Asstt.CIT Satara Circle, Satara V. M/s.B.H.Khoja & Company, Satara

ITA 834/PUN/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2033 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Proportionate interest; Commercial expediency
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 834/PN/2009 (ASSTT.YEAR : 2005-06) ACIT, SATARA CIRCLE, OPP : SCIENCE COLLEGE, MANJUNATH MANOR. SATARA. .. APPELLANT VS. B.H. KHOJA & COMPANY, SHANIWAR PETH, KARAD, TAL : KARAD, DIST : SATARA. .. RESPONDENT PAN NO. AABFB 4296N ITA NO. 1443/PN/2009 AND ITA NO.1444/PN/2009 (ASSTT.YEARS : 2006-07 AND 2004-05) B.H. KHOJA & COMPANY, SHANIWAR PETH, KARAD, TAL : KARAD, DIST : SATARA. .. APPELLANT PAN NO. AABFB 4296N VS. ACIT, SATARA CIRCLE, OPP : SCIENCE COLLEGE, MANJUNATH MANOR. SATARA. .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI ACHAL SHARMA DATE OF HEARING : 14-02-2013 DATE OF PRONOUNCEMENT : 22-02-2013 ORDER PER R.K. PANDA, AM : ITA NO.834/PN/2009 FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29-04-2009 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEAR 2005-06. ITA NO.1443/PN/2009 AND ITA NO.1444/PN/2009 FILED BY TH E ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 09-10-2009 OF THE CIT(A)-III, PUNE RELATING TO ASSESSMENT YEAR 2006-07 AND 2004-05 RESPECTIVELY. SINCE COMMON ISSUES ARE INVOLVES IN ALL THESE APPEALS, THEREFORE, THESE WER E HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2 ITA NO.834/PN/2009 (BY REVENUE) (A.Y.2005-06) : 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE REVENUE THEY ALL RELATE TO THE ORDER OF THE CIT(A) IN DELETING THE A DDITION OF ` 12,69,559 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROPORTIONATE DISAL LOWANCE OF INTEREST U/S.37 OF THE INCOME TAX ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF TRADING OF SUGAR AND ALS O EARNING COMMISSION INCOME FROM SUCH BUSINESS. THE ASSESSEE FILED ITS RETURN OF INCOME ALONG WITH AUDITED ACCOUNTS DECLARING TOTAL INCOME OF ` 8,99,000. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED FROM THE PROFIT AND LOS S ACCOUNT AS WELL AS THE DETAILS FILED FROM TIME TO TIME THAT THE ASSESSEE DURING TH E IMPUGNED ASSESSMENT YEAR HAS PAID INTEREST ON BANK OD/C.C. ACCOUNT OF ` 4,18,825. SIMILARLY, IT HAS PAID INTEREST ON DEPOSITS AMOUNTING TO ` 16,80,056 AND INTEREST TO PARTNERS ON THEIR CAPITAL OF ` 1,96,717. THUS INTEREST WAS PAID ON THE SECURED AN D UNSECURED LOANS TAKEN BY THE ASSESSEE FIRM FROM THE BANK AS WELL AS PERSONS/RELA TIVES COVERED U/S.40A(2)(B) OF THE INCOME TAX ACT. THE AO NOTED THE ASSESSEE DURI NG THE IMPUGNED ASSESSMENT YEAR HAS NOT CHARGED INTEREST FROM THE PARTIES TO W HOM ADVANCES/DEPOSITS/LOANS HAVE BEEN GIVEN. HE NOTED THAT THE AMOUNTS OUTSTAN DING AS ON 31-03-2005 WITH VARIOUS PARTIES FROM WHOM NO INTEREST WERE RECEIVED OR CHARGED BY THE ASSESSEE WERE AS UNDER : 3.1 ON BEING CONFRONTED BY THE ASSESSING OFFICER AS TO WHY PROPORTIONATE DISALLOWANCE SHOULD NOT BE MADE ON ACCOUNT OF HUGE INTEREST FREE ADVANCES LYING SR. NO. NAME OF THE SUGAR FACTORY AMOUNT OUTSTANDING AS ON 31-03-2005 (RS.) 1 SAHYADRI S.S.K. LTD. YASWANTNAGAR 18,25,200 2 BALASAHEB DESAI S.S.K. LTD. DOULATNAGAR 4,20,000 3 RAJARAMBAPU PATIL S.S.K. LTD. 23,34,640 4 YASHWANT S.S.K. LTD. THEIR 4,48,840 5 JARANDESHWAR S.S.K. LTD. CHIMANGAON 1,68,38,802 6 DONGRAL SAGRESHWAR S.S.K. LTD. 9,62,500 3 WITH VARIOUS PARTIES THE ASSESSEE INTER-ALIA SUBMIT TED THAT EXCEPT M/S. JARANDESHWAR S.S.K. LTD. AND M/S. DONGRAL S.S.K. LTD THE OUTSTAN DING AMOUNT IN CASE OF REMAINING PARTIES HAVE BEEN ADJUSTED IN THE NEXT WE EK ITSELF. IT WAS SUBMITTED THAT ACTUALLY THESE AMOUNTS ARE NOT DEPOSITS OR ADVANCES BUT AGAINST THE PAYMENT OF SUGAR PURCHASED BY FILING TENDER IN THE MONTH OF MA RCH, DELIVERY OF WHICH WAS TAKEN IN THE MONTH OF APRIL. IT WAS ACCORDINGLY SU BMITTED THAT THERE IS NO QUESTION OF CHARGING INTEREST ON ADVANCES GIVEN TO PARTIES O THER THAN JARANDESHWAR S.S.K. LTD. AND DONGRAL S.S.K. LTD. 3.2 IN CASE OF JARANDESHWAR S.S.K. LTD. IT WAS SUBM ITTED THAT ALTHOUGH THE ASSESSEE HAD ALWAYS CREDIT BALANCE WITH THE SUGAR F ACTORY EXCEEDING ` 90 LAKHS, THE SAME IS DUE TO THE IMPLIED UNDERSTANDING WITH THE S UGAR FACTORY THAT IT WILL SALE SUGAR AT DISCOUNTED PRICE OF AROUND ` 40 TO ` 50 PER BAG. THE COMPARATIVE STATEMENT OF MARKET RATE OF SUGAR PURCHASED FROM JARANDESHWAR S.S.K. LTD. AND FROM OTHER SUGAR FACTORIES WAS FILED TO THE PROPOSITION THAT T HE ASSESSEE IS BENEFITTED BY ALMOST ` 20 LAKHS SINCE THE ASSESSEE HAS PURCHASED MORE THA N 40,000 BAGS OF SUGAR AT DISCOUNTED RATE. THEREFORE, THERE IS NO QUESTION O F CHARGING INTEREST ` 12% ON ` 90 LAKHS. 3.3 IN CASE OF DONGRAL SUGAR FACTORY IT WAS SUBMITT ED THAT THE ASSESSEE HAS DEPOSITED ` 9,62,500 ON ACCOUNT OF PURCHASE OF SUGAR AS PER TEN DER OF THE SUGAR FACTORY. HOWEVER, FACTORY COULD NOT GIVE DELIVERY OF SUGAR AND IT HAS DECIDED TO REFUND THE AMOUNT PAID AGAINST THE TENDER OF PURCHA SE OF SUGAR. HOWEVER, DUE TO FINANCIAL CRISIS THE CHEQUE ISSUED BY THE SUGAR FAC TORY WAS RETURNED BACK BY THE BANK ON ACCOUNT OF INSUFFICIENT BALANCE THRICE. SU BSEQUENTLY, THE PARTY REFUNDED THE MONEY WHICH WAS RECEIVED IN THE FINANCIAL YEAR 2005-06. IT WAS SUBMITTED THAT IT IS NOT A DEPOSIT AND THEREFORE THE QUESTION OF C HARGING INTEREST ON THE SAME DOES NOT ARISE. 4 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT IF THE ASSESSEE W OULD NOT HAVE GIVEN THE ADVANCES, THEN HE WOULD HAVE SAVED INTEREST TO THE EXTENT OF MORE THAN ` 12 LAKHS ESPECIALLY IN THE CASE OF JARANDESHWAR S.S.K. LTD. SINCE THE ASSESSEE HAD USED THE INTEREST BEARING BORROWED FUNDS FOR MAKING INTEREST FREE ADVANCES THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 12,16,559 ON ACCOUNT OF ADVANCES GIVEN TO JARANDESHWAR S.S.K. LTD. SIMILARLY HE DISALLOWED AN AMOUNT OF ` 50,000 ON ADHOC BASIS FOR OTHER PARTIES. THUS, IN EFFECT, THE ASSE SSING OFFICER DISALLOWED AN AMOUNT OF ` 12,66,559 ON ACCOUNT OF PROPORTIONATE INTEREST ON I NTEREST FREE ADVANCE TO DIFFERENT PARTIES. 5. BEFORE THE CIT(A) IT WAS ARGUED THAT ADVANCES WE RE GIVEN TO JARANDESHWAR S.S.K. LTD. WHEN IT WAS IN FINANCIAL CRISES AND VER Y WEAK AND WHEN IT GAVE ATTRACTIVE BUSINESS OFFER. IT WAS ARGUED THAT THE SUGAR FACTORY ACCEPTED TO SUPPLY SUGAR AT DISCOUNTED RATES AS AGAINST THE PREVAILING MARKET RATE. IT WAS SUBMITTED THAT THE ASSESSEE IS A TRADER/BUSINESSMAN AND NOT A MONEY LENDER AND EARNING OF INTEREST ON DEPOSITS/ADVANCES IS NOT THE BUSINESS O F THE ASSESSEE. RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. REPORTED IN 288 ITR 1 (SC) IT WAS SUBMITTED THAT THERE IS NO QUESTION OF CHARGING INTEREST ON INTEREST FREE ADVA NCES TO VARIOUS PARTIES. 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LEARNED CIT(A) DELETED THE ADDITION. WHILE DOING SO, HE NOTED THA T THE ADVANCE GIVEN TO JARANDESHWAR S.S.K. LTD. WAS FOR BUSINESS PURPOSE A ND IN RETURN THE ASSESSEE GOT DISCOUNT OF ` 40 TO ` 50 PER BAG OF SUGAR WHICH IS SUBSTANTIAL WITH REFE RENCE TO THE OVERALL TURNOVER AND PURCHASES FROM VARIOUS CONCERN S. RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILD ERS (SUPRA) AND CONSIDERING THE SUBMISSION OF THE ASSESSEE THAT IT HAS GOT RATE DISCOUNT ON ACCOUNT OF PURCHASE 5 OF SUGAR FROM JARANDESHWAR S.S.K. LTD. THE LEARNED CIT(A) HELD THAT THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF PROPORTIONATE INT EREST. 6.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE ASSESSEE COULD NOT ESTABLISH THE PROPOSITION OF COMMERCIAL EXPEDIE NCY FOR NOT CHARGING INTEREST FROM M/S. JARANDESHWAR S.S.K. LTD.. HE SUBMITTED T HAT IN THE A.Y. 2006-07 THE ASSESSING OFFICER HAS DISPROVED THE STATEMENT OF TH E ASSESSEE THAT IT HAD EARNED HUGE DISCOUNT ON ACCOUNT OF PURCHASES FROM JARANDES HWAR S.S.K. LTD. HE SUBMITTED THAT A MERE LOOK AT THE CHART PREPARED BY THE ASSESSING OFFICER ON THE BASIS OF THE VARIOUS DOCUMENTS FURNISHED BY THE ASS ESSEE DURING THE A.Y. 2006-07 SHOWS THAT PRICE PAID TO JARANDESHWAR S.S.K. LTD. O N ACCOUNT OF PURCHASE OF SUGAR PER QUINTAL IS MUCH MORE THAN THE PRICE PAID TO VAR IOUS OTHER PARTIES. THE LEARNED CIT(A) WITHOUT VERIFYING THE DETAILS HAS MERELY ACC EPTED THE CONTENTION OF THE ASSESSEE. THEREFORE, THE FINDING GIVEN BY THE LEAR NED CIT(A) BEING CONTRARY TO FACTS SHOULD NOT BE ACCEPTED. HE SUBMITTED THAT TH E FINDING GIVEN BY THE LEARNED CIT(A) THAT THE ASSESSEE GOT DISCOUNT OF ` 40 TO ` 50 PER BAG IS NOT BORNE OUT OF RECORDS. THEREFORE, THE ORDER OF THE CIT(A) BE REV ERSED AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSE E GOT RATE DISCOUNT FROM JARANDESHWAR S.S.K. LTD. DUE TO ADVANCES GIVEN TO T HEM WHICH WAS EXPLAINED BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT TH E ASSESSEE HAS THE OPTION TO CONDUCT ITS BUSINESS IN THE WAY IT LIKES AND THE DE PARTMENT CANNOT FORCE THE ASSESSEE TO ACT IN A PARTICULAR MANNER. HE SUBMITTE D THAT THE ADVANCES GIVEN TO JARANDESHWAR S.S.K. LTD. WAS FOR COMMERCIAL EXPEDIE NCY AND THEREFORE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF S.A. BUILDERS (SUPRA) NO 6 PROPORTIONATE DISALLOWANCE OF INTEREST CAN BE MADE. IN HIS ALTERNATE CONTENTION HE SUBMITTED THAT THE ASSESSEE HAD ARGUED BEFORE THE L EARNED CIT(A) THAT IT HAD SUFFICIENT INTEREST FREE FUNDS OUT OF WHICH INTERES T FREE ADVANCES HAS BEEN GIVEN. HOWEVER, THE LEARNED CIT(A) HAS NOT DISCUSSED THIS ISSUE. HE ACCORDINGLY SUBMITTED THAT SINCE THE AMOUNT WAS GIVEN FOR COMME RCIAL EXPEDIENCY AND THE ASSESSEE HAD SUFFICIENT OWN FUNDS AND INTEREST FREE FUNDS, THEREFORE, DISALLOWANCE OF PROPORTIONATE INTEREST BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND THE CIT(A) WAS RIGHT IN DELETING SUCH ADDITION. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD GIVEN INTEREST FREE ADVANCES TO VARIOUS PARTIES THE DETAILS OF WHICH ARE GIVEN BY T HE ASSESSING OFFICER AT PAGE 3 OF THE ASSESSMENT ORDER. WE FIND THE ASSESSING OFFICE R DISALLOWED AN AMOUNT OF ` 12,66,559 BEING PROPORTIONATE INTEREST ON ACCOUNT O F INTEREST FREE ADVANCES GIVEN TO JARANDESHWAR S.S.K. LTD. AND VARIOUS OTHER PARTI ES. WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS CAL CULATED THE PROPORTIONATE INTEREST ON ACCOUNT OF INTEREST FREE ADVANCES TO JA RANDESHWAR S.S.K. LTD. AT ` 12,66,559 AND ANOTHER ` 50,000 FOR VARIOUS OTHER PARTIES. WE FIND THE LEA RNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING O FFICER ON THE GROUND THAT THE ASSESSEE GOT DISCOUNT OF ` 40 TO ` 50 PER BAG OF SUGAR PURCHASED FROM JARANDESHWAR S.S.K. LTD. AND THE ADVANCE PAID TO THE ABOVE PARTY IS FOR COMMERCIAL EXPEDIENCY. 9.1 IT IS THE CASE OF THE REVENUE THAT THE RECORDS DO NOT SHOW THAT THE ASSESSEE HAS RECEIVED DISCOUNT OF ` 40 TO ` 50 PER BAG OF SUGAR IN THE LIGHT OF THE FINDING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT OR DER FOR A.Y. 2005-06 ACCORDING TO WHICH THE PRICE PAID PER BAG OF SUGAR TO JARANDE SHWAR S.S.K. LTD. IS MORE THAN 7 THE PRICE PAID TO VARIOUS OTHER PARTIES. ON A POIN TED QUERY BY THE BENCH AS TO HOW THE ASSESSEE HAS RECEIVED THE DISCOUNT OF ` 40 TO ` 50 PER BAG OF SUGAR IN THE LIGHT OF THE FINDING GIVEN BY THE ASSESSING OFFICER IN THE O RDER FOR A.Y. 2005-06 THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT SUBSTANT IATE WITH SATISFACTORY EVIDENCE. FURTHER, IN ABSENCE OF FURNISHING OF AUDITED ACCOUN TS IN THE SHAPE OF PAPER BOOK AND IN ABSENCE OF ANY DISCUSSION BY THE ASSESSING O FFICER IN THE BODY OF THE ASSESSMENT ORDER OR BY THE LEARNED CIT(A) IN THE AP PELLATE ORDER REGARDING THE AVAILABILITY OF OWN FUNDS AND INTEREST FREE FUNDS T HE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT HAS SUFFICIENT INT EREST FREE FUNDS AND FREE RESERVES WHICH IS MORE THAN THE INTEREST FREE ADVANCES REMAI NS UNVERIFIED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE, IN THE INTER EST OF JUSTICE, DEEM IT PROPER TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIAT E WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE ASSE SSEE HAS INFACT RECEIVED DISCOUNT FROM JARANDESHWAR S.S.K. LTD. FURTHER, THE ASSESSIN G OFFICER ALSO SHALL VERIFY THE CONTENTION OF THE ASSESSEE THAT THE CAPITAL AND FRE E RESERVES AND INTEREST FREE FUNDS ARE MORE THAN THE INTEREST FREE ADVANCES GIVEN TO V ARIOUS OTHER PARTIES. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AF RESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1443/PN/2009 (BY ASSESSEE) (A.Y. 2006-07) : 10. THE ASSESSEE IN THE GROUNDS OF APPEAL NO. 1 AND 2 HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF ` 11,17,418 AND ` 13,350 RESPECTIVELY MADE BY THE ASSESSING OFFICER U/S.36(1)(III) R.W.S. 40A(2)(B) OF THE INCOME TAX ACT. 8 11. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE ADDITION SUSTAINED BY THE LEARNED CIT(A) TO THE EXT ENT OF ` 13,350 FOR WHICH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. THEREFORE, THE ONLY ISSUE THAT REMAINS IN GROUNDS OF APPEAL 1 & 2 BY THE ASSE SSEE RELATES TO ADDITION OF ` 11,17,418 MADE BY THE ASSESSING OFFICER AND SUSTAIN ED BY THE LEARNED CIT(A). 12. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER DISALLOWED PROPORTIONATE INTEREST OF ` 11,17,418 BEING INTEREST FREE ADVANCE GIVEN TO JARANDESHWAR S.S.K. LTD. WHILE DOING SO, HE REJECT ED THE CONTENTION OF THE ASSESSEE THAT IT HAS RECEIVED RATE DISCOUNT OF SUGA R PURCHASED FROM THE SAID PARTY. THE ASSESSING OFFICER DISCUSSED THE ISSUE AT PARA 4 .3 OF THE ORDER AND HAS PREPARED A TABLE ACCORDING TO WHICH THE PRICE PAID TO JARAND ESHWAR S.S.K. LTD. DURING OCTOBER 2005 IS MORE THAN THE PRICE PAID TO VARIOUS OTHER PARTIES. SIMILARLY, THE PRICE PAID TO JARANDESHWAR S.S.K. LTD. DURING NOVEM BER 2005 IS ALSO MORE THAN THE PRICE PAID TO DIFFERENT PARTIES EXCEPT PRICE PA ID TO BALASAHEB DESAI S.S.K. LTD. SIMILARLY, THE PRICE PAID TO JARANDESHWAR S.S.K. LT D. DURING JANUARY 2006 IS MORE THAN THE PRICE PAID TO VARIOUS OTHER SUPPLIERS. TH E TABLE PREPARED BY THE ASSESSING OFFICER READS AS UNDER : PURCHASE RATE PER QUINTAL IN (RS.) SR. NO. NAME OF FACTORY DURING OCTOBER 2005 DURING NOVEMBER 2005 DURING JANUARY 2006 1 JARANDESHWAR SSK 1785 1790 1740 2 KRISHNA SSK LTD. 1738 1758 1760 3 SAHYADRI SSK LTD. 1737 1762 1742 4 BALASAHEB DESAI SSK 1739 1812 1797 5 RAJARAMBAPU SSK 1707 1744 1742 12.1 IN APPEAL, THE LEARNED CIT(A) UPHELD THE ADDIT ION MADE BY THE ASSESSING OFFICER. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME CIT(A) WHO HAS PASSED THE ORDER IN FAVOUR OF THE ASSESSEE FOR A.Y. 2005-06 HAS DEVIATED FROM 9 HIS EARLIER ORDER AND DISALLOWED THE PROPORTIONATE INTEREST ON INTEREST FREE ADVANCES GIVEN TO JARANDESHWAR S.S.K. LTD. HE SUBMITTED THA T THE ADVANCE PAID TO THE ABOVE PARTY WAS FOR COMMERCIAL EXPEDIENCY. FURTHER, THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEE FIRM HAD SUFFIC IENT CAPITAL AND FREE RESERVES AND INTEREST FREE ADVANCES WHICH IS MUCH MORE THAN THE INTEREST FREE ADVANCE GIVEN TO VARIOUS PARTIES ESPECIALLY JARANDESHWAR S.S.K. LTD. HAS NOT AT ALL BEEN ADDRESSED BY THE LEARNED CIT(A) ALTHOUGH THE SAME WAS ARGUED BEFORE HIM. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET-ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE ASSESSING OFFICER HAS CATEGORICALLY FOUND THAT THERE IS NO SUCH DISCOUNT AS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE TOWAR DS PURCHASE OF SUGAR DUE TO SUCH HUGE INTEREST FREE ADVANCES GIVEN TO JARANDESH WAR S.S.K. LTD. THEREFORE, THE ORDER OF THE CIT(A) BEING IN CONFORMITY WITH THE FA CTUAL POSITION SHOULD BE UPHELD. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. THE ISSUE RELATING TO DISALLOWANCE OF PROPORTIONATE INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE IS IDENTICAL TO THE GROUNDS RAISED BY THE R EVENUE IN ITA NO.834/PN/2009. WE HAVE DISCUSSED THE ISSUE AND HAVE RESTORED THE S AME TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH CERTAIN DIRECTI ONS. FOLLOWING THE SAME RATIO, THE FIRST 2 GROUNDS RAISED BY THE ASSESSEE ARE ALSO RES TORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF DIRE CTION GIVEN THEREIN. GROUNDS OF APPEAL NO.1 & 2 BY THE ASSESSEE ARE ACCORDINGLY ALL OWED FOR STATISTICAL PURPOSES. 16. GROUND OF APPEAL NO.3 BY THE ASSESSEE RELATES T O CHARGING OF INTEREST U/S.234A, 234B AND 234C. 10 16.1 SINCE CHARGING OF INTEREST UNDER THE ABOVE PRO VISIONS IS MANDATORY AND CONSEQUENTIAL IN NATURE, THEREFORE, THIS GROUND IS DISMISSED. 17. GROUND OF APPEAL NO.4 BY THE ASSESSEE BEING GEN ERAL IN NATURE IS DISMISSED. ITA NO.1444/PN/2009 (BY ASSESSEE) (A.Y. 2004-05) : 18. GROUNDS OF APPEAL NO.1 & 2 BY THE ASSESSEE REL ATES TO THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE INITIATION OF PROCE EDINGS U/S.147. 19. AFTER HEARING BOTH THE SIDES, WE FIND THE ORIGI NAL RETURN OF INCOME WAS FILED ON 19-10-2004 WHICH WAS PROCESSED U/S.143(1) ON 20- 03-2005. THE ASSESSING OFFICER ISSUED NOTICE U/S.148 ON 04-03-2008 WHICH WAS DULY SERVED ON THE ASSESSEE ON 06-03-2008. THE NOTICE SO ISSUED IS WI THIN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE CHALLENGED SUCH INITIATION OF ASSESSMENT U/S.147 BEFORE THE CIT(A) WHO REJECTED THE SAME ON THE GROUND THAT NO SUBMISSION HAS BEEN MADE IN THIS REGARD DURING APPEAL PROCEEDI NGS. HE HAS FURTHER NOTED THAT THE ASSESSING OFFICER WHILE RE-OPENING ASSESSMENT H AD GIVEN THE REASON THAT ON ACCOUNT ON NON-DISALLOWANCE OF PROPORTIONATE INTERE ST, INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. SINCE THE ASSESSMENT WAS M ADE U/S.143(1) AND SINCE THE NOTICE U/S.147/148 HAS BEEN ISSUED WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS.RAJESH JHAVERI STOCK BROKERS (P) LTD. REPORTED IN 291 ITR 500 THE INITIATION OF RE-ASSESS MENT PROCEEDINGS MADE BY THE ASSESSING OFFICER AND UPHELD BY THE LEARNED CIT(A) IS JUSTIFIED. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SIN CE IN ALL THOSE CASES THE ASSESSMENTS WERE PENDING WHERE VALID RETURN WAS FIL ED AND TIME FOR ISSUE OF NOTICE U/S.143(2) HAS NOT EXPIRED. HOWEVER, IN THE INSTAN T CASE, THE PROCESSING WAS 11 ALREADY DONE AND THE TIME PERIOD FOR NOTICE U/S.143 (2) HAS ALREADY EXPIRED. IN THIS VIEW OF THE MATTER, THE GROUND RAISED BY THE ASSESS EE CHALLENGING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS IS DECIDED AGAINST THE AS SESSEE. 20. IN GROUNDS OF APPEAL 3 & 4 THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF ` 1,68,474 ON ACCOUNT OF PROPORTIONATE INTEREST ON INTEREST FREE ADVANCES GIVEN TO JARANDE SHWAR S.S.K. LTD. 21. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUNDS ARE IDENTICAL TO GROUNDS OF APPEAL NO. 1 & 2 IN ITA NO.1443/PN/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HA VE BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. FOLL OWING THE SAME RATIO, THE ABOVE 2 GROUNDS BY THE ASSESSEE ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DIRECTIONS GIVEN T HEREIN. THESE GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 22. GROUNDS OF APPEAL NO.5 BY THE ASSESSEE RELATES TO CHARGING OF INTEREST U/S.234A, 234B AND 234C. SINCE CHARGING OF INTERES T UNDER THESE PROVISIONS ARE MANDATORY AND CONSEQUENTIAL IN NATURE, THEREFORE, T HIS GROUND IS DISMISSED. 23. GROUND OF APPEAL NO.6 BY THE ASSESSEE BEING GEN ERAL IN NATURE IS DISMISSED. 24. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF FEBRUARY 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED THE 22 ND FEBRUARY 2013 SATISH 12 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II AND III, PUNE 4. THE CIT-II AND III, PUNE 5. D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENI OR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE