EMERGENT MEDI- TECH (INDIA) P. LTD, MUMBAI V. ITO WD10(1)(4), MUMBAI

ITA 6555/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6175 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 28-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: REENA JHA TRIPATHI
• Keywords: Unexplained cash credit
• Section: 68; 263; 144

Judgement Text

1 ITA 6555/M/09, M/S EMERGENT MEDI-TECH (INDIA) P.LT D. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SMT. ASHA VIJAYAR AGHAVAN, JM ITA NO. 6555/MUM/2009 ASSESSMENT YEAR 2006-07 M/S EMERGENT MEDI-TECH (INDIA) PVT. LTD., 118, DAMJI SHAMJI INDUSTRIAL COMPLEX, 9, L.B. S. ROAD, KURLA (WEST), MUMBAI 400 002. PAN AAACE8060B VS. ICOMMISSIONER OF INCOME TAX - 10, MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI VIJAY MEHTA RESPONDENT BY MS. REENA JHA TRIPATHI ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT- 10, MUMBAI, DATED 26.10.09 PASSED U/S 263 OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPAN Y WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.11.06 DECLARING A TOTAL INCOME OF ` 13,00,523/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE FAILED TO FURNISH THE DETAILS REQUIRED BY THE A.O. FOR THE PURPOSE OF ASSESSMENT DESPITE SUFFICIENT OPPORTUNITIES AND THE A.O. THEREFORE PROCEEDED TO COMPLETE THE ASSESS MENT TO THE BEST OF HIS JUDGMENT U/S 144 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT ` 1,15,97,740/- AFTER MAKING ADDITION, INTER ALIA, OF ` 69,21,600/- ON ACCOUNT OF UNSECURED LOAN TREATING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68. THE RECORDS OF THE SAID ASSESS MENT WERE SUBSEQUENTLY EXAMINED BY THE LD. CIT AND ON SUCH EXAMINATION, HE FOUND THAT ALTHOUGH THE AMOUNT OF ` 69,21,600/- 2 ITA 6555/M/09, M/S EMERGENT MEDI-TECH (INDIA) P.LT D. REPRESENTING UNSECURED LOAN WAS ADDED BY THE A.O. U /S 68 TREATING THE SAME AS UNEXPLAINED CASH CREDITS, THE CORRESPONDING INTERES T PAID ON SUCH LOANS AND DEBITED TO THE P&L ACCOUNT BY THE ASSESSEE WAS NOT DISALLOWED IN T HE ASSESSMENT. HE, THEREFORE, TREATED THE ASSESSMENT MADE BY THE A.O. AS ERRONEOUS AS WEL L AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND SETTING ASIDE THE SAME BY AN ORDER PASS ED U/S 263, HE DIRECTED THE A.O. TO PASS A FRESH ASSESSMENT ORDER AFTER MAKING THE DISA LLOWANCE ON ACCOUNT OF INTEREST AS PER LAW. AGGRIEVED BY THE ORDER OF THE LD. CIT, THE AS SESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SID ES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE AS SESSEE HAS AGREED BEFORE US THAT THE DISALLOWANCE OF INTEREST PAID ON UNSECURED LOANS WH ICH WERE TREATED BY THE A.O. AS UNEXPLAINED CASH CREDIT U/S 68 WAS REQUIRED TO BE M ADE BY THE A.O. AND THE ASSESSMENT MADE BY THE A.O. WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE TO THE EXTENT OF NOT MAKING SUCH DISALLOWANCE. HE, HOWEVE R, HAS SUBMITTED THAT THE ENTIRE AMOUNT OF UNSECURED LOAN WAS NOT RECEIVED BY THE AS SESSEE COMPANY IN THE YEAR UNDER CONSIDERATION AND THE ADDITION OF ` 69,21,600/- MADE BY THE A.O. U/S 68 TO THE EXTENT OF OPENING BALANCE OF UNSECURED LOANS REPRESENTING LOA NS TAKEN IN THE EARLIER YEARS IS NOT SUSTAINABLE. HE HAS CONTENDED THAT THE ASSESSEE HA S ALREADY DISPUTED THE ADDITION MADE U/S 68 TO THAT EXTENT IN AN APPEAL FILED BEFORE THE LD. CIT(A) AND THE ADDITION MADE U/S 68 TO THE EXTENT OF OPENING BALANCE OF UNSECURED LOANS BEING NOT SUSTAINABLE, THE INTEREST ATTRIBUTABLE TO SUCH OPENING BALANCE CANNOT BE DISA LLOWED. HE INVITED OUR ATTENTION TO THE STATEMENT PREPARED AND FURNISHED AT PAGE NO. 6 TO 1 0 OF HIS PAPER BOOK TO POINT OUT THAT OUT OF TOTAL INTEREST OF ` 5,68,328/- PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ON UNSECURED LOANS, THE AMOUNT OF ` 3,37,519/- WAS IN RESPECT OF OPENING BALANCE OF UNSECURED LOANS WHICH WERE TAKEN IN THE EARLIER YEA RS. HE HAS CONTENDED THAT THE DISALLOWANCE OF INTEREST THEREFORE CAN BE MADE ONLY TO THE EXTENT OF BALANCE AMOUNT OF ` 2,30,809/-. HE HAS URGED THAT THE IMPUGNED ORDER OF THE LD. CIT PASSED U/S 263 MAY THEREFORE BE MODIFIED AND THE A.O. MAY BE DIRECTED TO RESTRICT THE DISALLOWANCE OF INTEREST 3 ITA 6555/M/09, M/S EMERGENT MEDI-TECH (INDIA) P.LT D. AFTER VERIFYING THE STAND OF THE ASSESSEE FROM THE RELEVANT RECORD. THE LEARNED D.R. HAS NOT RAISED ANY OBJECTION TO THIS LIMITED RELIEF SOU GHT BY THE LEARNED COUNSEL FOR THE ASSESSEE WHICH IN ANY CASE IS FAIR AND REASONABLE. AS A MATTER OF FACT, EVEN THE LD. CIT IN HIS IMPUGNED ORDER HAS CLARIFIED THAT THE AMOUNT OF INTEREST DISALLOWABLE WILL UNDERGO CHANGES SUBSEQUENTLY DEPENDING UPON THE ORDER OF VA RIOUS APPELLATE AUTHORITIES RELATING TO ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAI NED CASH CREDIT U/S 68. WE THEREFORE DIRECT THE A.O. TO RECOMPUTE THE INTEREST TO BE DIS ALLOWED AFTER TAKING INTO CONSIDERATION THE STAND OF THE ASSESSEE AS WELL AS THE APPELLATE ORDER PASSED IN THE CASE OF THE ASSESSEE DETERMINING THE QUANTUM OF ADDITION WHICH IS FINALL Y LIABLE TO BE MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT REPRESENTING UNSECURED LOAN S U/S 68. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) ( P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 30 TH NOVEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- 10 - MUMBAI 4. THE ACIT- RANGE 10(1) MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 6555/M/09, M/S EMERGENT MEDI-TECH (INDIA) P.LT D. DATE INITIALS 1. DRAFT DICTATED 24.11.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 25.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.