Seagram India Pvt. Ltd., V. Addl. CIT, Range-8,

ITA 4534/DEL/2004

• Counselvise Citation: 453420114 RSA 2004
• Duration Of Justice: 7 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-02-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 15-10-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Assessee Lawyers: DEEPAK KUMAR
• Keywords: Gift; Business income; Income from undisclosed sources; Opportunity of being heard; Additional evidence; Reasonable cause; Commercial expediency
• Section: 144; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 4534(DEL)/2004 ASSESSMENT YEAR : 2000-01 SEAGRAM MANUFACTURING PVT. LTD., ADDITIONAL COMMISSIONER OF 303, MANOSAROVER, 90, VS. INCOME-TAX, RANGE-8, NEHRU PLACE, NEW DELHI. NEW DELHI. PAN: AAACS9563R ITA NO. 4691(DEL)/2004 ASSESSMENT YEAR : 2000-01 ADDITIONAL COMMISSIONER OF SEAG RAM MANUFACTURING PVT. LTD., INCOME-TAX, RANGE-8, NEW DELHI. VS. NEW DELHI . (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK KUMAR, ADVOCATE DEPARTMENT BY: SHRI R AJ TANDON, CIT (DR) DATE OF HEARING : 21/02/2012 DATE OF PRONOUNCEMEN T: 23/03/2012 ORDER PER K.G. BANSAL : AM THESE CROSS APPEALS, EMANATING FROM THE ORDER OF CIT(APPEALS)- XI, NEW DELHI, DATED 13.08.2004 IN APPEAL NO. 1 5/03-04, WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR TH E ASSESSEE AND THE LD. CIT, DR. THEREFORE, A COMMON ORDER IS PASSED. F OR THIS PURPOSE, WE WILL BE PROCEEDING WITH THE APPEAL OF THE ASSESSEE A T THE FIRST INSTANCE. ITA NOS. 4534&4691(DEL)/2004 2 1.1 THE ASSESSEE HAD SOUGHT TO RAISE AN ADDITI ONAL GROUND BY FILING AN APPLICATION DATED 08.06.2010 TO THE EFFECT THAT THE ASSESSING OFFICER ERRED BOTH ON FACTS AND IN LAW IN FRAMING THE ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961, WITHOUT HAVING ISSUED NOTICE U/S 143(2) WITHIN THE TIME PRESCRIBED UNDER PROVISO TO THE AFOR ESAID PROVISION. THIS APPLICATION HAS BEEN WITHDRAWN IN THE COURSE OF HEARING BEFORE US ON 21.02.2012. THEREFORE, THE GROUND IS NOT ADMITTE D AND, THUS, NO ADJUDICATION IS REQUIRED IN THIS MATTER. 1.2 GROUND NOS. 1, 2 AND 3 ARE GENERAL IN NATU RE TO THE EFFECT THAT THE IMPUGNED ORDER IS BAD IN LAW, IT HAS BEEN PASSE D WITHOUT APPLICATION OF MIND AND THAT THE LD. CIT(APPEALS) FAILED TO APPR ECIATE THAT THE ASSESSMENT WAS FRAMED IN A HURRIED MANNER WITH OUT AFFORDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THESE GROUNDS HAVE NOT BEEN PRESSED BEFORE US. THEREFORE, THESE GROUNDS ARE ALSO TREATED AS DISMISSED. 2. GROUND NO. 4 CONSISTS OF 8 SUB-GROUNDS. THESE GROUNDS DEAL WITH NON-ADMISSION OF ADDITIONAL EVIDENCE FILED BEFOR E THE LD. CIT(APPEALS). IT HAS BEEN EXPLAINED TO US THAT GROUND NO. 4 PRO JECTS THE REAL GRIEVANCE, ITA NOS. 4534&4691(DEL)/2004 3 NAMELY, THAT THE LD. CIT(APPEALS) ERRED IN NOT ADMITTING ADDITIONAL EVIDENCE WHICH WAS PLACED BEFORE HIM AND SUCH N ON-ADMISSION HAS RESULTED IN GRAVE MISCARRIAGE OF JUSTICE. THE L D. COUNSEL HAS CLUBBED GROUND NO. 6.3 WITH THIS GROUND WHICH IS TO TH E EFFECT THAT THE LD. CIT(APPEALS) GROSSLY ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT APPEAL FOR ASSESSMENT YEAR 2001-02 WAS ALSO PE NDING BEFORE HIM AND IN THAT ASSESSMENT NO DISALLOWANCE WAS MADE FROM T HE EXPENDITURE INCURRED UNDER THE HEAD SALES AND MARKETING EXPENSES. 2.1 IN THIS CONNECTION, THE LD. COUNSEL DREW OUR ATTENTION TO PARAGRAPH NO. 5 OF THE ASSESSMENT ORDER WHICH DEALS WITH THESE EXPENSES. IT IS MENTIONED THAT THESE EXPENSES HAVE INCREASED FRO M ABOUT RS. 19.91 CRORE IN THE PRECEDING YEAR TO ABOUT RS. 24.17 CRORE IN THE CURRENT YEAR. SIMILARLY, COMMISSION ON SALES, LEGAL AND PROFES SIONAL EXPENSES HAVE ALSO INCREASED IN THIS YEAR. THEREFORE, A QUES TIONNAIRE DATED 12.12.2002 WAS ISSUED TO THE ASSESSEE ASKING IT TO FURNI SH THE DETAILS OF THESE EXPENSES, NAME AND ADDRESS OF THE PARTIES TO W HOM PAYMENTS WERE MADE AND THE BASIS OF THE PAYMENT. THE ASSESSEE FILED A BREAK-UP OF THE EXPENSES OF ABOUT RS. 24.18 CRORE IN TERMS OF MEDIA ADVERTISEMENT, CONSUMER PROMOTION EXPENSES, TRADE LUNCH EXPENSES , TRADE SCHEME ITA NOS. 4534&4691(DEL)/2004 4 EXPENSES, MERCHANDISING EXPENSES AND MARKETING EXPENSES. THE DETAILS HAVE BEEN MENTIONED ON PAGE NO. 14 OF THE ASSES SMENT ORDER IN PARAGRAPH NO. 5.1. THE ASSESSEE ALSO FURNISHED FURTHER B REAK-UP UNDER DIFFERENT HEADS, BUT COMPLETE DETAILS IN TERMS OF NAME A ND ADDRESS OF THE PAYEES WERE NOT FILED. THE ASSESSEE WAS REMINDED TO F ILE THESE DETAILS. IT WAS SUBMITTED IN LETTER DATED 11.02.2003 THAT THE ASSESSEE HAD ALREADY FILED THE DETAILS OF MARKETING EXPENSES IN ANNEXURE-2 OF THE LETTER. ON PERUSAL THEREOF, IT WAS FOUND THAT ONLY NAMES AND AMOUNT S WERE MENTIONED BUT ADDRESSES WERE NOT FURNISHED. THE AO HAS SUMMARI ZED THE DETAILS OF THE EXPENSES ON PAGE NO. 15 IN PARAGRAPH NO. 5.2 TH E MARKETING EXPENSES ARE TO THE EXTENT OF ABOUT RS. 8.31 CRORE, TRADE S CHEME EXPENSES ARE ABOUT RS. 11.49 CRORE AND OTHER MISCELLANEOUS EXPENSES ARE ABOUT RS. 4.37 CRORE. IT IS FURTHER MENTIONED THAT THE NAMES AND AMOUNTS HAVE BEEN FURNISHED ONLY IN RESPECT OF MARKETING AND TRADE SCHEME EXPENSE S AND NOT IN RESPECT OF OTHER/MISCELLANEOUS EXPENSES. THE ASSESSEE EXPR ESSED ITS INABILITY TO FURNISH COMPLETE ADDRESSES AS THE NUMBER OF P ARTIES WAS LARGE, THEREFORE, IT WAS REQUESTED THAT A MONETARY LI MIT MAY BE FIXED FOR FURNISHING COMPLETE ADDRESSES. THE AO FIXED THIS LIMIT AT RS. 10.00 LAKH, I.E., THE ASSESSEE WAS REQUIRED