The DCIT, Circle-4, Ahmedabad V. Madhur Capital & Finance Pvt.Ltd., Ahmedabad

ITA 27/AHD/2008

• Counselvise Citation: 2720514 RSA 2008
• Duration Of Justice: 4 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-10-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 02-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N SOPARKAR
• Assessee Lawyers: D C PATWARI
• Keywords: Unexplained cash credit; Opportunity of being heard; Source of fund; Deemed dividend
• Section: 43B; 234B; 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.580/ AHD/2006 (ASSESSMENT YEAR 2000-01) MADHUR CAPITAL & FINANCE LTD., MADHUR COMPLEX, STADIUM CIRCLE, NAVRANGPURA, AHMEDABAD VS. ACIT, CIRCLE 4, AHMEDABAD PAN/GIR NO. : AABCM3158M I.T.A.NO. 27/AHD/2008 (ASSESSMENT YEAR 2000-01) ACIT, CIRCLE 4, VS. MADHUR CAPITAL & FINANCE LTD. , AHMEDABAD MADHUR COMPLEX, STADIUM CIRCLE NAVRANGPURA, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N SOPARKAR, AR RESPONDENT BY: SHRI D C PATWARI, CIT DR DATE OF HEARING: 25.10.2012 DATE OF PRONOUNCEMENT: 30.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- OUT OF THESE TWO APPEALS, THERE IS ONE QUANTUM AP PEAL FILED BY THE ASSESSEE AND ANOTHER ONE IS REVENUES APPEAL IN THE CASE OF PENALTY PROCEEDINGS U/S271(1)(C) OF THE INCOME TAX ACT, 196 1, WHICH HAS BEEN FILED BY THE REVENUE FOR THE SAME ASSESSMENT YEAR I .E. ASSESSMENT YEAR 2000-01 WHICH ARE DIRECTED AGAINST TWO SEPARATE ORD ERS OF LD. CIT(A) I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 2 VIII, AHMEDABAD DATED 30.01.2006 IN THE CASE OF QUA NTUM PROCEEDINGS AND DATED 03.10.2007 IN THE CASE OF PENALTY PROCEED INGS. 2. FIRST, WE TAKE UP THE QUANTUM APPEAL FILED BY TH E ASSESSEE I.E. I.T.A.NO. 580/AHD/2006. 2.1 GROUND NO.1 READS AS UNDER: 1. THE LEARNED CTT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF THE AO IN REOPENING THE AS SESSMENT PROCEEDINGS U/S. 147 OF THE I.I. ACT. UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENIN G IS WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR O N TACT. THE PRESENT PROCEEDINGS, THEREFORE, ARE REQUIRE TO HE Q UASHED. 2.1.1 THIS GROUND WAS NOT PRESSED BY THE LD. A.R. A ND HENCE, REJECTED AS NOT PRESSED. 2.2 GROUNDS NO.2, 3 & 4 ARE INTERCONNECTED WHICH RE AD AS UNDER: 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF THE AO IN ADDING RS.73,69, 973/- UNDER SEC.2(22)(E) OF THE ACT AS DEEMED DIVIDEND IN THE H ANDS OF THE APPELLANT. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE NOT AT ALL ATTRACTED AN D THEREFORE NO SUCH ADDITION OUGHT TO HAVE BEEN MADE IN THE HANDS OF TH E APPELLANT. 3. ALTERNATIVELY AND WITHOUT PREJUDICE, LEARN ED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE SAID DEEMED DIVIDEND OUGHT TO HAVE BEEN RESTRICTED TO THE ACCUM ULATED PROFITS OF THE MADHUR SHARES & STOCK PVT. LTD. 4. ALTERNATIVELY AND WITHOUT PREJUDICE, LEARN ED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOR FOLLOWING AND CONV ENIENTLY IGNORING THE DIRECT AND BINDING DECISION OF JURISDI CTIONAL TRIBUNAL IN THE CASE OF M. B. STOCK HOLDING PVT. LTD. VS. AC IT (84 ITD 542) WHILE QUANTIFYING THE DEEMED. 2.2.1 THE BRIEF FACTS REGARDING THIS ISSUE TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARAS 2, 2.1, 2,2 & 2.3 OF HIS ORDER AND HENCE, THE SAME ARE REPRODUCED BELOW FOR THE SAKE OF READY REF ERENCE: I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 3 GROUND NO. 2, 3 & 4 : THESE GROUNDS RELATE TO THE ACTION OF THE AO IN MAKING ADDITION OF RS. 73,69,973/-UNDER SECTI ON 2(22)(E) OF THE ACT AS DEEMED DIVIDEND IN THE HANDS OF THE APPE LLANT. THE APPELLANT HAS OBJECTED THAT PROVISIONS OF SECTION 2 (22)(E) OF THE ACT ARE NOT AT ALL ATTRACTED THEREFORE NO SUCH ADDITION OUGHT TO HAVE BEEN MADE IN THE HANDS OF THE .APPELLANT. THE APPEL LANT HAS ALSO STATED THAT THE SAID DEEMED DIVIDEND OUGHT TO HAVE BEEN RESTRICTED TO THE ACCUMULATED PROFITS OF THE SAID MSSL. HE ALS O SUBMITTED THAT THE AO HAS ERRED IN LAW AND ON FACTS IN ERRONE OUSLY QUANTIFYING THE DEEMED DIVIDEND UNDER SECTION 2(22) (E) OF THE ACT. 2.1 VIDE NOTICES DATED 20.12.2004 AND 27.12.2004, T HE AO ASKED THE APPELLANT TO PRODUCE DETAILS OF ALL SUCH PRIVAT E LIMITED COMPANIES IN WHICH APPELLANT HAD SHAREHOLDING AND W ITH WHOM APPELLANT HAD CARRIED TO ANY KIND OF TRANSACTION. I N THIS CONNECTION, VIDE LETTER DATED 20.12.2004, THE APPELLANT SUBMITT ED IT HAD CARRIED OUT TRANSACTIONS ONLY WITH MADHUR INDUSTRIES LIMITE D (FORMERLY KNOWN AS MADHUR FOODS PRODUCTS LTD.) AND MADHUR SHA RES AND STOCK PVT. LTD. IN RESPECT OF OTHER COMPANIES, THE APPELLANT SUBMITTED THAT THERE WERE NO TRANSACTIONS DURING TH E YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED THAT MADHUR IN DUSTRIES LTD. IS A PUBLIC LIMITED COMPANY AND THEREFORE PROVISIONS O F SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE. 2.2 THE APPELLANT WAS ALSO ASKED TO PRODUCE TH E COPY OF ACCOUNT OF MADHUR SHARES AND STOCK PVT. LTD. (IN SH ORT 'MSSL') AS APPEARING ITS BOOKS OF ACCOUNT FOR A.Y. 2000-01. FROM THE COPY OF ACCOUNT, THE AO NOTICED THAT ON SEVERAL OCCASION S, MSSL HAD EXTENDED LOAN TO THE APPELLANT. VIDE LETTER DATED 1 7.12.2004, THE APPELLANT SUBMITTED THAT MSSL HAS NO SYSTEM TO ASC ERTAIN THE ACCUMULATED PROFIT AT THE END OF EVERY MONTH. IT WAS ALSO SUBMITTED THAT SO FAR AS ACCUMULATED PROFIT AT THE END OF EVERY MONTH IS CONCERNED, THE COMPANY HAVE NO SYSTEM FOR ASCERTAINING THE ACCUMULATED PROFIT. IN VIEW OF THE ABOVE REPL Y OF THE APPELLANT, THE AO THOUGHT IT PROPER TO CALCULATE THE PROFIT OF MSSL AT THE END OF EVERY MONTH ON PROPORTIONATE BA SIS . ACCORDINGLY, A SHOW-CAUSE NOTICE WAS ISSUED TO THE APPELLANT COMPANY ON 27.12.2004. THE AO CONSIDERED THE REP LY SUBMITTED BY THE APPELLANT AND OTHER MATERIAL AVAILABLE ON THE RECORD. HE NOTED THAT (A) MSSL IS A COMPANY IN WHICH THE PUB LIC ARE NOT SUBSTANTIALLY INTERESTED, (B) MCFL IS A SHAREHOLD ER OF 248100 SHARES ( OUT OF TOTAL 600200 SHARES OF THE COMPANY) OF THE MSSL I.E. IT HAS A HOLDING OF 41.34% IN MSSL, MEANING TH EREBY IT IS A I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 4 SUBSTANTIAL SHAREHOLDER OF THE MSSL AND (C) THE ACC OUNT OF APPELLANT COMPANY IN THE BOOKS OF MSSL PRODUCED B Y THE APPELLANT CLEARLY SHOWS THAT ON SEVERAL OCCASIONS, ADVANCES HAVE BEEN MADE TO THE APPELLANT BY MSSL. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT COMPANY. THE AO ALSO NOTED THAT THE APPELLANT'S ARGUMENT THAT IT HAD BUSINESS TRANSACTION WITH MSSL DOES NOT CARRY ANY WEIGHT BECAUSE SECTION 2(22)(E) DOES NOT PROVIDE FOR ANY SUCH EXCEPTION. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF MSSL, IT WAS MENTIONED B Y MSSL THAT TRANSACTIONS ENTERED INTO WITH MCFL ARE ON CO MMERCIAL BASIS AND MSSL IS USING INFRASTRUCTURE OF THE APPELLA NT. HOWEVER, THE AO OF, HAD GIVEN A FINDING THAT SUCH CONTENTI ON HAD NOT BEEN FOUND CORRECT AS MSSL COULD NOT PROVIDE ANY EVIDENC E IN THIS REGARD. THE ARGUMENT OF THE APPELLANT COMPANY THAT THE MONEY LENDING WAS ALSO ONE OF ITS BUSINESSES WAS NOT FOUN D CORRECT BY THE AO IN LIGHT OF THE ABOVE FACT. AS PER AUDIT REPORT THE BUSINESS ACTIVITIES OF THE APPELLATE ARE LEASING, HIRE PURCH ASE AND TRADING IN SHARES/STOCKS. THEREFORE THE CONTENTION OF THE APPE LLANT REGARDING BUSINESS TRANSACTION WAS REJECTED BY THE AO, BOTH O N THE BASIS OF FACT AND ON THE GROUND OF LAW. 2.3 THE AO NOTED THAT THE CONTENTION OF THE A PPELLANT THAT THE ACCUMULATED PROFIT IN THE CASE OF MSSL SHOULD BE C OMPUTED ONLY UPTO THE END OF THE LAST FINANCIAL YEAR I.E. UPTO 3 1.03.1999, WAS ALSO NOT TENABLE. THE AO HAS REPRODUCED EXPLANATIO N 2 TO SECTION 2(22) OF THE ACT IN THE ASSESSMENT ORDER, ACCORDING TO WHICH, THE PHRASE USED IN THE EXPLANATION IS UPTO THE DATE OF DISTRIBUTION OF PAYMENT'. HE NOTED THAT THIS LEAVES NO DOUBT IN THE MIND THAT THE ACCUMULATED PROFIT SHOULD BE CONSIDERED ONLY UPTO T HE DATE OF DISTRIBUTION OF ADVANCE. HE ALSO RELIED ON THE J UDGMENT OF THE HON'BLE IT AT MADRAS 'B' BENCH IN THE CASE OF SUJA THA VENKATESWARAN VS. ACIT 61 ITD 485 TO SUPPORT HIS CO NTENTION. IN VIEW OF THE ABOVE JUDGMENT, HE INFERRED THAT ACC UMULATED PROFIT IN THE CASE OF MSSL HAS TO BE CALCULATED TILL 28.02 .2004. THE APPELLANT WAS ASKED TO FURNISH THE DETAILS OF ACCUM ULATED PROFITS UPTO 28.02.2000. HOWEVER THE SAME WERE NOT FURNISHE D. THEREFORE, THE AO HAS LEFT WITH NO OPTION BUT TO CO MPUTE THE SAME ON THE PROPORTIONATE BASIS. THE AO HAS FURTHER S UBMITTED THAT AS PER THE FINDINGS OF AO OF MSSL, AFTER THE PERUSAL O F THE SAUDA BOOK I.E. BROKERAGE ACCOUNT OF THE MSSL, THE BROKER AGE BUSINESS IN WHICH THE MSSL IS ENGAGED HAS DISPLAYED A CONSI STENT TREND OF I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 5 INCOME. IT WAS OBSERVED IN THE ASSESSMENT ORDER OF THE MSSL THAT THE TREND OF EARNING THE INCOME IN EVERY MONTH WAS ALMOST SAME. AS PER THE RECORDS AND DETAILS SUPPLIED BY THE AO OF MSSL, WHICH WAS SUBSTANTIATED BY THE APPELLANT CO MPANY ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, MSSL H AS SHOWN A PROFIT OF RS. 70,08,496/-(PROFIT BEFORE TAX). THE REFORE, DURING THE RELEVANT ASSESSMENT YEAR, PROPORTIONATE PROFIT EARN ED UPTO 28.02.2000 WAS RS. 64,24,455/- I.E. (RS. 70,08, 496 X 11/12). HENCE, THIS AMOUNT OF RS. 64,24,455/- WAS CONSIDERE D AS PROFIT ACCUMULATED (FOR A.Y. 2000-01) AT THE POINT OF TIME WHEN THE MSSL HAD ADVANCED SUM OF RS. 73,69,973/- TO THE APP ELLANT COMPANY. AT THE END OF A.Y. 1999-2000, MSSL HAD ACCUMULATED PROFIT OF RS. 25,83,250/- AND THEREFORE , THE ACCUMULATED PROFIT AS ON 28.02.2004 WAS WORKED OU T TO RS. 90,07,705/-. IN BRIEF, IT WAS EXPLAINED THAT MSSL HAD EXTENDED AN ADVANCE OF RS. 73,69,973/-TO ITS SUBSTANTIAL SHARE HOLDERS MCFL ON 28.02.2002, WHEN MSSL WAS HAVING AN ACCUMULATED PROFIT OF RS. 90,07,705/-. THEREFORE, IN THE LIGHT OF SECTI ON 2(22)(E) OF THE ACT, THE WHOLE AMOUNT OF RS. 73,69,973/- WAS CONSID ERED AS DIVIDEND IN THE HANDS OF THE APPELLANT COMPANY AND ADDED BACK THE SAME TO THE TOTAL INCOME. 2.2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 2.2.3 IT WAS SUBMITTED BY THE LD. A.R. THAT COPY OF LEDGER ACCOUNT OF MADHUR SHARES & STOCK LTD., AS SHOWN IN THE BOOKS O F THE ASSESSEE, IS AVAILABLE ON PAGES 39-45 OF THE PAPER BOOK AND FROM THE SAME, IT CAN BE SEEN THAT IT IS IN THE NATURE OF CURRENT ACCOUNT AN D ON VARIOUS DATES, THERE WAS DEBIT BALANCE OF THE ASSESSEE RECOVERABLE FROM MADHUR SHARES & STOCK LTD. (MSSL) AND ON OTHER DATES, THERE WAS CRE DIT BALANCE AND HENCE, IT IS NOT AN ADVANCING OF LOAN BY EITHER PAR TY AND IT IS MERE TEMPORARY ACCOMMODATION IN THE NATURE OF CURRENT AC COUNT. HE POINTED OUT THAT THE OPENING BALANCE IS DEBIT BALANCE AND O NLY ON ONE DATE, WHEN THE ASSESSEE RECEIVED AN AMOUNT OF RS.1 CRORES FROM THAT PARTY AGAINST I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 6 OUTSTANDING DEBIT BALANCE OF RS.99,36,027/-, IT RES ULTED INTO CREDIT BALANCE OF RS.63,973/- AND AGAIN, THE ASSESSEE MADE A PAYME NT OF RS.16 LACS AND THE CREDIT BALANCE WAS CONVERTED INTO DEBIT BALANCE . AGAIN, AN AMOUNT OF RS.64 LACS WAS RECEIVED BY THE ASSESSEE FROM THIS C OMPANY AGAINST OUTSTANDING DEBIT BALANCE OF RS.60,86,027/- WHICH R ESULTED INTO A CREDIT BALANCE OF RS.3,13,923/-. AGAIN, TWO PAYMENTS OF RS.30,000/- AND RS.7 LACS WERE MADE BY THE ASSESSEE AND THE CREDIT BALAN CE WAS CONVERTED INTO DEBIT BALANCE. IT WAS FURTHER SUBMITTED THAT FOR T HE SUBSTANTIAL PART OF THE YEAR, THE DEBIT BALANCE CONTINUED AND AGAIN WHEN AS SESSEE RECEIVES AN AMOUNT OF RS.23.50 LACS AND RS.51 LACS AGAINST OUTS TANDING DEBIT BALANCE OF RS.14,71,027/-, THERE WAS CREDIT BALANCE OF RS.5 4,78,973/- FOR A BRIEF PERIOD AND AGAIN THE ASSESSEE MADE VARIOUS PAYMENTS OF RS.35 LACS, 6.50 LACS, RS.26 LACS AND RS.9 LACS ETC. AND AGAIN THE C REDIT BALANCE WAS CONVERTED INTO DEBIT BALANCE. HE FURTHER SUBMITTED THAT IN A SIMILAR MANNER, THERE WAS DEBIT BALANCE ON SOME DATES AND T HERE WAS CREDIT BALANCE ON SOME OTHER DATES AND HENCE, IT IS NOT A CASE OF LOAN ADVANCED BY A COMPANY TO THE ASSESSEE AND, THEREFORE, PROVIS IONS OF SECTION 2(22)(E) ARE NOT APPLICABLE. HE ALSO SUBMITTED TH AT THE TRANSACTIONS ARE FOR BUSINESS CONNECTION ALSO AND IN THIS REGARD, HE DRAWN OUR ATTENTION TO LETTER DATED 3.12.2004 WRITTEN BY THE ASSESSEE TO T HE A.O. COPY OF WHICH IS AVAILABLE ON PAGES 29-30 OF THE PAPER BOOK, WHER E, IT WAS EXPLAINED BY THE ASSESSEE THAT THE COMPANY M/S. MADHUR SHARES AN D STOCK LTD. WAS CARRYING ON THE BUSINESS OF SHARE BROKING AND AS WE LL AS LENDING MONEY TO ITS CLIENTS AND THE MONEY WAS GIVEN FOR SHORT DURAT ION AND, THEREFORE, SUCH ADVANCING OF MONEY IN THE NATURE OF CURRENT ACCOUNT TO THE ASSESSEE CANNOT BE HIT BY THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 7 OF N.H. SECURITIES LTD. VS DCIT AS REPORTED 11 SOT 302 (BBY). RELIANCE WAS ALSO PLACED ON THE JUDGEMENT OF HONBL E DELHI HIGH COURT AS RENDERED IN THE CASE OF CIT VS CREATIVE DYEING A ND PRINTING P. LTD. AS REPORTED IN 318 ITR 476 (DEL.) AND ON ANOTHER DECIS ION OF THE TRIBUNAL RENDERED IN THE CASE OF DCIT VS ATUL ENGINEERING UD YOG AS REPORTED IN 133 ITD 01 (AGRA). 2.2.4 AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDER S OF AUTHORITIES BELOW AND HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS P.K. BADIYANI AS REP ORTED IN 76 ITR 369. REGARDING THE DECISION OF HONBLE BOMBAY BENCH OF T HE TRIBUNAL CITED BY THE LD. A.R., IT WAS SUBMITTED THAT THIS TRIBUNA L DECISION IS PER INQUIRIUM BECAUSE THE HONBLE BOMBAY HIGH COURTS D ECISION WAS NOT CONSIDERED IN THAT CASE. HE ALSO PLACED RELIANCE O N THE TRIBUNAL DECISION RENDERED IN THE CASE OF MRS. SUJATA VENKTESHWARAN V S ACIT AS REPORTED IN 61 ITD 485 (MAD.). 