M/s. Jhaveri Industries, Dist. Valsad V. The ACIT., Vapi Circle, Vapi

ITA 267/AHD/2009

• Counselvise Citation: 26720514 RSA 2009
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 28-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA; B L YADAV DRS
• Assessee Lawyers: S N SOPARKAR
• Keywords: Gift; Business income; Depreciation; Principle of natural justice; Proportionate interest; Question of law; Right to appeal; Onus to prove
• Section: 6; 263

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'# '#,$% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER 1. ./ I.T.A.NO.267/AHD/2009 - # ( # ( # ( # (/ // / A.Y. 2004-05 2. ./ I.T.A.NO.398/AHD/2010 - # ( # ( # ( # (/ // / A.Y. 2004-05 M/S.JHAVERI INDUSTRIES A-1/179, GIDC UMERGAON DIST.VALSAD # # # # / VS. THE ACIT CIRCLE VAPI VAPI ) $% ./*+ ./ PAN/GIR NO. : AACFJ 8263 E ( ), / // / APPELLANTS ) .. ( -.), / RESPONDENTS ) ), / $/ APPELLANT BY : SHRI S.N.SOPARKAR, SR.ADV. -.), 0 / $ / RESPONDENT BY : SHRI D.P.GUPTA & SHRI B.L.YADAV, D.RS. #1 0 %/ // / DATE OF HEARING : 14/03/2012 2'( 0 % / DATE OF PRONOUNCEMENT : 31/5/2012 $3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS ARE HEREBY CONSOLIDATED AND THUS DECIDED BY THIS COMMON ORDER. ONE OF THE APPEALS IS AGAINST T HE ORDER OF CIT- VALSAD PASSED U/S.263 DATED 9/4/2007 AND THE OTHER APPEAL IS ARISING FROM AN ORDER OF CIT(A)-VALSAD DATED 14.9.2009. [A] 267/AHD/2009 A.Y. 2004-05 2. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE RE GISTRY HAS RAISED AN OBJECTION THAT IN RESPECT OF THE APPEAL FILED AG AINST THE ORDER PASSED ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 2 - U/S.263 BY CIT, THE APPELLANT HAD PAID ONLY RS.1,00 0/- AND, THEREFORE, THE TRIBUNAL FEES WAS PAID SHORT BY RS.9,000/-. IN THI S REGARD, OUR ATTENTION HAS BEEN DRAWN ON A DECISION OF JET ELECTRONICS VS. ACIT 116 TTJ 225 (AHD.), WHEREIN IT HAS BEEN HELD THAT AN APPEAL FI LED AGAINST THE ORDER U/S.263 OF THE ACT IS GOVERNED BY CLAUSE(D) OF SECT ION 253(6) OF I.T. ACT. ACCORDINGLY, THE FILING FEES IS TO BE GOVERNED BY T HE RESIDUARY CLAUSE, I.E. SECTION 253(6)(D) OF IT ACT. THE OBJECTION R AISED BY THE REGISTRY IS THEREFORE TURNED DOWN AND THE APPEAL IS ADMITTED FO R ADJUDICATION. AN ANOTHER OBJECTION HAS ALSO BEEN RAISED THAT THIS AP PEAL WAS BELATED FILED BY THE ASSESSEE. THEREFORE, AN APPEAL U/S.263 BEIN G AN IMPORTANT APPEAL AND SUBSTANTIAL QUESTION OF LAW INVOLVES THEREFORE IN THE INTEREST OF NATURAL JUSTICE, IT IS JUSTIFIABLE TO ADMIT THIS AP PEAL BY CONDONING THE DELAY. 2.1. THOUGH UNDISPUTEDLY THE LAW OF LIMITATION IS ENSHRINED IN THE MAXIM INTEREST REPUBLICA UT SIT FINIS LITIUM ( IT IS FOR GENERAL WELFARE THAT A PERIOD BE PUT TO LITIGATION), BUT WHEN SUBST ANTIAL JUSTICE AND TECHNICAL CONSIDERATION ARE PITTED AGAINST EACH OTH ER; THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED. OTH ERWISE ALSO THE PRIMARY FUNCTION OF A COURT IS TO ADJUDICATE THE DISPUTE BE TWEEN PARTIES AND TO ADVANCE SUBSTANTIAL JUSTICE. HON'BLE COURTS HAVE H ELD THAT WHILE EXERCISING THE DISCRETION OF SEC.5 OF LIMITATION A CT A PRAGMATIC APPROACH SHOULD BE MADE TO BE COUPLED WITH APPLICATION OF A RATIONAL COMMON SENSE, RATHER A PEDANTIC ONE. WE HAVE TAKEN THE GI ST FROM THE CITATIONS VIZ. COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS. REPORTED AS 62 CTR 23 (S.C.), AUTO CENTRE VS. STATE OF UTTAR PRADE SH REPORTED AS 204 ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 3 - CTR 142 (ALL.) AND STATE OF HARYANA VS. CHANDRA MA NI REPORTED AS AIR 1996 (SC) 1623. 3. THE ASSESSEE HAS RAISED SEVERAL GROUNDS THROUGH WHICH AGITATED THE JURISDICTION INVOKED U/S.263 BY LD.CIT. AS PER T HE GROUNDS THE APPELLANT HAS SUPPORTED THE ASSESSMENT ORDER AND PL EADED THAT THERE WAS NO JUSTIFICATION TO HOLD THAT THE SAID ORDER WAS ER RONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THE LD.COMMISSIONER WHILE PASSING THE ASST.ORDER U/S.263 HAS OBSERVED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF INTEREST PAID TO THE PARTNERS OF RS.72,65,894/-. AS PER THE PARTNERS C APITAL ACCOUNT ONLY AN AMOUNT OF RS.10,000/- WAS REFLECTED IN THE BALANCE- SHEET. PARTNERS CURRENT ACCOUNT HAD SHOWN RS.7,82,36,658/-. THE A SSESSEE HAS ALSO SHOWN INVESTMENT OF RS.5,84,60,738/- IN VARIOUS INS TRUMENTS, I.E. MUTUAL FUNDS. THE ASSESSEE HAS ALSO MADE AN INVESTMENT IN THE RESIDENTIAL HOUSE OF RS.31,08,158/-. THE LD.COMMISSIONER HAS THERE FORE ALLEGED THAT THE INTEREST WAS PAID TO THE PARTNERS ON THE FUNDS UTI LISED FOR NON-BUSINESS PURPOSES AND THEREFORE SHOULD BE DISALLOWED. A NOT ICE WAS ISSUED POINTING OUT THE SAID DISCREPANCY. THE ASSESSEE S PLEA WAS THAT THE INVESTMENT WAS WITH HDFC BANK AND INTEREST ON SUCH DEPOSIT AMOUNTING TO RS.45.94 LACS WAS OFFERED FOR TAXATION, HENCE NO T AN EXEMPTED INCOME. LIKEWISE IT HAS ALSO BEEN PLEADED THAT THE INVESTME NT IN RESIDENTIAL BUILDING HAD NO LIVE-LINK WITH THE BORROWED FUNDS. IT HAS ALSO BEEN PLEADED THAT INTEREST ON CAPITAL AND REMUNERATION T O PARTNER WAS NOTHING BUT DISTRIBUTION OF PROFITS AND TAXED IN THE HANDS OF THE PARTNER AS ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 4 - BUSINESS INCOME AS PER SECTION 28(V OF IT ACT. HOW EVER, LD.CIT WAS NOT CONVINCED AND DIRECTED THE AO TO RE-ASSESS AS FOLLO WS:- 5. I HAVE CONSIDERED THE CONTENTION OF THE ASSES SEE. THE NOTATION OF THE INVESTMENT MENTIONED IN THE DOCUMEN T FILED DURING ASSESSMENT RESEMBLED THE NOTATION ORDINARILY UTILIZ ED FOR MUTUAL FUNDS. THE ASSESSEE HAS NOT BROUGHT OUT NOT THE A. O. HAS CONSIDERED WHETHER THE RATE OF INTEREST EARNED ON T HE BANK DEPOSITS AND THE RATE OF INTEREST PAID TO THE PARTNERS WERE AT PAR. SIMILARLY, THE USER OF RESIDENTIAL BUILDING HA SNOT BEEN EXAMI NED BY THE AO FOR CONSIDERING THE BORROWED FUNDS UTILIZED AND INT EREST PAID THEREON. IN VIEW OF THE ABOVE, THE ASSESSMENT IS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESS MENT IS THEREFORE SET ASIDE U/S.263 OF I.T. ACT WITH A DIRECTION TO T HE A.O. TO RE- COMPUTE THE ASSESSMENT AFTER CONSIDERING THE FOLLOW ING:- (I) THE RATE OF INTEREST EARNED ON BANK DEPOSITS A ND RATE OF INTEREST PAID TO THE PARTNERS ON CAPITAL. (II) THE INTEREST PAID ON BORROWED FUNDS UTILIZED F OR ACQUISITION OF RESIDENTIAL PROPERTY. 5. FROM THE SIDE OF THE APPELLANT-ASSESSEE LD.AR MR .S.N.SOPARKAR APPEARED AND ARGUED THAT THERE WAS NO FALLACY IN TH E ASSESSMENT ORDER BECAUSE THE SAME WAS COMPLETED AFTER DETAILED SCRUT INY AND HENCE U/S.143(3) OF IT ACT. IN COMPLIANCE OF A NOTICE, U/S.143(1) OF IT ACT, THE ASSESSEE HAS FURNISHED THE DETAILS AND THE WRIT TEN SUBMISSIONS. THE AO HAS SPECIFICALLY MENTIONED THAT THOSE DETAILS WE RE EXAMINED AND ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 5 - CROSS-VERIFIED. THEREAFTER ONLY, FEW DISALLOWANCES HAVE BEEN MADE IN RESPECT OF EXPENDITURE WHICH ACCORDING TO AO WAS NO T RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE. AS AGAINST THE DECLARED BUSINESS INCOME OF RS.1,37,28,100/- FINALLY THE INCOME WAS A SSESSED AT RS.1,91,92,015/-. LD.AR HAS ALSO ARGUED THAT THE PARTNERS SHARE IS A BUSINESS INCOME AS PER SECTION 28(V) OF IT ACT, HEN CE THE DIRECTIONS OF LD.CIT MAY BE QUASHED. 6. WE HAVE HEARD BOTH THE SIDES. THE ORIGINAL OR DER WHICH WAS PASSED U/S.143(3) DATED 30/11/2006 HAS ONLY DEALT W ITH THE ADDITIONS IN RESPECT OF (I) BMW CAR EXPENSES (II) NON-BUSINESS E XPENDITURE ON TELEPHONE, ETC. (III) MISCELLANEOUS EXPENSES, SUCH AS MARRIAGE GIFT TO SALES MAN, (IV) DOGS TRAINING FEES AND (V) LOSS ON SALE OF FIXED ASSETS. UNDISPUTEDLY, AS AGAINST THE DECLARED INCOME OF RS. 1,84,51,302/- THE TOTAL INCOME AFTER THOSE ADDITIONS WAS ASSESSED AT RS.1,91,92,015/-. HOWEVER, THE LD.COMMISSIONER HAS EXAMINED THE RECOR DS OF THE CASE AND PRIMA-FACIE HE HAS ARRIVED AT THE CONCLUSION THAT T HE ASSESSEE HAD CLAIMED A DEDUCTION OF INTEREST OF RS.72,65,894/- PAID TO T HE PARTNERS. AN ANOTHER FACT WHICH WAS NOTICED; ON PRIMA-FACIE PERU SAL OF BALANCE-SHEET; THAT ON ONE SIDE THE PARTNERS CURRENT ACCOUNT HAD SHOWN AN AMOUNT OF RS.7,82,36,658/-, AS AGAINST THAT ON THE OTHER SIDE THE INVESTMENT SHOWN WAS AT RS.5,84,60,738/-. ON EXAMINATION OF THE IN VESTMENT, IT WAS NOTED THAT THE INVESTMENT WAS MADE IN RESIDENTIAL BUILDIN G AND ALSO INVESTMENT MADE IN MUTUAL FUNDS. ON THAT BASIS, WE HAVE TO E XAMINE THAT WHETHER IN SUCH CIRCUMSTANCES THE LD.COMMISSIONER HAS RIGHT LY INVOKED THE REVISIONAL POWERS OR NOT. AS FAR AS THE NECESSITY OF INTRODUCTION OF ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 6 - SECTION 263 IS CONCERNED, A WELL-KNOWN REASON IS TH AT THE DEPARTMENT HAD NO RIGHT TO APPEAL BEFORE THE FIRST APPELLATE AUTHO RITY AGAINST ANY ORDER PASSED BY THE A.O. THEREFORE, THE PROVISIONS OF SECTION 263 WERE ENACTED TO ARM THE COMMISSIONER WITH THE POWERS OF REVISION WHENEVER HE IS OF THE OPINION THAT AN ERRONEOUS JUDGEMENT W AS TAKEN BY THE AO AND, THEREFORE, THAT ORDER IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE. THE ESSENTIAL FEATURE BEFORE THE INVOCATION OF SECT ION 263 IS THAT THE COMMISSIONER MAY CALL FOR AND MAY EXAMINE THE RECOR DS. IN THE PRESENT CASE, THE LD.COMMISSIONER HAS EXAMINED THE RECORDS WHICH WAS VERY MUCH WITHIN HIS ADMINISTRATIVE CONTROL AND THE REUPON HE HAS ARRIVED AT THE CONCLUSION THAT THE AO HAD GONE WRONG IN NOT CONSIDERING THE ASPECT OF PAYMENT OF INTEREST TO PARTNERS ON THEIR RESPECTIVE CURRENT ACCOUNTS. IN THE PRESENT CASE, THOUGH THE AO HAD MADE CERTAIN ENQUIRIES, AS ARGUED BEFORE US, BUT SUCH GLARING FE ATURE OF THE BALANCE- SHEET WAS NOT CONFRONTED TO THE ASSESSEE. SUCH A N ASSESSMENT WHICH HAS BEEN MADE WITHOUT TAKING INTO ACCOUNT THE POSITION OF THE OUTSTANDING BALANCES AS SHOWN IN THE BALANCE-SHEET AND THE RELA TED CONSEQUENCE ON THE PROFIT DISCLOSED AS PER THE P&L ACCOUNT CAN GIV E RISE TO AN AUTOMATIC SUSPICION THAT AN ERRONEOUS ORDER HAS BEEN PASSED C AUSING PREJUDICE TO THE REVENUE. BECAUSE OF THAT REASON, SOME OF THE HONBLE COURTS HAVE EVEN HELD THAT THE WORD ERRONEOUS WOULD ALSO INCL UDE A FAILURE TO MAKE A SPECIFIC ENQUIRY WHICH WAS NECESSARY FOR COMPLETI ON OF THE ASSESSMENT. RATHER, IT IS INCUMBENT ON THE AO TO ATLEAST INVEST IGATE THE FACTS AS STATED IN THE RETURN OF INCOME. IT IS FURTHER INCUMBENT U PON THE AO TO STUDY THE PROFIT & LOSS ACCOUNT AS ALSO THE BALANCE-SHEET PLA CED BEFORE HIM. IF ON THE BASIS OF THE RECORD AVAILABLE, LD.COMMISSIONER HAS OPINED THAT ANY ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 7 - PRUDENT AO WOULD HAVE ENQUIRED ABOUT THE SAID DISCR EPANCY. IF THE LD.CIT FORMS AN OPINION THAT THE AO HAS NOT SHOWN THAT PRUDENCE, THEN AFTER ASSIGNING PROPER REASON, THE LD.COMMISSIONER CAN INVOKE THE REVISIONAL POWERS. IN THE PRESENT CASE, ON EXAMIN ATION OF THE RECORDS, WE HAVE NOTICED THAT BOTH THE INGREDIENTS, I.E. ORD ER BEING AN ERRONEOUS ORDER AND SECOND, I.E. THE ORDER BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE, DID CO-EXIST. THUS, CONSIDERING THE VIE W EXPRESSED HEREINABOVE AND IN THE LIGHT OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY HOLD THAT THE REVISIONAL POW ERS U/S.263 OF THE IT ACT HAS RIGHTLY BEEN INVOKED BY THE LD.COMMISSIONER . RESULTANTLY, THE IMPUGNED ORDER PASSED U/S.263 DATED 09/04/2007 FOR A.Y. 2004-05 IS HEREBY UPHELD. [B] ITA NO.398/AHD/2010 A.Y. 2004-05 7. ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S BY CONFIRMING THE ACTION OF LD. AO IN DISALLOWING PROPORTIONATE I NTEREST EXPENDITURE OF RS.21,89,507/- OUT OF INTEREST PAID TO PARTNERS, LENDERS AND DISTRIBUTORS ON THE GROUND OF INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR NON-BUSINESS PURPOSE. 7.1. WHILE PASSING THE ORDER U/S.143(3) R.W.S.263 O F THE IT ACT DATED 19/12/2008, THE AO HAS NOTICED THAT THE LD.COMMISIS ONER HAS GIVEN DIRECTIONS VIDE AN ORDER PASSED U/S.263 DATED 09/04 /2007 TO RE-COMPUTE THE ASSESSMENT CONSIDERING THE INTEREST PAID ON BOR ROWED FUNDS ALLEGED TO BE UTILIZED FOR THE ACQUISITION OF RESIDENTIAL PROP ERTY. THE AO OBSERVED THAT THE PARTNERS CAPITAL ACCOUNT SHOWS A CREDIT B ALANCE OF RS.10,000/- ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 8 - ONLY AND PAID INTEREST OF RS.72,65,894/- ON THE CUR RENT ACCOUNTS OF THE PARTNERS. SINCE THE INTEREST PAID ON CURRENT ACC OUNT IS NOTHING BUT THE DISTRIBUTION OF PROFIT OF THE BUSINESS AND REALIZAT ION OF INTEREST ON INVESTMENT IS LESS THAN 10%, WHEREAS, THE INTEREST PAID TO THE PARTNERS AT THE RATE OF 12% IS SUGGESTIVE OF DIVERSION OF PROFI T TO THE PARTNERS THROUGH COLOURFUL DEVICE. THE ASSESSING OFFICER HAS FURTH ER OBSERVED THAT THE USE OF BORROWED FUNDS FOR NON-BUSINESS PURPOSE WAS AS UNDER:- (I) RESIDENTIAL BUILDING : RS. 3,13,531/- (II) RESIDENTIAL BUILDING NO.134: RS.21,56,250/- (III)RESIDENTIAL PLOT : RS. 47,837/- (IV) UMBERGAON MEETING HALL : RS. 5,90,540/- ----------------- RS.31,08,158/- HE ALSO REFERRED TO THE SUBMISSION OF THE APPELLAN T WHICH SPEAKS ABOUT THE INVESTMENT MADE IN THE RESIDENTIAL PROPER TY, WHEREIN, THE APPELLANT SUBMITTED THAT THE INVESTMENT MADE IN TH E RESIDENTIAL PROPERTY IS FOR THE SOLE PURPOSE OF HAVING A PLACE TO STAY F OR THE PARTNERS TRAVELING BETWEEN BOMBAY AT THE AND FACTORY SITE TO LOOK AFTE R THE BUSINESS. THE AO CONTENDED THAT THE APPELLANT HIMSELF ADMITS THE PURPOSE AND NATURE OF THE BUILDING. THE ASSESSEE HAS ALSO CONFIRMED THA T THE PARTNERS STAY REGULARLY BUT THE RESIDENTIAL PROPERTY IS ALSO USED FOR THE PURPOSE OF BUSINESS. THE AO FURTHER NOTICED THAT THE APPELLAN T DID NOT CLAIM DEPRECIATION ON THE RESIDENTIAL PROPERTY AND THEREF ORE, IT IS CLEARLY EVIDENT THAT THE INVESTMENT IN THE RESIDENTIAL PROPERTY WAS AN INVESTMENT FOR NON- BUSINESS PURPOSE. THE AO BY GIVING AN OPPORTUNITY TO THE APPELLANT ASKED THE APPELLANT TO FURNISH SPECIFIC EVIDENCE TO HAVE NEXUS OF THE BORROWED FUNDS VIS--VIS INVESTMENT. CONSIDERING T HE TOTALITY OF THE ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 9 - FACTS, THE AO DISALLOWED THE PROPORTIONATE INTEREST PAID TO THE DEPOSITORS, PARTNERS ETC. FOR RS.21,89,507/-. 8. AGAINST THAT ORDER OF THE AO, THE ASSESSEE HAD G ONE IN APPEAL AND LD.CIT(A) HAS GIVEN HIS FINDING AS UNDER:- 4.3. FINDIG :- I HAVE CONSIDERED THE WRITTEN SUBMISSION OF THE AR OF THE APPELLANT AS WELL AS OBSERVATION MADE BY THE AO IN THE ASSESS MENT ORDER. I FOUND AO VERY RIGHTLY FOLLOWED THE DIRECTION GIVEN IN THE ORDER PASSED BY THE C.I.T., VALSAD U/S.263 OF THE ACT. H E HAS GIVEN SUFFICIENT OPPORTUNITY TO THE APPELLANT TO EXPLAIN THE INVESTMENT MADE IN RESPECT OF RESIDENTIAL PROPERTY VIS--VIS B ORROWED FUNDS UTILIZED FOR THE SAME. THE AO HAS A VERY RIGHTLY F OLLOWED THE REASON AND FINDING THAT THE APPELLANT DOES NOT CLAI M DEPRECIATION ON THE PROPERTIES REFERRED TO WHICH ITSELF INDICATE THAT THE APPELLANT HIMSELF BELIEVES THAT THE INVESTMENTS ARE MADE IN THE ASSETS, WHICH OF NON-BUSINESS. I FOUND AO TO BE JU STIFIED IN MAKING AN ADDITION IN RESPECT OF UTILIZATION OF BORROWED F UNDS FOR NON- BUSINESS PURPOSE AS THE APPELLANT HIMSELF HAS DISCL OSED EVEN IN THE AUDITED BALANCE-SHEET THE PROPERTIES AS AN INVESTME NT VIDE SCHEDULE-H AND NOT AS A FIXED ASSET AS SCHEDULE-G A ND PURPOSELY HE HAS NOT CLAIMED THE DEPRECIATION. THE ARGUMENTS ADVANCED BY THE AR OF THE APPELLANT ARE HIGHLY ILLOGICAL BECAUS E WITHOUT OBJECTING THE ORDER OF THE C.I.T. U/S.263 OF THE AC T AND WITHOUT ESTABLISHING NEXUS OF INVESTMENT AND BORROWED FUNDS , HE WANTED TO SHIFT HIS ONUS TO THE AO ASKING HIM TO MAKE A SPOT INQUIRY AND THE SPECIFIC FINDING SINCE THE APPELLANT FAILED TO DISC HARGE HIS ONUS, THE AO IS JUSTIFIED IN MAKING THE SAID ADDITION. T HUS, THIS GROUND OF APPEAL IS DISMISSED . 9. FROM THE SIDE OF THE APPELLANT-ASSESSEE MR.S.N.S OPARKAR SR.ADV. APPEARED AND PLACED RELIANCE ON CORNERSTONE EXPORTS PVT.LTD. VS. DCIT ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 10 - (ITAT A BENCH AHMEDABAD IN ITA NO.859/AHD/1999 A.Y. 1995- 96, ORDER DATED 31/07/2006), DY.CIT VS. ADITYA MEDI SALES LIMITED (ITAT D BENCH AHMEDABAD IN ITA NO.3272/AHD/2002 & OTHERS A.Y. 199-2000 & OTHERS, ORDER DATED 30/09/2010). L D.AR ALSO PLACED RELIANCE ON GLAXO SMITHKLINE ASIA (P) LTD. 236 CTR 113 (SC) AND INDO SAUDI SERVICES (TRAVEL) (P) LTD. 310 ITR 306(BOM.). FROM THE SIDE OF THE REVENUE, LD.DRS MR.D.P.GUPTA & MR.B.L.YADAV HA VE APPEARED AND SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES . 10. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND AFTER CONSIDERING THE COMPILATION FILED WE FIND THAT THE ASSESSEE HAD SHOWN PAYMENT OF INTEREST TO PARTNERS OF RS.72,65,894/-. FACTS OF THE CASE HAVE REVEALED THAT THE ASSESSEE HAD MADE INVESTMENT IN N ON-BUSINESS ASSETS TO THE TUNE OF RS.5,84,60,738/-. THE AO HAS GIVEN A F INDING THAT THE INTEREST-BEARING FUNDS REPRESENTING THE PARTNERS C URRENT ACCOUNT WAS DIVERTED TOWARDS NON-BUSINESS PURPOSES. THE ONLY EXPLANATION OF THE ASSESSEE WAS THAT THE BUILDING USED FOR THE PURPOSE S OF THE BUSINESS AS WELL AS FOR THE PURPOSE OF PROVIDING STAY FOR PARTN ERS. BUT SIMULTANEOUSLY, THIS FACT HAS ALSO BEEN BROUGHT ON RECORD THAT THE SAID BUILDING WAS NOT TREATED AS A BUSINESS ASSET BECAUS E THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON THE SAME. A PLEA HAS BEEN RAISED FROM THE SIDE OF THE ASSESSEE THAT THERE WERE FUNDS AVAILABLE WHI CH WERE INTEREST-FREE OF CERTAIN CREDITORS TO THE TUNE OF RS.1,70,88,455/-, HOWEVER, THAT FACT WAS RIGHTLY REJECTED BY THE AO THAT THE ASSESSEE WAS HA VING CLOSING STOCK OF RS.1,69,82,980/- AS WELL AS SUNDRY DEBTORS OF RS.41 ,18,920/-. THE AO HAS RIGHTLY ARRIVED AT THE CONCLUSION THAT THE FIRM HAD INVESTED ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 11 - RS.5,72,18,535/- TOWARDS NON-BUSINESS ASSETS. TH E AO HAS THUS ESTABLISHED A NEXUS THAT THE NON-BUSINESS ASSETS HA VE FACTUALLY BEEN FUNDED FROM THE CURRENT ACCOUNTS OF THE PARTNERS. ON THE OTHER HAND, THE ASSESSEE HAS NOT CATEGORICALLY DENIED THE SAID FIND ING OF THE AO BY PLACING A DIRECT EVIDENCE THAT NONE OF THE PARTNERS CAPITAL HAD IN FACT BEEN USED FOR SUCH NON-BUSINESS PURPOSES. RATHER, FACTS OF THE CASE HAVE REVEALED THAT THE ASSESSEE HAS NOT DISCHARGED ITS P RIMARY ONUS TO PROVE THAT ENTIRE INTEREST-BEARING FUNDS INCLUDING PARTNE RS CAPITAL ACCOUNT WERE ENTIRELY USED FOR THE PURPOSES OF THE BUSINESS. AS FAR AS THE DECISIONS RELIED UPON FROM THE SIDE OF THE ASSESSEE ARE CONCE RNED, WE HAVE EXAMINED THE FACTS OF THOSE CASES AND SOME OF THEM ARE MERELY ON THE PROVISIONS OF SECTION 40A(2) OF IT ACT AND SOME OF THEM ARE PRIMARILY ON THE FACTS OF THOSE VERY CASES. WE THEREFORE HOLD THAT THE FACTS OF THE PRESENT CASE BEING NOT IDENTICAL AND THE ISSUE INVO LVED BEING NOT COVERED BY THOSE DECISIONS, HENCE SUCH RELIANCE WAS MISPLAC ED. THE ADDITION IS HEREBY CONFIRMED AND GROUND IS DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND DISMISSED. SD/- SD/- ( .'# '# ) ( ) $% ( A. MOHAN ALANKAMONY ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD; DATED 31 / 05 /2012 4..#, .#../ T.C. NAIR, SR. PS ITA NO S.267/AHD/09 AND 398/AHD/10 M/S.JHAVERI INDS. VS. ACIT ASST.YEAR 2004-05 - 12 - $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5(/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-VALSAD 5. 5:; -# , , / DR, ITAT, AHMEDABAD 6. ; <1 / GUARD FILE. $3# $3# $3# $3# / BY ORDER, .5 - //TRUE COPY// = == =/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER 28.5.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.5.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER