THE DCIT, 1(1), Bhopal V. M/S. NATHURAM SHRINARAYAN AGRAWAL, Itarsi

ITA 680/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5932 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 147; 148; 139

Judgement Text

DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO.680/IND/2014 A.Y. : 2008-09. DY. CIT, 1(1), BHOPAL M/S.NATHURAM SHRINARAYAN AGRAWAL, VS. ITARSI. APPELLANT RESPONDENT PAN NO. AACFN6525F APPELLANTS BY : SHRI ANIL KHABYA, CA RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R PER D.T.GARASIA, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 28.08.2014 FOR THE ASSESSME NT YEAR 2008- 09. DATE OF HEARING : 23.11.2015. DATE OF PRONOUNCEMENT : 07.01.2016 DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF AGRICULTURE PRODUCES. THE ASSESSEE HAD FURNISHED ITS RETURN OF INCOME FOR A.Y.2008-09 ON 03.11.2008, WHICH WAS REVISED ON 21. 03.2010. THE REGULAR ASSESSMENT U/S 143(3) WAS COMPLETED ON 10.12.2010 DETERMINING TOTAL INCOME AT RS.95,87,190/-. THEREAFTER, THE AO AFTER RECORDING REASONS INITIATED RE-ASSESSMENT PRO CEEDINGS U/S 147 FOR A. Y. 2008-09 BY ISSUING NOTICE U/S 148 DATED 21.09.2011. IN RESPONSE, THE ASSESSEE STATED THAT RETURN FILED U/S 139 MAY BE TREATED AS RETURN IN PURSUANCE TO THE NOTICE U/S 14 8 FOR A.Y. 2008-09. AFTER ISSUING NOTICE U/S 143(2) AND 142(1), ALONGWITH QUESTIONNAIRES, THE RE-ASSESSMENT U/S 147 R.W.S. 143(3) WAS COMPLETED ON 19.03.2013 DETERMINING TAXABLE INCOME AT RS.1 ,88,04,7601-. THE AO NOTICED FROM THE BALANCE SHEET OF THE APPELL ANT THAT THERE WERE LOANS AND ADVANCES OF RS. 8,99,41,423/- GIVEN AND OUT OF THIS, AN AMOUNT OF RS. 8,98,50,739/- WAS LOAN AND A DVANCE TO A SISTER CONCERN, M/S. SANWARIA AGRO OILS LIMITED, IT ARSI, ON WHICH NO INTEREST WAS CHARGED, WHEREAS THE ASSESSEE HAD C LAIMED DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 3 3 INTEREST EXPENSES OF RS. 86,14,467/- ON ACCOUNT OF INTEREST TO OTHERS. THE AO ASKED THE APPELLANT TO EXPLAIN AS T O WHY THE INTEREST EXPENSES DEBITED OF RS. 86,14,467/- SHOULD NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE SUBMITTED BEF ORE THE AO THAT THE LOAN ACCOUNT HAD BEEN MAINTAINED WITH M/S SANWARIA AGRO OILS LTD. AND INTEREST WAS BEING CALCULATED ON DAILY BASIS METHOD. IT WAS ALSO POINTED OUT THAT THE ISSUE OF I NTEREST PAYMENT WAS EXAMINED DURING THE ORIGINAL ASSESSMENT PROCEED INGS ALSO. BUT THE AO DID NOT ACCEPT THE SUBMISSION OF THE ASS ESSEE AND DISALLOWED INTEREST EXPENSES OF' RS.86, 14,467/- OBSERVING IN THE ASSESSMENT ORDER AS UNDER: - 'B. THE CONTENTION OF THE ASSESSEE IS NOT TENABLE I N VIEW OF THE EXPRESS PROVISIONS OF THE INCOME-TAX ACT, 1961,REGARDING DEBITING OF INTEREST IN P & L AS EXPENDITURE BUT NOT CHARGING THE INTEREST ON LOANS AND ADVANCES TO SISTER/RELATED CONCERNS. 3. THUS, THE CONTENTION OF THE ASSESSEE IS NOT FOUND TENABLE, THEREFORE, THE 'INTEREST TO OTHERS.' DEBIT ED OF RS. 86,14,467/- IS DISALLOWED AND ADDED TO THE TOTAL IN COME OF THE ASSESSEE. ' DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 4 4 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER :- 4.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT AND FACTS OF THE CASE. IT SEEMS THAT THE AO HAD NOT PROPERLY APPRECIATED TO THE FACTS OF THE CASE. THE AO REJECTED THE SUBMISSION OF THE APPELLANT WITHOUT GI VING ANY COGENT REASON AND SIMPLY STATED THAT 'THE SUBMISSION OF THE APPELLANT WAS NOT TENABLE IN VIEW OF THE EXPRESS PROVISIONS OF THE INCOME-TAX ACT REGARDING DEBITING O F INTEREST IN PROFIT & LOSS ACCOUNT AS EXPENDITURE BUT NOT CHARGING INTEREST ON LOANS A ND ADVANCES TO SISTER/ RELATED CONCERNS '. AS SUBMITTED BY THE APPELLANT, DURING ASSESSMENT PROCEEDINGS AS WEL L AS APPELLATE PROCEEDINGS, ON PERUSAL OF COPY OF LED GER ACCOUNT, IT IS NOTICED THAT THE APPELLANT WAS MAINT AINING A CURRENT ACCOUNT WITH M/S SANWARIA AGRO OILS LTD. A ND THERE WERE REGULAR TRANSACTIONS RELATING TO RECEIVI NG AND GIVING ADVANCES TO EACH OTHER. AS ON 31.03.2008, THE RE WAS A DEBIT BALANCE IN THE ACCOUNT OF M/S. SANWARIA AGRO OILS LTD. OF RS. 8,98,50,739/- BECAUSE OF THE FACT THAT THE APPELLANT HAD GIVEN AN ADVANCE OF DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 5 5 RS.9,50,00,000/- TO M/S SANWARIA AGRO OILS LTD., ON 20.03.2008. HOWEVER, DURING THE COURSE OF F.Y.2007- 08, THE APPELLANT HAD UTILIZED THE FUNDS OF M/S. SANWAR IA AGRO OILS LTD. AND MOST OF THE TIME THERE WAS CREDIT BALANCE OF M/S SANWARIA AGRO OILS LTD. WITH THE APPELLANT. THE INTEREST WAS CALCULATED ON THE BASIS OF DAY TO DAY BALANCE AND FINALLY THE TOTAL INTEREST W AS PAID BY THE APPELLANT TO M/S SANWARIA AGRO OILS LTD. OF RS.16,OO,270/- ON WHICH THE TDS OF RS.3,62,621/- WAS ALSO DEDUCTED FOR UTILIZING FUNDS OF M/S. SANWARIA AGRO OILS LTD. THUS, IN FACT THE APPELLANT HAD PAID INTE REST ON THE ADVANCES RECEIVED FROM M/S SANWARIA AGRO OILS LTD. AND IT WAS NOT A CASE WHERE APPELLANT HAD GIVE N INTEREST FREE ADVANCES TO M/S SANWARIA AGRO OILS LTD . BY DIVERTING INTEREST BEARING FUNDS. THEREFORE, THE RE WAS NO QUESTION OF DISALLOWING ANY INTEREST U/S 36(1)(III) OF THE ACT OUT OF INTEREST CLAIMED BY THE APPELLANT TO BE INCURRED DURING THE YEAR UNDER CONSIDERATION FOR BUSINESS PURPOSES. HENCE, THE DISALLOWANCE OF RS. 86,14,467/- OUT OF INTEREST CHARGED IN PROFIT & LOSS ACCOUNT MADE BY THE AO IS DELETED. DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 6 6 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES. LD. DR SUBMITTED BEFORE US THAT THE ASSESSEE HAS PR ODUCED THE STATEMENT OF COPY OF ACCOUNTS FOR SANWARIA AGRO OIL S LIMITED, WHICH IS THE SISTER CONCERN OF THE ASSESSEE AND IT IS THE ALLEGATION OF THE AO THAT THE ASSESSEE HAS TAKEN LOAN OF RS.8, 99,41,423/- TO THE SISTER CONCERN SANWARIA AGRO OILS LIMITED ON WH ICH NO INTEREST WAS CHARGED. THE ASSESSEE HAS NOT PRODUCED THIS COPY OF ACCOUNTS BEFORE THE AO. THEREFORE, THE AO HAD NO CH ANCE TO VERIFY THESE ACCOUNTS. THE LD. CIT(A) HAS GRANTED T HE RELIEF ON THE GROUND THAT IT IS A BUSINESS ADVANCE. THEREFORE, TH ERE IS NO QUESTION OF DISALLOWING INTEREST U/S 36(1)(III) OF THE INCOME-TAX ACT, 1961. 6. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIV E DURING THE COURSE OF HEARING HAS SUBMITTED THAT THE LD. CIT(A) HAS CATEGORICALLY HELD THAT THE ASSESSEE HAS UTILIZ ED THE FUND OF SANWARIA AGRO OIL MOST OF THE TIME AND INTEREST WAS CALCULATED ON THE BASIS OF DAY TO DAY BALANCE AND FINALLY TOTA L INTEREST WAS PAID BY THE ASSESSEE TO SANWARIA AGRO. THUS, THE AS SESSEE HAS PAID INTEREST ON ADVANCES RECEIVED FROM SANWARIA AG RO. THEREFORE, THE LD. CIT(A) HAS ALLOWED THE CLAIM. DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 7 7 7. WE ARE OF THE VIEW THAT THESE EVIDENCES RELATING TO PAYMENT OF INTEREST AND DAY TO DAY INTEREST PAYMENT WAS NOT GIVEN TO THE AO AND THE LD. CIT(A) HAS ALSO NOT DIS CUSSED THE ISSUE WHETHER THE ASSESSEE HAS CHARGED INTEREST ON THE ADVANCE ON DAY TO DAY BASIS OR NOT. THEREFORE, WE REVERSE T HE FINDING OF THE CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE OF AO AND THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE WHE THER THE ASSESSEE HAS PAID INTEREST OR NOT AND IF THE ASSESS EE HAS PAID INTEREST, IT MAY BE ALLOWED AFTER VERIFYING THE REC EIPT AND PAYMENT DETAILS FILED BEFORE US AND DECIDE THE MATTER AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 7 TH JANUARY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 7 TH JANUARY, 2016. CPU* 2311 DY. CIT, BHOPAL VS. M/S. NATHURAM SHRINARAYAN AGRAW AL, ITARSI I.T.A.NO. 680/IND/2014 A.Y.2008-09 8 8