Uma Dutt Paliwal Prop, Panipat V. ACIT circle, Panipat

ITA 3271/DEL/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3429 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 12-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 03-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Business income; Business expenditure; Proportionate interest; Corroborative evidences
• Section: 80IB; 207; 69

Judgement Text

I.T.A. NO.3271 /DEL/08 1/12 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 3271/DEL/2008 ASSESSMENT YEAR : 2005-06 M/S UMA DATT PALIWAL, ACIT, PROP. PALIWAL HOME FURNITURE, CIRCLE PANIPAT, GOHANA ROAD, PANIPAT. V. PANIPAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA, ADVOCATE. RESPONDENT BY : SHRI N.K. CHAND, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL DIRECTED AGAINST THE O RDER OF LD CIT(A), KARNAL DATED 16.9.2008 FOR ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING TH E ASSESSMENT ORDER MECHANICALLY ON THE GROUND THAT THE ORDER OF ASSES SING AUTHORITY IS JUSTIFIED WHEREAS AS PER THE ASSESSEE THERE IS NONE INDEPENDENT APPLICATION OF JUDICIAL MIND FOR ARRIVING OF A DECI SION MAKING. 2. (A) THAT THE LD CIT(A) IS NOT JUSTIFIED IN UPHOL DINGTHE ASSESSMENT ORDER FOR DECIDING THE CLAIM OF EXPORT INCENTIVES DUTY DRAW B ACK/DEPB U/S 80IB ON THE GROUND OF PLACING RELIANCE ON THE JUDGMENT OF H ON'BLE ZP&H HIGH COURT IN THE CASE OF LIBERTY INDIA V. CIT 207 ITR 2 43 (P&H) WHEREAS THE . I.T.A. NO.3271/DEL/08 2/12 DUTY DRAW BACK RECEIVED BY THE APPELLANT IS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS PER THE GENSIS OF THE WORD DERIVED I N ITS TRUE SENSE AND SPIRITS. (B) THAT THE ACTION OF THE CIT(A) IS UNSUSTAINABLE IN DENYING THE CLAIM OF THE DUTY DRAW BACK/DEPB WHICH IS HAVING DIRECT NEXU S AND BEING GERMANE TO THE BUSINESS AS PER THE JUDGMENT OF UNIO N OF INDIA V. RAJINDRA DYEING AND PRINTING MILLS LTD. 2005 (180 ELT 433 (S C), SUN INDUSTRIES (1988) 35 ELT 241 (SC) AND RECENTLY HON'BLE HIGH CO URT OF RAJASTHAN IN THE CASE OF M/S SARAF SEASONING UDYOG V. ITO, WARD- 2, CHURU IN I.T.A. NO.76 OF 2006 & 77 OF 2006). 3. THE CIT(A) HAS ERRED IN REDUCING THE DEDUCTION U /S 80-IB FROM RS.31,47,317/- TO RS. NIL TREATING INCOME DECLARED UNDER SURVEY AMOUNTING TO RS.73,50,000/- UNDER THE HEAD INCOME F ROM OTHER SOURCES INSTEAD OF PROFIT & GAINS FROM BUSINESS PROFESSION . 4. THAT THE CIT(A) HAS NOT ALLOWED TELEPHONE EXPENS ES AMOUNTING TO RS.19,689/- (1/6 TH OF RS.1,18,132/-) TREATED AS PERSONAL EXPENDITURE INSTEAD OF BUSINESS EXPENDITURE WHICH IS HIGHLY EXC ESSIVE. 5. THAT THE LD CIT(A) HAS NOT ALLOWED AMOUNTING TO RS.24,750/- ON PRO RATA INTEREST ON LOAN GIVEN TO HIS FATHER U/S 36(1)(III) WHICH IS HIGHLY UNDESIRABLE AND UNCALLED FOR. 3. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE TH AT GROUND NO.1 IS GENERAL IN NATURE AND NO SEPARATE ADJUDICATION IS CALLED FO R. REGARDING GROUND NO.2, HE HAS FAIRLY CONCEDED THAT THAT THIS ISSUE IS NOW COV ERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA AS REPORTED IN 317 ITR 218 (SC), RESPECTFULLY FOLLOWIN G THIS JUDGMENT OF HON'BLE APEX COURT, THIS ISSUE IS DECIDED AGAINST THE ASSES SEE AND GROUND NO.2 IS REJECTED AND IT IS HELD THAT THE ASSESSEE IS NOT EL IGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN CONNECTION WITH EXPORT INCENTIVES I.E. D UTY DRAW BACK/DEPB RECEIVED BY THE ASSESSEE. . I.T.A. NO.3271/DEL/08 3/12 4. REGARDING GROUND NO.3, THE FACTS ARE THAT A SURV EY U/S 133 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED ON 9.3.2005 AT THE BUSI NESS PREMISES OF THE ASSESSEE. IT IS NOTED BY THE ASSESSING OFFICER ON P AGE NO.1 OF THE ASSESSMENT ORDER THAT DURING THE COURSE OF SURVEY, CERTAIN DIS CREPANCIES WERE FOUND. ONE DISCREPANCY WAS FOUND REGARDING DIFFERENCE IN STOCK OF RS.71,84,341/- AND OTHER DISCREPANCY WAS FOUND FOR DIFFERENCE IN CASH OF RS. 1,13,475/-. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE SURRENDE RED AN AMOUNT OF RS. 73.50 LAKHS IN THE DECLARATION MADE DURING THE COURSE OF SURVEY. IT IS NOTED BY THE ASSESSING OFFICER THAT ACCORDINGLY, WHILE COMPUTING THE INCOME OF THE ASSESSEE, THE SURRENDERED INCOME IS BEING TAKEN AT RS.73.50 L AKHS AS AGAINST THE SUM OF RS.72,92,822/- CREDITED TO THE TRADING ACCOUNT BY T HE ASSESSEE. THERE IS NO DISPUTE BEFORE US REGARDING THIS MINOR DIFFERENCE I N THE INCOME ASSESSED BY THE ASSESSING OFFICER OF RS.73.50 LAKHS AND THE INCOME CREDITED BY THE ASSESSEE TO THE TRADING ACCOUNT OF RS.72,92,822/-. THE DISPUTE BEFORE US IS THAT WHETHER THIS INCOME OF RS.73.50 LAKHS IS ASSESSABLE AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE OR INCOME FROM OTHER SOURCES AS HAS BEEN A SSESSED BY THE ASSESSING OFFICER AND CONSEQUENTLY, WHETHER THIS INCOME IS TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASS ESSEE U/S 80IB OF THE ACT. THE ASSESSING OFFICER HAS NOT CONSIDERED THIS INCOM E FOR THIS PURPOSE BECAUSE THIS INCOME WAS ASSESSED BY THE ASSESSING OFFICER A S INCOME FROM OTHER SOURCES. WHILE HOLDING THAT THIS INCOME OF RS.73.50 LAKHS HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES, IT IS NOTED BY THE ASSES SING OFFICER IN PARA NO.4.1. OF THE ASSESSMENT ORDER THAT IT WAS SUBMITTED BY THE A SSESSEE BEFORE HIM THAT MOST OF THE STOCK LYING IN THE PREMISES WAS OF SAMPLES/A SSORTED ITEMS WHICH CARRY NO COMMERCIAL VALUE AND WERE ACCUMULATED DURING THE CO URSE OF EXPORT BUSINESS FOR LAST SEVERAL YEARS AND IN SPITE OF OBJECTION BY THE ASSESSEE, THE STOCK WAS VALUED AT THE COST PRICE, WHICH RESULTED INTO INCREASE IN VALUATION AND AMOUNT WAS SURRENDERED TO BUY PEACE AND HARMONIOUS RELATIONSHI P WITH THE DEPARTMENT. IT WAS THE CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE AMOUNT OF SURRENDER WAS DUE TO VALUATION DIFFERENCE AND THERE WAS NO UNEXPLAINED . I.T.A. NO.3271/DEL/08 4/12 INVESTMENT IN STOCK AS DEFINED IN SECTION 69 OF THE ACT. THE ASSESSING OFFICER WAS NOT SATISFIED. IT IS OBSERVED BY THE ASSESSING OFFICER IN THE SAME PARA OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT BEEN ABL E TO ESTABLISH AS TO HOW THIS SUM OF RS.73.50 LAKHS REPRESENTS ITS BUSINESS INCOME. THE ASSESSING OFFICER ASSESSED THIS INCOME AS INCOME FROM OTHER S OURCES. 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 AND THIS ISSUE HAS BEEN RAISED BY HIM AS GROUND NO.3 OF THE APPEAL. 5. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE BE FORE US THAT THE TRADING ACCOUNT FOR THE PERIOD UP TO THE DATE OF SURVEY AS ON 9.3.2005 IS AVAILABLE ON PAGE NO.43 OF THE PAPER BOOK WHEREAS THE TRADING AC COUNT FOR THE POST SURVEY PERIOD FROM 10.3.2005 TO 31.3.2005 IS AVAILABLE ON PAGE NO.44 OF THE PAPER BOOK. IT IS ALSO SUBMITTED THAT IN THE TRADING ACC OUNT FOR THE POST SURVEY PERIOD, THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.72,99,392 /- ON ACCOUNT OF INCOME DECLARED BY THE ASSESSEE IN THE COURSE OF SURVEY AN D AFTER INCLUDING THAT INCOME IN GROSS PROFIT, THE GROSS PROFIT OF THE ASSESSEE F IRM IS OF RS.78.48 LAKHS AGAINST TURNOVER OF RS.57.90 LAKHS DURING POST SURVEY PERIO D WHEREAS IN THE PRE SURVEY PERIOD, THE GROSS PROFIT AS PER TRADING ACCOUNT COM ES TO RS.68.04 LAKHS AGAINST THE TURNOVER OF RS.810.23 LAKHS. IT IS ALSO SUBMIT TED THAT THE COMBINED GROSS PROFIT FOR THE ENTIRE YEAR IS OF RS.146.53 LAKHS AG AINST A COMBINED TURNOVER OF RS.868.13 LAKHS AND THE GP RATE COMES TO 16.88% ONL Y WHICH IS IN LINE WITH THE GROSS PROFIT OF THIS TYPE OF BUSINESS AND ALSO OF T HE ASSESSEE IN EARLIER YEARS. HE SUBMITTED A CHART OG GP RATE FOR EARLIER THREE YEAR S, AS PER WHICH GP RATE WAS RANGING BETWEEN 17.62% TO 24.44% IN THESE THREE EAR LIER YEARS. WITHOUT THIS EXTRA PROFIT GP RATE OF THE PRESENT YEAR COMES TO 1 4.76% AS PER THIS CHART. IT IS SUBMITTED THAT HENCE, THE INCOME SURRENDERED BY THE ASSESSEE IN THE COURSE OF SURVEY IS ASSESSABLE AS INCOME FROM BUSINESS AND NO T AS INCOME FROM OTHER SOURCES. IT IS ALSO SUBMITTED THAT NO DOCUMENT WAS FOUND IN THE COURSE OF SURVEY SUGGESTING ANY UNDISCLOSED PURCHASE. IT IS ALSO SUB MITTED THAT THERE IS NO OTHER . I.T.A. NO.3271/DEL/08 5/12 KNOWN SOURCE OF INCOME AND THEREFORE, THIS INCOME S HOULD BE ASSESSED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM OTHER S OURCES. 6. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- 1. 31 DTR 323 CIT V. ALLIED INDUSTRIES. 2. 12 DTR 219 (RAJ.) CIT V. MEHTA GWAR GUM COMPANY 3. 314 ITR 119 (GUJ.) CIT V. SUMAN PAPER AND BOARDS LTD. 7. IT IS ALSO SUBMITTED THAT THE SUBMISSIONS OF THE ASSESSEE BEFORE LD CIT(A) ON THIS ISSUE ARE AVAILABLE ON PAGES 72-85 OF THE P APER BOOK. IT IS ALSO SUBMITTED THAT THE LETTER DATED 9.3.2005 REGARDING SURRENDER OF INCOME IS AVAILABLE ON PAGE NO.45 OF THE PAPER BOOK. IT IS ALSO SUBMITTED THAT THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS PER LETTER DATED 10.12.2007 IS AVAILABLE ON PAGES 51-52 OF THE PAPER BOOK. 8. AS AGAINST THIS, LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE. WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THROUGH O UT THAT THE DIFFERENCE IN VALUE OF STOCK ON THE DATE OF SURVEY FOR WHICH SURRENDER WAS MADE BY THE ASSESSEE IN THE COURSE OF SURVEY OF RS.73.50 LAKHS IS ON ACCOUNT O F VALUATION DIFFERENCE IN VALUE OF STOCK AS PER SURVEY TEAM AS COMPARED TO THE VALU E OF STOCK AS PER BOOKS OF THE ASSESSEE ON THE BASIS OF GROSS PROFIT RATE OF L AST YEAR. IT HAS BEEN SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS PER LETTER DATED 10.12.2007 THAT ON THE DATE OF SURVEY, STOCK LYING IN THE PREMISES OF THE ASSESSEE WAS VALUED AT RS.1,39,56,570/- WHILE STOCK AS PER GROSS PROFIT OF LAST YEAR COMES TO RS.67,70,653- AND FOR THIS REASON, AN AMOUNT OF RS. 71,85,917/- WAS SURRENDERED. IT IS ALSO THE CLAIM OF THE ASSESSEE T HAT MOST OF THE STOCK LYING IN . I.T.A. NO.3271/DEL/08 6/12 THE PREMISES WAS OF SAMPLES/ASSORTED ITEMS WHICH CA RRY NO COMMERCIAL VALUE AND WERE ACCUMULATED DURING THE COURSE OF EXPORT BU SINESS FOR LAST SEVERAL YEARS AND IN SPITE OF THE OBJECTION OF THE ASSESSEE, THE AUTHORITIES CONSIDERED THE VALUE OF SUCH STOCK ALSO AT THE COST PRICE WHICH RESULTED IN TO INCREASE IN VALUATION OF STOCK AND THE AMOUNT WAS SURRENDERED TO BUY PEACE A ND HARMONIOUS RELATIONSHIP WITH THE DEPARTMENT BUT WE FIND THAT A PART FROM MAKING THIS GENERAL SUBMISSION, THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE IN SUPPORT OF THESE CONTENTIONS. AS PER THE SURRENDER LETTER DATE D 9.3.2005 AS AVAILABLE ON PAGE NO.45 OF THE PAPER BOOK, IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT DURING THE COURSE OF SURVEY, INVENTORY OF STOCK HAS BEEN P REPARED WITH THE ASSISTANCE OF STAFF OF THE ASSESSEE. THERE IS NO ALLEGATION IN TH IS LETTER ON THESE LINES THAT THOSE ITEMS WERE ALSO CONSIDERED IN THE STOCK INVENTORY W HICH WERE OF NO VALUE. APART FROM THIS, THE ASSESSEE HAS NOT BROUGHT ON RECORD A NY EVIDENCE BY SHOWING THAT THERE IS NO DIFFERENCE IN QUANTITY OF STOCK AS PER THE INVENTORY PREPARED BY THE SURVEY TEAM AND AS PER THE STOCK REGISTER MAINTAINE D BY THE ASSESSEE. NOTHING IS BROUGHT ON RECORD IN THE FORM, OF INVENTORY LIST OF EARLIER YEARS SHOWING THAT ANY ITEM WAS SHOWN IN STOCK WITHOUT ASSIGNING ANY VALUE . IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION THAT MOST OF THE STOCK LYING IN THE PREMISES WAS OF SAMPLES/ASSORTED ITEMS WHICH CARRY NO COMMERCIAL VALUE AND WERE ACCUMULATED DURI NG THE COURSE OF EXPORT BUSINESS FOR LAST SEVERAL YEARS, THESE CONTENTIONS OF THE ASSESSEE CANNOT BE ACCEPTED PARTICULARLY WHEN THERE IS SUCH A HUGE DIF FERENCE BETWEEN THE STOCK AS PER THE SURVEY TEAM OF RS.139.56 LAKHS AND THE STOC K AS PER THE BOOKS OF THE ASSESSEE ON THE BASIS OF GROSS PROFIT RATE OF LAST YEAR WHICH WAS DETERMINED AT RS.67.70 LAKHS ONLY RESULTING INTO DIFFERENCE OF RS .71.86 LAKHS WHICH IS MORE THAN 106% OF THE INVENTORY AS PER BOOKS. IT IS NOT ACCE PTABLE PARTICULARLY IN THE ABSENCE OF ANY SUPPORTING EVIDENCE THAT THERE CAN B E SUCH A HUGE DIFFERENCE IN INVENTORY ON ACCOUNT OF SAMPLES/ASSORTED ITEMS ACCU MULATED DURING THE COURSE OF BUSINESS OF SEVERAL YEARS. SINCE THE ASSESSEE H AS NOT BROUGHT ON RECORD ANY EVIDENCE IN THIS REGARD SHOWING THAT THERE IS NO DI FFERENCE IN QUANTITY OF STOCK FOUND BY THE SURVEY TEAM, IT HAS TO BE ACCEPTED THA T THE EXTRA STOCK FOUND IN THE . I.T.A. NO.3271/DEL/08 7/12 COURSE OF SURVEY IS ON ACCOUNT OF UN-ACCOUNTED/UNDI SCLOSED STOCK WHICH IS ASSESSABLE UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 AND THE SAME IS RIGHTLY ASSESSED BY THE ASSESSING OFFICER AS INCOME FROM OT HER SOURCES BECAUSE SUCH EXTRA STOCK WAS FOUND IN THE POSSESSION OF THE ASSE SSEE WHICH WAS NOT RECORDED IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE HAS N OT OFFERED ANY SATISFACTORY EXPLANATION ON THIS ACCOUNT AND HENCE WE FIND NO RE ASON TO INTERFERE IN THE ORDER OF THE LD CIT(A) ON THIS ISSUE. 11. BEFORE PARTING, WE WOULD LIKE TO DEAL WITH THE JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE. THE FIRST JUDGMENT IS OF HON'B LE HIMACHAL PRADESH HIGH COURT RENDERED IN THE CASE OF CIT V. ALLIED INDUSTR IES (SUPRA). IN THAT CASE, THE FACTS ARE THAT THE ASSESSEE FIRM OFFERED A SUM OF R S.2.50 LAKHS FOR TAXATION TO COVER UP CERTAIN DISCREPANCIES AND IT WAS NOT THE C ASE OF THE REVENUE THAT THIS WAS INCOME DERIVED FROM UNDISCLOSED SOURCES. IN THA T CASE, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE SISTER CONCERN OF THE AS SESSEE IS PRODUCING PARTS FOR SOME OTHER TRACTORS MANUFACTURERS AND IN THAT CASE, THERE WAS NO EXPENSES FOR REPAIRS AND MAINTENANCE ALTHOUGH IT WAS EXPLAINED B Y THE ASSESSEE THAT THAT FIRM WAS USING NEW MACHINERY AND HENCE FOR THIS REASON, THERE WAS NO EXPENSES FOR REPAIRS AND MAINTENANCE. ON ACCOUNT OF THIS DISCRE PANCY, THE ASSESSEE IN THAT CASE OFFERED A SUM OF RS.2.50 LAKHS FOR TAXATION AN D UNDER THESE FACTS IT WAS HELD THAT THIS INCOME WAS DERIVED FROM BUSINESS AND IS ELIGIBLE FOR DEDUCTION ALLOWABLE U/S 80IB OF THE ACT. IN THE PRESENT CASE , THE FACTS ARE DIFFERENT AND HENCE, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESE NT CASE. IN FACT, IN PARA NO.9 OF THE SAME JUDGMENT, IT HAS BEEN MADE CLEAR BY THE HO N'BLE HIMACHAL PRADESH HIGH COURT THAT THEY ARE DECIDING THIS CASE ON THE BASIS OF PECULIAR FACTS AND IF IN A GIVEN CASE, THE DEPARTMENT PROVES THAT THE INCOME WAS DERIVED NOT FROM BUSINESS BUT FROM SOME OTHER SOURCES, THEN SUCH DED UCTION MAY NOT BE PERMITTED. IT IS ALSO OBSERVED BY HON'BLE HIMACHAL PRADESH HIGH COURT IN THAT CASE, THAT NEITHER THE ASSESSING OFFICER NOR ANY OT HER AUTHORITY HAS COME TO THE CONCLUSION THAT THE INCOME WAS FROM ANY OTHER SOURC ES. IN THE PRESENT CASE, THE ASSESSEE COULD NOT SHOW US WITH EVIDENCE THAT THE I NCOME IN QUESTION OF . I.T.A. NO.3271/DEL/08 8/12 RS.73.50 LAKHS IS IN FACT BUSINESS INCOME WHEREAS T HE DEPARTMENT HAS MADE OUT A CASE THAT THE INCOME IS FROM OTHER SOURCES AND HE NCE, FACTS BEING DIFFERENT, THIS JUDGMENT IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. 12. ONE OF THE JUDGMENTS CITED BY LD AR OF THE ASSE SSEE IS THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT V. SUMAN PAPER AND BOARDS LTD. (SUPRA). THIS JUDGMENT IS NOT APPLICABL E IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE DISPUTE WAS AS TO WHETHER DEDUCTION UNDER CHAPTER VIA OF THE INCOME TAX ACT, 1961 CAN B E ALLOWED IN CONNECTION WITH UNDISCLOSED INCOME ASSESSED IN THE COURSE OF B LOCK ASSESSMENT . IN THAT CASE, UNDISCLOSED INCOME WAS DECLARED BY THE ASSESS EE IN THE BLOCK RETURN AND THE SAME WAS DECLARED AS BUSINESS INCOME AND WAS AC CEPTED ALSO AS BUSINESS INCOME AND THE ONLY DISPUTE RAISED WAS THAT THE ASS ESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER CHAPTER VIA OF THE ACT IN RELATION TO THE TOTAL UNDISCLOSED INCOME OF THE BLOCK PERIOD. IN THAT CASE, IT WAS ON E OF THE REASONS FOR NOT ALLOWING THE CLAIM OF THE ASSESSEE REGARDING DEDUCT ION U/S VIA THAT THE UNDISCLOSED INCOME COULD NOT BE CERTIFIED BY THE AU DITORS IN THE AUDIT REPORT AND THERE WAS NO DISPUTE IN THAT CASE AS TO WHETHER THE UNDISCLOSED INCOME IN THAT CASE IS BUSINESS INCOME OR INCOME FROM OTHER SOURCE S. HENCE, IN THE PRESENT CASE, THIS JUDGMENT OF HON'BLE GUJARAT HIGH COURT H AS NO RELEVANCE BECAUSE IN THE PRESENT CASE, INCOME IS ASSESSED AS INCOME FROM OTHER SOURCES AND THE ASSESSEE COULD NOT SHOW THAT THIS INCOME IS IN FACT BUSINESS INCOME. 13. THE THIRD JUDGMENT CITED BEFORE US IS THE JUDGM ENT OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT V. MEHTA GWA R GUM COMPANY (SUPRA). THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE ALSO, THERE WAS A SURVEY CO NDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE AND EXCESS STOCK WAS FOUND IN THE COURSE OF SURVEY TO THE TUNE OF RS.4.51 LAKHS AND IN THE RETURN OF INCO ME, THE ASSESSEE HAS DECLARED TOTAL SALES OF RS.548.02 LAKHS AND HAD SHOWN GROSS PROFIT @ 0.93%. THE ASSESSING OFFICER REJECTED THE BOOKS WITHIN THE MEA NING OF SECTION 145(3) AND . I.T.A. NO.3271/DEL/08 9/12 THEN APPLIED GP RATE OF 3% AS AGAINST 0.93% SHOWN B Y THE ASSESSEE. IN THIS MANNER, THE ASSESSING OFFICER MADE ADDITION OF RS.1 9.57 LAKHS. THE ASSESSING OFFICER THEN PROCEEDED TO MAKE FURTHER ADDITION ON ACCOUNT OF EXCESS STOCK FOUND IN THE COURSE OF SURVEY. UNDER THESE FACTS, I T WAS HELD THAT NO SUCH EXTRA ADDITION CAN BE MADE U/S 69 ON ACCOUNT OF ALLEGED E XTRA STOCK FOUND IN THE COURSE OF SURVEY BECAUSE ACCORDING TO THE BOOKS OF ACCOUNTS EVEN AS REJECTED, THE FIGURE OF SALE WAS ARRIVED AT AFTER DULY ACCOUN TING FOR THE ALLEGED EXTRA STOCK FOUND DURING THE COURSE OF SURVEY. IN THE PRESENT CASE, IT IS NOT IN DISPUTE BEFORE US AS TO WHETHER ANY ADDITION HAS TO BE MADE OR NOT ON ACCOUNT OF EXTRA STOCK FOUND IN THE COURSE OF SURVEY. IN THE PRESENT CASE , THE ASSESSING OFFICER HAS NOT REJECTED BOOKS OF ACCOUNTS AND HAS NOT APPLIED GP R ATE TO ASSESS THE INCOME OF THE ASSESSEE AND HENCE, THIS JUDGMENT IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. 14. IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN GROUND NO.3 RAISED BY THE ASSESSEE. 15. REGARDING GROUND NO.4 OF THE APPEAL, THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.5 OF THE ASSESSMENT OR DER THAT THE ASSESSEE HAS CLAIMED A SUM OF 1,118,132/- UNDER THE HEAD TELEPHO NE EXPENSES. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT AS PER THE DETA ILS FILED BY THE ASSESSEE, IT HAS BEEN NOTICED THAT SOME OF THE TELEPHONES ARE INSTAL LED AT THE RESIDENCE OF THE ASSESSEE. THE ASSESSING OFFICER HAS OBSERVED THAT T HE USE OF TELEPHONE BY THE ASSESSEE AND HIS FAMILY MEMBERS FOR THE PURPOSE OTH ER THAN THE BUSINESS CANNOT BE DENIED AND ON THIS BASIS, HE MADE DISALLO WANCE OF RS.19,689/- OUT OF TELEPHONE EXPENSES WHICH IS TO THE EXTENT OF 1/6 TH OF THE TOTAL TELEPHONE EXPENSES. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THE DIS ALLOWANCE IS EXCESSIVE WHEREAS LD DR OF THE REVENUE SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. . I.T.A. NO.3271/DEL/08 10/12 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT NO DETAILS HAS BE EN FURNISHED BY THE ASSESSEE SHOWING THE EXPENDITURE ON THOSE TELEPHONES WHICH A RE INSTALLED AT THE RESIDENCE OF THE ASSESSEE AND IN THE ABSENCE OF THA T, IT CANNOT BE EXAMINED AS TO WHETHER THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS EXCESSIVE OR NOT. PERSONAL USE OF TELEPHONE BY THE ASSESSEE AND HER F AMILY MEMBERS CANNOT BE RULED OUT SINCE SOME OF THE TELEPHONES WERE INSTALL ED AT THE RESIDENCE OF THE ASSESSEE. WE, THEREFORE, CONFIRM THE ORDER OF THE L D CIT(A) ON THIS ISSUE BECAUSE THE ASSESSEE COULD NOT MAKE OUT A CASE THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS EXCESSIVE BY FURNISHING NE CESSARY DETAILS BEFORE US. GROUND NO.4 IS ALSO REJECTED. 17. REGARDING GROUND NO.5 OF THE APPEAL, THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.3 OF THE ASSESSMENT OR DER THAT THE ASSESSEE HAS ADVANCED RS.2.75 LAKHS TO SHRI AMBA PARKASH PALIWAL ON WHICH NO INTREST WAS CHARGED. THE ASSESSING OFFICER ASKED THE ASSESSEE T O EXPLAIN AS TO WHY PROPORTIONATE INTEREST MAY NOT BE DISALLOWED. IN R EPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT THIS SUM HAS BEEN ADVANCED TO SHRI AM BA PARKASH PALIWAL WHO IS FATHER OF THE ASSESSEE AND THEREFORE, NO INTEREST W AS CHARGED. THE ASSESSING OFFICER HAS NOTED THAT AS PER P&L A/C OF THE ASSESS EE, THE ASSESSEE HAS PAID SUM OF RS.10.57 LAKHS BY WAY OF BANK INTEREST. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.24,750/- OUT OF SUCH INTEREST PA YMENT BY APPLYING THE INTEREST RATE OF 9% PER ANNUM ON THE AMOUNT OF RS.2.75 LAKHS ADVANCED BY THE ASSESSEE TO HIS FATHER WITHOUT ANY INTEREST. THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE AS SESSEE IS IN FURTHER APPEAL BEFORE US. 18. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE TH AT COPY OF CAPITAL ACCOUNT OF THE ASSESSEE IS AVAILABLE ON PAGE NO.1 OF THE PA PER BOOK AND FROM THE SAME, IT CAN BE SEEN THAT THE OPENING CREDIT BALANCE IN T HE CAPITAL ACCOUNT WAS OF RS.142.52 LAKHS AND THE CLOSING CREDIT BALANCE OF C APITAL ACCOUNT IS OF RS.354.88 . I.T.A. NO.3271/DEL/08 11/12 LAKHS AND HENCE SUCH INTEREST FREE ADVANCE TO THE F ATHER OF THE ASSESSEE WAS GIVEN OUT OF OWN FUNDS AND NOT OUT OF BORROWED FUND S AND HENCE, NO DISALLOWANCE IS JUSTIFIED OUT OF INTEREST PAYMENT. 19. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT EVEN DURING THIS YEAR, THERE IS AN ACCRETION OF MORE THAN RS.200 LAKHS IN THE CAPITAL OF THE ASSESS EE AND HENCE ADVANCE OF RS.2.75 LAKHS TO THE FATHER OF THE ASSESSEE WITHOUT CHARGING OF INTEREST CANNOT BE CONSIDERED AS ADVANCE OUT OF BORROWED FUNDS IN THE ABSENCE OF ANY DIRECT NEXUS BEING BROUGHT ON RECORD BY THE ASSESSING OFFICER. W E, THEREFORE, FIND NO JUSTIFICATION FOR SUCH DISALLOWANCE AND HENCE DELET E THE SAME. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 22. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JULY, 2010. SD/- SD/- (C.L. SETHI) (A.K. G ARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 30. .7.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). . I.T.A. NO.3271/DEL/08 12/12