ITO 19(2)(3), MUMBAI V. LUPIN INTERNATIOAL, MUMBAI

ITA 5553/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92251 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-04-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 09-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Rule of consistency; Additional evidence

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.5553/MUM/2009, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-1998-99 ITO 19(2)(3), R.NO.311, 3RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 VS M/S LUPIN INTERNATIONAL, 159, CST ROAD, KALIAN, SANTACRUZ (E), MUMBAI-98 PAN:AABFL2573J ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) ' ( / REVENUE BY :SHRI SACHCHIDANAND DUBE ! )* ! )* ! )* ! )* ( ( ( ( /ASSESSEE BY :MS. VASANTI PATEL ! ! ! ! ' '' ' *+ *+ *+ *+ / DATE OF HEARING : 09 - 04 -2015 ,-' ' *+ / DATE OF PRONOUNCEMENT : 09 -04-2015 ! ! ! ! , 1961 1961 1961 1961 ' ' ' ' 254 254 254 254( (( (1 11 1) )) ) *6* 7 *6* 7 *6* 7 *6* 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) ! ! ! ! PER RAJENDRA, AM - CHALLENGING THE ORDER DT.04.08.2009 OF THE CIT(A)-X IX, MUMBAI, ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN ED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,32,08,738/-O N ACCOUNT OF DISCOUNT CHARGES MADE BY A.O. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE FIRM HAD NOT BEEN ABLE TO PROVE THAT THE DISCOUNTING CHARGES HAVE BEEN PAID WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE WAS GIVEN OP PORTUNITY TO PRODUCE THE COPIES OF BILLS OF DISCOUNTING/FINANCE CHARGES WHICH WERE NOT PRODUCED AT THE TIME OF ORIGINAL ASSESSMENT AS WELL AS AT THE TIME OF FRESH ASSESSME NT. 4.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF TRADING AN D INVESTMENT IN SHARES,FILED ITS RETURN OF INCOME ON 02.11.1998,DECLARING TOTAL INCOME OF RS. (-)1,33,47,190/-.THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 18.01.2001,DETE RMINING THE INCOME OF THE ASSESSEE AT RS. (-)58,538/-.THE AO DISALLOWED ASSESSEES CLAIM OF I NTEREST EXPENSE OF RS.1.32 CRORES.MATTER TRAVELLED UP TO THE TRIBUNAL AND VIDE ITS ORDER DAT ED 26.06.2007,TRIBUNAL RESTORED BACK THE MATTER TO THE FILE OF THE AO WITH FOLLOWING DIRECTION: 'IF THE POSITION IS THAT THE ASSESSEE IS CONTINUOU SLY OFFERING THE SAME AMOUNT FOR TAXATION IN EARLIER YEARS, THE PRINCIPLE OF CONSISTENCY WOUL D NOT PERMIT TO TAKE A DIFFERENT VIEW.HOWEVER,IF THE FACTS OF THE INSTANT CASE ARE S IMILAR THOSE OF M/S.DELTA INTERNATIONAL AND M/S.ALPHA CORPORATION THEN THE ISSUE WOULD REQUIRE EXAMINATION AT THE A.O'S END IN THE LIGHT OF THE DIRECTION CONTAINED IN SUCH ORDER. WE,THEREFORE,SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE O F THE AO,WHO WILL DECIDE THIS MATTER AFRESH IN THE LIGHT OF OUR ABOVE OBSERVATIONS.' HOWEVER,THE AO DISALLOWED THE DISCOUNTING CHARGES O F RS.1.32 CRORES. ITA/5553/MUM//2009,AY.1998-99-LI 2 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS CONTENTED THAT TH E FINDING OF THE AO WERE IN CONTRADICTION WITH THE DIRECTIONS OF THE TRIBUNAL,THAT THE IT HA D ACTUALLY INCURRED FINANCE CHARGES AND OTHER EXPENSES,THAT BILL DISCOUNTING TRANSACTIONS WERE IN THE NATURE OF FINANCIAL TRANSACTIONS,THAT ALL THE TRANSACTIONS WERE ROUTED THROUGH BANKING CHANNELS,T HAT IT HAD REPAID THE PRINCIPLE AMOUNT OF FUNDS BORROWED FROM TIME TO TIME,THAT IT HAD PRODUC ED THE NECESSARY DOCUMENTARY EVIDENCES IN SUPPORT OF THE CLAIM,THAT THE DISCOUNTING CHARGES W ERE IN NATURE OF INTEREST PAID ON MONIES BORROWED,THAT SAME HAD TO BE ALLOWED AS A DEDUCTION U/S.36(1)(III)OF THE ACT, THAT THE FACTS IN THE PRESENT APPEA1 WERE IDENTICAL TO THE CASE OF M/ S. DELTA INTERNATIONAL,THAT UNDER IDENTICAL CIRCUMSTANCES DISALLOWANCE OF DISCOUNTING CHARGES/FINANCE CHARGES HAD BEEN DELETED IN GROUP CASES BY THE FAA.AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT THAT THE ISSUE FOR THE APPEAL UNDER CONSIDERATION WAS IDENTICAL TO THE FACTS OF THE CASE OF M/S.DELTA INTERNATIONAL-A GROUP CONCERN, THAT WHILE DECIDING THE APPEAL OF THAT ASSESSEE FOR THE AY.1996-97THE DISALLO - WANCE OF DISCOUNTING CHARGES WAS DELETED.FOLLOWING THE SAME,THE FAA ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. AUTHORISED REPRESENTATIVE (AR)STATED THAT IN THE CA SE OF DELTA INTERNATIONAL AND EAST WEST CORPORATION AND OTHER GROUP CONCERNS THE TRIBUNAL H AD DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEES.HE REFERRED TO THE ORDERS OF THE TRIBUNAL DELIVERED ON 25.09.2013, 24.07.2013 (ITA/5340 & OTHERS/MUM/2011-AY.1997-98 AND OTHERS.- PAPER BOOK PG.6-12.) 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF DISCOUNTING CHARGES HAVE BEEN EXTENSIVELY DELIBERATED UPON BY THE TRIBUNAL IN THE GROUP CASES AND IT HAD DISMISSED THE APPEALS FILED BY THE AO.S FOR THE AY.1997-98.WE WOULD LIKE TO REPRODUCE THE DECISIONS OF DELTA INTERNATIONAL,DEL IVERED BY THE TRIBUNAL ON 25.09.2013(SUPRA) AND IT READS AS UNDER: GROUND NOS. I TO 3 RELATE TO DISALLOWANCE OF DISCO UNTING CHARGES/ INTEREST OF RS. 46, 32, 752.BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED, MAKING ADDITION, INTER-ALIA, OF RS.46,32,752/- ON ACCOUNT OF DISCOUNTING CHARGES/INTEREST.WHEN THE MATTER FIN ALLY CAME UP BEFORE THE TRIBUNAL, THE TRIBUNAL VIDE ORDE R DATED 28.11.2006 PASSED IN ITA NO.639/M12004 RESTORED THE ISSUE TO THE FILE OF A.O. WITH A DIREC TION TO EXAMINE AS TO WHETHER SUCH DISCOUNT/INTERES T WAS INCURRED BY THE ASSESSEE IN CARRYING ON OF ITS BUSI NESS. THIS ORDER WAS PASSED BY THE TRIBUNAL BY FOLLOWING ANOTHER ORDER BY THE TRIBUNAL IN THE CASE OF ANOTHER GROUP CONCERN OF THE ASSESSEE THE'FELLOWSHIP CORPORATION VS.JCIT[ITA NO.4352/MUMI 2001]. PURSUANT TO THE DIRECTION GIVEN BY THE TRIBUNAL, THE ASSESSING OFFICER REPEATED THE ADDITI ON TOWARDS FINANCE CHARGES IN THE PRESENT CASE. THE LEARNED CIT(A), HOWEVER DELETED THE SAID ADDITI ON. THE REVENUE HAS COME UP IN APPEAL AGAINST SUCH DELETION.THE LD. AR HAS BROUGHT TO OUR NOTICE THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED W ITH THE FINDINGS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL G IVEN IN THE OWN CASE OF THE ASSESSEE FOR A.Y.1996-9 7 PASSED IN ITA NO.5028/MUM/2009 VIDE ORDER DT.24.07. 2013. THE OPERATING PART OF THE ORDER,FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: FROM THE BODY OF THE ASSESSMENT ORDER IT CAN BE SE EN THAT THE ASSESSING OFFICER SIMPLY REPEATED THE ASSESSMENT AND FIRST APPELLATE AUTHORITY'S ORDE R WITHOUT DISCUSSING ANYTHING NEW ABOUT THE MATTER ON WHICH THE TRIBUNAL GAVE DIRECTION.HE SIMP LY NOTICED THAT THE ASSESSEE DID NOT PRODUCE ANY ADDITIONAL EVIDENCE TO CO-RELATE THE FINANCING CHARGES WITH THE BUSINESS EXPENDITURE.AS AGAINST THAT, THE LEARNED AR INVITED OUR ATTENTION TOWARDS VARIOUS DETAILS FURNISHED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF SUCH FRESH P ROCEEDINGS. FIRST LETTER OF THE ASSESSEE IN THE FRESH PROCEEDINGS IS DATED 05.09.2006 BY WHICH IT F URNISHED FUND FLOW STATEMENT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR IN QUESTIO N AND FOR THE EARLIER YEAR,DETAILS OF DISCOUNT CHARGES PAID,STATEMENT OF ACCOUNT, PARTIES IN SUPPO RT OF RECEIPT PAYMENT OF DISCOUNTING CHARGES, COPIES OF ACCOUNT OF PARTIES TRACING THE ORIGINAL F UNDS, USER OF FUNDS AND REPAYMENT OF CHARGES WITH DISCOUNTING CHARGES ETC. ANOTHER LETTER WAS FI LED BEFORE THE ASSESSING OFFICER ON ITA/5553/MUM//2009,AY.1998-99-LI 3 24.11.2006 PRODUCING COMPLETE BOOKS OF ACCOUNT, DET AILS OF FINANCE CHARGES PAID WITH BIFURCATION OF PARTIES AND RATE OF INTEREST AND A C OPY OF ASSESSMENT ORDER PASSED BY THE A.O. FOR THE PRECEDING YEAR IN WHICH SIMILAR DEDUCTION WAS ALLOWED.THE PRESENT ASSESSMENT ORDER WAS PASSED BY THE AO ON 18.12.2006 AFTER FILING OF THE ABOVE REFERRED DOCUMENTS BY THE ASSESSEE.IT IS SURPRISING THAT THE ASSESSING OFFICE R DID NOT MAKE A WHISPER, IN THE ASSESSMENT ORDER OF SUCH DETAILS HAVING BEEN FILED BY THE ASSESSEE WHAT TO TALK OF ADVERSELY COMMENTING ,THE A.0.EVEN DID NOT BOTHER TO INCORPOR ATE OR DISCUSS SUCH FACTS IN THE ASSESSMENT ORDER. THIS FACT HAS BEEN ELABORATELY CONSIDERED BY THE LEARNED CIT(A), THE DISCUSSION ON WHICH HAS BEEN MADE IN PAR AS 1.10 TO 1.14 OF THE IMPUGNE D ORDER. ON THE APPRECIATION OF THE ENTIRE MATERIAL /EVIDENCE PLACED BY THE ASSESSEE BEFORE TH E A.O. IN THE FRESH ROUND OF PROCEEDINGS,THE LEARNED CIT(A) HAS RECORDED A CATEGORICAL FINDING T HAT THESE EXPENSES WERE INCURRED DURING THE COURSE OF BUSINESS. APART FROM RELYING ON THE ASSES SMENT ORDER, THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FINDINGS GI VEN BY THE LEARNED CIT(A)IN SUPPORT OF THE GRANT OF DEDUCTION. WE, THEREFORE, UPHOLD THE IMPUG NED ORDER IN DELETING THE SAID ADDITION.' 3.LD. D.R. HAS NOT BROUGHT BEFORE US ANY DISTINGUIS HABLE FACT WHICH MAY JUSTIFY DEPARTURE FROM THE FLNDINGS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL G IVEN FOR THE PRECEDING YEAR BASED ON SIMILAR FACTS AND CIRCUMSTANCES. SO RESPECTFULLY FOLLOWING THE FI NDINGS OF THE CO ORDINATE BENCH OF THE TRIBUNAL FOR THE EARLIER YEAR, THE ISSUE IS DECIDED AGAINST THE REVE NUE AND THE ORDER OF THE ID. CIT(A) DELET I NG THE DISALLOWANCE RELATING TO THE ISSUE IS UPHELD. AS THE FACTS OF THE CASE UNDER APPEAL AND THAT OF D ELTA INTERNATIONAL ARE IDENTICAL,THEREFORE, RESPECTFULLY,FOLLOWING IT WE ARE UPHOLDING THE ORDE R OF THE FAA.EFFECTIVE GROUND OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STAN DS DISMISSED. 9*: ! )* + ; < ' 6 ! = ' * >?. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH ,APRIL,2015. 7 ' ,-' A B! 9 %?,2015 - ' 6 E SD/- SD/- ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, B! /DATE:09.04.2015 SK 7 7 7 7 ' '' ' %*F %*F %*F %*F GF'* GF'* GF'* GF'* / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ H I , 4. THE CONCERNED CIT / H I 5. DR A BENCH, ITAT, MUMBAI / FJ6 %*! , , . . . 6. GUARD FILE/ 6 9 &F* %* //TRUE COPY// 7! / BY ORDER, K / > DY./ASST. REGISTRAR , /ITAT, MUMBAI.