M/S.RICH PRINTS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER -13(3)(2), MUMBAI

ITA 5810/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6973 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M ANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 5810 / MUM/2017 ( ASSESSMENT YEAR : 20 13 1 4 ) M/S. RICH PRINTS PVT. LTD. 416, DIAMOND INDUSTRIAL ESTATE DAHISAR (EAST), MUMBAI 400 001 PAN AAECR7205D . APPELLANT V/S INCOME TAX OFFICER WARD 13(3)(2), MUMBAI . RESPONDENT ASSESSEE BY : NONE REVENUE BY : MS. N. HEMALATHA DATE OF HEARING 21 .0 5 .2018 DATE OF ORDER 23.05.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 1 ST JUNE 2017 , PASSED BY THE L EARNED COMMISSIONER (APPEALS) 21 , MUMBAI, FOR THE ASSESSMENT YEAR 20 13 14 . 2 . WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT FOR THE ASSESSEE DESPITE SERVICE OF HEARING NOTICE ISSUED THROUGH RPAD WHICH IS EVIDENT FROM THE POSTAL ACKNOWLEDGMENT KEPT ON RECORD. IN VIEW OF THE ABOVE, WE PROCEED TO DISPOSE OFF THE APPEAL EX PARTE QUA 2 M/S. RICH PRINTS PVT. LTD. THE ASSESSEE AFTER HEARING THE LEARN ED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL ON RECORD. 3 . THE ONLY DISPUTED ISSUE IN THE PRESENT APPEAL IS RELATING TO ADDITION OF ` 41,80,326, ON ACCOUNT OF INTEREST EARNED ON FIXED DEPOSITS. 4 . BRIEF FACTS ARE, THE ASSESSEE A COMPANY IS ENGA GED IN THE BUSINESS AND MANUFACTURING ACTIVITY OF VARIOUS TYPES OF PRINTERS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 9 TH DECEMBER 2013, DECLARING NIL INCOME BOTH UNDER THE NORMAL PROVISIONS AS WELL AS UNDER SECTION 115 JB OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). DURING THE ASSESSMENT PROCEEDINGS, ON THE BASIS OF AIR DATA, THE ASSESSING OFFICER FOUND THAT ASSESSEE HAS RECEIVED INTEREST INCOME OF ` 41,80,326, WHICH WAS NOT OFFERED TO TAX. WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN THE REASON FOR NOT OFFERING THE INTEREST INCOME, IT WAS SUBMITTED BY THE ASSESSEE THAT THE INTEREST RECEIVED DURING THE YEAR ALONG WITH OTHER INCOME WAS DEDUCTED FROM TOTAL EXPENDITURE AND ONL Y THE NET EXPENDITURE WAS CAPITALI Z ED. THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSI ONS OF THE ASSESSEE. HE OBSERVED , THE ASSESSEE HAS RECEIVED INTEREST ON FIXED DEPOSIT ON WHICH TAX HAS BEEN DEDUCTED AT SOURCE. THE ASSESSEE HAS ALSO CLAIMED CRE DIT OF TDS IN THE RETURN OF INCOME. THEREFORE, THE 3 M/S. RICH PRINTS PVT. LTD. INTEREST INCOME RECEIVED HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND ADDED BACK TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT. BEING AGGRIEVE D WITH THE AFORESAID ADDITION, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5 . AT THE TIME OF HEARING OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY IT WAS SUBMITTED BY THE ASSESSEE THAT THE FIXED DEPOSITS GIVING RISE TO THE INTEREST I NCOME WERE KEPT TOWARDS MARGIN MONEY AGAINST THE LOANS BORROWED FROM THE BANK. THEREFORE, IT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES , BUT , HAS TO BE REDUCED FROM THE EXPENDI TURE INCURRED AND CAPITALIZED. LEARNED COMMISSIONER (APPEALS), HOWEVER, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE. RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICAL AND FERTILIZERS LTD. V/S CIT, [1997] 227 ITR 172 (SC) HE UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOING SO, HE ALSO OBSERVED THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE FIXED DEPOSITS WERE IN RESPECT OF MARGIN MONEY AGAINST THE BORROWINGS. 6 . WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN, THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE ADDITION OF INTEREST INCOME 4 M/S. RICH PRINTS PVT. LTD. RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICAL AND FERTILIZERS LTD. (SUPRA). I N THE SAID CASE, THE HON'BLE SUPREME COURT WAS CALLED UPON TO DECIDE THE NATURE OF RECEIPT PERTAINING TO INTEREST EARNED ON DEPOSIT OF SURPLUS FUND S PRIOR TO COMMENCEMENT OF BUSINESS. HOWEVER, IN THE PRESENT CASE, IT IS THE CLAIM OF THE ASSESSEE THAT THE FIXED DEPOSITS ON WHICH IT HAS EARNED THE INTEREST INCOME ARE KEPT AS MARGIN MONEY AGAINST BORROWINGS MADE. IT WAS FURTHER CLAIMED THAT SINCE THE BUS INESS HAS NOT COMMENCED, THE ASSESSEE HAS REDUCED THE INTEREST INCOME FROM TOTAL EXPENDITURE AND ONLY NET EXPENDITURE HAS BEEN CAPITALIZED. THUS, IF THE AFORESAID CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT, THE RATIO LAID DOWN IN CASE OF TUTICORIN ALKALI CHEMICAL AND FERTILIZERS LTD. (SUPRA) MAY NOT BE APPLICABLE. HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS OBSERVED THAT ASSESSEES CLAIM THAT THE FIXED DEPOSITS WERE TOWARDS MARGIN MONEY KEPT AGAINST BORROWINGS WERE NOT ESTABLISHED THROUGH DOCUMENTARY EVID ENCES. IN VIEW OF SUCH FINDING OF THE LEARNED COMMISSIONER (APPEALS), ONUS IS ON THE ASSESSEE TO ESTABLISH ON RECORD THROUGH PROPER DOCUMENTARY EVIDENCE THAT FIXED DEPOSITS ON WHICH IT HAS EARNED INTEREST INCOME ARE TOWARDS MARGIN MONEY KEPT AGAINST THE BO RROWINGS MADE. SINCE , THE ASSESSEE HAS NOT ESTABLISHED THIS FACT EITHER BEFORE THE DEPARTMENTAL AUTHORITIES OR BEFORE US, WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO 5 M/S. RICH PRINTS PVT. LTD. ADJUDICATION KEEPING IN VEW THE FACTS AND MATERIALS ON RECOR D AS WELL AS RELEVANT CASE LAWS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF BOKARO STEELS V/S CIT, 236 ITR 315 (SC). NEEDLESS TO SAY, THE ASSESSING OFFICER MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS RAISED ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 23.05.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI