ITO 19(2)-1, MUMBAI V. ALPHA CORPORATION ( NOW KNOWN AS M/S. NOVAMED PHARMACEUTICALS P.LTD), MUMBAI

ITA 5947/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-05-2013
• Assessment Year: 1997-1998
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIRAJ VYAS
• Keywords: Business expenditure; Additional evidence; Revenue expenditure
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKA RA RAO, AM ' ./I.T.A. NO.5947/M/2011 (AY: 1997-1998) ' ./I.T.A. NO.5948/M/2011 (AY: 1997-1998) ITO - 19(2)(1), R.NO. 312, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. M/S. ALPHA CORPORATION, ( NOW KNOWN AS M/S. NOVAMED PHARMACEUTICALS PVT. LTD), 159, CST ROAD, KALINA, SANTACRUZ(E), MUMBAI 400 098. PAN:AAAFA 5724 H ( %& /APPELLANT) .. ( '(%& / RESPONDENT) %& ) * ' / APPELLANT BY : SHRI MANOJ KUMAR, DR '(%& ) * ' / RESPONDENT BY : SHRI NIRAJ VYAS ' + ) ,! /DATE OF HEARING : 7.5.2013 -./ ) ,! /DATE OF PRONOUNCEMENT : 15.5.2013 #0 #0 #0 #0 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND BOTH THE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A)-35, MUMBAI COMMONLY DATED 29.6.2011 FOR THE SAME ASSESSMENT YEAR 1997-1998. FOR THE SAKE O F CONVENIENCE, BOTH THE APPEALS (ON QUANTUM AND THE CONCEALMENT PENALTY) ARE CLUBBE D AND BEING ADJUDICATED IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE AD JUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. ITA NO.5948/M/2011 REVENUES APPEAL ON QUANTUM ADDITION 2. FIRSTLY, WE SHALL TAKE UP ITA NO.5948/M/2011 AND THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 18,20,387/- ON ACC OUNT OF INTEREST ON CALL MONEY MADE BY ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO PRODUCE THE DETAILS AND JUS TIFICATION ALONG WITH SUPPORTING 2 DOCUMENTARY EVIDENCES WHICH WERE NOT PRODUCED AT TH E TIME OF ORIGINAL ASSESSMENT AS WELL AS THE TIME OF FRESH ASSESSMENT. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE LOSS OF RS. 39,24,980/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING THE TOTAL LOSS AT RS. 16,26,597/-. THERE WAS AN ISSUE OF ALLOWABILITY OF INTEREST PAID ON CALL MONEY OF RS. 18,20,387/-. FOR WANT OF DETAILS, AO DISALLOWED THE CLAIM OF THE ASSESSEE. THE MATTE R TRAVELLED UP TO THE ITAT AND THE D BENCH, ITAT, MUMBAI SET ASIDE THE ISSUE TO THE AO VIDE THE APPEAL ITA NO.409/M/2004, DATED 15.12.2006. IN THE SET ASIDE PROCEEDINGS, ASSESSEE SUBMITTED REQUISITE DETAILS AND DEMONSTRATED THAT THE INTERES T WAS PAID IN THE COURSE OF THE BUSINESS ACTIVITIES OF THE ASSESSEE AND PLEADED THA T THE EXPENDITURE IS ALLOWABLE AS DEDUCTION. HOWEVER, AO DID NOT APPRECIATE THE SUBMI SSIONS OF THE ASSESSEE AND REPEATED THE ADDITION ORIGINALLY MADE IN THE ASSESS MENT. THE REASONS GIVEN BY THE AO ARE VERY CRYPTIC AND THE SAME IS EVIDENT FROM TH E RELEVANT PARAGRAPHS IMPORTED HERE AS UNDER: AS THE ASSESSEE HAS NOT PRODUCED ANY ADDITIONAL EVIDENCE AS REFERRED ABOVE IN VIEW OF THE DETAILED REASONING GIVEN BY THE THEN AO IN ORIGINAL ASSESSMENT ORDER, AND SUBSEQUENTLY UPHELD BY THE LD CIT (A). I HAVE NO REASON TO DEVIATE THE STAND TAKEN BY THE THEN AO IN THE ORIGINAL ORDER. HENCE, ASSES SEES CLAIM OF INTEREST ON CALL MONEY FOR RS. 18,20,387/- IS REJECTED. 3.1. AGGRIEVED WITH THE ABOVE, ASSESSEE FILED AN AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE CIT (A) IN THE SECOND ROUND, ASSESSEE SUBMITTED THAT THE IMPUGNED INTEREST EXPENDITURE OF RS. 18,20,387/- WAS PAID ON UNPAID CALL MONEY, WHICH IS INCIDENTAL TO THE BUSIN ESS ACTIVITY OF THE ASSESSEE. THEREFORE, THE CLAIM IS ALLOWABLE U/S 36(1)(III) OF THE ACT. THESE EXPENSES ARE INCIDENTAL TO THE SHARES, WHICH WERE UNDISPUTEDLY HELD BY THE ASSESSEE AS STOCK- IN-TRADE . FURTHER, ASSESSEE SUBMITTED THAT THE SAID INTERE ST AMOUNT WAS PAID INVOLVING THREE PARTIES NAMELY (I) SOMANI SWISS IND USTRIES LTD (RS.5,46,033/-); (II) SAMTEL ELECTRONICS (RS. 9,68,804/-) AND (III) H.B. PORTFOLIO (RS. 3,05,550/-). HE ALSO SUBMITTED THAT INTEREST PAYMENTS ON UNPAID CALL MON EY IS ALLOWABLE IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF SMT. NIRMALA M. DOSHI VS . CIT (82 ITR 648) (BOM) AND RELEVANT PORTIONS ARE EX TRACTED BY THE CIT (A) IN PARA 5.1 3 OF THE IMPUGNED ORDER. ON CONSIDERING THE ABOVE SU BMISSIONS AS WELL AS THE LEGAL PROPOSITIONS, THE CIT (A) CAME TO THE CONCLUSION TH AT THE AO HAS NOT APPLIED HIS MIND TO THE DOCUMENTS / ADDITIONAL EVIDENCES ALREADY FU RNISHED BY THE ASSESSEE AND MECHANICALLY REPEATED THE ADDITION. CONSIDERING THE ADDITIONAL EVIDENCES AND CRYPTIC IN NATURE OF THE FINDING OF THE AO, THE CIT (A) REJ ECTED THE ADDITION MADE BY THE AO AND DELETED THE SAME CONSIDERING THE FACTS AND EVID ENCES AND ALSO THE LEGAL PROPOSITION SET IN THE CITED DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF SMT. NIRMALA M. DOSHI VS. CIT (SUPRA). PARA 5.2 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. 4.1. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT ( A), REVENUE IS IN APPEAL NOW BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED O N THE ORDER OF THE AO AND THE GROUND RAISED BEFORE US. HE ARGUED STATING THAT THE ASSESSEE FAILED TO PRODUCE THE DETAILS AND JUSTIFICATION FOR ALLOWING THAT THE INT EREST CLAIMS AMOUNTING TO RS. 18,20,387/-. 6. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE M ENTIONED THAT THE IT IS THE SECOND ROUND OF THE PROCEEDINGS BEFORE THE TRIBUNAL . THE ORDER OF THE AO IN THE SECOND ROUND BEFORE HIM IS TOTALLY BIASED AND THE A O FAILED TO APPLY HIM MIND TO THE ISSUE AND THE PAPERS FILED BEFORE HIM. IN THIS REGA RD, ON THE ISSUES OF THE DETAILS FURNISHED BEFORE THEM, LD COUNSEL READ OUT THE RELE VANT PARA 5.1 FROM THE ORDER OF THE CIT (A) IN GENERAL AND CITED JURISDICTIONAL HIG H COURT JUDGMENT IN THE CASE OF SMT. NIRMALA M. DOSHI VS. CIT (SUPRA) IN PARTICULAR. HE ALSO READ OUT PARA 5.2 OF THE IMPUGNED ORDER AND MENTIONED THAT CIT (A) GRANTED R ELIEF TO THE ASSESSEE ON THE FACT THAT AO HAS NOT APPRECIATED THE SUPPORTING DOCUMENT S / ADDITIONAL EVIDENCES, ALREADY FURNISHED BEFORE THE AO / CIT (A). FURTHER, LD COUN SEL MENTIONED THAT THE AO HAS NOT DOUBTED THE GENUINENESS OF THE PAYMENT OF THE EXPEN DITURE. THUS, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ORDER OF THE CIT(A) DOE S NOT REQUIRE ANY INTERFERENCE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDER OF THE REVENUE AS WELL AS THE CONTENTS OF PARA 5.2 OF THE IMPUGNED ORDER. IT IS EVIDENT FROM THE DOCUMENTS 4 PLACE BEFORE US THAT THE INTEREST ON CALL MONEY IS A GENUINE PAYMENT UNDISPUTEDLY. BUSINESS NATURE OF THE EXPENDITURE WAS ALSO NOT DOU BTED WITH ANY EVIDENCE IN HIS HAND. AO DISALLOWED THE CLAIM MERELY BECAUSE OF HIS FAILURE TO APPLY HIS MIND TO THE DOCUMENTS PLACED BEFORE HIM. LEGALLY, WE FIND THE CLAIM OF THE ASSESSEE IS ALLOWABLE IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT, RELIED UPON BY THE ASSESSEE. FURTHER, WE HAVE EXAMINED THE CONTENTS OF THE PARA 5.2 OF THE IMPUGNED ORDER OF THE CIT(A) AND FIND THE SAME IS IMPORTANT AND HENCE, IT IS REPRODUCED AS UNDER: 5.2. I HAVE PERUSED THE SUBMISSIONS OF THE APPELLAN T ON THIS GROUND AND THE IMPUGNED ORDER OF AO. THE APPELLANT SUBMITTED THE D ETAILS OF INTEREST PAID ON CALL MONEY BY LETTER DATED 09.10.2007 BEFORE THE AO AS S HOWN BELOW: SOMANI SWISS INDUSTRIES LTD. -- RS. 5,46,033/- SAMTEL ELECTRONICS -- RS. 9,68,804/- H.B. PORTFOLIO -- RS. 3,05,550/- IT IS FURTHER SEEN THAT THE CIT (A) WHILE DECIDING THE APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDER HELD THAT THE APPELLANT FILED DETA ILS ALONG WITH SUPPORTING DOCUMENTS BUT CONFIRMED THE ADDITION ONLY ON THE GROUND THAT THE SAME WAS HIT BY 46A. IN THE CIRCUMSTANCES WHEN THE HONBLE TRIBUNAL SET-ASIDE T HE ISSUE TO THE FILE OF THE AO, HE OUGHT TO HAVE EXAMINED THE ADDITIONAL EVIDENCES WHEREAS HE REPRODUCED THE ORDER OF CIT (A) AND REPEATED THE SAME ADDITION WIT HOUT APPLICATION OF MIND. I FIND THAT THE APPELLANT HAS FILED THE DETAILS BEFORE THE AO O N WHICH NO COMMENTS HAVE BEEN MADE BY THE AO. FURTHER, AS CONTENDED BY THE REPRE SENTATIVE THE INTEREST ON CALL MONEY WAS PAID IN RESPECT OF SHARES HELD AS STOCK-I N-TRADE AND, THEREFORE, ALLOWABLE AS BUSINESS EXPENDITURE. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS. 18,20,387/-. 7.1. THE PERUSAL OF THE CITED DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF SMT. NIRMALA M. DOSHI VS. CIT (SUPRA) REVEALED THAT THE CLAIM OF ASSESSEE IS CERTAINLY ALLOWABLE IN FAVOUR OF THE ASSESSEE. THE SAID JUDG MENT IS RELEVANT FOR THE PROPOSITION THAT THE PAYMENT OF INTEREST ON THE AMOUNTS OF THE CALL MONE Y STANDS IN THE SAME FOOTING AS PAYMENT OF LIKE INTEREST IN THE SAM E AMOUNT, THEREFORE, SUCH INTEREST CONSTITUTES REVENUE EXPENDITURE. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) IS REA SONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE R EVENUE ARE DISMISSED . 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 5 I.T.A. NO.5947/M/2011 (AY: 1997-1998) PENALTY U/S 271(1)(C) OF THE ACT 9. THIS APPEAL FILED BY THE REVENUE ON 25.8.2011 IS AGAINST THE ORDER OF CIT (A)- 35, MUMBAI DATED 29.6.2011 FOR THE AY 1997-98 AND I T RELATES TO THE PENALTY U/S 271(1)(C) OF THE ACT. IN THIS APPEAL, REVENUE RAIS ED THE FOLLOWING GROUND WHICH READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) HAS ERRED IN CANCELLING THE PENALTY OF RS. 14,56,310/- LEVIED U/S 271(1)(C) OF THE ACT, JUST BECAUSE OF DELETING THE QUANTUM OF ADDITI ONS MADE IN THE ORDER U/S 143(3) R.W.S 254 OF THE ACT BY THE LD CIT (A) IGNORING THE FACT THAT THE IMPUGNED ORDER OF THE LD CIT (A) HAS BEEN CHALLENGED BEFORE THE ITAT. 10. ON PERUSAL OF THE ORDERS OF THE AO AND THE CIT( A), IT IS EVIDENT THAT THE IMPUGNED PENALTY OF RS 14,56,310/- IS DIRECTLY INCIDENTAL TO THE ADDITION ON ACCOUNT OF INTERST PAID ON CALL MONEY. THIS ISSUE WAS ALREADY DISCUSSED AND AD JUDICATED WHILE DEALING WITH THE APPEAL ITA NO.5948/M/2011. WE HAVE HELD THAT THE ADDITION ON ACCOUNT OF INTEREST PAID ON CALL MONEY IS UNCALLED FOR AND THEREFORE WE CONFIR MED THE ORDER THE CIT(A) ON MERITS. THE PRESENT APPEAL UNDISPUTEDLY RELATES TO THE ISSU E OF LEVY OF CONCEALMENT PENALTY U/S 271(1)(C) OF THE ACT ON THE SAID DISALLOWANCE O F INTEREST PAID, WHICH NOW STANDS DELETED. IT IS A TRITE LAW THAT WHEN THE QUANTUM OF ADDITIONS MADE BY THE AO WERE DELETED, THE RELATED PENALTY LEVIED U/S 271(1)(C) O F THE ACT DOES NOT SURVIVE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED . 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 1 ,2 3$ ) !13 ) 3, 45 ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. . #0 ) -./ ! 6#+2 15.5.2013 . ) 7 SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBAI MUMBAI; 6#+ DATED 15/05/2013 6 . 8+ . ' ./ OKK , SR. PS #0 #0 #0 #0 ) )) ) '8,9: '8,9: '8,9: '8,9: ;:/, ;:/, ;:/, ;:/, / COPY OF THE ORDER FORWARDED TO : 1. %& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. :=7 '8,8+ , , / DR, ITAT, MUMBAI 6. 7 > / GUARD FILE. '(:, '8, //TRUE COPY// #0+ ' #0+ ' #0+ ' #0+ ' / BY ORDER, ? ?? ? / '4 '4 '4 '4 3 3 3 3 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI @