DCIT, Jaipur V. ART ASIA, Jaipur

ITA 235/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5258 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S DANGUR
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Depreciation; Opportunity of being heard; Corroborative evidences
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R.MEENA, AM VK;DJ VIHY LA -@ ITA NO. 235/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR. CUKE VS. M/S ART ASIA, G-292, 293, 294, EPIP INDUSTRIAL AREA, SITAPURA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAIFA 3883 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 24/JP/2015 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 235/JP/2015) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 M/S ART ASIA, G-292, 293, 294, EPIP INDUSTRIAL AREA, SITAPURA, JAIPUR. CUKE VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAIFA 3883 H IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DANGUR (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/06/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 16/06/2016. ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 2 VKNS'K@ ORDER PER T.R. MEENA, A.M. THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARISE AGAINST THE ORDER DATED 16/12/2014 P ASSED BY THE LD. CIT(A)-III, JAIPUR FOR THE ASSESSMENT YEAR 2011-12 W HEREIN THE REVENUE AS WELL AS THE ASSESSEE RAISED FOLLOWING GROUNDS:- GROUND OF ITA NO. 235/JP/2015 REVENUES APPEAL 1. ON THE FACTS & CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE TRADING ADDI TION TO RS. 14,27,270/- IN PLACE OF RS. 24,40,423/- EVEN TH OUGH THE SAME WAS MADE BY THE AO AFTER PROPER REJECTION O F BOOKS AND REASONED ESTIMATION OF INCOME. 2. ON THE FACTS & CIRCUMSTANCE OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE FROM VARIOUS EXPENSES TO RS. 1,36,602/- WITHOUT CONSIDERI NG THE FACT THAT DISALLOWANCE WERE MADE NOT ONLY FOR PERSONAL USE BUT ALSO AS THE EXPENSES WERE NON VERIFIABLE. 3. ON THE FACTS & CIRCUMSTANCE OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U /S 40(A)(IA) ON THE AMOUNT WHICH WERE NOT FOUND PAYABLE AT THE END OF FINANCIAL YEAR WITHOUT PROPER APPRECIA TION OF THE PROVISION OF THE SECTION & FURTHER DIRECTION S ISSUED BY THE CBDT IN THIS REGARD. 4. ON THE FACTS & CIRCUMSTANCE OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST CALCULATED ON THE RECEIVABLES FROM PARTNER S ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 3 WITHOUT CONSIDERING THE FACT THAT INTEREST BEARING L OANS WERE BEING DIVERTED FOR THE PERSONAL USE OF PARTNERS . GROUND OF ASSESSEES C.O. NO. 24/JP/2015 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE APPLICAT ION OF SEC. 145(3). HE HAS FURTHER ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 14,27,270/- BY APPLYING G.P . RATE OF 25.50% ON THE TURNOVER DECLARED BY THE ASSESSEE AS AGAINST G.P. RATE OF 24.82% DECLARED BY THE ASSESSEE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN DISALLOWING 15% OF EXPENSES OUT OF VEHICLE MAINTENANCE, DEPRECIATION O N CAR AND TELEPHONE EXPENSES, THEREBY CONFIRMING DISALLOWANCE OF RS. 1,36,602/-. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS.32,957/- U/S 40(A)(IA) OF THE IT ACT, 1961. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS.5,88,000/- OUT OF INTEREST PAYMENT BY HOLDING TH AT THE INTEREST BEARING LOANS WERE USED FOR INVESTMENT IN RESIDENTIAL FLAT AND SUCH INVESTMENT IS NOT RELATED TO THE BUSINESS. 2. GROUND NO. 1 OF THE REVENUES APPEAL IS AGAINST RESTRICTING THE TRADING ADDITION OF RS. 14,27,270/- IN PLACE OF RS. 24,40,423/- AND GROUND NO. 1 OF THE ASSESSEES APPEAL IS AGAINST CO NFIRMING THE ADDITION OF RS. 14,27,270/-. THE ASSESSEE FILED ITS RETURN FO R THE YEAR UNDER ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 4 CONSIDERATION ON 23/09/2011 DECLARING TOTAL INCOME OF RS. 2,09,34,650/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 14/2/2014. THE ASSES SEE IS IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF HA NDICRAFTS, WOODEN FURNITURE, EMBROIDERED TEXTILE MADEUPS. THE LD ASSES SING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE HAD SHOWN GROSS PROFIT OF RS. 5,23,96,482/- @ 24.82% ON T OTAL SALES OF RS. 21,10,73,538/-. HE HAD ANALYSED GP FOR THE LAST TWO YEARS AND FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE GP HA S BEEN DECLINED TO 24.82% AGAINST 25.98% IN IMMEDIATE PRECEDING YEAR. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON DECLINE OF GP AND ASKED TO PRODUCE THE BOOKS OF ACCOUNT AND COMPLETE VOUCHERS FOR EXPENSES, STOCK REGISTER. HE HELD THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, THEREFORE, OPENING AND CLOSING STOC KS WERE NOT POSSIBLE TO VERIFY. THE ASSESSEE HAS ALSO NOT MAINTAINED QUANTIT ATIVE AND QUALITATIVE WISE DETAILS OF DAY TO DAY STOCK POSITION, THEREFORE , VERIFICATION OF RAW MATERIAL CONSUMED IN THE MANUFACTURING PROCESS WAS N OT POSSIBLE. FURTHER SOME OF THE DIRECT EXPENSES, SUCH AS FREIGH T AND CARTAGE, JOB CHARGES, WAGES HAD BEEN CLAIMED ON THE BASIS OF SELF MADE VOUCHERS. PAYMENTS IN SOME OF THE CASES EVEN TO THE TRANSPORT ERS HAVE BEEN MADE ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 5 IN CASH. THEREFORE, VERIFICATION OF THE DECLARED GP WAS NOT ASCERTAINABLE WITH THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES. HE PROPOSED TO REJECTION OF BOOKS OF ACCO UNT, ON WHICH, THE ASSESSEE ALSO SUBMITTED REPLY VIDE LETTER DATED 20/ 1/2014, WHICH HAS BEEN REPRODUCED ON PAGE 2 AND 3 OF THE ASSESSMENT O RDER. AFTER CONSIDERING THE ASSESSEES REPLY, HE CONCLUDED THAT THE ASSESSEES CASE IS LIABLE TO APPLICATION OF PROVISIONS OF SECTION 145( 3) OF THE ACT BY CONSIDERING THE FOLLOWING DECISIONS ON REJECTION OF BOOKS OF ACCOUNT AND NON-MAINTENANCE OF STOCK REGISTER. (1) AMIYA KUMAR ROY & BROTHERS VS CIT 206 ITR 306 (C AL). (2) RATAN LAL OM PRAKASH 132 ITR 640. (3) RAM KRISHAN POONGALIA 184 CTR 448 (RAJ). (4) NAMASIVAYAM CHETTIAR (S.N.) VS CIT 38 ITR 579 (S C). (5) BASTIRAM NARAINDASS MAHESHWARI VS CIT 210 ITR 438 (MUM). (6) M/S HAVANA TRADING COMPANY PVT. LTD. VS. CIT 67 ITR 582. ACCORDINGLY, HE APPLIED THE PROVISIONS OF SECTION 1 45(3) OF THE ACT AND ALSO HELD REASONABLE GP APPLICABLE FOR THE YEAR UND ER CONSIDERATION @ 25.98%. HE MADE TRADING ADDITION OF RS. 24,40,423/- . 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALL OWED THE APPEAL PARTLY BY OBSERVING THAT THE ASSESSEES CLOSING STO CK IS NOT SUBJECT TO ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 6 VERIFICATION IN ABSENCE OF DAY TO DAY STOCK REGISTE R. THE DEFECTS POINTED OUT BY THE ASSESSING OFFICER ARE SUFFICIENT TO APPL Y PROVISIONS OF SECTION 145(3) OF THE ACT. THE CASE LAW REFERRED BY THE ASSE SSEE I.E. DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MA LANI RAM JEEVAN JAGANNATH VS ACIT 207 CTR 19 HELD DISTINGUISHABLE AS CLOSING STOCK WAS NOT FOUND TO BE INCORRECT IN THAT CASE. 3.1 HE FURTHER HELD THAT AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3), THE LD ASSESSING OFFICER SUPPOSED TO MAKE A N HONEST ESTIMATION EITHER BASED ON THE PAST HISTORY OF THE APPELLANTS OWN CASE OR ON THE BASIS OF ANY COMPARABLE CASE. THE LD ASSESSING OFFIC ER HAD APPLIED GP RATE OF PRECEDING YEAR I.E. 25.98% DURING THE YEAR UNDER CONSIDERATION BUT IN ASSESSEES CASE, SALES HAS GONE UP FROM 19.9 0 CRORES TO 21.10 CRORES COMPARABLE TO PRECEDING YEAR. IT IS A FACT T HAT WHEN TURNOVER INCREASES, IT REDUCES PROFIT MARGIN. IT IS FURTHER CONTENDED BY THE ASSESSEE THAT DURING THIS YEAR, THE ASSESSEE CREDIT ED FOREIGN EXCHANGE RATE DIFFERENCES IN THE P&L ACCOUNT AND IF SUCH REC EIPTS BEING PART OF THE SALE PROCEEDS, ARE CONSIDERED, THEN THE GP RATE WOUL D BE 25.42% AND THE DECLINE IN GP RATE WILL BE ONLY 0.56%. THE CASE L AWS RELIED BY THE ASSESSEE, SUPPORT ITS CASE. AFTER CONSIDERING ALL T HE FACTS AND ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 7 CIRCUMSTANCES OF THE CASE OF THE ASSESSEE, HE APPLI ED GP RATE @ 25.50% ON TOTAL TURNOVER OF RS. 21,10,73,538/- AND CONFIRM ED THE ADDITION OF RS. 14,27,270/-. 4. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGISTER AND THEREFORE, OPENING AND CLOSING STOCKS ARE NOT SUBJECT TO VERIFICATION. THE LD CIT(A) WAS NOT JUSTIFIED IN DELET ING THE PART ADDITION MADE BY THE ASSESSING OFFICER, THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD ASSESSING OFFICER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REI TERATED THE ARGUMENTS MADE BEFORE THE LD CIT(A) AND SUBMITTED TH AT THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS OF ACCOUNT, WHICH WAS SUBJECT TO AUDIT. THESE BOOKS ARE DULY SUPPORTED BY THE BILLS AND VOUC HERS. BOTH THE LOWER AUTHORITIES HAD NOT FOUND ANY DEFECT IN THE PURCHAS E OR SALE OR ANY OTHER ENTRY RECORDED ON THE BOOKS. MOSTLY PAYMENTS WERE MA DE THROUGH ACCOUNT PAYEE CHEQUES/DD. THE ASSESSEE HAD NOT MAINT AINED STOCK REGISTER AS IT IS NOT POSSIBLE IN SUCH KIND OF BUSI NESS BUT IT HAS VERIFIED THE CLOSING STOCK OF ALL MAJOR ITEMS AT THE YEAR END. I N THESE CIRCUMSTANCES, ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 8 EVEN IF THE APPLICATION OF SECTION 145(3) IS UPHELD , THE SAME ARE NOT NECESSARY LEAD TO TRADING ADDITION. HE RELIED ON TH E FOLLOWING DECISIONS:- (A) PR. CIT VS HUES INDIA LTD. 2015-TIOL-2275 (RAJ) DATED 30/07/2015. (B) MALANI RAMJIVAN JAGANNATH VS ACIT 207 CTR 19 (RAJ ). (C) ASHOKE REFRACTORIES P. LIMITED VS CIT 279 ITR 457 (CAL.) (D) CIT VS JACKSONS HOUSE 198 TAXMAN 385 (DELHI). (E) CIT VS JAS JACK ELEGANCE EXPORTS 324 ITR 95/233 C TR 398 (DEL)(2010). (F) CIT VS SMT. POONAM RANI 41 DTR 194 (DEL.)(2010). (G) CIT VS OM OVERSEAS 315 ITR 185 (P&H). HE FURTHER ARGUED THAT DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE HAD CREDITED FOREIGN EXCHANGE RATE DIFFERENCE IN TH E P&L ACCOUNT INSTEAD OF THE TRADING ACCOUNT AS DONE IN THE LAST YEAR, WH ICH IS PART OF THE SALE PROCEEDS, THEREFORE, IT SHOULD BE CONSIDERED FOR FO REIGN EXCHANGE RATE DIFFERENCE IN SALE PROCEEDS, THE GP WOULD BE 25.42%. THEREAFTER, HARDLY ANY DIFFERENCE IS IN GP RATE IS THERE. FURTHER THE SALE HAS ALSO GONE UP FROM 19.9 CRORES TO 21.1 CRORES. FOR INCREASE IN TU RNOVER, IT IS AUTOMATIC TO REDUCE THE PROFITABILITY IN THE MARKET. THE LOWER AUTHORITIES HAVE NOT DOUBTED ANY PURCHASES AND EXPENSES CLAIMED BY THE A SSESSEE. THE LD CIT(A) ALSO NOT RIGHT BY HOLDING THAT THE ASSESSING OFFICER FOUND CLOSING STOCK NOT CORRECT FOR WHICH THE LD AR ARGUED THAT CL OSING OF THIS YEAR HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS OPENING S TOCK IN SUBSEQUENT ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 9 YEAR. HE FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF EXCEL INDUSTRIES LTD. 358 ITR 295, THUS NO T RADING ADDITION IS CALLED FOR. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS ON MARGINAL DECLINE OF GP:- (I) ITO VS ARUN KUMAR GUPTA 103 TTJ 134 (JD.) (II) MADAN LAL VS ITO 99 TTJ 538 (JD.) THEREFORE, HE PRAYED TO ALLOW THE ASSESSEES APPEAL A ND APPEAL OF THE REVENUE MAY BE DISMISSED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WHATE VER EVIDENCE POINTED OUT BY THE ASSESSING OFFICER, WHICH HAS BEEN CONFIRM ED BY THE LD CIT(A) SUPPORT THAT THE ASSESSEES BOOKS ARE NOT RELIABLE AND WE ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER FOR APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. IT IS A FACT THAT THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF HANDICRAFTS, WO ODEN FURNITURE, EMBROIDERED TEXTILE MADEUPS. IT IS UNDISPUTED FACT THAT THE HANDICRAFTS MARKET IS NOT ORGANIZED BUSINESS AS SUCH. MOST OF R AW MATERIALS ARE PURCHASED FROM THE LOCAL PARTIES, WHICH ARE PROCESSE D BY THE ASSESSEE THROUGH THE LOCAL LABOURS. BEING THE EXTRA ORDINARY NATURE OF BUSINESS, IT ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 10 IS NOT POSSIBLE TO GET THE PURCHASE BILL OR BILL OF THE EXPENSES WHICH CAN BE RELIED UPON AND THESE PARTIES GENERALLY ACCEPT THE PAYMENTS IN CASH ON SELF MADE VOUCHERS. IT IS ALSO A FACT THAT IT IS DIFFICULT TO MAINTAIN DAY TO DAY STOCK REGIST ER IN THE LINE OF HANDICRAFT BUSINESS AS NUMBER OF ITEMS ARE SO LARGE AND LABOUR COST IS VARY FROM ITEM TO ITEM AND ON EXPERTISE OF THE LABOUR EMPLOYED. THE BENCH SPECIFICALLY RAISED A QUERY THAT IN PAST, ANY ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER WHICH HAS BEEN EI THER DELETED OR CONFIRMED BY THE HIGHER APPELLATE AUTHORITY. THE LD DR SUBMITTED THAT IN PAST ALSO, THERE WAS AN ADDITION, WHICH HAS B EEN PARTLY CONFIRMED BY THE LD CIT(A). THE LD AR HAS NOT BEEN A BLE TO CLARIFY THE PAST HISTORY OF THE CASE AS REFERRED BY THE LD DR. DURING THE YEAR, THE ASSESSEES GP HAS GONE DOWN COMPARED T O LAST YEAR BUT TURNOVER HAS INCREASED. IT IS MARKET PRINCIPLE THAT THE TURNOVER INCREASES, REDUCES THE PROFIT. THE LD CIT( A) HAS CONFIRMED THE ADDITION PARTLY BUT APPEARS TO BE HIGHER SIDE. VARI OUS HON'BLE HIGH COURTS HAVE UPHELD THE ADDITION ON ACCOUNT OF NOT MAINTAIN ING STOCK REGISTER. THE ASSESSEE HAS ADMITTED THAT HE HAS NOT MAINTAINED STOCK REGISTER, THEREFORE, WE UPHELD THE LUMP SUM ADDITION OF RS. 10 LACS IN PLACE OF ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 11 ADDITION CONFIRMED BY THE LD CIT(A) AT RS. 14,27,270 /-. THE ASSESSEE GETS RELIEF OF RS. 4,27,270/-. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND ASSESSEES C.O. IS PARTLY ALLOWED ON THIS GROUND. 8. THE GROUND NO. 2 OF THE REVENUES APPEAL IS AGAIN ST RESTRICTING THE DISALLOWANCE FROM THE VARIOUS EXPENSES AT RS. 1,36,6 02/- AS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER AT RS. 3,44, 523/- WHEREAS THE GROUND NO. 2 OF THE ASSESSEES C.O. IS AGAINST CONF IRMING THE ADDITION OF RS. 1,36,602/- ON ACCOUNT OF EXPENSES CLAIMED BY TH E ASSESSEE ON VEHICLE MAINTENANCE, DEPRECIATION AND TELEPHONE EXP ENSES. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CL AIMED VEHICLE MAINTENANCE AND CAR RUNNING EXPENSES AT RS. 1,90,16 3/-, DIWALI EXPENSES RS. 95,153/-, DEPRECIATION ON CAR RS. 4,35 ,522/-, CONVEYANCE EXPENSES RS. 1,95,884/-, STAFF WELFARE EXPENSES OF R S. 4,53,751/-, TELEPHONE EXPENSES OF RS. 2,85,001/- AND OFFICE EXP ENSES OF RS. 67,141/- . THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNI TY OF BEING HEARD AND ASKED TO PRODUCE THE BOOKS OF ACCOUNT AND BILL/ VOUCHER FOR VERIFICATION OF THE CLAIM. ON VERIFICATION, HE FOUN D THAT THESE EXPENSES HAS BEEN CLAIMED ON SELF MADE VOUCHERS. SOME OF THE EXPENSES ARE NOT ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 12 SUPPORTED BY ANY BILL/VOUCHER. NO CALL REGISTER FOR TELEPHONE, NO LOG BOOK FOR RUNNING OF VEHICLES HAD BEEN MAINTAINED BY THE ASSESSEE. PERSONAL USE CANNOT BE RULED OUT, THEREFORE, HE DISALLOWED 20 % EXPENSES AT RS. 3,44,523/- OUT OF THESE EXPENSES, WHICH WAS CHALLENG ED BEFORE THE LD CIT(A), WHO HAD ALLOWED THE APPEAL PARTLY BY OBSERVIN G THAT THE DISALLOWANCE @ 20% APPEARS TO BE HIGHER SIDE. MOREOVE R, THERE WAS NOTHING ON RECORD, WHICH MAY INDICATE THAT THE PART NERS OF THE FIRM HAVE OWNED INDEPENDENT VEHICLE AND TELEPHONE, MOBILE PHON E AND THAT THE FACILITIES OF FIRM WERE NOT USED BY THESE PERSONS. TH EREFORE, HE CONFIRMED THE DISALLOWANCE @ 15% OUT OF VEHICLE MAINTENANCE, DE PRECIATION ON CAR AND TELEPHONE EXPENSES AT RS. 1,36,602/-. THE OTHER DISALLOWANCES HAVE BEEN DELETED BY THE LD CIT(A) ON THE BASIS OF THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PUR POSES. 9. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD ASSESSING OFFICER WHEREAS THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD FILED COMPLETE DETAILS OF THESE EXPENSES AND ALSO P RODUCED SUPPORTING EVIDENCES. THE LD ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC INSTANCES OF EXPENSES, WHICH IS NOT PROPERLY VOUCHED . EVEN IN THE LEDGER ACCOUNT, COMPLETE DETAILS OF EXPENSES HAD BEEN MAIN TAINED. THESE ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 13 EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. LOOKING TO THE VOLUME OF THE BUSINESS, THE EXPENSES ARE REASONABLE . THE LD CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE AT RS. 1,62,386/- O UT OF DIWALI EXPENSES, CONVEYANCE EXPENSES, STAFF WELFARE EXPENSES AND OFFI CE EXPENSES BY HOLDING THAT THEY WERE INCURRED FOR BUSINESS PURPOS ES BUT REMAINING DISALLOWANCES HAD BEEN WRONGLY CONFIRMED BY THE LD CI T(A) UNDER THE HEAD VEHICLE MAINTENANCE AND CAR RUNNING EXPENSES B Y HOLDING THAT THE PERSONAL USE OF THESE FACILITIES CANNOT BE RULED OU T, WITHOUT SPECIFYING ANY PARTICULAR EXPENDITURE WHICH IS FOR NON-BUSINESS PURPOSES. THEREFORE, HE PRAYED TO DELETE THE DISALLOWANCE CONFIRMED BY TH E LD CIT(A). HE RELIED ON THE FOLLOWING CASE LAWS ON THIS ISSUE. (1) ACIT VS GANPATI ENTERPRISES LTD. (2013) 142 ITD 118 (DELHI)(TRIB). (2) CIT VS ORACLE INDIA (P) LTD. 199 TAXMAN 181 (DEL)(HC)(MAG). (3) ARTHUR & ANDERSON & CO. VS. ACIT 2010-TIOL-416-IT AT- MUM. (4) SEASONS CATERING SERVICES (P) LTD. VS. DCIT 43 D TR 397 (DEL)(TRIB). FOR DEPRECIATION, IT HAS BEEN ARGUED THAT IN CASE OF KAILASH CHAND GUPTA VS. DCIT 35 TAX WORLD 36, IT HAS BEEN HELD THAT DEPRECIATION IS A STATUTORY PROVISION AND ON ACCOUNT OF PERSONAL USE, NO DISALLOWANCE CAN BE MADE. THUS, HE PRAYED TO ALLOW THE ASSESSEES C.O. ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 14 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS DIFFICULT TO GET 100% EVIDENCE TO CLAIM THE EXPENSES GENUINELY UNDER THE HEADS VEHICLE MAINTENANCE, CAR RUNNING EXPENSES BUT THE DISALLOWAN CES CONFIRMED BY THE LD CIT(A) @ 15% APPEARS TO BE HIGHER SIDE, THEREF ORE, WE UPHELD THE DISALLOWANCE OUT OF VEHICLE EXPENSES, CAR RUNNING EX PENSES AND TELEPHONE EXPENSES @ 10%. THE LD ASSESSING OFFICER IS DIRECTED TO CALCULATE THE DISALLOWANCE @ 10%. HOWEVER, DEPRECIATIO N BEING A STATUTORY DEDUCTION AS HELD IN THE CASE OF KAILASH CHAND GUPTA VS. DCIT (SUPRA), THEREFORE, DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION IS DELETED. ACCORDINGLY, WE DISMISS THE REVENUES APPEA L AND CO OF THE ASSESSEE IS PARTLY ALLOWED. 11. THE 3 RD GROUND OF THE REVENUES APPEAL AS WELL AS ASSESSEE S C.O. ARE AGAINST DELETING THE ADDITION AND CONFIRMING TH E DISALLOWANCE OF RS. 32,957/- U/S 40(A)(IA) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD MADE PAYMENT TO THE FOLLOWING PARTIES TOWARDS CARGO EXPENSES WITHOUT D EDUCTING TDS:- S.NO. NAME OF PARTY AMOUNT PAID 1. APL INDIA PVT. LTD. 4,13,276/- 2. CONTAINER CORPORATION OF INDIA LTD. 8,60,496/- 3. MERIDAN SHIPPING AGENCY PVT. LTD. 72,411/- TOTAL 13,46,183/- ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 15 THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AVAILED BY THE ASSESSEE VIDE LETTER DATED 2 0/1/2014. IT IS SUBMITTED BY THE ASSESSEE IN CASE OF APL PVT. LTD. AND MERIDAN SHIPPING AGENCY PVT. LTD., TDS IS NOT LIABLE TO BE DEDUCTED D UE TO EXEMPTION CERTIFICATE. ON VERIFICATION OF THE DETAILS, IT IS FOUND THAT THE ASSESSEE HAD FURNISHED LETTER GRANTING OF 100% OF DIT RELIEF IN BOTH THE CASES BUT NO EXEMPTION CERTIFICATE FROM THE TDS AUTHORITY IN CAS E OF PAYMENT TO CONTAINER CORPORATION OF INDIA LTD. IT WAS CLAIMED BY THE ASSESSEE THAT THESE PAYMENTS WERE MADE TO RAILWAY, THEREFORE, TDS I S NOT LIABLE. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THAT THE ASSESSEE VIOLATED THE PROVISIONS OF TDS, THEREFORE, HE DISALLOWED EXPENSES CLAIMED AT RS. 13,46,183/-. 12. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALL OWED THE APPEAL PARTLY BY OBSERVING THAT AS PER PROVISIONS OF SECTI ON 195, THE TDS IS TO BE DEDUCTED ONLY WHEN THE AMOUNT WAS CHARGEABLE TO TAX I N THE INDIA. HE FURTHER OBSERVED THAT THE CERTIFICATE FURNISHED BY THE ASSESSEE IN RESPECT OF EXEMPTION OF INCOME ON TAXATION IN CASE OF M/S A PL INDIA PVT. LTD. AND M/S MERIDAN SHIPPING AGENCY PVT. LTD. BUT SUCH EXEM PTION WAS ONLY IN ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 16 RESPECT OF INCOME DERIVED BY WAY OF FREIGHT ON SPECI FIC VESSELS. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAD FAILED TO PROVE THAT THE RECEIPTS/INCOME ON WHICH TDS WAS NOT DEDUCTED WAS DERI VED FROM SUCH SPECIFIC VESSELS SHIPS. AS REGARDS NON DEDUCTION OF TDS ON PAYMENT MADE TO M/S CONTAINER CORPORATION OF INDIA, NO JUST IFICATION HAS BEEN FILED. HE FURTHER CONSIDERED THE ALTERNATE CLAIM OF THE ASSESSEE ON THE BASIS OF PAID AND PAYABLE. AFTER CONSIDERING THE DE CISION OF HONBLE ITAT IN THE CASE OF JVVNL VS. DCIT (2009) 123 TTJ 888 ORDE R DATED 30/4/2009, WHICH IS BINDING ON HIM AND ALSO CONSIDER ED THE CBDT CIRCULAR NO. 10/DV/2013, F.NO. 279/MISC/M-61/2012-I TJ(VOL-II) AND HELD THAT DISALLOWANCE IS ON THE BASIS OF PAYABLE AS ON 3 1/3/2011 U/S 40(A)(IA) OF THE ACT. THUS, HE CONFIRMED THE ADDITIO N OF RS. 32,957/- AS AGAINST RS. 13,46,183/- MADE BY THE ASSESSING OFFIC ER. 13. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REITER ATED THE ARGUMENTS MADE BEFORE THE LD CIT(A) AND FURTHER RELIED ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRANS PORT VS. ACIT 16 ITR(TRIB) 1 WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE U/S 40(A)(IA) CAN ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 17 BE MADE ONLY ON THE AMOUNT PAYABLE NOT PAID DURING THE YEAR. HE FURTHER RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS SIKANDAR KHAN N. TUNVAR 357 ITR 312 AND CALCUTTA HIGH COURT DECISION IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE 94 DTR 8 1 WHEREIN IDENTICAL PROPOSITION HAS BEEN HELD I.E. THIS SECTI ON IS APPLICABLE ONLY IN CASE OF AMOUNT PAYABLE. HE FURTHER RELIED ON THE DE CISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VECTOR SH IPPING SERVICES (P) LTD. 94 DTR 101/357 ITR 642 WHEREIN ALSO IDENTICAL FIN DINGS GIVEN BY THE HON'BLE HIGH COURT WHICH WERE CHALLENGED BEFORE THE H ON'BLE SUPREME COURT IN SLP BUT SAME HAS BEEN DISMISSED. HE FURTHE R RELIED ON THE FOLLOWING CASE LAWS:- (I) AMIT KAUSHIK VS. ITO ITA NO. 45/JP/2014 A.Y. 20 09-10 ORDER DATED 6/11/2015. (II) ACIT VS GIRDHARI LAL BARGOTI ITA NO. 757/JP/201 2 A.Y. 2009- 10 ORDER DATED 10/4/2015. (III) DCIT VS ANANDA MARAKALA (2014) 150 ITD 323 (BA NG)(TRIB). (IV) ITO VS M/S THEEKATHIR PRESS (CHENNAI) (TRIB) ITA NO. 2076 (MDS) 2012 DATED 18/09/2013. HE FURTHER ARGUED THAT M/S ALP INDIA PVT. LTD. AND M/S MERIDIAN SHIPPING AGENCY PVT. LTD. ARE AGENTS OF NON-RESIDENT. IN INC OME OF THESE PERSONS IS NOT TAXABLE IN INDIA AS PER THE EXEMPTION CERTIF ICATE ISSUED TO THEM. COPY OF THE CERTIFICATE IS ALSO ENCLOSED AT PAGE NO . 43 AND 44 OF THE ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 18 PAPER BOOK. FURTHER IT IS ARGUED THAT SECTION 40(A) (IA) OF THE ACT IS APPLICABLE IN THE CASE OF PAYMENTS MADE TO RESIDENT AND NOT TO NON- RESIDENT. THEREFORE, DISALLOWANCE CONFIRMED BY THE L D CIT(A) MADE PLEASE BE DELETED. 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE VA RIOUS COURTS HAVE DECIDED THAT DISALLOWANCE U/S 40(A)(IA) CAN BE MADE ONLY AMOUNT PAYABLE ON WHICH TDS HAS NOT BEEN DEDUCTED AND NOT A MOUNT PAID DURING THE YEAR, THEREFORE, LD CIT(A) RIGHTLY DECIDE D THE ISSUE. THE REMAINING ADDITION CONFIRMED BY THE LD CIT(A) ON THE BASIS OF AMOUNT PAYABLE AS THE LD AR HAS NOT BEEN ABLE TO PROVE THA T M/S APL INDIA PVT. LTD. AND M/S MERIDIAN SHIPPING AGENCY PVT. LTD. HAD TAKEN EXEMPTION CERTIFICATE, THEREFORE, DISALLOWANCE CONFIRMED BY TH E LD CIT(A) IS JUSTIFIED. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A). 15. IN THE RESULT, ON THIS GROUND, THE REVENUES AP PEAL AND ASSESSEES C.O. ARE DISMISSED. 16. GROUND NO. 4 OF THE REVENUES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF INTEREST CALCULATED ON THE RECEIVABL ES FROM THE PARTNERS. THE LD ASSESSING OFFICER OBSERVED THAT THE PARTNERS NAMELY SHRI SANDEEP ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 19 MOONDRA AND SHRI RAVI KANT LADDA HAD DEBIT BALANCE IN THE CAPITAL ACCOUNT. THE FIRM HAS PROVIDED INTEREST ON FIXED CAP ITAL TO THE PARTNERS. HOWEVER, HAD NOT CHARGED INTEREST ON DEBIT BALANCE WO RKED OUT TO RS. 1,68,138/- IN RESPECT OF SHRI RAVI KANT LADDA AND R S. 4,19,121/- IN RESPECT OF SHRI SANDEEP MOONDRA. THE ASSESSEE HAD DE BITED INTEREST EXPENSES AT RS. 34,43,436/- ON BORROWINGS. SIMILARLY , THE ASSESSEE HAD CLAIMED INTEREST TO PARTNERS AT RS. 28,80,000/-. THE LD ASSESSING OFFICER FOUND THAT THIS DUEL POLICY OF THE ASSESSEE REFLECT S NO BUSINESS EXPEDIENCY. HAD THE FUNDS NOT BEEN ADVANCED TO THE PARTNERS WITHOUT INTEREST, THE CONSEQUENTIAL INTEREST LIABILITY OF T HE ASSESSEE WOULD HAVE COMMENSURATELY REDUCED. THEREFORE, HE CALCULATED THE INTEREST ON DEBIT BALANCE @ 12% ON DAY TO DAY BASIS AND MADE ADDITION OF RS. 5,27,259/- U/S 36(1)(III) OF THE ACT. 17. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALL OWED THE APPEAL BY OBSERVING THAT SIMILAR ADDITIONS WERE MADE IN A.Y. 2 008-09 BY THE ASSESSING OFFICER WHICH HAS BEEN DELETED BY THE LD C IT(A) IN A.Y. 2008- 09, WHICH HAS BEEN CONFIRMED BY THE HONBLE ITAT. ON CAREFUL CONSIDERATION OF THE RELEVANT FACTS, IT WAS NOTED BY HIM THAT THE ASSESSEE HAD RECEIVED MONEY FROM THE PARTNERS IN THE CURRENT ACCOUNT AND ON ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 20 CERTAIN DATES, THE ASSESSEE ALSO ADVANCED MONEY TO THE PARTNERS. THE LD ASSESSING OFFICER CALCULATED INTEREST LIABILITY @ 12 % ONLY IN RESPECT OF DEBIT BALANCE BUT NO INTEREST HAS BEEN CALCULATED B Y THE ASSESSING OFFICER ON CREDIT BALANCE IN CURRENT ACCOUNT OF THE PARTNER . SUCH FINDINGS ARE ALSO SUPPORTED FROM THE DECISION OF WORTHY CIT(A) IN RESPE CT OF A.Y. 2008-09, WHICH ARE ALSO CONFIRMED BY THE HONBLE ITAT. IN THIS BACKGROUND, IF THE CREDIT RECEIVED FROM THE PARTNERS ARE CONSIDERED TH EN THERE WAS NO INTEREST RECEIVABLES FROM THE PARTNERS. ACCORDINGLY , HE ALLOWED THE APPEAL. 18. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFO RE THE LD CIT(A) AND ARGUED THAT THIS ISSUE HAS BEEN CONSIDERED BY T HE HONBLE ITAT AND THE LD ASSESSING OFFICER ONLY HAD CONSIDERED DEBIT BALANCE IN THE CURRENT ACCOUNT OF THE PARTNERS AND NOT CREDIT BALANCE IN T HE ACCOUNT OF PARTNERS. THE LD AR HAS DRAWN OUR ATTENTION ON COMPUTATION OF DISALLOWANCES ON THE BASIS OF INTEREST BORROWED ON DEBIT BALANCE AND BORROWED ON CREDIT BALANCE. THE FIRM HAD TO PAY MORE INTEREST TO THE PA RTNERS, IT MEANS NO DISALLOWANCE CAN BE MADE BY THE ASSESSING OFFICER. ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 21 19. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS A FACT THAT THIS ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN A.Y. 2008-09 ON IDENTICAL FACTS AND DISALLOWANCE MADE BY THE ASSESSI NG OFFICER, DELETED BY THE LD CIT(A), UPHELD BY THE COORDINATE BENCH IN A.Y. 2008-09. THE COMPUTATION OF INTEREST @ 12% MADE BY THE AR HAS NOT BEEN CONTROVERTED BY THE LD DR, THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A). 20. GROUND NO. 4 OF THE ASSESSEES C.O. IS AGAINST CONFIRMING THE ADDITION OF INTEREST AT RS. 5,88,000/- BY HOLDING T HAT THE INTEREST BEARING LOANS WERE USED FOR INVESTMENT IN RESIDENTIAL FLATS AND SUCH INVESTMENT IS NOT RELATED TO BUSINESS. THE LD ASSESSING OFFICER O BSERVED THAT THE ASSESSEE MADE ADVANCES AT RS. 49.00 LACS TO M/S UNI QUE BUILDERS. THE LD ASSESSING OFFICER ASKED TO EXPLAIN THE PURPOSE OF L OAN AND ADVANCE TO M/S UNIQUE BUILDERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON THIS ISSUE, WHICH WAS AVAILED BY THE ASSESSEE VIDE LETTER DATED 20/1/2014 WHEREIN IT HAS BEEN CLAIMED THAT ADVANCE WAS GIVEN OU T OF PARTNERS CAPITAL, HENCE THERE SHOULD NOT BE ANY DISALLOWANCE OF INTEREST. THE LD ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 22 ASSESSING OFFICER FOUND THAT THESE ADVANCES MADE FO R PURCHASE OF FLAT FOR M/S UNIQUE BUILDERS. THERE IS NO BUSINESS RELATION WI TH M/S UNIQUE BUILDERS. THESE FLATS ARE RESIDENTIAL IN NATURE AND NO BUSINESS USE AND THE SAME IS APPARENT. THE ASSESSEE HAD PAID INTEREST AT RS. 34,43,436/- ON ITS BORROWINGS. HAD IT NOT BEEN INVESTED IN THE F LATS, THE COST OF INTEREST WOULD HAVE REDUCED SUBSTANTIALLY, THEREFORE , HE CALCULATED INTEREST @ 15% ON RS. 49.00 LACS AND MADE DISALLOWAN CE OF RS. 7,35,000/-, WHICH WAS CHALLENGED BEFORE THE LD CIT(A) , WHO HAD CONFIRMED THE ADDITION PARTLY BY OBSERVING THAT THE PREVAILING INTEREST RATE IS 10 TO 12%, THEREFORE, DISALLOWANCE IS TO BE MADE ON THE BASIS OF PREVAILING INTEREST RATE IN THE MARKET. ACCORDINGLY , HE APPLIED 12% INTEREST RATE WHICH WAS WORKED OUT AT RS. 5.88 LACS OU T OF TOTAL INTEREST PAYMENT OF RS. 34,73,436/-, WHICH WAS ALSO INCURRED F OR OTHER THAN BUSINESS PURPOSES. ACCORDINGLY, HE CONFIRMED THE DI SALLOWANCE AT RS. 5,88,000/-. 21. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD A R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE MADE INVESTMENT IN FLAT FOR USE AS GUEST HOUSE TO BE UTILIZED BY THE AGENT/SUPPLIER AS WELL A S BUYERS OF THE ASSESSEE WHENEVER THEY COME TO JAIPUR FOR VISIT TO THE SHOWROOM. THIS ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 23 EXPLANATION WAS GIVEN BEFORE THE LD CIT(A), HAS NOT B EEN DISPUTED, THEREFORE, ADVANCES WERE MADE FOR BUSINESS PURPOSES. IT FURTHER ARGUED THAT THE ASSESSEE HAD NOT PAID INTEREST TO THE EXTE NT OF RS. 3,10,750/- TO PARTNERS ON THEIR CAPITAL. THUS, FUNDS TO THE EXTENT OF RS. 25,89,583/- WAS AVAILABLE INTEREST FREE WITH THE FIRM. HENCE, DIS ALLOWANCE OF INTEREST IS TO BE DELETED. 22. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE LD CIT(A). 23. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE UNDISPUTEDLY, INVESTED FUNDS IN THE PURCHASE OF FLATS. THE LD AR H AS NOT BEEN ABLE TO DEMONSTRATE THAT THIS FLAT IS FOR GUEST HOUSE. IN P AST ALSO, NO SERVICES HAVE BEEN PROVIDED BY THE ASSESSEE TO THEIR CUSTOME RS/CLIENTS. THE OTHER ARGUMENTS ALSO NOT FOUND CONVINCING THAT THE ASSESS EE HAS NOT PROVIDED INTEREST ON CAPITAL TO THE EXTENT OF RS. 25,89,583/ - AS CURRENT CAPITAL ACCOUNT AS WELL AS FIXED CAPITAL ACCOUNT HAS BEEN CO NSIDERED IN DISALLOWANCE OF THE INTEREST ON DEBIT BALANCE OF THE PARTNERS. THEREFORE, WE DO NOT FIND ANY REASON TO INTERVENE IN THE ORDER OF THE LD CIT(A), ITA NO.235/JP/2015 & CO 24/JP/2015 DCIT VS M/S ART ASIA 24 ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A). THI S GROUND OF THE C.O. OF THE ASSESSEE IS DISMISSED. 24. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND ASSESSEES C.O. IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/06/2016. SD/- SD/- DQYHKKJR VH-VKJ-EHUK (KUL BHARAT) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 TH JUNE, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-7, JAIPUR.. 2. IZR;FKHZ @ THE RESPONDENT- M/S ART ASIA, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 235/JP/2015 & CO 24/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR