M/S MAGRATH PROPERTIES (P) LTD.,,BANGALORE vs. DCIT, BANGALORE

Brief facts of the case are that the assessee-company which had filed its return of income for the assessment year 2006-07 u/s 115JB of the Act. The Assessing Officer(AO) passed the assessment u/s 143(3) on 12/01/2008. On perusal of the M/s.Magrath Properties (P) Ltd., Page 2 of 6 assessment records, the CIT observed that the assessee has paid interest on loans availed and has also advanced loans to its sister concerns and that loan to one of its sister concern was without interest. The CIT was therefore of the opinion that the AO ought to have disallowed interest expenditure on account of interest advanced to its sister concern, M/s.Dynasty Stock Holding Pvt. Ltd.,(DSHPL). Therefore, he issued notice u/s 263 on 11/10/2010. During the course of the revision proceedings, the assessee had stated that it has not charged interest in view of MOU entered into with its sister concern and that the said MOU is lost and is not traceable. The assessee further submitted a copy of the agreement dated 2/12/2010 incorporating all the terms of the MOU dated 18/6/2005 before the CIT. The CIT, however, held that the assessee has failed to prove the commercial expediency by not producing the original MOU dated 18/6/2005 and that the claim of loss of the original MOU dated 18/6/2005 and the subsequent MOU dated 2/12/2010 is purely an after-thought. He further held that since the original MOU dated 18/6/2005 was not registered, it was a colourable devise to avoid disallowance of interest. He, accordingly, revised the assessment order and directed the AO to pass an order of assessment by disallowing the interest expenditure on the loan advanced to assessee’s sister concern. Aggrieved, the assessee preferred an appeal before the ITAT along with an application for admission of additional evidence. The Tribunal, vide orders

In the remand proceedings, the case was posted for hearing on 28/3/2013. The learned counsel for the assessee appeared on 21/3/2011 and filed his objections dated 20/3/2011 to the revision proceedings. The CIT has reproduced gist of the objections of the assessee at pages 4 and 5 of his order. Observing that the ITAT has remanded the issue to the file of the CIT to examine the additional evidence filed by the assessee and since the assessee has not furnished any additional evidence for re-examination with regard to the commercial expediency, except for the objections dated 20/3/2013, another opportunity was given to the assessee vide office letter dated 28/11/2013 posting the case for hearing on 10/12/2013. The assessee

Though the assessee has raised three grounds of appeal stating that the reasonable opportunity of hearing was not given to the assessee and that the assessee’s request for adjournment was rejected and reasons submitted on 20/3/2013 were not considered by the CIT, the learned counsel for the assessee did not advance any argument on these grounds. The learned counsel for the assessee only submitted that the counsel’s wife Smt.Janaki was severely ill and was admitted to the hospital and he being the lone person looking after her at such time, he had sought adjournment before the CIT, but unfortunately the CIT has not granted further time but has concluded the revision proceedings. In support of his contention, he placed before us medical certificate issued by Kumaraswami Health Centre, Kottayam to show that his wife was an in-patient of the hospital from 2/2/2014 to 18/2/2014. He submitted that his wife had fallen ill in the month of June 2013 and had to be taken to M/s.Magrath Properties (P) Ltd., Page 5 of 6 various hospitals before finally being operated in February 2014 which is the cause of non-appearance of the counsel and non- production of additional evidence before the CIT. Therefore, he prayed that the assessee be given another opportunity of presenting its case before the CIT.

Having regard to the rival contentions and the material on record, we find that the earlier proceedings u/s 263 were set aside by the Tribunal with a direction to the CIT to consider the issue in the light of commercial expediency and also to examine the additional evidence, if necessary, filed by the assessee. The assessee has failed to file even the additional evidence which it had already filed before the ITAT and has only filed objections to the proceedings u/263. As noticed from the order of the CIT, the effective hearing of the proceedings were from November 2013 to February 2014. Therefore, taking the oral submissions of the learned counsel for the assessee as well as the medical certificates into consideration, we accept that he was prevented by sufficient reasons from appearing before the CIT and deem it fit and proper to set aside the order of the CIT u/s 263 for the purpose of giving the assessee another opportunity of presenting

In the result, the assessee’s appeal is treated as allowed for statistical purposes.