Smt. Jagjit Kaur Chawla, Mohali V. DCIT, Mohali

ITA 189/CHANDI/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0238 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest; Additional evidence; Question of law; Agreed addition; Right to appeal; Retraction; Ignorance of law; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' #$ % & ' ($ , ! BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.189/CHD/2017 / ASSESSMENT YEAR : 2011-12 SMT.JAGJIT KAUR CHAWLA, CHAWLA COMPLEX, VPO-DAUN, MOHALI. THE D.C.I.T., CIRCLE 6(1), MOHALI. ./PAN NO: ACJPC2658R /ASSESSEE BY : SHRI PARIKSHIT AGGARWAL, CA / REVENUE BY : SMT.CHANDERKANTA, SR.DR ! /DATE OF HEARING : 15.01.2019 '#$% ! /DATE OF PRONOUNCEMENT: 29.03.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON (IN SHORT CIT(A) DATED 21.11 .2016 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS ACT). 2. THE SOLE ISSUE IN THE PRESENT APPEAL RELATES TO DISALLOWANCE MADE OF INTEREST U/S 36(1)(III) OF TH E ACT. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSING OFFICER(A.O.) NOTED THAT THE ASSESSEE HAD DEBITED INTEREST EXPENSES TO THE TUNE OF RS.25,77,096/- TO ITS PROFIT & LOSS ACCOUNT AND HA D ITA NO.189/CHD/2017 A.Y.2011-12 2 AT THE SAME TIME GIVEN INTEREST FREE,NON BUSINESS PURPOSE LOANS AND ADVANCES TO THE TUNE OF RS.69,32,692/- TO HER SISTER CONCERNS AND FAMILY MEMBERS. IN THE ABSENCE OF ANY EXPLANATION GIVEN BY THE ASSESSEE FOR THE SAME AND RELYING ON THE DECISI ON OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD.(2006) 286 ITR 1(P&H), THE A.O. ACCORDINGLY, DISALLOWED PROPORTIONATE INTEREST EXPENDITURE RELATING TO THE SAID LOANS AND ADVANCES COMPUTED @ 12% PER ANNUM ON THE AVERAGE DAILY AT RS.5,90,976/- AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE SAME, THE ASSESSEE WENT IN APPEAL BEFORE THE LD.CIT(A) WHERE THE ASSESSEE CONTENDED THAT SINCE IT HAD SUFFICIENT OWN INTEREST FREE FUNDS THERE WAS NO QUESTION OF ANY DISALLOWANC E U/S 36(1)(III) OF THE ACT. FOR THIS PROPOSITION REL IANCE WAS PLACED UPON NUMEROUS CASE LAWS AS REPRODUCED AT PARA 4.2 OF THE CIT(A)S ORDER. ALTERNATIVELY, IT W AS ALSO CONTENDED THAT THE DISALLOWANCE OUGHT TO BE CALCULATED BY APPLYING AVERAGE COST OF DEBT FUNDS WHICH CAME TO 5.26% AS AGAINST 12% APPLIED BY THE A.O. THE LD.CIT(A) DISMISSED BOTH THE CONTENTIONS O F THE ASSESSEE HOLDING THAT THE EXPLANATION RELATING TO SUFFICIENCY OF OWN FUNDS AVAILABLE, WAS A NEW ARGUMENT MADE BEFORE HIM AND SINCE NO APPLICATION UNDER RULE 46A PRAYING FOR ADMISSION OF ADDITIONAL ITA NO.189/CHD/2017 A.Y.2011-12 3 EVIDENCE WAS FILED, THE, ADDITIONAL EVIDENCE FILED ALONGWITH WITH THIS NEW EXPLANATION COULD NOT BE TAKEN ON RECORD. HE FURTHER POINTED OUT FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAD AGREED TO TH E IMPUGNED DISALLOWANCE AND, THEREFORE, HELD THAT NO APPEAL LAY AGAINST THE AGREED ADDITION. HE, THEREFO RE, DISMISSED THE APPEAL OF THE ASSESSEE FOR THE ABOVE REASONS. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSI TION OF THE CASE, THE WORTHY CIT(A) IN APPEAL NO. 678/2013-14 DATED 21.11.2016 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIO NS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF LD. AO OF ADDITION OF RS. 5,90,976/- U/S 36(L)(III) IN RESPECT OF FOLLOWING PARTIES WITH RESPE CTIVE AVERAGE DAILY BALANCES : NAME OF THE PARTY AVERAGE DAILY BALANCE FOR THE YEAR (IN RS.) A. DR. SAHIB SINGH & SONS RS.18,57,814/- B. RELIANT POWER PVT. LTD. RS.15,56,862/- C. RELIANT MEGASTRUCTURE PVT. LTD. RS.11,32,833/- D. MR. H. S. CHAWLA RS.3,78,294/- 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) WAS UNJUSTIFIED IN HOLDING THAT THE ALTERNATE PLEA ABOUT SUFFICIENCY OF OWNED FUNDS FOR MAKING INTEREST FREE ADVANCE IN RESPECT OF ADDITION U/S 36 (1)(III) AMOUNTS TO FURNISHING OF ADDITIONAL EVIDENCE U/R 46 A. 4. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON O R BEFORE THE DISPOSAL OF THE SAME. 6. DURING THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE CONTENTION ITA NO.189/CHD/2017 A.Y.2011-12 4 RAISED BEFORE THE LD.CIT(A), REGARDING SUFFICIENCY OF OWN FUNDS WARRANTING NO DISALLOWANCE U/S 36(1)(III) OF THE ACT, WAS A LEGAL GROUND WHICH COULD BE RAISED DURING THE APPELLATE PROCEEDINGS. IT WAS FURTHER POINTED OUT THAT NO ADDITIONAL EVIDENCES WERE REQUI RED TO BE FILED SINCE THE FACT OF SUFFICIENCY OF OWN FU NDS EMANATED FROM THE DOCUMENTS ALREADY ON RECORD BEING FILED DURING ASSESSMENT PROCEEDINGS ITSELF I.E. BAL ANCE SHEET AND PROFIT & LOSS ACCOUNT. THEREFORE, THE CONTENTION OF THE LD.CIT(A) THAT THE ASSESSEE HAD RAISED A NEW GROUND ALONGWITH DOCUMENTARY EVIDENCES WHICH COULD NOT BE ADMITTED IN THE ABSENCE OF AN APPLICATION PRAYING FOR ADMITTING THE SAME IS INCOR RECT AND OUGHT TO BE REJECTED. THE LD. COUNSEL FOR ASSES SEE FURTHER CONTENDED THAT THE LD.CIT(A) COULD NOT HAVE REFUSED TO ENTERTAIN ITS OTHERWISE LEGALLY TENABLE CLAIM BECAUSE THE ADDITION WAS AGREED TO DURING ASSESSMEN T PROCEEDINGS IN IGNORANCE OF THE PROPOSITION OF LAW IN THIS REGARD. 7. THEREAFTER THE LD.COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES THAT SINCE IT HAD SUFFICIENT OWN INTERE ST FREE FUNDS AMOUNTING TO RS.75.43 LACS IN THE FORM O F PROPRIETORS CAPITALS AS AGAINST THE INTEREST FREE ADVANCES GIVEN OF RS.49.24 LACS, NO DISALLOWANCE U /S 36(1)(III) OF THE ACT WAS CALLED FOR. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: ITA NO.189/CHD/2017 A.Y.2011-12 5 I. HERO CYCLES P LTD. VS. CIT, 379 ITR 347 (SC) II. GURDAS GARG VS. CIT(A), ITA NO.413 OF 2014, P&H HIGH COURT III. CIT VS. KAPSONS ASSOCIATES, 381 ITR 204 P&H HIGH COURT. IV. BRIGHT ENTERPRISES P LTD. VS. CIT, 381 ITR 107 P&H HIGH COURT. V. CIT VS. RAKESH GUPTA, ITA NO.37 OF 2014 P&H HIGH COURT. VI. AARTI STEEL LD. VS ACIT DTD. 771/2011, CHANDIGARH TRIBUNAL. VII. HERO CYCLES P LTD. VS CIT, 379 ITR 347 SC IX. SA BUILDERS VS CIT, 288 ITR 1 SC. 8. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A). AND DREW OUR ATTENTION TO HIS FINDINGS AT PARA OF THE ORDER AS UNDER: 4.3. I HAVE GIVEN CAREFUL CONSIDERATION TO THE FAC TS OF THE PRESENT CASE AND FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS WHILE THE ASSESSING OFFICER WA S SEEKING EXPLANATION FOR NOT CHARGING OF INTEREST, TH E APPELLANT DID NOT PROVIDE ANY EXPLANATION THAT SUFFIC IENT INTEREST FREE FUNDS ARE AVAILABLE WITH THE APPELLAN T. THIS IS A NEW ARGUMENT PUT UP IN THE STAGE OF APPEAL ALONG W ITH THE DOCUMENTARY EVIDENCE WHICH WAS NOT FILED BEFORE THE ASSESSING OFFICER. THERE IS NO APPLICATION UNDER RU LE 46 A INTERALIA PRAYING FOR ADMISSION OF ADDITIONAL EVIDENC E AND THEREFORE NO SUCH DOCUMENT CAN BE TAKEN ON RECORD A T THIS STAGE. 4.3.1. ON THE CONTRARY, IT IS MENTIONED IN THE ASSES SMENT ORDER THAT: ''THE COUNSEL WAS NOT ABLE TO OFFER ANY PLAUSIBLE EXPLANATION ON THIS ISSUE AND AGREED FOR THE SAID DISALLOWANCE. THE COMPUTATION OF THE SAME IS AS UNDER:.' 4.3.2. IT TRANSPIRES FROM THE ABOVE THAT THERE WAS NO SUITABLE EXPLANATION ENTERED IN THE COURSE OF ASSES SMENT PROCEEDINGS RATHER THE APPLICANT HAS AGREED FOR MAK ING OF ADDITION AGAINST THE AGREED ADDITION. REFERENCE IN TH IS REGARD MAY BE MADE TO THE FOLLOWING CASES: PULLANGODE RUBBER PRODUCTS CO. LTD. VS. STATE OF KE RALA & ANR, 91 ITR 18 (SC), WHEREIN, IT WAS HELD THAT ADMISS ION MADE WAS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE AND THOUGH IT WAS NOT CONCLUSIVE THE STATEMENT MADE BY THE ASSESSEE COULD FORM BASIS OF ASSESSMENT. ITA NO.189/CHD/2017 A.Y.2011-12 6 (2) DEWAN BAHADUR SETH GOPAL DAS MOHTA VS. THE UNION OF INDIA & ORS. (SC) 26 ITR. WHERE THE PETITI ONER ENTERED INTO A VOLUNTARY SETTLEMENT WITH THE GOVERN MENT AND HIS LIABILITY TO PAY AROSE FROM SUCH SETTLEMENT, HE CAN NOT QUESTION THE SETTLEMENT -UNLESS AND UNTIL HE CAN ESTABL ISH THAT HIS CONSENT WAS IMPROPERLY PROCURED. (3) NARAYAN BHAGWANTRAO GOSAVI BATAJIWALE VS. GOPAL AIT 1960 SC 100, WHEREIN, IT IS HELD THAT AN ADMISSION IS THE BEST EVIDENCE THAT AN OPPOSING PAR TY CAN RELY UPON AND THOUGH NOT CONCLUSIVE, IS DECISIVE OF THE M ATTER, UNLESS SUCCESSFULLY WITHDRAWN OR PROVED ERRONEOUS. JUDGEMENT OF HON'BLE JURISDICTIONAL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF BACHHITAR SINGH V S. CIT & ANR (2010) 236 CTR (P&H) 587, WHERE IT IS HEL D THAT THE VOLUNTARILY STATEMENT THAT TOO RECORDED IN THE PRESENCE OF FAMILY MEMBERS AND COUNSEL IS AN IMPORTANT PIECE OF EVIDENCE WHICH SIMPLY CANNOT BE BRUSHED ASIDE UNLESS AND UNTIL OTHERWISE PROVED. BANTA SINGH KARTAR SINGH, 125 ITR 239 (P&H) WHEREIN IT WAS HELD THAT THE ASSESSEE CANNOT TURN AR OUND AFTER HE HAS AGREED TO SOME ADDITIONS. BY AGREEING TO THE ADDITION, THE ASSESSEE PRECLUDES THE ASSESSING OFFIC ER FOR MAKING ANY FURTHER INVESTIGATION. (6) RAMESHCHANDRA & CO. VS. CIT (BOM) 168 ITR 375. IT SAID, IN ANSWER, THAT IT COULD NOT BE HELD AS A MATTE R OF. LAW THAT THE REMEDY OF APPEAL UNDER THE ACT COULD NOT BE A VAILED OF BY THE ASSESSEE WITHOUT HAVING FILED A RECTIFICATIO N APPLICATION BEFORE THE INCOME-TAX OFFICER IN A CASE WHERE THE O RDER OF THE INCOME-TAX OFFICER SHOWED THAT THE ASSESSEE HAD AGR EED TO THE ADDITION TO THE INCOME. THERE WAS NO PROVISION I N THE ACT WHEREIN THE REMEDY OF APPEAL AGAINST THE ORDER OF TH E INCOME- TAX OFFICER OR OF THE APPELLATE ASSISTANT COMMISSIONE R WAS BARRED IF THE IMPUGNED ORDER MENTIONED THAT THE ORD ER HAD BEEN PASSED ON THE AGREEMENT OF THE ASSESSEE. THE P ROVISIONS- OF THE ACT ENTITLED AN ASSESSEE TO FILE AN APPEAL A GAINST THE ORDER OF THE INCOME-TAX OFFICER BEFORE THE APPE LLATE ASSISTANT COMMISSIONER WHERE THE ASSESSEE DENIED HI S LIABILITY TO BE ASSESSED UNDER THE ACT. IT WAS A DIFFE RENT MATTER IF THE APPELLATE ASSISTANT COMMISSIONER CAME TO THE CONCLUSION THAT THE ORDER WAS PASSED ON THE ADMISSION OF THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO EXPLAIN THAT THE ADMISSION WAS WRONGLY RECORDED UNDER SOME MISTAKEN BELIEF OF FACT AND LAW. IN THAT CASE, THE APPELLATE ASSISTANT COMMISSIONER COULD DISMISS THE APPEAL ON MERITS BUT IT COULD NOT BE HELD AS MATTER OF LAW THA T NO APPEAL WAS COMPETENT. IT WAS NO DOUBT TRUE THAT IN A C ASE WHERE THE ADMISSION OF THE ASSESSEE HAD BEEN WRONGL Y RECORDED IN THE ASSESSMENT ORDER, IT WAS OPEN TO TH E ASSESSEE TO FILE A PETITION FOR RECTIFICATION; BUT IF T HE ORDER WAS APPEALABLE, IT WAS EQUALLY OPEN TO THE ASSESSEE TO AVA IL OF THE REMEDY OF APPEAL AND THE APPELLATE AUTHORITY WO ULD HAVE TO DECIDE THE APPEAL ON MERITS. NOR WAS IT NEC ESSARY FOR THE ASSESSEE TO FILE AN AFFIDAVIT IN SUPPORT OF HIS ITA NO.189/CHD/2017 A.Y.2011-12 7 SUBMISSIONS IN ALL CASES. THE ASSESSEE MIGHT CHOOSE TO FILE AN AFFIDAVIT IN SUPPORT OF HIS SUBMISSIONS AND. IF HE C HOSE NOT TO FILE IT. THE CIRCUMSTANCES APPEARING ON THE FILE HAD TO BE JUDGED IN THE LIGHT OF THE MATERIAL AVAILABLE AND IF THERE WERE SUFFICIENT CIRCUMSTANCES ON THE FILE TO COME TO T HE CONCLUSION THAT THE ADMISSION MADE BY THE ASSESSEE WAS NOT BINDING ON HIM, HE WOULD BE ENTITLED TO THE RELIEF IN APPEAL. WITH GREAT RESPECT TO THE LEARNED JUDGES OF THE PUN JAB AND HARYANA HIGH COURT WHO DECIDED CHHAT MULL AGGARWAL'S CASE [1979] 116 ITR 694, WE ARE UNABLE TO AGREE. WHERE AN ASSESSEE HAS MADE A STATEMENT OF FACTS, HE CAN HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TAXES HIM IN ACCO RDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE, HE CAN FILE NO APPEAL. THEREFORE, IT IS IMPERATIVE, IF THE ASSESSEE'S C ASE IS THAT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THA T HE MADE IT UNDER MISTAKEN BELIEF OF FACT OR LAW , THAT HE SHOULD MAKE AN APPLICATION FOR RECTIFICATION TO THE AUTHORI TY WHICH PASSED THE ORDER BASED UPON THE STATEMENT. UNTIL RECT IFICATION IS MADE, AN APPEAL IS NOT COMPETENT. (7) RAMANLAL KAMDAR VS. CIT (MAD) 108 ITR 73. WE ARE OF THE OPINION THAT THE APPEALS TO THE APPELL ATE ASSISTANT COMMISSIONER AND TO THE TRIBUNAL, BY THE ASSE SSEE, WERE INCOMPETENT. WE HAVE ALREADY REFERRED TO THE FAC T THAT ONE OF THE PARTNERS OF THE ASSESSEE, VIZ., SHRI CHANDU LAL KAMDAR, APPEARED BEFORE THE INCOME-TAX OFFICER ON OC TOBER 27, 1967, AND STATED THAT THE ASSESSEE HAD NO OBJECTI ON TO THE PROPOSED REVISION. ONCE THE ASSESSEE HAD STATED THAT IT HAD NO OBJECTION TO THE PROPOSED REVISION AND THE I NCOME-TAX OFFICER HAD ALSO REVISED THE ORIGINAL ASSESSMENT AS P ROPOSED BY HIM, THE ASSESSEE COULD NOT BE SAID TO HAVE BEEN AGGRIEVED BY THE ORDER OF THE INCOME-TAX OFFICER. ON LY IF THE ASSESSEE WAS AGGRIEVED BY THE ORDER OF THE INCOME-TAX OFFICER, HE HAD THE RIGHT TO FILE AN APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER AND ONCE THE ASSESSEE COULD NOT HAVE HAD ANY GRIEVANCE IN VIEW O F THE STATEMENT MADE BY THE PARTNER, THE APPEAL TO THE APPELLATE ASSISTANT COMMISSIONER WAS INCOMPETENT AND EQUALLY THE APPEAL TO THE TRIBUNAL WAS INCOMPETENT. IF SO, THE REFERENCE TO THIS COURT OF THE TWO QUESTIONS SAID TO ARISE OUT OF THE ORDER OF THE TRIBUNAL IS ALSO INCOMPETENT. WE M AY POINT OUT IN THIS CONTEXT THE FACT THAT ONE OF THE PARTNER S OF THE ASSESSEE APPEARED BEFORE THE INCOME-TAX OFFICER AND S TATED THAT THE ASSESSEE HAD NO OBJECTION TO THE PROPOSED R EVISION HAS NOT BEEN DISPUTED AT ANY STAGE AND EVEN BEFORE US, AND EVERY ONE OF THE AUTHORITIES, VIZ., THE INCOME-TAX OFF ICER, THE APPELLATE ASSISTANT COMMISSIONER AND THE TRIBUNAL HA S REFERRED TO THIS FACT IN THE COURSE OF THEIR ORDERS . 4.4 THE FACT THAT THE AO HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(L)(C) DOES NOT VITIATE THE ACTION O F THE AO IN MAKING ADDITION ON THE ISSUE WHERE THE APPELLANT HAD NO EXPLANATION TO OFFER AND AGREED TO THE SURRENDER. ITA NO.189/CHD/2017 A.Y.2011-12 8 4.5. KEEPING IN VIEW THE AFORESAID FACTUAL AND LEGAL POSITION, THE ADDITION MADE BY THE AO IS CONFIRMED. THIS GROUN D OF APPEAL IS ACCORDINGLY DISMISSED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ISSUE BEFORE U S RELATES TO DISALLOWANCE OF INTEREST EXPENSES U/S 36(1)(III) OF THE ACT. THE LD.CIT(A), WE FIND, HAS NOT ADJUDICATED THE ISSUE ON MERITS BUT HAS UPHELD THE DISALLOWANCE FOR THE REASON THAT THE ASSESSEE HAD AGREED TO THE DISALLOWANCE DURING ASSESSMENT PROCEEDINGS AND, THEREFORE, HE WAS NOT ENTITLED TO APPEAL AGAINST THE SAME AND ALSO FOR THE REASON THA T THE ASSESSEE HAD TAKEN UP THE NEW PLEA/EXPLANATION BEFORE HIM AS TO WHY THE DISALLOWANCE OUGHT NOT TO BE MADE SUPPLEMENTED WITH DOCUMENTARY EVIDENCES WHICH WERE ADDITIONAL EVIDENCES AND NO PRAYER WAS MADE F OR ADMISSION OF THE SAME AS PRESCRIBED BY RULE 46A OF THE ACT. 10. WE ARE NOT IN AGREEMENT WITH THE LD.CIT(A) ON BOTH THE COUNTS. THE ACT ALLOWS THE REMEDY OF APPE AL IF THE ASSESSEE IS AGGRIEVED BY AN ORDER PASSED. THOUGH ON THE FACE OF IT, THERE CAN BE NO GRIEVANCE IN CASE OF AN AGREED ADDITION, BUT IF THE ASSESSEE IS ABLE TO DEMONSTRATE THAT THE AGREEMENT WAS MADE UNDER SOME MISTAKEN BELIEF/IGNORANCE OF LAW, THE ASSESSEE THEN CAN VERY WELL BE SAID TO BE AGGRIEVED BY THE ADDITION SO MADE. AFTER ALL THE ENTIRE EXERCISE OF ASSESSMENT AND APPEAL IS AIMED AT DETERMINING THE TRUE AND CORRECT INCOME WHICH IS LIABLE TO TAX AS P ER ITA NO.189/CHD/2017 A.Y.2011-12 9 THE PROVISIONS OF THE INCOME TAX ACT AND NO ADDITION/DISALLOWANCE CAN BE MADE/UPHELD, MERELY BECAUSE THE SAME WAS AGREED TO BY THE ASSESSEE IN IGNORANCE OF THE LAW. AN ASSESSEE CAN, IN APPEAL, V ERY WELL RETRACT ITS AGREEMENT MADE BY EXPLAINING THAT IT WAS RECORDED UNDER A MISTAKEN BELIEF OF LAW. 11. THE CASE LAWS REFERRED TO BY THE LD.CIT(A) DO NOT SUPPORT HIS CONTENTION THAT NO APPEAL LIES AGAINST AGREED ADDITION. IN FACT MOST OF THE DECISIONS HAVE BEEN RENDERED IN A DIFFERENT CONTEXT RELATING TO RETRACTION OF AN ADMISSION DURING ASSESSMENT PROCEEDINGS OR QUESTIONING A SETTLEMENT AGREEMENT ENTERED INTO WITH THE GOVERNMENT, BUT IN ALL THE CA SE LAWS THE COURTS HAVE UNANIMOUSLY HELD THAT THOUGH ADMISSION IS THE BEST PIECE OF EVIDENCE , IT IS NOT CONCLUSIVE AND AN ASSESSEE CAN RETRACT THE SAME BY SHOWING THAT IT WAS INCORRECTLY MADE. 12. IN THE FACTS OF THE PRESENT CASE, WE FIND THAT BEFORE THE A.O. THE ASSESSEE HAD OFFERED NO PLAUSIB LE EXPLANATION AS TO WHY THE DISALLOWANCE OF INTEREST EXPENSES U/S 36(1)(III) OF THE ACT BE NOT MADE BUT BEFORE THE LD.CIT(A) HE PLEADED THAT THE SAME BE ALLOWED IN VIEW OF THE PROPOSITION OF LAW LAID DOWN BY VARIOUS HIGH COURTS INCLUDING THE APEX COURT AND TH E JURISDICTIONAL HIGH COURT, THAT WHERE SUFFICIENT OW N INTEREST FREE FUNDS ARE AVAILABLE, NO DISALLOWANCE U/S 36(1)(III) CAN BE MADE. THE ASSESSEE ALSO SHOWED FR OM ITA NO.189/CHD/2017 A.Y.2011-12 10 HER FINANCIAL STATEMENTS THAT THERE WERE SUFFICIENT OWN FUNDS AVAILABLE IN THE FORM OF OWN CAPITAL OF THE PROPRIETOR FOR MAKING THE INTEREST FREE ADVANCES. UNDOUBTEDLY, THE ASSESSEE HAD DEMONSTRATED THAT ITS ADMISSION WAS WRONGLY MADE AS PER LAW AND FACTS ALS O. THEREFORE, WE HOLD, THAT THE LD.CIT(A) OUGHT TO HAV E CONSIDERED THE SAME ON MERITS AND HIS ACTION OF HOLDING THAT NO APPEAL LAY AGAINST THE AGREED DISALLOWANCE IS THEREFORE SET ASIDE. 13. MOREOVER, WE DO NOT AGREE WITH THE LD.CIT(A) TH AT THE CONTENTION RAISED WAS NOT ADMISSIBLE SINCE IT W AS A NEW GROUND AND ADDITIONAL EVIDENCES WERE FILED WHICH WERE NOT ACCOMPANIED BY AN APPLICATION FOR ADMITTING THE SAME AS PRESCRIBED BY THE INCOME TAX RULES UNDER RULE 46A IN THIS REGARD. IN FACT WE FIN D THAT THE ASSESSEE HAD RAISED A CONTENTION BASED ON PROPOSITION OF LAW LAID DOWN BY COURTS ,WHICH IT WA S ENTITLED TO RAISE IN APPEAL. ALSO THE FINANCIAL STATEMENTS SHOWING THE AVAILABILITY OF SUFFICIENT O WN FUNDS WAS ALREADY AVAILABLE ON RECORD HAVING BEEN FILED DURING ASSESSMENT PROCEEDINGS ITSELF. THE DOCUMENTS REFERRED TO BY THE ASSESSEE FOR ESTABLISH ING THE FACT OF AVAILABILITY OF SUFFICIENT OWN FUNDS WE RE NOT ADDITIONAL EVIDENCES AT ALL, THEREFORE, AND THUS, W E HOLD THAT THE LD.CIT(A) WAS WRONG IN STATING THAT T HEY WERE ADDITIONAL EVIDENCES AND, THEREFORE, REFUSING TO ITA NO.189/CHD/2017 A.Y.2011-12 11 ADMIT THEM SINCE NO PRAYER FOR ADMISSION OF THE SAM E WAS FILED BY THE ASSESSEE. 14. NOW COMING TO THE MERITS OF THE CASE, WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT IT IS SETTLED LAW THAT WHERE SUFF ICIENT OWN INTEREST FREE FUNDS ARE AVAILABLE, NO DISALLOWA NCE U/S 36(1)(III) OF THE ACT CAN BE MADE. THE HON'BLE APEX COURT IN A RECENT DECISION IN THE CASE OF CIT VS RE LIANCE INDUSTRIES LTD. IN CIVIL APPEAL NO.10 OF 2019 DATED 02.1.2019 HAS HELD THAT THE PRESUMPTION IN SUCH A CASE IS THAT OWN FUNDS HAVE BEEN USED FOR MAKING THE ADVANC ES, CALLING FOR NO DISALLOWANCE OF INTEREST U/S 36(1)(I II) OF THE ACT. THE QUESTION OF LAW BEFORE THE HONBLE COURT W AS : 1. WHETHER THE HIGH COURT IS CORRECT IN HOLDING THAT INTEREST AMOUNT BEING INTEREST REFERABLE TO FUNDS GIVEN TO SU BSIDIARIES IS ALLOWABLE AS DEDUCTION UNDER SECTION 36(1)(III) OF TH E INCOME TAX ACT, 1961 (FOR SHORT THE ACT) WHEN THE INTERES T WOULD NOT HAVE BEEN PAYABLE TO BANKS, IF FUNDS WERE NOT PROVIDE D TO SUBSIDIARIES; THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT IN RESPECT TO THE SAME ARE AS UNDER: INSOFAR AS THE FIRST QUESTION IS CONCERNED, THE ISS UE RAISES A PURE QUESTION OF FACT. THE HIGH COURT HAS NOTED THE FINDING OF THE TRIBUNAL THAT THE INTEREST FREE FUNDS AVAILABLE T O THE ASSESSEE WERE SUFFICIENT TO MEET ITS INVESTMENT. HENC E, IT COULD BE PRESUMED THAT THE INVESTMENTS WERE MADE FRO M THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE T RIBUNAL HAS ALSO FOLLOWED ITS OWN ORDER FOR ASSESSMENT YEAR 20 02-03. IN VIEW OF THE ABOVE FINDINGS, WE FIND NO REASON TO INTERFERE WITH THE JUDGMENT OF THE HIGH COURT IN REGARD TO THE FIRST QUESTION. ACCORDINGLY, THE APPEALS ARE DISMISSED IN REG ARD TO THE FIRST QUESTION. 15. THE ASSESSEE HAS ALSO PLACED THE RELEVANT FACTS BEFORE US REFLECTING THE SAME FROM ITS FINANCIAL STATEMENT . SINCE THE SAID FACTS NEED TO BE VERIFIED, WE CONSIDER IT FIT TO RESTORE THE ITA NO.189/CHD/2017 A.Y.2011-12 12 ISSUE BACK TO THE CIT(A) TO CONSIDER THE SUBMISSION S OF THE ASSESSEE AND AFTER VERIFICATION OF THE FACTS ADJUDI CATE THE SAME IN ACCORDANCE WITH LAW. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- % & ' ($ (SANJAY GARG) (ANNAPURNA GUPTA) ! /JUDICIAL MEMBER )* ! /ACCOUNTANT MEMBER , % /DATED: 29 TH MARCH, 2019 * $ * #&' ()*) / COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT 2. ',+ / THE RESPONDENT 3. - / CIT 4. - ( )/ THE CIT(A) 5. )./' 0 , !0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35 / GUARD FILE #& / BY ORDER, / ASSISTANT REGISTRAR