M/s. ATS Infrastructure Ltd., New Delhi V. ACIT, Noida

ITA 3079/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9407 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: A, NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3079/DEL./2017 ASSESSMENT YEAR: 2010-11 M/S. ATS INFRASTRUCTURE LTD., 711/92, DEEPALI, NEHRU PLACE, NEW DELHI VS. ACIT, CENTRAL CIRCLE, NOIDA PAN :AADCA0609B (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 31/03/2017 PASSED BY THE LEARNED CIT(APPEALS)-IV, K ANPUR [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2010-11 RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX APPELLANT BY SHRI VED JAIN, ADV. SHRI ASHISH GOEL, CA RESPONDENT BY SHRI R.K. GUPTA, SR. DR DATE OF HEARING 11.08.2020 DATE OF PRONOUNCEMENT 18.08.2020 2 ITA NO. 3079/DEL./2017 (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYES OF LAW AND ON FACTS. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN PASSI NG THE ORDER WITHOUT GIVING ASSESSEE A PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN CLEAR VIOLATION OF PR INCIPAL OF NATURAL JUSTICE. 3 (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE DISALLOWANCE ON AN AMOUNT OF RS. 11,49,085/- MADE BY AO ON ACCOUNT OF INTEREST UNDER SECTION 36(L)(III) OF THE ACT. (II) THAT THE DISALLOWANCE WAS MADE DESPITE THE FAC T THAT THE LOANS WERE GIVEN OUT OF BUSINESS EXPEDIENCY. (III) THAT THE DISALLOWANCE IS NOT CALLED FOR IN VI EW OF THE FACT THAT THE ASSESSEE HAVING SUFFICIENT OWNED FUND S AND THE ADVANCES HAVING BEEN NOT MADE OUT OF BORROWED FUNDS, NO DISALLOWANCE OF INTEREST CAN BE MADE. 4 THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY WAS ENGAGED IN THE BUSINESS OF THE REAL EST ATE AND FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 15/10/2010 DECLARING TOTAL INCOME OF 7,36,59,266/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASS ESSMENT AND STATUTORY NOTICES UNDER THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. DURING ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS DEBITED INTEREST OF 11,49,085/- 3 ITA NO. 3079/DEL./2017 BUT IN THE COMPUTATION OF THE INCOME FILED, CLAIMED INTEREST OF 2,40,49,065/- ON BORROWED CAPITAL UNDER SECTION 36( 1)(III) OF THE ACT. THE ASSESSING OFFICER DENIED THIS CLAIM AS IT WAS NOT MADE BY WAY OF FILING REVISED RETURN OF INCOME. FURTHER, RE GARDING THE INTEREST OF RS.11,49,085/- WHICH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAD GIVEN INTEREST-FREE ADVANCES TO THE SISTER CONC ERN AND SUBSIDIARY COMPANIES, WHEREAS THE ASSESSEE HAS PAID INTEREST AT THE RATE OF 12-14% PER ANNUM ON THE MONEY BORROWED. THE ASSESSING OFFICER HAS PROVIDED THE LIST OF THE PART IES TO WHOM INTEREST FREE ADVANCES WERE GIVEN AS UNDER: I. MADHAV CAPITAL SERVICES RS. 10,00,000/- II. RAJANDEEP SINGH TAWANA RS. 31,00,000/- III. SUNSHINE INFRATECH RS. 2,00,00,000/- IV. LEASE PLAN INDIA LIMITED RS. 7,27,579/- V. STG SOFTECH RS. 50,00,000/- TOTAL RS. 2,98,27,579/- 2.1 THE ASSESSING OFFICER QUESTIONED THE ALLOWABILITY INTEREST EXPENDITURE. IN RESPONSE, THE ASSESSEE SUBMITTED TH AT THE ADVANCES WERE MADE FOR THE BUSINESS PURPOSE TO THE SUBSIDIARY COMPANIES/SISTER CONCERN, WHO WAS ENGAGED IN REAL E STATE BUSINESS. THE ASSESSING OFFICER REJECTED THIS CONTE NTION AS IT WAS NOT SUPPORTED BY THE DOCUMENTARY EVIDENCES. ACCORDI NGLY, THE ASSESSING OFFICER FOLLOWING THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT-I, LUCKNOW VS SAHU ENT ERPRISE 4 ITA NO. 3079/DEL./2017 (SUPRA), DISALLOWED THE INTEREST EXPENDITURE OF 11,49,085/- IN TERMS OF SECTION 36(1)(III) OF THE ACT. 2.2 THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), H OWEVER NONE APPEARED BEFORE HIM IN RESPONSE TO THE NOTICES ISSUED/OPPORTUNITIES ALLOWED. THE LD. CIT(A) UPHELD THE DISALLOWANCE OBSERVING THAT THE ASSESSEE COULD NOT BRING ANYTHING ON RECORD TO SHOW FIRSTLY, THAT HE HAD INT EREST-FREE FUNDS AVAILABLE WITH HIM, SECONDLY, THE INTEREST-FREE FUN DS WERE USED TO GIVE ADVANCES TO ITS SISTER CONCERN FOR BUSINESS PU RPOSES. 2.3 AGGRIEVED, THE ASSESSEE IS BEFORE THE TRIBUNAL RAI SING GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE FIL ED A PAPER- BOOK CONTAINING PAGES 1 TO 89 AND SUBMITTED THAT A SIMILAR ISSUE CAME UP FOR DECISION BEFORE THE TRIBUNAL IN ASSESSE ES OWN CASE FOR A.Y. 2012-13 & AY 2013-14 IN ITA NO. 3080/DEL/2 017 & 5408/DEL/2018 VIDE ORDER DATED 15.01.2020 (PB PAGE 71-89), WHEREIN ALSO, THE LD. AO MADE ADDITION U/S 36(1)(II I) OF THE ACT AND THE TRIBUNAL HAS DELETED THE ADDITION. HE SUBMI TTED THAT THE CASE IN HAND IS SQUARELY COVERED BY THE ABOVE ORDER AS UNDER: (I) IN THE CASE OF A.Y. 2012-13 & AY 2013-14, THE ITAT HELD THAT THE ASSESSEE HAD SUFFICIENT OWN INTEREST FREE FUNDS FROM WHICH THE INVESTMENTS WERE MADE BY THE ASSESSEE IN ITS SISTER CONCERN AND DELETED THE ADDI TION MADE BY THE LD. AO. (II) IN THE CASE IN HAND ALSO, THE ASSESSEE COMPAN Y HAD SUFFICIENT OWN FUNDS OF RS.30,59,44,905/- WHICH HAV E BEEN USED TO MAKE THESE BUSINESS ADVANCES OF RS. 2,98,27,579/- AND THE SAME IS EVIDENT FROM THE 5 ITA NO. 3079/DEL./2017 BALANCE SHEET (PB PG. 11) THAT ASSESSEE OWNED SURPL US FUNDS AS UNDER: PAID UP SHARE CAPITAL- RS.1,50,42,000/- RESERVE & SURPLUS - RS.29,09,02,905/- TOTAL - RS. 30,59,44,905/- 4. THE LEARNED COUNSEL FURTHER SUBMITTED THAT IT IS A SETTLED LAW THAT ASSESSEE IS FREE TO USE ITS OWN FUNDS THE WAY IT WANTS AND THE REVENUE CANNOT COMPEL THE ASSESSEE TO DO OR PERFORM OR USE ITS FUNDS IN A PARTICULAR MANNER. IT IS ALSO SE TTLED LAW THAT WHEN OWN FUNDS ARE MORE THAN THE FUNDS UTILIZED TOW ARDS INTEREST FREE ADVANCES, THERE CANNOT BE ANY DISALLO WANCE. IN A SCENARIO, WHERE THE INTEREST FREE ADVANCES ARE GIVE N OUT OF INTEREST FREE FUNDS, THERE IS NO NEED FOR ASSESSEE TO PROVE THE BUSINESS EXPEDIENCY. THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V . RELIANCE INDUSTRIES LTD. CIVIL APPEAL NO. 10 OF 2019 DATED 0 2.01.2019, CITATION 410 ITR 466 (SC). 5. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, SUBMITTED THAT THE ARGUMENT OF AVAILABILITY OF THE INTEREST-FREE FUNDS WITH THE ASSESSEE HAS BEEN TAKEN FOR THE FIRS T TIME BEFORE THE TRIBUNAL AND NO SUCH ARGUMENTS AND THE DOCUMENT ARY EVIDENCE IN SUPPORT THEREOF HAVE BEEN SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND, THEREFORE, ISSUE MIGHT BE RESTORED BACK EITHER TO THE LD. CIT(A) OR TO THE AS SESSING OFFICER FOR DECIDING AFRESH IN ACCORDANCE WITH LAW. 6 ITA NO. 3079/DEL./2017 6. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE ISSUE OF AVAILABILITY OF INTEREST-FREE FUNDS HAS TO BE DE CIDED AFTER VERIFICATION OF FACTS OF THE EACH YEAR AND CANNOT B E ALLOWED MERELY BY FOLLOWING THE DECISIONS OF THE TRIBUNAL (SUPRA) IN THE CASE OF THE ASSESSEE IN EARLIER YEARS. WE AGREE WITH THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THIS I SSUE OF AVAILABILITY OF INTEREST FREE FUNDS HAS NOT BEEN RA ISED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING ASSESS MENT PROCEEDINGS. IN VIEW OF THE DECISIONS CITED, IF AN ASSESSEE SUCCEEDS IN ESTABLISHING THAT INTEREST FREE ADVANCE S ARE GIVEN OUT OF INTEREST FREE FUNDS AVAILABLE WITH HIM, THEN NO DISALLOWANCE IS REQUIRED TO BE MADE UNDER SECTION 36 (1)(III) OF TH E ACT. IF AN ASSESSEE IS UNABLE TO SATISFY AVAILABILITY OF INTER EST FREE FUNDS, THEN HE MAY TAKE THE GROUND THAT LOANS HAVE BEEN UT ILIZED FOR THE PURPOSE OF THE BUSINESS. 6.1 WE FIND THAT BEFORE THE ASSESSING OFFICER, THE ASS ESSEE ARGUED ONLY UTILISATION OF LOAN FUNDS BY THE SUBSID IARY COMPANIES/SISTER CONCERN FOR BUSINESS PURPOSES AND FOR THAT TOO ALSO NO DOCUMENTARY EVIDENCES WERE SUBMITTED BEFORE THE ASSESSING OFFICER. BEFORE THE LD. CIT(A), THE ASSES SEE DID NOT APPEAR AND NOT FILED ANY SUBMISSIONS. THE ARGUMENT OF AVAILABILITY OF INTEREST FREE FUNDS AND GIVING OF L OANS TO SUBSIDIARY COMPANIES/SISTER CONCERN OUT OF SUCH INTEREST-FREE FUNDS, HAS BEEN RAISED FOR THE FIRST TIME BEFORE US, THEREFORE IN THE INTEREST OF NATURAL JUSTICE, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO THE FILE OF LEARNED ASSESSING OFFICER FOR DECIDING AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORT UNITY OF BEING 7 ITA NO. 3079/DEL./2017 HEARD TO THE ASSESSEE. THE GROUNDS RAISED BY THE AS SESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2020. SD/- SD/- (KULDIP SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH AUGUST, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI