ACIT, Circle-33(1), New Delhi V. Lucky Exports, New Delhi

ITA 712/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2446 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Proportionate interest

Judgement Text

ITA NO. 712/DEL/2018 A.Y. 2014-15 LUCKY EXPORTS 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F, NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL ME MBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBE R ITA NO. 712/DEL/2018 AY: 2014-15 ACIT, CIRCLE 33(1), NEW DELHI. VS . LUCKY EXPORTS UG-28, SOM DUTT CHAMBERS-II, 9, BHIKAJI CAMA PLACE, NEW DELHI. AAAFL1147P (APPELLANT) (RESPONDE NT) REVENUE BY : SH. SURENDER PAL, SR. DR ASSESSEE BY : NONE DATE OF HEARING : 06/11/2018 DATE OF PRONOUNCEMENT : 14/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST OR DER DATED 14/11/17 PASSED BY LD. CIT (A)-11, NEW DELHI FOR AS SESSMENT YEAR 2014-15 ON FOLLOWING GROUNDS OF APPEAL: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY DELETING DISALLOWANCE OF INTEREST AMOUNTING TO R S. 1,91,98,016/-? 2. THE DEPARTMENT CRAVES LEAVE TO ADD, TO ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G? 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME ON 22/11/14, DE CLARING TOTAL INCOME OF RS.22,29,023/-. THE CASE WAS SELECTED FOR SCRUTINY AND ITA NO. 712/DEL/2018 A.Y. 2014-15 LUCKY EXPORTS 2 NOTICE UNDER SECTION 143 (2) OF THE ACT ALONG WITH QUESTIONNAIRE UNDER SECTION 142 (1) OF THE ACT WAS ISSUED TO ASSE SSEE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF AS SESSEE APPEARED BEFORE THE LD. AO IS AND FILED REQUISITE D ETAILS AS CALLED FOR. 2.1 LD. AO OBSERVED THAT ASSESSEE IS ENGAGED IN BUS INESS OF TRADING AND EXPORT OF LAB, AGRICULTURAL, ELECTRICAL SOLAR AND HOSPITAL EQUIPMENTS, ENGINEERING GOODS, MEDICINE, S PICES, RICE COMPUTER PARTS CHEMICALS, MACHINERY AND EQUIPMENTS, COMMISSIONING OF PROJECTS ABROAD WITH INSTALLATION OF PLANTS. 2.2 LD.AO OBSERVED THAT ASSESSEE HAS SHOWN SECURED LOANS OF RS.9,26,21,147/- FROM VARIOUS BANKS AND HAS CLAIMED FINANCIAL EXPENSES AMOUNTING TO RS.7,67,64,326/-. IT IS ALSO OBSERVED THAT ASSESSEE GAVE INTEREST-FREE LOANS AND ADVANCES TO V ARIOUS SISTER CONCERNS AND HAS MADE INVESTMENT IN PROPERTIES IN T HE NAME OF FIRM, AS WELL AS PARTNERS. LD.AO ASKED ASSESSEE AS TO WHY PROPORTIONATE INTEREST SHOULD NOT BE DISALLOWED FOR DIVERGING INTEREST-BEARING FUNDS FOR NON-BUSINESS PURPOSES. 2.3 ASSESSEE REPLIED TO SHOW CAUSE BY SUBMITTING TH AT IT HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE AT ITS DIS POSAL AND, THEREFORE, DISALLOWANCE CANNOT BE MADE. 2.4 LD.AO NOT BEEN SATISFIED WITH REPLY OF ASSESSEE DISALLOWED A SUM OF RS.1,91,98,016/- ON ACCOUNT OF PROPORTIONATE INTEREST COMPUTED AT THE RATE OF 10%. 2.5 AGGRIEVED BY ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO ALLOWED CLAIM OF ASSESSEE. ITA NO. 712/DEL/2018 A.Y. 2014-15 LUCKY EXPORTS 3 2.6 AGGRIEVED BY ORDER OF LD. CIT (A), REVENUE IS I N APPEAL BEFORE US NOW. 3. AT THE OUTSET, NONE HAS APPEARED ON BEHALF OF AS SESSEE BEFORE US AT THE TIME OF HEARING. CONSIDERING SMAL LNESS OF ISSUE, WE DO NOT INTEND TO KEEP THE APPEAL PENDING AND, TH EREFORE, IS BEING DECIDED EX PARTE, ASSESSEE. 4. LD. SR. DR PLACED RELIANCE UPON OBSERVATIONS OF LD. AO. WE HAVE PERUSED RECORDS PLACED BEFORE US IN THE LIG HT OF SUBMISSIONS ADVANCED BY LD. SR. DR. 5. LD. CIT (A) CONSIDERED THE ISSUE AT LENGTH. IT I S OBSERVED THAT ASSESSEE HAS ADVANCED LOANS TO ITS SISTER CONCERN A ND ALSO MADE INVESTMENT IN PROPERTIES AS UNDER: LD.AO HAS ALLEGED THAT ASSESSEE ADVANCED INTEREST- BEARING FUNDS FOR GIVING INTEREST-FREE LOANS TO ITS SISTER CONCERN AND FOR MAKING INVESTMENT IN PROPERTIES WHI CH ARE NON-BUSINESS PURPOSES. S.NO. PARTY NAME AVERAGE AMOUNT OF ADVANCE/INVESTMENTS PERIOD INTEREST @10% TILL 31.03.2012 1. PROPERTY- GLOBAL FOYER, GURGAON 17,99,22,878 1/4/2013 TO 31/3/2014 1,79,92,288 2. RAJESH SONDHI 1,20,57,275 1/4/2013 TO 31/3/2014 12,05,728 TOTAL 1,91,98,016/- ITA NO. 712/DEL/2018 A.Y. 2014-15 LUCKY EXPORTS 4 6. BEFORE LD. CIT(A), ASSESSEE SUBMITTED THAT, OUT OF RS.19,20,41,754/- IS A SUM OF RS.2,71,44,030/- WAS ADVANCED DURING EA RLIER YEAR, WHICH HAS BEEN DULY ACCEPTED BY LD. AO IN ASSESSMENT YEAR 201 0-11. IT IS ALSO STATED THAT A SUM OF RS.12,83,27,112/-, HAS BEEN EXTENDED DURING ASSESSMENT YEAR 2011-12 AND RS.6,00,39,922/-, DURING ASSESSMEN T YEAR 2012-13. IT HAS BEEN SUBMITTED BY ASSESSEE BEFORE LD. CIT (A) T HAT A SUM OF RS. 1,23,200/- IS FRESH ADVANCES DURING YEAR UNDER CONS IDERATION. IT WAS SUBMITTED BY ASSESSEE THAT DURING RELEVANT PERIOD, ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE. IT WAS SUBMITTED TH AT FOR ASSESSMENT YEARS 2011-12 AND 2012-13 LD. AO IN SCRUTINY ASSESSMENT U NDER SECTION 143 (3) OF THE ACT, DISALLOWED SIMILAR INTEREST EXPENSES WH ICH WAS SUBSEQUENTLY DELETED IN ORDER PASSED BY THE THEN LD. CIT (A). 7. WHILE GRANTING RELIEF TO ASSESSEE FOR YEAR UNDER CONSIDERATION, LD. CIT (A) OBSERVED THAT ASSESSEE HAS GOT ENOUGH INTEREST- FREE FUNDS AVAILABLE IT IS DISPOSAL, OUT OF WHICH THESE ADVANCES/INVESTMENTS H AVE BEEN MADE. HE PLACED RELIANCE UPON ANALYSIS OF FUNDS AVAILABLE AT DISPOSAL OF ASSESSEE REPRODUCED IN HIS ORDER. BEFORE US LD. SR. DR HAS N OT BEEN ABLE TO PRODUCE ANY CONTRARY EVIDENCES/OBSERVATIONS IN ORDER TO DEV IATE FROM AFORESTATED VIEW BY LD. CIT (A). THERE IS NOTHING ON RECORD TO SHOW THAT ENTIRE INTEREST FREE ADVANCE MADE TO SISTER CONCERN PERTAINS TO YEA R UNDER CONSIDERATION. WE ARE, THEREFORE, NOT INCLINED TO INTERFERE WITH F INDINGS OF LD. CIT (A) AND SAME IS UPHELD. ACCORDINGLY GROUNDS RAISED BY REVENUE STANDS DISMIS SED. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/11/2018 SD/- SD/- (PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JU DICIAL MEMBER DT. 14 TH NOVEMBER,2018 *KAVITA ARORA ITA NO. 712/DEL/2018 A.Y. 2014-15 LUCKY EXPORTS 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES DATE DRAFT DICTATED ON 13.11.2018 DRAFT PLACED BEFORE AUTHOR 14.11.2018 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 14.11.2018 KEPT FOR PRONOUNCEMENT ON & ORDER UPLOADED ON : 14.11.2018 FILE SENT TO THE BENCH CLERK 14.11.2018 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.