Jayntilal T Oswal, V. Addl CIT, Pune

ITA 965/PUN/2012

• Counselvise Citation: 96524514 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Section: 143(3); 263; 63; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.965/PN/2012 (ASSESSMENT YEAR : 2007-08) JAYNTILAL T OSWAL, 259/A/5, BHAWANI PETH, PUNE. PAN : AACPO7931M . APPELLANT VS. CIT-III, PUNE. . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MR. A. K. MODI DATE OF HEARING : 24-09-2014 DATE OF PRONOUNCEMENT : 29-09-2014 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-III, PUNE (IN SHORT THE COMMISSIONER) DATED 28.03.2012 PASSED U/S 263 OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT) WHEREBY AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT DATED 24.12.2009 HAS BEEN HELD TO BE ERRONE OUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. 2. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S AN INDIVIDUAL WHO IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF DEVELOPMENT AND SALE OF VARIOUS RESIDENTIAL/COMMERCIAL PROJECTS. FOR THE ASSESSMEN T YEAR 2007-08, HE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.9,16, 59,230/-, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT. THE ASSESSING OFFICER PA SSED AN ORDER U/S 143(3) OF THE ACT DATED 24.12.2009 WHEREBY THE TOTAL INCOM E WAS ASSESSED AT RS.11,75,47,385/- AFTER MAKING ADDITIONS ON ACCOUNT OF UNPROVED EXPENDITURE OF RS.1,05,00,000/- AND UNDISCLOSED SALE CONSIDERAT ION ON SALE OF LAND ITA NO.965/PN/2012 AMOUNTING TO RS.1,53,88,155/-. SUBSEQUENTLY, THE C OMMISSIONER HAS INVOKED HIS REVISIONARY JURISDICTION CONTAINED IN SECTION 2 63 OF THE ACT. AS PER THE COMMISSIONER, ON EXAMINATION OF THE RECORD OF PROCE EDINGS, THE ASSESSMENT ORDER DATED 24.12.2009 (SUPRA) WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT QUA THE NON-EXAMINATION BY THE ASSESSING OFFICER OF THE INTEREST EXPENDITURE OF RS.28,75,916/- CLAIMED BY THE ASSESSEE. AS PER THE COMMISSIONER, ASSESSEE HAD GIVEN INTEREST-FREE ADVANCE OF RS.1,21,46,981/- TO M/S ELCON INDUSTRIES, A SISTER CONCERN AND AT THE SAME TIME ASSESSEE HAD PA ID INTEREST ON FUNDS RAISED. AS PER THE COMMISSIONER, SINCE THE ASSESSE E HAD DIVERTED PART OF ITS INTEREST BEARING MONIES FOR INTEREST-FREE ADVANCE T O THE SISTER CONCERN, INTEREST RELATING TO SUCH ADVANCE WAS PRIMA-FACIE NOT ADMISS IBLE AS AN EXPENSE WHILE COMPUTING PROFITS AND GAINS OF HIS BUSINESS. AFTER SHOW-CAUSING THE ASSESSEE AND CONSIDERING THE SUBMISSIONS PUT-FORTH BEFORE HI M, THE COMMISSIONER HAS DIRECTED THE ASSESSING OFFICER TO MAKE ASSESSMENT A FRESH AFTER MAKING PROPER ENQUIRIES ON THE ABOVE ISSUE. 3. THE AFORESAID ORDER OF THE COMMISSIONER IS IN CH ALLENGE BEFORE US. THE SUM AND SUBSTANCE OF THE PLEA RAISED BY THE ASSESSE E IS THAT THE COMMISSIONER ERRED IN EXERCISING HIS REVISIONARY JU RISDICTION IN THE PRESENT CASE BECAUSE THE ASSESSMENT ORDER WAS NEITHER ERRON EOUS IN LAW AND NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE QUA THE AFORESAID ISSUE FOR THE PURPOSES OF SECTION 263 OF THE ACT. 4. AT THE TIME OF HEARING, OUR ATTENTION WAS DRAWN TO AN ARGUMENT SETUP BEFORE THE COMMISSIONER, WHICH WAS BASED ON THE JUD GEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES & POWER LTD., 313 ITR 340 (BOM), WHICH ACCORDING TO THE LEARNED COUNS EL HAS NOT BEEN ADDRESSED BY THE COMMISSIONER AT ALL. IT IS POINTE D OUT THAT AS PER THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN C ASE WHERE ASSESSEE HAS ITA NO.965/PN/2012 OWN FUNDS AS WELL AS BORROWED FUNDS AND IN CASE THE NON-INTEREST BEARING FUNDS ARE ENOUGH TO COVER THE INVESTMENTS IN QUESTI ON, THEN A PRESUMPTION WOULD ARISE THAT SUCH INVESTMENTS HAVE BEEN MADE OU T OF INTEREST-FREE FUNDS. IN THIS CONTEXT, THE LEARNED COUNSEL POINTED OUT TH AT ASSESSEE HAD EXPLAINED THAT OUT OF THE TOTAL ADVANCE OF RS.1,21,46,981/- S TANDING AGAINST THE NAME OF THE SISTER CONCERN, A SUM OF RS.41,46,981/- WAS THE OPENING BALANCE I.E. IT WAS ADVANCED IN THE PRECEDING YEAR AND DURING THE Y EAR UNDER CONSIDERATION A SUM OF RS.80,00,000/- ONLY HAS BEEN ADVANCED. IT WAS FURTHER POINTED OUT THAT THE OPENING CAPITAL ACCOUNT BALANCE AVAILABLE WAS TO THE TUNE OF RS.1,83,14,100/- AND THE CLOSING BALANCE IN THE CAP ITAL ACCOUNT AS ON 31.03.2007 WAS RS.8,35,28,683/-, AFTER CREDITING TH E INCOME/PROFITS FOR THE YEAR UNDER CONSIDERATION. IT WAS POINTED OUT THAT THE AMOUNT AVAILABLE IN THE CAPITAL ACCOUNT WAS A NON-INTEREST BEARING FUND, WH ICH WAS ENOUGH TO COVER THE INTEREST-FREE ADVANCE MADE TO THE SISTER CONCER N AND THEREFORE IN TERMS OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COUR T, IT IS TO BE PRESUMED THAT SUCH ADVANCE HAS BEEN MADE OUT OF NON-INTEREST BEARING FUNDS. THEREFORE, IN THIS MANNER, NO DISALLOWANCE WOULD BE MERITED AND THE ASSESSMENT ORDER DATED 24.12.2009 (SUPRA) COULD NOT BE HELD TO BE ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF THE ACT. 5. THE LEARNED CIT-DR APPEARING FOR THE REVENUE HAS RELIED UPON THE ORDER OF THE COMMISSIONER BUT DID NOT OPPOSE THE FA CTUAL MATRIX ASSERTED BY THE ASSESSEE THAT THE PLEA OF THE ASSESSEE BASED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE U TILITIES & POWER LTD. (SUPRA) HAS NOT BEEN ADDRESSED BY THE COMMISSIONER. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE CRUX OF THE CONTROVERSY BEFORE US IS WITH REGARD TO INVOKING OF SECTION 263 OF THE ACT BY THE COMMISSIONER TO HOLD THE ASSESSMENT ORDER DATED 24.12.2009 (SUPRA) AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE WITHIN THE ITA NO.965/PN/2012 MEANING OF SECTION 263 OF THE ACT. SECTION 263 OF THE ACT EMPOWERS THE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT, AND IF HE CONSIDERS ANY ORDER PASSED THEREIN B Y THE ASSESSING OFFICER AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRIES AS HE MAY DEEM NE CESSARY, PASS SUCH ORDER THEREON INCLUDING AN ORDER ENHANCING OR MODIF YING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. IN THE PRESENT CASE, THE COMMISSIONER HAS INVOKED HIS REVISIONARY POWER AND FOUND THE ASSESSMENT ORDER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON ACCOUNT OF NO DISALLOWANCE HAVING BEEN MADE BY THE ASSESSING OFFICER OF THE INTEREST EXPENDITURE RELAT ABLE TO THE INTEREST-FREE ADVANCE MADE TO A SISTER CONCERN. THE PHRASEOLOGY OF SECTION 263 OF THE ACT MAKES IT CLEAR THAT THE COMMISSIONER IS COMPETENT T O INVOKE HIS REVISIONARY POWER ONLY ON SATISFACTION OF TWO CONDITIONS, NAMEL Y, THAT (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND, (II) SUCH ORDER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 7. THE ASSESSEE RESISTED THE ACTION OF THE COMMISSI ONER TO INVOKE SECTION 263 OF THE ACT AND A COPY OF THE WRITTEN SUBMISSION S FURNISHED BEFORE HIM HAS BEEN PLACED ON RECORD. ONE OF THE ISSUES RAISED BY THE ASSESSEE WAS BASED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA). BEFORE THE COMMISS IONER, IT WAS SOUGHT TO BE MADE OUT THAT NO AMOUNT OF INTEREST WAS DISALLOWABL E IN THE PRESENT CASE ON AN APPLICATION OF THE RATIO LAID DOWN BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA), AN D THEREFORE THE ATTEMPT WAS TO SHOW THE COMMISSIONER THAT NO PREJUDICE WAS CAUS ED TO THE REVENUE ON ACCOUNT OF THE ASSESSMENT ORDER DATED 24.12.2009 (S UPRA) ON THIS SCORE. ASSESSEE POINTED OUT THAT HE POSSESSED SUFFICIENT I NTEREST-FREE FUNDS WHICH WAS MORE THAN THE INTEREST-FREE ADVANCE GIVEN TO TH E SISTER CONCERN AND ITA NO.965/PN/2012 THEREFORE IT WAS TO BE PRESUMED THAT THE ADVANCE TO THE SISTER CONCERN HAS BEEN MADE OUT OF INTEREST-FREE FUNDS AND THEREFORE NO PART OF INTEREST ON BORROWINGS CAN BE DISALLOWED ON THE GROUND THAT ADV ANCES TO SISTER CONCERN WERE MADE OUT OF INTEREST BEARING FUNDS. HAVING RE GARD TO THE FACTUAL ASPECTS BROUGHT OUT BY THE COUNSEL FOR THE ASSESSEE, WHICH ALSO FORM A PART OF WRITTEN SUBMISSIONS MADE BEFORE THE COMMISSIONER, IN OUR VI EW, THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF REL IANCE UTILITIES & POWER LTD. (SUPRA) CLEARLY APPLIES IN THE PRESENT CASE. THEREFORE, IN OUR VIEW, THE COMMISSIONER HAS FAILED TO DEMONSTRATE ANY ERROR OR PREJUDICE CAUSED TO THE REVENUE QUA THE AFORESAID ISSUE BY THE ASSESSMENT O RDER DATED 24.12.2009 (SUPRA) WITHIN THE MEANING OF SECTION 263 OF THE AC T. 8. IN THE RESULT, WE SET-ASIDE THE ORDER OF THE COM MISSIONER BY ADVERTING TO THE AFORESAID LIMITED ISSUE AND THE ASSESSMENT O RDER DATED 24.12.2009 (SUPRA) IS HEREBY RESTORED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 29 TH SEPTEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT-III, PUNE; 4) THE DR B BENCH, I.T.A.T., PUNE; 5) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE