SQNY GRANITES,SIVAKASI vs. DCIT, MADURAI

This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-19, Chennai in 15, passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘’the Act’’) for the assessment year 2009-2010.

The assessee is a partnership firm and raised only one substantive ground of charging interest on amount advanced to sister concern by the Assessing Officer and subsequently further enhanced by the Commissioner of Income Tax (Appeals).

The brief facts of the case are that the assessee is in the business of mining and trading of granite at Sivakasi. There was search operations u/s.132 of the Act on group concern M/s. Sony Firewoks Private Limited on 21.10.2008 and also residential premises of the Directors. Simultaneously, the Income Tax Department conducted survey u/s.133A in the business premises and factories of the group concern and impounded books of accounts, documents, and other incrementing materials. The ld. Assessing Officer has issued notice u/s.153C r.w.s153A (a) dated 30.11.2009 to the assessee firm to file the return of income within specified time.

The assessee firm has filed return of income admitting a loss of �11,08,565/- on 31.08.2010. In the assessment proceedings, a questionnaire was issued and the ld. AR appeared before the Assessing authorities from time to time and filed details and also gave submissions in respect of seized material and other movable and immovable properties owned by the assessee. The ld. Assessing

The ld. Authorised Representative has argued that as per agreement nil percentage of interest is payable by the sister concern M/s. Sqny Stones (P) Ltd as on 31.03.2009 and relied on the decision of Delhi High Court in the case of CIT vs Exxon Mobil Lubricants (P)

Before the Tribunal, ld. counsel submitted that the firm has adequate liquidity of funds and there are no contingent liabilities payable. The ld. Assessing Officer without considering the terms of agreement on advance has unilaterally estimated the interest rate at 6% on �45.25 lakhs advanced to the sister concern M/s.Sqny Stones Private Limited and made disallowance of �2,71,500/. Further, the ld. Commissioner of Income Tax (Appeals) exercising powers erred in enhancing the interest rate from 6% to 12.5% which is practically not possible for any business entities to consider interest when there is no actual receipts and made additional interest disallowance of �2,94,125/- and total aggregating to �5,65,625/-. The ld. Authorised Representative argued that on perusal of balance sheet at page No.3. of paper book, the current liabilities are �1.57 crores compared to current assets including advance to sister concern �68.77 lakhs. The ld. Authorised Representative also demonstrated before us by referring to agreement at page 21 were no interest is payable on advance and filed written submissions with income tax particulars and ledger accounts copies of the sister concern shown under current liabilities M/s. Chindia Granites (P) Ltd and M/s. AAA Trade Agencies to prove that adequate interest free funds are available. The ld. CIT(A) has overlooked the balances available with the assessee and charged

On the other hand, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently argued that the assessee has not submitted the information before the Assessing Officer nor in appellate proceedings, hence, the appeal of the assessee be dismissed.

After hearing the rival submissions of both the parties, and also perused the material on record and the orders of the lower authorities, the ld. AR has substantiated his claim for deletion of interest with arguments and filed paper book and ledger account copies of sister concerns who has advanced amount to assessee which were utilized for advancing to M/s. Sqny Stones P. Ltd and relied on case laws. It is a fact that material evidence filed was very much crucial for assessment purpose. On perusal of balance sheet the surplus funds are available comparing current liabilities at �1.57 crores against the advance shown to sister concern in current assets at ITA No.1307/Mds/2015 :- 7 -:

In the result, the appeal of the assessee in is partly allowed for statistical purposes.