Sanjay Manikchand Raisoni, Pune V. ITO, Wd.-2(1), Pune

ITA 1241/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67017 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Additional evidence; Commercial expediency; Onus to prove
• Section: 40A(3); 68; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.835 & 1471/PN/2010 (ASSTT. YEAR : 2006-07 & 2007-08) SHRI MANIKCHAND G.RAISONI, PROP: MANIKCHAND GANESHMAL & CO., SHOP NO.2, G.S.TOWER, MARKET YARD, PUNE 411037. .. APPELLANT VS. ITO, WARD-2(1) .. RESPONDENT AND ITA.NO.836/PN/2010 & 1241/PN/2011 (ASSTT. YEAR : 2006-07 & 2007-08) SHRI SANJAY MANIKCHAND RAISONI, A-301, SHRI SHANTINAGAR SOCIETY, S.NO.63/1/3, KHONDWA, PUNE 411037. .. APPELLANT VS. ITO, WARD-2(1) .. RESPONDENT AND ITA.NO.834/PN/2010 & 1242/PN/2011 (ASSTT. YEAR : 2006-07 & 2007-08) SHRI SANTOSH MANIKCHAND RAISONI, PROP: LAXMI STEEL CORPORATION, SHOP NO.2, G.S.TOWER, MARKET YARD, PUNE 411037. .. APPELLANT VS. ITO, WARD-2(1) .. RESPONDENT ITA.NO.1472/PN/2010 (ASSTT. YEAR : 2007-08) SMT. SAPNA SANJAY RAISONI, PROP: MAHAVIR SALES CORPORATION, C-102, GAGAN GALLAXY, MARKET YARD, PUNE 411037. .. APPELLANT VS. ITO, WARD-2(1) .. RESPONDENT 2 ASSESSEE BY : SHRI SUNIL PATHAK DEPARTMENT BY : SHRI SANTOSH KUMAR ORDER PER R.S.PADVEKAR, JM : IN THIS BATCH OF SEVEN APPEALS WHICH ARE FILED BY THE FOUR ASSESSEES, THE ISSUES AS WELL AS FACTS ARE IDENTICA L AND, HENCE, THIS BATCH OF SEVEN APPEALS ARE DISPOSED OF BY THIS CONS OLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE ASSESSMENT YEARS INVO LVED ARE 2006- 07 AND 2007-08. THE ASSESSEES HAVE CHALLENGED THE RESPECTIVE ORDERS OF THE LD. CIT(A)-II, PUNE, FOR THE A.YS. 20 06-07 AND 2007- 08. 2. THE FIRST ISSUE WHICH ARISES FOR OUR CONSIDERATI ON IS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961. FOR AVOIDING THE REPETITION OF FACTS, WE PREFER TO TAKE APPEAL OF SH RI MANIKCHAND FOR A.Y. 2006-07 BEING ITA.NO.835/PN/2010. THE FACTS W HICH ARE REVEALED FROM THE RECORD ARE AS UNDER. ALL THE ASS ESSEES ARE IN THE TRADING OF SCRAP AND THEY ARE REGULARLY PARTICIPATI NG IN THE AUCTIONS HELD BY MSRTC, MSEB, PMT AND OTHER GOVERNMENT ORGAN IZATIONS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THESE ASSESSEES HAVE MADE THE PAYMENTS IN DIFFERENT AUCTIONS IN CASH IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSES SING OFFICER SOUGHT THE EXPLANATION OF THESE ASSESSEES WHY THE P ROVISIONS OF SECTION 40A(3) SHOULD NOT BE APPLIED. THE ASSESSEES SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS ARE MADE TO THE AUTONOMOUS BODIES AND THE MANDATORY REQUIREMENT IS TO PAY 25% CASH ON BIDDING WHEN THE HAMMER FALLS. IT WAS FURT HER SUBMITTED THAT THE BALANCE 75% AMOUNT CAN BE PAID IN DEMAND D RAFTS BUT GOODS ARE HANDED IN THEIR POSSESSION ONLY ON THE 7 TH DAY OF THE DEMAND DRAFT HAS BEEN CREDITED TO THEIR ACCOUNT. D UE TO THAT, ASSESSEES BUSINESS INTERESTS SUFFER SINCE THEY CAN NOT WAIT FOR SEVEN DAYS FOR DELIVERY. ASSESSEES ALSO RELIED ON RULE 6D D. THE ASSESSING 3 OFFICER WAS OF THE OPINION THAT MSRTC, MSEB, ARE NO T GOVERNMENT AUTHORITIES AND THOSE ARE AUTONOMOUS BODIES. IN TH E OPINION OF THE ASSESSING OFFICER, THERE WERE NO EXCEPTIONAL CIRCUM STANCES UNDER WHICH THE ASSESSEES WERE FORCED TO MAKE THE PAYMENT IN CASH. IN SUM AND SUBSTANCE, THERE WAS NO EMERGENCY FOR THE A SSESSEES TO MAKE THE CASH PAYMENTS WHILE BIDDING THE AUCTION. THE ASSESSING OFFICER, THEREFORE, MADE THE DISALLOWANCE IN RESPEC T OF THESE ASSESSEES INVOKING THE PROVISIONS OF SECTION 40A(3) AS UNDER: SR.NO. NAME OF THE ASSESSEE A.Y. ITA.NO. AMOUNT DISALLOWED U/S.40A(3) 1 SHRI MANIKCHAND G.RAISONI 2006 - 07 835 /PN/2010 40,54,693 2 SHRI MANIKCHAND G.RAISONI 2007 - 08 1471/PN/2010 68,05,054 3 SHRI SANJAY MANIKCHAND RAISONI 2006 - 07 836/PN/2010 23,48,058 4 SHRI SANJAY MANIKCHAND RAISONI 2007 - 08 1241/PN/2010 51,98,367 5 SHRI SANTOSH MANIKCHAND RAISONI 2006 - 07 836/P N/2011 25,81,731 6 SHRI SANTOSH MANIKCHAND RAISONI 2007 - 08 1242/PN/2011 41,92,284 7 SMT.SAPNA SANJAY RAISONI 2007 - 08 1472/PN/2010 31,57,610 3. THE ISSUE WAS CARRIED BEFORE THE LD. CIT(APPEALS ) IN ALL THESE CASES BUT WITHOUT SUCCESS. NOW THE ASSESSEES ARE I N APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEES VEHEMENTLY A RGUED THAT SECTION 40A(3) IS BROUGHT ON THE STATUTE BOOK FOR C URBING THE CIRCULATION OF BLACK MONEY AND IF PAYMENTS MADE ARE BONAFIDE, THEN THERE IS NO REQUIREMENT, AS PER THE INTENTION OF TH E LEGISLATURE, TO MAKE THE DISALLOWANCE. HE FURTHER ARGUES THAT FOR REDUCING THE HARDSHIP, RULE 6DD IS INCORPORATED WHICH IS IN THE NATURE OF PROVISO TO SUB-SECTION (3) TO SECTION 40A. HE SUBM ITS THAT AS PER CLAUSE (B) TO RULE 6DD, IF PAYMENTS ARE MADE TO THE GOVERNMENT, THOSE PAYMENTS ARE OUT OF THE HARSH PROVISIONS OF S ECTION 40A(3). THE LD. COUNSEL SUBMITS THAT ASSESSEES ARE TO DO TH E BUSINESS AND IT IS UNDISPUTED FACT THAT AS PER THE RULES FRAMED BY THE AUTONOMOUS BODIES LIKE MSRTC, ASSESSEES ARE BOUND T O MAKE 25% OF PAYMENT IN CASH ON FALL OF THE HAMMER AND BALANC E PAYMENT MAY BE MADE WITHIN 15 WORKING DAYS OF THE ACCEPTANCE OF THE BID. HE 4 SUBMITS THAT IN ALL THESE CASES, THE PAYMENTS WERE MADE TO MSRTC, MSEB, BEST, ZILLA PARISHAD, ETC. EXCEPT FEW PRIVATE PARTIES. HE SUBMITS THAT SO FAR AS MSRTC, MSEB, BEST, ZILLA PAR ISHAD, PUBLIC WORKS DEPARTMENT, THEY ARE THE INSTRUMENTALITIES OF THE GOVERNMENT AND THESE ARE THE LIMBS OF THE GOVERNMEN T ONLY AND MAINLY BECAUSE IT PARTAKES THE CHARACTER OF THE BUS INESS ENTERPRISES TO SOME EXTENT, DOES NOT MAKE THEM AWAY FROM THE GOVERNMENT. HE SUBMITS THAT THERE ARE PLETHORA OF D ECISIONS IN ARTICLE 12 OF THE CONSTITUTION OF INDIA IN WHICH IT IS HELD THAT THE CORPORATIONS ESTABLISHED UNDER SPECIFIC ENACTMENT A RE STATE. ALL THE LOCAL GOVERNMENTS ARE PART OF THE GOVERNMENT. HE SUBMITS THAT THE DEFINITION OF THE GOVERNMENT IS NOT GIVEN IN THE INCOME TAX ACT AND WE HAVE TO TAKE THE LIBERAL INTERPRETATION CONSIDERING THE FACT THAT THIS IS A FISCAL LEGISLATION AND THE LIMI TED PURPOSE TO INTRODUCE THE PROVISIONS OF SECTION 40A(3) IS TO CU RB AND KEEP CHECK ON THE CIRCULATION OF BLACK MONEY. IF THERE IS A G ENUINE HARDSHIP OR THERE IS A BUSINESS OR COMMERCIAL EXPEDIENCY AND IF OTHERWISE RECIPIENT IS GOVERNMENT, THAT WILL NOT BRING THE PA YMENT INTO THE HARSH PROVISIONS LIKE SECTION 40A(3). THE LD. COUN SEL RELIED ON THE FOLLOWING PRECEDENTS: 1. RAJASTHAN STATE ELECTRICITY BOARD JAIPUR VS. MOHANL AL & OTHERS 1967 AIR 1857 SC. 2. RAMANA DAYARAM SHETTY VS. INTERNATIONAL AIRPORTS AUTHORITY OF INDIA AND OTHERS 279 AIR 1628 SC. 3. MAHARASHTRA STATE WAREHOUSING CORPORATION, PUNE VS. ACIT, CIRCLE-1(2), PUNE IN ITA.NO.382, 794 AND 1372/PN/2007 ORDER DATED 31.08.2011. 4. CIDCO LTD. VS. ACIT-10(3), MUMBAI 138 ITD 381 (MUMBAI). 5. SHRI DEVENDRAPPA M KALAL VS. ITO, HUBLI IN ITA.NO.220/BANG/2012 DATED 30.03.2012. 4. WE HAVE ALSO HEARD THE LD. DR. THE LD. DR HAS ALSO FILED THE WRITTEN SUBMISSIONS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND ANXIOUSLY CONSIDERED ARGUMENTS MADE AT BAR BY THE L D. COUNSEL AS WELL AS THE LD. DR. THE ISSUE IN CONTROVERSY BEFOR E US IS WHETHER THE CASH PAYMENTS MADE BY THE ASSESSEES WHILE PARTI CIPATING IN THE 5 AUCTIONS FOR PURCHASING THE SCRAP FROM MSRTC, MSEB, ZILLA PARISHAD, MUNICIPAL CORPORATION, PUBLIC WORKS DEPAR TMENT, GOVERNMENT OF MAHARASTHRA, ETC., CAN BE TAKEN OUT O F THE PROVISIONS OF SECTION 40A(3). ADMITTEDLY, THE PRO VISIONS OF SECTION 40A(3) ARE BROUGHT ON THE STATUTE BOOK WITH INTENTI ON TO CURB AND ALSO TO KEEP CHECK ON THE CIRCULATION OF THE BLACK MONEY. THE SAID PROVISION WAS JUDICIALLY TESTED BEFORE THE HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO 191 I TR 667, IN WHICH THE CONSTITUTIONAL VALIDITY OF THE SAID PROVI SION WAS CHALLENGED. THE HONBLE SUPREME COURT HELD THAT TH E SAID PROVISION WAS CONSTITUTIONALLY VALID AND TO REDUCE THE RIGORS OR HARDSHIP WHICH MAY BE CAUSED WHILE IMPLEMENTING THE SAID PROVISION, CARE HAS BEEN TAKEN BY THE PARLIAMENT BY INTRODUCING RULE 6DD. 5.1. SO FAR AS THE CASES BEFORE US ARE CONCERNED, T HE FACTS ARE NOT IN DISPUTE. WHILE PARTICIPATING IN THE AUCTION FOR PURCHASE OF SCRAP THESE ASSESSEES HAVE MADE THE PAYMENT IN CASH WHICH ARE IN EXCESS OF RS.20,000/-. WE HAVE TO CONSIDER THE RULE 6DD A S IT WAS APPLICABLE FOR THE A.YS. 2006-07 AND 2007-08. THE MAIN THRUST OF ARGUMENT OF THE LD. COUNSEL IS THAT MSRTC, MSEB, ZI LLA PARISHAD, PUBLIC WORKS DEPARTMENT ARE INSTRUMENTALITIES OF TH E GOVERNMENT, MAY BE DISCHARGING THE COMMERCIAL FUNCTIONS WHICH A RE ALSO NOT PROHIBITED UNDER THE CONSTITUTION AND, HENCE, THESE PAYMENTS ARE COVERED BY CLAUSE (B) TO RULE 6DD. HE ALSO ARGUED THAT GOVERNMENT IS A VERY WIDE TERM AND THERE IS A PLETHORA OF DECI SIONS TO SUPPORT THE CONTENTION OF THE LD. COUNSEL WHICH ARE RENDERE D UNDER ARTICLE 12 OF THE CONSTITUTION OF INDIA. LET US CONSIDER T HE DECISIONS RELIED ON BY THE LD. COUNSEL. 6. IN THE CASE OF RAJASTHAN STATE ELECTRICITY BOARD (SUPRA), THE WRIT PETITION FILED UNDER ARTICLES 226 AND 227 ALLE GING THE VIOLATION OF ARTICLES 14 AND 16 WAS ALLOWED IN RESPECT OF THE SERVICE CONDITIONS OF THE RESPONDENT. WHEN THE MATTER REACH ED BEFORE THE HONBLE SUPREME COURT, THEIR LORDSHIPS HELD THAT TH E APPELLANT 6 BOARD IS OTHER AUTHORITY WITHIN THE MEANING OF ARTI CLE 12 AND, THEREFORE, IT IS STATE TO WHICH THE APPROPRIATE DIR ECTIONS CAN BE GIVEN UNDER ARTICLES 224 AND 227 OF THE CONSTITUTIO N. THE TERM STATE IS VERY IMPORTANT SO FAR AS THE CONSTITUTIO N OF INDIA IS CONCERNED AS THE FUNDAMENTAL RIGHTS CAN BE ENFORCED ONLY AGAINST THE STATE IF THERE IS A VIOLATION BY WAY OF A WRIT REMEDIES EITHER UNDER ARTICLE 226 OR ARTICLE 32 OF THE CONSTITUTION OF INDIA. 7. IN THE CASE OF RAMANA DAYARAM SHETTY VS. INTERNA TIONAL AIRPORTS AUTHORITY OF INDIA (SUPRA), AGAIN THE QUES TION POSED BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE INTERNATI ONAL AIRPORTS AUTHORITY OF INDIA IS A STATE WITHIN THE ARTICLE 12 OF THE CONSTITUTION. THE HONBLE SUPREME COURT EXAMINED T HE PROVISIONS OF INTERNATIONAL AIRPORTS AUTHORITIES ACT, 1971, AN D HELD THAT THE TEST LAID DOWN BY THE HONBLE SUPREME COURT IN DECI DING WHETHER THE STATUTORY AUTHORITY COMES WITHIN THE PURVIEW OF ARTICLE 12 OF THE CONSTITUTION IS SATISFIED IN THE CASE OF INTERNATIO NAL AIRPORTS AUTHORITY OF INDIA AS IT IS AN INSTRUMENTALITY OR A GENCY OF CENTRAL GOVERNMENT AND FALLS WITHIN THE DEFINITION OF THE S TATE. 8. INTERESTINGLY, IN THE CASE OF MAHARASHTRA WAREHO USING CORPORATION (SUPRA), WHILE EXAMINING THE LEGALITY A ND PROPRIETY IN RESPECT OF THE DISALLOWANCE MADE U/S.40A(9) WHICH W AS IN RESPECT OF CONTRIBUTION MADE BY THE ASSESSEE CORPORATION TO MSW KARMACHARI WELFARE FUND, THE TRIBUNAL HELD THAT THE SAID CONTRIBUTION IS NOT HIT BY THE PROVISIONS OF SECTIO N 40A(9) OF THE ACT. THE OPERATIVE PART OF THE FINDINGS OF THE TRIBUNAL IS AS UNDER: 10. IN ORDER TO TEST THE EFFICACY OF THE ASSESSEE'S PLEA, THE MOOT QUESTION TO BE ADDRESSED IS AS TO WHETHER THE REGUL ATIONS IN TERMS OF WHICH THE PAYMENT HAS BEEN MADE BY THE ASS ESSEE, CARRY THE FORCE OF LAW OR NOT. IN THIS CONNECTION, WE MAY REFER TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF U P WAREHOUSING CORPORATION (SUPRA) RELIED UPON BY THE APPELLANT BEFORE US. THE STATUS OF THE ENTITY BEFORE THE HON' BLE SUPREME COURT WAS ANALOGOUS TO THAT OF THE APPELLANT BEFORE US. AS HAS BEEN OBSERVED EARLIER, THE APPELLANT IS A CORPORATI ON ESTABLISHED BY THE STATE GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTIONS (1) & (3) OF SECTION 28 O F THE 7 AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING) CO RPORATION ACT, 1956 (28 OF 1956), WHICH WAS SUBSEQUENTLY REPL ACED BY WAREHOUSING CORPORATION ACT, 1962 (58 OF 1962). THE APPELLANT IS A STATUTORY BODY FULLY CONTROLLED AND MANAGED BY THE GOVERNMENT. THE ENTITY BEFORE THE HON'BLE SUPREME C OURT WAS ALSO A SIMILARLY ESTABLISHED CORPORATION, BEING A S TATUTORY BODY WHOLLY CONTROLLED AND MANAGED BY THE STATE GOVERNME NT OF UP. THE HON'BLE SUPREME COURT REFERRED TO ITS EARLIER D ECISION IN THE CASE OF SUKHDEV SINGH (SUPRA) AND ADDRESSED THE QUE STION AS TO WHETHER THE REGULATIONS OF SUCH A STATUTORY CORP ORATION, PROVIDING, INTER ALIA, FOR THE TERMS AND CONDITIONS OF EMPLOYMENT AND SERVICES OF THEIR EMPLOYEES CARRY A FORCE OF LA W OR NOT. ANOTHER ALLIED QUESTION WAS AS TO WHETHER SUCH STAT UTORY CORPORATIONS ARE 'STATE' WITHIN THE MEANING OF ARTI CLE 12 OF THE CONSTITUTION. NEVERTHELESS THE PERTINENT QUESTION W AS WHETHER THE REGULATIONS PROVIDING FOR THE TERMS AND CONDITI ONS OF EMPLOYMENT AND CONDITIONS OF SERVICE HAVE THE FORCE OF LAW OR NOT? IN THIS CONNECTION, THE FOLLOWING PORTION OF T HE JUDGMENT OF THE HON'BLE SUPREME COURT IS WORTHY OF NOTICE: 'THE STATUTORY BODIES IN THAT CASE WERE OIL AND NAT URAL GAS COMMISSION, INDUSTRIAL FINANCE CORPORATION AND LIFE INSURANCE CORPORATION. ALL THE THREE BODIES WERE CR EATED UNDER SEPARATE STATUTES ENACTED BY THE CENTRAL LEGISLATURE. IT WAS CLEAR FROM THE OIL AND NATURAL GAS COMMISSION ACT, 1954, THAT THE COMMISSION CREATED B Y IT, ACTS AS AN AGENCY OF THE CENTRAL GOVERNMENT. SIMILA RLY, BY VIRTUE OF THE INDUSTRIAL FINANCE CORPORATION ACT, 1 948, THE FINANCE CORPORATION IS UNDER THE CONTROL AND MANAGE MENT OF THE CENTRAL GOVERNMENT. THE LIFE INSURANCE CORPO RATION IS SIMILARLY OWNED AND MANAGED BY THE GOVERNMENT AN D CAN BE DISSOLVED ONLY BY THE GOVERNMENT IN VIEW OF THE PROVISIONS OF THE LIFE INSURANCE ACT, 1956. ALL THE THREE STATUTES CONSTITUTION THE THREE STATUTORY CORPORATI ONS ENABLED THEM TO MAKE REGULATIONS WHICH PROVIDE, INT ER ALIA, FOR THE TERMS AND CONDITIONS OF EMPLOYMENT AN D SERVICES OF THEIR EMPLOYEES. QUESTIONS AROSE, (I) W HETHER THE REGULATIONS HAVE THE FORCE OF LAW, AND (II) WHE THER THE STATUTORY CORPORATIONS ARE 'STATE' WITHIN THE MEANI NG OF ARTICLE 12 OF THE CONSTITUTION? RAY, C.J., SPEAKING FOR HIMSELF AND CHANDRACHUD AND GUPTA, JJ., HELD THAT T HE REGULATIONS FRAMED BY THESE STATUTORY BODIES FOR TH E PURPOSE OF DEFINING THE DUTIES, CONDUCT AND CONDITI ONS OF ITS EMPLOYEES HAVE THE FORCE OF LAW. THE FORM AND C ONTENT OF THE CONTRACT WITH A PARTICULAR EMPLOYEE IS PRESC RIPTIVE AND STATUTORY. THE NOTABLE FEATURE IS THAT THESE ST ATUTORY BODIES HAVE NO FREE HAND IN FRAMING THE CONDITIONS AND TERMS OF SERVICE OF THEIR EMPLOYEES. THEY ARE BOUND TO APPLY THE TERMS AND CONDITIONS AS LAID DOWN IN THE REGULATIONS. THESE REGULATIONS ARE NOT ONLY BINDING ON THE AUTHORITY BUT ALSO ON THE PUBLIC. THEY GIVE THE EMP LOYEES A STATUTORY STATUS AND IMPOSE OBLIGATIONS ON THE STAT UTORY 8 AUTHORITIES, WHO CANNOT DEVIATE FROM THE CONDITIONS OF SERVICE.' 11. THE HON'BLE SUPREME COURT HELD THAT THE REGULAT IONS FRAMED BY THE CORPORATIONS, BEING FRAMED UNDER THE STATUTORY PROVISIONS WOULD HAVE THE FORCE OF LAW. THE HON'BLE SUPREME COURT FURTHER WENT ON TO HOLD THAT THERE WAS NO DIS TINCTION ON PRINCIPLE BETWEEN A PERSON DIRECTLY UNDER THE EMPLO YMENT OF THE GOVERNMENT AND A PERSON UNDER THE EMPLOYMENT OF AN AGENCY OR INSTRUMENTALITY OF THE GOVERNMENT OR A CORPORATI ON, SET UP UNDER A STATUTE OR INCORPORATED BUT WHOLLY OWNED BY THE GOVERNMENT. 12. IN THE BACKGROUND OF THE LEGAL POSITION EXPLAIN ED BY THE HON'BLE SUPREME COURT, IN OUR VIEW, THE SERVICE REG ULATIONS FRAMED BY THE APPELLANT CORPORATION FOR THE TERMS A ND CONDITIONS OF EMPLOYMENT AND SERVICES OF THEIR EMPL OYEES CARRY A STATUTORY FORCE. IN THIS CONTEXT, WE HAVE PERUSED THE MAHARASHTRA STATE STAFF WAREHOUSING CORPORATION (ST AFF) SERVICE REGULATIONS AND FIND THAT THE SAME HAVE BEE N FRAMED WITH THE PREVIOUS SANCTION OF THE GOVERNMENT OF MAH ARASTHRA IN EXERCISE OF THE POWERS CONFERRED BY SECTION 42 OF T HE WAREHOUSING CORPORATION ACT, 1962 (58 OF 1962). TH EREFORE, THE IMPUGNED CONTRIBUTION MADE BY THE APPELLANT AS AN E MPLOYER TOWARDS THE KARMACHARI WELFARE FUND FALLS WITHIN TH E EXPRESSION AS REQUIRED BY OR UNDER ANY OTHER LAW FOR THE PURPOSES OF SECTION 40A(9) OF THE ACT. AS A CONSEQ UENCE, SUCH AN AMOUNT IS NOT DISALLOWABLE IN TERMS OF SECTION 4 0A(9) OF THE ACT. 9. THE LD. DR ARGUES THAT THE DEFINITION OF STATE G IVEN IN ARTICLE 12 OF THE CONSTITUTION CANNOT BE APPLIED TO THE TER M GOVERNMENT AS REFERRED TO IN RULE 6DD AS IT IS IN VERY NARROW CONCEPT. HE ALSO ARGUES THAT EVERY LIMB OF GOVERNMENT, SEMI-GOVERNME NT, AUTONOMOUS BODIES AND GOVERNMENT UNDERTAKINGS COME WITHIN THE PURVIEW OF THE STATE AND HENCE, MSRTC AND MSEB ARE ALSO PART OF THE STATE, BUT THEY ARE NOT THE GOVERNMENT AS CONTE MPLATED IN RULE 6DD(B) OF THE I.T. RULES. 10. WE ARE UNABLE TO ACCEPT THE ARGUMENT CANVASSED BY THE LD. DR. THE ARTICLE 12 OF THE CONSTITUTION READS AS UN DER: THE STATE INCLUDES THE GOVERNMENT AND PARLIAMENT OF INDIA AND GOVERNMENT AND THE LEGISLATURE OF THE STATES AND AL L LOCAL OR OTHER AUTHORITIES WITHIN THE TERRITORY OF INDIA OR UNDER THE CONTROL OF THE GOVERNMENT OF INDIA. 9 11. THE DEFINITION OF THE STATE UNDER ARTICLE 12 HA S COME FOR THE CONSIDERATION ON NUMBER OF OCCASIONS BEFORE THE HON BLE SUPREME COURT. THE STATE CONSISTS OF THREE DEPARTMENTS, TH E LEGISLATURE, THE EXECUTIVE AND THE JUDICIARY. WE NEED NOT GO INTO A LL THE LIMBS OF THE STATE AS ONLY THE LIMITED ISSUE BEFORE US IS WH ETHER THE TERM GOVERNMENT USED IN CLAUSE (B) TO RULE 6DD INCLUDES EVEN THE AUTONOMOUS BODIES WHICH PARTAKES THE CHARACTER OF INSTRUMENTALITIES OF THE GOVERNMENT. THE CORE TEST TO BE APPLIED WHETHER A PARTICULAR CORPORATION WHICH IS AUTONOMOU S BODY IS A PART OF GOVERNMENT, TO BE SEEN IN THE CONTEXT OF DE GREE OF CONTROL OVER MANAGEMENT AND POLICY DECISIONS. WE FIND THAT IN THE CASE OF MSRTC AS PER THE CERTIFICATE OF THE SHARE CAPITAL F ILED BEFORE US, THE ENTIRE SHARE CAPITAL IS CONTRIBUTED BY THE STATE GO VERNMENT AND THE CENTRAL GOVERNMENT AND THERE IS NO PRIVATE PARTICIP ATION. WE FURTHER FIND THAT MSRTC IS INCORPORATED UNDER SPECI AL LEGISLATION I.E., ROAD TRANSPORT CORPORATION ACT, 1950. WE HAV E EXAMINED THE PROVISIONS OF THE SAID ENACTMENT. AS PER SECTION 5 OF THE SAID ACT, THE STATE GOVERNMENT IS ONLY HAVING POWER TO APPOIN T THE CHAIRMAN AND OTHER MEMBERS IN THE MANAGING BODY. T HERE IS A FULL CONTROL OF THE STATE GOVERNMENT ON THE POLICY DECIS IONS AS WELL AS MANAGEMENT. IN OUR OPINION, IF WE APPLY THE TEST O F THE CONTROL AND MANAGEMENT AS WELL AS THE EQUITY PARTICIPATION, MSR TC IS A STATE WITHIN ARTICLE 12 OF THE CONSTITUTION. APPLYING TH E ABOVE TEST, THE HONBLE SUPREME COURT HAS HELD, AS DISCUSSED HEREIN ABOVE, THAT THE AUTONOMOUS BODIES LIKE STATE ROAD TRANSPORT COR PORATION OR WAREHOUSING CORPORATION WHERE THERE IS A FULL CONTR OL BY THE GOVERNMENT, EITHER CENTRAL OR STATE, THESE ARE THE INSTRUMENTALITIES OF THE GOVERNMENT ONLY. 12. THE TERM GOVERNMENT IS VERY MUCH WIDE UNDER THE CONSTITUTIONAL SET UP. GOVERNMENT MAY BE CENTRAL OR STATE, OR IT MAY BE LOCAL GOVERNMENT WHICH IS ENVISAGED BY OUR C ONSTITUTION, LIKE ZILLA PARISHAD, MUNICIPAL CORPORATIONS, MUNICI PAL COUNCILS, PANCHAYAT SAMITHIS, ETC. THE PUBLIC WORKS DEPARTM ENT IS PART OF THE GOVERNMENT. IN OUR OPINION, THIS ASPECT HAS NO T BEEN 10 CONSIDERED BY THE AUTHORITIES BELOW AND THEY HAVE C LOSED DOOR TO THE ASSESSEES TO MAKE OUT THE CASE FOR EXAMINATION UNDER RULE 6DD. WE ARE, THEREFORE, OF THE OPINION THAT IN THE LIGHT OF OUR ABOVE DISCUSSION, THE PLEA OF THE ASSESSEES NEED RECONSID ERATION BY THE LD. CIT(APPEALS). WE, THEREFORE, SET ASIDE THE ISS UE IN RESPECT OF THE DISALLOWANCE MADE U/S.40A(3) TO THE FILE OF THE LD. CIT(A) TO DECIDE THE SAME DE NOVO IN THE LIGHT OF OUR ABOVE OBSERVAT IONS AND DISCUSSION. ACCORDINGLY, THE RELEVANT GROUNDS TAKE N BY THE ASSESSEES IN ALL THESE APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSES. NEEDLESS TO SAY THE CIT(A) IS DIRECTED TO GIVE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEES AS PER THE PRINCIPLES OF NAT URAL JUSTICE. 13. THE NEXT ISSUE IS ADDITION MADE U/S.68 OF THE A CT. WE WILL DECIDE THIS ISSUE INDEPENDENTLY ASSESSEE-WISE. WE FIRST TAKE THE CASE OF SHRI MANIKCHAND G.RAISONI. IN THIS CASE, IN THE A.Y. 2006-07, THE ASSESSING OFFICER MADE THE ADDITION OF RS.18,00,000/- U/S.68 OF THE ACT. THE ASSESSING OFFICER HAS OBSER VED THAT THE ASSESSEE WAS SHOWING THE DEBTORS HAVING CREDIT BALA NCES, AND HE ACCORDINGLY REQUESTED THE ASSESSEE TO FILE THE CONF IRMATIONS AND PANS OF THE CONCERNED DEBTORS. THE ASSESSEE MERELY INFORMED THAT CONFIRMATIONS FROM THOSE PERSONS/DEBTORS ARE AWAITE D. THE ASSESSING OFFICER ACCORDINGLY INVOKED THE PROVISION S OF SECTION 68 AND MADE THE ADDITION OF RS.18,00,000/-. THE ASSES SEE CARRIED THE ISSUE BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS. 14. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. LAW IS WELL SETTLED THAT THE BURDEN IS ON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CA PACITY OF THE CREDITOR. NOTHING HAS BEEN PLACED BEFORE US TO CON TROVERT THE FINDINGS GIVEN BY THE AUTHORITIES BELOW. IT APPEAR S THAT ASSESSEE ONLY FILED RECEIPTS FROM MSRTC AND TAKEN CONTENTION THAT FROM THE SAID RECEIPTS IT IS EVIDENT THAT THE SAID PERSONS H AVE MADE THE PAYMENT. IN OUR OPINION, BOTH THE AUTHORITIES BELO W HAVE RIGHTLY HELD THAT THE AMOUNT TO THE EXTENT OF RS.18,00,000/ - WAS UNPROVED AND ASSESSEE FAILED TO DISCHARGE THE BURDEN. IN OU R OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE AUTH ORITIES BELOW. 11 ACCORDINGLY, THE RELEVANT GROUND TAKEN BY THE ASSES SEE FOR A.Y. 2006-07 IS DISMISSED. IN THE CASE OF THIS ASSESSEE IN A.Y. 2007-08, NO ADDITION IS MADE. 15. IN THE CASE OF ANOTHER ASSESSEE, SHRI SANJAY M. RAISONI, IN THE A.Y. 2006-07, THE ASSESSING OFFICER MADE AN ADDITIO N U/S.68 OF THE ACT AS UNDER: 1. SHRI MOHAMAD JAVED SUBHEDAR RS.13,50,000 2. SHRI KANTILAL P.BAFNA RS. 15,000 3. SHRI KISHOR KANTILAL BAFNA RS. 15,000 4. SHRI CHANDRAKANT RITE RS. 15,000 5. SHRI SATISH CHEDE RS. 15,000 6. MS.NISHA CHORDIYA RS. 15,000 7. SHRI SAMIR MAHESH SHAH RS. 15,000 8. SAGAR S. ABAD RS. 15,000 RS.14,55,000 16. THE ASSESSEE DID NOT FILE ANY CONFIRMATION LETT ERS NOR THE PANS BEFORE THE ASSESSING OFFICER. BEFORE THE LD. CIT(A ) THE ASSESSEE FILED SOME ADDITIONAL EVIDENCE IN THE FORM OF RECEIPT OF RS.13,59,678/- DATED 20.03.2006 ISSUED BY MSRTC ALONGWITH DELIVERY VOUCHERS ISSUED FOR GOODS DELIVERED. THE ASSESSEE CONTENDED THAT THE PAYMENT WAS DIRECTLY MADE BY SHRI MOHAMMED JAVED SU BHEDAR TO MSRTC ON APPELLANTS BEHALF ON 20.03.2006. THE FAC T REMAINED THAT EXCEPT FILING THE RECEIPT FROM MSRTC, NO OTHER EVIDENCE HAS BEEN FILED. IF THE PARTY HAS MADE DIRECT PAYMENT T O MSRTC, THEN THE ASSESSEE COULD HAVE FILED CONFIRMATION FROM THE SAID PARTY. ASSESSEE FAILED TO DISCHARGE THE BURDEN TO PROVE TH E IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AS WELL AS THE CAPACITY OF THE SAID CREDITOR. THE LD. CIT(A) ACCORDINGLY CONF IRMED THE SAID ADDITION TO THE EXTENT OF RS.13,50,000/-. SO FAR AS THE CREDIT BALANCES FROM SL.NO.2 ONWARDS ARE CONCERNED, THE AS SESSEE COULD NOT FILE ANY CONFIRMATION LETTERS FROM THOSE PERSON S. IN OUR OPINION THE ADDITION HAS BEEN RIGHTLY MADE BY THE ASSESSING OFFICER U/S.68 AS ASSESSEE FAILED TO DISCHARGE HIS BURDEN. WE THE REFORE, FIND NO MERIT IN THE GROUNDS TAKEN BY THE ASSESSEE IN THE A.Y. 2006-07. ACCORDINGLY RELEVANT GROUNDS ARE DIS MISSED. 12 17. SO FAR AS A.Y. 2007-08 IS CONCERNED, THE ASSESS ING OFFICER MADE THE ADDITION OF RS.15,50,000/- U/S.68 OF THE A CT. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SHOWN THE CREDIT BALANCE IN THE NAME OF ONE MR.JAKIR M.SUBEDA R WHICH WAS TO THE EXTENT OF RS.15,50,000/-. NO CONFIRMATION FROM THE SAID PARTY WAS FILED BY THE ASSESSEE. EVEN BEFORE LD. CIT(A), NO CONFIRMATION OR ANY EVIDENCE WAS FILED TO PROVE THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CAPACITY OF THE SAID CREDITOR. THE LD. CIT(A) ALSO CONFIRMED THE ADDITION. IN OUR OPINION, THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN PUT ON HIM U/S.68 AND BOTH THE AUTHORITIES BELOW HAVE RIGHTLY ADDED THE S AID INCOME U/S.68 OF THE ACT. 18. NOW WE TAKE UP THE CASE OF SHRI SANTOSH M.RAISO NI IN ITA.NO.834/PN/2010 FOR A.Y. 2006-07. IN THIS CAS E, THE ASSESSING OFFICER MADE THE ADDITION OF RS.27,94,713/- U/S.68 OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HA S SHOWN THE CREDIT BALANCES IN THE NAMES OF THE FOLLOWING PERSO NS: 1. SHRI AMJAD ALI KHAN RS.15,60,000/- 2. SHRI RANJIT SINGH RAJPAL RS.12,34,713/- 19. AS NOTED BY THE ASSESSING OFFICER, THE ASSESSEE DID NOT FILE ANY CONFIRMATIONS OR PANS OF THOSE PERSONS DURING THE C OURSE OF ASSESSMENT. ASSESSEE CHALLENGED THE ADDITION BEFOR E THE LD. CIT(A). EXCEPT FILING THE RECEIPT ISSUED BY MSRTC WHICH WER E IN THE NAMES OF THOSE PERSONS, AS WELL AS THE DELIVERY VOUCHERS ISSUED FOR GOODS DELIVERED, NO OTHER EVIDENCE WAS FILED BY THE ASSES SEE FOR DISCHARGING THE BURDEN PUT ON HIM U/S.68 OF THE ACT . BEFORE US ALSO NOTHING HAS BEEN FILED AND ARGUMENT MADE BEFOR E THE LD. CIT(A) WAS REITERATED. IN OUR OPINION, IN THE CASE OF THIS ASSESSEE FOR A.Y. 2006-07, ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN BY PROVING THE IDENTITY OF THE CREDITOR, GENUINENESS O F THE TRANSACTION AS WELL AS CREDITWORTHINESS OF THE SAID PERSONS TO ADVANCE THE SAID HUGE AMOUNTS. IN OUR OPINION, NO INTERFERENCE IS C ALLED FOR AS THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING 13 OFFICER. HENCE, RELEVANT GROUNDS TAKEN BY THE ASSE SSEE IN THE A.Y. 2006-07 ARE DISMISSED. 20. IN THE CASE OF THE SAID ASSESSEE IN THE A.Y. 20 07-08, THE ASSESSING OFFICER MADE THE ADDITION OF RS.40,98,148 /-. ASSESSEE HAD SHOWN THE CREDIT BALANCES IN THE NAMES OF FOLLO WING PERSONS: 1. SHRI AMJAD ALI KHAN RS.21,80,000 2. SHRI RANJIT SINGH RAJPAL RS.12,34,713 3. SHRI JAVED M.SUBEDAR RS.11,78,148 21. ASSESSEE PRODUCED BEFORE THE ASSESSING OFFICER LEDGER EXTRACT OF SHRI RANJIT SINGH RAJPAL ALONGWITH RECEIPTS/VOUC HERS ISSUED BY MSRTC. THE ASSESSING OFFICER HAS OBSERVED THAT NO CONFIRMATION LETTERS WERE FILED BY THE ASSESSEE. THE ASSESSING OFFICER GAVE THE BENEFIT OF OPENING BALANCE OF RS.12,34,713/- IN RES PECT OF SHRI RANJIT SINGH RAJPAL AS THE SAID AMOUNT HAS ALR EADY BEEN ADDED IN THE A.Y. 2006-07 AND MADE THE ADDITION OF RS.7,40,000/-. SO FAR AS SHRI AMJAD ALI KHAN IS CONCERNED, THE ASS ESSING OFFICER MADE THE FULL ADDITION OF RS.21,80,000/- U/S.68 OF THE ACT. IN RESPECT OF SHRI JAVED M.SUBEDAR, THE ASSESSING OFFI CER AGAIN MADE THE ADDITION OF RS.21,80,000/- AND ACCORDINGLY TOTA L ADDITION MADE U/S.68 IS TO THE EXTENT OF RS.40,98,148/-. AS OBSE RVED BY THE ASSESSING OFFICER, THE ASSESSEE WAS MAKING CASH PAY MENTS TO MSRTC IN THE AUCTIONS HELD AT VARIOUS PLACES AND TH E AMOUNTS WERE SHOWN IN THE NAMES OF THE ABOVE PERSONS. THE ASSESSEE DID NOT PROVE THE IDENTITY OF THE SAID CREDITOR, GENUIN ENESS OF THE TRANSACTIONS AS WELL AS THE CREDITWORTHINESS OF THE SAID CREDITORS TO MAKE SUCH HUGE PAYMENTS ON BEHALF OF THE ASSESSEE. EVEN BEFORE THE LD. CIT(A), EXCEPT FILING THE RECEIPTS FROM MSR TC, NO OTHER EVIDENCE WAS FILED. 22. WE HAVE ANXIOUSLY CONSIDERED THE REASONS GIVEN BY THE LD. CIT(A). WE FIND THAT ASSESSEE EVEN AT THAT STAGE D ID NOT FILE ANY CONFIRMATION FROM THOSE CREDITORS TO PROVE ANY IDEN TITY. THE FACT REMAINS THAT THE ASSESSEE IS IN THE BUSINESS OF SCR AP AND BIDDING THE AUCTIONS OF MSRTC. THE PAYMENTS ARE SHOWN IN T HE NAMES OF 14 DIFFERENT PERSONS BUT THE AUCTIONS ARE TAKEN BY THE ASSESSEE. ASSESSEE ALSO CLAIMED THAT THE SAID PAYMENTS ARE MA DE BY THOSE UNIDENTIFIED PERSONS, THEN THE BURDEN IS ON THE ASS ESSEE TO PROVE WHO THOSE PERSONS ARE AND THE GENUINENESS OF THE TR ANSACTIONS. IN OUR OPINION, ASSESSEE HAS FAILED TO DISCHARGE THE B URDEN CAST ON HIM U/S.68 AS EVEN BEFORE US NOTHING HAS BEEN PLACE D TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). WE ACCORDINGLY CON FIRM THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT. 23. THE NEXT ISSUE IS DISALLOWANCE IN RESPECT OF IN TEREST-FREE ADVANCES. THE SAID DISALLOWANCE IS MADE IN RESPECT OF THESE ASSESSEES AS UNDER: 1. SHRI MANIKCHAND G.RAISONI 2007-08 RS.4,39,797 2. SHRI SANJAY M.RAISONI 2006-07 RS. 63,144 3. SHRI SANJAY M.RAISONI 2007-08 RS.2,50,147 4. SHRI SANTOSH M.RAISONI 2006-07 RS. 14,080 5. SHRI SANTOSH M.RAISONI 2007-08 RS.3,59,598 6. SMT.SAPNA S.RAISONI 2007-08 RS.1,23,728 24. IN RESPECT OF SHRI MANIKCHAND IN THE A.Y. 2006- 07 IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS ADVANCED RS.53,23,709/- BUT ASSESSEE HAS CHARGED THE INTERES T ONLY ON THE THREE PARTIES CONSISTING THE AMOUNT OF RS.12,70,150 /-. HENCE, THE ASSESSEE DID NOT CHARGE THE INTEREST ON THE AMOUNT OF RS.40,53,559/-. AT THE SAME TIME ASSESSEE HAD DEBI TED THE AMOUNT OF RS.1,62,572/- TOWARDS THE INTEREST WHICH WAS CLA IMED TO HAVE BEEN PAID TO SIX INDIVIDUAL AND RS.65,240/- TO G.E. CAPITAL. ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THA T THE SUM OF RS.13,48,085/- IS GIVEN AS INTEREST FREE LOAN TO SI STER CONCERN. IN RESPECT OF RS.13,58,790/- MONEY WAS ADVANCED TO DIF FERENT PARTIES LIKE DEEPCHAND OSWAL, S.B.SANKLA, ASHOK JAIN, WHICH WAS IN THE NATURE OF TRADING ADVANCES. ASSESSEE ALSO PLEADED THAT THE CAPITAL ACCOUNT BALANCE AS ON 31.03.2006 WAS TO THE EXTENT OF RS.21,14,400/-. IN RESPECT OF A.Y. 2007-08 AS OBSE RVED BY THE ASSESSING OFFICER, THE ASSESSEE HAS MADE THE ADVANC ES TO THE EXTENT OF RS.94,13,089/- ON WHICH NO INTEREST WAS CHARGED. AT THE SAME 15 TIME, ASSESSEE HAS DEBITED THE AMOUNT TOWARDS THE I NTEREST OF RS.4,39,797/- WHICH WAS CLAIMED TO HAVE BEEN PAID T O NINE INDIVIDUALS. ASSESSEE COULD NOT GIVE CONVINCING EX PLANATION AND HENCE THE ASSESSING OFFICER DISALLOWED THE ENTIRE A MOUNT DEBITED BY THE ASSESSEE TOWARDS INTEREST TO THE EXTENT OF RS.4 ,39,797/-. 25. IN RESPECT OF SHRI SANJAY M.RAISONI, IN THE A.Y . 2006-07 AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE HAS DEBITED TO P & L ACCOUNT TOWARDS THE AMOUNT OF INTEREST OF RS.83,559 /- PAID TO SIX INDIVIDUALS AND RS.20,145/- PAID TO G.E. CAPITAL. THE ASSESSING OFFICER HAS NOTED THAT ASSESSEE HAD ADVANCED RS.66, 37,551/- TO DIFFERENT INDIVIDUALS WITHOUT CHARGING OF INTEREST, BUT AT THE SAME TIME HAS SHOWN TO HAVE PAID INTEREST TO SOME PRIVAT E PARTIES BY DEBITING TO THE PROFIT & LOSS ACCOUNT. THE ASSESSI NG OFFICER ALSO REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLO WED THE ENTIRE INTEREST. IN THE A.Y. 2007-08, IT WAS NOTICED BY T HE ASSESSING OFFICER THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS.2 ,50,147/- TOWARDS THE INTEREST PAYMENT AND AT THE SAME TIME A S PER THE BALANCE SHEET IT WAS NOTICED BY THE ASSESSING OFFIC ER THAT ASSESSEE HAS ADVANCED RS.92,14,750/- BUT INTEREST IS ONLY CH ARGED OF RS.1,73,827/-. THE ASSESSING OFFICER, THEREFORE, D ISALLOWED THE INTEREST DEBITED BY THE ASSESSEE TO PROFIT & LOSS A CCOUNT. SAME WAY, THE ASSESSING OFFICER MADE DISALLOWANCE IN RES PECT OF SHRI SANTOSH M.RAISONI IN A.YS. 2006-07 AND 2007-08 AND ALSO IN RESPECT OF SMT.SAPNA S.RAISONI IN THE A.Y. 2007-08. THE ASSESSEES CARRIED THE ISSUES BEFORE THE LD. CIT(A) BUT WITHOU T SUCCESS. 26. WE HAVE HEARD THE PARTIES ON THIS ISSUE. WE FI ND THAT THE CONTENTION OF THE ASSESSEES THAT THERE WERE TRADE A DVANCES ON WHICH NO INTEREST WAS CHARGED, THAT HAS NOT BEEN PR OPERLY APPRECIATED BY THE AUTHORITIES BELOW. AS ADMITTEDL Y, THE ASSESSEE IS ALSO BIDDING THE AUCTIONS OF MSRTC AND, HENCE, THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT COMPRISING THE ELEMENT OF INTEREST PAID FOR THE DELAYED PAYMENTS ON THE BIDDING OF THE AUCT IONS TO MSRTC. MOREOVER, WE ALSO FIND THAT AS CONTENDED BY THE ASS ESSEE, THE CAPITAL ACCOUNT OF THE ASSESSEE IS SUBSTANTIALLY CR EDIT BALANCES. IF IT 16 IS SO, THEN TO THAT EXTENT IT CAN BE SAID THAT THE ASSESSEE HAS ADVANCED THE MONEY INTEREST-FREE, OTHERWISE ALSO OU T OF ASSESSEES OWN CAPITAL. THIS ISSUE NEEDS RECONSIDERATION. WE ACCORDINGLY SET ASIDE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION. HE SHOULD CALL FOR THE REMAND REPORT OF THE ASSESSI NG OFFICER AND ADJUDICATE THE ISSUE AFTER HEARING THE ASSESSEES. 27. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF MAY, 2013. SD/- SD/- ( R.K.PANDA ) ( R.S.PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 20 TH MAY, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-2(1), PUNE. 3. THE CIT(A)-II, PUNE. 4. THE CIT-II, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.