M/s Suresh Chandra Srigopal, Hyderabad V. ITO,Ward 7(4), Hyderabad

ITA 48/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82348 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: A V RAGHURAM
• Keywords: Search and seizure
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICAL MEMBER ITA.NO.48/HYD/2014 ASSESSMENT YEAR 2009-10 M/S. SURESH CHANDRA SRIGOPAL, HYDERABAD. PAN-AAGFS-4445-P VS. INCOME TAX OFFICER, WARD 7(4) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A.V. RAGHURAM FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 03.09.2014 DATE OF PRONOUNCEMENT : 12.09.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT UNDER SECTION 263 DATED 12.11.2013. LD. CIT ON EXAMINING THE RECORD ISSUED A SHOW CAUSE NOTICE UND ER SECTION 263 DATED 29.10.2013 ON THE FOLLOWING TWO ISSUES : (1) IT WAS OBSERVED FROM THE BALANCE SHEET THAT Y OU HAD LIABILITIES OF RS.1,28,94,150/- AS CAPITAL AND LOANS AND DEPOSITS OF RS.1,22,25,343/- AND OTHERS RS.1,14,289/-. AGAINST WHICH YOU HAD TRADE DEBTORS OF RS.2,07,90,786/- AND BANK BALANCE OF RS.32,61,001/- AND OTHERS RS. 11,81,995/- ON THE ASSETS SIDE. IT I S ALSO NOTICED THAT AGAINST THE TURNOVER OF RS. 46,65,96,5 52/- DURING THE A.Y. 2009-10, YOU HAD SHOWN OUTSTANDING TRADE DEBTORS OF RS.2,07,90,786/- AND OUTSTANDING T RADE CREDITORS AT 'NIL' AND ALSO CLAIMED INTEREST EXPEND ITURE OF RS.18,37,720 ON LOAN CREDITORS. HENCE IT IS EVIDENT THAT YOU HAVE UTILIZED THE LOANS AND DEPOSITS AMOUNTS TA KEN TO PAY THE AMOUNTS DUE TO TRADE CREDITORS. AS YOU H AVE NOT OFFERED ANY INTEREST INCOME ON THE OUTSTANDING TRADE 2 ITA.NO.48/HYD/2014 M/S. SURESH CHANDRA SRIGOPAL, HYDERABAD. DEBTORS AMOUNT THE INTEREST EXPENDITURE OF RS.18,37,720/- CLAIMED NEEDS TO BE DISALLOWED AS TH E SAME WAS CLAIMED ON TRADE CREDITORS. THE AO HAS NOT VERIFIED THIS ASPECT WHILE COMPLETING THE ASSESSMEN T. (2) THE AO FAILED TO CALL FOR THE VAT RETURN IN O RDER TO VERIFY THE GENUINENESS OF PURCHASES EXPENDITURE CLAIMED. 2. ASSESSEE SUBMITTED THAT IT WAS IN TRADING ON SU GAR PURCHASING FROM VARIOUS FACTORIES AND DEALERS IN WH OLESALE BY PAYING ADVANCE AND THESE ARE SOLD TO SOME WHOLESALE RS AND OTHER CONSUMER COMPANIES. IT WAS SUBMITTED THAT ASSESSEE DOES NOT PURCHASE OR SELL ON CREDIT AND THEREFORE, THERE ARE NO CREDITORS AND HAS NOT ACCEPTED ANY FRESH LOANS. IT WAS SUBMITTED THAT ALL THE FUNDS ARE ADVANCES ONLY FOR PURCHASE OF SUGAR AND T HEREFORE, THE INTEREST CLAIMED IN THE RETURN WAS FOR BUSINESS PUR POSE ONLY. IT WAS SUBMITTED THAT ALL THE DETAILS WERE ENQUIRED BY THE A.O. IN THE COURSE OF ASSESSMENT AND PLACED ON RECORD THE LETTE RS DATED 21.03.2011 AND 20.10.2011 FILED BEFORE THE A.O. IN THE COURSE OF ASSESSMENT PROCEEDINGS ALONG WITH NECESSARY ENCLOSU RES. 3. LD. CIT, HOWEVER, DID NOT AGREE AND ON THE REAS ON THAT A.O. DID NOT EXAMINE THE ISSUES IN DETAIL TO A LOGI CAL CONCLUSION, SET ASIDE THE ASSESSMENT WITH A DIRECTION TO RE-DO THE SAME AFTER EXAMINING THE BOOKS OF ACCOUNTS, WHETHER THEY ARE A LLOWABLE OR NOT AND VERIFICATION OF CAPITAL ACCOUNT, BALANCE SH EET AND OTHER ISSUES AS DISCUSSED. 4. CONTESTING THE ABOVE, IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT THE A.O. HAS EXAMINED THE ISSUES IN TH E COURSE OF ASSESSMENT AND MADE CERTAIN DISALLOWANCES AND COMPL ETED THE ASSESSMENT AFTER DUE SCRUTINY. WITH REFERENCE TO BO OKS OF ACCOUNTS, LD. COUNSEL PLACED ON RECORD IN THE PAPER BOOK THE TRADING AND P & L ACCOUNTS, OTHER SCHEDULES INCLUDI NG AUDIT 3 ITA.NO.48/HYD/2014 M/S. SURESH CHANDRA SRIGOPAL, HYDERABAD. REPORT TO SUBMIT THAT THERE IS NO SCOPE FOR REJECTI ON OF BOOKS OF ACCOUNTS AS NOTED BY THE LD. CIT. IT WAS HIS CONTEN TION THAT LD. CIT ON PRESUMPTIONS AND SURMISES SET ASIDE THE ASSE SSMENT WITHOUT ANY VALID REASON. 5. LD. D.R. HOWEVER, SUBMITTED THAT A.O. DID NOT EXAMINE THE ISSUES AND REFERRED TO THE OBSERVATIONS OF THE LD. CIT. IT WAS HIS SUBMISSION THAT SINCE ASSESSMENT HAS BEE N SET ASIDE NO PREJUDICE IS CAUSED TO THE ASSESSEE, IF A.O. EXAMIN ED THE ISSUES AGAIN. 6. WE HAVE EXAMINED THE RIVAL CONTENTIONS AND PERU SED THE PAPER BOOK PLACED ON RECORD. THERE IS NO DISPUT E WITH REFERENCE TO THE FACT THAT ASSESSEE HAS OFFERED TOT AL INCOME OF RS.17,83,680 AFTER CLAIMING DEDUCTION UNDER SECTION 40(B) TO AN EXTENT OF RS.14,25,930 ON TURNOVER OF RS.46.65 CROR ES. AS STATED ASSESSEE PURCHASES FROM VARIOUS FACTORIES AND WHOSA LERS SUGAR AND SUPPLIES TO OTHERS. THERE ARE NO TRADE CREDITOR S BECAUSE ASSESSEE PURCHASED BY PAYING ADVANCE AMOUNTS AND NO CREDIT WAS AVAILED. A.O. IN THE COURSE OF SCRUTINY ASSESSMENT EXAMINED THE CLAIM OF INTEREST AND ALSO OBTAINED THE BANK ACCOUN T. A.O. GAVE A FINDING THAT LEARNED A.R. APPEARED AND FURNISHED IN FORMATION CALLED FOR AND THE SAME WERE EXAMINED. HE ALSO DISA LLOWED SOME EXPENDITURE. A.O. ALSO EXAMINED THE FBT RETURN FIL ED BY ASSESSEE. IT WAS ALSO FOUND TO BE IN ORDER AND ACCEPTED. FURT HER, AS SEEN FROM THE ORDER OF THE LD. CIT, JUST BECAUSE THERE A RE NO CREDITORS AND HAVING DEBTORS IT DOES NOT MEAN THAT INTEREST C LAIMED AS EXPENDITURE CANNOT BE CONSIDERED AS BUSINESS EXPEND ITURE. EVEN AS PER THE SHOW CAUSE NOTICE ISSUED BY THE LD. CIT, HE WAS ALSO CONFIRMING THAT LOANS AND DEPOSITS HAVE BEEN UTILIZ ED TO PAY THE AMOUNTS DUE FROM CREDITORS. SINCE ALL THE FUNDS ARE USED IN THE BUSINESS OF TRADE, THE AMOUNT OF INTEREST CANNOT BE DISALLOWED, AS 4 ITA.NO.48/HYD/2014 M/S. SURESH CHANDRA SRIGOPAL, HYDERABAD. PER PROVISIONS OF SECTION 37(1). ON THAT ACCOUNT AL SO OBSERVATIONS OF THE LD. CIT CANNOT BE UPHELD. MOREOVER, A.O. HAS EXAMINED AND THIS BEING A SIMPLE CASE OF TRADING WITHOUT ANY ASS ETS AS STATED BY THE ASSESSEE, WE ARE AFRAID THE DIRECTIONS OF THE L D. CIT ARE NOT WARRANTED ON THE FACTS OF THE CASE. WE ARE OF THE O PINION THAT THERE IS NO MERIT IN THE ACTION OF THE LD. CIT AND IN FAC T, HE HAS NOT GIVEN ANY FINDING WHAT IS THE ERROR IN THE ORDER AN D PREJUDICE CAUSED TO THE REVENUE. AS ALREADY STATED, A.O. HAS EXAMINED MANY OF THE ISSUES IN THE COURSE OF SCRUTINY AND IN FACT, EVEN DISALLOWED SOME EXPENDITURE CLAIMED. IN VIEW OF THI S, WE ARE OF THE OPINION THAT EXERCISE OF JURISDICTION BY THE LD. CI T IS NOT CORRECT ON THE FACTS OF THE CASE. THEREFORE, WE SET ASIDE T HE ORDER OF LD. CIT AND RESTORE THE ORDER OF A.O. ASSESSEES GROUND S ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12.09.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH SEPTEMBER, 2014 VBP/- COPY TO 1. M/S. SURESH CHANDRA SRIGOPAL, HYDERABAD C/O. MR. K. VASANTKUMAR & MR. A.V. RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD- 500 001. 2. INCOME TAX OFFICER, WARD 7(4), HYDERABAD 3. COMMISSIONER OF INCOME TAX, HYDERABAD 4. ADDL. CIT, RANGE-7, HYDERABAD. 5. D.R. B BENCH, ITAT, HYDERABAD.