WORLD WIDE SHIP MANAGEMENT P.LTD,MUMBAI vs. ITO WD 15(3)(2), MUMBAI

This appeal, filed by the assessee, being 30th July , 2015 passed by learned Commissioner of Income Tax (Appeals)-24, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 8th March, 2013 ITA 5525/Mum/2015 2 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (Hereinafter called “the Act”).

Before learned CIT(A) , the assessee made submissions that interest is paid on term loans which were raised in financial year 2007-08 for purchase of premises and equipments and it is not possible to grant loans to Director during the relevant previous year out of interest bearing funds raised by the assessee from term loans from banks as the interest bearing funds raised by the assessee from banks towards term loan stood utilized during the financial year 2007-08 itself. It was also submitted that interest bearing working capital loan raised by the assessee from banks were utilized for business of the assessee. , which could be verified from the Balance Sheet of the assessee. The learned CIT(A) rejected the afore-stated contention of the assessee on the grounds that such arguments were not raised by the assessee before the AO and hence addition stood confirmed by the learned CIT(A) vide appellate orders dated 30-07-2015 passed by learned CIT(A).

Aggrieved by appellate orders dated 30-07-2015 passed by learned CIT(A), the assessee is in appeal before the tribunal.

The learned counsel for the assessee submitted that non consideration and rejection by learned CIT(A) of the explanations and evidences filed by the assesses in its defense before learned CIT(A on the grounds that such contentions were not raised by the assessee before the AO is clearly erroneous. It was submitted that learned CIT(A) powers are co-terminus with powers of AO and the learned CIT(A) ought to have considered the said explanations and in terms of Rule 46A of Income-tax Rules, 1962 , the learned CIT(A) could have remanded the additional evidences to AO for remand report. It was also submitted that the learned CIT(A) has also not recorded reasons for non consideration of assessee’s explanations and evidences as required under Rule 46A of Income-tax Rules, 1962. The learned counsel for assessee prayed that the matter may be set aside and restored to ITA 5525/Mum/2015 6 the file of AO for de-novo determination of the issue on merits by the AO, after consideration of explanation and evidences filed by the assessee in its defense. The learned DR relied upon orders of authorities below but fairly agreed that this issue may be restored to the file of AO for de-novo determination of the issue on merits in accordance with law. Thus, in nut- shell both learned counsel for the assessee and learned DR are fairly in agreement that the issue under the instant appeal need to be restored to the file of the AO as there are additional evidences/ explanations on which the assessee is relying on which need verification, enquiry and examination by the AO on merits in accordance with law . The other additions made by the AO are not subject matter of dispute between the rival parties as the said additions have reached finality vide appellate orders dated 30-07-2015 of learned CIT(A). It is not brought on record by learned DR that Revenue is in appeal as against the relief granted by learned CIT(A) to the assessee.

We have considered rival contentions and perused the material on record. We have observed that the assesee is engaged in the business of crew management where the entire operation of the vessel sailing from port to port is being operated by assessee on behalf of the principals. The entire crew and its provision are operated by the assessee on behalf of the principal. The AO , inter-alia, made an additions on account of disallowance of interest to the tune of Rs. 5,65,566/- paid to the bank on term loan and working capital on the grounds that the interest free loan/advance was advanced to Director of the assessee company from interest bearing borrowed funds. The assessee claimed before the AO that the said advance/loan granted to the Director was erroneously being grouped as advance for properties while the same is in nature of loan/advance to Director on which interest will be recovered from the said Director retrospectively. The assessee also submitted before the AO that the said amount advanced to the said director is in the nature of loan/advance to the Director as Director has purchase the property in Pune ITA 5525/Mum/2015 7 in his personal name. The AO rejected the said contention of the assessee. Before learned CIT(A) , the assessee made submissions that interest is paid on term loans which were raised in financial year 2007-08 for purchase of premises and equipments and it is not possible to grant loans to Director during the relevant previous year out of interest bearing funds raised by the assessee as the interest bearing funds raised by the assessee stood utilized during the financial year 2007-08 itself. It was also submitted by the assessee before learned CIT(A) that interest bearing working capital loan raised by the assessee from bank were utilized for business of the assessee. , which could be verified from the Balance Sheet of the assessee. The learned CIT(A) instead of adjudicating the said contentions raised by the assessee rejected the contentions of the assessee on threshold on the grounds that such arguments were not raised by the assessee before the AO. The learned CIT(A) committed an error in not considering the said contentions of the assessee on merits. The learned CIT(A) powers are co-terminus with powers of the AO . The learned CIT(A) should have forwarded the additional evidences to learned AO for seeking remand report as mandated u/r 46A of 1962 Rules for necessary examination, enquiry and verification by the AO of these additional evidences. Thus, keeping in view factual matrix of the case and in the interest of justice and fair play to both the parties, we are inclined to set aside and restore this issue to the file of the AO for de-novo determination of the issue on merits in accordance with law. Needless to say that proper and adequate opportunity of being heard shall be provided by the A.O. to the assessee in accordance with the principles of natural justice in accordance with law in the set aside proceedings. The assessee will be allowed by the AO to furnish all necessary/relevant evidences and explanation in his defense in set aside proceedings. We order accordingly.