M/s Mahadev Rice & General Mills, Jagaron V. CIT III, Ludhiana

ITA 472/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63912 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMAR
• Section: 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, VP AND SHRI T.R. SOOD, AM ITA NO. 472/CHD/2012 ASSESSMENT YEAR: 2007-08 M/S MAHADEV RICE & GEN MILLS V CIT-III, LUDHIANA VILLAGE HATHUR TEHSIL JAGRAON AAHFM 8999D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUDHIR SEHGAL RESPONDENT BY: SMT. JYOTI KUMAR DATE OF HEARING: 23.08.2012 DATE OF PRONOUNCEMENT: 30 .08.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROU NDS BUT THE ONLY ISSUE IS THAT THE ORDER PASSED U/S 263 OF THE ACT I S NOT MAINTAINABLE. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT UPON EXAMINATION OF THE RECORDS IT WAS NOTICED BY THE LD. CIT THAT THE ASSE SSEE HAD CLAIMED INTEREST EXPENDITURE AMOUNTING TO RS. 5,69,630/-. AT THE S AME TIME THERE WAS A DEBIT BALANCE OF RS. 26,42,000/- AGAINST THE SISTER CONC ERNS. THIS MEANS THAT THE INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR NON-B USINESS PURPOSES AND INTEREST SHOULD HAVE BEEN DISALLOWED IN VIEW OF THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. ABHISHEK INDUSTRIES, 286 ITR 1. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS MAINLY SUB MITTED THAT THE ASSESSEE HAD SURPLUS FUNDS BECAUSE FROM ONE OF THE SISTER CO NCERNS THE AMOUNT PAYABLE WAS RS. 53,97,047/-, THEREFORE, SUFFICIENT FUNDS W ERE AVAILABLE AND INTEREST COULD NOT HAVE BEEN DISALLOWED. IT WAS ALSO SUBMIT TED THAT THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. ABHISHEK INDUSTRIES (SUPRA) STOOD DISTINGUISHED BY THE LATTER DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. WINSOME TEXTILE INDUST RIES LTD. 319 ITR 204 (PH). IT WAS ALSO PLEADED THAT THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEW AND IF POSSIBLE VIEW IS TAKEN THEN THE ORDER C AN NOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. MAX INDIA LTD. 295 ITR 282. 2 3. THE LD. CIT DID NOT FIND FORCE IN THE SUBMISSION S AND OBSERVED THAT THERE IS A CREDIT OF ABOUT RS. 53 LAKHS FROM OTHER ASSOCI ATE CONCERN WAS NOT IN THE FORM OF CASH BUT ONLY GOODS HAVE BEEN RECEIVED. HE ALSO OBSERVED THAT DECISION OF WINSOME TEXTILE INDUSTRIES LTD (SUPRA) WAS WITH REGARD TO SECTION 14A AND WAS NOT APPLICABLE. HE ALSO OBSERVED THAT IN CASE OF SHRI SHIVJI RAM, ITA NO. 201/CHD/2011, THE TRIBUNAL HAS ALREADY DECI DED THE ISSUE IN FAVOUR OF THE REVENUE EVEN AFTER DISINTEGRATING THE DECISION OF HON'BLE SUPREME COURT IN CASE OF MUNJAL SALE CORPORATION V. CIT, 298 ITR 298 (S.C). 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REFER RED TO THE DECISION OF THE TRIBUNAL IN CASE OF SHRI SHIVJI RAM, ITA NO. 201/CH D/2011 (COPY OF WHICH HAS BEEN FILED ON RECORD) AND POINTED OUT THAT IN THAT CASE THERE IS A FINDING THAT THE ASSESSING OFFICER HAD NOT MADE PROPER ENQUIRIES AND THAT IS WHY ASSESSMENT ORDER WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE WHEREAS IN CASE BEFORE US, IN RESPONSE TO THE QUERY BY THE ASSESSING OFFICER THE ASSESSEE HAD FILED COPIES OF ACCOUNTS OF THE SI STER CONCERNS WHICH ARE PLACED AT PAGES 29 TO 33. PAGE 29 CLEARLY SHOWS TH AT IN MAHADEV TRADING CO. HATHUR THERE WAS A CREDIT BALANCE OF RS. 53,97,047/ - AND THERE WAS A DEBIT BALANCE AMOUNTING TO RS. 6,57,000/-, RS. 10.00 LAKH S, RS. 9.85,000 FROM THREE SISTER CONCERNS NAMELY MAHADEV TRADING CO. MAUNKE, MAHADEV TRADING CO. JAGRAON, MAHADEV TRADING CO. HATHUR. THUS THE ASSE SSEE HAD MORE CREDITS FROM SISTER CONCERNS THEN THE DEBIT BALANCES OF SIS TER CONCERNS. THEREFORE, IN SUCH A SITUATION THE DECISION OF CIT V. ABHISHEK IN DUSTRIES (SUPRA) IS NOT APPLICABLE. IN ANY CASE THERE IS ONE OF THE POSSIBL E VIEW AND THE HON'BLE SUPREME COURT IN CASE OF CIT V. MAX INDIA LTD (SUPR A) HAS CLEARLY HELD THAT IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE POSSIB LE VIEW THEN SUCH ORDER CANNOT BE CALLED ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU BMITTED IN THE ASSESSMENT ORDER THAT THERE IS NO DISCUSSION ON THI S POINT THAT THERE IS LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER AND AC CORDINGLY THE ORDER IS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. IN RESPONSE TO THE QUERY COPIES OF ACCOUNTS OF ALL THE SISTER CONCERNS WERE FILED BEFORE THE ASSESSING OFFICER WHICH HAS BEEN PLACED IN THE PAPER BOOK FRO M PAGE 29 TO 32 AND PAGE 29 CLEARLY SHOWS THAT THERE WAS A CREDIT BALANCE IN THE NAME OF MAHADEV TRADING CO. HATHUR. THE LD. CIT HAS BRUSHED ASIDE THIS CREDIT BALANCE BY STATING THAT THIS WAS ON ACCOUNT OF SUPPLIES MADE BY SISTER CONCERNS. IN OUR OPINION, IT DOES NOT MAKE DIFFERENCE WHETHER THE CR EDIT IS ON ACCOUNT OF 3 SUPPLIES OF GOODS OR CASH BECAUSE THE GOODS CAN BE CONVERTED INTO CASH AT ANY POINT OF TIME. AGAINST THIS CREDIT BALANCE OF RS. 53,97,047/- THERE IS DEBIT BALANCE OF RS. 26,42,000/- IN THE NAME OF OTHER THR EE SISTER CONCERNS. THIS CLEARLY SHOWS THAT MORE FUNDS WERE AVAILABLE FROM T HE SISTER CONCERNS THEN WERE DIVERTED TO THEM. THIS WAS ONE OF THE POSSIBL E VIEW AND ONCE THE POSSIBLE VIEW IS TAKEN BY THE ASSESSING OFFICER THE N SUCH ASSESSMENT ORDER CANNOT BE CALLED TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. HON'BLE SUPREME COURT IN CASE OF CIT V. MAX INDIA L TD (SUPRA) OBSERVED AS UNDER:- THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVE NUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961 HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR E XAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LA W AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE RE VENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. WE ARE OF THE OPINION THAT ABOVE OBSERVATION IS CLE ARLY APPLICABLE TO THE CASE OF THE ASSESSEE AND ACCORDINGLY WE QUASH THE ORDER PA SSED U/S 263 OF THE ACT. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 30.08.2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEM BER DATED: 30.08.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 4