TROPICAL SECURITIES AND INVESTMENTS P. LTD, MUMBAI V. DCIT (OSD-II) CR 7, MUMBAI

ITA 3769/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0451 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 25-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2013
• Court: TRIBUNAL
• Assessee Lawyers: DINKLE HANIA
• Keywords: Opportunity of being heard
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3769/MUM/2013 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 6343/MUM/2014 ASSESSMENT YEAR: 2011 - 12 M/S. TROPICAL SECURITIES VS. DCIT (OSD - II), CR - 7 AND INVESTMENT PVT. LTD., MUMBAI BHUPEN CHAMBERS, GROUND FLOOR , DALAL STREET MUMBAI - 400023 PAN NO. AAACT1670N (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. DINKLE HANIA, AR REVENUE BY: SHRI SAURABH KUMAR R AI, DR DATE OF HEARING : 25/05/2017 DATE OF PRONOUNCEMENT: 31/05/2017 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS FILED BY THE ASSESSEE FOR THE A.Y. 2010 - 11 & 2011 - 12 ARE DIRECTED AGAINST THE ORDER COMMISSIONER (APPEALS) 40 , MUMBAI AND ARISE OUT OF ASSESSMENT MADE U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - ITA NO. 3769/M/2013 & 6343/M/2014 2 A.Y. 2010 - 11 1. A. ON FACTS & IN LAW, THE CO MMISSIONER OF INCOME TAX (APPEALS) 40, MUMBAI [THE CIT(A)] ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST OF RS.38,16,020/ - INCURRED FOR THE YEAR. 1. B. THE LD. CIT(A) ERRED IN FACTS AND IN LAW IN NOT CONSIDER ING THE SUBMISSION MADE BEFORE HIM FULLY AND THEREBY CONFIRMING DISALLOWANCE OF RS.38,16,020/ - OUT OF INTEREST PAID. 2. ON FACTS AND IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT NO ADJUSTMENT COULD HAVE BEEN CARRIED OUT BY THE A.O. WHILE DETERMINING B OOKS P ROFIT IN RESPECT OF DISALLOWANCE OF INTEREST AND THEREBY ERRED IN NOT DIRECTING THE A.O. TO DELETE SUCH ADJUSTMENT MADE WHILE DETERMINING B OOK P ROFIT. 3. ON F ACTS AND IN L AW, THE CIT(A) ERRED IN NOT DECIDING GROUND RELATING TO LEVY OF INTEREST U/S 234B OF THE ACT. A.Y. 201 1 - 12 1 1. A. ON FACTS & IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) 40, MUMBAI [THE CIT(A)] ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST OF RS.38,16,020/ - INCURRED FOR THE YEAR. 1. B. THE LD. CIT(A) ERRED IN FACTS AND IN LAW MERELY RELYING ON THE ORDERS OF HIS PREDECESSOR FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 WITHOUT CONSIDERING THE SUBMISSION MADE BEFORE HIM AND THEREBY CONFIRMING DISALLOWANCE OF RS.38,16,020/ - OUT OF INTEREST PAID. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (A.O.) NOTI CED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD PAID INTEREST TO THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY LOAN AMOUNT (RS.) RATE INTEREST (RS.) 1. RRB SECURITIES LTD. 50,00,000/ - 12% 60,000/ - 2. HB STOCK HOLDING LTD. 1,00,00,000/ - 12% 12,00,000/ - 3. PISCES PORTFOLIO PVT. LTD. 2,50,00,000/ - 12% 30,00,000/ - ITA NO. 3769/M/2013 & 6343/M/2014 3 THE A.O. NOTICED THAT THE ASSESSEE HAD NOT OFFERED ANY INTEREST ON LOAN OF RS.3,18,00,160/ - GIVING TO M/S PURSARTH TRADING CO. PVT. LTD. (PURSARTH ). AS THE ASSESSEE HAD PAID INTEREST ON LOAN TAKEN, WHEREAS IT HAD NOT CHARGED ANY INTEREST OF LOAN GIVEN TO PURSARTH , THE A.O. CONCLUDED THAT THE INTEREST BEARING FUND WAS UTILIZED FOR NON - INTEREST BEARING LOAN AND THEREFORE, CALCULATED INTEREST @ 12% ON THE LOAN AMOUNT OF RS.3,18,00,160/ - AND BROUGHT TO TAX RS.38,16,020/ - . 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS RELIED UPON THE ORDER HIS PREDECESSOR - IN - OFFICE FOR THE A.Y. 200 9 - 10 WHICH READS AS UNDER: - 3.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERUSED THE SUBMISSIONS AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE APPELLANT HAS CLAIMED THAT THE INTEREST - BEARING LOAN RECEIVED WAS UTILIZED FOR MAKING PAYMENT TO THE CREDITORS. HOWEVER, NO INTEREST WAS CHARGED FROM M/S PURSARTH TRADING CO. PVT. LTD., TO WHOM LOAN WAS GIVEN BY THE APPELLANT. IT IS STATED THAT NO FRESH LOANS WERE ADVANCED TO M/S PURSARTH TRADING CO. PVT. LTD. DURING THIS YEAR, BUT ADVANCE MADE DUR ING THE YEAR ENDING 31.03.2005, AND, HENCE, THERE CAN BE NO REASON FOR DISALLOWANCE, FURTHER, IT IS STATED THAT THE APPELLANT HAS A PAID - UP CAPITAL OF RS.3.75 CRORES, WHICH HAS TO BE PRESUMED TO HAVE BEEN UTILIZED FOR ADVANCING THESE FUNDS OF RS.3,18,00,16 0/ - . ON VERIFICATION OF THE DETAILS FILED, IT IS NOTED THAT THE APPELLANT HAD GIVEN AN ADVANCE OF RS.6,93,94,403/ - IN F.Y. 2004 - 05 TO M/S PURSARTH TRADING CO. PVT. LTD. AND DURING THAT YEAR, THE CAPITAL AS PER BALANCE SHEET WAS RS.3.75 CRORES ONLY AND, HEN CE, THE SAME CANNOT BE CLAIMED TO HAVE BEEN ADVANCED OUT OF THE SHARE CAPITAL. IN VIEW OF THIS, THE EXPLANATION OFFERED BY APPELLANT IS NOT BASED ON FACTS, AND ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O. IS UPHELD. ITA NO. 3769/M/2013 & 6343/M/2014 4 5. BEFORE US, T HE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAD TO RECEI VE SUBSTANTIAL AMOUNT FROM PURSARTH . THE AMOUNTS ADVANCED/RECEIVABLE FROM PURSARTH WERE OUT OF NON - INTEREST BEARING FUNDS OF THE ASSESSEE. DUE TO LOSSES IN PURSARTH, THE SAID COMPANY COULD NOT MAKE IMMEDIATE RE - PAYMENT TO THE ASSESSEE. AS ON 31.03.2004 THE AMOUNT RECEIVABLE FROM PURSARTH WAS RS.6.93 CRORES. THEREAFTER, THERE IS NO DEBIT IN THIS ACCOUNT, EXCEPT ONE DEBIT ENTRY REGARDING A SMALL TRANSACTION OF RS.3.38 LACS ON 05.03.2010. THE ONLY ENTRIES AFTER 0 1.04.2004 ARE RE - PAYMENTS BEING MADE BY THAT COMPANY OVER THE YEARS. THE LD. COUNSEL FILED A COPY OF THE LEDGER ACCOUNT OF PURSARTH FO R THE ACCOUNTING YEAR 2004 - 05 & 2009 - 10 . THE LD. COUNSEL FURTHER SUBMITS THAT DURING THE ACCOUNTING YEAR 2004 - 05, THE AS SESSEE HAD TO BORROW FUNDS FROM THREE CONCERNS I.E. R.R.B SECURITIES, H.B. STOCK - HOLDINGS LTD. AND PISCES PORTFOLIOS P. LTD. AND NO AMOUNT BORROWED FROM THIS THREE CONCERNS HAD AT ALL GONE TO PURSARTH. SHE FILED LEDGER ACCOUNT ON THE ABOVE. SHE FURTHER SUB MITS THAT NO DISALLOWANCE OF INTEREST PAID TO THESE THREE CONCERNS WERE MADE EARLIER. WITHOUT PREJUDICE TO THE ABOVE THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAD A PAID UP CAPITAL OF RS.3.75 CRORES AND SHARE PREMIUM OF RS.75 LACS. IN ABSENCE OF ANY CONT RARY FINDING, IT CAN BE ASSUMED THAT THE AMOUNT HAS B EEN ADVANCED OUT OF THESE FUNDS. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340. ITA NO. 3769/M/2013 & 6343/M/2014 5 6. ON THE OTHER HAND THE L D. D.R. SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITS THAT THE A.O. HAS RIGHTLY DISALLOWED INTEREST EXPENDITURE OF RS.38,16,020/ - . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LEDGER ACCOUNT OF PURSARTH OF ACCOUNTING YEAR 2004 - 05 AND 2009 - 10 NEED TO BE EXAMINED FOR RESOLVING THE PRESENT ISSUE. NEITHER THE A.O. NOR THE LD. CIT(A) HAS EXAMINED THE SAME. ALSO THE CONTENTION OF THE ASSESSEE THAT THE BORROWED FUNDS WERE USED FOR DISCHARGING BUSINE SS LIABILITIES TOWARDS ITS CREDITORS HAS NOT BEEN EXAMINED EITHER BY THE A.O. OR THE LD. CIT(A) . IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE SAME TO THE FILE OF THE A.O . TO EXAMINE THE CONTENTIONS DELINEATED AT PARA 5 HER E - IN - ABOVE AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE A.O. 8. IN THE RESULT, THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .05.2017 SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 31 .05.2017 DATED: RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - ITA NO. 3769/M/2013 & 6343/M/2014 6 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI