PRADEEP STEEL RE-ROLLING MILLS P. LTD, LUCKNOW v. ITO 8(2)(4), MUMBAI

ITA 111/MUM/2010 | 2003-2004
Pronouncement Date: 19-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 11119914 RSA 2010
Bench Mumbai
Appeal Number ITA 111/MUM/2010
Duration Of Justice 1 year(s) 13 day(s)
Appellant PRADEEP STEEL RE-ROLLING MILLS P. LTD, LUCKNOW
Respondent ITO 8(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 19-01-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2003-2004
Appeal Filed On 06-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.111/MUM/2010 ASSESSMENT YEAR : 2003-04 M/S. PRADEEP STEEL RE-ROLLING MILLS PVT. LTD. ADMINISTRATIVE OFFICE B-964/A SECTOR-A MAHANAGAR LUCKNOW 226 006. ..( APPELLANT ) P.A. NO: (AACCP 8697 B) VS. INCOME TAX OFFICER-8(2)(4) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHR I ASHISH MEHTA RESPONDENT BY : SHRI SURENDRA KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 18.10.2009 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL BE SIDES LETTING OUT OF GODOWN OF ITS SURPLUS COMMERCIAL ASSETS TO EARN INCOME . THE RETURN WAS FILED DECLARING NET LOSS OF RS.12 59 927/-. DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS CLAIMED INTEREST EXP ENDITURE OF ITA NO.111/M/10 A.Y:03-04 2 RS.13 79 301/- ON ACCOUNT OF ONE TIME SETTLEMENT OF LOA N WITH CANARA BANK LUCKNOW. IT WAS STATED BY THE ASSESSEE THAT THE ASSESSE E HAD ACCEPTED ONE TIME SETTLEMENT WITH CANARA BANK LUCKNOW FOR RS.30.25 LACS AGAINST WHICH A SUM OF RS.30.25 LACS AGAINST WHICH A SU M OF RS.7.52 LACS WAS ALREADY PAID IN EARLIER YEARS AND THE B ALANCE OF RS.23 07 671/- WAS PAID ON 23.9.2002 WHICH INCLUDED R S.22 72 200/- TOWARDS ONE TIME SETTLEMENT AND RS.35 471/- TOWARDS EX PENSES. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE OUTSTANDING LO AN AS PER BOOKS AS ON 1.4.2002 WAS RS.9 03 488/- THE BALANCE PAYM ENT OF INTEREST OF RS.13 79 301/- WAS CLAIMED DURING THE RELEV ANT YEAR. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) TO THE BANK TO CLARIFY THE DETAILS OF INTEREST AND PRINCIPAL IN ONE TI ME STATEMENT. THE BANK VIDE LETTER DATED 22.12.2008 HAD INTIMATED THA T THE MATTER BEING OLD IT WAS NOT POSSIBLE TO GIVE DETAILS. IN THE ABSE NCE OF ANY EVIDENCE THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF INTEREST OF RS.13 79 311/- AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER AFTER MAKING SOME OTHER ADDITION COMPLET ED THE ASSESSMENT AT AN INCOME OF RS.63 56 670/- VIDE ORDER DAT ED 31.12.2008 PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TA X ACT 1961(THE ACT). BEFORE THE LD. CIT(A) THE ASSESSEE WHILE EXPLAINING THE FACTUAL MATRIX OF THE ISSUE ALSO FILED A LETTER FROM TH E BANK CONFIRMING THAT THE PARTY HAS DEPOSITED A CHEQUE FOR RS.23 07 671/ - ON 23.9.2002 WHICH INCLUDED RS.22 72 200/- TOWARDS OTS AND RS.35 471/- TOWARDS SUIT EXPENSES. ACCORDING TO THE ASSESSEE SINCE THE OUTSTANDING BALANCE IN THE BOOKS AS ON 31.3.2002 WA S RS.9 03 489/- AND THE AMOUNT WAS PAID RS.22 72 200/- THEREFORE THE DIFFERENCE OF RS.13 68 712/- WAS CLAIMED DURING THE YEA R AS THE SAME WAS PAID BY THE ASSESSEE TO THE BANK DURING THE YEAR. HOWEVER THE LD. CIT(A) WHILE OBSERVING THAT THE APPELLANT IS MAI NTAINING ITS BOOKS ITA NO.111/M/10 A.Y:03-04 3 OF ACCOUNT ON MERCANTILE BASIS AND SINCE NO INTEREST HAS B EEN PROVIDED IN THE BOOKS OF ACCOUNTS IN THE EARLIER YEARS THE ENTIR E PAYMENT MADE BY THE ASSESSEE WHICH IS RELATING TO THE EARLIER YEARS CAN NOT BE ALLOWED AND ACCORDINGLY HE SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 AND 2 ARE AGAINST THE VALIDITY OF RE- OPENING OF ASSESSMENT U/S. 147 OF THE ACT. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT HE IS NOT PRESSING THE ABOVE GROUNDS OF APPEAL WHI CH WAS NOT OBJECTED TO BY THE LD. DR. 6. THAT BEING SO AND IN THE ABSENCE OF ANY SUPPORTING MATERIAL PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE THE G ROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE REJECTED BEING NOT PRESSED . 7. GROUND NO.3 AND 4 ARE AGAINST THE SUSTENANCE OF DISAL LOWANCE OF INTEREST CLAIM OF RS.13 79 301/-. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT SINCE T HE FINAL PAYMENT OF RS.22 72 200/- WAS SETTLED WITH THE BANK IN THE YE AR UNDER ITA NO.111/M/10 A.Y:03-04 4 CONSIDERATION AND WAS PAID ON 23.9.2002 I.E. IN THE FI NANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2003-04 THEREFORE THE SAME IS ALLOWABLE AS BUSINESS EXPENDITURE. 9. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) . 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT IT IS ALSO N OT IN DISPUTE THAT THE ASSESSEE HAS TAKEN LOANS FROM CANARA BANK ON HYPOTHET ICATION OF ITS ASSETS. SINCE THE ASSESSEE HAS NOT REPAID THE LOAN AMOU NT THE BANK HAD INSTITUTED A SUIT AGAINST THE ASSESSEE COMPANY. THEREAFTER ONE TIME SETTLEMENT WAS ENTERED WITH THE BANK AND THE ASSESSEE HAS PAID THE AMOUNT TO THE BANK WHICH WAS CONFIRMED BY TH E BANK VIDE ITS LETTER WHICH HAS BEEN EXTRACTED IN PARA 4.3 OF THE O RDER OF THE LD. CIT(A) AS UNDER:- WITH REFERENCE TO THE ABOVE PLEASE FIND OUR REPLY AS UNDER 1.ONE TIME SETTLEMENT WAS ACCEPTED FOR RS.30.25 LAC S AND PENDING SUIT EXPENSES OF RS.35 471/- WAS TO PAI D BY THE PART (A PERMISSION COPY OF COMPROMISE BY OUR HEA D OFFICE IS ENCLOSED) 2.THE OUTSTANDING AMOUNT TOWARDS PRINCIPAL WAS RS.12 90 814.12 AND RS.17 34 185.88 TOWARDS INTERES T AT THE TIME OF SETTLEMENT. 3.OTS WAS ACCEPTED FOR RS.30.25 LACS. OUT OF WHICH PARTY HAD PAID RS.7 52 800/- IN 1993-94 & 1994-95 A ND THE BALANCE AMOUNT OF RS.22 72 200/- ON 23.09.2002. (PARTY HAS DEPOSITED A CHEQUE FOR RS.23 07 671/- ON 23.09.2002 WHICH INCLUDED RS.22 72 200/- TOWARDS OT S AND RS.35 471/- TOWARDS SUIT EXPENSES). ITA NO.111/M/10 A.Y:03-04 5 4.APPROXIMATELY ABOUT RS.48.26 LACS HAS BEEN WAIVED AS PER DECREE @ 15% ON RS.1749397/31 WEF 05.10.1977 TI LL 09.09.2002. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THERE WAS AN OPENI NG BALANCE OF RS.9 03 489/- AND THE AMOUNT WAS PAID BY THE ASSESSEE RS.22 72 200/- ON 23.9.2002 TO THE BANK AS FINAL SETTL EMENT THEREFORE THE DIFFERENCE OF RS.13 68 712/- WAS CLAIMED BY THE ASSESSEE DURING THE YEAR AS BUSINESS EXPENDITURE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT TH E ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME AND THE LD. CIT(A ) REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS FOL LOWING MERCANTILE SYSTEM OF ACCOUNTING THE INTEREST CLAIMED IS RELATING TO EARLIER YEARS HENCE CANNOT BE ALLOWED. SINCE THE AM OUNT OF RS.23 07 671/- IS A REPAYMENT OF PRINCIPAL AMOUNT WHICH INCLUDES LITIGATION EXPENSES AND INTEREST PRIOR TO 5.10.1997 AND THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE SAID AMOUNT OF INT EREST HAS BEEN CLAIMED AND ALLOWED IN THE RELEVANT ASSESSMENT YEARS. T HIS BEING SO AND KEEPING IN VIEW THAT THE ASSESSEE HAS FILED BANKS LE TTER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) WITHOUT REFERRING THE SAME TO THE ASSESSING OFFICER AS PER PROVISIONS OF RULE 46A OF THE I.T. RULES 1962 WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE TH E MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY W E SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCO UNT AND SEND BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SH ALL DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOV E AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.111/M/10 A.Y:03-04 6 11. IN THE RESULT ASSESSEE'S APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.1.2011. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 19.1.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.