DCIT, Bangalore V. Shri. Dhiraj Kumar Bhandari, Bangalore

ITA 1147/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63658 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Fair market value; Commercial expediency
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.1147/BANG/2011 (ASSESSMENT YEAR : 2008-09) DY. COMMISSIONER OF INCOME TAX, CIRCLE 5(1), BANGALORE. . APPELLANT. VS. SHRI DHIRAJ KUMAR BHANDARI, PROP. MYSORE METAL INDUSTRIES, NO.7, P.L. LANE, S P ROAD CROSS, BANGALORE. .. RESPONDENT. PAN AASPL 0367M C.O. NO.16/BANG/2012 (BY ASSESSEE) (IN ITA NO.1147/BANG/2012) (ASSESSMENT YEAR : 2008-09) ASSESSEE/CROSS OBJECTOR BY : SHRI NAGIN KHINCHA. REVENUE BY : MS. SUSAN THOMAS JOSE. DATE OF HEARING : 27.8.2012. DATE OF PRONOUNCEMENT : 7.9.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, BANGALORE DT.23.9.2011 FOR ASSESS MENT YEAR 2007-08. THE CROSS OBJECTIONS IN THIS APPEAL ARE PREFERRED BY THE ASSE SSEE. BOTH THE APPEAL OF REVENUE AND THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISPOSED OFF B Y THIS COMMON ORDER. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE, A DEALER IN IRON AND STEEL, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 25.9.2008 DECLARING TOTAL INCOME O F RS.1,89,32,565. THE RETURN WAS 2 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') AND WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE UNDER SECTION 143(2). THE ASSESSING OFFICER AFTER EXAMINING THE CASE COMPLETE D THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 31.12.2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS.2,06,85,680. IN DOING SO THE ASSESSING OFFICER MADE THE FOLLOWING DISALLOWANCES : I) INTEREST DUE TO DEBTOR M/S. MYSORE METAL INDUSTR IES RS.6,98,355 II) INTEREST DEBITED TO OWN ACCOUNT RS.10,54,76 2 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT.31 .12.2010, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) DISPOSED OFF THE APPEAL BY ORDER DT.23.9.2011 WHEREIN FOLLOWING THE DECISION OF THE CO-ORDINATE B ENCH IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.978/BANG/2010 DT. 15.7.2011, THE ASSESSEE WAS ALLOWED PARTIAL RELIEF BY WAY OF DELETION OF THE DISALLOWAN CE OF RS.6,98,355 ON ACCOUNT OF INTEREST DUE TO M/S.MYSORE METAL INDUSTRIES. THE LEARNED CI T(A) HOWEVER UPHELD THE DISALLOWANCE OF INTEREST AMOUNTING TO RS/.10,54,762 DEBITED TO T HE ASSESSEES OWN ACCOUNT. ITA NO.1147/BANG/2011 3. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), REVENUE HAS PREFERRED THIS APPEAL. THE GROUNDS RAISED BY REVENUE IN THIS APPEAL ARE AS UNDER : 1. THE ORDER OF THE CIT(A) IS OPPOSED TO THE FACT S OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 6,98,355 ATTRIBUTABLE TO THE INTEREST EXPENSES CORRESPONDING TO INTEREST BEARING LOAN TO THE BROTHERS PROPRIETARY CONCERN M/S. MYSORE METAL INDUSTRIES. 3. THE LEARNED CIT(A) HAS ERRED IN FOLLOWING TH E DECISION OF THE HON'BLE ITAT IN RESPECT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08. 4. A MISCELLANEOUS PETITION AGAINST THE ORDER O F THE ITAT IS BEING FILED IN RESPECT OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 . 3 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE APPEAL, THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 4.0 THE GROUNDS OF APPEAL AT S.NOS.1, 4 & 5 BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 5.1 THE GROUNDS OF APPEAL AT S. NOS.2 AND 3 PERTAIN TO THE SOLE GROUND OF DISPUTE IN THIS APPEAL. REVNEUE CHALLENGES THE ACTION OF THE LEARN ED CIT(A) IN DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.6,98,355 ATTRIBUTABLE TO I NTEREST PAID TO ASSESSEES BROTHERS PROPRIETARY CONCERN M/S. MYSORE METAL INDUSTRIES. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUMENTS SUPPORTED THE GROUNDS OF A PPEAL WHICH SOUGHT REVERSAL OF THE CIT(A)S FINDING AND RESTORATION OF THE ASSESSING OFFICERS ORDER ON THIS POINT. 5.2 THE LEARNED COUNSEL FOR THE ASSESSEE SUPPOR TED THE FINDING OF THE LEARNED CIT(A) WHICH HE SUBMITTED WAS COVERED IN THE ASSESSEES FA VOUR ON THE VERY SAME POINT BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE ASSESSEES OWN CASE IN ITA NO.978/BANG/2010 DT.15.7.2011 FOR ASSESSMENT YEAR 2 007-08. 5.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PE RUSED AND CONSIDERED THE MATERIAL ON RECORD. W E FIND FROM THE RECORD THAT IN THE IMMEDIATELY PREC EDING YEAR I.E. ASSESSMENT YEAR 2007-08 IN THE ASSESSEES OWN CASE THE VERY SA ME ISSUE WAS ADDRESSED AND DISPOSED OFF IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL ITA NO.978/BANG/2010 DT.15.7.2011. FOR THE SAKE OF CLARITY THE OPERATIV E PART OF THE TRIBUNAL ORDER AT PARA 8 ON PAGE 7 AND 8 THEREOF IS EXTRACTED HEREUNDER : HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDER ED THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS U NDISPUTEDLY ADVANCED INTEREST 4 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 FREE ADVANCES TO THE PROPRIETARY CONCERN OF HIS BRO THER. AS SEEN FROM THE CIT(A)S ORDER, THERE HAVE BEEN TRADING ACTIVITIES ALSO BETWEEN THE ASSESSEE AND THE PROPRIETARY CONCERN OF HIS BROTHER M/S. MYSORE METAL INDUSTRIES. THE ASSESSEE HAD CLAIMED BEFORE THE CIT(A) THAT HE HAD SUFFICIENT CAPITAL TO ADVANCE INTEREST FREE ADVANCES. THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS CITED SUPRA HAS SQUARELY HELD THAT MERELY BECAUSE I NTEREST FREE ADVANCE HAVE BEEN GIVEN TO SISTER CONCERNS, THE DISALLOWANCE CAN NOT BE MADE AND WHAT HAS TO BE SEEN IS THE COMMERCIAL EXPEDIENCY OF MAKING SUCH AD VANCES. SINCE BOTH THE BROTHERS ARE IN THE SAME BUSINESS OF IRON AND STEEL AND ALSO THERE BEING TRADING ACTIVITIES BETWEEN THEM. IT IS QUITE NATURAL THAT THE ASSESSEE WOULD HAVE MADE ADVANCES TO HIS BROTHERS CONCERN OUT OF COMMERCIAL EXPEDIENCY. FURTHER AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MUNJAL SALE CORPORATION CITED SUPRA WHERE THE INTEREST FREE FUNDS AND NOT INTEREST BEAR ING FUNDS ARE CLUBBED TOGETHER AND THE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND THE ADVANCES IS NOT PROVED, IT IS TO BE PRESUMED THAT THE ADVANCES ARE OUT OF OWN AND NON- INTEREST BEARING FUNDS AND NOT OUT OF INTEREST BEAR ING FUNDS. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE INTEREST AMOUNT CANN OT BE DISALLOWED. FURTHER, SECTION 40A(2) PROVIDES THAT WHERE THE ASSESSEE INC URS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO ANY PERSON REFERRED IN CLAUSE (B) OF THIS SUB SECTION AND THE ASSESSING OFFICER IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THERE FROM, SO MUCH O F THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE S HALL NOT BE ALLOWED AS A DEDUCTION. IN THE CASE BEFORE US THE ISSUE IS OF A DVANCING OF INTEREST FREE LOANS AND THE ASSESSING OFFICER HAS NOT STATED OUT AS TO WHAT IS THE PAYMENT MADE BY THE ASSESSEE TO THE PERSON REFERRED TO IN SECTION 40A(2) AND AS TO HOW THE SAID EXPENDITURE IS EXCESSIVE OR UNREASONABLE. THEREFOR E, IN OUR OPINION, THIS PROVISION DOES NOT APPLY TO THE FACTS OF THE CASE BEFORE US. IN VIEW OF THE SAME, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISS UE IN THE YEAR UNDER CONSIDERATION BEING SIMILAR, RESPECTFULLY FOLLOWING THE ORDER OF CO-ORD INATE BENCH OF THE ITAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08, WE HOLD THAT THE DISALLOWANCE OF RS.6,98,355 ON 5 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 ACCOUNT OF INTEREST ATTRIBUTABLE TO M/S. MYSORE STE EL INDUSTRIES IS NOT CALLED FOR AND THEREFORE THE FINDING OF THE LEARNED CIT(A) ON THIS POINT DELETING THE SAID DISALLOWANCE IS CONFIRMED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSE D. C.O. NO.16/BANG/2012 7.1 IN THE ORDER OF ASSESSMENT DT.31.12.2010, T HE ASSESSING OFFICER HAD ALSO MADE A DISALLOWANCE OF AN AMOUNT OF RS.10,54,762 ON ACCOUN T OF INTEREST DEBITED TO ITS OWN ACCOUNT. IN APPEAL, THE LEARNED CIT(A) PARTIALLY CONFIRMED T HE DISALLOWANCE, IN AS MUCH AS OUT OF APPLICATION OF RS.1,27,00,000 OUT OF BORROWED FUNDS , THE LEARNED CIT(A) CONTENDED THE DISALLOWANCE OF INTEREST ON A SUM OF RS.1,12,00,000 WHILE DELETING THE DISALLOWANCE OF INTEREST ON THE REMAINING AMOUNT OF RS.15,00,000. THE RELEVANT PORTION OF THE LEARNED CIT(A) S ORDER AT PARAS 4.1 TO 4.9 ARE EXTRACTED A ND REPRODUCED HEREUNDER : 4.1 THE ASSESSING OFFICER ALSO OBSERVED THAT A SUM OF RS.10,54,762 HAD BEEN CLAIMED AS INTEREST DEBITED TO THE APPELLANTS OWN ACCOUNT AND DISALLOWED THE SAME. 4.2 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSION AND PERUSED THE ASSESSMENT ORDER. THE APPELLANT HAS RELIED ON THE DECISION OF VARIOUS COURTS AND THE DECISION OF THE HON'BLE ITAT IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2007-08 VIDE ITA NO.978/BANG/2010 DATED 15.7.2 011. THE DECISION OF THE HON'BLE ITAT, BANGALORE BENCH A, BANGALORE AT PAR A 8 READS AS UNDER : . FURTHER AS HELD BY THE HON'BLE SUPREME COURT I N THE CASE OF MUNJAL SALE CORPORATION CITED SUPRA WHERE THE INTEREST FREE FUN DS AND NOT INTEREST BEARING FUNDS ARE CLUBBED TOGETHER AND THE NEXUS BETWEEN TH E INTEREST BEARING FUNDS AND THE ADVANCES IS NOT PROVED, IT IS TO BE PRESUMED TH AT THE ADVANCES ARE OUT OF OWN AND NON-INTEREST BEARING FUNDS AND NOT OUT OF INTER EST BEARING FUNDS. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE INTEREST A MOUNT CANNOT BE DISALLOWED. 4.3 IT IS CLEAR THAT, IN THE CASE BEFORE THE HO N'BLE TRIBUNAL, THE ASSESSING OFFICER HAD NOT PROVED THAT INTEREST FREE FUNDS AND NOT INTEREST BEARING FUNDS WERE CLUBBED TOGETHER AND THE NEXUS BETWEEN INTERES T BEARING FUNDS AND INTEREST FREE ADVANCE WAS NOT PROVED. HOWEVER, IN THE PRESE NT CASE, THE ASSESSING OFFICER HAS IN HIS REMAND REPORT STATED AS UNDER : 6 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 IN RESPECT OF INTEREST DISALLOWED OF RS. 10,54,762 THE ASSESSEE HAS FURNISHED DETAILS AS UNDER : SL.NO. PARTICULARS LOAN BORROWED DURING THE YEAR (RS. ) INTEREST PAID DURING THE YEAR (RS. ) RATE OF INTEREST 1. N RAMU BROS ELECTRICAL LTD 20,00,000 2,30,001 12.1667 2. MEETA REALTORS P. LTD. 25,00,000 2,78,667 12.1667 3. RINKU 30,00,000 3,26,501 12.1667 4. PUNJAB NATIONAL BANK 52,00,000 2,19,593 14.25 TOTAL 1,27,00,000 10,54,762 LOAN BORROWED RS. 1,27,00,000 DURING THE YEAR WAS U TILIZED IN THE FOLLOWING MANNER : I) INTEREST FREE LOAN GIVEN TO MINOX METAL P. LTD. RS. 1,12,00,000 WHEREIN THE APPELLANT IS A DIRECTOR. II) REPAYMENT OF INTEREST FREE LOAN TAKEN FROM SHRI BHAWARLAL. RS.5,00,000 III) TRANSFER OF PROPRIETARY CONCERN MYSORE STEEL SUPPLIERS RS.10,00,000 TOTAL : RS.1,27,00,000 FROM THE ABOVE, IT IS CLEAR THAT THERE IS A DIRECT NEXUS BETWEEN INTEREST BEARING LOANS AVAILED BY THE ASSESSEE TOWARDS NON-INTEREST BEARING ADVANCES MADE. ALSO BUT FOR THE ADVANCES MADE, NO LOAN WOULD HAVE BEEN REQUIRED. AS SUCH THE DISALLOWANCES OF INTEREST HAS BEEN RIGHTLY MADE. T HEREFORE, THE ASSESSEES CONTENTION THAT CAPITAL BALANCE OF THE ASSESSEE IN PERSONAL BONDS WERE SUFFICIENT TO COVER THE INTEREST FREE LOAN GIVEN TO MINOX META L PVT LTD. IS UNJUSTIFIED. THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DISTINGUI SHABLE AND THEREFORE NOT APPLICABLE TO THE INSTANT CASE. 4.4 THUS IT IS CLEAR THAT, IN THE PRESENT CASE, THERE IS A DIRECT NEXUS BETWEEN THE INTEREST BEARING FUNDS AND INTEREST FREE ADVANC ES. IN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS (2 88 ITR 1), IT IS HELD AS FOLLOWS : AS ALREADY STATED ABOVE, WE HAVE TO SEE THE TRANS FER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCI AL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED F OR EARNING PROFITS. WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADV ANCES IT TO A SISTER CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF TH E RESPECTIVE CASE. 7 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 4.5 IN THE PRESENT CASE, SINCE THE ASSESSING OFFICER HAS PROVED ON THE BASIS OF THE APPELLANTS OWN SUBMISSION THAT THE INTEREST BEARIN G FUNDS WERE DIRECTLY ADVANCED TO SISTER CONCERN WITHOUT INTEREST, THE DECISION OF THE HON'B LE ITAT IN THE APPELLANTS OWN CASE IS DISTINGUISHABLE. 4.6 AS REGARDS BUSINESS EXIGENCY, THE APPELL ANT HAS NOT SHOWN THAT THERE WAS A BUSINESS EXIGENCY TO BEAR THE COST OF INTEREST ON FREE ADVAN CES MADE TO ITS SISTER CONCERN. IN THE CASE CITED BY THE APPELLANT ALSO, THE COURT HAS HE LD THAT THE ASSESSEE IS REQUIRED TO PROVE THAT ADVANCING THE AMOUNTS TO ITS SISTER CONCERNS H AS SPECIFICALLY BEEN DONE AS A BUSINESS EXPEDIENCY. HOWEVER, IN THE PRESENT CASE, THE APPE LLANT HAS FAILED TO DO SO. MERELY STATING THAT THE TWO ARE IN THE SAME LINE OF BUSINESS IS NO T SUFFICIENT. SPECIFIC BUSINESS EXPEDIENCY NEEDS TO BE PROVED, WHICH THE APPELLANT HAS FAILED TO DO IN THIS CASE. 4.7 HOWEVER, I FIND THAT THIS DISALLOWANCE CONS ISTS OF 3 PARTS VIZ. I) INTEREST FREE LOAN GIVEN TO MINOX METAL P. LTD. RS.1,12,00,000 II) REPAYMENT OF INTEREST FREE LOAN TAKEN FROM SHRI BHAWARLAL RS.5,00,000 III) TRANSFER TO PROPRIETARY CONCERN M/S. MYSORE S TEEL SUPPLIERS RS.10,00,000 TOTAL : RS.1,27,00,000 4.8 I FIND THAT A SUM OF RS. 5,00,000 HAS BEEN UT ILIZED TO REPAY INTEREST FREE LOAN TAKEN FROM SHRI BHAWARLAL. ALSO, A SUM OF RS.10,00,000 H AS BEEN TRANSFERRED TO THE PROPRIETARY CONCERN OF THE APPELLANT ITSELF. THEREFORE, INTER EST PERTAINING TO THESE TWO ADVANCES IS TREATED AS ALLOWABLE AS THESE CANNOT BE SAID TO BE NOT FOR THE APPELLANTS BUSINESS. THE 8 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 ASSESSING OFFICER IS DIRECTED TO WORK OUT THE INTER EST ON THESE TWO AMOUNTS AND ALLOW DEDUCTION TOWARDS THE SAME. 4.9 THEREFORE, WITH REGARD TO THE INTEREST PAYA BLE ON INTEREST FREE ADVANCE OF RS. 1,12,00,000 TO M/S. MINOX METAL P. LTD., SINCE IT I S DIRECTLY FROM LOAN TAKEN BY THE APPELLANT AND NO SPECIFIC BUSINESS EXPEDIENCY HAS BEEN PROVED AS DISCUSSED ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS UPHELD. 7.2 THE ASSESSEE HAS FILED CROSS OBJECTIONS AGA INST THE SUSTENANCE OF THE DISALLOWANCE OF INTEREST ON RS.1,12,00,000 BY THE LEARNED CIT(A). THE GROUNDS IN THE CROSS OBJECTION READ AS UNDER : 1. THE LEARNED CIT(A)-II, BANGALORE HAS ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST PAID CONSIDERING THE INTEREST FREE ADVANCE OF RS. 1,12,00,000 MADE TO M/S. MINOX METAL P. LTD. 2. THE LEARNED CIT(A)-II, BANGALORE HAS ERRED I N NOT APPRECIATING THAT INTEREST FREE ADVANCES WERE MADE TO M/S. MINOX METAL P. LTD. OUT OF BUSINESS OR COMMERCIAL EXPEDIENCY. 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND LAW APPLICABLE, DISALLOWANCE OF INTEREST AS CONFIRMED BY THE LEARNED CIT(A) IS T O BE DELETED IN ENTIRETY. 7.3 IN THE GROUNDS RAISED IN THE CROSS OBJECTI ON, THE ASSESSEE CONTENDS THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE WITHOUT ASS IGNING ANY REASONS. IT IS SUBMITTED THAT THE REASONS ADDUCED BY THE ASSESSEE THAT THE AMOUNT WAS GIVEN TO M/S. MINOX METAL PVT. LTD. WAS DUE TO BUSINESS NECESSITY AND EXIGENCIES WAS NOT CONSIDERED BY THE LEARNED CIT(A). IT IS FURTHER CONTENDED THAT THE CAPITAL OF THE ASS ESSEE, IN THE RELEVANT PERIOD, WAS MORE THAN THE INTEREST FREE ADVANCES MADE AND THEREFORE MAKING THE DISALLOWANCE BY INVOKING 9 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 VARIOUS CASE LAWS INCLUDING THE CASE OF MUNJAL SALE S CORPORATION VS. CIT OF THE HON'BLE APEX COURT REPORTED IN 298 ITR 298 WAS NOT CALLED FOR. 7.4 WE FIND FROM THE DETAILS ON RECORD THAT THE ASSESSEE HAD FILED WRITTEN SUBMISSION ON 10.3.2010 BEFORE THE LEARNED CIT(A) (WHICH ARE ON P AGES 19 TO 30 OF ASSESSEES PAPER BOOK FILED ON 31.7.2012) AND WERE FORWARDED TO THE ASSES SING OFFICER. THE ASSESSING OFFICER HAS GIVEN HIS REMAND REPORT THEREON DT.30.5.2011 (AT PA GES 31 AND 32 OF ASSESSEES PAPER BOOK). IN THE SAID REMAND REPORT, WE FIND THAT THE ASSESSI NG OFFICER HAS GIVEN THE REASONS WHICH PROMPTED THE DISALLOWANCE OF INTEREST. FURTHER, I T IS ALSO SEEN FROM THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LEARNED CIT(A) (AT PAGE 21 OF A SSESSEES PAPER BOOK) THAT THE ASSESSEE HIMSELF HAS ADMITTED ADVANCING INTEREST FREE LOANS. THEREFORE, THE CONTENTION OF THE ASSESSEE IN THE CROSS OBJECTION THAT NO OPPORTUNITY WAS AFFORDED TO HIM TO EXPLAIN HIS CASE OR THAT THE CAPITAL BALANCE WAS MORE THAN THE INTE REST FREE LOANS DO NOT HOLD ANY WATER AND ARE ACCORDINGLY REJECTED. 7.5 HOWEVER, WE FIND FROM THE WRITTEN SUBMISSIO NS MADE BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT THE ASSESSEES CONTENTION THAT THE AMOUNT OF ADVANCES WERE MADE DUE TO BUSINESS EXIGENCIES, HAS NOT BEEN DELIBERATED UPON BY THE LEARNED CIT(A). FURTHER, A PERUSAL OF THE LETTER DT.27.7.2010 ISSUED ALONG WITH NOTICE UNDER SECTION 142(1) (ON PAGES 1 TO 3 OF ASSESSEES PAPER BOOK) AND ALSO THE REASONING GIVEN BY THE ASSESSING OFFICER FOR MAKING THE SAID DISALLOWANCE IN THE ORDER OF ASSESSMENT, IT AP PEARS THAT EVEN THE ASSESSING OFFICER HAD NO OCCASION TO CONSIDER AND DELIBERATE ON THIS ISSU E. THEREFORE, IN THE INTEREST OF EQUITY AND JUSTICE, WE HEREBY REMAND THIS MATTER FOR EXAMINING BUSINESS EXIGENCIES, IF ANY, FOR 10 ITA NO. 1147/BANG/11 C.O. NO.16/BANG/2012 ADVANCING INTEREST FREE ADVANCES OF RS.1,12,00,000 TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION AND ADJUDICATION THEREON AFTER GIVIN G THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE CROSS OBJECTIONS OF THE ASSES SEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPT., 2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED: 07.09.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE