ACIT - 23(1), MUMBAI V. Sri. RAPHEAL SEQUEIRA, MUMBAI

ITA 5974/MUM/2006

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9299 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-12-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 13-11-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI SR
• Assessee Lawyers: HARSHAVARDHANA DATAR
• Keywords: Notional interest
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO.5974/M/2006 ASSESSMENT YEAR: 2002-2003 ACIT, CIRCLE-23(1), BLDG. C-10, 1 ST FLOOR, ROOM NO.108, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. VS. SHRI RAPHEAL SEQUEIRA, HANUMAN SILK MILLS COMPOUND, KANJURMARG (E), MUMBAI 400 078. PAN: AADPS4268B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.B. KOLI, SR. AR RESPONDENT BY : SHRI HARSHAVARDHANA DATAR DATE OF HEARING: 5.12.2012 DAT E OF ORDER: 12.12.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A)-XXIII, MUMBAI DATED 25.8.2006 FOR THE ASSESSMENT YEAR 2002 -2003. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF ESIC & PF PAYMENTS MADE OUT OF DUE DATE OF RS. 1,29,303/- IGNORING TH E DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. M/ S. SOUTH INDIA CORPN. LTD 242 ITR 114 WHEREIN IT WAS HELD THAT PAYMENTS M ADE OUT OF DUE DATE ARE NOT ALLOWABLE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD CIT (A) ERRED IN GIVING A FINDING THAT THE ASSESSING OFFICE R MADE AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST WHEN NEITHER THE ASSESSING OFFICER SO INTENDED, NOR HE DID SO. IN FACT THE ASSESSING OFF ICER ONLY ADJUDICATED UPON THE INTEREST ALLOWABLE U/S 36(1)(III). 3. THE ONLY ISSUES RAISED BEFORE US RELATES TO THE ALLOWABILITY OF PAYMENTS MADE ON ACCOUNT OF ESIC & PF AMOUNTING TO RS. 1,29,303/- WHEN THE PAYMENTS ARE MADE WITH THE DELAY OF 2 TO 4 DAYS FOR THE MONTH OF APRI L, JULY AND AUGUST AND 14 DAYS FOR THE MONTH OF SEPTEMBER. IT IS AN UNDISPUTED FACT T HAT THE ASSESSEE MADE THE 2 PAYMENTS BEFORE THE DUE DATE FOR FILING OF THE APPE AL. IN THE ASSESSMENT PROCEEDINGS, AO MADE DISALLOWANCES CONSIDERING THE DELAY REFERRED TO ABOVE AND IGNORING THE CHANGED LEGAL POSITION WITH REFERENCE TO THE PROVISIONS OF SECTION 43B OF THE ACT. THE CIT (A) GRANTED RELIEF FOR THE ASSESS EE CONSIDERING THE FACT THAT THE SAID AMOUNTS WERE PAID BEFORE THE DUE DATE FOR THE FILING OF RETURN OF INCOME. IN THE PROCESS, CIT (A) RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P) LTD. VS.CIT (224 ITR 677) (SC) AN D HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF ESCORTS LTD. VS. UNION OF I NDIA (189 ITR 81) WHEREIN, IT WAS HELD THAT THE PROVISO TO SECTION 43B IS RETROSPECTI VE IN NATURE. RELEVANT DISCUSSION IS GIVEN IN PARA 9 TO 10 OF THE IMPUGNED ORDER. AGGRI EVED WITH THE ABOVE, REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, SHRI HARSHAVARDHANA DATAR, LD COU NSEL FOR THE ASSESSEE FILED A COPY OF THE JUDGMENT OF HONBLE SUPREME COURT IN TH E CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) WHICH IS RE LEVANT FOR THE PROPOSITION THAT WITH THE OMISSION OF SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT, 2003, THE PAYMENTS MADE BEFORE THE DUE DATE FOR FI LING OF THE RETURN, ARE ALLOWABLE VIDE THE PROVISIONS OF THE FIRST PROVISO WHICH IS B ROUGHT INTO THE STATUTE W.E.F. 1 ST APRIL, 1988, I.E. THE DATE OF INSERTION OF FIRST PR OVISO OF SECTION 43B OF THE ACT. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE ALONG WITH THE PAPERS FILED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE MADE THE IMPUGNED PAYMENTS ESIC & PF BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME. IT IS ALSO A SETTLED POSITION VIDE THE APEX COURTS JUDGMENT IN THE CASE OF ALOM EXTRUSIONS LTD, SUPRA , THAT WITH THE DELETION OF THE SECOND PROVISO, THE PAYMENTS MADE BEFORE THE DUE DATE FOR FILING OF THE RETURN, ARE ALLOWABLE VIDE THE FIRST PROVISO WHICH IS BROUGHT INTO THE STATUTE W.E .F. 1 ST APRIL, 1988. CONSIDERING THE ABOVE SETTLED NATURE OF THE MATTER, WE ARE OF THE O PINION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION AS THE IMPUGNED PAYMENTS ON ACCOUNT OF ESIC & PF ARE MADE BEFORE THE FILING OF RETURN OF INCOME. THEREFORE, T HE ORDER OF THE CIT (A) DOES NOT CALL ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED . 3 7. GROUND NO.2 RELATES TO ADDITION OF RS 6,00,050/- . AO ESTIMATED THE SAME ADOPTING 10% ON THE INTEREST-FREE ADVANCES/LOANS OF RS 60,005,000/-GIVEN BY THE ASSESSEE. ASSESSEE INCURRED FINANCIAL CHARGES OF RS 1,06,18,310/- ON THE BORROWED FUNDS AND DEBITED THE SAME TO THE P AND L ACCOUNT. AO IS OF THE OPINION THAT THE ASSESSEE WOULD HAVE SAVED IF THE SAID SUM OF 60,005 ,000/- IS USED FOR CLEARING THE BORROWED FUNDS. CIT(A) DELETED THE SAID NON-EXISTEN T INCOME CONSIDERING THE APEX COURTS JUDGMENTS IN THE CASES OF SHOORJI VALLABHDA S 46ITR 144 AND GODHRA ELECTRICITY CO LTD (225 ITR 746) FOR THE PROPOSITIO N THAT THE TAX ALWAYS CALCULATED ON REAL INCOME AND NOT ON HYPOTHETICAL OR NOTIONAL INC OME. ASSESSEE KNOWS HOW TO RUN HIS BUSINESS. IT IS A FACT THAT THE AO HAS NOT GIVEN REASONS FOR ADOPTING THE FLAT RATE OF 10% FOR CALCULATING THE HYPOTHETICAL INCOME. CIT (A) TOOK THE VIEW THAT THE ASSESSEE KNOWS HOW TO CONDUCT ITS BUSINESS AND THE AO IS NOT JUSTIFIED IN MAKING SUCH ADDITIONS AND THEREFORE, DELETED THE SAME. AT THE OUTSET, LD DR FAIRLY RELIED ON THE ORDER OF THE AO AND DID NOT PRESS THE GROUND 2 CONSIDERING THE INHERENT DEFICIENCIES IN MAKING SUCH ADDITION. 8. ON THE OTHER HAND, LD AR FOR THE ASSESSEE HEAVIL Y RELIED ON THE ORDER OF THE CIT(A) AND RELIED ON THE FINDING GIVEN IN PARAGRAPH S 13 OF THE IMPUGNED ORDER. 9. ON PERUSAL OF THE RELEVANT FACTS, WE FIND THAT T HE ORDER OF THE CIT(A) IS FAIR AND REASONABLE. IN OUR OPINION, THE AO IS NOT JUSTIF IED IN MAKING THIS KIND OF ADDITIONS ON NOTIONAL BASIS WITHOUT HAVING ANY EVID ENCE AT HIS POSSESSION. THEREFORE, CIT(A) IS JUSTIFIED IN DELETING THE ADDI TION RELYING ON THE APEX COURTS JUDGMENTS IN THE CASES OF SHOORJI VALLABHDAS (SUPRA ) AND GODHRA ELECTRICITY CO LTD (SUPRA), WHICH SUPPORT THE ASSESSEE. ACCORDINGLY, T HE GROUND 2 RAISED BY THE REVENUE IS DISMISSED . 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF DECEMBER, 2012. SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) VICE PRESIDENT ACCOUNTANT MEMBER 4 DATE : 12.12.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR D , BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI