SHREE SAINATH ENTERPRISES,MUMBAI vs. DCIT CENTRAL RANGE-7(3), MUMBAI

The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals) – 49, Mumbai passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal;

The brief facts of the case are that the assessee is a partnership firm part of the Lodha Group and is engaged in the business of land development and construction of real estate properties. The assessee has filed the return of income on 30.09.2013 for the A.Y 2013-14 disclosing a total loss of Rs. 28,71,63,095/-.Subsequently the case was selected under the CASS and notice u/s 143(2) and U/sec 142(1) of the Act calling for various details and clarification was issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details. The AO on perusal of the financial statement found that the assessee has made investments of Rs. 22.48 Lakhs in the share of Indian companies, therefore the AO called for the information and also dealt on the provisions of Sec. 14A r.w Rule 8D and made a disallowance of Rs. 96,63,023/-.

Aggrieved by the order the assessee has filed an appeal before the CIT(A), whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO and in respect of disallowance u/s 14A of the Act, the CIT(A) has granted partial relief and confirmed the addition of interest and partly allowed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.

At the time of hearing the Ld. AR has filed the additional ground of appeal and the same was not pressed. Further the Ld.AR has made submissions on the facts that the assessee has considered the commercial expediency and also the assessee has not charged any interest on the debtors as the material supplied to non related party. The contentions of the Ld.AR that this transaction is purely a commercial transaction and they are not related concerns and the assessee has purchased the materials from sister concern and paid interest and it was claimed deduction. Similarly the assessee has also utilized the funds for the purpose of selling the products and has shown as debtor and the Ld. AR substantiated his submissions with the financial statements and paper book and prayed for allowing the appeal. Contra, the Ld. DR supported the order the order of the CIT(A).

We heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld.AR that the CIT(A) has erred in confirming the disallowance of interest proportionately as the assessee has not charged the any interest on debtors. The Ld. AR’s contentions are that the assessee is the business of construction and development of real estate properties and developed residential houses at various places. The Ld. AR also emphasized on the fact that the assessee has also submitted the bank account, brought forward unabsorbed depreciation /losses. The contention of the Ld. AR that the assessee has submitted the details of unsecured loans and confirmations supporting the return of income filed and the details of the receivables and trade payables and the loans and advances reflected in the balance sheet and the assessee’s transactions are purely in the nature of business transactions and interest expenses and interest income are reflected at page 114 to 123 of the paper book. The Ld. AR mentioned that the assessee has acquired the trading materials from the sister concerns and has paid interest. Whereas the material was sold to the M/s Suvidinath Bildtech Pvt Ltd which is not related concern and the transactions are at Arm’s length. We found from the facts and the material information filed by the assessee and the assessment order there are no discussions on share holding pattern or directors of the debtor company. Accordingly, the Assessing officer is directed to verify whether the assessee is a related

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purpose.