RIYA TRAVEL & TOURS (I) P.LTD, MUMBAI V. ASST CIT CEN CIR 34,

ITA 3124/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3904 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHAKA
• Keywords: Search and seizure; Principle of natural justice; Validity of assessment; Block assessment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI AMARJIT SINGH , JM ITA NO. 3124 /MUM/20 15 ( ASSESSMENT YEAR : 2007 - 08 ) M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 237, GULAB BUILDING P.D.MELLO STREET FORT, M UMBAI 400 001 VS. ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 34, ROOM NO.104, 1 ST FLOOR AAYAKAR BHAVAN MUMBAI 400 020 PAN/GIR NO. AAACR3178B ( APPELLANT ) .. ( RESPONDENT ) ITA NO. 6972/MUM/2016 ( ASSESSMENT YEAR : 2008 - 09 ) M/S. RIYA TRAVEL & TOUR S (I) PVT. LTD., 237, GULAB BUILDING P.D.MELLO STREET FORT, MUMBAI 400 001 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 6(1), ROOM NO.1905, 19 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 021 PAN/GIR NO. AAACR3178B ( APPELLANT ) .. ( RESPO NDENT ) ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY MS. VIDISHAKA & MS. RIDDHI MISHRA DATE OF HEARING 21 / 01 /201 9 DATE OF PRONOUNCEMENT 31 / 01 /201 9 ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 2 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEALS ARE FILED BY ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A) - 54, MUMBAI DATED 21/09/2016 FOR A.Y.2007 - 08 & 2008 - 09 IN THE MATTER OF ORDER PASSED U/S.154 OF THE INCOME TAX ACT, 1961. ITA NO.3124/MUM/ 2015 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL FOR A.Y.2007 - 08 IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITION OF RS.54 , 24 , 193/ - TOWARDS NEGATIVE CASH BALANCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. A SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE CASE OF M/S. RIYA GROUP ON 22/02/2011. THE GROUP IS DEALING THE BUSINESS OF AIR BOOKING, FOREIGN EXCHANGE, VISA PROCESSING, VISA STAMPING, INBO UND / OUTBOUND TOUR BOOKING ETC., IT HAS 45 IATA APPROVED LOCATIONS IN INDIA WITH HEAD OFFICE AT MUMBAI. THE ASSESSEE IS ONE OF THE MAIN CONCERNS IN THE GROUP. IN THE COURSE OF SEARCH, VARIOUS INCRIMINATING EVIDENCES WERE FOUND INCLUDING THE BACK UP OF THE COMPUTER ANALYSIS FROM WHERE THE LD. AO FOUND THAT THERE WAS NEGATIVE CASH BALANCE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE LD. AO OBSERVED THAT ON 05/03/2007 THERE WAS A NEGATIVE CASH BALANCE OF RS.54,24,193/ - AND ON 08/07/2005, THERE WAS A ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 3 NEGATIVE CASH BALANCE OF RS.1,08, 18,184/ - . A SHOW - CAUSE NOTICE WAS ISSUED BY THE LD. AO AS TO WHY THE SAID NEGATIVE CASH BALANCE BE NOT BROUGHT TO TAX IN RESPECTIVE ASSESSMENT YEARS. THE ASSESSEE IN REPLY STATED THAT IT HAD DECLARED AN ADDITIONAL INCOME OF RS.9 CR ORES FOR THE BLOCK ASSESSMENT PERIOD 2000 - 01 TO 2006 - 07 WHICH WOULD EXPLAIN THE SAID NEGATIVE CASH BALANCE. THIS REPLY NOT PROVING SATISFACTORY, THE LD. AO PROCEEDED TO MAKE ADDITION U/S.69 TO THE TUNE OF RS.54,24,193/ - IN RESPECT OF NEGATIVE CASH BALANCE IN A.Y.2007 - 08. BEFORE THE LD. CIT(A), APART FROM REITERATING THE STATEMENTS MADE BY THE ASSESSEE BEFORE THE LD. AO, THE ASSESSEE ALSO MADE ALTERNATIVE STATEMENT THAT SIMILAR ADDITION TOWARDS NEGATIVE CASH BALANCE WAS MADE BY THE LD. AO IN THE A.Y.2006 - 07 TO THE TUNE OF RS.1,08,18,184/ - WHICH WOULD GO TO INCREASE CASH BALANCE AND THAT WOULD REMAIN AS A SOURCE TO EXPLAIN NEGATIVE CASH BALANCE IN A.Y. 2007 - 08 TO THE TUNE OF RS.54,24,193/ - . ACCORDINGLY, IT WAS OBSERVED THAT NO ADDITION TOWARDS NEGATIVE CASH BA LANCE IN THE SUM OF RS.54,24,193/ - IS TO BE MADE IN THE A.Y.2007 - 08. LD. CIT(A) HOWEVER OBSERVED THAT THE CONTENTION OF THE ASSESSEE WAS THAT ADDITION MADE TOWARDS NEGATIVE CASH BALANCE IN A.Y. 2006 - 07 WOULD INCREASE THE CASH BALANCE IS NOT CORRECT AS IT W OULD ONLY WIPE OUT THE NEGATIVE CASH DURING THAT YEAR. HE OBSERVED THAT THE LD. AO HAS MADE ADDITION OF RS.54,24,193/ - ONLY FOR A.Y.2007 - 08 AND HENCE THE ADDITION MADE IN A.Y. 2006 - 07 WOULD NOT IMPACT THE ASSESSEE IN A.Y. 2007 - 08. WITH THESE OBSERVATIONS, HE UPHELD THE ACTION OF LD. AO. ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 4 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT LD. AR HAD PLACED ON RECORD THE COPY OF THE ASSESSMENT ORDER FRAMED FOR THE A.Y.2006 - 07 WHEREIN THE SUM OF RS.1,08,18, 184/ - WAS ADDED TOWARDS NEGATIVE CASH BALANCE. WE ALSO FOUND FROM THE CASH LEDGER FOR THE PERIOD 01/04/2006 TO 31/03/2007 FILED BY THE LD. AR WHICH ARE ENCLOSED IN PAGES 39 TO 44 THAT THE CASH NEGATIVE BALANCE OF RS.54,24,193/ - HAS BEEN ARRIVED BY CARRYING FORWARD THE CLOSING CASH BALANCE ON 31/03/2006 WHICH WAS ARRIVED WITHOUT CONSIDERING THE ADDITION OF INCOME OF RS.1,08,18,184/ - IN THE A.Y.2006 - 07. IN OTHER WORDS, PURSUANT TO THE ADDITION MADE IN A.Y.2006 - 07 TO THE EXTENT OF RS.1,08,18,184/ - , THE NEGATIV E CASH BALANCE GETS WIPED OUT AND THE REVISED CASH ACCOUNT HAS TO BE PREPARED FOR A.Y.2006 - 07 AND CLOSING CASH BALANCE ON 31/03/2006 TO BE ARRIVED THEREON. LATER, THE SAID RE - WORKED CLOSING CASH BALANCE AS ON 31/03/2006 SHOULD HAVE TO BE CARRIED FORWARD AS OPENING BALANCE AS ON 01/04/2006 AND THE NEGATIVE CASH BALANCE , IF ANY , HAD TO BE WORKED OUT. THIS REQUIRES FACTUAL VERIFICATION BY THE LD. AO AND ACCORDINGLY, WE DEEM IT FIT AND APPROPRIATE TO REMAND THIS ISSUE TO THE FILE OF THE AO TO DECIDE THE IMPUGNE D ISSUE BASED ON THE FINAL OUTCOME OF A.Y.2006 - 07 AND WITH ALL THE ISSUES ON MERITS FOR A.Y.2007 - 08 LEFT OPEN . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE A.Y.2007 - 08 ARE ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO DIRECTIONS CONTAINED HEREINAB OVE. ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 5 6. WE FIND THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL BEFORE US. ONE OF THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE REGARDING THE VALIDITY OF ASSESSMENT FRAMED U/S.153A R.W.S. 143(3) OF THE ACT FOR THE A.Y.2007 - 08 WAS STATED TO BE NOT PRESS ED BY THE LD. AR AT THE TIME OF HEARING. ACCORDINGLY, THE ADDITIONAL GROUNDS 1 & 2 RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 7. WE FIND THAT THE ASSESSEE HAD RAISED ADDITIONAL GROUND NO.3 REGARDING THE CLA IM FOR INTEREST O N SERVICE TAX A S ALLOWA BLE DEDUCTION TO THE TUNE OF RS.77,68,368/ - WHICH IS CONSEQUENT TO THE ACTION TAKEN BY THE AUTHORITIES BELOW ON THE SAME ISSUE IN THE A.Y.2008 - 09. IN THIS SCENARIO, WE DEEM IT FIT TO ADMIT THIS ADDITIONAL GROUND OF APPEAL BEFORE US AND TAKE UP THE SAME FOR ADJUDICATION. 8. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE LD. AO OBSERVED THAT ASSESSEE HAS CLAIMED EXPENDITURE BY WAY OF INTEREST PAID O N SERVICE TAX FOR EARLIER YEARS AS DEDUCTION. THE ASSESSEE WAS ASKED TO SUBMIT THE ENTIRE DETAILS OF SERVICE TAX PAY MENTS, INTEREST PAYMENTS THEREON FROM THE A.Y 2005 - 06 ONWARDS. THE ENTIRE DETAILS OF THE SAME WERE FURNISHED BY THE ASSESSEE BEFORE THE LD. AO TOGETHER WITH THE DATES THEREON. THE LD. AO FOUND THAT INTEREST ON DELAYED PAYMENT OF SERVICE TAX IS PENAL IN NAT URE AND ACCORDINGLY PROCEEDED TO DISALLOW A SUM OF RS.2 , 83 , 46 , 608/ - IN THE ASSESSMENT. THE LD. CIT(A) GAVE A CATEGORICAL FINDING THAT THE ASSESSEES CLAIM IN RESPECT OF INTEREST O N SERVICE TAX CANNOT BE ALLOWED AS DEDUCTION ON PAYMENT BASIS IN A.Y. 2007 - 08 BECAUSE SUCH LIABILITY ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 6 ACCRUED OR AROSE TO IT ONLY IN A.Y.2008 - 09 PURSUANT TO DETERMINATION BY THE SERVICE TAX AUTHORITIES VIDE ORDER DATED 18/09/20 0 7. THE LD. CIT(A) ALSO OBSERVED IN HIS ORDER THAT ASSESSEE IS ENTITLED TO SEEK DEDUCTION OF THIS CLAIM IN A.Y.2008 - 09. ACCORDINGLY, HE UPHELD THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST ON SERVICE TAX AMOUNTING TO RS.2 , 83 , 46 , 608/ - IN A.Y. 2007 - 08. 9. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US BY WAY OF ADDITIONAL GROUND. 10. WE HAVE HEARD RIVAL SUBMISSIONS. W E FIND THAT THE ADDITIONAL GROUND RAISED BY ASSESSEE WITH REGARD TO THIS ISSUE IS AS UNDER: - 3. WITHOUT PREJUDICE TO THE CLAIM FOR INTEREST ON SERVICE TAX AS AN ALLOWABLE DEDUCTION, THE LEARNED ASSESSING OFFICER OUGHT TO HAVE RESTRICTED THE DISALLOWANCE T O RS.77,68,368/ - , BEING THE ACTUAL AMOUNT OF EXPENDITURE ON ACCOUNT OF INTEREST ON SERVICE TAX CLAIMED DURING THE RELEVANT PREVIOUS YEAR. 11. AT THE OUTSET, WE FIND THAT THE TOTAL INTEREST ON DELAYED PAYMENT OF SERVICE TAX IS RS.2,83,46,608/ - COMPRISING OF RS.77,68,368/ - AND RS.2,05,78,240/ - FOR A.YRS. 2007 - 08 AND 2008 - 09 RESPECTIVELY . WE FIND FROM THE SERVICE TAX AUTHORITIES ORDER DATED 16/11/2007 ENCLOSED IN PAGE 4 OF THE PAPER BOOK THAT ASSESSEE HAD PAID THE TOTAL SUM OF RS.8,44,73,819/ - BEFORE THE ISS UANCE OF SHOW - CAUSE NOTICE BY THE SERVICE TAX AUTHORITIES AND OUT OF THE SAME, A SUM OF RS.7 , 67 , 05 , 451 IS APPROPRIATED TOWARDS SERVICE TAX. THE REMAINING SUM OF RS.77,68,368/ - [RS.8,44,73,819 RS.7,67,05,451] IS APPROPRIATED TOWARDS INTEREST ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 7 PAYABLE BY TH E ASSESSEE. THE TOTAL INTEREST WORKED OUT FOR THE ENTIRE PERIOD OF DELAYED PAYMENT OF SERVICE TAX IS RS. 2,83,46,608/ - WHICH INCLUDES RS. 77,68,368/ - AS ST ATED SUPRA. WE FIND THAT THE SUM OF RS.2,05,78,240/ - REPRESENTING INTEREST ON SERVICE TAX WAS PAID BY THE ASSESSEE ON 10/10/2007 FALLING IN A.Y.2008 - 09. PURSUANT TO THIS CORRESPONDENCE FROM SERVICE TAX AUTHORITIES DATED 16/11/2007 ENCLOSED IN PAGE 4 OF THE PAPER BOOK, WE HOLD THAT A SUM OF RS.2,05,78,240/ - IS TO BE ALLOWED AS DEDUCTI ON IN A.Y.2008 - 09 AND A SUM OF R S.77,68,368/ - IS TO BE ALLOWED AS DEDUCTION IN A.Y.2007 - 08 AS ADMITTEDLY THE SAID PAYMENT WAS MADE BY THE ASSESSEE BEFORE 30/11/2006 ITSELF, BEING THE DATE OF ISSUE OF SHOW - CAUSE NOTICE BY THE SERVICE TAX AUTHORITIES. THIS FACT IS VERY CLEAR FROM THE SERVICE TAX DEPARTMENTS CORRESPONDENCE TO THE ASSESSEE DATED 16/11/2007 ENCLOSED IN PAGE 4 OF THE PAPER BOOK. HENCE, WE FIND THAT THE AUTHORITIES BELOW ERRED IN DISALLOWING THE TOTAL INTEREST OF RS.2,83,46,608/ - IN A.Y. 2007 - 08. WE DIRECT THE LD. AO TO DELETE THE SUM OF RS.2,83,46,608/ - AND ALLOW THE SUM OF RS.77,68,368/ - AS DEDUCTION IN A.Y.2007 - 08 AND THE REMAINING SUM OF RS.2,05,78,240/ - AS DEDUCTION IN A.Y.2008 - 09. IN THIS REGARD, THE LD AR FAIRLY STATED THAT THE LD AO HAD INDEED GIVEN DEDUCTION O F RS 2,05,78,240/ - IN A.Y. 2008 - 09 TO THE ASSESSEE. ACCORDINGLY, THE ADDITIONAL GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 8 12. IN THE RESULT, APPEAL OF THE ASSESSEE FOR A.Y.2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6972/MUM/2016 (A. Y.2008 - 09) 13. WE FIND THAT THE ASSESSEE HAD FILED REVISED GROUND OF APPEAL AS UNDER: - 1. THE LD. C!T(A) ERRED IN REJECTING THE CLAIM MADE BY THE APPELLANT FOR ALLOWANCE OF INTEREST ON DELAYED PAYMENT OF SERVICE TAX AMOUNTING TO RS. 2,83,46,608/ - . THE RE ASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 2. THE LD. C!T(A)/ AO ERRED IN LAW AND FACTS IN MISINTERPRETING THE SPECIFIC FINDING OF HON'BLE CIT (A) IN THE ORDER OF AY 2007 - 08 AS 'SUGGES TION' AND HENCE NOT ALLOWING INTEREST ON DELAYED PAYMENT OF SERVICE TAX AMOUNTING TO RS. 2,83,46,608 / - . THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 3. THE LD. CIT(A)7 AO OUGHT TO HAVE CONSIDERED THAT HON'BLE CIT (A) IN AY 2007 - 08 HAS NOT DISPUTED THE FACT THAT INTEREST ON DELAYED PAYMENT OF SERVICE TAX IS ALLOWABLE TO THE ASSESSEE HOWEVER IT IS ALLOWABLE IN ASST. YEAR 2008 - 09 AND THEREFORE NOT ALLOWING THE RIGHTFUL CLAIM OF THE ASS ESSEE IS AGAINST THE PROVISIONS OF LAW AND PRINCIPLES OF NATURAL JUSTICE. 4. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 5. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE GROUNDS OF APPEAL. 14. IN VIEW OF OUR FIN DINGS GIVEN FOR A.Y.2007 - 08 ABOVE, THIS GROUND RAISED BY THE ASSESSEE DESERVES TO BE DISMISSED AS RELIEF IS OTHERWISE GRANTED ALREADY TO THE ASSESSEE. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE IN A.Y.2008 - 09 ARE DISMISSED. ITA NO. 3124/MUM/2015& 6972/MUM/2016 M/S. RIYA TRAVEL & TOURS (I) PVT. LTD., 9 TO SUM UP 15. APPEAL OF THE ASSESSEE FOR A.Y.2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. AND APPEAL OF THE ASSESSEE FOR A.Y.2008 - 09 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 01 /201 9 SD/ - ( AMARJIT SINGH ) SD/ - ( M. BALA GANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 / 01 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. D R, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//