M/s. PMS Diesels, Phagwara V. The Income-tax Officer, Phagwara

ITA 118/ASR/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7846 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Rejection of books of accounts; Depreciation; Search and seizure; Period of limitation; Additional evidence; Question of law; Non-deduction of tax; Corroborative evidences; Deemed dividend; Notional interest; Time period of passing order
• Section: 69C; 40A(3); 143(3); 194C; 201(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO.114/(ASR)/2014 ASSESSMENT YEAR: 2006-07 PAN: AAAFP9505H [ M/S PMS DIESELS, VILLAGE : JAMALPUR, G.T. ROAD, PHAGWARA. VS. ADDL. C. I. T. PHAGWARA RANGE; PHAGWARA. (APPELLANT) (RESPONDENT) I.T.A NO.116/(ASR)/2014 ASSESSMENT YEAR: 2007-08 PAN: AAAFP9505H [ M/S PMS DIESELS, VILLAGE : JAMALPUR, G.T. ROAD, PHAGWARA. VS. DY. C. I. T. PHAGWARA CIRCLE, PHAGWARA. (APPELLANT) (RESPONDENT) I.T.A NO.117/(ASR)/2014 ASSESSMENT YEAR: 2008-09 PAN: AAAFP-9505-H [ M/S PMS DIESELS, VILLAGE : JAMALPUR, G.T. ROAD, PHAGWARA. VS. INCOME TAX OFFICER, WARD-3, PHAGWARA. (APPELLANT) (RESPONDENT) I.T.A NO.118/(ASR)/2014 ASSESSMENT YEAR: 2009-10 PAN: AAAFP9505H [ M/S PMS DIESELS, VILLAGE : JAMALPUR, G.T. ROAD, PHAGWARA. VS. INCOME TAX OFFICER, WARD-3, PHAGWARA. (APPELLANT) (RESPONDENT) ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 2 I.T.A NO.214, 216 & 217/(ASR)/2014 ASSESSMENT YEARS: 2006-07, 2007-08 & 2008-09 PAN: AAAFP9505H [ D.C.I.T, PHAGWARA CIRCLE, PHAGWARA. VS. M/S PMS DIESELS, VILLAGE : JAMALPUR, G.T. ROAD, PHAGWARA (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARUN BANSAL ( ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (D.R.) DATE OF HEARING: 02.08.2017 DATE OF PRONOUNCEMENT: 30.08.201 7 ORDER PER T. S. KAPOOR (AM): THESE ARE SEVEN APPEALS FILED BY ASSESSEE AS WELL A S REVENUE FOR THE ASST. YEARS 2006-07 TO ASST. YEARS 2009-10. THESE A PPEALS WERE HEARD TOGETHER AND SOME COMMON ISSUES ARE INVOLVED IN THE SE APPEALS AND, THEREFORE, FOR THE SAKE OF CONVENIENCE, A COMMON AN D CONSOLIDATED ORDER IS BEING PASSED. 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE AS WELL AS BY THE REVENUE ARE REPRODUCED BELOW: GROUNDS OF APPEAL IN ITA NO. 114/ASR/2014 1. THAT THE ORDER OF THE CIT(A) TO THE EXTENT UPHOLDI NG THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW HAD THEREIN ERRED IN UPHOLD ING DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT ON ADVANCES MA DE BY THE ASSESSEE ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 3 FIRM TO SH. RAJESH KUMAR, SH. SATPAL SETHI, M/S FIN E SWITCH GEARS, SH. SOHAN LAL, SMT. MAYA DEVI EDUCATI ONAL SOCIETY, M/S AROMA ENGG. CORPN. AND M/S BAPU JEWELLERS. 3. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW HAD ERRED IN UPHOLDING DISA LLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT ON ADVANCES MADE BY THE ASSESSEE FIRM TO ITS SISTER CONCERNS, NAMELY M/S STAR TRADING CO., M/S PMS ENTERPRISES AND M/S SAHDEV ENTERPRISES, SPECIFICALLY WHEN THE S AME WERE PROMPTED BY COMMERCIAL EXPENDIENCY. 4. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW HAD WRONGLY UPHELD THE ADDI TION AGGREGATING TO RS. 11,58,963/- MADE BY THE ASSESSING OFFICER U/ S 41(1) OF THE ACT ON THE GROUND OF ALLEGED CESSATION OF LIABILI TY PERTAINING TO THE FOLLOWING PARTIES :- (I) M/S EL MARWA IMPORT AND TRADING CO., CAIRO : RS.6,15,095/- (II) M/S KHYATI MACHINE TOOLS : RS.66,060/- (III) SH. M.N. PATEL : RS.2,48,600/- (IV) M/S S.R. FORGINGS : RS.2,29,2 08/- 5. THE CIT(A) MISCONCEIVING THE FACTS OF THE CASE AND RATHER MOST ARBITRARILY BRUSHING ASIDE THE VERY FACT THAT THE G .P. RATE FOR THE YEAR UNDER CONSIDERATION WAS SUBSTANTIALLY PROGRESSIVE A S IN COMPARISON TO THAT OF THE PRECEDING YEARS HAD UPHELD THE TRAD ING ADDITION OF RS.4,73,392/- SO MADE BY THE ASSESSING OFFICER IN T HE HANDS OF THE ASSESSEE FIRM. 6. THE CIT(A) HAD THOUGH DELETED THE ADDITION OF RS.1, 62,842/- ON THE GROUND THAT THE SAME WOULD BE COVERED BY THE TRADI NG ADDITION WHICH HAD BEEN SUSTAINED BY HIM, HAD HOWEVER GROSSL Y ERRED IN FAILING TO INDEPENDENTLY ADJUDICATE THE SAID ISSUE WHICH WAS SPECIFICALLY CHALLENGED BY THE ASSESSEE ON MERITS B EFORE HIM. 7. THAT THE CIT(A) HAD ERRED IN LAW AND FACTS OF THE C ASE BY FAILING TO APPRECIATE THAT THE DISALLOWANCE U/S 40(A)(IA) OF T HE ACT WAS LIABLE TOT BE RESTRICTED ONLY WITH RESPECT TO THE AMOUNTS AS WERE FOUND PAYABLE IN THE BALANCE SHEET PERTAINING TO THE YEAR UNDER CONSIDERATION. 8. THAT THE CIT(A) HAD GRAVELY ERRED IN LAW AND FACTS OF THE CASE IN SUSTAINING THE DISALLOWANCE U/S 40(A)(IA) OF THE A CT WITH RESPECT TO PAYMENTS AGGREGATING TO RS.7,27,908/- MADE BY THE A SSESSEE FIRM TO THE SHIPPING AGENTS TOWARDS IHC, THC, BAF & CAF C HARGES, FAILING TO APPRECIATE THAT NO TDS WAS REQUIRED TO BE DEDUCT ED ON THE SAID AMOUNTS U/S 172(8) OF THE ACT. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 4 9. THAT THE CIT(A) HAD ERRED IN LAW AND FACTS OF THE C ASE IN UPHOLDING THE ADDITION OF RS.21,000/- SO MADE BY THE ASSESSIN G OFFICER U/S 40A(3) OF THE ACT. 10. ANY OTHER GROUND OF APPEAL AS MAY BE ALLOWED TO BE RAISED AT THE TIME OF HEARING OF THE APPEAL. GROUNDS OF APPEAL IN ITA NO. 116/ASR/2014 1. THAT THE ORDER OF THE CIT(A) TO THE EXTENT UPHOL DING THE ADDITION MADE BY THE ASSESSING OFFICER IS AGAINST LAW AND FA CTS OF THE CASE. 2. THAT THE CIT(A) FAILING TO APPRECIATE THE FACT S OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW HAD WRONGLY UPHELD THE DISA LLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT AMOUNTING TO R S.4,95,560/- 3. THAT THE CIT(A) FAILING TO APPRECIATE THE FACT S OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW HAD THEREIN ERRED IN SUSTAI NING THE DISALLOWANCE OF RS.98,660/- MADE BY THE ASSESSING O FFICER U/S 40(A)(IA) ACT. 4. ANY OTHER GROUND OF APPEAL AS MAY BE ALLOWED TO BE RAISED AT THE TIME OF HEARING OF THE APPEAL. GROUNDS OF APPEAL IN ITA NO. 117/ASR/2014 1. THAT THE ORDER OF THE CIT(A) TO THE EXTENT UPHOLDI NG THE ADDITIONS MADE BY THE ASSESSING OFFICER IS AGAINST THE LAW AN D FACTS OF THE CASE. 2. THAT THE CIT(A) HAD ON THE BASIS OF MISCONCEIVED FA CTS WRONGLY UPHELD THE ADDITIONS OF RS.3,82,113/- IN THE HANDS OF THE ASSESSEE FIRM. 3. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW AND THEREIN ERRED IN UP HOLDING DISALLOWANCE OF INTEREST ON ADVANCES OF RS.59,43,78 2/- 4. THAT THE CIT(A) WHILE DIRECTING THE ASSESSING OF FICER TO ALSO DISALLOW INTEREST ON AMOUNTS AGGREGATING TO RS.24,0 8,050/- ON ADVANCES MADE TO SH. RAJESH KUMAR, SMT. MAYA DEVI EDUCATIONAL SOCIETY AND SH. SOHAN LAL, HAD EXCEEDED HIS POWERS AND ENHANCED THE INCOME OF THE ASSESSEE FIRM WITHOU T AFFORDING ANY OPPORTUNITY TO THE LATTER, AS STATUTORILY REQUI RED U/S 251(2) OF THE ACT. 5. ANY OTHER GROUND OF APPEAL AS MAY BE ALLOWED TO BE RAISED AT THE TIME OF HEARING OF THE APPEAL. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 5 GROUNDS OF APPEAL IN ITA NO. 118/ASR/2014 1. THAT THE ORDER OF THE CIT(A) TO THE EXTENT UPHOLDI NG THE ADDITIONS MADE BY THE ASSESSING OFFICER IS AGAINST THE LAW AN D FACTS OF THE CASE. 2. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE IN LIGHT OF THE SETTLED POSITION OF LAW AND THEREIN ERRED IN UPHOLD ING DISALLOWANCE OF INTEREST ON ADVANCES MADE TO M/S RAJESH JEWELLERS, SH. RAJESH KUMAR, SMT. MAYA DEVI EDUCATIONAL SOCIETY, SH. SOHA N LAL, M/S PMS ENTERPRISES, SH. BALWINDER KAUR AND M/S S.R. FORGIN GS. 3. THAT THE CIT(A) HAD ERRED IN SUSTAINING THE DISALLO WANCE OF 1/10 TH OF THE VEHICLE EXPENSES AMOUNTING TO RS.1,18,225/-. 4. THAT THE CIT(A) HAD ERRED IN UPHOLDING THE ADDITION OF RS.10,319/- MADE BY THE ASSESSING OFFICER IN THE HANDS OF THE A SSESSEE FIRM. 5. ANY OTHER GROUND OF APPEAL AS MAY BE ALLOWED TO BE RAISED AT THE TIME OF HEARING OF THE APPEAL. GROUNDS OF APPEAL IN ITA NO. 214/ASR/2014 1. DELETING THE ADDITION OF RS.39,64,344/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961 AND HELD THAT DEEMED DIVIDEND CAN ONLY BE CONSIDERED IN THE HANDS OF A SHAREHOLDER. THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE FIRM HAS TO BE TREATED AS THE SHAREH OLDER EVEN THOUGH IT IS NOT THE REGISTERED SHAREHOLDER FOR THE PURP OSE OF SECTION 2(22)(E) OF THE I.T. ACT, 1961 IN VIEW OF DELHI HIG H COURT JUDGMENT IN THE CASE OF CIT VS. M/S NATIONAL TRAVEL SERVICES. 2. DELETING THE ADDITION OF RS.3,61,074/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCES U/S 36(1)(III) OF THE I NCOME TAX ACT, 1961, AS DIRECTED TO RECALCULATE THE DISALLOWANCES AT THE RATE AT WHICH THE ASSESSEE FIRM IS PAYING INTEREST. 3. DELETING THE ADDITION OF RS.1,93,71,054/- MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY U/S 41 (1) OF THE INCOME TAX ACT, 1961. ASSESSING OFFICER HAS BROUGHT ON RECORD THAT THE LIABILITIES WERE BOGUS AND ASSESSEE FAILED TO SUBSTANTIATE WITH EVIDENCE. 4. DELETING THE ADDITION OF RS.1,62,842/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED VOUCHER FOR EXPENSES AS T HESE EXPANSES HAVE NOT BEEN FOUND TO BE BOOKED IN THE REGULAR BOO KS OF ACCOUNTS. 5. DELETING THE ADDITION OF RS.3,13,400/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSES U/S 40(A)(IA ) OF THE INCOME TAX ACT, 1961, THOUGH DURING APPELLATE PROCEEDINGS THE COUNSEL FOR THE ASSESSEE ADMITS DEFAULTS FOR NON DEDUCTIONS OF TDS. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 6 6. IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET-ASIDE A ND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. THE APPELLANT REQUEST FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED O FF. GROUNDS OF APPEAL IN ITA NO. 216/ASR/2014 1. DELETING THE ADDITION OF RS.14,25,204/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961 AND HELD THAT DEEMED DIVIDEND CAN BE MADE ONLY BE CONSIDERED IN THE HANDS OF A SHAREHOLDER. THE LD. C IT(A) HAS NOT APPRECIATED THE FACT THAT THE FIRM HAS TO BE TREATE D AS THE SHAREHOLDER EVEN THOUGH IT IS NOT THE REGISTERED SHAREHOLDER FOR THE PURPOSE OF SECTION 2(22)(E) OF THE I.T. ACT, 19 61 IN VIEW OF DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. M/S NATI ONAL TRAVEL SERVICES DATED 01.10.2011. 2. DELETING THE ADDITION OF RS.4,95,560/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCES U/S 36(1)(III) OF THE I NCOME TAX ACT, 1961, AS DIRECTED TO RECALCULATE THE DISALLOWANCES AT THE RATE AT WHICH THE ASSESSEE FIRM IS PAYING INTEREST. 3. DELETING THE ADDITION OF RS.46,11,381/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON CHARGING ON INTEREST ON L OANS TO SISTER CONCERNS IGNORING THE DECISION OF JURISDICTIONAL HI GH COURT IN THE CASE OF ABHISHEK INDUSTRIES REPORTED AT 286 ITR 1. 4. IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) BE SET-ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED. 5. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED O FF. GROUNDS OF APPEAL IN ITA NO. 217/ASR/2014 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION OF RS.18,85,177/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF NOTIONAL INTEREST CHARGEABLE ON INTEREST FREE LO ANS AND ADVANCES TO SISTER CONCERNS IGNORING THE DECISION OF JURISDICTI ONAL HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES REPORTED AT 286 ITR 1. 2. IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) BE SET-ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED. 3. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED O FF. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 7 3. AT THE OUTSET, THE LD. AR INVITED OUR ATTENTION TO THE COMMON GROUNDS OF APPEAL IN ALL THESE APPEALS AND INVITED OUR ATTENTION TO A CONSOLIDATED CHART SHOWING THE COMMON GROUNDS OF AP PEAL. 4. THE LD. AR ALSO INVITED OUR ATTENTION TO APPLICA TION FOR RAISING ADDITIONAL GROUNDS OF APPEAL IN ASSESSMENT YEAR 200 6-07 BUT WHICH STOOD WITHDRAWN ON DATED 23.05.2016 AND THEREFORE THE APP LICATION FOR RAISING ADDITIONAL GROUNDS OF APPEAL IN ASST. YEAR 2006-07 IS DISMISSED AS WITHDRAWN. GROUND NO. 1 IN ASSESSEES APPEALS IS GE NERAL IN NATURE AND DO NOT REQUIRE ADJUDICATION. AS REGARDS GROUNDS NO. 2 IN ASSESSMENT YEAR 2006-07, 2007-08 AND 2009-10, RELATING TO DISALLOWA NCE U/S 36(1)(III) OF THE ACT, THE LD. AR SUBMITTED THAT THE LD. CIT(A) H AS CONFIRMED THIS DISALLOWANCE AND WHILE CONFIRMING THE DISALLOWANCE, HE HAS NOT CONSIDERED THE EXCLUSION OF OPENING BALANCES FOR THE PURPOSE O F CALCULATION OF MAKING DISALLOWANCE AND IN THIS RESPECT INVITED OUR ATTENT ION TO SYNOPSIS PAGE 313 WHERE THE DETAILED CALCULATION OF DISALLOWANCE OF U /S 36(1)(III) WAS PLACED. 5. THE LD. AR SUBMITTED THAT AS PER THE DECISION OF HON'BLE. TRIBUNAL IN THE CASE OF ASSESSEE ITSELF IN ITA NO. 425, IT H AS BEEN HELD THAT NO DISALLOWANCE OF INTEREST U/S 36(1)(III) CAN BE MADE FOR OPENING BALANCES. HE SUBMITTED THAT SIMILAR DECISION HAS BEEN MADE BY THE HON'BLE. TRIBUNAL AMRITSAR BENCH IN THE CASE OF DCIT VS. ISH AR INFRASTRUCTURE IN ITA NO. 198/ASR/2013. THE LD. AR FURTHER PLACED HIS RELIANCE ON THE FOLLOWING CASE LAWS: (I) AJAY ELECTRONICS VS. ITO (2016) 52 ITR (TRIB) 3 32 (ASR), ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 8 (II) DCIT VS. SADGURU LAND FINANCE (2016) 52 ITR(T RIB) 182 (ASR) 6. THE LD. AR IN THIS RESPECT ALSO INVITED OUR ATTE NTION TO THE AMOUNT OF CLOSING BALANCES OF VARIOUS ADVANCES ON WHICH SU CH DISALLOWANCE WAS MADE. HE SUBMITTED THAT IF THE OPENING BALANCES ARE REDUCED FROM THESE FIGURES, THE REMAINING AMOUNT REPRESENTING INTEREST FREE ADVANCES WILL BE LESS THAN THE INTEREST FREE CAPITAL AND INTEREST FR EE UNSECURED LOAN AVAILABLE WITH THE ASSESSEE AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK 36 FOR ASST. YEAR 2006-07 WHERE A COPY O F BALANCE SHEET WAS PLACED. THE LD. AR SUBMITTED THAT AS PER THE SETTLE D LAW NO ADDITION CAN BE MADE WHEN INTEREST FREE FUNDS OF THE PARTNERS AR E MORE THAN THE INTEREST FREE ADVANCES AND IN THIS RESPECT PLACED H IS RELIANCE ON THE FOLLOWING CASE LAWS: (I) PMS DIESELS VS. DCIT ITA NO. 425/ASR/2014 DTD. 5.5.17 OWN CASE OF APPELLANT, COPY ENCLOSED AT PAGE 168 TO 172 (II) MBD PRINTOGRAPHICS PVT. LTD. VS. DCIT 61 I .T. REPS 187 (2016) 7 ITR(TRIB) OL 593 (AMRITSAR) ENCLOSED AT PAGE 188 TO 194 (III) MALHOTRA BOOK DEPOT VS. ACIT (2016) 47 CCH 879 ASR TRIB ENCLOSED AT PAGE 195 TO 199 (IV) CIT VS. SATISH BALA MALHOTRA & ORS. (2016) 387 ITR 403 (P & H) ENCLOSED AT PAGE 200 TO 203 (V) CIT VS. MAX INDIA LTD. (NO.2) (2016) 388 ITR 81 (P&H) ENCLOSED AT PAGE 204 TO 215 SIMILARLY, THE LD. AR IN ITA NO. 116/ASR/2014 FOR ASST. YEAR 2007- 08 INVITED OUR ATTENTION PAGE 21 OF SYNOPSIS AND SU BMITTED THAT DURING ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 9 THIS YEAR ALSO THERE WERE OPENING BALANCES AND LD. CIT(A) HAD CONFIRMED THE ADDITION ON THE TOTAL ADVANCES INCLUD ING OPENING BALANCES. THE LD. AR SUBMITTED THAT AFTER REDUCING THE OPENIN G BALANCES, THE TOTAL ADVANCES MADE DURING THE YEAR COMES TO RS.67,62,551 /-. HE SUBMITTED THAT THE CAPITAL AND UNSECURED LOANS WHICH WERE INT EREST FREE BALANCES WAS MORE THAN THIS AMOUNT AND WHICH WAS MORE THAN T HE INTEREST FREE ADVANCES AND THEREFORE IN ASSESSMENT YEAR 2007-08 A LSO THE ADDITION WAS NOT WARRANTED. INVITING OUR ATTENTION TO SIMILAR DI SALLOWANCE IN ASSESSMENT YEAR 2008-09, THE LD. AR SUBMITTED THAT IN THIS YEAR ALSO THERE WERE OPENING BALANCES AND ALSO THE CAPITAL OF THE PARTNERS AND INTEREST FREE LOANS WAS MORE THAN THE INTEREST FREE ADVANCES AND THEREFORE, THE SAME IS ALSO COVERED BY THE VARIOUS CASE LAWS A S CITED IN THE APPEAL IN ITA NO. 114/ASR/2014. COMING TO THE GROUND NO. 2 OF APPEAL OF REVENUE FO R WHICH THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE IN ASSESS MENT YEAR 2006-07 & 2007-08, THE LD. AR SUBMITTED THAT THE LD. CIT(A) H AD DIRECTED THE ASSESSING OFFICER TO MAKE THE DISALLOWANCE U/S 36(1 )(III) OF THE ACT AS THE RATES AT WHICH ASSESSEE HAD PAID INTEREST. 7. LD. AR SUBMITTED THAT NO ADDITION CAN BE MADE WH EN THE INTEREST FREE FUNDS ARE MORE THAN THE INTEREST FREE ADVANCES WHICH HAS ALREADY BEEN HIGHLIGHTED, WHILE ARGUING THE ASSESSEES APPE AL AND THEREFORE THIS GROUND OF APPEAL OF REVENUE WILL BECOME INFRUCTUOUS , IF THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. SIMILARLY HE SUBMITT ED THAT GROUND NO. 1 IN REVENUES APPEAL IN ITA NO. 217 WILL BE COME INFRUC TUOUS IF THE APPEAL OF ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 10 THE ASSESSEE IS DECIDED IN FAVOUR OF ASSESSEE KEEPI NG IN VIEW THE CASE LAWS CITED BY HIM. 8. INVITING OUR ATTENTION TO THE SECOND ISSUE OF AD DITION U/S 41(1) OF THE ACT, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICE R HAD MADE A TOTAL ADDITION OF RS.2,05,30,717/- ON ACCOUNT OF CESSATIO N OF LIABILITY U/S 41(1) OF THE ACT. HE SUBMITTED THAT THE LD. CIT(A) HAS DE LETED A SUBSTANTIAL AMOUNT OF RS.1,93,71,054/- AND HAS CONFIRMED ONLY R S.11,59,663/-. IN THIS RESPECT, THE LD. AR SUBMITTED THAT DETAILED CH ART OF THE ADDITION HAS BEEN MENTIONED BY THE ASSESSING OFFICER AT PAGE 26 OF HIS ORDER. THE LD. AR SUBMITTED THAT AS PER THIS CHART THE BALANCES WE RE OUTSTANDING FROM ASSESSMENT YEARS 2001 ONWARDS AND NONE OF THE AMOUN T WAS RELATING TO THE YEAR UNDER CONSIDERATION. 9. THE LD. AR FURTHER SUBMITTED THAT FEW OF THE ACC OUNTS NOTED AT SERIAL NO. 4 TO 7 WERE ALREADY SQUARED UP BY YEAR E NDING 31.03.2008. THE LD. AR SUBMITTED THAT NO SUCH ADDITION WAS MADE IN THE PRECEDING ASSESSMENT YEAR AND IN THIS RESPECT OUR ATTENTION W AS INVITED TO ASSESSMENT ORDER OF ASSESSMENT YEAR 2005-06 PLACED AT PAPER BOOK PAGE 1 TO 20. THE LD. AR SUBMITTED THAT IF THE ASSESSEE CO NTINUES TO DECLARE THE LIABILITIES IN THE BALANCE SHEET, THE LIABILITY CAN NOT BE SAID TO HAVE EXTINGUISHED. THE LD. AR SUBMITTED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS PVT. LTD. ( 1999) 236 ITR 518(SC) HAS EXPLAINED THE POSITION WITH RESPECT TO CESSATIO N OF LIABILITIES U/S 41(1) OF THE ACT. THEREFORE, THE ADDITION CANNOT BE SUSTA INED AS THE AMOUNTS ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 1 1 WERE BROUGHT FORWARD BALANCES AND FURTHER RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) DCIT VS. SADGURU LAND FIN ANCE (2016) 52 ITR(TRIB) 182, AMRITSAR IMPORTANT PARA 22, PAGE-200 (II) CIT VS. SMT. SITA DEVI JUNEJA (2009) 77 CCH 1104 (PHHC) ALSO SEE PAGE 86 OF CIT(A)S ORDER ENCLOSED AT PAGE 218 TO 220 (III) CIT VS. G.P. INTERNATIONAL LTD. (2009) 77 CCH 1100 (PHHC) ALSO SEE PAGE-87 OF CIT(A)S ORDER ENCLOSED AT PAGE 221 TO 223 (IV) CIT VS. SHRI VARDHMAN OVERSEAS LTD. (2012) 343 ITR 408 (DEL HON'BLE HIGH COURT) COPY ENCLOSE AT PAGE 224 TO 233. (V) CIT VS. BHOGILAL RAMJIBHAI ATARA (2014) 88 CCH 49 (GUJ HON'BLE HIGH COURT) (2014) 222 TAXMAN 313 (GUJ) COPY ENCLOSED AT PAGE 234 TO 237 10. AS REGARDS THE ADDITION OF RS.4,73,392/- WHICH HAS BEEN MADE AS A TRADING ADDITION, THE LD. AR SUBMITTED THAT THE GRO SS PROFIT RATIO DECLARED BY ASSESSEE WAS PROGRESSIVE AS HAS BEEN NOTED BY LD . CIT(A) IN HIS ORDER AT PAGE 97. HE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE G.P. RATE WAS DECLARED AT 13.01% WHICH WAS MORE THA N THE EARLIER YEARS, G.P. RATE OF 11.92% AND 11.03% RESPECTIVELY AND MOR EOVER THE ASSESSING OFFICER U/S 143(3) HAD ACCEPTED 11.03% AS GROSS PRO FITS OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ACTION OF LD. CIT(A) IS NOT CORRECT AS THE GROSS PROFIT WAS PROGRESSIVE AND ASSESSING OFFICER HAD NOT REJECTED THE BOOKS OF ACCOUNTS. RELIANCE IN THIS RESPECT WAS PLA CED ON THE FOLLOWING CASE LAWS: ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 12 (I) SARGAM CINEMA VS. CIT (SC) (2010) 328 ITR 513 (II) SH. DUSHIANT KUMAR VS. ITO ITA NO. 468/ASR/2014 A. Y. 2010-11 (COPY ENCLOSED AT PAGE 295 TO 309 (III) VINOD KUMAR VS. ITO ITA NO. 467/ASR/2014 A. Y. 2010-11 (IV) DCIT VS. HARPREET SINGH GULATI ITA NO. 317/ASR/2013 (V) GANESH DASS PIARA LAL JAIN VS. ITO (2016) 49 ITR(TRIB) 36 (CHD) (VI) CIT VS. BHOLANATH POLY FAB P LTD. (2013) 335 ITR 290 (GUJ) PAGE- 293 (VII) SHAKTI INDUSTRIES (GUJ HON'BLE HIGH COURT) (2013) 36 TAXMANN.COM 16 AS REGARDS THE ADDITION ON ACCOUNT OF UNACCOUNTED VOUCHERS AMOUNTING TO RS.1,62,841/-, THE LD. AR SUBMITTED TH AT THOUGH THE LD. CIT(A) HAD DELETED THE ADDITION BY HOLDING THAT THE ADDITION WAS ALREADY COVERED BY THE TRADING ADDITION BUT HE HAS NOT ADJU DICATED ON THE MERITS OF THIS ADDITION. 11. AS REGARDS THE ADDITION U/S 40(A)(IA) OF THE AC T, THE LD. AR SUBMITTED THAT IN RESPECT OF A FEW PARTIES, THE ASS ESSEE HAD DEPOSITED THE TAX DEDUCTED AT SOURCE BEFORE THE FILLING OF RETURN AND LD. CIT(A) HAD ALLOWED RELIEF TO THE ASSESSEE SUBJECT TO THE CONDI TION THAT ASSESSING OFFICER WILL VERIFY SUCH DEPOSITS OF TAX. THE LD. A R SUBMITTED THAT ASSESSING OFFICER HAD VERIFIED SUCH DEPOSITS AND HA S ALREADY DECIDED THE ISSUE AND HAS GIVEN RELIEF AS PER PAPER BOOK PAGE 92 AND REVENUE HAS NO T FILED ANY APPEAL AGAINST SUCH RELIEF. THE LD. AR SU BMITTED THAT IN RESPECT ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 13 OF OTHER PAYEES THE ASSESSEE HAD DEPOSITED THE TAX IN SUCCEEDING YEAR AND THEREFORE ASSESSEE SHOULD BE GIVEN CREDIT FOR SUCH TAXES PAID IN SUCCEEDING YEAR. IN RESPECT OF OTHER PAYEES THE LD. AR SUBMITTED THAT IN FEW CASES THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T AX AT ALL AS IN SOME CASES THE PAYMENTS DID NOT EXCEED RS.2,0000/-. THE LD. AR SUBMITTED THAT IN SOME CASES THE PAYMENTS WERE MADE AS REIMBU RSEMENTS AND THEREFORE THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T DS IN RESPECT OF SUCH PARTIES. IN THIS RESPECT THE LD. AR INVITED OUR ATT ENTION TO AN ORDER OF HON'BLE ITAT AMRITSAR BENCH IN THE CASE OF ASSESSEE ITSELF IN ITA NO. 257 WHEREIN THE HON'BLE BENCH HAD HELD THAT ASSESSEE WA S NOT REQUIRED TO DEDUCT TAXES IN SUCH CASES. THE LD. AR SUBMITTED THAT THESE PAYMENTS WERE MADE TO SHIPPING AGENTS TOWARDS IFC, THC, BAF, AND CAF CHARGES AND T HE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS AS PER THE PROVISIONS OF 172 (8) OF THE ACT. AS REGARDS DISALLOWANCE U/S 40A(3) IN ASSESSMENT Y EAR 2006-07, THE LD. AR SUBMITTED THAT ABOVE PAYMENT OF RS.21,000/- WAS PAID IN CASH TOWARDS VISA FEE TO UAE EMBASSY AS THE SAID DAY WAS A FRIDAY AND KEEPING IN VIEW THE BUSINESS EXIGENCIES, THE SAID PAYMENTS COULD NOT HAVE BEEN DELAYED. THE SAID PAYMENT BY WAY OF ACCOUNT PAYEE D RAFT AT THAT POINT OF TIME WAS NOT POSSIBLE, AND THAT IS WHY THE ASSESSEE HAD TO MAKE THE PAYMENT OF VISA FEE IN CASH. THE LD. AR SUBMITTED T HAT ASSESSING OFFICER DID NOT RAISE ANY DOUBT ABOUT THE GENUINENESS OF PA YMENT AND PAYEE WAS ALSO IDENTIFIED AND THEREFORE NO DISALLOWANCE U/S 4 0A(3) WAS WARRANTED ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 14 AND IN THIS RESPECT RELIANCE WAS PLACED ON THE CASE LAWS IN ITO VS. DHANSHREE ISPAT 50 CCH 0086 AND IN THE CASE LAW OF GURDAS GARG BY PUNJAB & HARYANA HIGH COURT IN ITA NO. 413/ASR/201 4. WITHOUT PREJUDICE IT WAS SUBMITTED THAT THE FINANCE ACT, 19 95 HAD AMENDED THE SECTION AND WHEREBY THE DISALLOWANCE CAN ONLY BE MA DE UPTO 20% OF SUCH PAYMENT WHICH COMES TO RS.4200/-. AS REGARDS CONFIRMATION OF DISALLOWANCE OF VEHICLE EXPENSES, THE LD. AR SUBMITTED THAT ASSESSING OFFICER HAS MADE DISALL OWANCE AT THE RATE OF 1/5 TH OF DEPRECIATION ON CARS AND PETROL EXPENSES AND WH ICH THE LD. CIT(A) HAS REDUCED TO 1/10 TH WHICH AGAIN IS VERY EXCESSIVE. WITHOUT PREJUDICE I T WAS SUBMITTED THAT THE ADDITION ON ACCOUNT OF DEPRE CIATION ON CARS CAN NOT BE MADE IRRESPECTIVE OF THE FACT AS TO WHETHER THE CAR WAS USED FOR PERSONAL USE OR FOR BUSINESS PURPOSES AND RELIANCE WAS PLACED ON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MUKESH K . SHAH VS. ITO (2004) 23 CCH 0225 MUM TRIB. FOR ADDITION OF OTHER EXPENSE S, THE LD. AR SUBMITTED THAT SUITABLE RELIEF MAY BE GIVEN. AS REGARDS THE ADDITION OF RS.10,319/- ON ACCOUNT O F BALANCE OF BAWA HARDWARE STORE, THE LD. AR SUBMITTED THAT THE AMOUNT OF BAWA HARDWARE STORE HAS ALREADY BEEN TRANSFERRED TO REBA TE & DISCOUNT IN THE F.Y. 2009-10, AND OUR ATTENTION WAS INVITED TO PAPE R BOOK PAGE 6 WHERE A COPY OF ACCOUNT OF BAWA HARDWARE STORE WAS PLACED A ND WHEREIN THE AMOUNT WAS TRANSFERRED TO REBATE AND DISCOUNT AND I N VIEW OF THE ABOVE, IT WAS SUBMITTED THAT ADDITION SUSTAINED BY LD. CIT(A) WILL TANTAMOUNT TO ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 15 DOUBLE ADDITION AND IN VIEW OF THE ABOVE IT WAS PRA YED THAT THE SAME MAY BE DELETED. 12. THE LD. DR ARGUING ON BEHALF OF THE REVENUE SU BMITTED THAT THE DISALLOWANCE U/S 36(1)(III) WAS PARTLY DELETED BY L D. CIT(A) AND HE HAD UPHELD ONLY THAT PORTION OF DISALLOWANCE WHERE HE W AS SATISFIED THAT THE DISALLOWANCE WAS NECESSARY. AS REGARDS THE ADDITION PARTLY SUSTAINED BY LD. CIT(A) IN RESPECT OF ADDITION U/S 41(1) OF THE ACT, THE LD. DR SUBMITTED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION IN ACCOR DANCE WITH THE SPECIFIC PROVISIONS OF THE ACT AND HE HEAVILY PLACED HIS REL IANCE ON THE ORDER OF ASSESSING OFFICER. AS REGARDS ADDITION U/S 40(A)(IA) THE LD. DR SUBMI TTED THAT THE ENTIRE ISSUE CAN BE SET ASIDE TO THE OFFICE OF ASSE SSING OFFICER WHO SHOULD VERIFY THE SAME AND SHOULD ALLOW THE RELIEF ACCORDI NGLY. AS REGARDS THE GROSS PROFIT ADDITION AND ADDITION ON ACCOUNT OF UNACCOUNTED VOUCHERS, THE LD. DR PLACED HIS RELIANC E ON THE ORDERS OF AUTHORITIES BELOW: ARGUING UPON REVENUES APPEAL, THE LD. DR IN RESPE CT OF DELETION BY LD. CIT(A) ON ACCOUNT OF ADDITION U/S 2(22)(E) SUBM ITTED THAT THE ASSESSEE FIRM WAS NOT A SHAREHOLDER BUT THE PARTNERS OF THE FIRM WERE SHAREHOLDERS AND THEREFORE THE ASSESSEE FIRM HAS TO BE TREATED A S THE BENEFICIAL SHAREHOLDER AND THEREFORE, THE LD. CIT(A) HAS WRONG LY ALLOWED RELIEF TO THE ASSESSEE. THE LD. DR IN THIS RESPECT RELIED ON THE CASE LAWS SHRI. GOPAL & SONS VS. CIT PRONOUNCED BY HON'BLE SUPREME COURT OF INDIA IN CIVIL APPEAL NO. 12274 OF 2016. THE LD. DR SUBMITTED THAT IN THIS CASE, THE ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 16 ASSESSEE WAS HOLDING SHARES IN ITS INDIVIDUAL CAPAC ITY AND THE HON'BLE SUPREME COURT HELD THAT PROVISIONS OF DEEMED DIVIDE ND GET ATTRACTED EVEN IF THE LOAN WAS GIVEN TO HUF WHICH WAS NOT A REGIST ERED SHAREHOLDER. THE LD. DR SUBMITTED THAT HON'BLE SUPREME COURT HAS HEL D THAT THOUGH THE SHARES WERE HELD IN THE INDIVIDUAL CAPACITY BUT FOR THE PURPOSE SECTION 2(22)(E), EVEN HUF WAS CONSIDERED AS A BENEFICIAL O WNER OF THE SHARES AND THEREFORE FOLLOWING THE SAME IN THE PRESENT CASE, T HOUGH ASSESSEE FIRM IS NOT A PARTNER BUT THE PARTNERS IN THEIR INDIVIDUAL CAPACITIES ARE SHAREHOLDER OF THE COMPANY AND THEREFORE THE DEEMIN G PROVISIONS WERE APPLICABLE. AS REGARDS THE RELIEF GIVEN BY LD. CIT( A) ON ACCOUNT OF ADDITION U/S 41(1) OF THE ACT, THE LD. DR SUBMITTED THAT ADD ITIONS WERE MADE STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 41(1). AS REGARD REGARDS THE DELETION OF ADDITION U/S 36(1)(III), TH E LD. DR SUBMITTED THAT HIS ARGUMENTS ARE SAME AS WERE ADVANCED IN THE ASSE SSEES APPEAL ON THIS ISSUE. 13. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIRST TAKE UP THE APPEAL IN IT A NO. 214. GROUND NO. IS GENERAL AND DO NOT REQUIRE ANY ADJUDICATION. GRO UND NO. 2 AND 3 RELATE TO ADDITION U/S 36(1)(III) OF THE ACT. THE LD. AR H AS ARGUED THAT THE CLOSING BALANCES ON WHICH THE INTEREST WAS CALCULATED ALSO INCLUDED OPENING BALANCES AND ALSO ARGUED THAT THE INTEREST FREE FUN DS AVAILABLE WITH THE ASSESSEE WERE MORE THAN THE INTEREST FEE ADVANCES A ND THEREFORE, RELYING ON VARIOUS CASE LAWS, HE HAD ARGUED THAT THE ADDITI ON WAS NOT SUSTAINABLE. WE FIND THAT IN ASSESSEES OWN CASE IN ITA NO. 425/ASR/2014 ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 17 DECIDED BY AMRITSAR BENCH VIDE ORDER DATED 05.05.20 17, THE AMRITSAR BENCH HAD RESTORED THE ABOVE ISSUE TO THE OFFICE OF THE ASSESSING OFFICER WITH THE FOLLOWING FINDINGS. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GO NE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS A FACT THAT IN ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD MADE DISALLO WANCE OF INTEREST U/S 36(1)(III) IN RESPECT OF 10 PARTIES , WHEREAS THE A SSESSING OFFICER IN THE SECOND ROUND OF PROCEEDINGS EXAMINED 14 PARTIES AND MADE DISALLOWANCES ACCORDINGLY WHICH IS NOT AS PER DIRECTIONS OF HON'B LE ITAT. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALL OWANCE IF ANY IN RESPECT OF ONLY 10 PARTIES WHICH WERE ORIGINALLY LISTED IN THE ORIGINAL ASSESSMENT ORDER. WE FURTHER FIND THAT IN A FEW CASES, THE AMOUNT OF ADVANCES WAS AS OPENING BALANCES AND THERE ARE JUDGMENTS OF AMRITSA R TRIBUNAL HOLDING THAT IN RESPECT OF OLD ADVANCES FROM EARLIER YEARS, NO D ISALLOWANCE U/S 36 (1) (III) OF THE ACT WAS WARRANTED. FURTHER THE DISALLOWANCE IF ANY U/S 36(1)(III) HAS TO BE RESTRICTED TO THE AMOUNTS OF LOANS WHICH EXCE EDED THE CAPITAL OF THE ASSESSEE AS HAS BEEN HELD BY HON'BLE AMRITSAR BENCH IN VARIOUS CASE LAWS RELIED ON BY ASSESSEE. THEREFORE, THE ASSESSING OFF ICER IS DIRECTED TO RESTRICT THE DISALLOWANCE OF INTEREST ON LOAN AMOUNTS EXCEED ING THE AVAILABLE CAPITAL OF THE ASSESSEE. WITH THESE DIRECTIONS THE APPEAL O F THE ASSESSEE IS SET ASIDE TO THE OFFICE OF ASSESSING OFFICER TO REFRAME THE A SSESSMENT ORDER IN TERMS OF ABOVE SAID DIRECTIONS. IN THE PRESENT CASE ALSO WE ARE OF THE OPINION THA T ASSESSING OFFICER SHOULD EXAMINE THE DISALLOWANCE KEEPING IN VIEW THE CASE LAWS RELIED ON BY ASSESSEE WHEREIN IT HAS BEEN HELD THAT ON OPENIN G BALANCES OF ADVANCES NO DISALLOWANCE U/S 36(1)(III) WAS WARRANTED AND SI MILARLY IN CASES IT HAS BEEN HELD THAT IF THE INTEREST FREE FUNDS OF THE AS SESSEE ARE MORE THAN THE INTEREST FREE ADVANCES, NO DISALLOWANCE U/S 36(1)(I II) CAN BE MADE. 14. IN VIEW OF THE ABOVE WE REMIT THIS ISSUE TO THE ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH, IN VIEW OF THE JUDGMENTS RELIED ON BY THE ASSESSEE TO ASSESSING OFFICER SHOULD EXAMINE AVAILA BILITY OF INTEREST FREE FUNDS VIS--VIS INTEREST FREE ADVANCES. IN VIEW OF THE ABOVE GROUND NO. 2, 3 IN ITA NO. 114/ASR/2014, GROUND NO. 2 IN ITA NO. 11 6/ASR/2014, GROUND ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 18 NO. 3 & 4 IN ITA NO. 117/ASR/2014, GROUND NO. 2 IN ITA NO. 118/ASR/2014, GROUND NO. 2 IN ITA NO. 214/ASR/2014, GROUND NO. 2 AND 3 IN ITA NO. 216/ASR/2014 AND GROUND NO. 1 IN ITA N O. 217/ASR/2014 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 15. NOW COMING TO THE ADDITION PARTLY DELETED BY LD . CIT(A) IN RESPECT OF ADDITION U/S 41(1) WHICH IS GROUND NO. 4 IN ITA NO. 114/ASR/2014 AND GROUND NO. 3 IN ITA NO. 214/ASR/2014, WE FIND THAT THE ISSUE OF ADDITION U/S 41(1) HAS BEEN DEALT WITH MANY CASES. THE AMRIT SAR BENCH IN ITA NO. 639/ASR/2016 VIDE ORDER DATED 11.08.2017 HAS CONSID ERED VARIOUS CASE LAWS IN THIS RESPECT AND HAS DECIDED THE ISSUE IN F AVOUR OF ASSESSEE BY HOLDING AS UNDER: GROUND OF APPEAL NO. 7: DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO, THAT THE ASSESSEE HAS SHOWN IN H IS BOOKS OF ACCOUNT THAT FOLLOWING AMOUNTS WERE PAYABLE TO EIGHT PARTIES MEN TIONED IN THE FOLLOWING TABLE AMOUNTING TO RS. 26,26,270/- S. NO. NAME OF THE PARTY TOTAL AMOUNT 1. HATTIM COPPER 4,00,000 CLOSED 2. KARITKE BUILD CON 1,80,000 NOT REPLIED 3. MONTAGE ENTERPRISES 68,687 DENIED 4. SARVESHWAR RICE MILLS, BARI BRHAMANA 3,14,508 NOT REPLIED 5 SATYA METALS, LANE 3 BARI BRAHMANA 6,66,809 NOT REPLIED 6 SPERRY PLAST, BARI BRAHMANA 1,00,000 NOT REPLIED 7 STAR INDUSTRIES 6,17,684 NOT REPLIED 8 VS INDUSTRIES 3,12,582 NOT REPLIED TOTAL 26,60,270 THE AO, ON VERIFICATION OF LEDGER ACCOUNTS IN THE P RECEDING TWO YEARS NOTICED THAT THE ABOVE STATED CREDITORS ARE STATIC CREDITOR SINCE OUTSTANDING BALANCE ARE BEING SHOWN BY THE ASSESSEE FOR MORE TH AN THREE YEARS. THERE ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 19 WAS NO SINGLE TRANSACTION BETWEEN THE ASSESSEE AND CREDITORS DURING LAST THREE YEARS NEITHER ANY INTEREST HAS BE EN PAID. THE CREDITORS HAVE ALSO NOT DEMANDED THE OUTSTANDING PAYMENTS. TH E AO, THEREFORE, CONCLUDED THAT THE ABOVE CREDITORS MIGHT HAVE SQUAR ED OFF OR WRITTEN OFF THE IMPUGNED DEMANDS/BALANCES AND AS SUCH THERE IS A RE MISSION OR CESSATION OF ASSESSEE'S LIABILITY. THE AO HAS ALSO STATED THA T IN THE CASE OF M/S MONTAGE ENTERPRISES, IT WAS DENIED THAT ANY AMOUNT IS RECEIVABLE FROM THE ASSESSEE. IN THE CASE OF M/S HATIM COPPER, THE UNIT HAS BEEN CLOSED SINCE LONG AND NO CONFIRMATION COULD BE MADE. THE AO, THE REFORE, ASKED THE ASSESSEE TO SUBMIT ITS REPLY ON THE PROPOSED ADDITI ON. IN RESPONSE TO THAT THE ASSESSEE SUBMITTED THAT THE AMOUNTS SHOWN IN TH E ABOVE TABLE 'AS PAYABLE' AGAINST THE CREDITORS ARE NOT STATIC AND A RE ACTUALLY PAYABLE. THERE IS NO CESSATION OR REMISSION OF LIABILITY SHOWN AGA INST THEM. THE ASSESSEE FURTHER SUBMITTED THAT IT IS A FACT THAT THE ASSESS EE FIRM IS NOT DEALING WITH THESE PARTIES AND HAS WITHHELD THE PAYMENTS BECAUSE OF WORKING CAPITAL CRUNCH AT THAT TIME. THE REPLIES NOT RECEIVED FROM THESE PARTIES DO NOT MEAN THAT THE LIABILITY HAS CEASED TO EXIST OR HAS BEEN REMITTED. THE AO, HOWEVER, WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE AN D ADDED BACK THE ENTIRE AMOUNT OF RS.26,60,270/- TO THE TOTAL INCOME OF THE ASSESSEE U/S. 41(1) OF THE INCOME TAX ACT. THE APPELLANT, ON THE OTHER HAND, IN HIS SUBMISSION MADE DURING THE APPELLATE PROCEEDINGS HAS STATED AS UNDER:- 'THE APPELLANT SUBMITS AS UNDER: - THE LD. AO HAS MADE ADDITIONS OF RS. 2660270/- U/S 41(1) ON ACCOUNT OF STATIC CREDITORS. SECTION 41(1) OF THE INCOME TAX A CT, 1961 READS AS UNDER: PROFITS CHARGEABLE TO TAX. 41 .[ (L) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MAD E IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRA DING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST- MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, A). THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETH ER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH 60 LOSS OR EXPENDITURE 60 OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILI TY 60 BY WAY OF REMISSION OR CESSATION THEREOF 60 , THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE I S IN EXISTENCE IN THAT YEAR OR NOT; OR B). THE SUCCESSOR IN BUSINESS HAS OBTAINED 60 , WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF W HICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST-MENTIONED PER SON OR SOME BENEFIT IN ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 20 RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLA USE (A) BY WAY OF REMISSION OR CESSATION THEREOF 60 , THE AMOUNT OBTAINED 60 BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SU CCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS O R PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. [EXPLANATION L.FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE R EMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENT IONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) O F THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN IS ACCOUNTS.] FORM THE ABOVE IT IS CLEAR THAT TO ATTRACT SECTION 41(1) FOLLOWING CONDITIONS MUST BE SATISFIED:- A). IN THE ASSESSMENT OF AN ASSESSEE, AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF ANY LOSS, EXPENDITURE O R TRADING LIABILITY INCURRED BY HIM B). (I) ANY AMOUNT IS OBTAINED IN RESPECT OF SUC H LOSS OR EXPENDITURE, OR (II) ANY BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF C). SUCH AMOUNT OR BENEFIT IS OBTAINED BY THE ASSES SEE; AND D). SUCH AMOUNT OR BENEFIT IS OBTAINED IN A SUBSEQ UENT YEAR. ONLY IF ALL THESE CONDITIONS ARE FULFILLED SECTION 41(1) GETS ATTRACTED. MOREOVER THE AMOUNTS ARE ADDED TO THE INCOME OF THE PREVIOUS YEAR IN WHICH THE LIABILITY CEASES OR REMITS OR THE BENEFIT IS RECEIV ED BY THE APPELLANT. IN THE PRESENT CASE; NEITHER THE LIABILITY HAS CEAS ED TO EXIST NOR HAS THE APPELLANT WRITTEN OFF THESE AMOUNTS IN ITS BOOKS OF ACCOUNT AS PROVIDED BY EXPLANATION-1 ABOVE. ALL THE BALANCES ARE SHOWN AS PAYABLE IN THE BOOKS OF ACCOUNT. COPIES OF ACCOUNT OF ALL THESE CREDITORS S HOWING THAT THERE WERE NO TRANSACTIONS DURING THE YEAR ARE ENCLOSED (PAGE 28- 29). MOREOVER, THE LD. AO HAD NOT BROUGHT ANYTHING ON RE CORD TO PROVE THAT ANY AMOUNT OR BENEFIT HAD BEEN OBTAINED BY THE APPELLAN T DURING THE YEAR UNDER CONSIDERATION AGAINST LIABILITIES WHICH IS ALLEGEDL Y CEASED TO EXIST. IT IS ALSO AN ESTABLISHED PROPOSITION OF LAW THAT ONUS IS ON T HE AO TO ESTABLISH THAT ANY BENEFIT HAS ACCRUED TO THE APPELLANT AGAINST AL LEGED LIABILITIES DURING THE YEAR UNDER CONSIDERATION. SINCE THE LD. AO HAS FAIL ED TO PROVE HIS CASE, THE ADDITIONS ARE PRAYED TO BE DELETED. CASE LAWS IN SU PPORT OF APPELLANT'S CONTENTION ARE GIVEN BELOW: - 1. ITO VS. SH. JAGMOHANSINGH G DHIMAN ITA NO. 1959/AH D/2012 - A.Y. 2009-10 ITAT AHMEDABAD (PAGE 30-34) ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 21 2. CIT VS. SHRI VARDHMAN OVERSEAS LTD. ITA NO. 774/2009 DEL HC (PAGE 35-50) 3. CIT V. SUGAULI SUGAR WORKS (P) LTD. (1999), 236 ITR 518 SC (PAGE 51-54) 4. CIT V. KESARIA TEA CO. LTD. (2002) 254 ITR 434 SC ( PAGE 55-58) I HAVE CONSIDERED THE RIVAL CONTENTIONS AND IT IS F OUND THAT THOUGH THE PAYMENTS HAVE NOT BEEN MADE TO THESE CREDITORS AND SHOWN AS THE LIABILITY AND ALSO THAT THERE WAS NO TRANSACTION IN LAST THRE E YEARS WITH ALL THESE CREDITORS AND NO CONFIRMATION WAS RECEIVED, YET IT CANNOT BE SAID THAT LIABILITIES HAVE CEASED TO EXIST. COMING TO THE CAS E LAWS CITED BY THE APPELLANT IN SUPPORT OF ITS CLAIM THAT THERE WAS NO CESSATION OR REMISSION OF THIS LIABILITY AS DEFINED U/S. 41(1) OF THE INCOME TAX ACT, I HAVE PERUSED THE ABOVE DECISIONS AND IT IS FOUND THAT IN THE CASE OF CIT VS. SUGAULI SUGAR WOKS (P) LTD ( 1999) 236 ITR 518 SC IT HAS BEEN HEL D THAT THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITAT ION IS NOT A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE ASSESSEE'S CASE A LONE BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITOR HAS ST ATED THAT THE LIABILITY HAS CEASED TO EXIST BECAUSE THE CREDITOR MAY ENFORCE TH E DEBT OR LIABILITY AFTER EXPIRY OF SOMETIME THEN IT WOULD NOT BE POSSIBLE FO R THE ASSESSEE TO PAY BACK THE OUTSTANDING BALANCE. THE HON'BLE COURTS HA VE THEREFORE, HELD THAT THE LIABILITY TO MAKE PAYMENT CEASED TO EXIST ONLY AFTER EXPIRY OF THE NORMAL PORTION OF LIMITATION AS PROVIDED UNDER THE LIMITAT ION ACT. THE OTHER DECISIONS ALSO CITED BY THE APPELLANTS SUPPORT THE CASE OF TH E APPELLANT. I, THEREFORE, HOLD THAT IN THE ABSENCE OF ANY EXAMI NATION OF THE CREDITORS TO THE EFFECT THAT THEY HAVE WAIVED THE L IABILITY OR THE LIMITATION PERIOD HAS EXPIRED UNDER THE LIMITATION ACT, THE CR EDITORS SHOWN IN THE BALANCE SHEET CANNOT BE TREATED TO HAVE BEEN REMITT ED U/S. 41(1) OF THE INCOME TAX ACT. THUS, THE ADDITION MADE BY THE AO O N THIS GROUND IS DELETED AND APPELLANT GETS A RELIEF OF RS.26,60,270/- THE LD. CIT(A) HAS DELETED THE PART ADDITION AFTER EXAMINING VARIOUS DOCUMENTS AND FROM WHICH HE ARRIVED AT THE CONCLUSI ON THAT THE REASONS WHY THE AMOUNTS WERE LAYING FOR SUCH A LONG PERIOD OF TIME WERE EXPLAINABLE AND THEREFORE, HE DELETED SUBSTANTIAL P ORTION OF THE ADDITION. WHILE DELETING THE ADDITION, THE LD. CIT(A) HAD ACC EPTED ADDITIONAL EVIDENCES ALSO. HOWEVER THE CASE LAWS RELIED ON BY LD. AR CLEARLY ESTABLISH THAT ADDITION U/S 41(1) IS NOT WARRANTED UNLESS THE ASSESSEE WRITES OFF THE ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 22 CREDIT BALANCES OF SUCH CREDITORS. IN VIEW OF THE A BOVE GROUND NO. 4 IN ITA NO. 114/ASR/2014 IS ALLOWED WHEREAS THE GROUND NO. 3 IN ITA NO. 214/ASR/2014 IS DISMISSED. 16. NOW COMING TO ADDITIONS U/S 40(A)(IA), WE FIND THAT IN FEW CASES THE ASSESSEE HAD SUBMITTED BEFORE LD. CIT(A) THAT TAXES WERE DULY DEPOSITED AND FOR WHICH THE LD. CIT(A) HAD ISSUED DIRECTIONS TO ASSESSING OFFICER FOR VERIFICATION OF SUCH CASES. THE LD. AR SUBMITTED TH AT THE ASSESSING OFFICER HAD CARRIED OUT SUCH VERIFICATION AND HAD ALLOWED R ELIEF TO THE ASSESSEE AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PA PER BOOKS PAGE 92. WE FIND THAT THIS IS A DOCUMENT GIVING APPEAL EFFECT O F LD. CIT(A)S ORDER AND ASSESSING OFFICER WAS REQUIRED TO EXAMINE THAT TAXE S ON THESE AMOUNTS WERE DULY DEPOSITED AND THEREFORE HE HAS GIVEN RELI EF ONLY AFTER SUCH EXAMINATION AND THEREFORE GROUND NO. 5 IN ITA NO. 2 14 IS DISMISSED. IN RESPECT OF OTHER GROUP OF ITEMS, THE LD. AR HAS ARG UED THAT IN SOME CASES THE AMOUNTS ON WHICH TAX WAS DEDUCTIBLE WERE PAID D URING THE YEAR AND WAS NOT PAYABLE AND THEREFORE THE DISALLOWANCE SHOU LD HAVE BEEN RESTRICTED ONLY TO THE AMOUNTS PAYABLE BUT WHEN HIS ATTENTION WAS INVITED TO THE FACT THAT THIS ISSUE IS SETTLED NOW AGAINST ASSESSEE, THE LD. AR SUBMITTED THAT TAXES ON SUCH PAYMENTS WERE DEPOSITE D IN SUCCEEDING YEAR AND THEREFORE AS PER THE PROVISIONS OF LAW ITS BENE FIT SHOULD BE GIVEN IN SUCCEEDING YEAR. THE LD. AR SUBMITTED THAT IN RESPE CT OF ANJALI ENGINEERS AND P.S. CASTINGS IN ASST YEAR 2006-07 TAX WAS DEPO SITED IN SUCCEEDING YEAR. IN VIEW OF THE SUBSTANTIAL JUSTICE WE DEEM IT APPROPRIATE TO REMIT THIS ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 23 ISSUE BACK TO ASSESSING OFFICER WHO SHOULD DECIDE T HE ISSUE AFRESH IN VIEW OF THE PROVISIONS OF LAW. SIMILARLY THE ISSUE OF PAYMENTS TO V. B. SETH AND CO IS ALSO REMITTED BACK TO ASSESSING OFFICER A S THE LD. AR HAS SUBMITTED THAT PAYMENTS IN THIS CASE DID NOT EXCEED RS. 2,0000/-. THEREFORE GROUND NO. 7 IN ITA NO. 214 IS ALLOWED FO R STATISTICAL PURPOSES. 17. THE THIRD CLASS OF CASES IS THOSE CASES WHERE T HE LD. AR HAS CLAIMED THAT TAX WAS NOT DEDUCTIBLE AS THE AMOUNTS WERE PAI D AS REIMBURSEMENT TO SHIPPING AGENTS. WE FIND THAT IN THE CASE OF ASS ESSEE ITSELF IN ITA NO. 257/ASR/2014, THE HON'BLE ITAT VIDE ORDER DATED 22. 03.2016 HAD HELD THAT IN THE CASE OF PAYMENTS MADE TO SHIPPING AGENT S OF NON RESIDENT OWNERS, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS. WHILE DECIDING IN SUCH A MANNER, THE HON'BLE TRIBUNAL HAD RELIED ON THE CA SE LAWS ITO FREIGHT SYSTEMS (INDIA) PVT. LTD.; 6, SOT 473(DEL). WE FIND THAT IN ITA NO. 257/ASR/2014 VIDE ORDER DATED 22.03.2016, THE ISSUE OF TAX DEDUCTION AT SOURCE ON PAYMENTS ON ACCOUNT OF INLAND HAULAGE CHA RGES, TERMINAL HANDLING CHARGES, BUNKER ADJUSTMENT FACTOR AND COST ADJUSTMENT FACTOR WERE CONSIDERED IN RESPECT OF PAYMENTS OF M/S IAL, M/S R.K. SHIPPING, M/S S.K. SHIPPING, LTA WORLDWIDE WERE CONSIDERED AN D THE HON'BLE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF ASSESSE E BY HOLDING AS UNDER: 5. APROPOS GROUND NO. 2, THE ASSESSING OFFICER NOT ED THAT IT WAS THE OBSERVATION OF THE AUDITORS OF THE ASSESSEE THAT TH E ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE IN SOME OF SUCH PAYMENT, WHI CH HAD BEEN MADE TO THE CONTRACTORS, CUSTOM AGENTS, LEASE RENT CHARGES ETC., AS UNDER: NATURE OF EXPENSES AMOUNT OF PAYM ENT A. SHIPPING EXPENSES ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 24 M/S, WORLDWIDE CONTAINER & SHIPPING SERVICES RS .1,00,000/- M/S. VENUS CLEARING RS.21,712/- M/S. IAL RS. 75,762/- M/S. R.K. SHIPPING RS. 68,846/- M/S. S.K. SHIPPING RS. 46,013/- M/S. LTA WORLDWIDE RS. 40,101/- B. PAYMENTS OF RAJKOT BRANCH: I. JOB WORK RS. 91,620/- II) M/S. NANDA RAODWAYS RS.1,37,924/- 6. THE AO OBSERVED THAT THE ASSESSEES CONTENTION T HAT NON DEDUCTION OF TAX AT SOURCE WAS IN PURSUANCE TO THE PROVISIONS OF SECTION 172(8) OF THE I.T. ACT, AS SUPPLEMENTED BY CBDT CIRCULAR NO.723 DATED 19.09.1995, WAS NOT ACCEPTABLE, SINCE THE AMOUNTS PAID WERE FOUND TO RE PRESENT CHARGES PAID OTHER THAN OCEAN FREIGHT AND WERE NOT PAID UNDER TH E PROVISIONS OF SECTION 172(8) AND THE CIRCULAR OF THE BOARD; THAT THE AMOU NTS OF SHIPPING CHARGES DO NOT CONSTITUTE FREIGHT AMOUNT, BUT REPRESENTED O THER CHARGES WHICH HAD BEEN PAID TO THE CLEARING AND FORWARDING AGENTS FOR THEIR SERVICES TO CLEAR THE GOODS AT THE CUSTOM PORT; AND THAT BY CLEARING THE GOODS AT THE CUSTOM PORT, THE CLEARING AND FORWARDING AGENTS CANNOT BE CONSIDERED TO BE THE AGENTS OF THE NONRESIDENT SHIP-OWNERS OR CHARTERS A ND THEY WILL NOT STEP INTO THE SHOES OF THE PRINCIPAL AS STATED IN CIRCULAR NO .723, DATED 19.09.1995. AS SUCH, THE AO HELD THE ASSESSEE TO BE IN DEFAULT IN RESPECT OF PAYMENTS OF RS.3,52,434/-. THE TAX IN DEFAULT @ 2.04% WAS WORKE D OUT TO RS.7,189/-, WHEREAS THE INTEREST U/S 201(1A) FROM 31.03.2006 WA S WORKED OUT AT RS.4,314/-. 7. THE ID. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 8. THE ID. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE ID. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE AO, HOLDING THE ASSESSEE COMPANY TO BE IN CONTRAVENTION OF SECTION 194C OF THE ACT IN RESP ECT OF SHIPPING EXPENSES; THAT ACCORDING TO SECTION 172(8) OF THE ACT, AS SUP PLEMENTED BY CBDT CIRCULAR NO. 723 DATED 19.09.1995, THE AMOUNTS PAID BY THE ASSESSEE COMPANY TOWARDS INLAND HAULAGE CHARGES, TERMINAL HA NDLING CHARGES, BUNKER ADJUSTMENT FACTOR, COST ADJUSTMENT FACTOR, E TC., I.E., SHIPPING EXPENSES, WERE NOT LIABLE FOR ANY DEDUCTION OF TAX AT SOURCE AND THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THE ASSESSE E-COMPANY TO BE IN DEFAULT U/S 201(1)/201(1A) READ WITH SECTION 194C O F THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE ON THESE AMOUNTS. 9. ON THE OTHER HAND, THE ID. DR, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE QUESTION IS AS TO WHETHER INLAND HAULAGE CHARGES, TERMINAL HANDLING CHARGES, BUNKER ADJUSTMENT FACTOR , COST ADJUSTMENT FACTOR, ETC., I.E., SHIPPING EXPENSES PAID BY THE A SSESSEE REGARDING EXPORTS USING NON-RESIDENT SHIPPING CALL FOR TDS. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 25 11. SECTION 172 OF THE ACT REGULATES THE PROCEDURE FOR ASSESSING THE INCOME OF NON-RESIDENT SHIPPING. 12. SECTION 172(2) READS AS FOLLOWS: WHERE SUCH A SHIP CARRIES GOODS SHIPPED AT A PORT IN INDIA, SEVEN AND HALF PERCENT OF THE AMOUNT PAID OR PAYABLE ON ACCOU NT OF SUCH CARRIAGE TO THE OWNER OR THE CHARTERER OR TO ANY PERSON ON H IS BEHALF, WHETHER THAT AMOUNT IS PAID OR PAYABLE IN OR OUT OF INDIA, SHALL BE DEEMED TO BE INCOME ACCRUING IN INDIA TO THE OWNER OR CHARTERER ON ACCO UNT OF SUCH CARRIAGE. 13. SECTION 172(6) IS AS FOLLOWS: A PORT CLEARANCE SHALL NOT BE GRANTED TO THE SHIP UNTIL THE COLLECTOR OF CUSTOMS OR OTHER OFFICER DULY AUTHORIZED TO GRANT T HE SAME, IS SATISFIED THAT THE TAX ASSESSABLE UNDER THIS SECTION HAS BEEN DULY PAID OR THAT SATISFACTORY ARRANGEMENTS HAVE BEEN MADE FOR THE PAYMENT THEREOF . 14. ACCORDING TO SECTION 172(8): FOR THE PURPOSE O F THIS SECTION, THE AMOUNT REFERRED TO IN SUB-SECTION (2) SHALL INCLUDE THE AMOUNT PAID OR PAYABLE BY WAY OF DEMURRAGE CHARGE OR HANDLING CHAR GE OR ANY OTHER AMOUNT OF SIMILAR NATURE. 15. FROM THE ABOVE, IT IS CLEAR THAT IN CASE OF SHI PPING OF GOODS AT A PORT IN INDIA , SEVEN AND A HALF PERCENT OF THE CARRIAGE CHARGES SHALL BE DEEMED TO BE INCOME ACCRUING IN INDIA ON ACCOUNT OF SUCH C ARRIAGE; THAT UNLESS AND UNTIL THE TAX ASSESSABLE U/S 172 IS PAID OR ARRANGE D FOR AND THE COLLECTOR OF CUSTOMS IS SATISFIED TO THAT EFFECT, THE SHIP SHALL NOT BE GRANTED PORT CLEARANCE; THAT THE CARRIAGE CHARGES, AS AND ENVISA GED BY SECTION 172(2) SHALL BE INCLUDED IN THE AMOUNT OF DEMURRAGE CHARGE OR HANDLING CHARGE OR ANY OTHER AMOUNT OF SIMILAR NATURE. 16. IN THIS REGARD, AS PER CBDT CIRCULAR NO.723 DAT ED 19.09.1995 (APB 37-38), WHERE PAYMENTS ARE MADE TO SHIPPING AGENTS OF NONRESIDENT SHIP- OWNERS OR CHARTERERS FOR CARRIAGE OF PASSENGERS, ET C., SHIPPED AT A PORT IN INDIA, SINCE THE AGENT ACTED ON BEHALF OF THE NONRE SIDENT SHIP-OWNER OR CHARTERER, HE STEPS INTO THE SHOES OF THE PRINCIPAL AND, ACCORDINGLY, THE PROVISIONS OF SECTION 172 SHALL APPLY AND THOSE OF SECTIONS 194C AND 195 WILL NOT APPLY. 17. FURTHER, IN TTO VS. FREIGHT SYSTEMS (INDIA ) PVT. L TD., 6 SOT 473 (DEL.), IT HAS BEEN HELD THAT PAYMENT OF OCEAN FREI GHT AND INLAND HAULAGE CHARGES CANNOT BE SUBJECTED TO TDS BY VIRTU E OF THE PROVISIONS OF SECTION 172 OF THE ACT, WHICH POSITIO N IS CLARIFIED BY CBDT CIRCULAR NO.723 DATED 19.09.1995. THIS DECISIO N, THOUGH CITED BY THE ASSESSEE BEFORE THE ID. CIT(A), IT DOE S NOT FIND EVEN A MENTION, MUCH LESS ADJUDICATION, BY THE ID. CIT(A), IN THE OPERATIVE PORTION OF THE ORDER. BEFORE US ALSO, NO DECISION C ONTRARY TO FREIGHT SYSTEMS (INDIA) PVT. LTD. (SUPRA) HAS BEE N CITED ON BEHALF ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 26 OF THE DEPARTMENT. THUS, IN VIEW OF THE CLEAR PROVISIONS OF SECTION 172(8) OF THE ACT, AS S UPPLEMENTED BY CBDT CIRCULAR NO.723 DATED 19.09.1995, BOTH OF WHIC H HAVE BEEN DULY CONSIDERED IN FREIGHT SYSTEMS (INDIA ) PVT. L TD. (SUPRA). THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND NO. 2 IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. ACCORDINGLY, THE DEMAND OF RS.7,189/- U/S 201(1) AND RS.4,314/- U/S 201(1A) OF THE ACT FOR NON-DEDUCTION OF TDS ON PAYMENT OF SHIPPING EXPENSE S OF RS.3,52,434/- IS CANCELLED. WE FIND THAT IN THE PRESENT CASE THE ASSESSEE HAD MADE PAYMENTS TO FEW OF THE PARTIES MENTIONED IN THE ORDER OF HON'BL E ITAT. THEREFORE WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO ASSESSIN G OFFICER WHO SHOULD EXAMINE THE NATURE OF EXPENSES AND IF THE PAYMENTS MADE ARE COVERED BY THE PROVISIONS OF SECTION 172(8) AND CBDT CIRCULAR NO. 723, THEN ASSESSING OFFICER SHOULD ALLOW RELIEF THEREOF. IN V IEW OF THE ABOVE GROUND NO. 8 IS ALLOWED FOR STATISTICAL PURPOSES. 18. AS REGARDS THE ADDITION ON ACCOUNT OF UNACCOUNT ED VOUCHERS IN ASSESSMENT YEAR 2006-07, THE LD. AR HAD RELIED ON T HE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. LUBTECH INDIA LTD. 311 ITR 175 FOR THE PROPOSITION THAT ADDITION CANNOT BE MADE FOR UNACCO UNTED VOUCHERS. WE FIND THAT IN THIS CASE THE ADDITION WAS MADE U/S 69 C OF THE ACT ON ACCOUNT OF CERTAIN ITEMS JOTTED IN PENCIL ON TWO SHEETS OF PAPER WHICH WERE RECOVERED DURING THE COURSE SEARCH AND SEIZURE OPER ATION. THE ASSESSEE SUBMITTED THAT THE SAID CAN NOT BE TREATED AS UNEXP LAINED EXPENDITURE AND UNDER THESE CIRCUMSTANCES, THE HON'BLE DELHI HI GH COURT IN THE CASE OF LUBTECH INDIA LTD. HAS HELD THAT SECTION 69(C) P OSTULATES THAT FIRST OF ALL, THE ASSESSEE MUST HAVE INCURRED THE EXPENDITURE AND THEREAFTER IF THE ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 27 EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND S ATISFACTORY ONLY THEN THE ADDITION CAN BE MADE U/S 69C OF THE ACT. I N THE PRESENT CASE ALSO THE ASSESSEE HAD DENIED TO HAVE INCURRED THIS EXPEN DITURE AND THE ASSESSEE HAD BEEN MAINTAINING THAT SUCH EXPENDITURE WAS NEVER INCURRED BY THE ASSESSEE AND THESE WERE NOT REIMBURSED TO TH E EMPLOYEES AND THEREFORE WE ARE IN AGREEMENT WITH THE ARGUMENTS OF ASSESSEE THAT ADDITION UNDER THESE CIRCUMSTANCES CAN NOT BE MADE U/S 69C OF THE ACT. IN VIEW OF THE ABOVE, GROUND NO. 6 IN ITA NO. 114/A SR/2014 IS ALLOWED WHEREAS THE GROUND NO. 4 IN ITA NO. 214/ASR/2014 IS DISMISSED. 19. AS REGARDS THE ADDITION U/S 40(A)(IA) AMOUNTING TO RS.21,000/-, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LD. AR THAT THE SAID PAYMENT WAS MADE IN CASH DUE TO EXCEPTIONAL CIRCUMSTANCES AS TH E PAYMENT WAS MADE ON FRIDAY AND THE FEE WAS PAID TO THE EMBASSY. THE ASSESSING OFFICER DID NOT DOUBT THE GENUINENESS OF THE PARTY TO WHOM THE PAYMENT WAS MADE AND THE PARTY IS IDENTIFIED AND THEREFORE GROUND NO . 9 IN ITA NO. 114/ASR/2014 IS ALLOWED. 20. COMING TO THE ADDITION ON ACCOUNT OF LOW GROSS PROFIT RATIO, WE FIND THAT IN ASSESSMENT YEAR 2004-05, THE G.P. RATIO WAS 11.92% AND IN ASSESSMENT YEAR 2005-06, THE G.P. RATIO WAS 11.03%. THE G.P. RATIO IN ASSESSMENT YEAR 2005-06 WAS ACCEPTED BY THE DEPARTM ENT U/S 143(3) OF THE ACT. THE ASSESSEE HAS DECLARED G.P. RATIO OF 13 .01% IN THE YEAR UNDER CONSIDERATION WHICH IS PROGRESSIVE WHEN COMPARED WI TH EARLIER YEARS AND MOREOVER, WE FIND THAT THOUGH ASSESSING OFFICER OBT AINED AUDITORS REPORT ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 28 FROM THE AUDITORS BUT HE DID NOT REJECT THE BOOKS O F ACCOUNT. THE VARIOUS BENCHES OF THE TRIBUNAL AND VARIOUS HIGH CO URTS HAD HELD THAT NO ADDITION ON ACCOUNT OF G.P. CAN BE MADE IF THE BOOK S OF ACCOUNT ARE NOT REJECTED. THE AMRITSAR BENCH IN THE CASE OF HARPREET SINGH G ULATI IN ITA NO. 317/ASR/2013 HAS DECIDED THIS ISSUE IN FAVOUR OF AS SESSEE BY HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSING OFFICER HAS FAILED TO RECORD ANY FINDING IN THE ASSESSMENT ORDER THAT THE CASE OF THE ASSESSEE IS AKIN TO THE PROVISIONS OF SECTION 145(3 ) OF THE ACT. THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE LD. CIT(A) ARE THAT THE ASSESSEE FURNISHED AUDITED ACCOUNTS/TA X AUDIT REPORT ALONGWITH BOOKS OF ACCOUNT AND BILLS/VOUCHERS FOR PURCHASE/SA LES OF LIQUOR AND RELATING TO EXPENSES WERE PRODUCED FOR VERIFICATION S. THE DETAILS AND BASIS OF VALUATION OF CLOSING STOCK WERE PLACED ON RECORD DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STATE EXCISE AND TAXATI ON DEPARTMENT KEEPS STRICT CONTROL AND SUPERVISION OVER THE LIQUOR TRAD E CARRIED OUT BY THE ASSESSEE. THE PURCHASES OF LIQUOR CAN BE MADE BY T HE ASSESSEE AGAINST THE PERMITS ISSUED BY THE STATE EXCISE DEPARTMENT AND S IMILARLY THE SALES OF THE LIQUOR BY THE ASSESSEE TO THE RETAILERS HAVING 1-2 LICENSES CAN ONLY BE MADE AGAINST THE PERMITS ISSUED BY THE STATE EXCISE DEPA RTMENT. THE ASSESSING OFFICER FAILED TO REBUT THE CONTENTION OF THE ASSES SEE THAT THAT THE NET REBATE OF RS.16586467/- IS A PART OF THE TRADING RESULTS A ND ALSO THE GROSS PROFIT. THE ASSESSING OFFICER HAS TRIED TO MAKE OUT A CASE THAT THE ABOVE STATED AMOUNT OF RS.16586467/- IS THE INCOME OF THE ASSESS EE AS PER HIS OWN VERSION BY TWISTING THE CONTENTIONS OF THE ASSESSEE IN WRITTEN REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY RECO RDING THE FINDING THAT A FACT THAT EMERGES IS THAT WHETHER THE REBATE REC EIVED BY THE ASSESSEE IS ULTIMATELY PASSED IN TOTO TO THE RETAILERS AS PER T HE ASSESSEES WON VERSION AS STATED ABOVE OR NOT BECAUSE THE WORD IN TOTO HA S BEEN INTRODUCED BY THE ASSESSING OFFICER BUT THE COUNSEL OF THE ASSESSEE D ID NOT USE THIS WORD IN THE WRITTEN REPLY. THE DETAILS OF REBATE RECEIVED F ROM THE SELLERS FROM WHOM THE LIQUOR WAS PURCHASED AND PAID TO THE PURCHASERS L-2 LICENSE HOLDERS TO WHOM THE LIQUOR WAS SOLED, ALONGWITH THE SUPPORTING EVIDENCE WAS FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS AND NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFI CER EITHER DURING THE COURSE OF THE ASSESSMENT PROCEEDING OR IN THE ASSES SMENT ORDER. NO OPPORTUNITY WAS ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE MAKING THE ADDITION OF RS.48,16,438/-. ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 29 6.1. AS MENTIONED HEREINABOVE, WE CONCUR WITH THE F INDINGS OF THE LD. CIT(A) THAT THE CASE OF THE ASSESSEE IS COVERED BY THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA REPORTED IN 269 ITR 577 AND THE JUDGMENT OF THE HON'BLE CHHATTI SGARH HIGH COURT IN THE CASE OF ACIT, RAIPUR VS. ROOP CHAND THARANI REPORTE D IN 249 CTR 326 IN WHICH IT HAS BEEN HELD THAT THE PROFITS CANNOT BE E STIMATED WITHOUT REJECTING THE BOOKS OF ACCOUNT BY POINTING OUT THE SPECIFIC D EFECTS AND RECORDING THE FINDING REGARDING THE SAME. THE CONTENTIONS OF THE AR OF THE ASSESSEE ARE FACTUALLY CORRECT AND THE ASSESSING OFFICER HAS FAI LED TO POINT OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT TO JUSTIFY HIS ACTION OF ESTIMATING THE INCOME OF THE ASSESSEE AT RS.16586467/- AS AGAINST THE INCOME OF RS.11770029/- DECLARED IN THE PROFIT AND LOSS ACCOU NT. 6.2. THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE DISCUSSED ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION OF RS.48,16,438/-. WE ACCORDIN GLY, UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENU E. THERE ARE OTHER CASE LAWS ALSO HOLDING THE SAME PR OPOSITION WHICH FOR THE PURPOSE OF BREVITY HAS NOT BEEN REPRODUCED HERE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE GROUND NO. 5 IN ITA NO. 114/ASR/2014 IS ALLOWED. AS REGARDS ISSUE OF DISALLOWANCE OF 1/10 TH OUT OF VEHICLE EXPENSES WE FIND THAT THE DISALLOWANCE SUSTAINED BY LD. CIT(A) CONSISTED OF DEPRECIATION AND OTHER CAR EXPENSES. AS REGARDS DIS ALLOWANCE OF DEPRECIATION ON ACCOUNT OF PERSONAL USE WE FIND THA T MUMBAI TRIBUNAL IN THE CASE OF MUKESH K. SHAH VS. INCOME TAX OFFICER I N ITA NO. 3888/MUM/2000 HAS HELD AS UNDER: IF THE CAR IS USED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS, THEN THE DEPRECIATION NEED TO BE ALLOWED AS PER THE RATE SUGGESTED BY THE STATUTE. DEPRECIATION IS AN STATUTORY ALLOWANCE . THE STATUTORY ALLOWANCE CANNOT BE RESTRICTED ON THE BASIS OF THE VOLUME OF BUSINESS USE AND VOLUME OF PERSONAL USE. THE CONDITION TO BE SATISFIED IS THAT THE ASSET SHOULD BE OWNED BY THE ASSESSEE AND IT SH OULD BE USED FOR THE BUSINESS OF PROFESSION. BOTH THE CONDITIONS ARE SATISFIED HERE. PERSONAL USE OF THE CARE CANNOT FETTER THE GRANTING OF STATUTORY ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 30 ALLOWANCE. THEREFORE, THE DISALLOWANCE MADE ON ACCO UNT OF DEPRECIATION IS DELETED. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIR ECTED TO DELETE DISALLOWANCE ON ACCOUNT OF DEPRECIATION WHICH THE L D. CIT(A) HAD SUSTAINED DUE TO PERSONAL USE. HOWEVER AS REGARDS O THER EXPENSES THE DISALLOWANCE SUSTAINED BY LD. CIT(A) IS UPHELD. IN VIEW OF THIS GROUND NO. 3 IN ITA NO. 118 IS PAR TLY ALLOWED. AS REGARDS ADDITION SUSTAINED BY LD. CIT(A) FOR A CREDIT BALANCE OF RS.10319/-, WE FIND THAT ASSESSEE AT ITS OWN HAD TR ANSFERRED THIS AMOUNT TO REBATE AND DISCOUNT IN THE SUCCEEDING YEAR AND T HEREFORE ADDITION DURING THE YEAR UNDER CONSIDERATION WILL TANTAMOUNT TO DOUBLE ADDITION. IN VIEW OF THE ABOVE GROUND NO. 4 IN ITA NO. 118 I S ALLOWED. AS REGARDS THE ADDITION DELETED BY LD. CIT(A) ON A CCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, WE FIND THAT SECT ION 2(22)(E) NECESSARILY IMPOSES A CONDITION THAT PAYEE MUST BE A SHAREHOLDE R WHO MUST BE THE BENEFICIAL OWNER OF SHARES. IN THE PRESENT CASE, UN DISPUTEDLY THE ASSESSEE IS NOT A SHAREHOLDER AS IS NOTED BY LD. CIT(A) IN H IS ORDER AT PAGE 22 OF HIS ORDER WHERE HE HAS RECORDED A SUBMISSION OF ASSESSE E THAT THE PARTNERS OF THE ASSESSEE FIRM WERE REGISTERED SHAREHOLDER OF TH E AFORESAID COMPANY IN THEIR INDIVIDUAL CAPACITY. THE LD. CIT(A) HAS MADE A FINDING OF FACT THAT THE DEEMED DIVIDEND CAN ONLY BE ASSESSED IN THE HANDS O F SHAREHOLDER. HE HAS ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 31 FURTHER NOTED THAT ASSESSEE HAD CLEARLY DEMONSTRATE D THAT IT WAS NOT A SHAREHOLDER IN THE COMPANY WHICH HAD ADVANCED LOA N. 21. THE LD. DR HAD RELIED ON THE JUDGMENT OF HON'BL E SUPREME COURT IN THE CASE OF GOPAL AND SONS (HUF) VS. CIT FOR THE PR OPOSITION THAT WHERE A CONCERN RECEIVES SOME ADVANCE AND THE PARTNERS OF T HE CONCERN ARE SHAREHOLDERS IN THE COMPANY, THE PROVISIONS OF SECT ION 2(22)(E) WILL BE APPLICABLE. HOWEVER FROM THE FACTS OF THIS CASE WE FIND THAT T HE HON'BLE SUPREME COURT IN PARA 17 HAS NOTED THAT IN THE ANNU AL RETURNS THE HUF WAS SHOWN AS REGISTERED AND BENEFICIAL OWNERS. MORE OVER WE FIND THAT HON'BLE MADRAS HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. ENNORE CARGO CONTAINER TERMINAL P. L TD. VIDE ORDER DATED 27.03.2017 AND IN ITA NOS. 106 & 107, AFTER CONSIDE RING THE JUDGMENT OF GOPAL AND SONS (HUF) HAS DECIDED VIDE PARA 5.1 ONWA RDS AS UNDER: 5.1 IN OUR VIEW, THE QUESTION OF LAW CONSIDERED BY THE SUPREME COURT IN THE CASE OF GOPAL AND SONS (SUPRA) WAS DIFFERENT FROM T HE ISSUE WHICH ARISES IN THE PRESENT MATTER. THE QUESTION OF LAW WHICH THE S UPREME COURT WAS CALLED UPON TO CONSIDER WAS WHETHER LOANS AND ADVANCES REC EIVED BY A HUF COULD BE DEEMED AS A DIVIDEND WITHIN THE MEANING OF SECTI ON 2(22)(E) OF THE ACT. THE ASSESSEE IN THAT CASE WAS THE HUF AND THE PAYME NT IN QUESTION WAS MADE TO THE HUF. THE SHARES WERE HELD BY THE KARTA OF THE HUF. IT IS IN THIS CONTEXT THAT THE SUPREME COURT CAME TO THE CONCLUSI ON THAT HUF WAS THE BENEFICIAL SHAREHOLDER. WE FIND THAT IN THE PRESENT CASE ALSO THE REGISTER ED AND BENEFICIAL SHAREHOLDERS ARE DIFFERENT THAN THE ASSESSEE COMPAN Y AND THEREFORE THE CASE LAW OF HON'BLE SUPREME COURT IN THE CASE OF GO PAL AND SONS (HUF) IS ITA NOS.114,116,117,118,214,216,&217 (ASR)/2015 ASS T. YEARS:2006-07,TO,09-10,06-07 TO,08-09,07-08 32 DISTINGUISHABLE. IN VIEW OF THE ABOVE GROUND NO. 1 IN ITA NO. 214 AND IN ITA NO. 216 ARE DISMISSED. 22. IN NUTSHELL, THE ABOVE APPEALS ARE DECIDED IN THE MANNER AS DESCRIBED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30.08.2017. SD/- SD/- (N.K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30.08.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER