The ITO, Ward -4, Bharuch V. Shri Yashwant S. Tejani, Anklehswar

ITA 268/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9153 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 28-01-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Depreciation; Commercial expediency; Onus to prove; Capital Gains
• Section: 143(3); 274; 251

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH,AHMED ABAD. BEFORE :SHRI MAHAVIR SINGH, JUDICIAL MEM BER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-2002) INCOME TAX OFFICER, WD-4, ABOVE BANK OF BARODA BUILDING, STATION ROAD, BHARUCH. VERSUS SHRI. YASHWANT S. TEJANI, PROP OF ANKITA EQUIPMENT PLOT NO. 271 GIDC ESTATE, ANKLESHWAR. (APPELLANT) (RESPONDENT) PAN: AAAHT 6497 A FOR THE APPELLANT: SHRI C.K. MISHRA , DR FOR THE RESPONDENT SHRI URVASHI SHODHAN, AR ORDER PER SHRI D.C. AGRAWAL: THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOLLOWING GROUNDS. 1. IN DELETING THE ADDITION OF RS.6,55,258/- ON AC COUNT OF DISALLOWANCE OF DEPRECIATION OF RS. 2,94,914/- AND ADDITION ON A CCOUNT OF SHORT-TERM CAPITAL GAIN OF RS. 3,60,344/- RESPECTIVELY, IGNORI NG THE FACTS DISCUSSED IN PARAS 2.1 TO 2.3 OF THE ORDER U/S. 143(3) OF THE ACT. 2.IN DELETING THE DISALLOWANCE OF RS. 84,000/- U/S. 40A(2)(B) OF THE I.T. ACT IN RESPECT OF SALARY PAID BY THE ASSESSEE HUF T O ITS KARTA IN HIS INDIVIDUAL CAPACITY, IGNORING THE FACT THAT THE PAY MENT OF SALARY TO THE INDIVIDUAL WAS NOTHING BUT A DEVICE TO REDUCE PROFI T, AS THE KARTA BEING RESPONSIBLE FOR HIS OWN BUSINESS CANNOT JUSTIFY REC EIPT OF SALARY IN A DIFFERENT CAPACITY. 3.IN DELETING THE DISALLOWANCE OF RS. 1,28,607/- ON ACCOUNT OF INTEREST ON BORROWING IGNORING THE FACT THAT THE ASSESSEE HAD F AILED TO DISCHARGE ITS ONUS TO PROVE THAT THE CAPITAL BORROWED HAD NOT BEE N DIVERTED FOR MAKING INTEREST FREE ADVANCES. 2. THE ASSESSEE IS HUF OF SHRI. Y.S. TEJANI ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICAL PROCESS EQUIPMENTS. IT H AD FILED RETURN OF INCOME ON 31-10-2001, ADMITTING TOTAL INCOME OF RS. 10,22, 865/-. THE FIRST GROUND 2 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) COMPRISES OF 2 PARTS. (I) DISALLOWANCE OF DEPRECIAT ION OF RS. 2,94,914/- AND, (II) SHORT TERM CAPITAL GAINS OF RS. 3,60,344/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT SHRI. YASHVANT TEJANI, INDIVIDUAL, HAD PLANT A MACHINERY WHOSE WRITTEN DOW N VALUE WAS RS. 48,548/- AND MARKET VALUE WAS RS. 13,40,000/- AS ON 31-03-20 00. IT WAS TRANSFERRED TO HUF ACCOUNT ON 03-08-2000. THE ASSESSEE CLAIMED DEPRECIATION ON THE PLANT AND MACHINERY, BUT THE ASSESSING OFFICER TOOK THE V ALUE AT NIL AND DISALLOWED DEPRECIATION BY INVOKING EXPLANATION 3 TO SECTION 4 3(1). ACCORDING TO HIM THE ASSETS WERE TRANSFERRED TO HUF WITH INTENTION TO RE DUCE TAX LIABILITY. IN ADDITION, THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE HAD SOLD SOME PLANT AND MACHINERY WORTH RS. 4,50,000/-. HE IDENTIFIED WDV THERE AT RS. 89,656/- AND WORKED OUT SHORT TERM CAPITAL GAIN AT RS. 3,60,344/ -. HE, THUS, MADE THIS ADDITION AS WELL AS DISALLOWED DEPRECIATION OF RS. 2,94,914/-. 3. BEFORE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S), FOLLOWING SUBMISSIONS WERE MADE. IT IS HUMBLY SUBMITTED THAT THE DISALLOWANCE OF D EPRECIATION BY THE LD. A.O. IS WITHOUT APPRECIATION OF FACTS. THE BUSINESS OF M/S. DINESH INDUSTRIES IS OF MANUFACTURING OF MACHINERY. DURING THE YEAR UNDER CONSIDERATION, THE MACHINERIES WERE PURCHASED BY M/S. ANKITA EQUIPMENT, (APPELLANT) FROM M/S DINESH INDUSTRIES T HROUGH THE INVOICES RAISED, WHICH ARE ENCLOSED AT PAGE NOS. 1 TO 3 OF T HE PAPER BOOK. THESE MACHINES ARE SOLD BY M/S DINESH INDUSTRIES OUT OF S TOCK AVAILABLE WITH IT AS ON 31.3.2000 REFLECTED IN THE BALANCE SHEET AT R S. 12,93,232/-, A COPY OF WHICH IS ENCLOSED AT PAGE NOS. 4 TO 12 OF PAPER BOOK AND THE RELEVANT REFERENCE IS ON PAGE 4 AND PAGE 9. THE COPY OF ACC OUNT OF M/S DINESH INDUSTRIES AS APPEARING IN THE BOOKS OF THE APPELLA NT EVIDENCING THE PURCHASE IS ALSO ENCLOSED AT PAGE NO. 13 OF THE PAP ER BOOK. IT IS FURTHER SUBMITTED THAT THESE MACHINES ARE PU RCHASED OUT OF BORROWINGS BY WAY OF TERM LOAN OF RS. 10,00,000/- M ADE FROM ORIENTAL BANK OF COMMERCE, THE SANCTION OF WHICH IS ENCLOSED AT PAGE NO. 14 OF THE PAPER BOOK AND THE CLAIM OF DEPRECIATION IS DUL Y CERTIFIED BY THE AUDITORS WHEREIN AS PER CLAUSE-14 OF FORM 3CD, THE AUDITORS HAVE QUANTIFIED THE AMOUNT OF ELIGIBLE DEPRECIATION CONS IDERING THE ADDITION OF PLANT AND MACHINERY WORTH RS. 13.4 LAKHS. AS PER STATEMENT OF DEPRECIATION FILED, IN THE BLO CK OF PLANT AND MACHINERY, THE DEPRECATION CLAIMED, WRITTEN DOWN VA LUE AND THE SALE OF ASSETS IS SHOWN AS UNDER: 3 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) OPENING WDV RS. 89,655/- ADDITIONS DURING THE YEAR RS. 13,40,000/- SALES RS. 4,50,000/- DEPRECIATION FOR THE YEAR RS. 2,94,914/- CLOSING WRITTEN DOWN VALUE RS. 7,34,742/- CONSIDERING THE ABOVE FIGURES AND ALSO HOLDING THA T THE APPELLANT HAS NOT PURCHASED THE MACHINERY OF RS. 13.40 LAKHS, THE LD.A.O. RECOMPUTED THE SHORT-TERM CAPITAL GAIN OF RS.3,60,3 44/- AS PER THE PROVISION OF SECTION 50 AS UNDER: PROCEEDS OF MACHINERY RS.4,50,000/- LESS: WDV OF MACHINERY AS ON1.4.00 RS. 89,656/- SHORT TERM GAIN RS.3,60,344/- AS ALREADY EXPLAINED IN RELATION TO THE ALLOWABILIT Y OF CLAIM OF DEPRECIATION OF RS.2,94,914/-., IT IS EXPLAINED THA T THE VALUE OF MACHINERY WORTH RS. 13.40 LAKHS IS ACTUALLY PURCHAS ED AND CONSEQUENTLY, THE LD. A.O. NEED NOT COMPUTE THE SHO RT TERM CAPITAL GAIN AS ABOVE. THE APPELLANT RESPECTFULLY SUBMITS THAT THE ADDITION MADE BY THE LD. A.O. BEING ERRONEOUS IN FACTS AND IN LAW BE DIRECTED TO BE DELETED. IN VIEW OF THE ABOVE FACT, THE DISALLOWANCE OF DEPR ECIATION OF RS.2,94,914/- MADE BY THE LD. A.O. IN RESPECT OF MA CHINERY PURCHASED IS CONTRARY TO FACTS AND WITHOUT APPRECIATION OF MATER IAL AVAILABLE WITH THE LD. A.O. AND THEREFORE, IT IS PRAYED THAT THE LD. A .O. BE DIRECTED TO ALLOW THE DEPRECIATION OF RS. 2,94,914/- AS CLAIMED AND ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN MAY BE DELETE D SINCE ASSESSING OFFICER HAS MISUNDERSTOOD THE CASE. 4. AFTER CONSIDERING THE ABOVE SUBMISSIONS, LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITIONS BY OBSERV ING AS UNDER: 3.4 I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER AND ALSO THE SUBMISSIONS MADE BY THE AUTHORISED REP RESENTATIVE OF THE APPELLANT H.U.F. I AM OF THE VIEW THAT MISTAKE IN THE ASSESSMENT ORDER OF THE ASSESSING OFFICER HAS OCCURRED BECAUSE THE A PPELLANT HUF HAD MADE PURCHASES OF RS.13.40 LACS FROM M/S. DINESH IN DUSTRIES WHICH IS THE SOLE PROPRIETARY CONCERN OF SHRI YASHWANT TEJAN I (INDIVIDUAL). THE SALES MADE BY M/S. DINESH INDUSTRIES HAVE BEEN DULL Y REFLECTED IN THE SALES OF M/S. DINESH INDUSTRIES AND PRIOR TO SALE S UCH MACHINERY WAS REFLECTED IN THE STOCK OF M/S. DINESH INDUSTRIES. THE ASSESSING OFFICER HAS WRONGLY VERIFIED THE BLOCK OF ASSETS OF M/S. DI NESH INDUSTRIES RATHER 4 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) THAN STOCK OF WHILE COMPLETING THE ASSESSMENT. THI S HAS LED TO INCORRECT FINDING AND DENIAL OF THE DEPRECIATION AND FURTHER ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN. IN CASE, THE ASSESSING OFFICER HAS RIGHTLY APPRECIATED THE FACTS, THEN THERE WAS NO CASE FOR D ISALLOWANCE OF DEPRECATION ON MACHINERY AND CHARGING OF SHORT TERM CAPITAL GAIN. IN CASE, THE ASSESSING OFFICER HAS RIGHTLY APPRECIATED THE FACTS, THEN THERE WAS NO CASE FOR DISALLOWANCE OF DEPRECIATION ON MAC HINERY AND CHARGING OF SHORT TERM CAPITAL GAIN THEREON. THE M ISTAKE OF THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEPRECIATION ON MACHINERY PURCHASED BY RAISING TERM LOAN FROM ORIENTAL BANK O F COMMERCE AND AT THE SAME TIME IMAGINARY ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN BY HIM IS DIRECTED TO BE DELETED. 5. FROM THE ABOVE FACTS IT IS CLEAR THAT ASSESSEE H AD PURCHASED MACHINERY FROM M/S. DINESH INDUSTRIES ADDED THE SAME IN BLOCK OF ASSETS AND REDUCED FROM BLOCK, THAT PART OF MACHINERY WHICH WAS SOLD B Y HIM. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAD ACCORDINGLY ALLOWED THE DEPRECIATION AND CANCELLED SHORT TERM CAPITAL GAINS . 6. WE HAVE HEARD LD. D.R. AND LD. AR. IN OUR CONSI DERED VIEW THERE IS NOT CASE FOR INTERFERENCE IN THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS). IT IS CLEAR THAT ASSESSEE HAD PURCHA SED PLANT AND MACHINERY FROM M/S. DINESH INDUSTRIES FOR RS. 30,40,000/-. IN ADDI TION, IT HAD SOLD MACHINES FOR THE VALUE OF RS.4,50,000/-. THE, WORKING OF W.D.V. , ADDITIONS AND REDUCTION IN THE BLOCK ASSETS IS ACCORDING TO THE RULES AND THER E IS NO CASE FOR HOLDING THAT ASSESSEE DID NOT HAVE ANY MACHINERY AND HENCE DEPRE CIATION IS NOT ALLOWABLE OR THAT THERE WAS A SEPARATE SALE OF MACHINERY ON WHIC H SHORT TERM CAPITAL GAINS IS CHARGEABLE. FINDING OF LD. ASSESSING OFFICER IS IN CORRECT AND IS BASED ON WRONG APPRECIATION OF FACTS. THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) HAS CORRECTED THE MISTAKES DONE BY THE ASSESSING OFFICER AND THERE IS NO REASON TO DISTURB HIS FINDING. AS A RE SULT, THIS GROUND OF REVENUE IS REJECTED. 5 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) 7. SECOND GROUND IS OF DISALLOWANCE OF SALARY OF RS . 84,000 TO THE HUF. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE G ROUND THAT SALARY CANNOT BE ALLOWED TO THE INDIVIDUAL IF HE IS MANAGING BUSINES S OF HIS HUF. 8. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE CLAIM FOLLOWING THE DECISION OF HON'BLE ALLAHABAD HIGH CO URT IN GOPINATH SHETH VS. CIT (1984) 146 ITR 586 (ALLAHABAD) AND OF HON'BLE M .P. HIGH COURT IN JAYNARAYAN CHHOTELAL VS. CIT (1985), 152 ITR 11 (MP ). THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALSO HELD THAT PAYMENT OF SALARY OF RS. 7,000/- PER MONTH IS NEITHER EXCESSIVE NOR UNREASON ABLE. 9. WE HAVE HEARD LD. A.R. AND LD. D.R. IN OUR CONS IDERED VIEW, THERE IS NO REASON TO TAKE A DIFFERENT VIEW FROM THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS). CLAIM OF THE ASSESSEE CANNOT BE DISA LLOWED UNDER SECTION 40A(2)(B) TO UNLESS THE FINDING IS GIVEN THAT PAYME NT IS EXCESSIVE OR UNREASONABLE. NO SUCH FINDING IS GIVEN BY ASSESSIN G OFFICER. PAYMENT BY HUF TO INDIVIDUAL IS PERMISSIBLE IN VIEW OF THE 2 J UDGMENTS REFERRED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN HIS ORDER. THE HON'BLE SUPREME COURT IN JITMAL BHURAMAL VS. CIT (1962) 44 ITR 887 (SC) HAS HELD THAT AN HUF CAN BE ALLOWED TO DEDUCT SALARY PAID TO THE MEMBERS OF FAMILY IF PAYMENT IS MADE AS A MATTER OF COMMERCIAL OR BUSINE SS EXPEDIENCY, IF SERVICE IS RENDERED TO THE FAMILY. THIS WAS FURTHER EXPLAI NED BY THE HON'BLE SUPREME COURT IN JUGALKISHOR BALDEV SAHAY VS. CIT 1967 63 I TR 238 (SC) AND BY HON'BLE GUJARAT HIGH COURT IN SHANKARLAL H. DAVE VS . CIT (1980) 124 ITR 733 (GUJARAT) WHEREIN IT IS HELD THAT THERE IS NO P ROHIBITION UNDER HINDU LAW OR UNDER THE GENERAL LAW FOR HUF TO CARRY ON A BUSINES S AND A KARTA CAN RECEIVE REMUNERATION FROM HUF, IF THERE IS A VALID AGREEMEN T, IF IT IS IN THE INTEREST OF THE BUSINESS OF THE FAMILY AND IT IS JUSTIFIED ON G ROUNDS OF COMMERCIAL EXPENDITURE. IN VIEW OF THE ABOVE, WE HOLD THAT OR DER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS ACCORDING TO LAW AND IS THEREFORE CONFIRMED. 6 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) 10. 3 RD GROUND IS REGARDING DISALLOWANCE OF RS. 1,28,607/- DELETED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE A SSESSING OFFICER NOTED THAT THE ASSESSEE HAS MADE FOLLOWING INTEREST FREE ADVANCES. (A) SHRI. CHANDUBHAI B. PATEL RS. 46,800/- (B) SMT. KOKILABEN Y. TEJANI RS.5,39,685/- (C) SHRI. MAHESH L. TEJANI RS. 45,000/- (D) SHRI MANISH L. TEJANI RS. 83,000/- RS.7,14,485/- 11. THE ASSESSEE EXPLAINED THESE INTEREST FREE ADVA NCES AS UNDER: REGARDS TO LOANS AND ADVANCE GIVEN TO: LOANS GIVEN TO KOKILABEN TEJANI IS AN OPENING BALAN CE CARRIED FORWARD AND PAID DURING THE YEAR IS GIVEN ON BEHALF OF YESHUBHAI TEJANI, HUF, INSTEAD OF DEBITING TO CAPITAL ACCOUNT IS SHOWN AS LOAN GIVEN. AMOUNT PAID TO MAHESH TEJANI IS CARRIED FORWARD FOR M PREVIOUS YEAR AND IS OPENING BALANCE. SHRI MANISH L. TEJANI IS AN EMPLOYEE OF THE COMPANY AND IS GIVEN AS ADVANCES TO STAFF. FURTHER WE WOULD LIKE TO MENTION HERE THAT WE DO HA VE CAPITAL BALANCE AS PROPRIETARY CONCERN OF RS. 10,18,611.49 AS ON 31.03.01 IN BUSINESS AS SUCH WE REQUEST YOU LOOK IN TO THE MATTER ACCORDINGLY. THE LD. ASSESSING OFFICER HELD THAT ASSESSEE FAILE D TO ESTABLISH THE NEXUS BETWEEN INTEREST FREE ADVANCES GIVEN TO THE R ELATED PERSONS. THE ASSESSING OFFICER RELIED ON THE FOLLOWING JUDGMENTS . (1) CIT VS. M.S. VENKATESWARAN 222 ITR 163 (MAD). (2) K. SOMASUNDARAM & BROTHERS VS. CIT 238 ITR 939 (MAD ). (3) R. DALMIA VS. CIT 133 ITR 169(DEL) 12. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION ON THE GROUND THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO EXTENT 7 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) OF RS. 72,00,000/-. SECONDLY, INTEREST RATE PAID B Y THE ASSESSEE ON MONEY BORROWED FROM BANK IS 15%, WHEREAS, ASSESSING OFFIC ER HAS DISALLOWED INTEREST PAYMENT AT THE RATE OF RS. 18%. THIRDLY, THE ASSESSING OFFICER HAS DISALLOWED INTEREST FOR FULL YEAR WHEREAS INTEREST FREE ADVANCES WERE GIVEN IN DIFFERENT PARTS OF THE YEAR SUCH AS JUNE, OCTOBER, DECEMBER, JANUARY AND FEBRUARY. THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) RELIED ON THE FACT THAT INTEREST FREE ADVANCES WERE GIVEN TO THE FRIENDS OUT OF OWN INTEREST FREE FUNDS. 13. HE ALSO RELIED ON THE FOLLOWING JUDGMENTS. I. SHREE DIGVIJAY CEMENT CO. LTD V/S CIT 138 ITR 4 5 (GUJ) II. CIT V/S GOPIKRISHNA MURALIDHAR, 47 ITR 469 (AP ), III. CIT V/S HOTEL SAVERA 239 ITR 795 (MAD) IV. GNFC V/S CIT 73 TTJ 787 (AHD), V. SHAHIBAUG ENTERPRISES V/S CIT 49 TTJ 554 (AHD) AND VI. TORRENT FINANCIERS V/S CIT 73 TTJ 624 (AHD) VII. CIT V/S ALOK PAPER INDUSTRIES 138 ITR 729 VIII. R. D. JOSHI V/S CIT 251 ITR 332 (M.P.) 14. WE HAVE HEARD LD. A.R. AND LD. D.R. THE LD. D. R. SUBMITTED THAT ASSESSEE FAILED TO ESTABLISH NEXUS BETWEEN INTEREST FREE FUNDS AND INTEREST FREE ADVANCES GIVEN TO RELATED PERSONS. ON THE OTHER HA ND LD. A.R. SUBMITTED THAT NO SUCH DISALLOWANCES WERE MADE IN RESPECT OF ADVAN CES TO FIRST 2 PERSONS VIZ. SHRI. CHANDUBHAI PATEL AND KOKILABEN TEJANI TO WHOM ADVANCES IN EARLIER YEAR WERE ALSO GIVEN. SECONDLY, SHRI. MANISH TEJANI IS EMPLOYEE OF THE COMPANY AND ADVANCE IS GIVEN TO STAFF. THIRDLY, ASSESSEE H AS SUFFICIENT INTEREST FREE FUNDS AS STATED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). FOLLOWING ADDITIONAL DECISIONS SUPPORT THE CASE OF THE ASSESSEE. TORRENT FINANCIERS V. ACIT (2001) 73 TTJ 624 (AHD) 8 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) CIT V. PREM HEAVY ENGG. WORKS (P.) LTD. (2006) 285 ITR 554 (ALL) CIT V. BRITANNIA INDUSTRIES LTD. (2006) 280 ITR 525 (CAL) CIT V. RADICO KHAITAN LTD. (2005) 274 ITR 354 (ALL) CIT V. TIN BOX CO. (2003) 260 ITR 637 (DEL) MUNJAL SALES CORPORATION 298 ITR 298 (SC) 15. FINALLY LD. A.R. REFERRED TO THE DECISIONS OF H ON'BLE BOMBAY HIGH COURT IN CIT VS. RELIANCE SECURITIES AND POWER LIMI TED (2009) 313 ITR 340 BOMBAY FOR THE PROPOSITION THAT PRESUMPTION IS THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION . IT IS BECAUSE INTEREST FREE ADVANCES TO KOKILABEN TEJANI & MAHESH S. TEJANI WER E OLD BALANCES AND NO DISALLOWANCE IN THE PAST HAS BEEN MADE. SECONDLY, SHRI. MANISH TEJANI IS AN EMPLOYEE AND INTEREST FREE ADVANCES ARE GIVEN TO HI M FOR COMMERCIAL EXPEDIENCY. THIRDLY, LOAN TAKEN FROM BANK ARE APPA RENTLY USED FOR PURCHASING PLANT AND MACHINERY AS EXPLAINED BY LD. A.R. NOTWI THSTANDING ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AND ASSESSING OFFICE R IS EXPECTED TO SHOW THAT EXPLANATION FURNISHED BY THE ASSESSEE THAT IT IS ON LY OUT OF INTEREST FREE FUNDS FROM WHICH INTEREST FREE ADVANCES ARE GIVEN IS NOT CORRECT BY POINTING OUT THAT WHEN MONEY WAS GIVEN TO THE FRIENDLY PERSONS, THE A SSESSEE HAD BUILT UP CASH BALANCES BY BORROWING INTEREST BEARING LOANS FROM T HE BANK OR FROM OTHER PERSONS AND HAD HE NOT BORROWED FUNDS ON INTEREST, HE COULD NOT HAVE GIVEN SUCH ADVANCES TO FRIENDLY PERSONS WITHOUT INTEREST, AS HE WOULD NOT HAVE ADEQUATE CASH BALANCE AT THE POINT OF TIME WHEN HE MADE INTEREST FREE ADVANCES. THE ONUS IS NEVER FIXED, IT GOES ON SHIFTING FROM A SSESSING OFFICER TO ASSESSEE AND FROM ASSESSEE TO ASSESSING OFFICER, DEPENDING U PON EVIDENCE AND EXPLANATION FURNISHED BY THE PARTIES. IF, THE ASSE SSEE HAS FURNISHED AN 9 ITA NO.268/AHD/2005 (ASSESSMENT YEAR 2001-02) EXPLANATION THAT IT HAS SUFFICIENT INTEREST FREE AD VANCES, THEN ASSESSEE HAS PRIMA-FACIE DISCHARGED THE ONUS AND IT IS NOW THE D UTY OF THE ASSESSING OFFICER TO SHOW THAT ASSESSEE DID NOT HAVE SUFFICIENT INTER EST FREE FUNDS AVAILABLE AT THE POINT OF TIME WHEN HE HAD GIVEN INTEREST FREE ADVAN CES. HE CAN DO SO BY CALLING DIRECTLY OR FROM ASSESSEE, COPIES OF BANK A CCOUNT SHOWING RECEIPT & TRANSFER OF THE FUNDS IN QUESTION. MERELY, REJECTIN G THE EXPLANATION OF THE ASSESSEE IS NOT SUFFICIENT. THE VIEW OF HON'BLE BO MBAY HIGH COURT IN RELIANCE UTILITIES AND POWER LIMITED GIVES CLEAR INDICATION THAT IF ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, THEN IT SHALL BE PRESUMED THAT INTEREST FREE ADVANCES WAS GIVEN OUT OF INTEREST FREE FUNDS. SUCH PRESUMPTION IS REBUTTABLE AND THE ASSESSING OFFICER IS EXPECTED TO GIVE HIS FINDING O N THE AVAILABILITY OF CASH AT THE POINT OF TIME WHEN SUCH INTEREST FREE ADVANCES ARE GIVEN. IF HE CHOOSES NOT TO DO SO THEN HE LOSES THE RIGHT TO MAKE ADDITION. THIS IS EXACTLY WHAT HAS HAPPENED IN THIS CASE. THEREFORE, ADDITION MADE BY THE ASSESSING OFFICER CANNOT BE JUSTIFIED. AS A RESULT THIS GROUND OF RE VENUE IS REJECTED. 17. FINALLY, APPEAL FILED BY THE REVENUE IS DISMISS ED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 4 TH SEPTEMBER, 2009. SD/- SD/- (MAHAVIR SINGH) (D .C. AGRAWAL) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED: 04/09/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.