ACIT, Cen.Cir.1(1), Pune, Pune V. M/s. Dhariwal & Doshi Industries Pvt.Ltd., Sakarda

ITA 159/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0922 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N K APADIA
• Keywords: Fair market value; Onus to prove
• Section: 143(3); 68

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NOS.157, 159 & 160/PN/2012 A.YS. : 2005-06, 2006-07 & 2007-08 THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), PUNE . APPELLANT VS. M/S DHARIWAL & DOSHI INDUSTRIES PVT. LTD., N.H. NO.8, FAZALPUR, P.O. SAKARDA, DIST. BARODA. PAN : AABCD0217E . RESPONDENT / APPELLANT BY : SHRI RAJESH DAMOR / RESPONDENT BY : SHRI S.N. KAPADIA / DATE OF HEARING : 08.09.2015 / DATE OF PRONOUNCEMENT: 28.10.2015 % / ORDER PER PRADIP KUMAR KEDIA, AM : THIS BUNCH OF THREE APPEALS FILED BY THE REVENUE AR E AGAINST THE CONSOLIDATED ORDER OF CIT(A)-I, BARODA DATED 18.11. 2011 RELATING TO ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 PASSE D UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.157/PN/2012 (A.Y. : 2005-06) : 2. FIRST, WE MAY TAKE-UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005-06 IN ITA NO.157/PN/2012. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXCESSIVE AND UNREASONABLE PAYMENTS MADE BY THE ASSESSEE TO THE PERSONS SPECIF IED U/S. 40A(2)(B), 2 ITA NOS.157, 159 & 160/PN/2012 WHEN ASSESSEE HAD NOT DISCHARGED ONUS TO PROVE REAS ONABLENESS OF THE SAID EXPENDITURE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF INDO SAUDI SERVICES (T RAVEL) (P) LTD. (2009) 310 ITR 309 AND DELETING THE DISALLOWANCE MA DE U/S. 40A(2)(B), WHEN JUDICIAL DECISION IN CASE OF NUND & SAMOUNT CO. P. LTD 78 ITR 268 (SC) AND CIT VS. SHATRUNJA DIAMONDS (261 ITR 258 (B OM) ARE SQUARELY APPLICABLE TO THIS CASE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING DISALLOWA NCE MADE U/ S.36(I)(VA) FOR EMPLOYEES CONTRIBUTION TO PF & ESIC, WHICH WERE PAID BEYOND THE DUE DATE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING DISALLOWA NCE MADE U/S.40 (A)(IA) IN RESPECT OF TDS PAID IN TO THE GOVERNMENT ACCOUNT BEYOND DUE DATES. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE VACATED AND THAT OF THE AO'S ORDER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D, MODIFY ANY OF THE ABOVE GROUNDS RAISED, ANY OTHER GROUNDS AT THE TIME OF PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL WHICH MAY PLEASE BE GRA NTED. 3. THE FIRST AND SECOND GROUNDS OF APPEAL OF THE RE VENUE QUESTIONS THE ACTION OF THE CIT(A) IN REVERSING THE EXCESSIVE AND UNREASONABLE PAYMENTS MADE BY THE ASSESSEE TO THE PERSONS SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT. 4. THE RELEVANT FACTS GOVERNING THE ISSUE ARE BRIEF LY STATED AS FOLLOWS. THE ASSESSEE COMPANY IS IN THE BUSINESS OF BLENDING, PR OCESSING, PACKING, RE- PACKING AND SELLING OF TEA. DURING THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HAS FILED HIS RETURN OF INCOME SHOWING TOTAL LOSS O F RS.6,78,39,149/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOW N SALE OF RS.12,92,96,549/- AND A GROSS PROFIT OF (-) RS.79,87,590/- I.E. (-) 6 .18%. IN THE EARLIER YEAR, THE FIGURES WERE RESPECTIVELY RS.13,30,01,003/- AND RS. 83,77,174/- I.E. 6.29%. FROM THE TAX AUDIT REPORT, IT WAS SEEN BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS INCURRED EXPENDITURE AND PAID TO THE S PECIFIED PERSONS UNDER SECTION 40A(2)(B) OF THE ACT AS FOLLOWS :- (I) PURCHASES RS.7,12,28,743/-; (II) INTEREST RS.1,98,63,209/-; 3 ITA NOS.157, 159 & 160/PN/2012 (III) RENT RS.1,20,000/-; AND, (IV) ADVERTISEMENT AND SALES PROMOTION EXPENDITURE RS.28,71,845/-. 5. THE ASSESSING OFFICER NEXT OBSERVED THAT THERE I S A STEEP FALL IN THE GROSS PROFIT OF 12.47% [CURRENT YEARS (-) 6.18% PLUS LAS T YEARS 6.29%]. THE ASSESSING OFFICER OBSERVED THAT THERE IS AN ELEMENT OF EXCESSIVE OR UNREASONABLE AMOUNT OF PAYMENT MADE TO THE SISTER C ONCERNS HAVING REGARD TO THE FAIR MARKET VALUE OF GOODS/SERVICES OR PURCHASE S OBTAINED. ACCORDINGLY, HE ESTIMATED 10% OF RS.7,42,20,588/- AS EXCESSIVE AS W ELL AS UNREASONABLE PAYMENTS TO THE SPECIFIED PERSONS FOR PURCHASES, RE NT AND ADVERTISEMENT AND SALE PROMOTION EXPENSES. ACCORDINGLY, RS.74,22,058 /- WAS DISALLOWED BY THE ASSESSING OFFICER INVOKING PROVISIONS OF SECTION 40 A(2)(B) OF THE ACT. 6. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN R ESPECT OF INTEREST EXPENSES, THE ASSESSEE HAS PAID INTEREST TO PERSON OTHER THAN SPECIFIED PERSONS I.E. LOCAL PARTIES AT 6% WHEREAS TO THE SPECIFIED P ERSONS AT THE RATE OF 8%. ACCORDINGLY, HE DISALLOWED EXCESS CLAIM OF 2% CONSI DERING THE SAME AS UNREASONABLE HAVING REGARD TO THE FAIR MARKET RATE ALLOWED BY THE ASSESSEE ITSELF TO THE OUTSIDER BY THE LOCAL PARTIES AND CON SEQUENT TO THE DISALLOWANCE OF RS.49,65,802/-. AS A RESULT, AN AGGREGATE AMOUNT T O RS.1,23,87,860/- WERE DISALLOWED. 7. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT T HE DETAILED EXPLANATION FILED BY THE ASSESSEE IN JUSTIFICATION OF THE REASO NABLENESS OF THE EXPENDITURE HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER AT ALL. HAVING REGARD TO THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE REPRODUCE D IN PARA 3.1 OF THE CIT(A)S ORDER, THE CIT(A) OBTAINED REMAND REPORT F ROM THE CONCERNED ASSESSING OFFICER, PUNE FOR WHICH THE REJOINDER FRO M THE ASSESSEE WAS SOUGHT AND REPRODUCED IN PARA 3.3 OF THE APPELLATE ORDER. THE ASSESSEE, INTER-ALIA , SUBMITTED THAT FOR THE ASSESSMENT YEARS 2001-02, 20 03-04 AND 2004-05, WHERE THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF T HE ACT, NO DISALLOWANCE WAS MADE IN EARLIER YEARS AFTER SCRUTINY, BASED ON THE SIMILAR JUSTIFICATION 4 ITA NOS.157, 159 & 160/PN/2012 CANVASSED IN RESPECT OF SAME PARTIES. THEREFORE, P RIMARY ONUS WHICH LAY UPON THE ASSESSEE IS DULY DISCHARGED IN THIS CASE. THER E ARE NO CHANGE IN THE CIRCUMSTANCES OR THE FACTS. HE ALSO CANVASSED THAT THERE WERE SUBSTANTIAL BROUGHT FORWARD ASSESSED LOSSES AVAILABLE TO THE AS SESSEE AND THEREFORE THERE IS NO PERCEPTIBLE BENEFIT TO THE ASSESSEE BY INDULGING WRONGFUL EXCESSIVE PAYMENTS UNDER SECTION 40A(2)(B) OF THE ACT. 8. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) CONCURRED WITH THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITIONS MADE UNDER SECTION 40A(2)(B) OF THE ACT. THE RELEVANT O PERATIVE PARA FOR COMING TO SUCH CONCLUSION IS REPRODUCED AS UNDER :- 3.4 I HAVE CONSIDERED FACTS OF THE CASE, APPELLANT' S SUBMISSIONS, AO'S REPORT AND APPELLANT'S COMMENTS THERE UPON. AO'S ONLY REAS ON FOR MAKING DISALLOWANCE U/S 40A(2)(B) WAS FAILURE OF APPELLANT TO DISCHARGE ONUS ON IT REGARDING THE REASONABLENESS OF PAYMENTS MADE TO SE CTION 40A(2) PARTIES VIS-A- VIS FAIR MARKET VALUE OF THE GOODS ETC. ON OTHER HA ND, APPELLANT'S CONTENTION IS THAT A DETAILED NOTE JUSTIFYING PAYMENTS MADE TO SE CTION 40A(2) PARTIES WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS FOR THI S YEAR. APPELLANT FILED COPY OF THIS NOTE DURING THE APPELLATE PROCEEDINGS, WHIC H WAS FORWARDED TO THE AO FOR EXAMINATION ON MERITS OF THE MATTER. APPELLANT HAD BEEN FILING THE JUSTIFICATION BY WAY OF SAME NOTE, WITHOUT ANY MODI FICATION IN ASSESSMENT PROCEEDINGS FOR ALL YEARS SINCE AY 2001-02. IT CANN OT BE THEREFORE SAID THAT THE JUSTIFICATION PROVIDED IN THIS YEAR WAS ANYTHING NE W, BEING ALREADY ON AOS RECORD. IN THE SCRUTINY ASSESSMENTS FOR A.YS. 2001- 02 TO 2004-05, NO DISALLOWANCE WAS MADE U/S 40A(2) AFTER CONSIDERING THE SAME JUSTIFICATION. IN THIS SITUATION, IT CANNOT BE SAID THAT APPELLANT DID NOT DISCHARGE ONUS ON IT U/S 40A(2) IN THE ASSESSMENT PROCEEDINGS FOR AY 2005-06 . MOREOVER, EVEN ON BEING ASKED AT APPELLATE STAGE, A.O. HAD NO COMMENTS ON M ERITS OF THE JUSTIFICATION FILED BY APPELLANT. JUSTIFICATION PROVIDED BY APPELLANT IN S UPPORT OF SECTION 40A(2) PAYMENTS IS NOW TAKEN UP ON MERITS. AS FAR AS TRANSACTIONS O F PURCHASE OF TEA WERE CONCERNED, DOSHI GROUP WHICH SPECIALIZED IN PURCHASE AND BLEND ING OF SELECTED QUALITIES OF TEA WAS ENTRUSTED WITH THE TASK OF TEA PURCHASE. MARGIN OF 2% ONLY ON PRICE AT WHICH DOSHI GROUP PARTIES COVERED U/S 40A(2) PURCHASED TE A AT CALCUTTTA TEA AUCTION AND FROM VARIOUS TEA GARDENS WAS RETAINED BY THEM WHILE SELLING TEA TO APPELLANT. DOSHI GROUP WAS IN TEA INDUSTRY FOR OVER 40 YEARS AND THE 2% MARGIN WAS TOWARDS EXPERTISE OF DOSHI GROUP IN PURCHASING THE TEA FROM VARIOUS CONCERNS. MARGIN OF 2% IS A REASONABLE MARGIN FOR THE FUNCTIONS PERFORM ED BY THE SEC 40(A(2) PARTIES, I.E. DOSHI GROUP FROM WHICH PURCHASE WAS MADE. CONS IDERING THESE ASPECTS AND THE FACT THAT PURCHASES AT SAME MARGIN FROM THE SAME SE C. 40A(2) PARTIES WERE ACCEPTED BY THE AO FROM AY 2001-02 ONWARDS WITHOUT ANY DISAL LOWANCE U/S 40A(2), IT IS HELD THAT THERE WAS NO JUSTIFICATION TO INVOKE PROVISION S OF SECTION 40A(2) IN RESPECT OF PURCHASE OF RAW MATERIALS. REGARDING PURCHASE OF PA CKING MATERIAL, ADVERTISEMENT AND SALES PROMOTION, APPELLANT HAD BEEN CHARGED ON COST PLUS BASIS BY THE SISTER CONCERNS SUPPLYING LAMINATED PACKING MATERIAL AND P ROVIDING ADVERTISEMENT AND SALES PROMOTION SERVICES. PACKING MATERIAL IN QUEST ION WAS AS PER APPELLANT'S REQUIREMENT FOR PACKING THE TEA IN LAMINATED FILM W ITH HIGHER DENSITY AND IN VARIOUS COLOURS, COMPARABLE INSTANCES FOR WHICH WERE NOT AV AILABLE. THE ARMS LENGTH NATURE 5 ITA NOS.157, 159 & 160/PN/2012 OF TRANSACTIONS IN RESPECT OF SUPPLY OF PACKING MAT ERIAL, ADVERTISEMENT AND SALE PROMOTION HAD BEEN ACCEPTED IN EARLIER YEARS BY THE AO. AFTER APPELLANT HAD JUSTIFIED THE CONSIDERATION PAID TOWARDS PACKING MATERIAL, ADVERTISEMENT AND SALES PROMOTION EXPENSES ETC IN THE ABOVE MENTIONED MANNER, IT WAS FOR THE AO TO HAVE BROUGHT MATERIAL ON RECORD BEFORE IT COULD BE HELD THAT THE PRICE PAID WAS EXCESSIVE OR UNREASONABLE VIS-A-VIS FAIR MARKET VALUE. SIMILAR TRANSACTIONS WERE ACCEPTED BY THE AO FROM AY 2001-02 ONWARDS WIT HOUT ANY DISALLOWANCE U/S 40A(2). IT IS HELD THAT THERE IS NO BASIS FOR M AKING DISALLOWANCE @ 10% IN AN ADHOC MANNER OUT OF PACKING MATERIAL PURCHASE, A DVERTISEMENT AND SALES PROMOTION EXPENSES ETC AND THE SAME CANNOT BE SUSTA INED WHEN APPELLANT HAD DISCHARGED PRIMARY ONUS ON IT AND AO DID NOT BRING ANY MATERIAL ON RECORD TO WARRANT ADVERSE INFERENCE. REGARDING INTEREST PAYME NTS BEING EXCESSIVE, AS SUBMITTED BY THE APPELLANT, THE INTEREST PAID TO SU PPLIERS COVERED U/S 40A(2)(B) @ 8% WAS MUCH LOWER THAN INTEREST ON BANK BORROWINGS @ 14.5%. THE SUPPLIERS' CREDIT FROM SECTION 40A(2) PARTIES @ 8% WERE A MEANS TO REDUCE BORROWINGS FROM BANK AND THEREFORE, RATE SHOULD BE COMPARED WITH BANK BORROWINGS AND NOT AGENCY DEPOSITS WHICH IN ANY CAS E WERE INSIGNIFICANT AS COMPARED TO SUPPLIERS' CREDIT. MOREOVER, AGENCY DEP OSITS WERE ACTUALLY NOT LOANS BUT SECURITY AGAINST SUPPLIES MADE BY THE APP ELLANT. I AM IN AGREEMENT WITH APPELLANT THAT INTEREST RATE ON SUPPLIERS' CRE DIT CANNOT BE COMPARED WITH INTEREST RATE ON AGENCY DEPOSITS. APPROPRIATE BENCH MARK FOR INTEREST RATE ON SUPPLIERS' CREDIT WOULD BE BANK RATE ONLY, WHICH WA S MUCH HIGHER. IT IS HELD THAT AO WAS THEREFORE, NOT JUSTIFIED IN INVOKING SECTION 40A(2) TO ALLOW INTEREST @ 6% ONLY. ON SUPPLIERS CREDIT THEREBY MAKING ADDITIO N OF RS.49,65,802/- ON THIS COUNT. LASTLY, THERE IS MERIT IN APPELLANT'S CONTEN TION THAT IT HAD HUGE BROUGHT FORWARD ASSESSED LOSS AND THEREFORE, THERE WAS NO B ENEFIT TO IT BY CLAIMING EXCESSIVE EXPENSES IN RESPECT OF SECTION 40A(2) PAR TIES. IT IS A MATTER OF RECORD THAT APPELLANT HAD BROUGHT FORWARD LOSS EXCEEDING R S.40 CRORE AND ASSESSED INCOME FOR AY 2005-06 WAS LOSS OF RS.5,49,59,480/-, I.E. FAR IN EXCESS OF DISALLOWANCE U/S 40A(2). DECISION BY HONBLE BOMBA Y HIGH COURT IN THE CASE OF SAUDI SERVICES (TRAVEL) PVT. LTD. [2009] 310 ITR 306 (BOM) IS RELEVANT IN THIS REGARD. TO SUM UP, DISALLOWANCE U/S 40(A)(2) OF RS.1,23,87,860/- IS CANCELLED AND THIS GROUND OF APPEAL IS ALLOWED. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 10. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE ONUS RESTS ON THE ASSESSEE TO PROVE THE REASONABLENESS OF THE PAYMENTS MADE TO THE SPECIFIED PERSONS UNDER SECTION 40A(2)(B) OF THE ACT, WHICH HAS NOT B EEN DISCHARGED. 11. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE RAISED PRELIMINARILY OBJECTION THAT THE JURISDICTION FOR HEARING THIS AP PEAL LIES WITH THE AHMEDABAD BENCH OF THE TRIBUNAL AND NOT WITH THIS BENCH SITUA TED AT PUNE. THIS IS OWING TO THE FACT THAT THE ASSESSMENT ORDER HAS BEEN PASS ED BY THE ASSESSEE SITUATED AT 6 ITA NOS.157, 159 & 160/PN/2012 BARODA, GUJARAT AND THEREFORE THE APPELLATE JURISDI CTION LIES WITH THE AHMEDABAD BENCH OF THE TRIBUNAL IN TERMS OF RULE 4 OF THE STANDING ORDERS UNDER THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 19 63, WHICH PROVIDES FOR ORDINARY JURISDICTION OF THE BENCH TO BE DETERMINED BY THE LOCATION OF THE OFFICE OF THE ASSESSING OFFICER. 12. IN REJOINDER, THE LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE SUBMITTED THAT THE SUBSEQUENT REMAND REPORT HAS BEE N OBTAINED FROM THE ASSESSING OFFICER SITUATED AT PUNE AND THEREFORE JU RISDICTION MAY LIE WITH THE PUNE BENCH OF THE TRIBUNAL. THE LD. AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE DID NOT OBJECT TO SUCH PROPOSITION. IN VI EW OF THIS, THE PRELIMINARILY OBJECTION IS SET-ASIDE AND MATTER WAS PROCEEDED FOR HEARING ON MERITS. ON MERITS, THE LD. AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ORDER OF THE CIT(A) IS DETAILED AND WELL REASONED A ND AFTER CONSIDERATION OF ALL THE RELEVANT FACTS AND CIRCUMSTANCES AND CASE LAWS CITED IN THIS REGARD. 13. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS, ORDERS OF THE AUTHORITIES BELOW AND PERUSED THE CASE LAWS REFERRED. WE FIND NO REBUTTAL TO THE CONTENTION OF THE ASSESSEE THAT SIMILAR PAYMENTS HA VE BEEN MADE TO DOSHI GROUP FOR MAKING PURCHASE OF TEA ON BEHALF OF THE A SSESSEE IN INCURRING OTHER EXPENSES IN THE EARLIER YEARS WHERE ON CONSIDERATIO N OF THE IDENTICAL PREMISES FORWARDED BY THE ASSESSEE AND NO GRIEVANCE WAS MADE OUT. THEREFORE, THERE BEING NO NEW CIRCUMSTANCE, THE ONUS THAT LAY UPON T HE ASSESSEE HAS BEEN DISCHARGED. HENCE, DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NUND & SAMONT CO. PVT. LTD. VS. CIT, 78 ITR 268 (SC ) IS NOT APPLICABLE TO THE FACTS. SECONDLY AND IMPORTANTLY, THE ASSESSEE STAT ES TO HAVE LARGE BROUGHT FORWARD LOSSES EXCEEDING RS.40 CRORES AND LOSSES IN THE CURRENT YEAR ALSO IS A POINTER TO THE FACT THAT THE ASSESSEE DOES NOT STAN D TO ANY BENEFIT BY MAKING EXCESSIVE PAYMENTS TO THE SPECIFIED PERSONS OVER FA IR MARKET VALUE OF GOODS OR SERVICE, ETC.. NO CASE OF TAX ADVANTAGE IS PERCEPT IBLE IN SUCH ALLEGED EXCESSIVE PAYMENTS. DECISION OF THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. INDO SAUDI SERVICES (TRAVEL) P. LTD., (2009) 310 IT R 306 (BOM) AND CIT VS. 7 ITA NOS.157, 159 & 160/PN/2012 SHATRUNJAY DIAMONDS, (2003) 261 ITR 258 (BOM) IS SQ UARELY APPLICABLE IN THESE FACTS. THE RECIPIENT I.E. DOSHI GROUP HAS EA RNED ONLY 2% MARGIN TOWARDS EXPERTISE AND VAST EXISTENCE FOR PURCHASING THE TEA FROM VARIOUS CUSTOMERS ON COST PLUS BASIS METHOD WHICH APPEARS TO BE QUITE RE ASONABLE AND IS IN ACCORDANCE WITH THE PAST PRACTICES. SIMILARLY, INT EREST @ 8% IS MUCH LOWER THAN INTEREST ON BANK BORROWINGS @ 14.5% STATED TO HAVE BEEN PAID BY THE ASSESSEE TO THE BANKERS, INTEREST @ 6% WERE PAID ON LY TO SPECIFIC SUPPLIERS TOWARDS SMALL AMOUNT OF SECURITY CREDIT OF RS.66 LA KHS ONLY AS AGAINST IMPUGNED CREDIT OF RS.30 CRORES @ 8%. THEREFORE, T HE TOKEN AMOUNT CREDIT AVAILABLE @ 6% DOES NOT GIVE PROPER FOUNDATION FOR COMPARISON. IN THE LIGHT OF AFORESAID FACTS AND CIRCUMSTANCES, WE ARE IN COM PLETE AGREEMENT WITH THE FINDINGS OF THE CIT(A) AND THEREFORE DECLINE TO INT ERFERE. ACCORDINGLY, WE HOLD THAT DISALLOWANCE UNDER SECTION 40A(2)(B) OF T HE ACT IS NOT CALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIGHTLY DELETED BY THE CIT(A). THUS, THE GROUND OF APPEAL NOS.1 AND 2 PERTAINING T O DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT RAISED BY THE REVENUE ARE DISMISSED. 14. THE GROUND NO.3 OF THE REVENUES APPEAL ARISES FROM THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER UNDER SECTION 36(1)(VA) OF THE ACT FOR EMPLOYEES CONTRIBU TION TO PF & ESIC WHICH ARE PAID BEYOND DUE DATE. 15. THE ASSESSING OFFICER OBSERVED THAT EMPLOYEES C ONTRIBUTION TO PF & ESIC WERE PAID BEYOND DUE DATE UNDER RESPECTIVE ACT AS PER SECTION 36(1)(VA) OF THE ACT. THE ASSESSING OFFICER DISALLOWED EMPLO YEES CONTRIBUTION TO PF OF RS.28,444/- AND EMPLOYEES CONTRIBUTION TO ESIC O F RS.22,667/-. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT ONLY DELAY IS FOR THE MONTH OF JANUARY, 2005 OF RS.28,444/- WHICH HAS BEEN DEPOSITED ON 17. 02.2005, THE PAYMENT THOUGH DELAYED HAS BEEN MADE WITHIN GRACE PERIOD AV AILABLE UNDER EMPLOYEES PROVIDENT FUND REGULATIONS. SIMILARLY, FOR ESIC CO NTRIBUTION, THE PAYMENT IS STATED TO HAVE BEEN MADE BEFORE DUE DATE OF FILING OF RETURN. THE CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFICER AND AL LOWED THE EXPENSES INCURRED 8 ITA NOS.157, 159 & 160/PN/2012 BY THE ASSESSEE FOR IMPUGNED PAYMENT OF PF AND ESIC FOLLOWING THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF G UJARAT CONTAINERS LTD. IN ITA NO.2609/AHD/2008, ORDER DATED 02.03.2009 AND TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. P.M. ELECTRONICS, 220 CTR 635 (DEL). WE FIND NO ERROR COMMITTED BY THE CIT(A) IN COMING TO THE AFOR ESAID CONCLUSION. THUS, THE GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 16. THE NEXT GROUND NO.4 OF THE REVENUES APPEAL RE LATES TO DISALLOWANCE OF TDS PAYMENT UNDER SECTION 40(A)(IA) OF THE ACT IN R ESPECT OF TDS PAYMENT MADE BY THE ASSESSEE BEYOND DUE DATES. 16.1 IN THE CONTEXT, THE ASSESSING OFFICER MADE A D ISALLOWANCE OF RS.4,34,901/- UNDER SECTION 40(A)(IA) OF THE ACT BY STATING THAT PAYMENT HAS BEEN MADE BEFORE THE DUE DATE AND SECTION 40(A)(IA) OF THE ACT ARE MANDATORY. THE CIT(A) OBSERVED THAT THE RELEVANT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD BE APPLICABLE ARE AS PER AMENDMENT CARRIE D OUT BY THE FINANCE ACT, 2008 W.R.E.F. 01.04.2005. AS PER THESE PROVISIONS, WHERE THE TAX WAS DEDUCTED IN THE MONTH OF MARCH, 2005 BUT PAID BEFORE DUE DAT E OF FILING OF RETURN, DEDUCTION OF CORRESPONDING EXPENSES WOULD BE ALLOWE D. IN CASES, WHERE THE TAX WAS DEDUCTED IN OTHER MONTH OF THE PREVIOUS YEA R BUT PAID BEFORE THE LAST DATE OF THE PREVIOUS YEAR I.E. 31.03.2005, CORRESPO NDING EXPENSES IS TO BE ALLOWED. HE ACCORDINGLY, DIRECTED THE ASSESSING OF FICER TO ALLOW EXPENSES IN QUESTION AS PER AFORESAID CRITERIA. WE FIND NO ERR OR IN THE CONCLUSION OF THE CIT(A) AND HENCE, WE DECLINE TO INTERFERE WITH HIS FINDINGS. THUS, THE GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED. 16.2. IN THE RESULT, THE APPEAL OF THE REVENUE IN I TA NO.157/PN/2012 RELATING TO ASSESSMENT YEAR 2005-06 IS DISMISSED. 9 ITA NOS.157, 159 & 160/PN/2012 ITA NO.159/PN/2012 (A.Y. : 2006-07) : 17. NOW, WE TAKE-UP THE APPEAL OF THE REVENUE FOR A SSESSMENT YEAR 2006-07 IN ITA NO.159/PN/2012. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXCESSIVE AND UNREASONABLE PAYMENTS MADE BY THE ASSESSEE TO THE PERSONS SPECIF IED U/S. 40A(2)(B), WHEN ASSESSEE HAD NOT DISCHARGED ONUS TO PROVE REAS ONABLENESS OF THE SAID EXPENDITURE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF INDO SAUDI SERVICES (T RAVEL) (P) LTD. (2009) 310 ITR 309 AND DELETING THE DISALLOWANCE MA DE U/S. 40A(2)(B), WHEN JUDICIAL DECISION IN CASE OF NUND & SAMOUNT CO. P. LTD 78 ITR 268 (SC) AND CIT VS. SHATRUNJA DIAMONDS (261 ITR 258 (B OM) ARE SQUARELY APPLICABLE TO THIS CASE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING DISALLOWA NCE MADE U/ S.36(I)(VA) FOR EMPLOYEES CONTRIBUTION TO PF & ESIC, WHICH WERE PAID BEYOND THE DUE DATE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDIT ION OF RS.2,00,00,000/- MADE U/S. 68, WHEN THE ASSESSEE COULD NOT PROVE GEN UINENESS AND CREDITWORTHINESS OF DEPOSITOR/CREDITOR INSPITE OF S UFFICIENT OPPORTUNITY GIVEN TO HIM BY THE AO TO PROVE THE SAME. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE VACATED AND THAT OF THE AO'S ORDER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D, MODIFY ANY OF THE ABOVE GROUNDS RAISED, ANY OTHER GROUNDS AT THE TIME OF PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL WHICH MAY PLEASE BE GRA NTED. 18. GROUND NOS.1 AND 2 OF THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006-07 ARE PARI-MATERIA WITH GROUND NOS.1 AND 2 OF THE ASSESSMENT YEAR 2005-06 DISCUSSED EARLIER. SINCE THE ISSUES INVOLV ED ARE IDENTICAL AND ARISING FROM THE SIMILAR FACTS FOR THE SAME ASSESSEE, WE OB SERVE THAT THE FINDINGS IN RESPECT OF GROUND NOS.1 AND 2 PERTAINING TO ASSESSM ENT YEAR 2005-06 SHALL APPLY MUTATIS-MUTANDIS TO THE GROUND NOS.1 AND 2 HEREIN FOR ASSESSMENT YE AR 2006-07. THUS, THE GROUND NOS.1 AND 2 RAISED BY TH E REVENUE ARE DISMISSED. 10 ITA NOS.157, 159 & 160/PN/2012 19. THE GROUND NO.3 OF THE REVENUES APPEAL RELATES TO DISALLOWANCE UNDER SECTION 36(1)(VA) OF THE ACT TOWARDS EMPLOYEES CONT RIBUTION TO PF & ESIC, WHICH IS PAID BEYOND DUE DATE SIMILAR TO GROUND NO. 3 OF ASSESSMENT YEAR 2005-06 DISCUSSED EARLIER IN THE CONSOLIDATED ORDER . FOR THE PARITY OF REASONING, THE IMPUGNED GROUND NO.3 IS ALSO DISMISS ED. 20. THE GROUND NO.4 OF THE REVENUES APPEAL RELATES TO ADDITION OF RS.2,00,00,000/- UNDER SECTION 68 OF THE ACT VACATE D BY THE CIT(A). 20.1 IN THIS CONTEXT, THE RELEVANT FACTS, IN BRIEF, ARE THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN A FRESH UNSECUR ED LOAN/CASH CREDIT OF RS.2,00,00,000/- IN THE NAME OF SHRI JAYANT SANGHVI . THE ASSESSING OFFICER QUESTIONED THE IMPUGNED CREDIT ON THE GROUND THAT C ONFIRMATION FROM THE LENDER HAS NOT BEEN FURNISHED. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT THE SIGNATURE IN THE PAN CARD OF THE PURPORTED LENDER, SHRI JAYANT SHANTILAL SANGHVI IS ALSO IN VARIANCE AND DO NOT TALLY. THE CONFIRMATION FILED IS ALSO NOT RELATED TO THE TRANSACTIONS PERTAINING TO FINANCIAL YEAR UNDER SCRUTINY I.E. F.Y. 2005-06. HE, ACCORDINGLY, HELD THAT THE ASSESSEE H AS FAILED TO PROVE THAT IDENTIFY, GENUINENESS AND CREDITWORTHINESS IN RESPE CT OF THE ABOVE CASH CREDIT IS NOT PROVED. 20.2 BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE LENDER, SHRI JAYANT SANGHAVI IS A REPUTED BUSINESSMAN IN VADODARA. THE ASSESSING OFFICER HAS COME TO THE ADVERSE CONCLUSION ON THE GROUND THAT ( A) THE SIGNATURE ON PAN CARD DOES NOT MATCH WITH THE SIGNATURE ON THE CONFI RMATION LETTER; (B) CONFIRMATION LETTER FILED DOES NOT PERTAIN TO THE R ELEVANT ASSESSMENT YEAR; AND (C) COPY OF THE DEPOSITORS BANK ACCOUNT IS NOT FUR NISHED. THUS, THE ASSESSEE HAS NOT DISCHARGED HIS BURDEN OF PROVING THE GENUIN ENESS OF THE CASH CREDIT. IN DEFENCE, THE ASSESSEE SUBMITTED BEFORE THE CIT(A) T HAT THE CONFIRMATION LETTER SHOWING THE DEPOSITORS ACCOUNT FOR THE YEAR ENDED ON 31.03.2007. THE OPENING BALANCE WHICH INCLUDES THE PRINCIPAL AMOUNT OF RS.2 CRORES PLUS THE ACCRUED INTEREST OF RS.4,81,601/- (NET OF TDS). TH E ACCOUNT SHOWS THAT THE 11 ITA NOS.157, 159 & 160/PN/2012 INTEREST HAVING BEEN PAID ON 22.06.2006. THE ACCOU NT SHOWS ENTRY FOR CREDIT OF INTEREST OF RS.12,00,000/- OUT OF WHICH TDS OF RS.1 ,34,640/- IS DEDUCTED. THIS CONFIRMATION IS SIGNED BY SHOBHIT H. SHAH, THE ACCO UNTS MANAGER OF THE DEPOSITOR, WHO IS AN AUTHORIZED SIGNATORY. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT IN LARGE ORGANIZATIONS, ACCOUNT CONFI RMATIONS ARE GENERALLY SIGNED BY THE HEADS OF THE ACCOUNTS DEPARTMENTS AND THE QU ESTION OF THE SIGNATURE BEING DIFFERENT FROM THAT ON THE PAN CARD IS OF NO CONSEQUENCE. HE NEXT CONTENDED THAT COPY OF CHEQUE NO.102207 DATED 18.10 .2005 DRAWN ON ABN AMRO BANK DULY SIGNED BY THE DEPOSITOR TOGETHER WIT H THE COPY OF THE FORWARDING LETTER FOR THE CHEQUE WAS FURNISHED BEFO RE THE ASSESSING OFFICER WHEREFROM IT CAN BE SEEN THAT WHILE THE CHEQUE WAS SIGNED BY THE DEPOSITOR HIMSELF, THE FORWARDING LETTER IS SIGNED BY THE SAM E PERSON WHO HAS SIGNED THE CONFIRMATION LETTER. IT WAS FURTHER SUBMITTED THAT COPY OF THE ACKNOWLEDGEMENT OF THE RETURN OF INCOME FILED BY TH E DEPOSITOR WITH ACIT, CIRCLE- 2(1), BARODA PLACED DURING THE COURSE OF HE ARING SHOWS THE TOTAL AMOUNT OF RS.13,95,826/- TOGETHER WITH THE COMPUTAT ION OF INCOME. THE COMPUTATION SHOWS INTEREST INCOME OF RS.7,63,850/- WHICH INCLUDES INTEREST OF RS.5,42,466/- FROM THE ASSESSEE AS PER COPY OF THE TDS CERTIFICATE. THE COMPUTATION ALSO SHOWS THAT THE DEPOSITOR HAS EXEMP T INCOME OF RS.5.08 CRORES WHICH ADEQUATELY PROVES THE CREDITWORTHINESS OF THE DEPOSITOR. THE ASSESSEE, THEREFORE, PLEADED THAT THE FACTUM OF DEP OSIT HAVING BEEN RECEIVED FROM AN IDENTIFIED PERSONS AND THE FACT THAT THE DE POSITOR HAS SUBSTANTIAL MEANS TO MAKE THE DEPOSIT ARE ESTABLISHED. HE RELIED UPO N THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S DWARKADHISH CAPITAL (P) LTD. REPORTED IN 6 TAXMANN.COM 84 (DELHI), FOR THE PROPOSITION THAT THE BONA- FIDES OF SUCH TRANSACTIONS SHOULD NOT BE QUESTIONED WHEN THERE IS NOTHING AGAINST THE ASSESSEE. THE ASSESSING OFFICER IS DUT Y BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR, THE GENUINENESS O F THE TRANSACTIONS, ETC.. 20.3 THE CIT(A) AFTER CONSIDERATION OF THE FACTS AN D SUBMISSIONS MADE BY THE ASSESSEE DELETED THE ADDITION HOLDING THAT THE ADDI TION UNDER SECTION 68 OF THE 12 ITA NOS.157, 159 & 160/PN/2012 ACT WAS NOT JUSTIFIED IN THE FACTS OF THE CASE. TH E RELEVANT OPERATIVE PARA OF THE CIT(A)S ORDER IS REPRODUCED HEREUNDER :- 6.2 I HAVE CONSIDERED FACTS OF THE CASE AND APPELL ANT'S SUBMISSIONS. I HAVE ALSO GONE THROUGH THE DOCUMENTS FILED BY THE APPELLANT I N THIS REGARD DURING ASSESSMENT PROCEEDINGS THROUGH LETTERS DT. 10.12.2008 AND 18.1 2.2008. APPELLANT FILED CONFIRMATION FROM THE PARTY FOR THE PERIOD ENDING 3 1.3.2007, COPY OF LETTER DT. 17.10.2005 FROM JAYANT SANGHAVI FORWARDING THE ACCO UNT PAYEE ABN AMRO BANK CHEQUE DATED 18.10.2005 OF RS.2 CRORE ISSUED BY SHR I JAYANT SANGHAVI, COPY OF CHEQUE, COPY OF THE BANK SLIP DEPOSITING SAID CHEQU E IN APPELLANT'S BANK ACCOUNT, COPY OF THE BANK STATEMENT OF THE APPELLANT SHOWING CREDIT OF THE CHEQUE IN APPELLANT'S BANK ACCOUNT ON 18.10.2005, COPY OF PAN CARD OF SHRI JAYANT SANGHAVI AND COPY OF ACKNOWLEDGEMENT OF RETURN FILED ALONG W ITH COMPUTATION OF TOTAL INCOME BY SHRI JAYANT SANGHAVI FOR AY 2006-07. CONFIRMATIO N LETTER FILED BY THE APPELLANT SHOWED DEPOSITOR'S ACCOUNT FOR THE YEAR ENDED 31-3- 2007 WITH OPENING BALANCE AS ON 1.4.2006 OF RS.2,04,81,601/-, WHICH I NCLUDED PRINCIPAL AMOUNT OF RS.2 CRORE PLUS THE ACCRUED INTEREST OF RS. 4,81,601/- (NET OF TDS). THE ACCOUNT SHOWED THE INTEREST AS ABOVE HAVING BEEN PAID ON 22-06-200 6. APPELLANT HAD ALSO FILED COPY OF CHEQUE DATED 18.10.2005 OF RS.2,00,00,000/- SIGNED BY JAYANT SANGHVI, WHICH WAS CREDITED IN APPELLANT'S BANK ACC OUNT ON THE SAME DAY. AFTER FILING OF CONFIRMATION AS ABOVE, AO DOES NOT SEEM T O HAVE ASKED FOR CONFIRMATION FOR FY 2005-06. AS SUCH, WHEN THE DOCU MENTS FILED PROVED THE UNDERLYING LOAN TRANSACTION IN FY 2005-06 ALSO, MER ELY BECAUSE THE CONFIRMATION WAS FOR FY 2006-07 CANNOT LEAD TO ADVE RSE INFERENCE. THE CONFIRMATION LETTER FILED WAS SIGNED BY THE ACCOUNT S MANAGER OF THE DEPOSITOR, WHO WAS AN AUTHORIZED SIGNATORY, DUE TO WHICH THE S IGNATURES DID NOT MATCH WITH SIGNATURES ON THE PAN CARD OF SHRI JAYANT SANG HAVI. HOWEVER, THE SIGNATURES ON THE PAN CARD DO MATCH WITH SIGNATURES ON THE CHEQUE DT. 18.10.2005 ISSUED BY SHRI JAYANT SANGHAVI IN APPELL ANT'S NAME, WHICH WAS CREDITED IN APPELLANT'S BANK ACCOUNT ON THE SAME DA Y. AS SUCH, DUE TO THE DOCUMENTS FILED, THERE IS NO DOUBT ABOUT IDENTITY O F THE LENDER WHOSE PAN CARD BEARING PHOTOGRAPH WAS FILED. THERE IS NO DOUBT ABO UT GENUINENESS OF THE TRANSACTION, WHICH WAS THROUGH BANKING CHANNELS/ACC OUNT PAYEE CHEQUE. IF AO HAD ANY DOUBTS, IT WAS UP TO HER TO HAVE ASKED THE APPELLANT TO EXPLAIN OR IN THE ALTERNATIVE, MAKE INDEPENDENT VERIFICATION, NEI THER OF WHICH WAS DONE. SO FAR AS APPELLANT IS CONCERNED, ONUS U/S 68 IN RESPECT OF IDENTITY OF PERSON AND GENUINENESS OF TRANSACTION STOOD DISCHAR GED. REGARDING CREDITWORTHINESS OF LENDER, SHRI JAYANT SANGHAVI WA S ASSESSED TO TAX AND COPY OF HIS PAN CARD WAS FURNISHED TO THE AO. APPELLANT ALSO FURNISHED COPY OF INCOME-TAX RETURN OF SHRI JAYANT SANGHAVI FOR AY 20 06-07 DECLARING TAXABLE INCOME OF RS.13,95,826/- IN WHICH INTEREST ON DEPOS ITS OF RS.7,63,850/- WAS REFLECTED. THIS INTEREST IS CLAIMED TO BE INCLUDING GROSS INTEREST OF RS.5,42,266/- FROM THE APPELLANT. MOREOVER, AS PER COMPUTATION O F INCOME SHRI JAYANT SANGHVI HAD SHOWN EXEMPT OF RS.5.06 CRORE IN THE RE TURN OF INCOME FILED FOR AY 2006-07, I.E. HE WAS A MAN OF MEANS. A.O.S OBSERV ATION ABOUT NON-FILING OF BANK STATEMENT OF SHRI JAYANT SANGHAVI IS NOT TENAB LE, SINCE CREDITWORTHINESS NEED NOT BE ESTABLISHED THROUGH BANK STATEMENT ALON E AND OTHER DOCUMENTS CAN ALWAYS BE FILED TO SUPPORT FINANCIAL CAPACITY OF LE NDER, AS WAS DONE. IN ANY CASE, THE BANK ACCOUNT DETAILS OF JAYANT SANGHVI WE RE VERY MUCH AVAILABLE WITH THE A.O. FROM THE CHEQUE OF RS.2,00,00,000/-, COPY OF WHICH WAS FILED. IF SHE HAD ANY DOUBTS, IT WAS UPTO HER TO HAVE MADE FURTHE R VERIFICATION. AS FAR AS APPELLANT IS CONCERNED, ONUS U/S 68 REGARDING CREDI TWORTHINESS OF THE PARTY STOOD SUFFICIENTLY DISCHARGED. IT IS HELD THAT ADD ITION OF RS.2,00,00,000/- U/S 68 WAS NOT JUSTIFIED AND THE SAME IS DELETED. 13 ITA NOS.157, 159 & 160/PN/2012 21. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION UNDER SECTION 68 OF THE ACT WHEN THE BASIC INGREDIENTS TO SATISFY THE BONA-FIDES OF THE LOAN ARE NOT PRESENT, EVEN THE CONFIRMATION LETTER WAS NOT FILED. HE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 22. THE LD. AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE CIT(A) HAVE COME TO THE CORRECT CONCLUSION AFTER EXAMINATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE. HE, THEREFORE, PLEADED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE DOCUMENTS FILE D BY THE ASSESSEE HAVE NOT BEEN PURPORTEDLY EXAMINED. IT IS NOT CLEAR WHETHER ALL THE DOCUMENTS FILED BEFORE THE CIT(A) WERE PRESENT BEFORE THE ASSESSING OFFICER OR NOT. WE FIND THAT THE CONFIRMATION LETTER HAS BEEN FILED FOR SUB SEQUENT YEAR WHICH INDICATES THE OPENING BALANCE OF THE EARLIER YEAR. WE CONSID ER IT NECESSARY THAT PROPER ENQUIRY IS CONDUCTED BY THE ASSESSING OFFICER TO FI ND OUT THE BONA-FIDES OF THE IMPUGNED CASH CREDIT. WE OBSERVE THAT THE ASSESSIN G OFFICER HAS FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PROPER ENQUIR Y QUA THE LENDER TO TAKE THE MATTER TO LOGICAL CONCLUSION. THE CIT(A) HAS ALSO ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT ANY ENQUIRY FROM VENDEE. IN OUR C ONSIDERED VIEW, THE PROPER ENQUIRY IS NECESSARY IN THE CIRCUMSTANCES EXISTING IN THE CASE. ACCORDINGLY, WE SET-ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-EXAMINE THE ISSUE AFTER PROPER ENQUIRY AND AFTER GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE WITH LAW. 24. THUS, THE GROUND NO.4 OF THE APPEAL OF THE REVE NUE IS ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.159/PN/2012 RELATING TO ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. 14 ITA NOS.157, 159 & 160/PN/2012 ITA NO.160/PN/2012 (A.Y. : 2007-08) : 26. NOW, WE TAKE-UP THE APPEAL OF THE REVENUE FOR A SSESSMENT YEAR 2007-08 IN ITA NO.160/PN/2012. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXCESSIVE AND UNREASONABLE PAYMENTS MADE BY THE ASSESSEE TO THE PERSONS SPECIF IED U/S. 40A(2)(B), WHEN ASSESSEE HAD NOT DISCHARGED ONUS TO PROVE REAS ONABLENESS OF THE SAID EXPENDITURE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF INDO SAUDI SERVICES (T RAVEL) (P) LTD. (2009) 310 ITR 309 AND DELETING THE DISALLOWANCE MA DE U/S. 40A(2)(B), WHEN JUDICIAL DECISION IN CASE OF NUND & SAMOUNT CO. P. LTD 78 ITR 268 (SC) AND CIT VS. SHATRUNJA DIAMONDS (261 ITR 258 (B OM) ARE SQUARELY APPLICABLE TO THIS CASE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS.12,00,000/- MADE BY THE AO ON ACCOUNT OF INTEREST PAID ON THE ADDITI ON OF RS.2,00,00,000/- MADE U/S 68 IN THE PREVIOUS YEAR WHEN THE ASSESSEE COULD NOT PROVE GENUINENESS AND CREDITWORTHINESS OF DEPOSITOR/ CRED ITOR INSPITE OF SUFFICIENT OPPORTUNITY GIVEN TO HIM BY THE AO TO PR OVE THE SAME. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) BE VACATED AND THAT OF THE AO'S ORDER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D, MODIFY ANY OF THE ABOVE GROUNDS RAISED, ANY OTHER GROUNDS AT THE TIME OF PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL WHICH MAY PLEASE BE GRA NTED. 27. GROUND NOS.1 AND 2 OF THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007-08 ARE PARI-MATERIA WITH GROUND NOS.1 AND 2 OF THE ASSESSMENT YEAR 2005-06 DISCUSSED EARLIER. SINCE THE ISSUES INVOLV ED ARE IDENTICAL AND ARISING FROM THE SIMILAR FACTS FOR THE SAME ASSESSEE, WE OB SERVE THAT THE FINDINGS IN RESPECT OF GROUND NOS.1 AND 2 PERTAINING TO ASSESSM ENT YEAR 2005-06 SHALL APPLY MUTATIS-MUTANDIS TO THE GROUND NOS.1 AND 2 HEREIN FOR ASSESSMENT YE AR 2007-08. THUS, THE GROUND NOS.1 AND 2 RAISED BY TH E REVENUE ARE DISMISSED. 28. THE GROUND NO.3 OF THE REVENUES APPEAL CONSEQU ENTIAL TO GROUND NO.4 OF THE REVENUES APPEAL IN ITA NO.159/PN/2012 (SUPRA). ACCORDINGLY, THE ISSUE IS ALSO SET-ASIDE TO THE FILE OF THE ASSE SSING OFFICER. THE ASSESSING 15 ITA NOS.157, 159 & 160/PN/2012 OFFICER SHALL CONSIDER THE ISSUE AFRESH IN THE LIGH T OF FINDINGS ARRIVED AT AS PER GROUND NO.4 (SUPRA). THUS, THE GROUND NO.3 OF THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.160/PN/2012 RELATING TO ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED. 30. RESULTANTLY, ALL THE CAPTIONED APPEALS OF THE R EVENUE ARE DISPOSED-OFF, AS PER TERMS NOTED ABOVE. ORDER PRONOUNCED ON THIS 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 28 TH OCTOBER, 2015. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, BARODA; 4) THE CIT-I, BARODA; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE