGNIZED AS ITA NO. 2919 / CHNY /201 8 : - 2 - : AN INTEREST INCOME PAYABLE BY M/S. M.D. IMRAN TANNERS. IN LINE WITH THE ASSESSMENT MADE FOR AY 2014 - 15 , AFTER DETAILED DISCUSSION AND IN ORDER TO MAINTAIN CONSISTENCY , THE AO TREATED THE AMOUNT RECEIVABLE FROM M/S. M.D. IMRAN TANNERS AS AN INTEREST ACCRUED IN THE HANDS OF THE ASSESSEE AND THEREFORE ADDED IT AS AN INCOME UNDER THE HEAD OTHER SOURCES . 3 . AGG RIEVED AGAINST ADDITION, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEAL. AGAINST THE ORDER OF LD. CIT(A), THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW, FA CTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY NOT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE INCOME TAX RULES WHEN THE MATERIAL FILED IN APPEAL PROCEEDINGS WERE NEW OCCURRENC ES AND NOT AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS. 3. THE LD. CIT(A) HAS ERRED IN NOT GIVING OPPORTUNITY TO THE ASSESSING OFFICER AND ALLOWING THE APPEAL OF THE ASSESSEE WHEN THERE WERE FACTUAL VARIATIONS OF CRITICAL NATURE BETWEEN THE SUBMISSION S MADE BY THE ASSESSEE AT THE ASSESSMENT STAGE AND APPEAL STAGE SUCH AS THE PRINCIPAL AMOUNT OF LOAN STATED TO HAVE BEEN ADVANCE TO M/S M.D.IMRAN TANNERS AS PER NOTE 26 OF NOTES ON ACCOUNT OF THE ANNUAL REPORT FOR FY 2014 - 15 WHEREAS THE LETTER DATED 07 - 07 - 2018 FILED BY MIS. M.D.IMRAN THIS PRINCIPAL AMOUNT IS STATED TO BE RS.7.26 CRORES. 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE MAINTAINS ITS ACCOUNT IN MERCANTILE BASIS AND INTEREST AMOUNTING TO RS.78,36,000/ - ACCRUED TO THE ASSESSEE AND THE SAME WAS SUBJECT TO TAX. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 4 . THE LD. DR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL , SUPRA . PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE OF ASSESSEE SUBMITTED THAT ITA NO. 2919 / CHNY /201 8 : - 3 - : SUBSEQUENTLY, THE M ORTGAGED PROPERTY IS SOLD TO THE ASSESSEE AND THEREFORE, THE REVENUE S APPEAL MAY BE DISMISSED . 5 . WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RE CORD. THE ASSESSEE ADVANCED RS. 6.5 CR. TO M/S. M.D. IMRAN TANNERS AND AS PER THE AGREEMENT , IT WAS ENTITLED TO INTEREST @ 12% P.A. THE LOAN WAS SECURED BY THE MORTGAGE OF THE PROPERTY OWNED BY THE M/S. M.D. IMRAN TANNERS. THE ASSESSEE ALSO HAD TAKEN ON RENT THE TANNERY OF M/S. M.D. IMRAN TANNERS FOR THE MONTHLY RENT OF RS. 90,000/ - . DURING THE PERIOD RELEVANT TO THE IMPUGNED ASSESSMENT YEAR, THE INTEREST RECEIVABLE BY THE ASSESSEE WAS RS. 78 LAKHS AND THE RENT PAYABLE BY THE ASSESSEE WAS RS. 3.6 LAKHS. THE ASSESSEE SHOWN THE RENT PAYABLE AT RS. 3.6 LAKHS AS AN INTEREST RECEIPT BUT DID NOT OFFER THE REMAINING INTEREST RECEIVABLE A S AN INCOME . T HE AO CONTENDED THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE AMOUNT OF INTEREST RECEIVABLE ON THE LOAN WAS IN FACT IRRECOVERABLE. THEREFORE, HE ADDED THE BALANCE INTEREST OF RS. 74.76 LAKHS. ON APPEAL , THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE INTEREST ON LOAN WAS NOT RECOVERABLE HAVING REGARD TO THE POOR FINANCIAL CONDITION OF THE PAYEE M/S. M.D . IMRAN TANNERS . I N THIS REGARD , IT PLACED THE FINANCIAL STATEMENT ETC. BEFORE THE LD CIT(A) AND PLEADED THAT UNTIL AND UNLESS THE MORTGAGE D PROPERTY IS SOLD , T HE ASSESSEE WOULD BE UNABLE TO RECOVER ANY INTEREST FROM M/S. M.D. IMRAN TANNERS ETC. THE ASSE SSEE ALSO PLACED ON RECORD A LETTER FROM THE PARTY DECLARING THAT ITA NO. 2919 / CHNY /201 8 : - 4 - : DUE TO POOR FINANCIAL CONDITION , IT DID NOT PAY INTEREST . CONSIDERING THEM, THE LD. CIT(A) ALLOWED THE APPEAL. THE REVENUE IS ON APPEAL PLEADING THAT THE AO WAS NOT GIVEN AN OPPORTUN ITY ON THE FACTUAL VARIATIONS AS PER THE GROUNDS EXTRACTED SUPRA. THE LD. AR ALSO SUBMITTED THAT IN THE SUBSEQUENT YEAR , THE MORTGAGE D PROPERTY WAS SOLD TO THE ASSESSEE AND IT SETTLED THE BALANCE SUM AFTER ADJUSTING THE LIABILITIES DUE TO IT. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THE ISSUE S BACK TO THE AO FOR A FRESH EXAMINATION OF THE RELEVANT DOCUMENTS AND DECIDE THE ISSUE S IN ACCORDANCE WITH LAW. WHILE DOING S O, THE AO WOULD EXAMINE ALL THE DOCUMENTS RELATED TO THE SETTLEMENT OF MORTGAGE D PROPERTY . I F THE INTEREST COMPONENT IS CONSIDERED IN THE TRANSACTION S ETC , HE WOULD ASSESS THE INTEREST COMPONENT IN THE RELEVANT ASSESSMENT YEAR . 6 . IN THE RESULT, THE A PPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON 09TH MAY , 2019 IN CHENNAI. SD/ - [ SD/ - ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) ( S. JAYARAMAN ) / ACCOUNTANT MEMBER / CHENNAI, / DATED: 09TH MAY , 2019 . EDN, SR. P.S / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR 6. / GF