ACIT, Faridabad V. M/s A.E. Fashion Pvt. Ltd, Delhi

ITA 1674/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4230 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Opportunity of being heard; Notional interest
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `A: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI C.L.SETHI, JUDICIAL MEMBER. I.T. A. NO.1674/DEL/2010 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX, M/S. A.E. FASHI ON PVT. LTD., CIRCLE-1, FARIDABAD. VS. FORMERLY KNOWN AS: M/S. RENU SCALES PVT. LTD., 206A, MUKUND HOUSE, AZADPUR COMMERCIAL COMPLEX, DELHI. PAN: AAACR7759N (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. ANUSHA KHURANA, SR.D R. RESPONDENT BY: SHRI ASHWANI TANEJA, CA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 11 .02.2010 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), IN THE MA TTER OF AN ASSESSMENT MADE UNDER SEC. 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS.1,00,62,000/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF UNEXPLAINED RECEIPTS U/S 68 OF THE INCOME TAX ACT, 1961 2 ESPECIALLY WHEN THE ASSESSEE HAD FAILED TO EXPLAIN THE RECEIPT OF SAME DESPITE SPECIFIC REQUIREMENT. 3. DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SHOWN HUGE INVESTMENT S IN UNQUOTED SHARES. IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAD VERY NO MINAL INCOME, HEAVY INVESTMENT IN SHARES SEEMS TO BE UNREASONABLY BEYON D ASSESSEES WORTH. FROM THE DETAILS FILED BY THE ASSESSEE, IT WAS FOUN D BY THE AO THAT INVESTMENT IN QUOTED SHARES WAS OF RS.81,080/-, AND IN UNQUOTED SHARES IS OF RS.2,14,90,000/-, IN THE YEAR ENDED ON 31.03.2006. THE ASSESSEE CLAIMED BEFORE THE AO THAT OUT OF THE UNQUOTED SHARES OF RS .2,14,90,000/-, THE ASSESSEE HAD SOLD UNQUOTED SHARES OF RS.1,00,62,000 /-, THE DETAILS OF WHICH WAS FILED. THE AO THEN ASKED THE ASSESSEE TO FURNI SH COMPLETE NAMES AND ADDRESSES OF THE PARTIES THROUGH WHOM UNQUOTED SHAR ES WERE SOLD AND PURCHASED. IN REPLY, THE ASSESSEE SUBMITTED THAT I NVESTMENT IN SHARES SOLD WERE OF UNQUOTED SHARES AND NOT SOLD THROUGH STOCK EXCHANGE SO THAT THE CONTRACT NOTE WAS NOT REQUIRED. HOWEVER, THE AO H AS TAKEN A VIEW THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCUMENTARY EVID ENCE FOR THE SALE AND PURCHASE OF THE SHARES AND HAS ALSO FAILED TO SUBMI T ANY AGREEMENT, CONTRACT NOTE AND NAME OF AGENTS THROUGH WHOM THE SHARES WER E SOLD. THE AO FURTHER OBSERVED THAT EVEN IN THE BANK STATEMENT FI LED BY THE ASSESSEE, NO NAME OF THE PARTY WAS MENTIONED AGAINST CREDIT ENTR Y OF CHEQUE DEPOSITED IN 3 THE BANK ACCOUNT. THE ASSESSING OFFICER, THEREFORE , HAS TAKEN A VIEW THAT CREDIT ENTRIES IN THE BANK STATEMENT REMAINED UNEXP LAINED. HE, THEREFORE, TREATED THE RECEIPT OF RS.1,00,62,000/- AS UNEXPLAI NED RECEIPT AND ADDED THE SAME TO THE ASSESSEES TOTAL INCOME. 4. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFOR E THE LEARNED CIT(A). 5. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D A DETAILED WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED BY THE LEARNED CIT(A) AT PARA 7 OF HIS ORDER. IN THE WRITTEN SUBMISSIONS, THE ASSESSE E STATED THAT THERE WAS NO DISPUTE THAT THE ASSESSEE COMPANY WAS HOLDING INVES TMENT IN UNQUOTED SHARES. HE FURTHER POINTED OUT THAT THE SHARES WOR TH RS.1,00,62,000/- SOLD DURING THE YEAR WERE SOLD TO M/S. SHREE SHYAM AGENC IES AND THE COMPLETE ADDRESS OF THE SAID PARTY WAS GIVEN IN THE ASSESSEE S LETTER DATED 7.12.2009 FILED BEFORE THE AO. IT WAS FURTHER POINTED OUT TH AT ALONG WITH THIS LETTER DATED 7.12.2009, COMPLETE LEDGER ACCOUNT SHOWING TH E OPENING BALANCE IN INVESTMENT OF SHARE ACCOUNTS, INVESTMENT SOLD DURIN G THE YEAR WITH DETAILS OF FUND REALIZED, DETAILS OF NEW INVESTMENTS MADE DURI NG THE YEAR AND THE CLOSING BALANCE IN THE INVESTMENT ACCOUNT WAS SUBMI TTED. HE FURTHER SUBMITTED BEFORE THE LEARNED CIT(A) THAT A CONFIRMA TION OF PAYMENT SHOWING THE DETAILS OF THE SHARES SOLD BY THE ASSES SEE COMPANY WAS ALSO 4 PRODUCED BEFORE THE AO. IN THIS REGARD, VARIOUS DO CUMENTS PLACED IN THE PAPER BOOK FILED BEFORE THE LEARNED CIT(A) WERE REF ERRED TO. 6. AFTER CONSIDERING THE ASSESSEES SUBMISSION, PE RUSING THE DETAILS FILED BY THE ASSESSEE AND THE AOS ORDER, THE LEARNED CIT (A) DELETED THIS ADDITION BY OBSERVING AND HOLDING AS UNDER:- 8. I HAVE CAREFULLY CONSIDERED THE ABOVE PROTESTAT IONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. I HAVE GONE THROUGH ALL THE CORRESPONDENCE AND DOCUMENTARY EVID ENCES PLACED BY THE LD. A.R. IN THE PAPER BOOK IN SUPPORT OF THE ASSESSEES AUTHENTIC AND ESTABLISHED BUSINESS AFFAI RS SINCE THE COMPANYS INCORPORATION IN 1983. THE AOS VERY ASS ESSMENT ORDER, AS ACKNOWLEDGED BY THE A.O. HERSELF, REVEALS THAT THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY AND I S DEALING IN UNQUOTED SHARES WHICH AS PER THE RETURN SHOWED T HE TRADE INVESTMENTS IN EQUITY SHARES AT RS.1,75,09,080/- IN THE BALANCE- SHEET AS ON 31.03.2007 RELEVANT TO THE A.Y. UNDER C ONTEXT. YET IT IS DEPLORABLE AND UNFORTUNATE THAT THE A.O. HAS SHO WN TOTAL SCARCITY OF UNDERSTANDING AND APPRECIATING THE PROV ISIONS OF THE INDIAN COMPANIES ACT, 1956 AND MANDATORY PROVIS IONS OF SECTION 44AB OF THE INCOME TAX ACT, 1961, WHICH HAV E BEEN FAITHFULLY FOLLOWED BY THE ASSESSEE COMPANY AS EVID ENT FROM THE AUDIT REPORT DATED 15.04.2007 FROM AMT R GUPTA & AS SOCIATE, CAS. FURTHER, THE AO HAS PUT BLINKERS ON HER EYES IN NOT SEEING THE TRADE INVESTMENTS IN EQUITY SHARES IN THEIR PRO PER PERSPECTIVE WHICH HAVE THE OPENING BALANCE AS ON 31 .03.2006 AT RS.25,15,71,080/- (CORRECT FIGURE RS.2,15,71,080 /-) AND AS ON 31.03.2007 AT RS.1,75,09,080/-; THE REDUCTION IN BA LANCE OWES TO THE DEALINGS IN UNQUOTED EQUITY SHARES. THE AO HAS COMPLETELY IGNORED THE INFORMATION PROVIDED BY THE APPELLANTS COUNSEL DURING THE ASSESSMENT PROCEEDINGS IN HIS LE TTERS DATED 04.11.2009, 19.11.2009, 07.02.2009, 17.12.2009, AND 24.12.2009, DEMONSTRATING A DELIBERATE ATTEMPT IN L YNCHING THIS REGULAR ASSESSEE ON THE PEDESTAL OF HER OWN CRUEL D ESIGNS. VIDE LETTER DATED 17.12.2009, THE STATEMENT SHOWING THE DETAILS OF ACQUISITION OF THE INVESTMENT SOLD DURING THE YEAR UNDER 5 CONSIDERATION, WAS FURNISHED, STATING IN PARA 6 AND 7 THEREIN THAT THE ASSESSEE HAD SOLD ITS EXISTING INVESTMENT AS PER THE DETAILS ALREADY PROVIDED IN THE INVESTMENT ACCOUNT AND THE BANK ACCOUNT IN WHICH THE PROCEEDS OF THE SAID INVESTMEN T HAD BEEN REFLECTED, INTIMATING FURTHER THAT THE ASSESSEE HAD PURCHASED CERTAIN NEW INVESTMENT IN SHARES OUT OF THE SALE PR OCEEDS OF OLD INVESTMENTS, THE DETAILS OF FRESH INVESTMENT ALREAD Y SUBMITTED IN THE INVESTMENT ACCOUNT. CONSPICUOUSLY THEN, THE AP PELLANT COMPANY HAS NOT INTRODUCED ANY CREDIT OR CAPITAL DU RING THE YEAR UNDER CONSIDERATION, AND WHATEVER INVESTMENTS HAVE BEEN MADE, THEY ARE ALREADY OUT OF THE APPELLANT S COMP ANY OWN FUNDS EXISTING WITH IT AS PER THE BALANCE SHEET AND OTHER ACCOUNTS. THEREFORE, IN VIEW OF SUCH FACTS, THE A. O. HAS TOTALLY MISLED HERSELF IN RESORTING TO THE PROVISIONS OF SE CTION 68 OF THE INCOME TAX ACT, 1961, WHICH ARE NOT ABSOLUTELY INVO KABLE, AS NO NEW CREDIT HAS BEEN INTRODUCED IN THE BOOKS OF A CCOUNT ON THE FACTS OF THE INSTANT CASE DURING THE YEAR IN QU ESTION, AS ALREADY INFORMED IN POINTS 11 AND 12 OF THE APPELLA NTS LETTER DATED 04.11.2009 WHERE IT WAS MENTIONED THAT NEITHE R ANY SECURED LOANS FROM THE BANK NOR UNSECURED LOANS WER E TAKEN DURING THE YEAR. IT IS RATHER REGRETTABLE THAT THE AO HAS THROWN TO WINDS AND DUST THE ENTIRE AFFAIRS OF THE ASSESSE E AS A GENUINE COMPANY, AND THAT TOO, THROUGH WHOLLY INCORRECT AND UNCHARITABLE OBSERVATIONS WHICH STAND REBUTTED BY T HE LD. A/R ABOVE. IN VIEW OF SUCH DISCUSSION, THE ADDITION OF RS.1,06,02,000/- BEING FRIVOLOUS AND WHOLLY PERVERS E, IS KNOCKED DOWN MERCILESSLY. 7. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 8. THE LEARNED DR HAS VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE AND ESTABLISH THAT THE SHARES WO RTH RS.1,00,62,000/- WERE ACTUALLY SOLD AND THE AMOUNT WAS REALIZED AGAINST T HE SALE PROCEEDS OF THE SHARES SOLD INASMUCH AS THE ASSESSEE HAS NOT FILED ANY AGREEMENT, CONTRACT NOTE OR THE NAME OF THE AGENT THROUGH WHOM THE SHAR ES WERE SOLD. THE 6 LEARNED DR THEREFORE, SUBMITTED THAT THE AO WAS VER Y MUCH JUSTIFIED IN TREATING THE CREDIT RECEIPTS ENTERED INTO THE ASSES SEES BANK ACCOUNT AS UNDISCLOSED RECEIPTS OF THE ASSESSEE LIABLE TO BE A SSESSED AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD OPENING BALANCE OF INVESTMENT IN EQUITY SHARES TO T HE EXTENT OF RS.2,15,71,080/- AS ON 31.03.2006. THE INVESTMENTS MADE IN EARLIER YEARS IN UNQUOTED SHARES WERE REALIZED BY WAY OF SALE OF SHA RES AND THE AMOUNT WAS CREDITED IN THE BANK ACCOUNT. HE FURTHER SUBMITTED THAT OUT OF THE SALE PROCEEDS OF THE SHARES SOLD, THE ASSESSEE HAD ALSO PURCHASED NEW SHARES. HE HAS DRAWN OUR ATTENTION TO PAGES 4 TO 8 OF THE PAPE R BOOK WHICH IS THE COPY OF LEDGER ACCOUNT OF INVESTMENT IN SHARES WHICH SHO WS THAT THE ASSESSEE WAS HOLDING INVESTMENT TO THE TUNE OF RS.2,15,71,080/- AS ON 31.03.2006/1.04.2006. HE FURTHER POINTED OUT THAT THE ASSESSEE PURCHASED SOME SHARES DURING THE YEAR. THE LEDGER ACCOUNT OF INVESTMENT WOULD FURTHER SHOW THAT THE ASSESSEE HAD SOLD VARIOUS SHA RES FOR AN AGGREGATE AMOUNT OF RS.1,00,62,000/- AND PAYMENTS WERE RECEIV ED BY CHEQUE AND CREDITED IN THE BANK ACCOUNT. HE FURTHER DREW OUR ATTENTION TO THE COPY OF THE BANK ACCOUNT SHOWING THE PAYMENTS AND RECEIPTS ON ACCOUNT OF PURCHASE AND SALE OF SHARES DURING THE YEAR. THE LEARNED CO UNSEL FOR THE ASSESSEE 7 FURTHER POINTED OUT THAT THE COPIES OF CONFIRMATION S OF THE BUYERS OF THE SHARES AND PAYMENTS MADE BY THEM TO THE ASSESSEE AR E PLACED AT PAGES 40 TO 50 OF THE PAPER BOOK. HE, THEREFORE, SUBMITTED THA T THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THAT THE SHARES HELD IN EARLIER Y EARS AS INVESTMENT WERE SOLD IN PART DURING THE YEAR AND AN AMOUNT OF RS.1,00,62 ,000/- WAS REALIZED AND CREDITED IN THE BANK ACCOUNT. HE, THEREFORE, SUBMI TTED THAT THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE SOURCE OF DEPOSIT OF RS.1, 00,62,000/- CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. HE, THEREFORE, SUBMI TTED THAT THE CIT(A) WAS VERY MUCH JUSTIFIED IN DELETING THE ADDITION. 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE PERUSED THE LEDGER ACCOUNT OF INVESTMEN T IN SHARES FOR THE PERIOD FROM 1 ST APRIL, 2006 TO 31 ST MARCH, 2007 AND FIND THAT THE OPENING BALANCE OF INVESTMENT IS OF RS.2,15,71,080/- AND TH E CLOSING BALANCE OF THE INVESTMENT IS OF RS.1,75,09,080/- AS ON 31.03.2007. IN THIS INVESTMENT ACCOUNT, THE ASSESSEE HAS SHOWN THE SALES OF SHARES TO THE EXTENT OF RS.1,00,62,000/-. THE ASSESSEE HAS ALSO SHOWN PURC HASES OF NEW SHARES TO THE EXTENT OF RS.60,00,000/- DURING THE YEAR UNDER CONSIDERATION. AGAINST THE SALE OF SHARES AMOUNTING TO RS.1,00,62,000/- TH E ASSESSEE RECEIVED THE AMOUNT FROM TIME TO TIME DURING THE YEAR, WHICH WAS CREDITED IN THE 8 ASSESSEES BANK ACCOUNT. THE NAMES OF THE SHARES S OLD ARE MENTIONED AGAINST EACH ITEM OF SALE SHOWN IN THE INVESTMENT A CCOUNT. IN THE BANK ACCOUNT, THE AMOUNT REALIZED BY WAY OF SALES HAS BE EN DEPOSITED. THE ASSESSEE HAS ALSO FILED CONFIRMATION FROM M/S. SHRE E SHYAM AGENCIES PLACED AT PAGES 40 TO 50 OF THE PAPER BOOK WHERE TH E ITEM-WISE SALE OF SHARES AND RESPECTIVE AMOUNT ALONG WITH CHEQUE NO. ARE MENTIONED. NAMES OF THE SHARES SOLD BY THE ASSESSEE TO M/S. SHREE SH YAM AGENCIES ARE MENTIONED IN THE CONFIRMATION LETTER. M/S. SHREE S HYAM AGENCIES HAS GIVEN ITS PERMANENT ACCOUNT NO. AS PAN-AAIPJ8526A. IN TH E LETTER DATED 7.11.2009 FILED BEFORE THE AO, THE ASSESSEE HAS CAT EGORICALLY STATED VIDE ITEM NO.8 THAT THE SHARES DURING THE YEAR UNDER CON SIDERATION WERE SOLD TO SHREE SHYAM AGENCIES, 207-A, MUKUND HOUSE, COMMERCI AL COMPLEX, AZADPUR, DELHI-110 033. HOWEVER, THE AO HAS FAILED TO MAKE ANY ENQUIRY FROM M/S. SHREE SHYAM AGENCIES AS TO WHETHER THE SH ARES WERE ACTUALLY SOLD TO THEM AND THE PAYMENTS WERE MADE BY THEM. THE AO HAS MERELY STATED THAT THE ASSESSEE HAS NOT SUBMITTED THE CONTRACT AG REEMENT OR THE NAME OF THE AGENT TO WHOM THE SHARES WERE SOLD. IT WAS CLARIFIE D BY THE ASSESSEE BEFORE THE AO THAT THE SHARES SOLD WERE UNQUOTED SHARES AN D WERE DIRECTLY SOLD TO M/S. SHREE SHYAM AGENCIES AND QUESTION OF FURNISHIN G CONTRACT NOTE DID NOT ARISE. IN THE LIGHT OF THESE DETAILS FILED BY THE ASSESSEE, WHICH HAS NOT BEEN 9 CONTROVERTED BY THE DEPARTMENT, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF CREDITS IN THE ASSESSEES BANK ACCOUNT AGAINST SALE PROCEEDS OF SHARES SOLD DURING THE YEAR. THUS, THIS GROUND NO.1 RAISED BY THE REVENUE IS REJECTED. 12. GROUND NO.2 IS DIRECTED AGAINST THE CIT(A)S OR DER IN DELETING THE ADDITION OF RS.1,95,000/- MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF NOTIONAL INTEREST ON ADVANCES OF RS.50,00,000/- GIV EN TO M/S. NICKS EXPORT (P) LTD. 13. DURING THE YEAR UNDER CONSIDERATION, IT WAS NOT ICED BY THE AO THAT THE ASSESSEE HAD GIVEN AN AMOUNT OF RS.50,00,000/- ON 4 .12.2006 TO M/S. NICKS EXPORT (P) LTD. THE ASSESSEE CLAIMED THAT THE ADVA NCE WAS GIVEN FOR PURCHASE OF SHOP AT SAKET, WHICH WAS REFUNDABLE SUB JECT TO NEGOTIATION AND FINALIZATION OF CONTRACT. THE ASSESSING OFFICER AS KED THE ASSESSEE TO FURNISH DOCUMENTARY EVIDENCE FOR THE PURPOSE OF ADVANCE GIV EN. HOWEVER, THE ASSESSEE FAILED TO PRODUCE ANY AGREEMENT IN THAT RE GARD. THE AO, THEREFORE, REJECTED THE ASSESSEES CONTENTION THAT THE ADVANCE S WERE GIVEN AGAINST PURCHASE OF SHOP. HE, THEREFORE, TREATED THE AMOUN T TO BE IN THE NATURE OF LOAN AND WORKED OUT THE INTEREST AT RS.1,95,000/- B Y APPLYING THE RATE OF 12% FOR THE PERIOD FROM 4.12.2006 TO THE END OF THE YEAR. THE AO, THEREFORE, MADE THE ADDITION OF RS.1,95,000/- ON TH AT ACCOUNT. 10 14. THE LEARNED CIT(A) DELETED THE ADDITION BY OBSE RVING THAT THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THE AMOUNT GIVEN WAS ACTUALLY A LOAN AND THE ASSESSEE HAD TO RECEIVE ANY INTEREST THEREUPON. THE CIT(A) FURTHER OBSERVED THAT IT WAS THE ASSESSEES CLAIM T HAT HE HAD TAKEN NO LOAN FROM THE BANK OR ANY OTHER PARTY ON WHICH INTEREST WAS PAID SO THAT INTEREST PAID ON LOAN COULD BE DISALLOWED TO THE EXTENT OF T HE AMOUNT UTILIZED FOR NON-BUSINESS PURPOSES. 15. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 16. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 17. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD GIVE N THE SUM OF RS.50,00,000/- TO M/S. NICKS EXPORT (P) LTD. A CON FIRMATION OF ACCOUNT FROM M/S. NICKS EXPORT (P) LTD. WAS FILED WHERE THE CLOSING BALANCE HAS BEEN SHOWN AT RS.50,00,000/- AND NO INTEREST HAS BE EN CREDITED TO THE ASSESSEES ACCOUNT. IT IS ALSO NOT THE CASE, WHERE INTEREST BEARING FUND HAS BEEN UTILIZED FOR NON-BUSINESS PURPOSES SO THAT THE INTEREST PAID ON BORROWED FUND CAN BE DISALLOWED. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THERE WAS AN AGREEMENT BETWEEN THE ASSES SEE AND NICKS EXPORT (P) LTD. TO PAY ANY INTEREST UPON THE ADVANCES GIVE N. THE AO HAS FAILED TO MAKE ANY ENQUIRY FROM M/S. NICKS EXPORT (P) LTD. BE FORE CONCLUDING THAT 11 THE ADVANCES GIVEN BY THE ASSESSEE WERE IN THE NATU RE OF INTEREST BEARING LOAN. WE, THEREFORE, FIND THAT THIS NOTIONAL INCOM E ASSESSED BY THE AO IN THE HANDS OF THE PRESENT ASSESSEE IS NOT CALLED FOR. W E, THEREFORE, HOLD THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 18. GROUND NO.3 IS AGAINST CIT(A)S ORDER IN DELETI NG THE ADDITION OF RS.1,97,000/- ON ACCOUNT OF UNEXPLAINED CASH DEPOSI T IN THE ASSESSEES BANK ACCOUNT. 19. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THERE WAS A CASH DEPOSIT OF RS.1,97,000/- IN THE ASSESSEES B ANK ACCOUNT ON 5.12.2006. THE ASSESSEE DID NOT PRODUCE ANY CASH BOOK DURING T HE ASSESSMENT PROCEEDINGS. THEREFORE, THE SOURCE OF THE CASH DEP OSITED IN THE BANK ACCOUNT REMAINED UNEXPLAINED. THE AO, THEREFORE, MADE ADDI TION OF RS.1,97,000/- IN ASSESSEES HAND. 20. ON APPEAL, THE LEARNED CIT(A) HAS DELETED THE A DDITION HOLDING THAT NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO EXPLAIN TH E MATTER. HOWEVER, HE FURTHER FOUND THAT THE AMOUNT OF RS.1,97,000/- WAS THE SALE PROCEEDS OF INVESTMENT RECEIVED ON 5.12.2006 WHICH WAS VERIFIAB LE FROM THE INVESTMENT ACCOUNT IN SHARES FILED BY THE ASSESSEE. 21. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 12 22. WE HAVE GONE THROUGH THE INVESTMENT ACCOUNT AND FIND THAT TOTAL SHARES SOLD DURING THE YEAR WERE OF RS.1,00,62,000/ - WHICH INCLUDES ALSO AN ITEM OF RS.1,97,000/-. THE SUM OF RS.1,97,000/- HA S BEEN DEPOSITED BY CHEQUE AND NOT BY CASH. HOWEVER, THE AO STATED THA T THE AMOUNT WAS DEPOSITED IN CASH. THE FIGURE OF RS.1,00,62,000/- HAS ALREADY BEEN CONSIDERED IN GROUND NO.1. IT IS, THEREFORE, NOT C LEAR AS TO WHETHER THIS ADDITION OF RS.1,97,000/- MADE BY THE AO IS A PART OF RS.1,00,62,000/- OR SEPARATE ADDITION MADE BY THE AO, WHICH HAS BEEN DE LETED BY THE CIT(A). SINCE IN THIS CASE, NO EXPLANATION WAS CALLED FOR B Y THE AO FROM THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD NO OCCASION TO EXPLAIN THE SAME AND FACTS OF THE CASE FOUND TO BE CONFUSIN G AS STATED ABOVE, WE RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 23. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED TO BE PARTLY ALLOWED FOR A STATISTICAL PURPOSE. 24. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 21 ST APRIL, 2011. SD/- SD/- (G.E. VEERABHADRAPPA) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 21 ST APRIL, 2011. 13 ITA NO.1674/DEL/2010 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.