FAB TRADE PRIVATE LIMITED, MUMBAI V. ITO, WARD 15(1)(2), M

ITA 3258/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3461 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Assessee Lawyers: MOHIT KISINCHANDANI
• Keywords: Principle of natural justice; Additional evidence; Notional interest; Set aside
• Section: 201

Judgement Text

3 ITA 3258 /M/201 9 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI S.R IFAUR RAHMAN (ACCOUNTANT MEMBER) I.T.A. NO. 3258 /MUM/201 9 (ASSESSMENT YEAR 20 1 3 - 1 4 ) FAB TRADE PRIVATE LIMITED E - 2, ADDL.AMBERNATH MIDC ANAND NAGAR, AMBERNATH MAHARASHTRA - 421 501 PAN : AABCF1786A VS INCOME - TAX OFFICER WARD - 15(1)(2), MUMBAI APPELLANT RESPONDENT A PPELLANT BY SHRI MOHIT KISINCHANDANI, AR RE SPONDENT BY SHRI SANJAY J SETHI, DR DATE OF HEARING 2 3 - 02 - 2021 DATE OF PRONOUNCEMENT 08 - 03 - 2021 O R D E R PER SAKTIJIT DEY (JM): THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 04 - 0 2 - 2019 OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 24 , MUMBAI FOR THE ASSESSMENT YEAR 201 3 - 1 4 . 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO DISALLOWANCE OF INTEREST EXPENDITURE OF RS.33,72,240/ - . 3 ITA 3258 /M/201 9 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A RESIDENT COMPANY ENGAGED IN THE BUSINESS OF RESEL LER AND DISTRIBUTOR IN CHEMICALS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 01 - 10 - 2013 DECL ARING INCOME OF RS.8,20,110/ - . IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT FOR THE YEAR UNDER CONSIDERATION ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.1,321,70,813 / - ON LOANS AVA ILED FROM BANK. ON FURTHER VERIFICATION, HE FOUND THAT THE ASSESSEE HAS GIVEN ADVANCES TO M/S ADISHANK CHEMICALS PVT LTD. HE, THEREFORE, CALLED UPON THE ASSESSE E TO EXPLAIN WHY NOTIONAL INTEREST INCOME SHOULD NOT BE ESTIMATED ON THE ADVANCES GIVEN TO THE C ONCERNED PARTY. AS ALLEGED BY THE ASSESSING OFFICER, THE ASSESSEE NEITHER FURNISHED ANY DETAILS NOR A PROPER EXPLANATION . S TATING THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE ON LOAN AVAILED, WHEREAS , IT HAS ADVANCED MONEY TO SISTER CO NCERN WITHOUT CHARGING INTEREST, T HE ASSESSING OFFICER COMPUTED NOTIONAL INTEREST ON THE ADVANCES GIVEN TO THE SISTER CONCERN BY APPLYING THE RATE OF 15.28% AND DISALLOWE D AN AMOUNT OF RS.33,72,240/ - . THOUGH , THE ASSESSEE CONTE STED THE AFORESAID DISALLOWANCE/ ADDITION BE FORE THE FIRST APPELLATE AUTHORITY; HOWEVER, IT WAS UNSUCCESSFUL. 4. RE - ITERATING THE STAND TAKEN B EFORE THE DEPARTMENTAL AUTHORITIES, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE ASSESSEE HAS REGULAR TRANSACTION WITH M/S ADISHANK CHEMICALS PVT LTD. H E SUBMITTED, THE ASSESSEE SELLS RAW MATERIALS TO THE CONCERNED PARTY AND PURCHASES FINISHED PRODUCTS FROM IT. THUS, THE DISPUTED AMOUNT IS ONLY A TRADE ADVANCE RECEIVABLE OR TO BE AD JUSTED AGAINST PURCHASES MADE. HE SUBMITTED, BEFO RE THE DEPARTMENTAL AUTHO RITIES THE ASSESSEE WAS UNABLE TO REPRESENT THE CASE PROPERLY; HENCE, RELEVANT FACTS AND EVIDENCES TO 3 ITA 3258 /M/201 9 ESTABLISH THAT IT IS A TRADE ADVANCE, COULD NOT BE BROUGHT ON RECORD. THEREFORE, HE SUBMITTED, ASSESSEE MAY BE PERMITTED TO FURNISH ADDITIONAL EVIDENCE T O ESTABLISH ITS CLAIM AT THIS STAGE, WHICH C OULD NOT BE FURNISHED EARLIER. IN THIS CONTEXT, HE DREW OUR ATTENTION TO APPLICATION DATED 5 - 02 - 2021 SEEKING PERMISSION FOR ADMISSION OF ADDITIONAL EVIDENCE AND THE EVIDENCES ATTACHED THEREW ITH IN THE FORM OF PAP ER BOOK. FURTHER, HE SUBMITTED, THE INTEREST BEARING FUNDS ON WHICH THE ASSESSEE HAS PAID INTEREST ARE A VAILED FROM CASH CREDIT AND OVER DRAFT ACCOUNT AND ENTIRELY USE D FOR THE PURPOSE OF BUSINESS. H E SUBMITTED, GIVEN AN OPPORTUNITY, ASSESSEE CAN ESTABLISH THE LINK BETWEEN THE BORROWED FUNDS AND THE PURPOSE FOR WHICH SUCH FUNDS HAVE BEEN UTILIZED. THUS, HE SUBMITTED, THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION, AFTER EXAMINING THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE . 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH , EXPRESSED RESERVATION S WITH REGARD TO ADMISSION OF ADDITIONAL EVIDENCE, HOWEVER, HE SUBMITTED, MATTER CAN BE RE - EXAMINED BY THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED M ATERIALS ON RECORD. AS COULD BE SEEN , FROM THE STAGE O F ASSESSMENT PROCEEDINGS ITSELF THE A SSESSEE HAS CONSISTENTLY TAKEN THE STAND THAT THE SO - CALLED ADVANCE WITH M/S ADISHANK CHEMICALS PVT LTD IS IN THE NATURE OF A TRADE ADVANCE AS THE ASSESSEE HAS A RU NNING ACCOUNT WITH THE SAID PARTY FOR SALE OF RAW - MATERIALS AND PURCHASE OF FINISHED PRODUCTS. HOWEVER, BOT H THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) HAVE REJECTED THE AFORESAID CLAIM OF THE ASSESSEE ON THE GROUND THAT NECES SARY EVIDENCES WERE NOT FILED. 3 ITA 3258 /M/201 9 7. B EFORE US, THE ASSESSEE HAS FILED CERTAIN DOCUMENTARY EVIDENCES BY WAY OF ADDITIONAL EVIDENCE TO PROVE ITS CLAIM THAT THE ADVANCES WITH THE CONCERNED PARTY ARE IN THE NATURE OF TRADE ADVANCES AND FURTHER, THE BORROWED FUN DS ON WHICH INTEREST HAS BEEN PAID ARE ENTIRELY USED FOR BUSINESS PURPOSE . IN OUR VIEW, IF THE ASSESSEE FOR BONA FIDE REASONS WAS UNABLE TO BRING MATERIALS ON RECORD TO FACTUALLY PROVE ITS CLAIM BEFORE THE DEPARTMENTAL AUTHORITIES AND COMES FORWARD TO FIL E ADDITIONAL EVIDENCES BEFORE THE TRIBUNAL TO PROVE SUCH FACT , THE ASSESSEE SHOULD NOT BE PREVENTED FROM DOING SO. I T IS IN THE INT EREST OF NATURAL JUSTICE AND FAIRPLAY TO ALLOW ASSESSEE TO ESTABLISH ITS CLAIM. WHEN THE ASSESSEE CONTENDS THAT THE ENTIRE B ORROWED FUNDS HAS BEEN UTILIZED FOR THE PURPOSE OF BUSINESS AND NEXUS BETWEEN THE BORROWED FUNDS AND UTILIZATION CAN BE ESTABLISHED THROUGH PROPER DOCUMENTARY EVIDENCES, AN OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE TO DO SO. MOREOVER, NO PREJUDICE IS LIK ELY TO BE CAUSED TO THE REVENUE IF THE ASSESSEE IS PERMITTED TO FURNISH ADDITIONAL EVIDENCE TO ESTABLISH ITS CLAIM, AS; THE ADDITIONAL EVIDENCES HAVE TO BE EXAMINED ON THEIR OWN MERITS. THEREFORE, WE ARE INCLINED TO ADMIT THE ADDITIONAL EVIDENCE S FILED BY THE ASSESSEE. HOWEVER, CONSIDERING T HE FACT THAT THESE EVIDENCES HAVE BEEN FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL, THE REVENUE SHOULD BE GIVEN AN OPPORTUNITY TO VERIFY THE CORRECTNESS OF ASSESSEES CLAIM VIS - - VIS THE ADDITIONAL EVIDENCE S FILED. ACCO RDINGL Y, WE ARE INCLINED TO SET ASIDE THE IMPUGNED O RDER OF LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. THE ASSESSING OFFICER MUST EXAMIN E THE ADDITIONAL EVIDENCES ALONG WITH THE OTHER EVIDENCES FILED BY THE ASSESSEE ON ITS OWN MERITS AND GRANT SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ESTABLISH ITS CLAIM . WITH THE AFORESAID OBSERVATIONS, GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE S . 3 ITA 3258 /M/201 9 8 . IN THE RESULT, APPEAL IS ALLOWED, FOR STATISTICAL PURPOSE S . ORDER PRONOUNCED ON 08 / 03 /2021. SD/ - SD/ - ( S.RIFAUR RAHMAN ) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 08 /03 /2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 3 ITA 3258 /M/201 9