DCIT, New Delhi V. Shiv Kumar, Delhi

ITA 3247/DEL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7479 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Source of fund; Tangible material; Fair market value; Onus to prove
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.3247/DEL/2010 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME-TAX, SHRI SHIV KUMAR, PR OP. CIRCLE 35(1), NEW DELHI. VS. M/S. SWAMI GATTA FACTO RY & M/S. AVDHUT SWAMI METAL WORKS, F-2/34, KRISHNA NAGAR, DELHI. PAN: AAGPK1068C (APPELLANT) (RESPONDEN T) APPELLANT BY: SHRI ROHIT GARG, DR. RESPONDENT BY: SHRI KAPIL GOEL, ADVOCATE. O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2007 -08 ARISES OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS)-XXVII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.74,45,000/ - MADE BY THE AO U/S 68 OF THE IT ACT. 2. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.18,57,189/- MADE U/S 40A(2) OF THE IT ACT. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE SUBMISSION AND FRESH EVI DENCE OF THE ASSESSEE FILED BEFORE HIM AND NOT PROVIDING OPPORTU NITY TO THE AO. THUS, THERE IS A VIOLATION OF RULE 46A(1) OF T HE I. TAX RULES. 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS.74,45,000/- MADE BY THE ASSESSING OFFICER UNDER SEC. 68 OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED UNSECURED LOANS OF RS.74,45,0 00/- FROM THE FOLLOWING PERSONS:- 1. SMT. KRISHNA DEVI RS.16,00,000/- 2. SMT. PANKHURI AGGARWAL RS.21,70,000/- 3. SHRI ROHIT GUPTA RS. 7,40,000/- 4. SHRI RAM KISHORE HUF RS. 9,00,000/- 5. SHRI MOHIT GUPTA RS.20,35,000/- THE AO REQUIRED THE ASSESSEE TO ESTABLISH IDENTITY OF CREDITORS, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF CREDITORS I N RESPECT OF ABOVE MENTIONED PERSONS. THE ASSESSEE FILED CONFIRMATION S, COPIES OF ACCOUNTS, COPIES OF ACKNOWLEDGEMENT OF RETURNS OF INCOME FOR ASSESSMENT YEAR 2007- 08 AND COPIES OF BANK STATEMENTS IN RESPECT OF THE CREDITORS. THE ASSESSING OFFICER ISSUED SUMMONS UNDER SEC. 131 TO SMT. KRISH NA DEVI, PANKHURI AGGARWAL AND SH. MOHIT GUPTA. IN RESPONSE THERETO, SMT. KRISHNA DEVI, PANKHURI AGGARWAL AND SHRI MOHIT GUPTA ATTENDED AND THEIR STATEMENTS ON OATH WERE RECORDED UNDER SEC. 131 OF THE ACT. IN T HEIR STATEMENTS THEY CONFIRMED TO HAVE GIVEN LOAN TO THE ASSESSEE. HOWE VER, CERTAIN 3 INCONSISTENCY WAS NOTED BY THE AO. THE AO BASED ON SUCH INCONSISTENCY HELD THAT THE SOURCE OF DEPOSIT BY THE CREDITORS WA S NOT EXPLAINED. THEREFORE, THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS WAS NOT ESTABLISHED IN ANY OF THE CASES. 4. BEFORE THE CIT(A) DETAILED SUBMISSIONS WERE MADE IN RESPECT OF EACH CREDITOR. IT WAS SUBMITTED THAT ALL THE CREDITORS WERE FAMILY MEMBERS AND WERE ASSESSED TO TAX FOR LAST SO MANY YEARS. THE A SSESSEE ESTABLISHED THE IDENTITY, CREDITWORTHINESS OF LENDERS BY FILING THE CONFIRMATIONS, COPIES OF INCOME-TAX RETURNS AND BANK STATEMENTS. THE LEARNE D CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPECT OF ALL THE CASH CREDITORS AND THE POINTS RAISED BY THE AO IN THE AS SESSMENT ORDER, DELETED THE ADDITION BY OBSERVING AS UNDER:- 7. DETERMINATION : I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AS WELL AS THE FINDINGS OF THE ASSESSING OFFICER. ON DEEPER CONSIDERATION OF THE ARGUMENTS OF LD. ASSES SING OFFICER AS NARRATED IN ASSESSMENT ORDER AND ARGUMENTS MADE BEFORE ME BY SHRI GOEL, I FIND SUBSTANCE IN THE SUBMISSIONS O F AUTHORIZED REPRESENTATIVE FOR REASONS GIVEN IN THE SUCCEEDING PARAGRAPHS. 7.1 AS REGARDS ADDITION OF UNSECURED LOANS U/S 68 O F THE INCOME TAX ACT, IT IS MANIFEST THAT THERE WAS ADDIT IONS DURING THE YEAR UNDER CONSIDERATION OF LOANS OBTAINED FROM NINE PARTIES FROM WHICH THE ASSESSING OFFICER HAS CHOSEN TO DRAW ADVERSE INFERENCE IN FIVE PARTIES (KRISHNA DEVI; PA NKHURI AGGARWAL; MOHIT GUPTA; RAM KISHORE HUF AND ROHIT GU PTA) IN WHICH SUMMONS U/S 131 OF THE ACT WERE LIMITEDLY ISSUED TO THREE PARTIES (KRISHNA DEVI; PANKHURI AGGARWAL; MOH IT 4 GUPTA). THE PARTIES FROM WHICH FRESH/ADDITIONAL LOA NS DURING THE SUBJECT YEAR STOOD ACCEPTED AS GENUINE BY THE A SSESSING OFFICER ON SAME PATTERN OF EVIDENCE AS SUBMITTED FO R OTHER LENDERS ARE AS UNDER :- A) RAJ KR AGGARWAL HUF RS. 14,35,000 (FRESH ADDITIO N DURING THE SUBJECT YEAR) B) SURYA AGGARWAL RS. 6,75,000 (FRESH ADDITION DURI NG THE SUBJECT YEAR) C) SHIV KR HUF RS. 950,000 (FRESH ADDITION DURING THE SUBJECT YEAR) D) SHWETA AGGARWAL RS. 90,000 (FRESH ADDITION DURING T HE SUBJECT YEAR) THESE DETAILS ARE BORNE OUT FROM SUBMISSIONS DATED 12.3.2009 AS FILED BY ASSESSEE BEFORE ASSESSING OFF ICER DURING ASSESSMENT PROCEEDINGS, VIDE POINT NO. 13, INTER-AL IA STATING AS THE CHART CONTAINING THE DETAILS OF UNSECURED LOAN S TAKEN DURING THE RELEVANT PERIOD IS ENCLOSED IN THE PRES CRIBED FORMAT AS PER POINT NO 20 OF THE QUESTIONNAIRE. THE RAND OM ATTEMPT BY THE ASSESSING OFFICER IN MAKING THE ADDITIONS P ERTAINING TO SELECT UNSECURED LOANS WHERE SIMILAR PATTERN OF EVI DENCE IS ON RECORD FOR ALL THE PARTIES / LENDERS BESIDES BEING INCONSISTENT, IN MY VIEW IS ALSO NOT IN CONFORMITY WITH THE LEGAL POSITION ON THE SUBJECT AND THEREFORE THE SAME BECOMES UNTENABL E IN LAW. 7.2 BE THAT AS IT MAY, AS REGARDS ADDITIONS FOR LO ANS OBTAINED BY ASSESSEE FROM MR. RAM KISHORE HUF (RS. 9,00,000) AND ROHIT GUPTA (RS. 7,40,000), WHERE SAM E HAVE BEEN COMPLETELY IDENTIFIED AS GENUINE ON PART OF TH E ASSESSEE / APPELLANT, BY TENDERING THEIR (LENDERS) BANK STATE MENTS (FROM WHERE ASSESSEE GOT THE LOAN BY ACCOUNT PAYEE CHEQUE ) AND ITRS COPY ALONG WITH THEIR CONFIRMED ACCOUNT STATE MENT, WHICH HAS NOT BEEN DISPROVED BY THE ASSESSING OFFICER, AS THERE IS NO FURTHER ENQUIRY ON THE SAME EITHER U/S 131 OR SECTI ON 133(6) OF THE ACT, CONCLUSION OF LD. ASSESSING OFFICER AS TO NON EXPLANATION BY CREDITOR IS NOT ONLY PERVERSE BUT A LSO AGAINST 5 THE LEGAL POSITION OF THE SUBJECT. THAT IS, FOR AFO RESAID LENDERS, WHERE ASSESSEE HAS COMPLETELY DISCHARGED ITS PRIMAR Y ONUS BY PROVIDING THE BASIC DETAILS IN ITS POSSESSION ALONG WITH LENDERS BANK STATEMENT, ITR AND CONFORMATION ETC, AND WHERE ASSESSING OFFICER HAS NOT DISLODGED THE SAME BY MAKING ANY FU RTHER INVESTIGATION, IT IS HELD THAT NO ADDITION FOR THE SAME IS POSSIBLE U/S 68 OF THE ACT AND THEY ARE TO BE TREATED AS SAT ISFACTORILY EXPLAINED BY THE ASSESSEE. 7.3 FURTHER, AS REGARDS SUBJECT LOANS TAKEN FROM T HREE PARTIES VIZ. KRISHNA DEVI; PANKHURI AGGARWAL AND MO HIT GUPTA WHERE ASSESSING OFFICER HAS ISSUED SUMMONS U/S 131 OF THE ACT, IT IS ADMITTED POSITION THAT ALL THOSE PARTIES OFFE RED THEMSELVES FOR PERSONAL VERIFICATION BEFORE THE ASSESSING OFFI CER DURING ASSESSMENT PROCEEDINGS. FURTHER, IT IS ADMITTED POS ITION THAT IN THEIR STATEMENTS RECORDED NO ADVERSE COMMENT WAS MA DE BY ANY OF THE LENDERS AS FAR AS LOAN GIVEN TO ASSESSEE IS CONCERNED. FURTHER, IT IS AN ADMITTED FACT THAT THESE THREE PA RTIES WHEN THEY APPEARED BEFORE THE ASSESSING OFFICER, FILED THEIR STATEMENT OF AFFAIRS, PRESENT INCOME TAX ASSESSMENT DETAILS, EXP LANATION AS TO THEIR SOURCE OF LENDING ETC. THE POINT MADE BY ASSE SSING OFFICER FOR TREATING THE SUBJECT THREE LOANS AS UNEXPLAINED FOR SECTION 68 OF THE ACT, LIES IN NARROW COMPASS AS, LENDERS A RE NOT ABLE TO GIVE THE SATISFACTORY EXPLANATION FOR THEIR FUNDING SOURCE SO AS TO LEND THE SUBJECT AMOUNT TO THE ASSESSEE. IN LIGH T OF THESE FACTS, WHERE ASSESSEE NOT ONLY IDENTIFIED THE LENDE RS AND PROVED THE SUBJECT LOANS AS GENUINE BY TENDERING PRIMARY D ETAILS TO ASSESSING OFFICER BUT ALSO THOSE LENDERS CORROBORAT ED THE FACTUM OF LOAN GIVEN TO ASSESSEE FROM THEIR ACCUMUL ATED MONEY BY TENDERING FURTHER EVIDENCE FOR THE SAME IN SHAPE OF THEIR STATEMENT OF AFFAIRS ETC, MERELY BECAUSE THE ASSESS ING OFFICER IS NOT SATISFIED AS TO THE AVAILABILITY OF SOURCE OF L ENDING VIS A LENDERS, NO ADDITION U/S 68 OF THE ACT IS TENABLE I N HANDS OF BORROWER / ASSESSEE AS ASSESSEE CANNOT BE ASKED TO EXPLAIN THE SOURCE OF SOURCE. THIS CONCLUSION IS ARRIVED AT AF TER PERUSAL OF PAPER BOOK VOLUME II PAGES 1 TO 67 CONTAINING THE D ETAILS SUBMITTED BEFORE THE ASSESSING OFFICER DURING ASSES SMENT PROCEEDINGS. 6 7.4 ACCORDINGLY ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS BEING U NSECURED LOANS TAKEN FROM AFORESAID LENDERS, IS HEREBY DELET ED IN ITS ENTIRETY. THEREFORE, GROUNDS OF APPEAL NO. 2 & 3 AR E ALLOWED IN FULL. (RELIEF: RS. 74,45,000/-) 5. BEFORE US, THE LEARNED SR. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE ASSESSEE HAS NOT DISCHARGED PRIMARY ONUS. THE ASSESSING OFFICER ISSUED SUMMONS UNDER SEC. 131 IN THREE CASES. THE CASH CR EDITORS ARE FAMILY MEMBERS OF THE ASSESSEE. THEY HAVE GIVEN GENERAL R EPLY IN RESPECT OF SPECIFIC ENQUIRIES MADE BY THE AO. IT WAS ALSO SUB MITTED THAT ON PERUSAL OF BANK STATEMENTS, IT CAN BE SEEN THAT THE AMOUNTS HA VE BEEN CREDITED IN THEIR ACCOUNTS FROM COMMON BANK AS IS SEEN FROM THE CHEQU E NUMBERS. THEREFORE, THE FUNDS HAVE BEEN TRANSFERRED IN THEIR ACCOUNTS FROM A COMMON FUND. THE ONUS WAS ON THE ASSESSEE TO PROVE THE CA PACITY OF THE CREDITORS. HE PLACED RELIANCE ON THE DECISION OF HONBLE RAJAS THAN HIGH COURT IN THE CASE OF KAMAL MOTORS VS. CIT, 131 TAXMAN 155 (RAJ.) . THE LEARNED SR. DR THEREFORE, SUBMITTED THAT THE ISSUE MAY BE SET ASID E TO THE FILE OF THE AO FOR VERIFICATION OF THE FACT ABOUT THE SOURCE OF FUNDS. 6. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAS DISCHARGED INITIAL ONUS BY FILING THE CONFIRMATIONS, BANK STATEMENTS, COPIES OF RETURNS. HE SUBMITTED THAT A LL THE CASH CREDITORS ARE FAMILY MEMBERS OF THE ASSESSEE. THE CASH CREDITORS COME FROM REPUTED 7 FAMILIES AND THEREFORE, THEIR CAPACITY CANNOT BE DO UBTED. HE ALSO SUBMITTED THAT IN THE CASE OF PANKHURI AGGARWAL, SHE WAS INCO ME TAX ASSESSEE SINCE CHILDHOOD. WHEN SHE WAS MERELY SIX MONTHS OLD BABY , SHE WAS WEALTH-TAX ASSESSEE SINCE 1991. AS PER STATEMENT OF AFFAIRS A S ON 31 ST MARCH, 2007, SHE HAD NET WEALTH OF RS.33,70,568/-. IN THE CASE OF S HRI MOHIT GUPTA, IT WAS SUBMITTED THAT HE BELONGS TO WELL ESTABLISHED AND F INANCIALLY SOUND BUSINESS FAMILY. HE IS AN OLD INCOME-TAX ASSESSEE SINCE ASS ESSMENT YEAR 1989-90. AS PER HIS STATEMENT OF AFFAIRS AS ON 31 ST MARCH, 2007, THE NET WEALTH OF THE LENDER WAS RS.38,39,779/-. THE AO HAD NOT ISSUED S UMMONS TO RAM KISHORE HUF AND ROHIT GUPTA BUT HAD ARBITRARILY WIT HOUT APPLICATION OF MIND, CONCLUDED THAT THEY HAD NOT EXPLAINED THE DEP OSITS MADE BY THEM WITH THE ASSESSEE. THE ADDITIONS MADE BY THE AO ARE WIT HOUT APPLICATION OF MIND AND DE-HORSE THE MATERIAL ON RECORD. IT WAS ALSO S UBMITTED THAT THE SOURCE OF DEPOSITS IN THEIR ACCOUNTS HAS COME FROM SALE PROCE EDS OF SHARES. THE ASSESSEE HAD DISCHARGED INITIAL ONUS BY FILING THE CONFIRMATIONS, BANK STATEMENTS AND COPIES OF INCOME-TAX RETURNS. SINCE THE AMOUNTS HAVE BEEN CONFIRMED BY THE LENDERS, NO ADDITION CAN BE MADE I N THE HANDS OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT IN THEIR ACCO UNTS, THERE IS NO CREDIT BY WAY OF CASH. THE SALE PROCEEDS OF SHARES HAVE BEEN CREDITED IN THEIR ACCOUNTS BECAUSE OF WHICH, THE CHEQUE NUMBERS ARE F ROM THE SAME BANK 8 ACCOUNT I.E. OF THE BROKER. THE AO HAS MADE ADDITI ON MERELY ON SUSPICION AND CONJECTURES. HE PLACED RELIANCE ON THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DWARKADHISH INVESTMENT P. LTD., 330 ITR 298 (DEL), WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE INITIAL BURDEN OF PROOF LIES ON ASSESSEE. ONCE HE PROVES THE IDENTIT Y OF THE CREDITOR, EITHER BY SHOWING THEIR PAN NUMBER OR INCOME-TAX ASSESSMENT N UMBER AND ALSO SHOWS GENUINENESS OF TRANSACTION WHILE SHOWING MONE Y IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO REVENUE. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE ORDE R OF THE LEARNED CIT(A) CAREFULLY. THE LEARNED CIT(A) AFTER EXAMINING THE FACTS HAS COME TO THE CONCLUSION THAT IN THEIR STATEMENTS RECORDED ON OAT H, NO ADVERSE COMMENT WAS MADE BY ANY OF THE LENDERS AS FAR AS LOAN GIVEN TO THE ASSESSEE IS CONCERNED. THREE PARTIES TO WHOM SUMMONS WERE ISSU ED APPEARED BEFORE THE AO, FILED THEIR STATEMENTS OF AFFAIRS, INCOME-T AX DETAILS AND EXPLANATION AS TO THEIR SOURCE OF LENDING ETC. SMT. KRISHNA DE VI, MS PANKHURI AGGARWAL AND SHRI MOHIT GUPTA ARE ASSESSED TO TAX AND THEY A RE FAMILY MEMBERS OF THE ASSESSEE. SINCE THE CREDITORS HAVE GIVEN CONFIRMAT ION, PROVED THEIR IDENTITY AND CREDITWORTHINESS, IN OUR CONSIDERED VIEW, NO AD DITION CAN BE MADE UNDER 9 SEC. 68 OF THE ACT. AS REGARD THE ADDITION IN CASE OF SHRI RAM KISHORE HUF AND SHRI ROHIT GUPTA, THE AO HAS MADE ADDITION WITH OUT BRINGING MATERIAL ON RECORD. THEREFORE, THE ADDITION MADE IN RESPECT OF LOANS RECEIVED FROM THEM IS WITHOUT APPLICATION OF MIND AND CONTRARY MA TERIAL AVAILABLE ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. 8. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TING OF ADDITION OF RS.18,57,189/- MADE UNDER SEC. 40A(2) OF THE ACT. THE FACTS OF THE CASE RELATING TO THIS GROUND ARE THAT THE ASSESSEE HAD A LLOWED INTEREST TO FAMILY MEMBERS @ 18% PER ANNUM WHILE ACCORDING TO THE ASSE SSING OFFICER, THE PREVAILING RATE OF INTEREST WAS ONLY 12% PER ANNUM. THE AO, THEREFORE, CAME TO THE CONCLUSION THAT THE ASSESSEE HAD PAID E XCESS PAYMENT ON ACCOUNT OF INTEREST @ 18% TO VARIOUS PERSONS SPECIFIED UNDE R SEC. 40A(2)(B) OF THE ACT. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE I NTEREST PAID BY THE ASSESSEE HAS BEEN OFFERED TO TAX BY RESPECTIVE LEND ERS IN THEIR RETURNS OF INCOME. THE AO HAS NOT BROUGHT ANY MATERIAL ON REC ORD FOR JUSTIFICATION OF EXCESSIVE PAYMENT OF INTEREST. RELIANCE WAS PLACED ON SEVERAL DECISIONS. THE LEARNED CIT(A) ON THE BASIS OF ARGUMENTS ADVANC ED AND MATERIAL AVAILABLE ON RECORD, OBSERVED THAT THE AO HAD NOT B ROUGHT ANY MATERIAL MUCH LESS POSITIVE TANGIBLE MATERIAL SO AS TO SUPPO RT THE ALLEGATION OF 10 EXCESSIVENESS IN STATED INTEREST EXPENSE. THEREFOR E, ADDITION MADE BY A.O. WAS NOT TENABLE. HE ALSO NOTED THAT NO ENQUIRY WAS MADE BY THE AO IN ORDER TO ARRIVE AT THE CONCLUSION THAT EXCESSIVE RATE OF INTEREST HAS BEEN ALLOWED TO FAMILY MEMBERS. THE ONUS WAS ON THE AO TO BRING TH E MATERIAL ON RECORD TO PROVE THAT THE PAYMENT MADE BY THE AO WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVI CES RENDERED. IF SOME MATERIAL/EVIDENCE WAS BROUGHT ON RECORD TO INDICATE THAT PAYMENT APPEARED TO BE EXCESSIVE OR UNREASONABLE, THEN ONUS WOULD HA VE SHIFTED TO THE ASSESSEE TO PROVE THAT THE PAYMENT WAS NOT EXCESSIV E OR UNREASONABLE. SINCE NO ENQUIRY AS CONTEMPLATED BY THE PROVISIONS OF SEC . 40A(2)(B) HAS BEEN MADE BY THE AO, THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. HE ACCORDINGLY DELETED THE ADDITION OF RS.18,57,189/-. 9. BEFORE US, THE LEARNED SR. DR SUBMITTED THAT THE AO HAS GIVEN CLEAR CUT FINDING THAT RATE OF INTEREST DURING THE PERIOD WAS 12%. THEREFORE, PAYMENT OF INTEREST @ 18% IS EXCESSIVE. THE REASON ABLENESS OF EXPENSES HAS TO BE PROVED BY THE ASSESSEE AND NOT BY THE DEP ARTMENT. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF NUND & SAMONT CO. PVT. LTD. VS. CIT, 78 ITR 268 AND DECISI ON OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEPC INDIA LTD, 3 03 ITR 271. 11 10. THE LEARNED AR OF THE ASSESSEE ON THE OTHER HAN D, SUBMITTED THAT THE ASSESSEE HAS OBTAINED UNSECURED LOAN. THE RATE OF INTEREST IN RESPECT OF UNSECURED LOAN IS ALWAYS HIGH AS COMPARED TO RATE O F INTEREST ON SECURED LOANS. THE ASSESSEE HAS DEDUCTED TAX AT SOURCE WHI LE MAKING THE PAYMENT. THE CREDITORS HAVE ADMITTED THE INTEREST INCOME IN THEIR RETURNS OF INCOME, WHICH HAS BEEN ASSESSED IN THEIR HANDS. THEREFORE, DISALLOWANCE OF INTEREST COULD NOT BE MADE UNDER SEC. 40A(2)(B) OF THE ACT. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD PAID INTERE ST @ 18% TO FAMILY MEMBERS WHEREAS ACCORDINGLY TO THE AO, THE FAIR RAT E OF INTEREST APPLICABLE DURING THE RELEVANT PERIOD WAS 12%. IT IS TRUE THA T IN CASE OF UNSECURED LOANS, THE RATE OF INTEREST IS ALWAYS HIGHER THAN S ECURED LOANS. THE AO HOWEVER, HAS NOT CARRIED OUT ANY EXERCISE IN ORDER TO PROVE THAT EXCESSIVE RATE OF INTEREST HAS BEEN PAID BY THE ASSESSEE TO F AMILY MEMBERS. MOREOVER, THE LENDERS HAVE ADMITTED THE INTEREST AMOUNT IN TH EIR RETURNS OF INCOME. THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER WAS NOT JUSTIFIED TO DISALLOW INTEREST U/S 40A(2) OF THE ACT. ACCORD INGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) DELETIN G THE ADDITION ON ACCOUNT OF EXCESS PAYMENT OF INTEREST. 12 12. THE NEXT GROUND RELATES TO VIOLATION OF RULE 46 A OF THE INCOME-TAX RULES ON THE GROUND THAT THE LEARNED CIT(A) HAS ADM ITTED FRESH EVIDENCE. DURING THE COURSE OF HEARING, THE LEARNED SR. DR CO ULD NOT POINT OUT AS TO WHICH FRESH EVIDENCE WAS ADMITTED WITHOUT AFFORDING THE OPPORTUNITY TO THE ASSESSING OFFICER. THEREFORE, THIS GROUND OF APPEA L RAISED BY THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 14. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 20 TH JANUARY, 2012. SD/- SD/- (DIVA SINGH) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20 TH JANUARY, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.