DCIT 16(3)), MUMBAI V. PANKAJ METALS, MUMBAI

ITA 7815/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1899 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AMBRISH MEHTA
• Keywords: Additional evidence; Corroborative evidences; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI N.K.BILLAIYA (ACCOUNTANT MEMBER) ITA NO.7815/MUM/2011 ASSESSMENT YEAR: 2008-09 DCIT 16(3), MATRU MANDIR, 2 ND FLOOR, R.NO.206, TARDEO ROAD,MUMBAI. PANKAJ METALS, 532, ARUN CHAMBERS, TARDEO MAIN ROAD, MUMBAI. PA NO.AAIFP 1763 H (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI RAJARSHI DWIVEDY RESPONDENT BY: SHRI AMBRISH MEHTA DATE OF HEARING: 4.2.2013 DATE OF PRONOUNCEMENT: 4 .2.2013 ORDER PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2008-09 AGAINST ORDER DATED 9.8.2011 OF LD CIT(A) -27, MUMBAI ON FOLLOWI NG GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT(A) ERRED IN DELETING AN AMOUNT OF RS.23,39,723/- BEING THE D ISALLOWANCE OF INTEREST U/S.36(1)(III) OF THE I.T.ACT, 1961 DEBITE D TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, WITHOUT APPRECIATION THAT THE ASSESSEE HAS NOT ESTABLISHED THE COMMERCIAL EXPEDIENCY IN INVESTING THE INTEREST BEARING FUNDS WITH THE SISTER CONCERN AS LAID DOWN BY HONB LE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS CIT& ANOTHER, 288 ITR 1(SC) . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD CIT(A) ERRED IN ADMITTING FRESH EVIDENCE WITHOUT ALLOWING AN OPP ORTUNITY TO THE AO TO EXAMINE THE SAME IN VIEW OF THE PROVISIONS OF RULE 46A OF THE I.T.RULES, 1962. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE T HAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF BAL ANCE SHEET, THE AO NOTICED THAT ASSESSEE HAS BORROWED RS.2.45 CRORES DURING THE YEA R UNDER CONSIDERATION FOR WORKING CAPITAL REQUIREMENTS. AO ALSO NOTICED THAT ASSESSE E HAS INVESTED AN AMOUNT OF RS.1.53 ITA NO.7815/MUM/2011 ASSESSMENT YEAR: 2008-09 2 CRORES BY WAY OF SHARE APPLICATION MONEY IN M/S. PA NKAJ EXTRUSIONS LTD.(PEL), A SISTER CONCERN. BESIDES THAT ASSESSE HAS ALSO INVESTED AN AMOUNT OF RS.1 CRORE IN ACQUISITION OF SHARES OF M/S. PANKAJ EXTRUSIONS LTD. AO ALSO N OTED THAT NO SUPPORTING EVIDENCE WAS FURNISHED TO SUPPORT THE CONTENTION THAT BORROWED M ONEY WAS UTILIZED FOR THE PURPOSES OF BUSINESS ONLY. BESIDES, ASSESSEE ALSO DID NOT S UBMIT LEDGER ACCOUNT OF CREDITORS TO SHOW THAT MONEY OWED TO THEM HAS BEEN USED FOR INVE STING IN SHARES AND SHARE APPLICATION OF M/S. PANKAJ EXTRUSIONS LTD. IT WAS IN THIS BACKDROP THAT AO DISALLOWED AN AMOUNT OF RS.25,81,334/- BEING THE INTEREST DEBITED TO PROFIT AND LOSS ACCOUNT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD CIT(A). 3. BEFORE LD CIT(A), ASSESSEE FILED THE RELEVANT LE DGER EXTRACTS AND EXPLAINED THAT NO INTEREST DISALLOWANCE IS CALLED FOR IN VIEW OF T HE FACT THAT THE INTEREST RECEIVED FROM M/S. PEL IS MORE THAN THE INTEREST PAID. ASSESSEE ALSO FURNISHED THE CASH FLOW FOR INVESTMENT IN EQUITY SHARES AND SHARE APPLICATION M ONEY OF M/S. PEL. LD CIT(A) CONSIDERED THE LEDGER EXTRACTS FURNISHED BY THE ASS ESSEE AND STATED THAT ON PERUSAL OF THE CASH FLOW STATEMENT FURNISHED BY THE ASSESSEE, THE AMOUNTS INVESTED WITH PEL WERE OUT OF L/C DISCOUNTING MONEY RECEIVED BY THE ASSES SEE ON WHICH INTEREST WAS PAID. LD CIT(A) HAS EXTRACTED THE STATEMENT AT PAGE 3 OF THE IMPUGNED ORDER THE AMOUNT OF RS.2,41,611/- ATTRIBUTABLE TO THE TRANSACTIONS IN R ESPECT OF LC DISCOUNTING MONEY ON WHICH INTEREST WAS PAID AND OBSERVED THAT THE SAME CANNOT BE ALLOWED AS RELEVANT EXPENDITURE U/S.36(1)(III) OF THE ACT. ACCORDINGLY, HE DIRECTED THE AO TO DISALLOW AN AMOUNT OF RS.2,41,611/- OUT OF RS.25,81,334/- DISAL LOWED BY THE AO. HENCE, THIS APPEAL BY THE DEPARTMENT. 4. AT THE OUTSET, LEARNED DEPARTMENTAL REPRESENTATI VE CONTENDS THAT LD CIT(A) HAS DELETED THE DISALLOWANCE OF INTEREST MADE BY THE AO BY CONSIDERING ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY TO AND/OR SEEKING REMAND REPORT FROM THE ASSESSING OFFICER. HE SUBMITTED THAT THERE IS VIOLATION OF RULE 46A OF I.T.RULES, 1962 AND , THEREFORE, THE MATTER BE RESTORED TO THE FILE OF THE AO. ON THE O THER HAND, LD COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT SOME OF THE ADDITIONAL EVIDENC ES WERE PRODUCED BEFORE LD CIT(A) WHICH HAVE BEEN CONSIDERED WHILE DELETING THE DISAL LOWANCE OF INTEREST. 5. CONSIDERING THE SUBMISSIONS OF LD REPRESENTATIVE S OF PARTIES AND THE FACTS THAT LD CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE DE HORS TO RULE 46A OF THE I.T.RULES ITA NO.7815/MUM/2011 ASSESSMENT YEAR: 2008-09 3 WITHOUT AFFORDING OPPORTUNITY OF HEARING THE AO, WE CONSIDER IT PRUDENT TO SET ASIDE THE ORDER OF THE CIT (A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO WILL REDECIDE THE ISSUE AFRESH ON THE BASIS OF MATERIAL AS MAY PRODUCED BY THE ASSESSEE BEFORE HIM AND AFTER PROVIDING A REASONAB LE OPPORTUNITY TO THE ASSESSEE BY WAY OF A REASONED ORDER. THEREFORE, GROUNDS OF APP EAL TAKEN BY DEPARTMENT ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2013 I.E. ON THE DATE OF HEARING. SD/- (N.K.BILLAIYA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 4 TH FEBRUARY, 2013 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),27, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-16 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI