RARE ENTERPRISES, MUMBAI V. DCIT, CIR-7(1), MUMBAI

MA 436/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4326 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-10-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 30-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: S C TIWARI
• Keywords: Search and seizure

Judgement Text

M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER M.A. NO. 436/MUM/2019 (ARISING OUT OF ITA NO. 3060/MUM/2016) (ASSESSMENT YEAR: 2011 - 12 ) M/S RARE ENTERPRISES 1 51, NARIMAN BHAVAN, NARIMAN POINT, MUMBAI - 400021 MAHARASHTRA VS DCIT, CIRCLE 7(1) ROOM NO. 653, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 MAHARASHTRA PAN AAEFR8176J (APPLICANT) (RESPONDENT) APPLICANT BY: SHRI S.C. TIWARI , A.R RESPO NDENT BY: SHRI V.VINOD KUMAR , D.R DATE OF HEARING: 16 .10 .2020 DATE OF PRONOUNCEMENT: 26 . 10 .2020 O R D E R PER RAVISH SOOD, JM THE PR ESENT MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE ON 30.07.2019 ARISES FROM THE ORDER PASSED BY THE TRIBUNAL IN ITA NO. 3060/MUM/2016, DATED 28.12.2018. 2. ON A PERUSAL OF THE AFORESAID APPLICATION, IT TRANSPIRES THAT THE ASSESSEE HAS CLAIMED THAT THE AFORESAID ORDER OF THE TRIBUNAL UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.3,53,06,301/ - U/S 36(1)(III) OF THE ACT SUFFERS FROM A MISTAKE, WHICH BEING APPAR ENT FROM RECORD RENDERS THE SAME AMENABLE FOR RECTIFICATION UNDER SEC.254(2) OF THE ACT. AS IS DISCERNIBLE FROM THE AFORESAID APPLICATION, IT IS THE CLAIM OF THE ASSESSEE THAT ONLY A SUM M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 2 OF RS.6,534/ - COULD HAVE BE EN DISALLOWED OUT OF THE INTEREST EXPENDITURE THAT WAS CLAIMED BY IT AS A DEDUCTION DURING THE YEAR UNDER CONSIDERATION. 3. DURING THE COURSE OF HEARING OF THE APPLICATION THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE APPLICANT TOOK US THROUGH THE AFORESAID APPLICATION, AND SUBMITTED, THAT AS THE ASSESSEE APPLICANT AT THE RELEVANT POINT OF TIME HAD SUFFICIENT INTEREST FREE FUNDS, THEREFORE, THE DISALLOWANCE UNDER SEC. 36(1)(III) IN RESPECT OF THE OVE RD RAWN PARTNERS CAPITAL ACCOUNT AND THE INTEREST FREE LOANS ADVANCE D TO THIRD PARTIES WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF RS.6,534/ - . IT WAS SUBMITTED BY THE LD. A.R THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S RELIANCE INDUSTRIES LTD. IN CIVIL APPEAL NO. 10 OF 2019 , DATED 02.01.2019, HAD OBSERVED, THAT IN CASE IF AN ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT TO EXPLAIN ITS INVESTMENT, THEN, THE PRESUMPTIO N WOULD BE THAT SUCH INVESTMENT WAS MADE FROM THE INTERE ST FREE FUNDS AVAILABLE WITH IT . IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT, THEREFORE, THE TRIBUNAL WHILE UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.3,53,06,301/ - UNDE R SEC.36(1)(II I) OF THE ACT HAD ERRED IN L O OSING SIGHT OF THE SAID MATERIAL FACT. THE LD. A.R IN HIS ATTEMPT TO IMPRESS UPON US THAT THE ORDER OF THE TRIBUNAL SUFFERED FROM A M ISTAKE APPARENT FROM RECORD, WHICH THEREIN HAD RENDERED IT AMENABLE FOR RECTIFICATION UNDER SEC.254(2) OF THE ACT, TOOK US THROUGH THE AFORESAID APP LICATION. IN THE BACKDROP OF HIS AFORESAID SUBMISSION S , IT WAS THE CLAIM OF THE LD. A.R THAT AS THE ORDER PASSED BY THE TRIBUNAL SUFFERED FROM A MISTAKE A PPARENT FROM RECORD, THE SAME , MAY , THEREFORE BE SUITABLY AMENDED. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT AS THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL DID NOT SUFFER FROM ANY MISTAKE, THEREFORE, THE APPLICATION FILED BY THE ASSESSEE APPLICANT WAS LIABLE TO BE REJECTED ON THE SAID COUNT ITSELF. IT WAS SUBMITTED BY THE LD. D.R THAT THE ASSESSEE BY FI LING THE PRESENT APPLICATION HAS IN FACT SOUGHT A REVIEW OF THE ORDER PASSED BY THE TRIBUN AL UNDER SEC. 254(1) M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 3 OF THE ACT. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE REVIEW OF AN ORDER PASSED BY THE TRIBUNAL IS NOT PERMISSIBLE UNDER LAW AND IN FACT BEYOND THE PURVIEW OF THE JURISDICTION OF THE TRIBUNAL, THEREFORE, THE APPLICATION FILED BY THE ASSESSEE APPLICANT WAS LIABLE TO BE REJECTED. INSOFAR THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V S. M/S RELIANCE INDUSTRIES LTD. IN CIVIL APPEAL NO.10 OF 2019, DATED 02.01.2019 WAS CONCERNED, IT WAS SUBMITTED BY THE LD. D.R THAT ADMITTED LY THE HONBLE APEX COURT HAD HELD THAT IN CASE IF AN ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WHICH WOULD JUSTIFY MAKING OF AN INVESTMENT UNDER CONSIDERATION, THE PRESUM PTION THERETO WOULD BE THAT THE INVESTMENT WAS MADE FROM SUCH INTEREST FREE FU NDS AVAILABLE WITH THE ASSESSEE. IT WAS SUBMITTED BY THE LD. D .R THAT AS THE CAPTIONED ASSESSEE DID NOT HAVE ANY INTEREST FREE FUNDS AVAILABLE WITH IT DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA) CLEARLY BEING DISTINGUISHABLE ON FACTS WOULD NOT ASSIST ITS CASE . ON THE BASIS OF HIS AFORESAID CONTENTION, IT WAS SUBMITTED BY THE LD. D.R THAT THE APPLICATION FILED BY THE ASSESSEE APPLICANT BEING DEVOID AND BEREFT OF ANY MERIT WAS THUS LIABLE TO BE DISMISSED. 5. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES AND PERUSED THE APPLICATION FILED BY THE ASSESSEE APPLICANT IN THE BACKDROP OF THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL VIDE ITS ORDER DATED 28.12.2018. AS OBSERVED BY US HEREINABOVE, THE ASSESSEE BY FI LING THE PRESENT APPLICATION HAS T RIED TO IMPRESS UPON US THAT THE DISALLOWANCE UNDER SEC.36(1)(III) OF THE INTEREST EXPENDITURE OF RS.3,53,06,301/ - , AS HAD BEEN SUSTAINED BY THE TRIBUNAL , WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF RS.6,534/ - . IN ORDER TO DRIVE HOME ITS AFORESAID CL AIM THE ASSESSEE HAS DRAWN SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD. IN CIVIL APPEAL NO. 10 OF 2019, DATED 02.01.2019, WHEREIN IT WAS OBSERVED THAT IN CASE IF AN ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT , THEN , IT COULD SAFELY BE CONCLUDED THAT THE INTEREST FREE ADVANCES WERE MADE FROM SUCH FUNDS. HOWEVER, AS THE FACTS INVOLVED IN THE M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 4 AFORESAID AP PEAL ARE CLEARLY DISTINGUISHABLE AS AGAINST THOSE INVOLVED IN THE CASE OF THE PRESENT ASSESSEE, HENCE, THE SAID JUDICIAL PRONOUNCEMENT OF THE HONBLE APEX COURT RELIED UPON BY THE ASSESSEE WOULD NOT ASSIST ITS CASE. ON A PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE ASSESSEES APPEAL, WE FIND , THAT IT WAS THEREIN OBSERVED THAT THE ASSESSEE COMPANY HAD ADVANCED AMOUNTS TO 3 PARTIES IN THE EARLIER FINANCIAL YEARS, VIZ : (I) M/S BEST VALUE HYPERMARKET (RS.10,00,00,000/ - ); (II) M/S LESCONCEIRAGES L IFE CARE SERVICE (RS.2,00,00,000/ - ); AND (III) M/S PARK DEVELOPERS (RS.2,30,00,000/ - ). APART FROM THAT, THE CUMULATIVE CREDIT BALANCE IN THE CAPITAL ACCOUNTS OF THE PARTNERS AS ON 01.04.2010 OF RS.28.16 CRORE (CR.) HAD TURNED INTO A CUMULATIVE DEBIT BALANC E OF RS.21.59 CRORES (DR.) AFTER CONSIDERING THE DEBIT OF RS.49.7 CRORES [RS.37.31 CRORES (+) RS.12.44 CRORES] MADE IN THEIR ACCOUNTS ON 01.04.2010. IN SUM AND SUBSTANCE, THE ASSESSEE HAD NOT ONLY MADE A SUBSTANTIAL INTEREST FREE ADVANCE/LOANS TO THE AFORE MENTIONED THREE PARTIES BUT HAD ALSO OVERDRAWN THE CAPITAL ACCOUNTS OF THE PARTNERS ON 01.04.2010 . IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX, IT WAS OBSERVED BY THE TRIBUNAL THAT THE ADVANCING OF LOANS TO THIRD PARTIES AND OVERDRAWING OF THE CAPITAL ACCOUNT OF THE PARTNERS COULD SAFELY BE RELATED TO THE INTEREST BEARING LOANS OR THE B ANK OVERDRAFTS AVAILED BY THE ASSESSEE . AS REGARDS THE CLAIM OF THE ASSESSEE THAT PROFIT OF RS.29.73 CRORES GENERAT ED DURING THE YEAR UNDER CONSIDERATION WAS AVAILABLE WITH IT TO EXPLAIN THE SOURCE OF THE INTEREST FREE ADVANCES GIVEN DURI NG THE YEAR UNDER CONSIDERATION, IT WAS OBSERVED BY THE TRIBUNAL THAT THE SAID PROFITS WOULD ONLY GO TO REDUCE THE DEBIT BALANCE S, OV ERDRAFTS ETC. IN FACT, IT WAS OBSERVED BY THE TRIBUNAL THAT A PERUSAL OF RECORDS REVEALED THAT THE CUMULATIVE BALANCE IN THE CAP ITAL ACCOUNTS OF THE PARTNERS ON 31.03.2011 AFTER CREDITING THE PROFITS OF RS.29,73,91,730/ - THEREIN STOOD REFLECTED AT RS.14,62,65,453/ - (DR.) 6. ON THE BASIS OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE TRIBUNAL WHILE UPHOLDING THE DISALLOWANCE U/S 36(1)(III) OF RS.3,53,06,301/ - , HAD TAKEN A CONSCIOUS VIEW IN THE BACKDROP OF THE FACTS AVAILABLE ON RECORD. CONSIDERING THE CLAIM RAISED BY THE ASSESSEE IN ITS AFORESAID APPLICATION, WE M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 5 FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION ADVANCED BY THE LD. D.R, THAT THE ASSESSEE IN THE GUISE OF THE PRESENT APPLICATION IS IN FACT SEEKING A REVIEW OF THE ORDER THAT WAS PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL VIDE ITS ORDER PASSED IN ITA NO. 3060/MUM/2016, DATED 28.12.2018, WHICH WE ARE AFRAID IS BEYOND THE POWERS VESTED WITH THE TRIBUNAL UNDER S UB - SECTION (2) OF SEC.254 OF THE ACT . ACCORDINGLY, NO T FINDING FAVOUR WITH THE CLAIM OF THE ASSESSEE THAT THE ORDER PASSED BY THE TRIBUNAL SUFFERS FROM A MISTAKE WHICH IS APPARENT FROM RECORD, WE DISMISS THE AFORESAID APPLICATION. 7. THE APPLICATION FILED BY THE ASSESSEE APPLICANT IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - M.BALAGANESH RAVISH SOOD (ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) MUMBAI, DATE: 26 .10.2020 R. KUMAR M.A. NO. 436/MUM/2019 A.Y. 2011 - 12 (ARISING OUT OF ITA NO.3060/MUM/2016) M/S RARE ENTERPRISES VS. DCIT,CIRCLE - 7(1) 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR D BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI