SHREE GEBI ENTERPRISES, MUMBAI V. ITO 25(3)(4), MUMBAI

ITA 3999/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84331 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 1995-1996
• Appeal Filed On: 20-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Keywords: Principle of natural justice
• Section: 80HHC; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES SMC, MUMBAI . . , BEFORE SHRI I P BANSAL, JUDICIAL MEMBER ./ITA NO.3999/MUM/2013 ( / ASSESSMENT YEAR:1995-96) M/S. SHREE GEBI ENTERPRISES 117, SUPER SHOPPING COMPLEX, 1 ST FLOOR, BAJAJ CROSS ROAD, KANDIVALI (W) MUMBAI- 400 067 PAN AAAFT3118N VS. ITO 25(3)(4) MUMBAI ( ! /APPELLANT) ( '# ! / RESPONDENT) APPELLANT BY : SHRI PRAMOD KUMAR PARIDA & MS. SANJUKTA CHOWDHURY RESPONDENT BY : SHRI NEIL PHILIP DATE OF HEARING : 26.11.2014 DATE OF PRONOUNCEME NT :26.11.2014 $ / O R D E R THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT(A) DATED 28.02.2013 FOR A.Y. 1995-96. THE GROUNDS OF APPEAL READ AS UNDER: 1. FAILURE OF NATURAL JUSTICE THE LOWER AUTHORITIES ERRED IN PASSING THE ORDER EX -PARTE WITHOUT GRANTING SUFFICIENT OPPORTUNITY AND WITHOUT APPRECI ATING THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAD ATTENDED THE HE ARING ON VARIOUS DATES. HENCE, THE EX-PARTE ORDER PASSED WITHOUT EQ UITY AND JUSTICE MAY BE VACATED. 2 ITA NO.3999/MUM.2013 AY:1995-96 2. REOPENING IS BAD-IN-LAW THE LOWER AUTHORITIES ERRED IN REOPENING AND DECIDI NG THE ISSUE WITHOUT APPRECIATING TO THE FACT THAT ON THE DECLARATION MA DE UNDER KVSS, THE APPELLANT HAD BEEN ISSUED THE RELEVANT CERTIFICATE ISSUE UNDER KVSS, WHICH ENSURES COMPLETE IMMUNITY INCLUDING REASSESSM ENT; THEREFORE, ISSUE OF NOTICE U/S. 148 IS BAD-IN-LAW AND THE IMPU GNED ORDER MAY BE TREATED AS VOID-AB-INITIO. 3. DISALLOWANCE OF SET-OFF OF INTEREST RS.4,46,824 /- A) THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF SET-OFF OF INTEREST RECEIVED OUT OF LOANS AND ADVANCES GIVEN A GAINST THE INTEREST PAID ON INTEREST BEARING LOANS B) THE LD. CIT(A) FURTHER ERRED IN NOT APPRECIATING ME RITS THAT THE APPELLANT HAS ESTABLISHED THE NEXUS BETWEEN THE INT EREST EARNED AND PAID BY PROVIDING DETAILS OF LEDGERS ACCOUNT OF PARTIES WITH REFERENCE TO BANK OD DETAILS, THEREFORE, DENIAL OF SET-OFF IS BAD-IN- LAW AND FACTS AND THE SAME MAY BE ALLOWED. 4. LEVY OF PENAL INTERESTS THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO P ENAL INTEREST 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A LL OR ANY OF THE ABOVE GROUND OF APPEAL. 2. DURING THE COURSE OF HEARING IT WAS FOUND THAT T HE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED IN PURSUANCE TO THE ORDER PAS SED BY THE TRIBUNAL DATED 18.12.2007 IN ITA NO. 65/MUM/2006, COPY OF WHICH WA S PLACED ON MY RECORD. THOUGH THE ASSESSEE HAD RAISED A GROUND REGARDING R E-ASSESSMENT, THAT WAS NOT PRESSED AT THE TIME OF HEARING AND THIS FACT HAS BE EN RECORDED IN PARA 2 OF THE SAID ORDER. THE ONLY GRIEVANCE OF THE ASSESSEE WAS WITH REGARD TO CLAIM OF DEDUCTION U/S. 80HHC, WHICH ACCORDING TO GROUND WAS NOT WORKE D OUT PROPERLY AND FOR WHICH RECTIFICATION APPLICATION WAS ALSO IGNORED. THE CO NTENTIONS OF THE ASSESSEE ON THE SAID GROUND AND THE DECISION OF THE TRIBUNAL ARE RE CORDED IN PARA 3 TO 6 OF THE ORDER, WHICH FOR THE SAKE OF CONVENIENCE IS REPRODUCED BEL OW:- 3. WITH REGARD TO CONTROVERSY INVOLVED IN GROUND N O.4, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE WORKING OUT D EDUCTION U/S. 80HHC, THE AO EXCLUDED 90% OF INTEREST INCOME WITHO UT ALLOWING THE BENEFIT OF NETTING. FOR ALLOWANCE OF BENEFIT OF NE TTING, THE COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT DEL HI (SB) IN THE CASE OF LALSON ENTERPRISES, 89 ITD 25 (DEL)(SB) 3 ITA NO.3999/MUM.2013 AY:1995-96 4. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. SHE POINTED OUT THAT THE LOANS AND ADVANCES WERE OUT OF SURPLUS FUNDS, THEREFORE, THE ASSESSEE IS NO T ENTITLED TO BENEFIT OF NETTING. 5. IN REPLY, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT BEFORE ANY OF THE DEPARTMENTAL AUTHORITIES BELOW, THE ASSESSEE HAS NOT STATED THAT BORROWED FUNDS WERE NOT USED FOR GIVING LOANS AND A DVANCES. THE SURPLUS FUNDS MAY ALSO OUT OF BORROWED FUNDS, THERE FORE, TO THE EXTENT THE NEXUS IS PROVED, THE ASSESSEE IS ENTITLED TO BE NEFIT OF NETTING AS PER THE DECISION IN THE CASE OF LALSON ENTERPRISES (SUPRA). 5. I HAVE HEARD BOTH THE SIDES. THE ITAT DELHI (SB ) IN THE CASE OF LALSON ENTERPRISES (SUPRA) HELD THAT AS PER THE PRO VISIONS OF CLAUSE (BAA) TO SEC. 80HHC ONLY 90% OF NET INTEREST IS REQ UIRED TO BE EXCLUDED PROVIDED THE ASSESSEE PROVES THE NEXUS. T HE ONUS IS ON THE ASSESSEE TO PROVE THAT MONEY BORROWED ON INTEREST W AS USED FOR GIVING LOANS AND ADVANCES. AS A MATTER OF FACT, TH IS ASPECT WAS NOT EXAMINED BY ANY OF THE AUTHORITIES BELOW. I THEREF ORE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE T HE SAME TO THE FILE OF THE AO WITH THE DIRECTION THAT ASSESSEE SHOULD FURN ISH COMPLETE DETAILS. TO THE EXTENT THE NEXUS IS PROVED, THE AO WILL ALLOW THE BENEFIT OF NETTING AS PER THE DECISION IN THE CASE OF LALSON ENTERPRISES (SUPRA). 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL IS TREATED AS PARTLY ALLOWED. 3. DURING THE COURSE OF HEARING, IT WAS BROUGHT TO THE NOTICE OF THE LEARNED AR THAT ACCORDING TO THE SAID ORDER THE JURISDICTION O F THE AO WAS RESTRICTED ONLY TO ADJUDICATE THE ISSUE REGARDING THE DEDUCTION U/S. 8 0HHC AND ASSESSEE IN THE PRESENT APPEAL CANNOT AGITATE THE ISSUE REGARDING R E-ASSESSMENT PROCEEDINGS, WHICH WERE NOT PRESSED IN THE EARLIER APPEAL. IT WAS ALS O POINTED OUT THAT IF THE ASSESSEE HAD GRIEVANCE AGAINST THE RE-ASSESSMENT THEN THE AS SESSEE COULD HAVE CHALLENGED THE AFORESAID ORDER DATED 18.12.2007 IN FURTHER APP EAL, WHICH ADMITTEDLY WAS NOT DONE BY THE ASSESSEE. IT IS IN THIS BACKGROUND, TH E LEARNED AR DID NOT PRESS GROUND NOS. 1 & 2 AND HIS GRIEVANCE WAS RESTRICTED ONLY TO GROUND NOS. 3 & 4. 4. GROUND NO.3 TOUCHES THE ISSUE REGARDING NETTING OF INTEREST FOR THE PURPOSE OF ALLOWABILITY OF DEDUCTION U/S. 80HHC AND GROUND NO. 4 RELATES TO INTEREST WHICH ACCORDING TO THE LEARNED AR WAS CONSEQUENTIAL TO TH E ASSESSED INCOME. 4 ITA NO.3999/MUM.2013 AY:1995-96 5. I HAVE HEARD BOTH THE PARTIES. THE ISSUE WHICH IS PRESSED BY THE LEARNED AR IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. L TD V. CIT, 343 ITR 89 (SC), WHEREIN THEIR LORDSHIPS HAVE HELD THAT ONLY 90% OF RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR ANY OTHER REC EIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFITS COMPUTED UNDER THE HEAD PROFIT AND GAI NS OF BUSINESS OF AN ASSESSEE COULD BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION ( BAA) TO SECTION 80HHC AND NOT 90% OF THE QUANTUM OF ANY OF THE AFORESAID RECEIPTS WHICH ARE ALLOWED AS EXPENSES AND, THEREFORE, NOT INCLUDED IN THE PROFIT OF BUSIN ESS OF THE ASSESSEE. THEREFORE, I DIRECT THE AO TO RE-COMPUTE DEDUCTION U/S. 80HHC IN ACCORDANCE WITH THE AFOREMENTIONED DECISION OF THE HONBLE SUPREME COUR T AND ALLOW THE NECESSARY RELIEF TO THE ASSESSEE. GROUND NO.3 IS ALLOWED. 6. IN SO FAR AS IT RELATES TO LEVY OF INTEREST, THE SAME IS CONSEQUENTIAL. THE AO AFTER RECALCULATING DEDUCTION U/S. 80HHC ON THE NET ASSESSABLE INCOME SHALL COMPUTE INTEREST AS PER THE PROVISIONS OF LAW. THE REFORE, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. I DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- (I P BANSAL) JUDICIAL MEMBER MUMBAI, DT : 26 TH NOVEMBER, 2014 SA 5 ITA NO.3999/MUM.2013 AY:1995-96 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, SMC BENCH, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI