As per sec 251 of the Act CIT has no power to set aside any matter to the file of AO for fresh verification without considering additional evidence

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B, KOLKATA

Before Shri Mahavir Singh, Judicial Member & Sri C.D. Rao, Accountant Member

ITA No. 994 (Kol) of 2009

Assessment Year 2005-06

Visura Trading & Investment (I)Ltd

Kolkata. (PAN-AAACV9060C)

(Appellant)

Vs.

Income-tax Officer, Wd-9(2)

Kolkata.

(Respondent)

ITA No. 1088 (Kol) of 2009

Assessment Year 2005-06

Income-tax Officer, Wd-9(2),

Kolkata.

Vs.

Visura Trading & Investment (I)

Ltd., Kolkata. (PAN- AAACV9060C)

For the Assessee: Sri S.M. Surana

For the Department:Sri B.Bhattacharya

Date of Hearing: 13/12/2011

Date of Pronouncement: 15/02/2012

ORDER

(C.D. Rao), Accountant Member:

These two appeals, one by the assessee and the other by the department, are directed against the order of ld. C.I.T.(A)-VIII, Kolkata dated 31/03/2009 for assessment year 2005-06. As common issues are involved, they are being disposed by this common order.

2. The grounds raised in the assessee’s appeal read as under:-

“1) For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law.

2) For that the Ld. C.I.T.(A) erred in retaining the addition of Rs.513309/- when there was no nexus between the advances given and the overdraft/loan. The overdraft taken was for business purposes the interest paid was allowable and no notional interest can be estimated and treated as income.

3) For that on the facts and circumstances of the case the order of the CIT(A) retaining addition of Rs.513309/- be modified and the assessee be given the relief prayed for.”

3. On the other hand, the Revenue has contested that the ld. C.I.T.(A) has set aside the issue to the ld. A.O., whereas he has no power to set aside u/s. 251(1)(9) of the Act and in this regard the following grounds have been raised:-

“1. In the facts and in the circumstance of the case, the Ld.CIT(APPEAL) erred in bifurcating the interest free advance of Rs. 2.43 crores granted to M/s. Tarajyot Polymers Pvt. Ltd. partly as business advance for the part of the year and partly as non-business advance ignoring the fact that the advance was made prior to the commencement of business transactions. Secondly, there was no decline in the quantum of advance even when the business transaction with M/s. Tarajyot Polymers Pvt. Ltd. commenced. The Ld. CIT(A) was not correct in observing that the AO should verify the quantum of exclusion of consignment transaction as Ld. CIT(A) has no power to set aside u/s. 251(1)(9).

2. In the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in allowing the interest of Rs. 11,94,715/- ( Rs. 17,08,224/- (-) Rs. 5.13,509/-) attributable to interest free advance granted to M/s. Tarajyot Polymers Pvt. Ltd., ignoring the fact that the assessee had borrowed funds on interest - since the assessee is a consignment agent.

3. In the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 8,68,134/- made under the head discount allowed to M/s. Tarajyot Polymers Pvt. Ltd. as the same was nothing but the charge of interest on advance which was not utilized for the purpose of business of the assessee – being a consignment agent.

4. The Ld. C1T(A) also erred in deleting the addition made on the account of trade advances amounting Rs. 1,16,228/- with a direction to the AO to verify the same has been taken in the income of the subsequent A.Y. 2006-07. Such power is not conferred on the Ld. CTT(A) u/s. 251(l)(9).”

4. After hearing rival submissions and going through the material placed on record, we find that the issues require fresh verification by the ld. A.O. It was the contention of the department that ld. C.I.T.(A) granted relief by placing reliance on ledger details of funds of M/s. Tarajyot Polymers Ltd., which were never produced during assessment proceedings. It was further contended that the ld. C.I.T.(A) passed the order with a direction to ld. A.O. to verify the quantum of exclusions of consignment transactions and asked to sustain disallowance to the extent of Rs.5,13,509/- in place of Rs.25,76,358/- on account of undercharge of interest, which can only be ascertained  after re-examining the assessee’s records and additional materials placed on record, inasmuch as the ld. A.O. is not empowered by orders u/s. 251(1) of the Act to reexamine a case already adjudicated u/s. 143(3) of the Act. We find force in the contention of the department. There is no dispute to the fact that as per sec. 251(1) of the Act, the ld. C.I.T.(A) has no power to set aside any matter to the file of ld. A.O. for fresh verification and adjudication. Therefore, considering the fact that some additional evidence was admitted by the ld. C.I.T.(A) and he has set aside some issues to the file of ld. A.O. u/s. 251(1) of the Act, which he is not empowered to do, we deem it proper to set aside the orders of the authorities below and remit the issues to the file of ld. A.O. for fresh adjudication in accordance with law. The ld. A.O. shall provide reasonable opportunity of being heard to the assessee and the assessee is also directed to produce any evidence in support of its claims during set aside proceedings.

5. In the result, both the appeals by the assessee and department are treated as allowed for statistical purposes.

This order is pronounced in the open Court on 15.2.2012.

                                                 Sd/-                            Sd/-

                                       (Mahavir Singh)             (C.D. Rao),

                                      Judicial Member       Accountant Member

Date: 15-02-2012

Copy of the order forwarded to:

1.The Appellant : Visura Trading & Investment (I) Ltd., 156A, M.G. Road, 2nd Floor, R.No.203, Kolkata-700 007.

2 The Respondent : I.T.O., Ward-9(2), Kolkata.

3. The CIT(A) – VIII, Kolkata.

4. The C.I.T., Kol -

5 DR, ITAT, Kolkata Benches, Kolkata

6 Guard file.

True Copy,

(dkp)

                                                                                                                                  By order,

Asstt. Registrar.