DCIT 8(3), MUMBAI V. SJR COMMODITIES & CONSULTANCIES P.LTD, MUMBAI

ITA 6612/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8186 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Section: 143(3)

Judgement Text

, BZ BZBZ BZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , IOU IOUIOU IOU , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMBE R & PAWAN SINGH, JUDICIAL MEMBER /.ITA NO.6612/MUM/2014, /ASSESSMENT YEAR-2007-08 DCIT-8(3), ROOM NO. 217, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400020 VS. M/S SJR COMMODITIES & CONSULTANCIES PVT. LTD. (FORMERLY KNOWN AS SURAJ DIAMONDS CONSULTANCIES PVT. LTD.), 73C, SURAJ HOUSE, CROSS ROAD, MIDC, ANDHERI (E), MUMBAI-400093. PAN: AAACS9779H ( / APPELLANT) ( / RESPONDENT) / REVENUE BY : MS BEENA SANTOSH (DR) ! ! / ASSESSEE BY : SHRI RAJESH P. SHAH (AR) ' ! / DATE OF HEARING : 12 -01-2017 ! '( / DATE OF PRONOUNCEMENT : 15 -02-2017 , 1961 ' 254(1) #!$! ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER PAWAN SINGH, J.M. IOU IOUIOU IOU : 1. THIS APPEAL BY REVENUE U/S 253 OF THE INCOME TAX AC T (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-1 8 [CIT(A)-33], MUMBAI DATED 13.08.2014 FOR ASSESSMENT YEARS (AYS) 2007-08.THE R EVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST RELY ING ON THE JUDGEMENT IN THE CASE OF M/S S.A. BUILDERS (288 ITR 1 ) IGNORING THE SUBSEQUENT JUDGEMENT OF SUPREME COURT IN THE CASE OF TULIP STAR HOTELS LTD. (2012) (21 TAXMANN.C OM 97) WHEREIN E APEX COURT HAS HELD THAT THE JUDGEMENT IN THE CASE OF S.A. BUILDER S (288 ITR 1) NEEDS RECONSIDERATION ?' II. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF R S.95,85,467/-, HOLDING THAT THE ADVANCES FOR THE PURPOSE OF BUSINESS OF THE SISTER CONCERN ARE REQUIRED TO BE TREATED AS FOR BUSINESS PURPOSES AS OBSERVED BY THE SUPREME CO URT IN THE CASE OF S.A. BUILDERS (288 ITR 1 )?' III. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.21, 07,126/- MADE U/S 41(1) OF THE IT ACT IGNORING THE RATIO LAID DOWN BY THE ITAT, MUMBA I IN THE CASE OF ITA VS. SAJJANKUMAR DIDWANI (2014) (47 TAXMANN.COM 381) WHE REIN WITH REGARD TO THE TRADE LIABILITY SHOWN BY THE ASSESSEE IT WAS HELD THAT SI NCE NO CONFIRMATION OR ANY OTHER MATERIAL FURNISHED, THE CLAIM OF SUCH LIABILITY WOU LD BE SAID TO BE CLEARLY UNPROVED AND APPLICATION OF SECTION 41(1) IN RELATION TO THE SAI D CREDIT WAS JUSTIFIED?' IV. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED.' 2 ITA NO.6612/M/2014 M/S SJR COMMODITIES & CONSULTAN CIES PVT. LTD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN DIAMONDS AND SEMI PREC IOUS STONES, FILED ITS RETURN OF INCOME ON 21.10.2007, DECLARING TOTAL INCOME AT RS. 30,63,530/-. THE ASSESSMENT WAS COMPLETED ON 04.12.2009 U/S 143(3) OF THE ACT. WHIL E FRAMING ASSESSMENT, THE ASSESSING OFFICER (AO) BESIDES THE OTHER ADDITION AND DISALLO WANCE MADE THE DISALLOWANCE OF INTEREST OF RS. 95,85,467/- AND FURTHER DISALLOWED RS. 21,07,126/- U/S 41(1) OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), BOTH THE DISALLOWANCE WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US . 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AS WELL AS LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, IT WAS SUBMITTE D BY LD. AR OF THE ASSESSEE THAT GROUND NO. 1 & 2 RAISED BY THE REVENUE IN THE PRESENT APPE AL IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO. 2120/MUM/2008. IT WAS FURTHER SUBMITTED THAT THE OR DER OF TRIBUNAL WAS FURTHER FOLLOWED IN APPEAL FOR AY 2005-06 IN ITA NO. 4066/MUM/2009 D ATED 11.01.2012. LD. DR FOR THE REVENUE NOT DISPUTED THE DECISION FOR AYS 2004-05 A ND 2005-06. 4. WE HAVE CONSIDERED THE CONTENTION OF BOTH THE PARTI ES AND SEEN THAT SIMILAR GROUNDS OF APPEAL WERE RAISED BY REVENUE FOR AY 2004-05 AND FU RTHER FOR AY 2005-06. THE CO- ORDINATE BENCH OF THIS TRIBUNAL WHILE CONSIDERING T HE GROUNDS OF APPEAL PASSED THE FOLLOWING ORDER: 3 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004-05 IN ITA NO. 2120/MUM/2008 VIDE ORDER DATED 29TH SJR COMMODI TIES & CONSULTANCIES P LTD SEPT 2011. WE FURTHER NOTE THAT THE CIT(A) HAS ALLOWED T HE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE ASSESSMENT YEAR 2004-05. 4 THIS ISSUE HAS BEEN DECIDED AGAINST THE REVENUE B Y THE TRIBUNAL AND IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IN PARA 5 AS UNDER: '5. HAVING HEARD THE RIVAL CONTENTIONS, AND HAVING PERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO DISTURB WELL REASONED CONCLUSI ONS ARRIVED AT BY THE CIT(A) - PARTICULARLY AS LEARNED DEPARTMENTAL REPRESENTATIVE DID RIOT REALLY DISPUTE FACTUAL ELEMENTS EMBEDDED IN THE CONCLUSIONS ARRIVED AT BY THE CIT (A) WITH REGARD TO THE BUSINESS EXPEDIENCY OF THE ASSESSEE. WE HAVE ALSO T AKEN NOTE OF LEARNED COUNSEL'S ARGUMENT THAT ASSESSEE'S STAND TO THE EFFECT THAT A DVANCES WERE MADE FOR THE PURPOSE OF IMPORT OF ROUGH DIAMONDS, AND SIMPLY BEC AUSE IMPORTS COULD NOT BE EFFECTED THE NATURE OF ADVANCES WOULD NOT CHANGE, H AS REMAINED UNCONTROVERTED BY THE REVENUE. IN ANY CASE, AS HELD BY HON'BLE SUPREM E COURT IN THE CASE OF S.A. BUILDERS (SUPRA), THE EXPRESSION 'COMMERCIAL EXPEDI ENCY' IS OF WIDE IMPORT AND 3 ITA NO.6612/M/2014 M/S SJR COMMODITIES & CONSULTAN CIES PVT. LTD. EVEN ADVANCES FOR THE PURPOSE OF BUSINESS OF THE SI STER CONCERN ARE REQUIRED TO BE TREATED AS FOR BUSINESS PURPOSES. THE ASSESSING OFF ICER WAS THUS CLEARLY IN ERROR IN RESORTING TO THE DISALLOWANCE ON THE SHORT GROUND T HAT WHILE THE ASSESSEE HAS BORROWED THE MONEY ON INTEREST, IT HAS GIVEN AN INT EREST FREE ADVANCE TO THE SISTER CONCERN. THAT APPROACH CERTAINLY CONSTITUTE A VERY SUPERFICIAL VIEW OF THE MATTER, AND THE CIT(A) WAS JUSTIFIED IN REVERSING THE DISAL LOWANCE SO MADE BY THE ASSESSING OFFICER. WE APPROVE THE CONCLUSION ARRIVE D AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER.' 5 THEREFORE, FOLLOWING THE ORDER FOR THE EARLIER YE AR OF THE TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6 I N THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. THEREFORE, CONSIDERING THE DECISION OF CO-ORDINATE BENCH FOR EARLIER YEARS, THE GROUND NOS. 1 & 2 OF APPEAL RAISED BY REVENUE ARE DISMISSE D. 5. GROUND NO.3 RELATES TO DELETING THE DISALLOWANCE U/ S 41(1) OF THE ACT. LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO AND PRAYED FOR RE STORING THE ORDER OF AO BY SETTING- ASIDE THE ORDER OF LD. CIT(A). ON THE OTHER HAND, L D. AR OF ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). LD. AR OF ASSESSEE FURTHER ARGUED THAT AO WRONGLY APPLIED THE DECISION OF HONBLE APEX COURT IN CASE OF T.V. SUNDARAM IYENGER & SONS LIMITED 222 ITR 344. THE CASE OF ASSESSEE IS INFACT COVERED BY THE DECISION OF HONBLE APEX COURT IN SUGAULI SUGAR WORKS PVT. LTD. 236 ITR 518. THE ASSESSEE HAS NOT CREDITED THE AMOUNT TO THE PRO FIT & LOSS A/C IN THE YEAR UNDER CONSIDERATION AND THE SA ME WAS DECLARED IN AY 2013-14 AND NO ADDITION WAS CALLED FOR. THE LD. AR OF ASSESSEE SUB MITTED THAT THESE FACT WAS BROUGHT IN THE NOTICE OF LD. CIT(A) AND AFTER CONSIDERING THE CONTENTION OF ASSESSEE, THE DISALLOWANCE WAS DELETED. 6. WE HAVE CONSIDERED THE CONTENTION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING , THE AO OBSERVED THAT ASSESSEE HAS SHOWN AN AMOUNT OF RS. 21,07,126/- DUE TO M/S PLANE T STAR TRADING PVT. LTD. FOR MORE THAN THREE YEARS. THE AO ISSUED SHOW-CAUSE NOTICE T O THE ASSESSEE THAT AS TO WHY THE AMOUNT SHOULD NOT BE TREATED AS CESSATION OF LIABIL ITY U/S 41(1) OF THE ACT. THE ASSESSEE FILED ITS REPLY. IN THE REPLY, THE ASSESSEE CONTEN DED THAT UNILATERAL ENTRIES IN THE ACCOUNTS WILL NOT AMOUNT TO CESSATION OF LIABILITY, SECTION 41(1) CONTEMPLATE THE OBTAINING BY THE ASSESSEE AN AMOUNT EITHER IN CASH OR IN ANY OTHER W AY WHATSOEVER BENEFIT BY WAY OF REMISSION OF CESSATION. IT SHOULD NOT BE PARTICULAR AMOUNT OBTAINED BY HIM. IT WAS FURTHER CONTENDED FOR THE OBTAINING BENEFIT TO THE ASSESSEE BY VIRTUE OF REMISSION OF CESSATION IS SINE-QUA-NON FOR THE APPLICATION OF THIS SECTION. THE MERE FACT THAT ASSESSEE HAS MADE AN ENTRY OR TRANSFER IN ITS ACCOUNT UNILATERALLY WILL NOT UNABLE THE DEPARTMENT TO SAY THAT 4 ITA NO.6612/M/2014 M/S SJR COMMODITIES & CONSULTAN CIES PVT. LTD. SECTION 41(1) OF THE ACT WOULD APPLY AND AMOUNT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE ALSO RELIED UPON THE DECISIO N OF SUGAULI SUGAR WORKS PVT. LTD.(SUPRA). THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO W HILE RELYING UPON THE DECISION OF T.V. SUNDARAM IYENGER & SONS LIMITED (S UPRA) AND DISALLOWED THE AMOUNT. THE SIMILAR CONTENTION WAS URGED BEFORE THE LD. CIT (A). THE LD. CIT(A) AFTER CONSIDERING THE FACT, PASSED THE FOLLOWING ORDER: FROM THE ANALYSIS OF THE DECISION OF HON'BLE SUPRE ME COURT AND HON'BLE GUJARAT HIGH COURT (SUPRA), IT IS HELD THAT THE DECISION IN CASE OF TV.SUNDARAM IYENGAR & SONS LTD. WHICH IS RELIED ON BY THE A.O. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE IN THAT CASE, THE HON'BLE APEX COURT HAS HELD THAT WHE N THE ASSESSEE HAS DEBITED THE UNCLAIMED BALANCE TO THE PROFIT & LOSS ACCOUNT, ONL Y THEN IT COVER U/S 41 (1) OF THE I.T. ACT. BUT, IN THE PRESENT CASE, THE ASSESSEE HAS CRE DITED THIS AMOUNT TO THE PROFIT & LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION, THEREFORE, THIS DECISION IS NOT APPLICABLE TO THIS CASE. HOWEVER, THE DECISION OF HON'BLE SUPREME COUR T IN CASE OF SUGAULI SUGAR WORKS AND THE HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V S. G.K.PATEL & CO. IS APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE AS PER THE DE CISION OF HON'BLE SUPREME COURT IN THIS CASE THERE IS NO UNILATERAL ACT OF THE ASSESSEE OF MAKING ANY ENTRY IN THE ACCOUNT OF TRADING AGENCY IN THE PROFIT & LOSS ACCOUNT. SECOND LY, THERE SHOULD BE AN EVENT OF CESSATION OF LIABILITY TO TAKE PLACE. IF ANYTHING H APPENS DURING THE YEAR UNDER CONSIDERATION IT CANNOT BE SAID THAT THE LIABILITY HAS TO BE CEASED TO EXIST. IN CASE OF REMISSION THERE HAS TO BE A WAIVER BY A CREDITOR IN FAVOUR OF THE ASSESSEE EITHER UNILATERALLY OR THROUGH CONTRACTUAL AGREEMENT. FURT HER, THERE HAS TO BE A POSITIVE ACT ON THE PART OF THE CREDITOR IN THE CURRENT YEAR WHICH WOULD PROVIDE THE BENEFIT TO THE ASSESSEE BY WAY OF REMISSION. IF NO SUCH ACT TAKES PLACE THE N THERE IS NO CASE FOR HOLDING THAT A LIABILITY HAS BEEN REMITTED IN FAVOUR OF THE ASSESS EE. 'MERELY BECAUSE CERTAIN AMOUNT IS OUTSTANDING FOR A NUMBER OF YEARS IT CANNOT BE SAID THAT THERE IS CESSATION OR REMISSION. SINCE IN THE PRESENT CASE, THE ASSESSEE HAS NOT CRE DITED THIS AMOUNT TO THE PROFIT & LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION AND MOREOVE R THE ASSESSEE HAS DECLARED THIS AMOUNT IN AY. 2013-14 BY REFLECTING THE ENTRY OF RS . 21,07,1261- TO THE PROFIT & LOSS ACCOUNT, THEREFORE, NO ADDITION IS CALLED FOR IN TH E UNDER CONSIDERATION. IN TOTALITY OF FACTS & CIRCUMSTANCES, IT IS HELD THAT THE DECISION OF HO N'BLE SUPREME COURT IN CASE OF T.V. SUNDARAM IYENGAR & SONS LTD. RELIED ON BY THE AO. I S NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, BUT, IT IS SQUARELY COVERED BY THE DE CISION OF HON'BLE SUPREME COURT IN CASE OF SUGAULI SUGAR WORKS PVT. LTD. AND THE CASE OF TH E HON'BLE GUJARAT HIGH COURT IN CASE OF G.K.PATEL & CO., THUS, THE DISALLOWANCE MADE BY THE AO IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 7. WE HAVE SEEN THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE AFTER CONSIDERING THE FACT THAT THE ASSESSEE HAS DECLARED THIS AMOUNT (IMPUGNE D AMOUNT OF DISALLOWANCE) IN AY 2013-14 BY REFLECTING THE ENTRY OF RS. 21,07,162/- TO THE PROFIT & LOSS A/C AND THUS NO ADDITION WAS CALLED FOR. THUS, CONSIDERING THE FACT S OF THE CASE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). THUS, GROUND NO.3 RAISED BY REVENUE IS DISMISSED. GROUND NO.4 & 5 RAISED BY REV ENUE IS GENERAL AND NEEDS NO ADJUDICATION. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 5 ITA NO.6612/M/2014 M/S SJR COMMODITIES & CONSULTAN CIES PVT. LTD. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY 2017. + ! , - 15 QJ ( , 201 7 ! 12 3 SD/- SD/- ( / RAJENDRA ( IOU IOUIOU IOU / PAWAN SINGH)) ( / ACCOUNTANT MEMBER # ( / JUDICIAL MEMBER 2 /MUMBAI, - /DATE: 15.02.2017 SK ' )!*+ ,+! / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ 45 ( 6' , 4. THE CONCERNED CIT / 45 6' 5. DR E BENCH, ITAT, MUMBAI / 781 '95 BZ BZBZ BZ , . . . 2 6. GUARD FILE/ 1 2 7' /TRCOPY// + / BY ORDER, / DY./ASST. REGISTRAR ( 95 , 2 /ITAT, MUMBAI