Smt. Sangita Jain, Kolkata V. ITO, Ward 36(3), Kolkata

ITA 1817/KOL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5011 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 10-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2009
• Court: TRIBUNAL
• Department Lawyers: DEBASISH LAHIRI
• Assessee Lawyers: J M THARD
• Keywords: Business income; Deemed dividend

Judgement Text

I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1817/KOL/ 2009 ASSESSMENT YEAR: 2006-2007 SMT. SANGITA JAIN,................................. ................................APPELLANT C/O. SURYA SAMAY, 9/12, LAL BAZAR STREET, BLOCK-D, MERCANTILE BUILDING, KOLKATA-700 001 [PAN : ACTPJ 7050 N] -VS.- INCOME TAX OFFICER,................................ ...........................RESPONDENT WARD-36(3), KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI J.M. THARD, ADVOCATE, FOR THE ASSESSEE SHRI DEBASISH LAHIRI, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JANUARY 29, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 11, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 28.08.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL INVOL VE A COMMON ISSUE RELATING TO THE ADDITION MADE BY THE ASSESSING OFFI CER AND SUSTAINED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT TO THE EXTENT OF RS.49,01,812/- . 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION D ECLARING TOTAL INCOME I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 8 OF RS.4,04,690/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS REC EIVED A TOTAL SUM OF RS.64,55,800/- AS LOAN FROM M/S. SURYA BUSINESS PVT . LIMITED. SINCE THE PROVISIONS OF SECTION 2(22)(E) WERE ATTRACTED IN CA SE OF THE SAID LOAN AMOUNT, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW-CAUSE AS TO WHY THE SAME SHOULD NOT BE ADDED TO HER TOTAL INCOM E TREATING THE SAME AS DEEMED DIVIDEND. IN REPLY, VARIOUS CONTENTIONS W ERE RAISED BY THE ASSESSEE TO CHALLENGE THE APPLICABILITY OF SECTION 2(22)(E) TO THE LOAN AMOUNT RECEIVED BY HER FROM M/S. SURYA BUSINESS PVT . LIMITED. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN T HE SAID CONTENTIONS AND AFTER GIVING REASONS TO REJECT THE SAME IN THE ASSE SSMENT ORDER, HE MADE AN ADDITION OF RS.64,55,800/- TO THE TOTAL INCOME O F THE ASSESSEE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) O F THE ACT. 4. THE ADDITION MADE BY THE ASSESSING OFFICER ON AC COUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) WAS DISPUTED BY THE ASSESSEE, IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND THE SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED ON BEHALF OF THE ASSESSEE IN SUPPORT OF HER CASE. THE LD. CIT(APPEALS), HOWEVER, DID NOT FIND THE SAME TO BE ACCEPTABLE EXCEPT IN RESPECT OF ONE ASPECT WHEREBY HE FOUND THE ACCUMULATED PROFIT OF M/S. SURYA BUSINESS PVT. LIM ITED AT THE RELEVANT POINT OF TIME TO BE ONLY TO THE EXTENT OF RS.49,01, 812/-. ACCORDINGLY HE SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF DEEMED DIVIDEND TO THE EXTENT OF RS.49,01,812/- AFT ER RECORDING HIS OBSERVATIONS IN PARAGRAPH NO. 3.3 AS UNDER:- 3.3. I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ASSESSMENT ORDER. ON FACTS, THERE IS NO DISPUTE THAT DURING THE PREVIOUS YEAR THE APPELLANT HAS TAKEN LO AN AND ADVANCES AMOUNTING TO RS.64,55,800/- FROM THE COMPA NY M/S SURYA BUSINESS PVT. LTD. THE OPENING BALANCE AS ON 1-4-2005 WAS RS.6,22,058/- AND THE CLOSING BALANCE AS ON 31.3.20 06 WAS RS.26,90,949/-. ON PERUSAL OF THE COPY OF ACCOUNT O F M/S. SURYA BUSINESS PVT. LTD IN THE BOOKS OF APPELLANT, IT IS SEEN THAT BESIDES OPENING BALANCE OF LOAN AS ON 1-4-2005, THE APPELLA NT HAS TAKEN LOANS AMOUNTING TO RS.64,55,800/- FROM 26-05-2005 T O 24-10- 2005 AND SHE HAS ALSO REPAID CERTAIN AMOUNTS OF LOA N FROM 22- 07-2005 TO 22-03-2006. I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 8 THERE IS ALSO NO DISPUTE THAT THE TOTAL SHARE HOLDI NG OF THE COMPANY M/ S. SURYA BUSINESS PVT. LTD WAS 1,50,000 EQUITY SHARES OF RS.100/- EACH, OUT OF WHICH, THE APPELLAN T WAS HOLDING 22,678 EQUITY SHARES, MEANING THEREBY THAT THE APPE LLANT WAS HOLDING MORE THAN 10% OF EQUITY SHARES. THE PROVISI ONS OF SECTION 2(22)(E) READ AS UNDER:- 'ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF A NY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS O F THE COMPANY OR OTHERWISE) MADE AFTER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER I N THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS.' THUS, TO INVOKE THE PROVISIONS OF SECTION 2(22)(E), THE FOLLOWING CONDITIONS SHOULD BE SATISFIED- (I) THERE SHOULD BE A PAYMENT BY A COMPANY BY WAY ADVANCE OR LOAN TO A SH AREHOLDER AND THE PUBLIC SHOULD NOT BE SUBSTANTIALLY INTEREST ED IN THE SAID COMPANY; (II) SUCH SHARE HOLDER SHOULD BE BENEFICIA L OWNER OF SHARES HOLDING NOT LESS THAN TEN PERCENT OF THE VOT ING POWER. IN THE CASE OF THE APPELLANT, BOTH THESE CONDITIONS ARE SATISFIED AS THE COMPANY M/S. SURYA BUSINESS PVT. L TD. HAS MADE PAYMENT TO THE APPELLANT BY WAY OF ADVANCE OR LOAN AND THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED IN THE SAID COMPANY. THE SHAREHOLDER I.E. THE APPELLANT IS HOLDING MORE THAN TEN PERCENT OF THE VOTING POWER IN THE SAID COMPANY. THEREFORE, I AM OF THE OPINION THAT THE PROVISIONS OF SECTION 2(22)(E) ARE APPLICABLE IN THE CASE OF APPELLANT. THE AMOUNT OF ADVANCE OR LOA N WILL NOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SE CTION 2(22)(E) PROVIDED ANY OF THE CONDITIONS MENTIONED I N CLAUSES (I) TO (V) OF SECTION 2(22)(E) IS SATISFIED. THE APPELL ANT HAS CONTENDED BEFORE THE AO AS WELL AS BEFORE ME THAT, IN HER CASE, CLAUSE (II) OF SECTION 2(22)(E) IS APPLICABLE AND H ENCE THE AO WAS NOT JUSTIFIED IN TAXING THE AMOUNT OF LOAN AND ADVA NCE FROM M/ S SURYA BUSINESS PVT. LTD. AS DEEMED DIVIDEND. CLAUSE (II) OF SECTION 2(22)(E) READS AS UNDER- 'ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR THE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 8 ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY'. IT WAS CONTENDED BY THE APPELLANT THAT THE MEMORAND UM AND ARTICLES OF ASSOCIATION OF THE COMPANY OF M/S. SURY A BUSINESS PVT. LIMITED AUTHORIZED IT TO CARRY ON THE BUSINESS OF THE FINANCIERS AND MONEY LENDERS. SINCE PAST MANY YEARS , THE COMPANY HAS BEEN CARRYING ON MONEY LENDING BUSINESS AND HAS RECEIVED INTEREST INCOME, WHICH HAS BEEN ASSESSED A S BUSINESS INCOME. IT WAS CONTENDED THAT DURING THE YEARS ENDI NG 31-03- 2004, 31-03-2005 AND 31-03-2006, THE STATUS OF LOAN S GIVEN AND INTEREST EARNED BY THE COMPANY WAS AS UNDER- YEAR AMOUNT OF LOAN GIVEN INTEREST EARNED 31.03.2004 RS.43,51,396/- RS.4,86,351/- 31.03.2005 RS.41,74,307/- RS.1,88,360/- 31.03.2006 RS.97,85,333/- RS.2,65,810/- THUS, THE COMPANY HAS ADVANCED LOAN TO THE APPELLAN T IN THE ORDINARY COURSE OF ITS BUSINESS AND THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT B UT I DO NOT AGREE WITH IT. ON PERUSAL OF THE TAX AUDIT REPORT O F THE COMPANY M/ S SURYA BUSINESS PVT. LTD AS ON 31.03.2006, IT I S SEEN THAT THE NATURE OF BUSINESS OR PROFESSION OF THE COMPANY HAS BEEN MENTIONED AS 'TRADING IN WATCHES, ELECTRONICS' ITEM S, CELLULAR PHONES, HOME APPLIANCES, CAMERAS, CALCULATORS, SUN GLASSES AND BEVERAGES, ETC.' NOWHERE THE AUDITORS HAVE MENTIONE D THAT THE MONEY LENDING IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. ON PERUSAL OF SCHEDULE 3, 4 & 9 OF THE BAL ANCE SHEET OF THE COMPANY AS ON 31.3.2006, IT IS SEEN THAT IT HAS TAKEN SECURED AND UNSECURED LOANS AMOUNTING TO RS.8,85,13,627/ A ND HAS ADVANCED LOAN TO THE EXTENT OF RS.97,85,333/- ONLY. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT OF THE COMPANY AS ON 31.3 .2006, IT IS SEEN THAT THE TOTAL TURNOVER ON ACCOUNT OF TRADING OF VARIOUS ITEMS WAS RS.29,71,68,775/-, WHILE THE INTEREST REC EIVED ON LOAN WAS ONLY RS.2,65,810/-, WHICH WAS INCLUDED UNDER TH E HEAD 'OTHER INCOME'. THUS IT CANNOT BE SAID THAT THE LENDING OF THE MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. ME RELY BECAUSE THE COMPANY HAS ADVANCED CERTAIN LOANS AND ADVANCES AND HAS EARNED CERTAIN AMOUNT OF INTEREST, IT CANNOT BE SAI D THAT THE COMPANY WAS ENGAGED IN THE BUSINESS OF MONEY LENDIN G. EVEN TURNOVER-WISE, THE PERCENTAGE OF LOANS AND ADVANCES OF RS.97,85,333/- ADVANCED BY THE COMPANY VIS-A-VIS TO TAL TURNOVER OF RS.29,85,30,665/- WORKS OUT TO 3.2% ONLY. THUS, IT COULD BE TOTALLY UNJUSTIFIED TO ASSUME THAT THE COMPANY WAS CARRYING ON THE BUSINESS OF MONEY LENDING. IN VIEW OF ABOVE FAC TS, IT IS HELD THAT THE AO WAS JUSTIFIED IN ARRIVING AT THE CONCLU SION THAT THE COMPANY M/ S SURYA BUSINESS PVT. LTD. WAS NOT ENGAG ED IN THE BUSINESS OF MONEY LENDING AND THAT LENDING OF MONEY IS NOT A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. AN D THEREFORE, I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 5 OF 8 THE PROVISIONS OF SECTION 2(22)(E)(II) ARE NOT APPL ICABLE IN THE CASE OF THE APPELLANT. I UPHOLD THE VIEW TAKEN BY T HE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS CONTENDED BY THE APPELLANT THAT THE ADDITION, IF AT ALL IS TO BE MADE U/S. 2(22)(E), CANNOT EXCEED THE SUM OF RS.17,89,923/- B EING THE ACTUAL AMOUNT OF LOAN OUTSTANDING AS ON 31-3-2006 A FTER MERGING ACCOUNTS OF INDIVIDUAL AND THE PROPRIETARY CONCERNS LOCATED AT KOLKATA AND JORHAT, IT WAS FURTHER SUBMITTED BY THE APPELLANT THAT UNDER NO CIRCUMSTANCES, THE AMOUNT OF ADDITION U/S 2(22)(E) COULD EXCEED THE ACCUMULATED PROFITS OF THE COMPANY WHICH WAS RS.49,01,812/-. ADDITION OF RS.64,55,800/- IS THERE FORE, IN ANY CASE, BASICALLY WRONG AND OUTSIDE THE PROVISIONS OF THE ACT. I FIND NO SUBSTANCE IN THE ARGUMENT OF THE APPELLAN T THAT THE ADDITION UNDER SECTION 2(22)(E) SHOULD BE RESTR ICTED TO THE EXTENT OF ACTUAL LOAN DUE AS ON 31-3-2006. IF THE A PPELLANT WAS MAINTAINING CURRENT ACCOUNT WITH THE AFORESAID COMP ANY, EVEN THEN, FOR THE PURPOSES OF SECTION 2(22)(E), EACH EN TRY OF LOAN TAKEN IS TO BE CONSIDERED SEPARATELY AND THE ENTIRE AMOUNT OF LOAN TAKEN DURING THE RELEVANT PREVIOUS YEAR IS COVERED UNDER SECTION 2(22)(E). HOWEVER, I FIND FORCE IN THE SUBMISSION O F THE APPELLANT THAT, UNDER NO CIRCUMSTANCES, THE ADDITION U/ S 2(2 2)(E) COULD BE MORE THAN THE ACCUMULATED PROFITS OF THE COMPANY. O N PERUSAL OF THE BALANCE SHEET OF THE COMPANY AS ON 31-3-2006 IT IS SEEN THAT, AS PER SCHEDULE 2 OF THE BALANCE SHEET, THE 'RESERV E AND SURPLUS' WAS RS.99,01,812/ -. IT CONSISTS OF ACCUMULATED PRO FITS ON ACCOUNT OF PROFIT & LOSS ACCOUNT AMOUNTING TO RS.49,01,812/ - AND SHARE PREMIUM ACCOUNT AMOUNTING TO RS.50,00,000/-. THUS, THE COMPANY WAS HAVING ACCUMULATED PROFITS OF RS.49,01,812/- ON LY AND THE SHARE PREMIUM ACCOUNT CANNOT BE CONSIDERED AS ACCUM ULATED PROFITS FOR THE PURPOSES OF SECTION 2(22)(E). THE A CCUMULATED PROFIT IS THE PROFIT WHICH HAS BEEN TAKEN TO THE BA LANCE SHEET FROM THE PROFIT AND LOSS ACCOUNT AND AVAILABLE FOR DECLA RATION OF DIVIDEND IN NORMAL COURSE. IN THE CASE OF APPELLANT , SUCH ACCUMULATED PROFIT AMOUNTS TO RS.49,01,812/- AND HE NCE THE AO IS DIRECTED TO RESTRICT THE ADDITION U/S. 2(22)(E) TO THE EXTENT OF RS.49,01,812/-. GROUND NO. 1 & 2 ARE DISMISSED AND GROUND NO. 3 IS PARTLY ALLOWED. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ONE OF THE M AIN CONTENTIONS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US IS THAT THE LOAN IN QUESTION TREATED AS DEEMED DIVIDEND UND ER SECTION 2(22)(E) BY THE AUTHORITIES BELOW WAS TAKEN BY THE ASSESSEE FROM M/S. SURYA BUSINESS PVT. LIMITED ON INTEREST AND SINCE THE SAI D COMPANY WAS COMPENSATED BY WAY OF INTEREST PAID BY THE ASSESSEE ON LOAN, THE ASSESSEE IN REAL SENSE DID NOT DERIVE ANY BENEFIT FROM THE F UNDS OF THE COMPANY SO I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 6 OF 8 AS TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E). A LTHOUGH THE LD. D.R. HAS VEHEMENTLY OPPOSED THIS CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE BY SUBMITTING THAT THE PAYMENT OF INTEREST ALONE CANNO T BE CONSIDERED FROM THE BENEFIT ANGLE AS ENVISAGED UNDER SECTION 2(22)( E), IT IS OBSERVED THAT THE JUDICIAL PRONOUNCEMENTS CITED BY THE LD. COUNSE L FOR THE ASSESSEE CLEARLY SUPPORT THE CASE OF THE ASSESSEE. 6. IN THE CASE OF PRADIP KUMAR MALHOTRA REPORTED IN 338 ITR 538 CITED BY THE LD. COUNSEL FOR THE ASSESESE, IT WAS HELD BY THE HONBLE CALCUTTA HIGH COURT THAT THE PHRASE BY WAY OF ADVANCE OR LO AN APPEARING IN SECTION 2(22)(E) MUST BE CONSTRUED TO MEAN THOSE AD VANCES OR LOANS, WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PARTNER, WHO IS THE BENEFICIAL OWNER OF SHARES, BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CO NSIDERATION, WHICH IS BENEFICIAL TO THE COMPANY, RECEIVED FROM SUCH SHARE HOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DI VIDEND WITHIN THE MEANING OF THE ACT. IT WAS HELD THAT GRATUITOUS LOA N OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS THUS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22)(E) BUT NOT THE CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON T HE COMPANY BY SUCH SHAREHOLDER. IN THE CASE OF ACIT VS.- M/S. ZENON ( INDIA) PVT. LIMITED, A LOAN TAKEN BY THE ASSESSEE WAS TREATED BY THE ASSES SING OFFICER AS DEEMED DIVIDEND UNDER SECTION 2(22)(E), BUT THE LD. CIT(APPEALS) DID NOT APPROVE THE ACTION OF THE ASSESSING OFFICER AFTER H AVING NOTICED THAT INTEREST AT THE RATE OF 9% PER ANNUM WAS PAID BY TH E ASSESSEE ON SUCH LOAN, WHICH, ACCORDING TO HIM, WAS A CONSIDERATION RECEIVED FROM HER SHAREHOLDERS, WHICH WAS BENEFICIAL TO THE COMPANY A ND THE ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE WAS UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 29.06.2015 PASSED IN ITA NO. 1 124/KOL/2012 BY RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIG H COURT IN THE CASE OF PRADIP KUMAR MALHOTRA (SUPRA). KEEPING IN VIEW THE SAID DECISION OF THE HONBLE CALCUTTA HIGH COURT WHICH HAS BEEN FOLLOWED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. ZENON (I NDIA) PVT. LIMITED I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 7 OF 8 (SUPRA), WE HOLD THAT THE ADDITION MADE BY THE ASSE SSING OFFICER AND SUSTAINED BY THE LD. CIT(APPEALS) UNDER SECTION 2(2 2)(E) ON ACCOUNT OF LOAN RECEIVED BY THE ASSESSEE FROM M/S. SURYA BUSIN ESS PVT. LIMITED ON WHICH CONSIDERATION IN THE FORM OF INTEREST WAS PAI D BY THE ASSESSEE TO THE BENEFIT OF THE COMPANY IS NOT SUSTAINABLE. WE, THEREFORE, DELETE THE SAME AND ALLOW GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL. 7. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 3 OF THE ASSESSEES APPEAL RELATING TO THE DISALLOWANCE OF RS.28,267/-, RS.11,869/- AND RS.38,353/- MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) OUT OF TRAVELLING & CONVEYANCE, TELEPH ONE EXPENSES AND SALES PROMOTION EXPENSES RESPECTIVELY, IT IS OBSERV ED THAT THESE DISALLOWANCES TO THE EXTENT OF 10% OUT OF CORRESPON DING EXPENSES WERE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) FOR THE INVOLVEMENT OF PERSONAL ELEMENT. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO E STABLISH THAT PROPER RECORD IN THE FORM OF LOG BOOK, CALL REGISTER, ETC. IS MAINTAINED BY THE ASSESSEE IN ORDER TO SHOW THAT ALL THE EXPENSES INC URRED UNDER THESE THREE HEADS ARE WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF ASSESSEES BUSINESS. KEEPING IN VIEW THIS FAILURE OF THE ASSES SEE AND HAVING REGARD TO THE NATURE OF EXPENSES CLAIMED, WE FIND OURSELVE S IN AGREEMENT WITH THE AUTHORITIES BELOW THAT THE INVOLVEMENT OF PERSO NAL ELEMENT IN THESE EXPENSES CANNOT BE RULED OUT AND SINCE THE DISALLOW ANCE MADE AT 10% FOR SUCH PERSONAL ELEMENT, IN OUR OPINION, IS QUITE FAI R AND REASONABLE, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE SA ME. GROUND NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 11, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 11 TH DAY OF MARCH, 2016 I.T.A. NO. 1817/KOL./2009 ASSESSMENT YEAR: 2006-2007 PAGE 8 OF 8 COPIES TO : (1) SMT. SANGITA JAIN, C/O. SURYA SAMAY, 9/12, LAL BAZAR STREET, BLOCK-D, MERCANTILE BUILDING, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-36(3), KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XX, KOLKA TA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.