Madhav Cotton Ginning & Pressing Factory, Botad V. The Income Tax Officer, Ward-2(3), Bhavnagar

MA 220/AHD/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1766 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: S N DIVETIA A R
• Keywords: Tax effect; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER !.. , ' # $ # $ # $ # $ M.A. NO. 220/AHD/2013 (IN ITA NO. 266/AHD/2013) ASSESSMENT YEAR :2009-10 MADHAV COTTON GINNING & PRESSING FACTORY, OPP. MARKET YARD, PALIYAD ROAD, HADDAD, BOTAD.-364710 V/S . ITO, WD. 2 (3), BHAVNAGAR. PAN NO. A ADFM7111K (APPELLANT) .. (RESPONDENT) %& ' ( / BY APPELLANT SHRI S. N. DIVETIA, A.R. )%& ' ( /BY RESPONDENT SHRI K. C. MATHEWS, SR. D.R. *+, ' -' /DATE OF HEARING 04.04.2014 ./0 ' -' /DATE OF PRONOUNCEMENT 29.04.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS M.A. IS FILED BY THE ASSESSEE SEEKING RECALL O F THE TRIBUNALS ORDER DATED 25.10.2013. THE ASSESSEE SUBMITTED THAT THER E ARE SOME APPARENT ERRORS IN THIS ORDER, WHICH ARE REPRODUCED AS UNDER : 2.1 BRIEFLY STATED FACTS OF THE APPLICANT'S CASE A RE THAT THE APPELLANT IS PARTNERSHIP FIRM AND ENGAGED IN COTTON GINNING & PR ESSING. IT HAD M.A. NO. 220/AHD/2013 (IN ITA NO. 266/AHD/13) A.Y. 09-10 PAGE 2 FILED ITS E- RETURN OF INCOME FOR A.Y.2009-10 ON 25 .9.2009 DECLARING TOTAL INCOME OF RS.9,63,830. 2.2 DURING THE COURSE OF ASSTT. PROCEEDINGS, THE AO NOTICED THAT THE APPELLANT HAD MADE HUGE BORROWINGS OF RS. 10,24,74, 918 FROM PARTNERS, BANKS AND OTHERS ON WHICH IT HAD PAID INT EREST OF RS. 1,24,21,473 BUT IT HAD NOT CHARGED ANY INTEREST ON THE LOANS & ADVANCES TOTALING TO RS, 3,72,11,407. THE AVERAGE R ATE OF INTEREST WORKED OUT AT 12% SO THAT INTEREST OF RS. 44,65,368 ON SAID LOANS & ADVANCES WAS WORKED OUT. THE APPELLANT HAD EXPLAINE D THAT SINCE M/S OM KAILASH COTTON AND APPELLANT FIRM HAD INTERE ST FREE SHARFI DEALINGS AND COMMON PARTNERS WHO WERE ASSESSED AT M AXIMUM RATE OF TAX THERE WAS NO POINT IN CHARGING INTEREST AS WAS BEING DONE IN THE PAST, APART FROM COMMERCIAL EXPEDIENCY IN GIVING SUCH LOANS. IT WAS ALSO EXPLAINED THAT PARTNERS WITHDRAW ALS OF RS.9 LACS WAS INCLUDED IN THIS LIST AND OTHER PARTIES WERE GI VE ADVANCE TOWARDS PURCHASE OF LAND SO THAT NO INTEREST WAS CH ARGEABLE THEREON. HOWEVER THE AO MADE DISALLOWANCE OF RS.35, 07,708 WITHOUT GIVING ANY REASONS. 2.3 BEING AGGRIEVED THE APPELLANT PREFERRED APPEAL TO CIT(A) WHO ALSO CONFIRMED THE IMPUGNED DISALLOWANCE FOR THE REASONS STATED IN PARA-2.3 TO 2.8 OF THE IMPUGNED ORDER. THE CIT(A) A LSO ERRED IN OBSERVING THAT IT WAS UNDISPUTED FACT THAT THE BORR OWED CAPITAL WAS NOT UTILIZED FOR THE PURPOSES OF THE BUSINESS A ND THE SAID NEXUS WAS MISSING. 2.4 BEING AGGRIEVED THE APPLICANT PREFERRED APPEAL TO HON'BLE TRIBUNAL AND DURING THE COURSE OF HEARING THE APPLICANT SUBM ITTED PAPER BOOK (PAGES- 1-122) AS WELL AS WRITTEN SYNOPSIS DAT ED 8-8-2013 AND 14-8-2013. 2.5 THE APPLICANT SUBMITS THAT DURING THE COURSE OF HEARING THE APPLICANT HAD RAISED FOLLOWING CONTENTIONS: M.A. NO. 220/AHD/2013 (IN ITA NO. 266/AHD/13) A.Y. 09-10 PAGE 3 (A) THE AO HAD FAILED TO ESTABLISH THE NEXUS BETWEEN THE INTEREST BEARING BORROWINGS AND INTEREST FREE A DVANCES AND THEREFORE THE PRESUMPTION IS AS TO THE MIXED FUNDS AND IN THAT CASE, ONE HAS TO RELY UPON THE BALANCE SHEET. NOW THE PER USAL OF THE AUDITED ANNUAL ACCOUNTS OF THE APPELLANT FOR A.Y. 2 009-10 SHOW THAT THE APPELLANT WAS A CASH RICH ASSESSEE IN AS M UCH AS; (I) THERE WAS A CLOSING CASH BALANCE OF RS. 3,19,20,625 (SEE PAGE.25) (II) THERE WAS A HUGE TURNOVER AND GROSS PROFIT O F RS.2,33,89,836 AND NET PROFIT OF RS. 33,24,557 . (PAGE- 19).(REFER TO WOOLCOMERS OF INDIA LTD (134 ITR 219) (CAL) (B) THERE WAS A OPENING BALANCE OF RS. 69,18,863 (S EEPAGE-31) AND IN PAST NO DISALLOWANCE WAS MADE SO THAT IT WAS COVERED BY CASE OF SRIDEV ENTERPRISE ( 192 ITR 165) NOW THE IN TEREST THEREON WORKED OUT TO RS. 8,30,263 WHICH WAS NOT DISALLOWAB LE. 2.6 THE APPLICANT MOST RESPECTFULLY SUBMITS THAT HO N'BLE TRIBUNAL HAS NOT CONSIDERED AT ALL THE ABOVE SAID CONTENTIONS OF THE APPLICANT. IT HAS CONSIDERED THE CONTENTION RAISED BEFORE THE FIR ST APPELLATE AUTHORITY ONLY I.E. TAX EFFECT OF DISALLOWANCE IN T HE HANDS OF THE APPELLANT AND ITS PARTNERS AS WELL AS OM KAILASH CO TTON.(OF COURSE THIS CONTENTION WAS RIOT EMPHASIZED IN THE APPELLAT E PROCEEDINGS) 2.7 THE APPLICANT MOST RESPECTFULLY SUBMITS THAT H ON'BLE TRIBUNAL HAS NOT FULLY AND PROPERLY CONSIDERED THE CASE LAWS CIT ED AND RELIED UPON BY THE APPLICANT AND MERELY OBSERVED THAT THEY WERE NOT APPLICABLE THOUGH THE SAME WERE FULLY APPLICABLE TO THE FACTS OF THE APPLICANT'S CASE. SAY FOR EXAMPLE THE CASE OF SRIDEV ENTERPRISE OR WOO I COMBERS INDIA LTD.(SUPRA) WAS DIRECTLY APPLICABLE. IN VIEW OF ABOVE FACT AND CIRCUMSTANCE OF THE CASE, THE APPLICANT SUBMITS WITH UTMOST RESPECT THAT THE CONC LUSION DRAWN BY HON'BLE TRIBUNAL IS FACTUALLY ERRONEOUS AND IT HAS ALSO VITIATED THE ULTIMATE CONCLUSION OF UPHOLDING THE ADDITION OF RS .35,07,708/-. M.A. NO. 220/AHD/2013 (IN ITA NO. 266/AHD/13) A.Y. 09-10 PAGE 4 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HON BLE BENCH HAS NOT CONSIDERED FACTS AS WELL AS LEGAL ASPECT ON THIS IS SUE RAISED AT THE TIME OF HEARING IN DECIDING THE CASE. THE LD. A.R. ARGUED THAT ASSESSEE COMPANY IS A CASH-RICH COMPANY AND AS PER BALANCE SHEET, CASH WA S AVAILABLE AT RS.3.90 CRORE WITH IT AND ALSO NET PROFIT EARNED DURING THE YEAR 33.24 LACS. THE TRANSACTION MADE WITH M/S. OM KAILASH COTTON WAS SH ARAFI TRANSACTION ON ALMOST DAILY BASIS AND THERE WAS A BUSINESS EXPEDIE NCY TO ADVANCE THE LOAN TO IT. THE A.R. FURTHER HAS DRAWN OUR ATTENTION TH AT CASE LAW CITED AT THE TIME OF HEARING I.E. RADHASWAMI SATSANG (192 ITR .)(SC), WOOCOMBERS IND IA LTD. (134 ITR 219), RELIANCE UTILITIES & POWER LTD. (313 ITR 340) (BOM), RAGHUVIR SYNTHETICS (TAX APPEAL NO. 829 OF 2007 DT. 15.12.2011) (GUJ.) & SRIDEV ENTERPRISE (192 ITR 165) (KAR.), AND SUBMITTED THAT THEY ARE SQUARELY APPLICABLE ON THE FACTS OF THE ASSESSEE. THEREFORE , HE REQUESTED TO RECALL THE ORDER TO THE EXTENT OF FINDING GIVEN ON INTEREST DI SALLOWANCE OF RS.35,07,708/-. AT THE OUTSET, LD. SR. D.R. OPPOSED THE ARGUMENT RA ISED BY THE ASSESSEE AS ALL THE MATERIAL FACTS AS WELL AS LEGAL ASPECT BEING CO NSIDERED BY THE HONBLE BENCH. IF THE ASSESSEES REQUEST IS ACCEPTED, IT I S TANTAMOUNT TO REVIEW OF OWN DECISION, WHICH IS NOT PERMITTED UNDER THE IT L AW. THEREFORE, M.A. FILED BY THE ASSESSEE, MAY BE REJECTED. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS A CASE AND IS REQUIRED TO RE- CONSIDER THE FACTS OF THE CASE AND CASE LAWS CITED BY THE ASSESSEE. M.A. NO. 220/AHD/2013 (IN ITA NO. 266/AHD/13) A.Y. 09-10 PAGE 5 THEREFORE, WE RECALL OUR ORDER DATED 25.10.2013 ON THIS ISSUE. THIS CASE MAY BE FIXED ON REGULAR BASIS. 4. IN THE RESULT, THE M.A. OF THE ASSESSEE IS ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 29.04.2014 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA 1 1 1 1 ' '' ' )-2 )-2 )-2 )-2 320- 320- 320- 320- / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )%& / RESPONDENT 3. - *7 / CONCERNED CIT 4. *7- / CIT (A) 5. 2; )-+ , , / DR, ITAT, AHMEDABAD 6. = >? / GUARD FILE. BY ORDER/ 1 , @/ B , $