Debottor Trust Estate of Rammohan Mullick, Kolkata V. ITO, Ward - 43(4), Kolkata, Kolkata

ITA 216/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4565 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-12-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 15-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS LAHARI JCITSRDR
• Assessee Lawyers: S JHAJHARIA
• Keywords: Income from undisclosed sources; Principle of natural justice; Proportionate interest; Retrospective amendment; Additional evidence
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 216 & 327 / KOL / 2016 ASSESSMENT YEAR :2009-10 M/S ULUBERIA COKE OVEN PLANT, C/O SALARPURIA JAJODIA & CO., 7, CHITTARANJAN AVENUE, KOLKATA-700 072 [ PAN NO.AABFU 2589 D ] DCIT, CIRCLE-56, 3 GOVT. PLAE (WEST), 2 ND FLOOR, KOLKATA-700 001 V/S . V/S . JCIT, RANGE-56, 3, GOVT. PLACE (WEST) KOLKATA-700 001 M/S ULBERIA COKE OVEN PLANT, 2, BARROTTO LANE, 1 ST FLOOR, ROOM NO 105, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI S. JHAJHARIA & SHRI SUJOY SEN, AR /BY RESPONDENT SHRI DEBASHIS LAHARI, JCIT-SR-DR /DATE OF HEARING 14-07-2016 ! /DATE OF PRONOUNCEMENT 26-08-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THE CROSS-APPEALS HAVE BEEN FILED BY ASSESSEE AS W ELL AS BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 13.12.2012. ASSESSMENT WAS FRAMED BY JCIT, RANGE-56, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS COMMON ORDERS DATED 21.12.2011 FOR A SSESSMENT YEAR 2009-10. ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 2 SHRI S. JHAJHARIA & SHRI SUJOY SEN, LD. AUTHORIZED REPRESENTATIVES APPEARED ON BEHALF OF ASSESSEE AND SHRI DEBASHIS LAHIRI, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. BOTH APPEALS ARE HEARD TOGETHER AND ARE BEING DI SPOSED OF BY WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO.216/KO L/2013. 3. GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER:- 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE OF THE PAYMENT OF COMMISSION OF RS.8,29,500/- MADE TO THE SISTER CONCERN M/S MACLEOD FUELS PVT. LTD., WITHOUT PROPERLY CONSIDERI NG AND APPRECIATING THE FACTS AND THE DETAILED EXPLANATION FURNISHED BY THE APPELLANT ASSESSEE FIRM. THE ACTIONS OF THE AO & THE LD. CIT(A) WEE WHOLLY U NWARRANTED, UNCALLED FOR AND BAD IN LAW. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE US/S 40(A)(IA) OF THE ACT OF THE PAYMENT OF CARRIAGE INW ARD EXPENSE OF RS.6,99,508/- MADE TO M/S VIKAS ENTERPRISES DURING THE YEAR ITSELF BY WAY OF RE-IMBURSEMENT FOR TRANSPORTATION OF GOODS ON THE A LLEGED GROUND THAT THE ASSESSEE FIRM HAD FAILED TO DEDUCT TAX AT SOURCE ON THE SAID SUM U/S. 194C(1) OF THE ACT. THE DECISIONS TAKEN BY BOTH THE ASSESSING OFFICER & THE LD. CIT(A) WITHOUT PROPERLY CONSIDERING AND APPRECIATING THE FACTS AND THE EXPLANATION FURNISHED BY THE ASSESSEE FIRM WERE WHOLLY UNWARRANTED, UNCAL LED FOR AND BAD IN LAW. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT OF THE PAYMENT OF PORT EXPENSE S OF RS.45,50,580/- MADE TO M/S BHATIA INTERNATIONAL LTD., DURING THE YEAR I TSELF BY WAY OF RE- IMBURSEMENT ON THE ALLEGED GROUND THAT THE ASSESSEE FIRM HAD FAILED TO DEDUCT TAX AT SOURCE ON THE SAID SUM U/S. 194C(1) O F THE ACT. THE DECISIONS TAKEN BY BOTH THE AO & THE LD. CIT( A) WITHOUT PROPERLY CONSIDERING AND APPRECIATING THE FACTS AND THE EXPL ANATION FURNISHED BY THE ASSESSEE FIRM WERE WHOLLY UNWARRANTED, UNCALLED FOR AND BAD IN LAW. 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT OF THE PAYMENT OF LEGAL & PROF ESSIONAL CHARGES OF RS.30,000/- (INCLUSIVE OF THE PAYMENT OF OUT-OF-POC KET EXPENSE OF RS.14,000/- UN A/C OF CONVEYANCE ETC.) MADE TO THE TAX CONSULTA NT SRI SUBHAS MITRA DURING ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 3 THE YEAR ITSELF ON THE ALLEGED GROUND THAT THE ASSE SSEE FIRM HAD FAILED TO DEDUCT TAX AT SOURCE ON THE ENTIRE SUM U/S. 194J O F THE ACT. THE DECISIONS TAKEN BY BOTH THE AO & THE LD. CIT(A) WITHOUT PROPERLY CONSIDERING AND APPRECIATING THE FACTS AND THE EXPL ANATION FURNISHED BY THE ASSESSEE FIRM WERE WHOLLY UNWARRANTED, UNCALLED FOR AND BAD IN LAW. 5. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE U/S. 36(1)(III) OF THE ACT OF THE PAYMENT OF INTEREST O F RS.20,56,654/- MADE ON THE BORROWED FUNDS ON A PROPORTIONATE BASIS (OUT OF TOT AL INTEREST OF RS.1,19,03,998/- PAID AND DEBITED TO THE P&L A/C) O WING TO THE ALLEGED ADVANCEMENT OF INTEREST-FREE LOAN TO THE CLOSE RELA TIVES AND SISTER CONCERNS UNRELATED TO THE ASSESSEES BUSINESS WITHOUT ESTABL ISHING ANY NEXUS BETWEEN THE LOANS TAKEN AND GIVEN. THE DECISIONS TAKEN BY BOTH THE AO & THE LD. CIT(A) WITHOUT PROPERLY CONSIDERING AND APPRECIATING THE FACTS AND THE EXPL ANATION FURNISHED BY THE ASSESSEE FIRM WERE WHOLLY UNWARRANTED, UNCALLED FOR AND BAD IN LAW. 4. THE FIRST ISSUE RAISED BY THE ASSESSEE IN ITS AP PEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINI NG THE DISALLOWANCE OF PAYMENT OF COMMISSION OF RS. 8,29,500/- ON ACCOUNT OF PAYMENT TO SISTER CONCERN. 5. FACTS IN BRIEF ARE THAT ASSESSEE-FIRM CARRIED ON BUSINESS OF MANUFACTURING LOW ASH METALLURGICAL (LAM FOR SHORT) COKE OUT OF RAW COAL IMPORTED FROM AUSTRALIA AND ALSO FROM INDIGENOUS SO URCES. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS PAID COMMISSION T O M/S MACLEOD FUELS PVT. LTD. (FOR SHORT MFPL) IN WHICH ALMOST ALL THE DIRECTORS ARE THE PARTNER IN THE ASSESSEE FIRM. THE ASSESSEE CLAIMED THAT MFPL A SSISTED IN THE JOB OF UNLOADING AND LOADING OF IMPORTED COAL AND IT ALSO PROVIDES THE ADVANCE INFORMATION FOR THE ARRIVAL OF THE SHIPS FROM AUSTR ALIA. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE HAS ALREADY CLAIMED SEPA RATE EXPENSES AS PORT EXPENSES AMOUNTING TO RS.47,08,371. THERE WAS NEITHER ANY AGREEMENT TO PAY COMMISSION BETWEEN THE ASSESSEE AND MFPL NOR AN Y EVIDENCE THAT THE MFPL HAS RENDERED ANY SERVICES TO THE ASSESSEE. THE MFPL DOES NOT HOLD ANY LICENSE TO PERFORM THE ABOVE EXPLAINED FUNCTION S FROM THE PORT. THE ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 4 ASSESSEE DEDUCTED TDS ON COMMISSION PAID TO M/S MFP L @ 2% WHILE IT SHOULD BE 10%. ACCORDINGLY, THE AO DISALLOWED THE S AME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO THE L D. CIT(A) WHERE THE ASSESSEE PLEADED THAT NOMENCLATURE OF COMMISSION IS NOT CORRECT. IT WAS PAID FOR PROVIDING SUPERVISION OF LOADING AND UNLOADING CHARGES AND NOT FOR THE LOADING AND UNLOADING CHARGES. THERE IS A WRITTEN A GREEMENT IN WHICH SUPERVISION HAS BEEN PAID @ 150/- AFTER TDS DEDUCTION. NO LICENSE IS REQUIRED TO RENDER THE SUPERVISORY SERVICES. ONLY G ATE PASS IS ISSUED BY THE AUTHORITY CONCERN WHICH NEEDS TO BE SUBMITTED BACK. TDS HAS BEEN PAID @ 2% BECAUSE IT IS A WORKS CONTRACT. THE AO HAS NOT M ADE ANY EFFORT TO VERIFY THE TRANSACTIONS. HOWEVER, CIT(A) HAS UPHELD THE DE CISION OF AO BY OBSERVING THAT ASSESSEE AND ITS RELATIVES ARE HAVING MAJORITY OF SHARE HOLDING IN M/S MACLEOD FUELS PVT. LTD. THE ACCOUNTING ENTRIES FOR THESE TRANSACTIONS WERE PASSED ON 31.03.2009 FOR THE YEAR. THE EXPENSE CLAI MED HAS BEEN NAMED AS COMMISSION AND SO THAT TDS @10% WILL BE APPLICABLE. THE ASSESSEE IS NOT ABLE TO PROVIDE SUFFICIENT EVIDENCE THAT THE SERVIC ES HAVE BEEN RENDERED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE CAME IN SECOND APPEAL BEFORE US. 7. BEFORE US LD. AR SUBMITTED THAT THE PROVISIONS O F SECTION 40A(2) OF THE ACT HAS NOT BEEN APPLIED BY THE AO FOR MAKING THE A FORESAID DISALLOWANCES. THE EXPENSES CLAIMED BY THE ASSESSEE ARE GENUINE AN D ACCORDINGLY THESE SHOULD BE ALLOWED FOR DEDUCTION. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE FIND THAT THE NATURE OF T HE SERVICES RENDERED BY THE MFPL HAS NOT BEEN JUSTIFIED BY THE LD. AR. THE AO N EVER RAISED THE ISSUE THAT IT WAS MADE TO THE SISTER CONCERN THEREFORE IT IS D ISALLOWED. THE AR HAS NOT BROUGHT THE SPECIFIC SERVICES RENDERED BY THE MFPL. IN THE SIMILAR FACTS & ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 5 CIRCUMSTANCES THE ISSUE HAS BEEN DECIDED IN FAVOUR OF REVENUE BY THE HONBLE HIGH COURT OF GUJRAT IN THE CASE OF GUJARAT INSECTICIDES LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX * [2013] 40 TAXMANN.COM 166 (GUJARAT) HAVING PERUSED THE DECISION OF THE TRIBUNAL ON THI S ISSUE, WE NOTICE THAT IN THE PREVIOUS YEAR AS WELL AS IN THE PRESENT YEAR, WHILE REJECTING THE ASSESSEE'S CLAIM FOR DEDUCTION OF COMMISSION PA YMENT, THE TRIBUNAL HEAVILY RELIED ON THE FACTOR THAT THERE WAS NOTHING TO SUGGEST THAT THE RECIPIENT OF SUCH COMMISSION PAYMENT HAD RENDERED A NY SERVICES TO THE ASSESSEE. THE TRIBUNAL NOTED THAT THE ONUS WAS ON T HE ASSESSEE, CLAIMING SUCH DEDUCTION, TO ESTABLISH THAT SUCH PAY MENTS WERE MADE FOR SERVICES RENDERED. IN VIEW OF THE ABOVE CONCLUSION, WE DO NOT SEE ANY SCOPE OF ENTERTAINING SUCH QUESTION. IN THE ABSENCE OF THE SPECIFIC SERVICES RENDERED, W E FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND SAME IS UPHELD. ASSESSEE GROUND IS DISMISSED. 9. NEXT ISSUE RAISED BY ASSESSEE IS AS REGARDS THA T LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY DISALLOWING THE CARR IAGE INWARD EXPENSES OF RS. 6,99,508/- ON ACCOUNT OF NON DEDUCTION OF TDS. 10. THE CHARGES WERE PAID TO VIKAS ENTERPRISES TOWA RDS THE CARRIAGE INWARD EXPENSES FOR THE TRANSPORTATION OF COAL WITHOUT TDS . THEREFORE THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. THE ASSESSEE PREFERRED AN APPEAL TO LD.CIT(A) WHO U PHELD THE DECISION OF AO BY OBSERVING THAT EVEN THOUGH THERE IS NO ANY AG REEMENT BUT THE PAYMENTS WERE MADE FOR HIRING OF TRUCKS. SO THE PRO VISION OF SEC 194C IS APPLICABLE. BEING AGGRIEVED, BY THE ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 11. BEFORE US LD. AR FOR THE ASSESSEE REQUESTED THE BENCH TO RESTORE THE MATTER TO THE AO FOR VERIFICATION WHETHER THE PAYEE HAS INCLUDED THE RECEIPT IN ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 6 HIS INCOME TAX RETURN. ON THE OTHER HAND, LD. DR DI D NOT RAISE ANY OBJECTION IF THE MATTER MAY BE REMITTED BACK TO THE FILE OF AO. 12. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE FIND THAT THERE IS AMENDME NT OF PROVISO TO SEC. 40(A)(IA) OF THE ACT R.W.S 1 ST PROVISO TO SEC. 201, WHEREIN, IF ANY PAYEE HAS PAID THE TAXES BY OFFERING / DISCLOSING THE SAID RE CEIPT IN ITS RETURN OF INCOME, THEN THE PAYER (THE ASSESSEE HEREIN) SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT. ACCORDINGLY NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT COULD OPERATE IN THAT SCENARIO. THE SAID PROVISO THOUGH INSERTED BY THE FINANCE ACT 2012 W.E.F 1-4-2013 HAS BEEN HELD TO BE RETROSPECTIVE IN OPERA TION BY RECENT DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) WHEREIN THE QUESTIO N RAISED BEFORE THE COURT AND THE DECISION RENDERED THEREON IS REPR ODUCED HEREIN BELOW FOR THE SAKE OF CLARITY:- QUESTION : WHETHER THE SECOND PROVISO TO SECTION 40(A)(IA) ( INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTED AND PAID BY A DEDUCTOR IF RESIDENT RECIPIENT HAS DI SCLOSED THE AMOUNT IN HIS RETURN OF INCOME AND PAID TAX THEREON, IS RETROSPEC TIVE IN NATURE OR NOT? HELD : SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE ( NO.2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. HENCE , SECTION 40(A)(IA) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASNT DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCTEE ALSO HASNT OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(I) ISNT ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SEC TION 40(A)(IA) WHEN THERE WAS NO LOSS TO REVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL-VS-ACIT [2014] 45 TAXMANN.COM 555 (AGRA TRIB) HAD HELD THAT THE SEC OND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(8) WAS INSERTED BY THE FINANCE NO.(2) ACT, 2004, EVEN THOUGH THE FINANCE ACT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RE TROSPECTIVE IN NATURE. ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 7 THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISOS IS DECLARATORY AND CURATIVE IN NATURE AND HA RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. , (SUPRA) WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY TO SET ASIDE THIS ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE AFORESAID JUDGMENT. ACCORDINGLY, WE DIRECT THE AO TO VERIFY W HETHER THE PAYEES HAVE INCLUDED THE SUBJECT-MENTIONED RECEIPTS IN THEIR RE SPECTIVE RETURNS AND PAID TAXES THEREON OR NOT. IF THAT IS SO, THEN DISALLOWA NCE U/S. 40(A)(IA) OF THE ACT SHALL NOT BE MADE IN THE HANDS OF ASSESSEE. ACCORDI NGLY, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 13. NEXT ISSUE RAISED BY ASSESSEE IS AS REGARDS THA T LD. CIT(A) ERRED IN DISALLOWING THE PAYMENT OF PORT EXPENSES MADE BY AO BY DISALLOWING A SUM OF RS. 45,50,580.00 PAID TO M/S BHATIA INTERNATIONA L LTD ON ACCOUNT OF NON DEDUCTION OF TDS. 14. AO HAS DISALLOWED THE PORT EXPENSES PAID TO M/S BHATIA INTERNATIONAL DUE TO NON DEDUCTION OF TDS. THE ASSESSEE CLAIMED T HAT THE PAYMENT MADE UNDER THE HEAD PORT EXPENSES INCLUDING UNLOADING OF THE MATERIAL, STEVEDORING ETC. ARE ACTUALLY THE PART OF PURCHASE. HOWEVER THE AO DISREGARDED THE CLAIM OF THE ASSESSEE BY HOLDING TH AT THESE EXPENSES ARE IN ADDITION TO THE PURCHASE AMOUNT AND REPRESENTS LOAD ING AND UNLOADING INCLUDING OTHER SERVICES. ACCORDINGLY THE AO DISALL OWED THE SAME FOR THE VIOLATION OF SECTION 194C R.W.S. 40(A)(IA) OF THE A CT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 15. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE HAS SUBMITTED THAT IT IS ONLY THE REIMBURS EMENT OF THE EXPENSES ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 8 INCURRED BY BHATIA INTERNATIONAL LTD TO M/S ORISSA STEVEDORES PVT. LTD. THEREFORE TDS PROVISIONS ARE NOT APPLICABLE. HOWEVE R THE LD. CIT(A) DISREGARDED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER:- 7. GROUND NO. 6: IN SUCH RESPECT, THE APPELLANT HA S CONTENDED THAT SUCH SUM IS MERE REIMBURSEMENT OF THE EXPENSES OF B HATIA INTERNATIONAL LTD., ON THE BASIS OF DEBIT NOTE RAIS ED BY MM/S ORISSA STEVEDORES LTD., IN SUCH RESPECT, THE APPELLANT HAS FURTHER CONTENDED THAT M/S ORISSA STEVEDORES LTD, WHO ARE THE ULTIMAT E SERVICE PROVIDER TO BHATIA INTERNATIONAL LTD., HAVE DEDUCTED THE TDS ON SUCH SUM AND THE SUM PAID BY THE APPELLANT IS NOTHING BUT REIMBURSEM ENT OF EXPENSES TO M/S BHATIA INTERNATIONAL LTD., HAVING GONE THROUGH THE DOCUMENTS SO PLACED BEFORE ME I FIND THAT M/S BHATIA INTERNATION AL LTD., HAS ONLY REIMBURSED THE EXPENSES PAID TO M/S ORISSA STEVEDOR ES LTD., AND HENCE IT DOES NOT ATTRACT THE APPLICABILITY OF TDS IN THE MATTER. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN DETAI LS AND APPLICABILITY OF SEC. 40(A)(IA). SINCE APPELLANT HAS FAILED TO DEDUC T TDS, SUM OF RS.45,50,580/- IS DISALLOWABLE U/S. 40(A)(IA) OF IN COME TAX ACT. HOWEVER, SHIPPING (SUPRA), APPLICATION OF WHICH IS STAYED BY HONBLE HIGH COURT OF A.P. HENCE, APPEAL ON THIS GROUND IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE CAME IN SECOND APPEAL BEFORE US. 16. THE LD. AR BEFORE US SUBMITTED THAT THESE ARE T HE REIMBURSEMENT OF THE EXPENSES. SO THESE EXPENSES ARE OUT OF THE PURVIEW OF TDS PROVISIONS. THE LD. AR ALSO ALTERNATIVELY SUBMITTED THAT THE MATTER CAN BE RESTORED TO THE AO FOR VERIFICATION WHETHER THE RECEIPTS HAS BEEN INCL UDED IN THE BOOKS OF THE COMPANY. ON THE OTHER HAND THE LD. DR VEHEMENTLY SU PPORTED THE ORDER OF THE LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE ARE FINDING THAT THE ASSESSEE AT THE TIM E OF ASSESSMENT SUBMITTED THAT THE EXPENSES ARE ACTUALLY THE PART OF THE PURC HASES. BUT BEFORE THE LD. CIT(A) HE CHANGED THE PLEA THAT THESE ARE REIMBURSE MENT OF THE EXPENSES. NOW BEFORE US THE LD. AR ALTERNATIVELY SUBMITTED TH AT THE MATTER CAN BE RESTORED TO THE AO FOR VERIFICATION WHETHER THE REC EIPTS HAVE BEEN INCLUDED IN THE BOOKS OF THE COMPANY. WE FIND THAT THE AO HAS D ISALLOWED THE SAME FOR ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 9 THE VIOLATION OF TDS PROVISIONS. SO IN THE INTEREST OF THE JUSTICE WE ARE INCLINED TO RESTORE THE MATTER TO THE AO FOR FRESH VERIFICAT ION IN TERMS OF THE ORDER OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) (SUPRA) . RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. , (SUPRA) WE DEEM IT FIT AND APPROPRIATE IN THE INT EREST OF NATURAL JUSTICE AND FAIR PLAY TO SET ASIDE THIS ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE AFORESAID JUDG MENT. ACCORDINGLY, WE DIRECT THE AO TO VERIFY WHETHER THE PAYEES HAVE INCLUDED T HE SUBJECT-MENTIONED RECEIPTS IN THEIR RESPECTIVE RETURNS AND PAID TAXES THEREON OR NOT. IF THAT IS SO, THEN DISALLOWANCE U/S. 40(A)(IA) OF THE ACT SHALL N OT BE MADE IN THE HANDS OF ASSESSEE. ACCORDINGLY, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 18. COMING TO NEXT ISSUE IS THAT LD. CIT(A) ERRED I N DISALLOWING THE PROFESSIONAL CHARGES PAID TO SUBASH MITRA AMOUNTING TO RS. 30,000/- OUT OF WHICH RS. 10,000/- WERE OUT OF POCKET EXPENSES ON A CCOUNT OF NON DEDUCTION OF TDS. 19. AT THE OUTSET, WE FIND THAT LD.CIT(A) UPHELD TH E ACTION OF AO BY OBSERVING THAT THE CONTENTION OF ASSESSEE REGARDIN G THE REIMBURSEMENT DOES NOT HOLD GOOD. HENCE THERE IS VIOLATION OF SEC 194J . THE LD. AR ALSO REQUESTED US TO RESTORE THE MATTER TO THE AO FOR FRESH VERIFI CATION IN TERMS OF THE IN TERMS OF THE ORDER OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) (SUPRA) . RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HON'BLE DEL HI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. , (SUPRA) WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY TO SE T ASIDE THIS ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE A FORESAID JUDGMENT. ACCORDINGLY, WE DIRECT THE AO TO VERIFY WHETHER THE PAYEES HAVE INCLUDED THE SUBJECT-MENTIONED RECEIPTS IN THEIR RESPECTIVE RETU RNS AND PAID TAXES THEREON OR NOT. IF THAT IS SO, THEN DISALLOWANCE U/S. 40(A) (IA) OF THE ACT SHALL NOT BE ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 10 MADE IN THE HANDS OF ASSESSEE. ACCORDINGLY, ASSESSE ES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 20. COMING TO NEXT ISSUE RAISED BY ASSESSEE IN GROU ND NO.5 IS THAT LD. CIT(A) ERRED IN DISALLOWING A SUM OF RS.20,56,654 UNDER SEC 36(1)(III). 21. ASSESSEE HAS TAKEN INTEREST BEARING LOANS AND U SED THE SAID AMOUNT TO LEND AS INTEREST FREE LOAN TO ITS CLOSE RELATIVES A ND SISTER CONCERN. THE ASSESSEE HAS NOT DERIVED ANY COMMERCIAL BENEFITS OU T OF THE BORROWED FUNDS. IF THE ASSESSEE WOULD HAVE DEPLOYED ITS FUND IN ITS BUSINESS THE MINIMUM INCOME MUST HAVE EARNED @12% IS RS 20,56,654/-. SO THE AO HAS DISALLOWED THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE AMOUN TING TO RS. 20,56,654/- ON PROPORTIONATE BASIS. 22. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO HAS PARTLY ALLOWED THE RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER:- 5.1 IN SUCH RESPECT, I FIND THAT THE APPELLANT HAD BORROWED SUBSTANTIAL AMOUNT OF LOAN AND HAD PAID INTEREST BUT THE APPELL ANT HAD ADVANCED INTEREST FREE LOAN AND NO INTEREST WAS CHARGED, HEN CE, THE AO IN ITS ORDER AFTER TAKING ALL THE DETAILS ALL THE ADVANCES RECEIVED DURING THE YEAR HAS DISALLOWED THE PROPORTIONATE INTEREST @ 12 %. IN SUCH RESPECT, THE APPELLANT HAS AT THE OUTSET, CONTENDED THAT OUT OF THE SAID RELATED CONCERNS, M/S CIVIA INVESTMENTS LTD., AND SWATI MII NG P. LTD. WHICH WERE NOT AT ALL IN ANY MANNER APPELLANTS SISTER CO NCERNS OR ITS PARTNERS OR ITS RELATIVES. IN SUCH RESPECT, THE APPELLANT HA S FILED THE SHAREHOLDING OF SUCH CONCERNS ALONG WITH FORM 23B AS FILED WITH THE ROC. FURTHER, THE APPELLANT IN THE COURSE OF HEARING ALSO FILED D ETAILED WORKING OF THE INTEREST WORKED OUT AND THE AO HAS POINTED OUT THAT ON BASIS OF SUCH WORKING THAT INTEREST IN SUCH RESPECT WORKS OUT ONL Y TO RS.2,36,663/- AND HENCE THE DISALLOWANCE CANNOT BE BEYOND THE SAI D SUM OF RS.2,36,663/-. APART FROM THE SAME IT HAS CONTENDED THE NEXUS OF INTEREST-BEARING FUNDS HAS NOT BEEN ESTABLISHED BY THE AO THAT THE INTEREST FREE FUND SO GIVEN AND HENCE THE DISALLOWA NCE IN SUCH RESPECT WAS NOT JUSTIFIED FOLLOWING NUMBER OF JUDGMENTS INC LUDING THAT OF HONBLE SUPREME COURT. THE APPELLANT FURTHER CONTENDED THAT THE APPELLANT HAD SUFFICIENT INTEREST FREE ADVANCES FROM CUSTOMER WHI CH WERE EXCEEDED IN SUCH RESPECT WAS NOT CORRECT. HAVING CONSIDERED THE SUBMISSION AND THE AOS CONTENTION, I FIND THAT, SUM HAS GIVEN INT EREST FREE TO M/S CIVIA ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 11 INVESTMENTS LTD. AND SWATI MINING P. LTD. AND THE A PPELLANTS CONTENTION ARE CORRECT AND HENCE THE SAID TWO CONCE RNS CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF INTERE ST. HOWEVER, THE APPELLANTS CONTENTION THAT SUCH SUM HAS GIVEN INTE REST FREE TO RELATED CONCERNS HAVE BEEN GIVEN INTEREST FREE FUND OF THE APPELLANT ON A PERUSAL OF THE AUDITED ACCOUNTS AS ON 31.3.2009, IT WAS OBSERVED THAT THE APPELLANT HAD CURRENT LIABILITY TO AN EXTENT OF RS.8,70,80,084/- OUT OF WHICH ADVANCES FROM PARTIES WERE ONLY RS.1,15,03,65 6/- AND THE BALANCES WERE SUNDRY CREDITORS. FURTHER, IT WAS OBS ERVED THAT THE APPELLANT HAD INVENTORY OF RS.6,15,39,717/- AND DEB TORS OF RS.1,22,119,033/-. HENCE, IT CANNOT BE CONSIDERED I N ANY MANNER THAT THE APPELLANT HAD INTEREST FREE FUND OUT OF WHICH I T HAD ADVANCED THE SUM TO THE RELATED CONCERN. HOWEVER, HAVING GONE TH OUGH THE APPELLANTS WORKING IT WAS OBSERVED THAT THE AO DID NOT CONSIDER THE OPENING BALANCES OF THE SUM ADVANCED AND HENCE THE WORKING OF THE INTEREST IN SUCH RESPECT MADE BY THE AO DOES NOT AP PEAR TO BE CORRECT AFTER CONSIDERING THE WORKING SO SUBMITTED BY THE A PPELLANT. I FIND THAT THE ADDITION IN SUCH RESPECT IS RESTRICTED TO RS.2, 63,663/-. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE CAME IN SECOND APPEAL BEFORE US. 23. BEFORE US LD. AR FILED THE BREAKUP OF INTEREST AMOUNT WHICH IS PLACED ON PAGE 49 OF THE PAPER BOOK. THE LD. AR SUBMITTED THA T THE DISALLOWANCE INTEREST CAN BE CONSIDERED ONLY ON THE AMOUNT OF IN TEREST PAID TO THE BANK FOR AN AMOUNT OF RS. 9,19,547/- ONLY. ON THE OTHER HAND , LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 24. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE WE FIND THAT THE TOTAL INTEREST CLAIMED BY THE ASSESSEE STANDS AS UNDER:- INTER EST PAID GROUP S UMMARY 1-APRIL, 2008 TO 31-MAR-2009 PARTICULARS CLOSING BALANCE DEBIT CREDIT INTEREST ON CAR LOAN 26,003.00 INTEREST ON SALE TAX 33,545.00 ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 12 INTEREST ON U9NSECXURED LOANS 7,74,260.37 INTEREST TO BANK 9,19,547.00 SSI TERM LOAN INTEREST 420.00 USENCE PERIOD INTEREST FOR L C CREDIT 1,01,50,223.2 0 GRAND TOTAL 1,19,03,998.57 IN THE INSTANT CASE THE AO HAS DISALLOWED THE EXPEN SES OF INTEREST ON THE GROUND THAT THE LOAN BEARING FUND HAS BEEN DIVERTED AND INTEREST ON THE SAME HAS BEEN CLAIMED BY THE ASSESSEE. FROM THE ABOVE AM OUNT OF INTEREST THE INTEREST CAN BE CONSIDERED FOR THE DISALLOWANCE ONL Y FOR RS. 16,93,807.00 (9,19,547.00 PLUS 7,74,260.00) AS THE QUESTION OF D IVERSION OF FUND ON THE INTEREST PAID ON CAR LOAN, SALES TAX, LC CREDIT DOE S NOT ARISE. THE LD. AR BEFORE US SUBMITTED TO CONSIDER THE INTEREST AMOUNT OF LOA N FROM THE BANK ONLY BUT WE REJECT THE SAME AS UNSECURED LOAN IS ALSO LOAN BEAR ING FUND. IN VIEW OF ABOVE WE DIRECT THE AO TO CONSIDER THE ABOVE STATED INTER EST AMOUNT FOR THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT. H ENCE THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. COMING TO REVENUE APPEAL ITA 327/KOL/2013. 25. GROUNDS RAISED BY THE REVENUE PER ITS APPEAL AR E AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD CIT(A)-XXXVI, KOLKATA, ERRED IN ADMITTING ADDITIONA L EVIDENCE AT THE TIME OF APPELLATE PROCEEDINGS IN CONTRAVENTION OF RULE 46A N RESTRICTING THE ADDITION OF RS.20,56,564 TO RS.2,36,663 ON ACCO UNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) WHEREIN DOCUMENTS RELA TING TO CHIVA INVESTMENT PVT. LTD. AND SWATI MINING P T. LTD. WER E ACCEPTED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A)- XXXVI, KOLKATAS ORDER IS PERVERSE INSOFAR AS THE R ESTRICTION OF ADDITION OF RS.20,56,564 TO RS.2,36,663/- ON ACCOUNT OF DIS ALLOWANCE OF INTEREST U/S 36(1)(III) AS HE HAS NOT DECIDED THE ISSUE ON THE AOS CONTENTION AND FINDINGS THAT THE LOANS AND ADVANCES WERE MADE TO CLOSE RELATIVES WITHOUT ANY BUSINESS CONSIDERATION. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A)- XXXVI, KOLKATA, ERRED IN FACTS AND IN LAW BY DELETI NG THE DISALLOWANCE ON ACCOUNT OF UNDER VALUATION OF STOCK AMOUNTING T O RS.56,15,283 ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 13 RELYING ON THE ASSESSEES SUBMISSION AND WITHOUT TA KING INTO CONSIDERATION THE MERITS OF THE ASSESSMENT ORDER VI S--VIS FACTS OF THE CASE AND THE CASE LAWS REFERRED THEREIN. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER/OR AMEND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 26. FIRST ISSUE RAISED BY REVENUE IN GROUND NO. 1 & 2 IS THAT LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL EVIDENCE AT THE T IME OF APPELLATE PROCEEDINGS IN CONTRAVENTION OF RULE 46A OF THE IT RULES U/S 36 (1)(III) WE HAVE ALREADY DISCUSSED AND ALLOWED IN PART THE A FORESAID ISSUE IN ASSESSEES APPEAL IN PARA 24 OF THIS ORDER. WE ALSO FIND THAT THE LD. CIT(A) HAS CONSIDERED THE ONLY MATERIAL WHICH WAS AVAILABL E BEFORE AO AT THE TIME OF ASSESSMENT. CONSIDERING THE FACTS AND CIRCUMSTANCES WE DISMISS BOTH THE GROUNDS OF REVENUES APPEAL. 27. NEXT ISSUE RAISED BY REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS.56,15,283/- ON ACCOUNT O F UNDER VALUATION OF CLOSING STOCK. 28. THE ASSESSEE IN ITS BALANCE SHEET AS ON 31.03.2 009 HAS CLOSING STOCK OF RAW MATERIALS AND FINISHED GOODS AT RS.6,15,39,7 17/-. THE AO DURING ASSESSMENT PROCEEDINGS OBSERVED THAT THE CLOSING ST OCK REPORTED TO THE BANK WAS OF RS.6,71,55,000/-. THEREFORE, THERE WAS A MIS MATCH IN THE QUANTITY AND THE VALUE OF CLOSING STOCK FURNISHED TO THE BANK FO R RS.56,15,283/- WHICH WAS ADDED BY AO TO THE TOTAL INCOME OF ASSESSEE. 29. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UND ER:- 8. GROUND NO. 7 IN SUCH RESPECT, IT WAS OBSERVED T HAT AS PER COPY OF STOCK STATEMENT AS ON 31.3.2009 FILED WITH THE BANK , QUANTITY OF THE COKE, COAL TALLIED WITH THE QUANTITY SHOWN IN TAX A UDIT REPORT. THE DIFFERENCE IN SUCH RESPECT IS ONLY IN THE VALUATION OF THE RAW MATERIAL ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 14 AND FINISHED GOODS. THE APPELLANT HAD CONTENDED THA T IT HAS FOLLOWED THE METHOD OF VALUATION STOCK AT COST OVER THE YEAR AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE IN ALL THESE YEAR FOR THE PURPOSES OF BANK IT HAS TO PROVIDE THE CURRENT VALUE OF STOCK A ND HENCE THE DIFFERENCE IN VALUE AS SHOWN IN THE AUDITED ACCOUNT S AND IN THE STOCK STATEMENT FILED WITH THE BANK. I FIND STRENGTH IN THE ARGUMENT OF THE APPELLANT AN D IT WAS ALSO OBSERVED THE VALUATION OF THE STOCK IS ON COST BASIS AND SUC H METHOD HAS NOT BEEN CHANGED SINCE EARLIER YEARS. HENCE THE ADDITIO N IN SUCH RESPECT CANNOT BE SUSTAINED. HENCE, ADDITION ON ACCOUNT OF UNDERVALUATION OF STOCK OF RS.56,15,283/- IS DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 30. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. AT THE OUTSET, WE FIND THAT THE AO HAS NOT BROUGHT ANY DEFECT IN THE BOOKS OF ACCOUNT OF ASSESSEE WITH REG ARD TO THE MAINTENANCE OF STOCK. AS THERE WAS NO FLAW IN THE BOOKS OF THE ASS ESSEE WE ARE NOT INCLINED TO INTERFERE IN THE ORDER OF LD. CIT(A). IN THE AFO RESAID FACTS AND CIRCUMSTANCES, WE RELY ON THE JUDGMENT OF HONBLE G UJARAT HIGH COURT IN THE CASE OF JCIT VS. RIDDHI STEEL AND TUBES (P) LTD. (2014) 22 TAXMANN. 148 (GUJ), WHEREIN THE HEAD-NOTE REPRODUCED BELOW :- INCOME FROM UNDISCLOSED SOURCES U/S 69BAMOUNT OF S TOCK NOT FULLY DISCLOSED IN BOOKSADDITIONASSESSEE ENGAGED IN BUS INESS OF MANUFACTURING FILED RETURN AND CASE WAS SELECTED FO R SCRUTINYAO NOTICED THAT CLOSING STOCK IN BOOKS WAS LESS THAN S TOCK SHOWN IN BANK FOR SECURING CASH CREDITASSESSEE SUBMITTED THAT ST OCK STATEMENT OF BANK WAS ON ESTIMATED AND INFLATED FIGURES FOR SECU RING HIGHER CREDIT FACILITYHOWEVER, AO MADE ADDITION U/S 69B OF DIFFE RENCE IN VALUE OF STOCK AND INITIATED PENALTY PROCEEDINGS U/S 271(1)( C)CIT(A) PARTIALLY ALLOWED APPEAL OF ASSESSEETRIBUNAL DELETED ADDITIO N MADE BY AO HELD, THERE WAS NO PHYSICAL VERIFICATION OF STOCK B Y BANKING AUTHORITIES AS ON 31 ST MARCHALTHOUGH RELIANCE WAS PLACED BY AO AND CIT (A ) ON GODOWN VISIT BY BANK MANAGER AFTER CLOSING OF YEAR, HOWEVER, NO PHYSICAL VERIFICATION AND COUNTING OF STOCK TOOK PL ACEBANK MANAGER'S REPORT INDICATES THAT MANY TONNES OF COIL WAS ALREA DY INCLUDED IN STOCK AND BECAUSE OF WHICH STOCK POSITION OF MARCH HAS SH OWN INCREASE IN QUANTITYIT WAS FOUND THAT STOCK REGISTER WAS MAINT AINED BY ASSESSEE GIVING COMPLETE QUANTITY DETAILSASSESSEE WAS SUBJE CTED TO STATUTORY AUDIT AND ALSO TAX AUDIT WHEREIN NO ERRORS WERE FOU ND AT ANY STAGE IN REPORT SUBMITTED BY AUDITORSASSESSEE FOLLOWED ITA NO.216 & 327/KOL/2013 A.Y. 2009-10 M/S ULUBERIA COKE OVEN PLANT VS. JCIT RNJ-56 KO L. PAGE 15 CONTINUOUSLY/CONSISTENTLY METHOD OF ACCOUNTING AND VALUING CLOSING STOCK AND INVENTORY PROVIDED U/S 145THEREFORE, ONL Y ON ACCOUNT OF INFLATED STATEMENTS FURNISHED TO BANKING AUTHORITIE S FOR PURPOSE OF AVAILING OF LARGER CREDIT FACILITIES, NO ADDITION C AN BE MADE IF THERE APPEARS TO BE A DIFFERENCE BETWEEN STOCK SHOWN IN B OOKS AND STATEMENT FURNISHED TO BANKING AUTHORITIES RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE GUJA RAT HIGH COURT IN THE CASE OF RIDDHI STEEL AND TUBES (SUPRA) WE UPHOLD THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUES APPEAL IS DISMISSED. 31. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THAT OR REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 26/ 08/2016 SD/- SD/- (#$) () (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP &'(- 26 / 08 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S ULUBERIA COKE OVEN PLANT, C/O SALARPU RIA JAJODIA & CO., 7, CHITTARANJAN AV ENUE, KOLKATA-700 072 2. /REVENUE-JCIT RNGE-56, 3, GOVT. PLACE (WEST), KOLKA TA-72 3.'0'12 3 / CONCERNED CIT KOLKATA 4. 3- / CIT (A) KOLKATA 5.6 78$$12, 12!, / DR, ITAT, KOLKATA 6.8;<=> / GUARD FILE. BY ORDER/ , /TRUE COPY/ /' 12!,