Surat Filatex Pvt.Ltd., Surat V. The Income tax Officer,Ward-4(3), Surat

ITA 1748/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5463 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 16-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: MANISH R MALPAN I
• Keywords: Rejection of books of accounts; Business expenditure; Commercial expediency; Set aside
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABA D CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE SH RI D.C. AGRAWAL , A.M.) I.T.A. NO. 1748/AHD./2008 ASSESSMENT YEAR : 2004-2005 SURAT FILATEX PVT. LTD., SURAT -VS.- INCOME TAX OFFICER, WARD-4(3), SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH R. MALPAN I RESPONDENT BY : SHRI H.P. MEENA, SR. D .R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 17.03.2008 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT FOR TH E ASSESSMENT YEAR 2004-05. 2. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS AP PEAL READ AS UNDER :- (1) THAT THE HON'BLE CIT(A.) HAS ERRED IN SUSTAININ G THE ADDITION ON ACCOUNT OF LOWER G.P. RATIO OF RS.3,36,637/- WITHOUT CONSIDERI NG GENUINE AND LEGITIMATE REASONS FOR FALL IN G.P. RATIO GIVEN BY THE APPELLA NT. (2) THAT THE HON'BLE CIT(A.) HAS ERRED IN SUSTAININ G DISALLOWANCE OF INTEREST EXPENDITURE TO THE TUNE OF RS.2,14,592/- WHICH IS L EGITIMATE AND GENUINE BUSINESS EXPENDITURE. (3) WITHOUT PREJUDICE TO OTHER GROUNDS OF APPEAL, T HAT THE HON'BLE CIT(A.) HAS ERRED IN SUSTAINING INTEREST CHARGED U/S. 234B AND 234D OF THE ACT. 3. THE BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THE AFORESAID GROUND NO. 1 ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURING OF TEXTURISING OF YARN. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN O F INCOME ON 19.10.2004 DECLARING LOSS OF RS.3,63,836/-. THE ASSESSING OFFICER FRAMED THE ASS ESSMENT UNDER SECTION 143(3) AT A TOTAL INCOME OF RS.1,97,840/- BY MAKING FOLLOWING ADDITIO NS/ DISALLOWANCES :- (I) ADDITION ON ACCOUNT OF LOW G.P. RS.3,47,08 2/- (II) DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT RS.2,14,592/- 2 ITA NO. 1748-AHD-2008 4. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER. IT WAS ALSO ARGUED THAT WITHOUT GIVING THE BASIS AND COMPARING THE CASE OF SIYARAM PETROCHEM LTD. THE ASSESSING OFFICER CANNOT ADOPT THE FIGURES OF SIYARAM PETROCHEM LTD. IT WAS FURTHER SUBMITTED THAT THE OLD RECORDS WERE AVAILABLE AT THE KOHINOOR TEXTILE MARKET ADDRESS. T HE PRODUCTS MANUFACTURED BY THE ASSESSEE WERE SUBJECT TO CENVAT, SALES TAX AND REGULAR RETUR NS IN RESPECT OF CENVAT/ SALES TAX WERE FILED. IT WAS ALSO SUBMITTED THAT THE ASSESSEES MACHINERIES ARE OLD, THEREFORE, ITS G.P. IS MUCH LESS. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUG NED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFICER TO ADOPT G.P. @ 3.89%. ON THIS BASIS, HE RESTRICTED THE ADDITION TO RS.3,36,637/- ALLOWING M ARGINAL RELIEF OF RS.10,445/- TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI MANISH R. MALPANI, LD. COUNSEL APPEARED AND CONTENDED THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SUSTAINED THE ADDITION OF G.P. RATIO ON THE BASIS OF G.P. RATE OF IMMEDIATELY PRECEDING YEAR OF THE ASSESSEE-COMPANY. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT G.P. RATIO OF PRECEDING YEAR CANNOT BE COMPARE D WITH THAT OF CURRENT YEAR OF THE ASSESSEE ON ACCOUNT OF THE FOLLOWING REASONS :- (I) LAST YEAR TOTAL TURNOVER WAS RS.5.27 CRORES, WH EREAS IN THE CURRENT YEAR IT IS ONLY RS.0.92 CRORE. THUS, TURNOVER IN CURRENT YEAR HAS B EEN REDUCED BY FIVE TIMES. THE MACHINES OF THE ASSESSEE ARE OLD, THEREFORE, COULD NOT COMPETE WITH OTHER UNITS WITH NEW TECHNOLOGY MACHINERY. (II) IN THE PRECEDING YEAR, THERE WAS NO JOB WORK D ONE OF OUTSIDE PARTIES. IN THE CURRENT YEAR, THERE WAS JOB WORK DONE OF 64,331.060 KGS. (III) IN THE LAST YEAR, THE ASSESSEE HAD DONE TRAD ING OF YARN TOO WHEREBY IT HAD PURCHASED 2.23 LAKH KGS. OF YARN OF VALUE OF RS.2.1 2 CRORES AND DIRECTLY SOLD THEM. 3 ITA NO. 1748-AHD-2008 HENCE, ALMOST 50% OF TURNOVER WAS OF TRADING OF YAR N. WHILE IN THE CURRENT YEAR, THERE WAS NO TRADING OF YARN. (IV) IN THE CURRENT YEAR, THERE WAS CHANGE IN EXCIS E LAWS . UPTO PRECEDING YEAR, ADVOLERAM DUTY WAS CHANGED ON PRODUCTION OF YARN, I.E. DUTY WAS FIXED ON PER KG. OF PRODUCTION. WHILE, FROM CURRENT YEAR, CENVAT SYSTEM OF EXCISE WAS STARTED, WHEREBY CENVAT CREDIT WAS AVAILABLE OF RAW MATERIAL AND EXCISE DUTY CHARGED ON ASSESSED VALUE. THIS HAS HUGE IMPACT O N THE TRADING ACCOUNT. 5.1. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMIT TED THAT BOOKS OF ACCOUNTS COULD NOT BE PRODUCED BECAUSE THESE WERE STORED AT SHOP NO. 152, BASEMENT, KOHINOOR TEXTILE MARKET, RING ROAD, SURAT, WHICH IS VERY NEAR TO THE REGISTERED O FFICE AND OPERATES AS ANNEXEE TO THE REGISTERED OFFICE. ALL THE PAST RECORDS WERE KEPT THERE. DUE T O UNPRECEDENTED AND UNFORTUNATE FLOOD IN THE SURAT CITY IN MONTH OF AUGUST, 2006, ALL THESE RECO RDS WERE DESTROYED AS THE PLACE WAS IN BASEMENT AND FLOOD WATER ENTERED INTO THE PREMISES. SUFFICIENT EVIDENCES WERE FURNISHED TO LEARNED A.O. IN THIS RESPECT. LEARNED A.O. HAS ERRE D IN IGNORING THIS VITAL FACT AND EVIDENCES PRODUCED BEFORE HIM IN THIS RESPECT. HON'BLE C.I.T. (A) HAS REJECTED THE CLAIM OF APPELLANT ON THE GROUND THAT REGISTERED OFFICE OF THE COMPANY WA S _NOT AFFECTED BY FLOOD AND BOOKS SHOULD BE KEPT AT REGISTERED OFFICE. IT MAY BE NOTED THAT IT IS REQUIRED THAT ONLY CURRENT YEARS RECORD ARE TO BE KEPT AT REGISTERED OFFICE. EARLIER YEARS RECORD MAY BE STORED AT SOME OTHER PLACE. HENCE, THE APPELLANT HAS RIGHTLY STORED BOOKS AT KO HINOOR MARKET, BASEMENT,_WHICH WAS FLOODED WITH WATER AND HENCE BOOKS OF ACCOUNT WERE DESTROYED. THEREFORE, NO ADVERSE VIEW SHOULD BE TAKEN AND FALL IN G.P. IS DULY EXPLAINED. THE ASSESSING OFFICER BE DIRECTED TO ACCEPT THE BOOK RESULT. 6. ON THE OTHER HAND, SHRI H.P. MEENA, SR. D.R. APP EARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). THE LD. D.R. POINTED OUT THAT NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE HAS PRODUCED F IR OR PUBLIC NOTICE, WHEREAS NOW FOR THE FIRST TIME THE ASSESSEE HAS FURNISHED A COMPLAINT A ND A NOTICE GIVEN IN NEWSPAPER SANDESH ON 4 ITA NO. 1748-AHD-2008 25.08.2006. THE LD. D.R. SUBMITTED THAT IN THE ASSE SSMENT ORDER, THE ASSESSING OFFICER HAS GIVEN COGENT REASON FOR REJECTING THE BOOKS OF ACCO UNTS. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE ASSESSING OFFICER HAS NO OPTION BUT T O ESTIMATE THE INCOME. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ON A COMPARABLE CASE, FACTS OF WHICH ARE GIVEN IN THE ASSESSMENT ORDER, APPLIED 4% G.P. IN THE IMPUGNED ORDER, THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER APPLYING THE GP IN THE IMMEDIATE LY PRECEDING YEAR RESTRICTED THE GP ADDITION OF RS.3,36,637/-. THEREFORE, THE VIEW TAKE N BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING O FFICER FRAMED THE ASSESSMENT ON 31.10.2006. BEFORE THE ASSESSING OFFICER, THE COPY OF FIR AS WE LL AS PUBLIC NOTICE ALLEGED TO BE GIVEN IN THE NEWSPAPER SANDESH WERE NOT FURNISHED. IN THE ASSE SSMENT ORDER, THE ASSESSING OFFICER HAS STATED THAT SHRI RAJESH MALPANI, C.A., LD. A.R. OF THE ASSESSEE ATTENDED ON 20.10.2006 IN COMPANY OF SHRI R.B. JAJU, ONE OF THE DIRECTORS OF THE COMPANY AND VIDE THE ORDER SHEET ENTRY OF EVEN DATE ADMITTED THAT - (I) HE HAS NOT PREPARED DENIER WISE QUANTITY DETAIL S AND HE IS UNABLE TO FURNISH SUCH DETAILS. (II) HE HAS NOT MAINTAINED DAY-TO-DAY CONSUMPTION O F YARN, PRODUCTION AND WASTAGE DETAILS/ ACCOUNTS AND THEREFORE, HE IS UNAB LE TO PRODUCE SUCH DETAILS. (III) SINCE THE ASSESSEE HAS NOT MAINTAINED MONTH-W ISE CONSUMPTION OF ELECTRICITY AND PRODUCTION THEREOF, HE IS UNABLE TO PRODUCE SUC H DETAILS. (IV) SINCE THE ASSESSEE HAS NOT MAINTAINED DETAILS REGARDING WAGES PAID, HE IS UNABLE TON PRODUCE THE DETAILS IN THIS REGARD. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ALSO DOUBTED THE PLACE OF KEEPING THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS OBSERVED THA T LOSS OF BOOKS OF ACCOUNTS IN FLOOD IS NOTHING BUT A CROOKED UP STORY FOR NON-PRODUCTION O F BOOKS OF ACCOUNTS FORE THE REASONS BEST KNOWN TO THE ASSESSEE. IN THE BALANCE-SHEET, THE PR EMISES WHERE IT WAS CLAIMED THAT BOOKS OF ACCOUNTS WERE KEPT AND DESTROYED IN FLOOD IS NOT ME NTIONED. LOOKING TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE CONVINCED THA T THE ASSESSING OFFICER RIGHTLY REJECTED THE BOOKS OF ACCOUNTS. ONCE THE BOOKS OF ACCOUNTS ARE R EJECTED, THE ASSESSING OFFICER HAS NO OPTION 5 ITA NO. 1748-AHD-2008 BUT TO ESTIMATE THE INCOME. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS APPLIED THE GP RATIO OF IMMEDIATEL Y PRECEDING YEAR. ON PAGE 3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STATED THAT THE GP DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2002-03 WAS 2.75%, WHEREAS IN THE A SSESSMENT YEAR 2003-04, IT WAS 3.89%. THE AVERAGE G.P. OF IMMEDIATELY LAST TWO PRECEDING YEARS WORKS OUT AT 3.32%. AS AGAINST THIS, IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE H AS DECLARED G.P. AT 0.38%. THEREFORE, IN OUR OPINION, IN THE PRESENT CASE IT WILL MEET THE END O F JUSTICE, IF AVERAGE G.P. OF LAST TWO YEARS IS APPLIED, I.E. 3.32%. WE ACCORDINGLY SET ASIDE THE O RDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER B ACK TO THE FILE OF ASSESSING OFFICER, WHO WILL APPLY THE G.P. AT 3.32% AND RE-WORK OUT THE G.P. AD DITION. RESULTANTLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 2 ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED UNDER SECTI ON 36(1)(III) OF THE ACT TO THE TUNE OF RS.2,14,592/- BY TAKING THE BASE THAT INTEREST BEAR ING FUNDS HAS BEEN DIVERTED TO SISTER CONCERN AS INTEREST-FREE FUND. BEFORE THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS), IT WAS CONTENDED THAT NO DISALLOWANCE SHOULD BE MADE BECAU SE NO INTEREST-BEARING FUND WAS UTILIZED FOR ADVANCING THE LOAN. IT WAS ALSO STATED THAT THE FUNDS WERE GIVEN ON 17.04.2003 OF RS.24,79,425/- AND ON THE SAME DATE IT WAS RECEIVED INTEREST FREE FUNDS FROM SISTER CONCERN OF RS.24,31,180/-. IT WAS STATED THAT THERE IS A DIREC T NEXUS BETWEEN THE ADVANCE GIVEN TO VIBHUTI SYNTHETICS PVT. LTD. WITH THE INTEREST FREE LOANS R ECEIVED FROM THE SISTER CONCERN. APART FROM THIS, IT WAS CONTENDED THAT THE CURRENT ACCOUNT TRA NSACTIONS WITH THE SISTER CONCERN ARE BASED ON BUSINESS EXPEDIENCY AND THEREFORE, NO DISALLOWANCE CAN BE MADE IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS REPORTED IN 288 ITR PAGE 1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF ASSESSI NG OFFICER FOR THE DETAILED REASONS GIVEN IN PARA 3.3, WHICH READS AS UNDER :- 3.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. AS PER THE SETTLED POSITION OF LAW DECIDED BY THE SUPR EME COURT IN THE CASE OF S.A. BUILDERS (SUPRA), INTEREST DISALLOWANCE CANNOT BE MADE IF THERE IS CO MMERCIAL EXPEDIENCY. IN THE PRESENT CASE THERE IS NO COMMERCIAL EXPEDIENCY AS EVIDENCED FROM THE D OCUMENTS OR PAPERS. THE APPELLANT HAS STATED THAT AS AND WHEN FUNDS ARE REQUIRED IT RECEI VES FUNDS FROM SISTER CONCERN AND THEREFORE IT HAS TO GIVE FUNDS TO SISTER CONCERN WHENEVER THEY R EQUIRE. THIS IS A GENERAL STATEMENT MADE. THE APPELLANT HAS FAILED TO SHOW BY ANY DOCUMENT AS TO WHAT THE COMMERCIAL EXPEDIENCY WAS WHICH 6 ITA NO. 1748-AHD-2008 NECESSITATED IT TO GIVE LOAN/ADVANCE TO SISTER CONC ERN. HENCE THE RELIANCE PLACED BY THE APPELLANT ON THIS CASE OF HON'BLE SUPREME COURT IS MISPLACED. SINCE THERE IS NO COMMERCIAL EXPEDIENCY, THEREFORE DISALLOWANCE OF INTEREST IS IN ORDER IN V IEW OF THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF H.R SUGAR FACTORY [187 ITR 363 ] AND DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRI ES [286 ITR 1 ] WHERE THE HIGH COURT HAS STATED AS UNDER :- 'WE DO NOT SUBSCRIBE TO THE OBSERVATION IN THE JUDG MENTS TO THE EFFECT THAT IF THE AMOUNT IS ADVANCED FROM A MIXED OR SHARE CAP ITAL OR SALE PROCEEDS OR PROFITS, ETC., SAME WOULD NOT BE TERMED AS DIVER SION OF BORROWED OF THAT THE REVENUE HAD NOT BEEN ABLE TO ESTABLISH NEXUS OF THE FUNDS ADVANCED TO THE SISTER CONCERNS WITH THE BORROWED FUNDS. ONCE I F IS HOME OUT FROM THE RECORD THAT THE ASSESSES HAD BORROWED CERTAIN FUNDS AN WHICH LIABILITY TO PAY TAX IS BEING INCURRED AND ON THE OTHER HAND CER TAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS OR OTHERS WITHOUT CARRY ING ANY INTEREST AND WITHOUT ANY BUSINESS PURPOSE, THE INTEREST TO THE E XTENT THE ADVANCE HAD BEEN MADE WITHOUT CARRYING ANY INTEREST IS TO BE UNDER S ECTION 36(L)(III) OF THE ACT. SUCH BORROWINGS TO THAT EXTE NT CANNOT POSSIBLY BE HELD FOR THE PURPOSE OF BUSINESS BUT FOR SUPPLEMENT ING THE CASH DIVERTED WITHOUT ANY BENEFIT OUT OF IT. ACCORDINGLY, THE ASS ESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE B ORROWINGS TO THE EXTENT THOSE ARE DIVERTED TO SISTER CONCERNS OR OTHER PERS ONS WITHOUT INTEREST. ' IN VIEW OF THE ABOVE IT IS CLEAR THAT SINCE THERE W AS NO COMMERCIAL EXPEDIENCY, THE DISALLOWANCE MADE BY THE AO IS CORRECT AND THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) ON THIS ISSUE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL OF THE ASSESSEE PRODUCED THE BAL ANCE-SHEET ON THIS ISSUE AND CONTENDED THAT TOTAL INTEREST-FREE ADVANCE GIVEN WAS ONLY RS. 16,19,993/-, WHEREAS TOTAL INTEREST FREE FUNDS WAS RS.75,58,544/-. THE DETAILS OF INTEREST FREE FU NDS AND INTEREST FREE ADVANCES ARE AS UNDER :- PARTICULARS AS ON 31 ST MARCH, 2004 AMOUNT (RS.) SHARE CAPITAL 24,02,000/- SHARE APPLICATION MONEY 95,000/- RESERVES & SURPLUS (1,48,716/-) INTEREST FREE UNSECURED LOANS 52,10,260/- TOTAL INTEREST FREE FUNDS (TOTAL OF ABOVE 4 ITEMS) 75,58,544/- INTEREST FREE ADVANCE GIVEN 16,19,993/- 9.1. IT WAS POINTED OUT BY THE LD. COUNSEL OF THE A SSESSEE THAT FROM THE AFORESAID TABLE, IT IS CLEAR THAT TOTAL INTEREST FREE FUND AVAILABLE WAS M UCH MORE THAN INTEREST FREE ADVANCE GIVEN, 7 ITA NO. 1748-AHD-2008 THEREFORE, THE CASE OF THE ASSESSEE IS COVERED BY T HE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATION VS.- CIT & AN R. (2008) 215 CTR (SC) 105, WHEREIN IT WAS HELD THAT INTEREST FREE LOAN OF RS. 5 LACS WAS SUFFICIENTLY COVERED FROM OPENING BALANCE OF CAPITAL OF RS.1.91 CRORE. FURTHER RELIANCE WAS ALS O PLACED ON THE RECENT JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES & POWER LTD. REPORTED IN [2009] 313 ITR 340 (BOM.) FOR THE PROPOSITION THAT IF THER E WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WO ULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. HE ACCORDINGLY CONTENDED THAT DISALLOWANCE OF RS.2,14,592/- MADE BY THE ASSESSING OFFICER BE DELETED. 10. ON THE OTHER HAND, THE LD. D.R. VEHEMENTLY SUPP ORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE LD. D.R. POINTED OUT TH AT BOTH THE JUDGMENTS, WHICH ARE RELIED NOW BY THE LD. COUNSEL OF THE ASSESSEE, WERE NOT CITED BEFORE THE AUTHORITIES BELOW. IN ANY CASE, WHERE INTEREST-FREE FUNDS ARE AVAILABLE, THE ASSESSEE HAS GIVEN LOAN OF RS.24,79,425/- ON 17.04.2003 TO ITS SISTER CONCERN, WHICH NEEDS VERIFICATION AT THE END OF ASSESSING OFFICER. 11. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. WE FO UND CONSIDERABLE FORCE IN THE SUBMISSION MADE BY THE LD. D.R. THE POINT SPECIFICALLY, WHICH IS URGED BEFORE US, WAS NOT PLEADED BY ANY OF THE AUTHORITIES BELOW. WE, THEREFORE, SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER B ACK TO THE FILE OF ASSESSING OFFICER. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SHALL FURNISH C OMPLETE DETAILS OF ALL THE INTEREST-FREE FUNDS AVAILABLE AS WELL AS INTEREST-FREE LOANS GIVEN AT T HE RELEVANT TIME, I.E. ON 17.04.2003 WHEN ASSESSEE HAD GIVEN INTEREST FREE LOAN OF RS.24,79,4 25/- TO ITS SISTER CONCERN. THE ASSESSING OFFICER WILL EXAMINE THE SAME KEEPING IN VIEW THE R ATIO OF BOTH THE AFORESAID JUDGMENTS (SUPRA) AND RE-ADJUDICATE THE DISALLOWANCE OF INTEREST, IF ANY, AFRESH IN ACCORDANCE WITH LAW. 12. THE LAST GROUND OF APPEAL IS AGAINST SUSTENANCE OF INTEREST CHARGED UNDER SECTION 234B AND 234D OF THE INCOME TAX ACT, 1961. LEVY OF INTER EST UNDER BOTH THE SECTIONS IS MANDATORY. 8 ITA NO. 1748-AHD-2008 THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ALL OW CONSEQUENTIAL RELIEF IN LEVY OF INTEREST UNDER BOTH THE SECTIONS. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. THE ORDER WAS PRONOUNCED IN THE COURT ON 30.07.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 07 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.