M/s Harchandrai Bulchand, RAIPUR (CG) V. Commissioner of Income Tax, RAIPUR (CG)

ITA 48/BIL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94004 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 25-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: R B DOSHI
• Keywords: Opportunity of being heard; Proportionate interest
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI MUKUL K SHRAWAT, ( JM) AND SHAMIM YAHYA,(AM) ITA. NO.4 8 /BLPR/2012 (ASSESSMENT YEAR :2007 - 08) M/S HARCHANDRAI BULCHAND, GUDHIYARI, RAIPUR, CG) VS. COMMISSIONER OF INCOME TAX, C R BUILDING, CIVIL LINES, RAIPUR (CG), APPELLANT .. RESPONDENT PAN/GIR NO. :AABFH4703N APPELLANT BY : SHRI R B DOSHI RESPONDENT BY : SHRI D K JAIN DATE OF HEARING : 12.6.2015 DATE O F PRONOUNCEMENT : 19 .6.2015 O R D E R PER MUKUL K SHRAWAT, ( JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF COMMISSIONER OF INCOME TAX DATED 22.3.2012 FOR THE ASSESSMENT YEARS 2007 - 08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER U/S 263 OF THE ACT PASSED BY THE CIT IS ILLEGAL AND WITHOUT JURISDICTION; 2. THE LD. CIT ERRED IN HOLDING THAT THE ORDER U/S 143(3) PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT IS NOT JUSTIFIED IN INVOKING THE PROCEEDINGS OF SECTION 263 AND SETTING ASIDE THE ORDER PASSED BY THE AO U/S 143(3) OF ITA AND ITA. NO. 48 / BLPR/201 2 2 DIRECTING THE AO TO DIS ALLOW RS.12 , 67 , 330/ - OUT OF INTER E S T PAYMENT AS PER PROVISIONS OF SECTION 36(1)(III); 4. THAT THE ORDER PASSED BY THE CIT IS INCONSISTENT WITH THE PAST PRACTICE FOLLOWED BY THE APPELLANT FOR NOT CHARGING INTEREST ON DEBIT BALANCES DUE TO INTEREST FREE DEP OSITS LYING WITH THE FIRM HAVING FACTS DULY EXPLAINED AND EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3); 5. THAT THE DIRECTION OF THE CIT U/S 263 ARE CONTRARY TO THE RATIO OF DECISION OF HONBLE SC IN THE CASE OF MA LABAR INDUSTRIES REPORTED IN 243 ITR 83 AN INDIAN AND EASTERN NEWSPAPER SOCIETY REPORTED IN 119 ITR 996 3. THE ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 18.12.2009 . ACCORDING TO WHICH IT WAS NOTICED THAT THE ASSESSEE FIRM WAS IN THE BUSINESS OF MANUFACTURING OF EDIBLE OIL . THE RETURN OF INCOME WAS FILED DECLARING A TOTAL INCOME OF RS.16,69,220/ - AND AFTER FEW ADDITIONS, THE INCOME WAS ASSESSED AT RS.17,80,720/ - . THE ALLEGATION OF COMMISSIONER WAS THAT ON E XAMINATION IT WAS FOUND THAT THE ASSESSEE HAD PAID AN INTEREST OF RS.30,67,218/ - ON UNSECURED LOANS OF RS.2.79 CRORES . HOWEVER, ON THE OTHER HAND, THE FIRM HAS GIVEN LOANS AND ADVANCES TO DIFFERENT PERSONS STATED TO BE NOT RELATED TO BUSINESS AMOUNTING TO RS.1.15 CRORES ON WHICH NO INTEREST WAS CHARGED BY THE FIRM. THE COMMISSIONER HAS PROPOSED TO DISALLOW PROPORTIONATE INTEREST OF RS.12,67,330/ - BY INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THE DIRECTION OF THE COMMISSION ER IS REPRODUCED BELOW : I HAVE GONE THROUGH THE RECORDS AS WELL AS THE SUBMISSIONS MADE BY SHRI KHEMKA. SHRI KHEMKA HAS FAIRLY ADMITTED THAT THE FIRM HAD PAID SUBSTANTIAL INTEREST ON BORROWED FUNDS AND INTEREST FREE ADVANCES WERE ALSO GIVEN BY THE ASSESSEE. HE HAS ALSO ADMITTED THAT THE AO HAS ACCEPTED FIRMS EXPLANATION WITHOUT MAKING ANY EXERCISE AS TO WHETHER BORROWED FUNDS ARE UTILIZED FOR MAKING INTEREST FREE ADVANCES. IT SHOWS CLEARLY NON APPLICATION OF MIND BY THE AO WHILE PASSING ORDER DATED 18.12.2009. IN THE CIRCUMSTANCES, THE ORDER PASSED BY THE AO IS HELD TO BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THIS EXTENT. THEREFORE, THE SAME IS SET ASIDE AND DIRECTED TO BE PASSED AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE . ITA. NO. 48 / BLPR/201 2 3 4. FROM THE SIDE OF THE ASSESSEE, THE LD AR APPEARED AND PLEADED THAT THE ASSESSMENT WAS MADE AFTER PROPER INVESTIGATION AS WELL AS THE AO HAS APPLIED HIS MIND AND THEREUPON HELD THAT THERE WAS NO OCCASION TO DISALLOW PROPORTIONATE INTEREST. ON THIS LEGAL PROPOS ITION, THE LD. AR PLACED RELIANCE ON THE DECISIONS OF MADHYA PRADESH HIGH COURT IN THE CASES OF CIT V/S GOM INDUSTRIES LTD (2007) 292 ITR 0406 AND IN THE CASE OF CIT V/S ALOK PAPER INDUSTRIES ((1982) 138 ITR 0729 AND ARGUED THAT THE PROPORTIONATE DIS ALLOWANCE OF INTEREST WAS NOTHING BUT MERELY ON PRESUMPTION ; HENCE, THE DIRECTION OF COMMISSIONER SHOULD BE QUASHED. 5. FROM THE SIDE OF THE REVENUE, THE LD.DR APPEARED AND VEHEMENTLY OPPOSED THE CASE LAW CITED ON THE GROUND THAT THE AO HAS NOT AT ALL EXA MINED THE FACTS OF THE CA S E, HENCE, THE ORDER O F THE A O HAS CAUSED PREJUDICE TO THE REVENUE DEBARMENT . 6. HAVING HEARD BOTH THE PARTIES AND ON PERUSAL OF THE RECORD, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS VERY MUCH WITHIN HIS JURISDICTION TO INVOKE T HE PROVISIONS OF SECT ION 263 OF THE ACT SPECIALLY WHEN THE ASSESSEE HAS NOT DEMONSTRATED BEFORE US THE FACT RELATING TO NON CHARGING OF INTEREST WAS IN FACT EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. RATHER IT APPEARS THAT NO INQUIRY IN THIS REGARD HAS A T ALL BEEN MADE BY THE AO, HENCE, WE ARE OF THE VIEW THAT LD.COMMISSIONER HAS RIGHTLY DIRECTED THE AO TO PASS FRESH ORDER AFTER PROVIDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSE4SSEE. IT IS ALSO WORTH TO MENTION THAT THE COUNSEL O F THE ASSESSEE HAS ADMITTED DURING THE COURSE OF PROCEEDINGS U/S 263 OF THE ACT THAT THE FIRM HAD PAID SUBSTANTIAL INTEREST BEARING BORROWED FUNDS AND ALSO GIVEN INTEREST FREE ADVANCE. RATHER THE LD . AR HAD ADMITTED THAT THE AO HAD ACCEPTED THE EXPLANATI ON OF THE ASSESSEE WITHOUT MA KING ANY INVESTIGATION AS TO WHETHER THE BORROWED FUNDS UTILIZED FO R MAKING INTEREST FREE ADVANCES . FEW CASE LAW HAVE ALSO BEEN MENTIONED IN THE GROUNDS OF APPEAL BUT ON EXAMINATION OF THOSE CASE LAWS AS WELL , WE ARE OF THE VI EW THAT THE ORDER PASSED BY THE CIT ITA. NO. 48 / BLPR/201 2 4 U/S 263 WAS NOT CONTRARY TO THE LEGAL RATIO LAID DOWN BY T HE HON BLE COURTS IN THE SAID PR ECEDENTS . THUS, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INCLINED TO DISTURB THE DIRECTION GIVE N BY THE LD. CIT. THE ORDER PASSED UNDER SECTION 263 IS HEREBY CONFIRMED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2015 SD SD ( SHAMIM YAHYA ) ( MUKUL K SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR: 19TH JUNE,2015. SRL , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - CONCERNED 4. CIT CONCERNED 5. DR, ITAT, RAIPUR CONCERNED 6. GUARD FILE. BY ORDER, SENIOR PRIVATE SE CRETARY /AR