M/s. Jagannath Construction, Rayagada V. ITO, Rayagada Ward, Rayagada

ITA 147/CTK/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3842 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: J M PATNAIK
• Keywords: Depreciation; Charitable institution; Retrospective amendment; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER ITA NO.147 /CTK/2016 ASSESSMENT YEAR : 2012 - 13 C.O.NO.07/CTK/2016 (ARISING OUT OF ITA NO. 121/C TK/2016 ASSESSMENT YEAR: 2012 - 13 M/S. JAGANNATH CONSTRUCTION, AT: BIDYANAGAR, 2 ND LANE, NEAR AMA B HAGAWAN MANDIR, RAYAGADA. VS. ITO, RAYAGADA WA R D, RAYAGADA PAN/GIR NO. AAIFJ 0479 L (APPELLANT ) .. ( RESPONDENT ) ITA NO.121/CTK/2016 ASSESSMENT YEAR :2012 - 13 ITO, RAYAGADA WA R D, RAYAGADA. VS. M/S. JAGANNATH CONSTRUCTION, AT: BIDYANAGAR, 2 ND LANE, NEAR AMA B HAGAWAN MANDIR, RAYAGADA PAN/GIR NO. AAIFJ 0479 L (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI J.M.PATNAIK, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 19 /04/ 2017 DATE OF PRONOUNCEMENT : 25 /04/ 2017 2 M/S. JAGANNATH CONSTRUCTION O R D E R PER N.S.SAINI, AM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, BHUBANESWAR , DATED 11.1.2016 , FOR THE ASSESSMENT YEAR 2012 - 13 . ITA NO.147/CTK/2016: ASSESSEES APPEAL 2. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION FOR THE ENTIRE AMOUNT OF RS.76, 19,465/ - PAID TO SUB - CONTRACTORS WITHOUT DEDUCTING TDS U/S.194C OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THIS CASE ARE THAT THE ASSESSING OFFICER FOUND FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS MADE PAYMENT OF RS.76,19,465/ - TO THE SUB - CONTRACTORS WITHOUT DEDUCTION OF TAX AT SOURCE U/S.194C OF THE ACT. THEREFORE, BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, HE DISALLOWED DEDUCTION FOR THE SAME. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER RELYING ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE & OTHERS (2013) 33 TAXMAN.COM 250 AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKNDARKHAN N. TUNVAR (2013) 33 TAXMANN.COM 133 (GUJ). 3 M/S. JAGANNATH CONSTRUCTION 5. BEFORE US, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VICTOR SHIPPING SERVICES (P) LTD., (2013) 357 ITR 642(ALL), WHEREIN, IT HAS BEEN HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE, THE AMOUNT SHOULD BE PAYABLE AND NOT IT HAS BEEN PAID BY THE END OF THE YEAR. HE FURTHER SUBMITTED THAT THE SLP FILED AGAINST THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE JUDGMENT DATED 2.7.2014 IN CC NO.(S) 8068/2014. 6. LD A.R. OF THE ASSESSEE FURTHER RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF SRI RANJIT KUMAR BADAJENA VS DCIT (ITA NO.492/CTK/2014: A.Y. 2008 - 09) ORDER DATED 6.11.2015 AND SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISI ON OF THIS TRIBUNAL. HE SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENTS AND NO AMOUNT WAS OUTSTANDING AND PAYABLE. THEREFORE, IN VIEW OF THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF VICTOR SHIPPING SERVI C ES (P) LTD (SUPRA), AND THE DECISION OF CO - ORDINATE BENCH IN THE CASE OF SRI RANJIT KUMAR BADAJENA (SUPRA) , NO DISALLOWANCE U/S.40(A)(IA) WAS WARRANTED IN THE CASE OF THE ASSESSEE. HE SUBMITTED THAT WHERE THERE ARE CONTRARY DECISIONS OF HONBLE HIGH COURTS ON AN ISSUE AND NONE OF WHICH IS HO NBLE JURISDICTIONAL HIGH COURT, THEN THE DECISION IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS.VEGETABLE PRODUCTS LTD., 88 ITR 192 (SC). 4 M/S. JAGANNATH CONSTRUCTION 7. ON THE OTHER HAND, LD D.R. VEHEMENTLY OPPOS ED THE SUBMISSION OF LD A.R. OF THE ASSESSEE. HE SUBMITTED A DETAILED WRITTEN SUBMISSION ON THIS MATTER AS UNDER: THE CBDT VIDE CIRCULAR NO.10 DTD.16.12.2013 HAS STATED THAT THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. VECTOR SHIPPING SERVICE (P.) LTD. [2013] 38 TAXMANN.COM 77 (ALLAHABAD) WAS AN 'OBITER DICTA'. ON THE CONTRARY, THE DECISIONS OF HON'BLE CALCUTTA HIGH COURT AND HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME - TAX, KOLKATA - XI V. CRESCENT EXPORTS SYNDICATE [2013] 33 TAXMANN.COM 250 (CALCUTTA) AND COMMISSIONER OF INCOME - TAX - IV V. SIKANDARKHAN N TUNVAR [2013] 33 TAXMANN.COM 133 (GUJARAT) R ESPECTIVELY WERE 'RATIO DECIDENDI' AND RATIO DECIDENDI ALWAYS PREVAILS OVER AN ORBITER DICTA. THE VERBATIM OF THE CIRCULAR IS REPRODUCED HEREUNDER: '3. IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDL. CIT [2012] 20 TAXMANN.COM 244 (VISAKHATATNAM) IT WAS HELD BY SPECIAL BENCH OF ITAT, VISHAKHAPATNAM, THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD APPLY ONLY TO THE AMOUNT WHICH REMAINED PAYABLE AT THE END OF THE RELEVANT FINANCIAL YEAR AND COULD NOT BE INVO KED TO DISALLOW THE AMOUNT WHICH HAD ACTUALLY BEEN PAID DURING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TAX AT SOURCE. THE ORDER OF THE SPECIAL BENCH HAS SINCE BEEN PUT UNDER INTERIM SUSPENSION BY THE ANDHRA PRADESH HIGH COURT. 3.1 THE HON'BLE CALCUTTA HIG H COURT AND HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, KOLKATA - XI V. CRESCENT EXPORTS SYNDICATE [2013] 33 TAXMANN.COM 250 (CALCUTTA) AND COMMISSIONER OF INCOME - TAX - IV V. SIKANDARKHAN N TUNVAR [ 2013] 33 TAXMANN.COM 133 (GUJARAT) RESPECTIVELY, HAVE HELD THAT SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AT THE END OF THE PREVIOUS YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURIN G THE YEAR. 3.2 THE HON'BLE HIGH COURTS HAVE FURTHER HELD THAT THE INTENTION OF THE LEGISLATION WAS TO DISALLOW CERTAIN TYPES OF EXPENSE, SUBJECT TO PROVISIONS OF CHAPTER XVII - B WHICH AT PAYABLE AT ANY TIME DURING THE YEAR BUT NO TAX WAS DEDUCTED AT SOUR CE OR IF DEDUCTED WAS NOT PAID WITHIN THE STIPULATED TIME. THERE IS NO SUCH CONDITION THAT AMOUNT SHOULD REMAIN PAYABLE AT THE END OF THE YEAR. 3.3 THE HON'BLE ALLAHABAD HIGH COURT IN CIT V. VECTOR SHIPPING SERVICE (P.) LTD. [2013] 38 TAXMANN.COM 77 (ALTAHABAD) HAS AFFIRMED THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING THAT FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YE AR. HOWEVER, THE DECISIONS OF THE HON'BLE GUJARAT AND CALCUTTA HIGH COURTS (SUPRA) WERE NOT BROUGHT TO THE ATTENTION OF THE HON'BLE ALLAHABAD HIGH COURT. 3.4 IN THE CASE OF ACIT, CIRCLE 4(2), MUMBAI V. RISHTI STOCK AND SHARES PVT. LTD. IN ITA NO. 1121MUM/ '2012, HON'BLE ITAT, MUMBAI IN ITS ORDER DATED 2 - 8 - 2013 HAS EXAMINED THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT (SUPRA) AS REGARDS TO SECTION 40(A)(IA) OF THE ACT AND CONCLUDED THAT THE SAME WAS AN 'OBITER DICTA' WHILE THE DECISIONS OF THE HON'BLE GU JARAT AND CALCUTTA HIGH COURT (SUPRA) WERE 'RATIO DECIDENDI'. THE ITAT ACCORDINGLY APPLIED THE VIEW TAKEN BY THE HON'BLE GUJARAT AND CALCUTTA HIGH COURT AS RATIO DECIDENDI PREVAILS OVER AN OBITER DICTA. 5 M/S. JAGANNATH CONSTRUCTION 4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOARD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE STATUTORY PROVISIONS AR E AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOULD INCLUDE 'AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR'. THE DEPARTMENT HAD PRESSED THE FOLLOWING QUESTIONS OF LAW IN THE CASE OF CIT V. VECTOR SHIPPING SERVICE (P .) LTD. (SUPRA.) BEFORE THE HON'BLE ALLAHABAD HIGH COURT: 'THE DEPARTMENT HAS PRESSED THE ONLY QUESTION OF LAW AS FOLLOWS: '(A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE IT AT HAS RIGHTLY CONFIRMED THE ORDER OF THE CIT (A) AND THEREBY DELETING THE DISALLOWANCE OF RS.1,17,68,621/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 40 (A) (IA) OF THE I.T. ACT, 1961 BY IGNORING THE FACT THAT THE COMPANY M/S MERCATOR LINES LTD. HAD PERFORMED SHIP MANAGEMENT WORK ON BEHALF OF THE ASSESSEE M/S VECTOR SHIPPING SERVICES (P) LTD. AND THERE WAS A MEMORANDUM OF UNDERSTANDING SIGNED BETWEEN BOTH THE COMPANIES AND AS PER THE DEFINITION OF MEMORANDUM OF UNDERSTANDING, IT INCLUDED CONTRACT ALSO .' 5. THE CIT (A) REVERSED THE FINDINGS, WHICH HAVE BEEN AFFIRMED BY THE TRIBUNAL IN PARA 7 AS FOLLOWS: '7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE SUBMISSIONS MADE BEFORE ID. CIT (A), AS NOTED EARLIER, HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT. IT IS NOT DISPUTED THAT M/S MERCATOR LINES LIMITED HAD DEDUCTED TDS ON SALARIES PAID BY IT ON BEHALF OF ASSESSEE. UNDER SUCH CIRCUMSTANCES ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON REIMBURSEMENT BEING MADE BY IT TO M/S MERCATOR LINES LIMITED. FURTHER IN ANY VIEW OF THE MATTER, SINCE IT IS NOT DISPUTED THAT NO AMOUNT REMAINED PAYABLE AT THE YEAR END, THEREFORE, IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD., (13 6 ITD 23) (SB), ADDITION COULD NOT BE MADE. IN THIS CASE, IT WAS HELD AS UNDER: SECTION 40(A)(IA) WAS INTRODUCED IN THE ACT, BY THE FINANCE ACT, 2004 WITH EFFECT FROM 1.4.2005 WITH A VIEW TO AUGMENT THE REVENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT S OURCE. THIS PROVISION WAS BROUGHT ON STATUTE TO DISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION' IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCT ION OF TDS WOULD RESULT IN DISALLOWANCE OF EXPENDITURE ON WHICH SUCH TDS WAS DEDUCTIBLE.' 11. WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE NOT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTION OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERATION IN THE APPEAL.' 2. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS P. LTD. (1992) 198 ITR 297 (SC) OBSERVED AS UNDER: 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PIC K OUT A WORD OR A SENTENCE FROM THE JUDGEMENT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THE COURT. THE JUDGEMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS 6 M/S. JAGANNATH CONSTRUCTION FROM THE JUDGEMENT HAVE TO B E CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THE COURT SINCE THE TERM 'PAID' OR 'PAYABLE' IN PROVISIONS OF SECTION 40(A)(IA) WAS NOT THE QUESTION OF LAW BEFORE THE HON'BLE ALLAHABAD HIGH COURT OF IN THE CASE OF CIT V. VECTOR SHIPPING SERVIC E (P.) LTD. (SUPRA.), THE OBSERVATION OF THE HON'BLE COURT WAS AN 'ORBITER DICTA' AND NOT A 'RATIO DECIDENDI'. ON THE OTHER HAND, THE QUESTION OF LAW BEFORE THE HON'BLE CALCUTTA HIGH COURT COMMISSIONER OF INCOME - TAX, KOLKATA - XI V. CRESCENT EXPORTS SYNDICATE(SUPRA) IS REPRODUCED HEREUNDER: 'THE COURT: THE SUBJECT MATTER OF CHALLENGE IN ITAT NO.30 OF 2013 IS A JUDGMENT AND ORDER DATED JULY 18, 2012, BY WHICH THE LEARNED TRIBUNAL, RELYING ON THE DECISION OF A SPECIAL BENCH IN THE CASE OF MERILYN SHIPPI NG A TRANSPORTS V. ADDL. CIT [2012] 136 ITD 23/20 TAXMANN.COM 244 (VISAKHAPATNAM) HELD AS FOLLOWS: 'IF ALL THE AMOUNTS HAVE BEEN PAID, THEN OBVIOUSLY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SPECIAL BENCH OF TH IS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS, NO ADDITION SHALL BE MADE. IF ANY AMOUNT IS FOUND TO BE PAYABLE AS ON THE YEAR END, THEN THE ASSESSING OFFICER SHALL GIVE THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE HIS CASE AS TO WHY THE DIS ALLOWANCE, IF ANY, SHOULD NOT BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(1)(IA) OF THE ACT'. 2. ITAT NO.20 OF 2013 IS DIRECTED AGAINST A JUDGMENT AND ORDER DATED MAY 24, 2012, BY WHICH THE LEARNED TRIBUNAL, FOLLOWING THE AFORESAID JUDGMENT IN THE CA SE OF MERILYN SHIPPING & TRANSPORTS, (SUPRA) PASSED THE FOLLOWING ORDER: 'AS THE ISSUE CLAIMED BY THE ASSESSEE IS THAT THERE IS NOTHING PAYABLE AS ON 31.03.2006 AND THIS EXPENDITURE OF RS. 1,08,80,5591 - IS PAID DURING THE YEAR AND NOTHING REMAINS PAYABLE, IT MEANS THAT THE ISSUE IS COVERED. PRINCIPALLY, WE HAVE AGREEMENT WITH THE ASSESSEE'S COUNSEL AND ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. PRINCIPALLY, WE ALLOW THIS ISSUE OF THE ASSESSEE BUT SUBJECT TO THE VERIFICATI ON BY AO THAT THESE EXPENSES ARE PAID WITHIN THE YEAR I.E. UP TO 31.03.2006 AND NOTHING REMAINS PAYABLE. HENCE, THIS APPEAL OF ASSESSEE IN PRINCIPLE IS ALLOWED IN FAVOUR OF THE ASSESSEE BUT SUBJECT TO VERIFICATION.' THE REVENUE HAS COME UP IN APPEAL IN BO TH THE MATTERS.' THE FINDING OF THE HON'BLE CALCUTTA COURT ON THE ABOVE QUESTION OF THE LAW IS REPRODUCED AS UNDER: '19. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRETATION IS POSSIBLE. 20. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO U S, ARE 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B'. IF THE QUESTION IS 'WHICH EXPENSES ARE SOUGHT TO BE DISALLOWED?' THE ANSWER IS BOUND TO BE 'THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B. ONCE THIS IS REALIZE D NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD 'PAYABLE' AND NOT 'PAID OR CREDITED'. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN BE NO OCCASION F OR CLAIMING ANY DEDUCTION. 21. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OR SUB - CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE 7 M/S. JAGANNATH CONSTRUCTION THE WORDS 'AMOUNTS CREDITED OR PAID' WERE USED ONLY IN RELATION TO A CON TRACTOR OR SUB - CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR OR SUB CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANG UAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARSH. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MS. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOM E EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. 22. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING ET TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. THE APPEAL IS, THUS, ALLOWED IN FAVOUR OF THE REVENUE.' AND THE QUESTION OF LAW BEFORE THE HON'BLE GUJARAT HIGH COURT COMMISSIONER OF INCOME - TAX - IV V. SIKANDARKHAN N TUNVAR IS REPRODUCED HEREUNDER: '5. IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING ET TRANSPORTS (SUPRA) AND DELETED THE DISALLOWANCE ON THIS LIMITED GROUND . AS IN THE PRESENT CASE, OTHER GROUNDS OF CONTROVERSY BETWEEN THE PARTIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPENDITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: - '1. WHETHER DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION? 2. WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDL. CIT [2012] 136 ITD 23/20 TAXMANN.COM 244 (VISAKHA) LAYS DOWN CORRECT LAW?' 6. COUNSEL FOR THE REVENUE CONTENDED THAT THE TRIBUNAL HAS COMMITTED SERIOUS ERROR IN HOLD ING THAT PROVISION OF SECTION 40(A)(IA) OF THE ACT WOULD APPLY ONLY WHEN THE AMOUNT HAS REMAINED PAYABLE TILL THE END OF THE ACCOUNTING YEAR. THEY POINTED OUT THAT THE WORD 'PAYABLE' HAS NOT BEEN DEFINED UNDER THE ACT AND THE SAME WOULD, IN THE CONTEXT OF THE PROVISION UNDER CONSIDERATION, INCLUDE THE EXPRESSION 'PAID'. ANY OTHER INTERPRETATION WOULD LEAD TO ABSURD RESULTS. THEY CONTENDED THAT THE INTERPRETATION WHICH ADVANCES THE TRUE MEANING OF THE PROVISION SHOULD BE ADOPTED AND NOT ONE WHICH FRUSTRATES THE PROVISION.' THE FINDING OF THE HON'BLE ALLAHABAD HIGH COURT ON THE ABOVE QUESTION OF LAW IS REPRODUCED HEREUNDER: 8 M/S. JAGANNATH CONSTRUCTION '37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS AL READY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WHICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPI NION THAT SECTION 40(A) (IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN TH AT CONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MIS. MERILYN SHIPPING & TRANSPORTS (SURPA), DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTIONS AS UNDER: - QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES.' MOREOVER, WHAT IS BINDING IS THE PRINCIPLE DECIDED, I.E., THE RATIO DECIDENDI, AND NOT THE OBSERVATION MADE THEREIN, I.E ., THE OBITER DICTA. THE COURT BEFORE APPLYING A DECISION OF THE SUPREME COURT MUST FIND OUT THE RATIO OF THE DECISION AND THEN CONSIDER ITS APPLICABILITY - DELHI ADMINISTRATION V. MANOHAR LAI [2002] 7 SCC 222. IT IS THE RULE DEDUCTIBLE FROM THE APPLICATION OF LAW TO THE FACTS AND CIRCUMSTANCES OF A CASE WHICH CONSTITUTES ITS RATIO DECIDENDI AND NOT SOME CONCLUSIONS BASED ON SOME FACTS WHICH MAY APPEAR TO BE SIMILAR - REGIONAL MANAGER V. PAWAN KUMAR DUBEY AIR 197 6 SC 1766. IT IS JUDICIAL DECISION WHICH CONTAINS IN ITSELF A PRINCIPLE. RULE OF PRECEDENT IS A SOURCE OF LAW FOR WHICH IT ACTUALLY DECIDES AS ALSO BECAUSE NO JUDGE DEPARTS FROM PREVIOUS DECISION EXCEPT FOR COMPELLING REASONS AND LEGAL ADVISERS DO NOT ENCO URAGE VAIN HOPES IN THEIR CLIENTS. AUTHORITIES OR DECISIONS OF THE SUPERIOR COURTS ARE TO BE FOLLOWED. BUT THIS PRINCIPLE APPLIES IN A LIMITED WAY. THE ONLY THING IN A JUDGE'S DECISION BINDING AS AN AUTHORITY UPON A SUBSEQUENT JUDGE IS THE PRINCIPLE UPON W HICH THE CASE WAS DECIDED. THAT WHICH BINDS IS CALLED 'RATIO DECIDENDI', WHICH MEANS LITERALLY THE 'REASON OF DECISION' OR 'REASON FOR DECIDING'. REASONS AND SPIRIT OF CASES MAKE LAW, AND NOT THE LETTER OF PARTICULAR PRECEDENT. {FISHER V. PRINCE 3 BURR 136 3). TO BE THE RATIO DECIDENDI AMONGST OTHERS, THE MINIMUM REQUIREMENTS ARE : (1) THAT THE MATTER WAS DIRECTLY AT ISSUE, (2) THAT THE ISSUE NEEDS TO HAVE BEEN DECIDED, AND (3) THE MATTER HAS BEEN DECIDED BY GIVING REASONS - INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD V. DHANESH D. RUPARELIA [2000] 99 COMP. CAS. 181 (BOM.). THE HIGH COURT OR ANY OTHER COURT BEFORE APPLYING THE DECISION OF THE SUPREME COURT MUST FIND OUT THE RATIO OF THE DECISION AND THEN CONSIDER ITS APPLICABILITY - DELHI ADMIN ISTRATION V. MANOHAR LAI [2002] 7 SCC 222. O BITER D ICTA - PRONOUNCEMENTS OF LAW WHICH ARE NOT PART OF THE RATIO DECIDENDI ARE CLASSED AS OBITER DICTA. OBITER DICTA SIGNIFIES STATEMENT BY THE WAY, AND IS AN OBSERVATION BY A JUDGE WHICH IS EITHER NOT NECESSARY FOR THE DECISION OF THE CASE OR DOES NOT RELATE TO THE MAT FACTS IN ISSUE. - WHILE THE RULE OF PRECEDENT OR ITS MODERN 'STARE DECISIS' PRINCIPLE IN ENGLAND DOES NOT APPLY TO OBITER DICTA UNDER ARTICLE 141 OF THE CONSTITUTION, THE OBITER DICTA OF T HE SUPREME COURT IS BINDING UPON ALL THE COURTS. CIT V. VAZIR SULTAN & SONS AIR 1959 SC 814, ITO V. T.S. DEVINATHA NADAR AIR 1968 SC 623, CIT V. MADHUKANT M. MEHTA[L9SL] 132 ITR 159 (GUJ.) AND CIT V. SMT. T.P. SIDHWA [1982] 133 ITR 840 (BOM.). 9 M/S. JAGANNATH CONSTRUCTION BINDING ELEMENT IN SUPREME COURT'S DECISION IS THE RATIO DECIDENDI OF THE DECISION AND NOT ANY FINDING OF FACT. OBITER DICTUM ALTHOUGH MAY NOT BE BINDING IS NONETHELESS OF CONSIDERABLE WEIGHT - DIRECTOR OF SETTLEMENTS V. M.R. APPARAO [2002] 4 SCC 638. THE OBSERVATIONS BY WAY OF OBITER DICTA THOUGH ARE WITHOUT BINDING AUTHORITY, HELP TO RATIONALISE THE LAW AND ALSO TO GUIDE FUTURE DEVELOPMENT OF LAW BY WAY OF SUGGESTING SOLUTIONS TO PROBLEMS NOT YET DECIDED. DIAS ON JURISPRUDENCE, FIFTH EDITION AT PAGE 143, IT WAS STATED : 'PRONOUNCEMENTS OF LAW, WHICH ARE NOT PART OF RATIO DECIDENDI ARE CLASSED AS OBITER DICTA AND ARE NOT AUTHORITATIVE. RATIONALE AND DICTA TEND TO SHADE INTO EACH OTHER. THE FORMER HAVE LAW - QUALITY AND ARE BINDING ON LOWER COURTS; DICTA, TOO , HAVE LAW - QUALITY BUT ARE NOT BINDING AT ALL. VIS - A - VIS A HIGHER COURT EVEN THE RATIO DECIDENDI OF A LOWER COURT DECISION HAS ONLY PERSUASIVE FORCE LIKE THAT OF A DICTUM. IT HAS BEEN POINTED OUT THAT SOME DICTA ARE SO AUTHORITATIVE THAT THE DISTINCTION BE TWEEN RATIO AND DICTUM IS REDUCED TO VANISHING POINT. DICTA, WHICH HAVE NO FORCE ARE PROPOSITIONS STATED BY WAY OF ILLUSTRATION OR ON HYPOTHETICAL FACTS. GREATER DIFFICULTIES ATTEND RULINGS OF LAW WHICH ARE SUBSEQUENTLY RELEGATED TO THE STATUS OF DICTA BY INTERPRETATION. THE DISTINCTION IN SUCH CASES BETWEEN RATIO AND DICTUM IS BUT A DEVICE EMPLOYED BY SUBSEQUENT COURTS FOR THE ADOPTION OR REJECTION OF DOCTRINE EXPRESSED IN PREVIOUS CASES ACCORDING TO THE INCLINATION OF THE JUDGES. ' (I) WHETHER HON'BLE SC DEC ISION IN CASE OF VECTOR SHIPING HAS BINDING PRECEDENCE 3. THE DECISION OF HON'BLE ALLAHABAD HIGH COURT WAS CHALLENGED BY THE DEPARTMENT IN THE HON'BLE SUPREME COURT AND THE HON'BLE SUPREME COURT HAS DISMISSED THE SLP OF THE DEPARTMENT. THE DECISION OF THE HON'BLE SUPREME COURT IN CC NO(S).8068/2014 IS GIVEN HEREUNDER: 'HEARD MR. MUKUL ROHATGI, LEARNED ATTORNEY GENERAL, FOR THE PETITIONER. DELAY IN FILING AND REFILLING SPECIAL LEAV E PETITION IS CONDONED. SPECIAL LEAVE PETITION IS DISMISSED.' THE ABOVE ORDER OF THE HON'BLE SUPREME COURT IS A NON - SPEAKING ORDER OF DISMISSAL AND IT IS HELD IN THE CASE OF INDIAN OIL CORPN. LTD. V. STATE OF BIHAR AIR 1986 SC 1780, THE EFFECT OF A NON - SP EAKING ORDER OF DISMISSAL OF A SPECIAL LEAVE PETITION WITHOUT ANYTHING MORE INDICATING THE GROUNDS OR REASONS OF ITS DISMISSAL MUST, BY NECESSARY IMPLICATION, BE TAKEN TO BE THAT THE SUPREME COURT HAD DECIDED ONLY THAT IT WAS NOT A FIT CASE WHERE SPECIAL L EAVE SHOULD BE GRANTED. THIS CONCLUSION MAY HAVE BEEN REACHED BY THE SUPREME COURT DUE TO SEVERAL REASONS. WHEN THE ORDER PASSED BY THE COURT WAS NOT A SPEAKING ONE, IT IS NOT CORRECT TO ASSUME THAT SUPREME COURT HAD NECESSARILY DECIDED IMPLICITLY ALL THE QUESTIONS IN RELATION TO THE MERITS OF THE AWARD, WHICH WAS UNDER CHALLENGE BEFORE THE SUPREME COURT IN THE SPECIAL LEAVE PETITION. NEITHER ON THE PRINCIPLE OF RES JUDICATA NOR ON ANY PRINCIPLE OF PUBLIC POLICY ANALOGOUS THERETO, WOULD THE ORDER OF THE SUP REME COURT DISMISSAL OF A SPECIAL LEAVE PETITION OPERATE TO BAR THE TRIAL OF IDENTICAL ISSUES IN A SEP ARATE PROCEEDING, NAMELY, THE WRIT PROCEEDING BEFORE THE HIGH COURT MERELY ON THE BASIS OF AN UNCERTAIN ASSUMPTION, THAT THE ISSUES MUST HAVE BEEN DECIDED BY THE SUPREME COURT AT LEAST BY IMPLICATION. IT IS NOT CORRECT OR SAFE TO EXTEND THE PRINCIPLE OF RES JUDICATA OR CONSTRUCTIVE RES JUDICATA TO SUCH AN EXTENT SO AS TO FIND IT ON MERE GUESS WORK. IT IS NOT A SOUND EXERCISE OF DISCRETION VESTED IN THE HIGH COURT TO REFUSE TO CONSIDER A WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION SOLELY ON THE GROUND THAT THE SPECIAL LEAVE PETITION FILED BY THE PETITIONER IN THE SUPREME COURT HAD BEEN DISMISSED BY A NON - SPEAKING ORDER. 10 M/S. JAGANNATH CONSTRUCTION 3.1 IT IS FURTHER HELD IN T HE CASE OF CIT VS. SHREE MANJUNATHESWARA PACKING PRODUCTS & CAMPHOR WORKS (SC) 231 ITR 53, CIT VS. QUALITY (PAT) 224 ITR 77 AND J.K.CHARITABLE TRUST VS. WTO & ORS. (ALL) 222 ITR 523 THAT 'REJECTION OFSLP DOES NOT MEAN THAT DECISION OF HIGH COURT HAS BEEN A PPROVED'. 4. FURTHER, IN THE CASE OF V.M. SALGAOCAR & BROS. (P.) LTD. VRS. CIT [2000] 110 TAXMAN 67 (SC), IT IS HELD THAT 'DIFFERENT CONSIDERATIONS APPLY WHEN A SPECIAL LEAVE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION IS SIMPLY DISMISSED BY SAYING 'DISMISSED' AND AN APPEAL PROVIDED UNDER ARTICLE 133 IS DISMISSED ALSO WITH THE WORDS 'THE APPEAL IS DISMISSED'. IN THE FORMER CASE, IT HAS BEEN LAID DOWN BY THE SUPREME COURT THAT WHEN SPECIAL LEAVE PETITION IS DISMISSED, IT DOES NOT COMMENT ON THE CORRECTNESS OR OTHERWISE OF THE ORDER FROM WHICH LEAVE TO APPEAL IS SOUGHT. BUT WHAT THE COURT MEANS IS THAT IT DOES NOT CONSIDER IT TO BE AFT CASE FOR EXERCISE OF ITS JURISDICTION UNDER ARTICLE 136. THAT CERTAINLY COULD NOT BE SO WHEN APPEAL IS DISMISSED THOUGH BY A NON - SPEAKING ORDER. HERE THE DOCTRINE OF MERGER APPLIES. IN THAT CASE, THE SUPREME COURT UPHELD THE DECISION OF THE HIGH COURT OR OF THE TRIBUNAL FROM WHICH THE APPEAL IS PROVIDED UNDER CLAUSE (3) OF ARTICLE 133. THIS DOCTRINE OF MERGER DOES NOT APPLY IN THE CASE OF DISMISSAL OF SPECIAL LEAVE PETITION UNDER ARTICLE 136. WHEN APPEAL IS DISMISSED, THE ORDER OF THE HIGH COURT IS MERGED WITH THAT OF THE SUPREME COURT. ' (II) C ONFLICTING JUDGEMENT S : 5. WHEN THERE IS CONFLICTING DECISIONS BETWEEN TWO JUDGEMENTS, JUDGEMENTS LATER IN TIME IS NOT BINDING IF THE EARLIER IS BETTER IN LAW. WHEN JUDGMENTS OF THE SUPERIOR COURTS ARE OF CO EQUAL BENCHES, AND, THEREFORE, A MATCHING AUTHORITY, THEN THEIR W EIGHT INEVITABLY MUST BE CONSIDERED BY THE RATIONAL AND THE LOGIC THEREOF AND NOT BY THE MERE FORTUITOUS CIRCUMSTANCE OF THE TIME AND DATE ON WHICH THEY WERE RENDERED. EQUALLY, THE FACT THAT THE SUBSEQUENT JUDGMENT FAILED TO TAKE NOTICE OF THE EARLIER ONE OR ANY PRESUMPTION THAT A DEVIATION THERE FROM COULD NOT BE INTENDED, CANNOT POSSIBLY BE CONCLUSIVE. VITAL ISSUES, PERTAINING TO THE VITAL QUESTIONS OF THE CERTAINTY AND UNIFORMITY OF THE LAW, CANNOT BE SCUTTLED BY SUCH LEGAL SOPHISTRY. IT IS MANIFEST THAT WHEN TWO DIRECTLY CONFLICTING JUDGMENTS OF THE SUPERIOR COURT AND OF EQUAL AUTHORITY EXIST, THEN BOTH OF THEM CANNOT BE BINDING ON THE COURTS BELOW. A CHOICE, HOWEVER DIFFICULT IT MAY BE, HAS TO BE MADE IN SUCH A SITUATION AND THE DATE CANNOT BE THE GUIDE . HOWEVER, ON PRINCIPLE, THE COURT MUST FOLLOW THE JUDGMENT WHICH WOULD APPEAR TO LAY DOWN THE LAW MORE ELABORATELY AND ACCURATELY. THE MERE INCIDENCE OF TIME, WHETHER THE JUDGMENTS OF CO - EQUAL BENCHES OF THE SUPERIOR COURT ARE EARLIER OR LATER, AND WHETHE R THE LATER ONE MISSED CONSIDERATION OF THE EARLIER, ARE MATTERS HARDLY RELEVANT, AND, IN ANY CASE, NOT CONCLUSIVE. 1 [AMAR SINGH YADAV VS. SHANTI DEVI AIR 1987 PAT 191(FB)]. IF FACED WITH TWO JUDGMENTS OF EQUAL WEIGHT WHICH ARE IN CONFLICT, THE COURT SHOU LD FOLLOW THE ONE AS BEING BETTER ON POINT OF LAW. 2 [MILES VS. JARVIS [1883] 24 CH.D.633] THE COURT IS AT LIBERTY TO DECIDE OF ITS OWN WHICH OF THE TWO CONFLICTING DECISIONS WILL IT FOLLOW, IN CASE OF A CLEAR DIVERGENCE OF THE OPINION IN THE EARLIER PRECED ENTS. V YOUNG V. BRISTOL AEROPLANE CO. LTD. [1994] KB718J. THUS IN THE INTEREST OF THE ADMINISTRATION OF JUSTICE, THE COURT OUGHT TO FOLLOW THE ONE OUT OF THE TWO CONFLICTING JUDGMENTS WHICH IS BETTER IN POINT OF LAW THAN IN POINT OF TIME, 4 [G. GOVINDANAIK VS. WEST POTENT PRESS CO. LTD. AIR1980 KANT (FB)92J. AND WHICH APPEARS TO IT TO STATE THE LAW MORE ELABORATELY AND ACCURATELY. 3 .MAR SINGH YADAV VS. SHANTI DEVI AIR PAT. 191 (FB). HENCE, THE DECISION OF HON'BLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURTS HAS DISCUSSED THE ISSUE OF PAID AND PAYABLE ELABORATELY UNLIKE THE DECISION OF HON'BLE ALLAHABAD HIGH COURT. 11 M/S. JAGANNATH CONSTRUCTION (ILL) WHETHER DECISION OF HON'BLE SC IN M/S VEGETABLE PRODUCT LTD. IS APPLICABLE IN THE PRESENT CASE. 6. IN THE CASE OF CIT VS. M/S. VEGETABLE PRODUCTS LTD.(SC) 88 ITR 192, THE INTERPRETATION OF THE PROVISION WAS RELATED TO IMPOSITION OF PENALTY AND THE HON'BLE HIGH COURTS IN BOTH THE CASES HAVE INTERPRETED THE PROVISIONS AND HAS GIVEN THEIR RULINGS ONE IN FAVOUR OF ASSESSEE AND ANOTHE R IN FAVOUR OF REVENUE. THE FINDING OF THE HON'BLE SUPREME COURT IS REPRODUCED AS UNDER: 'IN SUPPORT OF THE INTERPRETATION PLACED BY HIM, MR. MANCHANDA RELIED ON THE DECISIONS OF THE LAHORE HIGH COURT IN VIR BHAN BANSI LAI V. COMMISSIONER OF INCOME - TAX 11938] 6 ITR 616 AND THE DECISION OF THE DELHI HIGH COURT IN COMMISSIONER OF INCOME - TAX V. HINDUSTAN INDUSTRIAL CORPORATION 11972] 86 ITR 657 . THE DELHI HIGH COURT FOLLOWED THE DECISION OF THE LAHORE HIGH COURT. ON THE OTHER HAND, IT WAS URGED BY MR. B. SEN, LEARNED COUNSEL FOR THE ASSESSEE, AND MR. S.V. GUPTE, LEARNED COUNSEL FOR THE INTERVENERS, THAT ON A PROPER INTERPRETATION OF THE PROVISION MENTIONED EARLIER, IT WOULD BE CLEAR THAT THE PENALTY CAN BE ONLY IMPOSED ON THE AMOUNT PAYABLE UNDER SECTION 1 56. IN SUPPORT OF THEIR CONTENTION, THEY RELIED ON THE DECISION OF THE MYSORE HIGH COURT IN M.M. ANNAIAH V. COMMISSIONER OF INCOME - TAX [1970] 76 ITR 582 . THEY FURTHER URGED THAT IF THE INTERPRETATION PLACED BY THE REVENUE ON SECTION 271(1)(A)(I) IS ACCEPT ED AS CORRECT, THE RESULT WOULD BE THAT THE ADVANCE TAX PAID OR TAXES DEDUCTED AT THE SOURCE CANNOT BE TAKEN INTO CONSIDERATION IN DETERMINING THE PENALTY PAYABLE. IF THAT BE TRUE, THE COUNSEL URGED THAT, EVEN IF THE ASSESSEE HAD PAID MORE TAX THAN HE NEED HAVE PAID, BUT HAD NOT SUBMITTED HIS RETURN WITHIN THE TIME FIXED, HE WOULD BE LIABLE TO PAY PENALTY ON THE ENTIRE AMOUNT ASSESSED. ACCORDING TO THEM, THE LAW CANNOT BE PRESUMED TO BE SO HARSH AS THAT. THERE IS NO DOUBT THAT THE ACCEPTANCE OF ONE OR THE OTHER INTERPRETATION SOUGHT TO BE PLACED ON SECTION 271(1)(A)( I) BY THE PARTIES WOULD LEAD TO SOME INCONVENIENT RESULT, BUT THE DUTY OF THE COURT IS TO READ THE SECTION, UNDERSTAND ITS LANGUAGE AND GIVE EFFECT TO THE SAME. IF THE LANGUAGE IS PLAIN, THE FA CT THAT THE CONSEQUENCE OF GIVING EFFECT TO IT MAY LEAD TO SOME ABSURD RESULT IS NOT A FACTOR TO BE TAKEN INTO ACCOUNT IN INTERPRETING A PROVISION. IT IS FOR THE LEGISLATURE TO STEP IN AND REMOVE THE ABSURDITY. ON THE OTHER HAND, IF TWO REASONABLE CONSTRUC TIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS IS A WELL - ACCEPTED RULE OF CONSTRUCTION RECOGNISED BY THIS COURT IN SEVERAL OF ITS DECISIONS. HENCE, ALL THAT WE HAVE TO SEE IS, WHAT IS THE TRUE E FFECT OF THE LANGUAGE EMPLOYED IN SECTION 271(1)(A)( I). IF WE FIND THAT LANGUAGE TO BE AMBIGUOUS OR CAPABLE OF MORE MEANINGS THAN ONE, THEN WE HAVE TO ADOPT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE, MORE PARTICULARLY SO BECAUSE THE PROVISION RELATES TO IMPOSITION OF PENALTY. ' 7. THE JUDGEMENTS OF THE COURTS ARE NOT BE CONSTRUED AS STATUTES. JUDGES INTERPRET STATUTES; THEY DO NOT INTERPRET JUDGEMENTS. TO INTERPRET WORDS, PHRASES AND PROVISIONS OF A STATUTE, IT MAY BECOME NECESSARY FOR JUDGES TO EMBARK INTO LENGTHY DISCUSSIONS BUT THE DISCUSSION IS MEANT TO EXPLAIN AND NOT TO DEFINE. JUDGES INTERPRET WORDS OF STATUTES, THEIR WORDS ARE NOT TO BE INTERPRETED AS STATUTES. [AMAR NATH OM PRAKASH V. STATE OF PUNJAB AIR 1985 SC 218.; AND ALSO HARYANA FINANCIAL CORPORATION V. JAGADAMBA OIL MILLS [2002] 110 COMP. CAS. 20 (SC).] 12 M/S. JAGANNATH CONSTRUCTION A JUDGEMENT SHOULD NOT BE READ AS STATUTE. IT SHOULD BE UNDERSTOOD AND APPLIED HAVING IN MIND THE FACTUAL MATRIX INVOLVED THEREIN. (INDIAN CHARGE CHROME LTD. V. UNION OF INDIA [2003] 2 SCC 533 AS PER S.B. SINHA J]. IT IS THUS A WELL SETTLED PRINCIPLE OF LAW THAT A JUDGEMENT SHOULD NOT BE READ AS A STATUTE - REKHA MUKHERJEE V. ASHIS KUMAR DAS [2004] 1 SCL 483/AIR 2004 SC 443/[2004] 13 ILD 37 (37) FURTHER, IN THE CASE OF P ADMASUNDARA RAO VS STATE OF TAMIL NADU [2002] 255 ITR 147 (SC), IT WAS HELD THAT THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A SPEECH OR JUDGEMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES A RE, MADE IN THE SETTINGS OF THE FACTS OF A PARTICULAR CASE, SAID LORD MORRIN IN HERRINGTON VS BRITISH RAILWAYS BOARD [1972] 2 WLR 537 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFERENT FACT MAY MAKE A WORD OF DIFFERENCE BETWEEN CONCLUSIONS IN TW O CASES. 7.1 ON THE CONTRARY, THOUGH HON'BLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE INTERPRETED THE TERM 'PAID' AND 'PAYABLE', THE ALLAHABAD HIGH COURT HAS PASSED AN OBSERVATION. THEREFORE IT IS RESPECTFULLY SUBMITTED THAT AS THERE IS NO DIVERGEN T VIEW BY TWO SUPERIOR COURTS, OUR VIEW IS 'RATIO DECIDENDI' AND OTHER VIEW IS AN OBITER DICTA. THE VIEW EXPRESSED BY HON'BLE SUPREME COURT IN THE CASE OF M/S VEGETABLE PRODUCTS LTD. IS NOT APPLICABLE IN THIS CASE. (IV) I NTENTION OF LEGISLAT URE 8. A STATUTE IS AN EDICT OF LEGISLATURE AND THE EFFECTIVE WAY OF INTERPRETING OR CONSTRUCTING A STATUTE IS TO SEEK THE INTENTION OF ITS MAKER. IT IS HELD BY THE HON'BLE SUPREME COURT IN THE CASES OF CIT VS GOTLA J. H. (SC) 156 ITR 323, K. P. VERGHESE VS ITO & ANR. (SC) 131 ITR 597, C.W.S. (INDIA) LIMITED ETC. VS CIT (SC) 208 ITR 649 AND SHREE SAJAN MILLS LTD. VS CIT & ANR. (SC) 156 ITR 585 THAT 'IF A STRICT AND LITERAL CONSTRUCTION OF THE STATUTE LEADS TO AN ABSURD RESULT, I.E. A RESULT NOT INTENDED TO B E SUB - SERVED BY THE OBJECT OF THE LEGISLATION ASCERTAINED FROM THE SCHEME OF LEGISLATION, THEN, IF ANOTHER CONSTRUCTION IS POSSIBLE APART FROM THE STRICT LITERAL CONSTRUCTION, THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCTION. ' 9. SECTION 40(A)(IA) HAS BEEN AMENDED BY THE FINANCE ACT, 2004 WITH RETROSPECTIVE EFFECT FROM 01.04.2004. THE INTENTION OF THE LEGISLATURE HAS BEEN EXPLAINED IN CIRCULAR NO. 5 OF 2005, DATED 15 - 07 - 2005, THE CONTENTS OF WHICH ARE REPRODUCED BELOW: 'FURTHE R, WITH A VIEW TO AUGMENT COMPLIANCE WITH TDS PROVISIONS IN THE CASE OF RESIDENTS AND CURB BOGUS PAYMENTS TO THEM IT HAS BEEN PROVIDED THAT NO DEDUCTION WILL BE ALLOWED IN THE COMPUTATION OF INCOME WHERE TAX IS NOT DEDUCTED FROM PAYMENTS OF INTEREST, COMMI SSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES AND PAYMENTS TO A CONTRACTOR OR SUB - CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AS SOURCE UNDER CH APTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE EXPIRY OF THE TIME PRESCRIBED UNDER SUB - SECTION (I) OF SECTION 200. ' FROM THE ABOVE, IT IS CLEAR THAT THE LEGISLATIVE INTENT OF THE PROVISION WAS TO AUGMENT TDS COMPLIANCE AND TO CURB BOGUS PAYMENT AND NOT TO LITERALLY GO THROUGH THE LANGUAGE OF THE PROVISION. 13 M/S. JAGANNATH CONSTRUCTION 10. MOREOVER, IT IS OFTEN SAID THAT TAXING STATUTE SHOULD BE GIVEN A STRICT AND LITERAL INTERP RETATION. BUT AS POINTED OUT IN THE CASE OF VARGHESE (KP) VS ITO 131 ITR 597 (SC). EVEN IN CONSTRUCTING A TAXING STATUTE, IT MUST BE BORN IN MIND THAT THE TASK OF INTERPRETATION OF A STATUTORY ENACTMENT IS NOT MECHANICAL TASK OF FINDING OUT A DICTIONARY ME ANING OF THE WORDS USED, AS IF READING MATHEMATICAL FORMULA; IT IS REALLY AN ATTEMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED REMEMBERING THAT LANGUAGE IS AT BEST AN IMPERFECT INSTRUMENT FOR EXPRESSION OF HUMAN THOUGHT. THE DICTIONA RY MEANING OF WORDS USED IS RELEVANT BUT NOT SACROSANCT AND CAN BE DEPARTED FROM WHERE SUCH LITERAL INTERPRETATION IS LIKELY TO PRODUCE MANIFESTLY UNJUST AND UNINTENDED RESULT. CIT V AHMEDABAD MASKATI CLOTH DEALERS CO - OPERATIVE WAREHOUSES SOCIETY LTD. (198 6) 162 ITR 142 (GUJ); J.K. SYNTHETICS LTD V CTO (1994) 94 STC 422 (SC): AIR 1994 SC 2393; CWT V KARAN SINGH (DR) (1993) 200 ITR 614 (SC). 11. IT IS ALSO HELD IN THE CASE OF CIT VS. M.K. VAIDYA (KAR) 224 ITR 186, LEGISLATIVE HISTORY AND CIRCULARS OF C BDT CAN BE USED AIDS FOR INTERPRETATION OF THE PROVISION. THE DECISION OF THE HON'BLE HIGH COURT IS REPRODUCED HEREUNDER: 'THE LEGISLATIVE HISTORY OF A FISCAL STATUTE COULD BE TRACED AND CONSIDERED TO UNDERSTAND ITS SCOPE; FOR EXAMPLE, THIS PROPOSITION WAS APPLIED BY THE SUPREME COURT TO CONSIDER THE SCOPE OF RULE 19A,AND THE CONTENTS OF SECTION 80J IN LOHIA MACHINES LTD. V. UNION OF INDIA {1985J152 ITR 508. THE COURTS ARE PERMITTED TO TRAVEL BEYOND THE WORDS USED IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHICH A PARTICULAR PROVISION IS ENACTED; FOR THIS PURPOSE, EVEN THE SPEECH OF THE FINANCE MINISTER, WHILE INTRODUCING THE P ARTICULAR FISCAL LEGISLATION COULD BE LOOKED INTO (VIDE K.P. VARGHESE V. ITO [1981] 131 ITR 597 (SC)). WHILE STATING THIS PRINCIPLE, THE SUPREME COURT FURTHER OBSERVED (AT PAGE 608): 'THIS IS IN ACCORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTERN COUNTRIES BUT ALSO IN INDIA THAT INTERPRETATION OF A STATUTE BEING AN EXERCISE IN THE ASCERTAINMENT OF MEANING, EVERYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE ADMISSIBLE.' (EMPHASIS* SUPPLIED). IN THE SAME DECISION, THE CIRCULAR ISSUED BY THE C ENTRAL BOARD OF DIRE CT TAXES WAS ALSO REFERRED TO UNDERSTAND THE SCOPE AND OBJECT OF THE PARTICULAR SECTION OF THE ACT INVOLVED THEREIN. THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES WERE NOT ONLY BINDING ON THE TAX DEPARTMENT, BUT WERE ALSO I N THE NATURE OF CONTEMPORANEOUS EXPOSITION FURNISHING LEGITIMATE AID IN THE CONSTRUCTION OF THE SECTION. IF SO, THERE CAN BE NO DOUBT ABOUT THE PURPOSE BEHIND ENACTING CLAUSE (VI) IN THE YEAR 1984 AND ITS SUBSEQUENT DELETION BY THE FINANCE ACT, 1985. THE C LEAR IMPLICATION IS THAT, BUT FOR ENACTING CLAUSE (VI), THE GRANT OF A LOAN TO AN EMPLOYEE FOR HOUSE BUILDING PURPOSES WAS NOT HITHERTO COVERED BY SECTION 17(2), IN SPITE OF ITS CLAUSE (HI) AND, THEREFORE, CLAUSE (VI) HAD TO BE INSERTED BY THE AMENDMENT AC T OF 1984.' THE CBDT CIRCULAR AS DISCUSSED EARLIER HAS ALREADY SHOWN THAT 'AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOARD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOULD INCLUDE 'AMOUNTS WHICH ARE PAID DURING TH E PREVIOUS YEAR'. 12. CONSIDERING THE DECISIONS OF CALCUTTA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, KOLKATA - XI V. CRESCENT EXPORTS SYNDICATE (SUPRA) 14 M/S. JAGANNATH CONSTRUCTION AND HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX - IV V. SIKANDARKHAN N TUNVAR(SUPRA),THE HON'BLE ITAT MUMBAI BENCHES 'D' IN THE CASE OF ACIT CIRCLE - 4(2), MUMBAI VS. M/S. RISHTI STOCK AND SHARES PVT. LTD. (ITA NO.LL2/MUM/2012 DTD.02.08.2013) HAS ACCEPTED THE VIEWS EXPRESSED IN CBDT CIRCULAR NO. 10 DTD. 16.12.201 3. (V) D ECISION OF OTHER H IGH C OURTS ON THE SAME IS SUE 13. THE HON'BLE CALCUTTA HIGH AND COURTS GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, KOLKATA - XI V. CRESCENT EXPORTS SYNDICATE AND COMMISSIONER OF INCOME - TAX - IV V. SIKANDARK HAN N TUNVAR RESPECTIVELY HAD DECIDED THE ISSUE MUCH EARLIER THAN THE ALLAHABAD HIGH COURT. IT HAS BEEN WELL ACCEPTED THAT THOUGH LEGALLY JUDGMENT OF ANOTHER HIGH COURT IS NOT A BINDING PRECEDENT, JUDICIAL COMITY OR JUDICIAL DISCIPLINE IS INVOKED BY COURT THAT IN RESPECT OF INTERPRETATION OF CENTRAL STATUTES A DECISION OF ANOTHER HIGH COURT SHOULD BE FOLLOWED THOUGH JUDGE MAY HAVE A DIFFERENT VIEW. THE GUJARAT HC HAD EARLIER EXPLAINED THE PRINCIPLES IN THE CASE OF ARVLND BOARD & PAPER PRODUCTS LTD. VS. CIT (1982) 137ITR 635 IN THE FOLLOWING WORDS : - (1) 'IN INCOME TAX MATTERS WHICH ARE GOVERNED BY AN ALL INDIA STATUTE, WHEN THERE IS A DECISION OF A HIGH COURT INTERPRETING A STATUTORY PROVISION, IT WOULD BE A WISE JUDICIAL POLICY AND PRACTICE NOT TO TAKE A DIFFERENT VIEW, BARRING OF COURSE CERTAIN EXCEPTIO NS LIKE WHERE THE DECISION IS SUB - SILENTIO PER INCURIUM, OBITER DICTA OR BASED ON A CONCESSION OR TAKES A VIEW WHICH IS IMPOSSIBLE TO ARRIVE AT OR THERE IS ANOTHER VIEW IN THE FIELD OR THERE IS A SUBSEQUENT AMENDMENT OF THE STATUTE OR REVERSAL OR IMPLIED O VERRULING OF THE DECISION BY A HIGH COURT OR SAME SUCH OR SIMILAR INFIRMITY IS MANIFESTLY PERCEIVABLE IN THE DECISION.' THIS PRINCIPLE IS RECENTLY FOLLOWED IN CIT VS. SAE WELFARE TRUST (2004) 192CTR70(DEL). (2) THE COURTS HAVE HOWEVER OBSERVED THAT THIS IS NO T A UNIVERSAL RULE AND A JUDGE OF THE HIGH COURT NEED NOT SLAVISHLY FOLLOW THE JUDGMENT OF ANOTHER HIGH COURT. IN THE CASE OF N.R. PAPERS AND BOARD LTD. VS. DY. CIT (1998) 234 ITR 733 (GUJ) THE COURT OBSERVED THAT 'DECISIONS OF OTHER HIGH COURTS HAVE GREAT PERSUASIVE VALUE BUT IF IT BECOMES IMPOSSIBLE TO AGREE WITH OR IF THERE ARE NO REASONS AND ONLY PRONOUNCEMENT OF LEGAL PRINCIPLES, THE COURT IS FREE TO GIVE ITS OWN REASONS NOT COINCIDING WITH CONCLUSION REACHED BY ANOTHER COURT IN GRAPHIC LANGUAGE. IT IS SAID THAT 'THE DECISIONS OF ANY HIGH COURT ARE AFTER ALL NOT INTENDED TO BE GAG ORDER FOR OTHER HIGH COURTS AND DO NOT HAVE THE EFFECT OF FREEZING JUDICIAL THINKING ON THE POINTS COVERED BY THEM'. 3. JUDICIAL DECORUM, PROPRIETY AND DISCIPLINE REQUIRES T HAT THE HIGH COURTS, SHOULD ESPECIALLY IN THE EVENT OF ITS CONTRA VIEW OR DISSENT, DISCUSS THE JUDGEMENT OF THE DIFFERENT HIGH COURTS AND RECORD OWN REASONS FOR ITS CONTRA VIEW - JUDGEMENTS GIVEN BY A HIGH COURT ARE NOT BINDING ON OTHER HIGH COURTS, BUT AL L THE SAME, THEY HAVE PERSUASIVE VALUE. PRADIP J. MEHTA VS. CIT (SC) 300 ITR 231 C ONCLUSION : IN VIEW OF THE ABOVE IT IS SUBMITTED THAT THE HON'BLE ITAT CUTTACK'S VIEW WITH REGARD TO DISALLOWANCE U/S 40(A)(IA ) BE RECONSIDERED, OR IN THE ALTERNATIVE THE DEPARTMENT MAY BE PERMITTED TO APPROACH HON'BLE PRESIDENT ITAT TO CONSTITUTE A SPECIAL BENCH TO BRING A FINALITY TO VARIOUS DISPUTED ISSUES RELATING TO 15 M/S. JAGANNATH CONSTRUCTION DISALLOWANCE U/S 40(A)(IA), WITH DIFFERENT BENCHES OF ITAT GIVING DIFFERING OPINIONS LEADING TO INCREASED LITIGATION 8. WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RANJIT KUMAR BADAJENA (SUPRA) HAS DEALT WITH THIS ISSUE AND OBSERVED AS UNDER: 6.3 WITH REFERENCE TO THE DISPUTE WHETHER THE AMOUNTS ARE COVERED BY THE PROVISIONS OF SECTION 40(A)(IA) AS ARGUED BY LD D.R., WE ARE OF THE OPINION THAT THE DECISION OF THE HON'BLE SPECIAL BENCH OF THE IT AT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), IS BINDING ON THE COORDINATE BENCH OF I TAT. THUS, SINCE THERE IS NO AMOUNT OUTSTANDING AT THE END OF THE ACCOUNTING YEAR, NO AMOUNT CAN BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT. BE THATAS IT MAY, THIS ISSUE WAS CONSIDERED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT - VS - VENTOR SHIPPING SERVICES (P) LTD. 38 TAXMANN.COM (ALL), WHICH AFFIRMED THE SAID DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING & TRANSPORT (SUPRA) THAT FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE A CT, THE AMOUNT SHOULD BE PAYABLE OR NOT WHICH HAS BEEN PAID DURING THE YEAR. THIS FACT WAS ALSO ACCEPTED BY THE CBDT IN CIRCULAR NO.LO/DV/2013 DATED 16.12.2013 (VIDE PAGE 3.3) RELIED ON BY THE ID. DR. AS RIGHTLY SUBMITTED BY THE ID. COUNSEL FOR THE ASSESSE E, THE HON'BLE SUPREME COURT OF INDIA HAS AFFIRMED THE DECISION OF THE HON'BLE HIGH COURT OF ALLAHABAD AS REGARDS THE APPLICABILITY OF SECTION 40(A)(IA) OF THE I.T. ACT, 1961. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE COORDINATE BENCH HAS TO FOLLOW T HE DECISION OF THE SPECIAL BENCH, MORE SO, THE OPINION EXPRESSED BY THE SPECIAL BENCH IS ULTIMATELY APPROVED BY THE HON'BLE SUPREME COURT. FOR THESE REASONS, WE ARE OF THE OPINION THAT ON THE FACTS OF THE CASE, THERE CAN BE NO DISALLOWANCE UNDER SECTION 40 (A)(IA). ACCORDINGLY, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. LD D.R. COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THE ABOVE QUOTED ORDER OF THE TRIBUNAL WAS VARIED IN APPEAL BY ANY OTHER HIGHER FORUM. IT IS A SETTLED POSITION OF LAW THAT WHEN THERE ARE CONTRARY DECISION OF DIFFERENT HONBLE HIGH COURTS AND NONE OF WHICH IS IS HONBLE JURISDICTIONAL HIGH COURT, THEN THE DECISION IN FAVOUR OF THE ASSESSEE SHOU LD BE FOLLOWED. THIS VIEW FINDS SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGE TABLE PRODUCTS LTD., 88 ITR 192 (SC). 16 M/S. JAGANNATH CONSTRUCTION 12. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THERE IS NO AMOUNT OUTSTANDING AND PAYABLE AT TH E END OF THE YEAR. THEREFORE, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. V ICTOR SHIPPING SERVICES (P) LTD(SUPRA) AND DECISION OF THIS BENCH IN THE CASE OF RANJIT KUMAR BADAJENA (SUPRA) DELETE THE DISALLOWANCE OF RS.76,19,465/ - MADE U/S.40(A)(IA) OF THE ACT. HENCE, T HIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.121/CTK/2016: REVENUES APPEAL: 13. THE SOLE ISSUE INVOLVED IN THE APPEAL OF THE RE VENUE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,50,90,891/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNSECURED LOAN. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND ON VERIFICATION OF BANK ACCOUNT MAINTAINED BY THE ASSESSEE WITH AXIS BANK LTD., RAYAGADA THAT THERE WERE TOTAL CREDITS OF RS.4,47,50,803/ - IN ASSESSEES ACCOUNT AGAINST THE GROSS CONTRACT RE CEIPTS OF RS.1,77,92,837/ - SHOWN IN THE PROFIT & LOSS ACCOUNT. ON A SHOW CAUSE ISSUED BY THE ASSESSING OFFICER, THE PARTNER OF THE ASSESSEE FIRM, SHRI AJAY KUMAR JAIN SUBMITTED TH A T HE WAS DOING CONTRACT WORK IN HIS INDIVIDUAL CAPACITY UNDER UTKAL ALUMIN A INTERNATIONAL LTD., AND THE CONTRACT PAYMENTS RECEIVED BY SRI JAIN FROM THE COMPANY WERE CREDITED IN THE BANK ACCOUNT OF THE FIRM. LD 17 M/S. JAGANNATH CONSTRUCTION A.R. OF THE ASSESSEE FILED COPY OF 26AS STATEMENTS OF THE FIRM AND THE PARTNER IN SUPPORT OF ITS WHICH WAS VERIFIED BY T HE ASSESSING OFFICER. FROM THE BALANCE SHEET, THE ASSESSING OFFICER OBSERVED THAT THE UNSECURED LOAN STOOD AT RS.1,50,90,891/ - . ON A SHOW CAUSE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THAT THE LOAN WAS THE BALANCE AMOUNT PAYABLE TO THE PA RTNER SHRI AJAY KUMAR JAIN . IT WAS EXPLAINED THAT TOTAL RECEIPTS FROM SHRI AJAY KUMAR JAIN WAS RS.3,299,49,894/ - AND AN AMOUNT OF RS.1,78,59,003/ - WAS PAID TO HIM LEAVING THE BALANCE AMOUNT OF RS.1,50,90,891/ - AS PAYABLE TO HIM AS AT 3.1.3.2012. IT WAS S UBMITTED THAT THE CONTRACT RECEIPTS RECEIVED BY SHRI JAIN IN HIS INDIVIDUAL CAPACITY WERE DEPOSITED IN THE FIRMS BANK ACCOUNT AND THAT AFTER DEDUCTING THE WITHDRAWALS MADE BY SRI JAIN FOR HIS PERSONAL PURPOSES, THE BALANCE AMOUNT WAS SHOWN AS LOAN FORM H IM. THE ASSESSING OFFICER, HOWEVER, TREATED THE ENTIRE AMOUNT OF RS.1,50,90,891/ - AS BOGUS WITH THE FOLLOWING OBSERVATIONS MADE IN THE ASSESSMENT ORDER: '3. AGAIN, VERIFICATION OF BANK ACCOUNT OF THE FIRM IT WAS REVEALED THAT THE CLOSING BALANCE AS ON 31.03,2012 STOOD AT RS, 1,10,52,953/ - , THE LAST - AMOUNT WAS CREDITED IN THE BANK ACCOUNT WAS ON 27,02.2012 TO THE TUNE OF RS,1,82,61,221/ - RECEIVED FROM UTKAL ALU MINA INTERNATIONAL LTD, AND THEREAFTER NO AMOUNT WAS CREDITED IN THE BANK ACCOUNT, THE EXPLANATION V/AS ASKED WHY THE LOAN AMOUNT WAS SHOWN WHEN THE FIRM HAD AMPLE CASH BALANCE IN THE BANK ACCOUNT, THEN THE REPLY WAS FURNISHED THAT AS THE PARTNER WAS OUT O F STATION THE PAYMENT FOR MAJOR EXPENSES FOR THE WORKS CARRIED OUT COULD NOT BE MADE FOR WHICH THE BANK BALANCE WAS HIGH. THE REPLY FURNISHED IS AT ALL NOT BELIEVABLE THAT THE MANAGING PARTNER WHO LOOKS AFTER THE AFFAIRS OF THE FIRM WAS OUT OF STATION FOR MORE THAN A MONTH AT THE CLOSE OF THE FINANCIAL YEAR AND BY SUCH TIME ALL THE CONTRACTORS ARE NORMALLY ENGAGED FOR COMPLETION OF WORKS AWARDED TO THEM FOR CLEARING THE PENDING BILLS BY THE CONTRACTEES. SO ONCE THE PARTNER WAS PRESENT, THEN BY WITHDRAWING T HE AMOUNT FROM 18 M/S. JAGANNATH CONSTRUCTION THE BANK ACCOUNT THE ASSESSEE COULD HAVE SQUARED OFF THE LOAN AMOUNT, FURTHER, THE MORE INTERESTING THING IS THAT ON VERIFICATION OF THE BALANCE SHEET OF THE PARTNER SRI A JAY KUMAR JAIN WHO IS ALSO AN ASSESSEE UNDER THIS WARD AND ALSO HIS A CCOUNTS ARE AUDITED, IT CAME TO LIGHT THAT HE HAS NOT SHOWN SUCH LOAN AMOUNT IN THE ASSET SIDE OF THE BALANCE SHEET. THE RETURNS OF INCOME OF BOTH THE FIRM AND PARTNER WERE AUDITED BY THE SAME CH ARTERED ACCOUNTANT WHO HAS ALSO FILED BOTH THE RETURNS ELECTR ONICALLY, IN THE ASSET SIDE OF THE BALANCE SHEET OF HRI JAIN, UNDER THE HEAD 'LOANS AND ADVANCES', THE AMOUNT IS SHOWN AT RS. 1,00,000/ - AND THE SOURCES OF FUND AND AP PLICATION OF FUND ARE SHOWN AT RS.50,67,695/ - . THE BALANCE SHEET FILED ALONGWIT H THE RETURN OF INCOME ELECTRONICALLY BY THE FIRM AS WELL AS PARTNER IS REPRODUCED AS UNDER FOR BETTER CLARIFICATIONS: - M/S. JAGANNATH CONSTRUCTION (BALANCE SHEET AS ON 31,03.2012) L.A) PARTNERS'/MEMBERS' CAPITAL . 17,28,458 1 FIXED ASSETS NIL 2. A) SECURED LOANS NIL 2 INVESTMENTS NIL B) UNSECURED LOANS 3 CURRENT ASSETS, LOANS AND ADVANCES I) FROM BANKS NIL A) CURRENT ASSETS: - II) FROM OTHERS 1,50,90,891 I) C) STOCK - IN - PROGRESS II) SUNDRY DEBTORS 20,60,600 39,21,403 3. DEFERRED TAX LIABILITY NIL HI) CASH AND BANK BALANCES 4. SOURCES OF FUND 1,68,19,349 A) CASH - IN - HAND 22,430 D) CURRENT LIABILITIES & PROVISIONS B) BALANCES WITH BANKS 1,10,52,952 I) CURRENT LIABILITIES: - A) SUNDRY CREDITORS 17,54,629 B) LOANS AND ADVANCES: - II) PROVISIONS: - I) ADVANCES RECOVERABLE 13,75,000 A) PROVISION FOR INCOME - TAX 70,304 II) DEPOSITS 2,11,897 5 . TOTAL, APPLICATION OF FUNDS 1,68,19,349 SHRI AJAY KUMAR JAIN (BALANCE SHEET AS ON 31,03.2012) L.A) PROPRIETOR'S CAPITAL 45,63,191 1. FIXED ASSETS 2. A~) SECURED LOANS A) GROSS BLOCK 12,99,360 A) FROM BANKS NIL B) DEPRECIATION 1,29,190 B) FROM OTHERS 5,04,504 C) NET BLOCK 11,70,170 B) UNSECURED LOANS 2. INVESTMENTS NIL I) FROM BANKS NIL 3, CURRENT ASSETS, LOANS AND ADVANCES II) FROM OTHERS NIL A) CURRENT ASSETS NIL 3. DEFERRED TAX LIABILITY NIL II) SUNDRY DEBTORS 33,43,081 4. SOURCES OF FUND . 50,67,695 HI) CASH AND BANK BALANCES D) CURRENT LIABILITIES & ORO VISIONS A) CASH - IN - HAND 10,948 I) CURRENT LIABILITIES: - B) BALANCE WITH BANKS 8,40,469 A) SUNDRY CREDITORS 29,44,404 IV) OTHER CURRENT ASSETS 25,47,431 IF) PROVISIONS: - B) LOANS AND ADVANCES: - A) PROVISION FOR INCOME - TAX NIL I) ADVANCES RECOVERABLE 1,00,000 II) DEPOSITS NIL 5. TOTAL, APPLICATION OF FUNDS 50,67695 4,. IF A CLOSE WATCH IS GIVEN ON THE ABOVE TWO BALANCE SHEETS, IT IS SEEN THAT THOUGH THE FIRM HAS SHOWN UNSECURED LOAN OF RS.1,50,90,891/ - IN 19 M/S. JAGANNATH CONSTRUCTION THE LIABILITY SIDE OF THE BALANCE SHEET, SUCH LOAN AMOUNT HAS NOT BEEN APPEARED IN THE COLUMN 'LOANS AND ADVANCES' IN THE ASSET SIDE OF THE BALANCE SHEET OF THE PARTNER. AS PER ACCOUNTING PRINCIPLE, IF THE LOAN CREDITOR HAS SHOWN THE LOAN AMOUNT IN THE LIA BILITY SIDE THEN THAT LOAN AMOUNT MUST HAVE BEEN APPEARED IN THE ASSET SIDE OF THE BALANCE SHEET OF THE PERSON CONCERNED WHO HAS GIVEN THE LOAN. HERE THOUGH THE ASSESSEE FIRM HAS CLAIMED TO HAVE TAKEN LOAN FROM THE PARTNER SHRI AJAY KUMAR JAIN, BUT SUCH L OAN AMOUNT HAS NOT BEEN SHOWN IN THE ASSET SIDE OF THE BALANCE SHEET BY HIM. FROM THE ABOVE CONDUCT OF THE ALLEGED CREDITOR IT IS REASONABLE TO HOLD THAT HE HAS ALREADY RECEIVED BACK THE SAID LOAN IN CASH, IF ANY, FROM THE ASSESSEE AND FOR THIS REASON THE SAME HAS NOT BEEN REFLECTED IN HIS BALANCE SHEET .' 15. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE HAD FILED A WRITTEN SUBMISSION ALONG WITH COPIES OF AUDITED FINAL ACCOUNTS FOR THE FY 2011 - 12 IN THE CASE OF SRI AJAY KUMAR JAIN. IT WAS CLAIME D THAT THE OBSERVATION OF THE ASSESSING OFFICER THAT THE LOAN AMOUNT DID NOT APPEAR IN THE ASSET SIDE OF THE BALANCE SHEET OF SRI AJAY KUMAR JAIN WAS NOT CORRECT SINCE THE LOAN WAS VERY MUCH REFLECTED IN THE BALANCE SHEET OF SRI JA IN. IT WAS CONTENDED THAT THE ASSESS ING OFFICER WITHOUT CALLING FOR THE AUDITED BALANCE SHEET OF SRI JAIN FOR THE AY 2012 - 13 PREFERRED TO TAKE THE FIGURES FROM THE RETURN WHERE THE HEADINGS & GROUPINGS IN THE BALANCE SHEET DIFFERED. 16. THE CIT(A) FORWARDED WRITTEN SUBMISSION ALONG WITH COPIES OF THE AUDITED FINAL AC COUNTS OF SRI JAIN TO THE ASSESSING OFFICER FOR HIS V ERIFICATION AND COMMENTS. THE ASSESSING OFFICER VIDE HIS ELABORATE LETTER DT.9.11.2015 HAS GIVEN HIS OBJECTION TO ACCEPTANCE OF THE AUDITED BA LANCE SHEET OF SRI JAIN FILED BY THE ASSESSEE IN THE COU RSE OF THE APPEAL HEARING. HE WAS OF TH E VIEW THAT THE BALANCE SHEET WAS A MANIPULATED ONE PREPARED SUBSEQUENTLY JUST TO ACCOMMODATE THE LOAN OF 20 M/S. JAGANNATH CONSTRUCTION RS.1,50,90,891/ - REFLECTED IN THE BALANCE SH EET OF THE ASSESSEE - FIRM. THE ASSESSING OFFICER HAS SERIOUS DOUBTS ABOUT THE GENUINENESS OF THE BALANCE SHEET OF SRI JAIN FILED DURING THE COURSE OF APPEAL HEARING. THE RELEVANT PORTION OF THE REMAND REPORT IS AS UNDER: 'THE REPORT REGARDING NON - DISCLOSURE OF UNSEC URED LOAN GIVEN TO THE FIRM BY THE PARTNER SRI AJAY KUMAR JAIN IN THE ASSET SIDE OF T H E BA LAN CE SHEET FOR WHICH THE LOAN TAKEN BY THE FIRM WAS NOT TREATED AS GENUINE AND ADDED TO THE TOTAL INCOME OF THE FIRM TREATING THE LOAN AMOUNT BEING BOGUS AND FURTHER BALANCE SHEET OF THE PARTNER FILED BY THE FIRM IN COURSE OF APPEAL HEARING WHEREIN THE LOAN GIVEN BY THE PARTNER TO THE FIRM APPEARED AS ( - ) FIGURE IN THE LIABILITY SIDE OF THE BALANCE SHEET OF THE PARTNER ETC. IS SUBMITTED AS UNDER: - THE REASON FOR SELE CTION OF THE CASE FOR SCRUTINY UNDER CASS WAS TO VERIFY LARGE INCREASE OF UNSECURED LOANS. THE FIRM CONSISTED OF TWO PARTNERS NAMELY SRI AJAY KUMAR JAIN AND SMT. SAROJADEBI JAIN. THE TOTAL CAPITAL OF THE TWO PARTNERS AS ON 31.03.2012 WITH THE FIRM STOOD A T RS. 17,28,458/ - (RS.9,08,722 + RS.8,19, 736), WHEREAS THE FIRM HAS SHOW N UNSECURED LOAN OF RS.1,50,90,891/ - IN THE LIABILITY SIDE OF THE BALANCE SHEET DURING THE YEAR UNDER CONSIDERATION. IN THE QUESTIONNAIRE ISSUED, THE ASSESSEE REQUIRED TO FURNISH COMPLE TE NAME, ADDRESS AND PAN OF THE UNSECURED LOAN CREDITOR ALONGWITH LOAN CONFIRMATION LETTER. IN REPLY TO THE QUESTIONNAIRE, THE ASSESSEE FILED THE EXPLANATION IN THE FOLLOWING MANNER: - 'ON CLOSE ASSESSMENT TO THE FINANCIAL STATEMENT, IT IS BROUGHT TO THE N OTICE THAT THE AMOUNT OF RS.1,50,90,891/ - SHOWN AS UNSECURED LOAN IN RETURN FORM ARE IN NATURE OF UNPAID BILLS OR CURRENT LIABILITIES.' AGAIN VIDE ORDER - SHEET ENTRY DATED.23.06.2014, THE QUERY WAS RAISED THAT IN THE LIABILITY SIDE OF THE BALANCE SHEET THE FIRM HAS ALREADY SHOW BILLS PAYABLE OF RS. 17,54,629/ - AND AFTER PAYMENT MADE TO SHRI AJAY KUMAR JAIN FOR VARIOUS PURPOSES OUT OF THE TOTAL RECEIPT FROM SRI JAIN THE NET PAYABLE AMOUNT IS SHOWN AT RS.1,50,90,891/ - WHICH IS DEFINITELY IN THE NATURE OF UNSE CURED LOAN. THEREAFTER, THE REPLY WAS FURNISHED ON 21.08.2014 MENTIONING THE FACT TH A T THE AMOUNT OF RS.1,50,90,891 / - AS REFLECTED IN ITR REFERS TO LOAN FROM SRI AJAY KUMAR JAIN. IN COURSE OF HEARING, ON VERIFICATION OF BANK ACCOUNT, IT WAS NOTICED THAT THE TOTAL CONTRACT RECEIPT FROM DIFFERENT CONCERNS CREDITED IN THE BANK ACCOUNT STOOD AT RS.4,47,50,803/ - , WHEREAS TH E FIRM HAS DISCLOSED THE TOTAL CONTRACT RECEIPT OF RS.1,77,92,837/ - DURING THE YEAR UNDER CONSIDERATION. REGARDING NON - DISCLOSURE OF ENTIRE RECEIPT AMOUNT IN THE RETURN OF INCOME, THE ASSESSEE EXPLAINED THAT THE PARTNER WAS ALSO DOING THE CONTRACT BUSINESS AND THE CONTRACT RECEIPTS OF THE PARTNER WERE DEPOSITED IN THE FIRM'S BANK ACCOUNT. THE TOTAL DEPOSIT MADE IN THE BANK' ACCOUNT IN RESPECT OF THE PARTNER WAS SHOWN AS ADVANCE TO THE FIRM AND AFTER DEDUCTING THE WITHDRAWALS MADE BY THE PARTNER FROM THE BAN K 21 M/S. JAGANNATH CONSTRUCTION ACCOUNT THE BALANCE OUTSTANDING IN THE BANK ACCOUNT RELATED TO THE PARTNER WAS SHOWN AS UNSECURED LOAN TO THE FIRM. HERE IT IS MENTIONED THAT BOTH THE ASSESSEE FIRM AND THE PARTNER ARE DOING CONTRACT WORK SEPARATELY. INSTEAD OF DEPOSITING THE CONTRACT RE CEIPT IN HIS INDIVIDUAL BANK ACCOUNT WHY THE PARTNER DEPOSITED THE RECEIPTS IN THE FIRM'S ACCOUNT AND AFTER WITHDRAWING SOME AMOUNTS FOR HIS PERSONAL PURPOSE THE BALANCE WAS SHOWN AS LOAN, THE REASON BEHIND SUCH EXERCISE IS BEST KNOWN TO THE PARTNER. BOTH THE ACCOUNTS OF THE ASSESSEE FIRM AND THE PARTNER ARE AUDITED BY THE SAME CHARTERED ACCOUNTANT AND THE AMOUNT LYING IN THE HANDS OF THE PARTNER I.E. IN THE BANK ACCOUNT SHOULD HAVE BEEN SHOWN BY THE PARTNER IN THE ASSET SIDE OF THE BALANCE SHEET BEING CASH AT BANK STRAIGHTAWAY BY NOT DOING SUCH EXERCISE,. THE PARTNER HAVING A TURNOVER OF MORE THAN RS,4 CRORES DURING THE ASSESSMENT YEAR 2012 - 13 MUST HAVE MAINTAINED THE BANK ACCOUNT. VERIFICATION OF BALANCE SHEET OF THE PARTNER FOR THE A.Y. 2012 - 13, IT IS SEE N THAT THE BALANCE WITH BANK ACCOUNT STOOD AT RS.8,40,469/ - . SO BY NOT DEPOSITING THE PERSONAL CONTRACT RECEIPTS IN THE FIRMS BANK ACCOUNT THE PARTNER COULD HAVE DEPOSITED THE SAME IN HIS INDIVIDUAL BANK ACCOUNT, AGAIN THE FIRM HAD AMPLE CASH BALANCE AT TH E CLOSE OF THE FINANCIAL YEAR WHICH STOOD AT RS,1,10,52,953/ - AND BY WITHDRAWING THE SAME THE FIRM COULD H A VE SQU ARED OFF THE LOAN AMOUNT IF ANY AMOUNT S PAYABLE TO THE PARTNER BY THE FIRM, THEN SUCH AMOUNT SHOULD HAVE BEEN SHOWN BY THE PARTNER IN HIS BALAN CE SHEET IN ASSET SIDE. AS BOTH THE FIRM AND PARTNER'S ACCOUNTS WERE AUDITED BY THE SAME CHARTERED ACCOUNTANT, THEN NOTHING WAS PREVENTED THE PARTNER TO SHOW THE LOAN AMOUNT GIVEN TO THE FIRM IN HIS BALANCE SHEET AS PER ACCOUNTING PRINCIPLE. SINCE THE PART NER HAS NOT DISCLOSED THE LOAN AMOUNT IN THE ASSET SIDE OF THE BALANCE SHEET, THE LOAN AMOUNT SHOWN BY THE ASSESSEE FIRM IS TREATED AS BOGUS AND ACCORDINGLY ADDED TO THE TOTAL INCOME. REGARDING THE STAND TAKEN BY THE ASSESSEE IN COURSE OF APPEAL HEARING . THAT BREAK - UP DETAILS OF BALANCE SHEET OF THE PARTNER WAS NOT CALLED FOR, IT IS SUBMITTED THAT IN THE SHOW - CAUSE LETTER ISSUED DATED 10.10.2014, THE ASSESSEE WAS REQUIRED TO SHOW - CAUSE THE FOLLOWING: - 'YOU ARE REQUIRED TO SHOW - CAUSE WHY THE LOAN AMOUNT CL AIMED TO BE PAYABLE TO SRI AJAY KUMAR JAIN SHALL NOT BE TREATED AS BOGUS FOR THE REASON THAT INITIALLY THE REPLY WAS GIVEN THAT THE SAME REPRESENTED AS BILLS PAYABLE AND SUBSEQUENTLY IN RESPONSE TO THE FURTHER QUERY THE REPLY WAS GIVEN THE SAME REPRESENTED AS LOAN BUT SUCH LOAN AMOUNT HAS NOT BEEN APPEARED IN THE ASSET SIDE OF THE BALANCE SHEET OF SRI AJAY KUMAR JAIN. MOREOVER, THE FIRM HAD AMPLE CASH BALANCE AT THE CLOSE OF THE YEAR AND BY UTILIZING THE SAME THE LOAN AMOUNT COULD HAVE BEEN SQUARED OFF IF A T ALL THE LOAN HAS B E EN TAKEN.' IN RESPONSE TO SUCH QUERY, THE ASSESSEE FILED THE WRITTEN EXPLANATION THE FOLLOWING MANNER: - 'AS ESTABLISHED EARLIER THAT THE AMO UNT PAYABLE TO SHRI AJAY KUMAR JAIN IS IN NATURE OF LOAN AND ADVANCES. THE ASSESSEE H AS ALREADY PROVED THE GENUINENESS OF THE LOAN TRANSACTION. THE LENDER HAS ALSO PAID INCOME - TAX ON THE SAID INCOME. HOWEVER, DISALLOWING OR T REATING THE LOAN 22 M/S. JAGANNATH CONSTRUCTION AMOUNT AS BOGUS MERELY BECAUSE THE SAME AMOUNT OF LOAN IS NOT APPEARING IN THE ASSET SIDE OF BALANC E SHEET OF LENDER WOULD AMOUNT TO UNFAIR TREATMENT TO THE ASSESSEE AND WOULD RESULT IN DOUBLE TAXATION OF INCOME FOR THE SAME AMOUNT. THE ASSESSEE IS A GENUINE TAX PAYER AND BY NO INTENT WANTS TO AVOID AND/OR EVADE TAX. HENCE ADDING BACK THE AMOUNT OF LOAN WOULD BE UNJUST TO THE ASSESSEE,' ON GOING THROUGH THE EXPLANATION FURNISHED BY THE ASSESSEE IN COURSE OF HEARING MENTIONED SUPRA IT IS ESTABLISHED THAT THE PARTNER HAS NOT DISCLOSED THE LOAN AMOUNT IN THE ASSET SIDE OF THE BALANCE SHEET. ONCE THE PARTNE R HAS NOT SHOWN THE LOAN AMOUNT IN THE BALANCE SHEET, IT IS PROVED THAT NO LOAN AMOUNT IS RECEIVABLE BY THE PARTNER FROM THE FIRM AND ACCORDINGLY THE LOAN AMOUNT CLAIMED BY THE FIRM HAS BEEN CORRECTLY TREATED AS BOGUS AND ADDED TO THE TOTA L INCOME. NO BALA NCE SHEET AS PRODUCED NOW IN COURSE O F APPEAL HEARING MENTIONING THE LOAN - AMOUNT - GIVEN IN - ( - ) FIGURE IN THE LIABILITY SIDE OF THE BALANCE SHEET WHICH NORMALLY TAKES PLACE IN THE ASSET SIDE OF THE BALANC E SHEET AS PER ACCOUNTING PRINCIPLE COULD BE FILED IN COURSE OF HEARING. EVEN THOUGH THE HEARING WAS TAKEN UP ON SO MANY OCCASIONS AND NON - APPEARANCE OF THE LOAN AMOUNT IN THE BALANCE SHEET OF THE PARTNER WAS DISCUSSED WITH THE A.R. OF THE ASSESSEE ON ALL THE OCCASIONS AND THE COPY OF THE BALANCE SHEET OF PARTNER DOWNLOADED FROM AST WAS ALSO SHOWN TO THE A.R., BUT THE A.R. NEVER FI LED SUCH A BALANCE SHEET AT ANY TIME AND EVEN IF IN RESPONSE TO THE S HOW - CAUSE LETTER ISSUED. NOW FILING OF THE BALANCE SHEET BY CREATING A SUNDRY PAYABLE OF RS. 1, 80,25,295/ - IN THE 'LIABILITY SIDE OF THE BALANCE SHEET AND BY DEDUC TING THE LOAN AMOUNT OF RS.1,50 ,90,891/ - FROM SUCH SUNDRY PAYABLE BRINGING - THE NET AMOUNT OF RS.29,44,404/ - SHOWN IN THE LIABILITY SIDE IN THE BALANCE SHEET UPLOADED IN AST WHILE FILING THE RETURN OF INCOME ELECTRONICALLY IS NOTHING BUT TO TAKE A GROUND BY THE ASSESSEE FIRM TO GET EXEMPTION FROM THE ADDITION MADE IN THE ASSESSMENT ORDER. IN THE BALANCE SHEET UPLOAD IN AST, THE SUNDRY PAYABLE SHOWN NOW COULD HAVE BEEN SHOWN BY THE ASSESSEE IN THE COLUM N MEANT IN THE LIABILITY SIDE AND THE LOAN AMOUNT GIVEN T O THE FIRM COULD HAVE BEEN SHOW N IN THE COLUMN MEANT FOR 'ADVANCES RECOVERABLE IN CASH OR IN KIND OR FOR VALUE TO BE RECEIVED'. BUT IN THE AFORESAID COLUMN IN THE ASSET SIDE THE ASSESSEE HAS SHOWN ON LY AN AMOUNT OF RS.1,00,000/ - . MOREOVER, IN THE ''SUNDRY DEBTORS''' COLUMN THE ASSESSEE HAS SHOWN THE AMOUNT OF RS.33,43,081/ - WHICH IS IN THE NATURE OF BILLS RECEIVABLE. ONCE THE AASSESSEE MENTIONED THE BILLS RECEIVABLE AMOUNT IN THE ASSET SIDE OF THE BAL ANCE SHEET IN THE RELEVANT COLUMN, THEN NOTHING WAS PREVENTED TO MENTION THE LOAN GIVEN IN THE COLUMN 'ADVANCES RECOVERABLE' AND THE SUNDRY PAYABLE CLAIMED NOW IN THE BALANCE SHEET FILED IN COURSE OF APPEAL HEARING SHOULD HAVE BEEN SHOWN IN THE LIABILITY S IDE OF THE BALANCE SHEET AS PER ACCOUNTING PRINCIPLE. NOWHERE IN THE ACCOUNTING SYSTEM, THE NET OF PAYABLE OR RECEIVABLE IS SHOWN IN THE LIABILITY/ASSET SIDE OF THE BALANCE SHEET. THERE ARE SPECIFIC COLUMNS IN THE LIABILITY SIDE OF THE BALANCE SHEET TO MEN TION THE CAPITAL, LOANS TAKEN, SUNDRY CREDITORS, BILLS PAYABLE ETC. AND COLUMNS IN THE ASSET SIDE OF THE BALANCE SHEET TO MENTION THE FIXED ASSETS, CLOSING STOCK, BILLS RECEIVABLE, DEPOSITS MADE, SUNDRY DEBTORS, CASH IN HAND AND CASH AT BANK ETC. IF ANY AS SESSEE DOES NOT MENTION THE CORRECT AMOUNT OF PAYABLE AND CORRECT AMOUNT OF RECEIVABLE IN THE BALANCE SHEET, THEN 23 M/S. JAGANNATH CONSTRUCTION HOW THE TRUE PICTURE OF A BALANCE SHEET, WILL COME UP. COMING TO THE BALANCE SHEET OF THE PARTNER AS FILED BY THE ASSESSEE IN COURSE OF APPEAL HEARING BY SHOWING THE NET OF PAYABLE IN THE LIABILITY SIDE AND BY NOT SHOWING THE LOANS RECEIVABLE FROM THE FIRM IN THE ASSET SIDE, A QUESTION ARISES, IF SOME PART OF LOAN IS RECOVERED IN THE SUBSEQUENT YEAR THEN HOW THE LOAN AMOUNT RECOVERED WILL BE SHO WN? WHETHER THE LOAN RECEIVED WILL BE DEDUCTED FROM THE NET OF PAYABLE SHOWN? SIMILARLY HOW THE TOTAL OF ASSETS AND LIABILITIES OF THE BALANCE SHEET TO BE CARRIED OVER TO THE SUBSEQUENT YEAR? BECAUSE AS PER THE PRESENT BALANCE SHEET FILED BY THE ASSESSEE I N RESPECT OF THE PARTNER, THERE IS NO LOAN IS SHOWN AS RECEIVABLE AND ONLY THE NET OF PAYABLE IS SHOWN AND IF THE FIRM PAYS PART OF LOAN AMOUNT IN THE SUBSEQUENT YEAR THEN WHERE SUCH LOAN AMOUN T WILL TAKE PLACE? SO THIS TYPE OF BALANCE SHEET BY VIOLATING T HE PRINCIPLE OF ACCOUNTING I.E. BY NOT SHOWING THE TOTAL OF LIABILITIES AND ASSETS IN THE RESPECTIVE COLUMNS HAS BEEN FILED BY THE ASSESSEE ONLY TO PURTFORTH THE CLAIM THAT THE LOAN AMOUNT HAS BEEN SHOWN IN THE BALANCE SHEET AND IT DOES NOT MAKE ANY DIFFER ENCE WHETHER THE SAME IS SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET INSTEAD OF ASSET SIDE. AGAIN, IN THE ANNEXURE - 1 (PART - A) OF THE AUDIT REPORT WH EREIN AS PER COLUMN - 7 WHICH IS MEANT FOR TOTAL OF BALANCE SHEET, IF THE AMOUNT OF LOAN GIVEN IS DEDUCT ED FROM THE PAYABLE SHOWN IN THE LIABILITY SIDE AND NET OF PAYABLE IS SHOWN, THEN THE TOTAL AMOUNT OF BALANCE SHEET W ILL DRASTICALLY COME DOWN AND LESSER AMOUNT WILL APPEAR IN THE COLUMN. IN VIEW OF THE ABOVE DISCUSSION, IT IS PROVED THAT THE ASSESSEE HAS PREPARED THE BALANCE SHEET NOW, W HICH COULD NOT BE FILED IN COURSE OF HEARING EVEN IF IN RESPONSE TO SHOW - CAUSE LETTER ISSUED AND ALSO THE FACT THAT THE ASSESSEE HAS ADMITTED IN THE EXPLAN ATION FILED IN RESPONSE TO THE SHOW - CAUSE LETTER THAT THE LOAN AM O UNT HAS NOT BEEN APPEARED IN THE BALANCE SHEET OF THE PARTNER SRI AJAY KUMAR JAIN, ONLY TO TAKE THE SHELTER THAT THE LOAN AMOUNT HAS BEEN SHOWN BY THE PARTNER IN THE BALANCE SHEET WHEREAS TH E JOAN AMOUNT - SHOULD HAVE BEEN APPEARED IN THE ASSET SIDE OF THE BALANCE SHEET.' 17. THE COMMENTS OF THE ASSESSING OFFICER WERE GIVEN TO THE ASSESSEE AND IT WAS REQUIRED TO FILE ITS RESPONSE TO THE SAME. THE A. R OF THE ASSESSEE HAS FILED A WRITTE N SUBMISSION IN THIS REGARD IN THE COURSE OF APPEAL HEARING O N 10.12.2015 AS UNDER: AS REGARDS TO THE UNSECURED LOAN AMOUNTING TO RS. 1,50,90,891, FROM SRI AJAY KUMAR JAIN, THE PARTNER TO THE PARTNERSHIP FIRM, IT IS TO EXPLAIN THAT THE AMOUNT 'CREDITED BY UTKAL ALUMINA INTERNATIONAL LTD AGAINST WORK EXECUTED BY - SRI AJAY KUMAR JAIN, IN HIS INDIVIDUAL CAPACITY IN THE TRADE NAME OF M/S JAGANNATH CONSTRUCTION WAS CREDITED IN THE AXIS BANK ACCOUNT OF PARTNERSHIP FIRM, M/S JAGANNATH CONSTRUCTION. 24 M/S. JAGANNATH CONSTRUCTION IT.IS FURTHER TO CLARIFY THAT AS BECAUSE THE NAME & STYLE OF BOTH THE BUSINESS CONCERN I.E. OF AJAY KUMAR JAIN, AS AN INDIVIDUAL AND THAT OF THE PARTNERSHIP FIRM HAPPENS TO BE THE SAME I.E M/S JAGANNATH CONSTRUCTION, THE PAYMENT OF INDIVIDUAL FIRM WAS EASI LY CREDITED TO THE PARTNERSHIP ACCOUNT. THIS IS TO FURTHER CLARIFY THAT THE RECEIPTS OF INDIVIDUAL FIRM WAS CREDITED TO THE BANK ACCOUNT OF PARTNERSHIP FIRM COINCIDENTALLY , AS BECAUSE THE NAME AND STYLE BUSINESS CONCERN WAS SAME. IT IS TO FURTHER SUBMIT T HAT THE SAME HAS ALREADY BEEN CLARIFIED AND HAS PROVED TO BE GENUINE BEFORE THE ASSESSING OFFICER AND YOUR HONOUR, THE ASSESSEE IS A GENUINE TAX PAYABLE AND THE AMOUNT UNDER DISCUSSION HAS ALREADY SUFFERED TAX. IT HAS ALREADY BEEN AN ESTABLISHED FACT THAT THE LOAN HAS BEEN ALREADY DISCLOSED IN INCOME TAX RETURN OF THE PARTNER IN INDIVIDUAL CAPACITY AND THE COPIES OF THE SAME WERE ALREADY SUBMITTED BEFORE YOUR HONOUR. IT IS TO FURTHER SUBMIT THAT THE BALANCE SHEETS WERE DRAWN AND SUBSEQUENTLY THE INCOME TAX RETURN WAS FILLED FOR THE RESPECTIVE ASSESSEE. IT IS DENIED THAT ASSESSEE HAS PREPARED NOW THE BALANCE SHEET AS ALLEGED IN REMAND REPORT. IT IS JUST NOT PRACTICABLE TO SUBMIT THE RETURN FIRST AND DRAW THE BALANCE SHEET LATER, THE ASSESSING OFFICER HAS NEVER ASKED CATEGORICALLY TO PRODUCE THE COPY OF BALANCE SHEET OF THE PARTNER DURING THE COURSE OF HEARING, THE ASSESSING OFFICER HAS GIVE N SHOW CAUSE NOTICE TO PROVE THE GENUINE NE SS OF LOAN TRANSACTION AND HENCE THE GENUINE NE SS W AS PROVED. THE ASSESSEE THROUGH HIS AR HAS REPEATED ASSERTED IN THE COURSE OF HEARING B EFORE THE - ASSESSING - OFF ICER - THAT THIS - LOAN AMOUNT IS G ENUI NE NE SS AND ASSESSING OFFICE R HAS ACKNOWLEDGED THE GENUINENESS OF LOAN, SINCE THE ASSESSING OFFICER DID NOT AS KED FOR THE COPY OF BALANCE SHEET CATEGORICALLY, HENCE THE SAME WAS NOT PROVED TO HIM. HO W EVER, OTHER RELATED DOCUMENTS SUCH AS COPY OF BANK AC COUNT, INCOME TAX RETURN, ACKNOW LEDGEMENT, 26 AS AND OTHER RECORDED DOCUMENT V/ERE SUBMITTED IN THE COURSE OF HEA RING BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE YOUR HONOUR. THESE DOCUMENTS WERE GENERATED ON REAL TIME BASIS BY THE CONCERNED .DEPARTMENTS/AUTHORITIES AND HENCE CAN'T BE PREPARED NOW. SHRI AJAY KUMAR JAIN, IS FILING INCOME TAX RETURN SINCE LONG AND T HIS CAPITAL HAS BEEN BUILD UP SINCE LONG AND AS ALLEGED BY AO THIS CAPITAL CAN'T BUILD UP IN A YEAR OR TWO . AS FORWARDED EARLIER, THE AMOUNT HAS ALREADY SUFFERED TAX. FURTHER TO GET A CLEAR UNDERSTANDING, BALANCE SHEETS ARE MERE SUMMARIES OF FINANCIAL BALANCES. TO ESTABLISH THE TRUE AND FAIR VIEW OF BALANCE SHEET, WHAT MATTERS IS THE RECORDS AND DOCUMENTS ON THE BASIS OF WHICH BALANCE SHEET IS PREPARED. AS THE ASSESSEE HAS ALREADY SUBMITTED THE TRUE DOCUMENTS AND RECORDS THE GENUINE NE SS OF BALANCE SHEET CAN'T BE HELD SUSPICIOUS.' 25 M/S. JAGANNATH CONSTRUCTION 18. THEREAFTER AFTER CONSIDERING THE REMAND REPORT AND THE REPLY OF THE ASSESSING OFFICER TO THE REMAND REPORT, THE CIT(A) DELETED THE ADDITIO N BY OBSERVING AS UNDER: 3.2 1 HAVE CONSIDERED THE MATTER CAREFULLY. THE WHOLE ISSUE BOILS DOWN TO WHETHER THE LOAN IN THE NAME OF SRI AJAY KUMAR J AIN WAS GENUINE OR NOT. BALANCE SHEET REFLECTS THE SUMMARY OF CERTAIN TRANSACTIONS AT THE END OF THE YEAR. BALANCE SHEET IS A FINANCIAL STATEMENT PREPARED AT THE END OF ACCOUNTING YEAR OF ASSETS, LIABILITIES AND CAPITAL OF A BUSINESS. IT IS A CONDENSED STA TEMENT THAT SHOWS THE FINANCIAL POSITION OF AN ENTITY ON THE LAST DAY OF THE ACCOUNTING PERIOD. THE BALANCE SHEET IS PREPARED BASED ON THE TRANSACTIONS REFLECTED IN THE BOOKS OF ACCOUNT SUCH CASH BOOK AND LEDGER. HENCE, THERE CANNOT BE ANY MANIPULATION IN THE BALANCE SHEET UNLESS THE TRANSACTIONS REFLECTED IN THE BOOKS OF ACCOUNT ARE MANIPULATED, IN THE BALANCE SHEET FILED BY SRI AJAY KUMAR 3AIN CERTAIN CONSOLIDATED FIGURES WERE GIVEN. THE BREAKS - UP OF THE FIGURE UNDER THE HEAD 'CURRENT LIABILITIES' SHOWN A T RS.29,44,404/ - IN THE RETURN SHOWS THAT THE SUMMARY OF THE TRANSACTIONS WITH THE ASSESSEE - FIRM THAT GIVES RISE TO A NET DEBIT OF RS.1,50,90,891/ - AS AT 31.3.2012. THE AO HAS SERIOUS DOUBT ABOUT THE GENUINENESS OF THIS DEBIT FOR THE FOLLOWING REASONS AS I S EVIDENT FROM HIS LETTER REPRODUCED ABOVE. I) THE BALANCE SHEET OF SRI AJAY KUMAR BAIN WAS NOT FILED AT THE TIME OF ASSESSMENT THOUGH THE ASSESSEE WAS SPECIFICALLY ASKED AS TO WHY THE SAME SHOULD NOT BE TREATED AS BOGUS HAVING NOT BEEN REFLECTED IN TH E BALANCE SHEET OF THE PARTNER. II) THE FORM IN WHICH THE LOAN HAS BEEN REFLECTED IN THE BALANCE SHEET OF SRI J AIN IS HIGHLY IRREGULAR AND ABNORMAL. THE BALANCE SHEET SHOULD HAVE BEEN DRAWN IN A MORE CONVENTIONAL MANNER. III ) THE CONTRACT RECEIPTS OF THE PARTNER SRI AJAY KUMAR 3AIN WERE DEPOSITED IN THE ASSESSEE - FIRM'S BANK ACCOUNT AND WERE SHOWN AS LIABILITY TO THE PARTNER AT THE END OF THE YEAR AFTER DEDUCTING THE WITHDRAWALS. THE REASON AS TO WHY THE RECEIPTS OF THE PARTNER WERE NOT DEPOSITED IN THE BANK ACCOUNT IS BEST KNOWN TO THE ASSESSEE, IV) THE FIRM HAD AMPLE CASH BALANCE AT THE DOSE OF THE FINANCIAL YEAR WHICH STOOD AT RS. 1,10,52,953/ - AND BY WITHDRAWING THE SAME, THE FIRM SHOULD HAVE SQUARED UP THE LOAN. SINCE THE ACCOUNTS OF BOTH THE FIRM AND THE PARTNER WERE AUDITED BY THE SAME CHARTERED ACCOUNTANT, NOTHING PRE VENTED THE PARTNER TO SHOW THE L OAN AMOUNT GIVEN TO THE FIRM IN HIS BALANCE SH EET AS PER ACCOUNTING PRINCIPLE. V) THE PARTNER'S BALANCE SHEET WITH DETAILS FURNISHED IN THE COU RSE OF APPEAL HEARING IS NOT PREPARED IN ACCORDANCE WITH THE ACCEPTED ACCOUNTING PRINCIPLE AND HAS TO BE TREATED AS COOKED UP. 26 M/S. JAGANNATH CONSTRUCTION 3.2.1 IT APPEARS FROM THE OBJECTIONS RAISED BY THE AO IN HIS REMAND REPORT .THAT HE IS MORE CONCERNED OF THE FORM RATHER THAN THE CONTENTS. THERE IS NO SUCH ACCOUNTING FORMAT STIPULATING HOW THE TRANSACTIONS WITH A PARTNER IS TO BE REPRESENTED IN THE BALANCE SHEET, ESPECIALLY, THE TRANSACTIONS THAT TOOK PLACE I N THIS CASE WITH ITS PARTNER SRI AJAY KUMAR JAIN. IT IS WELL SETTLED THAT HOW A BUSINESSMAN WILL RUN HIS BUSINESS IS ENTIRELY HIS CONCERN AND THE AO CANNOT QUESTION HIS WISDOM IN THE MATTER. IN THIS CASE, THOUGH THE ASSESSEE - FIRM HAD DISCLOSED GROSS CONTR ACT RECEIPTS OF RS. 1,77,92,837/ - , THE TOTAL DEPOSITS IN ITS BANK ACCOUNT AMOUNTED TO RS.4,47,50,803/ - AND THERE IS NO DISPUTE ON THE FACT THAT CONTRACT RECEIPTS BELONGING TO THE PARTNER SRI AJAY KUMAR JAIN WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSE E - FIRM. AFTER TAKING INTO CONSIDERATION THE WITHDRAWALS OF SRI JAIN FROM THE FIRM, THE BALANCE AMOUNT OF RS. 1,50,90,891/ - WAS SHOWN AS LOANS AND ADVANCES FROM SRI JAIN IN THE FIRM'S ACCOUNT. I DO NOT FIND ANY INFIRMITY IN THE BALANCE SHEET OF THE PARTNE R WHO IS ALSO AN ASSESSEE IN THE SAME WARD AS THE ASSESSEE - FIRM. AFTER ACCEPTING THE FACT OF DEPOSIT OF CONTRACT RECEIPTS OF THE PARTNER IN THE FIRM'S BANK ACCOUNT, THE AO HAS NO REASON AT ALL TO DISBELI EVE THE BALANCE FIGURE OF RS . 1,50,9,891/ - PAYABLE BY THE FIRM TO THE PARTNER. HIS CONCLUSION THAT THE BALANCE SHEET OF THE PARTNER IS COOKED UP OR MANIPULATED ONE IS TOTALLY BASELESS AND HAS ITS FOUNDATION MERELY ON SUSPICION. WE HAVE TO REMEMBER THAT SUSPICION, HOWEVER, STRONG CAN NOT TAKE THE PLACE OF EVIDENCE OR PROOF, AND CANNOT OVERRIDE THE FACTS AS ESTABLISHED BY TRANSACTIONS. IT CANNOT AT ALL BE BELIEVED THAT THE PARTNER WOULD NOT HAVE SHOWN THE AMOUNT RECEIVABLE FROM THE FIRM IN HIS BALANCE SHEET WHICH THE AO OPTED TO BELIEVE WITHOUT ANY RHYME OR REASON, AND ENTIRELY ON THE BASIS OF SUSPICION ARISING OUT OF IMAGINATION. 3.2.2 THE AO COULD HAVE ASKED FOR A COPY OF THE BALANCE SHEET OF THE PARTNER IN THE COURSE OF ASSESSMENT PROCEEDING INSTEAD OF EXTRACTING THE SAME FRO M THE RETURN OF INCOME. NOTHING PREVENTED HIM TO DO THIS. HOWEVER, HE PREFERRED TO MAKE AS HUGE AN ADDITION AS RS,1,50,90,891/ - WITHOUT ASKING FOR A COPY OF THE BALANCE SHEET OF THE PARTNER WHOSE ACCOUNTS WERE ALSO AUDITED U/S.44AB. NOT HAVING DONE SO, HIS EFFORT TO QUESTION THE BALANCE SHEET FILED IN THE COURSE OF APPEAL HEARING IN THE REMAND REPORT CANNOT AT ALL BE APPRECIATED. BEING A QUASI - JUDICIAL AUTHORITY, THE AO IS SUPPOSED TO BE FAIR AND REASONABLE. IN THIS CASE, THE AO APPEARS TO HAVE QUESTIONED T HE GENUINENESS OF THE BALANCE SHEET EVEN AFTER ACCEPTING THE RELEVANT TRANSACTIONS AND THIS CLEARLY SMACKS OF PRE - DETERMINED MIND - SET. KEEPING ALL THIS IN VIEW, IT IS TO BE HELD THAT THE AMOUNT OF RS.1,50,90,891/ - SHOWN AS LIABILITY IN THE BALANCE SHEET IN THE NAME OF THE PARTNER SRI AJAY KUMAR JAIN HAS TO BE ACCEPTED AS GENUINE. THEREFORE, THE ADDITION OF RS, 1,50,90,891/ - IS DELETED. 19. LD D.R. DURING THE COURSE OF HEARING RELIED ON THE ORDER OF THE ASSESSING OFFICER. 20. LD A.R. SUPPORTED THE ORDER OF THE CIT(A). 27 M/S. JAGANNATH CONSTRUCTION 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, WE FIND THAT LD D.R. SIMPLY RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF T HE CIT(A). HE COULD NOT BRING ANY POSITIVE MATERIAL ON RECORD TO CONTROVERT THE FINDING OF FACT RECORDED BY THE CIT(A) IN PARA 3.2.1 OF HIS ORDER TO THE EFFECT THAT THE ASSESSEE FIRM HAD DISCLOSED GROSS CONTRACT RECEIPT OF RS.1,77,92,837/ - . THE TOTAL DEP OSITS IN ITS BANK ACCOUNT WAS RS.4,47,50,803/ - AND THAT THERE WAS NO DISPUTE ON THE FACT THAT THE CONTRACT RECEIPTS BELONGING TO THE PARTNER SHRI AJAY KUMAR JAIN WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE FIRM AND AFTER TAKING INTO CONSIDERATION TH E WITHDRAWALS OF SRI JAIN FROM THE FIRM, THE BALANCE AMOUNT OF RS.1,50,90,891/ - WAS SHOWN AS LOANS AND ADVANCES FROM SRI JAIN IN THE FIRMS ACCOUNT. THEREFORE, THERE IS NO INFIRMITY IN THE BALANCE SHEET OF THE PARTNER WHO IS ALSO AN ASSESSEE IN THE SAME W ARD AS THE ASSESSEE FIRM. AFTER ACCEPTING THE FACT OF DEPOSIT OF CONTRACT RECEIPTS OF THE PARTNER IN THE FIRMS ACCOUNT, THE ASSESSING OFFICER HAS NO REASON TO DISBELIEVE THE BALANCE FIGURE OF RS.1,50,90,891/ - PAYABLE BY THE FIRM TO THE PARTNER. THE CONC LUSION OF THE ASSESSING OFFICER THAT THE BALANCE SHEET OF THE PARTNER IS COOKED UP OR MANIPULATED ONE IS TOTALLY BASELESS AND HAS ITS FOUNDATION MERELY ON SUSPICION AND THAT SUSPICION HOWEVER, STRONG CANNOT TAKE THE PLACE OF EVIDENCE OR PROOF AND CANNOT OV ERRIDE THE FACTS AS ESTABLISHED BY TRANSACTIONS. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE WELL - REASONED ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 28 M/S. JAGANNATH CONSTRUCTION 22. AT THE TIME OF HEARING, LD A.R. OF THE ASSE SSEE DID NOT PRESS THE CROSS OBJECTION FILED BY THE ASSESSEE AND, THEREFORE, SAME IS DISMISSED FOR WANT OF PROSECUTION. 23 . IN THE RESULT, THE APPEAL F ILED BY THE ASSESSEE IS ALLOWED AND APPEAL OF THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ALSO DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 25 /04/2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - (KULDIP SINGH) ( N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER CUTTACK; DATED 25 /04/2017 B.K.PARIDA , SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT M/S. JAGANNATH CONSTRUCTION, AT: BIDYANAGAR, 2 ND LANE, NEAR AMA B HAGAWAN MANDIR, RAYAGADA. 2. THE RESPONDENT. ITO, RAYAGADA WAD, RAYAGADA 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//