Madhu Sudan Dalmia, Kolkata V. A.C.I.T Cir - 31,kolkata, Kolkata

ITA 524/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3166 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2013
• Court: TRIBUNAL
• Department Lawyers: R K KUREEL
• Assessee Lawyers: A K GUPTA
• Keywords: Business income; Commercial expediency
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.524/KOL/2013 ASSESSMENT YEAR: 2009-10 MADHU SUDAN DALMIA VS. ASSISTANT COMMISSIONER O F INCOME-TAX, (PAN:AFSPD6334D) CIRCLE-31, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 17.12.2015 DATE OF PRONOUNCEMENT: 03.02.2016 FOR THE APPELLANT: SHRI A. K. GUPTA, FCA FOR THE RESPONDENT: SHRI R. K. KUREEL, JCIT ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XIX, KOLKATA VIDE APPEAL NO. 172/CIT(A)-XIX/ACIT CIR-31/KOL/11-12 DATED 12.02.20 13. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-31, KOLKATA U/S. 143(3) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 19 .11.2011. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO MAKING ADDITION OF INTEREST WAIVED BEF ORE ACCRUAL AMOUNTING TO RS.99,12,892/-. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF GRANTING OF LOANS AND ADVANCES, INVESTMENT IN SHARES AND SECURITIES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE BALANCE SHEET THAT THE A SSESSEE HAS INVESTED APPROXIMATELY RS. 11 CR. IN GRANTING OF LOANS ONLY TO THREE PARTIES NAME LY, AVIS TIE UP PVT. LTD. AMOUNTING TO RS.1,38,68,079/- AND SAURABH SARAF AMOUNTING TO RS. 21,20,000/- AND TO SSD SECURITIES PVT. LTD. AMOUNTING TO RS.23,06,06,987/-. BUT ACCORDING TO A O, NO INTEREST WAS CHARGED FROM SSD SECURITIES PVT. LTD. THE AO ALSO NOTED THAT SSD SE CURITIES PVT. LTD. HAS PAID TOTAL INTEREST OF RS.6,32,13,790/- TO VARIOUS OTHER PARTIES FROM WHOM LOANS WERE TAKEN BY THE CO. BUT NO INTEREST WAS PAID TO THE ASSESSEE COMPANY. ACCORDING TO AO, IT CLEARLY ESTABLISHES THAT THE ASSESSEE HAS DELIBERATELY REDUCED HIS BUSINESS INCOME RECEIVABLE FROM SSD SECURITIES PVT. LTD. WHICH HE MANAGED AND CONTROLLED AND AVOIDED DECLARING INCOME ON A VERY FLIMSY PRETEXT. THE AO REPRODUCED THE COPY OF LEDGER ACCOUNT WHEREIN ASSES SEE HAS CALCULATED INTEREST ACCRUAL @ 6% IN THE RELEVANT YEAR. ACCORDING TO AO, THE ASSESSEE AV OIDED CREDITING THIS INTEREST OF RS.99,12,892/- 2 ITA NO.524/KOL/2013 MADHU SUDAN DALMIA, AY 2009-10 2 TO ITSELF FROM A COMPANY WHICH HE HAD CONTROLLING S TAKE AS SHAREHOLDER AND DIRECTOR. HENCE, THE AO ADDED BACK THIS INTEREST OF RS.99,12,892/- TO TH E RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED NOW, ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE EXPLAINED BEFORE THE AO T HAT THERE WAS A REQUEST FOR WAIVER OF INTEREST, WHICH WAS RECEIVED BY THE ASSESSEE THROUGH LETTER D ATED 19.09.2008 FROM THE SSD SECURITIES PVT. LTD. AND THAT PARTY HAD NOT PAID INTEREST DUE TO FI NANCIAL CRISIS AND SLOW DOWN OF THE BUSINESS AND PROFITABILITY OF THE ASSESSEE COMPANY. BEFORE US I T WAS ALSO EXPLAINED THAT IT IS CLEAR FROM THE AUDITED ACCOUNTS OF SSD SECURITIES PVT. LTD. THAT F OR FYS 2007-08, 2008-09 AND 2009-10 THE ASSESSEES POSITION DETERIORATED IN TERM OF FINANCE S, HE REFERRED TO THE FOLLOWING FIGURES: FINANCIAL YEAR PROFIT (LOSS) BEFORE TAXATION 2007-08 RS.23,76,92,156 2008-09 RS.(1,24,24,909) 2009-10 RS.3,90,36,554 IT WAS EXPLAINED THAT THE PROFIT OF RS.23.76 CR. IN FY 2007-08 SLIPPED TO LOSS OF RS.1.24 CR. IN FY 2008-09 I.E. THE YEAR UNDER CONSIDERATION AND BA LANCE SHEET WAS IN RED. ACCORDING TO LD. COUNSEL, THE GRANTING OF WAIVER OF INTEREST WAS NOT AT ALL USED AS A DEVICE TO REDUCE THE INCOME OF THE ASSESSEE BUT AS A MEASURE PERMISSIBLE TO THE BUSINESSMAN IN TERM OF COMMERCIAL EXPEDIENCY. THE LD. COUNSEL FOR THE ASSESSEE PLEAD ED FOR COMMERCIAL EXPEDIENCY AND HE RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN T HE CASE OF BAGORIA UDYOG VS. CIT (2011) 334 ITR 280 (CAL). LD. COUNSEL FOR THE ASSESSEE BE FORE US ALSO EXPLAINED THAT THE IMMEDIATE CAUSE OF ACTION FOR WAIVER OF SUCH INTEREST WAS CLA IMED ON ACCOUNT OF GLOBAL FINANCIAL CRISIS, WHICH SEVERELY AFFECTED CAPITAL MARKET WITH UNEXPEC TED VOLATILITY. ACCORDINGLY, THE ASSESSEE BEFORE US CONTENDED THAT THE COMMERCIAL EXPEDIENCY WAS THE REASON FOR NOT CHARGING INTEREST/WAIVER OF INTEREST BEFORE THE YEAR END. T HIS ISSUE HAS BEEN ANSWERED BY HONBLE CALCUTTA HIGH COURT IN BAGORIA UDYOG, SUPRA AS UNDE R: 9. APART FROM THE AFORESAID FACT, WE ARE OF THE V IEW THAT WITHIN THE SCOPE OF APPEAL BEFORE THE TRIBUNAL PREFERRED BY THE REVENUE, THE QUESTION WAS WHETHER THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS JUSTIFIED IN PASSING THE ORDER IMPUGN ED ON THE BASIS OF MATERIALS ON RECORD AND THERE WAS NO QUESTION OF DECIDING THE APPEAL ON THE BASIS OF ANY ADMISSION WHEN AT NO POINT OF TIME IN THE PAST THERE WAS ANY ADMISSION OF THE ASSESSEE TH AT THERE WAS NO BUSINESS CONNECTION BETWEEN THE ASSESSEE AND M/S. HAMLET AND SUCH ALLEGED ADMISSION WAS ALSO NOT PUT FORWARD AS ONE OF THE GROUNDS BY THE REVENUE IN APPEAL BEFORE THE TRIBUNA L. ON THE OTHER HAND, THE COMMISSIONER OF INCOME-TAX (APPEALS) ACCEPTED THE WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND M/S. HAMLET SHOWING EXEMPTION OF INTEREST BY THE ASSESSEE ON PU RE BUSINESS CONSIDERATION HOLDING THAT THE 3 ITA NO.524/KOL/2013 MADHU SUDAN DALMIA, AY 2009-10 3 INTEREST HAVING BEEN WAIVED BEFORE IT BECAME DUE, T HE ASSESSEE WAS ENTITLED TO RELY UPON SUCH WAIVER AND THERE WAS NO JUSTIFICATION OF ADDING THE AMOUNT AS DEEMED INTEREST ACCRUED IN FAVOUR OF THE ASSESSEE. IN OUR OPINION, IT WAS THE DUTY OF TH E TRIBUNAL TO ANSWER THE SAID QUESTION IN ACCORDANCE WITH LAW OF THE LAND. IN THIS CASE, THE TRIBUNAL ACCEPTED THE POSITION OF LAW THAT SUCH WAIVER WAS PERMISSIBLE ACCORDING TO THE DECISION OF THE SUPREME COURT AND FURTHER ACCEPTED THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT SUFFICIENT CAUSE WAS SHOWN BY THE ASSESSEE FOR NON-PRODUCTION OF THE AGREEMENT BEFORE THE ASSESSING OFFICER. 10. WE, THEREFORE, FIND THAT HAVING REGARD TO THE P OSITION OF LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF CIT V. SHIV PRAKASH JANAK RAJ AND CO. P . LTD. [1996] 222 ITR 583 (SC), RELIED UPON BY THE COMMISSIONER OF INCOME-TAX (APPEALS), THE TRIBU NAL ERRED IN LAW IN SETTING ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THE ALL EGED GROUND OF CONCESSION WHICH ITSELF WAS INCORRECT. IN VIEW OF THE ABOVE PROPOSITION OF LAW LAID DOWN B Y HONBLE CALCUTTA HIGH COURT, THE WAIVER OF INTEREST BEFORE THE YEAR END CANNOT BE TREATED A S INCOME IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE DELETE THE ADDITION A ND ALLOW THIS ISSUE OF ASSESSEES APPEAL. 5. THE NEXT ISSUES IN RESPECT OF CONFIRMING THE ADD ITION BY CIT(A) OF RS.2,80,248 BEING THE NOTIONAL FOREIGN CURRENCY EXCHANGE DIFFERENCE AND C ONFIRMING THE DISALLOWANCE OF RS.1,29,898/- U/S. 14A OF THE ACT WERE NOT PRESSED BY THE LD. COU NSEL FOR THE ASSESSEE AT THE TIME OF HEARING. HENCE, THE SAME ARE DISMISSED BEING NOT PRESSED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.03.2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD FEBRUARY, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT SHRI MADHU SUDAN DALMIA, 11/1, SARAT BO SE ROAD, 3 RD FLOOR, SUITE NO.315, KOLKATA-700020. 2. RESPONDENT ACIT, CIRCLE-31, KOLKATA. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .