VIJAYDEEP HOTELS P. LTD, MUMBAI V. DCIT CEN CIR 29, MUMBAI

ITA 3241/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3073 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 02-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G M DASS
• Keywords: Business income; Income from undisclosed sources; Document seized; Opportunity of being heard; Period of limitation; Deemed dividend; Commercial expediency; Documents seized
• Section: 143(3); 153A; 37(1); 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL F BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER / I .TA NOS. 3291,3293,3384 & 3385/MUM/11 ( / ASSESSMENT YEARS: 2004-05 TO 2007-08 THE ACIT, CENT. CIR-29, AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. VIJAYDEEP HOTELS PVT. LTD., HOTEL BAWA INTERNATIONAL, NEHRU ROAD EXT, NEAR DOMESTIC AIRPORT, VILE PARLE, MUMBAI-400 049 / I .TA NOS. 3241 & 3243/MUM/11 ( / ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. VIJAYDEEP HOTELS PVT. LTD., HOTEL BAWA INTERNATIONAL, NEHRU ROAD EXT, NEAR DOMESTIC AIRPORT, VILE PARLE, MUMBAI-400 049 / VS. THE ACIT, CENT. CIR-29, AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. AAACV 1582D /I.TA NOS. 951 TO 953/MUM/2013 ( / ASSESSMENT YEARS: 2005-06 TO 2007-08 SHRI KARANVEER SINGH G. BAWA, 22, SAHIB GURU ANGAD NIWAS, VITTHAL NAGAR CO. OP. SOC. N.S. ROAD NO. 22, JVPD SCHEME, JUHU, VILE PARLE (E), MUMBAI-400 049 / VS. THE ACIT, CENT. CIR-29, AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. AEJPB 8856F VIJAYDEEP HOTELS 2 ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI RAJIV KHANDELWAL / RESPONDENT BY: SHRI G.M. DASS / DATE OF HEARING :22.03.2016 ! / DATE OF PRONOUNCEMENT :20.06.2016 / O R D E R PER BENCH THESE ARE APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDERS OF THE LD. CIT(A) FOR ASSESSMENT YEARS 2004- 05 TO 2007-08. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPO SED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AS THE ISS UES ARE COMMON. ITA NO. 3291/MUM/2011- A.Y 2004-05 - REVENUES APPE AL 2. THE FIRST COMMON ISSUE IN REVENUES APPEAL IS TH AT THE LD. CIT(A) ERRED IN ALLOWING EXPENDITURE WITH REGARD TO UNACCOUNTED SALES FROM AVALON PUB THOUGH NO EVIDENCE OF THESE E XPENSES WERE PRODUCED BY THE ASSESSEE. 3. BRIEF FACTS ARE THAT THERE WAS A SEARCH U/S. 132 OF THE ACT ON 5.1.2007 IN THE BUSINESS AND RESIDENTIAL PREMISES O F SHRI GUNNDER SINGH BAWA, HIS FAMILY MEMBERS AND VARIOUS FAMILY C ONCERNS INCLUDING THE OFFICE PREMISES OF THE ASSESSEE COMPA NY. CONSEQUENT TO THE SEARCH, NOTICE U/S. 153A WAS ISSUED TO THE ASSESSEE TO FILE RETURN OF INCOME AND IN RESPONSE TO SAID NOTICE, AS SESSEE FILED RETURN OF INCOME ON 29.8.2007 DECLARING INCOME AT RS. 93,0 5,623/- FOR ASSESSMENT YEAR 2004-05. THIS INCOME OF RS. 93,05, 623/- INCLUDES INCOME OF RS. 45,33,960/- WHICH WAS DECLARED AT THE TIME OF SEARCH VIJAYDEEP HOTELS 3 TOWARDS SUPPRESSION OF SALES OF AVALON PUB. THE ASS ESSMENT WAS COMPLETED ON 29.12.208 U/S. 143(3) R.W. SECTION 153 A DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,41,19,240 /-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HA S TAKEN INCOME FROM UNACCOUNTED SALES AT RS. 53,34,070/- WITHOUT A LLOWING THE COST OF LIQUOR AS CLAIMED BY THE ASSESSEE. THE ASSESSE E CLAIMED RS. 8,00,110/- BEING 15% OF THE AVALON PUB SALE OF RS. 53,34,070/- AS ALLOWABLE EXPENSES AND REPORTED INCOME OF RS. 45,3 3,960/-. HOWEVER, THE ASSESSING OFFICER REJECTED THE CLAIM O F THE ASSESSEE STATING THAT IN THE COURSE OF ASSESSMENT PROCEEDING S, ASSESSEE WAS REQUESTED TO PRODUCE INVOICES FOR LIQUOR PURCHASES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. BUT THE ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM WITH EVIDENCES. THE CONTEN TION OF THE ASSESSEE WAS THAT SEARCH PARTY DID NOT FIND ANY DIS CREPANCY IN THE STOCK OF LIQUOR AND THEREFORE THERE CANNOT BE ANY S ALES OF LIQUOR WITHOUT ANY PURCHASE OF SUCH LIQUOR. IT WAS THE CO NTENTION OF THE ASSESSEE THAT SINCE THERE WAS NO DISCREPANCY IN THE STOCK THEN THERE ARE BOUND TO BE PURCHASES OF LIQUOR NOT RECORDED IN THE BOOKS OF ACCOUNT. FURTHER, IT WAS CONTENDED THAT SEIZED MAT ERIALS CONTAINED DETAILS OF BOTTLES PURCHASED AND NOT ACCOUNTED AND ALSO CERTAIN EXPENSES SUCH AS PAYMENT OF SALARIES AND INCENTIVES TO THE MANAGER, PAYMENTS MADE TO POLICE, RTO, MUNICIPAL STAFF AND E XCISE STAFF ETC. IT WAS CONTENDED BEFORE THE ASSESSING OFFICER THAT THE EXPENSES CLAIMED BY THE ASSESSEE AT 15% TOWARDS COST OF LIQU OR IS VERY MUCH REASONABLE AND MUCH BELOW THE ACTUAL EXPENDITURE, T HEREFORE, SHOULD BE ALLOWED. THIS WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE HAS TREATED THE ENTIRE GROSS SALES OF RS. 53,34,070 /- AS INCOME OF THE ASSESSEE. VIJAYDEEP HOTELS 4 4. ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION OF 15% FROM THE GROSS SALES ASSESSE D AS INCOME. 5. THE LD. DEPARTMENTAL REPRESENTATIVE BEFORE US CO NTENDED THAT THE EXPENSES CLAIMED BY THE ASSESSEE CANNOT BE ALLO WED IN THE ABSENCE OF ANY EVIDENCES PRODUCED BY THE ASSESSEE A ND HE FURTHER SUBMITS THAT THE PAYMENTS MADE TO POLICE PERSONNEL , EXCISE DEPARTMENT, RTO ETC ARE NOT ALLOWABLE AS EXPENSES U /S. 37(1) OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT TH E CLAIM OF 15% OF THE GROSS SALES FROM AVALON PUB IS TOWARDS COST OF LIQUOR PURCHASED AND SOLD OUTSIDE THE BOOKS OF ACCOUNT. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT GROSS SALES HAVE BEEN TAX ED BUT WITHOUT PURCHASES THERE CANNOT BE SALES. THE LD. COUNSEL F OR THE ASSESSEE REFERRING TO PAGE 50 TO 54 OF THE PAPER BOOK SUBMIT S THAT ASSESSEE HAS RECORDED PAYMENTS TO VISHAL WINE SHOPS FOR PURC HASE OF LIQUOR AND THE LIQUOR BOTTLES PURCHASED WERE ALSO RECORDED AND THEREFORE THE LD. COUNSEL SUBMITS THAT THE COST OF LIQUOR PUR CHASED HAS TO BE REDUCED. HE FURTHER SUBMITS THAT THE COST OF PURCH ASE OF LIQUOR WHICH WAS RECORDED IN THE REGULAR BOOKS OF ACCOUNT WAS AL LOWED AND SUCH COST OF LIQUOR IN THE BAR SALES STOOD AT THE RANGE OF 19 TO 26% AND THEREFORE HE SUBMITS THAT DEDUCTION CLAIMED BY THE ASSESSEE @ 15% OF PUB SALES TOWARDS COST OF LIQUOR IS VERY MUCH RE ASONABLE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE E NTIRE SALE OF LIQUOR CANNOT BE TAXED AND HE PLACES RELIANCE ON THE DECIS IONS IN THE CASE OF ABHISHEK CORPORATION VS DCIT {63 TTJ 651(AHD)}, KIS HORE MOHANLAL VIJAYDEEP HOTELS 5 TELWALA VS ACIT (64 TTJ 543) AND IN THE CASE OF A GARWAL MOTORS VS ACIT 68 ITD 407 (JAB). 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIALS PLACED BEFORE U S. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT CONSIDERED THE ENTIRE GROSS SALES OF RS. 53,34,070/- FROM AVALON PUB AS UNACCOU NTED SALES FROM LIQUOR. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT 15% OF SUCH SALES ARE TOWARDS COST OF LIQUOR AND THEREFORE IT SHOULD BE REDUCED AND ONLY THE BALANCE SHOULD BE CONSIDERED A S SALES AND ACCORDINGLY HE OFFERED RS. 45,33,960/- AFTER DEDUCT ING 15% TOWARDS COST OF LIQUOR OF RS. 8,00,110/-. THE CONTENTIONS OF THE ASSESSEE THAT WITHOUT THERE BEING ANY PURCHASE, THERE CANNOT BE S ALE AT ALL AND THEREFORE 15% OF SUCH SALES SHOULD BE CONSIDERED AS COST OF PURCHASE OF LIQUOR IS REJECTED BY THE ASSESSING OFFICER. T HE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE SEIZED DOCUMENTS DIRECTED THE ASSESSING OFFICER TO ALLOW D EDUCTION OF 15% FROM THE AVALON PUB SALES TOWARDS COST OF LIQUOR OB SERVING THAT THE SEIZED MATERIALS CONTAINS THE RECORDING OF SALES AN D PAYMENTS WERE MADE FOR PURCHASE OF LIQUOR OUTSIDE THE BOOKS OF AC COUNT AND FURTHER ON VERIFICATION OF THE FOREIGN LIQUOR REGISTER (FLR ) EACH AND EVERY BOTTLE OF LIQUOR SOLD IS ACCOUNTED FOR IN THE FLR. HE FURTHER OBSERVED THAT IF THERE WERE ANY UNACCOUNTED SALES OF LIQUOR , IT HAS TO COME OUT OF UNACCOUNTED PURCHASES OF LIQUOR ONLY. THE LD. C IT(A) ALSO HELD THAT AS PER THE REGULAR BOOKS OF ACCOUNTS, THE CO ST OF BAR SALES IS AROUND 19% TO 26% AND THEREFORE THE DEDUCTION CLAI MED BY THE ASSESSEE @ 15% IS REASONABLE AND IN FACT IT IS LES S THAN WHAT HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN COMPUTING THE INCOME FROM AVALON PUB AS PER THE REGULAR BOOKS OF ACCOUNT. TH EREFORE, HE VIJAYDEEP HOTELS 6 CONCLUDED THAT 15% OF THE SALES CLAIMED BY THE ASSE SSEE TOWARDS COST OF LIQUOR IS VERY MUCH REASONABLE. THE FINDINGS OF THE LD. CIT(A) ARE VERY MUCH LOGICAL AND IT IS COMMONSENSE THAT UNLESS THERE ARE UNACCOUNTED PURCHASES, THERE CANNOT BE UNACCOUNTED SALES. THE REVENUE IS NOT DISPUTED THAT IN THE REGULAR BOOKS O F ACCOUNT ASSESSEE HAS CLAIMED THE COST OF BAR SALES IN THE RANGE OF 1 9 TO 26% AND SUCH COST OF SALES WERE ALLOWED AS DEDUCTION IN COMPUTIN G THE INCOME. IT IS ALSO EVIDENT FROM THE SEIZED MATERIALS THAT THE ASSESSEE PAID AMOUNTS TO LIQUOR SHOPS I.E. VISHAL WINES. THIS SH OWS THAT THERE ARE UNACCOUNTED PURCHASES OF LIQUOR. IN THE CIRCUMSTAN CES, WE FIND THAT THE CLAIM OF THE ASSESSEE 15% TOWARDS COST OF LIQUO R IS VERY MUCH REASONABLE. THUS, WE SUSTAIN THE ORDER OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION OF 15% FRO M THE GROSS SALES MADE FROM AVALON PUB TOWARDS COST OF PURCHASES OF LIQUOR. THIS GROUND OF THE REVENUE IS REJECTED. 8. THE NEXT COMMON GROUND IN THE APPEAL OF THE REVE NUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE U /S. 36(I)(III) OUT OF BANK INTEREST PAID. 9. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITS THAT THE ASSESSEE HIMSELF HAS DISALLOWED INTEREST OF RS . 10,68,637/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT NO INCRIM INATING MATERIALS OR DOCUMENTS WERE FOUND IN THE COURSE OF SEARCH SUG GESTING THAT THERE IS ESCAPEMENT OF INCOME AND THEREFORE NO ADDITION/DISALLOWANCE CAN BE MADE TOWARDS INTEREST U/S. 36(I)(III) BECAUSE ADDITION/DISALLOWANCE IS NOT BASED ON SEIZE D MATERIALS. REFERRING TO PAGE-5 AT PARA-4 OF THE ASSESSMENT ORD ER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS TABLE WH ICH WAS EXTRACTED VIJAYDEEP HOTELS 7 BY THE ASSESSING OFFICER HAS BEEN TAKEN FROM THE BA LANCE SHEET AND BASED ON WHICH HE CAME TO THE CONCLUSION THAT THE B ANK OVERDRAFT WAS UTILIZED FOR NON BUSINESS PURPOSES AND THE ASSE SSEE ADVANCED INTEREST FREE LOANS FOR NON-BUSINESS PURPOSES AND T HEREFORE INTEREST U/S. 36(I)(III) IS DISALLOWABLE. HE SUBMITS THAT T HIS CONCLUSION WAS ARRIVED ONLY ON THE BASIS OF THE MATERIALS AVAILABL E IN THE BALANCE SHEET AND NOT FROM THE SEIZED MATERIALS. THE LD. C OUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 HAS BEEN COMPLETED U/S. 143(3) ON 28.12.200 8 AND THIS ASSESSMENT HAS BECOME FINAL AND AS ON THE DATE OF I NITIATION OF SEARCH U/S. 132, THERE IS NO PENDING PROCEEDINGS FOR ASSES SMENT YEAR 2004- 05, THE ASSESSMENT IS NOT ABATED AND IN WHICH CIRCU MSTANCES THERE CANNOT BE ANY ADDITION OR DISALLOWANCE WITHOUT THE RE BEING ANY SEIZED MATERIALS. HE PLACES RELIANCE ON THE DECISI ON OF THE BOMBAY HIGH COURT IN THE CASE OF MURLI AGRO PRODUCTS LTD. (49 TAXMANN.COM 172). 10. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE SU BMITS THAT THE DISALLOWANCE OF INTEREST IS NOT AT ALL JUSTIFIED FO R THE REASON THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE FAR EXCESS THAN THE FUNDS UTILIZED FOR MAKING INVESTMENTS/GIVING ADVANC E TO GROUP CONCERNS. HE SUBMITS THAT WHEN ASSESSEE HAS SUFFIC IENT INTEREST FREE FUNDS AVAILABLE, PRESUMPTION IS THAT INVESTMENTS/IN TEREST FREE ADVANCES GIVEN ARE OUT OF INTEREST FREE FUNDS AVAIL ABLE WITH THE ASSESSEE. FOR THIS PROPOSITION, HE PLACES RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD., (313 ITR 340). THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE INTEREST FREE ADVANCES MADE TO SIS TER CONCERNS ARE FOR THE PURPOSE OF BUSINESS ONLY AND DUE TO COMMERC IAL EXPEDIENCY VIJAYDEEP HOTELS 8 AND THEREFORE HE SUBMITS THAT NO DISALLOWANCE IS WA RRANTED U/S. 36(I)(III) OF THE ACT. 11. IN SO FAR AS THE CONTENTION THAT NO ADDITION IS POSSIBLE WHEN NO INCRIMINATING MATERIAL IS FOUND IN THE COURSE OF SE ARCH WHEN THE ASSESSMENT ALREADY COMPLETED IS NOT ABATED IS CONCE RNED, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THERE IS N O APPEAL BY THE ASSESSEE RAISING SUCH CONTENTIONS BEFORE THIS TRIBU NAL AND THEREFORE HE SUBMITS THAT THE CONTENTION RAISED BY THE ASSESS EE IS NOT TENABLE AS THERE IS NO APPEAL AT ALL. COMING TO THE MERITS OF THE CASE, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESS EE HAS GIVEN SOME OF THE ADVANCE FOR ACQUIRING PROPERTIES AND TH EREFORE THE ADVANCES GIVEN FOR THESE PROPERTIES CANNOT BE SAID TO BE FOR THE PURPOSE OF BUSINESS. THUS HE SUBMITS THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONSIDERING THESE ASSETS AS BUSINESS A SSETS. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT UNDER RUL E 27 OF THE ITAT RULES, THE ASSESSEE CAN SUPPORT THE ORDERS OF THE L D. CIT(A) ON ANY OF THE GROUNDS WHICH ARE DECIDED AGAINST THE ASSESSEE. HE PLACES RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF ITO VS SHRI RUPKUMAR BALCHAND ROHRA IN ITA NO. 4999/MUM/2010 DATED 10.10.2013. ON A QUERY FROM TH E BENCH WHETHER THIS ISSUE WAS DECIDED BY THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD. CIT(A) INFACT IN PARA-2 OF HIS ORDER DISCUSSED THIS ISSUE AND IN PARA-6.3 OF HIS ORDER S TATED THAT THE CONTENTIONS AND ARGUMENTS OF THE ASSESSEE WILL BE DEALT LATER BUT THE LD. CIT(A) HAS NOT DECIDED WHILE DISPOSING OF THE A PPEAL. HE SUBMITS THAT THE ISSUE HAS BEEN DECIDED ON MERITS. WITH RE GARD TO THE CONTENTIONS OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT SOME OF THE ADVANCES GIVEN FOR ACQUIRING PROPERTIES CANNOT BE C ONSIDERED FOR THE VIJAYDEEP HOTELS 9 PURPOSE OF BUSINESS, THE LD. COUNSEL FOR THE ASSESS EE SUBMITS THAT THE PROPERTIES WERE PURCHASED BY THE ASSESSEE AND THEY WERE PROVIDED AS ACCOMMODATION TO THE DIRECTORS AND THEREFORE TH EY ARE BUSINESS ASSETS OF THE ASSESSEE. 12. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE OR DERS OF THE AUTHORITIES BELOW AND THE DECISION RELIED ON. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSMENT PROCEEDINGS FOR TH E ASSESSMENT YEAR 2004-05 HAVE BECOME FINAL AND IN THE ABSENCE OF ANY PENDING PROCEEDINGS, THE ASSESSMENT HAS NOT ABATED AND THER EFORE SUCH ASSESSMENT CANNOT BE DISTURBED UNLESS THERE ARE INC RIMINATING MATERIALS FOUND SUGGESTING UNDISCLOSED INCOME AND S INCE IN THE ASSESSEES CASE, THE DISALLOWANCE OF INTEREST U/S. 36(I)(III) WAS MADE BASED ON THE MATERIALS ALREADY AVAILABLE IN THE BAL ANCE SHEET AND NOT BASED ON THE SEIZED MATERIALS. THE ADDITION CANNOT BE SUSTAINED IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF MURLI AGRO PRODUCTS (SUPRA). THOUGH THIS CONTENTIO N WAS RAISED BEFORE THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS NOT DECIDED THIS ISSUE AND THE ISSUE WAS LEFT OPEN. THE LD. CIT(A) HAS DECIDED THE ISSUE ON MERITS. FURTHER, THE ASSESSEE HAS NEITHER FILED AN APPEAL NOR PETITION UNDER RULE 27 OF ITAT RULES RAISING THE AB OVE CONTENTIONS BEFORE US. THE ASSESSEE IS MAKING ONLY ORAL SUBMI SSIONS. IN SUCH CIRCUMSTANCES, WE ARE NOT INCLINED TO GO INTO SUCH CONTENTIONS RAISED BY THE ASSESSEE. COMING TO THE MERITS OF DISALLOWA NCE MADE U/S. 36(I)(III), THE LD. CIT(A) AFTER CONSIDERING THE SU BMISSION OF THE ASSESSEE AND THE CASE LAWS RELIED ON BY THE ASSESSE E CONCLUDED THAT SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE FOR ADVANCING INTEREST FREE LOANS, THEREFORE DELETED TH E DISALLOWANCE MADE U/S. 36(I)(III) OBSERVING AS UNDER: VIJAYDEEP HOTELS 10 6.6. I HAVE CAREFULLY CONSIDERED THE ISSUE. THE A PPELLANT HAS CLAIMED THAT CURRENT LIABILITIES SHOULD BE TREA TED AS INTEREST FREE FUNDS AVAILABLE WITH THEM. I FIND NO MERITS I N THE CONTENTIONS OF THE APPELLANT. THE CURRENT LIABILIT IES IS A PART OF WORKING CAPITAL AND CANNOT BE EXPLAINED AS INTEREST FREE FUND AVAILABLE WITH THE APPELLANT FOR MAKING INTEREST FR EE LOANS ADVANCED. THUS, THE INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT IS REWORKED AS UNDER: SOURCES OF FUNDS AMOUNT (RS.) SHARES 26,20,000 RESERVES AND SURPLUSES 1,08,19,110/- UNSECURED LOANS 6,94,74,854/- ------------------ TOTAL 8,29,13,964/- 6.7. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS TREATED THE ENTIRE INVESTMENTS AS FOR NON BUSINESS PURPOSES WHICH IS NOT CORRECT. IT IS SEEN FROM THE SCHEDULE OF IN VESTMENTS THAT THE APPELLANT HAS GIVEN ADVANCE FOR BUNGALOW AMOUNTING TO RS. 2,17,70,000/- PAID A SUM OF RS. 45,0,000/- FOR FLAT AT BANDRA AND A SUM OF RS. 8,37 ,162/- BEING FIXED DEPOSITS WITH BANK. ALL THESE ARE BUSI NESS ASSETS AND SHOULD BE EXCLUDED FOR THE PURPOSES OF COMPUTING FUNDS UTILIZED FOR NON BUSINESS PURPOSES. THUS THE FUNDS UTILIZED FOR NON-BUSINESS PURPOSES IS COM PUTED AS UNDER: FUNDS UTILISED FOR NON BUSINESS PURPOSES AMOUNT(RS.) INVESTMENT 3,78,96,510/- LOANS AND ADVANCES 4,68,91,872/- TOTAL 8,47,88,382 6.8. IN VIEW OF THE ABOVE IT IS REASONABLE TO CONCL UDE THAT SUM OF RS. 18,74,418/- (I.E. 8,47,88,382/- - 8,29,1 3,964/-) HAS COME OUT OF INTEREST BEARING FUNDS. A SUM OF R S. 10,68,637/- HAS BEEN DISALLOWED FROM THE INTEREST C LAIMED WHICH IS MORE THAN REASONABLE ON THE FACTS OF THE C ASE. I SEE NO REASONS FOR MAKING ANY FURTHER DISALLOWANCE FROM INTEREST PAID. THE DISALLOWANCE OF BANK INTEREST IS VIJAYDEEP HOTELS 11 RESTRICTED TO RS. 10,68,637/- BEING INTEREST ALREAD Y DISALLOWED IN THE ORIGINAL ASSESSMENT. FURTHER, DISALLOWANCE OF RS. 36,99,211/- IS, THEREFORE DIREC TED TO BE DELETED. THIS GROUND OF APPEAL, IS ACCORDINGLY, AL LOWED. 13. THE JURISDICTIONAL HIGH COURT IN THE CASE OF RE LIANCE UTILITIES (SUPRA) HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE SUFFICIENT TO MEET ITS INVESTMENT AND AT T HE SAME TIME ASSESSEE RAISED LOAN, IT CAN BE PRESUMED THAT INVES TMENTS MADE WERE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSES SEE ONLY. THE JURISDICTIONAL HIGH COURT HELD AS UNDER: IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN ASS ESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST-FREE FUNDS AVAIL ABLE. IN OUR OPINION THE SUPREME COURT IN EAST INDIA PHARMACEUTI CAL WORKS LTD HAD THE OCCASION TO CONSIDER THE DECISION OF TH E CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACT ER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR A ND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINE SS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM T HE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSI DERABLE FORCE, BUT CONSIDERING THE FACT THAT THE CONTENTION , HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS CASE THE CALCUTTA HIGH COURT H AD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITE D IN THE OVERDRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CAS E IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFIT S OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNIN G OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, T HERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE THEREFORE WOUL D BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OV ERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT IN VESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAILABLE VIJAYDEEP HOTELS 12 WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE S UFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE CIT(A) AND I.T.A.T. 14. IN THIS CASE IT IS THE FINDING OF THE LD. CIT( A) THAT THE UTILIZATION OF FUNDS FOR NON-BUSINESS PURPOSES STOOD AT RS. 8,4 7,88,382/- AND THE AVAILABLE FUNDS WITH THE ASSESSEE STOOD AT RS. 8,29 ,13,964/- AND THEREFORE IT IS REASONABLE TO CONCLUDE THAT A SUM OF RS. 18,74,418/- ONLY HAS COME OUT OF INTEREST BEARING FUNDS. HE F URTHER CONCLUDED THAT SINCE ASSESSEE HIMSELF HAS DISALLOWED RS. 10,6 8,637/-, THERE IS NO REASON FOR MAKING FURTHER DISALLOWANCE AND DIREC TED TO DELETE THE DISALLOWANCE OF INTEREST OF RS. 36,99,211/-. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND VALID REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE. THEREFORE, IN VIEW OF OUR ABOVE DISCUSSION, WE UPH OLD THE ORDER OF THE LD. CIT(A). THIS GROUND OF THE REVENUE IS DISMI SSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2004-05 IS DISMISSED. ITA NO. 3293/M/2011 A.Y. 2005-06 16. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEA L IS IDENTICAL IN GROUND NO.1&2 IN ITA NO.3291/M/2011 THOUGH QUANTUM MAY DIFFER. SINCE THE FIRST AND SECOND GROUNDS ARE SIMILAR TO THE APPEAL IN ITA NO. 3291/M/11, THE DECISION RENDERED THEREIN APPLIE S MUTATIS AND MUTANDIS TO THESE GROUNDS. THEREFORE, ON SIMILAR L INES AND FOR SIMILAR REASONS, THE GROUNDS RAISED ON 1 ST AND 2 ND ISSUE OF COST OF LIQUOR PURCHASES AND DISALLOWANCE OF INTEREST U/S. 36(1)(III) BY THE REVENUE IN ITA NO. 3293/M/11 FOR ASSESSMENT YEAR 2 005-06 ARE DISMISSED. VIJAYDEEP HOTELS 13 ITA NO. 3384/M/2011 A.Y. 2006-07 16. THE FIRST AND SECOND GROUND RAISED BY THE REVEN UE IN THIS APPEAL IS IDENTICAL IN GROUND NO.1&2 IN ITA NO.3291/M/2011 THOUGH QUANTUM MAY DIFFER. SINCE FIRST AND SECOND GROUNDS ARE SIMILAR TO THE APPEAL IN ITA NO. 3291/M/11, THE DECISION RENDERED THEREIN APPLIES MUTATIS AND MUTANDIS TO THESE GROUNDS. THEREFORE, ON SIMILAR LINES AND FOR SIMILAR REASONS, THE GROUNDS RAISED ON 1 ST AND 2 ND ISSUE OF COST OF LIQUOR PURCHASES AND DISALLOWANCE OF INTERE ST U/S. 36(1)(III) BY THE REVENUE IN ITA NO. 3384/M/11 FOR ASSESSMENT YEAR 2006-07 ARE DISMISSED. 17. THE THIRD ISSUE IN THE APPEAL OF THE REVENUE FO R ASSESSMENT YEAR 2006-07 IS THAT THE LD. CIT(A) ERRED IN DELETI NG THE ADDITION MADE U/S. 2(22)(E) AS DEEMED DIVIDEND. 17.1. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WH ILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE HAS RECEIVED LOAN OF RS. 65,63,000/- FROM M/S. GUNJYOT PROPERTIES PVT. LTD., A COMPANY I N WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. HE ALSO NOTICED THAT ONE OF THE DIRECTORS SHRI KARANVEER SINGH BAWA HAD SUBSTANTIALLY INTERES TED IN BOTH ASSESSEE COMPANY AS WELL AS M/S. GUNJYOT PROPERTIES PVT. LTD., HOLDING 47.7.% AND 49.3% OF SHARE HOLDING RESPECT IVELY. HE ALSO NOTICED THAT M/S. GUNJYOT PROPERTIES PVT. LTD IS HA VING ACCUMULATED PROFITS AND THERE ARE NO BUSINESS TRANSACTIONS EITH ER WITH THE ASSESSEE COMPANY OR WITH THE BENEFICIAL SHARE HOLD ER I.E. SHRI KARAN VEER SINGH BAWA. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT PROVISIONS OF SEC 2(22)(E) ARE ATTRACTED. WHE N CALLED FOR EXPLANATION FROM THE ASSESSEE, THE ASSESSEE CONTEND ED THAT THE VIJAYDEEP HOTELS 14 ASSESSEE WAS NOT A SHAREHOLDER IN M/S. GUNJYOT PROP ERTIES PVT. LTD., ARE THEREFORE NO ADDITION CAN BE MADE TOWARDS DEEME D DIVIDEND. THE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED A ND AN ADDITION OF RS. 6,86,191/- WAS MADE BY THE ASSESSING OFFICER U/ S. 2(22)(E) OF THE ACT FOR THE REASON THAT AN ADDITION OF RS. 94,70,00 0/- HAS ALREADY BEEN TREATED AS DEEMED DIVIDEND IN THE HANDS OF SH RI KARAN VEER SINGH BAWA FOR ASSESSMENT YEAR 2006-07. 18. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS UNI VERSAL MEDICARE PVT. LTD (324 ITR 264) DELETED THE ADDITION MADE U/S. 2(22)(E) SINCE ASSESSEE IS NOT A REGISTERED SHARE HOLDER OF GUNJYO T PROPERTIES (P) LTD., FROM WHOM THE LOAN WAS TAKEN. 19. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE ASSESSING OFFICER IN INVOKING THE PRO VISIONS OF SEC. 2(22)(E) OF THE ACT. 20. THE LD. COUNSEL FOR THE ASSESSEE PLACES RELIANC E ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF UNI VERSAL MEDICARE PVT. LTD (SUPRA). HE FURTHER SUBMITS THAT THE DECISION OF THE MUMBAI SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR PVT. LT D WHEREIN IT WAS HELD THAT ADDITION IN RESPECT OF DEEMED DIVIDEND CA N BE MADE ONLY IN THE HANDS OF THE REGISTERED SHAREHOLDERS IS AFFIRME D BY THE BOMBAY HIGH COURT. THEREFORE, HE SUBMITS THAT SINCE ASSES SEE COMPANY IS NOT A REGISTERED SHAREHOLDER OF M/S. GUNJYOT PROPERTIES PVT. LTD., ADDITION U/S. 2(22)(E) CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED ON. ADMITTEDLY, THE VIJAYDEEP HOTELS 15 ASSESSEE IS NOT A SHAREHOLDER IN M/S. GUNJYOT PROPE RTIES PVT. LTD., AND THEREFORE IN VIEW OF THE DECISION OF THE JURISDICTI ONAL HIGH COURT HOLDING THAT THE PROVISIONS OF SEC. 2(22)(E) ARE AT TRACTED ONLY TO REGISTER SHAREHOLDERS AND SINCE ASSESSEE IS NOT THE SHAREHOLDER OF LENDING COMPANY I.E. M/S. GUNJYOT PROPERTIES PVT. L TD., NO ADDITION CAN BE MADE U/S. 2(22)(E) OF THE ACT IN THE HANDS O F THE ASSESSEE. THUS RESPECTFULLY FOLLOWING THE SAID DECISION OF TH E JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE. THIS GROUND IS THEREFORE REJECTED. ITA NO. 3385/M/2011 A.Y. 2007-08 22. THE FIRST AND SECOND GROUND RAISED BY THE REVEN UE IN THIS APPEAL IS IDENTICAL IN GROUND NO.1&2 IN ITA NO.3291/M/2011 FOR ASSESSMENT YEAR 2004-05 THOUGH QUANTUM MAY DIFFER THEREFORE, ON SIMILAR LINES AND FOR SIMILAR REASONS, THE GROUNDS RAISED BY THE REVENUE IN ITA NO. 3385/M/11 FOR ASSESSMENT YEAR 2 007-08 IS ALSO DISMISSED. 23. THE THIRD ISSUE IN THE APPEAL OF THE REVENUE FO R ASSESSMENT YEAR 2007-08 IS THAT THE LD. CIT(A) ERRED IN DELETI NG THE ADDITION MADE U/S. 2(22)(E) AS DEEMED DIVIDEND. 24. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHIL E COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE HAS RECEIVED LOAN OF RS. 78,85,000/- FROM M/S. BACKBAY PROPERTIES PVT. LTD., A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. HE ALSO NOTICED THAT ONE OF THE DIRECTORS SHRI KARANVEER SINGH BAWA HAD SUBSTANTIAL LY INTERESTED IN BOTH ASSESSEE COMPANY AS WELL AS M/S. BACKBAY PROPE RTIES PVT. LTD., VIJAYDEEP HOTELS 16 HOLDING 47.7.% AND 50% SHARE HOLDING RESPECTIVELY . HE ALSO NOTICED THAT M/S. BACKBAY PROPERTIES PVT. LTD IS HAVING ACC UMULATED PROFITS AND THERE ARE NO BUSINESS TRANSACTIONS EITHER WITH THE ASSESSEE COMPANY OR WITH THE BENEFICIAL SHARE HOLDER I.E. SH RI KARAN VEER SINGH BAWA. THEREFORE, THE ASSESSING OFFICER WAS O F THE VIEW THAT PROVISIONS OF SEC 2(22)(E) ARE ATTRACTED AND WHEN C ALLED FOR EXPLANATION FROM THE ASSESSEE, THE ASSESSEE CONTEND ED THAT THE ASSESSEE WAS NOT A SHAREHOLDER IN M/S. BACKBAY PROP ERTIES PVT. LTD., THEREFORE THERE IS NO ADDITION CAN BE MADE TOWARDS DEEMED DIVIDEND. THE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED AND AN ADDITION OF RS. 78,85,000/- WAS MADE BY THE ASSESSI NG OFFICER U/S. 2(22)(E) OF THE ACT FOR THE REASON THAT AN ADDITION OF RS. 94,70,000/- HAS ALREADY BEEN TREATED AS DEEMED DIVIDEND IN THE HANDS OF SHRI KARAN VEER SINGH BAWA FOR ASSESSMENT YEAR 2007-08. 25. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS UNI VERSAL MEDICARE PVT. LTD (324 ITR 264) DELETED THE ADDITION SINCE THE A SSESSEE IS NOT A REGISTERED SHARE HOLDER OF BACKBAY PROPERTIES (P) L TD FROM WHOM THE LOAN WAS TAKEN. 26. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE ASSESSING OFFICER IN INVOKING THE PRO VISIONS OF SEC. 2(22)(E) OF THE ACT. 27. THE LD. COUNSEL FOR THE ASSESSEE PLACES RELIANC E ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF UNI VERSAL MEDICARE PVT. LTD (SUPRA). HE FURTHER SUBMITS THAT THE DECISION OF THE MUMBAI SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR PVT. LT D WHEREIN IT WAS VIJAYDEEP HOTELS 17 HELD THAT ADDITION IN RESPECT OF DEEMED DIVIDEND CA N BE MADE ONLY IN THE HANDS OF THE REGISTERED SHAREHOLDERS IS AFFIRME D BY THE BOMBAY HIGH COURT. THEREFORE, HE SUBMITS THAT SINCE ASSES SEE COMPANY IS NOT A REGISTERED SHAREHOLDER OF M/S. BACKBAY PROPERTIE S PVT. LTD ., ADDITION U/S. 2(22)(E) CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. 28. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED ON. ADMITTEDLY, THE ASSESSEE IS NOT A SHAREHOLDER IN M/S. BACKBAY PROPE RTIES PVT. LTD., AND THEREFORE IN VIEW OF THE DECISION OF THE JURISD ICTIONAL HIGH COURT HOLDING THAT THE PROVISIONS OF SEC. 2(22)(E) ARE AT TRACTED ONLY TO REGISTER SHAREHOLDERS AND SINCE ASSESSEE IS NOT THE SHAREHOLDER OF LENDING COMPANY I.E. M/S. BACKBAY PROPERTIES PVT. L TD., ADDITION U/S. 2(22)(E) OF THE ACT IS NOT WARRANTED IN THE HANDS O F THE ASSESSEE. THUS RESPECTFULLY FOLLOWING THE SAID DECISION OF TH E JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE. THIS GROUND IS THEREFORE REJECTED. ITA NO. 3241/M/2011 ASSESSEES APPEAL 29. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO ASSESSED RENTAL RECEIVED AS BUSINESS INC OME AS AGAINST INCOME FROM HOUSE PROPERTY. LOOKING TO THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE APPELLANT SUBMITS THAT LD. CIT(A) OU GHT TO HAVE HELD THAT THE RENTALS RECEIVED SHOULD BE ASSES SED AS INCOME FROM HOUSE PROPERTY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS. VIJAYDEEP HOTELS 18 41,32,500/- ON ACCOUNT OF THE ALLEGED DEEMED DIVIDE ND U/S. 2(22)(E) OF THE I.T. ACT 1961. LOOKING TO THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE APPELLANT SUBMITS THAT LD. CIT(A) OU GHT TO HAVE HELD THAT THE SAID ADDITION IS INCORRECT AND I NVALID AND OUGHT TO HAVE DELETED THE SAID ADDITION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ADDITIONS MADE ON ACCOUNT OF THE RENTAL INCOME AND DEEMED DIVIDEND ARE BEYOND THE SCOPE OF PROVISI ONS OF SECTION 153A AND HENCE INVALID AND THE SAME OUGHT TO BE DELETED. 30. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS THAT GROUND NO. 3 IS NOT PRESSED THEREFORE IT IS DISMISS ED AS NOT PRESSED. 31. GROUND NO. 1 IS REGARDING CHALLENGING THE ORDER OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ASSESS RENTAL INCOME RECEIVED BY THE ASSESSEE AS BUSINESS INCOME AS AGAI NST INCOME FROM HOUSE PROPERTY. 31.1. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WH ILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE RECEIVED INCOME FR OM RELIANCE INFOCOM LTD., AGAINST INSTALLATION OF A ANTENNA/TOW ER AND BTS EQUIPMENT INSTALLED BY RELIANCE INFOCOM LTD., ON TH E TERRACE OF ASSESSEES HOTEL BUILDING AND THIS INCOME WAS SHOWN UNDER THE HEAD INCOME FROM BUSINESS PROPERTY. THE ASSESSING OFF ICER WAS OF THE VIEW THAT RELIANCE INFOCOM BY PAYING RENT TO THE AS SESSEE FOR THE ANTENNA/TOWER AND BTS EQUIPMENT ERECTED ON THE TERR ACE OF HOTEL BUILDING OF THE ASSESSEE HAS ONLY OBTAINED A RIGHT TO USE A PART OF THE TERRACE FOR PUTTING UP ITS MOBILE TOWER AND HAS N OT OBTAINED LEASE OF THE PROPERTY CONSISTING OF ANY BUILDING OR LAND. THEREFORE, HE WAS OF THE VIEW THAT THE SAID INCOME RECEIVED BY THE AS SESSEE CANNOT BE VIJAYDEEP HOTELS 19 TREATED AS PROPERTY INCOME U/S. 22 OF THE ACT AND T HE ASSESSING OFFICER ASSESSED THIS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. HE PLACED RELIANCE ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF MUKHERJEE ESTATE (P) LTD VS CIT (244 ITR 01). 32. ON APPEAL, THE LD. CIT(A) HELD THAT THIS INCOME IS TO BE ASSESSED AS BUSINESS INCOME AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES OR INCOME FROM HOUSE PROPERTY. 33. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT T ERRACE OF THE HOTEL BUILDING WAS GIVEN TO RELIANCE INFOCOM FOR SE TTING UP OF ANTENNA/TOWER AND THIS IS THE CASE OF SIMPLE LET OU T OF TERRACE PLACE AND ASSESSEE HAS NEITHER ERECTED NOR MAINTAINED THE ANTENNA/TOWER. HE FURTHER SUBMITS THAT DAY TODAY MAINTENANCE IS DO NE BY RELIANCE INFOCOM LTD., AND ASSESSEE HAS SIMPLY LET OUT OF I TS TERRACE PLACE FOR SETTING UP OF ANTENNA. THEREFORE HE SUBMITS THAT T HE RENTAL INCOME RECEIVED BY THE ASSESSEE IS NOTHING BUT INCOME FROM PROPERTY ONLY AND CERTAINLY NOT ITS BUSINESS INCOME. HE STRONGLY PLACES RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE O F M/S. KAMLESH REAL ESTATES PVT. LTD. VS ACIT IN ITA NO. 1451/M/2 010 DATED 20.4.2011. THE LD. COUNSEL FOR THE ASSESSEE SUBMIT S THAT THE DECISION OF THE CALCUTTA HIGH COURT RELIED ON BY THE ASSESS ING OFFICER IN THE CASE OF MUKHERJEE ESTATE (P) LTD (SUPRA) HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN THIS CASE AND ON IDENTICAL CIR CUMSTANCES IT HAS BEEN HELD THAT INCOME FROM LETTING OUT OF THE TERR ACE FOR PUTTING UP ITS MOBILE TOWER BY THE TELECOM COMPANIES IS ASSESS ABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD. COUNSEL FOR THE ASSES SEE ALSO PLACED RELIANCE ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE VIJAYDEEP HOTELS 20 OF MANPREET SINGH VS ITO (53 TAXMANN.COM 244) AND S UBMITS THAT THE TRIBUNAL HELD THAT INCOME EARNED BY THE ASSESS EE FROM RENTING OF TERRACE FOR INSTALLATION OF MOBILE ANTENNA WAS TAXA BLE AS INCOME FROM HOUSE PROPERTY. THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT EVEN IN THIS CASE THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF MUKHERJEE ESTATE (P) LTD (SUPRA) HAS BEEN CONSIDERE D. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACES RELIANCE ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF NIAGARA HOTELS & BU ILDERS (P) LTD VS CIT (60 TAXMANN.COM 83) AND SUBMITS THAT ON IDENTIC AL FACTS THE HIGH COURT HELD THAT THE LICENCE FEE RECEIVED BY TH E ASSESSEE BY ENTERING INTO AN AGREEMENT WITH A TELECOM COMPANY F OR MOUNTING TOWER AND ANTENNA IS ASSESSABLE UNDER THE HEAD INC OME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM BUSINE SS. THUS, HE PLEADS FOR ALLOWING THE GROUND AND TO DIRECT THE AS SESSING OFFICER TO CONSIDER THE INCOME FROM LETTING OUT OF TERRACE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT NOT UNDER THE HEAD INCOME FROM BUSINESS/OTHER SOURCES. 34. THE LD. DEPARTMENTAL REPRESENTATIVE PLACES RELI ANCE ON THE DECISION OF THE AUTHORITIES BELOW. 35. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORD ERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RELIED ON. THE ASSESSEE HAS LET OUT ON LEASE TERRACE PLACE ON RENT TO RELIANCE INF OCOM LTD., FOR ERECTION OF ANTENNA/TOWER AND THIS INCOME WAS SHOWN BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE ASSESSING OFFICER TREATED THIS INCOME AS NOT DERIVE D FROM THE BUILDING AND THEREFORE HE HELD THAT THIS INCOME CAN NOT BE CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT SHO ULD BE ASSESSED VIJAYDEEP HOTELS 21 UNDER THE HEAD INCOME FROM OTHER SOURCES. IN COM ING TO SUCH CONCLUSION HE PLACED RELIANCE ON THE DECISION OF TH E CALCUTTA HIGH COURT IN THE CASE OF MUKHERJEE ESTATE (P) LTD VS C IT (244 ITR 01). THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE LD. CIT(A) HELD THAT THE INCOME RECEIVED BY THE ASSESSEE IS FR OM A COMMERCIAL BUILDING THEREFORE IT HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND NOT UNDER THE HEAD INCOME FROM HOUS E PROPERTY OR AS ASSESSED BY THE ASSESSING OFFICER UNDER THE HEAD I NCOME FROM OTHER SOURCES. WE FIND AN IDENTICAL ISSUES HAS COME UP BEFORE THE DELHI HIGH COURT IN THE CASE OF NIAGARA HOTELS & BUILDER S (P) LTD VS CIT (SUPRA) WHEREIN THE ASSESSING OFFICER TREATED THE LICENCE FEE RECEIVED BY THE ASSESSEE FROM TELECOM COMPANY FOR R ENTING OUT THE TERRACE FLOOR OF THE BUILDING FOR INSTALLING TOWER ANTENNA AND THIS INCOME WAS ASSESSED BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPERTY TREATING THE PROPERTY AS COMMERCIAL ASSET. THE HONBLE DELHI HI GH COURT REJECTED THE CONCLUSION OF THE TRIBUNAL IN HOLDING THAT AGRE EMENT OF RENTING AND HIRING TERRACE IS IN ESSENCE FOR HIRING SPACE A ND NOT HIRING BUILDING OR LAND APPURTENANT THERETO. THE HONBLE HIGH COURT HELD THAT THE LICENCE FEE RECEIVED BY THE ASSESSEE FOR L ETTING OUT THE TERRACE SPACE IS TO BE TAXED AS INCOME FROM HOUSE PROPERTY. WHILE COMING TO SUCH CONCLUSION, THE HONBLE HIGH COURT ALSO CONSID ERED THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF MUKHERJ EE ESTATE (P) LTD VS CIT (SUPRA). SIMILAR ISSUE HAS ARISEN IN THE CASE OF MANPREET SINGH VS ITO (SUPRA) WHEREIN THE DELHI TRIBUNAL HELD THAT IN COME RECEIVED FROM LETTING OUT OF TERRACE FOR SETTING UP FOR INST ALLATION OF MOBILE ANTENNA IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENC H IN THE CASE OF VIJAYDEEP HOTELS 22 KAMLESH REAL ESTATES PVT. LTD. VS ACIT IN ITA NO. 1451/M/2010 DATED 20.4.2011. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISIONS, WE HOLD THAT THE INCOME RECEIVED BY THE ASSESSEE FROM LETTING OUT OF TERRACE SPACE FOR ERECTION OF ANTENNA TOWER FOR REL IANCE INFOCOM IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PR OPERTY ONLY AND NOT UNDER THE HEAD INCOME FROM BUSINESS OR UNDER THE HEAD INCOME FROM OTHER SOURCES AS WAS ASSESSED BY THE LD. CIT(A )/ASSESSING OFFICER . THIS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED. 36. THE SECOND GROUND OF APPEAL IS REGARDING CHALLE NGING THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS . 41,32,500/- U/S. 2(22)(E) AS DEEMED DIVIDEND. 37. BRIEF FACTS ARE THAT THE ASSESSING OFFICER IN T HE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT M/S. JAGJIT SINGH & CO. WHICH IS A GROUP CONCERN OF THE ASSESSEE AND ALSO A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED HAS GIVEN LOANS A ND ADVANCES AMOUNTING TO RS. 73,77,157/- TO THE ASSESSEE COMPAN Y. HE ALSO FOUND THAT DURING THE YEAR ASSESSEE WAS ONE OF THE SHAREHOLDERS, HAVING 49.5% SHARE HOLDING OF JAGJIT SINGH & CO., H AS TAKEN AN ADVANCE OF RS. 41,32,500/- FROM THE COMPANY. THE A SSESSING OFFICER FOUND THAT M/S. JAGJIT SINGH & CO. WAS NOT HAVING BUSINESS TRANSACTIONS WITH THE ASSESSEE THE BENEFICIAL SHAR E HOLDER AND THEREFORE THE ADVANCE RECEIVED BY THE ASSESSEE FRO M M/S. JAGJIT SINGH & CO. WAS TREATED AS DEEMED DIVIDEND WITHIN THE P ROVISIONS OF SEC. 2(22)(E) OF THE ACT SINCE THE ASSESSEE COMPANY IS HOLDING 49.5% SHARE HOLDING WHICH IS MORE THAN 10% OF THE VOTING POWER IN M/S. JAGJIT SINGH & CO. ACCORDINGLY, THE ADVANCE OF RS. 41,32,500/- WAS TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT . VIJAYDEEP HOTELS 23 38. ON APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITIO N. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IS HAVING MUTUAL, OPEN AND CURRENT ACCOUNT WITH M/S. JAGJIT SINGH & CO. THERE IS DISTINCTION BETWEEN LOAN/ADVANCE AND A MUTUAL, OPEN AND CURRENT ACCOUNT. A MUTUAL, OPEN AND CURRENT ACCOUNT IS AN ACCOUNT WHERE THERE ARE RECIPROCAL DEMANDS BETWEEN THE PARTIES. REFERRING TO ITEM 1 PART 1 TO THE SCHEDULE TO THE LIMITATION ACT, HE SUBMITS THAT THE PERIOD OF LIMITATION TO FILE SUIT IS 3 YEARS FROM T HE CLOSE OF THE YEAR IN WHICH THE LAST ITEM ADMITTED OR PROVED IS ENTERED I N THE ACCOUNT. IN RESPECT OF ADVANCE/LOAN, REFERRING TO ITEM 19 AND 21 PART II TO THE AFORESAID SCHEDULE SUBMITS THAT THE PERIOD OF LIMI TATION TO FILE SUIT IS 3 YEARS FROM THE DAY WHEN THE LOAN IS MADE. THUS H E SUBMITS THAT THE PROVISIONS OF SEC 2(22)(E) WILL NOT BE APPLICAB LE TO MUTUAL, OPEN AND CURRENT ACCOUNT. 39. HE PLACES RELIANCE ON FOLLOWING DECISIONS IN SU PPORT OF THE ABOVE CONTENTIONS. 1. DCIT VS LAKRA BROS (207) 162 TAXMAN 170 (CHD.(MAG.) 2. CIT VS AMBASSADOR TRAVELS (P) LTD (208) 173 TAXMAN 407 (DEL). 3. SHRI SATCHIDANAND S. PANDIT VS ITO (208) 19 SOT 213 (MUM) 4. NH SECURITIES LTD VS DCIT (207) 11 SOT 302 (MUM) 39.1. HE FURTHER SUBMITS THAT THE CONCEPT OF DEEMIN G CERTAIN PAYMENTS OR LOANS OR ADVANCES TO SUBSTANTIAL SHAREH OLDERS AS INCOME WAS INTRODUCED WITH THE OBJECT OF CURBING TAX EVASI ON. UPTO 31.5.1997 DIVIDEND WAS TAXED IN THE HANDS OF THE RE CIPIENT OF THE VIJAYDEEP HOTELS 24 DIVIDEND. HOWEVER MANY CLOSELY HELD COMPANIES NEVE R DECLARED ANY DIVIDEND AND ACCUMULATED PROFITS IN THE COMPANY ITS ELF. SINCE NO DIVIDEND WAS DECLARED THE SAME COULD NOT BE TAXED. HOWEVER, THE COMPANIES DID GIVE LOANS OR ADVANCES TO SUBSTANTIAL SHAREHOLDERS OR TO THEIR CONCERNS/COMPANIES WHO PRESUMABLY ENJOYED THESE FUNDS BUT WERE NOT LIABLE TO PAY ANY TAX ON THE SAME AS T HE AMOUNTS WERE LOANS OR ADVANCES LIABLE TO BE RETURNED. THESE AMO UNTS OF LOANS OR ADVANCES ARE SOUGHT TO BE TAXED AS DIVIDEND BY SECT ION 2(22)(E) OF THE ACT BY WAY OF A DEEMING FICTION. 39.2. HE FURTHER SUBMITS THAT IT IS NOT THE INTENTI ON OF THE LEGISLATURE TO TREAT THE BONAFIDE TRANSACTIONS BETWEEN TWO ASSO CIATE PARTIES OUT OF COMMERCIAL EXPEDIENCY AS DEEMED DIVIDEND. VARIO US GROUP CONCERNS OF THE APPELLANT HAVE BANK ACCOUNT WITH TH E SAME BANK. IF THE BANK MANAGER FINDS THAT THE BANK BALANCE IN THE BANK ACCOUNT OF A PARTICULAR CONCERN IS NOT SUFFICIENT TO MEET THE OBLIGATION THE BANK MANAGER WOULD TRANSFER FUNDS FROM THE BANK ACCOUNT OF ANY OTHER GROUP CONCERN. THESE TRANSACTIONS ARE NOT IN NATUR E OF LOAN OR ADVANCES. THESE TRANSACTIONS ARE IN THE NATURE OF THE CURRENT ACCOUNT TRANSACTION FLOWING BOTH WAYS AND ENTERED INTO OUT OF COMMERCIAL EXPEDIENCY. UNDER THE FACTS AND CIRCUMSTANCE OF TH E APPELLANT CASE THE PROVISIONS OF SEC. 2(22)(E) ARE NOT ATTRACTED T O SUCH TRANSACTIONS. 39.3. WITHOUT PREJUDICE TO ABOVE, THE LD. COUNSEL F OR THE ASSESSEE ARGUED THAT IN DETERMINING THE AMOUNT TAXABLE U/S. 2(22)(E), ADDITION HAS TO BE RESTRICTED TO SUCH PERCENTAGE OF ACCUMULATED PROFITS AS CORRESPONDS TO ASSESSEES SHAREHOLDING IN COMPANY IN QUESTION. RELIANCE WAS PLACED ON THE DECISION OF P UNE BENCH OF THE TRIBUNAL IN THE CASE OF KEWAL KUMAR JAIN VS ACIT (1 44 ITD 672). THE VIJAYDEEP HOTELS 25 SHAREHOLDING OF HIS CLIENT IS 49.5%. IT IS ALSO TH E CONTENTION OF THE ASSESSEE THAT OPENING BALANCE IS TO BE KEPT OUT OF THE PURVIEW OF SEC. 2(22)(E) OF THE ACT AND FOR THIS PROPOSITION RELIAN CE WAS PLACED ON THE DECISION OF THE PUNE BENCH OF TRIBUNAL IN THE V ERY SAME CASE OF KEWAL KUMAR JAIN (SUPRA). 40. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY PLA CES RELIANCE ON THE ORDER OF THE LOWER AUTHORITIES. 41. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE CASE LAWS RELIED ON. ADM ITTEDLY, THERE IS NO BUSINESS RELATION BETWEEN THE ASSESSEE COMPANY AND M/S. JAGJIT SINGH & CO.. THE ADVANCES RECEIVED BY THE ASSESSEE COMPANY ARE NOT IN THE COURSE OF ANY BUSINESS CONNECTION BETWEEN TH ESE TWO COMPANIES. IN THE CIRCUMSTANCES, WE DO NOT FIND AN Y SUBSTANCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE TH AT THE TRANSACTION IS OUTSIDE THE PURVIEW OF THE PROVISIONS OF SEC. 2( 22)(E) OF THE ACT. THE DECISIONS RELIED ON BY THE ASSESSEE ARE DISTING UISHABLE ON FACTS AND THEY ARE NOT APPLICABLE TO THE ASSESSEE. THUS WE HOLD THAT THE PROVISIONS OF SEC 2(22)(E) ARE ATTRACTED IN THIS CA SE. HOWEVER, THE ALTERNATE CONTENTION OF THE ASSESSEE IS THAT IN DET ERMINING THE TAXABLE INCOME I.E. DEEMED DIVIDEND, ADDITION IS TO BE REST RICTED TO SUCH PERCENTAGE OF ACCUMULATED PROFITS AS CORRESPONDS TO ASSESSEES SHARE HOLDING AND IN THIS CASE IT IS 49.5%. THE PUNE BEN CH OF ITAT CONSIDERED THIS ISSUE IN THE CASE OF KEWAL KUMAR JA IN (SUPRA) WHEREIN IT WAS HELD THAT WHILE DETERMINING AMOUNT T AXABLE U/S. 2(22)(E) OF THE ACT, ADDITION HAS TO BE RESTRICTED TO SUCH PERCENTAGE OF ACCUMULATED PROFITS AS CORRESPONDING TO ASSESSEE S SHARE HOLDING IN THE COMPANY AS WAS RIGHTLY DONE BY THE ASSESSING OFFICER WHILE VIJAYDEEP HOTELS 26 COMPLETING THE ASSESSMENT. THE REVENUE DID NOT BR ING TO OUR NOTICE ANY OTHER DECISION CONTRARY TO THE PUNE BENCH. THE REFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION ONLY TO SUCH PERCE NTAGE OF SHARE HOLDING OF THE ASSESSEE TO THE ACCUMULATED PROFITS IN LINE WITH THE DECISION OF THE PUNE BENCH OF ITAT. SIMILARLY, FOL LOWING THE DECISION OF THE PUNE BENCH IN THE CASE OF KEWAL KUMAR JAIN ( SUPRA), WE DIRECT THE ASSESSING OFFICER TO EXCLUDE LOAN/ADVANCES GIVE N TO THE ASSESSEE IN EARLIER YEARS WHICH ARE ASSESSABLE AS DEEMED DIV IDEND IN THE HANDS OF THE ASSESSEE IN THE PAST YEARS WHILE COMP UTING THE DEEMED DIVIDEND TAXABLE U/S. 2(22)(E) OF THE ACT DURING TH IS ASSESSMENT YEAR. THIS GROUND IS PARTLY ALLOWED. ITA NO. 3243/M/2011 A.Y. 2007-08 42. GROUND NO. 1 IS REGARDING CHALLENGING THE ORDER OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ASSESS RENTAL INCOME RECEIVED BY THE ASSESSEE AS BUSINESS INCOME AS AGAI NST INCOME FROM BUSINESS PROPERTY. 42.1. THE ISSUE IS IDENTICAL WITH THE ISSUE IN GRO UND NO.1 IN ITA NO. 3241/M/11 FOR ASSESSMENT YEAR 2006-07 FROM PARA 31 TO 35. THEREFORE, ON SIMILAR LINES AND FOR SIMILAR REASONS , THE GROUND RAISED BY THE ASSESSEE IN ITA NO. 3243/M/11 FOR ASSESSMEN T YEAR 2007-08 IS ALLOWED. 43. THE SECOND GROUND OF APPEAL IS REGARDING CHALLE NGING THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS . 9,47,000/- U/S. 2(22)(E) AS DEEMED DIVIDEND. VIJAYDEEP HOTELS 27 43.1. THE ISSUE IS IDENTICAL WITH THE ISSUE IN GRO UND NO.2 IN ITA NO. 3241/M/11 FOR ASSESSMENT YEAR 2006-07 FROM PARA 36 TO 41. THEREFORE, ON SIMILAR LINES AND FOR SIMILAR REASONS , THE GROUND RAISED BY THE ASSESSEE IN ITA NO. 3243/M/11 FOR ASSESSMEN T YEAR 2007-08 IS DISMISSED. 44. NOW WE TAKE UP THE APPEALS OF SHRI KARANVEER S INGH BAWA, WHO IS A DIRECTOR IN M/S. VIJAYDEEP HOTELS PVT. LTD . THE ONLY ISSUE IN ALL THESE APPEALS OF THE ASSESSEE IS THAT THE LD. C IT(A) ERRED IN NOT ALLOWING THE BENEFIT OF TELESCOPING IN RESPECT OF UNEXPLAINED INCOME AGAINST THE SUBSTANTIAL DISCLOSURE OF INCOME IN THE HANDS OF GROUP OF CONCERNS OF THE ASSESSEE MORE PARTICULARLY VIJAY DE EP HOTELS PVT. LTD. 45. THIS IS SECOND ROUND OF APPEAL BEFORE US BY THE ASSESSEE. IN THE ORIGINAL ASSESSMENTS CERTAIN ADDITIONS WERE MADE TO WARDS UNEXPLAINED EXPENSES FOR ASSESSMENT YEARS 2004-05 T O 2006-07 IN THE CASE OF THE ASSESSEE. THE ASSESSEE CONTESTED TH E ADDITIONS BEFORE THE LD. CIT(A) AND ALSO THE TRIBUNAL. THE TRIBUNAL BY ORDER DATED 29.4.2011 RESTORED THE ISSUE OF ALTERNATIVE PLEA O F THE ASSESSEE FOR GIVING RELIEF ON THE PRINCIPLES OF TELESCOPING WITH A DIRECTION TO RECONSIDER THE PLEA OF THE ASSESSEE SINCE ADMITTEDL Y THE ASSESSEE HAS MADE SUBSTANTIAL DISCLOSURE OF INCOME IN RESPECT OF THE ASSESSEE AND THEIR GROUP CONCERNS. THE ASSESSING OFFICER PASSED ORDERS U/S. 143(3) R.W. S. 254 OF THE ACT, DENYING THE BENEFIT OF TELESCOPING OBSERVING THAT ASSESSEE GROUP DECLARED ADDITIONAL I NCOME OF RS. 9.10 CRORES ONLY IN THE RETURNS AS AGAINST ADDITIONAL IN COME OF RS. 12.50 CRORES ADMITTED IN THE DECLARATION MADE U/S. 132(4) IN THE COURSE OF SEARCH, THEREFORE, TELESCOPING CANNOT BE ALLOWED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE SUPPRESSED INCOME BELONGS TO VIJAY VIJAYDEEP HOTELS 28 DEEP HOTELS PVT. LTD., WHICH IS A CLOSELY HELD COM PANY AND SEPARATE LEGAL ENTITY AND THEREFORE SET OFF OR TELESCOPING O F THE UNACCOUNTED INCOME OF THIS COMPANY CANNOT BE ALLOWED WITH REGAR D TO THE UNEXPLAINED AND UNACCOUNTED INCOME OF THE ASSESSEE WHO IS AN INDIVIDUAL. THE ASSESSING OFFICER ALSO OBSERVED TH AT THE UNEXPLAINED AMOUNT IS IN ROUND FIGURES AND THEREFORE TELESCOPIN G CANNOT BE GIVEN AGAINST SUPPRESSED SALE OF AVALON PUB RELATING TO VIJAY DEEP HOTELS PVT. LTD. THUS, HE DENIED POSSIBILITY OF GIVING TE LESCOPING OF UNEXPLAINED INCOME FOR ALL THE THREE YEARS AND BROU GHT TO TAX. 46. ON APPEAL, THE LD. CIT(A) AGREED WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E SUBMITS THAT THE ASSESSING OFFICER FAILED TO CARRY OUT THE DIRECTION S OF THE TRIBUNAL IN ALLOWING TELESCOPING. THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT IT IS NOT IN DISPUTE THAT ALL THESE RECEIPTS ARE GENER ATED OUT OF UNACCOUNTED SALES MADE FROM AVALON PUB OF M/S. VIJA Y DEEP HOTELS PVT. LTD., WHICH IS A GROUP CONCERN OF THE ASSESSEE AND THE SALES FROM AVALON PUB HAVE BEEN COMPLETELY TAXED AND THEREFORE THERE IS NO JUSTIFICATION IN NOT ALLOWING TELESCOPING. HE FURT HER SUBMITS THAT TELESCOPING WAS DENIED ON THE GROUND THAT THESE ARE ALL ROUND FIGURES. HE SUBMITS THAT THIS IS NOT A GROUND FOR REJECTING THE PLEA OF THE ASSESSEE FOR TELESCOPING. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS MADE DISCLOSURE OF RS . 9.10 CRORES IN THE HANDS OF VARIOUS GROUP CONCERNS OF THE ASSESSEE THEREFORE THE TELESCOPING SHOULD BE GIVEN IN THE HANDS OF THE ASS ESSEE AND ITS GROUP CONCERN. 47. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THE DIRECTION OF THE TRIBUNAL WAS ONLY FOR CONSIDERING ALTERNATIVE PLEA AS VIJAYDEEP HOTELS 29 TO WHETHER TELESCOPING CAN BE ALLOWED OR NOT. THER E IS NO SPECIFIC DIRECTION BY THE TRIBUNAL TO GRANT TELESCOPING. HE FURTHER SUBMITS THAT TELESCOPING IS NOT AUTOMATIC. THE LD. DEPARTM ENTAL REPRESENTATIVE SUPPORTING THE ORDERS OF THE ASSESSI NG OFFICER AND LD. CIT(A) SUBMITS THAT SINCE ASSESSEE HAS DISCLOSED TO TAL UNDISCLOSED INCOME AS ACCEPTED IN THE DECLARATION, THE ASSESSIN G OFFICER RIGHTLY DENIED THE TELESCOPING. HE SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES. 48. HEARD BOTH SIDES, PERUSED THE ORDERS OF THE AUT HORITIES BELOW. THE TRIBUNAL IN THE FIRST ROUND OF APPEAL DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ALTERNATIVE PLEA OF THE ASS ESSEE TO GIVE THE BENEFIT OF TELESCOPING. IN THE SECOND ROUND, THE A SSESSING OFFICER DENIED TELESCOPING FOR THE REASON THAT THESE RECEIP TS ARE GENERATED OUT OF SUPPRESSED SALES FROM AVALON PUB OF VIJAY DE EP HOTELS PVT. LTD., WHICH IS A SEPARATE ENTITY. THE SECOND REASO N FOR DENIAL OF TELESCOPING IS THAT THE FIGURES ARE ROUND FIGURES A ND THEREFORE THEY CANNOT BE PROVED THAT THEY ARE FROM SUPPRESSED SALE S OF AVALON PUB. ONE MORE REASON FOR DENYING TELESCOPING IS THAT THE ASSESSEE GROUP IN THE DECLARATION MADE U/S. 132(4) OFFERED ADDITIO NAL INCOME OF RS. 12.50 CRORES BUT IN THE RETURNS FILED THEY ADMITTED ONLY RS. 9.10 CRORES AND NOT OFFERED BALANCE AMOUNT OF RS. 2.667C RORES AND THEREFORE TELESCOPING IS NOT POSSIBLE. WE ARE UNAB LE TO AGREE WITH THE VIEWS OF THE AUTHORITIES BELOW IN NOT GRANTING THE BENEFIT OF TELESCOPING FOR THE REASON THAT THE ASSESSEE AND TH EIR CONCERNS MADE DISCLOSURE IN THE GROUP AS A WHOLE AND THIS HAS BEE N ACCEPTED BY THE REVENUE AND THEREFORE TELESCOPING CANNOT BE DENIED SIMPLY BECAUSE THE CONCERNS AND THE ASSESSEE ARE SEPARATE ENTITIES . WE ALSO DO NOT FIND ANY VALID REASON FOR DENYING TELESCOPING SIM PLY BECAUSE THE VIJAYDEEP HOTELS 30 FIGURES ARE ROUND FIGURES. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSING OFFICER ACCEPTS THAT THESE UNACCOUNTED IN COME IS GENERATED FROM OUT OF THE SUPPRESSED SALES OF AVALON PUB OF V IJAY DEEP HOTELS PVT. LTD AND THIS SUPPRESSED SALES HAVE ALREADY BEE N TAXED IN THE HANDS OF VIJAY DEEP HOTELS PVT. LTD. THERE IS ONE MORE REASON FOR DENYING TELESCOPING THAT ASSESSEE HAS NOT FULLY DI SCLOSED THE AMOUNT AS AGREED IN THE DECLARATION. IF THIS IS THE CONTE NTION OF THE ASSESSING OFFICER FOR NOT ALLOWING TELESCOPING, HE COULD HAVE MADE ADDITIONS BASED ON THE SEIZED MATERIALS IGNORING THE DECLARAT ION. WE FAILED TO UNDERSTAND WHY THE ASSESSING OFFICER HAS NOT MADE A DDITIONS BASED ON SEIZED MATERIALS RATHER THAN GOING BY THE ADDITI ONAL INCOME OFFERED BY THE ASSESSEE. WE ALSO SEE THAT THE INCO ME FROM SUPPRESSED SALES OF AVALON PUB HAVE BEEN FULLY TAXE D AS SUPPRESSED INCOME AND THE VERY SAME INCOME IS DISALLOWED IN TH E HANDS OF THE DIRECTOR I.E. ASSESSEE TREATING THE SAME AS UNEXPLA INED INCOME WHICH WOULD RESULT IN DOUBLE ADDITION. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IT IS UNJUST IN DENYING TELESCOPING OF TH ESE AMOUNTS AMONG THE GROUP OF THE ASSESSEE. HOWEVER, WE MAKE IT CLEA R THAT IF VIJAYDEEP HOTELS PVT. LTD UTILIZED THESE AMOUNTS FOR ANY OTHE R SOURCES OTHER THAN FOR ADVANCING SUCH AMOUNTS TO THE DIRECTOR M R. KARANVEER SINGH BAWA, TO THAT EXTENT IT CANNOT BE USED FOR TE LESCOPING. THEREFORE, THE ASSESSING OFFICER SHALL EXAMINE THES E ASPECTS. IN THE CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO A LLOW TELESCOPING OF THESE AMOUNTS SUBJECT TO VERIFICATION AFTER CALLIN G FOR NECESSARY DETAILS AND PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS THEREFORE PARTLY ALLOWED . VIJAYDEEP HOTELS 31 39. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE APPEALS FILED BY THE ASSESSEE ARE PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE, 2016. SD/- SD/- (RAMIT KOCHAR) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 20 TH JUNE, 2016 . % . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI