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TMI Blog2019 (2) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... : Ms. Rinku Singh, Sr. DR For The Assessee : Shri S.D. Kapila, Adv. And Shri R.R. Maurya, Adv. ORDER PER ANADEE NATH MISSHRA, AM This appeal by Revenue i.e. 4705/Del/2014 and Cross Objection by Assessee i.e. 46/Del/2015 are filed against the order of Learned Commissioner of Income Tax (Appeals)-VIII, New Delhi, [ Ld. CIT(A) , for short] dated 13.06.2014 for Assessment Year 2005-06. (2) Return of income was filed by Assessee on 28.10.2005 passed U/s 139 of Income Tax Act, 1961 ( I.T. Act , for short) declaring total income Nil of ₹ 1,09,04,160/-. The return was processed U/s 143(1) of I.T. Act on 30.03.2006. Notice U/s 148 of I.T. Act was issued to the Assessee on 19.09.2011, requiring the Assessee to file the return of income. In response, the Assessee filed letter dated 05.10.2011 requesting to treat the aforesaid return filed on 28.10.2005 U/s 139 of I.T. Act; as return filed in response to notice U/s 148 of I.T. Act. In Assessment Order dated 30.03.2013 passed U/s 147/143(3) of I.T. Act, the Assessing Officer ( AO for short) has observed as under: 3. The letter was signed with remark Authorized Signatory but the name of the signa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not due In the reasons of opening assessment u/s 147 of Act, your good self has stated that interest liability amounting to ₹ 1,79,92,000/- has been increased but the same is not due and paid as per Schedule 6 current liabilities provisions of balance sheet. Therefore, underassessment of income occurs by ₹ 1,79,92,000. In this regard, we wish to submit that the above interest of ₹ 1,79,92,000 was neither debited in the profit and loss account prepared for financial year 2004-05 and not it was claimed as expenditure for the year by the assessee. The interest liability had accrued on security deposits received from customers by Mother Dairy Foods Processing Limited (MDFPL), a fellow subsidiary of assessee s holding company. The security deposits were received by MDFPL on behalf of Assessee Company. The security deposits together with interest liability thereon were been transferred by MDFPL to assessee company during the year under consideration. The aforesaid fact in relation of security deposits together with interest liability accrued thereon have been stated in audited financials. Please refer note 9 of notes forming part of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under the purview of provisions of section 43B of the Act. 6. The submission of the assessee has been examined in the light circumstances of the present case. The assessee in its reply contended that M/s Mother Dairy Food Processing Ltd. (MDFPL) has received security deposits from various customers on behalf of the assessee company. The interest has been accrued on the security deposits and the security deposits along-with interests were transferred to the assessee company during the year under consideration. The assessee in its reply has narrated the facts relating to the accrued interest but it has not put light on the debit aspect of the transaction entered in its books. Moreover, the assessee company has not brought on record the supporting documents evidencing its contention in the case, in respect of transactions made with the MDFPL. The interest expenses are of the revenue in nature and at the year end the expenses cumulative in the interest account are transferred to the profit loss account to get the fair picture of the profitability of the business of the entity. There is enough force in the conclusion that the interest accrued but not due to the tune of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appellate Tribunal ( ITAT , for short) has been filed by Revenue, against the aforesaid impugned order dated 13.06.2014 of the Ld. CIT(A) with the following grounds of appeal: 1. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) has erred in deleting the additions of ₹ 1,79,92,000/- made by the AO on account of Interest Expenses not actually paid? 1.1 Whether on the facts and circumstances of the case in law, the Ld. CIT(A) has ignored that the Assessee Company had shown the liability which was not due and paid during the year and assessee has failed to substance the debit side of the transaction? 1.2 Whether on the facts and circumstances of the case in law, the Ld. CIT(A) has erred in presuming that the addition has been made by invoking the provisions of section 43B of the I.T. Act, 1961. 2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 3. That the grounds of appeal are without prejudice to each other. 4. That the appellant craves leave to add, alter, amend or forgo any ground(s) of the appeal raised above at the time of the hearing. (4) The Assessee al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Submission filed before AO vide letter dated March 11, 2013 17. Submission filed before AO vide letter dated March 18, 2013 18. Case laws i. Sapthagiri Finance investments v. ITO (2012) 25 Taxmann 341 (Mad.) ii. Assistant Commissioner of Income-tax, Company Circle II(3), Chennai vs. Indo Swiss Exports Ltd [2012] 25 taxmann.com 85 (Chennai) iii. Commissioner of Income-tax, Faizabad vs. Adarsh Travel Bus Service [2012] 17 taxmann.com 140 (All.)] iv. Submission filed before CIT(A) vide letter dated May 28, 2014. Dated - 24.04.2018 19. Assessee filed income tax return 20. Notice u/s 148 was issued 21. Copy of reasons recorded for reopening the case 22. Assessee filed letter requesting AO to treat original return file is to be treated return in response to notice u/s 148 23. Notice u/s 143(2) issued. 24. Assessee objected that notice u/s 143(2) was served beyond limitation 25. AO withdraws notice u/s 143(2) dt. 7.11.2012 26. Assessee furnished power of attorney dt. 28th September, 2011 before AO 27. Fresh notice u/s 142(1) along with questionnaire is issued 28. Assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer on account of disallowance of Interest Expenses was wholly unjustified and illegal because the aforesaid amount was not even claimed as expenditure or deduction by the Assessee. The Ld. Counsel for Assessee took us through the Paper Books to establish his contention, that the aforesaid amount of ₹ 1,79,92,000/- was not claimed by the Assessee as deduction. In particulars, the Ld. Counsel for Assessee highlighted the following submissions made by the Assessee before the Assessing officer during the assessment proceedings: Interest accrued but not due In the reasons of opening assessment u/s 147 of the Act, your goodself has stated that interest liability amounting to ₹ 1,79,92,000/- has been increased but the same is not due and paid as per Schedule 6 current liability provisions of balance sheet. Therefore, underassessment of income occurs by ₹ 1,79,92,000. In this regard, we wish to submit that the above interest of ₹ 1,79,92,000 was neither debited in the profit and loss account prepared for financial year 2004-05 and nor it was claimed as expenditure for the year by the assessee. The interest liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him .. From perusal of provisions of section 43B of the Act, it can be observed that it provides for disallowance of unpaid interest only in the case of loans/borrowings from public financial institutions, state financial corporation, state industrial investment corporation or scheduled banks. In the present case the interest payable is not in respect of any of the aforesaid entities. As stated above, the interest is payable to customers on security deposits and does not fall under the purview of provisions of section 43B of the Act. The Ld. Counsel for Assessee also drew our attention to reconciliation of Interest Expenses and reconciliation of disallowance made by the AO, which was furnished by the Assessee in the Paper Book, and is reproduced below for ready reference: Reconciliation of interest expense debited in P L Account (Refer Schedule 11 at page 37 of paper book of audited financials) Particular Amount (INR in 000) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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