N.G. GROUP, NAVI MUMBAI V. ITO 22(3)(3), NAVI MUMBAI

ITA 5009/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3495 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Notional interest; Commercial expediency
• Section: 68

Judgement Text

ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 5009/MUM/2012 (ASSESSMENT YEAR 2009-10 ) DATE OF HEARING: 11/6/2013 DATE OF PRONOUNCEMENT: 19/6/2013 O R D E R PER RAJENDRA SINGH THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 6.7.2012 OF CIT (A) FOR THE ASSESSMENT YEAR 2009-10 .THE ASSESSE IN THIS APPEAL HAS RAISED DISPUTES ON THREE DIFFERENT GROUN DS. 2. THE FIRST DISPUTE RAISED IS REGARDING DISALLOWA NCE OF EXPENSES AMOUNTING TO RS. 2,17,57,872/- U/S 40 (A) (IA) ON T HE GROUND OF NON DEDUCTION OF TAX AT SOURCE AND EXCLUSION OF THE SAM E FROM WORK IN PROGRESS. THE LEARNED AR FOR THE ASSESSEE AT THE TI ME OF HEARING OF THE APPEAL DID NOT PRESS THIS GROUND. THERFORE, THE GRO UND RAISED IS DISMISSED AS NOT PRESSED. N.G. GROUP, PLOT NO. 8, SECTOR-11, OPP. JUINAGAR RLY. STATION, SANPADA, MUMBAI 400 709. PAN:- AAFFN9159E ITO 22(3) (3) VASHI RAILWAY STATION COMPLEX NAVE MUMBAI. APPELLANT RESPONDENT DEPARTMENT BY. SHRI A.P. SINGH ASSESSEE BY: SMT. KRITIKA AGARWAL ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 2 OF 7 3. THE SECOND DISPUTE IS REGARDING ADDITION OF LOAN S OF RS. 16,00,000/- AND CONSEQUENTIAL INTEREST OF RS. 1,51,040/- AS UNE XPLAINED CASH CREDIT U/S 68 OF THE IT ACT. THE AO NOTED THAT THE ASSESSE E HAD TAKEN LOANS OF RS. 5.35 LAKH FROM BHARAT MANGALDAS BHANUSHALI, R S. 5.30 LAKH FROM MAIYA MEGHJ BHANUSHALI, RS. 5.35 LAKH FROM NARESH V ALJI BHANUSHALI. THE AO OBSERVED THAT THE ASSESSEE DID NOT SUBMIT LO ANS CONFIRMATION, BANK PASS BOOK AND COPIES OF THE INCOME TAX RETURN AND BALANCE SHEET OF THE LENDERS. THE AO, THEREFORE, HELD THAT THE CREDI TWORTHINESS AND GENUINENESS OF TRANSACTIONS WERE NOT ESTABLISHED. T HE AO, THUS, TREATED THE SUM OF RS. 16,00,000/- AND CONSEQUENTIAL INTERE ST OF RS. 1,51,040/- AGGREGATING TO RS. 17,51,040/- AS INCOME OF THE ASS ESSEE U/S 68 OF THE IT ACT. 3.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT (A) THAT THE AO HAD TREATED THE CASH CREDIT AS INCO ME ON THE GROUND THAT THE ASSESSEE HAD FAILED TO FILE THE CONFIRMATIONS F ROM THE LENDERS AND COPIES OF THE BANK PASS BOOK, RETURN OF INCOME ETC. IT WAS SUBMITTED THAT THE LOANS HAD BEEN REPAYED ON THE DATE OF ASSESSMEN T AND THE PARTIES WERE NOT COOPERATING WHICH WAS THE REASON FOR NON S UBMISSION OF DETAILS. HOWEVER, SUBSEQUENTLY THE DETAILS HAVE BEEN OBTAINE D FROM THE LENDERS AND THE SAME WERE BEING SUBMITTED AS ADDITIONAL EVI DENCE BEFORE CIT (A). IT WAS REQUESTED THAT THE ADDITIONAL EVIDENCE MAY B E ADMITTED AND ISSUE MAY BE DECIDED BASED ON SUCH EVIDENCE. CIT (A) HOWE VER OBSERVED THAT THE ADDITIONAL EVIDENCE UNDER RULE 46 A COULD BE AD MITTED ONLY IN THE SITUATIONS MENTIONED IN THE SAID RULE WHICH WERE NO T SATISFIED IN THIS CASE. CIT (A), THEREFORE, REFUSED TO ADMIT THE ADDI TIONAL EVIDENCE. AS REGARDS THE MERIT OF THE CASE, CIT (A) OBSERVED THA T THE BURDEN WAS ON THE ASSESSEE TO PROVE THE IDENTITY AND CAPACITY OF THE CREDITORS AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE HAD N EITHER FILED THE CONFIRMATIONS NOR THE COPY OF BALANCE SHEET OR BANK ACCOUNT ETC., FROM ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 3 OF 7 THE LENDERS. UNDER THESE SITUATIONS, THE CASH CREDI T CANNOT BE ACCEPTED AS EXPLAINED SATISFACTORILY. CIT (A) ACCORDINLGY, CONF IRMED THE ADDITION MADE BY AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.2 BEFORE US LEARNED AR FOR THE ASSESSEE SUBMITTED THAT CIT (A) WAS NOT JUSTIFIED IN REFUSING THE ADMISSION OF ADDITION AL EVIDENCE SUBMITTED BY THE ASSESSEE. IT WAS POINTED OUT THAT THE LOANS HAD BEEN REPAYED AND THE PARTIES WERE NOT COOPERATING AS A RESULT OF WHICH T HE ASSESSEE WAS UNABLE TO PROCURE THE CONFIRMATIONS AND OTHER DETAILS FROM THE LENDORS. HOWEVER, SUBSEQUENTLY AFTER A LOT OF PURSUATION, THE ASSESSE E SUCEEDED IN GETTING THE CONFIRMATIONS AND OTHER DETAILS FROM THE LENDER S AND, THEREFORE, IN SUCH A SITUATION THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY CIT (A) UNDER CLAUSE (C) OF R ULE 46 A (1) AS PER WHICH IN CASE THE ASSESSEE WAS PREVENTED BY SUFFICI ENT CAUSE FROM PRODUCING ANY EVIDENCE BEFORE THE AO WHICH IS RELEV ANT TO THE GROUND OF APPEAL IT SHOULD BE ADMITTED. IN THIS CASE AS EXPLA INED EARLIER THE ASSESSEE HAD SUFFICIENT CAUSE AND THEREFORE, CIT (A ) WAS NOT JUSTIFIED IN REFUSING THE ADMISSION OF ADDITIONAL EVIDENCE. LE ANRED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT (A). 3.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACCOUNT OF CAS H CREDIT. THE ADDITION HAD BEEN MADE BY THE AO ON THE GROUND THAT THE ASSE SSEE COULD NOT FILE THE CONFIRMATIONS NOR THE COPIES OF BALANCE SHEET O F BANK ACCOUNT AND EVIDENCE OF FILING RETURN OF INCOME BY THE LENDERS IN THE ABSENCE OF WHICH THE CASH CREDIT WAS NOT EXPLAINED SATISFACTORILY. B EFORE CIT (A) THE ASSESSEE FILED THE CONFIRMATIONS AS WELL AS THE COP Y OF BANK PASSBOOK BALANCE SHEET OF THE LENDORS BEFORE CIT (A) AND REQ UESTDED THE SAME TO BE ADMITTED AS ADDITIONAL EVIDENCE. THE ASSESSEE EXPLA INED THAT THE ASSESSEE COULD NOT OBTAIN THESE DETAILS EARLIER AS THE LOANS HAD BEEN REPAYED AND ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 4 OF 7 THE LENDERS WERE NOT COOPERATING. CIT (A) REJECTED THE REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE. IN OUR VIEW, ON THE FACTS OF THE CASE ORDER OF CIT (A) REFUSING THE ADMISSION OF ADDITION AL EVIDENCE IS NOT JUSTIFIED. ONCE THE LOANS HAD BEEN REPAYED AND THE LENDERS WERE NOT COOPERATING, IT IS DIFFICULT FOR THE ASSESSEE TO PR OCURE THE CONFIRMATIONS AND COPIES OF BANK ACCOUNT, BALANCE SHEET ETC. OF T HE LENDERS. THEREFORE, THERE WAS SUFFICIENT CAUSE OF THE ASSESSEE TO NOT P RODUCE THESE EVIDENCES BEFORE THE AO. HOWEVER, ONCE THE ASSESSEE SUCCEEDED IN GETTING DETAILS AND THE SAME WERE SUBMITTED BEFORE CIT (A) WHICH WE RE RELEVANT FOR DECIDING THE GROUND OF APPEAL, THE SAME IS REQUIRED TO BE ADMITTED FOR ARRIVING AT A FAIR AND PROPER