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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 ..... eturn 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 signatory was not mentioned. Further, the power of attorney authorizing the signatory was not filed. Therefore, the letter was treated as invalid and held that the return has not been filed. A letter dated 04.012013 was issued and served upon the assessee in this regard. Thereafter, notice u/s 142(1) dated 04/01/2013 was issued and served upon the assessee requiring to file return of income u/s 148 and necessary details as per questionnaire dated 04/01/2013. 4. The assessee filed letter dated 28/01/2013 in which the assessee has submitted that the return filed originally u/s 139 of the Act may be treated as return filed in response to notice u/s 148 of the Act. The letter was signed by Sh. Kunal Singhal and a power of attorney duly authorizing him was also filed. In the original return, the assessee has declared income of Rs. 1,09,04,160/- which is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred 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 accounts i.e. Schedule 12 of audited financials. (Audited Financial are attached as Annexure-2). The assessee had booked aforesaid transfer of security deposits and interest accrued thereon as liability in its books of accounts. In the balance sheet for the year ending March 31, 2005, the security deposit and interest accrued thereon have been shown as payable under the head current liabilities. Please refer schedule 6 of audited financials. In view of the above, your good self will appreciate that question of disallowing an interest liability not claimed as expenditure by assessee does not arise. Further without prejudice to above facts, we wish to state that as the interest liability stated above is neither payable to public financial institution and nor to scheduled bank, the same is outside the purview of disallowance u/s 43B of Act. Relevant extract of section 43B of the Act is reproduced below for ready ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,79,92,000/- has been debited to the profit & loss account after crediting to the current liabilities. As such the interest expenses of Rs. 1,79,92,000/- has not been actually paid, the same need to be disallowed as it is not an allowable deduction under the Income Tax Act, 1961. In view of the same, the amount of Rs. 1,79,92,000/- is hereby disallowed and added back to the total income of the assessee company for the year under consideration. For the reasons mentioned above, I am satisfied that the assessee has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271(1)(c) of the Act are initiated separately for failure to disclose the true particulars of income." (2.2) Aggrieved, the Assessee filed appeal before the CIT(A), who, vide order dated 13.06.2014, deleted the aforesaid addition of Rs. 1,79,92,000/-. The relevant portion of the order of Ld. CIT(A) is reproduced as under: "I have perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out 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 also filed Cross Objection No. 46/Del/2015 for Assessment Year 2005-06, in which following grounds were taken: "1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the additions of Rs. 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) along with questionnaire is issued 28. Assessee files same reply as in 27.11.2012 at Sr. No. 6 above 29. Fresh Notice u/s 143(2) issued by AO 30. Assessee submission before AO 31. Assessee submission before AO 32. Ledger A/c of interest expenses as per Schedule 11 at Pg. 37/PB 33. National Dairy Development Board (NDDB) was created by National Dairy Development Board Act 1987 34. NDDB demerged fruit & vegetable unit to a separate limited company named 'Mother Dairy Fruit and Vegetable Pvt Ltd. 35. Mother Dairy Fruit and Vegetable Pvt Ltd. set up 100% subsidiary named Mother Dairy Foods Processing Ltd. 36. Mother Dairy India Ltd (MDIL) (Appellant) was incorporated as wholly owned subsidiary of Mother Dairy Fruit & Vegetable Private Ltd. 37. Appellant used to purchase Milk and fresh fruits and vegetable from Mother Dairy unit at Patparganj and Fruit and vegetable unit at Mangolpuri. Both of these units were part of Mother Dairy Foods Processing Ltd. (MDFPL) 38. Appellant 'Mother Dairy India Ltd' (MDIL) merged with Mother Dairy Fruit and Vegetable Pvt Ltd. 39. Mother Dairy Foods Processing Ltd. merged with Mother Dairy Fruit and Vegetable Pvt Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers by Mother dairy Foods Processing Limited (MDFPL), a fellow subsidiary of assessee's holding company. These security deposits were received by MDFPL on behalf of assessee company. The security deposits together with interest liability accrued thereon were been transferred by MDFPL to assessee company during the year under consideration. The aforesaid fact in relation to transfer of security deposits together with interest liability accrued thereon have been stated in audited financials. Please refer note 9 of notes forming part of accounts i.e Schedule 12 of audited financials. (Audited Financial are attached a Annexure-2) The assessee had booked aforesaid transfer of security deposits and interest accrued thereon as liability in its books of accounts. In the balance sheet for the year ending March 31, 2005, the security deposits and interest accrued thereon have been shown as payable under the head current liabilities. Please refer schedule 6 of audited financials. In view of above, your goodself will appreciate that question of disallowing an Interest liability not claimed as expenditure by assessee does not arise. Further with prejudice to above facts, we wish to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. b. Less: Interest earned On staff loans -1,456 Schedule 11 of P&L A/c at page 37/PB On fixed deposits with bank -19 Net Interest expense debited in P & L 4,603 Pg. 27/PB (5.2) In response, the Ld. DR could not contradict the contention of the Ld. Counsel for Assessee that the aforesaid amount of Rs. 1,79,92,000/- was not claimed by the Assessee as expenditure during the year. However, she supported the disallowance of Interest Expenses by relying on the order of the AO. (6) We have heard both sides patiently. We have perused all materials on our records carefully. We have considered the judicial precedents referred to in the records. We find that contention of the Ld. Counsel for Assessee that the aforesaid amount of Rs. 1,79,92,000/- was not claimed as expenditure, or deduction is borne out from records, which could not be contradicted by the Ld. DR. In view of this factual situation; and after perusal of the submissions made from the Assessee's side during assessment proceedings (already reproduced in para no. (5.1) earlier), and after perusal of the reconciliation of Interest Expenses and also reconciliation o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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