2.2.5 IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A.R. THAT IN PARA 13 OF THE TRIBUNAL DECISION RENDERED BY BOMBAY BENCH OF T HE TRIBUNAL AND CITED BY HIM, THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT WAS DULY NOTED BY THE TRIBUNAL AND, THEREFORE, THIS TRIBUNAL DECISION IS NOT PER INQUIRIUM. 2.2.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY BOTH THE SIDES. WE FIND THAT T HE SUBMISSIONS MADE BY THE ASSESSEE BEFORE LD. CIT(A) WERE REPRODUCED B Y HIM IN HIS ORDER AND AS PER SUCH SUBMISSIONS REPRODUCED ON PAGE 7 OF THE ORDER OF LD. CIT(A), IT IS SEEN THAT IT WAS SUBMITTED BY THE ASS ESSEE BEFORE HIM THAT ACCOUNTS OF THE ASSESSEE WITH MSSL WAS IN THE NATUR E OF ACCOMMODATION BECAUSE THERE WAS DEBIT BALANCE IN THE BEGINNING OF THE YEAR WHICH HAS I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 8 GOT CONVERTED INTO CREDIT BALANCE DURING THE YEAR A ND, THEREFORE, IT IS ACCOMMODATION BY THE ADJUSTMENT ACCOUNT REFLECTING BUSINESS TRANSACTION AND THEREFORE, SECTION 2(22)(E) IS NOT APPLICABLE. LD. CIT(A) HAD DECIDED THIS ISSUE AGAINST THE ASSESSEE ON THIS BASIS THAT WHETHER IT IS AN ADVANCE OR LOAN, THE SAME WILL BE TREATED AS DEEMED DIVIDEN D IF OTHER CONDITIONS ARE SATISFIED. BUT HE HAS NOT CONSIDERED THIS ASPE CT OF THE MATTER THAT WHETHER IN THE PRESENT CASE, THE ACCOUNT OF THE PAR TY M/S. MSSL WITH THE ASSESSEE IS CURRENT ADJUSTMENT ACCOUNT OR NOT AND W HETHER THESE TRANSACTIONS ARE BUSINESS TRANSACTIONS OR NOT. 2.2.7 NOW, WE CONSIDER THE TRIBUNAL DECISION RENDER ED IN THE CASE OF N.H. SECURITIES LTD. (SUPRA) ON WHICH RELIANCE WAS PLACED BY THE LD. A.R. IN THAT CASE, THE TRIBUNAL HAS FOLLOWED THE JUDGEME NT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS NAGINDAS M KAPADIA (SUPRA) AND BY FOLLOWING THIS JUDGEMENT, IT WAS HELD THAT W HEN PAYMENT IS MADE IN ORDINARY COURSE OF BUSINESS THROUGH MUTUAL OPEN AND CURRENT ACCOUNT TO A RELATED PARTY, IT DOES NOT COME UNDER THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. RELEVANT PARA 37 ON PAGE 15 OF THE TRIBUNAL DECISION IS REPRODUCED BELOW: 37. IN THE LIGHT OF THE DISCUSSION MADE IN PARAGRA PHS ABOVE, IT IS TO BE SEEN THAT PAYMENTS MADE BY A COMPANY THROUGH A RUNNING ACCOUNT IN DISCHARGE OF ITS EXISTING DEBTS OR AGAIN ST PURCHASES OR FOR AVAILING SERVICES, SUCH PAYMENTS MADE IN THE OR DINARY COURSE OF BUSINESS CARRIED ON BY BOTH THE PARTIES COULD NO T BE TREATED AS DEEMED DIVIDEND FOR THE PURPOSE OF SECTION 2(22)(E) . THE DEEMING PROVISIONS OF LAW CONTAINED IN SECTION 2(22)(E) APP LY IN SUCH CASES WHERE THE COMPANY PAYS TO A RELATED PERSON AN AMOUN T AS ADVANCE OR A LOAN AS SUCH AND NOT IN ANY OTHER CONTEXT. TH E LAW DOES NOT PROHIBIT BUSINESS TRANSACTIONS BETWEEN RELATED CONC ERNS, AND, THEREFORE, PAYMENTS MADE IN THE ORDINARY COURSE OF BUSINESS CANNOT BE TREATED AS LOANS AND ADVANCES. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS CONSIDERED ABOVE, ESPECIALLY IN THE LIGHT OF I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 9 DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF NA GINDAS M. KAPADIA (SUPRA), WE HOLD THAT PAYMENTS MADE BY A CO MPANY IN THE COURSE OF CARRYING ON OF ITS REGULAR BUSINESS THROU GH A MUTUAL, OPEN AND CURRENT ACCOUNT TO A RELATED PARTY DO NOT COME UNDER THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. 2.2.8 REGARDING THIS OBJECTION OF THE LD. D.R. THAT THIS TRIBUNAL DECISION IS PER INQUIRIUM BECAUSE IT HAS NOT CONSIDERED THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS PK BADIANI (SUPRA), WE FIND THAT AS POINTED OUT BY THE LD. A.R., THIS J UDGEMENT WAS VERY MUCH CITED BEFORE THE TRIBUNAL AND IT WAS TAKEN NOT E OF BY THE TRIBUNAL IN PARA 30 OF THE TRIBUNAL DECISION. HENCE, IT CANNOT BE SAID THAT THIS JUDGMENT OF HONBLE BOMBAY HIGH COURT WAS NOT CONSI DERED BY THE TRIBUNAL AND, THEREFORE, TRIBUNAL DECISION IS PER I NQUIRIUM. IN FACT, THE TRIBUNAL HAS CONSIDERED A SUBSEQUENT DECISION OF HO NBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF NAGINDAS M KAPADIA (S UPRA). AS PER THE FACTS OF THIS CASE, WE HAVE NOTED THAT THE ASSESSEE IS MAINTAINING A CURRENT ACCOUNT WITH MSSL AND THE OPENING BALANCE WAS DEBIT BALANCE AND SIMILARLY, THE CLOSING BALANCE WAS ALSO DEBIT BALAN CE AND FOR THE MAJOR PART OF THE YEAR ALSO, THERE WAS DEBIT BALANCE AND ONLY FOR SOME SMALL PORTION OF THE YEAR THERE WERE SOME CREDIT BALANCE AND THIS IS ALSO CONTENDED BY THE ASSESSEE BEFORE THE A.O. THAT THIS PARTY MSSL WAS CARRYING ON THE BUSINESS OF SHARE BROKING AND LENDI NG OF MONEY TO ITS CLIENTS AND, THEREFORE, THESE TRANSACTIONS ARE IN T HE COURSE OF BUSINESS AND, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) ARE N OT APPLICABLE. CONSIDERING ALL THESE FACTS AND THIS TRIBUNAL DECIS ION OF BOMBAY BENCH OF THE TRIBUNAL CITED BY THE LD. A.R., WE ARE OF THE C ONSIDERED OPINION THAT IN THE F ACTS OF THE PRESENT CASE, IT CANNOT BE SAI D THAT THE CREDIT BALANCE OF MSSL IN THE BOOKS OF THE ASSESSEE ON VARIOUS DATES FOR A SMALL PART OF THE I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 10 YEAR WAS IN THE NATURE OF LOANS AND ADVANCES BY THA T COMPANY TO THE ASSESSEE AND HENCE, THE PROVISIONS OF SECTION 2(22) (E) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 2.2.9 REGARDING THE JUDGEMENT OF HONBLE BOMBAY HIG H COURT, ON WHICH RELIANCE HAS BEEN PLACED BY LD. D.R. HAVING B EEN RENDERED IN THE CASE OF CIT VS P K BADIANI (SUPRA), WE FIND THAT TH IS JUDGEMENT OF HONBLE BOMBAY HIGH COURT WAS DULY CITED BEFORE THE TRIBUNAL IN THE CASE OF H N SECURITIES LTD. (SUPRA) AND EVEN AFTER THIS, TRIBUNAL HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOL LOWING SUBSEQUENT JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF NAGINDAS M KAPADIA (SUPRA) AND, THEREFORE, THIS JUD GEMENT OF HONBLE BOMBAY HIGH COURT DOES NOT SUPPORT THE CASE OF THE REVENUE. REGARDING THE TRIBUNAL DECISION RENDERED IN THE CASE OF MRS. SUJATA VENKTESHWARA VS ACIT AS REPORTED IN 61 ITD 485 (MAD.) ON WHICH R ELIANCE WAS PLACED BY THE LD. D.R., WE FIND THAT THIS TRIBUNAL DECISIO N IS IN RESPECT OF MANNER OF COMPUTATION OF ACCUMULATED PROFIT BUT SINCE IN T HE PRESENT CASE, WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE O N THIS BASIS THAT IN THE FACTS OF THE PRESENT CASE, THERE IS NO LOAN OR ADVA NCE RECEIVED BY THE ASSESSEE FROM MSSL, THIS TRIBUNAL DECISION HAS NO R ELEVANCE IN THE PRESENT CASE. HENCE, BY RESPECTFULLY FOLLOWING THI S TRIBUNAL DECISION RENDERED IN THE CASE OF N H SECURITIES LTD., WE DEC IDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THEREFORE, ADDITION IS DELETED. THESE GROUNDS OF THE ASSESSEE ARE ALLOWED. 2.3 GROUND NO.5, 6 & 7 ARE INTERCONNECTED WHICH REA D AS UNDER: 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS IN CONFIRMING THE ACTION OF LEARNED A.G. IN APPLYING, THE PROVISIONS OF SEC. 14 A OF THE ACT IN DISALLOWING AN AMOUNT OF RS ,7,21,408'-. 6. THE LEARNED CIT( A) HAS ERRED IN LAW AND O N FACTS IN NOT APPRECIATING THAT AS AGAINST THE DISALLOWANCE OF RS .7,21,408A I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 11 UNDER SEC. 14A OF THE ACT THE TOTAL DIVIDEND INCOME CLAIMED AS EXEMPT UNDER SEC. 10(33) OF THE ACT WAS ONLY RS.4,3 5 698/-. 7. ALTERNATIVELY AND WITHOUT PREJUDICE, THE A PPELLANT HAS INTEREST FREE FUNDS FAR IN EXCESS OF THE TOTAL INVE STMENT AND THEREFORE NO DISALLOWANCE OF THE INTEREST COMPONENT CAN BE MADE. LD. CTT(A) HAS IN THIS RESPECT NOT FOLLOWED AND CON VENIENTLY IGNORED THE DIRECT AND BINDING DECISION OF -JURISDI CTIONAL TRIBUNAL IN THE CASE OF TORRENT FINANCERS (73 TTJ 624). 2.3.1 BRIEF FACTS OF THIS ISSUE ARE THAT IT IS NOTE D BY THE A.O. THAT THE ASSESSEE HAS CLAIMED DIVIDEND INCOME OF RS.4,35,498 /- BEING EXEMPT U/S 10(33) OF THE INCOME TAX ACT, 1961. HE HAS ALSO NO TED THAT AS PER THE P & L ACCOUNT, THE ASSESSEE HAD CLAIMED INTEREST EXPENS E ANDADMINISTRATIVE/GENERAL EXPENSES TO THE TUNE OF R S.64,73,243/- AND OF RS.38,50,394/- RESPECTIVELY. IT IS ALSO NOTED THAT TOTAL BORROWED FUNDS BEING UNSECURED AND SECURED LOANS WERE TO THE EXTEN T OF RS.523.52 LACS ON WHICH INTEREST WAS PAID BY THE ASSESSEE AND THE ASSESSEE HAD MADE INVESTMENT OF RS.158.67 LACS IN SHARES. THE A.O. C AME TO THE CONCLUSION THAT PROPORTIONATE DISALLOWANCE OUT OF INTEREST EXP ENDITURE IS LIABLE TO BE MADE U/S 14A OF THE INCOME TAX ACT, 1961. HE WORKED OUT THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.6,45,978 /- AS PROPORTIONAL INTEREST EXPENDITURE. HE ALSO WORKED OUT DISALLOWA NCE OF RS.75,431/- BEING PROPORTIONAL DISALLOWANCE TO BE MADE IN RESPE CT OF ADMINISTRATIVE/GENERAL EXPENSES AND IN THIS MANNER, HE MADE TOTAL DISALLOWANCE OF RS.7,21,408/- U/S 14A OF THE INCOME TAX ACT, 1961. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2.3.2 IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASS ESSEE WAS HAVING SUFFICIENT OWN FUNDS AND, THEREFORE, NO DISALLOWANC E IS CALLED FOR U/S 14A I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 12 OUT OF INTEREST EXPENDITURE AND IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED BY HIM ON THE JUDGEMENT OF HONBLE BOMBAY HI GH COURT RENDERED IN THE CASE OF CIT VS RELIANCE UTILITIES AND POWER LTD. AS REPORTED IN 313 ITR 340 (BOM.). HE ALSO SUBMITTED THAT THE BALANC E SHEET OF THE ASSESSEE FOR THE RELEVANT YEAR IS AVAILABLE ON PAGE 37 OF TH E PAPER BOOK AND AS PER THE SAME, OWN FUNDS OF THE ASSESSEE AT THE BEGINNIN G OF THE YEAR WAS RS.1040.87 LACS WHEREAS THE INVESTMENT AT THE BEGIN NING OF THE YEAR WAS OF RS.229.62 LACS AND AT THE END OF THE YEAR INVEST MENT WAS ONLY RS.158.67 LACS AND HENCE, THE OWN FUNDS WERE MUCH M ORE THAN THE AMOUNT OF INVESTMENT AND, THEREFORE, THIS JUDGEMENT OF HONBLE BOMBAY HIGH COURT IS SQUARELY APPLICABLE AND NO DISALLOWAN CE OUT OF INTEREST EXPENDITURE IS CALLED FOR. REGARDING DISALLOWANCE OF RS.75,931/- MADE BY THE A.O. OUT OF ADMINISTRATIVE/GENERAL EXPENSES, IT WAS SUBMITTED THAT THE ASSESSEE COMPANY WAS HOLDING SHARES OF ONLY 6 C OMPANIES AS PER THE DETAILS OF INVESTMENT GIVEN IN SCHEDULE VI TO THE B ALANCE SHEET AND HENCE, THE DISALLOWANCE OUT OF ADMINISTRATIVE / GEN ERAL EXPENSES IS NOT CALLED FOR AND EVEN IF SOME TOKEN DISALLOWANCE IS T O BE MADE, THE DISALLOWANCE MADE BY THE A.O. IS VERY EXCESSIVE. 2.3.3 AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDER S OF AUTHORITIES BELOW. 2.3.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY LD. A.R. IN THE LIGHT OF THIS JU DGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA), AS PER THE FACTS OF THE PRESENT CASE WHICH SHOWS THAT OWN FUNDS WERE MANY TIMES MORE THAN THE INVESTMENT MADE BY TH E ASSESSEE, NO DISALLOWANCE U/S 14A IS CALLED FOR OUT OF INTEREST EXPENDITURE OF THE I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 13 ASSESSEE. THIS PART OF DISALLOWANCE IS DELETED BY RESPECTFULLY FOLLOWING THIS JUDGEMENT OF HONBLE BOMBAY HIGH COURT. 2.3.5 REGARDING THE BALANCE DISALLOWANCE OF RS.75,4 31/-, OUT OF ADMINISTRATIVE/GENERAL EXPENSES, IN OUR CONSIDERED OPINION, ALTHOUGH VERY FEW COMPANYS SHARES WERE HELD BY THE ASSESSEE BUT STILL SOME DISALLOWANCE OUT OF ADMINISTRATIVE/GENERAL EXPENSE IS JUSTIFIED BECAUSE DECISION HAS TO BE TAKEN AS TO WHETHER SUCH INVESTM ENT IS TO BE CONTINUED OR NOT BUT WE FIND FORCE IN THE SUBMISSION OF THE L D. A.R. AND IN THE FACTS OF THE PRESENT CASE, THE DISALLOWANCE MADE BY THE A .O. ON PROPORTIONATE BASIS TO THE EXTENT OF RS.75,431/- IS EXCESSIVE AND ONLY A TOKEN DISALLOWANCE IS CALLED FOR IN THE FACTS OF THE PRES ENT CASE. WE, THEREFORE, CONFIRM THE DISALLOWANCE OF RS.25,000/- ON ESTIMATE BASIS AND IN OUR CONSIDERED OPINION, IT WILL MEET THE ENDS OF JUSTIC E AND THE BALANCE DISALLOWANCE IS DELETED. THESE GROUNDS ARE PARTLY ALLOWED. 2.4 GROUND NO.8, 9 & 10 ARE INTERCONNECTED WHICH RE AD AS UNDER: 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS IN CONFIRMING THE ACTION OF ID. A.O IN ADDING RS.9,42, 00,000/- AS UNEXPLAINED CASH CREDIT UNDER SEC.68 OF THE ACT IN THE HANDS OF THE APPELLANT. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, SINCE THE APPELLANT HAS FILED THE NAME, ADDRESS, CONFIRMATION , COPY OF CONTRA A/E., PAN AS WELL AS THE NAME AND ADDRESS TO THE AS SESSING OFFICER TO THE SAID CREDITOR, NO SUCH ADDITION OUGHT TO HAV E BEEN MADE. 9. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN ENHANCING THE INCOME OF THE APPELLANT BY RS.52.58.9 83/- BEING THE INTEREST ON THE SAID ALLEGED UNEXPLAINED CASH CREDI T ON ALL TOGETHER DIFFERENT GROUNDS AND REASONING. THIS ACTION OF ID, CIT'(A) HAS RESULTED INTO ENHANCEMENT OF INCOME OF THE APPELLAN T ON ENTIRELY DIFFERENT GROUNDS WHICH WERE NOT THE BASIS FOR MAKI NG THE ADDITIONS IN THE ASSESSMENT ORDER AND WHICH ARE FAR FROM THE FACTS AND EVIDENCES ON RECORDS AND BASED ON CONJECTURES A ND SURMISES. THUS, THIS ACTION OF LD. CIT(A) HAS RESULTED INTO A SSESSING AN ALTOGETHER NEW SOURCE OF INCOME IN THE HANDS OF THE APPELLANT I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 14 WHICH IS NOT PERMISSIBLE UNDER THE LAW AND THEREFOR E DESERVES TO BE QUASHED, 10. THE FINDINGS OF THE ID. CIT(A) IN RESPECT O F THE GROUND RELATING TO THE ADDITION OF ALLEGED CASH CREDIT ARE PERVERSE IN AS MUCH AS HE HAS OBSERVED THAT THE APPELLANT HAS NOT GIVEN THE NAME OF THE WARD OR CIRCLE WHERE THE I CREDITOR IS BEING ASSESSED. HOWEVER THIS IS FAR FROM THE TRUTH AND THE DETAILS OF ASSESSING AUTHORITY OF THE. CREDITOR WERE GIVEN BOTH TO THE A C) AS WELL AS THE ID. CIT(A) AND EVEN THE REFERENCE TO THAT EFFECT HA S BEEN GIVEN IN THE WRITTEN SUBMISSIONS' WHICH HAS BEEN CONVENIENTL Y IGNORED BY THE CIT(A). 2.4.1 BRIEF FACTS OF THIS ISSUE TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 8.1 AND 8.1.1 OF HIS ORDER AND THESE PARAS OF HIS ORDER ARE REPRODUCED BELOW: 8.1 IT WAS NOTED BY THE AO THAT DURING THE Y EAR UNDER CONSIDERATION, THE APPELLANT HAS RECEIVED UNSECURED LOANS OF RS. 9,42,00,000/-- FROM M/S. PANTHER FINCAP & MANAGEMEN T SERVICES LTD. ON 15.09.1999 AND 02.11.1999. THE APPELLANT WAS ASKED TO ESTABLISH THE IDENTITY OF THE PARTIES, MODE OF PAYM ENT AND THEIR CREDITWORTHINESS. WITH REGARD TO IDENTITY, THE APP ELLANT WAS ASKED TO FURNISH THE DETAILS OF REGISTERED OFFICE, CORP ORATE OFFICES, TELEPHONE NUMBERS ETC. ALONG WITH DETAILS OF DIRE CTORS OF THE ABOVE COMPANIES AND THEIR SHAREHOLDING PATTERN. WITH REGARD TO CREDITWORTHINESS THE DETAILS OF BUSINESS ACTIVI TIES BEING CARRIED OUT, SOURCES OF INCOME, COPY OF RETURN OF INCOME OF THE ABOVE PARTIES ETC. WERE ALSO CALLED FOR. VIDE ITS SUB MISSION THE APPELLANT SUBMITTED THE COPY OF CONTRA ACCOUNT AL ONGWITH CONFIRMATION, PAN ETC. HOWEVER, THE CONFIRMATIONS FILED BY THE APPELLANT WERE QUITE OLD. THE AUTHENTICITY OF TH E CONFIRMATION COULD NOT BE ESTABLISHED BY THE APPELLANT AS THE A PPELLANT HAD FAILED TO SUBMIT ANY OTHER EVIDENCE IN THIS REGARD. NEITHER ANY FRESH CONFIRMATION WAS FILED BY THE APPELLANT NOR A NY EVIDENCE TO PROVE THE CREDITWORTHINESS OF THE PARTIES OR THE GE NUINENESS OF THE TRANSACTIONS WERE SUBMITTED. THE TRANSACTIONS W ITH THE ABOVE PARTIES WERE RELATED TO MADHAVPURA MERCANTILE CO-O P. BANK WHICH RELATES TO THE SCAM OF KETAN PAREKH GROUP, WH EREIN SOME OF THE DIRECTORS WERE COMMON. THE APPELLANT WAS PROV IDED OPPORTUNITY TO DISCHARGE THE ONUS CASTED UPON IT VIDE LETTER DATED I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 15 03.02.2005. HOWEVER, THE APPELLANT COMPANY DID NOT FILE ANY PLAUSIBLE EXPLANATION IN THIS REGARD. THE AO NOT ED THAT MERE FILING OF CONFIRMATION LETTER WAS NOT SUFFICIENT FO R DISCHARGING ONUS CASTED UNDER SECTION 68 OF THE ACT. TO SUPPORT HIS CONTENTION, HE RELIED UPON THE FOLLOWING CASE LAWS : (I). UNITED COMMERCIAL BANK VS. CIT [187 ITR 696 (C AL)] (II) NANAKCHAND LAXMANDAS VS. CIT [140 ITR 151 (ALL .)] (III) K. MAHITN VS. CIT [213 ITR 820 (KERALA)] (IV) B.TEX CORPORATION [46 TTJ 608 (MUMBAI)] (V) G. VENKAT REDDY & CO. VS. DCIT [73 TTJ 401 (HYD ERABAD)] (VI) OCEANIC PRODUCTS EXPORTING CO. VS. CIT [241 IT R 497 (KERALA)] 8.1.1 IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION , THE AO CONCLUDED THAT THE APPELLANT HAD FAILED TO DISCHARG E THE ONUS CASTED UPON IT BY FURNISHING POSITIVE MATERIAL TO PROVE CR EDIT-WORTHINESS AS REQUIRED U/S. 68 OF THE ACT AND CONSIDERING RS. 9,42,00,000/- AS UNEXPLAINED CASH CREDIT, HE ADDED THE SAME TO THE T OTAL INCOME OF THE APPELLANT. 2.4.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2.4.3 IT WAS SUBMITTED BY THE LD. A.R. THAT COPY OF ACCOUNT IS AVAILABLE ON PAGE 10 OF THE PAPER BOOK AND ON PAGE 20-21 OF T HE PAPER BOOK, IS THE CONFIRMATION OF THIS PARTY M/S. PANTHAR FINCAP AND MANAGEMENT SERVICES LTD. HE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS : A) CIT VS PRAGATI COP. BANK LTD. 278 ITR 170 (GUJ.) B) MURLIDHR LAHORIMAL VS CIT 280 ITR 512 (GUJ.) 2.4.4 HE ALSO SUBMITTED THAT THE MATTER MAY BE REST ORED BACK TO THE FILE OF THE A.O. FOR AFRESH DECISION BECAUSE IT IS NOTED BY LD. CIT(A) IN PARA 8.3 OF HIS ORDER THAT THE ASSESSEE HAD SIMPLY FILED A COPY OF THE ACCOUNTS WHICH HAS BEEN SIGNED BY SOME AUTHORISED SIGNATORY ON BEHALF OF PANTHAR FINCAP & MANAGEMENT SERVICES LTD. BUT THE NAME OF T HE SIGNATORY HAS NOT BEEN GIVEN AND ALONG WITH PAN ALSO, NAMES AND W ARD/CIRCLE WHERE THIS COMPANY IS ASSESSED WAS ALSO NOT GIVEN AND, TH EREFORE, COMPLETE I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 16 DETAILS WERE NOT AVAILABLE. HE SUBMITTED THAT NO W, THE ASSESSEE IS READY TO PROVIDE ALL THESE DETAILS. 2.4.5 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.4.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE ASSESSEE HAS FURNISHED A CONFIRMATION ALON G WITH PAN BUT THE NAMES OF AUTHORIZED SIGNATORY ON THE CONFIRMATION W AS NOT GIVEN AND THE DETAILS OF WARD /CIRCLE WHERE THE CREDITOR WAS ASSE SSED, HAS NOT BEEN GIVEN. THERE IS NO MENTION ABOUT ANY MATERIAL SUPPL IED IN SUPPORT OF THE CREDITWORTHINESS OF THIS CREDITOR. UNDER THESE FAC TS, WE FEEL THAT THIS ISSUE CANNOT BE DECIDED WITHOUT EXAMINING ALL THESE DOCUM ENTS AND IN THE INTEREST OF JUSTICE, THE ASSESSEE DESERVES ONE MORE OPPORTUNITY TO FURNISH THOSE REQUIREMENTS AND HENCE, WE SET ASIDE THE ORDE R OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF VARIOUS DECISIONS CITED BY LD. A.R. BEFORE US AS NOTED ABOVE. WE WOULD LIKE TO MAKE IT CLEAR THAT T HE BURDEN IS ON THE ASSESSEE TO BRING NECESSARY DETAILS AND EVIDENCES O N RECORD SUCH AS NAME OF AUTHORIZED SIGNATORY ON THE CONFIRMATION ALONG W ITH DETAILS OF WARD / CIRCLE WHERE THE CREDITOR WAS BEING ASSESSED ALONG WITH THE DETAILS OF PRESENT A.O. OF THE CONCERNED CREDITOR. THE ASSESS EE SHOULD ALSO FURNISH EVIDENCE IN SUPPORT OF CREDITWORTHINESS OF THE CRED ITOR. THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABO VE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 2.5 GROUND NO.11 IS AS UNDER: 11. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT GIVING SET OFF OR CREDIT OF THE TDS OF RS. 11,56,97 0/- ON THE SAID INTEREST ON THE ALL UNEXPLAINED CASH CREDIT SO AS T O AVOID DOUBLE I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 17 TAXATION. LD. C1T(A) HAS GROSSLY ERRED IN MERELY RE PRODUCING THE ARGUMENTS OF THE APPELLANT WITHOUT DEALING WITH THI S ASPECT IN HIS FINDINGS. 2.5.1 THIS GROUND WAS NOT PRESSED BY THE LD. A.R. A ND HENCE, REJECTED AS NOT PRESSED. 2.6 GROUND NO.12 IS AS UNDER: 12. THE LEARNED A.O. HAS ERRED IN TAW AND ON F ACTS IN DISALLOWING, INTEREST TAX OF RS.2,36,22'5/- U/S 40\ A)(II) OF THE ACT WITHOUT APPRECIATING THAT INTEREST TAX IS NEITHER A TAX LEVIED ON PROFITS OF THE BUSINESS NOR ASSESSED AT A PROPORTIO N OF .OR ON THE BASIS OF PROFITS OR GAINS OF A BUSINESS. 2.6.1 NO SERIOUS ARGUMENT WAS MADE BY THE LD. A.R. REGARDING THIS GROUND. WE ALSO FIND THAT IT IS NOTED BY LD. CIT(A ) IN PARA 9.3 OF HIS ORDER THAT THE A.O. HAS CLEARLY MENTIONED THAT THE TAX HAD NOT BEEN PAID TILL THE FILING OF RETURN OF INCOME AND THIS HAS NO T BEEN DENIED BY THE ASSESSEE. HE HAS THEREFORE HELD THAT THIS AMOUNT O F TAX CANNOT BE ALLOWED AS DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 4 3B OF THE INCOME TAX ACT, 1961. BEFORE US ALSO, NOTHING HAS BEEN BROUGH T ON RECORD TO SHOW THAT THE AMOUNT OF INTEREST TAX WAS PAID BY THE ASS ESSEE DURING THE YEAR OR BEFORE THE FILING OF RETURN OF INCOME AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISS UE. THIS GROUND OF THE ASSESSEE STANDS REJECTED. 2.7 GROUND NO.13 IS GENERAL AND GROUND NO.14 IS REG ARDING CHARGING OF INTEREST U/S 234B AND 234C WHICH IS CONSEQUENTIA L IN NATURE AND GROUND NO.15 IS REGARDING INITIATION OF PENALTY PRO CEEDINGS U/S 271(1)(C), WHICH NEEDS NO SEPARATE ADJUDICATION AT THIS JUNCTU RE. IN THE RESULT, THESE GROUNDS ARE REJECTED. 2.8 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 18 3. NOW, WE TAKE UP THE PENALTY APPEAL OF THE REVENU E IN I.T.A.NO. 27/AHD/2008. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS O F THE CASE IN DELETING THE PENALTY OF RS.3,91,04,440/- LEVIED U/S 271 (1 )(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. 3.1 LD. D.R. SUPPORTED THE PENALTY ORDER WHEREAS, T HE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTE D THAT IF IN THE QUANTUM APPEAL OF THE ASSESSEE, VARIOUS ADDITIONS M ADE BY THE A.O. ARE DELETED THEN THE PENALTY CANNOT SURVIVE IN ANY CASE . 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT WHILE DECIDING THE QUANTUM APPEAL OF THE ASSESSEE FOR THI S VERY YEAR, WE HAVE DELETED ALMOST ALL THE DISALLOWANCES. THE DISALLOW ANCE CONFIRMED BY US IS OF RS.50,431/- U/S 14A OUT OF ADMINISTRATIVE/ GE NERAL EXPENSES AND OF RS.2,36,225/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 IN RESPECT OF INTEREST TAX WHICH WAS NOT PAID BY THE ASSESSEE BEF ORE THE DUE DATE OF FILING OF RETURN OF INCOME. IN OUR CONSIDERED OPI NION, EVEN FOR SUCH PART DISALLOWANCE CONFIRMED BY US, PENALTY IS NOT JUSTIF IED IN THE FACTS OF THE PRESENT CASE BECAUSE THE FIRST DISALLOWANCE IS ON E STIMATE BASIS MADE BY THE A.O. AND PARTLY CONFIRMED BY US. THE 2 ND DISALLOWANCE IS CONFIRMED BY US U/S 43B AND THERE IS NO CONCEALMENT BY THE AS SESSEE IN THIS REGARD BECAUSE ALL THE MATERIAL FACTS WERE AVAILABLE ON RE CORD AND CONSIDERING ALL THESE FACTS, WE FEEL THAT EVEN FOR THESE TWO DISALL OWANCES CONFIRMED BY US, PENALTY IS NOT JUSTIFIED. REGARDING THE ADDITI ON OF RS.942 LACS U/S 68 AND CONSEQUENTIAL INTEREST OF RS.52,58,983/- BEING INTEREST ON THE SAID I.T.A.NO.580 /AHD/2006 I.T.A.NO. 27/AHD/2008 19 ALLEGED UNEXPLAINED CASH CREDIT, THIS ISSUE HAS BEE N RESTORED BACK BY US TO THE FILE OF THE A.O. FOR A FRESH DECISION AND HENCE , EVEN FOR THESE TWO ADDITIONS/DISALLOWANCES, PENALTY CANNOT SURVIVE. I F THE A.O. MAKES ADDITION AGAIN, HE IS AT LIBERTY TO INITIATE PENALT Y PROCEEDINGS AGAIN IF HE FEELS SO. 3.3 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 4. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE I S PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 23/11/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27/11/2012.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 30/11/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/11/2012 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. .