ASTRA EXIM P. LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 7419/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3297 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M MURALI
• Keywords: Business expenditure

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDERSINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A. NO.7419/MUM/2013 , / ASSESSMENT YEAR: 2010-11 ASTRA EXIM PVT.LTD.,OBERIO GARDEN ESTATE, UNIT NO.4101,CHANDIVILI,ANDHERI(EAST), MUMBAI-400072 PAN:AADCA9987A VS. ITO(2)(1)(1) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SH.M MURALI ASSESSEE BY: SH.VIMAL PUNAMIYA / DATE OF HEARING: 16.03.2016 / DATE OF PRONOUNCEMENT: 16.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. - CHALLENGING THE ORDER,DTD.20.11.2013,OF CIT(A)-4,MU MBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,FILED ITS RETURN OF INCOME ON 16.09.2010,DECLARING INCOME AT RS. NIL.THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSME NT ON 31.12.2012,U/S.143(3)OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.74,91, 510/-. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE O F INTEREST RS.72.07 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE HAD EARNED INTEREST OF RS.74.91 LACS, HAD PAID INTEREST OF RS.72.07 LACS, THAT IT HAD CL AIMED CERTAIN EXPENSES AGAINST INTEREST INCOME.VIDE HIS ORDER SHEET DT.8.11.2012 THE AO ASK ED THE ASSESSEE AS TO WHY THE EXPENSES DEBITED TO P&L ACCOUNT SHOULD NOT BE DISALLOWED AS THE SAME WERE NOT RELATED TO INCOME EARNED.AFTER CONSIDERING THE SUBMISSION OF THE ASSE SSEE, THE AO HELD THAT IT HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR, FOR ALLO WING ANY EXPENDITURE THE FIRST PRE-CONDITION WAS THAT THE EXPENSES SHOULD HAVE BEEN INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THAT IN THE PREVIOUS YEAR THE ASSESSEE H AD SHOWN INTEREST INCOME BUT HAD NOT CLAIMED INTEREST EXPENSES, THAT PERUSAL OF THE BAL ANCE SHEET PROVED THAT ASSESSEE HAD NOT SHOWN SECURE/UNSECURED LOANS. ON A QUERY BY THE AO THE ASSESSEE STATED THAT IT HAD TAKEN UNSECURED LOANS, IT HAD PAID INTEREST ON THE SAID LOANS AND HAD DEDUCTED TDS BEFORE MAKING THE PAYMENT, THAT THE UNSECURED LOANS WERE SHOWN UN DER THE HEAD SUNDRY CREDITORS.THE AO OBSERVED THAT THE ASSESSEE HAD NOT TAKEN SECURED/UN SECURED LOANS UNDER CONSIDERATION, THAT THE SUNDRY CREDITORS SHOWN WERE OF EARLIER YEARS, T HAT IT HAD PAID INTEREST OF RS.70.00 LACS TO BENZO PETRO INTERNATIONAL LTD.,(BPIL) AND RS.2,07,1 23/- TO CHANDIWALA SHARES AND SECURITIES (CSS), THAT THE RETURN FILED BY BPIL SHOWED THAT IT HAD SHOWN LOSS OF RS.1.15 CRORES, THAT THE OPENING AND CLOSING AMOUNT IN THE BOOKS OF THE ASSE SSEE IN THE ACCOUNT OF BPIL WAS RS.44.16CRORES, THAT THE ASSESSEE HAD PAID THE INTE REST SO THAT BPIL COULD SET OFF ITS LOSSES. FINALLY,HE DISALLOWED THE INTEREST OF RS.72.07 LACS . 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS ARGUED THAT THE AO HAD IGNORED THE BASIC FACT THAT THERE WAS A TEMPORARY LUG IN THE BUSINESS OF T HE ASSESSEE,THAT HE HAD NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE CLAIM OF THE ASSESSEE, DURI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED INCOME FROM OTHER SOURCES,THAT THE ASS ESSEE HAD FILED COMPLETE DETAILS OF BUSINESS EXPENDITURE, THAT LOANS HAD BEEN TAKEN DUR ING THE YEAR AND HAD BEEN SHOWN IN THE 7419/M/13-ASTRA 2 LEDGER BOOK,THAT IT HAD RECEIVED INTEREST FROM FOU R PARTIES,THAT THE AO HAD ISSUED NOTICE U/S. 133(6)OF THE ACT TO VERIFY THE GENUINENESS OF THE I NTEREST EXPENDITURE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT IT HAD EARNED INTEREST OF RS.74,91,507/-, THAT IN THAT YEAR NO EXPENDITURE WAS CLAIMED ,THAT IT HAD NOT DISCLOSED ANY SECURED LOAN DURING THE YEAR FY 2008-09/2009-10,THAT IT HAD NOT DISCLOSED ANY UNDISCLOSED LOAN DURING THE SAME PERI OD, THAT THERE WAS NO JUSTIFICATION OF PAYMENT OF INTEREST, THAT NO INTEREST WAS PAID TO S UNDRY CREDITORS TILL 31.3.2009,THAT ASSESSEES BUSINESS IN TRADING IN PHARMACEUTICAL PRODUCTS WAS ACTIVE TILL ASSESSMENT YEAR 2007-08. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE STATED THAT THE ASSESSEE HAD TAKEN LOAN FROM TWO PARTIES AND ADVANCED IT TO FOUR PARTIES,THAT IT HAD EARNED INTEREST INCOME AND SAME WAS OFFERED FOR TAX,THAT BOTH THE PARTIES WERE NOT RELATED TO T HE ASSESSEE,THAT THERE WAS LULL IN THE REGULAR BUSINESS DURING THE YEAR UNDER CONSIDERATION,THAT THE ASSESSEE HAD NOT MADE PROPER ENTRIES IN THE BALANCE SHEET ABOUT THE TRADE LOANS OF EARLIER YEARS AND MONEY USED FOR EARNING INTEREST INCOME.THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTE D THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD DISALLOWED THE INTEREST EXPENDITURE ON THE G ROUND THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER A PPEAL,THAT THE ASSESSEE HAD CLAIMED THAT IT HAD TAKEN LOANS FROM BPIL AND CSS AND THAT LOAN TAK EN FROM THOSE PARTIES WERE USED FOR EARNING INTEREST INCOME,THAT THE AO AND THE FAA HAD NOT CONSIDERED THIS ISSUE AT ALL,THAT THEY HAVE TAKEN DECISION ON THE BASIS OF THE ENTRIES APP EARING IN THE BALANCE-SHEETS OF EARLIER YEARS.BEFORE US,THE AR HAD ADMITTED THAT IN THE BAL ANCE SHEETS PROPER ENTRIES WERE NOT MADE,THAT FACT OF TAKING LOAN AT LOWER RATE AND ADV ANCING LOAN AT HIGHER RATE DURING THE YEAR IN NOT IN DOUBT.AFTER CONSIDERING THE PECULIAR FACTS A ND CIRCUMSTANCES OF THE CASE,WE ARE OF THE OPINION THAT THE MATTER NEEDS FURTHER VERIFICATION. THEREFORE,IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE ISSUE TO THE FILE OF THE AO WHO WOULD DECIDED THE ISSUE AFRESH.HE WOULD AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS PARTLY ALLOWED. ! ' . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH,2016. 16 , 2016 SD/- SD/- ( /JOGINDERSINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.