DCIT-CENTRAL-CIRCLE-1(3), Nagpur V. M/S PALACE DEVELOPERS, Nagpur

ITA 315/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1618 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Section: 154

Judgement Text

1 ITA NO. 315/NA G/2014. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T. A. NO.315/NAG/2014 ASSESSMENT YEAR : 2009 10. DY. COMMISSIONER OF INCOME - TAX, M/S PALACE DEVELOPERS, CENTRAL CIRCLE - 1(3), NAGPUR. VS. NAGPUR. PAN AABFP 4614Q APPELLANT RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI ABHAY AGRAWAL. . DATE OF HEARING : 23 - 09 - 2015. DATE O F PRONOUNCEMENT : 30 TH OCT., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - III, NAGPUR DATED 28 - 03 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. GROUNDS OF APPEAL READ AS UNDER : - 1} ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , WHETHER THE LD . CLT{A} HAS ERRED IN HOLDING THAT RS . 35 . 34 LAKHS IS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TAWARDS THE ASSESSEE ' S CLAIM AF EXPENDITURE ON INTEREST , WHEREAS IT WAS THE ADDITION MADE TOWARDS INTEREST RECEIVABLE BY THE ASSESSEE ON THE LOANS GIVEN TA I TS SISTER CONCERNS? 2} ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , WHETHER THE LD. CLT{A} HAS ERRED IN TREATING THE ADDITION TOWARDS INTEREST RECEIVABLE AS DISALLOWANCE AND RESTRICTING THE SAME TO THE AMOUNT OF INTEREST DEBITED TO THE PROFIT & LOSS ACCAUNT? 3} THE LD . CLT{A} OUGHT TO HAVE SUSTAINED THE ADDITION , AS THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCAUNTING , AND AS PER THE ASSESSEE'S SUBMISSIONS, THE INTEREST RECEIVABLE BY THE ASSESSEE FROM ITS SISTER CONCERNS , AMOUNTED TORS . 35 . 34 LAKHS . 2 ITA NO. 315/NA G/2014. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : THERE WAS A SEARCH ACTION IN THE CASE OF GIGEO CONSTRUCTION CO. PVT. LTD. AND A NOTICE U/S 153 C WAS ISSUED TO THE ASSESSEE ON 07 - 04 - 2010 IN RESPONSE TO WHICH THE ASSESSEE FILED ITS RETURN OF INCOME ON 14 - 12 - 2010 DECLARING A TOTAL INCOME AT A LOSS OF RS.12,93,205/ - . DURING THE ASSESSMENT PROCEEDINGS THE AO DISALLOWED RS.35,34,349/ - ON ACCOUNT OF IN TEREST AND DETERMINED THE INCOME AT RS.35,34,349/ - , BY TAKING THE TOTAL INCOME AS PER RETURN OF INCOME AS NIL INSTEAD OF RS. ( - ) RS.12,93,205/ - . HAVING FOUND THE MISTAKE OCCURRED IS APPARENT FROM RE CORD, THE ASSESSEE FILED A RECTIFICATION APPLICATION U/S 154 OF THE I.T. ACT ON 21 - 01 - 2011 BEFORE THE AO. BUT THE AO REJECTED THE SAME VIDE ORDER DATED 21 - 06 - 2011 STATING THAT IT INVOLVES THE INTERPRETATION OF STATISTICS. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(APPEALS). 3. AFTER CONS IDERING THE ASSESSEES SUBMISSION ON THE IMPUGNED ISSUE, LEARNED CIT(APPEALS) HELD AS UNDER : IT IS OBSERVED THAT THE APPELLANT HAD FILED THE RETURN OF INCOME ON 14.12.2010 IN RESPONSE TO NOTICE U/S 153C OF THE I.T. ACT DECLARING A LOSS OF RS.12,93,205/ - . WHILE FINALISING THE ASSESSMENT, THE AO DISALLOWED RS.35,34,349/ - ON ACCOUNT OF INTEREST AS MENTIONED IN THE ASSESSMENT ORDER, AND DETERMINING THE TOTAL INCOME AT RS . 35,34,349/ - . WHILE MAKING THE COMPUTATION, THE AO MISTAKENLY TOOK THE TOTAL INCOME FILED BY THE ASSESSEE AS PER RETURN OF INCOME AS NIL, WHEREAS THE ACTUAL TOTAL INCOME FILED AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE IS RS . ( - )12,93 , 205/ - AS STATED ABOVE . A COPY OF ACKNOWLEDGEMENT AS WELL AS RETURN OF INCOME IS PLACED ON RECORD . IT IS FURTHER OBSERVED THAT THE ISSUE, AS RAISED BY THE ASSESSEE IN ITS REJECTION APPLICATION , CLEARLY FALLS WITHIN THE THE PREVIEW OF 'MISTAKE APPARENT FROM RECORD '. THE AO . APPEARS NOT TO HAVE APPLIED HIS MIND PROPERLY TOWARDS THE ISSUE AND SUMMARILY REJECTED THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE. THIS IS UNFAIR AND CANNOT BE ACCEPTED AS PER LAW . ONCE THE ASSESSEE HAS SUBMITTED THE COPY OF ACKNOWLEDGEMENT OF THE RETURN OF INCOME FILED , WHICH CLEARLY SHOWS THE TOTAL INCOME FILED AT RS . ( - )12,93,205/ - , THE SAME SHOULD HAVE BEEN ADOPTED AS THE BASIS OF THE COMPUTATION OF INCOME, INSTEAD OF NIL TAKEN BY THE AO. FURTHER AS REGARDS THE ADDITION MADE OF RS . 35,34 , 349/ - BY THE AO . ON ACCOUNT OF INTEREST DISALLOWANCE , THE AR OF THE APPELLANT HA S SUBMITTED THAT THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT HAS DEBITED RS . 11, 14,639/ - ONLY AND HAS CLAIMED THE INTEREST EXPENSES TO THAT EXTENT . THUS THE AR HAS SUBMITTED, THAT THE DISALLOWANCE CAN AT BEST BE FOR AN AMOUNT WHICH HAS BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT AND CANNOT EXCEED THE SAME . THEREFORE THE ADDITION ON THIS ACCOUNT IS TO BE RESTRICTED TO RS . 10 , 53 , 803/ - , AFTER ALLOWING RS.60 , 836/ - AS INTEREST EXPENSES PERTAINING TO NON RELATED TO THE BUSINESS , (WHICH HAS BEEN ALLOWED BY THE AO . ). THUS THE ASSESSEE DESERVES A RELIEF TO THE EXTENT OF RS . 24 , 80 , 546/ - ON THIS ACCOUNT . 3 ITA NO. 315/NA G/2014. . ACCORDINGLY THE TOTAL RELIEF , WHICH THE APPELLANT DESERVES TO BE GRANTED AMOUNTS TO ~ ~ R RS. S. ; 37, 7 3, 7 51/ - (RS . 12 , 93,205 + RS . 24 , 80 , 546/ - ) . ~ ':~ - ; . ' - :. IN LIEU OF THE AFORESAID DISCUSSION THE AO . IS HEREBY DIRECTED TO CONSIDER THE L - , ' APPLICATION U/S 154 OF THE I . T . ACT MADE BY THE APPELLANT AND RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE , IN THE LIGHT OF THE ABOVE STATED DISCUSSION . THESE GROUNDS OF APPEAL ARE ACCORDINGLY DISPOSED OFF. 4. AGAINST THE ABOVE OR DE R, REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE IN THIS CASE HAS FILED A RETURN DECLARING TOTAL INCOME AT ( - )RS.12,93,205/ - . THE AO HAS TAKEN THE RETURNED INCOME AS NIL. THE AO WAS MAKING ENQUIRY FOR INTEREST DEBITED TO P&L ACCOUNT TO RS.10,53,803/ - . IT TRANSPIRED THAT THE ASSESSEE HAD TAKEN LOAN FROM BANKS WHICH WAS GIVEN TO OTHER CONCER NS. THE RESPONSE OF THE ASSESSEE IN THIS REGARD TO THE AO MAY BE REPRODUCED AS UNDER : IN RESPONSE TO THE QUERY RAISED DURING THE COURSE OF ASSESSMENT THAT THE INTEREST CHARGED IN THE PROFIT & LOSS ACCOUNT IS ONLY RS.11,14,639/ - IN RESPECT OF LOAN OUTSTA NDING OF RS.2.25 CR. THE ASSESSEE IN RESPECT TO THAT HAS TO INFORM YOU THAT THE INTEREST DEBITED TO PROFIT & LOSS ACCOUNT WAS AS PER THE INTEREST CHARGED BY THE BANK ON LOAN ACCOUNT. AS THE ACCOUNT WAS CLASSIFIED AS NPA, THE BANK DOESNT CHARGE ANY INTERE ST ON ACCRUAL BASIS. SO THE TOTAL INTEREST AS PER THE SANCTION FOR THE ASST. YR. 2009 - 10 IS RS.36,15,186/ - . THE INTEREST DEBITED TO PROFIT & LOSS ACCOUNT IS SRS.11,14,639/ - , SO THE TOTAL INTEREST NOT DEBITED AS PER THE MERCANTILE BASIS OF ACCOUNTING IS RS. 25,00,547/ - . THE TOTAL INTEREST RECEIVABLE AGAINST SUCH INTEREST WAS SSSSSSSSSSRS.35,34,349/ - . THE AO PROCEEDED TO HOLD AS UNDER : IN RESPONSE TO THE SAID SHOW CAUSE ASSESSEE ADMITTED FACT THAT INTEREST DEBITED TO PROFIT AND LOSS ACCOUNT IS NOT FOR THE PURPOSE OF BUSINESS EXCLUDING THE INTEREST IN RESPECT OF VEHICLE LOAN AND NEEDS TO DISALLOW WHILE COMPUTING OF INCOME EARNED BY ASSESSEE FROM ITS BUSINESS. J 4 ITA NO. 315/NA G/2014. IN VIEW OF THE ABOVE ASSESSEE CLAIM OF DUE EXPENSES ON ACCOUNT OF INTEREST IS DISALLOWED TO THE EXTENT OF RS.35,34,349/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR FILING INACCURATE DETAILS CONSEQUENTIALLY CONCEALING THE INCOME TAXABLE ARE INITIATED SEPARATELY. 6. FROM THE ABOVE IT IS APPARENT THAT FIRST LY THE AO IS COMPLETELY IN ERROR IN TAKING THE INCOME RETURNED AS NIL AS HAS BEEN RIGHTLY NOTED BY THE LEARNED CIT(APPEALS). SECONDLY IN THE TOTAL EXPENSE DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF INTEREST IS RS.11,14,639/ - . IT REMAINS TO BE EXP LAINED AS TO HOW THE AO CAN MAKE A DISALLOWANCE OF RS.35,34,350/ - . IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, LEARNED CIT(APPALS) IS CORRECT IN DIRECTING THE AO TO CONSIDER THE ASSESSEES APPLICATION AND RECOMPUTE THE TOTAL INCOME IN THE LIGHT OF LEARNED CIT(APPEALS) DIRECTIONS. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCT., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 30 TH OCT., 2015. 5 ITA NO. 315/NA G/2014. COPY FORWARDED TO : 1. M/S PALACE DEVELOPERS BLOCK NO. 1, KHULLAR CHAMBERS, MUNJE SQUARE, SITABULDI, NAGPUR. 2. DCIT, CENTRAL CIRCLE - 1(3), NAGPUR. 3. C.I.T., CONCERNED 4. CIT(APPEALS) - I II , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR