M/s. Oscar Chemicals Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

CO 78/AHD/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6296 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J M TRIVEDI
• Keywords: Unexplained cash credit; Business expenditure; Opportunity of being heard; Principle of natural justice; Additional evidence; Bad and doubtful debts
• Section: 143(3)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ %% % & %% % & %% % & %% % &, , , , ' ' ' ' ( ' ( ' ( ' ( ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 [ASSTT.YEAR : 2005-2006] DCIT, CIR.5 AHMEDABAD. /VS. M/S.OSCAR CHEMICALS PVT. LTD. 404, FLORENCE, OPP: ASHRAM ROAD POST AHMEDABAD. PAN : AAACO 2267 L ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ' . / (/ REVENUE BY : SHRI C.K. MISHRA 1& . / (/ ASSESSEE BY : SHRI J.M. TRIVEDI DATE OF HEARING : 3 RD AUGUST, 2011 (2 / O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS REVENUES APPEAL AND ASSESSEES CO AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- XI, AHMEDABAD DATED 30.12.2008 ARISING OUT OF THE O RDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. ITA NO.709/AHD/2009 (REVENUES APPEAL): 2. THE GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.3,80,000/- ON ACCOUNT OF DISALL OWANCE OF CLUB MEMBERSHIP FEES. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY T HE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.20012-2002 VIDE ITA NO. 3051/AHD/2003. THAT ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -2- THE ABOVE DECISION WAS GIVEN BY THE ITAT AFTER CONS IDERING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GU JARAT STATE EXPORT CORPORATION VS. CIT, 209 ITR 649 (GUJ). THAT THE FA CTS AND CIRCUMSTANCES OF THE YEAR UNDER CONSIDERATION IS IDENTICAL BECAUSE I N THAT YEAR ALSO THE ENTRANCE FEE WAS PAID FOR BECOMING THE MEMBER OF THE CLUB BY SHRI BHURMAL KOTHARI, DIRECTOR OF THE COMPANY. IN THIS YEAR ALSO ENTRANC E FEE IS PAID FOR BECOMING THE MEMBER OF RAJPATH CLUB BY THE DIRECTORS. HE THEREF ORE SUBMITTED THAT THE ORDER OF THE CIT(A) ON THIS POINT MAY BE REVERSED A ND THAT OF THE AO MAY BE RESTORED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND STATED THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE DIFFERENT BECAUSE IN THIS YEAR THE COMPANY HAS PASSED A RESOLUTION THAT THE DIRECTORS WILL BECOME MEMBER OF THE RAJPATH CLUB FOR THE BENEFIT OF THE COMPANY. IT WA S ALSO RESOLVED THAT THE MEMBERSHIP SHOULD BE OBTAINED IN THE NAME OF DIRECT OR FOR THE SAKE OF CONVENIENCE. HE PRODUCED COPY OF THE RESOLUTION. HOWEVER, HE WAS FAIR ENOUGH TO ADMIT THAT THE ABOVE RESOLUTION WAS NOT P RODUCED BEFORE THE AO AND THEREFORE IT IS A FRESH EVIDENCE BEFORE THE ITAT. HE ALSO REQUESTED FOR ADMISSION OF THIS EVIDENCE AS ADDITIONAL EVIDENCE B ECAUSE THIS RESOLUTION WOULD BE VERY CRUCIAL TO DECIDE THE ISSUE UNDER CONSIDERA TION. HE ALSO STATED THAT THE AO DID NOT ALLOW ADEQUATE OPPORTUNITY OF BEING HEAR D BEFORE DISALLOWING CLUB MEMBERSHIP FEE OTHERWISE THE BOARD RESOLUTION WOULD HAVE BEEN PRODUCED BEFORE THE AO. HE ALSO RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. SUNDARAM INDU STRIES LTD., 240 ITR 335 AND STATED THAT UNFORTUNATELY AT THE TIME OF HEARIN G OF THE APPEAL OF THE ASSESSEE FOR A.Y.2001-02, THIS DECISION OF THE HONBLE MADRA S HIGH COURT WAS NOT REFERRED TO BY THE ASSESSEE AND THEREFORE THE ITAT COULD NOT CONSIDER THE SAME. HE HAS STATED THAT THE IDENTICAL ISSUE WAS CONSIDER ED BY THE HONBLE MADRAS HIGH COURT AND THE RATIO OF THE ABOVE DECISION WOUL D BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -3- 5. IN REJOINDER, IT IS STATED BY THE LEARNED DR THA T THE FRESH EVIDENCE IN THE FORM OF BOARD RESOLUTION SHOULD NOT BE ADMITTED AND IF AT ALL ADMITTED, THEN THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A O BECAUSE THIS RESOLUTION WAS NEVER PRODUCED BEFORE THE AO. 6. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS EVIDENT THAT THE BOARD RESOLUTION WAS NOT PRODUCED BEFORE THE AO. BUT AT THE SAME TIME, IT IS ALSO EVIDENT THAT THE AO DID NOT A LLOW ANY SPECIFIC OPPORTUNITY TO THE ASSESSEE BEFORE DISALLOWING THE MEMBERSHIP F EE. IN OUR OPINION, THE RESOLUTION OF THE BOARD OF DIRECTORS RESOLVING THAT THE DIRECTORS SHOULD BECOME MEMBER IN THE CLUB FOR THE BENEFIT OF THE COMPANY W OULD BE CRUCIAL EVIDENCE TO CONSIDER THE ALLOWABILITY OF CLUB MEMBERSHIP FEE PA ID FOR THE ASSESSEE- COMPANY. ADMITTEDLY, THIS RESOLUTION WAS NOT PRODU CED BEFORE THE AO AND THEREFORE THE NATURAL JUSTICE DEMANDS THAT THE AO S HOULD BE GIVEN AN OPPORTUNITY TO EXAMINE THIS EVIDENCE. WE THEREFORE DEEM IT PROPER TO SET ASIDE THE ORDER OF THE CIT(A) ON THIS POINT AND RESTORE T HE MATTER BACK TO THE FILE OF THE AO. WE ORDER ACCORDINGLY AND RESTORE THE MATTE R BACK TO THE FILE OF THE AO. WE DIRECT HIM TO ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THEREAFTER RE-ADJUDICATE THE MATTER IN ACCORDANCE WITH LAW AFTER TAKING INTO ACCOUNT ALL FACTUAL AND LEGAL POSITION. 7. GROUND NO.2 OF THE REVENUES APPEAL READS AS UND ER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF CLUB EXPENSES FROM RS.1 ,03,586/- TO RS.50,000/- 8. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE-COMPANY INCURRED EXPENSES OF RS.1,03,586/- BY WAY OF PAYMENT TO CLUB. THE AO TREATED THE EXPENDITURE AS PERSONAL E XPENDITURE OF THE DIRECTOR. ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -4- THE CIT(A) REDUCED THE DISALLOWANCE TO RS.50,000/- WITH THE FOLLOWING FINDINGS: 3. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CLU B EXPENSES AT RS.1,03,586/- AT VARIOUS CLUBS. IT IS SEEN THAT THE APPELLANT HAS INCURRED THE ABOVE EXPENSES IN 3 CLUBS BUT THE DETAILS WITH REGARD TO EXPENSES HAVE NOT BEEN EXPLAINED. THEREFORE, IT CANNOT BE SA ID THAT THE ENTIRE EXPENSES IS INCURRED FOR THE PURPOSE OF THE BUSINES S. THEREFORE, I AM OF THE VIEW THAT THERE COULD BE SOME EXPENSES NOT RELA TED TO THE BUSINESS. THEREFORE, OUT OF THE DISALLOWANCES MADE BY THE A.O . RS.50,000/- IS CONFIRMED AND THE BALANCE AMOUNT IS DELETED. HENCE , THIS GROUND OF APPEAL IS PARTLY ALLOWED. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES A ND PERUSAL OF RECORDS, WE ENTIRELY AGREE WITH THE ORDER OF THE CIT(A) . WHIL E INCURRING CLUB EXPENSES BY THE DIRECTORS IT IS ALWAYS POSSIBLE THAT IT INCLUDE S SOME PERSONAL EXPENDITURE. BUT AT THE SAME TIME, THE VIEW OF THE AO THAT THE E NTIRE EXPENDITURE WAS ONLY PERSONAL EXPENDITURE OF THE DIRECTOR WAS ALSO NOT C ORRECT. THEREFORE, THE VIEW TAKEN BY THE CIT(A) THAT PART OF THE EXPENDITURE WA S PERSONAL EXPENDITURE AND PART OF THE EXPENDITURE WAS INCURRED FOR THE PURPOS E OF BUSINESS, APPEARS TO BE MORE REASONABLE, THEREFORE, THE SAME IS UPHELD AND THE GROUND NO.2 OF THE REVENUES APPEAL AND THE GROUND NO.1 OF THE CO, WHI CH IS AGAINST THE DISALLOWANCE SUSTAINED BY THE CIT(A) AT RS.50,000/- ARE REJECTED. 9. GROUND NO.3 OF THE REVENUES APPEAL READS AS UND ER: 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.1,14,000/- ON ACCOUNT OF DISALL OWANCE OF BAD DEBTS. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO DISALLOWED BAD DEBTS ON THE GROUND THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE DEBT HAS BECOME BAD. WE FIND THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE APEX COURT IN THE CASE COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 3 97 (SC) WHEREIN THEIR LORDSHIP HELD AS UNDER: ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -5- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME TAX ACT, 1961 WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. ADMITTEDLY, THERE IS NO DISPUTE THAT THE AMOUNT OF BAD DEBT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AND THEREFOR E, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE APEX COURT, WE DISMIS S THIS GROUND OF THE REVENUE. 11. GROUND NO.4 OF THE REVENUES APPEAL READS AS UN DER: 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.50,000/- ON ACCOUNT OF THE DISA LLOWANCE OF EMD WRITTEN OFF. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO HAS DISALLOWED THE PAYMENT OF RS.50,000 /- TO GUJARAT STATE FINANCIAL CORPORATION WITH THE FOLLOWING FINDINGS: SIMILARLY, THE ASSESSEE HAD WRITTEN OFF RS.50,000/ - BEING 'EMD WRITTEN OFF'. THIS IS DEPOSIT FORFEITED BY THE GSFC, AHMEDA BAD SINCE THE ASSESSEE FAILED TO COMPLY WITH THE TERMS AND CONDITIONS OF S ALE OFFER WITHIN STIPULATED TIME. THIS CAPITAL LOSS AND FORFEITURE W AS FOR CONTRAVENTION OF THE TERMS AND CONDITIONS OF SALE OFFER THIS IS NOT BUSINESS EXPENSES BESIDES, AS PER THE PROVISION OF SEC 36(2) OF THE A CT, NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF H AS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR OR OF AN EARLIER PREVIOUS YEAR OR REPRESENTS MONEY LEN T IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY-LENDING WHIC H IS CARRIED ON BY THE ASSESSEE IN THE INSTANT CASE, ASSESSEE FAILS TO PROVE ITS CASE IN ADDITION TO THE ABOVE, FORFEIT WAS MADE ON 4.4.2005 , I.E. AFTER COMPLETING THE PERVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION. ON THIS SCORE ALSO, THE AMOUNT CANNOT BE ALLOWED. T HEREFORE, AN AMOUNT OF RS.50,000/-, BEING EMD WRITTEN OFF, IS DISALLOWE D AND ADDED TO THE TOTAL INCOME. 13. THE CIT(A) ALLOWED THE DEDUCTION WITH THE FOLLO WING FINDINGS: ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -6- 6. WITH REGARD TO THE DISALLOWANCE OF RS.50,000/- WHICH IS STATED TO HAVE BEEN PAID AS EMD TO GSFC, IT IS THE SUBMISSION OF THE AR THAT THE APPELLANT WANTED TO ACQUIRE A UNIT FROM GSFC FOR WH ICH THE DEPOSIT OF RS.50,000/- WAS MADE BUT THE SAME TRANSACTION COULD NOT GO THROUGH, THEREFORE, THE APPELLANT HAD TO LOOSE THE DEPOSIT M ADE AT RS.50,000/- HENCE CLAIMED AS A FORFEITURE OF DEPOSIT AS A LOSS. I HAVE PERUSED THE SUBMISSIONS OF THE AR AND AFTER VERIFYING THE FACTS OF THE CASE, I AM OF THE VIEW THAT THE LOSS INCURRED IS DURING THE COURS E OF BUSINESS DEALINGS THEREFORE, THE SAME IS ALLOWED AS A BUSINESS LOSS. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. FROM THE PERUSAL OF THE FINDINGS OF THE AO, IT IS E VIDENT THAT HE DISALLOWED THE DEDUCTION OF EMD WRITTEN OFF ON TWO GROUNDS, (I) TH AT THE AMOUNT OF DEPOSIT MADE BY THE ASSESSEE WAS FOR ACQUIRING UNIT FROM GS FC. SINCE THE ASSESSEE FAILED TO COMPLY WITH THE TERMS AND CONDITIONS OF T HE SALE, THE EMD DEPOSITED WITH THE GSFC WAS FORFEITED. THUS, IT WAS CAPITAL LOSS. (II) THE FORFEITURE WAS MADE ON 4-4-2005 I.E. AFTER THE END OF THE RELEVAN T PREVIOUS YEAR. THE CIT(A) HAS DELETED THE DISALLOWANCE WITHOUT CONTROVERTING ANY OF THE ABOVE FINDINGS OF THE AO. THE CIT(A) HAS NOT GIVEN ANY REASON HOW TH E CAPITAL LOSS CAN BE ALLOWED OR WHEN THE LOSS WAS INCURRED AFTER THE END OF THE RELEVANT ASSESSMENT YEAR, HOW IT CAN BE ALLOWED FOR THE YEAR UNDER CONS IDERATION. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO NOT GIVEN ANY EXP LANATION HOW THE DEDUCTION FOR FORFEITURE OF DEPOSIT FOR ACQUISITION OF CAPITA L ASSET CAN BE ALLOWED AS BUSINESS LOSS. WE THEREFORE REVERSE THE ORDER OF T HE CIT(A) ON THIS POINT AND RESTORE THAT OF THE AO. ASSESSEES CO: 14. GROUND NO.1 OF THE ASSESSEES CO WHICH WAS AGAI NST THE SUSTENANCE OF THE DISALLOWANCE OF RS.50,000/- BY THE CIT(A) IS RE JECTED IN VIEW OF OUR DECISION IN THE REVENUES APPEAL CONTAINED IN PARA- 8. 15. GROUND NO.2 OF THE CO READS AS UNDER: ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -7- 2. THAT THE LEARNED CIT(A) ERRED IN LAW AND FACTS IN DISALLOWING REMUNERATION OF RS.4,00,000/- TO EX-DIRECTORS. 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUN D THAT IN THE P&L ACCOUNT, THE ASSESSEE HAS DEBITED SALARY EXPENSES A MOUNTING TO RS.16,80,800/- AS AGAINST THE EXPENSES OF RS.9,62,240/-. THE TURN OVER OF THE ASSESSEE WAS INCREASED MARGINALLY ONLY I.E. FROM RS.25.65 CRORES OF THE LAST YEAR TO RS.26.57 LAKHS IN THE YEAR UNDER CONSIDERATION. HE THEREFOR E EXAMINED THE DETAILS OF THE SALARY AND FOUND THAT SALARY OF RS.4.00 LAKHS HAVE BEEN PAID TO EX-DIRECTORS. DURING THE ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PROVE ANY SERVICE RENDERED BY THOSE EX-DIRECTORS. HE ALSO AS KED THE ASSESSEE TO PRODUCE THEM. THE ASSESSEE NEITHER PRODUCED THOSE EX-DIREC TORS NOR ANY EXPLANATION/EVIDENCE WITH REGARD TO RENDERING OF SE RVICE BY THEM. HE ALSO NOTICED THAT THERE WAS NO ACTUAL PAYMENT OF SALARY, BUT ON THE OTHER HAND, THERE WAS ONLY AN ADJUSTMENT ENTRY AS ON 31-3-2004. ON T HESE FACTS, THE AO DISALLOWED SALARY OF A SUM OF RS.4.00 LAKHS BEING S ALARY PAID TO RETIRED DIRECTORS. 17. ON APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANC E WITH THE FOLLOWING FINDINGS: 7.1 IT IS THE CONTENTION OF THE A.R. THAT THE EX- DIRECTORS ARE RENDERING LIASIONING SERVICES. THEREFORE, THE REMUN ERATION PAID TO THEM SHOULD NOT HAVE BEEN DISALLOWED. IT MAY BE SEEN THA T THE APPELLANT IS ALREADY HAVING DIRECTORS WHO ARE RENDERING THE SERV ICES, THEREFORE, IT IS NOT CONVINCING THAT WHY THE EX-DIRECTORS SERVICES A RE REQUIRED AND WHY THEY SHOULD BE PAID EVEN AFTER THE RETIREMENT. FURT HER, IT IS SEEN THAT THE EXACT NATURE OF SERVICES RENDERED BY THE EX-DIRECTO RS IS NOT EXPLAINED TO THE A.O. AND ALSO THE EX-DIRECTORS SEEM TO HAVE NOT RESPONDED TO THE A.O'S SUMMONS. THE AO WAS NOT SATISFIED WITH EXPLAN ATION OFFERED BY THE AR OF THE APPELLANT. THEREFORE, THE REMUNERATI ON PAID TO THE EX- DIRECTORS IS RIGHTLY DISALLOWED BY THE AO. HENCE, THIS GROUND OF APPEAL IS DISMISSED. ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -8- 18. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE WAS UNABLE TO CONTROVERT THE FINDINGS RECORDED BY T HE AO. THE ONLY EXPLANATION GIVEN BY HIM WAS THAT THE RETIRED DIREC TORS GAVE USEFUL GUIDANCE AND ADVICE TO THE NEW DIRECTORS FROM TIME TO TIME. HOWEVER, NO EVIDENCE IN THIS REGARD WAS PRODUCED BY THE ASSESSEE. THE ASSE SSEE ALSO COULD NOT EXPLAIN WHY HE COULD NOT PRODUCE THOSE PERSONS BEFORE THE A O AND WHY THE SALARY WAS DEBITED BY WAY OF ONLY ADJUSTMENT ENTRY. IN VIEW O F THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO DISTURB THE CONCURRENT FINDING S OF THE FACT RECORDED BY THE AO AS WELL AS THE CIT(A) IN THIS REGARD. ACCORDING LY, THE GROUND NO.2 OF THE ASSESSEES CO IS REJECTED. 19. THE GROUND NO.3 OF THE CO READS AS UNDER: 3. THAT THE LD.CIT(A) ERRED IN LAW AND FACTS IN DI SALLOWING UNEXPLAINED CASH CREDIT OF RS.2,80,000/- 20. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT THE AO DISALLOWED A SUM OF RS.2,50,000/- BEING THE FRESH CREDIT IN THE ACCOUNT OF SHRI V.B. MEHTA AND VIKASH SHAH. HE ALS O DISALLOWED INTEREST OF RS.30,000/- PAID TO THEM. HE SUBMITTED THAT THE CR EDIT IN THE ACCOUNT OF V.B. MEHTA AND SHRI VIKASH SHAH WAS BY WAY OF ADJUSTMENT ENTRY I.E. BY DEBITING SALARY ACCOUNT THEIR ACCOUNT WAS CREDITED. THUS, T HERE WAS NO CASH RECEIPT DURING THE YEAR UNDER CONSIDERATION AND THEREFORE I T CANNOT BE TREATED AS FRESH CASH CREDIT. THAT THE SALARY HAS ALREADY BEEN DISA LLOWED BY THE AO AND IF THE AMOUNT IS AGAIN DISALLOWED, IT WOULD AMOUNT TO DOUB LE ADDITION. WITH REGARD TO THE INTEREST PAYMENT, IT WAS POINTED OUT THAT TH E INTEREST WAS CALCULATED ONLY ON THE OPENING BALANCE AND THE CREDIT DURING THE YE AR UNDER CONSIDERATION WAS NOT CONSIDERED, BECAUSE THE CREDIT DURING THE YEAR UNDER CONSIDERATION WAS AT THE END OF THE YEAR. HE THEREFORE SUBMITTED THAT T HE ADDITION OF RS.2,80,000/- SUSTAINED BY THE CIT(A) SHOULD BE DELETED. ITA NO.709/AHD/2009 WITH CO NO.78/AHD/2009 -9- 21. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 22. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO HAS ALREADY DISALLOWED A SUM OF RS.4.00 LAKHS OUT OF SALARY. IT INCLUDES SALARY PAID TO SHRI V.B.MEHTA OF RS.1.50 LAKHS AND VIKASH SHAH OF RS.1.00 LAKH. THA T THE SAME AMOUNT WAS CREDITED IN THEIR ACCOUNT WHICH IS DISALLOWED AS UN EXPLAINED CASH CREDIT. THAT WHILE CONSIDERING THE GROUND NO.2 OF THE ASSESSEES CO WE HAVE ALREADY UPHELD DISALLOWANCE OUT OF SALARY. HOWEVER, IN OUR OPINION, THE SAME CANNOT BE ADDED AGAIN AS UNEXPLAINED CASH CREDIT OTHERWISE IT WOULD AMOUNT TO DOUBLE ADDITION. MOREOVER, BY WAY OF CREDIT OF SALARY IN THEIR ACCOUNT, THERE WAS NO RECEIPT OF MONEY BY THE ASSESSEE EITHER IN CASH OR BY CHEQUE. THEIR ACCOUNT WAS CREDITED AND SALARY ACCOUNT WAS DEBITED. THERE FORE, PER SE THIS AMOUNT CAN BE TREATED AS CASH CREDIT. MOREOVER, THE SALARY PA ID TO THESE PERSONS HAS ALREADY BEEN DISALLOWED. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION FOR ADDITION OF RS.2.50 LAKHS AS UNEXPLAINED CASH C REDIT. ADMITTEDLY, THE INTEREST OF RS.30,000/- WAS PAID ON OPENING BALANCE WHICH WAS ALREADY ACCEPTED IN EARLIER YEARS, THEREFORE, IN OUR OPINIO N, THE INTEREST THEREON CANNOT BE DISALLOWED. IN VIEW OF THE ABOVE, WE DELETE THE ADDITION OF RS.2,80,000/-. 23. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSE SSEES CO BOTH PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 TH AUGUST, 2011 SD/- SD/- ( %% % & %% % & %% % & %% % & /MUKUL KR. SHRAWAT ) ' ' ' ' /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT PLACE : AHMEDABAD DATE : 12-08-2011