Gujarat Industrial Investment Corpn., Gandhinagar V. The Addl.C.I.T., Gandhinagar Circle., Gandhinagar

ITA 4215/AHD/2007

• Counselvise Citation: 421520514 RSA 2007
• Duration Of Justice: 4 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: SANJA R SHAH
• Keywords: Depreciation; Search and seizure; Opportunity of being heard; Proportionate interest; Retrospective amendment; Onus to prove; Revised return
• Section: 142(1); 14A; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4215 & 4378/AHD/2007 ASSESSMENT YEAR:2004-05 GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD., 6 TH FLOOR, BLOCK NO.11 UDYOG BHAVAN, SECTOR-11, GANDHINAGAR PAN NO.AAACG5304G ASSTT. COMMISSIONER OF INCOME-TAX, GANDHINAGAR / V/S . / V/S . ADDL. COMMISSIONER OF INCOME-TAX, GANDHINAGAR RANGE, GANDHINAGAR GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD. / APPELLANT .. / RESPONDENT / BY ASSESSEE SHRI SANJA R SHAH, AR / BY REVENUE SHRI ALOK JOHRI, CITDR ! / DATE OF HEARING 19-01-2012 '#$% ! / DATE OF PRONOUNCEMENT 31-01-2012 &'( &'( &'( &'( / / / / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THESE CROSS-APPEALS OF THE REVENUE AND THE ASSESSEE ARISE FROM THE ORDER OF LD. COMMISSIONER OF INC-TAX (APPEALS)-GAND HINAGAR, AHMEDABAD DATED 26-09-2007 FOR THE ASSESSMENT YEAR 2004-05. T HE REVENUE HAS RAISED THE GROUNDS OF APPEAL:- [1] THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.6,62,50,000 MADE U/S.14A OF THE I.T. ACT, 1961. ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 2 [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. [3] IT IS THEREFORE PRAYED THAT THE OF THE LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED TO THE AB OVE EXTENT. THE ASSESSEE HAS THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN REJECTING THE REVISED RETURN OF INCOME ON THE GROUN D THAT THERE WAS NO OMISSION OR WRONG STATEMENT IN THE ORIGINAL RETURN OF INCOME. IT IS SUBMITTED THAT THE REVISED RETURN WAS AS PER PROVIS IONS OF SECTION 139(5) OF THE ACT AND WAS A VALID RETURN. IT IS SUB MITTED THAT IT BE SO HELD NOW. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONSIDERING THE SERVICE CHARGES OF RS.44995181/- AS INCOME OF THE YEAR UNDER CONSIDERATION. IT IS SUBMITTED THAT THE CIT(A ) OUGHT TO HAVE EXCLUDED THE SAME ON PRINCIPLE OF REAL INCOME AS ON LY REAL INCOME CAN BE AXED. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SERV ICE CHARGES OF RS.44995181/- FROM THE INCOME OF A.Y 2005-06. IT IS SUBMITTED THAT AS THE INCOME IS TAXED IN THE YEAR UNDER CONSIDERATION IT OUGHT TO BE EXCLUDED FROM THE INCOME OF A.Y. 2005-06. IT IS SUB MITTED THAT IT BE SO HELD NOW. 2. IN REVENUES APPEAL THE BRIEF FACTS AS ARISING F ROM THE AO'S ORDER AT PAGE-6 TO 10 WHICH ARE REPRODUCED AS UNDER:- 5. DISALLOWANCE U/S 14A : FROM THE STATEMENT OF ACCOUNTS, IT WAS OBSERVED THAT THE ASSESSEE HAS OBTAINED UNSECURED G OVERNMENT LOANS OF RS.384.95 CRORES AND PAID INTEREST OF RS.6,62,50 ,000/- ON THIS ACCOUNT. ON FURTHER VERIFICATION OF THE BALANCE SHE ET IT WAS ALSO NOTED THAT THE ASSESSEE HAS MADE INVESTMENT IN DIFFERENT ACCOUNTS OF EQUITY SHARES OF RS.29,57,84,855/- (295.78 CRORES). IN VIE W OF THE PROVISIONS OF SECTION 10(34) OF IT ACT, THE PROSPECTIVE DIVIDEND INCOME OF SUCH INVESTMENT WOULD BE AN EXEMPTED INCOME FOR TAXATION PURPOSE. CONSIDERING THE ABOVE FACT, IT WAS PERCEIVED THAT M AKING AN INVESTMENT IN EQUITY SHARES BEARING TAX-FREE RETURNS, PRIMA FA CIE AMOUNTS TO DIVERSION OF BUSINESS FUND AS SUCH. IN OTHER WORDS, BY USING THE BUSINESS FOUND OF SUCH NATURE FOR OTHER FINANCIAL A CTIVITY WHICH DOES NOT YIELD ANY TAXABLE RETURN AMOUNTS TO AN EFFORT TOWAR DS REDUCTION IN TAXABLE INCOME WHILE CLAIMING INTEREST EXPENDITURE INCURRED ON FUND UTILIZED FOR SUCH INVESTMENT. THE ABOVE IS NOT A PE RMISSIBLE TAXATION ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 3 PLANNING IN VIEW OF THE HISTORICAL DECISION OF THE SUPREME COURT GIVEN IN THE CASE OF MACDNALD. TO DEAL WITH SUCH SITUATION, THE LEGISLATURE IN ITS WISDOM HAS INCORPORATED THE SECTION 14A, WHICH READ S AS UNDER:- SECTION 14A: EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME: FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDI TURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 5.1 CONSIDERING THE ABOVE FACT, THE ASSESSEE WAS AS KED THAT WHY THE PROPORTIONATE INTEREST EXPENDITURE CLAIMED IN THE P ROFIT & LOSS ACCOUNT TO THE EXTENT OF DIVERSION OF INTEREST BEARING FUND S TO NON-TAXABLE YIELDING INVESTMENT SHOULD NOT BE DISALLOWED U/S.14 A OF THE IT ACT. THE ASSESSEE VIDE ITS LETTER DATED 13/12/06 EXPLAINED I TS POSITION IN THE FOLLOWING MANNER: YOUR GOODSELF HAS STATED IN YOUR LETTER THAT WE HA VE CLAIMED EXEMPTION U/S10(34) FOR THE DIVIDEND INCOME. WE HAV E INVESTMENTS IN SHARES TO THE TUNE OF RS.295.78 CROR ES AND PAID INTEREST OF RS.66.25 CRORES ON THE LOANS. YOUR GOOD SELF HAS REQUIRED US TO EXPLAIN WHY HE PROPORTIONATE EXPENSE S CLAIMED IN THE PROFIT AND LOSS ACCOUNT TO THE EXTENT OF DIVERS ION OF INTEREST BEARING FUNDS TO NON TAXABLE YIELDING INVESTMENTS S HOULD NOT BE DISALLOWED U/S.14A OF THE IT ACT, IN THIS CONNECTIO N WE WOULD LIKE TO SUBMIT AS UNDER: BREAK-UP OF THE INVESTMENTS ARE AS UNDER: INVESTMENTS MADE BEFORE 1997-98 RS.297.75 CRO RES INVESTMENTS MADE AFTER 1997-98 RS. 8.82 CR ORES TOTAL RS.306.57 CRORES LESS: PROVISION FOR NPA RS. 10.79 CRORES INVESTMENTS AS PER THE BALANCE SHEET RS295.79 C RORRES WE WOULD LIKE TO SATE THAT MAJORITY OF THE INVESTME NTS ARE MADE BEFORE 1997-98. IN THOSE YEARS DEDUCTIONS WERE CLAIMED U/S.80M OF THE ACT. ASSESSING OFFICER HAS DISALLOWED THE INTEREST EXPENSES INCURRED FOR THE E ARNING THE DIVIDEND AND ALLOWED THE DEDUCTION U/S.80M ON T HE NET DIVIDEND INCOME RECEIVED. IN ALL THE ASSESSMENT YEA RS LEARNED CIT(A) AND UP TO A.Y. 196-97 ITAT HAS DELET ED THE DISALLOWANCE MADE AND ALLOWED THE DEDUCTION U/S.80M ON THE GROSS DIVIDEND INCOME RECEIVED. ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 4 5.2 THE ASSESSEES SUBMISSION AND JUSTIFICATION MAD E IN RESPECT OF THE PROPOSED DISALLOWANCE U/S.14A WAS CONSIDERED IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES INVOLVED AND ALSO THE LEGAL PROVI SIONS OF SECTION 80M AND SECTION 14A OF IT ACT. AFTER TAKING A HOLIS TIC VIEW OF THE ABOVE REFERRED ASPECTS, IT IS FOUND THAT THE ASSESSEES C ONTENTION IS DEVOID OF LEGAL AND FACTUAL GROUNDS, THEREFORE, THE SAME IS N OT ACCEPTABLE FOR THE FOLLOWING REASONS: I) REGARDING THE RELEVANCE OF THE CIT(A)S DECISION , AS RELIED UPON BY THE ASSESSEE, IT IS FELT THAT THE SAME IS N OT APPLICABLE IN THE INSTANT CASE FOR THE REASON THAT THE DECISION OF CIT(A) OF DELETING THE DISALLOWANCE OF INTEREST EXPENSES VIS-A-VIS THE CLAIM MADE U/S. 80M OF IT AC T WAS RELEVANT TO A.Y. 1997-98 AND FOR PRIOR PERIOD ONLY. HOWEVER, THE GENESIS OF PROPOSED ADDITION I.E. PROVISION OF SECTION 14A HAS BEEN INSERTED BY THE FINANCE ACT 2001 AT SUBSEQUENT PERIOD. IN OTHER WORDS THE RELEVANT SECT ION 14A WAS NOT IN EXISTENCE WHEN THE CIT(A) DECIDED THE IS SUE OF DISALLOWANCE OF INTEREST EXPENSES RELEVANT TO CLAIM MADE U/S/.80-0M, THEREFORE, THE APPLICABILITY OF PROVISI ON OF SECTION 14A WAS NEVER CONSIDERED AT ANY STAGE BEFOR E. ACCORDINGLY ANY DECISION TAKEN BY AN APPELLANT AUTH ORITY UNDER SUCH CIRCUMSTANCES HAS NO BEARING OR RELIANCE TO THE ISSUE UNDER CONSIDERATION AT THIS STAGE. II) AS FAR AS THE ASSESSEES ARGUMENT I.E. UTILIZAT ION OF ITS OWN INTEREST-FREE FUNDS TO MAKE THE IMPUGNED INVESTMENT IS CONCERNED, THIS STATEMENT ITSELF MAY RAISE A VITAL AND INTERESTING ISSUE THAT HOW THE ASSESSEE WOULD BE AB LE TO DIFFERENTIATE IN BETWEEN ITS OWN FUND AND THE BORRO WED FUND FROM THE TOTAL FUND AVAILABLE TO THEM AT ANY POINT OF TIME. IT ALSO LEADS TO AN INTERESTING ISSUE I.E. THAT SINCE THE ASSESSEE WAS PAYING HUGE AMOUNT OF INTEREST, THEN W HY AND HOW IT OPTED TO INVEST A PART OF BUSINESS FUND IN A PARTICULAR MANNER, WHEREIN THE RETURN OF INVESTMENT WAS LESSER THAN THE INTEREST EXPENDITURE ON THE BORROWE D FUND. III) REGARDING ESTABLISHING THE CONCEPT OF NEXUS IN BETWEEN THE AMOUNT BORROWED AND INVESTMENT MADE IS CONCERNE D, PARTICULARLY IT HAS NO SIGNIFICANCE AS BEING AN INT ERNAL DECISION BASED ON ITS CONVENIENCE, THE ASSESSEE MAY DECIDED TO FIRST INVEST AND THEN BORROW THE FUND OR VICE VERSA. AS THE EVENTUAL AND ULTIMATE EFFECT OF BOTH THE APPROACH WOULD BE SAME (I.E. SHORTAGE OF ITS OWN FU ND AND NEED OF BORROWING THE SAME),M THEREFORE, NO UNDUE IMPORTANCE OR RELEVANCE HAS BEEN GIVEN TO THE ASPEC T OF NEXUS THEORY, WHILE DECIDING THE ISSUE UNDER CONSID ERATION. IN THIS REGARD, THE DECISION OF THE HONBLE HIGH CO URT OF ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 5 ALLAHABAD IN THE CASE OF CIT VS. H.R. SUGAR FACTORY P. LTD. (187 ITR 363 (ALL)) PROVIDES SUFFICIENT GUIDANCE. T HEIR LORDSHIP HELD THAT- HAD THIS MONEY BEEN ADVANCED TO THE DIRECTORS, IT WOULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS BUSINESS PURPOSE AND TO THAT EXTENT IT MIGHT NOT HA VE BEEN NECESSARY TO BORROW FROM THE BANK. THEREFORE THE ITO WAS RIGHT IN DISALLOWING THE DIFFERENCE BETWEEN INTEREST PAID TO THE BANKS AND INTEREST RECOVERED FROM THE DIRECTORS 5.3 IN VIEW OF THE ABOVE DISCUSSION AND ALSO AFTER CONSIDERING THE ASSESSEES EXPLANATION, IT IS HELD THAT THE STAND T AKEN BY THE ASSESSEE IS NOT TENABLE AND ACCEPTABLE EVEN ON PRIMA FACIE G ROUND. IN THIS REGARD, RELIANCE IS ALSO PLACED ON THE DECISION OF HONOURABLE ITAT MUMBAI BENCH SMC IN THE CASE OF ACIT VS. DAKSHESH S SHAH (2004) (90 ITD 519) A.Y. 98-99. THE GIST OF THE DECISION IS REPRODUCED AS UNDER: THE ASSESSEE MADE INVESTMENT IN SHARES BY OBTAINING BORROWED LOANS. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED DEDUCTION APPARENTLY U/S.57(III) IN RESPECT OF INTE REST PAID ON SUCH BORROWED FUNDS. THE AO NOTICED THAT DIVIDEND INCOME WAS EXEMPT FROM TAX IN THE HANDS OF THE RECEIVER, AS PER THE P ROVISIONS OF SECTION 10(33) RWS 115(O). THE AO HELD THAT SINCE THE INCOM E WAS EXEMPT FROM TAX, EXPENDITURE INCURRED FOR EARNING OF SUCH INCOME COULD NOT BE ALLOWED. ON APPEAL, THE COMMISSIONER (APPEALS) ALLO WED DEDUCTION. ON APPEAL BY THE REVENUE: HELD CHAPTER IV, PROVIDES FIVE HEADS OF INCOME, THE FIRS T FOUR BEING SPECIFIC HEADS OF INCOME, WHEREAS THE FIFTH ONE IS RESIDUARY IN NATURE. INCOME OR EXPENDITURE HAS TO FALL UNDER A SPECIFIC HEAD OF INCOME IN WHICH EVENT THE CLAIM OF AN ASSESSEE CAN BE CONSIDERED UN DER SUCH SPECIFIC HEAD. IN THE INSTANT CASE, THE ASSESSEE APPEARED TO HAVE CLAIMED DEDUCTION UNDER SECTION 57(III). IN ORDER TO ALLOW DEDUCTION U/S.57(III), THE ASSESSEE HAS TO SHOW THAT THE DIVIDEND INCOME I S ASSESSABLE U/S.56 WHEREAS IN THE INSTANT CASE, DIVIDEND INCOME WAS EXEMPT FROM TAX BY VIRTUE OF THE PROVISIONS OF SECTION 10(33). AT ANY RATE, SECTION 14A, EXPRESSLY PROHIBITS ALLOWANCE OF SUCH CLAIMS. ( PARA 22 ) SECTION 14A IS PART OF CHAPTER IV. IN OTHER WORDS, IT APPLIES TO EXPENDITURE REFERABLE TO ANY HEAD OF INCOME REFERRE D TO IN SECTION 124. IT WAS CONTENDED THAT DIVIDEND INCOME IS NOT EXEMPT FROM TAX BUT THE LEGISLATURE HAS INTENDED TO COLLECT THE TAX INDIREC TLY BY DEDUCTING TAX IN THE HANDS OF COMPANY. THIS CONTENTION CANNOT BE APP RECIATED. THERE ARE LAKHS OF SHAREHOLDERS WHOSE INCOME FALLS BELOW THE TAXABLE LIMIT AND IN THEIR CASE THERE MAY NOT BE ANY ASSESSABLE I NCOME WHICH IS ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 6 LIABLE TO TAX EVEN IF DIVIDEND INCOME IS HELD TO BE TAXABLE IN THE HANDS OF SUCH ASSESSEES. HENCE, IF THE INTENTION OF THE L EGISLATURE IS ONLY TO COLLECT THE TAX FROM THE RECIPIENTS OF THE DIVIDEND THROUGH MEDIUM OF COMPANY, THEN THERE SHOULD HAVE BEEN A PROVISION, W HEREBY THE COMPANY SHOULD NOT BE MADE TO PAY TAX IN RESPECT OF THAT PART IN THE DIVIDEND, WHICH IS ATTRIBUTABLE TO ASSESSEE WHO HAS NOT TAXABLE IN. IN THE ABSENCE OF SUCH A PROVISION, IT CANNOT BE SAID THAT THE TAX IS COLLECTED FROM THE COMPANY THOUGH THE LEGISLATURE I NTENDED TO COLLECT TAX FROM THE RECIPIENTS OF THE DIVIDENDS. AT ANY RA TE, SECTION 14A IS COUCHED IN SPECIFIC TERMS, WHICH DO NOT LEAVE ANY R OOM FOR DOUBT OR DISPUTE WITH REGARD TO THE FACT THAT IN ORDER TO CL AIM DEDUCTION OF EXPENDITURE IN RELATION TO A PARTICULAR INCOME, THE ASSESSEE HAS TO SHOW THAT THE SAID INCOME FORMS PART OF THE TOTAL I NCOME. THUS, LOOKING AT FROM ANY ANGLE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION OF THE INTEREST REFERABLE TO THE AMOUNT BORROWED FOR T HE PURPOSE OF INVESTMENT IN SHARES. NO DOUBT, THE ASSESSEE RAISED AN ALTERNATIVE PLEA THAT THE SHARES AS AND WHEN ARE SOLD, THE INCO ME/LOSS IS ASSESSABLE TO TAX UNDER THE HEAD CAPITAL GAINS IN WHICH EVENT EXPENDITURE HAS TO BE ALLOWED AS DEDUCTION. HOWEVER , THE ASSESSEE HAD NOT SOLD ANY SHARES TILL DATE AND SO FAR AS THE YEAR UNDER CONSIDERATION WAS CONCERNED, THE CONTENTION OF THE ASSESSEE WAS ACADEMIC. UNDER THE CIRCUMSTANCES, THE ORDER OF THE COMMISSIO NER (APPEALS) WAS REVERSED AND THE ORDER OF THE AO WAS UPHELD. 5.4 AFTER CONSIDERING ALL THE FACT AND CIRCUMSTANCE S AND COURTS DECISION AS NARRATED ABOVE, IT IS CONCLUDED THAT TH E PROVISION OF SECTION 14A IN RESPECT OF INVESTMENT IN EQUITY SHARES IS SQ UARELY APPLICABLE IN THE ASSESSEES CASE. ACCORDINGLY THE PROPOSED DISAL LOWANCE ON ACCOUNT OF DIVERSION OF INTEREST BEARING FUND TOWAR DS INVESTMENT HAVING NO TAXABLE RETURN IN THE FORM OF EQUITY SHARES HAS BEEN WORKED OUT AS BELOW: I) INVESTMENT IN EQUITY SHARES RS.2,95,78,48,555 II) RATE OF INTEREST (APPROXIMATELY) 10% III) TOTAL PROPOSED DISALLOWANCE RS.29,57,84,855 5.5 CONSIDERING THE FACT THAT THE ASSESSEE HAS ACTU ALLY INCURRED THE INTEREST EXPENDITURE OF RS.6,62,50,000/- ONLY, THER EFORE, THE PROPOSED DISALLOWANCE U/S.14A OF IT ACT IS ALSO RESTRICTED T O THE ACTUAL EXPENDITURE ON THIS ACCOUNT. IN VIEW OF THE ABOVE, THE ASSESSEES LOSS IS REDUCED TO THE EXTENT OF RS.6,62,50,000/-. THE LD. CIT(A) VIDE PARA-6.3, 6.3.1 AND 6.3.2 OBSER VES AS UNDER:- 6.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION AN D I AM AFRAID IN THE MANNER THE ASSESSING OFFICER HAS MADE THE ADDITION, THE SAME IS NOT ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 7 SUSTAINABLE. EVEN AT THE GENERAL LEVEL OF DISALLOWA NCE OF INTEREST FOR DIVERSION OF INTEREST-BEARING FUNDS, IT HAS NOW BEE N GENERALLY ACCEPTED THAT THE DEPARTMENT MUST SHOW A PROPER NEXUS BETWEE N THE INTEREST BEARING FUNDS BORROWED AND THOSE INVESTED. SINCE IN N ANY NORMAL SITUATION, THE INTEREST-BEARING FUNDS ARE BOUND TO MERGE WITH THE ASSESSEES OWN CAPITAL AS WELL AS NON-INTEREST-BEAR ING FUNDS, BEFORE MAKING THE DISALLOWANCE AND THEREBY FASTENING THE T AX LIABILITY ON THE ASSESSEE, THE ONUS SHALL BE ON THE DEPARTMENT TO PR OVE THE DIVERSION. OF COURSE, THE BURDEN OF PROOF NEEDED IS OF THE SAM E LEVEL AS IN ANY OTHER ISSUE PERTAINING TO INCOME-TAX ASSESSMENT. OP ERATION OF SECTION 14A, WHICH IS ANOTHER FACET OF THE SAME PROBLEM, TH EREFORE, HAS TO BE BASED ON THE SAME PRINCIPLE. AS DECIDED BY THE HON BLE ITAT DELHI IN THE CASE OF MARUTI UDHYOG LTD. VS. DCIT 92 ITD 119, NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENTS CAN BE SAID TO B E ESTABLISHED ONLY WHERE IT IS SHOWN THAT INTEREST FREE FUNDS ARE NOT AVAILABLE WITH THE ASSESSEE, IN CASE OF MIXED ACCOUNTS WHEREIN ALL KIN DS OF RECEIPTS WERE DEPOSITED. IN THE CASE OF WIMCO SEEDLINGS LTD. VS. DCIT , THE HONBLE ITAT DELHI E BENCH STATED THAT ONLY EXPENDITURE W HICH HAS BEEN PROVED TO BE INCURRED IN RELATION TO EARNING OF TAX -FREE INCOME CAN BE DISALLOWED AND SECTION 14A CANNOT BE EXTENDED TO DI SALLOW ARTIFICIALLY COMPUTED EXPENDITURE. THIS THIRD MEMBER JUDGMENT SP ECIFICALLY RELIED ON THE AMENDMENT TO SECTION 14A BY THE FINANCE ACT, 2006, WHEREIN SUB-SECTION (2) & (3) WERE BROUGHT ON STATUTE W.E.F . 1/4/2007, WHICH GAVE THE ASSESSING OFFICER THE AUTHORITY9 TO DETERM INE THE EXPENSES IN A PRESCRIBED MANNER. IT WAS STATED THAT POSITION PR IOR TO THIS AMENDMENT OBVIOUSLY DID NOT ALLOW ANY ADHOC PROCEDURE. 6.3.1 THE APPELLANTS PAST HISTORY ALSO NEEDS TO BE KEPT ON RECORD, WHERE DEPARTMENT ITSELF HAS BEEN TAKING THE VIEW TH AT NO EXPENSES, INCLUDING INTEREST, NEED BE ATTRIBUTED TO DIVIDEND FOR COMPUTING DEDUCTION U/S.80M. THE POSITION WITH RESPECT TO THE NON-INTEREST-BEARING FUNDS AS AVAILABLE ALSO GOES IN THE APPELLANTS FAV OUR, WHEREIN AS ON 31/3/2004, IT HAD SUCH FUNDS AMOUNTING TO RS.380.95 CRORES AGAINST THE INVESTMENTS OF RS.295.78 CRORES. 6.3.2 THEREFORE, CONSIDERING THE TOTALITY OF THE FA CTS, THE DISALLOWANCE U/S.14A OF RS.6,62,50,000/- IS NOT JUSTIFIED AND HE NCE DELETED. 3. THE LD. CIT-DR SHRI ALOK JOHRI ARGUED THAT THE D EDUCTION U/S.80M WAS RELEVANT IN THE PRESENT CASE UP TO THE ASSESSMENT Y EAR 1997-98, WHEN THE PROVISIONS OF SECTION 14A WERE NOT BROUGHT INTO STA TUTE. THE PROVISIONS OF SECTION 14A WERE BROUGHT INTO STATUTE BY THE FINANC E ACT, 2001 WITH EFFECT FROM 1-4-2001 AND THE RELEVANT FOR THE ASSESSMENT Y EAR 2001-02 AND ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 8 THEREAFTER. THEREFORE THE DECISION OF ITAT AHMEDABA D BENCH IN THE CASE OF ASSESSEE CANNOT BE THE BASIS FOR DELETING THE DISAL LOWANCE OF EXPENDITURE IN THE IMPUGNED YEAR. MR. JOHRI RELIED UPON THE JUDGME NT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DCIT (2010) 328 ITR 81 (BOM) AND ARGUED THAT PROPORTIONATE DISALLOW ANCE OF THE EXPENDITURE HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFICER. 4. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESS EE, SHRI SANJAY R SHAH INVITED OUR ATTENTION AT PAGE-6 OF ASSESSMENT ORDER WHEN THE INVESTMENT BEFORE ASSESSMENT YEAR 1997-98 WAS AT RS.2975 CRORE S. THE ASSESSEE MADE THE INVESTMENT FOR THE PURPOSE OF BUSINESS OUT OF B ORROWED FUNDS AND THEREFORE THE DEDUCTION U/S.80M WAS ALLOWABLE IN TH E EARLIER YEARS. MOREOVER, THE ASSESSEE IS IN THE BUSINESS OF BORROWING AND LE NDING FOR WHICH INTEREST IS PAID AND EARNED. IN ALL THE ASSESSMENT YEARS IN PAR TICULAR UP TO ASSESSMENT YEAR 1996-97 ITAT HAS DELETED SUCH DISALLOWANCE MAD E BY ASSESSING OFFICER AND THE DEDUCTION U/S.80M HAS BEEN ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAD R AISED THE LOAN OF RS.297.75 CRORES UP TO 1997-98 AND MAJORITY OF INVESTMENTS HA VE BEEN MADE BEFORE 1997-98 AND ASSESSEE HAD BEEN CLAIMING DEDUCTION U/ S.80M OF THE ACT. THE ASSESSING OFFICER IN THOSE YEAS HAD MADE A DISALLOW ANCE OF THE INTEREST EXPENSES INCURRED FOR EARNING THE DIVIDEND. WHEREAS THE LD. CIT(A) AND THE TRIBUNAL IN PARTICULAR UP TO 1996-97 HAS DELETED TH E DISALLOWANCE SO MADE ALONG WITH DEDUCTION U/S.80M OF THE ACT ON THE GROS S DIVIDEND RECEIPT. THOUGH IN SUCH A SITUATION, THE INTEREST BEARING FUNDS ARE BOUND TO MERGE WITH THE ASSESSEE ON CAPITAL WHICH IS NON-INTEREST BEARING. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE IS HAVING THE NON-INTEREST BEARI NG FUNDS AS UNDER:- SHARE CAPITAL RS.256.97 CRORES DEPRECIATION RESERVE RS. 5.43 CRORES PROVISION FOR NPA RS.111.55 CRORES ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 9 TOTAL FUNDS RS.380.95 CRORES INVESTMENTS RS.295.78 CRORES IN VIEW OF THE DECISION OF ITAT DELHI BENCH IN THE CASE OF MARUTI YDHYOG LTD. V. DCIT 92 ITD 119 (DEL) THE NEXUS BETWEEN BORROWED FUNDS AND INVESTMENTS CAN BE SAID TO BE ESTABLISHED ONLY WHER E IT IS SHOWN THAT INTEREST FREE FUNDS ARE NOT AVAILABLE WITH THE ASSESSEE. IN THE PRESENT CASE, THERE IS NO NEXUS OF SUCH KIND PROVED BY THE ASSESSING OFFICER. AS PER FOR THE PAST HISTORY OF THE ASSESSEE, THE DEPARTMENT ITSELF HAS BEEN TAK ING THE VIEW THAT NO EXPENSES INCLUDING THE INTEREST HAS BEEN ATTRIBUTED TO DIVIDEND FOR COMPUTING DEDUCTION U/S.80M OF THE ACT. THE ASSESSEE HAVING N ON-INTEREST BEARING FUNDS AS MENTIONED HEREINABOVE AND NO NEXUS BETWEEN BORRO WED FUNDS AND THE INVESTMENTS HAVING BEEN ESTABLISHED BY THE DEPARTME NT CANNOT HELP REVENUE AS ARGUED BY LD. CIT-DR. THEREFORE, IN THE CIRCUMST ANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT( A) WHO HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE AO. THUS, REVENUES APPEAL IS DISMISSED. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.4215/AHD /2007. 6. IN GROUND NO.1 THE ASSESSEES APPEAL AS ARISING FROM ASSESSING OFFICERS ORDER PAGE NO.1 TO 3 ARE AS UNDER:- 3.VALIDITY OF REVISED RETURN: AS DISCUSSED ABOVE, THE ASSESSEE HAD FILED A REVISE D RETURN U/S.139(5) OF THE I.T. ACT WHILE INCREASING ITS TOTAL LOSS BY RS.4,49,95,181/- IN COMPARISON TO THE LOSS SHOWN IN THE ORIGINAL RETURN OF INCOME. VIDE THIS OFFICE LETTER DATED 19/7/06, THE ASSESSEE WAS ASKED TO JUSTIFY THE ACT OF REVISING THEIR LOSS U/S.139(5) OF I.T. ACT. THE AS SESSEE EXPLAINED ITS POSITION VIDE THEIR LETTER DATED 21/11/06 AS UNDER: GOVERNMENT OF GUJARAT (GOG) HAS FLOATED SALES TA X DEFERMENT SCHEME FOR THE FACILITATION OF THE INDUSTRIAL UNITS WHO WANT THE BENEFIT OF THE SALES TAX INCENTIVE SCHEMES IN THE S ATE OF GUJARAT. THE ARRANGEMENT WAS DECIDED TO TREAT THE DEFERRED A MOUNT OF SALES TAX AS DEEMED LOAN AND IN LIEU THEREOF AND SU CH UNITS WERE REQUIRED TO FURNISH FIRST CHARGE / PARI PASSU CHARG E IN FAVOURS OF GIIC/GSFC/SALES TAX DEPARTMENT AS DECIDED BY THE GO G. HENCE, GIIC WAS THE NODAL AGENCY FOR THE SCHEME. DU RING THE YEAR PROVISION WAS MADE FOR RECEIPT OF SERVICE CHAR GES FOR THE ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 10 ABOVE REFERRED FEE BASED ACTIVITY ADDITION INCOME W AS ACCOUNTED FOR AND OFFERED TO TAX WHILE FILING ORIGINAL RETURN OF INCOME. HOWEVER, AFTERWARDS IT WAS FOUND OUT THAT GOG VIDE ITS GR NO.INC-102000-2797-1 DATED 17 TH SEPTEMBER, 2005 CANCELLED THE SALES TAX DEFERMENT SCHEME. RELEVANT EXTRACT OF THE GOG GR READS AS UNDER: AFTER CAREFUL CONSIDERATION THE GOVERNMENT OF GUJA RAT HAS DIRECTED TO CANCEL THE ABOVE CITED GRS DATED 21-3-8 8, 1-8- 90 AND 29-6-2002 WITH IMMEDIATE EFFECT AND SCHEME O F INTEREST FREE LOAN IN LIEU IF DEFERMENT OF SALES TA X AS INTRODUCED VIDE GR DATED 21-3-88, AS AMENDED F TIME TO TIME IS HEREBY WITHDRAWN. THUS, GOG HAS WITHDRAWN THE EARLIER GRS AND HENCE N O INCOME WAS REMAINED RECEIVABLE. THEREFORE, IN THE SUBSEQUE NT YEAR I.E. IN A.Y. 2005-06 GIIC HAS REVERSED THE INCOME IN THE BOOKS OF ACCOUNT. IT IS SUBMITTED THAT AS NO REAL INCOME ACC RUES TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THE SA ME IS REQUIRED TO BE EXCLUDED FROM THE TOTAL INCOME AS SH OWN IN THE REVISED RETURN OF INCOME FILED. HENCE, I THE SAME I S RIGHTLY EXCLUDED FROM THE INCOME AND NO DISALLOWANCE IS REQ UIRED TO BE MADE WHILE FINALIZING THE ASSESSMENT PROCEEDINGS. C OPY OF THE GOG R NO.2797 IS ENCLOSE HEREWITH FOR YOUR READY RE FERENCE MARKED AS ANNEXURE-A 3.1 THE ASSESSEES CONTENTION WAS EXAMINED IN THE L IGHT OF THE PROVISION OF SECTION 139(5) AND THE RELATED FACTS A ND CIRCUMSTANCES AND THE SAME IS FOUND NOT ADMISSIBLE FOR THE FOLLOWING REASONS: 3.2 THE PLAIN READING OF THE SECTION 139(5) STIPULA TES FULFILLMENT OF CERTAIN CONDITIONS TO ENABLE THE ASSESSEE TO EXERCI SE ITS RIGHTS FOR FILING REVISED RETURN OF INCOME, WHICH ARE SUMMARIZED AS U NDER: I) A RETURN CAN BE REVISED ONLY IF THE ORIGINAL RET URN IS FURNISHED U/S 139(1) OR IN PURSUANCE OF NOTICE U/S. 142(1) OF I.T. ACT. II) THE RETURN CAN BE REVISED BEFORE ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR FINALIZATION OF ASS ESSMENT PROCEEDINGS, WHICHEVER IS EARLIER. III) A REVISED RETURN CAN BE FILED U/S.139(5) OF TH E I.T. ACT ONLY IF THE ASSESSEE DISCOVERS ANY OMISSION OR WRONG STATEM ENT IN THE ORIGINAL RETURN FILED IN TIME. 3.1.2 AS FAR AS THE FIRST TWO CONDITIONS ARE CONCER NED, THE REVISED RETURN FILED BY THE ASSESSEE, IS IN CONFIRMATION TO SUCH R EQUIREMENT. HOWEVER, BEFORE DECIDING THE ISSUE OF COMPLIANCE OR OTHERWIS E OF THE THIRD ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 11 CONDITION, ALL THE RELATED ASPECT MENTIONED THEREIN , REQUIRES FURTHER DISCUSSION. THE THIRD CONDITION ALLOWS THE FILING O F REVISED RETURN IF THE ORIGINAL RETURN IS INFLICTED WITH AN OMISSION OR WR ONG STATEMENT ON PART OF THE ASSESSEE AND WHICH HAS BEEN SUBSEQUENTLY DISCOV ER AT A LATER STAGE. WHILE THE WORD OMISSION DENOTES AN UNINTENTIONAL ACT AND THE PHRASE WRONG STATEMENT INCLUDES WITHIN ITS SCOPE A STATEMENT WHICH IS NOT FALSE TO THE KNOWLEDGE OF THE ASSESSEE. SIMI LARLY THE WORD DISCOVER HAS A SPECIAL CONNOTATION AS IT SPECIFIES THAT TH E OMISSION/WRONG STATEMENT SHOULD BE HIDDEN/CONCEALED AND UNINTENTIONAL AT THE TIME OF FILING THE ORIGINAL RE TURN. IN OTHER WORDS THE GENESIS OF FILING THE REVISED RETURN SHOULD BE IN E XISTENCE OR A PREVAILING FACTOR WHILE THE COMPUTATION OF INCOME WAS MADE AND THE ORIGINAL RETURN OF INCOME WAS FILED. CONVERSELY IF A REVISED RETURN IS FILED ON THE BASIS OF FACTOR/EVENT WHEN WAS NOT IN EXISTENCE AT THE TI ME OF FILING ORIGINAL RETURN AND OCCURRED SUBSEQUENT TO THE DATE OF FILIN G OF RETURN, THE SAME CANNOT BE MADE BASIS OF INVOKING THE PROVISION OF S ECTIOON139(5) OF THE I.T. ACT, WHILE GIVING RETROSPECTIVE EFFECT TO SUCH DEVELOPMENT. 7. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER. 8. LD. COUNSEL FOR THE ASSESSEE, SHRI SANJAY R SHAH ARGUED THAT EVENT OCCURRING AFTER THE DATE OF BALANCE-SHEET WHICH IS AUDITED CAN BE TAKEN INTO CONSIDERATION WHILE REVISING THE RETURN INCOME. THE ASSESSEE FILED THE RETURN U/S.139(1) OF THE ACT. IN VIEW OF THE EVENT THAT TH E GOVERNMENT PASSING ORDER DATED 17-09-2005 WHEN THE SCHEME WAS CANCELLED THE ASSESSEE WAS NOT REQUIRED TO SANCTION IN LOAN OR GIVE ANY SERVICES T O THE PARTY AND THE ASSESSEE WAS NOT ENTITLED TO THE SERVICE CHARGES. ACCORDINGL Y, THE ASSESSEE REVISED THE INCOME IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2005-06. AS NO SERVICES WERE RENDERED, NO INCOME ACCRUED TO THE ASSESSEE. O N THE BASIS OF PRINCIPLE OF REAL INCOME, THE SAME SHOULD NOT HAVE BEEN TAXED THAT IS THE REASON THE ASSESSEE HAD IN FACT, HAS DISCOVERED THE OMISSION W RONG STATEMENT IN THE ORIGINAL RETURN AND ACCORDINGLY REVISED THE RETURN OF INCOME U/S.139(5) OF THE ACT . THE LD. AR RELIED UPON THE JUDGMENT OF HONB LE ALLAHABAD HIGH COURT IN THE CASE OF DHAMPUR SUGAR MILLS LTD. V. CIT (1973) 90 ITR 236 (ALL), JUDGMENT OF HONBE SUPREME COURT OF INDIA IN THE CASE OF CIT V. BOKARO STEEL LTD. (1999) AS REPORTED IN 236 ITR 315 (SC) AND THE JUDG MENT OF HONBLE ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 12 JURISDICTIONAL HIGH COURT IN THE CASE OF DEEPAK NITRITE LTD. V. CIT (2008) AS REPORTED IN 307 ITR 289 (GUJ). 9. ON THE OTHER HAND LD. CIT-DR, SHRI JOHRI ARGUED THAT ALL THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND THE ASSESSE E IS A LIMITED COMPANY. ONCE THE BOOKS OF ACCOUNT ARE CLOSED NO E NTRY IN THE BOOKS OF ACCOUNT CAN BE PASSED AND NO REVERSE ACTION CAN BE TAKEN. HE SUPPORTED THE ORDERS OF BOTH THE AUTHORITIES BELOW ACCORDINGLY. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE BOOKS OF A CCOUNT OF THE ASSESSEE ARE AUDITED AND THE ASSESSEE IS A LIMITED COMPANY. AN D AFTER CLOSING THE BOOKS OF ACCOUNT, NO ENTRY CAN BE PASSED IN THE BOOKS OF ACCOUNT. THESE ARGUMENTS OF THE LD. DR MR. JOHRI CANNOT HELP THE REVENUE BEC AUSE IT IS A CASE OF REVISING OF RETURN U/S 139(5) OF THE ACT. ACCORDING TO WHICH, IF THE ASSESSEE DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THERE IN, I.E. THE RETURN OF INCOME, HE MAY FURNISH REVISED RETURN AS PRESCRIBED U/S. 139(5) OF THE ACT PROVIDED THE ORIGINAL RETURN HAVING BEEN FURNISHED BY THE ASSESSEE U/S.139(1) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAVIN G BEEN FURNISHED THE RETURN OF INCOME U/S.139(1) OF THE ACT, WAS ENTITLED TO FU RNISH THE RETURN US/.139(5) OF THE ACT. THOUGH, THERE WAS A LOSS DECLARED IN THE R ETURN FURNISHED U/S.139(1) OF THE ACT AND BY REVISING THE RETURN FURTHER LOSS IS ALSO INCREASED, THERE CANNOT BE ANY BAR IN REVISING THE RETURN, IF THERE IS AN OMISSION OR WRONG STATEMENT FOUND BY THE ASSESSEE IN THE RETURN OF IN COME ORIGINALLY FILED U/S.139(1) OF THE ACT. IN THE PRESENT CASE BEFORE T HE EXPIRY OF THE LIMITATION TO FILE THE REVISED RETURN, THE ASSESSEE HAD DISCOVERE D THAT NO INCOME HAD ACCRUED TO THE ASSESSEE AND ACCORDINGLY THE RETURN HAD BEEN REVISED FOR THE REASONS OF WITHDRAWAL OF THE SCHEME BY THE GOVERNME NT. THE ACTION OF THE ASSESSEE IN REVISING THE RETURN ON PRINCIPLE OF REA L INCOME CANNOT BE SAID TO BE FALSE OR AGAINST THE PROVISIONS CONTAINED IN SEC TION 139(5) OF THE ACT, IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE DECISIO NS OF VARIOUS COURTS OF LAW RELIED UPON BY THE ASSESSEE HEREINABOVE. WE ACCORDI NGLY REVERSE THE ORDER OF ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 13 LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO ACCE PT THE REVISED RETURN FILED U/S.139(5) OF THE ACT. THUS, THE GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 11. AS REGARDS GROUNDS NO.2 AND 3 THE LD. CIT(A) VI DE PARA-4.3.1 TO 4.3.3 OBSERVED AS UNDER:- 4.3.1 WITHOUT PREJUDICE TO THIS ASPECT, EVEN ON TH E PRINCIPLE OF REAL INCOME, THE FACT THAT THE APPELLANT WAS IN RECEIPT OF THE MONEY CONSEQUENT TO A NEWLY FORMULATED SCHEME OF GOVERNME NT OF GUJARAT AND HAVING RECEIVED THE MONEY AFTER IN PRINCIPLE AP PROVAL OF THE DEFERMENT OF SALES TAX BY THE SALES TAX DEPARTMENT, IT CANNOT BE STATED THAT THE INCOME IS LIABLE FOR TAXATION ON THE GROUN D THAT IT HAS NOT BEEN EARNED. IN FACT, THE G.R RELIED UPON BY THE APPELLA NT IS QUITE AMBIGUOUS E.G. IT DID NOT SAY ANYTHING ABOUT SUCH CASES WHERE THE SCHEME HAD BEEN FULLY IMPLEMENTED OR IS IN THE PROCESS OF IMPL EMENTATION, AS IN THE APPELLANTS CASE. IT IS WORTHWHILE TO REPRODUCE THE G.R. HERE: AFTER CAREFUL CONSIDERATION THE GOVERNMENT OF GUJA RAT HAS DIRECTED TO CANCEL THE ABOVE CITED GRS DATED 21/3/8 8, 1/8/90 AND 29/6/2002 WITH IMMEDIATE EFFECT AND SCHEME OF INTER EST FREE LOAN IN LIEU OF DEFERMENT OF SALES TAX AS INTRODUCED VID E GR DATED 21/3/88, AS AMENDED FROM TIME TO TIME IS HEREBY WIT HDRAWN. THEREFORE, THE G.R DOES NOT CREATE A SITUATION WHER E IT CAN BE STATED THAT THERE IS A CHANGE OF THE CHARACTER OF THE RECE IPT. BUT EVEN IF IT IS UNDERSTOOD THAT THE CHARACTER OF THE RECEIPT GOT CH ANGED, CONSEQUENT TO THIS G.R., THIS HAS HAPPENED ONLY IN SEPTEMBER 2005 , ONE AND HALF YEAR AFTER THE CLOSURE OF THE BOOKS OF THE APPELLANT AND APPELLANT HAS ALSO MADE ADJUSTMENTS IN ITS BOOKS FOR THE PERIOD PERTAI NING TO ASSESSMENT YEAR 2005-06. THEREFORE, A REAL INCOME WAS VERY MUC H IN EXISTENCE DURING THE PREVIOUS YEAR 2003-04 I.E. ASSESSMENT YE AR 2004-05 AND IT WAS NOT A MERE BOOK ENTRY. 4.3.2 COMING TO THE CASE LAWS CITED BY THE APPELLAN T, IN THE CASE OF GODHRA ELECTRICITY CO., THE ISSUE INVOLVED WAS PRIM ARILY OF DOUBTFUL RECOVERIES FROM VARIOUS CUSTOMERS. SIMILARLY, IN TH E CASE OF UCO BANK, THE ISSUE INVOLVED IS THE TREATMENT GIVEN TO INTERE ST ON THE STICKY LOANS. CLEARLY IN BOTH THESE CASES, THE SITUATION IS DIFFE RENT FROM WHAT IS UNDER DISCUSSION IN THIS CASE WHERE THE TRANSACTION STAND S COMPLETED FROM BOTH THE PARTIES AT THIS POINT OF TIME, AS PER THE RULES AND PROCEDURES THEN IN PLACE. SIMILARLY, IN THE BOKARO STEEL LTD. AN ENTRY PERTAINING TO INCOME WAS MADE, WHICH HAD NOT MATERIALIZED AND THE SAME WAS REVERSED IN THE NEXT YEAR, WITHOUT THERE BEEN ANY T RANSFER OF FUNDS. THEREFORE, THE FACTS OF THIS CASE ARE ALSO NOT RELA TED TO THE APPELLANTS CASE. ITA NO.4215 & 4378/AHD/2007 A.Y. 2004-05 GIICL V. ADDL. CIT-GNG RNG PAGE 14 4.3.3 HENCE, CONSIDERING ALL THE FACT AND CIRCUMSTA NCES OF THE ISSUE INVOLVED, THE APPELLANTS PLEA THAT THE AMOUNT OF R S.4,49,95,181/- BE EXCLUDED FROM THE TOTAL INCOME, CANNOT BE ACCEPTED AND THE GROUND IS DISMISSED. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE FINDINGS OF THE LD. CIT(A) THAT THE REAL INCOME WAS VERY MUCH IN EXISTENCE DURING THE PREVIOUS YEAR 2003-04 I.E. ASSESSMENT YE AR 2004-05 HAS NO VALIDITY IN VIEW OF OUR DECISION IN GROUND NO.1 OF THE ASSES SEE HEREINABOVE. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CA SE, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER WHO WILL DECI DE THE TAXABILITY OF INCOME AND EXCLUSION OF SERVICE CHARGES OF RS.4,49,95,181/ -, IN THE ASSESSMENT YEAR 2004-06 IN VIEW OF OUR DECISION IN GROUND NO.1 HEREINABOVE BUT BY AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE.. THUS, GROUNDS NO.2 AND 3 OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL P URPOSES. 13. IN THE RESULT, REVENUES APPEAL IN ITA NO.4378/AHD/2007 IS DISMISSED AND THE APPEAL OF ASSESSEE IN ITA NO.4215/AHD/2007 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ) &'( '#$% *'+, 31 / 01 /201 2 # ! 0 1 2 3 THIS ORDER PRONOUNCED IN OPEN COURT ON 31/01/ 201 2. SD/- SD/- ( MUKUL KUMAR SHRAWAT ) ( B.P. JAIN ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *'+,- 31/01/2012 5'' 3 DKP* &'( &'( &'( &'( 6 6 6 6 76$ 76$ 76$ 76$ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ++ & &: / CONCERNED CIT 4. & &:- / CIT (A) 5. 6=2 , & %, 5'' / DR, ITAT, AHMEDABAD 6. 2@ A) / GUARD FILE. BY ORDER/ &'( , /TRUE COPY/ B/5 + & %, 5'' 3