R.J. TRADEWINGS P. LTD, MUMBAI V. ACIT CIR 2(3), MUMBAI

ITA 3027/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7760 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: KISHOR PATEL
• Keywords: Opportunity of being heard; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.3027/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. R.J. TRADEWINGS PVT. LTD., 30-K, DUBASH MARG, KALAGHODA, FORT, MUMBAI -400 023 .... ASSESSEE VS ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE 2(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 .REVENUE PAN: AABCR 1467 J ASSESSEE BY: SHRI KISHOR PATEL REVENUE BY: SHRI JITENDRA YADAV O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-VI MUMBAI DATED 18.01.2010 FOR THE A.Y. 2006-07. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE AD-HOC DISALLOWANCE OF A SUM OF ` 3,00,000/- BEING INTEREST PAID ON LOAN TAKEN FOR TH E PURPOSE OF BUSINESS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISALLOWANCE MADE OUGHT TO BE DELETED. ITA 3027/M/2010 M/S. R.J. TRADEWINGS PVT. LTD. 2 2. THE FACTS IN CONTROVERSY ARE IN NARROW COMPASS. TH E RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS TAKEN CERTAIN LOANS ON WHICH HE WA S PAYING THE INTEREST AND AT THE SAME TIME IT HAS GIVEN THE INTEREST FREE LOANS AND ADVANCES TO THE EXTENT OF ` 79,74,749/- TO SEVERAL PARTIES. THE A.O. SOUGHT T HE EXPLANATION OF THE ASSESSEE, MERELY FILED THE NAMES OF THE PERSONS TO WHOM HOUSE HE HAS GIVEN ADVANCES. NO OTHER DETAIL WAS GIVEN IN GIVING THE INTEREST FREE ADVANCES TO THOSE PARTIES. THE A .O., THEREFORE, MADE THE DISALLOWANCE OF RS 3 LAKHS OUT OF THE TOTAL INTERES T EXPENDITURE CLAIMED BY THE ASSESSEE. THE ASSESSEE CARRIED THE ISSUE BE FORE THE LD. CIT (A) BUT WITHOUT SUCCESS. NOW, THE ASSESSEE IS IN APPEAL BE FORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. COUNSEL ARGUED THAT THE ASSES SEE HAD SUFFICIENT INTEREST FREE FUNDS FROM WHICH ADVANCES ARE GIVEN. HE, FURTHER, ARGUES THAT THE PRINCIPLES LAID DOWN IN THE CASE OF CIT VS . RELIANCE UTILITIES & POWER LTD. 313 ITR 340 ARE APPLICABLE TO THE ASSESS EES CASE AND HENCE NO DISALLOWANCE CAN BE MADE. IT IS SEEN THAT THE A SSESSEE HAS NOT FILED ANYTHING TO SUPPORT THE SAID PLEA. THE LD. COUNSEL AGREED THAT IF THE MATTER IS SENT BACK TO THE A.O. THEN THE ASSESSEE C AN DEMONSTRATE THAT IT HAS SUFFICIENT INTEREST FREE FUNDS FROM WHICH ADVAN CES ARE GIVEN. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THIS MATTER T O THE FILE OF THE A.O. WITH THE DIRECTION THAT HE SHOULD TAKE INTO CONSIDERATIO N THE DETAILS FILED BY THE ASSESSEE TO PROVE THAT THE ASSESSEE HAS SUFFICI ENT INTEREST FREE FUNDS TO MAKE THE ADVANCES. THE A.O. SHOULD ALSO CONSIDE RED THAT THERE WAS A COMMERCIAL EXPEDIENCY AND TO DECIDE THE ISSUE IN TH E LIGHT OF THE PRINCIPLES LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA) NEEDLESS TO SAY THAT THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY OF BEING HEARD. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA 3027/M/2010 M/S. R.J. TRADEWINGS PVT. LTD. 3 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 1ST MARCH 2011. SD/- SD/- ( B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 31ST MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 6, MUMBAI. 4) THE CIT 2, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 3027/M/2010 M/S. R.J. TRADEWINGS PVT. LTD. 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 28.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 28.03.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER