Sree Rayalaseema Sugar Energy Private Limited, Hyd, Hyderabad V. ITO, Ward-3(1), Hyderabad, Hyderabad

ITA 856/HYD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9935 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 19-03-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C ROUT
• Assessee Lawyers: A V RAGHURAM
• Keywords: Opportunity of being heard; Commercial expediency
• Section: 143(3); 142(1); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A - SMC , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO .856 /HYD/ 2017 ASSESSMENT YEAR: 20 07 - 08 SREE RAYALSEEMA SUGAR ENERGY PRIVATE LIMITED, HYDERABAD. PAN: AAICS 7470 B VS. ITO, WARD - 3(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY: SRI A.C. ROUT, DR DATE OF HEARING: 19/03/2019 DATE OF PRONOUNCEMENT: 29 /03/2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: 1. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 FILED AGAINST THE ORDER OF THE CIT(A) - 3, HYDERABAD DATED 08/02/2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF SUGAR INDUSTRY, FILED ITS RETURN OF INCOME FOR THE A.Y. 2007 - 08 ON 31/10/2007 ADMITTING A LOSS OF RS. 27,62,928/ - WHILE D EEMED INCOME U/S 115JB OF THE ACT WAS COMPUTED AT RS. 22,23,670/ - AND ACCORDINGLY, ASSESSMENT U/S 143(3) WAS MADE VIDE ORDER DATED 24/12/2009 DETERMINING THE TOTAL INC OME AT RS. 2,33,06,970/ - . 2 ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGAINST THE FOLLOWING THREE ADDITIO NS : - 1. EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS ADDED TO THE VALUE OF THE CLOSING STOCK -- RS. 1,42,61,259 2. DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE ON THE BORROWED FUNDS ATTRIBUTABLE TO THE INTEREST FREE LOANS EXTENDED BY THE ASSESSEE TO ITS SISTER CONCERN. -- RS. 40,46,443 3. AGRICULTURAL INCOME DISALLOWED AND TREATED AS INCOME FROM OTHER SOURCES. -- RS. 55,17,315 3. VIDE HIS ORDER DATED 30/07/2010, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE TOWARDS EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS WHEREAS THE OTHER TWO ADDITIONS WERE CONFIRMED BY THE CIT(A). BOTH ASSESSEE AS WELL AS THE REVENU E PREFERRED APPEALS BEFORE THE ITAT AGAINST THE ORDER OF THE CIT(A). 4. THE COORDINATE BENCH, ITAT WHILE DISPOSING THE APPEAL OF THE ASSESSEE - COMPANY VIDE ITS ORDER DATED 14/10/2010, SET - ASIDE THE ORDER OF THE CIT(A) AND REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION ON ALL THE ISSUES. THE A.O. ACCORDINGLY TOOK THE RETURN FOR SCRUTINY AND FRESH CONSIDERATION AND NOTICES U/S 142(1) WERE ISSUED. THE ASSESSEES REPRESENTATIVE APPEARED AND FURNISHED THE REQUIRED INFORMATION. THE A.O. OBSERVED THAT THE ASSESSEE HAS MADE AN INVESTMENT OF RS. 3,78,63,670/ - IN M/S. SREE 3 RAYALASEEMA GREEN STELOY LTD AND HAD ALSO ADVANCED A SUM OF RS. 15, 11,000/ - TO M/S. SREE RAYALASEEMA GREEN ENERGY LTD, WHICH ARE BOTH THE SISTER - CONCERNS OF THE A SSESSEE - COMPANY. HE ALSO OBSERVED THAT THE LOANS / ADVANCES ARE STATED TO BE INTEREST - FREE WHEREAS THE ASSESSEE INCURRED EXPENDITURE OF RS. 98,48,916/ - TOWARDS INTEREST ON BORROWED FUNDS. HE WAS OF THE OPINION THAT INTEREST TO THE EXTENT ATTRIBUTABLE TO T HE INTEREST FREE LOANS ADVANCED TO THE SISTER CONCERNS WAS TO BE DISALLOWED AS DONE IN THE ORDER U/S 143(3) DATED 24/12/2009. SINCE THE ISSUE WAS SET - ASIDE TO HIM, THE A.O. ISSUED FRESH NOTICES REQUIRING THE ASSESSEE TO FURNISH CERTAIN INFORMATION CONCERN ING THE INVESTMENTS MADE IN ITS SISTER CONCERNS AND ALSO THE COMMERCIAL EXPEDIENCY FOR MAKING SUCH INVESTMENTS. THE ASSESSEE - COMPANY VIDE LETTER DATED 30/11/2011 REPLIED THAT THE IMMEDIATE SOURCE IS CASH AVAILABLE IN ITS BOOKS OF ACCOUNT AND THAT IT HAD H UGE INVENTORY AS COULD BE SEEN FROM FINANCIAL STATEMENTS AND THAT THE C ASH WAS TRANSFERRED TO SREE RAYALASEEMA GREEN STELOY LTD ON REGULAR BUSINESS ACTIVITY PURPOSE. THE A.O. OBSERVED THAT THE COMPANY HAD AN SOD ACCOUNT AND MOST OF THE INTEREST PAID BY THE COMPANY IS SEEN TO BE TOWARDS THIS SOD ACCOUNT ONLY . A.O. OBSERVED THAT INSTEAD OF DEPOSITING THE CASH BALANCE AVAILABLE IN THE BOOKS IN TO THE SOD ACCOUNT, ASSESSEE USED THE SAME FOR MAKING INTEREST FREE ADVANCES TO ITS SISTER CONCERN S . HOLDING THAT THE ASSESSEE FAILED TO PROVE ANY COMMERCIAL EXIGENCY IN SUPPORT OF THE ADVANCES MADE, THE A.O. 4 DISALLOWED THE INTEREST ON INTEREST FREE ADVANCES TO ITS SISTER CONCERNS AND ACCORDINGLY HE MADE AN ADDITION OF RS. 49,46,443/ - . 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A ). CIT(A) CALLED FOR CERTAIN FURTHER DETAILS. HOWEVER, THE ASSESSEE DID NOT FURNISH THE SAME AND THEREFORE, HE CONFIRMED THE ORDER OF THE A.O. AND DISMISSED THE ASSESSEES APPEAL. ACCORDINGLY, THE ASSESSEE IS IN SECOND APPEAL B EFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE LD. CIT(A) IS NOT ONLY ERRONEOUS BOTH ON FACTS AND IN LAW BUT IS CONTRARY TO THE RATIO LAID DOWN BY THE SUPREME COURT. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE A.O. OF DISALLOWING INTEREST RS. 49,46,443/ - ON MERE GROUND OF NOT RESPONDING WITH ANSWERS THOUGH IT IS DUE TO REASONS BEYOND ITS CONT ROL, FOR THE QUERIES RAISED THROUGH THEY ARE NOT RELEVANT ON THE ISSUE. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE A.O. HIMSELF HAS GIVEN A FINDING AFTER LOOKING AT THE ACCOUNTS OF SRI RAYALASEEMA GREEN STELOY THAT THE FUNDS RECEIVED FROM THE ASSESSE E ARE USED FOR USUAL BUSINESS ACTIVITY AND THUS ERRED IN CALLING FOR THE SAME INFORMATION ONCE AGAIN AND CONFIRMING THE ADDITION ON THE GROUND OF NOT SUBMITTING THE SAME. 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE A.O. AS PER THE DIRECTIONS OF THE TR IBUNAL IS REQUIRED TO FIND OUT WHETHER THERE IS OWN FUNDS AND SECONDLY WHETHER THERE IS COMMERCIAL EXPEDIENCY AND WHEREAS HE HAS NOT FOLLOWED IT AND IN SPITE OF PROVING THAT THE ASSESSEE HAS MORE OWN FUNDS THAN AMOUNT ADVANCED AND PROVED THAT THE SISTER CO MPANY USED IT FOR BUSINESS THUS PROVING THE COMMERCIAL EXPEDIENCY ON MERE GROUND THAT THE ASSESSEE IS HAVING A SOD A/CIT(A) AND THE CASH ADVANCED IF USED TO CLEAR LOAN THE INTEREST BURDEN WOULD HAVE BEEN LOWER HAS MADE THE DISALLOWANCE WHICH REASONING IMPL IEDLY OVER RULED BY THE ITAT. 6. LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, PRAYED FOR ONE MORE OPPORTUNITY TO PRESENT ITS CASE BEFORE THE CIT(A). HE SUBMITTED THAT 5 THE ASSESSEE HAD NOT FURNISHE D ALL THE RELEVANT DETAILS CALLED FOR BEFORE THE A.O. & THE CIT(A). 7. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, I FIND THAT THE ASSESSEE HAS NOT FURNISHED RELEVANT DETAILS REQUIRED BY THE CIT(A) AND SINCE THE ASSESSEE SUBMITS THAT IT IS READY TO FURNISH THE SAME, IN THE INTEREST OF JUSTICE, I DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO RECONSIDER THE ISSUE AFTER GIVING A FAIR OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2019 . SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 29 TH MARCH , 2019 OKK COPY TO: - 1) K.VASANTKUMAR, A.V. RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD - 1. 2) INCOME TAX OFFICER, WARD - 3(1), 7 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 6 3) THE CIT(A) - 3 , HYDERABAD 4) THE PR. CIT - 3 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE