The ACIT, Mehsana Circle, Mehsana V. M/s. Shaifali Steels Ltd., Kalol

ITA 1704/AHD/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5855 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-09-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA UPMANYU
• Keywords: Bogus Share capital; Unexplained investment; Additional evidence; Notional interest
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1704/AHD/2013 (ASSESSMENT YEAR : 2009-10) ACIT, MEHSANA CIRCLE, MEHSANA A PPELLANT VS. M/S. SHAIFALI STEELS LIMITED, SHAH INDUSTRIAL ESTAE, BLOCK NO. 1563, SOLA KALOL ROAD, SANTEJ, KALOL, PIN-382721 RESPONDENT PAN: AACCS6214R / BY REVENUE : SMT. VASUNDHARA UPMANYU, CIT. D. R. / BY ASSESSEE : NONE /DATE OF HEARING : 01.02.2018 /DATE OF PRONOUNCEMENT : 23.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 A RISES FROM THE CIT(A), GANDHINAGARS ORDER DATED 15.03.2013 IN CASE NO. CI T(A)/GNR/326/2011-12, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES B EHEST. LEARNED CIT. D.R. INFORMS US THAT THE DEPARTMENT HAS SERVED THE RELEV ANT NOTICE OF HEARING. NECESSARY REPORT TO THIS EFFECT IS TAKEN ON RECORD. WE THERE FORE PROCEED EX PARTE AGAINST THE ASSESSEE. ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 2 - 3. THE REVENUES FIRST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REVERSING ASSESSING OFFICERS A CTION MAKING ADDITION OF RS.5,28,94,800/- ON ACCOUNT OF UNEXPLAINED INVESTME NT IN CLOSING STOCK. IT EMERGES FROM THE CIT(A)S ORDER UNDER CHALLENGE THAT HE HAS DISCUSSED THE ENTIRE ISSUE AT LENGTH AS UNDER: 6. THE FIRST GROUND OF APPEAL IS AGAINST ADDITION OF RS. 5,28,94,800/- U/S 69 OF THE IT ACT HOLDING ON THE BASIS OF STOCK STATEMENT SUBMITTED BY THE APPELLANT TO THE BANK- THAT THE ASSESSEE HAS SUPPRESSED THE STOCK. 6.1 THE APPELLANT HAS SUBMITTED THE FOLLOWING ON TH E ISSUE: 'A) IT IS PERTINENT TO NOTE THAT THE APPELLANT WAS UTILIZING BANK FACILITIES BY WAY OF CASH CREDIT LIMIT AS WELL AS TERM LOAN AN D ACCORDINGLY IT WAS REQUIRED TO SUBMIT STOCK STATEMENT ON A MONTHLY BASIS AS PER THE REQUIREMENT OF THE BANK TO ITS BANKERS. THE APPELLA NT IS ENGAGED IN MANUFACTURING CI &. SGI CASTINGS AND ACCORDINGLY IT IS REQUIRED TO PURCHASE DIES, MOULDS, CHILLERS, ETC. ON A REGULAR BASIS BECAUSE OF THE FACT THAT THE SAID DIES, MOULDS AND CHILLERS AR E HAVING A SHORTER LIFE, AND THEREFORE IT HAD TO CONSTANTLY UPGRADE IT /MAINTAIN IT OR PURCHASE IT. HOWEVER, CONSIDERING THE FACT THAT THE CLASSIFICATION OF DIES, MOULDS AND CHILLERS IS TO BE TAKEN AS FIXED A SSETS AND ACCORDINGLY THE COMPANY USED TO REFLECT THE SAID DI ES, MOULDS, CHILLERS, ETC. AS FIXED ASSETS WHICH IS VERY WELL S UPPORTED' BY ENCLOSED BALANCE SHEET AND ENCLOSURES AS AT 31.03.2 009 AS ENCLOSURE-1 AS THESE MOULDS, DIES AND CHILLERS ARE HAVING A SHO RTER LIFE, THE BANK WAS NOT CONSIDERING IT AS A PART OF THE FIXED ASSET S AND AGAINST IT THEY WERE NEVER CONSIDERING ANY LONG TERM LOANS. WH ILE TAKING UP THIS ISSUE WITH THE BANK, IT HAS BEEN TRANSPIRED TH AT THESE DIES, MOULDS, CHILLERS, ETC. CAN BE CONSIDERED AS PART OF THE CURRENT ASSETS FOR THE PURPOSE OF BANK AND ACCORDINGLY THEY HAVE A LLOWED US TO SHOW IN THE STOCK STATEMENT AS PART OF THE CURRENT ASSETS AND GRANTED CC LIMIT AGAINST THESE. THIS PRACTICE WAS BEING FOL LOWED SINCE COMMENCEMENT OF THE BANK LIMIT AND ACCORDINGLY THE APPELLANT USED TO' SHOW THESE ITEMS AS STOCK IN THE BANK STATEMENT WHILE THE SAID ITEMS WERE REFLECTED IN THE GROUPINGS OF THE FIXED ASSETS IN THE BALANCE SHEET. THE TOTAL AMOUNT WORKS OUT TO RS.4.8 3 CRORES. THUS, WE HEREBY ALSO ENCLOSE A STOCK STATEMENT SUBMITTED TO THE BANK AS ON 31.03.2009 AS ENCLOSURE-2 WHICH ALSO REFLECTS THE SAID DIES MOULDS AND CHILLERS AMOUNTING TO RS.4.83 CRORES. THIS CLEA RLY RECONCILES THAT THERE IS NO VARIATION IN THE STATEMENT SUBMITT ED TO THE BANK AND THE BALANCE SHEET AND AUDITED ACCOUNTS OF THE COMPA NY FOR THE YEAR ENDING ON 31.03.2009. THUS, THE DIFFERENCE TO THE E XTENT OF RS.4.83 CRORES IS VERY MUCH RECONCILED AND THIS GROUND OF T HE APPEAL IS ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 3 - REQUIRED TO BE ALLOWED IN FAVOUR OF THE ASSESSEE. T HIS BEING FACTUALLY ESTABLISHED, NO CASH FLOWS ARE BEING SUBMITTED BY T HE APPELLANT. (B) THERE WAS A FURTHER DIFFERENCE OF ABOUT RS.0.46 CRORES IN THE STOCK STATEMENT. THE MAIN REASONS FOR THE SAID DIFFERENCE ARE AS UNDER: I) THE APPELLANT HAD SENT CERTAIN MATERIAL FOR JOB WORK OUTSIDE THE PREMISES. THE TOTAL AMOUNT OF THE SAID MATERIAL WORKS OUT TO RS. 0.46 CRORES . II) THE APPELLANT WAS UNDER THE HONEST IMPRESSION T HAT AS THE MATERIAL WAS SENT FOR THE PURPOSE OF JOB WORK AND T HE WORK IS BEING COMPLETED IT HAS SHOWN THE SAID MATERIAL AT I TS FULL VALUE I.E. TO SAY IT WAS VALUED AT THE FINISHED GOO DS PRICE INSTEAD OF WIP PRICE WHILE SUBMITTING THE -STATEMEN T TO THE BANK. HOWEVER, .CORRESPONDING EXPENDITURE OF THE JO B WORK WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. III) AT THE TIME OF FINALIZING THE ACCOUNTS, WHEN T HE AUDITOR HAD STARTED VALUING THE STOCK STATEMENT IT HAS BEEN FOU ND OUT THAT THE EXPENDITURE OF THE JOB WORK HAS NOT BEEN DEBITE D TO THE PROFIT AND LOSS ACCOUNT AND THEREFORE THE MATERIAL GIVEN ON JOB WORK BASIS SHOULD BE VALUED AT THE RAW MATERIAL COST INSTEAD OF FINISHED GOODS COST. THEREFORE, HE HAD N EITHER DEBITED ANY EXPENDITURE NOR INCREASED THE VALUE OF THE MATERIAL GIVEN FOR JOB WORK BASIS AND TO THAT EXTEN T THERE WAS A DIFFERENCE IN THE STOCK AMOUNT REFLECTED IN T HE BALANCE SHEET VIS-A-VIS THE STOCK AMOUNT REFLECTED IN THE B ANK STATEMENT. THIS BEING THE FACTUAL DIFFERENCE AND ONLY BECAUSE OF NON- AVAILABILITY OF ADEQUATE DETAILS WITH THE LD. AO, T HE ABOVE AMOUNT HAS BEEN ADDED WHILE FINALIZING THE ASSESSMENT PROC EEDINGS FOR THE ASSESSMENT YEAR 2009-10. HOWEVER, FROM THE RECORDS ENCLOSED HEREWITH, IT IS EVIDENTLY CLEAR THAT NO AMOUNT IS R EQUIRED TO BE ADDED AND THE ENTIRE ADDITION MADE BY THE LD. AO REQUIRES TO BE DELETED.' IN RESPONSE TO THE SPECIFIC QUESTIONS RAISED AND DE TAILS ASKED AS DISCUSSED EARLIER IN PARA 5 OF THIS ORDER, THE APPE LLANT FILED THE FOLLOWING FURTHER SUBMISSIONS: 'STOCK AS PER THE BANK STATEMENT AND STOCK AS PER T HE BALANCE SHEET: DETAILS OF FIXED ASSETS AND COMPLETE BREAK-UP OF PL ANT AND MACHINERY AS AT 31.03.2009 IS ENCLOSED AS ENCLOSURE -1 (PAGE NO. 1 TO-8). IT IS PERTINENT TO MENTION THAT DIES A ND MOULDS ARE PART OF THE FIXED ASSETS AS AT 31.03.2009. THE AMOUNT REFLECTED IN THE STOCK STATEMENT SUBMITTED TO THE B ANK IS FORMING IS PART OF THE FIXED ASSETS UNDER THE HEAD OF PLANT, AND MACHINERY TO THE BALANCE SHEET AS AT 31.03.2009 . THUS, DIES, CHILLERS, MOULDS, ETC. ON WHICH THE BANK HAD NOT GIVEN ANY TERM LOAN AND ACCORDINGLY THE BANK HAD ASKED TO REFLECT ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 4 - THE SAID DIES, CHILLERS, MOULDS, ETC. UNDER THE HEA D OF STOCK STATEMENT FOR AVAILING WORKING CAPITAL FACILITIES. THE APPELLANT WOULD ALSO LIKE TO STATE THAT THE VALUE O F THE RAW MATERIAL AS REFLECTED IN THE BANK STATEMENT AND REF LECTED IN THE BALANCE SHEET ARE THE SAME, THE VALUE OF THE FI NISHED GOODS AS REFLECTED IN THE SAID STATEMENT ALSO TALLY S WITH THE BALANCE SHEET. THUS, THERE WAS NO DIFFERENCE IN ANY OTHER AMOUNT BUT THE ADDITIONAL AMOUNT REFLECTED IN THE B ANK STATEMENT IS OF DIES, MOULDS, CHILLERS, ETC. WHICH IS REFLECTED UNDER THE HEADING OF FIXED ASSETS IN THE BALANCE SH EET. THUS, THERE WAS NO DIFFERENCE BETWEEN THE BOOK STOCK AND STOCK SUBMITTED TO THE BANK AND THEREFORE NO AMOUNT IS RE QUIRED TO BE ADDED. 2. VALUE OF STOCK SENT FOR LOB WORK: IT IS THE PRACTICE OF THE COMPANY TO SEND PART OF T HE RAW MATERIAL STOCK/ MACHINERY PARTS FOR JOB WORK OUTSID E THE FACTORY PREMISES TO OTHER PARTIES. THE DETAILS OF I TEMS SENT TO VARIOUS PARTIES DURING 2008-09 AND THE ITEMS WHICH WERE NOT RECEIVED DURING 2008-09 BUT IN THE SUBSEQUENT FINAN CIAL YEAR IS ENCLOSED AS ENCLOSURE-2 (PAGE NO. 9 TO 71). THE PART I OF THE CHALLANS EVIDENCING THE ABOVE ASPECT ARE ALSO E NCLOSED. FROM ALL THE CHALLANS, IT IS ALSO EVIDENT THAT THE GOODS HAVE BEEN RECEIVED IN THE SUBSEQUENT YEAR AND.PART-2 OF THE CHALLAN EVIDENCED THE SAID FACT. MORE SO, ONLY AFTE R RECEIPT OF THE GOODS, THE EXPENDITURE OF JOB WORK WERE DEBI TED TO P & L ACCOUNT AND ACCORDINGLY IN THE BALANCE SHEET, T HE SAID GOODS WERE VALUED AT COST PRICE. HOWEVER, AT THE TI ME OF SUBMITTING THE DATA TO THE BANK THE PREPARER OF THE STOCK STATEMENT UNDERSTOOD THAT THE SAID STOCK IS TO BE V ALUED AT FINISHED GOODS PRICE CONSIDERING THAT THE EXPENDITU RE ON THE MATERIAL HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUN T. THUS, THERE WAS A DIFFERENCE BETWEEN THE STOCK STATEMENT SUBMITTED TO BANK AND STOCK AS PER THE BALANCE SHEET BECAUSE VALUATION OF MATERIAL SENT FOR JOB WORK WAS VALUED AT RAW MAT ERIAL COST IN THE BALANCE SHEET BUT THE SAME WAS VALUED AT FIN ISHED GOODS PRICE IN THE STOCK STATEMENT. AS THE ADDITION WAS ON ACCOUNT OF NOT UNDERSTANDING THE FACTUAL POSITION, THE SAID DIFFERENCE IS REQUIRED TO BE DELETED.' 6.2 THE AO HAS SUBMITTED THE FOLLOWING IN HIS R EPORT: 'AO'S COMMENTS: THE PLEA OF TAKEN BY THE ASSESSEE IS FACTUALLY NOT CORRECT. THOUGH THE VALUE OF RAW MATERIAL AS PER BALANCE SHEET IS EQUAL TO THE STOCK STATEMENT FURNISHED TO THE BANK, THERE EXISTS A VARIATION OF VALUATION OF WIP AS SUBMITTED TO THE BANK AND AS APPEARING IN THE BALAN CE SHEET. THE VALUATION OF WIP AS PER BALANCE SHEET IS SHOWN AT RS. 18,95,5 3,803/- WHERE AS VALUATION SUBMITTED TO BANK IS SHOWN AT RS.24,24,48 ,603/-. FURTHER, THE ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 5 - CONTENTION OF THE ASSESSEE THAT THE INVENTORY SUBMI TTED TO THE BANK ALSO INCLUDED THE DIES, MOULDS ETC. WHICH HAS BEEN SHOWN UNDER THE HEAD FIXED ASSET IS NOT FOUND TO BE ACCEPTABLE. AS PER THE STA TEMENT PLACED BEFORE THE BANK THE RATE OF CHILLERS, DIES, BOTTOM BOX ETC. HA VE BEEN SHOWN AT RS. 50 PER PIECE, ONLY WHICH AGAIN IS NOT BELIEVABLE, SINC E, MOULD, DIES USED IN SUCH INDUSTRY ARE QUITE COSTLY. FURTHER, SUCH ITEMS CAN BE CONSIDERED TO BE SPARES AND STORES AND NOT PART OF PLANT & MACHINERY OF THE ASSESSEE. FURTHER, IN THE ABSENCE OF ANY DETAILED DESCRIPTION OF PLANT & MACHINERY AS REPORTED IN AUDIT REPORT IT IS ALSO NOT VERIFIABLE AS TO WHETHER THE DIES, MOULDS, CHILLERS HAVE BEEN SHOWN AS PART OF THE FIX ED ASSET AS CLAIMED BY THE ASSESSEE. THEREFORE, THE ARGUMENT OF THE ASSESS EE THAT THESE ITEMS ARE REFLECTED AS A PART OF PLANT & MACHINERIES IS ALSO NOT FOUND TO BE SATISFACTORY AND ACCEPTABLE. IN VIEW OF THE ABOVE, THE ASSESSEE PLEA THAT THE AD DITIONAL AMOUNT REFLECTED IN THE STATEMENT OF BANK IS OF DIES, CHIL LERS ETC ARE NOT SUSTAINABLE. (B) VALUE OF STOCK SENT FOR JOB WORK: AO'S COMMENTS: IT IS TO MENTION HERE THAT THE REASON GIVEN BY THE ASSESSEE FOR ENHANCED VALUATION STOCK SENT FOR JOB W ORK SEEMS UNACCEPTABLE. AS PER THE STATEMENT SUBMITTED TO THE BANK, THE MATERI AL SENT FOR. JOB WORK HAS BEEN SHOWN UNDER THE HEAD WORK IN PROCESS, AND .THE WORK IN PROCESS CANNOT BE VALUED AT THE MARKET PRICE OR THE-.COST O F FINISHED GOODS. HENCE, IT APPEARS THAT THE ASSESSEE HAD JUST MADE AN IN VA IN EFFORT TO ESTABLISH THE CORRECTNESS OF THIS STOCK BY TAKING THE PLEA THAT T HE STOCK SENT FOR JOB WORK HAS BEEN VALUED AS FINISHED- GOODS. FURTHER THE ASS ESSEE COULD PRODUCE NOTHING TO SHOW THAT SUCH STOCK HAS BEEN VALUED AT HIGHER RATE IN THE STATEMENT SUBMITTED BEFORE THE BANK. IN VIEW OF THE ABOVE, THE ARGUMENT OF THE ASSESSEE SEEMS UNACCEPTABLE AND NOT SUSTAINABLE.' 6.3 THE APPELLANT'S SUBMISSION IN ITS REJOINDER TO THE REMAND REPORT ARE SUMMED UP AS FOLLOWS: THE AO HAS ACCEPTED THAT THE VALUE OF THE RAW MAT ERIAL AND FINISHED GOODS SUBMITTED BY THE ASSESSEE AS CORRECT. THUS, T HE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE STATEME NT GIVEN TO THE BANK IS MORE OR LESS IN LINE WITH THE FACTUAL ASPEC T THE AO HAS NOT CARED TO VERIFY THE COST OF DI ES, CHILLERS, MOULDS, ETC, WHICH ALSO TAILYS WITH THE AMOUNT REFLECTED IN THE BALANCE SHEET. THUS, THE AO HAS ONLY GIVEN A STATEMENT THAT THE DE TAILS OF DESCRIPTION OF PLANT AND MACHINERY ARE NOT REPORTED IN THE AUDIT REPORT AND HENCE IT CANNOT BE VERIFIED.'IT IS PERTI NENT TO MENTION THAT THE AO WOULD HAVE CHECKED THE AUDIT REPORT ALONG WI TH THE DETAILS SUBMITTED BY THE ASSESSEE AS PART OF THE ADDITIONAL EVIDENCE, THE PLANT AND MACHINERY AMOUNT IS FULLY TALLIED WHICH I NCLUDES DIES, TOOLS, CHILLERS, ETC. WHICH HAS BEEN TAKEN AS A PAR T OF THE WIP STOCK ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 6 - IN THE STATEMENT TO BANK. MORE SO, THE AO HAS NEVER DISPUTED THAT THE CHILLERS, DIES, ETC. ARE PART OF PLANT AND MACH INERY. THE RATE OF DIES, TOOLS, CHILLERS, ETC., GIVEN TO THE BANK HAS BEEN MISUNDERSTOOD TO BE PER PIECE WHEREAS THE QUANTITIE S AND RATES HAVE BEEN GIVEN WITH REFERENCE TO KILOGRAMS. THE COST TO THE APPELLANT AVERAGES AROUND RS.50/- KG ONLY. ON THE EXPLANATION ON VALUE OF STOCK SENT FOR FOB WORK; THE APPELLANT HAS SUBMITTED THAT THE AO HAS NOT ACCEPTED THE ARGU MENT OF THE ASSESSEE ONLY BY STATING THAT THE ASSESSEE MADE AN IN VAIN EFFORT TO ESTABLISH THE CORRECTNESS OF THE STOCK. HOWEVER, TH E LD. AO HAS NOT MADE ANY EFFORTS TO VERIFY THAT THE ASSESSEE HAD NE ITHER DEBITED THE EXPENDITURE OF THE JOB WORK CHARGES TO ITS PROFIT A ND LOSS ACCOUNT AND ACCORDINGLY THE WIP STOCK SHOULD HAVE BEEN VALU ED AT WIP PRICE INSTEAD OF FINISHED GOODS PRICE. 6.4 I HAVE CAREFULLY CONSIDERED THE FACTS, THE STOC K STATEMENT GIVEN TO BANK, THE AUDITED BALANCE SHEET, THE EXPLANATIONS AND SUBMIS SIONS OF THE APPELLANT AND THE REMAND REPORT. AS FAR AS THE ISSUE OF INCLUSION OF DIES, CHILLERS, MOULDS, ETC., IN THE WORK-IN-PROGRESS IN THE STOCK STATEMENT GIVEN TO TH E BANK IS CONCERNED; THE FOLLOWING PERTINENT OBSERVATIONS ARE MADE: I) THAT DIES, CHILLERS, MOULDS, ETC., VALUED AT RS.4,82,94,800/- HAVE BEEN INCLUDED IN THE WIP GIVEN TO THE BANK . THIS IS BORNE OUT FROM THE VERY STATEMENT AND ITS ANNEXURE, ON THE BASIS O F WHICH THE AO HAS MADE THE ADDITION. II) IT IS NOT ANYBODY'S CASE THAT DIES, CHILLERS, M OULDS, ETC., ARE NOT REQUIRED BY THE APPELLANT AND ALSO THAT THESE ARE N OT SHOWN IN THE BOOKS OF ACCOUNT. IT IS ALSO NOT DISPUTED THAT THES E ARE SHOWN AS PART OF PLANT & MACHINERY IN THE BALANCE SHEET OF THE AP PELLANT. III) THE APPELLANT HAS GIVEN COMPLETE LIST OF PLANT & MACHINERY WITH THE WRITTEN DOWN VALUE WHICH MATCHES WITH THE FIGURE SH OWN IN THE BALANCE SHEET. THIS LIST WHICH WAS FORWARDED TO THE AO INCLUDED DIES, CHILLERS, MOULDS ETC., WHOSE WRITTEN DOWN VAL UE IS RS.4.83 CRORE. THIS EXACTLY MATCHES WITH THE FIGURE INCLUDED IN WO RK-IN- PROGRESS FOR THE SAME ITEMS IN THE STATEMENT GIVEN TO THE BANK. THE EXPLANATION AS TO THE RATE BEING PER KG IN THE STAT EMENT GIVEN TO BANK ALSO IS REASONABLE BECAUSE THAT IS A SUMMARY S TATEMENT AND VALUES AND. QUANTITIES WERE REQUIRED TO BE GIVEN IN THE PROFORMA PROVIDED. EVEN OTHERWISE, THE BANK AS ACCEPTED IT A ND THE AO HIMSELF IS RELYING ON IT TO MAKE THE ADDITION. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, IF THE BANK HAS ACCEPTED DIES, CHILLERS, MOULDS ETC. CLEARLY SHOWN AS SUCH I N THE STATEMENT TO THE BANK, AS PART OF WORK-IN-PROGRESS TO ASCERTAIN ITS CREDITWOR THINESS; IT DOES NOT MAKE THEM UNEXPLAINED INVESTMENT JUST BECAUSE IN THE BOOKS OF ACCOUNT THESE HAVE BEEN RIGHTLY INCLUDED IN THE PLANT & MACHINERY. THE ADDITION WOU LD HAVE BEEN JUSTIFIED IF THESE MOULDS, DIES ETC., WERE NOT SHOWN IN THE BOOKS AT A LL. WHEN EVEN THE VALUE OF THESE ON 31/3/2009, AS GIVEN TO THE BANK MATCHES EXACTLY WITH THE VALUE SHOWN IN THE BOOKS THOUGH INCLUDED IN THE PLANT & MACHINERY; NO ADDITION CAN BE JUSTIFIED HOLDING THE INVESTMENT TO BE UNEXPLAINED. ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 7 - THE SECOND PART OF THE EXPLANATION IS THAT THE COST OF JOB WORK DONE BY THIRD PARTIES ON MATERIAL SENT TO THEM HAS BEEN INCLUDED IN THE STATEMENT OF WORK-IN- PROGRESS GIVEN TO THE BANK. THE APPELLANT HAS CLAIM ED THAT WHILE PREPARING THE FINAL BALANCE SHEET, ONLY THOSE EXPENSES WHICH WERE DEBITED IN THE BOOKS OF ACCOUNTS BEFORE 31ST MARCH, 2009 WERE INCLUDED WHIL E VALUING THE WORK-IN- PROGRESS IN THE BALANCE SHEET. THE APPROACH ADOPTED BY THE APPELLANT, FOR VALUING THE WORK-IN-PROGRESS IN THE FINAL ACCOUNTS IS THE C ORRECT APPROACH AS PER THE PRINCIPLES OF ACCOUNTANCY. THE MISTAKE CLAIMED OF I NCLUDING THE COST OF JOB WORK DONE BUT BILLS NOT RECEIVED IN THE STATEMENT OF WOR K-IN-PROGRESS GIVEN TO THE BANK IS ALSO SUPPORTED BY THE EVIDENCES OF GOODS SENT WHICH WERE LYING WITH THESE PARTIES AS ON 31/3/2009, SUBMITTED BY THE ASSESSEE IN THE F ORM OF CHALLANS EVIDENCING THE GOODS SENT AND DETAILS OF BILLS RAISED BY THEM SUBS EQUENTLY. ALL THE EVIDENCES WERE ALSO FORWARDED TO THE AO. NO DISCREPANCY HAS BEEN F OUND IN THE CLAIM MADE BY THE APPELLANT. THE MISTAKE CLAIMED IS NOT ONLY A PLAUSI BLE EXPLANATION BUT IS ALSO SUPPORTED BY THE EVIDENCES SUBMITTED BY THE ASSESSE E. THE EXPLANATION IS THEREFORE ACCEPTED IN THIS RESPECT ALSO. 4. WE HAVE HEARD LEARNED CIT.D.R. VEHEMENTLY REITER ATING REVENUES GRIEVANCE IN SEEKING TO REVIVE THE IMPUGNED ADDITIO N. WE MAKE IT CLEAR THAT THE REVENUE ITSELF IS FAIR ENOUGH IN FILING A PAPER BOO K COMPRISING OF 49 PAGES INCLUDING VARIOUS NOTICES AS WELL AS STOCK STATEMEN T AND THREE REMAND REPORTS DATED 01.02.2013, 07.03.2013 AND 14.03.2013; RESPECTIVELY . LEARNED DEPARTMENTAL REPRESENTATIVE FAILED TO REBUT THE CIT(A)S CLINCHI NG FINDINGS EXTRACTED HEREINABOVE THAT ASSESSEE HAD INCLUDED THE RELEVANT ITEMS OF RS .4,82,94,800/- GIVEN TO THE BANK, THEY HAD ALREADY BEEN SHOWN IN ITS BOOKS OF ACCOUNT S, THE COMPLETE LIST OF PLANT AND MACHINERY REPORT ALONGWITH THE WRITTEN DOWN VALUE T ALLIES WITH THE CORRESPONDING ITEMS IN THE BALANCE SHEET AND THE COST OF JOB WORK DONE BY THIRD PARTIES ON MATERIAL SENT TO THEM HAS BEEN INCLUDED IN THE STATEMENT OF WORK-IN-PROGRESS GIVEN TO THE BANK. WE MAKE IT CLEAR THAT ALL THESE CLINCHING AS PECTS HAVE GONE UNREBUTTED FROM THE REVENUE SIDE. WE HOLD IN THIS BACKDROP OF FACT S WHEN THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.5,28,94,800/- MADE BY TH E ASSESSING OFFICER IN ASSESSMENT ORDER DATED 30.12.2011. THIS FIRST SUBS TANTIVE GROUND IS ACCORDINGLY DECLINED. 5. REVENUES SECOND SUBSTANTIVE GRIEVANCE SEEKS TO RESTORE THIS SECTION 68 ADDITION OF RS.79LACS IN THE NATURE OF UNEXPLAINED SHARE CAPITAL. THE CIT(A)S DETAILED DISCUSSION QUA THIS ISSUE READS AS UNDER: ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 8 - 7. THE NEXT GROUND OF APPEAL IS AGAINST OF AN AMOU NT OF RS. 79,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED INCREASE IN THE PAID UP CAPITAL BY THE APPELLANT AS NO EVIDENCES WERE SUBMITTED TO THE LD. AO DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS. 7.1 THE APPELLANT HAS FILED LEDGER ACCOUNT OF SHARE APPLICATION MONEY AND SHARE ALLOTMENT AND ALSO CONFIRMATIONS FROM SHRI VI PULKUMAR MAHENDRABHAI SHAH, PROP. MAHAVIR ENTERPRISE AND INDRA ENTERPRISES, WHO HAVE BEEN ALLOTTED SHARES DURING THE YEAR, ALONG WITH THEIR COPIES OF RETURNS ; AND THESE WERE FORWARDED TO THE AO FOR HIS EXAMINATION AND COMMENTS. THE FINAL REPO RT WHICH HAS BEEN RECEIVED ON THIS ISSUE IS AS UNDER: (A) SHARES ALLOTTED TO MAHAVIR ENTERPRISE. IN CONTINUATION OF MY EARLIER R EPLY DATED 07.03.2013 YOUR GOOD SELF HAD SOUGHT FOR FURTHER REPORT IN THE MATTER AS THE ASSESSES HAD FURNISHED A CLARIFLCATORY LETTER FROM MAHAVIR ENTERPRISE. ON GO ING THROUGH THE REFERRED LETTER IT H SEEN MAT MAHAVIR ENTERPRISE HAS CONFIRM ED THAT IF HAD APPLIED AND WAS ALLOTTED SHARES OF RS. 1,50,00,0007- FROM S HAIFALI STEEL LTD. SINCE, THE LETTER IS SELF EXPLANATORY AND CONSIDERING THE DETAILS FILED BEFORE YOUR HONOUR THE EXPLANATION OFFERED BY THE ASSESSEE SEEM S ACCEPTABLE. THEREFORE, THE MATTER MAY BE DECIDED ON MERITS. (B) SHARES ALLOTTED TO INDRA ENTERPRISE. ON THIS ISSUE, THE ASSESSEE HAD SUBMITTED A CONFIRM ATORY LETTER FROM INDRA ENTERPRISE STATING THAT THE FIRM HAD APPLIED AND ALLOTTED SHARE OF SHAIFALI STEEL LTD. HOWEVER, IT HAS NOT BEEN CLARIF IED AS TO DURING WHICH FINANCIAL YEAR, THE APPLICATION WAS MADE AND SHARES WERE ALLOTTED. FURTHER, THE ASSESSEE HAD PRODUCED ONLY A COPY OF R ECEIPT OF RETURN OF INCOME FILED BY INDRA ENTERPRISE. HOWEVER THE ISSUE MAY KINDLY BE DECIDED ON MERITS KEEPING IN VIEW THE DECISION OF HON'BLE S UPREME COURT IN THE CASE OF LOVELY EXPORTS.' 7.2 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE ACCOUNTS OF SHARE APPLICATION MONEY AND SHARE ALLOTMENT, OTHER EVIDENCES AND THE REPORT OF THE AO. THE FOLLOWING PERTINENT OBSERVATIONS ARE MADE ON THE IS SUE: I) THE ONLY NEW SHARE APPLICATION -MONEY, I.E. RS.7 9 LAC DURING THE HAS BEEN RECEIVED FROM SHRI VIPULKUMAR MAHENDRABHAI SHAH, P ROP. MAHAVIR ENTERPRISE. THE TOTAL SHARE APPLICATION MONEY IN HIS NAME, INCL UDING OPENING BALANCE BECAME RS.1,50,00,000/-. HE HAS BEEN ALLOTTED SHARES OF TH E SAME SUM. -THE RETURN OF SHRI VIPULKUMAR MAHENDRABHAI SHAH, PROP, MAHAVIR ENTERPR ISE HAS BEEN FILED TO PROVE THE CREDITWORTHINESS. THERE IS TOTAL RS.1,90,80,000 /- SHOWN AS SHARE APPLICATION MONEY IN HIS ASSETS AS PER HIS ACCOUNTS. HE HAS CER TIFIED THAT THE AMOUNT ADVANCED TO THE APPELLANT IS LYING IN SHARE APPLICATION MONE Y AS SHARES WERE NOT RECEIVED BY HIM. CLEARLY, IDENTITY AND THE CREDITWORTHINESS OF THE PERSON WHO HAS-APPLIED FOR SHARES AND IS CLAIMED TO HAVE DEPOSITED APPLICATION MONEY IS PROVED. THEREFORE, NO ADDITION IS NO LONGER JUSTIFIED ON THIS BASIS. IT IS TO BE NOTED THAT AS FAR AS THE OTHER SHARES A LLOTTED DURING THE YEAR ARE CONCERNED, THESE WERE RS.1.5 CRORE TO INDRA ENTERPR ISES WHOSE CONFIRMATION AS ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 9 - WELL AS COPY OF RETURN HAS BEEN SUBMITTED. OTHERW ISE ALSO THE SHARE APPLICATION MONEY IN THIS CASE IS THE OPENING BALANCE OF THE YE AR AND THEREFORE, NO ADDITION U/S 68 CAN BE MADE IN THIS YEAR. IN VIEW OF THE ABOVE, THE ADDITION MADE IS DIRECTED TO BE DELETED. 8. NEXT GROUND OF APPEAL IS AGAINST ADDITIONS OF UN EXPLAINED CREDITS U/S68. 8.1 THE APPELLANT HAS SUBMITTED THE FOLLOWING O N THE ISSUE: 'THE THIRD GROUND OF APPEAL WAS ADDITION MADE BY TH E LD, AO ON ACCOUNT OF NON-SUBMISSION OF DETAILS FOR INCREASE IN THE UNSEC URED LOAN DURING THE FINANCIAL YEAR IN QUESTION. DURING THE FINANCIAL YE AR, THE AMOUNT HAS BEEN RAISED FROM THE FOLLOWING PARTIES: 1. BLEECHEM : RS; 50,00,000/- 2. SANGITA SHAH : RS. 1,00,000/- 3. JAGDISHBHAI : RS.97,417/- IT IS PERTINENT TO MENTION THAT MS. SANGITA SHAH, I S A DIRECTOR OF THE COMPANY, AND COPY OF HER INCOME TAX RETURN PROVING HER CREDITWORTHINESS IS ENCLOSED AS ENCLOSURE 4 . AS REGARDS BLEECHEM, IT IS TO BE STATED 'THAT THE S AID FIRM HAS GIVEN ITS CONFIRMATION ENCLOSED AS ENCLOSURE 5 , SHOWING DEARLY THE GENUINENESS OF THE TRANSACTION. THUS, WE HAVE PROVIDED DETAILS ABO UT THE UNSECURED LOAN INCREASE. THEREFORE, THIS ADDITION IS REQUIRED TO B E DELETED. 8.2 THE EVIDENCES WERE FORWARDED TO THE AO AS DISCU SSED EARLIER AND HIS COMMENTS ON THE ISSUE ARE AS UNDER: 'THE LOANS FROM FOLLOWING -PERSONS WERE TREATED AS UNEXPLAINED DURING THE ASSESSMENTS PROCEEDINGS: 1. BLEECH CHEM RS. 5,00,000/- 2. SANGITASHAH RS. 1,00,000/- 3. JADGISHBHAI RS. 97,417/- NOW THE ASSESSEE HAD FURNISHED THE COPY OF R/I OF S ANGITA SHAH AND A COPY OF A/C BLEACHCHEM. SO FAR AS THE LOAN FROM SANGITA SHAH IS CONCERNED, THE ASSESSEE HAD FURNISHED A COPY OF HER R/I FOR A.Y. 2009-10. A S SUCH THE EXPLANATION OFFERED BY THE ASSESSEE SEEMS ACCEPTABLE SO FAR AS THE CONF IRMATION OF LOAN IS CONCERNED. HOWEVER, IN RESPECT OF LOAN FROM BLEACH CHEM, ON VE RIFICATION OF COPY OF A/C FURNISHED BY THE ASSESSEE, IT IS SEEN THAT THE ACCO UNT OF BLEACH CHEM SHOWS AN OUTSTANDING BALANCE OF RS. 10 LAKHS. AS SUCH, THE F RESH LOAN OF RS. 5 LAKHS AS MENTIONED IN THE ASSESSMENT IS NOT CORRECTLY VERIFI ABLE FROM THE COPY OF ACCOUNT FURNISHED BY THE ASSESSEE. FURTHER, CONFIRMATION, C OPY OF R/L IN RESPECT OF BLEACH CHEM HAS ALSO NOT BEEN FURNISHED. UNDER THE CIRCUMS TANCES, THE ASSESSEE'S PLEA THAT THE LOAN STANDS EXPLAINED IS NOT ACCEPTABLE. ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 10 - IN RESPECT OF UNEXPLAINED LOAN FROM M/S JAGDISH J. PATEL, NO PAPER/DOCUMENTS HAS BEEN FURNISHED BY THE ASSESSEE TO ESTABLISH THE GENUINENESS'S OF THE DEPOSIT. IN VIEW OF THE ABOVE, THE CONTENTION OF THE ASSESSE E SEEMS UNACCEPTABLE AND NOT SUSTAINABLE IN RESPECT OF LOANS OBTAINED FROM T HESE TWO PERSONS.' 8.3 I HAVE GONE THROUGH THE FACTS OF THE CASE AND T HE REMAND REPORT. AS FAR AS THE CREDIT IN THE NAME OF SANGITA SHAH IS CONCERNED , SHE IS REGULARLY FILING RETURN WHOSE COPY ALSO HAS BEEN SUBMITTED AND IS A DIRECTO R OF-THE APPELLANT COMPANY. THE AO IN HIS REMAND REPORT HAS ALSO COMMENTED THAT THE EXPLANATION IN HER REGARD SEEMS ACCEPTABLE. IN THESE CIRCUMSTANCES, TH E ADDITION OF RS.1,00,000/- BASED ON CREDIT IN HER NAME IS DIRECTED TO BE DELET ED. AS FAR AS THE ADDITION OF RS.5 LAC FOR INCREASE IN CREDIT IN CASE OF BLEACHCHEM IS CONCERNED, CONFIRMATION WITH PAN HAS BEEN FILED. THE COPY OF ACCOUNT SHOWS THAT THERE WAS AN OPENING CREDIT BALA NCE OF RS.45 LAC. THE WHOLE AMOUNT WAS RETURNED BACK BY CHEQUES AND THEN NEW CR EDITS HAS BEEN TAKEN AGAIN BY CHEQUES. THE CREDITOR IS A REGULAR ASSESSEE AND WHEN THE ENTIRE TRANSACTIONS ARE THROUGH BANKING CHANNELS AND NO EVIDENCE AGAINST TH E GENUINENESS HAS BEEN BROUGHT ON RECORD; THE ADDITION IS NOT JUSTIFIED AN D IS DIRECTED TO BE DELETED. THE LAST CREDIT WITH RESPECT TO WHICH THE ADDITION HAS BEEN MADE IS IN THE NAME OF SHRI JAGDISHBHAI J. PATEL-RS.97,4117/-. NO CONFIRMATION OR PROOF OF IDENTITY HAS BEEN SUBMITTED EVEN IN THE APPELLATE P ROCEEDINGS. THE ADDITION OF RS.97,417/- IS THEREFORE, CONFIRMED. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RE VENUES DETAILED ARGUMENT. LEARNED CIT.D.R. VEHEMENTLY REITERATES REVENUES PL EADINGS IN ITS SECOND AND THIRD SUBSTANTIVE GROUND THAT THE LOWER APPELLATE AUTHORI TY HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ABOVE UNEXPLAINED SHARE CAPIT AL ADDITION OF RS.79LACS IN PARTLY RESTRICTING SIMILAR LATTER ADDITION OF RS.6,97,717/ - TO RS.97,717/-; RESPECTIVELY. THERE IS NO DISPUTE THAT THE ASSESSEE HAD FILED NEC ESSARY CONFIRMATIONS AND DETAILS OF M/S. MAHAVIR ENTERPRISE AND INDRA ENTERPRISES IN QU ESTION QUA THE FORMER ISSUE. THIS IS NOT THE REVENUES CASE AS PER THE ASSESSING OFFICERS REMAND REPORT THAT THE WE HAD SOUGHT FOR FURTHER DETAILS FROM THE TAX PAYE R WHICH HE FAILED TO PRODUCE. IT HAS RATHER COME ON RECORD THAT THE ASSESSEE HAS FIL ED ALL THE BASIC INGREDIENTS OF IDENTITY, GENUINENESS AND CREDITWORTHINESS OF BOTH M/S. MAHAVIR ENTERPRISE AND INDRA ENTERPRISES. THE LATTER ADDITION AMOUNT OF R S.1.5CRORE HAS NOT EVEN BEEN RECEIVED IN THE IMPUGNED ASSESSMENT YEAR. THE SAME APPEARS TO BE THE CASE REGARDING M/S. BLEECH CHEM AND SANGITA SHAH. THE C IT(A) OBSERVES IN PARA 8.3 ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 11 - THAT MS. SHAHS AMOUNT OF RS.1LAKH HAS BEEN FOUND T O BE IN ORDER AS PER THE ABOVE REMAND REPORT. HE THEREAFTER CONCLUDES THAT THE AS SESSEE HAS FILED ALL CONFIRMATIONS AND PAN DETAILS OF RS.5LACS PERTAINING TO M/S. BLEE CH CHEM INDICATING THIS PARTY TO BE A REGULAR ASSESSEE TAKING RECOURSE OF BANKING CH ANNEL WITHOUT POINTING ANY DOUBT ON GENUINENESS ISSUE. THERE IS NO MATERIAL ON RECO RD AT REVENUES BEHEST TO CONTROVERT ALL THESE FINDINGS OF FACT. WE THUS AFF IRM THE CIT(A)S ACTION DELETING THE IMPUGNED ADDITION OF QUA THIS INSTANT ISSUE AS WELL. 7. REVENUES THIRD SUBSTANTIVE GRIEVANCE SEEKS TO R EVIVE ASSESSING OFFICERS ACTION DISALLOWING/ADDING AMOUNT OF RS.60,62,940/- ON ACCOUNT OF INTEREST PAYMENT AS DELETED THE LOWER APPELLATE PROCEEDINGS WITH THE FOLLOWING DETAILED DISCUSSIONS: 10. THE NEXT GROUND OF APPEAL IS AGAINST DISALLOWA NCE OF INTEREST EXPENDITURE, HOLDING THAT THE LOANS TAKEN FOR WHICH INTEREST HAS BEEN PAID, HAS BEEN DIVERTED TO ADVANCES FOR NON-BUSINESS PURPOSES. 10.1 THE APPELLANT HAS SUBMITTED THE FOLLOWING ON T HE ISSUE: INTEREST EXPENSES: THE AO HAS DISALLOWED INTEREST OF RS.60,62,908/- CO NSIDERING THAT LOANS AND ADVANCES OF RS.5,05,24,213/- WERE GIVEN INTERES T FREE AND ACCORDINGLY NOTIONAL INTEREST @ 12% P.A. AMOUNTING TO RS.60,62, 908/- WAS DISALLOWED. IN THIS CONNECTION, THE APPELLANT WOULD LIKE TO SUB MIT THE FOLLOWING: 1. BROAD BREAK-UP OF LOANS AND ADVANCE AND THE NATU RE OF ADVANCES IS GIVEN AT ANNEXURE-1. FROM THE SAID BREAKUP IT IS CL EARLY SEEN THAT AN AMOUNT OF RS.22.34 LACS WAS GIVEN AS CENVAT/EXCISE DUTY RECEIVABLES WHICH IS NOTHING BUT DEPOSIT AMOUNT REQ UIRED TO BE KEPT WITH THE EXCISE DEPARTMENT FOR CLEARANCE OF GOODS W HICH IS INDISPENSABLE FOR BUSINESS PURPOSES. 2. VAT/GST AMOUNT OF RS.90.45 LACS IS AGAIN LYING W ITH THE GOVERNMENT DEPARTMENT. 3. RS.2.17 LACS TOWARDS SALES TAX RECEIVABLES IS AL SO AGAIN LYING WITH THE GOVERNMENT DEPARTMENT WHICH HAS BEEN RECEIVED D URING THE SUBSEQUENT YEAR. 4. AMOUNT OF RS.302.84 LACS GIVEN TO VARIOUS PARTIE S AS ADVANCES SPECIFICALLY FOR THE PURPOSE OF PURCHASE OF GOODS O R FOR JOB WORK OR AGAINST CONSULTANCY WHICH WERE INDISPENSABLE BECAUS E OF THE FACT THAT IF THE SAID KIND OF MONEYS ARE NOT GIVEN IT MA Y ENTAIL IN PRICE FLUCTUATION RESULTING IN FURTHER LOSSES TO THE COMP ANY OR NON- AVAILABILITY OF SERVICES FROM CONSULTANTS WHICH SHA LL IMPAIR THE BUSINESS ACTIVITY AND THEREFORE CHARGING ANY INTERE ST ON SUCH TYPE OF TRANSACTION DOES NOT ARISE. ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 12 - 5. ADVANCES TO STAFF OR RS.12.14 LACS IS ALSO REQUI RED FOR THE PURPOSE OF CONTINUATION OF BUSINESS AND UNLESS THE STAFF HAS N OT BEEN GIVEN PROPER ADVANCES NO WORK CAN BE CONTINUED. THEREFORE LOANS AND ADVANCES GIVEN BY THE APPELLANT IS WITHIN THE BUSINESS EXIGENCY AND THEREFORE QUESTION OF CHARGIN G, ANY INTEREST ON THE SAID DEPOSITS/LOANS AND ADVANCES DOES NOT AR ISE AND ACCORDINGLY NO AMOUNT OF INTEREST-IS REQUIRED TO BE DISALLOWED.' 10.2 THE AO HAS COMMENTED ON THE ISSUE AS FOLLOWING : 'DISALLOWANCE OF INTEREST EXPENSES IN THIS REGARD IT IS SUBMITTED THAT DURING THE ASSE SSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS IN RES PECT OF INTEREST EXPENSE OF RS.60,62,908/-. IN RESPONSE TO THE SHOW CAUSE THE A SSESSEE ONLY STATED THAT LOANS AND ADVANCE WERE GIVEN AS PER BUSINESS PRACTI CE. SINCE, THE ASSESS HAD FAILED TO PROVE BUSINESS PURPOSE OF ADVANCES GI VE. THEREFORE, CLAIM OF INTEREST -.EXPENSE, TO THE EXTENT OF INTEREST INCOM E FORGONE ON ABOVE ADVANCE, CANNOT BE ALLOWED AS BUSINESS EXPENSE. THU S THE AO HAD RIGHTLY MADE THE INTEREST INCOME NOT OFFERED BY THE ASSESSE E FOR A.Y. 2009-10 ON LOAN AND ADVANCE.' 10.3 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT AND THE REMAND REPORT. THE APPELLANT HAD NOT SUBMITTED SPECIFIC DETAILS DURING THE ASSESSMENT PROCEEDINGS AND THEREFORE THE ADDITION W AS JUSTIFIED AT THAT STAGE. THE AO HAS ALSO IN HIS REMAND REPORT, ONLY JUSTIFIED TH E DISALLOWANCE AS THE APPELLANT HAD NOT SUBMITTED SPECIFIC DETAILS DURING THE ASSES SMENT PROCEEDINGS. HOWEVER, IN THE APPELLATE PROCEEDINGS, THE APPELLANT HAS GIVEN THE DETAILS OF THE ADVANCES OUTSTANDING. IT HAS SHOWN HOW THESE PERTAIN TO TAXE S LYING WITH THE GOVERNMENT, CENVAT/EXCISE DUTY RECEIVABLE, ADVANCES FOR PURCHAS ES, ADVANCES TO EMPLOYEES ETC. THERE- IS NO JUSTIFICATION NOW REMAINING FOR H OLDING THAT THE INTEREST WAS NOT FOR BUSINESS PURPOSES (EXCEPT FOR DISALLOWANCE REQU IRED AS PER SECTION 14A AS DISCUSSED AND DECIDED EARLIER). THE DISALLOWANCE MA DE IS THEREFORE DIRECTED TO BE DELETED. 8. IT HAS COME ON RECORD THAT THE AMOUNTS IN QUESTI ON PERTAINS TO VARIOUS GOVERNMENT TAX/CENVAT/EXCISE DUTY RECEIVABLES, PURC HASES ADVANCE, EMPLOYEES ADVANCE ETC. REMAINING UNREBUTTED FROM THE REVENUE SIDE. LEARNED CIT.D.R. IS UNABLE TO PINPOINT ANY SPECIFIC ITEM THEREIN WHICH COULD BE HELD TO BE DIVERSION OF INTEREST BEARING FUNDS FOR NON BUSINESS PURPOSES. T HE CIT(A) HAS ALREADY GIVEN CREDIT TO SECTION 14A DISALLOWANCE. WE THUS HAVE N O REASON TO INTERFERE WITH THE LOWER APPELLATE AUTHORITYS ABOVESTATED CONCLUSION UNDER CHALLENGE. THE REVENUE FAILS IN ITS INSTANT THIRD SUBSTANTIVE GROUND AS WE LL. ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 13 - 9. THIS LEAVES US WITH THE LAST ISSUE OF COMMISSION EXPENDITURE DISALLOWANCE OF RS.14,96,951/- AS DELETED IN THE LOWER APPELLATE PR OCEEDINGS READING AS FOLLOWS: 11. THE SIXTH GROUND OF APPEAL IS AGAINST DISALLOW ANCE OF COMMISSION . THE APPELLANT FILED VARIOUS EVIDENCES WITH REGARD TO TH ESE JURING THE APPELLATE' PROCEEDINGS. THESE WERE ADMITTED AS DISCUSSED AND W ERE FORWARDED TO THE AO. THE FINAL COMMENTS OF THE AO ON THIS ISSUE ARE AS UNDER : 'COMMISSION EXPENSE PAID IN EURO TO VARIOUS PARTIES . THE SUBMISSION MADE BY THE ASSESSEE HAS BEEN EXAMIN ED. THE ASSESSEE SUBMITTED THE GENERAL LEDGER FOR THE PERIO D 01.04.2008 TO 31.03.2009 IN WHICH THE DETAILS OF COMMISSION EXPEN SE HAVE CLAIMED TO HAVE INCURRED IN USD AS WELL AS EURO PAID IN CONVER TED INR HAVE BEEN MENTIONED, IN RESPECT OF COMMISSION PAID TO THE TUN E OF RS, 3720 USD(INR- RS. 1,53,004/- THE ASSESSEE HAD FURNISHED CERTAIN, DETAILS SO AS TO SHOW THAT 3720 LSD WAS PAID TO PACHLIS GLYSTIAS GREECE. A CER TIFICATE FROM THE SBI OVERSEAS BRANCH, AHMEDABAD HAS ALSO BEEN FURNISHED UNDER THE CIRCUMSTANCES, THE CLAIM OF COMMISSION EXPENSE OF R S. 1,53,004/- (USD 3720) SEEMS ACCEPTABLE. HOWEVER, IN RESPECT 6F COMM ISSION CLAIMED TO HAVE BEEN INCURRED IN EURO (INR-RS. 1,3,43,947/-) N O EVIDENCE AND DOCUMENTARY PROOF HAS BEEN PUT FORTH. THEREFORE, TH E CLAIM OF RS. 13,43,947/- SEEMS UNACCEPTABLE IN THE ABSENCE OF AN Y EVIDENTIARY MATERIAL.' 11.1 THE COPY OF REMAND REPORT WAS GIVEN TO THE AR. HE SUBMITTED THAT THE ENTIRE COMMISSION PAYMENTS WERE MADE TO THE SAME PARTY, VI Z., PACHLIS GLYSTIAS GREECE AND THE LEDGER ACCOUNT WHICH WAS SUBMITTED AND WAS FORWARDED TO THE AO/DULY SHOWED IT. HE ADDED THAT THE EVIDENCE IS LIKE BILL RAISED FOR COMMISSION, CERTIFICATE OF REMITTANCE FROM THE BANK, CA'S CERTIFICATE REGAR DING NO REQUIREMENT OF DEDUCTION OF TAX ETC. WERE SUBMITTED AS SAMPLE. HE INSISTED THAT THE AO SHOULD HAVE CALLED FOR THE EVIDENCE IN RESPECT OF REMAININ G TRANSACTIONS; IN CASE HE HAD DOUBTS ABOUT THEM. HE INSISTED THAT THE ENTIRE PAYM ENT OF COMMISSION IS GENUINE AND SHOULD BE ALLOWED. 11.2 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT, THE REMAND REPORT AND THE REBUTTAL OF THE AR AS SUM MED UP IN THE PREVIOUS PARAGRAPH. IT IS OBSERVED-THAT THE APPELLANT IS COR RECT THAT THE COPY OF LEDGER ACCOUNT FORWARDED TO THE AO CLEARLY SHOWED THAT THE ENTIRE COMMISSION PAYMENTS WERE MADE TO THE SAME PARTY, VIZ., PACHLIS GLYSTIAS GREECE. THE AO HAS FAILED TO APPRECIATE THE FACT. HE HAS ACCEPTED ON THE BASIS O F SAMPLE EVIDENCE THAT COMMISSION PAID TO THE TUNE OF RS. 3720 USD(INR-RS. 1,53,004/- TO PACHLIS GLYSTIAS GREECE SEEMS JUSTIFIED. PRIMA FACIE, THE PAYMENT OF ENTIRE COMMISSION BEING ON SAME LINES AND TO THE SAME PARTY SEEMS ACCEPTABLE. HOWEVER, IN MY VIE W, THE CERTIFICATE FROM THE BANK CERTIFYING THAT PAYMENT HAS BEEN REMITTED TO T HE PARTY, THROUGH BANKING CHANNELS; IS THE CLINCHING EVIDENCE. THE AO IS DIRECTED TO CALL FOR THE 'CERTIFICATES FR OM THE BANK CERTIFYING THAT PAYMENT HAS BEEN REMITTED TO THE PATTY AS CLAIMED; WHILE GIVING EFFECT TO THIS ORDER ITA NO. 1704/AHD/13 [ACIT VS. M/S. SHAIFALI STEELS LTD. ] A.Y. 2009-10 - 14 - AND ALLOW THOSE EXPENSES ONLY WHERE THE APPELLANT I S ABLE TO PROVE, THAT SUCH REMITTANCES WERE IN FACT MADE. THE GROUNDS OF APPEA L IS DECIDED ACCORDINGLY. 10. THE REVENUE STRONGLY SEEKS TO REVIVE THE IMPUGN ED DISALLOWANCE OF COMMISSION EXPENSES. WE FIND THAT THE CIT(A) HAS A LREADY DIRECTED THE ASSESSING AUTHORITY TO CARRY OUT A DETAILED EXERCISE FOR PRO VING THE GENUINENESS OF ASSESSEES IMPUGNED COMMISSION EXPENDITURE CLAIM. WE THEREFOR E CONCLUDE THAT NO PREJUDICE IS CAUSED TO REVENUES INTEREST IN THESE FACTS AND CIRCUMSTANCES. THIS LAST GROUND IS ACCORDINGLY REJECTED. 11. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF MARCH, 2018.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 23/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0