Amarnath Chaganla, Hyderabad V. ITO,Ward 9(4), Hyderabad

ITA 7/HYD/2014

• Counselvise Citation: 722514 RSA 2014
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: S K PISSAY
• Keywords: Depreciation; Assessment record; Revenue expenditure; Capital expenditure
• Section: 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICAL MEMBER ITA.NO.7/HYD/2014 ASSESSMENT YEAR 2009-2010 MR. AMARNATH CHAGANLA PROP. OF M/S. AMARNATH FRUIT COMPANY, GADDIANNARAM, HYDERABAD. PAN-AAGFS-4445-P VS. THE INCOME TAX OFFICER, WARD 9(4) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. S.K. PISSAY FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 02.09.2014 DATE OF PRONOUNCEMENT : 12.09.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT UNDER SECTION 263 DATED 31.02.2013. ON EXAMINING THE ASSESSMENT RECORD OF ASSESSEE, THE LD. CIT ISSU ED SHOW CAUSE NOTICE ON THE FOLLOWING ISSUES : (I) THE ASSESSEE DEBITED AN AMOUNT OF RS.6,80,139/- TOWARDS INTEREST PAID TO A.P.MAHESH CO.OP BANK LTD. , WHICH HAD NO NEXUS WITH THE BUSINESS MADE BY THE ASSESSEE. (II) IT WAS FURTHER SEEN THAT THE ASSESSEE HAD DEBITED A N AMOUNT OF RS.8,079/- TOWARDS ICICI FORD ENDEAVOUR PURCHASE CHARGES. THE SAME IS CAPITAL IN NATURE. 2. LD. CIT WAS OF THE OPINION THAT A.O. HAS NOT EX AMINED THESE ISSUES IN THE COURSE OF SCRUTINY ASSESSMENT A ND THEREFORE, 2 ITA.NO.7/HYD/2014 MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FRUIT COMPANY, HYDERABAD. BY NON EXAMINING THE ISSUES, THE ASSESSMENT COMPLET ED HAS RESULTED IN BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN RESPONSE, ASSESSEE SUBMITTED TO THE LD. CIT THAT A.O. VIDE ANNEXURE DATED 13.07.2011 CALLED FOR INFORMATI ON PARTICULARLY AT SERIAL NO. 9 AND 10 IN PARA-4 AS UNDER : 9. AS SEEN FROM THE P & L A/CIT(A) IN RESPECT OF A MARNATH FRUIT CO. YOU ARE A COMMISSION AGENT IN FRUITS BUSI NESS. FOR THIS COMMISSION BUSINESS, THERE IS NO REQUIREMENT O F HUGE INVESTMENT BY CLAIMING OF INTEREST ON OD TO THE TUN E OF RS.6,80,139. 10. PLEASE CLARIFY WHETHER YOU ARE DEALING THE FRUI T BUSINESS ON TRADE OR ON COMMISSION BASIS. IF YOU AR E DEALING ON COMMISSION BASIS WHAT IS THE REQUIREMENT OF HUGE BORROWING ON OD A/C. 2.1 ASSESSEE HAS EXPLAINED FURTHER AS UNDER : (B) THE ASSESSEE HAS AT PAGES NO. 10 & 11 OF HIS R EPLY DATED 12.10.2011 EXPLAINED IN DETAIL WHY THE OVERDR AFT FACILITY IS REQUIRED AND HOW UTILIZED. HE WAS ALSO FURNISHED WITH A COPY OF THE OVERDRAFT ACCOUNT STATEMENT DULY CERTIFIED BY THE BANK. IN FACT THE INTEREST CHARGED ON THE OD ACCOUNT IN A.P. MAHESH COOP. BANK LTD. FOR THE A.Y. 2009-10 WAS RS.14,80,139 OUT OF WHICH WHAT WAS USED FOR MANGO BUSINESS OF RS.6,80,139 ONLY WAS TRANSFERRED AND DE BITED TO PROFIT AND LOSS A/C. AND THE BALANCE OF INTEREST OF RS.8,00,000 WAS TRANSFERRED AND DEBITED TO CAPITAL ACCOUNT. THE ASSESSEE HIMSELF HAS BEEN TAKING THE BURDEN OF PART OF THE INTEREST PAID, AS SET OUT IN THE FOLLOWING TABL E : A.Y. TOTAL INTEREST DEBITED TRANSFER MADE TO P & L A/C. TRANSFER MADE TO CAPITAL A/C. 2005-06 15,32,154 5,77,681 9,54,473 2006-07 13,45,650 7,39,204 5,52,440 2007-08 14,43,371 8,21,373 6,21,998 2008-09 11,90,900 11,90,900 NIL 2009-10 14,80,139 6,80,139 8,00,000 3 ITA.NO.7/HYD/2014 MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FRUIT COMPANY, HYDERABAD. THE LEARNED ASSESSING OFFICER EXAMINED THIS MATTER IN DETAIL AND ALLOWED THE CLAIM OF INTEREST OF RS.6,80,139/-. (COPY OF THE LETTER DATED 12.10.2011 IS ENCLOSED AT PAGE NO. 15 TO 27) (C) YOUR APPELLANT HUMBLY SUBMITS THAT THE OBSERVAT IONS OF THE HONBLE COMMISSIONER OF INCOME TAX THAT THIS MATTER WAS NOT EXAMINED BY THE ASSESSING OFFICER IS NOT CORRECT AN D NO ERROR HAS CREPT IN THE ASSESSMENT ORDER. 3. WITH REFERENCE TO THE DCM VAN HIRE PURCHASE CHA RGES DEBIT OF RS.8,079, ASSESSEE FURTHER SUBMITTED THAT DCM EICHER VAN WAS PURCHASED ON 17.02.2006 FOR RS.6,60,243 AND A LOAN OF RS.5,60,000 WAS TAKEN FROM ICICI BANK ON EMI BASIS. ASSESSEE HAS FURNISHED THE LEDGER ACCOUNT COPY FROM A.YS. 20 06-07 TO 2009-10 TO SUBMIT THAT THE CLAIMS WERE MADE IN EARL IER YEARS AND A.O. EXAMINED THE ISSUE AND ALLOWED THE EXPENDITURE . IT WAS FURTHER CONTENDED THAT THE CASE LAW RELIED ON BY TH E LD. CIT DOES NOT HAVE ANY BEARING TO THE FACTS OF THE CASE AND M ADE DETAILED SUBMISSION TO THE LD. CIT. 4. LD. CIT, HOWEVER, DID NOT ACCEPT THE CONTENTION ON THE REASON THAT THE DETAILS OF TURNOVERS AND COMMISSION EARNED AS WELL AS OVERDRAFT DETAILS FROM 2001 TO 2009-10 FURN ISHED BY THE A.R. OF THE ASSESSEE NEVER FILED BEFORE A.O. HE SET ASIDE THE ASSESSMENT WITH A DIRECTION TO EXAMINE THE ISSUES. WITH REFERENCE TO EMI PAID ALSO THE LD. CIT WAS OF THE OPINION THA T A.O. HAS NOT VERIFIED THE DETAILS AND IT IS THE DUTY OF THE A.O. TO EXAMINE EVERY ISSUE ON FACTS AND MERITS AND DECIDE ACCORDINGLY. 5. LEARNED A.R. CONTESTED THE ORDER OF THE LD. CIT AND RELIED ON VARIOUS DETAILS FURNISHED IN THE COURSE O F SCRUTINY ASSESSMENT TO THE A.O. TO SUBMIT THAT ALL THE ISSUE S HAVE BEEN EXAMINED AND THERE WAS NO ERROR IN THE ORDER OF THE A.O. 4 ITA.NO.7/HYD/2014 MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FRUIT COMPANY, HYDERABAD. 6. LEARNED D.R. RELIED ON THE ORDER OF THE LD. CIT TO SUBMIT THAT NO PREJUDICE IS CAUSED TO THE ASSESSEE BY SIMPLY SETTING ASIDE THE ASSESSMENT WITHOUT ANY DIRECTION. THEREFORE, ASSESSEE CAN UNDERGO THE RE-EXAMINATION WITHOUT ANY PROBLEM. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMINED THE RECORD. THERE IS NO DISPUTE WITH REFER ENCE TO THE FACT THAT A.O. IN THE COURSE OF ASSESSMENT ISSUED A DETA ILED QUESTIONNAIRE DATED 13.07.2011 RUNNING INTO 19 ISSU ES AND IN THE ASSESSMENT ORDER EXAMINED ASSESSEES CLAIMS OF CAPI TAL GAINS AND EXEMPTIONS AND ALSO DISALLOWED EXPENDITURE CLAIMED IN THE P & L A/C. THE SHOW CAUSE NOTICE ISSUED AND THE REPLIES F URNISHED BY THE ASSESSEE PLACED IN THE PAPER BOOK DO INDICATE T HAT THE ISSUES WHICH ARE RAISED BY THE LD. CIT IN THE COURSE OF OR DER PASSED UNDER SECTION 263 ARE INDEED EXAMINED. IN FACT, ASS ESSEE ALSO FURNISHED MIRYALAGUDA FARM ACCOUNT, NERADA VILLAGE FARM ACCOUNT, GUNIGAL MANGO GARDEN ACCOUNT AND OTHER DET AILS IN THE COURSE OF SCRUTINY PROCEEDINGS, INCLUDING THE FRUIT COMMISSION AGENCY BUSINESS. IT WAS ALSO SUBMITTED THAT ASSESSE E IS A PROPRIETARY CONCERN, DOES THE BUSINESS OF SELLING T HE FRUITS BROUGHT TO THE MARKET ON COMMISSION OF 4% AND MAINTAINS A K ACHHA ARHATIA ACCOUNT. THEREFORE, PROVISIONS OF SECTION 4 4AB ARE NOT ATTRACTED. THIS INDICATE THAT A.O. COMPLETED THE SC RUTINY ASSESSMENT AFTER DUE EXAMINATION OF THE ASSESSMENT. NOT ONLY THAT ASSESSEE HIMSELF HAS NOT CLAIMED THE ENTIRE IN TEREST PAID BUT RESTRICTED THE CLAIM TO AN AMOUNT OF RS.6,80,139 AS AGAINST RS.14,80,139 PAID TO THE BANK. THE SAME WERE ALSO F URNISHED BEFORE THE A.O. FURTHER THE DETAILS OF HIRE PURCHAS E CLAIM AND DEPRECIATION CLAIM DO INDICATE THAT AO EXAMINED THE SE ASPECTS. THEREFORE, IT CANNOT BE STATED THAT A.O. HAS NOT EX AMINED THE ISSUE WITH REFERENCE TO INTEREST AND HIRE PURCHASE CHARGES DEBITED 5 ITA.NO.7/HYD/2014 MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FRUIT COMPANY, HYDERABAD. TO P & L ACCOUNT. WHAT THE ASSESSEE HAS CLAIMED IS ONLY THE INTEREST PORTION ON THE HIRE PURCHASE CHARGES ON TH E PRINCIPAL AMOUNT PAID AND THIS CLAIM WAS FROM A.Y. 2006-07. M OREOVER, THE INTEREST ON HIRE PURCHASE, ONCE THE ASSET HAS BEEN PUT TO USE, CANNOT BE CAPITALIZED AND IS TO BE ALLOWED AS REVEN UE EXPENDITURE. MOREOVER, THE EXPENDITURE IN DCM VAN WAS ALSO BEING ALLOWED AS REVENUE EXPENDITURE AND THERE IS NO DISPUTE WITH RE FERENCE TO THE FACT THAT DCM VAN WAS USED IN ASSESSEES BUSINESS. IN THESE CIRCUMSTANCES, HOW THE AMOUNT IS TO BE DISALLOWED A S CAPITAL EXPENDITURE HAS NOT BEEN EXPLAINED BY THE LD. CIT I N HIS ORDER. WE ARE ALSO NOT ABLE TO UNDERSTAND WHAT PURPOSE WOULD BE SERVED BY SETTING ASIDE THE ASSESSMENT, WHEN ALL THE FACTS AR E ALREADY EXAMINED BY A.O. AND FURTHER PLACED BEFORE THE LD. CIT IN THE COURSE OF ORDER PASSED UNDER SECTION 263 AS WELL. W ITHOUT FINDING ANY FAULT WITH THE ORDER OF THE A.O. JUST BECAUSE H E HAS NOT LEFT ANY NOTINGS REGARDING THE ENQUIRY, IT CANNOT BE PRE SUMED THAT THE A.O. HAS NOT EXAMINED THE ISSUES. ON THE FACTS OF T HE CASE, WE ARE UNABLE TO UPHOLD THE ACTION OF THE LD. CIT. WE ARE OF THE OPINION THAT THE ORDER OF THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE SO AS TO INVOKE THE JURISD ICTION UNDER SECTION 263 BY LD. CIT. ACCORDINGLY, ASSESSEES GRO UNDS ARE ALLOWED AND ORDER PASSED BY LD. CIT UNDER SECTION 2 63 IS SET ASIDE AND THAT OF ORDER OF A.O. WAS RESTORED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12.09.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH SEPTEMBER, 2014 VBP/- 6 ITA.NO.7/HYD/2014 MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FRUIT COMPANY, HYDERABAD. COPY TO 1. MR. AMARNATH CHAGANLA, PROP. OF M/S. AMARNATH FR UIT COMPANY, HYDERABAD. C/O. PISSAY & COMPANY, CHARTERE D ACCOUNTANTS, 5-4-548, ABID ROAD, HYDERABAD 500 00 1. 2. THE INCOME TAX OFFICER, WARD 9(4), HYDERABAD. 3. COMMISSIONER OF INCOME TAX, HYDERABAD 4. ADDL. COMMISSIONER OF INCOME TAX, RANGE-9, HYDER ABAD. 5. D.R. B BENCH, ITAT, HYDERABAD.