PHULCHAND EXPORTS PVT. LTD.,MUMBAI vs. DCIT, CENTRAL CIRCLE 3(3), MUMBAI

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ITA 2555/MUM/2022Status: DisposedITAT Mumbai13 January 2023AY 2015-164 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that similar disallowances in prior years were deleted by the ITAT, and for AY 2015-16, the matter was restored to the AO for fresh verification. Therefore, the impugned order was set aside.

What were the facts?

The assessee's appeal concerns a disallowance of Rs. 24,56,796/- under Section 36(1)(iii) for interest-bearing funds invested in interest-free advances. The Assessing Officer's order was brief and lacked detailed reasoning.

What were the issues?

Whether interest-bearing funds were wrongly invested in interest-free advances, and if the AO's order lacked proper reasoning and consideration of previous ITAT rulings.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Hearing: 20/12/2022Pronounced: 13/01/2023

ORDER PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals)-51, Mumbai (for short ‘CIT(A)’) dated 25.08.2022 under section 250) of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2015-16. The assessee has raised the following grounds of appeal:

“1. Ld. CIT (A) erred in confirming an addition of Rs. 24,56, 796/- under sec.36(1)( on the basis addition has already been upheld by the CIT(A) in appeal against original order without appreciating the fact that capital and free reserves of the appellant are much higher to the interest free advances made by the appellant and hence no disallowance out of interest was called for.

2. Ld. CIT(A) erred in retaining the addition U/s.36(1)(iii) as per original order U/s.143(3) without appreciating to the fact that Hon'ble ITAT in appellate order for A.Y.2014-15 deleted a similar disallowance and Ld. CIT(A) in appellate order against original order followed its order for A.Y.2014-15, which stood disapproved by Hon Tribunal.

3.

Appellant pray that addition made be deleted.”

2.

Brief facts of the case are that assessee filed return u/s139(1) on 30-09- 2015 declaring total loss at Rs. 4,29,23,218/-. Thereafter assessee revised its return u/s 139(5) on 08-10-2015 declaring total loss at Rs. 4, 29, 23,218/- under normal provisions and book loss of Rs. 11, 95,38,862/- under the provisions of MAT. The case was selected for scrutiny and assessed at loss of Rs. 3, 64, 09,916/- under the normal provisions and book loss of Rs. 11, 54, 82,350/- under the provisions of MAT. Assessee main business is trading and export of iron ore, metal and commodities.

3. Throughout the assessment order no description of disallowance /additions made by AO has been discussed and quantified. It astonishes that in an order of 2 pages without even describing the head of disallowance/addition AO straight away assessed income under the normal provisions and u/s 115JB.

4.

We have gone through the non-speaking, dumb and blind order of AO, order of Ld. CIT (A) and submissions of the assessee along with paper-book. The issue under contest pertains to disallowance of Rs. 24, 56,796/- u/s 36(1)(iii) on this disallowance stand of the revenue is that interest bearing funds has been invested in interest free advances. The similar issue has been examined by the ITAT in assessee own case vide (AY 2014-15) and they found that assessee has ample own funds and interest free funds to provide interest free advances and loans. Hence, they deleted the additions. Similar issue again examined by ITAT for AY 2015-16 with reference to assessment order passed u/s 143(3) vide ITA No. 4370/Mum/2019 wherein they restore the matter back to the AO to verify the position of assessee’s own fund along with interest free advances received vis-a-vis interest free advances and loans given.

5.

In views of the matter, we are of the considered view that issue is required to be decided by the AO afresh by passing speaking order by considering the direction given by the Tribunal in assessee’s own case in A.Y. 2015-16 whereby they have restored the matter back to the AO. So the impugned order passed by Ld. CIT (A) is set-aside and matter is remanded back to the AO to decide afresh.

6.

In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 13th day of January, 2023.

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