Deputy Commissioner of Income-tax, V. Ajanta Infrastructure Pvt. Ltd., Aurangabad

ITA 955/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7746 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASEEM SHARMA
• Keywords: Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 955 /P U N/201 6 / ASSESSMENT YEAR : 20 12 - 13 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, NASHIK ....... / APPELLANT / V/S. A JANTA INFRASTRUCTURE PVT. LTD., PLOT NO. 5, API COMPOUND, CHIKALTHANA, DISTT. - AURANGABAD - 431001 PAN : AAECA7855J / RESPONDENT ASSESSEE BY : S MT. DEEPA KHARE REVENUE BY : SHRI ASEEM SHARMA / DATE OF HEARING : 2 8 - 05 - 201 8 / DATE OF PRONOUNCEMENT : 30 - 0 5 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 1, AURANGABAD DATED 25 - 02 - 2016 FOR THE ASSESSMENT YEAR 2012 - 13. 2 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 2. THE REVENUE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON FOLLOWING GROUNDS : A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.61,35,335/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT. B. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.36,14,141/ - ADDED BY THE AO ON ACCOUNT OF SUPPRESSION OF INTEREST INCOME. C. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. SHRI ASEEM SHARMA REPRESENTING THE DEPARTMENT SUBMIT TED THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS GIVEN SHORT TERM UNSECURED LOANS/LOANS AND ADVANCES TO : (I). AJANTA FACILITY MANAGEMENT & INFRA LLP RS.44,72,82,078/ - . (II). API AURANGABAD MANUFACTURING SETTLEMENT RS.2,40,00,000/ - . TOTAL RS.47,12,82,078/ - . THE ASSESSEE HAD UTILIZED INTEREST BEARING FUNDS FOR NON - BUSINESS PURPOSES BY ADVANCING INTEREST FREE FUNDS. THEREFORE, THE ASSESSING OFFICER DISALLOWED INTEREST ON SUCH ADVANCES GIVEN FOR NON - BUSINESS PURPOSES. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER COMPUTED INTEREST @ 12% OF RS.47,12,82,078/ - . SINCE, THE ASSESSEE HAD DEBITED INTEREST EXPENSES OF RS. 61,35,335/ - , THE ASSESSING OFFICER RESTRICTED THE DISALL OWANCE TO THE AFORESAID AMOUNT U/S. 36(1)(III) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 3 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 3.1 IN RESPECT OF GROUND NO. 2 THE LD. DR SUBMITTED THAT THE ASSESSEE IN DIRECTORS REPORT HAD MENTIONED THAT IT HAS RECEIVED INTEREST TO THE TUNE OF RS.36,14,141/ - FROM M/S. TRINITY AUTO POINTS LTD. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF THE DIFFERENCE BETWEEN THE AMOUNT DISCLOSED BY THE ASSESSEE IN DIRECTORS REPORT AND THE AMOUNT REFLECTED IN FORM 26AS. FURTHER, THE ASSESSIN G OFFICER ON VERIFICATION OF FORM 26AS FOUND THAT THE ASSESSEE HAS RECEIVED INTEREST TO THE TUNE OF RS.2,49,85,218/ - . WHEREAS, THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS DISCLOSED INTEREST INCOME OF RS.2,30,29,383/ - . THE ASSESSING OFFICER MADE ADDITION OF RS.19,55,835/ - I.E. DIFFERENCE BETWEEN THE AMOUNT DISCLOSED IN P ROFIT AND L OSS ACCOUNT AND AMOUNT REFLECTED IN FORM 26AS. 4. ON THE OTHER HAND SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) PRAYED FOR DISMISSING THE APPEAL OF REVENUE. THE LD. AR SUBMITTED THAT DURING THE PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE HAD DEMONSTRATED THAT OWN INTEREST FREE FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO THE SISTER CONCERNS. THE ASSESSEE HAS R ESERVES AND S URPLUS OF RS. 71,04, 27,830/ - AND S HARE C APITAL OF RS.3,26,99,050/ - . FURTHER, THE ASSESSEE HAS RECEIVED LOANS AND ADVANCES OF RS.35,89,38,872/ - FROM ITS BUSINES S ASSOCIATES ON WHICH NO INTEREST WAS PAID. WHEREAS, THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE ON WHICH INTEREST HAS BEEN DISALLOWED IS ONLY TO THE TUNE OF RS.47,12,82,078/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER EXAMINING THE FACTS AND TAKIN G INTO CONSIDERATION THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE UTILITIES & POWER LTD. REPORTED AS 313 ITR 340 4 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 AND VARIOUS OTHER DECISIONS ON THIS ISSUE DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S. 36(1)(III) OF THE ACT. 4.1 IN RESPECT OF GROUND NO. 2 OF THE APPEAL, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HA S ERRED IN MAKING ADDITION OF RS.36,14,141/ - ON ACCOUNT OF INTEREST INCOME. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE ASSESSEE COMPANY HAD FILED REVISED RETURN OF INCOME WHEREIN THE CORRECTION W AS MADE. THE ASSESSEE HAD RECEIVED LABOUR CHARGES OF RS.19,55,835/ - FROM M/S. TRINITY AUTO POINTS LTD. AND INTEREST OF RS.36,14,141/ - WAS RECEIVED FROM MR. SACHIN NAGORE. THE LD. AR REFERRING TO PARA 7 OF THE COMMISSIONER OF INCOME TAX (APPEALS) SUBMITTE D THAT THE ISSUE WAS EXPLAINED TO FIRST APPELLATE AUTHORITY THREADBARE AND AFTER CONSIDERING THE SAME THE ADDITION MADE ON ACCOUNT OF INTEREST WAS DELETED. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORD ERS OF AUTHORITIES BELOW . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LAND DEVELOPERS, REAL ESTATE DEALERS, BUILDERS AND ALLIED ACTIVITIES. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA MADE DISALLOWANCE /ADD ITION ON ACCOUNT OF : I . DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT RS.61,35,335/ - . II . ADDITION ON ACCOUNT OF INTEREST INCOME RS.36,14,141/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED BOTH THE ADDITIONS AGAINST WHICH THE REVENUE IS IN APPEAL. 5 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 6 . BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE HAD DEMONSTRATED THAT INTEREST FREE OWN FUNDS INCLUDING SHARE CAPITAL OF THE ASSESSEE ARE MUCH MORE THAN THE AMOUNT ADVANCE D FOR ALLEGED NON - BUSINESS PURPOSES. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER ANALYZING THE BALANCE SHEET OF THE ASSESSEE COMPANY FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE UTILITIES & POWER LTD. (SUPRA) AND DELETED THE ADDITION OF RS.61,35,335/ - MADE U/S. 36(1)(III) OF THE ACT. THE ASSESSEE IN SUPPORT HIS SUBMISSIONS PLACED RELIANCE ON VARIOUS DECISIONS TO CONTEND THAT WHERE OWN INTEREST FREE FUNDS ARE SUFFICIENT TO COVER INTEREST FREE LOANS AND ADVANCES , T HE PRESUMPTION WOULD BE THAT INVESTMENT / LOANS AND ADVANCES ARE MADE FROM INTEREST FREE FUNDS AVAILABLE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE AFTER EXAMINING THE FUNDS POSITION OF THE ASSESSEE. THE LD. DR HAS NOT BE EN ABLE TO CONTROVERT THE FINDING OF FACT QUA AVAILABILITY OF OWN FUNDS AND INTEREST FREE FUNDS WITH THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF RS.61,35,335/ - . ACCORDINGLY, GROUND NO. 1 RAISED IN THE APPEAL BY REVENUE IS DISMISSED. 7 . IN GROUND NO. 2, THE REVENUE HAS ASSAILED DELETING OF INTEREST INCOME RS.36,14,141/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER : 7. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE AO HAS MADE ADDITION OF RS.36,14,141/ - ON ACCOUNT OF INTEREST INCOME WHICH WAS DULY SHOWN IN 26AS BUT NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY. IN THE YEAR UNDER REFERENCE, THE APPELLANT COMPANY HAD REVISED ITS RETURN OF 6 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 INCOME TO ACCOUNT FOR VARIOUS ENTRIES NAMELY 'BAD DEBTS WRITTEN OFF IN PREVIOUS YEAR OF RS.1,20,00,000/ - OF TRINITY AUTO POINT PVT. LTD WERE REINSTATED IN BOOKS ALONG WITH LABOUR CHARGE S INCOME OF RS.19,55,835/ - ' AND FURTHER 'INTEREST RECEIVED FROM MR. SACHIN NAGORE AMOUNTING TO RS.36,14,141/ - ' WAS ALSO ACCOUNTED FOR ALONG WITH THE TDS. THE AO OBSERVED THAT AS PER 26AS, THE APPELLANT HAD SHOWN INTEREST INCOME OF RS.19,55,835/ - FROM M/S TRINITY AUTO POINTS LIMITED BUT IT WAS NOT FOUND CREDITED IN THE BOOKS OF ACCOUNT. HOWEVER THE APPELLANT COMPANY BY FILING A REVISED RETURN OF INCOME, INCLUDED THE ABOVE AMOUNT IN THE P&L ACCOUNT OF ITS MADRAS BRANCH AS LABOUR CHARGES INCOME. THE AO FURTHE R OBSERVED THAT AS PER 26AS, THE TOTAL INCOME OF THE APPELLANT FOR THE YEAR UNDER REFERENCE WAS AT RS.2,49,85,218/ - WHEREAS THE APPELLANT COMPANY HAD SHOWN INTEREST INCOME OF RS.2,30,29,383/ - IN THE BOOKS OF ACCOUNT. THIS PROMPTED THE AO TO ADD THE DIFFER ENCE OF RS.19,55,835/ - TO THE INCOME OF THE APPELLANT COMPANY. BEFORE ME, THE COUNSEL OF THE APPELLANT HAS ARGUED THAT LABOUR CHARGES (CONVERSION CHARGES) OF RS.19,55,835/ - FROM M/S TRINITY AUTO POINTS LIMITED WAS SHOWN IN THE P&L ACCOUNT OF ITS API MADRA S UNIT (BRANCH). THEREAFTER NET LOSS OF RS.41,89,082/ - WAS TRANSFERRED TO THE P&L ACCOUNT OF THE HEAD OFFICE. THE TDS WAS DEDUCTED ON THE SAME HOWEVER THE DEDUCTOR HAD INADVERTENTLY SHOWN THE SAME AS INTEREST INCOME. THE COUNSEL OF THE APPELLANT HAS ALSO F ILED COPY OF P&L ACCOUNT OF ITS API, MADRAS UNIT. ON VERIFICATION OF THE SAME, THE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT. SINCE THE INTEREST INCOME OF RS.36,14,141/ - FROM SHRI SACHIN NAGORE WAS ALREADY SHOWN AND CREDITED IN THE PR O FIT AND LOS S ACCOUNT (INCLUDED IN THE FIGURE OF RS.2,30,29,383/ - ), THE ADDITION MADE BY THE AO TANTAMOUNTED TO DOUBLE ADDITION. THE DETAILS OF INTEREST INCOME CREDITED TO THE P&L ACCOUNT OF HEAD OFFICE WERE AS UNDER: (I). INTEREST FROM CSJ INFRASTRUCTURES PVT. LT D. RS.1,78,80,426/ - . (II). CHATRAPATI SAMBHAJI S.S. KARKHANA RS.3,24,608/ - . (III). LAMIFAB & PAPERS PVT. LTD. RS.12,10,208/ - . (IV). SACHIN NAGORE RS.36,14,141/ - . TOTAL RS.2,30,29,383/ - . ACCORDINGLY THE ADDITION MADE BY THE AO HAS NO LEGS TO STAND AND SAME IS NOT SUSTAINABLE IN LAW. I THEREFORE DIRECT THE AO TO DELETE THE ADDITION OF RS.36,14,141/ - MADE BY HIM. THIS GROUND OF APPEAL IS ALLOWED. 8 . THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE WELL REASONED FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). THE IMPUGNED ORDER IS WELL 7 ITA NO . 955/PUN/2016, A.Y. 2012 - 13 REASONED AND THUS WARRANTS NO INTERFERENCE. ACCORDINGLY, GROUND NO. 2 RAISED IN THE APPEAL BY REVENUE LACKS MERIT AND HENCE, DISMISSED. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED . ORDER PRONOUNCED ON WEDNESDAY, THE 30 TH DAY OF MAY, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 30 TH MAY, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, AURANGABAD 4. THE PR. CIT - 1, AURANGABAD 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE