ITO, Wd.-2(2), Nashik V. Shri Dharmendra D. Varu, Nashik

ITA 335/PUN/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9783 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINITA MENON
• Keywords: Capital asset; Business income; Business expenditure
• Section: 143(3); 37(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 335/PN/2010 (ASSESSMENT YEAR: 2006-07) I.T.O. WARD 2(2) NASIK .. APPELLANT VS. DHARMENDRA D. VARU 4 SARANG APARTMENT, COLLEGE ROAD, IB NAGAR, VISE MALA NASIK PAN AATPV 4582 A RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SMT. VINITA MENON DATE OF HEARING: 20-11-2012 DATE OF PRONOUNCEMENT: 22-11-2012 ORDER PER G.S. PANNU, A.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II NASIK DATED 7-12-2009 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 29-12-2 008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO TH E ASSESSMENT YEAR 2006-07, RAISING FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE HONBLE CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF TDR COST PAID AT RS. 17,50,000/- FOR FY 2005-06, MUNICIPAL TAX PAID AT RS. 98,628/- FOR FY 200-06, BROKERAGE AND COMMISSION PAID AT RS. 86,318/- FOR FY 2005-06, SECURITY CHARGES PAID AT RS. 10,500 FOR FY 2002-03 AND RS. 86,450/- FOR FY 2005-06 AND INTEREST PAID NOT FOR BUSINESS PURPOSE AT RS. 35,730/-FOR FY 2005-06. 2. THE CIT(A)-II NASIK ERRED IN DELETING THE ADDITI ONS CONSIDERING THE MATCHING PRINCIPLE OF ACCOUNTING AND NOT CONSIDERED THE CHARGEABILITY AS PER THE PROVISIONS OF SEC. 28 OF THE IT ACT. IN ORDER TO PROTEST THE INTEREST OF REVENUE, THE ORDER OF THE CIT(A) MAY BE CANCELLED AND THE ORDER OF THE AO MAY KINDLY BE RESTORED. 3. THE CIT(A)-II NASIK ERRED IN DELETING THE ADDITI ONS IN CONTRADICTION TO THE CASE LAWS SUPPORTING REVENUE FOR SEC. 28 AND SEC. 37(1) OF THE ACT. IN 2 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 ORDER TO PROTEST THE INTEREST OF REVENUE, THE ORDER OF THE CIT(A) MAY BE CANCELLED AND THE ORDER OF THE AO MAY KINDLY BE RESTORED. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF ARCHITECTURE AND LAND DEVELOPMENT. THE ASSESSEE FIL ED HIS RETURN DECLARING TOTAL INCOME AT RS. 8,75,510/- WHICH WAS PROCESSED U/S 143(3) R.W.S. 147 OF THE ACT DETERMINING THE TOTAL INCOME AT RS.53,09,019/- AFTER MAKING VARIOUS ADDITIONS/DISAL LOWANCES. THE CIT(A) HAS ALLOWED PARTIAL RELIEF ON THE ADDITIONS/ DISALLOWANCES CONTESTED BY THE ASSESSEE. THE REVENUE IS IN APPEA L ON VARIOUS RELIEFS ALLOWED BY THE CIT(A) AS PER THE STATED GRO UNDS OF APPEAL. 3. THE FIRST ISSUE IS WITH RESPECT TO DISALLOWANCE OF COST OF TDR RS. 17,50,000/-. ON THIS ASPECT, THE RELEVANT FACTS ARE THAT THE ASSESSEE AND TWO OTHERS ENTERED INTO A TRANSACTION WITH MR. SANJAY B. BHUTADA AND OTHERS RELATING TO LAND AT SURVEY NO . 659/3/2 KAKAD BAUG, NASIK IN TERMS OF DEVELOPMENT AGREEMENT REGIS TERED AND EXECUTED ON 2-4-2005. IN TERMS OF THE SAID AGREEME NT, THE SALE CONSIDERATION RECEIVED WAS OFFERED AS BUSINESS INC OME AFTER DEDUCTING VARIOUS EXPENSES. THE ASSESSEE HAD CLAIM ED THE EXPENSE OF RS. 17,50,000/- ON ACCOUNT OF COST OF TD R, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THE PAYMENT TOWARDS SUCH EXPENSE WAS MADE IN THE SUBSEQUENT ASS ESSMENT YEAR I.E. ON 30-8-2007. THE ASSESSEE CONTENDED THAT IN TERMS OF THE DEVELOPMENT AGREEMENT DATED 2-4-2005, THERE WAS AN OBLIGATION ON THE PART OF THE ASSESSEE TO PURCHASE TDR AND IN ORD ER TO FULFILL THIS OBLIGATION THE AMOUNT WAS INCURRED. SINCE THE PROFI T IN TERMS OF SALE CONSIDERATION RECEIVED AS PER THE DEVELOPMENT AGREE MENT WAS OFFERED TO TAX IN THE INSTANT YEAR ALL THE RELATAB LE EXPENSES INCLUDING THE COST TO BE INCURRED FOR ACQUIRING TDR WAS DEDUC TED, THOUGH SUCH COST WAS ACTUALLY PAID IN THE SUBSEQUENT PERIOD. I N SUPPORT OF THE AFORESAID, ASSESSEE PRODUCED BEFORE THE CIT(A) THE TDR CERTIFICATE 3 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 ISSUED BY THE NASIK MUNICIPAL CORPORATION AND REFER RED TO THE AGREEMENT BETWEEN THE TRANSFEROR AND TRANSFEREE OF THE LAND. IN THIS BACKGROUND, CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND PROCEEDED TO DELETE THE ADDITION BY OBS ERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND REMAND REPORTS OF THE AO AND SUBMISSIONS OF THE APPELLANT. THE EXPENDITURE INCURRED BY THE APPELLAN T IS UNDISPUTEDLY BUSINESS EXPENDITURE AND THE SAME IS D ULY SUPPORTED BY THE TDR CERTIFICATE OF NASIK MUNICIPAL CORPORATION OF THE LAND FILED BY THE APPELLANT ON R ECORD. THE AO HAS NOT DISPUTED ALLOWABILITY OF EXPENDITURE BUT UNDISPUTED THE YEAR OF ALLOWABILITY OF EXPENDITURE. THE AO CLAIMED IN THE REMAND REPORT DT. 6-7-2009 THAT T HE EXPENDITURE IS ACTUALLY INCURRED IN THE A.Y. 2007-0 8 AND HENCE ALLOWABLE IN THE SAID YEAR. FOR THIS PROPOSIT ION, THE AO RELIED ON THE PROVISIONS OF SEC. 28 OF THE A CT IT APPEARS THAT AS THE APPELLANT HAS PURCHASED TDR BY MAKING PAYMENT OF RS. 17,50,000/.- IN F.Y. 2006-07 RELEVANT TO A.Y. 2007-08, THE AO COMMENTED THAT THE SAME IS ALLOWABLE IN A.Y. 2007-08. ON PERUSAL OF S EC. 28, IT CAN BE NOTICED THAT THE SECTION DOES NOT PRO VIDE THAT THE EXPENDITURE IS TO BE ALLOWED ONLY IN THE Y EAR IN WHICH IT IS PAID. THE EXPENDITURE WAS INCURRED BY T HE APPELLANT AS AGREEMENT BETWEEN THE APPELLANT AND TH E PURCHASER OF THE LAND AND IS ALLOWABLE IN THE YEAR IN WHICH THE TRANSFER OF LAND TOOK PLACE AND INCOME FO R THE TRANSACTION WAS OFFERED TO TAX BY THE APPELLANT S P ER MATCHING PRINCIPLE OF THE ACCOUNTANCY. IN VIEW O F THE ABOVE FACTS AND DISCUSSION, THE AO IS DIRECTED TO D ELETE DISALLOWANCE OF RS. 17,50,000/- ON ACCOUNT OF TDR C OST. 4. BEFORE US, THE LEARNED DR APPEARING FOR THE REVE NUE HAS PRIMARILY RELIED UPON THE ASSESSMENT ORDER IN SUPPO RT OF THE CASE OF REVENUE BY POINTING OUT THAT THE EXPENDITURE IN QUE STION WAS PAID IN SUBSEQUENT YEAR AND THEREFORE, ITS ALLOWABILITY WOU LD ARISE ONLY IN THAT PARTICULAR YEAR. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE R ESPONDENT- ASSESSEE SUBMITTED THAT UNDENIABLY THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IN TERMS OF THE DEVELOPMENT AGREEMENT, AN OBLIGATION WAS CAST ON THE ASSESSEE T O ACQUIRE TDR ON BEHALF OF THE PURCHASER OF THE LAND AND THEREFOR E, THE PROFIT ARISING FROM THE TRANSFER EFFECTED BY THE DEVELOPME NT AGREEMENT WAS TO BE COMPUTED CONSIDERING THE EXPENSES INTENDED TO BE INCURRED AS 4 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 PER THE SAID AGREEMENT. IN SUM AND SUBSTANCE, THE LEARNED REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE CIT(A ). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN PARA 8.2 OF THE ORDER OF THE CIT(A), IT IS OBSERVED THAT THE ASSESSING OFFICER IN THE REMAND REPORT DID NOT DISPUTE THE PO SITION THAT THE COST OF TDR WAS TO BE INCURRED BY THE ASSESSEE AGAINST T HE CONSIDERATION STATED IN THE DEVELOPMENT AGREEMENT DATED 2-4-2005. THE PROFIT FROM THE TRANSACTION RESULTING IN THE DEVELOPMENT A GREEMENT DATED 2-4-2005 IS THE SUBJECT MATTER OF CONSIDERATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IN PRINCIPLE, THE ASSESS ING OFFICER HAS NOT DISPUTED THAT THERE WAS AN OBLIGATION ON THE PART O F THE ASSESSEE TO INCUR COST ON ACQUISITION OF TDR AS PER THE DEVELOP MENT AGREEMENT. THE ONLY OBJECTION RAISED BY THE ASSESSING OFFICER BEING THAT THE SAID EXPENDITURE HAS BEEN ACTUALLY PAID IN THE SUBS EQUENT YEAR AND HENCE THE AMOUNT OF RS. 17,50,000/- WAS NOT TO BE A LLOWED AS AN EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. I N OUR CONSIDERED OPINION, PROFITS FROM THE TRANSACTION OF DEVELOPMEN T AGREEMENT DATED 2-4-2005 ARE TO BE DEDUCED WHICH WOULD NECESS ARY INVOLVE TAKING INTO CONSIDERATION ALL SUCH EXPENSES WHICH A RE ACTUALLY PAID AS WELL AS THE EXPENSES WHICH ARE TO BE INCURRED AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT. THE EXPENDITURE I N QUESTION IS CLEARLY FASTENED TO THE SALE CONSIDERATION FLOWING FROM THE ASSESSEE IN TERMS OF THE DEVELOPMENT AGREEMENT DATED 2-4-200 5 AND AS PER THE MERCANTILE SYSTEM OF DEDUCING PROFITS THE SAID EXPENDITURE IS AN ALLOWABLE EXPENSE. IN FACT, THE POSITION OF THE AS SESSEE IS FULLY JUSTIFIED IN VIEW OF THE JUDGMENT OF HONBLE SUPREM E COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT WEST BENGAL (1959 ) 37 ITR 1 (SC) WHEREIN IT HAS BEEN HELD THAT IN A MERCANTILE SYSTE M OF ACCOUNTING EVEN AN ESTIMATION OF ACCRUED EXPENDITURE WHOSE LIA BILITY IS TO BE DISCHARGED AT A FUTURE DATE IS AN ALLOWABLE EXPENDI TURE.. IN THIS VIEW 5 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 OF THE MATTER, IN OUR CONSIDERED OPINION, THE CIT(A ) MADE NO MISTAKE IN DIRECTING ASSESSING OFFICER TO DELETE THE DISALL OWANCE OF RS. 17,50,000/- ON ACCOUNT OF TDR COST. THE REVENUE FAI LS ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO DISALLOWANCE OF MUNICI PAL TAX OF RS. 98,628/- PAID FOR HUT OWNERS/TENANTS ON THE LAND VA CATED AND SOLD. IN THIS REGARD, THE BRIEF FACTS ARE THAT THE ASSESS EE PAID MUNICIPAL TAXES FOR THE HUT-OWNERS/TENANTS ON THE LAND WHICH WAS VACATED AND SOLD. THE ASSESSING OFFICER DISALLOWED THE EXPENDI TURE ON THE GROUND THAT THE SAME WAS PAID IN THE F.Y. 2004-05 R ELEVANT TO THE A.Y. 2005-06 AND NOT DURING THE PREVIOUS YEAR RELEV ANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT(A) HA S SINCE DELETED THE ADDITION ON THE GROUND THAT THE AMOUNT WAS AN A LLOWABLE DEDUCTION IN THE YEAR UNDER CONSIDERATION, INASMUCH AS THE SALE OF SUCH LAND HAS TAKEN PLACE DURING THE YEAR UNDER CON SIDERATION. 8. BEFORE US, THE LEARNED DR APPEARING FOR THE REVE NUE REITERATED THE ARGUMENTS OF THE ASSESSING OFFICER W HICH WE HAVE NOTED EARLIER, WHICH NEED NOT BE REPEATED FOR THE S AKE OF BREVITY. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE RESP ONDENT- ASSESSEE SUBMITTED THAT THE LAND WAS GOT VACATED BY PAYING THE AMOUNTS TO HUT-OWNERS/TENANTS AND THAT THE MUNICIPA L TAXES PAID THEREOF WAS THE BUSINESS EXPENDITURE RELATABLE TO T HE SALE OF LAND AS PER THE DEVELOPMENT AGREEMENT DATED 2-4-2005. 9. IN OUR CONSIDERED OPINION, THE CIT(A) MADE NO MI STAKE IN ALLOWING THE CLAIM OF THE ASSESSEE, INASMUCH AS THE IMPUGNED AMOUNT CONSTITUTED AN EXPENDITURE RELATABLE TO THE TRANSACTIONS CARRIED OUT VIDE DEVELOPMENT AGREEMENT DATED 2-4-20 05 AND THE MERE PAYMENT OF EXPENDITURE IN AN EARLIER PERIOD WO ULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THAT SUCH EXPENDITURE WA S INDEED A 6 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 BUSINESS EXPENDITURE ALLOWABLE WHILE COMPUTING THE BUSINESS INCOME FROM TRANSACTION IN QUESTION. WE THEREFORE, DISMISS THIS GROUND RAISED BY THE REVENUE. 10. THE NEXT ISSUE RELATES TO DISALLOWANCE OF RS. 8 6,318/- ON ACCOUNT OF BROKERAGE AND COMMISSION PAID TO AGENTS FOR VACATING LAND TRANSFERRED BY THE ASSESSEE. THE ASSESSING OF FICER HAS DISALLOWED THE EXPENDITURE STATING THAT THE NARRATI ON IN THE VOUCHERS DID NOT SPECIFY THE LAND IN RESPECT OF WHICH THE PA YMENT WAS MADE. HOWEVER, THE CIT(A) HAS DELETED THE SAME BY OBSERVI NG THAT NO BROKERAGE EXPENDITURE WAS CLAIMED BY THE ASSESSEE I N RESPECT OF ANY OTHER LAND OR TRANSACTION DURING THE YEAR OR IN THE EARLIER YEARS EXCEPT IN RELATION TO THE LAND TRANSACTED BY DEVELO PMENT AGREEMENT DATED 2-4-2005. . 11. BEFORE US, THE LEARNED DR HAS AGAIN RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND CANVASSED THAT THE ONUS W AS ON THE ASSESSEE TO PROVE THAT THE IMPUGNED EXPENDITURE WAS RELATABLE TO THE LAND TRANSACTION IN QUESTION. 12. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE F OR THE RESPONDENT-ASSESSEE REFERRED TO PARA 11.1 OF THE OR DER OF THE CIT(A) WHEREIN THE WRITTEN SUBMISSIONS HAVE BEEN BROUGHT O UT, WHICH CLEARLY SHOW THAT COMPLETE DETAILS INCLUDING THE VO UCHERS EVIDENCING PAYMENT TO THE BROKERS AS CLAIMED, WAS FURNISHED TO THE ASSESSING OFFICER. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE BROKERAGE AND COMMISSION EXPENDITURE IN QUESTION WA S CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE TO AGENTS FOR GETTIN G THE LAND VACATED WHICH WAS THE SUBJECT MATTER OF SALE IN THI S YEAR. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE AFTER PERUSING THE 7 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 VOUCHERS ON THE GROUND THAT THE LAND IN RESPECT OF WHICH BROKERAGE COMMISSION WAS PAID, WAS NOT SPECIFIED IN THE SAID VOUCHERS. THE CIT(A) APPRECIATED THE POSITION CANVASSED BY THE AS SESSEE THAT THE BROKERAGE EXPENDITURE WAS CLAIMED ONLY WITH RESPECT TO THE LAND IN QUESTION AT KAKAD BAUG, NASIK, INASMUCH AS FOR NO O THER TRANSACTION THE ASSESSEE HAS CLAIMED SUCH EXPENDITURE EITHER DU RING THE YEAR OR EVEN IN THE EARLIER YEARS. IN OUR OPINION, IN THE A BSENCE OF ANY CONTRARY MATERIAL ON RECORD, THE EXPLANATION RENDER ED BY THE ASSESSEE IS LIABLE TO BE ACCEPTED AND THE CIT(A) RI GHTLY ALLOWED THE IMPUGNED EXPENDITURE. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY ERROR IN THE DECISION OF THE CIT(A) IN DIRECTIN G THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE WE UPH OLD THE SAME AND REJECT THE GROUND RAISED BY THE REVENUE. 14. THE NEXT ISSUE PERTAINS TO DISALLOWANCE OF RS. 96,950/- BEING SECURITY CHARGES. IN THE OPINION OF THE ASSESSING O FFICER, THE ONUS WAS ON THE ASSESSEE TO PROVE WITH NECESSARY FACTS I N ORDER TO AVAIL THE DEDUCTION U/S 37(1) OF THE ACT. HE ACCORDINGLY MADE THE DISALLOWANCE ON ACCOUNT OF SECURITY CHARGES. HOWEV ER, THE CIT(A) FOUND THAT THE EXPENDITURE WAS SUPPORTED BY NECESSA RY EVIDENCE WHICH HAS SINCE BEEN ACCEPTED BY THE ASSESSING OFFI CER ALSO IN HIS REMAND REPORT. IN THIS VIEW OF THE MATTER, WE DO N OT FIND ANY ERROR IN THE ORDER OF THE CIT(A) DIRECTING THE ASSESSING OFF ICER TO DELETE THE IMPUGNED DISALLOWANCE AND HENCE THE GROUND OF APPEA L OF THE REVENUE IS DISMISSED. 15. THE NEXT ISSUE PERTAINS TO DISALLOWANCE OF INTE REST OF RS. 35,730/- ON NOTIONAL BASIS. IN THIS REGARD, BRIEF FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE INCURRED AN INTEREST EXP ENDITURE OF RS. 16,77,282/- BY WAY OF PAYMENT TO NASIK DISTRICT CEN TRAL AND MERCANTILE CO-OPERATIVE BANK LTD., NASIK. THE ASSE SSING OFFICER 8 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 NOTICED THAT ASSESSEE HAD WITHDRAWN A SUM OF RS. 11 ,91,000/- ON 2-2-2005 WHICH ACCORDING TO HIM, WAS NOT UTILIZED F OR BUSINESS PURPOSE AND ACCORDINGLY, THE INTEREST OF RS. 35,73 0/- WAS DISALLOWED. BEFORE THE CIT(A), ASSESSEE EXPLAINED THAT THE WITHDRAWAL MADE BY THE ASSESSEE WAS FOR THE BUSINES S PURPOSES I.E. FOR ACQUIRING SOME LAND BY PAYING ADVANCES ON THE S POT. HOWEVER, THE TRANSACTION DID NOT FRUCTIFY IN VIEW OF ACUTE C OMPETITION AMONGST THE LAND DEVELOPERS. IN ANY CASE, THE AMOUNT WAS U TILIZED FOR MEETING BUSINESS EXPENSES IN THE SUBSEQUENT PERIOD. THE CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THERE WA S NO PROOF THAT THE AMOUNT WAS UTILIZED FOR NON-BUSINESS PURPOSES A ND THE INTEREST ON BORROWED CAPITAL CANNOT BE DISALLOWED MERELY BEC AUSE THE ASSESSEE WAS MAINTAINING CASH IN HAND. 16. BEFORE US, THE LEARNED DR HAS SUBMITTED THAT TH E ASSESSING OFFICER DISALLOWED THE EXPENDITURE BY OBSERVING THA T THE AMOUNT OF CASH WITHDRAWN ON 2-2-2005 WAS NOT FOR BUSINESS PU RPOSES AND THAT THE CIT(A) HAS ERRED IN APPRECIATING THE SAID POSIT ION. 17. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE F OR THE ASSESSEE POINTED OUT THAT THE CIT(A) HAS RIGHTLY APPRECIATED THE POSITION BY OBSERVING THAT THE AMOUNT WITHDRAWN WAS CASH IN HAN D AND WAS NOT UTILIZED FOR ANY NON-BUSINESS PURPOSES. THEREFORE, INTEREST EXPENDITURE WAS RIGHTLY ALLOWED BY HIM. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. EVIDENTLY, THE ASSESSING OFFICER HAS DISALLOWED THE EXPENDITUR E ON MERE SURMISES AND IN A VERY CRYPTIC MANNER AS IS EVIDEN T FROM PARA 12.1 OF THE ASSESSMENT ORDER WHEREIN THERE IS NO DISCUSS ION AS TO HOW HE INFERS THAT THE AMOUNT WITHDRAWN ON 2-2-2005 OF RS. 11,91,000.- WAS NOT USED FOR BUSINESS PURPOSES. APART FROM THE BA LD ASSERTION OF 9 ITA NO. 335/PN/2010 DHARMENDRA D VARU A.Y. 2006-07 THE ASSESSING OFFICER THAT THE AMOUNT WAS NOT WITHD RAWN FOR BUSINESS PURPOSES, THERE IS NO FURTHER SUPPORTING E XPLANATION OR MATERIAL AND THEREFORE THE CONSEQUENT DISALLOWANCE OUT OF INTEREST EXPENDITURE, IN OUR VIEW, IS BASED ON MERE SURMISES AND CONJECTURES . IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY ER ROR IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. WE ACCORDINGLY U PHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF APPEAL RAISED B Y THE REVENUE. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER 2012. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED:22 ND NOVEMBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A)-II NASIK 4. THE CIT- II NASIK 5. THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T. A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE