ACIT, CIR-3, Pune V. AVISHKAR BUILDERS, Pune

ITA 1156/PUN/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9879 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-10-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 05-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Unexplained cash credit; Value adopted by valuation officer; Unexplained expenditure; Proportionate interest; Tangible material; Difference of opinion; Valuation report
• Section: 143(3); 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1156/PN/2008 (ASSESSMENT YEAR: 2001-02) ASSTT. CIT CIR. 3 PUNE .. APPELLANT VS. M/S. AVISHKAR BUILDERS 34 THAKKAR HOUSE, 1418 GEN. THIMMAYYA ROAD, PUNE-411 01. PAN AAGFA 7793 Q RESPONDENT C.O. NO. 08/PN/2009 ARISING OUT OF ITA NO.1156/PN/2008 (ASSESSMENT YEAR: 2001-02) M/S. AVISHKAR BUILDERS 34 THAKKAR HOUSE, 1418 GEN. THIMMAYYA ROAD, PUNE-411 01. PAN AAGFA 7793 Q CROSS OBJECTOR VS. ASSTT. CIT CIR. 3, PUNE APPELLANT-IN-APPEAL ASSESSEE BY : SHRI NILESH KHANDELWAL DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 29-10-2012 DATE OF PRONOUNCEMENT : 31-10-2012 ORDER PER G.S. PANNU, A.M.: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME-TAX (APPEALS)-II PUNE DATED 19-5-2008 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 16-3-2004 PASSED BY THE ASS ESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2001-02. 2. GROUND NO.1.1 AND 1.2 OF REVENUES APPEAL AND GR OUND NO. 1 OF ASSESSEES CROSS OBJECTION RELATE TO THE SAME AD DITION. SINCE 2 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 THE CROSS GROUNDS ARISE OUT OF THE SAME ADDITION MA DE BY THE ASSESSING OFFICER, BOTH ARE TAKEN UP TOGETHER FOR A DJUDICATION. 3. IN BRIEF, FACTS ARE THAT THE ASSESSEE IS A PARTN ERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE FILED A RETURN OF INCOME FOR THE A.Y. 2001-02 DECLA RING A TOTAL INCOME OF RS.1,69,468/- FROM THE BUSINESS OF BUILDERS AND DEVELOPERS. THE INCOME HAS BEEN ACCOUNTED FOR ON PROJECT COMPLETIO N METHOD. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPL ETED ITS PROJECT AVISHKAR GARDENS A BUILDING. THE ASSESSING OFF ICER NOTICED THAT THE OPENING VALUE OF WORK-IN-PROGRESS (FOR SHORT W IP) FOR THE YEAR UNDER CONSIDERATION WAS SHOWN AT RS. 1,18,06,758/-W HILE CLOSING WIP WAS SHOWN AT RS. 30,60,290/-, WHICH PERTAINED T O THE UNDER- CONSTRUCTION PROJECT VIZ. AVISHKAR GARDENS B BUIL DING. FROM THE BALANCE-SHEET, TRADING AND PROFIT & LOSS ACCOUNT FO R THE EARLIER ASSESSMENT YEARS, THE ASSESSING OFFICER NOTICED THA T IN THE ASSESSMENT YEAR 1996-97 AND 1997-98, ANOTHER PROJEC T, NAMED AVISHKAR HEIGHTS WAS ALSO IN PROGRESS. FOR A.Y. 1997-98 THE CLOSING WIP FOR AVISHKAR HEIGHTS AND AVISHKAR GARDE NS A AND B PROJECTS WAS STATED AT RS. 1,04,26,359/- AND RS. 17 ,51,733/- RESPECTIVELY I.E. CUMULATIVELY TO RS. 1,21,78,092/- AND THE OPENING WIP FOR ASSESSMENT YEAR 1998-99 WAS TAKEN AT RS. 1, 17,54,092/-, THE DIFFERENCE OF RS. 4.24 LAKHS WAS EXPLAINED ON A CCOUNT OF A WRONG DEBIT MADE IN A.Y. 1997-98 TO THE WIP A/C. THE ASS ESSING OFFICER PROCEEDED WITH THE OPENING WIP FOR A.Y. 1998-99 AT RS. 1,17,54,092/- AND ITS BIFURCATION BEING AVISHKAR HE IGHTS RS. 1,00,02,359/- AND AVISHKAR GARDENS A & B BUILDI NGS RS. 17,51,733/-. IN THE ASSESSMENT YEAR `1998-99, THE P ROJECT, AVISHKAR HEIGHTS WAS COMPLETED. THE ASSESSING OFFICER CONCLU DED THAT WHATEVER EXPENDITURE WAS INCURRED BY THE ASSESSEE D URING THE A.Y. 1998-99, PERTAINED TO THE PROJECT OF AVISHKAR HEIGH TS AND THERE WAS NO WORK DONE IN RESPECT OF OTHER PROJECTS. ON THIS BASIS, THE 3 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 ASSESSING OFFICER CONSIDERED THE CLOSING WIP OF AVI SHKAR GARDENS A AND B BUILDINGS AT FIGURE RS. 17,51,733/- FOR A.Y. 1998-99. THIS WAS DIFFERENT THAN THE CLOSING WIP OF AVISHKAR GARD ENS A AND B BUILDINGS SHOWN BY THE ASSESSEE AT RS. 50,71,741/- AND ACCORDINGLY FOR THE SUBSEQUENT ASSESSMENT YEARS 1999-00 AND 200 0-01, THE DIFFERENCE OF RS. 33,20,008/- WAS CARRIED FORWARD A ND AS A RESULT, THE OPENING WIP (I.E. AS ON 1-4-2000) FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION SHOWN BY THE ASSESSEE AT RS. 1,18,06, 758/- FOR AVISHKAR GARDENS A AND B BUILDINGS PROJECT, WA S RE-COMPUTED AT RS. 84,86,750/-. ACCORDINGLY, THE ASSESSING OFFICE R PREPARED A REVISED TRADING A/C FOR THE ASSESSMENT YEAR UNDER C ONSIDERATION BY ADOPTING THE OPENING WIP AT RS. 84,86,750/- AS AGAI NST RS. 1,18,06,758/- ADOPTED BY THE ASSESSEE AND THE GROSS PROFIT WAS WORKED OUT AT RS. 59,94,357/- INSTEAD OF RS. 26,74, 350/- COMPUTED BY THE ASSESSEE. THIS DIFFERENCE OF RS. 33,29,008/ - HAS BEEN ADDED TO THE TOTAL INCOME ON ACCOUNT OF DISCREPANCY IN THE FIGURE OF WIP. 4. AT THE STAGE OF APPEAL BEFORE THE FIRST APPELLAT E AUTHORITY, ASSESSEE POINTED OUT THAT IT WAS MAINTAINING A COMM ON ACCOUNT IN RESPECT OF ITS TWO PROJECTS VIZ. AVISHKAR HEIGHTS A ND AVISHKAR GARDENS A AND B BUILDINGS. IN RESPECT OF AVISH KAR HEIGHTS, THE CONSTRUCTION WAS COMPLETED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1998-99 AND AS THE ACCOUNTS WERE CO MMON, THE EXPENDITURE RELATING TO AVISHKAR HEIGHTS WAS REQUIR ED TO BE SEGREGATED SO AS TO COMPUTE THE PROFITS OF THE SAID PROJECT AS PER THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSES SEE. SINCE THE ACCOUNTS WERE COMMON AND IT WAS DIFFICULT TO SEGREG ATE EXPENDITURE BETWEEN THE TWO PROJECTS THE COST OF INVESTMENT IN AVISHKAR HEIGHTS WAS GOT VALUED BY A REGISTERED VALUER WHO ASCERTAIN ED THE SAME AT RS. 68,92,351/-. IN THIS MANNER, IT WAS EXPLAINED THAT OUT OF THE TOTAL 4 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 COST INCURRED IN RESPECT OF TWO PROJECTS WHICH STOO D AT RS. 99,76,359/-, THE AMOUNT OF RS. 68,92,351/- WAS CONS IDERED AS COST OF CONSTRUCTION OF AVISHKAR HEIGHTS PROJECT AS PER THE VALUATION REPORT AND BALANCE OF RS. 30,84,008/- WAS CONSIDERE D AS REFLECTING THE EXPENDITURE ON AVISHKAR GARDENS A AND B PRO JECTS. THE CIT(A) APPRECIATED THE POSITION CANVASSED BY THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE COMMON FOR RECORDING OF EXPENSES ON CONSTRUCTION FOR BOTH THE PROJECTS VIZ. AVISHKAR HEIGHTS AND AVI SHKAR GARDENS A AND B AND THAT AVISHKAR HEIGHTS PROJECT WAS COMPL ETED DURING THE FINANCIAL YEAR ENDING 31-3-1998 AND SUCH EXPENDITUR E WAS REQUIRED TO BE IDENTIFIED TO DEDUCE THE INCOME FROM SUCH PRO JECT AS PER THE ACCOUNTING SYSTEM. THE CIT(A) NOTICED THAT THE EXP ENSES PERTAINING TO AVISHKAR HEIGHTS WERE ASCERTAINED ON THE BASIS O F VALUATION REPORT AT RS. 68,92,351/- AND THE BALANCE OF RS. 30,84,008 /- WAS TRANSFERRED TO WIP ACCOUNT OF AVISHKAR GARDENS A AND B PROJECT AS ON 31-3-1998. IN THE COURSE OF APPELLATE PROCEE DINGS, IN TERMS OF SEC. 250(4) OF THE ACT, THE MATTER OF SUCH VALUATIO N WAS REFERRED TO THE DEPARTMENTAL VALUATION OFFICER WHO VALUED THE C OST OF INVESTMENT IN AVISHKAR HEIGHTS AT RS. 77,82,000/-. THE CIT(A) NOTICED THAT THE AMOUNT OF RS. 99,76,359/- ADOPTED IN THE COMMON BOOKS OF ACCOUNT REFLECTED THE COST OF CONSTRUCTION OF BOTH THE PROJECTS WHICH WERE SIMULTANEOUSLY CARRIED OUT IN T HE FINANCIAL YEAR 1997-98 AND THAT THERE WAS NO ALLEGATION THAT SUCH EXPENDITURE WAS EITHER BOGUS OR NOT INCURRED AT ALL. THE CIT(A) CR YSTALLIZED THE DISPUTE RAISED BY THE ASSESSING OFFICER AS MERELY R ELATING TO THE BIFURCATION OF EXPENDITURE BETWEEN THE TWO PROJECTS DONE BY THE ASSESSEE IN THE A.Y. 1998-99. THE ASSESSEE SEGREGA TED SUCH AMOUNT BETWEEN AVISHKAR HEIGHTS AND AVISHKAR GARDEN S PROJECTS AT RS. 58,92,351/- AND RS. 30,84,008/- RESPECTIVELY AS ON 31-3-1998 AS PER THE VALUERS REPORT WHEREAS AS PER THE ASSESSIN G OFFICER, THE ENTIRE EXPENDITURE IN A.Y. 1998-99 RELATED ONLY TO AVISHKAR HEIGHTS 5 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 AS THE SAME WAS COMPLETED IN THE A.Y. 1998-99 ITSEL F. IN THIS BACKGROUND, THE CIT(A) FOUND THAT THERE WAS NO CLIN CHING MATERIAL ON RECORD TO VERIFY THE RIVAL POSITION. SO HOWEVER, IT WAS APPRECIATED THAT THE COMMON ACCOUNTS WERE MAINTAINED FOR RECORD ING CONSTRUCTION EXPENSES OF BOTH THE PROJECTS IN A.Y. 1998-99 AND THAT THERE WAS NO ALLEGATION THAT THE EXPENDITURE RECORD ED WAS BOGUS OR WAS NOT INCURRED AT ALL. CONSIDERING THE AFORESAID , THE CIT(A) RELIED UPON THE COST OF INVESTMENT IN AVISHKAR HEIGHTS AS ESTIMATED BY THE DVO AT RS. 77,82,000/- AND THE BALANCE OF RS. 21,94 ,359/- OUT OF RS. 99,79,359/- WAS SAID TO BE PERTAINING TO THE WI P OF AVISHKAR GARDENS A AND B BUILDINGS AS ON 31-3-1998. AS A RESULT OF SUCH CONCLUSION, THE CIT(A) CONCLUDED THAT OPENING BALAN CE OF WIP FOR A.Y. 2001-02 WOULD INCREASE BY RS. 8,89,643/- INSTE AD OF RS. 33,20,008/- COMPUTED BY THE ASSESSING OFFICER AND A CCORDINGLY REDUCED THE ADDITION TO RS. 8,89,643/-. 5. IN THIS BACKGROUND, RIVAL CONTENTIONS HAVE BEEN HEARD. THE MAIN PLEA SET UP BY THE REVENUE IN SUPPORT OF ITS G ROUND OF APPEAL IS THAT THE ADDITION RELATING TO THE WIP COMPUTED B Y THE ASSESSING OFFICER AT RS. 33,20,008/- WAS BASED ON REGULAR BOO KS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THAT THERE WAS NO JU STIFICATION TO RE- COMPUTE THE SAME ON THE BASIS OF VALUATION REPORT O F THE DVO AS DONE BY THE CIT(A). THE LEARNED DR POINTED OUT THA T THE ADDITION ITSELF WAS JUSTIFIED INASMUCH AS THE VALUE OF WIP A DOPTED BY THE ASSESSEE IN THE A.Y. 1998-99 FOR THE PROJECTS UNDER CONSIDERATION WAS WRONG WHICH HAD A CASCADING EFFECT FOR COMPUTAT ION OF PROFIT FOR THE YEAR UNDER CONSIDERATION FROM THE PROJECTS AVIS HKAR GARDENS A AND B BUILDINGS. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE VEHEMENTLY POINTED OUT THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED 6 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 IN REJECTING THE VALUE OF WIP ASCERTAINED BY THE AS SESSEE IN THE ASSESSMENT YEAR 1998-99 IN ORDER TO COMPUTE THE INC OME FOR THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT TH ERE IS NO FINDING MUCH LESS AN ALLEGATION THAT ANY OF THE CONSTRUCTIO N EXPENSES DEBITED IN THE BOOKS OF ACCOUNT WHICH WAS BIFURCATE D BETWEEN AVISHKAR HEIGHTS AND AVISHKAR GARDENS A AND B P ROJECTS, WAS WRONG OR WAS BOGUS. THEREFORE, IT WAS ONLY A QUEST ION OF ASCERTAINING WHAT EXPENDITURE WAS PERTAINING TO THE PROJECT AVISHKAR HEIGHTS ON ONE HAND AND AVISHKAR GARDENS A AND B ON THE OTHER HAND. IF THE PROPOSITION OF THE ASSESSING OFFICER T HAT THE COST OF CONSTRUCTION OF AVISHKAR HEIGHTS IN A.Y. 1998-99 TA KEN AT RS. 68,92,357/- OUT OF TOTAL OF RS. 99,79,359/- WAS LES S AND PART OF IT HAS BEEN SHOWN AS CLOSING WIP OF AVISHKAR GARDENS AS ON 31-3-1998, THEN IT ONLY GOES TO SHOW THAT FOR THE A.Y. 1998-99 , ASSESSEE HAS BEEN ASSESSED AT A HIGHER INCOME IN RELATION TO AVI SHKAR HEIGHTS PROJECT. NEVERTHELESS IT WAS POINTED OUT THAT THE ASCERTAINMENT OF COST OF CONSTRUCTION AT AVISHKAR HEIGHTS AT RS. 68, 92,351 WAS JUSTIFIED. SO HOWEVER, DURING THE APPELLATE PROCEED INGS, WHEN IT WAS CONFRONTED WITH THE REPORT OF THE DVO VALUING THE C OST OF CONSTRUCTION AT RS. 77,82,000/-, THE ASSESSEE DID N OT OBJECT TO THE SAME TO AVOID LITIGATION AND SETTLE THE DISPUTE. S O HOWEVER, AS THE DEPARTMENT DID NOT ACCEPT THE ORDER OF THE CIT(A), THE ACCEPTANCE OF DVOS REPORT BY THE ASSESSEE AT THE STAGE OF APPELL ATE PROCEEDINGS WAS OF NO CONSEQUENCE AND THEREFORE, BY WAY OF GROU ND NO. 1 IN THE CROSS OBJECTION, IT IS CONTENDED THAT EVEN THE BALA NCE ADDITION OF RS. 8,89,643/- SUSTAINED BY THE CIT(A) BE DELETED. IT WAS POINTED OUT THAT IF ANY ADDITION IS SUSTAINED ON THIS ACCOU NT, IT WOULD RESULT IN A DOUBLE ADDITION INASMUCH AS THE ASSESSEE HAS BEEN ASSESSED ON A HIGHER PROFIT IN A.Y. 1998-99 WITH RESPECT TO AVI SHKAR HEIGHTS PROJECT AND THEN AGAIN IT WOULD SUFFER SIMILAR ADDI TION IN THIS YEAR ALSO. IN THIS MANNER, IT WAS SOUGHT TO BE POINTED OUT THAT IN THE 7 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 FACTS AND CIRCUMSTANCES OF THE CASE NO ADDITION IS MAINTAINABLE ON THIS COUNT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE CONTROVERSY REVOLVES ROUND THE MANNER IN WHICH INCO ME HAS BEEN COMPUTED BY THE ASSESSEE WITH REGARD TO ITS BUSINES S. THE ASSESSE- FIRM IS IN THE BUSINESS OF BUILDERS AND DEVELOPERS AND UNDERTAKES DEVELOPMENT AND CONSTRUCTION OF BUILDING PROJECTS. THE ASSESSEE FIRM HAS BEEN CONSISTENTLY FOLLOWING THE PROJECT CO MPLETION METHOD WHILE DEDUCING INCOME FROM SUCH BUSINESS. DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPLETED ITS PROJECT A VISHKAR GARDENS A BUILDING AND ANOTHER PROJECT AVISHKAR GARDENS B BUILDING WAS INCOMPLETE AND UNDER PROGRESS AT THE END OF THE YEA R. THE ASSESSING OFFICER EXAMINED THE VALUE OF OPENING AND CLOSING WIPS DECLARED IN THE ANNUAL ACCOUNTS FILED BY THE ASSESS EE. THE OPENING WIP COMPRISED OF EXPENDITURE IN RELATION TO BOTH AV ISHKAR GARDENS A AND B BUILDINGS, AND THE CLOSING WIP COMPRISE D OF AVISHKAR GARDEN B BUILDING AS AVISHKAR GARDEN A BUILDIN G WAS COMPLETED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ALSO NOTICED THAT IN THE ASSESSMENT YEARS 1996-97 AND 19 97-98, ASSESSEE HAD UNDERTAKEN ANOTHER PROJECT ALSO VIZ. A VISHKAR HEIGHTS APART FROM THE PROJECTS AVISHKAR GARDENS A AND AV ISHKAR GARDENS B BUILDINGS. IN THE ASSESSMENT YEAR 1998-99, THE PROJECT AVISHKAR HEIGHTS WAS COMPLETED AND THE OTHER PROJECTS VIZ. A VISHKAR GARDENS A AND B BUILDINGS WERE IN PROGRESS. ACCORDINGL Y, IN ASSESSMENT YEAR 1998-99, FOLLOWING PROJECT COMPLETION METHOD, INCOME FROM THE PROJECT AVISHKAR HEIGHTS WAS OFFERED FOR TAXATION. AT THAT POINT OF TIME, THE ASSESSEE WAS MAINTAINING A COMMON SET OF ACCOUNTS WHICH DID NOT FACILITATE BIFURCATION OF EXPENSES BETWEEN THE PROJECTS AVISHKAR HEIGHTS AND THE BALANCE PROJECTS UNDER CON STRUCTION I.E. AVISHKAR GARDENS A AND B BUILDINGS. THE TOTAL EXPENDITURE OF RS. 8 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 99,76,759/- WAS REQUIRED TO BE BIFURCATED WHICH WAS DONE ON THE BASIS OF A VALUATION REPORT WHEREBY THE COST OF CON STRUCTION FOR AVISHKAR HEIGHTS WAS ASCERTAINED AT RS. 68,92,351/- AND THE BALANCE OF RS. 30,84,008/- WAS TRANSFERRED TO WIP O F THE UNDER CONSTRUCTION PROJECTS VIZ. AVISHKAR GARDENS A AND AVISHKAR GARDENS B BUILDINGS AS ON 31-3-1998. THUS, THE V ALUE OF WIP OF AVISHKAR GARDENS A AND B BUILDINGS HAS PROGRESS IVELY TOTALLED TO RS. 1,18,06,758/- AS OPENING WIP (I.E. AS ON 1-4-20 00) FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS DIS AGREED WITH THE AFORESAID VALUE ON THE GROUND THAT THE BIFURCATION MADE IN THE ASSESSMENT YEAR 1998-99 WAS NOT PROPER. ACCORDING TO HIM, IN THE ASSESSMENT YEAR 1998-99, THE CLOSING WIP OF AVISHKA R GARDENS A AND AVISHKAR GARDENS B BUILDINGS WAS OVERSTATED B Y RS. 33,20,008/- AND THUS THE OPENING WIP AS ON 1-4-2000 DECLARED BY ASSESSEE WAS TO BE REDUCED BY SUCH AN AMOUNT AND HE ACCORDINGLY RECOMPUTED THE WIP AT RS. 84,86,750/-. 8. IN THE ABOVE CONTEXT, WE MAY OBSERVE THAT SECTIO N 4 OF THE ACT PRESCRIBES THAT FOR ANY ASSESSMENT YEAR TAX SHALL B E CHARGED IN RESPECT OF TOTAL INCOME OF THE SAID YEAR IN ACCORDA NCE WITH AND SUBJECT TO THE PROVISIONS OF THE ACT. SECTION 5 OF THE ACT PRESCRIBES THE SCOPE OF SUCH TOTAL INCOME WHICH IS REQUIRED TO BE COMPUTED IN TERMS OF THE PROVISIONS OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE IS DERIVING INCOME UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS OR PROFESSION, THUS, THE TOTAL INCOME IS LIABLE TO BE DEDUCED IN TERMS OF SEC. 145 OF THE ACT. THE ASSESSEE IS EMPLOYING MER CANTILE SYSTEM OF ACCOUNTING AND ITS INCOME FROM PROJECTS IS BEING DECLARED ON THE PROJECT COMPLETION METHOD, WHICH IS NOT IN DISPUTE. IN TERMS OF SUCH METHOD OF ACCOUNTING, THE ASSESSEE DEDUCED ITS INCO ME FROM THE PROJECT COMPLETED DURING THE YEAR VIZ. AVISHKAR GAR DENS A BUILDING. HOWEVER, THE ASSESSING OFFICER HAS DISAGREED WITH T HE INCOME 9 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 DEDUCED BY THE ASSESSEE. IN TERMS OF SUB-SECTION (3 ) OF SEC. 145, IT IS PRESCRIBED THAT WHERE THE ASSESSING OFFICER IS N OT SATISFIED ABOUT THE CORRECTNESS OF COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECT ION (1) OR ACCOUNTING STANDARDS NOTIFIED UNDER SUB-SECTION (2) OF SEC. 145 OF THE ACT HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASS ESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT TO THE BES T OF HIS JUDGMENT DISREGARDING THE INCOME DECLARED BY THE AS SESSEE. IN THIS BACKGROUND, WE MAY NOTICE THAT THERE IS NO DISPUTE TO THE EFFECT THAT THE ASSESSEE HAS DECLARED ITS INCOME FROM THE PROJE CT COMPLETED METHOD DURING THE YEAR I.E. AVISHKAR GARDENS A BU ILDING IN TERMS OF A SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY IT SIN CE PAST YEARS. IN FACT, THE ASSESSING OFFICER HAS NOT REJECTED THE ME THOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. SO HOWEVER, T HE INCOME DEDUCED IN TERMS OF THE METHOD OF ACCOUNTING FOLLOW ED BY THE ASSESSEE HAS BEEN DIS-REGARDED BY THE ASSESSING OFF ICER WITHOUT SATISFYING THE REQUIREMENT OF SUB-SECTION (3) OF SE C. 145 OF THE ACT. PERTINENTLY, THE ASSESSING OFFICER IS TO A RECORD S ATISFACTION THAT THE ACCOUNTS ARE INCORRECT OR INCOMPLETE OR THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OF SEC. 145 OR ACCOUNTI NG STANDARDS NOTIFIED IN SUB-SECTION (2) OF SECTION 145 OF THE ACT HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE. THERE IS NO WH ISPER IN THE ASSESSMENT ORDER AS TO WHICH OF THE PRE-REQUISITES CONTAINED IN SUB- SECTION (3) OF SEC. 145 HAVE BEEN VIOLATED BY THE A SSESSEE SO AS TO EMPOWER THE ASSESSING OFFICER TO REJECT THE INCOME DECLARED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT DURING THE YEAR ON ACCOUNT OF COMPLETION OF AVISHKAR GARDENS A BUILDING. IN FACT, WHAT IS SOUGHT TO BE MADE OUT BY THE ASSESSING OFFICER AT B EST CAN BE TAKEN TO BE SATISFACTION OF INCORRECTNESS OF ACCOUNT OF T HE ASSESSEE FOR A.Y. 1998-99 AND NOT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. BE THAT AS IT MAY, EVEN IF THE DEFECT NOTICED BY TH E ASSESSING OFFICER 10 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 FOR A.Y 1998-99 IS CONSIDERED, IT DOES NOT REFLECT ANY BOGUS EXPENDITURE OR INFLATED EXPENDITURE, BUT IT IS MERE LY A DIFFERENCE IN OPINION BETWEEN THE ASSESSEE AND THE REVENUE ON BIF URCATION EXERCISE CARRIED OUT IN A.Y. 1998-99 FOR IDENTIFYIN G EXPENDITURE RELATING TO THE DIFFERENT PROJECTS, AN EXERCISE WHI CH WAS NECESSITATED BECAUSE OF A COMMON SET OF ACCOUNTS. 9. CONSIDERED IN THE OVERALL LIGHT, WE THEREFORE, F IND THAT THE ASSESSING OFFICER EXCEEDED HIS JURISDICTION WHILE C ONSIDERING THE BIFURCATION OF EXPENDITURE DONE IN ASSESSMENT YEAR 1988-99 AS A DEFECT TO TRIGGER SUB-SECTION (3) OF SEC. 145 OF TH E ACT WHILE COMPUTING THE INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS, ON THIS ASPECT, WE FIND NO JUSTIFICATION TO A FFIRM THE STAND OF THE ASSESSING OFFICER. 10. THE CIT(A) HAS ALLOWED ONLY PARTIAL RELIEF, INA SMUCH AS HE HAS RE-WORKED THE BIFURCATION OF EXPENDITURE IN A.Y. 19 88-99 ON THE BASIS OF REPORT OF THE DVO AS AGAINST THE BIFURCATION DON E BY THE ASSESSEE ON THE BASIS OF A REPORT OF REGISTERED VALUER. IN OUR CONSIDERED OPINION, THE CIT(A) OUGHT TO HAVE CONSIDERED WHETHE R THE ACTION OF THE ASSESSING OFFICER WAS VALID OR NOT BEFORE PROCE EDING TO ADOPT THE VALUE ASPER DVO REPORT. IN THE EARLIER PARAGRA PH, WE HAVE ALREADY CONCLUDED THT THERE WAS NO JUSTIFICATION FO R THE ASSESSING OFFICER TO INVOKE SUCH EXERCISE, THE ADDITION IN TO TALITY IS LIABLE TO BE DELETED. ACCORDINGLY, WHEREAS GROUND NOS. 1.1 AND 1.2 IN THE APPEAL OF THE REVENUE ARE DISMISSED, GROUND NO. 1 O F THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 11. IN GROUND NO. 2, REVENUE HAS CHALLENGED THE ACT ION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 23,91,925/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT AND INSTEAD RET AINING THE ADDITION 11 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 OF RS. 2,40,000/- ON ACCOUNT OF PROFITS EARNED OUTS IDE THE BOOKS OF ACCOUNT. IN ITS CROSS OBJECTION, BY WAY OF GROUND NO. 2, ASSESSEE HAS ASSAILED THE ACTION OF THE CIT(A) IN RETAINING THE ADDITION OF RS. 2,40,000/-. THE CROSS GROUNDS BEING ON THE SAME IS SUE ARE BEING CONSIDERED FOR ADJUDICATION TOGETHER. 12. IN THIS CONTEXT, BRIEF FACTS ARE THAT IT WAS NO TICED BY THE ASSESSING OFFICER THAT ONE OF THE PARTNERS SHRI O.P . AGARWAL HAD WITHDRAWN AND THEN RE-INTRODUCED CAPITAL OF RS. 23, 91,925/- DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICE R REQUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE DEPOSITS MADE IN THE CAPITAL ACCOUNT DURING THE YEAR WHICH WERE EXPLAINED BY THE ASSESSEE AS MERE RE-DEPOSIT OF THE AMOUNTS EARLIER WITHDRAWN FR OM THE FIRM BY SUCH PARTNER. THE ASSESSING OFFICER WAS NOT SATISF IED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE AND ACCORDING LY TREATED A SUM OF RS. 23,91,925/- AS UNEXPLAINED CREDIT ASSESS ABLE U/S 68 OF THE ACT. THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT IT HAD GIVEN ADEQUATE EXPLANATION WITH REGARD TO CREDITS IN QUES TION. THE ASSESSEE POINTED OUT THAT SUCH AMOUNTS WERE WITHDRA WN PARTLY FOR USE IN THE SEASONAL BUSINESS CARRIED ON BY THE PART NER AND ALSO FOR SAFE CUSTODY. THE CIT(A) HAS ACCEPTED THE PLEA OF THE ASSESSEE THAT THE AMOUNTS RE-INTRODUCED IN THE CAPITAL ACCOU NT WERE OUT OF THE AMOUNTS EARLIER WITHDRAWN BY THE PARTNER FROM THE F IRM. SO HOWEVER, THE CIT(A) NOTICED THAT ONE OF THE REASONS FOR WITH DRAWAL OF THE AMOUNTS FROM THE FIRM WAS THE USE OF SUCH FUNDS MAD E BY THE PARTNER IN HIS SEASONAL BUSINESS. THUS, THE CIT(A) HELD THAT THE PARTNER WOULD HAVE EARNED PROFIT ON UTILIZATION OF SUCH FUNDS WHICH BELONGED TO THE ASSESSEE-FIRM AND THEREFORE, 10% OF SUCH FUND WAS TREATED TO BE INCOME ATTRIBUTABLE TO SUCH FUNDS UTI LIZED OUTSIDE THE BOOKS OF ACCOUNT, AND ACCORDINGLY, AN AMOUNT OF RS. 2,40,000/- WAS DIRECTED TO BE ADDED ON THIS COUNT. 12 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 13. IN THIS BACKGROUND, THE LEARNED DR POINTED OUT THAT THE ASSESSING OFFICER HAS NOTED THAT CASH WAS WITHDRAWN FOR PERSONAL USE ALSO APART FOR SEASONABLE BUSINESS OF THE PARTN ER AND FOR SAFE CUSTODY WITH THE PARTNER. IT WAS POINTED OUT THAT THE AMOUNTS USED FOR PERSONAL PURPOSES COULD NOT HAVE BEEN AVAILABLE FOR RE- INTRODUCTION IN THE CAPITAL ACCOUNT AND THEREFORE, THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION SO RENDERED. THE ACTION OF THE ASSESSING OFFICER IN TREATING THE ENTIRE AMOUNT OF RS. 23,91,925/- AS UNEXPLAINED EXPENDITURE U/S 68 OF THE ACT WAS SOUGH T TO BE JUSTIFIED IN THIS MANNER. 14. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BEFORE THE CIT(A) IT WAS SPECIFICALL Y POINTED OUT THAT THE SAID PARTNER HAD SEPARATELY WITHDRAWN RS. 8,86, 046/- BY CHEQUE AND RS. 3,83,000/- IN CASH FROM THE ASSESSEE-FIRM W HICH TOOK CARE OF PERSONAL AND HOUSEHOLD EXPENSES AND THEREFORE, THE SAME WOULD NOT AFFECT THE EXPLANATION RENDERED BY THE ASSESSEE WIT H REGARD TO THE SOURCE OF RE-INTRODUCTION OF CAPITAL TO THE TUNE OF RS. 23,91,925/-. 15. ON THIS ASPECT, WE FIND THAT THE CIT(A) HAS RIG HTLY OBSERVED THAT THERE IS NO MATERIAL WITH THE ASSESSING OFFICE R TO HOLD THAT THE AMOUNTS WITHDRAWN BY THE PARTNER WERE NOT RE-INTROD UCED AS CAPITAL INTO THE FIRM. THE CIT(A) HAS DEDUCED THAT EARLIER WITHDRAWALS MADE BY THE PARTNER FROM THE CAPITAL ACCOUNT CLEARLY SH OW THAT SUCH AMOUNTS WERE AVAILABLE WITH THE CONCERNED PARTNER T O RE-DEPOSIT THE SAME AS CAPITAL IN THE ASSESSEE-FIRM. THE PLEA OF THE LEARNED DR TO THE EFFECT THAT PART OF THE WITHDRAWALS WERE USED F OR PERSONAL/HOUSEHOLD EXPENDITURE AND THEREFORE, WAS N OT AVAILABLE FOR RE-INTRODUCTION IS ALSO NOT TENABLE IN VIEW OF THE EXPLANATION RENDERED BY THE ASSESSEE IN THIS REGARD. THE ASSES SEES 13 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 EXPLANATION HAS BEEN RECORDED BY THE CIT(A) AT PAGE 15 OF HIS ORDER WHICH DEMONSTRATES THAT THE CONCERNED PARTNER HAD S EPARATELY WITHDRAWN AMOUNTS TO MEET HIS PERSONAL/HOUSEHOLD EX PENDITURE. MOREOVER, AT THE TIME OF HEARING, THE LEARNED COUNS EL EXPLAINED BEFORE US THAT THE INDIVIDUAL PARTNER CONCERNED SHR I O.P. AGARWAL HAD SEASONABLE BUSINESS OF SALE AND PURCHASE OF FIR E CRACKERS AND THAT SUCH AMOUNTS WERE WITHDRAWN FROM HIS CAPITAL A CCOUNT WITH THE FIRM FOR USE IN SUCH SEASONAL BUSINESS. IN THIS CO NTEXT IT WAS ALSO POINTED OUT THAT IMMEDIATELY AFTER ENDING OF SEASON AL BUSINESS IN OCTOBER 2000, THE AMOUNTS HAVE BEEN RE-INTRODUCED A S CAPITAL IN THE MONTH OF NOVEMBER/DECEMBER 2000. CONSIDERING THE T OTALITY OF THE CIRCUMSTANCES, WE THEREFORE, FIND THAT THE CIT(A) M ADE NO MISTAKE IN HOLDING THAT THE ADDITION OF RS. 23,91,925/- MADE B Y THE ASSESSING OFFICER INVOKING SECTION 68 OF THE ACT IS UNSUSTAIN ABLE. 16. NOW WE MAY TAKE UP THE ADDITION OF RS. 2,40,000 /- RETAINED BY THE CIT(A). AS PER THE ICIT(A) THE AMOUNTS WITHDRA WN BY THE PARTNER FROM HIS CAPITAL ACCOUNT WERE UTILIZED FOR SEASONAL BUSINESS WHICH YIELDED INCOME IN THE HANDS OF THE PARTNER. HE HAS ESTIMATED SUCH INCOME AT RS. 2,40,000/- AND ADDED THE SAME IN THE HANDS OF ASSESSEE-FIRM AS PROFITS EARNED OUTSIDE THE BOOKS O F ACCOUNT. 17. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUB MITTED THAT THE IMPUGNED ADDITION IS UNSUSTAINABLE, INASMUCH AS IT IS ABUNDANTLY CLEARLY THAT EVEN IF SUCH AMOUNT HAS BEEN EARNED FR OM SEASONAL BUSINESS, THE SAME IS NOT ASSESSABLE IN THE HANDS O F ASSESSEE-FIRM, INASMUCH AS SUCH SEASONAL BUSINESS BELONGED ONLY TO THE INDIVIDUAL PARTNER CONCERNED AND WAS CARRIED OUT BY HIM IN HIS INDIVIDUAL CAPACITY. THE ASSESSEE-FIRM THEREFORE, COULD NOT BE SUBJECTED TO TAX ON SUCH INCOME, EVEN IF THE CIT(A) WAS CORRECT IN ESTIMATING SUCH INCOME. 14 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 18. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE HAS JUSTIFIED THE ACTION OF THE CIT(A). 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. OSTENSIBLY, THE CIT(A) HAS MIS-DIRECTED HIMSELF IN DIRECTING THE ASSESSING OFFICER TO MAKE AN ADDITION OF RS. 2,40,0 00/- IN THE HANDS OF ASSESSEE-FIRM ON ACCOUNT OF PROFITS EARNED BY P ARTNER SHRI O.P. AGARWAL IN HIS INDIVIDUAL BUSINESS. IN THE ABSENCE OF ANY MATERIAL ON RECORD, WE ARE UNABLE TO UPHOLD THE CONCLUSION O F THE CIT(A) THAT SUCH PROFITS HAVE BEEN EARNED BY THE ASSESSEE-FIRM. THE ADDITION SOUGHT TO BE MADE OUT BY THE CIT(A), IN OUR VIEW, I S BASED ON MERE SURMISES AND CONJECTURES. THE SAME IS HEREBY DIREC TED TO BE DELETED. THE ASSESSEE SUCCEEDS ON THIS GROUND. RESU LTANTLY, GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED WHILE GROU ND NO. 2 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS ALLOWED. 20. NOW, WE MAY TAKE UP GROUND NO. 3 RAISED BY THE REVENUE WHICH IS AGAINST THE ACTION OF THE CIT(A) IN DELETI NG THE ADDITION OF RS. 7,95,100/-. IN THIS REGARD, BRIEF FACTS ARE TH AT WHILE EXAMINING THE DETAILS OF SALES OF VARIOUS FLATS IN THE PROJEC T AVISHKAR GARDENS A BUILDING MADE BY THE ASSESSEE, THE ASSESSING OF FICER FOUND THAT THERE WAS A HUGE VARIATION IN THE SALE RATES IN RES PECT OF DIFFERENT UNITS SOLD. THE ASSESSING OFFICER NOTICED THAT WIT HIN THE SAME FINANCIAL YEAR, ASSESSEE HAD SOLD UNITS WITH VARYIN G RATES, THOUGH SOME OF THE UNITS WERE IDENTICAL IN AREA, SPECIFICA TIONS, AMENITIES, ETC. THE ASSESSEE FURNISHED EXPLANATION WHICH WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. AS PER THE AS SESSING OFFICER, IN ORDER TO ACCOMMODATE BUYERS, ASSESSEE MIGHT HAVE ACCEPTED CONSIDERATION IN CASH OVER AND ABOVE THE STATED PRI CE IN THE CASE OF SOME FLATS AND THEREFORE, THERE WAS A CASE OF SUPPR ESSION IN SALES. 15 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 AN ADDITION OF RS. 7,95,100/- HAS BEEN MADE BY THE ASSESSING OFFICER ON THIS COUNT. THE CIT(A) HAS SINCE DELETE D THE ADDITION PRIMARILY ON THE GROUND THAT THERE IS NO EVIDENCE T O SHOW SUPPRESSION OF SALES BY THE ASSESSEE. 21. AGAINST THE AFORESAID, THE LEARNED DR POINTED O UT THAT THE VARIATION IN THE SELLING PRICE OF DIFFERENT UNITS S OLD DURING THE SAME FINANCIAL YEAR REFLECTED THAT IN SOME CASES, ASSESS EE HAD RECEIVED SALE CONSIDERATION IN CASH WHICH WAS NOT DECLARED I N THE REGULAR BOOKS OF ACCOUNT. ON THIS BASIS, THE ACTION OF THE CIT(A) HAS SOUGHT TO BE NEGATED. ON THE OTHER HAND, THE LEARNED REPR ESENTATIVE FOR THE ASSESSEE HAS SUPPORTED THE ORDER OF THE CIT(A) FOR THE REASONS CONTAINED THEREIN. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFF ICER HAS INFERRED SUPPRESSION OF SALES BY THE ASSESSEE PRIMARILY FOR THE REASON THAT THERE WAS VARIATION IN THE SELLING RATES OF FLATS S OLD TO DIFFERENT CUSTOMERS WITHIN THE SAME FINANCIAL YEAR. NO DOUBT , THE VARIATION IN SELLING RATES RAISES A DOUBT, SO HOWEVER, IT WAS FO R THE ASSESSING OFFICER THEREUPON TO DEMONSTRATE ON THE BASIS OF FU RTHER VERIFICATION AND EVIDENCE THAT THERE WAS SUPPRESSION OF SALES. THE VARIATION IN SALE RATES BY ITSELF CANNOT BE A GROUND IPSO FACTO TO INFER SUPPRESSION OF SALES ON THE PART OF THE ASSESSEE. T HE CIT(A) HAS NOTED THAT THE ASSESSING OFFICER NEITHER CONFRONTED THE CONCERNED CUSTOMERS NOR ANY OTHER MATERIAL IS BROUGHT ON RECO RD TO SHOW THAT ANY CONSIDERATION WAS RECEIVED BY THE ASSESSEE OUTS IDE THE BOOKS OF ACCOUNT IN ORDER TO ACCOMMODATE THE BUYERS. IN OUR CONSIDERED OPINION, THE CIT(A) HAS CORRECTLY APPRECIATED THE P OSITION AND ADDITION HAS RIGHTLY BEEN DELETED BY HIM IN THE ABS ENCE OF ANY TANGIBLE MATERIAL OF SUPPRESSION OF SALES ON THE PA RT OF THE 16 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 ASSESSEE. AS A RESULT, WE AFFIRM THE ORDER OF THE C IT(A) AND ACCORDINGLY, GROUND OF REVENUE IS DISMISSED. 23. NOW, WE MAY TAKE UP THE REMAINING GROUNDS IN TH E CROSS OBJECTION PREFERRED BY THE ASSESSEE. GROUND NO. 3 I S WITH REGARD TO DISALLOWANCE OF INTEREST ON LOAN OF M/S. BUILD INDI A AMOUNTING TO RS. 84,908/-. IN THIS CONNECTION, BRIEF FACTS ARE THAT ASSESSEE INCURRED AN EXPENDITURE ON INTEREST OF RS. 84,908/- WHICH PE RTAINED TO CASH CREDIT FACILITIES ENJOYED FROM THE BANK BY THE ASSE SSEES SISTER CONCERN M/S. BUILD INDIA. THE ASSESSING OFFICER DI SALLOWED THE EXPENDITURE ON THE GROUND THAT THE CREDIT FACILITIE S WITH THE BANK BELONGED TO ITS SISTER CONCERN M/S. BUILD INDIA AND NOT TO THE ASSESSEE. THE CIT(A) HAS ALSO SUSTAINED THE DISAL LOWANCE, AGAINST WHICH THE ASSESSEE IS IN CROSS OBJECTION BEFORE US. 24. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THOUGH THE CREDIT FACILITIES ADVANCED BY THE B ANK WAS IN THE NAME OF SISTER CONCERN M/S. BUILD INDIA, SO HOWEVER , THE ASSESSEE HAD UTILIZED THE SAME FOR THE PURPOSES OF ITS BUSIN ESS AND THEREFORE, THE EXPENDITURE WAS ALLOWABLE IN THE HANDS OF THE A SSESSEE. IT WAS POINTED OUT THAT THE SISTER CONCERN WAS ENGAGED IN CIVIL CONSTRUCTION BUSINESS FOR GOVERNMENT DEPARTMENTS AND HAD SUSPEND ED ALL ITS ACTIVITIES IN THE FINANCIAL YEAR 1994-95. THE SIST ER CONCERN CONTINUED TO ENJOY THE CREDIT FACILITIES WITH THE B ANK AND WAS UNDERTAKING CONSTRUCTION WORK OF ASSESSEES CLIENTS AND THEREFORE, THE AMOUNT OF INTEREST ON THE CREDIT FACILITIES TAK EN FROM THE BANK WAS DEBITED TO ASSESSEES ACCOUNT. THE ASSESSEE BO RE THIS EXPENDITURE, INASMUCH AS, THE CREDIT FACILITIES FRO M THE BANK WERE BEING USED FOR THE PURPOSE OF CONSTRUCTION WORK OF ASSESSEES CLIENTS. IT WAS POINTED OUT THAT THE CLAIM HAS BEE N DISALLOWED BY THE LOWER AUTHORITIES BY DIS-REGARDING ASSERTIONS MADE BY THE ASSESSEE. 17 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 25. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE CIT(A) HAS DISALLOWED THE CLAIM ON THE GROUND THAT THERE WAS NO PROOF FILED THAT THE FUNDS IN THE CASH CREDIT ACCOU NT OF M/S. BUILD INDIA WERE UTILIZED BY THE ASSESSEE. 26. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR VIEW, THE IMPUGNED EXPENDITURE CANNOT BE DISALLOWED MERELY BECAUSE THE CREDIT FACILITIES ADVANCED BY THE BANK WERE IN THE NAME OF SISTER CONCERN. THE ASSESSEE ASSERTED THAT THE CASH CREDIT FACILITIES FROM THE BANK STANDING IN THE NAME OF SI STER CONCERN WERE BEING USED FOR THE PURPOSE OF CONSTRUCTION WORK OF ASSESSEES CLIENTS AND THEREFORE, THE SISTER CONCERN CLAIMED T HE LIABILITY FROM THE ASSESSEE FOR THE CORRESPONDING INTEREST PAYABLE TO THE BANK. THE CLAIM HAS BEEN NEGATED IN THE ABSENCE OF ANY PROOF THAT THE FUNDS WERE UTILIZED BY THE ASSESSEE. IN OUR CONSIDERED O PINION, ON THIS ASPECT, THE LEARNED COUNSEL POINTED OUT THAT THE EN TIRE MATERIAL WAS PLACED BEFORE THE LOWER AUTHORITIES AND NO FURTHER QUERY WAS RAISED SO AS TO PROVE UTILIZATION OF FUNDS BY THE ASSESSEE . BE THAT AS IT MAY, WE DEEM IT FIT AND PROPER THAT THE MATTER BE R E-EXAMINED BY THE ASSESSING OFFICER. IF THE ASSESSING OFFICER FINDS THAT THE FUNDS OUT OF CASH CREDIT FACILITIES ADVANCED BY THE BANK IN T HE NAME OF M/S BUILD INDIA HAVE BEEN UTILIZED IN THE BUSINESS OF THE ASSESSEE, SUCH EXPENDITURE BE ALLOWED. HOWEVER, IF THE FINDING IS TO THE CONTRARY, THE THE ASSESSING OFFICER SHALL BE FREE TO PROCEED IN ACCORDANCE WITH LAW. FOR THE AFORESAID LIMITED PURPOSE, WE THEREFO RE, REMIT THE MATTER BACK TO THE ASSESSING OFFICER WHO SHALL ALLO W ASSESSEE AN OPPORTUNITY TO PUTFORTH RELEVANT MATERIAL AND EVIDE NCE AND THEREAFTER ADJUDICATE AFRESH AS PER OUR DIRECTIONS. ON THIS G ROUND, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 18 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 27. LAST GROUND IN THE CROSS OBJECTION WITH REGARD TO DISALLOWANCE OF RS. 61,050/-. IN THIS REGARD, BRIE F FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE ADVANCED AN AMOUNT OF RS . 6,17,919/- ON VARIOUS DATES DURING THE YEAR UNDER CONSIDERATIO N TO ITS SISTER CONCERN, VIZ. M/S. BUILD INDIA. THE ASSESSEE WAS R EQUIRED TO SHOW AS TO WHY NO INTEREST WAS CHARGED ON IT. IN THE ABS ENCE OF ANY EXPLANATION, THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 61,050/- AS PROPORTIONATE INTEREST EXPENDITURE ON FUNDS NOT UTILIZED FOR ASSESSEES BUSINESS PURPOSES. THE CIT(A) HAS ALSO SUSTAINED THE ADDITION. 28. BEFORE US, THE ONLY PLEA RAISED BY THE ASSESSEE IS THAT THE ASSESSEE HAD ADEQUATE NON-INTEREST BEARING FUNDS, V IZ. CAPITAL FUNDS OF PARTNERS, OUT OF WHICH SUCH AMOUNTS CAN BE CONSIDERED TO HAVE BEEN ADVANCED TO THE SISTER CONCERN. THEREFOR E, IT IS SOUGHT TO BE MADE OUT THAT THE DISALLOWANCE HAS BEEN MADE ON A WRONG CONSIDERATION. ON THE OTHER HAND, THE LEARNED DR H AS DEFENDED THE ORDER OF LOWER AUTHORITIES BY PLACING RELIANCE ON T HE SAME. 29. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR CONSIDERED OPINION, SAID ADDITION DESERVES TO BE UP HELD, INASMUCH AS BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD N OT DEMONSTRATED ANY BUSINESS PURPOSE FOR ADVANCING SUCH FUNDS. MOR EOVER, THE CIT(A) IN PARA 7.4 OF HIS ORDER RECORDS THAT THE AS SESSEE HAS ALSO NOT SHOWN THAT THE ADVANCES HAD BEEN MADE OUT OF IT S OWN FUNDS. FOR THE AFORESAID REASONS, WE FIND THAT THE DISALLO WANCE HAS BEEN RIGHTLY MADE BY THE LOWER AUTHORITIES WHICH WE HERE BY AFFIRM. THUS ON THIS GROUND, ASSESSEE FAILS. 19 ITA NO 1156/PN/08 AND CO 08/PN/09 AVISHKAR BUI LDERS A.Y. 2001-02 30. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHILE THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2012. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 31 ST OCTOBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A)-II, PUNE 4. THE CIT-III, PUNE 5. THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T. A.T., PUNE. BY ORDER SR. P.S. I.T.A.T., PUNE