WORLD WIDE SHIP MANAGEMENT P.LTD, MUMBAI V. ITO WD 15(3)(2), MUMBAI

ITA 5525/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1267 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALDR
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Reasonable cause; Condonation of delay
• Section: 143(3)

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5525/ MUM/2015 ( / ASSESSMENT YEAR : 2010-11) WORLDWIDE SHIP MANAGEMENT PRIVATE LIMITED 302, A-WING, GALLERIA HIRANANDANI GARDENS POWAI, MUMBAI-400076 / V. INCOME TAX OFFICER 15(3)(2) EARLIER WARD 10(3)(3) ROOM NO. 452 , 4 TH FLOOR AAYAKAR BHAWAN CHURCHGATE , MUMBAI ./ PAN : AAACQ1958N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI M.SUBRAMANIAN REVENUE BY : SH. SUNIL KUMAR AGARWAL,DR / DATE OF HEARING : 13-04-2017 / DATE OF PRONOUNCEMENT : 21-04-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5 525/MUM/2015, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 30 TH JULY , 2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-24, MUMBAI (HE REINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2010-11, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORD ER DATED 8 TH MARCH, 2013 ITA 5525/MUM/2015 2 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CAL LED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI (HER EINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. FIRST GROUND OF APPEAL: 1.1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 5,65,566/- O UT OF THE TOTAL INTEREST PAID BY THE APPELLANT COMPANY RS. 18,73,834/- TO THE BANK ON TERM LOAN AND WORKING CAPITA L ON GROUND THAT ARGUMENTS PUT BEFORE HER WERE NOT MADE BEFORE THE ASSESSING OFFICER(AO). 1.2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED BY IGNORING THE FACT THAT THE INTEREST PAID ON TER M LOAN WAS RS. 14,18,859/- ( OUT OF TOTAL INTEREST OF RS. 18,73,834/- ) WHICH WAS EXCLUSIVELY RAISED AND UTILI ZED FOR PURCHASE OF OFFICE PREMISES DURING FINANCIAL YEAR 2 007-08 AND UTILIZATION OF THOSE FUNDS FOR GIVING LOANS TO DIR ECTORS IS IMPOSSIBLE. 1.3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FAI LED TO CONSIDER THAT ALL FACT QUERIES RAISED BY THE ASSESSIN G OFFICER DURING THE COURSE OF HEARING WERE RELIED ACCORDINGLY BY THE APPELLANT AN ALL INFORMATION AS REQUIRED BY THE AO WERE PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE APPELLANT . 1.4. LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) FAILE D TO CONSIDER THE FACT THAT UTILIZATION OF BANK LOAN IS VE RIFIABLE FROM THE BALANCE SHEET ALREADY FILED WITH THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. AT THE OUTSET LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS APPEAL IS FILED LATE WITH THE TRIBUNAL BY 28 DAYS BEYOND THE TIME PRESCRIBED U/S 253(3) OF 1961 ACT. THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ASSESSEE HAS DULY SUBMITTED AN APPLICATION PRAYING FOR CONDO NATION OF DELAY ALONG WITH ITA 5525/MUM/2015 3 AN AFFIDAVIT DATED 13-01-2017 EXECUTED BY DIRECTOR OF THE ASSESSEE COMPANY EXPLAINING THE SUFFICIENT AND REASONABLE CAUSE WHIC H PREVENTED ASSESSEE IN FILING THIS APPEAL IN TIME AS PRESCRIBED UNDER STAT UTE. THE ASSESSEE SUBMITTED THAT MR. AUSTIN MIRANDA WHO WAS LOOKING AFTER THE A FFAIRS OF THE ASSESSEE COMPANY WAS SICK AND CONSEQUENTLY THE APPEAL COULD NOT BE FILED IN TIME. THE LEARNED COUNSEL FOR THE ASSESSEE STATED BEFORE US A BOUT THE TRUTHFULNESS AND CORRECTNESS OF THE AFFIDAVIT DATED 13-01-2017 FILED BY THE ASSESSEE COMPANY AND PRAYED THAT THE DELAY IN FILING THE INSTANT APP EAL WITH TRIBUNAL MAY BE CONDONED. THE LEARNED DR OBJECTED TO THE CONDONATIO N APPLICATION FILED BY THE ASSESSEE FOR CONDONING DELAY OF 28 DAYS IN FILING T HIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD AND WE ARE OF CONSIDERED VIEW THAT THE ASSESSEE HAS SHOWN SUFFICIENT AND REASONABLE CAUSE IN NOT FILING OF THIS INSTANT APPE AL WITH TRIBUNAL IN TIME AS PRESCRIBED U/S 253(3) OF 1961 ACT , WHICH CAUSE AVE RRED BY THE ASSESSEE IS DULY SUPPORTED BY AN AFFIDAVIT DATED 13-01-2017 EXE CUTED BY DIRECTOR OF THE ASSESSEE COMPANY AVERRING AND DEPOSING REASONS FOR THE DELAY BEING ATTRIBUTABLE TO ILL HEALTH OF MR. AUSTIN MIRANDA WH O WAS LOOKING AFTER THE AFFAIRS OF THE ASSESSEE COMPANY WHO WAS SICK DURIN G THE RELEVANT PERIOD WHICH LED TO DELAY IN FLING OF THIS INSTANT APPEAL . THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO MADE STATEMENT BEFORE US ABOUT TR UTHFULNESS AND CORRECTNESS OF THE SAID AFFIDAVIT DATED 13-01-2017 FILED BEFORE THE TRIBUNAL. THE SAID APPLICATION FOR CONDONATION OF DELAY AND A FFIDAVIT DATED 13-01-2017 ARE PLACED IN FILE. UNDER THESE FACTUAL MATRIX AND CIRCUMSTANCE OUTLINING THE CONDONATION APPLICATION FILED BY THE ASSESSEE, WE A RE SATISFIED AND INCLINED TO CONDONE DELAY OF 28 DAYS IN FILING OF THIS INSTANT APPEAL BY THE ASSESSEE WITH THE TRIBUNAL BY EXERCISING OUR POWERS U/S 253(5) OF 1961 ACT. IT IS WELL SETTLED PROPOSITION SUPPORTED BY CATENA OF JUDGMENTS THAT I F TECHNICALITIES ARE PITTED AGAINST THE JUSTICE, COURTS WILL LEAN TOWARDS SUB-S ERVING THE INTEREST OF JUSTICE ITA 5525/MUM/2015 4 IN PREFERENCE TO TECHNICALITIES, UNLESS MALA-FIDE O F THE PARTY SEEKING CONDONATION OF DELAY FROM COURT IS SHOWN OR NEGLIGE NCE ON THE PART OF SUCH PARTY IN PURSUING ITS LEGAL REMEDIES WITH DILIGENCE IS BROUGHT ON RECORD. WE DONOT FIND ANY DISABILITIES IN THE INSTANT APPEAL. THUS, IN THE INSTANT CASE, WE CONDONE DELAY OF 28 DAYS IN FILING OF THE INSTANT A PPEAL BY THE ASSESSEE WITH TRIBUNAL AND PROCEED TO ADJUDICATE THIS APPEAL ON M ERITS IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF CREW MANAGEMENT WHERE THE ENTIRE OPERATION OF TH E VESSEL SAILING FROM PORT TO PORT IS BEING OPERATED BY ASSESSEE ON BEHALF OF THE PRINCIPALS. THE ENTIRE CREW AND ITS PROVISION ARE OPERATED BY THE ASSESSE E ON BEHALF OF THE PRINCIPAL. THE AO FRAMED AN ASSESSMENT U/S 143(3) OF 1961 ACT VIDE ASSESSMENT ORDER DATED 08-03-2013 WHERE-IN , INTER-ALIA, ADDITIONS H AVE BEEN MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST TO THE TUNE OF RS. 5,65 ,566/- PAID TO THE BANK ON TERM LOAN AND WORKING CAPITAL ON THE GROUNDS THAT T HE INTEREST FREE LOAN/ADVANCE WAS ADVANCED TO DIRECTOR OF THE ASSESS EE COMPANY FROM INTEREST BEARING BORROWED FUNDS. THE ASSESSEE CLAIMED THAT T HE SAID ADVANCE/LOAN GRANTED TO THE DIRECTOR WAS ERRONEOUSLY BEING GROUP ED AS ADVANCE FOR PROPERTIES WHILE THE SAME IS IN NATURE OF LOAN/ADVA NCE TO DIRECTOR ON WHICH INTEREST WILL BE RECOVERED FROM THE SAID DIRECTOR R ETROSPECTIVELY. IT WAS SUBMITTED THAT THE SAID AMOUNT ADVANCED TO THE SAID DIRECTOR IS IN THE NATURE OF LOAN/ADVANCE AS DIRECTOR HAS PURCHASED THE PROPE RTY OUT OF SAID FUNDS IN PUNE IN HIS PERSONAL NAME. THE AO REJECTED THE SAID CONTENTION OF THE ASSESSEE WHILE FRAMING ASSESSMENT ORDER DATED 08-03 -2013 PASSED U/S 143(3) OF 1961 ACT, WHEREIN INTEREST OF RS. 5,65,56 6/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ASSESSMENT ORDER DATED 08-03-20 13 PASSED BY THE AO , THE ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A) . ITA 5525/MUM/2015 5 7. BEFORE LEARNED CIT(A) , THE ASSESSEE MADE SUBMIS SIONS THAT INTEREST IS PAID ON TERM LOANS WHICH WERE RAISED IN FINANCIAL YEAR 2 007-08 FOR PURCHASE OF PREMISES AND EQUIPMENTS AND IT IS NOT POSSIBLE TO GRANT LOANS TO DIRECTOR DURING THE RELEVANT PREVIOUS YEAR OUT OF INTEREST B EARING FUNDS RAISED BY THE ASSESSEE FROM TERM LOANS FROM BANKS AS THE INTEREST BEARING FUNDS RAISED BY THE ASSESSEE FROM BANKS TOWARDS TERM LOAN STOOD UTI LIZED DURING THE FINANCIAL YEAR 2007-08 ITSELF. IT WAS ALSO SUBMITTED THAT INT EREST BEARING WORKING CAPITAL LOAN RAISED BY THE ASSESSEE FROM BANKS WERE UTILIZED FOR BUSINESS OF THE ASSESSEE. , WHICH COULD BE VERIFIED FROM THE BA LANCE SHEET OF THE ASSESSEE. THE LEARNED CIT(A) REJECTED THE AFORE-STATED CONTEN TION OF THE ASSESSEE ON THE GROUNDS THAT SUCH ARGUMENTS WERE NOT RAISED BY THE ASSESSEE BEFORE THE AO AND HENCE ADDITION STOOD CONFIRMED BY THE LEARNED C IT(A) VIDE APPELLATE ORDERS DATED 30-07-2015 PASSED BY LEARNED CIT(A). 8. AGGRIEVED BY APPELLATE ORDERS DATED 30-07-2015 P ASSED BY LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT NON CONSIDERATION AND REJECTION BY LEARNED CIT(A) OF THE EXPLANATIONS AND EVIDENCES FILED BY THE ASSESSES IN ITS DEFENSE BEFORE LEARNED CIT(A ON THE GROUNDS THAT SUCH CONTENTIONS WERE NOT RAISED BY THE ASSESSEE BEFORE THE AO IS CLEARLY ERRONEOUS. IT WAS SUBMITTED THAT LEARNED CIT(A) POW ERS ARE CO-TERMINUS WITH POWERS OF AO AND THE LEARNED CIT(A) OUGHT TO HAVE C ONSIDERED THE SAID EXPLANATIONS AND IN TERMS OF RULE 46A OF INCOME-TAX RULES, 1962 , THE LEARNED CIT(A) COULD HAVE REMANDED THE ADDITIONAL E VIDENCES TO AO FOR REMAND REPORT. IT WAS ALSO SUBMITTED THAT THE LEARN ED CIT(A) HAS ALSO NOT RECORDED REASONS FOR NON CONSIDERATION OF ASSESSEE S EXPLANATIONS AND EVIDENCES AS REQUIRED UNDER RULE 46A OF INCOME-TAX RULES, 1962. THE LEARNED COUNSEL FOR ASSESSEE PRAYED THAT THE MATTER MAY BE SET ASIDE AND RESTORED TO ITA 5525/MUM/2015 6 THE FILE OF AO FOR DE-NOVO DETERMINATION OF THE ISS UE ON MERITS BY THE AO, AFTER CONSIDERATION OF EXPLANATION AND EVIDENCES FILED BY THE ASSESSEE IN ITS DEFENSE. THE LEARNED DR RELIED UPON ORDERS OF AUTHO RITIES BELOW BUT FAIRLY AGREED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF AO FOR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW. THUS, IN NUT- SHELL BOTH LEARNED COUNSEL FOR THE ASSESSEE AND LEA RNED DR ARE FAIRLY IN AGREEMENT THAT THE ISSUE UNDER THE INSTANT APPEAL N EED TO BE RESTORED TO THE FILE OF THE AO AS THERE ARE ADDITIONAL EVIDENCES/ E XPLANATIONS ON WHICH THE ASSESSEE IS RELYING ON WHICH NEED VERIFICATION, ENQ UIRY AND EXAMINATION BY THE AO ON MERITS IN ACCORDANCE WITH LAW . THE OTHER ADDITIONS MADE BY THE AO ARE NOT SUBJECT MATTER OF DISPUTE BETWEEN THE RI VAL PARTIES AS THE SAID ADDITIONS HAVE REACHED FINALITY VIDE APPELLATE ORDE RS DATED 30-07-2015 OF LEARNED CIT(A). IT IS NOT BROUGHT ON RECORD BY LEAR NED DR THAT REVENUE IS IN APPEAL AS AGAINST THE RELIEF GRANTED BY LEARNED CIT (A) TO THE ASSESSEE. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESEE IS ENGAGED IN TH E BUSINESS OF CREW MANAGEMENT WHERE THE ENTIRE OPERATION OF THE VESSEL SAILING FROM PORT TO PORT IS BEING OPERATED BY ASSESSEE ON BEHALF OF THE PRIN CIPALS. THE ENTIRE CREW AND ITS PROVISION ARE OPERATED BY THE ASSESSEE ON BEHAL F OF THE PRINCIPAL. THE AO , INTER-ALIA, MADE AN ADDITIONS ON ACCOUNT OF DISALLO WANCE OF INTEREST TO THE TUNE OF RS. 5,65,566/- PAID TO THE BANK ON TERM LOA N AND WORKING CAPITAL ON THE GROUNDS THAT THE INTEREST FREE LOAN/ADVANCE WAS ADVANCED TO DIRECTOR OF THE ASSESSEE COMPANY FROM INTEREST BEARING BORROWED FUNDS. THE ASSESSEE CLAIMED BEFORE THE AO THAT THE SAID ADVANCE/LOAN GR ANTED TO THE DIRECTOR WAS ERRONEOUSLY BEING GROUPED AS ADVANCE FOR PROPERTIES WHILE THE SAME IS IN NATURE OF LOAN/ADVANCE TO DIRECTOR ON WHICH INTERES T WILL BE RECOVERED FROM THE SAID DIRECTOR RETROSPECTIVELY. THE ASSESSEE ALS O SUBMITTED BEFORE THE AO THAT THE SAID AMOUNT ADVANCED TO THE SAID DIRECTOR IS IN THE NATURE OF LOAN/ADVANCE TO THE DIRECTOR AS DIRECTOR HAS PURCHA SE THE PROPERTY IN PUNE ITA 5525/MUM/2015 7 IN HIS PERSONAL NAME. THE AO REJECTED THE SAID CONT ENTION OF THE ASSESSEE. BEFORE LEARNED CIT(A) , THE ASSESSEE MADE SUBMISSIO NS THAT INTEREST IS PAID ON TERM LOANS WHICH WERE RAISED IN FINANCIAL YEAR 2007 -08 FOR PURCHASE OF PREMISES AND EQUIPMENTS AND IT IS NOT POSSIBLE TO GRANT LOANS TO DIRECTOR DURING THE RELEVANT PREVIOUS YEAR OUT OF INTEREST B EARING FUNDS RAISED BY THE ASSESSEE AS THE INTEREST BEARING FUNDS RAISED BY TH E ASSESSEE STOOD UTILIZED DURING THE FINANCIAL YEAR 2007-08 ITSELF. IT WAS AL SO SUBMITTED BY THE ASSESSEE BEFORE LEARNED CIT(A) THAT INTEREST BEARING WORKING CAPITAL LOAN RAISED BY THE ASSESSEE FROM BANK WERE UTILIZED FOR BUSINESS OF TH E ASSESSEE. , WHICH COULD BE VERIFIED FROM THE BALANCE SHEET OF THE ASSESSEE. THE LEARNED CIT(A) INSTEAD OF ADJUDICATING THE SAID CONTENTIONS RAISED BY THE ASSESSEE REJECTED THE CONTENTIONS OF THE ASSESSEE ON THRESHOLD ON THE GRO UNDS THAT SUCH ARGUMENTS WERE NOT RAISED BY THE ASSESSEE BEFORE THE AO. THE LEARNED CIT(A) COMMITTED AN ERROR IN NOT CONSIDERING THE SAID CONTENTIONS OF THE ASSESSEE ON MERITS. THE LEARNED CIT(A) POWERS ARE CO-TERMINUS WITH POWE RS OF THE AO . THE LEARNED CIT(A) SHOULD HAVE FORWARDED THE ADDITIONAL EVIDENCES TO LEARNED AO FOR SEEKING REMAND REPORT AS MANDATED U/R 46A OF 19 62 RULES FOR NECESSARY EXAMINATION, ENQUIRY AND VERIFICATION BY THE AO OF THESE ADDITIONAL EVIDENCES. THUS, KEEPING IN VIEW FACTUAL MATRIX OF THE CASE AN D IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, WE ARE INCLINED TO SET ASIDE AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DE-NOVO DETERMINATI ON OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER AN D ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE PROVIDED BY THE A.O. TO THE AS SESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WIT H LAW IN THE SET ASIDE PROCEEDINGS. THE ASSESSEE WILL BE ALLOWED BY THE AO TO FURNISH ALL NECESSARY/RELEVANT EVIDENCES AND EXPLANATION IN HIS DEFENSE IN SET ASIDE PROCEEDINGS. WE ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 5525/MUM/2015 FOR ASSESSMENT YEAR 2010-11 IS ALLOWED FOR STATISTI CAL PURPOSE. ITA 5525/MUM/2015 8 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2017. # $% &' 21-04-2017 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 21-04-2017 [ !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 9 / CIT- CONCERNED, MUMBAI 5. <=( >>?@ , ?@ , $ / DR, ITAT, MUMBAI I BENCH 6. (BC D / GUARD FILE. / BY ORDER, < > //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI