Deputy Commissioner of Income-tax, V. Shri Rajednra Bansilal Raisoni, Pune

ITA 1264/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5303 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-04-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: VIPIN GUJRATHI
• Keywords: Depreciation; Salary income; Proportionate interest; Additional evidence; Tax effect
• Section: 143(3); 153A; 132; 12; 28; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S. 1264 & 954 /P U N/201 6 / ASSESSMENT YEAR S : 200 5 - 06 & 2008 - 09 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 , NASHIK ....... / APPELLANT / V/S. SHRI RAJENDRA BANSILAL RAISONI, 45, MOTI BAUG, BIBVEWADI SATARA ROAD, PUNE 411037 PAN : AASPR4761K / RESPONDENT ASSESSEE BY : S HRI VIPIN GUJRATHI REVENUE BY : S MT. NIRUPAMA KOTRU / DATE OF HEARING : 24 - 04 - 201 8 / DATE OF PRONOUNCEMENT : 20 - 0 7 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH E REVENUE IN ITA NO. 1264/PUN/2016 HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 12, PUNE DATED 16 - 03 - 2016 FOR THE ASSESSMENT YEAR 2005 - 06. ITA NO. 954/PUN/2016 BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 12, 2 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 PUNE DATED 23 - 02 - 2016 FOR THE ASSESSMENT YEAR 2008 - 09 AGAINST DELETING OF THE ADDITIONS MADE BY ASSESSING OFFICER. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS ARE ARISING FROM SAME SET OF FACTS AND SIMILAR GROUNDS HAVE BEEN RAISED BY THE REVENUE IN BOTH THE APPEALS, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND DISPOSED OF VIDE THIS COMMON ORDER. ITA NO. 1264/PUN/2016 (A.Y. 2005 - 06) 2. TH E FACTS OF THE CASE HAVE BEEN CULLED OUT FROM THE APPEAL OF REVENUE FOR ASSESSMENT YEAR 2005 - 06. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF HIRING OF TIPPER S. THE ASSESSEE WAS ALSO ENGAGED IN THE BUSINESS OF TRADING OF GOODS THROUGH HIS PROPRIETARY CONCERN M/S. SHUBHAM EXPORTS. IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2005 - 06 , THE ASSESSEE HAS ALSO RECEIVED SALARY INCOME FROM M/S. ASHOKA BUILDERS PVT. LTD. THE ASSESSEE FILED ORIGINAL RETURN OF INCOME U/S. 139 OF THE ACT ON 20 - 07 - 20 06 DECLARING TOTAL INCOME OF RS.3,22,500/ - . A SEARCH ACTION U/S. 132 WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE. NOTICE U/S. 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 25 - 02 - 2011. IN RESPONSE TO THE SAID NOTICE TH E ASSESSEE FILED RETURN OF INCOME ON 17 - 10 - 2011 DECLARING INCOME OF RS.3,22,500/ - . WHILE FINALIZING THE ASSESSMENT, THE ASSESSING OFFICER MADE FOLLOWING ADDITIONS/DISALLOWANCES IN THE INCOME RETURNED : I . ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES IN M/S. SHUBHAM EXPORTS RS.28,46,783/ - . II . ADDITION ON ACCOUNT OF PROFIT ON SALE OF LAND RS.32,53,605/ - . AGGRIEVED BY THE ASSESSMENT ORDER DATED 26 - 03 - 2013, PASSED U/S. 143(3) R.W.S. 153A OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE 3 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE A UTHORITY AFTER ADMITTING ADDITIONAL EVIDENCE S GRANTED PART RELIEF TO THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED RS.19,21,835/ - ON ACCOUNT OF DISALLOWANCE OF EXPENSES IN RELATION TO M/S. SHUBHAM EXPORTS . 3. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) , THE REVENUE IN APPEAL BEFORE THE TRIBUNAL HAS RAISED FOLLOWING GROUNDS : 1) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD CIT(A) ,HAS ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE, CONSIDERING THE FACT THAT THE ASSESSE E WAS PROVIDED TIME AND OPPORTUNITY DURING THE ASSESSMENT TO SUBMIT DOCUMENTARY EVIDENCES AND EXPLAIN THE RETURN OF INCOME. THE HON'BLE CIT(A) ERRED IN NOT ACCEPTING THE FACT THAT THE ASSESSEE FAILED TO EXPLAIN THE CIRCUMSTANCES WHICH PREVENTED HIM IN SUB MITTING THE SAID ADDITIONAL EVIDENCES DURING THE ASSESSMENT PROCEEDINGS EVEN THOUGH AMPLE OPPORTUNITIES WERE PROVIDED FOR THE SAME. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION TO THE EXTENT OF RS.19,21, 835/ - MADE THE AO ON A/C OF EXPENSES IN M/S. SHUBHAM EXPORTS. 3) ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ACCEPTING THE FACT THAT THE ASSESSEE HAD UTILIZED THE BORROWED FUNDS FOR NON BUSINESS PURPOSE AND ERRED IN DELETING THE A DDITION TO THE EXTENT OF RS19,21 ,835/ - MADE U/S 36(1 )(III) OF THE ACT. 4) ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN ALLOWING THE SET OFF AND CARRIED FORWARD OF LOSS OF RS . 41,41,769/ - DURING THE YEAR UNDER CONSIDERATION ACCEPTING THE ADDITIONAL EVIDENCE, WHEN THE ASSESSEE FAILED TO SUBMITTED THE SAME DURING THE ASSESSMENT PROCEEDINGS EVEN THOUGH AMPLE OPPORTUNITIES WERE PROVIDED FOR THE SAME. 5) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 4 . SMT. NIRUPAMA KOTRU REPRESENTING THE DEPARTMENT SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCES FILED BY THE ASSESSEE DURING THE FIRST APPELLATE PROCEEDINGS. SUFFICIENT OPPORTUNITY OF HEARING WAS GRANTED TO THE ASSESSEE BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSEE FAILED TO FURNISH THE DOCUMENT S IN SUPPORT OF HIS SUBMISSIONS. 4 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 NO PLAUSIBLE REASON HAS BEEN GIVEN BY THE ASSESSEE FOR NOT FURNISHING THE DOCUMENTS DURING A SSESSMENT PROCEEDINGS. THE LD. DR CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER PLACING RELIANCE ON THE ADDITIONAL EVIDENCE S ALLOWED THE ASSESSEE TO SET OFF AND CARRIED FORWARD LOSS ES TO THE TUNE OF RS.41,41,769/ - . THE ASSESSING OFFICER IN REMAND REPORT VEHEMENTLY OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. 5. ON THE OTHER HAND SHRI VIPIN GUJRATHI APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDING THE IMPUGNED ORDER SUBMITTED THAT DURING ASSESSMENT PROCEEDI NGS SUFFICIENT OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE FOR FURNISHING NECESSARY DOCUMENTS FOR PROPER ADJUDICATION OF THE CASE. S PECIFIC SHOW CAUSE NOTICE FOR THE FIRST TIME WAS ISSUED TO THE ASSESSEE BY ASSESSING OFFICER ON 15 - 03 - 2013. THE SAID SHOW CA USE NOTICE WAS SERVED ON THE ASSESSEE ON 18 - 03 - 2013 AND THE ASSESSMENT ORDER WAS PASSED ON 26 - 03 - 2013. IN THE SHORT PERIOD OF ONE WEEK THE ASSESSEE COULD NOT PRODUCE ALL THE NECESSARY DOCUMENTS TO SUPPORT HIS CONTENTIONS. THE COMMISSIONER OF INCOME TAX ( APPEALS) APPRECIATED THIS FACT AND ACCEPTED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS SOUGHT REMAND REPORT FROM THE ASSESSING OFFICER IN R ESPECT OF ADDITIONAL EVIDENCES FI LED. THE LD. AR POINTED THAT THE ASSESSEE IN ADDITIONAL EVIDENCES HAD FILED THE COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 - 04 AND COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2003 - 04. THE ASSESSING OFFICER MERELY OPPOSED ADMISSION OF ADDITIONAL EVIDENCES BUT DID NOT COMMENT ON THE MERITS OF ADDITIONAL EVIDENCES. 5 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 5.1 IN RESPECT OF GROUND NOS. 2 AND 3 RELATING TO DELETING OF ADDITION OF RS.19,21,835/ - ON ACCOUNT OF EXPENSES TO M/S. SHUBHAM EXPORTS THE LD. AR PLACED RELIANCE ON THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN PARAS 4.4 TO 4.7 OF THE IMPUGNED ORDER. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE REVENUE IN GROUND NO S. 1 AND 4 OF THE APPEAL HAS IMPUGNED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ADMITTING ADDITIONAL EVIDENCE FILED BY THE ASSESSEE DURING FIRST APPELLATE PROCEEDINGS. IT IS AN UNDISPUTED FACT THAT THE COMMISSIONER OF INCOME TAX (APPEALS) BEFOR E ACCEPTING ADDITIONAL EVIDENCE HAD SOUGHT THE COMMENTS OF ASSESSING OFFICER ON THE DOCUMENTS FILED BY THE ASSESSEE AS ADDITIONAL EVIDENCE. THE ASSESSING OFFICER IN ITS REMAND REPORT VEHEMENTLY OPPOSED THE ADMISSION OF DOCUMENTS FILED BY THE ASSESSEE AS A DDITIONAL EVIDENCE. THE DOCUMENTS ON RECORD INDICATE THAT THE SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE BY THE ASSESSING OFFICER FOR THE FIRST TIME ON 15 - 03 - 2013. THE SAID NOTICE WAS SERVED ON THE ASSESSEE ON 18 - 03 - 2013. THE ASSESSEE REPLIED TO THE S HOW CAUSE NOTICE ON 25 - 03 - 2013 AND ON 26 - 03 - 2013 THE ASSESSMENT ORDER WAS PASSED. THE CHRONOLOGY OF EVENTS CLEARLY INDICATES THAT THE ASSESSEE DID NOT HAVE SUFFICIENT TIME TO RESPOND TO THE QUERIES RAISED BY THE ASSESSING OFFICER IN THE SHOW CAUSE NOTICE DATED 15 - 03 - 2013. THE COMMISSIONER OF INCOME TAX (APPEALS) APPRECIATED THIS FACT AND ACCEPTED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING ADDITIONAL EVIDEN CE FILED BY THE ASSESSEE DURING FIRST APPELLATE PROCEEDINGS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAD GIVEN DUE OPPORTUNITY TO THE ASSESSING OFFICER TO COMMENT ON THE DOCUMENTS 6 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 FURNISHED BY THE ASSESSEE AS ADDITIONAL EVIDENCE BUT THE ASSESSING OFFICER MERELY CHOSE TO OPPOSE THE ADMISSION OF THESE DOCUMENTS WITHOUT COMMENTING ON THE MERITS OF THE ADDITIONAL EVIDENCE. IN VIEW OF OUR ABOVE OBSERVATIONS THE GROUND NOS. 1 AND 4 RAISED IN THE APPEAL BY THE REVENUE ARE DISMISSED BEING DEVOID OF ANY MERIT. 7. IN GROUND NOS. 2 AND 3 OF THE APPEAL, THE REVENUE HAS ASSAILED DELETING OF THE ADDITION OF RS.19,21,835/ - IN RESPECT OF EXPENDITURE INCURRED ON ACCOUNT OF M/S. SHUBHAM EXPORTS , A PROPRIETARY CONCERN OF THE ASSESSEE/RESPONDENT. THE ASSESSEE HAD CLAIMED LOSS OF RS.28,46,783/ - WHICH WAS PRIMARILY ON ACCOUNT OF INTEREST CHARGES PAID TO THE BANK ON ACCOUNT OF LOAN TAKEN BY THE ASSESSEE DURING FINANCIAL YEAR 2001 - 02. THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAD ADVANCED BORROWED FUNDS FOR NON - BUSINESS PU RPOSE TO M/S. SHUBHAM EXPORTS AND HENCE DISALLOWED THE SAME U/S. 36(1)(III) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO RS.9,24,948/ - BY OBSERVING IN PARA 4.7 OF THE IMPUGNED ORDER AS UNDER : IT CAN BE SEEN THAT AT THE BEGINNING OF THE YEAR THERE WERE BORROWED FUNDS OF RS.4.56 CR WHICH HAS GONE DOWN TO RS.4.04 CR AT THE END OF THE YEAR. AVERAGE BORROWED FUNDS WERE OF RS.4.30 CR. APPELLANT'S DEBIT BALANCE IN CAPITAL ACCOUNT STOOD AT RS.2.18 CR AS ON 1.4.2004 WHICH IN CREASED TO RS.2.46 CR AFTER INCLUDING THE LOSS INCURRED DURING THE YEAR. AS DISCUSSED EARLIER, APPELLANT'S DEBIT BALANCE INCLUDED LOSS SUFFERED BY THE CONCERN DURING FY 2002 - 03 OF RS.0.78 CR. THEREFORE, OUT OF BORROWED FUNDS APPELLANT HAD DIVERTED BORROWE D FUNDS TO THE EXTENT OF RS.1.4 CR (RS.2.18 CR RS.0.78 CR) FOR NON - BUSINESS PURPOSES. APPELLANT WAS SPECIFICALLY ASKED TO SHOW IF DIVERTED FUNDS WERE USED FOR THE PURPOSE OF BUSINESS AND APPELLANT HAD FAILED TO FURNISH ANY DETAILS. THEREFORE, IT IS HELD THAT OUT OF AVERAGE BORROWED FUNDS OF RS.4.3 CR, FUNDS TO THE EXTENT OF RS.1.4 CR WERE NOT USED FOR THE PURPOSE OF BUSINESS. ACCORDINGLY IN VIEW OF THE PROVISION OF SECTION 36(1)(III) OF THE ACT, PROPORTIONATE INTEREST WOULD NOT BE ADMISSIBLE. INTEREST PAI D ON THE FUNDS DIVERTED FOR NON - BUSINESS PURPOSES WOULD BE RS.9,24,948 (RS 28,40,911 X 1.4 / 4.3). DISALLOWANCE MADE OUT OF THE INTEREST EXPENDITURE IS UPHELD TO THE EXTENT OF RS.9,24,948. APPELLANT GETS RELIEF OF RS.19,15,963 ON ACCOUNT OF DISALLOWANCE O F INT EREST, RS . 2,848 ON ACCOUNT OF DISALLOWANCE OF BANK CHARGES AND OF RS . 3,024 OF ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. GROUND RAISED BY THE APPELLAN T IS PARTLY ALLOWED. 7 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (A PPEALS) ON THIS ISSUE. ACCORDINGLY, THE SAME ARE UPHELD AND THE GROUND NOS. 2 AND 3 RAISED IN THE APPEAL BY THE REVENUE ARE DISMISSED BEING DEVOID OF ANY MERIT. 8. WE FURTHER OBSERVE THAT THE TAX EFFECT IN THE APPEAL IS LESS THAN RS.20 LAKHS. THE RECENT CBDT C IRCULAR NO. 3/2018, DATED 11 - 07 - 2018 HAS RAISED THE MONETARY LIMIT OF TAX EFFECT FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL TO RS.20 LAKHS. THE CIRCULAR APPLIES TO THE APPEALS TO BE FILED BY THE DEPARTMENT IN FUTURE, AS W ELL AS THE APPEALS PENDING BEFORE THE TRIBUNAL. THUS, IN VIEW OF THE CBDT CIRCULAR THE PRESENT APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT AS WELL . 9. IN THE RESULT, THE APPEAL OF REVENUE FOR THE ASSESSMENT YEAR 2005 - 06 I S DISMISSED. ITA NO. 954 /PUN/2016 (A.Y. 200 8 - 09 ) 10. IN THE ASSESSMENT YEAR 2008 - 09 THE ASSESSEE HAS FILED RETURN OF INCOME U/S. 139 OF THE ACT ON 24 - 05 - 2010 DECLARING LOSS OF RS.4,19,450/ - . CONSEQUENT TO THE SEARCH , NOTICE U/S. 153A WAS ISSUED TO THE ASSESSEE ON 25 - 02 - 2011. IN RESPONSE TO THE SAID NOTICE , THE ASSESSEE FILED RETURN OF INCOME ON 17 - 10 - 2011 DECLARING LOSS OF RS.4,19,450/ - . IN THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE FOLLOWING ADDITIONS/DISALLOWANCES IN THE INCOME RETURNED B Y THE ASSESSEE : I . DISALLOWANCE OF LOSS FROM M/S. SHUBHAM EXPORTS RS.23,52,479/ - . II . DISALLOWANCE OF INTEREST ON BORROWED FUNDS USED FOR NON - BUSINESS PURPOSE RS. 15,26,200/ - . 8 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 III . DISALLOWANCE OF EXPENSES CLAIMED IN M/S. SHUBHAM AGENCIES RS.5,01,694/ - . IV . ADDITION U/S. 40(A)(IA) ON INTEREST PAID TO NBFC WITHOUT DEDUCTION OF TDS RS.40,170/ - . AG AINST THE ASSESSMENT ORDER DATED 26 - 03 - 2013, PASSED U/S. 143(3) R.W.S. 153A OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER GRANTED PART RELIEF TO THE ASSESSEE. AGAINST THE RELIEF GRANTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSEE/RESPONDENT THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOW ING GROUNDS : 1) ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS GIVEN OPPORTUNITIES TO THE ASSESSEE FOR SUBMITTING THE NECESSARY DOCUMENTS AND ALSO TO EXPLAIN THE RETURN OF INCOME DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS ON VARIOUS DATES THE ASSESSEE FAILED TO SUBMIT THE DOCUMENTS IN QUESTION AT THE TIME OF ASSESSMENT PROCEEDINGS. 2) ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE IN CIRCUMSTANCES WHEN THE ASSESSEE FAILED TO EXPLAIN WHY THE SAME WAS NOT SUBMITTED BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS EVEN THOUGH AMPLE TIME WAS PROVIDED FOR THE SAME. 3) ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD C IT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 23,52,479/ - ,MADE ON ACCOUNT OF DISALLOWANCE OF LOSS CLAIMED FROM PROPRIETARY CONCERN. 4) ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15,26, 200 / - U/S 36(1 )(III) OF THE IT ACT. THE LEARNED CIT(A ) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE WAS PAYING HUGE INTEREST ON LOANS AND HAS FORWARDED INTEREST FREE LOANS FOR NON BUSINESS PURPOSE. 5) ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 4,71,694/ - MADE ON ACCOUNT OF EXPENSES MADE FOR NON BUSINESS PURPOSE. 6) THE APPELLANT CRAVES TO ADD, AMEND OR DELETE ANY OF THE ABOVE GROUNDS. 9 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 11. THE GROUND NOS. 1 AND 2 OF THE APPEAL ARE IN RESPECT OF A DMITTING ADDITIONAL EVIDENCE . AS WAS THE CASE IN THE ASSESSMENT YEAR 2005 - 06 , THE SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE BY ASSESSING OFFICER ON 15 - 03 - 2013 WHICH WAS SERVED ON THE ASSESSEE ON 18 - 03 - 2013. THE ASSESSEE REPLIED TO THE SHOW CAUSE NOTIC E ON 23 - 03 - 2013 AND THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 153A WAS PASSED ON 26 - 03 - 2013. IN THE SHORT SPAN OF 10 DAYS THE ASSESSEE COULD NOT PRODUCE ALL THE REQUISITE DOCUMENTS AS SOUGHT BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS ) APPRECIATED LACK OF TIME FACED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS AND ACCEPTED THE ADDITIONAL EVIDENCE FILED DURING THE FIRST APPELLATE PROCEEDINGS. THE COMMISSIONER OF INCOME TAX (APPEALS) BEFORE ADMITTING T HE DOCUMENTS FILED BY THE ASSESSEE HAD SOUGHT COMMENTS OF THE ASSESSING OFFICER ON THE ADMISSIBILITY AS WELL AS ON THE MERITS OF ADDITIONAL EVIDENCES. THE ASSESSING OFFICER MERELY OBJECTED TO THE ADMISSION OF THE DOCUMENTS AS ADDITIONAL EVIDENCE AND DID NOT COMMENT ON THE MERITS OF DOCUME NTS AND THE SUBMISSIONS MADE BY THE ASSESSEE. IN THE FACTS OF THE CASE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ADMITTING ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE DURING FIRST APPELLATE PROCEEDINGS. ACCORD INGLY, GROUND NOS. 1 AND 2 RAISED IN THE APPEAL BY THE REVENUE ARE DISMISSED BEING DEVOID OF ANY MERIT. 12. IN RESPECT OF GROUND NO. 3 RELATING TO DISALLOWANCE OF LOSS CLAIMED IN RESPECT OF M/S. SHUBHAM EXPORTS. WE FIND THAT THE ASSESSEE HAD IMPORTED CEMENT FROM PAKISTAN. THE CUSTOM AUTHORIT IES DID NOT CLEAR IMPORT CONSIGNMENT OF THE ASSESSEE AS THE QUALITY OF THE CEMENT FAILED TO QUALIFY THE STANDARD S FIXED BY THE BUREAU OF INDIAN STANDARD (BIS). THE ASSESSEE 10 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 SUFFERED LOSS AS THE CONSIGNMENT WAS REJ ECTED. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE ASSESSEES CLAIM BY OBSERVING AS UNDER : IN VIEW OF T HE FACTS THAT APPELLANT HAD IMPORTED THE CEMENT AND REMITTED THE PURCHASE AMOUNT TO THE EXPORTER AND ALSO INCURRED OTHER MISCELLANEOUS EXPEND ITURE LIKE C&F CHARGES, SAMPLING CHARGES, BANK CHARGES ETC. THEREAFTER QUALITY OF CEMENT IMPORTED WAS NOT FOUND TO BE OF REQUISITE STANDARD BY THE BIS HENCE APPELLANT COULD NOT GET THE CONSIGNMENT CLEARED FROM THE CUSTOMS AUTHORITY. NO MONEY WAS REALIZED B Y THE APPELLANT AFTER IMPORT OF GOODS AS SAME COULD NOT BE SOLD BY HIM AND THIS HAS RESULTED IN THE LOSS TO THE APPELLANT WHICH IS ALLOWABLE AS BUSINESS LOSS U/S. 28 OF THE ACT. THE ADDITION MADE BY THE AO OF RS.23,52,479 IS DELETED AND GROUND RAISED BY T HE APPELLANT IS ALLOWED. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) , HENCE, THE SAME ARE UPHELD AND GROUND NO. 3 RAISED IN THE APPEAL BY THE REVENUE IS DISMISSED. 1 3 . IN GROUND NO. 4 OF THE APPEAL THE REVENUE HAS ASSAILED DELETING OF ADDITION OF RS.15,26,200/ - U/S. 36(1)(III) OF THE ACT. THE LD. AR HAS POINTED THAT NO BORROWED FUNDS WERE UTILIZED BY THE ASSESSEE FOR ADVANCING TO M/S. SHUBHAM EXPORTS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN CATEGORI C FINDINGS ON THIS ISSUE. THE SAME IS REPRODUCED HERE - IN - BELOW : 6.4 I HAVE GONE THROUGH THE PROFIT AND LOSS ACCOUNTS AND THE BALANCE SHEET OF THE PROPRIETARY CONCERNS M/S. SHUBHAM EXPORTS, M/S. SHUBHAM AGENCIES AND CONSOLIDATED AUDITED BALANCE SHEET OF THE APPELLANT. IN THE BALANCE SHEET OF M / S SHUBHAM EXPORTS AS ON 31.3.2008 THERE ARE BORROWED FUNDS OF RS . 2,86,09,194 AND SAME WERE APPLIED IN FORM OF DEBIT BALANCE OF APPELLANT'S CAPITAL AT RS . 32,32,891, ADVANCE TO SUREKHA RAISONI OF RS . 1,52,62,000, DEBTORS OF RS . 95,77,247. HOWEVER, IN THE PROFIT AND LOSS ACCOUNT INTEREST WAS DEBITED TO THE EXTENT OF RS . 6,546 AND BALANCE AMOUNT OF RS . 30,76,680 WAS SHOWN AS INTEREST SUSPENSE UNDER THE GROUPING LOAN AND ADVANCES. IN THE ACCOUNTS OF M /S. SHUBHAM AGENCI ES, BORROWED FUNDS WERE APPLIED IN FORM OF STOCK, ADVANCES, DEBTORS AND INTEREST BEARING LOAN TO M /S. B.B. RAISONI & SONS. NET INTEREST DEBITED TO M/S. SHUBHAM AGENCIES WAS RS . 11,57,117 AND NO PART OF BORROWED FUNDS WERE FOUND TO BE DIVERTED FOR PERSONAL P URPOSE. THE APPELLANT HAD DEMONSTRATED THE NEXUS OF FUNDS WITH THE HELP OF BANK STATEMENTS WHICH SHOW THAT MONEY RECEIVED FROM SALE OF LAND WAS ROUTED THROUGH M/S . SHUBHAM EXPORTS TO SMT. SUREKHA RAISONI. NO BORROWED FUNDS AS PER FUND FLOW WERE USED FOR THIS PURPOSE. IN THE BOOKS OF M/S SHUBHAM EXPORTS, INTEREST ON BORROWED FUND WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE DISALLOWANCE MADE BY THE A O IS BASED ON THE 11 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 PREMISE THAT APPELLANT COULD HAVE REPAID BORROWED FUNDS OUT OF SALE PROCEED OF THE LAND AND COULD HAVE REDUCED THE INTEREST BURDEN. THE A O CANNOT STEP IN THE SHOES OF THE BUSINESSMAN DECIDE AS TO HOW TO MANAGE THE AFFAIRS. FOR MAKING DISALLOWANCE U/S . 36(1 )(III), THE A O HAS TO DEMONSTRATE THAT BORROWED FUNDS WERE DIVERTED FOR NON - BUSINES S PURPOSES. IN THE PRESENT CASE, A O HAD NOT GATHERED ANY SUCH DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO CONCLUDE THAT BORROWED FUNDS WERE APPLIED FOR NON - BUSINESS PURPOSES AND ON THE OTHER HAND APPELLANT DEMONSTRATED THE NEXUS OF SALE PROCEED OF LAND WITH THE MONEY ADVANCED TO SUREKHA RAISONI. THEREFORE, ESTIMATED DISALLOWANCE U/S . 36(1)(III) MADE BY THE A O WAS NOT JUSTIFIED. ADDITION MADE BY THE AO OF RS.15,26,200 IS DELETED AND GROUND RAISED BY THE APPELLANT IS ALLOWED. THE LD. DR HAS FAI LED TO CONTROVERT THE WELL REASONED FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). IN OUR CONSIDERED OPINION NO INTERFERENCE IS REQUIRED IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ALLOWING ASSESSEES CLAIM. ACCORDINGLY, GROUND NO. 4 RAISED IN THE APPEAL BY THE REVENUE IS DISMISSED. 1 4 . IN GROUND NO. 5 OF THE APPEAL THE REVENUE HAS ASSAILED DELETING THE ADDITION OF RS.4,71,694/ - MADE ON ACCOUNT OF VARIOUS EXPENSES WHICH INTER ALIA INCLUDES POSTAGE AND TELEPHONE, PROFESSIONAL FEE, LEGAL EXPENSES, LOAN PROCESSING CHARGES ETC. WE OBSERVE THAT THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS.5,01,694/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER EXAMINING THE FACTS UPHELD AD HOC ADDITION OF RS.30,000/ - AND DELETED THE REMAINING AMOUNT. ON ACCOUNT OF SMALLNESS OF THE AMOUNT INVOLVED ON VARIOUS EXPENDITURE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, GROUND NO. 5 RAISED IN THE APPEAL BY THE REVENUE IS DISMISSED. 1 5 . WE FURTHER OBSERVE THAT THE TAX EFFECT IN THE APPEAL IS LESS THAN RS.20 LAKHS. THE RECENT CBDT C IRCULAR NO. 3/2018, DATED 11 - 07 - 2018 HAS RAISED THE MONETARY LIMIT OF TAX EFFECT FOR FILING OF APPEALS BY THE 12 ITA NO S. 1264 & 954/PUN/2016, A.YS. 2005 - 06 & 2008 - 09 DEPARTMENT BEFORE THE TRIBUNAL TO RS.20 LAKHS. T HE CIRCULAR APPLIES TO THE APPEALS TO BE FILED BY THE DEPARTMENT IN FUTURE, AS WELL AS THE APPEALS PENDING BEFORE THE TRIBUNAL. THUS, IN VIEW OF THE CBDT CIRCULAR THE PRESENT APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT , AS WELL . 1 6 . IN THE RESULT, THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 IS DISMISSED. 1 7 . TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 20 TH DAY OF JULY, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 20 TH JULY, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1 2 , PUNE 4. THE PR. CIT, CENTRAL, NAGPUR 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE