The ACIT,(OSD), Circle-5, Ahmedabad V. Oracle Granito Pvt.Ltd., Ahmedabad

ITA 1444/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5969 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Capital asset
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, AHMEDABAD BEFORE SHRI R. P. TOLANI, VICE PRESIDENT AND SHRI AMARJIT SINGH , ACCOUNTANT MEMBER ./ ITA.NO. 1444 / AHD /201 2 / ASSTT. YEAR: 2008 - 2009 ACIT(OSD), CIRCLE - 5, AHMEDABAD VS . ORACLE GRANITO PVT. LTD. 206, DEV ARC, S.G. HIGHWAY, ISCON CRESS ROAD, AHMEDABAD - 380015 PAN NO.AAACO6238P (APPLICANT) (RESPONENT) REVENUE BY : SHRI JAMES KURIAN, SR.DR ASSESSEE BY : SHRI ASSEM L. THAKKAR, AR / DATE OF HEARING : 0 6 / 04 / 201 7 / DATE OF PRONOUNCEMENT: 04 / 05 /201 7 / O R D E R PER AMARJIT SINGH , ACCOUNTANT MEMBER : PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE L D.CIT(A) - XI, AHMEDABAD DATED 24.04.2012 PASSED FOR THE ASSTT.YEAR 2008 - 09 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. I) THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.21,72,700/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT. II) THE ID. CIT(A) HAS ERRED IN L AW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST UND ER THE PROVISO TO S ECTION 36(L)(III) OF THE ACT OF RS.10,43,063/ - III) THE ID. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.41,97,900/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AD JUSTMENT IN THE V ALUE OF C LOSING STOCK U/S.145A OF THE I.T. ACT. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 2 V) IT IS, THEREFORE, PRAYED THAT THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. IN THIS CASE RETURN OF INCOME DECLARING RS.2,46,93,530/ - WAS FILED ON 26/09/2008. THEREAFTER, CASE WAS SELECTED UNDER SCRUTINY BY ISSUING NOTICE U/S.143(2) OF THE ACT. THE FACTS OF CASE ARE DISCUSSED AS UNDER DIFFERENT GROUNDS OF APPEAL OF THE ASSESSEE. 3 . APROPOS TO GROUND NO.1 THE LEARNED ASSESSING OFFICER (IN S HORT LD.AO) D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE NOTICED THAT ASSESSEE HAS INTRODUCED CREDIT OF RS.2 , 73 , 51 , 600/ - IN THE FORM OF SHARE CAPITAL. THE LD.AO OBSERVED THAT ALL THOSE PERSONS WHO CONTRIBUTED TOWARDS SHARE CAPITAL WERE THE CLOSE RELATIVES OR HUF OF THE ASSESSEE - COMPANY. THEREAFTER, LD.AO ASKED THE ASESSEE TO FURNISH NAME, ADDRESSES, PAN AND CONFIRMATION LETTERS FROM THE PARTIES WHO HAD CONTRIBUTED TOWARDS SHARE CAPITAL IN THE ASSESSEE - COMPANY. SUBSEQUENTLY, LD.AO NOTICED THAT IN THE BANK ACCOUNTS OF THE 13 PARTIES AS MENTIONED BELOW, THERE WAS C ASH DEPOSIT IN THE BANK ACCOUNT IMMED IATELY BEFORE ISSUING OF CHEQUE IN FAVOUR OF ASSESSEE TOWARDS SUBSCRIPTION OF THE SHARE CAPITAL . SR.NO. NAME OF SHARE ALLOTEE AMOUNT RS. 1 MANJUBEN KHEMABHAI PATEL 50,000/ - 2. HARIBHAI RAMABHAI PATEL 75,000/ - 3. NARAYANBHAI RAMABHAI PATEL 75,000/ - 4. RAVINDRABHAI DHANJIBHAI PATEL 75,000/ - 5. MAHESHBHAI DAHYABHAI PATEL 90,000/ - 6. KEMABHAI PUNJABHAI PATEL 1,00,000/ - 7. REVABEN VALJIBHAI PATEL 1,20,000/ - ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 3 8. MAGANBHAI BECHERBHAI PATEL 1,25,000/ - 9. PRADIPKUMAR DAHYABHAI PATEL 1,40,000/ - 10. VASANTBHAI AMICHANDBHAI PATEL 1,89,800/ - 11. KAMLESHBHAI BECHARBHAI PATEL 1,89,800/ - 12. KAMLESHBHAI AMTHABHAI PATEL 3,05,000/ - 13. SANKARBHAI KALIDAD PATEL 5,27,900/ - IN THIS CONNECTION, LD.AO ASKED ASSESSEE TO EXPLAIN THE SOURCE OF CASH DEPOSIT S WITH EVIDENCE IN THE BANK ACCOUNT OF THE ABOVE STATED PARTIES. THEREAFTER, LD.AO HELD THAT THE ASSESSEE FAILED TO F URNISH ANY EXPLANATION ABOUT THE SOURCE OF CASH DEPOSIT MADE IN THE BANK ACCOUNT OF THESE PARTIES AND ALSO FAILED TO PROVE THE CREDITWORTHINESS OF THESE PARTIES . T HEREFORE A SUM OF RS.2,17,200/ - WAS TREATED AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE INCO ME TAX ACT. 4. AGGRIEVED AGAINST THE ADDITION MADE BY THE LD.AO, THE ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). THE LD.CIT(A) HAS DELETED THE ADDITION MADE BY THE LD.AO BY OBSERVING AS UNDER: - 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I HAVE ALSO PERUSED VARIOUS EVIDENCES FILED BY THE APPELLANT DURING ASSESSMENT PROCEEDINGS AND THE APPELLATE PROCEEDINGS. I HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE APPELLANT. DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T SPECIFICALLY SUBMITTED THAT THE FOLLOWING DOCUMENTS WERE SUBMITTED DURING THE 'ASSESSMENT PROCEEDINGS TO EXPLAIN THE SOURCE OF SHARE CAPITAL RECEIVED BY THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATION. A) CONFIRMATIONS B) COPY OF LEDGER ACCOUN T C) COPY OF L.T.RETURNS D) COPY OF BANK STATEMENT IN FACT THE A.O. HAD ACKNOWLEDGED THE RECEIPT OF THESE DOCUMENTS IN THE ASSESSMENT ORDER, HOWEVER, HE HAD NOTICED THAT IN THE BANK ACCOUNT OF THE PERSON FROM WHOM SHARE CAPITAL WAS RECEIVED, THERE ARE CAS H DEPOSITS OF ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 4 RS.21,72,700/ - .THESE CASH DEPOSITS WERE MADE BEFORE MAKING APPLICATIONS FOR ALLOTMENT OF SHARES. 5.3 THE ABOVE FACTS CLEARLY REVEALS THAT THE PERSONS FROM WHOM SHARE CAPITAL WAS RECEIVED ARE ASSESSED TO TAX AS THEIR PA NUMBERS AND COPIES OF L.T.RETURNS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. IN ADDITION TO THIS, COPY OF BANK ACCOUNT FROM WHERE THESE SHARE CAPITAL WAS RECEIVED WAS ALSO FURNISHED. IN MY CONSIDERED VIEW, THESE DOCUMENTS CLEARLY ESTABLISHED THE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITOR. THIS WAY THE APPELLANT HAS DISCHARGED THE ONUS CAST UPON HIM BY THE PROVISIONS OF SECTION 68 OF THE IT.ACT. 5.4 IT IS A MATTER OF RECORD THAT THE APPELLANT HAS RECEIVED SHARE CAPITAL OF RS.2,73,51,600/ - DURING THE YEAR UNDER CONSIDERATION. OUT OF THIS RECEIPT, THE A.O. HAD MADE AN ADDITION OF RS. 21,72,7007 - U/S.68 OF THE I.T.ACT. IT IS CLEARLY HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELI EXPORT PVT. LTD. 260 ITR 195 THAT IN THE CASE OF SHARE AP PLICATION MONEY, TO DISCHARGE ONUS OF SEC.68, THE APPELLANT HAS TO ESTABLISH THE IDENTITY OF THE PERSONS FROM WHOM SHARE CAPITAL WAS RECEIVED. IN SUCH CASES THE APPELLANT NEED NOT TO PROVE THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CRED ITOR. THE PAN NUMBERS CLEARLY ESTABLISHED THE IDENTITY OF THE PERSONS WHO HAD CONTRIBUTED SHARE CAPITAL AS THESE PERSONS ARE ASSESSED TO TAX. THE A.O. HAD NOWHERE CHALLENGED THE IDENTITY OF THESE PERSONS AND ACCORDINGLY I HOLD THAT ADDITION OF RS. 21,72,70 07 - MADE BY THE A.O. U/S.68 OF THE I.T.ACT IS UNTENABLE. THE A.O. WAS APPARENTLY NOT SATISFIED WITH THE SOURCE OF CASH DEPOSIT OF RS.21,72,7007 - IN THE BANK ACCOUNT OF THE PERSONS WHO HAD CONTRIBUTED THE SHARE CAPITAL. IN MY CONSIDERED VIEW, ADDITION IN TH E HANDS OF THE APPELLANT COMPANY CANNOT BE MADE FOR CASH DEPOSITS IN THE BANK ACCOUNTS' OF SHARE HOLDERS WHO ARE ASSESSED TO TAX. IN CASE THE A.O IS NOT SATISFIED WITH THE SOURCE OF CASH DEPOSIT IN THE BANK ACCOUNT OF SHARE HOLDERS, NECESSARY PROCEEDINGS C AN BE INITIATED IN THE CASES OF SHARE HOLDERS TO TAX THE UNEXPLAINED CASH DEPOSITS, IF ANY, HOWEVER, ADDITION IN RESPECT OF THESE CASH DEPOSITS IN THE BANK ACCOUNT OF SHARE HOLDERS CANNOT BE MADE IN THE HANDS OF APPELLANT COMPANY, ADDITION MADE U/S.68 IN T HE CASE OF THE APPELLANT COMPANY IS TOTALLY UNCALLED FOR. IN VIEW OF ABOVE FACTS, I DO NOT HAVE ANY HESITATION IN DELETING THE ADDITION OF RS.21,72,700/ - . THIS GROUND OF APPEAL IS ALLOWED. 5. APROPOS TO GROUND NO.2 THE LD.AO D URING THE COURSE OF ASSES SMENT PROCEEDINGS NOTICED THAT THE FUNDS UTILIZED FOR ACQUIRING FIXED ASSETS TO THE AMOUNT OF RS.2,54,26,455/ - HAD NOT BEEN CAPITALIZED BY THE ASSESSEE. IN ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 5 RESPONSE TO THE ABOVE QUERY ASSESSEE EXPLAINED THAT THIS ASSETS HAD BEEN FINANCED BY INTEREST - FREE F UNDS GENERATED INTERNALLY. THE LD.AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSEESEE AND WORKED OUT INTEREST OF RS.10,43,063/ - ATTRIBUTABLE TO THE FUNDS UTILIZED FOR ACQUIRING THE CAPITAL ASSETS AND DISALLOWED THE SAME UNDER THE PROVISION OF SEC.36(1)(I II) OF THE ACT. 6. AGGRIEVED AGAINST THIS ADDITION MADE BY LD.AO THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A) . THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. I HA VE ALSO PERUSED VARIOUS EVIDENCES FURNISHED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS. SINCE THE INTEREST IS BEING CAPITALIZED, IT WILL BE PERTINENT TO DISCUSS PROVISION OF PROVISO TO SEC.361(III). AS PER THESE PROVISIONS, INTEREST CAN BE CAPITALIZ ED, IF THE FOLLOWING CONDITIONS ARE FULFILLED: - (I) CAPITAL IS BORROWED FOR ACQUIRING CAPITAL ASSET. (II)INTEREST IS PAID IN RESPECT OF CAPITAL BORROWED. (III)THE ACQUISITION OF ASSET SHOULD BE FOR THE PURPOSE OF EXTENSION OF AN EXISTING BUSINESS OR PROFESSION. (IV)INTEREST LIABILITY MAY OR MAY NOT BE CAPITALIZED. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. IN THE INSTANT CASE THE A.O. HAS NOT IDENTIFIED CAPITAL BORROWED FOR ACQUIRING OR RAISING THE CAPITAL WORK - IN - PROGRESS. SINCE THE A.O. HAS NOT IDENTIFIED THE CAPITAL BORROWED, ACCORDINGLY THE FIRST CONDITION AS MENTIONED ABOVE IS NOT FULFILLED. SINCE THE BASIC CONDITION OF PROVISO TO SECTION 36(1)(III) IS NOT FULFILLED, ACCORDINGLY IN MY CONSIDERED VIEW INTER EST CANNOT BE CAPITALIZED AS PER THESE PROVISIONS. IT IS ALSO SEEN THAT THE A.O. HAS CAPITALIZED INTEREST ON PROPORTIONATE BASIS. PERUSAL OF PROVISIONS OF PROVISO TO SECTION 36(1)(III), WHICH HAS BEEN DISCUSSED IN DETAIL ABOVE, REVEALS THAT THESE PROVISION S DOES NOT PROVIDE FOR CAPITALIZATION OF INTEREST ON PROPORTIONATE BASIS. IN VIEW OF ABOVE FACTS, I AM OF THE CONSIDERED VIEW THAT THE A.O. HAS NOT CAPITALIZED INTEREST AS PER THE PROVISIONS OF PROVISO TO SEC.36(1)(III) AND THE, SAME IS UNTENABLE. 7. APROPOS TO GROUND NO.3 THE LD.AO D URING THE COURSE OF A SSESSMENT PROCEEDINGS HAS OBSERVED THAT ASSESSEE HAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK AMOUNT OF TAX, DUTY AND CESS ETC. ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLA CE OF ITS LOCATION. THEREAFTER, THE LD.AO ASKED ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 6 ASSESSEE TO EXPLAIN WHY THE VALUE OF CLOSING STOCK SHOULD NOT BE FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF CENVAT PAID ON THE GOODS LYING AS CLOSING STOCK AS ON 31/03/2008. THEREAFTER, LD.AO NOTICED THAT ASSE SSEE PAID CENVAT AT THE RATE OF 4% AND FOUND THAT THE SAME HAS NOT BEEN ADDED TO THE VALUE OF CLOSING STOCK OF RAW MATERIAL , PACKING MATERIAL AND STORES AND SPARES . THEREAFTER, LD.AO WORKED OUT SUM OF RS.1,5,16,996/ - AT THE RATE OF 4% ON THE TOTAL VALUE OF RS.3,79,24,895/ - PERTAINING TO CLOSING STOCK OF RAW MATERIAL, PACKING MATERIAL AND STORES AND SPARES. THAN FURTHER ON THE CLOSING OF FINISHED GOODS THE LD. AO WORKED OUT CENVAT AT THE RATE OF 4% TO THE AMOUNT OF RS.22,65,147/ - THEREAFTER, THE LD.AO HAS ALSO WORKED OUT THE CENVAT CONTRIBUTABLE TO THE SEMI - FINISHED GOODS TO THE AMOUNT OF RS.84,180/ - 7.1 THE ABOVE MENTIONED VALUE OF CLOSING STOCK INCLUDING RAW MATERIAL, SEMI - FINISHED GOODS AND FINISHED GOODS, STORES AND SPARES AND PACKING MATERIAL WAS INC REASED BY SUM OF RS.41,97,900/ - (2265147 + 1848573 + 84180) AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE REGARDING UNDERVALUATION OF CLOSING STOCK . 8. AGGRIEVED AGAINST THIS ADDITION THE ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). THE LD.CIT(A) HAS ALSO DELETED THIS ADDITION BY OBSERVING AS UNDER: - I HAVE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. 1 HAVE ALSO PERUSED CASE LAWS RELIED UPON BY THE APPELLANT. TAKING THE ENTIRETY OF FACTS AND POSITION OF LAW IN VIEW, 1 AM INCLINED TO AGREE, WIT H THE SUBMISSIONS OF LD. A .R. FOR THE FOLLOWING REASONS: (A) THE A.O. HAS NOT COMMENTED ON THE ACCOUNTING POLICIES FOLLOWED BY THE APPELLANT. THE POLICY OF VALUATION OF CLOSING STOCK IS CONSISTENTLY FOLLOWED BY THE APPELLANT IN THE PREVIOUS YEARS AS WELL AS IN THE SUCCEEDING YEARS. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VOLTAMP TRANSFORMERS LTD. V/S. CIT (2008) REPORTED ON 217 CTR 254 HAS HELD THAT A.O. HAS GOT VERY LIMITED POWERS TO CHANGE VALUATION OF CLOSING STOCK WHICH IS PART OF ACCOUNTING POLI CY. ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 7 THE A.O. CANNOT CHANGE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE WITHOUT VALID REASONS. (B) HON'B LE SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM (1953) REPORTED ON 24 ITR 481 HAS CLEARLY ARISE OUT OF VALUATION OF CLOSING STOCK AND SIT US OF ITS ARISING OR ACCRUING WHERE THE VALUATION IS MADE AND VALUATION OF UNSOLD STOCK IS NECESSARY PART OF THE PROCESS OF DETERMINING TRADING RESULTS BUT IT CAN IN NO SENSE BE REGARDED AS SOURCE OF SUCH PROFIT. (C) IT IS CLEARLY HELD IN THE CASE OF CIT V/S. AHMEDABAD NEW COTTON MILLS REPORTED AT 4 ITC 245 THAT WHEN THE OPENING AND CLOSING STOCK OF BUSINESS ARE BOTH UNDERVALUED, IF THE METHOD OF ALTERATION OF BOTH VALUATION IS NOT ADOPTED, IT IS PERFECTLY PLAIN THAT PROFITS WHICH IS BROUGHT FORWARD IS NOT REAL ONE. IN SUCH CASES, THE REAL PROFITS OF A PARTICULAR YEAR CANNOT BE ASCERTAINED BY MERELY RAISING VALUE OF CLOSING STOCK, NOT TAKING INTO CONSIDERATION THE SIMILAR VALUATION OF OPENING STOCK. AS PER THE RATIO OF THIS CASE, ENHANCING THE VALUE OF CLOSING STOCK WITHOUT GIVING CORRESPONDING EFFECT TO THE VALUATION OF OPENING STOCK IS NOT PROPER. (D) THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS SUBMITTED THAT IT WAS PAYING EXCISE DUTY AT A CONCESSIONAL RATE AND ACCORDINGLY IT WAS NOT ENTITLED TO TAKE BENEFIT OF CENVAT CREDIT. THIS IS A PLAUSIBLE EXPLANATION GIVEN BY THE APPELLANT WHICH REMAIN UNCONTROVERTED. IN MY CONSIDERED VIEW, SINCE CENVAT BENEFIT IS NOT AV AILABLE TO THE APPELLANT, ACCORDINGLY ENHANCING THE VALUE OF RAW MATERIAL, SEMI FINISHED GOODS AND FINISHED GOODS ON ACCOUNT OF CENVAT IN THE CLOSING STOCK IS NOT WARRANTED. (E) THE APPELLANT HAS ALSO SUBMITTED DURING THE APPELLATE PROCEEDINGS AS WELL AS ASSESSMENT PROCEEDINGS THAT PURCHASE OF PRIMARY RAW MATERIAL LIKE CHINA CLAY IS DIRECTLY PROCURED FROM MINES AND THE MAJOR STORES AND PACKING ITEMS ARE PURCHASED FROM SSI UNITS. THESE ENTITIES ARE EXEMPT FROM EXCISE DUTY. IN SUPPORT OF THIS CONTENTION THE APPELLANT HAS FURNISHED COPIES OF PURCHASE BILLS WHEREIN EXCISE DUTY HAS NOT BEEN CHARGED. SINCE THE APPELLANT IS NOT REQUIRED TO PAY EXCISE DUTY ON PRIMARY RAW MATERIALS AND MAJOR STORES AND PACKING ITEMS, ACCORDINGLY, THERE IS JUSTIFICATION FOR MAKING AS SUMPTION THAT EXCISE DUTY WAS PAID ON RAW MATERIAL AND STORES AND PACKING MATERIAL AND MAKING A CORRESPONDING ENHANCEMENT IN THE VALUATION OF RAW MATERIAL AND STORES AND PACKING ITEMS IN THE CLOSING STOCK IS NOT TENABLE. IN VIEW OF THE ABOVE FACTS, I AM N OT CONVINCED ABOUT THE MAINTAINABILITY OF ADDITION OF RS.41,97,9007 - IN VALUATION OF CLOSING STOCK. THE A.O. IS DIRECTED TO DELETE ADDITION OF RS.41,97,9007 - . THIS GROUND OF APPEAL IS ALLOWED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL BEFORE US. RE GARDING GROUND NO.1 WE NOTICE D THAT ASSESSEE HAS PROVIDED COPY OF I.T. ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 8 RETURN , BANK ACCOUNT NO. ETC OF THE PARTIES WHO HAD CONTRIBUTED TOWARDS SHARE CAPITAL OF THE ASSESSEE - COMPANY. THE ASSESSEE H AD RECEIVED TOTAL SHARE CAPITAL OF RS .2,73,51,600/ - AND THE ASSESSING OFFICER MADE AN AD DITION OF RS.21,72,700/ - U/S.68 OF THE ACT IN THE CASE OF THE ASSESSEE ON THE BASIS OF CASH DEPOSITED IN THE BANK ACCOUNT OF 13 PARTIES AS STATED ABOVE IN THIS ORDER. W E FIND THAT LD.AO HAS NOT CONDUCTED ANY ENQUIRY TO FIND OUT THE SOURCE OF ABOVE STATED CASH DEPOSIT IN THE BANK ACCOUNT OF THE PARTIES AND ASSESSING OFFICER HAS ALSO NOT INITIATED ANY PROCEEDINGS TO VERIFY THE SOURCE OF CASH DEPOSIT. ACCORDINGLY NO FURTHER PROCEEDINGS HAS BEEN INITIATED TO TAX THE UNEXPLAINED CASH DEPOSIT IF ANY IN THE HAND OF THE SHAREHOLDERS. THEREFORE, AFTER CONSIDERING THE DETAILED FINDINGS OF LD.CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD.CIT(A). 10. REGARDING DISALLOWANCE OF INTEREST MADE BY THE LD.AO AS PER THE PROVISION OF SEC.36(1)(III) AS DISCUSSED ABOVE IN THE GROUND NO.2 OF THE ASSESSEE , WE NOTICE D THAT THE ASSESSING OFFICER HAS STATED THAT INTEREST ATTRIBUTABLE TO THE FUNDS UTILIZED FOR ACQUIRING FIXED ASSETS HAS NOT BEEN CAPITALIZED BY THE ASSESSEE AND HE FURTHER HELD THAT ASSESSEE HAS ALSO NOT PROVED THE FUND FLOW STATEMENT. WE FURTHER NOTICED THAT THE LD.CIT(A) HELD THAT THE ASSESSING OFFICER HAD NOT IDENTIFIED CAPITAL BORROWED FOR ACQUIRING CAPITAL ASSETS. WE OBSERVED AFTER PERUSAL OF THE RECORDS THAT ASSESSEE HAD NOT FURNISHED NECESSARY BREAK - UP WITH THE FUND FLOW STATEMEN T FOR RECONCILIATION OF FUNDS USED IN ACQUIRING CAPITAL ASSETS. THEREFORE, WE DO NOT INCLINE WITH THE DECISION OF LD.CIT(A) AND IN THE INTEREST OF JUSTICE WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE A FRESH AFTER EXAMINATION OF THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE AND AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSEE. 11. REGARDING VALUATION OF CLOSING STOCK BY ADDING CENVAT BY THE LD.AO WE HAVE NOTICED THE CONTENTIONS OF THE LD.COUNSEL THAT THE ASSESSEE WAS PAYING ITA NO. 1444 /AHD/201 2 ASSTT. YEAR2008 - 09 9 EXCISE DUTY AT CONCESSIONAL RATE AND IT HAS NOT CLAIMED BENEFIT OF CENVAT CREDIT. WE HAVE CONSIDERED THE CONTENTIONS OF THE LD.COUNSEL THAT CENVAT BENEFIT WAS NOT AVAILABLE TO THE ASSESSEE THEREFORE ENHANCEMENT IN THE VALUE OF CLOSING STOCK ON ACCOUNT OF CENVAT WAS NOT WARRANTED. WE HAVE ALSO CONSIDERED THE FINDINGS OF LD.CIT(A) AND THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF VOLTAMP TRANSFORMERS LTD. V /S. CIT (2008) REPORTED ON 217 CTR 254 THAT ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING AND THE CENVAT WAS NOT DEBITED OR CREDITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, WE UPHOLD THE ORDER OF LD.CIT(A) ON THIS ISSUE. 13. IN THE RESULT , APPEAL OF THE REVENUE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE COURT ON 4 TH MAY , 2017 AT AHMEDABAD. SD/ - SD/ - ( R.P. TOLANI ) VICE PRESIDENT ( AMARJIT SINGH ) ACCOUNTANT MEMBER TRUE COPY AHMEDABAD; DATED 04 / 05 /2017 MANISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE . / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD