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Income Tax Appellate Tribunal, B Bench, Mumbai
Before: Shri R.C. Sharma & Shri Ravish Sood
This is an appeal filed by the assessee against the order of the CIT(A), Aurangabad-1, dated 23.03.2017 for A.Y. 2012-13 in the matter of order passed under Section 143(3) of the Income Tax Act (hereinafter “the Act”).
The grievance of the assessee relates to the addition made by rejecting the books of account and also disallowance of interest expenditure.
The brief facts of the case are that the assessee is a partnership firm carrying on the business of road asphalting, civil constructions and also derives rental income from container yard. For the assessment year under appeal, the income declared by the assessee is `3,20,86,560/-. In the assessment proceedings, the assessee informed the AO that the assessee's Books of Accounts and related documents have been impounded by VAT Department having its office at CBD Belapur, Navi Mumbai. The Assessee also gave the copy of Panchnama to the AO. The M/s. Blue Star Construction Co. assessee on the basis of available copies of the Books of Accounts gave submission from time to time, which according to the AO was sketchy and not sufficient. The AO invoked provisions of Section 145(3) of the Act and rejected Assessee's Books of Accounts only on the ground that the Assessee failed to produce Books of Accounts and estimated the income at 10% of the gross receipts of `36,11,63,384/- i.e. `3,61,16,338/-. By the impugned order the CIT(A) confirmed the action of the AO.
We have heard the rival contentions and carefully gone through the order of the Authorities below and found that at the time of assessment proceedings the Books of Account were impugned by the VAT Department. The assessee has also given copy of Panchanama to the AO. However, the AO did not agree with the assessee’s contention and rejected the book results by invoking provisions of Section 145(3) and estimated the income at 10% of gross receipts. We find that now the assessee is in possessions of regular Books of Accounts, therefore, in the interest of justice we restore the matter back to the file of the AO to verify the relevant Books of Account and for deciding the issue afresh as per law.
The next grievance of the assessee relates to disallowance of interest of `3,85,41,830/- being interest paid on land taken and utilised for business purposes.
At the outset the learned A.R. placed on record the order of the Tribunal in assessee’s own case for A.Y. 2010-11 dated 28.03.2017, wherein exactly similar issue was dealt with by the Tribunal and the matter was restored back to the file of the AO. We have carefully gone through the order of the Tribunal, wherein the Tribunal had restored the matter with regard to disallowance of interest after having the following observation: -
“7. We have considered the submissions of the parties and perused the material available on record. The dispute between the parties is limited to the issue whether the interest expenditure of `3,77,80,167 is directly related to the earning of rental income from letting out the container yard. It is the claim of the assessee that interest bearing
M/s. Blue Star Construction Co. bank loan is taken for development of container yard for making it viable for commercial use. However, the Departmental Authorities have refused to accept assessee's claim primarily for the reason that the assessee was unable to produce evidence to establish the fact that the bank loan was utilised for development of the land. In this context, we have noted that the learned Commissioner (Appeals) has referred to certain tripartite agreement between the assessee, bank and lessee with regard to availing of loan against rental income. Similarly, he has referred to memorandum of understanding entered into between the assessee and its partners. However, ultimately, the learned Commissioner (Appeals) has sustained the disallowance on the reasoning that the assessee had not furnished the entire loan documents before him. He has observed that out of three tripartite agreements, the assessee has submitted two and assessee has not provided the terms and conditions of term loan cum hypothecation agreement dated 20th October 2006 and 24th March 2007. He has also observed, the assessee had not provided copy of agreement between the assessee and the lessee. However, the learned Authorised Representative had submitted before us that all necessary and relevant documents to prove the fact that the loan was taken for development of land was submitted before the learned Commissioner (Appeals). Whereas, the learned Commissioner (Appeals) has not properly considered them. Thus, as could be seen from the aforesaid facts, the disallowance of expenditure is primarily due to lack of documentary evidences. Therefore, considering the submissions of the learned Authorised Representative that all relevant and necessary documents were available with the assessee to prove the utilisation of bank loan in development of container yard which, according to the learned Authorised Representative, were produced before the Departmental Authorities but not considered, for the interest of justice, we consider it appropriate to restore the matter back to the Assessing Officer for denovo assessment after considering all the documentary evidences produced by the assessee, the submissions to be made and the decisions to be relied upon by the assessee in support of its claim. We make it clear that not only the Assessing Officer must afford reasonable opportunity of being heard to the assessee but he must pass a reasoned order dealing with all the submissions of the assessee keeping in view the documentary evidence as well as the decisions to be relied upon. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.”
7. As the facts and circumstances during the year under consideration are exactly same, we restore this matter back to the file of the AO for deciding afresh as per law.
M/s. Blue Star Construction Co. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes.