Rajeev Kumar Singh, New Delhi V. ACIT Circle-57(1), New Delhi

ITA 3125/DEL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3289 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Income from undisclosed sources; Salary income; Additional evidence; Notional interest
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DLEHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA.NO 3125/DEL/2019 ASSESSMENT YEAR: 2013-14 RAJEEV KUMAR SINGH, VS ACIT, CIRCLE-57 (1) A-95, PHASE-II, VIVEK VIHAR NEW DELHI NEW DELHI-110095 PAN ACDPS 8082R (APPLICANT) (RESPONDENT) APPELLANT BY: SHRI RUCHESH SINHA, ADVOCATE RESPONDENT BY: SH. SURENDER PAL, SR. DR. DATE OF HEARING: 27/11/2019 DATE OF ORDER : 27/11/2019 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 15/3/2019 IN APPEAL NO . 35/2018-19 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-38, NEW DELHI (LD. CIT(A)) FOR THE ASSESSMENT YEAR 2013-1 4, MR RAJEEV KUMAR SINGH (THE ASSESSEE) PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE RU NS A PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF M/S PACIFIC TRADE LINKS, WHICH IS ENGAGED IN MANUFACTURING, PROCESSING, FINISHING, RE SELLING AND EXPORT OF 2 ALL KINDS OF SHAWLS, STORES, MEN AND WOMEN ACCESSOR IES AND TRADING IN SHARES AND FOREIGN CURRENCY ETC. FOR THE ASSESSMENT YEAR 2013-14 HE FILED HIS RETURN OF INCOME ON 30/9/2013 DECLARING A TOTAL INCOME OF RS.15,57,150/-. AS PER THE COMPUTATION SUBMITTED BY THE ASSESSEE, THE INCOME FROM SALARY RECEIVED FROM SL IMPEX PRIVATE L IMITED WAS RS. 6 LACS, INCOME FROM HOUSE PROPERTY WAS RS. 48,000/-, INCOME FROM BUSINESS/PROFESSION WAS RS. 10,41,011/-AND INCOME F ROM OTHER SOURCES WAS RS. 1,37,571/-. ASSESSEE CLAIM DEDUCTION OF RS. 1,24,377/-UNDER CHAPTER VI-A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND, THEREFORE, THE RETURNED INCOME WAS RS. 15,57,150/-. 3. DURING THE COURSE OF ASSESSMENT, LEARNED ASSESSI NG OFFICER NOTICED THAT A SUM OF RS. 1,12,50,000/-WAS INTRODUCED BY TH E ASSESSEE IN THE CASHBOOK. THE ASSESSEE PRODUCED THE CASHBOOK ON 28/ 3/2016. WHEN CONFRONTED WITH THE ENTRIES IN THE CASHBOOK OF PAC IFIC TRADE LINKS, AND WAS ASKED TO PROVIDE THE SOURCE OF THE CASH CREDITS , ASSESSEE REPLIED THAT SUCH CASH CREDITS WERE TAKEN FROM DIFFERENT SOURCES AND AT THAT TIME HE WAS NOT ABLE TO RECALL ALL OF THEM. ASSESSEE STATED THAT HE WILL FURNISH THE INFORMATION ON 30/3/2016, ON WHICH DATE THE ASSESSE E DID NOT PROVIDE ANY REPLY. HAVING CONSIDERED THE BALANCE SHEET WHER E THE ASSESSEE HAD NOT SHOWN ANY UNSECURED LOANS, IN THE LIGHT OF THE NATURE OF BUSINESS OF THE ASSESSEE, LEARNED ASSESSING OFFICER HELD THAT T HE CASE OF ASSESSEE IS SQUARELY HIT BY THE PROVISIONS OF SECTION 68 OF THE ACT. SINCE, IN RESPECT OF REPEATED DEMANDS MADE AND OPPORTUNITIES PROVIDED TH E ASSESSEE FAILED TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH PERSONS TO ADVANCE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTION, 3 LEARNED ASSESSING OFFICER TREATED SUCH AN AMOUNT AS UNACCOUNTED INCOME OF THE ASSESSEE AND BROUGHT IT TO TAX UNDER SECTION 68 OF THE ACT. 4. LEARNED ASSESSING OFFICER FURTHER NOTICED THAT T HE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 12,40,182/-IN HIS P&L ACCO UNT AS INTEREST EXPENSE WHEREAS THE RECORD REVEALED THAT THE ASSESS EE HAD GIVEN INTEREST-FREE ADVANCES TO VARIOUS PARTIES SUCH AS S AGAR KUMAR SINGH, SANJEEV SINGH, SARITHA SINGH, AND MRIDUL TYAGI TOTA LLING TO AN AMOUNT OF RS. 28, 26, 269/-. ON THIS THE LEARNED ASSESSING OF FICER DREW AN INFERENCE THAT THE ASSESSEE HAD TAKEN LOANS FROM BANKS AND GI VEN INTEREST-FREE ADVANCES TO THE ABOVE PERSONS AND, THEREFORE, THE N OTIONAL INTEREST AT 12 PERCENT ON THIS RS. 28,26,269/-WAS TO BE DISALLOWED UNDER SECTION 36 (1)(III) OF THE ACT. 5. ASSESSEE CHALLENGED THESE TWO ADDITIONS BEFORE L D. CIT(A) AND FILED CERTAIN DOCUMENTS BEFORE HER BY WAY OF ADDITI ONAL EVIDENCE. LD. CIT(A) RECEIVED THE ADDITIONAL EVIDENCE. IN THE OPI NION OF LD. CIT(A) THERE IS NO EXPLANATION FROM ASSESSEE REGARDING THE PROPE RTY DEAL AND AS TO WHY THE CASH RECEIPTS WERE THERE IN THE CASHBOOK OF PACIFIC TRADE LINKS. LD. CIT(A) OBSERVED THAT IF THE PROPERTY DEAL WAS W ITH THE ASSESSEE THROUGH BANK ACCOUNT, THEN WHY WERE THESE MENTIONED AS CASH CREDITS. HOLDING THAT ALL THESE DISCREPANCIES PROVE THAT THI S CASH CREDITS REMAIN UNEXPLAINED UNDER S. 68 OF THE ACT, LD. CIT(A) CONF IRMED THE ADDITION OF RS. 1,12,50,000/-. LD. CIT(A) ALSO AGREED WITH THE LEARNED ASSESSING OFFICER IN RESPECT OF THE DISALLOWANCE OF THE NOTIO NAL INTEREST TO THE TUNE OF RS. 3,39,152/-ON ACCOUNT OF THE LOANS GIVEN TO S AGAR KUMAR SINGH AND OTHERS TO THE TUNE OF RS. 28, 26, 269/-. 4 6. ASSESSEE IS THEREFORE BEFORE US IN THIS APPEAL C HALLENGING THE FINDINGS OF THE LD. CIT(A). IT IS THE SUBMISSION OF LD. AR THAT THE LD. CIT(A) WAS FACTUALLY INCORRECT INASMUCH AS SHE OBSERVED TH AT IF THE PROPERTY DEAL WITH THE ASSESSEE WAS A THROUGH BANK ACCOUNT, THEN THERE WAS NO OCCASION FOR THE CASH CREDITS AND THE LD. AR SUBMIT S THAT THE AGREEMENT OF SALE DATED 28-04-2012 CLEARLY SHOWS THAT THE PRO POSED CONSIDERATION WAS PAID IN CASH TO THE TUNE OF RS. 98,10,000/-AND THEREFORE IT IS BUT NATURAL THAT THE CASH WOULD BE FOUND IN THE CASHBOO K. HE FURTHER BROUGHT IT TO OUR NOTICE THAT THE ASSESSEE RETURNED THE ADV ANCES RECEIVED UNDER THE AGREEMENT OF SALE DATED 28/4/2012 IN THE SUBSEQ UENT YEARS AS COULD BE SEEN FROM THE BANK ACCOUNT ENTRIES OF THE ASSESS EE AS WELL AS THE PROPOSED BUYERS UNDER THE AGREEMENT OF SALE. INSOFA R AS THE STATEMENT OF THE ASSESSEE AT THE FIRST INSTANCE WHEN HE WAS C ALLED UPON TO EXPLAIN THE ENTRIES IN THE CASHBOOK, IT IS SUBMITTED BY THE LD. AR THAT IT WAS A MISTAKE ON THE PART OF THE ASSESSEE NOT TORECOLLECT THE SOURCES OF THE CASH ENTRIES. LD. AR VEHEMENTLY ARGUED THAT THOUGH THE LD. CIT(A) ADMITTED THE ADDITIONAL EVIDENCE, THE IMPUGNED ORDE R IS SILENT ON THE IMPACT OF THOSE DOCUMENTS. HE THEREFORE PRAYED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE LD. CIT(A) TO PASS A REASONED ORDER BY COMMENTING ON THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE BEFORE LD. CIT(A) BY WAY OF ADDITIONAL EVIDENCE. 7. PER CONTRA, IT IS THE SUBMISSION OF THE LD. DR T HAT THE CASE OF THE ASSESSEE HAS TO BE APPROACHED FROM THE CIRCUMSTANCE S AVAILABLE ON RECORD. HE VEHEMENTLY CONTENDED THAT THROUGHOUT THE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT COME FORWARD WITH THE THEORY OF HIS RECEIVING THE AMOUNTS UNDER THE AGREEMENT OF SALE D ATED 28/4/2012 AND 5 IS ONLY FOR THE 1 ST TIME, BEFORE THE LD. CIT(A), THE ASSESSEE DEVELOPE D THIS STORY. LD. DR SUBMITTED THAT THE AGREEMENT OF SALE DATED 28/4/2012 IS AN UNREGISTERED DOCUMENT THAT COULD HAVE BEEN BROUGHT INTO EXISTENCE AT ANY POINT OF TIME TO SUITE THE CONVENIENCE OF THE A SSESSEE. THERE IS NO EXPLANATION IN THIS DOCUMENT AS TO WHY SUCH USE AMO UNTS WERE PARTED WITH BY THE PROSPECTIVE BUYERS OF THE PROPERTY IN C ASH, INSTEAD OF RESORTING TO THE PAYMENT BY WAY OF BANKING CHANNELS . 8. INSOFAR AS THE CAPACITY OF THE TWO PROSPECTIVE B UYERS OF THE PROPERTY LD. DR INVITED OUR ATTENTION TO THE INCOME TAX RETURNS OF THESE 2 PERSONS, FILED BY THE ASSESSEE AND TO BE FOUND AT P AGE NUMBERS 62 AND 69 OF THE PAPEN BOOK. LD. DR SUBMITTED THAT ONE PAN NA LAL KHARBANDA, ONE OF THE BUYERS HAD THE GROSS TOTAL INCOME OF RS. 3, 79, 102/-WHEREAS THE OTHER EARLIER MAHESH KHARBANDA HAD THE GROSS TO TAL INCOME OF RS. 4, 19, 425/- FOR THE ASSESSMENT YEAR 2013-14. IT IS NO T KNOWN HOW THESE PERSONS COULD MAKE CASH PAYMENTS TO THE TUNE OF RS. 98,10,000/-. ACCORDING TO HIM THE ASSESSEE HIMSELF HAD THE GROSS TOTAL INCOME OF RS. 16,81,528/-AS IS REFLECTED IN THE RETURN OF INCOME FILED BY HIM FOR THE ASSESSMENT YEAR 2013-14. IN THE CIRCUMSTANCES HE SU BMITS THAT THE PLEA OF RETURN OF SUCH AMOUNT BY THE ASSESSEE IN THE ASS ESSMENT YEAR 2016-17 DOES NOT MERIT CONSIDERATION BECAUSE THAT WOULD ALS O HAVE BEEN MANUFACTURED SUBSEQUENT TO THE PASSING OF THE ASSES SMENT ORDER ON 30/3/2016. 9. LD. DR PLACED RELIANCE ON THE DECISIONS OF THE H ONBLE APEX COURT IN THE CASES OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) AND SUMATHI DAYAL VS. CIT (1995) 214 ITR 801 (SC) AND S UBMITTED THAT NO DOUBT, IT IS TRUE THAT IN ALL CASES IN WHICH A RECE IPT IS SOUGHT TO BE TAXABLE 6 AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PRO VE THAT IT IS WITHIN THE TAXING PROVISIONS, AND IF A RECEIPT IS IN THE N ATURE OF INCOME THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN THE EXEMPTIONS PROVIDED BY THE ACT LIES UPON THE ASSESS EE, BUT IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO I NCOME TAX AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS , IN THE OPEN OF LEARNED ASSESSING OFFICER, NOT SATISFACTORY. ACCORD ING TO HIM IN SUCH A CASE, THERE IS A PRIMA FACIE EVIDENCE AGAINST THE A SSESSEE, NAMELY, THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME , THE SAME EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDIN G THAT IT IS A RECEIPT OF AN INCOME NATURE, HAVING HAD THE REGARD TO THE E XPLANATION OF THE ASSESSEE AS TO WHETHER IT IS SATISFACTORY ARE OTHER WISE. 10. BASING ON THESE TWO DECISIONS, LD. DR SUBMITTED THAT THE CONDUCT OF THE ASSESSEE IN NOT SPEAKING ANYTHING BEFORE THE LD. ASSESSING OFFICER ABOUT THE PROPERTY DEAL COVERED BY THE AGREEMENT OF SALE AND DEVELOPING IT FOR THE 1 ST TIME BEFORE THE LD. CIT(A) AND THAT TOO NOT SUPPORTED BY ANY EVIDENCE NOT IN THE CONTROL OF THE ASSESSEE. HE SUBMITTED THAT THE UNREGISTERED AGREEMENT OF SALE C ANNOT BE TAKEN AS AN EVIDENCE NOT IN THE CONTROL OF THE ASSESSEE. FURTHE R THE PROSPECTIVE BUYERS HAD NO CAPACITY AS IS REVEALED BY THEIR RETU RNS OF INCOME. LASTLY, WHEN THE ASSESSEE WAS CONFRONTED WITH THE ENTRIES I N THE CASHBOOK, IT IS QUITE IMPROBABLE THAT THE ASSESSEE WOULD NOT HAVE R ECOLLECTED THE SOURCE OF SUCH CASH ENTRIES. WHEN THERE IS ONLY ONE SOURCE FOR SUCH CASH ENTRIES, IT IS IMPROBABLE THAT THE ASSESSEE WOULD H AVE STATED THAT THE 7 CASH CREDITS ARE APPEARING TO HAVE TAKEN FROM DIFFE RENT SOURCES AND HE WAS UNABLE TO RECOLLECT THE SAME. 11. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT REMAINS AN UNDISPUTED FACT THAT WHEN THE ASSESSEE WAS CONFRONTED WITH THE ENTRIES OF THE CAS HBOOK, WHICH ARE ENUMERATED BY THE ASSESSING OFFICER IN HIS ORDER AN D RUNNING BETWEEN 28/04/2012 AND 7/11/2012, THE REPLY WAS VERY STRANG E. HE STATED THAT,- THESE CASH CREDITS WHICH ARE APPEARING HOW BEEN TA KEN FROM DIFFERENT SOURCES. RIGHT NOW, IM NOT ABLE TO RECALL ALL OF THEM. I WILL PRODUCE THE SAME TOMORROW IN THE MORNING I.E., ON 30/3 /2016 AT 11.00 AM 12. AS A MATTER OF FACT, EVEN ACCORDING TO THE ASSE SSEE, THERE ARE NO MULTIPLE SOURCES FOR THESE CASH ENTRIES. ONLY SOURC E OF THESE CASH ENTRIES AS PLEADED BY THE ASSESSEE IS THE AGREEMENT OF SALE DATED 28/4/2012. FOR AN ASSESSEE WITH THE GROSS ANNUAL TOTAL INCOME OF R S. 16,81,528/-, IT IS QUITE STRANGE NOT TO RECOLLECT THE SOURCE OF CASH R ECEIPT TO THE TUNE OF RS. 98.1 LACS, THAT TOO A SINGLE SOURCE OF SUCH CASH CR EDIT. 13. THOUGH THE ASSESSEE SOUGHT TIME TILL 30/3/2016, THE ASSESSEE DID NOT RECOLLECT THE SOURCE OF THESE CASH CREDITS BY T HEN ALSO AND ALLOWED THE LD. ASSESSING OFFICER TO PROCEED WITH THE MATTE R. SURPRISINGLY FOR THE 1 ST TIME THE ASSESSEE PLACED RELIANCE ON THE AGREEMENT OF SALE. THOUGH THE ASSESSEE HAD FILED THE PARTICULARS OF THE BANK ACCOUNTS IN SUPPORT OF HIS CONTENTION OF THE REFUND OF THE AMOUNT, NO SUCH ATTEMPT IS MADE TO SHOW THAT AS A MATTER OF FACT THESE TWO PERSONS MAD E THE CASH PAYMENTS AND THEY HAD IN FACT THE CAPACITY TO MAKE SUCH PAYM ENTS. THE CONTENTS OF THE AGREEMENT OF SALE DATED 28/4/2012 GO UNVERIFIAB LE, AND ARE OF LITTLE 8 HELP TO THE CASE OF THE ASSESSEE. ABSOLUTELY THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE PROSPECTIVE BUYERS OF THE P ROPERTY UNDER THE AGREEMENT OF SALE DATED 28/4/2012 HAD IN FACT THE C APACITY TO ADVANCE SUCH AMOUNTS AND IN FACT THEY DID ADVANCE SUCH AMOU NTS ON SUCH PARTICULAR DATES TO CORRELATE THE ENTRIES OF THE CA SHBOOK AS POINTED OUT BY THE LEARNED ASSESSING OFFICER. 14. IT IS THE CASE OF THE ASSESSEE THAT HE HAD ENTE RED INTO AN AGREEMENT OF SALE WITH HUFS AND RECEIVED THE PART O F SALE CONSIDERATION IN CASH AND THAT IS THE SOURCE OF THE CASH CREDITS TO BE FOUND IN HIS BOOKS. FOR DETERMINATION OF THIS FACT WHICH THE ASSESSEE C LAIMS TO HAVE HAPPENED, THE LD. ASSESSING OFFICER IS DUTY BOUND T O HAVE REGARD TO THE COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT AND PUBLIC AND PRIVATE BUSINESS, IN THEIR RELATION TO THE FACTS OF THE CAS E OF THE ASSESSEE. THIS IS THE LAW OF THE LAND AND LAID DOWN BY THE HONBLE AP EX COURT IN THE CASES OF DURGA PRASAD MORE (SUPRA) AND SUMATHI DAYAL (SUP RA). 15. THE SUSPICIOUS CIRCUMSTANCES, AS RIGHTLY POINTE D OUT BY THE LD. DR, ARE THAT EVEN ACCORDING TO THE ASSESSEE THERE IS ON LY ONE SOURCE FOR THE IMPUGNED CASH CREDITS, WHEN CONFRONTED WITH SUCH CA SH CREDITS ASSESSEE PLEADS THAT THERE ARE MULTIPLE SOURCES FOR THE SAME AND HE CANNOT RECOLLECT THEM, HE PLEADS THAT IF TIME IS GRANTED T O DO SO, BUT NEVER DOES SO BEFORE THE LD. ASSESSING OFFICER, THOUGH THERE I S AN AGREEMENT OF SALE ACCORDING TO THE ASSESSEE TO SUPPORT THE ENTRIES IN THE CASHBOOK, HE NEVER PRODUCES THE SAME BEFORE THE LD. ASSESSING OF FICER NOR SPEAKS OF IT AT ANY TIME EARLIER THAN ITS PRODUCTION BEFORE THE LD. CIT(A), SUCH AN AGREEMENT OF SALE IS AN UNREGISTERED ONE AND UNDOUB TEDLY POSSIBLE TO HAVE BEEN BROUGHT INTO EXISTENCE AT THE WILL OF THE ASSESSEE, THE 9 PROSPECTIVE BUYERS UNDER THE AGREEMENT OF SALE DO N OT HAVE ANY APPARENT CAPACITY TO ADVANCE SUCH HUGE AMOUNTS TO B E FOUND IN THE AGREEMENT OF SALE. WE FAIL TO UNDERSTAND WHAT MORE IS REQUIRED TO CAST A SERIOUS CLOUD OF DOUBT ON THE CASE OF THE ASSESSEE THAN THIS. 16. THOUGH AN ATTEMPT IS MADE BY THE LD. AR TO EXPL AIN THE CONDUCT OF THE ASSESSEE IN TERMS OF A MISTAKE, WE ARE NOT CONV INCED WITH IT BECAUSE THE ATTENDANT CIRCUMSTANCES ARE NOT CONGENIAL FOR S UCH A BELIEF. STATEMENT OF THE ASSESSEE IS NOT AGREEING WITH HIS CONDUCT TO INSPIRE CONFIDENCE IN OUR MIND TO BELIEVE THE STORY DEVELOP ED BY HIM. WE SHALL HAVE TO KEEP IN MIND THAT WHEN A PARTY PLEADS A FAC T STATING THAT THERE ARE BONA FIDES IN IT, THEN THE CONDUCT OF SUCH PART Y IS ALSO RELEVANT BECAUSE SUCH CONDUCT INFLUENCES THE ISSUE RELATING TO THE GENUINENESS. 17. WHEN THE ASSESSEE SETS UP THE PLEA BASED ON THE AGREEMENT OF SALE, NATURALLY THE GENUINENESS OF SUCH PLEA DEPEND S ON THE CONDUCT OF THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS OR I N THE 1 ST APPELLATE PROCEEDINGS. AS ALREADY STATED ABOVE, WE FIND THAT IT IS QUITE IMPROBABLE THAT THE ASSESSEE WOULD HAVE GIVEN PREVARICATIVE AN SWER TO THE LEARNED ASSESSING OFFICER WHEN THE ASSESSEE WAS CONFRONTED WITH THE ENTRIES OF THE CASHBOOK. CERTAINLY, THE ANSWER GIVEN BY THE AS SESSEE IS A PREVARICATIVE ONE. FURTHER, THE CONDUCT OF ASSESSEE IN NOT SPEAKING ANYTHING ABOUT THE AGREEMENT OF SALE DURING THE ASS ESSMENT PROCEEDINGS IS ALSO CONTRARY TO THE RELIANCE OF THE ASSESSEE O N THE AGREEMENT OF SALE. SO ALSO, THE FINANCIAL CAPACITY OF THE PROSPECTIVE BUYERS AS IS REFLECTED IN THE RETURNS OF INCOME IS MILITATING AGAINST THE STA TEMENT OF THE ASSESSEE THAT THEY MADE THE PAYMENTS IN CASH. ALL THESE THIN GS VIEWED TOGETHER, TOTALLY FALSIFIES CASE OF THE ASSESSEE AND IN OUR C ONSIDERED OPINION 10 ASSESSEE FAILED MISERABLY TO DISPEL THESE DOUBTS RA ISED BY THE LEARNED ASSESSING OFFICER AND THE LD. CIT(A), BY OFFERING C OGENT EXPLANATION. AS A CONSEQUENCE OF THE FAILURE TO OFFER CONVINCING IN C OGENT EXPLANATION TO THE REASONABLE QUESTIONS RAISED BY THE LEARNED ASSE SSING OFFICER, THE CASE OF ASSESSEE SHALL FAIL. WHILE HOLDING SO, WE F IND THE 1 ST GROUND OF APPEAL OF THE ASSESSEE AS DEVOID OF MERITS AND ACCO RDINGLY DISMISSED THE SAME. 18. NOW COMING TO THE ADDITION OF RS. 3,39,152/-ON ACCOUNT OF NOTIONAL INTEREST ON THE INTEREST FREE ADVANCES MAD E TO SAGAR KUMAR SINGH AND OTHERS, LD. AR TOOK US TO THE MANUFACTUR ING AND TRADING AND P&L ACCOUNT FOR THE YEAR ENDED 31 MARCH 2013 WHERE BY IT IS DEMONSTRATED THAT THE ASSESSEE OBTAINED LOANS FROM THE BANKS AND OTHER SOURCES FOR SPECIFIC PURPOSES AND, THEREFORE, SUCH AMOUNT BORROWED WAS NOT AVAILABLE BE DIVERTED. HE FURTHER HAD TAKEN AS TO THE CASH AND BANK BALANCE IN SCHEDULED-H WHEREIN IT WAS SHOWN THAT A SUM OF RS. 13,94,524/-WAS AVAILABLE WITH THE ASSESSEE AT THE E ND OF THE YEAR. 19. LD. CIT(A), IN HER ORDER, DID NOT ADVERT TO THE SE FACTS BUT SIMPLY PROCEEDED TO UPHOLD THE DISALLOWANCE STATING THAT M ERELY BECAUSE NO INTEREST WAS CHARGED IN RESPECT OF THE ADVANCES MAD E TO SAGAR KUMAR SINGH AND OTHERS, THOUGH THE INTEREST WAS PAID ON L OANS TAKEN BY THE ASSESSEE, DISALLOWANCE OF INTEREST IS ATTRACTED. HA VING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDE RED OPINION THAT THE DISALLOWANCE OF NOTIONAL INTEREST CANNOT BE SUSTAIN ED MERELY BECAUSE THE ASSESSEE HAD TAKEN LOANS FOR THE PURPOSES OF BUSINE SS AND DIVERTED HIS OWN FUNDS FOR GIVING INTEREST FREE ADVANCES. WE THE REFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 3, 39, 152/-ON ACCOUNT 11 OF NOTIONAL INTEREST ON RS. 28, 26, 269/-ADVANCED T O SAGAR KUMAR SINGH AND OTHERS. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. PRONOUNCED IN OPEN COURT ON THIS THE 27 TH NOVEMBER, 2019. SD/- SD/- (G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 27/11/2019 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI