Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer,Ward-1(1),, Surat vs Center Point Gems Pvt.Ltd.,, Surat on 23 December, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH
Before: Shri R.P. Tolani, Judicial Member
And Shri Amarjit Singh, Accountant Member
ITA No. 2570/Ahd/2011
Assessment Year 2008-09
The ITO, M/s. Center Point
W ard 1(1), Room No. Gems Pvt. Ltd., 102,
111, Aa yakar Bhavan, Vs Nishit Diamond
Majura Gate, Surat Complex,
(Appellant) Hat Falia Haripura,
Surat-395301
PAN: AACCC8064F
(Respondent)
Revenue by: Ms. Sonia Kumar, Sr. D.R.
Assessee by: None
Date of hearing : 22-11-2016
Date of pronouncement : 23-12-2016
आदेश /ORDER
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This Revenue's appeal for A.Y. 2008-09, arises from order of the CIT(A)-9, Mumbai dated 29-06-2011 in appeal no. CIT(A)9/5(1)(3)/195/2010-11, in proceedings under section 143(3) of the Income Tax Act, 1961; in short "the Act".
I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 2 ITO vs. M/s. Center Point Gems Pvt. Ltd.
2. The assessee has raised following grounds of appeal:-
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A)-9, Mumbai has erred in deleting the addition of Rs.64,90,699/- on account of outstanding Foreign Bank interest which was debited in P & L A/c. without giving any opportunity to examine the additional evidence or document or to cross examine the witness in rebuttal of the additional evidence produced by the appellate, as required u/s. 46A(1) of the I.T. Act.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A)-9, Mumbai has erred in restricted the addition on account of disallowance of various expenses from 50% to 20% a without appreciating the fact that all the expenses are made in cash and no corroborative bill or evidence has been produced by the assessee. Further, assessee failed to discharge onus cash upon him to prove the genuineness of the expenses and whether the same had been incurred for the purpose of business."
3. In this case, return of income declaring income of Rs. 10,54,380/- was filed on 30th September, 2008. During the course of assessment proceedings, assessing officer noticed that the assessee had debited P & L a/c by Rs. 1,53,33,980/- under the head outstanding interest. In this connection, the assessing officer asked the assessee to furnish the details of parties to whom this interest was payable and when the same to be paid. The assessee explained the assessing officer that this interest pertains to the buyers' credit loan financed by foreign banks through Axis Bank and interest was payable to the foreign banks. In this connection, the assessee has submitted certificate issued by the Axis Bank along with list of buyers' credit transactions funded by the foreign banks and interest paid on these transactions. However, the assessee failed to furnish the working of outstanding interest debited to the P & L a/c I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 3 ITO vs. M/s. Center Point Gems Pvt. Ltd.
and the rate of interest charged on buyers credit by the foreign banks. Because of non-submitting of the details by the assessee, the assessing officer has worked out the interest payable as on 31st March, 2008 to the amount of Rs. 94,76,137/-. The assessing officer also stated that assessee has already claimed an interest of Rs. 6,32,856/- in the P & L a/c separately, therefore, the balance amount of interest payable after reducing Rs. 6,32,856/- comes to Rs. 88,43,281/- which was allowable to the assessee as outstanding interest. In view of the facts the assessing officer stated that assessee has claimed outstanding interest to the amount of Rs. 1,53,33,908/- which was found to be excess by an amount of Rs. 64,90,699/-, therefore, the amount of Rs. 64,90,699/- has been disallowed on account of excess claim of outstanding interest.
4. Aggrieved against the order of the assessing officer, the assessee has filed appeal before the Ld. Commissioner of Income Tax(A). The Ld. Commissioner of Income Tax(A) held that assessing officer was not justified in disallowing the interest expenditure which arises due to fluctuation in foreign exchange. The decision of the Ld. Commissioner of Income Tax(A) is reproduced as under:-
"3.2 I have carefully considered the findings of the Assessing Officer and submissions of the appellant. I have also gone through the case laws relied upon by the appellant. The interest disallowed by the Assessing Officer is related to fluctuation in foreign exchange. The facts of this case are squarely covered by the facts of the Supreme Court decision in the case of CIT vs Woodward Governor India Private Limited wherein the Hon'ble Apex Court has held that "loss"
suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance sheet is an item I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 4 ITO vs. M/s. Center Point Gems Pvt. Ltd.
expenditure under Section 37(1) of the Income-tax Act, 1961. In this decision the Hon'ble Supreme Court has confirmed the decision of Delhi High Court in the case of CIT vs Woodward Governor India Private Limited 294 ITR 451. The principle decided by the Bombay High Court in the case of Padamjee Pulp And Paper Mills Ltd vs C.I.T 210 ITR also supports the claim of the appellant. Further more, the appellant has furnished full working of interest and certificate issued by the Axis Bank Ltd in support of this claim. Therefore considering the entire facts and case laws, I am of the view that the Assessing Officer was not justified in disallowing the interest expenditure which arises due to fluctuation in foreign exchange.. Since this loan was taken for purchase and sale of diamonds; therefore the interest expenditure is allowable as revenue expenditure u/s. 37(1) Act. This ground of appeal is allowed."
5. During the course of appellate proceedings before us, Ld. departmental representative contended that Ld. Commissioner of Income Tax(A) had decided this issue without providing opportunity to the assessing officer to examine the additional documents and evidences and also not provided opportunity for rebuttal of additional evidences under rule 46A of the I.T. Rule. He further contended that during the course of assessment proceedings, the assessee failed to provide the necessary working of outstanding interest payable along with supporting evidences before the assessing officer. He further stated that the assessee provided additional evidences before the Ld. Commissioner of Income Tax(A) and the case has been decided in violation of rule 46A of the act. Nobody attended the hearing from the side of assessee. However, there is written submission filed by the ld. counsel of assessee vide dated 1st June, 2016 relating to bank transactions information but without fully elaborating the nature of transactions and supporting details.
I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 5 ITO vs. M/s. Center Point Gems Pvt. Ltd.
6. We have perused the material as per record. We noticed that in this case during the course of assessment proceedings, the assessing officer has asked the assessee to furnish the working of outstanding interest debited in the P & L a/c along with rate of interest charged on the buyers' credit by the foreign banks. The assessee failed to furnish this information which resulted in working of the interest made by the assessing officer on the basis of available information. We find that before the Ld. Commissioner of Income Tax(A), the assessee has filed paper book showing the working of interest along with certificate issued by the Axis Bank but the Ld. Commissioner of Income Tax(A) has not provided any opportunity to the assessing officer to examine the evidences or documents submitted before the Ld. Commissioner of Income Tax(A) according to the provision of Rule 46A(3). In this connection, we reproduce herewith the provision of Rule 46A.
"(i) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely:-
(a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or
(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or
(c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or
(d) where the Assessing Officer has made the order appealed against without giving sufficient v." opportunity to the appellant to adduce evidence relevant to any ground of appeal.
I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 6 ITO vs. M/s. Center Point Gems Pvt. Ltd.
(2) No evidence shall be admitted under sub-rule (i) unless the Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission, (3)The Deputy Commissioner(Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (i) unless the Income-tax Officer has been allowed a reasonable 7 ITA no.6o4/Del./2Oia opportunity
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or
(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub section (i) of section 251 or the imposition of penalty under section 271."
6.1 In view of the above facts and legal findings, we find it appropriate to set aside this issue to the file of the assessing officer to decide the matter afresh after providing proper opportunity to the assessee.
Ground No. 27. During the course of assessment proceedings, the assessing officer has noticed that assessee has debited various expenses under the head Salary, Employee food and Beverage Expenses, Travelling expenses, Registry & Postage, Telephone & Printing Expenses. In this connection, the assessing officer asked the assessee to furnish the names and addresses of the employees I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 7 ITO vs. M/s. Center Point Gems Pvt. Ltd.
along with the details of salaries paid to them. He was also asked to produce the salary register for verification. The assessee failed to furnish the information before the assessing officer. As a result, the assessing officer disallowed 50% of these expenses for want of supporting documentary evidences.
8. Aggrieved against the order of the assessing officer, the assessee filed appeal before the Ld. Commissioner of Income Tax(A). The Ld. Commissioner of Income Tax(A) has decided that it would be appropriate and justified to disallow 20% of the various expenses as against 50% disallowances made by the assessing officer. During the course of appellate proceedings, the Ld. D.R. contended that in this case the assessee failed to furnish the information and supporting evidences of these expenses. However, the Commissioner of Income Tax(A) has admitted the additional evidences without any opportunity to the assessing officer to examine and verify the said additional evidences before deciding the appeal of the appeal. Neither anybody attended on behalf of the assessee nor any written submission was made during the course of appellate proceedings.
9. We have perused the submission and material on record. We find that on this issue also the Ld. Commissioner of Income Tax(A) had decided the case after considering the additional evidences without providing any opportunity to the assessing officer to verify and examine the additional evidences before deciding the appeal. I.T.A No. 2570/Ahd/2011 A.Y. 2008-09 Page No 8 ITO vs. M/s. Center Point Gems Pvt. Ltd.
9.1 In view of these facts and legal findings as stated supra in this order, we also set aside this issue to assessing officer to decide the issue afresh after providing proper opportunity to the assessee.
10. In the result, the appeal of the revenue is allowed for statistical purposes.
Order pronounced in the open court on 23-12-2016 Sd/- Sd/-
(R.P. TOLANI) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 23/12/2016
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद