SYNERGY LOG IN SYSTEMS LTD, V. ADDL CIT SP RG 34,

MA 308/MUM/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7048 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 1998-1999
• Appeal Filed On: 30-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: J PRABHAKAR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI N.V. VASUDEVAN, (JM) AND SHRI RAJENDRA SINGH,(AM) MA NO.308/MUM/2011 ARISING OUT OF ITA NO. 4439/MUM/2001 ASSESSMENT YEAR : 1998-99 M/S. SYNERGY LOG-IN-SYSTEMS LTD. NO.401/402, 4 TH FLOOR, SAMARTH VAIBHAV LOKHANDAWALA COMPLEX OFF: LINK ROAD, ANDHERI WEST MUMBAI-400 053. ..( APPLICANT ) P.A. NO. (AABCS 9108 H) VS. ASSTT. COMMISSIONER OF INCOME TAX SPL. RANGE-34 ROOM NO.484, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ..( RESPONDENT ) APPLICANT BY : SHRI J. PRABHAKAR RESPONDENT BY : SHRI P .C. MAURYA DATE OF HEARING : 5.8.2011 DATE OF PRONOUNCEMENT : 24.8.2011. O R D E R PER RAJENDRA SINGH (AM). THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY TH E ASSESSEE REQUESTING FOR RECALL OF THE ORDER DATED 12.11.2010 OF THE TRIBUNAL IN ITA NO.4994/M/2001 POINTING OUT SOME APPARENT MISTAKES. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE FOR THE RELEVANT YEAR HAD CLAIMED DEDUCTION OF RS.250.55 LACS ON ACC OUNT OF INTEREST PAID ON BORROWINGS OF RS.1318.00 LACS. THE AO NOTED THAT T HE ASSESSEE HAD MADE INVESTMENT OF RS.3,78,04,770/- IN THE SHARES OF OTH ER COMPANIES AND HAD MA NO.308/M/11 A.Y:98-99 2 ALSO GIVEN INTEREST FREE ADVANCES OF RS.5,06,40,248 /- TO ASSOCIATE COMPANIES. AFTER NECESSARY EXAMINATION AND OPPORTU NITY TO THE ASSESSEE, THE AO GAVE A FINDING THAT THE ASSESSEE COULD NOT P RODUCE ANY EVIDENCE TO SHOW THAT INVESTMENT HAD BEEN MADE OUT OF INTEREST FREE FUNDS AND TO ESTABLISH NEXUS BETWEEN INTEREST FREE ADVANCES GIVE N WITH THE BUSINESS OF THE ASSESSEE. THE AO, THEREFORE, DISALLOWED PROPOR TIONATE INTEREST AMOUNTING TO RS.92.63 LACS. IN APPEAL THE CIT(A) A LSO GAVE A FINDING THAT THE ASSESSEE WAS NOT ABLE TO PROVE THAT INVESTMENT IN SHARES AND ADVANCES TO SISTER CONCERNS WERE MADE OUT OF OWN FUNDS. 2.1 IN APPEAL BEFORE THE TRIBUNAL, THE LD. AR FOR T HE ASSESSEE SUBMITTED THAT THE INVESTMENTS WERE MADE IN EARLIER YEARS AND VALUE OF INVESTMENT AS ON 31.3.1998 HAD ONLY DECREASED. AS REGARDS INTERE ST FREE ADVANCES GIVEN, IT WAS SUBMITTED THAT THE ASSESSEE HAD MADE DETAILE D SUBMISSION BEFORE THE CIT(A), AVAILABLE AT PAGE 9 TO 12 OF THE PAPER BOOK WHICH HAD NOT BEEN CONSIDERED. IT WAS ALSO SUBMITTED THAT IN SOME CAS ES ADVANCES WERE GIVEN IN CONNECTION WITH BUSINESS AND IN ONE CASE INTERES T HAD ACTUALLY BEEN CHARGED. SINCE CIT(A) HAD NOT CONSIDERED THE DETAIL ED SUBMISSIONS OF THE ASSESSEE, THE TRIBUNAL FOR VARIOUS REASONS GIVEN IN PARA 3.3.5 OF THE ORDER RESTORED THE ISSUE TO THE FILE OF THE AO FOR PASSI NG A FRESH ORDER AFTER NECESSARY EXAMINATION OF CLAIM OF ASSESSEE AND AFTE R ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 2.2 AS REGARDS DISALLOWANCE IN RELATION TO INVESTME NT IN SHARES, THE TRIBUNAL OBSERVED THAT NEITHER BEFORE LOWER AUTHORI TIES NOT AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE ASSESSEE COULD PRO DUCE ANY EVIDENCE TO SHOW THAT THE INTEREST HAD BEEN MADE OUT OF INTERES T FREE FUNDS. THE TRIBUNAL ALSO OBSERVED THAT THE ASSESSEE HAD SUBMIT TED BEFORE THE AUTHORITIES BELOW THAT INVESTMENTS WERE MADE IN EAR LIER YEARS AND THAT ON THE LAST DATE OF ACCOUNTING PERIOD I.E. 31.3.1998, THE ASSESSEE HAD RESERVE AND NET CURRENT ASSETS BUT NO EVIDENCE COULD BE PRO DUCED TO SHOW THAT ON THE DATES OF MAKING INVESTMENTS THE ASSESSEE HAD SU FFICIENT OWN FUNDS. THE MA NO.308/M/11 A.Y:98-99 3 ASSESSEE HAD ALSO RAISED A PLEA THAT A SUM OF RS.5. 93 CRORES RAISED IN PUBLIC ISSUE ON 3.5.1994 HAD BEEN UTILIZED IN MAKING THE I NVESTMENT BUT THE AUTHORITIES BELOW HAD GIVEN A CLEAR FINDING THAT PU BLIC ISSUE FUNDS WERE MEANT FOR THE PURPOSE OF BUSINESS AND NOT FOR INVES TMENT AND THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THESE F UNDS WERE INVESTED IN SHARES. THESE FINDINGS WERE NOT CONTROVERTED BEFOR E THE TRIBUNAL. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT INVESTMENTS WE RE MADE IN EARLIER YEARS IN WHICH NO DISALLOWANCE HAD BEEN MADE. IN RELATIO N TO THIS, THE TRIBUNAL OBSERVED THAT NO MATERIAL WAS PRODUCED TO SHOW THAT THE ISSUE WAS EXAMINED BY THE AO IN EARLIER YEARS AND FINDING WAS GIVEN THAT INVESTMENT WAS MADE FROM OWN FUNDS. THEREFORE, THE TRIBUNAL H ELD THAT IN SUCH A SITUATION, NON DISALLOWANCE OF INTEREST IN EARLIER YEARS WOULD NOT DE-BAR THE AO FROM MAKING DISALLOWANCE THIS YEAR AS IN EARLIER YEARS PROVISIONS OF SECTION 14A WERE NOT AVAILABLE. THE TRIBUNAL ALSO H ELD THAT THE PROVISIONS OF SECTION 14A HAD RETROSPECTIVE APPLICATION AND WOULD APPLY TO PENDING PROCEEDINGS. SUPPORT WAS DRAWN FOR THIS PROPOSITIO N FROM THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN CASE OF AQUARIUS T RAVELS (111 ITD 53). THE TRIBUNAL OBSERVED THAT THE ASSESSEE WAS HAVING MIXE D POOL OF FUNDS CONSISTING OF OWN AND BORROWED FUNDS AND NO DETAILS AND EVIDENCE HAD BEEN PRODUCED TO SHOW THAT OWN FUNDS WERE UTILIZED IN MA KING INVESTMENT IN SHARES NOR THE ASSESSEE COULD SHOW THAT ON THE DATE OF MAKING INVESTMENTS, THOUGH FUNDS WERE MIXED, OWN FUNDS WERE SUFFICIENT TO EXPLAIN THE INVESTMENT SO THAT PRESUMPTION COULD BE DRAWN IN FA VOUR OF THE ASSESSEE. THE TRIBUNAL, THEREFORE, CONFIRMED THE DISALLOWANCE IN RESPECT OF INVESTMENT IN SHARES. 3. IN THE MISCELLANEOUS APPLICATION, IT HAS BEEN SU BMITTED THAT THE TRIBUNAL WAS NOT CORRECT IN STATING THAT THE INVEST MENT IN SHARES WAS PER-SE AN INVESTMENT ACTIVITY AND NOT FOR THE PURPOSE OF B USINESS. THE ASSESSEE HAD PROVIDED BALANCE SHEETS FOR THE EARLIER YEARS TO SH OW THAT NO BORROWED FUNDS WERE DIVERTED FOR INVESTMENT IN SHARES. FURTHER, T HE AUTHORITIES BELOW HAD NOT DEMONSTRATIVELY PROVED THAT THE PURPOSE OF FUND S OBTAINED THROUGH MA NO.308/M/11 A.Y:98-99 4 PUBLIC ISSUE WAS ONLY FOR BUSINESS AND FOR THE PURP OSE OF INVESTMENT IN SHARES. THE LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT THE TRIBUNAL HAD SET ASIDE THE ORDER OF CIT(A) IN RELAT ION TO DISALLOWANCE RELATING TO INTEREST FREE ADVANCES BUT CONFIRMED THE DISALLO WANCE IN RELATION TO INVESTMENTS WHICH WAS NOT CORRECT. IN VIEW OF THE POINTS MADE IN THE MISCELLANEOUS APPLICATION, IT WAS SUBMITTED THAT TH IS ISSUE SHOULD ALSO BE SET ASIDE. THE LD. DR ON THE OTHER HAND POINTED OUT TH AT THE TRIBUNAL HAD PASSED A REASONED AND SPEAKING ORDER AND IT HAD NO POWER TO REVIEW ITS OWN DECISION. ACCORDINGLY IT WAS PLEADED THAT THE MISC ELLANEOUS APPLICATION SHOULD BE REJECTED. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. WE FIND THAT THE TRIBUNAL HAD DULY CONS IDERED ALL ASPECTS AT THE TIME OF PASSING OF THE ORDER. THE ASSESSEE COULD N OT PRODUCE ANY EVIDENCE TO CONTROVERT THE FINDING OF THE AUTHORITIES BELOW THAT INVESTMENT IN SHARES HAD BEEN MADE OUT OF INTEREST FREE FUNDS. THE TRIB UNAL HAD ALSO CONSIDERED THE ARGUMENT THAT THE INVESTMENT HAD BEEN MADE IN T HE EARLIER YEAR AS POINTED OUT IN PARA 2.1 EARLIER. THE PLEA OF INVES TMENT BEING MADE OUT OF PUBLIC ISSUE OF FUND AMOUNTING TO RS.5.93 CRORES WA S ALSO CONSIDERED. NO MATERIAL WAS PLACED BEFORE THE TRIBUNAL TO CONTROVE RT THE FINDING OF THE AUTHORITIES BELOW THAT PUBLIC ISSUE FUNDS WERE MEAN T FOR THE PURPOSE OF BUSINESS AND NOT FOR MAKING INVESTMENT AND THE ASSE SSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THESE FUNDS WERE INVESTED IN SHARES. THE LD. AR FOR THE ASSESSEE HAS NOW RAISED A FRESH PLEA THAT T HERE WAS NO MATERIAL TO SHOW THAT INVESTMENT WAS NOT BUSINESS ACTIVITY. WE FIND THAT NO ARGUMENTS HAD BEEN ADVANCED ON THESE LINES EITHER BEFORE LOWE R AUTHORITIES OR AT THE TIME OF HEARING BEFORE THE TRIBUNAL. SUCH PLEA CAN NOT BE ENTERTAINED AT THIS STAGE OF MISCELLANEOUS APPLICATION. IN CASE THE IN VESTMENT IN SHARES WAS BUSINESS ACTIVITY THE ASSESSEE COULD HAVE PRODUCED MATERIAL TO DEMONSTRATE THE SAME WHICH HAD NOT BEEN DONE. THE TRIBUNAL HAD PASSED A REASONED AND SPEAKING ORDER. THE ISSUE IN RELATION TO DISALLOWA NCE ON ACCOUNT OF INTEREST FREE ADVANCES HAD BEEN RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO AS MA NO.308/M/11 A.Y:98-99 5 CERTAIN SUBMISSIONS MADE BEFORE THE CIT(A) HAD NOT BEEN CONSIDERED. THE TRIBUNAL HAD GIVEN DETAILED REASONS IN PARA 3.3.5 O F THE ORDER FOR SETTING ASIDE THE ISSUE TO THE FILE OF THE AO. THEREFORE, MERELY BECAUSE THE ISSUE IN RELATION TO INTEREST FREE ADVANCE WAS SET ASIDE IT CANNOT BE ARGUED THAT OTHER ISSUES SHOULD ALSO BE SET ASIDE. THE TRIBUNAL HAS NO POWER TO REVIEW ITS OWN DECISION. WE SEE NO APPARENT MISTAKE IN THE ORDER O F THE TRIBUNAL, THEREFORE, THE MISCELLANEOUS APPLICATION IS REJECTED. 5. IN THE RESULT THE MISCELLANEOUS APPLICATION STAN DS REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.8.2011. SD/- SD/- (N.V. VASUDEVAN) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24.8.2011. JV. COPY TO: THE APPLICANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.