M/s. Apex Agencies, CHENNAI V. ACIT, CHENNAI

ITA 406/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2495 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: S SRIDHAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI S.S. GODARA, JUDICIAL MEMBER] I.T.A.NO.406/MDS/2012 ASSESSMENT YEAR : 2007-2008 M/S. APEX AGENCIES, POTTIPATTI PLAZA, IIND FLOOR, 77, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034 VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE XV, CHENNAI 600 034. [PAN AAIFA 0542M ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI. T.N. BETGERI, JCIT DATE OF HEARING : 30-04-2013 DATE OF PRONOUNCEMENT : 03-05-2013 O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL ARISES FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XII, CHENNAI, DATED 20-01- 2012, IN ITA NO.169/2009-2010, FOR ASSESSMENT YEA R 2007-08, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. I.T.A.NO.406/MDS/2012 :- 2 -: 2. IN THE PRESENT CASE, SOLE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) HAS WRONGLY CONFIRMED DISALLOWAN CE MADE BY THE ASSESSING OFFICER QUA INTEREST PAYMENTS TOTALING TO B18,92,485/- 3. IN THE COURSE OF HEARING, BOTH PARTIES REITERATE TH EIR RESPECTIVE PLEADINGS. 4. FACTS APPROS ARE THE ASSESSEE IS A FIRM; A WHOLES ALER/DISTRIBUTER OF NIPPO BATTERIES. IN ITS SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT IT HAD DEBITED FINANCE CHARGES OF B1, 78,20,156/- INCLUDING INTEREST ON OVER DRAFT/OTHER BANK CHARGES ETC. HE ALSO FOUND THAT IT HAD LENT INTEREST FREE ADVANCES TO TWENTY PERSONS I .E. CONNECTED CONCERNS WHO WERE ITS PARTNERS OR THEIR RELATIVES A ND PAID OVERDRAFT INTEREST. IN THE LIGHT THEREOF, IN THE ASSESSMENT O RDER DATED 29.12.2009, THE ASSESSING OFFICER HELD THAT SINCE T HE ASSESSEE HAD BORNE INTEREST BURDEN BY DIVERTING HIS FUNDS TO ITS SISTER CONCERNS/PARTNERS/ THEIR RELATIVES, THE INTEREST A MOUNT IN QUESTION WAS LIABLE TO BE DISALLOWED/ADDED. 5. IN APPEAL, THE CIT(A) HAS CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. THEREFORE, THE ASSESSE E IS IN APPEAL. I.T.A.NO.406/MDS/2012 :- 3 -: 6. WE HAVE HEARD BOTH PARTIES AND PERUSED THE CA SE FILE. THERE IS NO DISPUTE ON FACTS THAT THE ASSESSEE HAD MADE INT EREST FREE ADVANCES TO ITS SISTER CONCERN/PARTNERS ETC. AT THE SAME TIM E, WE NOTICE FROM THE ASSESSMENT ORDER THAT IT HAD FILED ITS REPLY BEFORE THE ASSESSING OFFICER REGARDING OVERDUE INTEREST DATED 14.11.2009 AND THE REAFTER, ASSESSMENT WAS FINALIZED ON 29.12.2009 ADDING DIVER TED FUNDS. IN OUR VIEW, BEFORE HOLDING THE ASSESSEE RESPONSIBLE FOR D IVERSION OF FUNDS, THE ASSESSING OFFICER DID NOT PROVIDE ADEQUATE OPPO RTUNITY OF HEARING TO EXPLAIN THE ELEMENT OF BUSINESS EXPEDIENCE IN LENDING MONEY IN QUESTION. WE REITERATE THAT MERELY BECAUSE AN ASSE SSEE LENDS INTEREST FREE ADVANCES TO ITS SISTER CONCERN; WOULD NOT IPS O FACTO ATTRACT DISALLOWANCE AS IN SUCH A CASE, IF IT IS BY FOLLOW ING THE PRINCIPLE OF COMMERCIAL EXPEDIENCE WHICH HAS TO BE DECIDED ON FACTS ON EACH CASE. IN THE INSTANCE CASE, THERE IS NEITHER ANY O PPORTUNITY AFFORDED TO THE ASSESSE NOR THERE IS ANY EVIDENCE JUSTIFYING THE PURPOSE OF ADVANCES. THEREFORE, WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL AFFORD ADEQUATE OPPORT UNITY OF HEARING TO THE ASSESSEE AND DECIDE IT IN ACCORDANCE WITH LAW. 7. THE APPEAL STANDS ALLOWED FOR STATISTICAL PURPOS E. I.T.A.NO.406/MDS/2012 :- 4 -: ORDER PRONOUNCED ON FRIDAY, THE 3RD OF MAY, 2013, A T CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER DATED: 3 RD MAY, 2013. K.V COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR