Pushp Steels & Mining (P) Ltd., Delhi V. ITO, Ward- 20(2), New Delhi

ITA 6095/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4065 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL; SULEKHA VERMA
• Keywords: Business income; Business expenditure; Period of limitation; Deemed dividend; Time period of passing order
• Section: 6; 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6095/DEL/2018 ASSESSMENT YEAR : 2013-14 PUSHP STEELS & MINING (P) LTD. 751, KUNDEWALAN STREET, AJMERI GATE, DELHI 110 006 (PAN: AADCP2925K) VS. ITO, WARD 20(2), NEW DELHI (ASSESSEE) ( RESPONDENT) ASSESSEE BY : SH. SURESH KUMAR GUPTA, CA DEPARTMENT BY : SMT. SULEKHA VERMA, CIT(DR) & SH. SURENDER PAL, SR. DR. ORDER PER H.S. SIDHU, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-7, NEW DELHI ON 12.09.2018 IN REL ATION TO THE ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS:- I) THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN CONFIRMING THE ADDITION OF RS. 2,05,72,944/- U/S. 2(22)(E) OF THE I.T. ACT CONSIDERING THE ADVANCE FROM THE SUBSIDIARY 2 COMPANY AS DEEMED DIVIDEND AND GIVING A FINDING THAT IN THE ABSENCE OF ANY MINING LEASE IN HAND, THERE WAS NO ELEMENT OF BUSINESS EXIGENCY OF EXECUTING A AGREEMENT FOR SUPPLY OF IRON ORE IGNORING THE FACT THAT THE ASSESSEE HAD OBTAINED ALL STATUTORY CLEARANCE FOR MINING OF IRON ORE IN CHATTISGARH WHERE THE SUBSIDIARY COMPANY HAD ITS SPONGE IRON PLANT REQUIRING SUPPLY OF IRON ORE AS CORE RAW MATERIAL. II) THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATING THE LE GAL GROUND CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSMENT ORDER HAS BEEN PASSED BEYOND THE LIMITATION PERIOD PRESCRIBED U/S. 153(1) OF I.T. ACT IGNORING THE EVIDENCES IN FORM OF TRACK REPORT OF THE DISPATCH OF ASSESSMENT ORDER SHOWING DATE OF DISPATCH 01.04.2016 AT 11.45 AM WHICH IS BEYOND THE LIMITATION DATE OF 31.03.2016. III) THE ASSESSEE CRAVES LEAVE TO ADD, DELETE, MODIFY / AMEND THE GROUNDS OF APPEAL WITH THE PERMISSION OF THE HONBLE APPELLATE AUTHORITY. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS E-RE TURN OF INCOME ON 15.9.2013 FOR THE AY 2013-14 DECLARING INCOME OF RS. 5 ,06,354/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE AO HAS PASSED THE ORDER U/S. 3 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) ON 30.3.2016, ASSESSING THE INCOME AT RS. 2,32,23,970/- AFTER TREATING THE INTEREST INCOME OF RS. 21,44,669/- AS INCOME FROM OTHER SOURCES AND NOT B USINESS INCOME AND DISALLOWED RS. 2,05,72,944/- U/S. 2(22)(E) OF THE ACT ON ACCOUNT OF DEEMED DIVIDEND VIDE HIS ASSESSMENT ORDER DATED 30.3.201 6 PASSED U/S. 143(3) OF THE ACT. 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER DATED 3 0.3.2016, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IM PUGNED ORDER DATED 12.9.2018 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . 4. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT ASSESSEE COMPANY IS A SUBSTANTIAL SHAREHOLDER IN SUBSIDIARY COMPA NY NAMELY M/S INDIAN STEEL AND POWER PVT. LTD. (ISPPL) HOLDING 70 .12% SHARES IN THE SAID COMPANY AS ON 31.03.2012 AND ONWARDS. IT WAS SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RECEIVED TRADE ADVANCE OF RS.2,40,00,000/- ON 08.06.2012 FROM ISPPL PURSUANT TO AGREEMENT EXECUTED BETWEEN BOTH THE ABOVE TWO COMPANIES ON 30.04 .2012. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAS RECORDED RS. 16,920/- ON VARIOUS DATES AS BEING MISCELLANEOUS BUSINESS EXPENSES INCURRE D BY ISPPL ON BEHALF OF ASSESSEE COMPANY TOWARDS EXECUTION OF THE ABO VE AGREEMENT. IT WAS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSE E THAT AO WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSEE COMPANY TREAT ED THE ABOVE AMOUNTS I.E. RS.2,40,16,920/- (RS.2,40,00,000/- PLUS RS. 16,920) AS DEEMED 4 DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY AS THE ASSESSEE IS SUBSTANTIAL SHAREHOLDER IN THE SUBSIDIARY COMPANY. IT WA S FURTHER SUBMITTED THAT THE AO WHILE TREATING THE ABOVE AMOUNT OF RS.2, 40,16,920/- AS DEEMED DIVIDEND HAS RESTRICTED THE ADDITION TO RS.2,05,72,944/ - I.E. ACCUMULATED PROFITS OF THE ISPPL TILL END OF THE FINANCIAL YEAR R ELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE BEING AGGRIEVED WI TH ABOVE ADDITION VEHEMENTLY CONTESTED THAT THE AO HAS MADE THE ABOVE IM PUGNED ADDITION OF RS.2,05,72,944/- WITHOUT PROVIDING ANY OPPORTUNITY T O ASSESSEE COMPANY AS THE AO HAS NEVER SHOW CAUSED THE ASSESSEE COMPANY TO EXPL AIN WHY SUCH ADDITION BE MADE IN THE HANDS OF THE ASSESSEE. HE FURTHE R SUBMITTED THAT LD. CIT(A) IN HIS ORDER VIDE PARA NO. 6.9 HAS HELD THAT THE AGREEMENT HAS NO BASIS, WITHOUT CONDUCTING ANY INQUIRY ON THIS ASPECT. IN VIEW OF ABOVE, IT IS PRAYED THAT THE EVIDENCE I.E. AGREEMENT EXECUTED BETW EEN ASSESSEE COMPANY AND ISPPL DATED 30.04.2012 PLACED HERE IN THE PRESENT APPEAL PROCEEDINGS BE KINDLY BE ADMITTED AS ADDITIONAL EVIDEN CE UNDER RULE 46A OF IT RULES 1962 FOR WHICH A SEPARATE APPLICATION IS FILED AND DECIDE THE ISSUES IN DISPUTE ACCORDINGLY. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT BOTH THE LOWER AUTHORITIES HAVE PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE. BUT COULD NOT CONTROVERT THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT AS TO WHY THE AO HAS NOT ISSUED SHOW CAUSE TO THE ASSESSEE AND PROVIDE AN OPPOR TUNITY TO 5 SUBSTANTIATE THE CLAIM AND SIMILARLY, WHY THE LD. CIT(A ) HAS ALSO NOT CONDUCTED ANY INQUIRY AND HELD THAT AGREEMENT HAS NO B ASIS. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT ASSESSEE COMP ANY IS A SUBSTANTIAL SHAREHOLDER IN SUBSIDIARY COMPANY NAMELY M/ S INDIAN STEEL & POWER PVT LTD HOLDING 70.12% SHARES IN THE SAID COMPANY AS ON 31.03.2012 AND ONWARDS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RECEIVED TRADE ADVANCE OF RS.2,40,00,000/- ON 08.06 .2012 FROM ISPPL PURSUANT TO AGREEMENT EXECUTED BETWEEN BOTH THE ABOV E TWO COMPANIES ON 30.04.2012. FURTHER, THE ASSESSEE COMPANY HAS RECORDED RS.1 6,920/- ON VARIOUS DATED AS BEING MISCELLANEOUS BUSINESS EXPENSES INCURRE D BY ISPPL ON BEHALF OF ASSESSEE COMPANY TOWARDS EXECUTION OF THE ABO VE AGREEMENT. IT IS NOTED THAT AO WITHOUT PROVIDING ANY OPPORTUN ITY TO THE ASSESSEE COMPANY TREATED THE ABOVE AMOUNTS I.E. RS.2,40,16,920/ - (RS.2,40,00,000/- PLUS RS.16,920) AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY AS THE ASSESSEE IS SUBSTANTIAL SHAREHOLDER IN THE SUBSIDIARY COMPANY. THE AO WHILE TREATING THE ABOVE AM OUNT OF RS.2,40,16,920/- AS DEEMED DIVIDEND HAS RESTRICTED THE ADDITION TO RS.2,05,72,944/- I.E. ACCUMULATED PROFITS OF THE ISPPL TILL END OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE BEING AGGRIEVED WITH ABOVE ADDITION VEHEMENTLY CONTE STED THAT THE AO HAS MADE THE ABOVE IMPUGNED ADDITION OF RS.2,05,72,944/- WITHOUT PROVIDING 6 ANY OPPORTUNITY TO ASSESSEE COMPANY AS THE AO HAS NEVER SH OW CAUSED THE ASSESSEE COMPANY TO EXPLAIN WHY SUCH ADDITION BE MADE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE CHALLENGES THE ABOVE ADDITION ON THE GROUND THAT THE ABOVE AMOUNT RECEIVED FROM ISPPL IS NOTHING BUT T RADE ADVANCE RECEIVED PURSUANT TO AGREEMENT DATED 30.04.2012 (PAPE R BOOK PAGES 52- 54) EXECUTED BETWEEN THE ABOVE BOTH COMPANIES. THE AGREEME NT BETWEEN BOTH THE PARTIES WAS EXECUTED IN THE NORMAL COURSE OF BU SINESS WITH THE INTENTION ON PART OF THE SUBSIDIARY COMPANY ISPPL TO SE CURE ASSURED AND LONG TERM SUPPLY OF RAW MATERIAL OF IRON ORE FOR ITS SPONGE IRON PLANT BY THE ASSESSEE COMPANY. IT IS RELEVANT TO NOTE THAT THE ASSESSEE CO MPANY HAD OBTAINED ALL STATUTORY CLEARANCES FOR EXECUTION OF MININ G LEASE OF IRON ORE IN FOREST COMPARTMENT NO.355 TO 358, EAST BHANUPRATAPPUR , DISTRICT KANKER, CHATTISGARH AND WAS EXPECTED TO COMMENCE MINING OF 1,00, 000 MT OF IRON ORE IN THE NEXT SIX MONTHS FROM THE DATE OF AGREEMENT I.E. 30.04.2012 WHEREAS THE ISPPL HAS ANNUAL REQUIREMENT OF 60000 MT OF IRON ORE. THEREFORE, BOTH THE PARTIES AGREED TO EXECUTE ABOVE L ONG TERM AGREEMENT WHERE THE ASSESSEE COMPANY WILL SUPPLY 60,000 MT OF IRON ORE ANNUALLY AT THE RATE OF RS.4,000/- MT IN THE STATE OF CHATTISGARH TO ISPPL WHICH AMOUNTS TO TOTAL CONSIDERATION OF RS.24,00,00,000/- (60000 MT PLUS RS.4000/- MT) PER FINANCIAL YEAR. TO EXECUTE THE ABOVE AGREEMENT, THE ISPPL AS PER TERMS AND CONDITION OF THE AGREEMENT HAS GIVEN INTEREST FREE TRADE ADVANCE OF RS.2,40,00,000/- TO ASSESSEE COMPANY AS ADVANCE FOR SUPPLY O F ABOVE IRON 7 ORE WHICH WILL BE ADJUSTED PER MONTH BY RS.10,00,000/ - FROM CONSIDERATION TO BE RECEIVED BY ASSESSEE COMPANY FROM SUPPLY OF IRON OR E TO ISPPL. THE ABOVE TRADE ADVANCE AMOUNTS OF 10% OF THE TOTAL SALES CO NSIDERATION I.E. RS.24,00,00,000/- TO BE RECEIVED BY ASSESSEE COMPANY FROM MAKING SALES OF IRON ORE TO THE ISPPL. THE MINING OF IRON ORE WA S NOT ABLE TO BE COMMENCED BY THE ASSESSEE COMPANY IN THE GIVEN TIME PERIOD IN THE ABOVE AGREEMENT DUE TO SOME REGULATORY HURDLES THEREFORE, T HE AGREEMENT BETWEEN ABOVE PARTIES WAS CANCELLED AND THE AMOUNT OF R S.2,40,16,920/- WAS REPAID BY THE ASSESSEE COMPANY TO ISPPL IN THE SUBSEQUE NT FY 2013-14 BEFORE THE 31.03.2014 AS PER THE TERMS AND CONDITION OF THE AGREEMENT. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT AO HAS NEVER PROVIDED OPPORTUNITY TO ASSESSEE COMPANY TO EXPLAIN HIS CONTENTION BEFORE HIM. WE FURTHER FIND THAT SIMILARLY, LD. CIT(A) VIDE PARA NO . 6.9 HAS OBSERVED AS UNDER:- .6.9 THE CONTENTION THAT IT WAS PART OF BUSINESS ARRANGEMENT IS NOT TENABLE AS IT IS NOT BROUGHT OUT IN ANY POINT OF THE AUDIT REPORT THAT IT WAS ANYTHING OTHER THAN A LOAN OR ADVANCE. ALSO A HYPOTHETICAL BUSINESS ARRANGEMENT IS SOUGHT TO BE CREATED IN ABSENCE OF ANY MINING LICENSE ALSO IN THE HAND OF THE APPELLANT. IT WAS FOR FETCHED AND CONTINGENT TO THE LICENSE BEING GRANTED TO THE APPELLANT, THUS, NO 8 ELEMENT OF BUSINESS EXIGENCY IS BROUGHT IN THE PREVIOUS YEAR. THE AGREEMENT HAS NO BASIS IN THIS REGARD. 6.1 AFTER PERUSING THE AFORESAID OBSERVATION OF THE LD . CIT(A), WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) BEFORE HOLDING T HAT THE AGREEMENT HAS NO BASIS, SHOULD HAVE CONDUCTED THE INQUIRY ON THIS ASPECT AND THEN DECIDE THE ISSUE IN DISPUTE, WHICH HE HAS NOT DONE. IT IS ALSO NOTED THAT THIS AGREEMENT HAS BEEN SUBMITTED BEFORE THE AO OF THE ISP PL IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2013-14 AND THE SAID AO HA S ACCEPTED THE ABOVE AGREEMENT ACCEPTING THE CONTENTION OF THE ISPPL THAT THE ADVANCE MADE TO ASSESSEE COMPANY UNDER THE ABOVE AGREEMENT WAS A TRADE ADVANCE. COPY OF THE ASSESSMENT ORDER PASSED IN THE CASE OF ISPPL IS PLACED IN PAPER BOOK AT PAGES 64-67, BUT COULD NOT PROVIDE A N OPPORTUNITY TO EXPLAIN BY ISSUING ANY SHOW CAUSE NOTICE AS TO WHY SUCH ADDI TION SHOULD NOT BE MADE IN THE HANDS OF THE ASSESSEE. IN VIEW OF ABOV E, WE REMIT BACK THE ISSUE NO. 1 TO THE FILE OF THE AO WITH THE DIRECTI ONS TO GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM, A FTER CONSIDERING ALL THE DOCUMENTS TO BE FILED BY IT INCLUDING THE AGREEME NT DATED 30.4.2012 EXECUTED BETWEEN ASSESSEE COMPANY AND M/S INDIAN STEEL & POWER PVT. LTD. AND DECIDE THE ISSUE IN DISPUTE AFRESH, AS PER LAW. SINCE THE ISSUE ON THE MERIT IS SET ASIDE TO THE FILE OF THE AO FOR FRESH CONSIDERATION, AS AFORESAID, THE OTHER ISSUE RAISED VIDE GROUND NO. 2 NEE D NOT BE ADJUDICATED. 9 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 07-02-2019. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 07-02-2019 SRBHATNAGAR COPY FORWARDED TO: 1. ASSESSEE 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.