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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SMT. DIVA SINGH
The present appeal has been filed by the assessee assailing the correctness of the order dt. 22.8.2017 of CIT(A)-37, New Delhi pertaining to 2013-14 AY on various grounds on merits. However, the parties were heard only qua the issues raised in ground no. 3 which reads as under: “3. That on facts and in law, Ld. CIT(A) has erred in not admitting the additional ground of appeal and additional evidence. As such and otherwise too the Ld. CIT(A) and the Ld. AO have erred on facts and in law in assessing interest income on FDRs of Rs. 9,04,348/- at its gross amount without netting off the same against substantially higher interest paid which has direct nexus with the said interest earned during pre-operative period related to the sole project being implemented.”
2. The relevant facts of the case are that the assessee company as per the assessment order was incorporated for the development and mining of coal from Amielia Coal Block in Distt. Sringholi (MP). The sole issue for consideration in the present appeal is the taxability of the receipt of interest income from FDRs. The assessee before the AO placed reliance upon the decisions the Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT (1997) 227 ITR 172 (S.C) and CIT vs. Bokaro Steel Ltd. (1999) (S.C) and also the decision of the Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. vs. ITO 315 ITR 255 (Del). The AO held these to be not applicable as the facts of the assessee’s case were considered to the entirely distinguishable. The AO was of the view that the general statement that these funds were temporarily placed in FDRs and were inextricably connected with the setting up of the mining project could not be accepted as the assessee was found to have offered no explanation setting out the specified purpose for which these funds’ were stated to be deployed. He held that the mere contention of the assessee that these funds were connected with the mining project by itself did not address the issue. He was of the view that the character of the receipt is determined by the purpose for which it has been used and in the facts, there was no specific stated purpose for which the money has been deposited in FDRs. Consequently, it was held that decision of the Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited was not applicable to assessee at all.
3. The issue was carried in appeal before the CIT(A) seeking permission to file additional evidence stated to be loans sanctioned by ICICI to suppor the claim that the entire funds raised by the company by way of share capital and term loan were meant only for the project and that there were no surplus funds. Considering the fact that the sufficient opportunity was provided in the course of the assessment proceedings by the AO, the fresh evidence was not admitted. Similarly, the prayer for admission of additional ground was also rejected by the CIT(A) leading to the filing of the present appeal.
The Ld. AR reiterated the submissions before the CIT(Appeals) which have been extracted in the order at page 3 & 4. The Ld. Sr.DR, on the other hand, relying upon the impugned order supported the same on the reasoning adopted by the AO and the CIT(A) namely on the ground that there was adequate opportunity at the assessment stage, hence fresh evidences could not be accepted. Apart from that it was also her submission that the evidence filed is not sufficient and complete.
I have heard the submissions and find on going through the record that admission of additional evidence was objected to by the AO on the following grounds: “The issue raised by the assessee company is considered but not acceptable as during the assessment proceedings, ample opportunities were provided to the assessee company to prove the Nexus between the funds utilized for making FDRs with borrowed funds but no such details were filed by the assessee. Further as stated in preceding para that the assessee has raised Rs. 39,79,59,180/- as paid up share capital during the year, which in no means specially meant for the Project but the surplus funds of the assessee. It is also important to Note that as per the Loan Sanctioned Letter issued by the ICICI Bank Limited mentioned at page 3 of the paper book that the purpose of the facility provides only for utilized for the purpose of financing the project including reimbursement of pre-operative expenses on the Project. Further it was mentioned at page 12 of the PB that the assessee company shall open with the Account Bank a Trust and Retention account to the satisfaction of ICICI Bank Limited for servicing of the facility for which funds were borrowed and also mentioned the utilization of funds in the manner prescribed in the clause, which clearly reflects that the amount received from ICICI Bank Limited as Term Loan cannot be utilized for the purpose of Investment in FDRs and will be disbursed only when the assessee company submitted the details of expenses to be paid for the Project Expenses. Accordingly, plea of the assessee company that the borrowed funds utilized for making FDRs are far away from the reality and liable to be rejected. Further no explanations have been filed by the assessee company regarding the paid-up capital raised during the year and its utilization, which reflects that the assessee had failed to prove the nexus between the borrowed funds and funds utilized for making FDRs and the interest income on FDRs were rightly added by the AO during the assessment proceedings.” (emphasis provided) 6. It is seen on a perusal of the above that admittedly the reliance placed by the assessee before the AO on submissions on the basis of facts available on record did not result with a favourable view. Consequently, the assessee approached the Appellate Forum with permission to raise fresh evidences. It is not the case of the Revenue as has been considered above that the evidence is not relevant or crucial for determining the issue. The fact that it is not sufficient and incomplete is the case made out by the CIT(A) as well as the Sr.DR. In such an eventuality, I do not see any reason why the CIT(A) did not direct the assessee to call for supporting documents and make good the insufficiency and/or incompleteness in the evidences noted. The Appellate Forum provided under the Act is not perceived to be an empty ritual wherein the claims/pleas of the taxpayers are to be mechanically obstructed. The Forum exists for rendering justice considering the correct evidences and it is the duty and responsibility of the CIT(A) to ensure that in the eventuality, the evidences relied upon are noticed to be insufficient or incomplete, then he ought to exercise the powers vested in the said Authority by sub-rule (4) of Rule 46A to call for the evidence. I find, on going through the material available on record that the additional evidences sought to be relied upon as noted are definitely relevant and crucial for determining the issue. Accordingly, in the interests of substantial justice, it is directed to be taken on record. Qua the sufficiency of the same which is considered to be doubted by the tax authority, I am of the view that in case the evidences filed are found to be insufficient and/or incomplete there is no impediment for the concerned authority to direct the assessee to further substantiate its claim.
The Ld. Sr. DR though placed reliance on the orders specifically requested that in case it is to be remanded, then a remand be made to the AO and not the CIT(Appeals) on the ground that the evidences will need to be considered first by the AO. The said request is accepted. The impugned order, accordingly, is set aside back to the file of the AO with a direction to pass a speaking order in accordance with law admitting fresh evidences and directing the assessee if need be to file further supporting evidences.
The issue sought to be raised by the assessee as additional ground before the CIT(A), accordingly, is also set aside permitting the assessee to raise appropriate claims in accordance with law. In terms of the above, the impugned order is set aside back to the file of the Assessing Officer with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 9. While so directing it is hoped that the opportunity so provided is utilized by the assessee fully and fairly by making proper compliances. It is made clear that in the eventuality of abuse of the same the AO would be at liberty to pass an order on the basis of material available on record. Said order was pronounced in the open court at the time of hearing itself. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27th June 2018.