TO FURNISH DET AILED ADDRESSES WHERE THE EXPENDITURE WAS RS. 10.00 LAKH AND ABOVE. THE A SSESSEE FURNISHED A LIST ITA NOS. 4534&4691(DEL)/2004 5 OF SUCH PARTIES BUT COULD NOT FURNISH COMPLETE DETAILS OF ALL OF THEM. IN RESPECT OF MARKETING EXPENSES, ADDRESSES OF SIX PARTIES OUT OF 14 COULD NOT BE FURNISHED. IN RESPECT OF TRADE SCHEME E XPENSES, THE ASSESSEE COULD NOT FURNISH ADDRESSES OF THREE PARTIES OUT OF 1 6. THE AO CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE H IM. IT IS MENTIONED THAT THE ACCOUNTS ARE FULLY COMPUTERIZED AND, THEREFO RE, GETTING ANY INFORMATION SHOULD NOT BE DIFFICULT AT ALL. THUS , THE EXPLANATION THAT INFORMATION IS NOT EASILY ACCESSIBLE WAS HELD TO BE INCREDIBLE. THERE WERE ALSO DISCREPANCIES IN THE FIGURES IN SOME CASES IN RESPECT OF WHICH ENQUIRIES WERE MADE BY THE AO. SUCH DISCREPANCI ES WERE RECONCILED BY THE ASSESSEE. HOWEVER, DUE TO LACK OF COMPLETE INFORMATION, EXPENDITURE OF RS. 10.00 LAKH AND ABOVE WHERE ADDRESSES COULD NOT BE FURNISHED AND 10% OF THE EXPENSES IN OTHER CASES WERE DISALLO WED. 2.2 IT IS FURTHER MENTIONED THAT THE ASSESSEE FURNISHED DETAILS OF TRADE SCHEME EXPENSES, WHICH AGGREGATED TO ABOUT RS. 1 2.6 CRORE, HOWEVER, SUCH EXPENSES WERE EARLIER SHOWN AT ABOUT RS. 11 .49 CRORE. THE DISCREPANCY COULD NOT BE RECONCILED. THEREFORE, A FURTHER ADDITION OF RS. 1,10,58,759/- WAS MADE. THE ASSESSEE HAD ALSO N OT FURNISHED COMPLETE DETAILS WHERE PAYMENTS WERE MADE OF AN AMOUNT OF RS. 10.00 LAKH OR ITA NOS. 4534&4691(DEL)/2004 6 ABOVE. THE AO HAS FURNISHED THE NAMES AND AMOU NTS IN RESPECT OF THESE PARTIES ON PAGE NO. 17 OF THE ORDER. IT IS SEEN THAT THERE ARE THREE PARTIES TO WHOM AGGREGATE PAYMENT OF RS.42,79,094/- WAS MADE. THIS AMOUNT WAS ALSO DISALLOWED IN COMPUTATION OF INCOME. THE DETAILS SHOWED THAT A PAYMENT OF RS. 13,47,349/- WAS MADE TO MANJIT B. SINGH. HOWEVER, THE DETAILS FURNISHED BY THE ASSESSEE SHOWED THE E XPENDITURE AT RS. 47,97,339/-. THE DIFFERENCE OF RS. 34,49,990/- WAS ALSO ADDED FOR LACK OF RECONCILIATION OF THE AMOUNTS. 3. BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTE D THAT THE AO REQUIRED THE ASSESSEE TO FURNISH NAME AND ADDRE SS OF THE PARTIES TO WHOM PAYMENTS WERE MADE IN EXCESS OF RS. 10.00 LAKH. THE ASSESSEE TOOK SOME TIME TO PREPARE THESE DETAILS FOR TWO REASONS , I.E., (I) THE CENTRALIZED ACCOUNTS WERE DE-CENTRALIZED ON 01.07.1999; AND (II) SPECIAL AUDIT WAS BEING CONDUCTED IN JANUARY AND FEBRUARY, 2003, DU E TO CHANGE IN MANAGEMENT. THEREFORE, WHILE THE DETAILS OF EX PENSES AGGREGATING TO RS. 24.17 CRORE WERE FILED, IT WAS TAKING TIME TO OBTAINING ADDRESSES FROM THE REGIONAL OFFICES LOCATED IN VARIOUS STATES. THE ASSESSEE-COMPANY SOUGHT TO FILE THE PENDING ADDRESSES ON 21.03.2003 IN THE AFTERNOON WHEN IT WAS INFORMED THAT NO FURTHER DETAILS CAN BE TA KEN ON RECORD. ITA NOS. 4534&4691(DEL)/2004 7 CONSEQUENTLY, THESE DETAILS WERE FORWARDED TO TH E AO ON 22.03.2003 BY SPEED POST. HOWEVER, THE AO PASSED THE ORDER ON 21.03.2003 AND THE AFORESAID DETAILS WERE NOT TAKEN COGNIZANCE OF. THUS, IT WAS REQUESTED THAT IT WANTS TO FILE ADDITIONAL EVIDENCES WHIC H APPEAR AT SERIAL NUMBERS 3,4,7, 8, 9, 10,11 AND 13 OF THE PAPER BOOK FILED B EFORE HIM. THE LD. CIT(APPEALS) CONSIDERED THE REQUEST FOR FILING ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME-TAX RULES, 1962. THE RULE IN THIS BEHALF IS THAT NO ADDITIONAL EVIDENCE SHALL BE FILED BEFORE THE CIT(APPEALS) EXCEPT IN FOLLOWING CIRCUMSTANCES:- (I) THE ASSESSING OFFICER HAS REFUSED TO ADMIT EVIDE NCE, WHICH OUGHT TO HAVE BEEN ADMITTED; (II) THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE F ROM PRODUCING THE EVIDENCE, WHICH HE WAS CALLED UPON TO PRODUCE ; (III) THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE F ROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE, WHICH I S RELEVANT TO ANY GROUND OF APPEAL; ITA NOS. 4534&4691(DEL)/2004 8 (IV) THE ASSESSING OFFICER MADE THE ORDER APPEALED A GAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. 3.1 IT MAY BE MENTIONED HERE THAT THE LD. CIT(AP PEALS) HAD OBTAINED THE REPORT OF THE AO, WHO STRONGLY OBJECTED TO ACCEP TANCE OF FRESH EVIDENCE. IT WAS SUBMITTED THAT VARIOUS OPPORTUNITIES WER E GRANTED TO FURNISH THE DETAILS AND RECONCILIATION. IT WAS NOT A CASE W HERE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN FURNISHING THESE DETAILS BUT IT WAS A CASE OF ADOPTION OF DELAYING TACTICS FOR AVOIDING IN VESTIGATION. AFTER CONSIDERING THE RIVAL SUBMISSIONS, THE LD. CIT(A ) CAME TO THE CONCLUSION THAT THE NAME AND ADDRESS OF THE PARTIES WITH WH OM ASSESSEE HAD REGULAR BUSINESS DEALINGS COULD HAVE BEEN INSTANTLY OBTA INED AS THE ACCOUNTS WERE COMPUTERIZED. THE GROUND THAT THE DETAILS HAD TO BE OBTAINED FROM REGIONAL OFFICES WAS MERELY A RUSE AS THESE D ETAILS OUGHT TO HAVE BEEN AVAILABLE WITH THE ASSESSEE WHEN THE RETURN WAS F ILED ON 30.11.2000. THUS, THE FRESH EVIDENCE WAS NOT TAKEN ON RECORD. THE APPEAL OF THE ASSESSEE REGARDING DISALLOWANCE FROM EXPENSES WAS ALSO DISMISSED AS THE ASSESSEE COULD NOT EXPLAIN THE DISCREPANCIES AND FULL DETAILS WERE NOT FURNISHED. ITA NOS. 4534&4691(DEL)/2004 9 4. BEFORE US, THE LD. COUNSEL REFERRED TO THE FIN DINGS IN THE ASSESSMENT ORDER AND THE IMPUGNED ORDER. THESE HAVE ALREAD Y BEEN SUMMARIZED BY US. OUR ATTENTION IS DRAWN TO THE FACT THAT THE NOTICE FOR FURNISHING THE DETAILS IN THE FORM OF QUESTIONNAIRE WAS ISSUED ON 12.12.2002 AND THE ASSESSMENT WAS MADE ON 21.03.2003. THE PROCEEDING S IN THIS RESPECT, THUS, COVERED A PERIOD OF THREE MONTHS AND 9 DAYS. THIS WAS NOT SUFFICIENT TIME FOR EXTRACTING THE VOLUMINOUS INFORMATION AN D FURNISHING THE SAME TO THE AO ALONG WITH RECONCILIATION OF VARIOUS AMOUN TS. OUR ATTENTION IS DRAWN TO PAGE NOS. 42 TO 45 OF THE PAPER BOOK, BE ING A LETTER DATED 21.03.2003 ADDRESSED TO THE AO AND ITS ENCLOSURES . ACCORDING TO THE LD. COUNSEL, THIS LETTER CONTAINS THE PENDING ADDRES SES REQUIRED BY THE AO. FURTHER, OUR ATTENTION IS DRAWN TO PAGE NOS. 4 6 TO 48 OF THE PAPER BOOK, BEING A LETTER DATED 24.03.2003 ADDRESSED TO THE AO, WHICH CONTAINS THE SAME OR SIMILAR INFORMATION AS IN LETTER DATED 21.03.2003. AS MENTIONED EARLIER, THIS INFORMATION WAS NOT CONSIDERED BY THE AO WHILE PASSING THE ORDER. IT IS SUBMITTED THAT RECONCILIATION WAS M ADE WHEREVER THE AO HAD FOUND DISCREPANCIES. IT IS FURTHER SUBMITTED THA T DETAILED ENQUIRY WAS MADE IN THE IMMEDIATELY SUCCEEDING YEAR IN RESPECT OF SIMILAR EXPENSES, BUT NO ITA NOS. 4534&4691(DEL)/2004 10 DISALLOWANCE WAS MADE IN THE ORDER PASSED ON 27. 02.2004. TEN PARTIES ARE COMMON IN THIS AND THE IMMEDIATELY SUCCEEDIN G YEAR. 4.1 OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS PAG E NOS. 276 AND 277 OF THE PAPER BOOK. PAGE NUMBER 276 GIVES THE D ETAILS OF PROMOTIONAL ALLOWANCES FOR THE PERIOD 01.04.1999 TO 30.06.19 99 WHILE PAGE NO. 277 FURNISHES DETAILS OF THE SAME EXPENDITURE FOR TH E PERIOD 01.07.1999 TO 31.03.2000. IT IS SUBMITTED THAT THIS SHOWS THAT THE ACCOUNTS WERE DE- CENTRALIZED W.E.F. 01.07.1999. OUR ATTENTION HAS ALSO BEEN DRAWN TO PAGE NOS. 85 TO 262, WHICH FURNISH PARTY-WISE DETAILS OF TRADE SCHEME EXPENSES WITH INDIVIDUAL LEDGER ACCOUNT. PAGE N OS. 263 TO 275 FURNISH EVIDENCE THAT THE PAYEES HAD LIQUOR LICENSES. P AGE NOS. 98 TO 102 CONTAIN DETAILS OF EXPENSES WHERE PAYMENT OF RS. 1 0.00 LAKH OR BELOW HAS BEEN MADE. THE CASE OF THE LD. COUNSEL IS THAT T HE ADDITIONAL EVIDENCE SHOULD HAVE BEEN ADMITTED AS SUFFICIENT OPPORTUN ITY WAS NOT GRANTED TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEED INGS. FURTHER, IF THESE DETAILS HAD BEEN CONSIDERED, NO ADDITION OR DISA LLOWANCE COULD HAVE BEEN MADE OR SUSTAINED. ITA NOS. 4534&4691(DEL)/2004 11 4.2 IN ORDER TO SUPPORT HIS CASE REGARDING ADMISS ION OF ADDITIONAL EVIDENCE, THE LD. COUNSEL RELIED ON THE DECISIO N IN THE CASE OF SMT. PRABHAVATI S. SHAH VS. CIT, (1998) 231 ITR 1 (B OM.). IN THIS CASE, THE ASSESSEE HAD RECEIVED LOANS FROM TWO PERSONS. H E WAS ASKED TO FILE CONFIRMATION LETTERS FROM THE CREDITORS BUT FAI LED TO DO SO. THEREAFTER, THE ITO MADE SOME ENQUIRIES ON HIS OWN. THE SUMMONS ISSUED TO THE FIRST CREDITOR WAS RETURNED AS IT WAS STATED THAT IT WAS NOT IN EXISTENCE. IN RESPECT OF THE LOAN FROM THE SECOND PARTY, HE FOU ND THAT THE ASSESSEE FAILED TO IDENTIFY THE CREDITOR. THUS, THE AMOUNT OF R S. 1,43,520/-, REPRESENTING THE AMOUNT OF TWO LOANS AND INTEREST THEREON WAS ADDED TO THE TOTAL INCOME. BEFORE THE AAC, IT WAS CONTENDED THAT TH E LOAN WAS TAKEN BY WAY OF A CHEQUE FROM THE FIRST PARTY AND, THE REFORE, THE ITO SHOULD HAVE MADE ENQUIRIES FROM THE BANK. IN RESPECT OF LOAN FROM THE SECOND PARTY, IT WAS CONTENDED THAT LOAN WAS RECEIVED BY WAY OF CHEQUE AND THE REPAYMENT WAS ALSO MADE BY WAY OF CHEQUE. THE ASSESSEE ALSO WANTED TO PRODUCE ADDITIONAL EVIDENCE IN THE FORM OF P HOTOCOPIES OF THE CHEQUES, CERTIFICATE FROM THE BANK TO SHOW THAT THE SECON D SUM OF RS. 40,000/- WAS RECEIVED FROM THE LENDER, AND THE BANK ACCOUNT. THE LD. CIT(APPEALS) DID NOT ACCEPT THE EVIDENCES AND CONFIRMED THE AD DITION MADE BY THE AO. THIS ORDER WAS UPHELD BY THE TRIBUNAL. THE HONBLE COURT MENTIONED THAT ITA NOS. 4534&4691(DEL)/2004 12 THE EVIDENCE SHOULD HAVE BEEN ACCEPTED UNDER RULE 4 6A FOR THE REASON THAT THE ASSESSEE DID NOT HAVE ANY OCCASION TO COLLEC T SUCH EVIDENCE EARLIER. SHE COULD HAVE EXPECTED THAT CREDITORS WOULD A PPEAR BEFORE THE ITO IN COMPLIANCE OF THE SUMMONS ISSUED BY HIM. SHE WAS NEVER INFORMED THAT THE CREDITORS WERE NOT AVAILABLE OR WERE UNIDENT IFIABLE. THEREFORE, THE CASE FALLS UNDER RULE 46A(1)(C). FURTHER, IN THE CASE OF CIT VS. K. RAVINDRANATHAN NAIR (2003) 131 TAXMAN 743 (KER.), THE ASSESSEE HAD SHOWN THE RECEIPT OF LOANS IN THE RELEVANT YEAR. THE ASSESSEE HAD PRODUCED COPIES OF RECEIPT BUT NO CONFIRMATION L ETTER WAS FILED FROM EITHER OF THE CREDITORS. THEREFORE, THE ADDITION WAS MADE U/S 68. BEFORE THE CIT(APPEALS), THE ASSESSEE PRODUCED TWO CONF IRMATION LETTERS. HOWEVER, HE DID NOT ENTERTAIN THE EVIDENCE BY ME NTIONING THAT THE CONDITIONS OF RULE 46A ARE NOT SATISFIED. IN S ECOND APPEAL, THE TRIBUNAL TOOK THE VIEW THAT THE LD. CIT(APPEALS) WAS NOT RIGHT IN STRAIGHTWAY REJECTING THE ADDITIONAL EVIDENCE AND INSTEAD THE MATTER SHOULD HAVE BEEN REMANDED TO THE AO FOR EXAMINING THE TRANSACTION S. ON APPEAL, THE HONBLE COURT MENTIONED THAT SUB-RULE (4) OF RUL E 46A AND THE PROVISIONS CONTAINED IN SECTION 250(1) ENABLE TH E COMMISSIONER (APPEALS) TO ACCEPT ADDITIONAL EVIDENCE IN APPROPRIATE CA SES. IF PROVISIONS OF SUB- RULE 46A ARE CONSIDERED TO BE MANDATORY, THE RE WILL BE A CONFLICT ITA NOS. 4534&4691(DEL)/2004 13 BETWEEN THESE PROVISIONS AND PROVISIONS CONTAINE D IN SECTION 250 CONFERRING POWER ON THE CIT(APPEALS) TO ENQUIRE INTO THE MATTER AND PASS APPROPRIATE ORDER. IT WAS NOT THE CASE OF TH E AO OR THE LD. CIT(APPEALS) THAT SEVERAL OPPORTUNITIES HAD B EEN GRANTED TO THE ASSESSEE TO PRODUCE CONFIRMATION LETTERS. IN THES E CIRCUMSTANCES, THE HONBLE COURT UPHELD THE ORDER OF THE TRIBUNAL. 5. IN REPLY, THE LD. CIT, DR REFERRED TO THE F INDINGS OF THE LD. CIT(APPEALS) IN THIS MATTER. IT IS MENTIONED THAT THE AO HAD MADE ENDLESS EFFORTS TO GET THE DETAILS, WHICH WERE NO T FURNISHED EVEN ON 17.03.2003, THE LAST DATE OF HEARING. THIS WAS DONE WITH A VIEW TO PREVENT THE AO FROM MAKING ANY FURTHER INVESTIGA TION. THE CASE OF THE ASSESSEE IS THAT THE DETAILS COULD NOT BE FURNISH ED BECAUSE OF CERTAIN REASONS WHICH WERE BEYOND ITS CONTROL. HOWEVER, T RUTH IS DIFFERENT AS STATED ABOVE AND IT IS FOR THE AFORESAID REASON THAT ADDITIONAL EVIDENCE WAS NOT ADMITTED. ELABORATING FURTHER, THE LD. CI T(APPEALS) MENTIONED ON PAGE NO. 79 OF THE IMPUGNED ORDER THAT THE INFORMA TION WAS NOT SUCH WHICH COULD HAVE TAKEN MONTHS TO COLLECT AND COLLATE . THE NAMES AND ADDRESSES OF THE PARTIES ARE INSTANTLY AVAILABLE WHEN THE ACCOUNTS ARE COMPUTERIZED. THE PLEA THAT THE DELAY OCCURRED ON ACCOUNT OF DE -CENTRALIZATION OF ITA NOS. 4534&4691(DEL)/2004 14 ACCOUNTS IS ALSO NOT ACCEPTABLE BECAUSE THESE D ETAILS SHOULD HAVE BEEN AVAILABLE WITH THE ASSESSEE WHEN ACCOUNTS WERE FINALIZED ABOUT TWO AND HALF MONTHS AGO AND THE RETURN WAS FILED. THE A O HAD INITIATED ASSESSMENT PROCEEDINGS ON 26.02.2002 AND A DETA ILED QUESTIONNAIRE WAS ISSUED ON 09.12.2002. THE AO REQUIRED THE ADD RESSES OF THE PARTIES SO THAT CROSS-VERIFICATION COULD BE MADE. FINALLY, AS PER REQUEST OF THE ASSESSEE, THE LIST WAS PRUNED TO INCLUDE ONLY T HOSE PARTIES WHO HAD BEEN PAID THE SUM EXCEEDING RS. 10.00 LAKH. THESE A RE BIG AMOUNTS AND, THEREFORE, ENQUIRY WAS NECESSARY. IT IS ARGUED THAT THE FAILURE TO FURNISH THE DETAIL WAS NOT ON ACCOUNT OF ANY REASONABLE C AUSE BUT THE ASSESSEE DID NOT WANT TO FURNISH THE DETAILS FOR AVOIDING ANY ENQUIRY. THEREFORE, THE LD. CIT(APPEALS) WAS RIGHT IN REJECTING THE ADDITIONAL EVIDENCE. 5.1 IN ORDER TO SUPPORT HER CASE, RELIANCE HAS B EEN PLACED ON THE DECISION IN THE CASE OF MRS. JYOTSNA SURI VS. DC IT (1997) 61 ITD 139 (DEL). THE FACTS ARE THAT THE ASSESSEE RECEIVE D CERTAIN SUMS BY WAY OF FOREIGN EXCHANGE AND CLAIMED THAT SHE ENJOYS IM MUNITY FROM ENQUIRY UNDER THE INCOME-TAX ACT, IN VIEW OF FOREIGN EXC HANGE BONDS (IMMUNITIES AND EXEMPTIONS) ACT, 1991. SHE WAS R EQUIRED TO FILE THE REQUISITE DECLARATION MADE BEFORE THE AUTHORIZED DEALER OF FOREIGN ITA NOS. 4534&4691(DEL)/2004 15 EXCHANGE. THIS WAS NOT DONE. AFTER SEEKING A NUMBER OF ADJOURNMENTS, IT WAS SUBMITTED THAT SHE WAS NOT UNDER OBLIGATI ON TO FILE A COPY OF THE DECLARATION. THE AO HELD THAT THE ASSESSEE WAS NO T ELIGIBLE FOR THE IMMUNITY AND THEREAFTER PROCEEDED TO MAKE FURTHER ENQUIRIES. INFORMATION WAS COLLECTED FROM THE BANK WHICH INFORMED THAT N O SUCH DECLARATION WAS FILED. CONSEQUENTLY, THE AMOUNT WAS CONSIDERED TO BE INCOME FROM UNDISCLOSED SOURCES. BEFORE THE CIT(APPEALS), IT WAS SUBMITTED THAT THE AMOUNTS WERE RECEIVED AS GIFT FROM A RELATIO N IN DUBAI AND A CERTIFICATE FROM THE BANK WAS FILED ABOUT THE F INANCIAL POSITION OF THE RELATIVE. THE LD. CIT(APPEALS) WAS ALSO INFORME D THAT A GIFT DEED HAS BEEN FILED BEFORE THE AO AFTER COMPLETION OF THE ASSESSMENT. THE LD. CIT(APPEALS) REFUSED TO ACCEPT THE ADDITIONAL E VIDENCE. IT HAS BEEN HELD THAT IT IS NECESSARY TO FILE A COPY OF THE DECL ARATION SO AS TO ENTITLE THE ASSESSEE TO GET THE BENEFIT OF THE IMMUNITY SCHE ME. THUS, THE ASSESSEE WAS NOT ENTITLED TO SUCH IMMUNITY. IN ABSENCE THEREOF, IT WAS FOR HER TO DISCHARGE THE BURDEN REGARDING THE GENUINENESS OF THE ALLEGED GIFT BY IDENTIFYING THE DONOR, PROVING HIS CAPACITY AND GENUINENESS OF THE GIFT. SINCE THE SAME HAS NOT BEEN DONE, THE FINDINGS OF THE LOWER AUTHORITIES HAVE BEEN UPHELD. COMING TO THE PROVISIONS CONTA INED IN RULE 46A AND SECTION 250(5), IT HAS BEEN HELD THAT THE ASSESSE E HAS NO VESTED RIGHT TO ITA NOS. 4534&4691(DEL)/2004 16 ADDUCE ADDITIONAL EVIDENCE BEFORE THE FIRST APP ELLATE AUTHORITY. THEREFORE, THE LD. CIT(APPEALS) WAS JUSTIFIED I N REFUSING TO ENTERTAIN THE ADDITIONAL EVIDENCE WHICH THE ASSESSEE FAILED T O PRODUCE BEFORE THE AO EVEN AFTER GRANT OF SEVERAL OPPORTUNITIES. IN THE CASE OF C. UNNIKRISHNAN VS. CIT, (1998) 233 ITR 485, THE ASSESSEE HAD FILE D A RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148. IN THE ASSESSMENT P ROCEEDINGS, THE ITO ISSUED NOTICES AND SUMMONS U/S 143(2), 142(1) AND 13 1 OF THE ACT. NO RESPONSE WAS RECEIVED FROM THE ASSESSEE. THEREF ORE, THE ASSESSMENT WAS COMPLETED U/S 144 ESTIMATING BUSINESS INCOME AT RS. 60,000/- FROM HOTEL BUSINESS AND RS. 15,000/- FROM CONTRACT BUSINESS. BEFORE THE LD. CIT(APPEALS), THE SERVICE OF NOTICES WAS ADMITT ED BUT IT WAS CONTENDED THAT THE NOTICES WERE NOT PROPERLY SERVED. HOW EVER, NO ATTEMPT WAS MADE TO PLACE ADDITIONAL EVIDENCE ON HIS RECORD . THE CIT(APPEALS) CAME TO THE CONCLUSION THAT THE NOTICE HAD BEEN PROP ERLY SERVED. THE PROOF OF SERVICE WAS ALSO PRODUCED BEFORE THE TRIBUNAL. TH US, THE TRIBUNAL ALSO CAME TO THE CONCLUSION THAT THE CONTENTION THAT N O OPPORTUNITY WAS GIVEN TO THE ASSESSEE IS BASELESS. IT WAS CONTENDED B EFORE THE TRIBUNAL THAT THE ASSESSEE HAD PRODUCED SALES-TAX ASSESSMENT ORDER SHOWING THAT HE WAS NOT THE PERSON WHO WAS RUNNING THE HOTEL BUT IT WAS SOME ONE ELSE DOING SO ON HIS BEHALF. THIS EVIDENCE WAS NOT CONSIDERED BY THE AAC. HOWEVER, ITA NOS. 4534&4691(DEL)/2004 17 THE TRIBUNAL DID NOT ACCEPT THIS CONTENTION. ON A REFERENCE, THE HONBLE COURT MENTIONED THAT THERE IS NO EVIDENCE FILED BY THE ASSESSEE ON RECORD IN RESPECT OF IMPROPER SERVICE OF NOTICE. FURTHER , THERE IS NO EVIDENCE THAT HE WAS NOT RUNNING THE HOTEL HIMSELF. THE EVID ENCE THAT SOME BODY WAS RUNNING THE HOTEL ON HIS BEHALF WAS WITHHELD. NO ATTEMPT WAS MADE BY THE ASSESSEE EITHER BEFORE THE INCOME-TAX OFF ICER OR THE AAC TO PRODUCE ADDITIONAL EVIDENCE. IN SUCH CIRCUMSTANCE S, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE AAC WAS JUSTIFIED IN NOT EN TERTAINING THE ADDITIONAL EVIDENCE. IN THE CASE OF CIT VS. MANISH BUILDWE LL (P) LTD. (2012) 204 TAXMAN 106 (DEL), THE HONBLE COURT CAME TO THE CONCLUSION THAT THE ADDITIONAL EVIDENCE WAS ADMITTED AND ACCEPTED AS GENUINE WITHOUT THE ASSESSING OFFICER FURNISHING HIS REPORT AND WITHOU T VERIFICATION. IN SUCH CIRCUMSTANCES, THE TRIBUNAL OUGHT TO HAVE RESTOR ED THE MATTER TO THE FILE OF THE CIT(APPEALS) WITH A DIRECTION TO HIM TO COMPLY WITH RULE 46A(3). THE ERROR OCCURRED BECAUSE THE TRIBUNAL MIXED UP THE POWERS OF CIT(APPEALS) U/S 250(4) WITH THE POWERS VESTED IN HIM UNDER RULE 46A. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PAR AGRAPH NO. 24 IS REPRODUCED BELOW:- 24. IN THE PRESENT CASE, THE CIT (A) HAS OBSERVED T HAT THE ADDITIONAL EVIDENCE SHOULD BE ADMITTED BECAUSE THE ASSESSEE WAS ITA NOS. 4534&4691(DEL)/2004 18 PREVENTED BY ADDUCING THEM BEFORE THE ASSESSING OFF ICER. THIS OBSERVATION TAKES CARE OF CLAUSE (C) OF SUB-RULE (1 ) OF RULE 46A. THE OBSERVATION OF THE CIT (A) ALSO TAKES CARE OF S UB-RULE (2) UNDER WHICH HE IS REQUIRED TO RECORD HIS REASONS FO R ADMITTING THE ADDITIONAL EVIDENCE. THUS, THE REQUIREMENT OF SUB-R ULES (1) AND (2) OF RULE 46A HAVE BEEN COMPLIED WITH. HOWEVER, S UB-RULE (3) WHICH INTERDICTS THE CIT (A) FROM TAKING INTO ACCOU NT ANY EVIDENCE PRODUCED FOR THE FIRST TIME BEFORE HIM UNL ESS THE ASSESSING OFFICER HAS HAD A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME, HAS NOT BEEN COMPL IED WITH. THERE IS NOTHING IN THE ORDER OF THE CIT (A) TO SHO W THAT THE ASSESSING OFFICER WAS CONFRONTED WITH THE CONFIRMAT ION LETTERS RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS WHO PAI D THE AMOUNTS BY CHEQUES AND ASKED FOR COMMENTS. THUS, TH E END RESULT HAS BEEN THAT ADDITIONAL EVIDENCE WAS ADMITT ED AND ACCEPTED AS GENUINE WITHOUT THE ASSESSING OFFICER F URNISHING HIS COMMENTS AND WITHOUT VERIFICATION. SINCE THIS IS AN INDISPENSABLE REQUIREMENT, WE ARE OF THE VIEW THAT THE TRIBUNAL O UGHT TO HAVE RESTORED THE MATTER TO THE CIT (A) WITH THE DIRECTI ON TO HIM TO COMPLY WITH SUB-RULE (3) OF RULE 46A. IN OUR OPINIO N AND WITH RESPECT, THE ERROR COMMITTED BY THE TRIBUNAL IS THA T IT PROCEEDED TO MIX UP THE POWERS OF THE CIT (A) UNDER SUB- SECTION (4) OF SECTION 250 WITH THE POWERS VESTED IN HIM UNDER RUL E 46A. THE TRIBUNAL SEEMS TO HAVE OVERLOOKED SUB-RULE(4) OF RU LE 46A WHICH ITSELF TAKES NOTE OF THE DISTINCTION BETWEEN THE POWERS CONFERRED BY THE CIT (A) UNDER THE STATUTE WHILE DI SPOSING OF THE ASSESSEES APPEAL AND THE POWERS CONFERRED UPON HIM UNDER RULE 46A. THE TRIBUNAL ERRED IN ITS INTERPRETATION OF TH E PROVISIONS OF RULE 46A VIS--VIS SECTION 250(4). ITS VIEW THAT SI NCE IN ANY CASE THE CIT (A), BY VIRTUE OF HIS CONTERMINOUS POWERS O VER THE ASSESSMENT ORDER, WAS EMPOWERED TO CALL FOR ANY DOC UMENT OR MAKE ANY FURTHER ENQUIRY AS HE THINKS FIT, THERE WA S NO VIOLATION OF RULE 46A IS ERRONEOUS. THE TRIBUNAL APPEARS TO H AVE NOT APPRECIATED THE DISTINCTION BETWEEN THE TWO PROVISI ONS. IF THE VIEW OF THE TRIBUNAL IS ACCEPTED, IT WOULD MAKE RUL E 46A OTIOSE AND IT WOULD OPEN UP THE POSSIBILITY OF THE ASSESSE ES CONTENDING THAT ANY ADDITIONAL EVIDENCE SOUGHT TO BE INTRODUCE D BY THEM BEFORE THE CIT (A) CANNOT BE SUBJECTED TO THE CONDI TIONS PRESCRIBED IN RULE 46A BECAUSE IN ANY CASE THE CIT (A) IS VESTED WITH CONTERMINOUS POWERS OVER THE ASSESSMENT ORDERS OR POWERS ITA NOS. 4534&4691(DEL)/2004 19 OF INDEPENDENT ENQUIRY UNDER SUB-SECTION (4) OF SEC TION 250. THAT IS A CONSEQUENCE WHICH CANNOT AT ALL BE COUNTE NANCED. 5.2 IT IS ALSO SUBMITTED THAT VERIFICATIONS MADE IN SUBSEQUENT YEAR IS NOT RELEVANT FOR THIS YEAR. THE FACT IS THAT SUFFICIE NT OPPORTUNITY HAD BEEN GRANTED TO THE ASSESSEE BUT NO EFFORT WAS MADE BY IT FOR FILING EVIDENCE BEFORE THE AO. 6. IN THE REJOINDER REPLY, THE LD. COUNSEL SUBM ITTED THAT THE TIME AVAILABLE WAS ONLY THREE MONTHS. NONE OF THE LOWE R AUTHORITIES NOR THE LD. CIT (DR) HAS REFUTED THAT THE ACCOUNTS WERE DE- CENTRALIZED IN THE MONTH OF JULY. IT IS NOT A CASE OF SERIOUS LAPSES O N THE PART OF THE ASSESSEE. THEREFORE, IT IS REQUESTED THAT THE ADDITIONAL EVIDENCE MAY BE ADMITTED AND THE APPEAL MAY BE ALLOWED. 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT THE RE TURN WAS FURNISHED ON 30.11.2000. IT WAS PROCESSED ON 26.07.2001. N OTICE U/S 143(2) WAS ISSUED ON 26.02.2002. A DETAILED QUESTIONNAIRE WAS ISSUED ON 09.12.2002 UNDER WHICH INFORMATION WAS SOUGHT ABOUT MARKETI NG EXPENSES ETC. THE ASSESSEE FURNISHED BREAK UP OF SALES AND MARKETI NG EXPENSES IN LETTER ITA NOS. 4534&4691(DEL)/2004 20 DATED 07.01.2003. A REQUEST WAS ALSO MADE THAT A MONETARY FLOOR LIMIT MAY BE PRESCRIBED FOR FURNISHING THE DETAILS AS OTHERWISE IT WILL BE A VOLUMINOUS EXERCISE. THE AO SET FLOOR LIMIT OF RS . 10.00 LAKH, I.E., THE DETAILS INCLUDING COMPLETE ADDRESSES WERE TO BE FURNISHED IN RESPECT OF PAYMENTS MADE IN EXCESS OF RS. 10.00 LAKH TO EAC H PARTY. THE AO MADE INDEPENDENT ENQUIRY ALSO AND FOUND CERTAIN DISCR EPANCIES. THE ASSESSEE WAS UNABLE TO FURNISH THE DETAILS UP TO THE DATE O F PASSING THE ORDER ON 21.03.2003. HOWEVER, SOON THEREAFTER HE FORWAR DED THE DETAILS BY SPEED POST AND ALSO FURNISHED RECONCILIATION STATEMENT IN RESPECT OF PARTIES WHERE THERE WERE DISCREPANCIES. THE REASON F OR INABILITY TO FURNISH THE DETAILS IS STATED THAT THE ACCOUNTS WERE DE-C ENTRALIZED WITH EFFECT FROM 01.07.1999. ON THE BASIS OF THESE FACTS, IT CAN BE SAID THAT THE ENQUIRY GOT CRYSTALLIZED ON OR ABOUT 07.01.2003 WHEN THE MO NETARY FLOOR LIMIT OF RS. 10.00 LAKH WAS PRESCRIBED BY THE AO. THEREAFTER, THE ASSESSEE HAD TIME OF ABOUT ONE AND HALF MONTHS. THE PLEA REGARDI NG DE-CENTRALIZATION OF ACCOUNT WITH EFFECT FROM 01.07.1999 HAD NOT BEE N REBUTTED. THE FACT THAT SPECIAL AUDIT WAS BEING CONDUCTED IN JANUARY AND FEBRUARY, 2003, DUE TO CHANGE OF MANAGEMENT HAS ALSO NOT BEEN REBUTTED BY THE REVENUE. THE QUESTION IS WHETHER THERE WAS REASONABLE CAUSE F OR THE ASSESSEE WHICH PREVENTED IT FROM FILING THE DETAILS. ITA NOS. 4534&4691(DEL)/2004 21 7.1 THE FACTS OF THE CASE OF SMT. PRABHAVATI S. SHAH (SUPRA) ARE DISTINGUISHABLE, AS IN THAT CASE THE AO COULD H AVE MADE ENQUIRY FROM THE BANK IN WHICH LOANS BY WAY OF CHEQUES WERE DEP OSITED. IN THIS CASE, THE AO COULD NOT HAVE MADE PROPER ENQUIRIES IN ABSENCE OF DETAILS OF ALL THE PAYEES. IN THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA), CONFIRMATION LETTERS WERE NOT ENTERTAINED BY THE LD. CIT(APPEA LS) AS NONE OF THE CONDITIONS OF RULE 46A WAS SATISFIED. THE HONB LE KERALA HIGH COURT CAME TO THE CONCLUSION THAT THE ADDITIONAL EVIDE NCE COULD NOT HAVE BEEN STRAIGHTWAY REJECTED AS THE LD. CIT(APPEALS) AL SO HAD POWER TO REQUISITION ADDITIONAL INFORMATION U/S 250(1). THIS CASE CAN BE CANVASSED AT BEST FOR RESTORING THE MATTER TO TH E CIT(APPEALS) OR THE AO FOR EXAMINATION OF THE EVIDENCE. COMING TO THE CASES RELIED UPON BY THE LD. CIT, DR, THE FACTS OF MRS. JYOTSNA SURI (SUP RA) ARE DISTINGUISHABLE. THE ASSESSEE HAD TAKEN SHIFTING STANDS AND EVEN CLAIMED IMMUNITY FROM ENQUIRY INTO THE MATTER. NO SUCH CIRCUMSTANCE EX ISTS IN THIS CASE. SUCH ARE ALSO THE FACTS IN THE CASE OF C. UNNIKRISHNA N (SUPRA) WHERE EVEN SERVICE OF NOTICE WAS CHALLENGED. THERE WAS N O PROPER EVIDENCE THAT SOMEBODY WAS DOING THE BUSINESS OF HOTEL ON BEHA LF OF THE ASSESSEE. THE GIST OF THE DECISION IN THE CASE OF MANISH BUILDW ELL (P) LTD. (SUPRA), WHICH ITA NOS. 4534&4691(DEL)/2004 22 IS THE RECENT DECISION BY HONBLE DELHI HIGH COU RT, IS TO THE EFFECT THAT WHEN AN ADDITIONAL EVIDENCE IS ENTERTAINED, A REMAND REPORT HAS TO BE OBTAINED FROM THE ASSESSING OFFICER SO THAT HE I S ALSO HEARD ON THE ADDITIONAL EVIDENCE. THUS, THIS CASE ALSO SUPPORT S THE SETTING ASIDE OF THE CASE RATHER THAN REJECTION OF ADDITIONAL EVIDE NCE. HAVING CONSIDERED THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE TIME OF ABOUT ONE AND A HALF MONTH WAS INSUFFICIENT FOR FURNISHING COMPLETE D ETAILS BECAUSE OF DE- CENTRALIZATION OF ACCOUNTS AND ON-GOING AUDIT WORK. THUS, THE CASE IS COVERED UNDER CLAUSE (II) TO THE EFFECT THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE, WHICH HE WAS CALLED UPON TO PRODUCE. IN THE LIGHT OF THIS FINDING, IT IS HELD THAT THE LD. CIT(APPEALS) OUGHT TO HAVE ENTERTAINED ADDITIONAL EVIDENCE S O THAT THE RELEVANT GROUNDS BEFORE HIM COULD BE DECIDED ON MERITS. 7.2 IT IS ALSO THE CASE OF THE LD. COUNSEL THAT N O DISALLOWANCE IS SUSTAINABLE IF ADDITIONAL EVIDENCE IS TAKEN INTO ACCOUNT. THEREFORE, HE INSISTED THAT THE DISALLOWANCES MAY BE DELETED. IN THIS CONNECTION, WE MAY AGAIN REFER TO THE DECISION OF JURISDICTIONA L HIGH COURT IN THE CASE OF MANISH BUILDWELL (P) LTD. THAT THE AO MUST GET A N OPPORTUNITY TO EXAMINE THE EVIDENCE AND STATE THE CASE OF THE REVENUE THEREUPON. IN THE ITA NOS. 4534&4691(DEL)/2004 23 LIGHT OF THIS DECISION, WE RESTORE THESE GROUNDS TO THE FILE OF THE AO. HE IS DIRECTED TO TAKE INTO ACCOUNT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS), MAKE SUIT ABLE ENQUIRY AND GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE FOR DECIDING THESE GROUNDS DE-NOVO. 7.3 THE RESULT IS THAT THESE GROUNDS ARE TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 5 CONSISTS OF FIVE PARTS. IN THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL PRESSED ONLY GROUND NO. 5, WHIC H IS THAT THE LD. CIT(APPEALS) ERRED IN SUSTAINING THE ADDITION OF RS. 1,10,58,759/- REPRESENTING UN-RECONCILED DIFFERENCE IN TRADE S CHEME EXPENSES. THE CASE OF THE LD. COUNSEL IS THAT THE DIFFERENCE HAD BEEN RECONCILED IN THE ADDITIONAL EVIDENCE. THE DIFFERENCE OCCURRED BECAU SE OF DE-CENTRALIZATION OF ACCOUNTS BECAUSE OF WHICH ONE ACCOUNT GOT SPLIT INTO TWO ACCOUNTS WITH EFFECT FROM 01.07.1999. SINCE WE HAVE RESTORED OTHER GROUNDS REGARDING VERIFICATION OF EXPENSES TO THE FILE OF AO, TH IS GROUND IS ALSO RESTORED TO HIS FILE FOR FRESH DECISION AFTER GIVING THE AS SESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. ITA NOS. 4534&4691(DEL)/2004 24 8.1 IN THE RESULT, THIS GROUND IS ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IT HAS BEEN SUBMITTED BEFORE US THAT GROUND N OS. 6, 7, 8 AND 9 ALSO ARISE ON ACCOUNT OF LACK OF ADDRESS AND SPLIT UP OF THE ACCOUNT OF MANJIT SINGH BHATIA IN TWO ACCOUNTS. FOLLOWING OUR DEC ISION IN RESPECT OF EARLIER GROUNDS, THESE GROUNDS ARE ALSO RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION TO BE MADE AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 9.1 IN THE RESULT, THESE GROUNDS ARE ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 10 IS TO THE EFFECT THAT THE LD. CIT(APPEALS) ERRED IN SUSTAINING ADDITION OF RS. 14,60,567/- ON ACCOUNT OF INTEREST-FREE LOANS GIVEN TO A SISTER CONCERN. THIS ISSUE HAS BEEN D ISCUSSED IN VARIOUS SUB- PARAGRAPHS OF PARAGRAPH NO. 4. IT IS MENTIONED THAT THE ASSESSEE-COMPANY ADVANCED A TOTAL AMOUNT OF RS. 3,34,40,078/- TO SEA GRAM DISTILLERIES PVT. LTD. (SDL FOR SHORT). HE WAS OF THE VIEW THAT BORROWED CAPITAL WAS ITA NOS. 4534&4691(DEL)/2004 25 DIVERTED TO THE SISTER CONCERN FREE OF INTEREST. THUS, BORROWED CAPITAL TO THE AFORESAID EXTENT WAS NOT USED FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, THE ASSESSEE WAS REQUIRED TO STATE ITS CASE IN RESPECT OF DISALLOWANCE OF CORRESPONDING AMOUNT OF INTEREST. IT WAS SUBMIT TED THAT THE ASSESSEE LENT THE AMOUNT TO SDL AS ITS UNIT WAS OPERATING AT MAXIMUM CAPACITY AND, THEREFORE, TO INCREASE MARKET SHARE FURTHER A COMPLIMENTARY UNIT WAS REQUIRED TO CATER TO SOUTHERN AND WESTERN REGIONS . THE SDL WAS IN THE INCORPORATION STAGE AND THE ADVANCE WOULD HELP IT TO SET UP ITS MANUFACTURING UNIT. IT WAS FURTHER SUBMITTED THAT THE BUSINESSES OF THE ASSESSEE AND THE SDL WERE INTEGRALLY RELATED T O EACH OTHER AND, THEREFORE, THE ADVANCE WAS MADE FOR PROMOTING THE BUSINESS INTEREST OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT IN THIS YEAR THE ASSESSEE HAS MADE RE-PAYMENT OF LOAN OF RS. 5.00 CRORE. TH IS PROVES THAT THE FUNDS OF THE ASSESSEE HAVE BEEN USED FOR REPAYMENT OF L OAN AND THE LOAN ADVANCED TO SDL WAS OUT OF ITS OWN FUNDS. THE AO CONSID ERED THE POSITION OF FUNDS, BOTH OWN AND BORROWED AS ON 31.03.1999 AN D 31.03.2000. IT IS MENTIONED THAT THE STATEMENT THAT ADVANCES HAVE BE EN MADE OUT OF OWN FUNDS, IS MISLEADING AS THE SHARE CAPITAL WAS LOCKED UP IN FIXED AND CURRENT ASSETS. THUS, THERE WAS NO RETAINED EA RNING WHICH COULD BE LENT TO THE SDL. THEREFORE, IT WAS HELD THAT THE ASSES SEE HAS DIVERTED BORROWED ITA NOS. 4534&4691(DEL)/2004 26 FUNDS TO THE SISTER CONCERN AND INTEREST ON BORR OWED FUNDS WAS NOT THE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. HE TOOK INTO ACCOUNT THE LOAN ADVANCED ON VARIOUS DATES AND PERIOD OF THE LOAN AND CALCULATED THE INTEREST AT RS. 14,60,567/-. THIS AMOUNT HAS BEEN DISALLOWED IN COMPUTING THE INCOME. THE LD. CIT(APPEALS) CON FIRMED THIS FINDING BY MENTIONING THAT THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE REASONS GIVEN BY THE AO IN THE ASSESSMENT ORDER. 10.1 BEFORE US, THE LD. COUNSEL REFERRED TO PAGE NO. 48 OF THE IMPUGNED ORDER WHERE THE SUBMISSIONS OF THE ASSESSEE HAVE B EEN SUMMARIZED. IT WAS SUBMITTED THAT LIQUOR INDUSTRY IN INDIA IS HIGHLY REGULATED AND THE TRADE IS LICENSED. THE OPERATIONS CANNOT BE C ARRIED OUT WITHOUT COMPLYING WITH STRINGENT RULES AND REGULATIONS. THE POLICY REVEALS THAT EACH STATE CAN MANUFACTURE OR LICENCE TO MANUF ACTURE SPECIFIED AMOUNT OF GRAIN NEUTRAL SPIRIT (GNS) FROM WHICH CONSUM ABLE LIQUOR IS MANUFACTURED. WHENEVER A LICENCE IS GRANTED FOR MANUFACTURE OF GNS, THE MANUFACTURING CAPACITY HAS TO BE SET SO THAT OV ERALL LIMIT OF THE STATE IS NOT EXCEEDED. A PERSON WILLING TO MANUFACTURE I NDIAN MADE FOREIGN LIQUOR (IMFL FOR SHORT) IN A PARTICULAR STATE HAS THE OPTION TO MANUFACTURE GNS IN THAT STATE ON ITS OWN, IT MAY ACQUIRE EXISTING ITA NOS. 4534&4691(DEL)/2004 27 UNDERTAKING, IT MAY IMPORT GNS AND PAY IMPORT DUTY ETC. OR BUY GNS FROM A COMPETITOR LOCATED IN THAT STATE. THE ASSESSEES UTILIZATION OF CAPACITY IN ASSESSMENT YEARS 1999-00 AND 1998-9 9 WAS 63% AND 40% RESPECTIVELY. IN ORDER TO EXPAND IN NEW MARKETS, SEAGRAM INDIA (P) LTD., THE HOLDING COMPANY OF THE ASSESSEE-COMPANY AND SDL ACQUIRED A RUNNING UNIT LOCATED IN NASIK. THE ADVANCE WAS MADE TO SDL BY THE ASSESSEE IN THESE CIRCUMSTANCES. THEREFORE, TH E LOAN WAS FURNISHED IN THE COURSE OF BUSINESS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE EARNED NET PROFIT OF RS. 12.85 CRORE AND CASH PROFIT OF RS. 13.86 CRORE IN THIS YEAR. MONTH-WISE POSITION OF BORROWED CAPITAL WAS A LSO FURNISHED WHICH SHOWS THAT THE BORROWING STARTED REDUCING FROM THE MONTH OF DECEMBER, 1999. IT STOOD AT RS. 23.78 CRORE IN AUGUST, 1 999 BUT REDUCED TO RS. 19.62 CRORE IN MARCH, 2000. THEREFORE, IT CAN BE SAID T HAT THE BORROWED CAPITAL WAS NOT DIVERTED TO THE SISTER CONCERN. THE S DL REPAID THE LOAN IN THE NEXT YEAR. THUS, IT WAS ARGUED THAT THE LOANS WERE ADVANCED IN THE COURSE OF BUSINESS AND SUCH ADVANCES WERE OUT O F OWN CAPITAL. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF S.A. B UILDERS LTD. VS. CIT & ANOTHER, (2007) 288 ITR 1. THE FINDING ON WHIC H RELIANCE HAS BEEN PLACED IS THAT IF LOAN IS ADVANCED IN THE COURSE OF BUSINESS AS A MATTER OF ITA NOS. 4534&4691(DEL)/2004 28 COMMERCIAL EXPEDIENCY, THEN INTEREST ON CORRES PONDING BORROWED CAPITAL CANNOT BE DISALLOWED. 10.2 IN REPLY, THE LD. CIT, DR SUBMITTED THAT TH E FINDINGS OF THE AO ARE THAT INTEREST-FREE ADVANCE TO SISTER CONCERN WA S MADE OUT OF INTEREST- BEARING BORROWED FUNDS AND IT FAILED TO PROVE TH AT THE SAME WAS MADE OUT OF THE OWN FUNDS. THE ASSESSEE FAILED TO FURNI SH A COPY OF THE BANK ACCOUNT IN THE COURSE OF ASSESSMENT PROCEEDINGS AND, THUS, PREVENTED THE ENQUIRY IN THE MATTER. THE BUSINESS OF THE SISTER CONCERN WAS AT THE INCORPORATION STAGE AND IT HAS NOT SHOWN IN ANY MANNER AS TO HOW THE ADVANCE WAS MADE IN THE COURSE OF ASSESSEES BUS INESS. ACCORDINGLY, IT WAS ARGUED THAT THE LOWER AUTHORITIES WERE RIGH T IN MAKING THE DISALLOWANCE. 10.3 WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAS BEEN PAYING INTEREST ON BORROWED CAPITAL, WHICH HAS BEEN CLAIM ED IN COMPUTING THE INCOME. THE ASSESSEE HAS ADVANCED LOANS TO T HE SDL, A SISTER CONCERN. THIS CONCERN WAS SETTING UP ITS BUSINE SS FOR PRODUCTION OF GNS. THE ASSESSEE HAS NOT SHOWN ANY AGREEMENT BETWE EN THE ASSESSEE AND ITA NOS. 4534&4691(DEL)/2004 29 THE SDL THAT THE PRODUCTS OF THE GNS WILL BE SOL D IN FUTURE TO THE ASSESSEE. THE LINKAGE OF THE BUSINESS OF THE TWO COMPANIES IN TERMS OF PURCHASER AND SELLER HAS NOT BEEN ESTABLISHED. T HUS, IT CAN BE SAFELY CONCLUDED THAT WHILE THE ASSESSEE WAS CARRYING ITS OWN BUSINESS, THE SDL WAS ALSO CARRYING ITS OWN BUSINESS. THE ONLY CONNECTION BETWEEN THESE COMPANIES IS THAT BOTH OF THEM ARE SUBSIDIA RY COMPANIES OF SEAGRAM INDIA (P) LTD. THEREFORE, THE SUBMISSION OF BU SINESS EXPEDIENCY HAS NOT BEEN ESTABLISHED. COMING TO THE ISSUE OF OWN FU NDS, THE ASSESSEE HAS NOT PRODUCED ITS BANK ACCOUNT BEFORE THE LOWER AUTHO RITIES. IN VIEW OF THIS FAILURE, THE ARGUMENT THAT OWN FUNDS WERE AVAILABL E CAN ONLY BE SAID TO BE THEORETICAL IN NATURE. THE POINT TO BE SEEN IS WHETHER THE ASSESSEE HAD OWN FUNDS EXCEEDING THE AMOUNT OF ADVANCE TO SD L ON THE RESPECTIVE DATES. SINCE THIS ENQUIRY COULD NOT BE MADE IN ASSESSMENT PROCEEDINGS, WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE T O RESTORE THIS MATTER TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO PRO DUCE THE BANK ACCOUNT BEFORE THE AO SO THAT AN INFORMED DECISION CAN B E TAKEN. 10.4 THUS, THIS GROUND IS ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 4534&4691(DEL)/2004 30 11. WE NOW COME TO THE GROUNDS TAKEN BY THE REVE NUE IN ITS APPEAL. GROUND NO. 1 IS IN RESPECT OF DISALLOWANCE OUT OF TRADE SCHEME, MARKETING EXPENSES AND OTHER EXPENSES. THE WHOLE ISSUE HAS BEEN RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER CONS IDERING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. C IT(A). THEREFORE, THIS GROUND DOES NOT REQUIRE ANY FURTHER COMMENTS FROM US. 11.1 THUS, THIS GROUND IS TREATED AS ALLOWED FO R STATISTICAL PURPOSE. 12. GROUND NO. 2 IS TO THE EFFECT THAT THE LD. CI T(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF FOREIGN EXCHANGE LOSS WITHOUT APPRECIATING THE FACT THAT CORRESPONDING LOAN WAS ON CAPITAL A CCOUNT. IT IS ALSO MENTIONED THAT THE LIABILITY WAS CONTINGENT IN NA TURE. 12.1 THE LD. CIT, DR SUBMITTED THAT THE REPAYMEN T OF LOAN WAS TO BEGIN AFTER SIX YEARS FROM THE DATE OF LOAN, I. E., WELL AFTER THE YEAR UNDER CONSIDERATION. THEREFORE, THE LIABILITY DID NOT ARISE IN THIS YEAR. FURTHER, THE LOSS SHOWN IN THE BOOKS DIFFERS FROM THE L OSS ACTUALLY CLAIMED. SHE ALSO RELIED ON THE FINDINGS OF THE AO. IN THE A SSESSMENT ORDER, IT IS MENTIONED THAT LOSS OF RS. 32,19,738/- WAS DEBI TED TO THE ACCOUNTS IN ITA NOS. 4534&4691(DEL)/2004 31 RESPECT OF FLUCTUATION IN RATE OF FOREIGN EXCHANG E. IT WAS SUBMITTED THAT THE LOSS OF RS. 35.40 LAKH IS ON ACCOUNT OF RE-S TATEMENT OF FOREIGN EXCHANGE CURRENCY LOAN TAKEN FROM THE PARENT COM PANY FOR MEETING WORKING CAPITAL REQUIREMENT. AFTER ADJUSTING TH E PROFIT OF RS. 3,20,262/- INCURRED ON SAME COUNT, THE LOSS OF RS. 32,19,73 8/- HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, IT HAS BEEN MENTIONED THAT THE FOREIGN CURRENCY LOA N WAS TAKEN TO AUGMENT THE FUNDS. THE LOAN WAS STATEDLY USED AS CIRC ULATING CAPITAL. HOWEVER, IT IS NOT MATERIAL WHETHER IT WAS USED AS FIXED CAPITAL OR WORKING CAPITAL. A LOAN CAN NEVER BE ON REVENUE ACCOUNT. THU S, THE CLAIM WAS DENIED. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE RELI ED ON THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR ASSESSMENT YEAR 1998-99 AND 1999-00. THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. I T WAS HELD THAT THE LOAN WAS TAKEN AND USED AS WORKING CAPITAL. RELYING ON THE ORDER OF THE TRIBUNAL THE DISALLOWANCE WAS DELETED. 12.2 IN REPLY, THE FINDING THAT UTILIZATION OF LOAN IS OF NO CONSEQUENCE HAS BEEN CHALLENGED IN THE LIGHT OF THE DECISION I N THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA LTD., 312 ITR 254 (SC). ACCORDINGLY, IT IS ITA NOS. 4534&4691(DEL)/2004 32 URGED THAT THE DIFFERENCE IN LOSS AND GAIN AMOUNT ING TO RS. 32,19,738/- MAY BE ALLOWED. 12.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS SEEN THAT THE ISSUE IS NO LON GER RES-INTEGRA AS WE HAVE GUIDELINES FROM THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF WOODWARD GOVERNOR INDIA LTD. (SUPRA). THE LOAN WA S TAKEN FOR USE AS CIRCULATING CAPITAL. THEREFORE, THE UTILIZATION W AS IN THE REVENUE FIELD AND NOT IN THE CAPITAL FIELD. IN THIS SITUATION, THE ASSESSEE IS ENTITLED TO DEDUCT THE NET LOSS OF RS. 32,19,738/-. 12.4 THUS, THIS GROUND IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (A.D. JAIN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NOS. 4534&4691(DEL)/2004 33 COPY OF THE ORDER FORWARDED TO:- SEAGRAM MANUFACTURING PVT. LTD., ACIT, CIRCLE 8(1), NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.