CONCLUSION IN THE MAT TER. THE ORDER OF CIT (A) REFUSING THE ADMISSION OF ADDITIONA EVIDENCE CANOT BE UPHELD. WE, THEREFORE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINAT ION OF ADDITIONAL EVIDENCES IF NECESSARY BY REMANDING THE MATTER TO A O AND AFTER ALLOWING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. THE THIRD DISPUTE IS REGARDING ADDITION ON ACCOU NT OF NOTIONAL INTEREST OF RS. 17,83,798/- ON THE INTEREST FREE AD VANCES GIVEN BY THE ASSESSEE TO THE ASSOCIATE CONCERNS. THE AO NOTED TH AT THE ASSESSEE HAD CLAIMED INTEREST EXPENSE OF RS. 1,53,73,110/-. THE ASSESSEE HAS ALSO GIVEN ADVANCE OF RS. 5,27,75,384/- ON WHICH NO INTE REST HAS BEEN CHARGED. THE AO COMPUTED THE NOTIONAL INTEREST ON S UCH ADVANCES AT RS. 17,83,798/- AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME COULD NOT BE ADDED TO THE TOTAL INCOME. THE ASSESSEE EXPL AINED THAT THE AMOUNTS HAD BEEN ADVANCED TO VARIOUS PARTIES INCLUD ING SISTER CONCERN FOR THE PURPOSE OF BUSINESS. THEREFORE, THE ADVANCE S WERE GIVEN ON COMMERCIAL EXPEDIENCY AND IN SUCH CASES, NO ADDITIO N COULD BE MADE IN VIEW OF THE JUDGMENT OF HONBLE HIGH SUPREME COURT IN CASE OF S.A. BUILDERS LTD. VS. CIT (A) (288 ITR 1). THE AO HOWEV ER DID NOT ACCEPT THE ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 5 OF 7 CONTENTIONS RAISED AND ADDED THE SUM OF RS. 17,83,7 98/- TO THE TOTAL INCOME. 4.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT (A) THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS O F REAL ESTATE DEVELOPMENT. THE INTEREST FREE LOANS AND ADVANCES H AD BEEN GIVEN TO THE PARTIES WHICH WERE IN THE SAME LINE OF BUSINESS. TH US THE LOANS/ADVANCES WERE GIVEN IN CONNECTION WITH BUSINESS AND IT COULD NOT BE CONSIDERED AS DEPLOYED FOR NON BUSINESS PARTIES. THE ASSESSEE ALS O POINTED OUT THAT IN THE BALANCE SHEET FOR ASSESSMENT YEAR 2009-10 THE A SSESSEE HAD SHOWN ADVANCES OF RS. 10,06,39,958/- RECEIVED AGAINST BOO KING ON WHICH NO INTEREST WAS PAYABLE. THE ASSESSEE HAD GIVEN THE AD VANCES TO OTHER PARTIES OUT OF SUCH INTEREST FREE FUND. IT WAS ACCO RDINLGY URGED THAT THE ADDITION MADE BY AO SHOULD BE DELETED. CIT (A) AFTE R CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT IT WAS HAVING INTEREST FREE FUND OF RS. 10,06,39,958/- WAS NOT IN DOUBT AS THE SAME AMOUNT WAS DULY REFLECTED IN THE BALANCE S HEET. BUT THE CONTENTION OF THE ASSESSEE THAT NO NOTIONAL INTERES T COULD BE CHARGED WAS NOT ACCEPTABLE SINCE THE ASSESSEE HAD FAILED TO PRO VE THE NEXUS OF INTEREST FREE ADVANCES GIVEN TO THE INTEREST FREE BOOKING AM OUNT AVAILABLE. IN THE ABSENCE OF ANY NEXUS, CIT (A) DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY AO, AGG RIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4.2 BEFORE US, LEARNED AR FOR THE ASSESSEE SUBMITT ED THAT THE ASSESSEE HAD NOT BEEEN GIVEN PROPER OPPORTUNITY TO EXPLAIN T HE NEXUS. IT WAS POINTED OUT THAT THE AO HAD ISSUED THE SHOW CAUSE F OR MAKING ADDITION OF NOTIONAL INTEREST AND THE ASSESSEE HAD EXPLAINED TH E SAME ON THE GROUND THAT ADVANCES WERE GIVEN ON COMMERCIAL EXPEDIENCY A ND, THEREFORE, NO ADDITION ARE REQUIRED. THEREAFTER, THE AO WITHOUT G IVING ANY OPPORTUNITY ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 6 OF 7 TO PROVE THE NEXUS HAD MADE THE DISALLOWANCE. EVEN THE CIT (A) HAD NOT GIVEN ANY PROPER OPPORTUNITY IN THIS REGARD. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD ENOUGH MATERIAL IN THE FORM OF COPY OF LEDGER ACCOUNTS OF THE PARTIES PLACED AT PAGE 21 TO 80 OF THE PAPER BO OK AS WELL AS THE COPIES OF THE BANK ACCOUNTS PLACED AT PAGE 81 TO 111 TO SH OW THAT THE INTEREST FREE ADVANCES HAD BEEN GIVEN OUT OF INTEREST FREE B OOKING AMOUNT. IT WAS, THEREFORE, REQUESTED THAT THE ASSESSEE MAY BE GIVEN FURTHER OPPORTUNITY TO EXPLAIN THE MATTER. LEANRED DR ON THE OTHER HAND ST RONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN RESPECTIVE ORDERS. 4.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACC OUNT OF NOTIONAL INTEREST ON INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE TO THE ASSOCIATE CONCERNS AND OTHER PARTIES. THE ASSESSEE DURING THE ASSESSME NT PROCEEDINGS EXPLAINED THAT INTEREST FREE ADVANCES HAD BEEN GIVE N TO PARTIES WHO HAD BUSINESS CONNNECTION WITH THE ASSESSEE AND, THEREFO RE, ADVANCES GIVEN WERE ON COMMERCIAL EXPEDIENCY AND NO DISALLOWANCE C OULD BE MADE IN SUCH A CASE. RELIANCE HAD BEEN PLACED ON THE JUDGME NT OF HONBLE SUPREME COURT IN CASE OF S.A BUILDERS (SUPRA). ONCE THE ADVANCE HAD BEEN GIVEN ON COMMERCIAL EXPEDIENCY IRRESPECTIVE OF FACT WHETHER THE ADVANCES HAVE BEEN GIVEN OUT OF BORROWED FUNDS, NO DISALLOWANCE COULD BE MADE. BUT IN CASE THE AO DID NOT FIND THE EXPLAN ATION SATISFACTORY, HE WAS REQUIRED TO GIVE NOTICE TO THE ASSESSEE SO THAT THE ASSESSEE COULD GIVE FURTHER EXPLANATION SUCH AS ADVANCES BEING GIVEN OU T OF INTEREST FREE FUND. THE ORDER OF AO, HOWEVER, DOES NOT SHOW ANY S UCH OPPORTUNITY BEING GIVEN TO THE ASSESSEE. AT THE APPELLATE STAGE , THOUGH THE CIT (A) HAS ACCEPTED THAT INTEREST FREE BOOKING AMOUNT OF RS. 1 0.06 CRORE WAS AVAILABLE WITH THE ASSESSEE, HE ALSO HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO PROVE NEXUS BETWEEN ADVANCES GIVEN AND THE INTEREST FREE ITA NO. ITA NO. ITA NO. ITA NO. 5009 5009 5009 5009/MUM/201 /MUM/201 /MUM/201 /MUM/2012 22 2 N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. N.G. GROUP MUMBAI. PAGE 7 OF 7 FUND AVAILABLE. THE ASSESSEE HAS SUBMITTED BEFORE U S THAT IN CASE THE OPPORTUNITY WAS GIVEN THE ASSESSEE WOULD HAVE PRODU CED NECESSARY EVIDENCES TO LINK THE INTEREST FREE ADVANCES GIVEN AND THE INTEREST FREE FUND AVAILABLE. THEREFORE, IN OUR VIEW, TO ARRIVE A T A FAIR CONCLUSION IN THE MATTER, IT IS NECESSARY TO EXAMINE THE CLAIM OF THE ASSESSEE FOR WHICH FURTHER OPPORTUNITY IS REQUIRED TO BE GIVEN. WE, TH EREFORE, SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION, IF REQUIRED BY R EMANDING THE MATTER TO AO AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 -6-2013 SD/- SD/- (SANJAY GARG ) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 19 JUNE, 2013. SK SR. P.S. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI