Income Tax Officer Ward -1(2), RAIPUR V. M/s. M.M.Developers, RAIPUR

ITA 179/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94025 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: S R RAO
• Keywords: Cost of acquisition
• Section: 37(1); 28

Judgement Text

1 ITA NO. 179/BLPR/2011 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T. A. NO. 179/BLPR/2011 ASSESSMENT YEAR : 2008-09. THE INCOME-TAX OFFICER, M/S M.M. DEVELOPERS, WARD-1(2), RAIPUR. V/S . 45, MAHALAXMI MARKET, PANDRI, RAIPUR. PAN ACNPR5993E (APPELLANT) RESPONDENT. APPELLANT BY : SHRI D.K. JAIN. RESPONDENT BY : SHRI S.R. RAO. DATE OF HEARING : 15-06-2015 DATE OF PRONOUNCEMENT : 17 TH JULY, 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS), RAIPUR DATED 19-05-2011 AND PERTAINS TO ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CAS E, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` .25,00,000/- MADE BY THE AO BY DISALLOWING EXPENSES TOWARDS FORFEITURE OF ADVANCE S. 2. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CAS E, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 16,39,404/- MADE THE AO BY DISALLOWING INTEREST EXPENSES CLAIMED. 2 ITA NO. 179/BLPR/2011 2. APROPOS GROUND NO.1. IN THIS CASE THE ASSESSEE IS ENGAGED IN THE REAL ESTATE BUSINESS. THE ASSESSING OFFICER OBSERVED THAT THE A SSESSEE HAS DEBITED IN THE PROFIT & LOSS ACCOUNT ` .25,00,000/- AS FORFEITURE OF ADVANCE. ON ENQUIRY F ROM THE ASSESSING OFFICER THE ASSESSEE RESPONDED AS UNDER : THE ASSESSEE FIRM HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF A SHOP AT BHILAI FOR A CONSIDERATION OF ` .1.85 CRORES AND ASSESSEE HAD PAID ADVANCE OF ` .25 LACS. HOWEVER, SUBSEQUENTLY ASSESSEE HAS FELT T HAT IT WILL NOT BE A GOOD PROPERTY FOR THE PURPOSE OF BUSINESS AS THE MARKET VALUE OF THE SAID PROPERTY FELL SHARPLY SUBSEQUENTLY AND HAD T HE ASSESSEE PURCHASED THE PROPERTY IT WOULD HAVE INCURRED MORE LOSS AND THER EFORE, THE ASSESSEE HAS THOUGHT IT PROPER TO CANCEL THE AGREEMENT AND ACCO RDINGLY AS A PRUDENT BUSINESS DECISION AND REQUESTED THE SELLER (OWNER OF THE SHOP) TO RETURN THE ADVANCE AMOUNT AFTER DEDUCTION OF SOME PERCENTAGE, BUT THE VENDOR HAD REFUSED AND FORFEITED THE WHOLE ADVANCE AMOUNT ON CANCELLATION OF THE DEAL. THEREFORE, ASSESSEE CANNOT RECOVER THE ADVANCE AMO UNT HENCE CLAIMED THE LOSS AS A BUSINESS LOSS U/S 28 OF THE INCOME TAX ACT, 1961, AS THE LOSS IN THE NORMAL COURSE OF BUSINESS ACTIVITIES. WE ARE E NCLOSING HEREWITH COPY OF AGREEMENT FOR YOUR KIND PERUSAL. COPY OF LEDGER AC COUNTS IN RESPECT OF THESE EXPENSES ARE SUBMITTED HEREWITH FOR YOUR KIND PERU SAL. THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTIO N PRIMARILY ON THE FOLLOWING REASONS : (I) THE APPELLANT HAS NOT FILED ANY DOCUMENTARY EV IDENCE REGARDING ACTUAL CANCELLATION OF THE AGREEMENT AND FORFEITURE OF TH E ADVANCE MONEY OF ` .25,00,000/- (II) THE APPELLANT HAS PAID ` .25,00,000/- TWICE TO MR. T.S. SHILLON VIDE CHEQUE NO. 148768 AND 148772, WHEREAS THE APPELLAN T HAS RECORDED ONLY ONE PAYMENT IN IN THE BOOKS OF THE APPELLANT. (III) THE APPELLANT HAS NOT FILED EVIDENCE IN THE SHAPE OF CORRESPONDENCE REGARDING THE CANCELLATION OF THE AGREEMENT AND RE TURN OF THE ADVANCE MONEY. 3 ITA NO. 179/BLPR/2011 3. UPON ASSESSEES APPEAL, THE LEARNED CIT(APPEALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED AS UNDER : 3.4 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. I HAVE CAREFULLY PERUSED THE AGREEM ENT DATED 25-11-2007 (HEREINAFTER REFERRED TO AS THE SAID AGREEMENT F OR THE SALE OF PROPERTY WHICH IS DULY NOTARIZED. I FIND THAT THE SAID AGRE EMENT STIPULATED THAT THE PAYMENT OF THE BALANCE AMOUNT AND THE REGISTRATION OF THE PROPERTY WAS REQUIRED TO BE DONE WITHIN THE PERIOD OF THREE MON THS WHICH COULD BE FURTHER EXTENDED FOR ONE MONTH WITH THE CONSENT OF OWNER O F THE PROPERTY. THE SAID AGREEMENT FURTHER PROVIDED THAT AFTER THE EXPIRY O F THE PERIOD OF 4 MONTHS, IF THE APPELLANT DID NOT FULFILL THE CONDITIONS LAID DOWN IN THE SAID AGREEMENT, THEN THE AGREEMENT WOULD AUTOMATICALLY COME TO AN END AND THE ADVANCE AMOUNT WOULD BE FORFEITED AS PROVIDED IN THE AGREE MENT. I DO NOT FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT THERE WAS NO QUESTION OF ENTERING INTO ANY CANCELLATION AGREEMENT AS THE AGREEMENT A UTOMATICALLY STOOD CANCELLED UPON NON FULFILLMENT OF CONDITIONS LAID DOWN IN THE AGREEMENT. I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELL ANT THAT THE QUESTION OF ASKING THE REFUND OF THE ADVANCE ALSO DOES NOT ARI SE AS THE APPELLANT HAD ITSELF AGREED FOR FORFEITURE OF ADVANCE SUBJECT TO THE CONDITIONS MENTIONED IN THE SAID AGREEMENT. SO FAR AS THE PAYMENT OF ` .50 LAKHS TO THE SELLER IS CONCERNED, THE APPELLANT HAS SUBMITTED THAT ` .25,00,000/- WAS PAID ON BEHALF OF RAJ ESTATE FROM WHICH LOAN WAS TAKEN BY THE APP ELLANT AND THIS AMOUNT HAS GONE ON TO REDUCE THE OUTSTANDING LOAN FROM RA J ESTATE. 3.5 THE ISSUE TO BE DECIDED IS WHETHER THE APPELLA NT IS ENTITLED TO CLAIM THE AMOUNT OF ` .25,00,000/- AS AN EXPENDITURE / LOSS IN COMPUTING THE INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE APPELLANT HAS MADE A CLAIM OF THE FORFEITED AMOUNT AS EXPENDITURE UND ER SECTION 37(1) OF THE ACT AS WELL AS A LOSS UNDER SECTION 28 OF THE ACT. ON PERUSAL OF THE AGREEMENT IT IS SEEN THAT IT IS PROVIDED IN THE AGREEMENT THAT THE APPELLANT HAS TO PAY THE BALANCE AMOUNT AND GET THE PROPERTY REGISTERED WIT HIN THREE MONTHS OF THE AGREEMENT WHICH CAN BE EXTENDED FOR A PERIOD OF ON E MONTH WITH THE CONSENT OF THE SELLER. IT IS FURTHER PROVIDED THAT IF THE APPELLANT FAILS TO FULFILL ITS OBLIGATIONS, THEN THE AGREEMENT WOULD STAND CANCE LLED AND THE ADVANCE 4 ITA NO. 179/BLPR/2011 MONEY WOULD STAND FORFEITED AND THAT THE APPELLANT WOULD HAVE NO RECOURSE FOR THE SAME. ADMITTEDLY, THE APPELLANT HAS NOT PA ID THE BALANCE AMOUNT, NEITHER DID THE APPELLANT GET THE PROPERTY REGISTE RED IN ITS NAME WITHIN THE TIME PROVIDED IN THE AGREEMENT. I AM NOT INCLINED TO ACCEPT THE CONCLUSION DRAWN BY THE A.O. THAT THE APPELLANT HAS N OT PROP ERLY PROVED THE CLAIM OF FORFEITURE OF ADVANCE OF ` .25,00,000/-. AS THE APPELLANT HAS NOT BEEN ABLE TO PAY THE BALANCE AMOUNT AND REGISTER THE PROPERTY I N ITS NAME WITHIN THE TIME AGREED BETWEEN THE PARTIES, THERE AGREEMENT AUTOMA TICALLY CAME TO AN END AND THERE WAS NO QUESTION OF THERE BEING A CANCELL ATION AGREEMENT. I AM OF THE CONSIDERED OPINION THAT THE APPELLANT WAS ALSO SNOT ENTITLED TO THE REFUND OF THE AFORESAID AMOUNT AS IT HAD BEEN AGREED BY T HE APPELLANT ITSELF IN THE SAID AGREEMENT. IN MY CONSIDERED VIEW, THE SAID AG REEMENT DATED 25-11- 2007 CANNOT BE SAID TO BE AN AFTER THOUGHT AS THE SAME IS DULY NOTARIZED BY A NOTARY. I AM OF THE CONSIDERED OPINION THAT THE SA ID AGREEMENT WAS BINDING UPON THE APPELLANT AND THE OWNER OF THE PROPERTY. I FIND THAT THE A.O. DID NOT BRING ON RECORD ANY EVIDENCE TO DISBELIEVE THE SAI D AGREEMENT, NOR DID THE A.O. OPINE THAT THE SAID AGREEMENT WAS A SHAM. THE A.O. ALSO FAILED TO BRING ON RECORD ANY EVIDENCE TO INDICATE THAT THE ADVANCE MONEY PAID BY THE APPELLANT ACTUALLY FLOWED BACK TO THE APPELLANT. F ROM THE PERUSAL OF LEDGER OF AJANTA INFRASTRUCTURE LIMITED IN THE BOOKS OF THE APPELLANT FOR THE F.Y. 2006-07, I FIND THAT THE APPELLANT HAD ALSO EARNED INCOME FROM SUCH CANCELLATION OF LAND BOOKING TO THE TUNE OF ` . 17.50 LACS ON 27-3-2007. HENCE, THE CLAIM OF THE APPELLANT APPEARS TO BE FA IR AND MET THE FACTUAL TEST. 3.6 I FIND THAT THE APPELLANT IS ENGAGED IN THE REAL ESTATE BUSINESS AND HENCE, THE AGREEMENT FOR PURCHASE OF PROPERTIES WOULD BE AN AGREEMENT IN THE COURSE OF THE BUSINESS OF THE APPELLANT. THEREFORE , THE LOSS INCURRED FROM CANCELLATION OF ANY AGREEMENT AND FORFEITURE OF AN Y ADVANCE WOULD BE A LOSS IN THE COURSE OF THE BUSINESS OF THE APPELLANT AND WOULD BE ALLOWED AS A BUSINESS LOSS UNDER SECTION 28 OF THE ACT. THEREFO RE, THE LOSS OF ` .25,00,000/- WOULD BE ALLOWABLE AS A BUSINESS LOSS UNDER SECTION 28 OF THE ACT. I FIND THAT THE A.O. HAS ALSO NOT RAISED ANY QUESTION ON THE ALLOWABILITY OR OTHERWISE OF THE CLAIM OF THE APPELLANT, THE A. O. HAS MERELY STATED THAT DUE TO LACK OF CORRESPONDENCE BETWEEN THE PARTIES WITH REGARD TO REFUND AND CANCELLATION OF AGREEMENT, THE APPELLANT IS NOT EN TITLED TO CLAIM DEDUCTION. 5 ITA NO. 179/BLPR/2011 THE ALTERNATIVE CLAIM OF THE APPELLANT OF ALLOWING THE FORFEITED AMOUNT AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT IS REJECT ED ON THE GROUND THAT THE AMOUNT FORFEITED IS NOT IN THE NATURE OF ANY EXPEN DITURE WHICH IS CONTEMPLATED UNDER SECTION 37(1) OF THE ACT. I ALS O FIND THAT THE ACT RECOGNIZES SUCH TRANSACTIONS AND FORFEITURE OF ADV ANCE MONEY. THE ADVANCE SO FORFEITED BY THE OWNER WILL BE DEDUCTED FROM TH E COST OF ACQUISITION OF THE ASSET IN THE HANDS OF THE OWNER. THUS, THE CLAIM O F THE APPELLANT HAS MET THE LEGAL TEST ALSO. HENCE, IN VIEW OF THE AFORESAID F INDING THAT IT IS ALLOWABLE AS LOSS UNDER SECTION 28 OF THE ACT, THIS GROUND OF A PPEAL IS ALLOWED AND ACCORDINGLY, THE ADDITION IS DELETED. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. AS PER THE ADMITTED FACTS OF THE CASE, THE ASSESSEE HAS ENTERE D INTO AN AGREEMENT FOR PURCHASE OF A SHOP IN BHILAI FOR ` .1.85 CRORES. A SUM OF ` .25 LAKHS WAS PAID IN ADVANCE. THE SAID AGREEMENT DEED PROVIDE FOR FORFEITURE OF THE AMOUNT PAID AS ADVANCE IN THE EVENT OF ASSESSEE NOT HONOURING THE CONTRACT AN D PAYING THE BALANCE AMOUNT. IN THIS CASE IT IS UNDISPUTED THAT THE ASSESSEE HAS NO T COMPLETED THE CONTRACT. IT HAS NOT PAID THE BALANCE AMOUNT. HE DID NOT GET THE PROPERT Y REGISTERED. HENCE THIS RESULTED IN THE FORFEITURE OF THE SUM PAID AS ADVA NCE AMOUNTING TO ` .25 LAKHS. THE REASON FOR ASSESSEES FAILURE TO COMPLETE THE CONTR ACT IS THAT THE ASSESSEE AFTER ENTERING INTO THE CONTRACT WAS OF THE OPINION THAT IT WOULD NOT BE PRUDENT TO GO THROUGH WITH THE HUGE INVESTMENT AS THE MARKET VALU E OF THE PROPERTY FELL SHARPLY SUBSEQUENTLY, AND HAD THE ASSESSEE PURCHASED THE PR OPERTY IT WOULD HAVE INCUR MORE LOSS. IN THIS VIEW OF THE MATTER, TO MINIMIZE THE LOSS THE ASSESSEE CHOSE TO FOREGO THE AMOUNT OF ADVANCE OF ` .25 LAKHS. THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE DEALINGS. HENCE THE TRANSACTION WAS CLEARLY IN THE REVENUE FIELD. THE ASSESSING OFFICER HAS NOT DISPUTED THE MERIT OF THE ASSESSEES CONTENTION THAT THE ASSESSEE WOULD HAVE INCURRED MORE LOSS HAD HE GONE WITH THE TRANSACTION BECAUSE OF THE SHARP FALL IN THE PREVALENT MARKET IN THE AR EA. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT THE LEARNED CIT(APPEALS) IS CORRECT IN HOLDING THAT THE LOSS 6 ITA NO. 179/BLPR/2011 OF THE ADVANCE AMOUNT IS ALLOWABLE AS BUSINESS LOSS UNDER SECTION 28 AS WELL AS DEDUCTION UNDER SECTION 37(1). LEARNED CIT(APPEALS ) HAS GIVEN A FINDING THAT THE AGREEMENT PRODUCED BY THE ASSESSEE CANNOT BE SAID T O AN AFTERTHOUGHT OR A SHAM. MOREOVER, LACK OF CORRESPONDENCE BETWEEN THE PARTIE S CANNOT BE SAID TO BE REASON TO DISBELIEVE TO THE ASSESSEES CLAIM. IT IS SETTL ED LAW THAT THE ASSESSING OFFICER CANNOT SIT INTO THE SHOES OF THE ASSESSEE AND DECID E WHAT IS REASONABLE. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THA T THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY, WE UPHO LD THE SAME. 5. APROPOS GROUND NO.2. ON THIS ISSUE THE ASSESSIN G OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS CHARGED LESS INTEREST ON LOANS GIVEN AND PAID MORE INTEREST ON THE LOANS AND ADVANCES TAKEN. THE ASSES SEE EXPLAINED IN THIS REGARD THAT THE ASSESSEE HAD PAID INTEREST OF ` .25,81,214/- AND RECEIVED INTEREST OF ` .9,41,810/- AND NET AMOUNT OF ` .16,39,404 IS DEBITED IN P&L A/C. IT HAS BEEN FURTH ER STATED THAT THE ASSESSEE WAS HAVING SUFFICIENT AMOUNT ON WHICH INTEREST IS NOT BEING PAID AS WELL AS INTEREST IS NOT BEING CHARGED. THE ASSESSEE HAS FILED THE COPY OF A/C. OF THE LOAN AND ADVANCE GIVEN. THE ASSESSEE HAS NOT CHARG ED INTEREST FROM THE FOLLOWING PERSONS ON LOAN AND ADVANCE GIVEN TO THEM: DEBIT BALANCE AS ON 31.03.2008 I) AJANTA INFRASTRUCTURE (P) LTD. 1,17,50,000/- II) ANITA SINDHWANI 21,72,896/- III) BABAR KHAN 5,00,000/- IV) CHETNA SURANA 5,31,370/- V) RAJIV SACHDEV 33,25,967/- VI) RAKESH SARAOGI 10,86,448/- VII) SHANKHNIL REALTER (P) LTD. 4,37,61,000/-. 7 ITA NO. 179/BLPR/2011 THE ASSESSING OFFICER WAS NOT SATISFIED. HE HELD AS UNDER : OUT OF THE ABOVE ONLY THE LOANS OUTSTANDING IN T HE A/C, OF SHANKHNIL REALTERS WAS GIVEN ON 31.03.2008. IN THE CASE OF R EMAINING PERSONS THE AMOUNT OF LOANS AND ADVANCE WERE THE OPENING BALAN CE AS ON 01.04.2007 AND ALSO CLOSING BALANCE OF SAME AMOUNT. IN THE A/ C. OF AJANTA INFRASTRUCTURE THE OPENING BALANCE WAS ` .2,17,50,000/- AND AMOUNT OF ` .1,00,00,000/- WAS CREDITED ON 09.10.2007. THE ASSE SSEE HAS NOT GIVEN THE DETAILS OF LOANS TAKEN IN WHICH INTEREST IS N OT BEING PAID. THE ASSESSEE HAS NOT PAID INTEREST ON UNSECURED LOAN TAKEN FRO M M/S RAJ ESTATES ` .89,75,000/- AND LALITA ESTATE WAS TAKEN ONLY ON 28.03.2008. ALSO THE BANK BALANCE IN THE HDFC BANK AS ON 31.03.2008 WA S THE HEAVY AMOUNT OF ` .1,67,45,580/-. THE INVESTMENT IN BUSINESS OF THE A SSESSEE IS ` .14,15,972/- IN FIXED ASSET AND CLOSING STOCK OF ` .2,00,86,904/- ONLY AGAINST WHICH THE PARTNERS CAPITAL OF ` .2,94,01,286/-. AS SUCH THE AMOUNT OF SECURED LOANS AND UNSECURED LOANS HAVE BEEN UTILIZ ED PARTLY BY THE ASSESSEE ON GIVING LOANS AND ADVANCE TO THE OTHERS , IN WHICH THE ASSESSEE HAS NOT CHARGED INTEREST. THE INTEREST CHARGEABLE ON THE LOANS AND ADVANCES GIVEN TO ABOVE PARTIES WILL BE MORE THAN THE NET AMOUNT OF INTEREST DEBITED ` .16,39,404/- IN P&L A/C. THEREFORE, ACCORDING TO TH E PROVISION OF SECTION 36(1)(III) OF THE I.T. ACT, T HE AMOUNT OF INTEREST EXPENSES CLAIMED ` .16,39,404/- IS DISALLOWED AND THE TOTAL INCOME OF THE ASSESSEE IS ACCORDINGLY INCREASED BY ` .16,39,404/-. PENALTY PROCEEDING U/S 271(1)(C) IS INITIATED ON THIS ISSUE. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED B EFORE THE LEARNED CIT(APPEALS). CONSIDERING THE ASSESSEES SUBMISSION S, LEARNED CIT(APPEALS) DELETED THE ADDITION HOLDING AS UNDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORD ER AND SUBMISSIONS OF THE APPELLANT. THE QUESTION WHICH ARISES FOR CO NSIDERATION IS WHETHER THE AMOUNTS WERE GIVEN AS LOAN OR AS ADVANCES IN T HE COURSE OF THE BUSINESS OF THE APPELLANT. FROM THE PERUSAL OF CO PY OF ACCOUNTS SUBMITTED BY THE APPELLANT AND PURCHASE DEEDS FROM THE PART IES TO WHOM THE LOANS WERE GIVEN, I FIND THAT THE APPELLANT HAD G IVEN ADVANCES IN THE COURSE 8 ITA NO. 179/BLPR/2011 OF BUSINESS OF THE APPELLANT. I ALSO FIND THAT TH E APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS TO GIVE THE ADVANCES. FROM THE DETAILS SUBMITTED, IT IS CLEAR THAT THE AMOUNTS WERE GIVEN AS ADVANCES BY THE APPELLANT EITHER FOR THE PURPOSE OF ACQUIRING THE PROPERTY OR FOR THE PURPOSE OF MAKING THE INVESTMENT ON BEHALF OF THE APPELLANT. THE AGREEME NTS FILED CLEARLY SHOW THAT THE ADVANCES WERE GIVEN FOR THE PURPOSE OF A CQUIRING THE PROPERTY IN THE COURSE OF THE BUSINESS OF THE APPELLANT. THER E IS NO DOUBT THAT IF THE AMOUNTS ARE GIVEN AS ADVANCES IN THE COURSE OF TH E BUSINESS, INTEREST PAID BY THE APPELLANT CANNOT BE DISALLOWED, AS DEDUCTIO N UNDER SECTION 36(1)(III) OF THE ACT IS ADMISSIBLE, IRRESPECTIVE OF WHETHER INTEREST IS CHARGED OR NOT ON THOSE ADVANCES. THEREFORE, THE A .O. WAS NOT CORRECT IN HOLDING THAT THE APPELLANT HAS GIVEN INTEREST FREE LOANS. THEREFORE, THE APPELLANT IS ENTITLED TO THE DEDUCTION UNDER SECTI ON 36(1)(III) OF THE ACT. THERE IS ALSO MERIT IN THE ALTERNATE CONTENTION OF THE APPELLANT THAT IF THE APPELLANT HAS SUFFICIENT INTEREST FREE FUNDS AVAIL ABLE TO GIVE THE LOANS, THEN NO DISALLOWANCE CAN BE MADE UNDER SECTION 36(1)(II I) OF THE ACT. IN VIEW OF THE AFORESAID FINDING, THIS GROUND OF APPEAL IS ALLOWED AND HENCE, THE DISALLOWANCE IS DELETED. 7. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE LEARNED CIT(APPEALS) HAS GRANTED RELIEF PRIMARILY O N THE GROUND THAT THE ASSESSEE HAS SHOWN EVIDENCES BEFORE HIM THAT THE AMOUNTS ADV ANCED BY THE ASSESSEE WERE FOR ACQUIRING PROPERTY IN THE COURSE OF BUSINESS. H ENCE NO DISALLOWANCE IS CALLED FOR. WE FIND THAT THERE IS NO MENTION OF ASSESSEE S PLEA BEFORE THE A.O. THAT THE ADVANCES WERE GIVEN BY IT FOR ACQUIRING PROPERTY NO R THERE IS ANY PROOF THAT THE LEARNED CIT(APPEALS) HAS CALLED FOR ANY REMAND REPO RT FROM THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES THE ASSESSEES PLEA THAT INT EREST FREE ADVANCES WERE GIVEN BY IT IN THE COURSE OF BUSINESS FOR ACQUIRING PROPERTY NEEDED TO BE EXAMINED AT THE LEVEL OF ASSESSING OFFICER. THIS HAS NOT BEEN DONE IN THIS CASE. HENCE IN OUR CONSIDERED OPINION THE ISSUE NEEDS TO BE REMITTED T O THE FILE OF THE ASSESSING 9 ITA NO. 179/BLPR/2011 OFFICER TO EXAMINE THE VERACITY OF ASSESSEES SUBMI SSION BEFORE THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) HAS ALSO MEN TIONED THAT THERE IS ALSO MERIT IN THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT IF THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO GIVE THE LOANS THE N NO DISALLOWANCE CAN BE MADE UNDER SECTION 36(1)(III). WE FIND THAT THIS IS A VE RY LACONIC OBSERVATION WITHOUT A VERIFICATION OR A SPEAKING ORDER ON THE MERITS OF T HIS CONTENTION. IN OUR CONSIDERED OPINION, THIS ISSUE ALSO NEEDS TO BE EXAMINED BY TH E ASSESSING OFFICER AFRESH. ACCORDINGLY THIS ISSUE IS REMITTED BACK TO THE FILE OF THE A.O. FOR EXAMINATION IN VIEW OF ASSESSEES SUBMISSION BEFORE THE LEARNED CI T(APPEALS). 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JULY, 2015. SD/- SD/- (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. DATED: 17 TH JULY, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, 5. THE D.R., ITAT, RAIPUR. 6. GUARD FILE. T RUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR.