Saravana Stores (Tex), CHENNAI v. DCIT, CHENNAI

CO 101/CHNY/2016 | 2012-2013
Pronouncement Date: 30-11-2017 | Result: Dismissed

Appeal Details

RSA Number 10121723 RSA 2016
Assessee PAN AAWFS6761Q
Bench Chennai
Appeal Number CO 101/CHNY/2016
Duration Of Justice 1 year(s) 4 month(s) 12 day(s)
Appellant Saravana Stores (Tex), CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-11-2017
Last Hearing Date 23-11-2017
First Hearing Date 23-11-2017
Assessment Year 2012-2013
Appeal Filed On 18-07-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI ... ! # !$ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI S. JAYARAMAN ACCOUNTANT MEMBER ./ ITA NOS.993 994 & 995/MDS/2016 & C.O. NOS.99 100 & 101/MDS/2016 (IN ITA NOS.993 994 & 995/MDS/2016) & '& / ASSESSMENT YEARS : 2010-11 TO 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(2) CHENNAI - 600 034. V. M/S SARAVANA STORES (TEX) NO.45 RANGANATHAN STREET T. NAGAR CHENNAI - 600 017. PAN : AAWFS 6761 Q ()*/ APPELLANT) (RESPONDENT & CROSS-OBJECTOR) ./ ITA NOS.1173 & 1174/MDS/2016 & '& / ASSESSMENT YEARS : 2010-11 TO 2011-12 M/S SARAVANA STORES (TEX) NO.45 RANGANATHAN STREET T. NAGAR CHENNAI - 600 017. V. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE IV(2) CHENNAI - 600 034. ()*/ APPELLANT) ( + )* /RESPONDENT) - . /REVENUE BY : SHRI S. BHARATH CIT &/0 - . /ASSESSEE BY : MS. JHARNA B. HARILAL CA 1 - 0# / DATE OF HEARING : 23.11.2017 23' - 0# / DATE OF PRONOUNCEMENT : 30.11.2017 2 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: THE APPEALS OF BOTH THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-18 CHENNAI DATED 27.01.2016. THE R EVENUES APPEALS PERTAIN TO ASSESSMENT YEARS 2010-11 TO 2012 -13 AND THE ASSESSEES APPEALS PERTAIN TO ASSESSMENT YEARS 2010 -11 AND 2011-12. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTI ONS AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS). SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THE APPEALS AND CROSS-OBJE CTIONS WE HEARD ALL THE APPEALS AND CROSS-OBJECTIONS TOGETHER AND D ISPOSING OF THE SAME BY THIS COMMON ORDER. 2. THERE WAS A DELAY OF 64 DAYS IN FILING THE CROSS -OBJECTIONS BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FO R CONDONATION OF DELAY. WE HAVE HEARD THE LD. REPRESENTATIVE AND TH E LD. D.R. WE FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE CROSS-OBJECTIONS BEFORE THE STIPULATED TIME. THEREFORE WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. MS. JHARNA B. HARILAL THE LD. REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THE ASSESSEE-PARTNERSHIP I S ENGAGED IN 3 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 THE BUSINESS OF RETAIL TRADING IN TEXTILES. ACCORD ING TO THE LD. REPRESENTATIVE THERE WAS A SEARCH OPERATION IN THE PREMISES OF THE ASSESSEE AND AT THE RESIDENTIAL PREMISES OF THE PAR TNERS. ACCORDING TO THE LD. REPRESENTATIVE OVER A PERIOD OF TIME T HE ASSESSEE HAS GIVEN INTEREST-FREE LOANS AND ADVANCES TO SISTER CO NCERNS FOR BUSINESS PURPOSES AND TO THE PARTNERS FOR CONSTRUCT ION OF BUSINESS PREMISES. ACCORDING TO THE LD. REPRESENTATIVE SOM E OF THE AMOUNTS WERE DEPOSITED IN BANK ACCOUNT AS AGAINST T HE LOAN BORROWED FROM BANK. ACCORDING TO THE LD. REPRESENT ATIVE THE ASSESSEE BORROWED LOAN FOR PURCHASING VEHICLES AND FOR WORKING CAPITAL PURPOSES. THE ASSESSING OFFICER DISALLOWED PROPORTIONATE INTEREST ON BORROWED LOAN IN PROPORTION OF THE INTE REST-FREE ADVANCES GIVEN TO SISTER CONCERNS. OVER A PERIOD OF TIME A CCORDING TO THE LD. REPRESENTATIVE THE ASSESSEE HAS ALSO EXPANDED THE TRADE IN JEWELLERY. THE ACCUMULATED PROFIT OF TEXTILE SEGME NT WAS USED FOR STARTING THE JEWELLERY RETAIL BUSINESS. ACCORDING TO THE LD. REPRESENTATIVE THE ASSESSEE IS ALSO ENGAGED IN THE BUSINESS OF OIL WATER BAKERY AND DAIRY PRODUCTS. THE TOTAL ADVANC ES GIVEN TO SISTER CONCERNS AND PARTNERS COME TO RS.20 46 38 34 5/-. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT DURING THE FINANCIAL YEAR 2002-03 ONE OF THE PARTNERS SHRI 4 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 SELVARATHINAM GOT SEPARATED FROM FAMILY BUSINESS BY WAY OF FAMILY PARTITION. THIS JEWELLERY BUSINESS OF THE ASSESSEE -FIRM OIL DIVISION AND SARAVANA STORES ENTERPRISES WERE TAKEN OVER BY THE SAID SHRI SELVARATHINAM. ACCORDING TO THE LD. REPRESENTATIVE OTHER BUSINESSES ARE UNDER THE CONTROL OF ASSESSEES PART NERSHIP FIRM. IN THE PROCESS OF FAMILY PARTITION THE JEWELLERY SEGM ENT OIL DIVISION AND SARAVANA STORES ENTERPRISES ARE ALLOTTED TO SHR I SELVARATHINAM. ACCORDING TO THE LD. REPRESENTATIVE THE ASSESSEES BUSINESS IS A FAMILY BUSINESS AND IT WAS CARRIED ON IN THE NAME O F PARTNERSHIP FIRM FOR THE PURPOSE OF CONVENIENCE. BY WAY OF A FAMILY ARRANGEMENT ONE OF THE PARTNER WAS ALLOTTED JEWELLERY SEGMENT OIL DIVISION AND SARAVANA ENTERPRISES ACCORDING TO THE LD. REPRESEN TATIVE HENCE THERE CANNOT BE ANY DISALLOWANCE OF INTEREST ON THE BORROWED FUNDS. ONLY FOR THE PURPOSE OF SETTLING THE FAMILY DISPUTE THE ADVANCES MADE TO JEWELLERY BUSINESS DIVISION OIL DIVISION A ND SARAVANA STORES ENTERPRISES WERE WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT. THEREFORE ACCORDING TO THE LD. REPRESENTATIVE THE RE IS NO QUESTION OF ANY DISALLOWANCE OF PROPORTIONATE INTEREST. 5. ON THE CONTRARY SHRI S. BHARATH THE LD. DEPART MENTAL REPRESENTATIVE SUBMITTED THAT IN RESPECT OF THE LO ANS GIVEN FOR THE EARLIER ASSESSMENT YEARS THE ASSESSING OFFICER GRA NTED PARTIAL 5 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 RELIEF EVEN THOUGH IN RESPECT OF THE LOAN THE INTE REST WAS DISALLOWED. ACCORDING TO THE LD. D.R. EVEN IF THE LOAN RELATES TO EARLIER YEARS THE DISALLOWANCE REQUIRES TO BE MADE ON THE INTEREST DEBITED IN EACH YEAR ONCE THE LOAN WAS PROVED TO BE FOR NON- BUSINESS PURPOSE. IN THE ABSENCE OF ANY MATERIAL T O SHOW THAT THE LOAN WAS ADVANCED OUT OF OWN FUNDS AND NOT OUT OF B ORROWED FUNDS ACCORDING TO THE LD. D.R. THE DISALLOWANCE HAS TO BE MADE THEREFORE THE CIT(APPEALS) IS NOT JUSTIFIED IN ALL OWING THE PARTIAL RELIEF TO THE ASSESSEE. ACCORDING TO THE LD. D.R. THE CIT(APPEALS) HAS ALSO PLACED RELIANCE ON THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2006-07 TO 2009-10 WHEREIN THE ADD ITIONS WERE DELETED SINCE THERE WAS NO INCRIMINATING MATERIAL F OUND DURING THE COURSE OF SEARCH OPERATION. DURING THE YEARS UNDER CONSIDERATION ACCORDING TO THE LD. D.R. THE ASSESSMENT PROCEEDIN G WAS PENDING THEREFORE THE PENDING ASSESSMENT WOULD ABATE. HEN CE ACCORDING TO THE LD. D.R. THE ASSESSING OFFICER HAS TO PASS A COMPOSITE ASSESSMENT ORDER INCLUDING THE INCOME WHICH WAS DIS CLOSED IN THE REGULAR RETURN THEREFORE THE CIT(APPEALS) IS NOT JUSTIFIED IN GRANTING PARTIAL RELIEF TO THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE 6 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 ADVANCED FUNDS TO SISTER CONCERNS AND ONE OF THE PA RTNERS. THE ASSESSEE ALSO BORROWED FUNDS FOR BUSINESS. THE ASS ESSING OFFICER DISALLOWED PROPORTIONATE INTEREST ON BORROWED FUNDS TO THE EXTENT TO WHICH IT WAS ADVANCED TO SISTER CONCERNS AND PARTNE R. ON A QUERY FROM THE BENCH BOTH THE REPRESENTATIVES OF THE ASS ESSEE AND REVENUE COULD NOT CLARIFY HOW THE CONCERNS WHICH RE CEIVED THE ADVANCES ARE SISTER CONCERNS OF THE ASSESSEE. THE ASSESSEE BEING A PARTNERSHIP FIRM IT IS NOT KNOWN WHETHER T HE ASSESSEE-FIRM HOLDING ANY SHARES OF OTHER FIRMS. MOREOVER THE A SSESSEE CLAIMS THAT IT IS A FAMILY BUSINESS AND THE FUNDS ALLOTTED TO JEWELLERY DIVISION OIL DIVISION AND SARAVANA STORE ENTERPRIS ES WERE WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT SINCE THE SAME WERE AL LOTTED TO SHRI SELVARATHINAM ON A FAMILY SETTLEMENT. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT WHEN THE FUNDS WERE WRITTEN OFF BY WAY OF FAMILY PARTITION THEN IT CANNOT BE CONSTRUED AS DI VERSION OF FUNDS. HOWEVER BOTH THE AUTHORITIES BELOW HAD NO OCCASION TO CONSIDER WHETHER THERE WAS FAMILY PARTITION AND HOW THE OTHE R FIRMS WHICH RECEIVED ADVANCES FROM THE ASSESSEE-FIRM ARE SISTER CONCERNS OF THE ASSESSEE. IN THOSE CIRCUMSTANCES THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECO NSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY ORDERS OF BOTH THE AUTHORITIES BELOW 7 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 ARE SET ASIDE AND THE ENTIRE ISSUE OF DISALLOWANCE OF INTEREST IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND BRING ON RE CORD HOW THE OTHER FIRMS WHICH RECEIVED THE ADVANCES FROM THE AS SESSEE-FIRM ARE THE SISTER CONCERNS OF THE ASSESSEE AND WHETHER THE RE IS ANY FAMILY PARTITION AS CLAIMED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 7. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTIONS TO SUPPORT THE ORDER OF THE CIT(APPEALS). SINCE THE ENTIRE ISSUE OF DISALLOWANCE OF INTEREST RAISED IN BOTH THE ASSESSEES APPEALS AND REVENUES APPEALS IS REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER THE CROSS-OBJECTIONS HAVE BECOME INFRUCTUOUS. 8. IN THE RESULT ALL THE APPEALS FILED BY THE REVE NUE AND THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. HOW EVER THE CROSS- OBJECTIONS STAND DISMISSED. ORDER PRONOUNCED ON 30 TH NOVEMBER 2017 AT CHENNAI. SD/- SD/- ( ! ) ( ... ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 5 /DATED THE 30 TH NOVEMBER 2017. KRI. 8 I.T.A. NOS.993 TO 995/MDS/16 I.T.A. NOS.1173 & 1174/MDS/16 C.O. NOS.99 TO 101/MDS/16 - +067 87'0 /COPY TO: 1. &/0 /ASSESSEE 2. ASSESSING OFFICER 3. 1 90 () /CIT(A)-18 CHENNAI-34 4. PRINCIPAL CIT -I CHENNAI 5. 7: +0 /DR 6. ;& < /GF.