The ACIT-1(2), Bhopal V. M/s. Bhaskar Industries Ltd., Bhopal

ITA 393/IND/2013

• Counselvise Citation: 39322714 RSA 2013
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESH
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAACB5809 M I.T.A.NO. 393 /IND/201 3 A.Y. : 2005-06 ACIT, 1(2), BHOPAL VS. M/S. BHASKAR INDUSTRIES LIMITED, 6, PRESS COMPLEX, ZONE I, M.P.NAGAR, BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI R.A.VERMA, SR. DR RESPONDENT BY : SHRI S.S.DESHPANDE, CA DATE OF HEARING : 02 . 0 5 .2014. DATE OF PRONOUNCEMENT : 13 . 0 6 .201 4 O R D E R PER JOGINDER SINGH, J. M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), DATED 21.03.2013 FOR THE ASSESSMENT YEAR 2005-06 IN THE MATTER OF ORDER PASSED U/S 254/143(3) OF THE INCOME- TAX ACT, 1961. 2. THE GROUND TAKEN BY THE REVENUE READS AS UNDER :- M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 2 PAGE 2 OF 8 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 25,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DOING BUSINESS OF SPINNING AND WEAVING AT MANDIDEEP AND P RINTING UNITS AT NOIDA AND JAIPUR. THE ASSESSEE HAD FURNISH ED ITS ORIGINAL RETURN OF INCOME OF A.Y. 2005-06 ON 30.09. 2005 DECLARING TOTAL INCOME AT RS. 6,97,29,403/-. THE CA SE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED INTEREST EXPENSES OF RS. 4.89 CRORES. HOWEVER, THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCES TO SEVERAL GROUP C ONCERNS AND SUCH FUNDS ADVANCED TO THE RELATED CONCERNS WERE SH OWN AS TRADE DEBTORS. THE ASSESSEE DID NOT PROVIDE DETAIL OF FUND FLOW AS WELL AS PERIOD DURING WHICH AMOUNTS WERE HELD BY THE M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 3 PAGE 3 OF 8 RELATED CONCERNS. IN THE ABSENCE OF DETAILS, THE AS SESSING OFFICER DISALLOWED RS. 25,00,000/- OUT OF INTEREST EXPENSES CLAIMED WHICH WORKS OUT TO ABOUT 5 % OF TOTAL INTER EST EXPENSES CLAIMED. ACCORDINGLY, THE ASSESSMENT U/S 2 43(3) WAS COMPLETED ON 28.12.2007 DETERMINING TOTAL INCOME AT RS. 7,22,29,400/-. THE ASSESSEE PREFERRED AN APPEAL AGA INST THIS ORDER AND LD. CIT(A) ALLOWED THE APPEAL OF THE ASSE SSEE IN APPEAL NO. CIT(A)-I/BPL/IT-193/07-08 ORDER DATED 31 .12.2008 AND DELETED THE DISALLOWANCE OF LUMP SUM AMOUNT OF INTEREST OF RS. 25,00,000/-. IN THE APPEAL FURNISHED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A), THE HON'BLE I.T.A.T. R ESTORED THE ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE T HE ISSUE AFRESH OBSERVING AS UNDER :- WE ARE FURTHER OF THE VIEW THAT ULTIMATELY, THE ASSESSING OFFICER HAS TO ESTABLISH THAT ASSESSEE IS NOT ENTITLED FOR ALLOWANCE OF AN EXPENDITURE, HOWEV ER, THE SAME CAN BE ESTABLISHED ONLY WHEN THE ASSESSEE FURNISHES THE REQUIRED DETAILS AND IF THE ASSESSEE FAILS TO DO SO, THEN, IN OUR HUMBLE OPINION AN ADVE RSE M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 4 PAGE 4 OF 8 INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. WE ARE FURTHER OF THE VIEW THAT THE FACTS OF THE CASE DEMA ND THAT THIS ASPECT SHOULD BE EXAMINED IN DEPTH, SO AS TO ARRIVE AT PROPER CONCLUSION. HENCE, WE RESTORE T HIS ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE T HE SAME AFRESH AND TAKE A VIEW THEREON AS PER LAW. IT IS NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHAL L GRANT AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE, WHO SHALL PROVIDE THE REQUISITE DETAILS S O AS TO ENABLE THE ASSESSING OFFICER TO COMPLETE THE PROCEEDINGS EXPEDITIOUSLY. THUS, THIS GROUND OF TH E REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES IN BOTH THE APPEALS. 4. THE ASSESSING OFFICER MENTIONED IN THE ORDER THAT DESPITE OPPORTUNITIES GIVEN NO SPECIFIC DETAILS ABO UT FUND FLOW/CASH FLOW STATEMENT WITH RESPECT TO ADVANCES G IVEN TO RELATED GROUP CONCERNS WERE FILED BY THE ASSESSEE. ASSESSING OFFICER ESTIMATED AGAIN RS. 25 LAKHS, ROUGHLY 5 % O F THE TOTAL INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE, AS IN TEREST M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 5 PAGE 5 OF 8 RELATED TO THE ADVANCES GIVEN TO RELATED GROUP CONC ERNS, WHICH WAS NOT INCURRED FOR BUSINESS PURPOSES BY THE ASSES SEE AND, ACCORDINGLY, MADE DISALLOWANCE OF RS. 25 LAKHS IN O RDER U/S 254 R.W.S. 143(3) OF THE ACT. 5. AT THE OUT-SET, THE SR. DR SUPPORTED THE ORDER OF T HE ASSESSING OFFICER. 6. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER WAS NOT AT ALL JUSTIFIED IN AGAIN MAKING LUMP SUM DISALLOWANCE OF RS. 25 LAKHS PURELY ON ESTIMATE BASIS OUT OF INTEREST EXPENSES CLAIMED. IT WAS NOT SUBMITTED THAT THE LD. CIT(A) HAD EARLIER DELETED THE AD HOC DISALLOWANCE OF RS. 25 LAKHS MADE BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT MADE CLEAR CASE OF DIVERSION OF INTEREST BEARING FUNDS F OR NON- BUSINESS PURPOSES. HON'BLE I.T.A.T. HAD SET ASIDE T HE ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE AFRESH, BU T THE ASSESSING OFFICER AGAIN MADE THE DISALLOWANCE STATI NG THAT SINCE THE CASE IS GETTING BARRED BY LIMITATION ON 31.12.2011 AND THE ASSESSEE HAS NOT GIVEN SPECIFIC DETAIL INSP ITE OF THE M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 6 PAGE 6 OF 8 OPPORTUNITIES GIVEN TO IT, THEREFORE, ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, I HEREBY ESTIMATE THAT ROUGHL Y 5 % OF TOTAL INTEREST EXPENDITURE IS ESTIMATED TO THE ADDITIONAL INTEREST EXPENDITURE ON ACCOUNT OF INTEREST FREE ADVANCES GI VEN TO THE RELATED CONCERNS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL. WE FOUND THAT TH E LD. CIT(A) HAS OBSERVED IN PARA 3.4 PAGE 5 THAT ON THE EARLIER BALANCES, NO DISALLOWANCE CAN BE MADE IN VIEW OF THE JUDGMENT OF THE HON'BLE KARANATAKA HIGH IN THE CASE OF CIT VS. SRID EV ENTERPRISES, (1991) 192 ITR 165 (KAR), WHEREIN IT W AS HELD THAT DISALLOWANCE WITH REFERENCE TO THE INTEREST FREE L OANS GIVEN HAD TO BE CONFINED TO THE INTEREST FREE LOANS GIVEN DURING THE RELEVANT ACCOUNTING YEAR ITSELF AND SUCH DISALLOWAN CE COULD BE EXTENDED TO THE INTEREST FREE LOANS GIVEN DURING EA RLIER YEAR(S), WHEREIN NO DISALLOWANCE WAS MADE IN THIS REGARD. THE LD. CIT(A) FURTHER OBSERVED THAT DEBITS GIVEN DURING TH E YEAR ARE MERELY BY THE TRANSFER ENTRIES AFTER JANUARY 2005. NO CASH OR M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 7 PAGE 7 OF 8 CHEQUES HAVE BEEN GIVEN DURING THE YEAR UNDER CONSI DERATION TO THESE PARTIES, WHICH ARE APPEARING IN BOOK ENTRI ES. THE LD. CIT(A) HAS CONCLUDED THAT SINCE THERE ARE MERELY TR ANSFER ENTRIES AND THERE IS NO ACTUAL FLOW OF FUNDS FROM T HE COMPANY TO VARIOUS COMPANY TO THE VARIOUS CONCERNS AND AS S UCH NO INTEREST BEARING FUNDS WERE DIVERTED BY THE ASSESSE E COMPANY TO THESE CONCERNS DURING THE YEAR UNDER CONSIDERATI ON AND HENCE, NO QUESTION OF DISALLOWANCE OF INTEREST ARIS ES. NOTHING HAS BEEN BROUGHT BY THE REVENUE ALSO ON RECORD TO S HOW THAT ANY CASH OR CHEQUES HAVE BEEN GIVEN TO THESE CONCER NS FOR THE DEBIT BALANCES. WE, THEREFORE, AGREE WITH THE FIN DINGS OF THE LD. CIT(A) AND DO NOT FIND ANY INFIRMITY IN THE ORD ER OF CIT(A). HENCE, ADDITION OF RS. 25 LAKHS IS DELETED. 8. ADDITIONAL GROUND HAS ALSO BEEN TAKEN BY THE REVENU E WHICH READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN ADMITTING THE ADDITIONAL EVIDENCE IN FORMS OF ACCOUNTS SUMMARY OF VARIOUS RELATED CONCERNS WITHOUT GIVING OPPORTUNITY TO THE M/S.BHASKAR INDUSTRIES LTD., BHOPAL I.T.A.NO. 393/IND/2013 A.Y. 2005-06 8 PAGE 8 OF 8 ASSESSING OFFICER TO EXAMINE THE EVIDENCE OR TO PRODUCE ANY EVIDENCE OR DOCUMENTS IN REBUTTAL OF THE ADDITIONAL EVIDENCE, IN VIOLATION OF RULE 46A. 9. NO FRESH OR ADDITIONAL EVIDENCE, IN VIOLATION OF RU LE 46A, HAS BEEN BROUGHT TO THE NOTICE OF THIS BENCH B Y THE REVENUE. HENCE, THIS GROUND IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2014. SD/- SD/- ( R. C. SHARMA ) ( JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH JUNE, 2014. CPU* 5.5.