GANJAM TRADING COMPANY PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1), MUMBAI

ITA 4843/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2216 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 11-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Question of law; Valuation report; Capital receipt
• Section: 143(3); 142(1); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 4843 /MUM/20 1 7 (ASSESSMENT YEAR 20 12 - 13 ) M/S. GANJAM TRADING CO. PVT. LTD. NEW PRAKASH CINEMA N.M. JOSHI MARG LOWER PAREL MUMBAI - 40 0 011. VS. DCIT CIRCLE 7(1)(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 5107 /MUM/2017 (ASSESSMENT YEAR 2012 - 13) A CIT CIRCLE 7(1)(1) ROOM NO. 4 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. GANJAM TRADIN G CO. PVT. LTD. C/O. M/S. ESSEL PROPACK LTD., 13 TH FLOOR TIMES TOWER, KAMALA CITY, SENAPATI BAPAT ROAD, LOWER PAREL MUMBAI - 400 013 . ( APPELLANT ) ( RESPONDENT ) PAN : AAACG3975H ASSESSEE BY SHRI VIJAY MEHTA DEPARTMENT BY S HRI VIDISHA KALRA DATE OF HEARING 01.11 . 201 8 DATE OF PRONOUNCEMENT 16 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 23 - 05 - 2017 PASSED BY LD CIT(A) - 13, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2012 - 13. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SECURITIES. M/S. GANJAM TRADING CO. PVT. LTD. 2 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE REVENUE, WHEREIN THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE ADDITION OF RS.436.00 CRORES MADE BY THE AO U/S 68 OF THE ACT. 4. THE FACTS RELATING THERETO ARE DISCUSSED IN BRIEF. THE AO NOTICED THAT THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, HAS ISSUED 1,09,000 COMPULSORILY CONVERTIBLE PREFERENCE SHARES (CCPS) OF RS.100/ - EACH AT A PREM IUM OF RS.39,900/ - PER SHARE TO A COMPANY NAMED M/S PREMIER FINANCE AND TRADING CO. LTD. THE AGGREGATE AMOUNT COLLECTED BY THE ASSESSEE ON THE ABOVE SAID ISSUE OF CCPS WAS RS.436.00 CRORES. HENCE THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF ALLOTT EE OF SHARES AND ALSO TO JUSTIFY THE SHARE PREMIUM CHARGED. AFTER A REMINDER, T HE ASSESSEE FURNISHED CERTAIN DETAILS AND ALSO CONTENDED THAT THE SHARE PREMIUM, BEING CAPITAL RECEIPT, CANNOT BE ASSESSED TO TAX. THE AO, BY PLACING RELIANCE ON HOST OF DECIS IONS, TOOK THE VIEW THAT THE ASSESSEE IS REQUIRED TO DISCHARGE THE INITIAL ONUS PLACED UPON IT U/S 68 OF THE ACT. SINCE THE ASSESSEE HAS NOT FURNISHED CONFIRMATION LETTER FROM M/S PREMIER FINANCE AND TRADING CO LTD A ND OTHER DETAILS, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN PLACED UPON IT U/S 68 OF THE ACT. ACCORDINGLY HE ASSESSED THE ABOVE SAID AMOUNT OF RS.436.00 CRORES AS INCOME OF THE ASSESSEE. WITHOUT PREJUDICE TO THE ABOVE, THE AO ALSO TOOK THE VIEW THAT THE ASSESSE E HAS FAILED TO SUBSTANTIATE THE SHARE PREMIUM AMOUNT OF RS.39,900/ - AND ACCORDINGLY TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE OF PREMIUM. ACCORDINGLY HE HELD THAT THE SHARE PREMIUM AMOUNT OF RS.434.49 CRORES IS UNEXPLAINED CREDIT U /S 68 OF THE ACT. 5. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED THIS ADDITION AND HENCE THE REVENUE HAS FILED THIS APPEAL. 6. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH NECESSARY DETAILS BEFORE THE AO IN ORDER TO DISCHA RGE THE BURDEN PLACED UPON IT U/S 68 OF THE A CT, DESPITE THE FACT THAT SUFFICIENT OPPORTUNITIES WERE GIVEN BY THE AO TO M/S. GANJAM TRADING CO. PVT. LTD. 3 FURNISH THE DETAILS. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE REQUIRED DETAILS BEFORE THE LD CIT(A) AND THE FIRST APPELLATE AUT HORITY HAS ALSO ADMITTED THE SAME WITHOUT SHOWING TH AT THE ASSESSEE WAS PREVENTED FROM FURNISHING THOSE DETAILS BEFORE THE AO IN TERMS OF RULE 46A OF THE I.T RULES. ACCORDINGLY, THE LD CIT - DR SAID THAT THE LD CIT(A) WAS NOT JUSTIFIED IN ADMITTING THE ADDI TIONAL EVIDENCES, AS THE ASSESSEE HAS FAILED TO SHOW THAT HIS CASE FALLS IN ANY OF THE EXCEPTIONS PROVIDED IN RULE 46A OF THE I.T RULES. IN THIS REGARD, THE LD CIT - DR PLACED HER RELIANCE ON THE ORDER PASSED BY CHANDIGARH BENCH OF TRIBUNAL IN THE CASE OF S HRI RISHI SAGAR VS. THE ITO (ITA NO.10/CHD/2013 DATED 23.05.2013) AND ALSO THE DECISION RENDERED BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF RAM PRASAD SHARMA VS. CIT (1979)(119 ITR 867). THE LD CIT - DR FURTHER SUBMITTED THAT THE SUBSCRIBER OF CCPS IS A SINGLE PARTY AND IS ALSO HAVING SAME ADDRESS AS THAT OF THE ASSESSEE. HENCE THE ASSESSEE COULD NOT HAVE GIVEN ANY SATISFACTORY EXPLANATION FOR NOT FURNISHING OF DETAILS BEFORE THE AO IN TERMS OF RULE 46A. 7. SHE SUBMITTED THAT THE LD CIT(A), AFTER A DMITTING THE ADDITIONAL EVIDENCES, HAS CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, T HE LD CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS NOT COMMENTED UPON THE VARIOUS DOCUMENTS/DETAILS FURNISHED BY THE AO. ACCORDINGLY HE HAS PROCEEDED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. SHE FURTHER SUBMITTED THE POWER OF THE LD CIT(A) IS CO - T ERMINUS AND HENCE HE HAS ALSO GOT AN OBLIGATION TO CONDUCT PROPER ENQUIRY ON FACTS RELATING TO THE ISSUES CONTESTED BEFORE HIM, AS HELD BY HONBLE DELHI HIGH COU RT IN THE CASE OF JANSAMPARK ADVERTISING & MARKETING (P) LTD (2015)(56 TAXMANN.COM 286). ACCORDINGLY, THE LD DR SUBMITTED THAT THE LD CIT(A) SHOULD HAVE CONDUCTED NECESSARY ENQUIRIES ON THE EVIDENCES FURNISHED BY THE ASSESSEE. THE LD CIT - DR FURTHER SUBMI TTED THAT THE ASSESSEE HAD SUBMITTED BEFORE THE LD CIT(A) THAT IT DID NOT RECEIVE THE SECOND NOTICE ISSUED U/S 142(1) OF THE ACT AND THE SAME HAS BEEN ACCEP T ED BY LD CIT(A) WITHOUT CAUSING NECESSARY VERIFICATION. SHE SUBMITTED THAT THE ASSESSEE HAS ACTUAL LY RECEIVED THE SAID NOTICE AND HAS ALSO FURNISHED ITS REPLY. M/S. GANJAM TRADING CO. PVT. LTD. 4 ACCORDINGLY SHE SUBMITTED THAT THERE ARE FACTUAL INCONSISTENCIES IN THE ORDER PASSED BY LD CIT(A). 8. THE LD CIT - DR FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN EXPLANATIONS TO JUSTIF Y HUGE PREMIUM AMOUNT OF RS.39,900/ - PER SHARE COLLECTED BY THE ASSESSEE AND THE SAME IS NOT COMMENSURATE WITH THE BOOK VALUE OF THE SHARES. ACCORDINGLY SHE SUBMITTED THAT THE UNJUSTIFIED SHARE PREMIUM AMOUNT WAS RIGHTLY TAKEN AS UNEXPLAINED CREDIT BY THE AO , AS THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE THEREOF. SHE SUBMITTED THAT THE ASSESSEE, IN ITS REPLY DATED 12.03.2015 FURNISHED BEFORE THE AO, HAS GIVEN PAN NUMBER OF M/S PREMIER FINANCE & TRADING CO. LTD AND DID NOT FURNISH ANY OTHER DETAILS. I F THE ADDITIONAL EVIDENCES ARE HELD TO BE NOT ADMISSIBLE BEFORE LD CIT(A), THEN THE ADDITION MADE BY THE AO U/S 68 OF THE ACT WOULD BE VERY MUCH JUSTIFIED, AS THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN PLACED UPON IT. 9. THE LD A.R, ON THE CONTRA RY, SUBMITTED THAT THE ASSESSEE, IN ITS LETTER DATED 12 - 03 - 2015 FILED BEFORE THE AO ON 17 - 03 - 2015, HAS FURNISHED THE REASONS FOR NOT FURNISHING THE DETAILS BEFORE THE AO. FURTHER, VIDE LETTER DATED 13 - 02 - 2015, THE ASSESSEE HAS FURNISHED CONFIRMATION LETTE RS FOR UNSECURED LOANS, CONFIRMATION OF PERSON TO WHOM SHARES WERE ALLOTTED, DETAILS FILED WITH ROC, VIZ., BOARD RESOLUTION AND RETURN OF ALLOTMENT IN FORM NO.2. THE ASSESSEE HAS SUBMITTE D THAT THE PERSON HANDLING TAX WORK WAS ON LEAVE DUE TO HIS FAMILY P ROBLEMS AND FURTHER THE ASSESSEE WAS ALSO FACING ADMINISTRATIVE PROBLEMS. HENCE IT COULD NOT FURNISH ALL THE DETAILS. HOWEVER, THE ASSESSEE HAS FURNISHED THE PAN NUMBER OF THE SUBSCR IBER OF CCPS. THE ASSESSEE HAS ALSO CONTEND ED BEFORE THE AO THAT THE SHA RE PREMIUM IS CAPITAL RECEIPT AND IN THAT REGARD, HAS PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFORE INDIA SERVICES P LTD AND ALSO THE CBDT INSTRUCTION NO.2/2015 DATED 29 - 02 - 2015. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GREEN INFRA (392 ITR 7) AND CIT VS. GAGANDEEP INFRASTRUCTURE P LTD (394 ITR M/S. GANJAM TRADING CO. PVT. LTD. 5 680). HENCE IT IS NOT A CASE OF NON - FURNISHING OF INFORMATION WITHOUT SUFFICIENT REASONS. HE SUBMIT TED THAT THE ASSESSEE HAS FILED THE DOCUMENTS/DETAILS THAT WERE CALLED FOR BY THE AO. WHEN THE AO HAS OBSERVED THAT THE ASSESSEE HAS NOT FILED DETAILS TO PROVE THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE M/S PREMIER FINANCE AND TRADING COMPANY LTD, THE ASSESSEE HAS FURNISHED ALL THE DETAILS BEFORE THE LD CIT(A). HENCE THE LD CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE AO AND HAS DECIDED THE ISSUE DULY CONSIDERING THE DOCUMENTS FURNISHED BY THE ASSESSEE AS WELL AS THE REMAND REPORT. 10. T HE LD A.R SUBMITTED THAT THE AO DID NOT MAKE NECESSARY ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THOUGH THE ASSESSEE HAS FURNISHED ALL THE AVAILABLE DETAILS. IF THE AO HAD CALLED FOR SPECIFIC DETAILS, THE ASSESSEE WOULD HAVE FURNISHED THEM BE FORE HIM AT THE TIME OF ASSESSMENT ITSELF. HE SUBMITTED THAT THE AO RAISED QUERIES ONLY ON 05 - 01 - 2015, EVEN THOUGH THE RETURN OF INCOME WAS FILED ON 28 - 09 - 2012. THE AO HAS COMPLETED THE ASSESSMENT ON 16.03.2015 AND DURING THE SHORT PERIOD OF TWO MONTHS, THE ASSESSEE HAS FURNISHED THE DETAILS THAT WERE ACTUALLY CALLED FOR BY THE AO. HE FURTHER SUBMITTED THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE ARE THOSE COLLECTED FROM THE THIRD PARTIES AND HENCE THE ASSESSEE IS REQUIRED TO COLLECT THEM FROM THE THIRD PARTY. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) HAS RIGHTLY ADMITTED THEM. HE SUBMITTED THAT THE LD CIT(A) IS REQUIRED TO EXERCISE THE POWER AS ENVISAGED U/S 250(4) OF THE ACT TO ADVANCE THE CAUSE OF JUSTICE AND HENCE HE IS REQUIRED TO CONSIDER EVIDEN CES WHICH ARE RELEVANT FOR DECIDING THE APPEAL. IN THIS REGARD, THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. PRABHAVATI SHAH VS. CIT (231 ITR 1). HE FURTHER SUBMITTED THAT THE LD CIT(A) HAS POWE R TO CALL FOR INFORMATION UNDER RULE 46A(4) OF I.T RULES FOR PRODUCTION OF ANY DOCUMENT TO ENABLE HIM TO DISPOSE OF THE APPEAL. HE FURTHER SUBMITTED THAT THE CHANDIGARH BENCH OF TRIBUNAL HAS HELD IN THE CASE OF SHREE GANESH CONCAST GROUP OF INDUSTRIES VS. DCIT (20 18)(195 TTJ (CHD)(UO) 1) THAT IF ANY DOCUMENT FURNISHED BY THE ASSESSEE BEFORE THE LD CIT(A) IS IN THE NATURE OF CLINCHING M/S. GANJAM TRADING CO. PVT. LTD. 6 EVIDENCE WHICH GOES TO THE ROOT OF THE CASE, THEN IN THE INTEREST OF JUSTICE, SUCH TYPES OF EVIDENCE SHOULD NOT BE REJECTED. 11. THE LD A.R SUBMITTTED THAT THE ASSESSEE HAS FURNISHED FOLLOWING DOCUMENTS BEFORE LD CIT(A): - (I) CONFIRMATION OF ACCOUNTS OF ASSESSEE IN BOOKS OF M/S PREMIER FINANCE AND TRADING COMPANY LTD. (II) VALUATION REPORT DATED 27 - 02 - 2012 (III) COPIES OF RETURN IN FORM 2 FILED BEFORE ROC (IV) ANNUAL REPORT OF M/S PREMIER FINANCE AND TRADING COMPANY LTD (V) ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT IN THE CASE OF PREMIER FINANCE AND TRADING COMPANY LTD. THE LD A.R SUBMITTED THAT THE LD CIT(A) HA S FORWARDED ALL THE ABOVE SAID DOCUMENTS TO THE ASSESSING OFFICER, WHO HAS ACKNOWLEDGED THE SAME AND DID NOT MAKE ANY ADVERSE COMMENTS THEREON. THE LD A.R, ACCORDINGLY, SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE ONUS PLACED UPON IT BY PROVING THE IDEN TITY OF THE SUBSCRIBER, THE CREDIT WORTHINESS OF SUBSCRIBER AND GENUINENESS OF TRANSACTIONS. 12. THE LD A.R FURTHER SUBMITTED THAT M/S PREMIER FINANCE & TRADING CO LTD IS THE RELATED PARTY OF THE ASSESSEE COMPANY AND THE SAID INFORMATION IS DULY DISCL O SED IN THE ANNUAL REPORT. FURTHER, IT IS AN ADMITTED FACT THAT BOTH THE ASSESSEE AND ABOVE SAID COMPANY WERE HAVING RUNNING FINANCIAL TRANSACTIONS FOR THE PAST SEVERAL YEARS. ACCORDINGLY HE SUBMITTED THAT IT IS NOT A CASE THAT THE ASSESSEE HAS ISSUED SH ARES TO A SHELL COMPANY. HE FURTHER SUBMITTED THAT THE ENTIRE AMOUNT OF RS.436 CRORES WAS NOT RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ALONE , I.E., MAJOR PORTION OF THE AMOUNT WAS RECEIVED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YE AR . HE SUBMITTED THAT THE RUNNING FINANCIAL TRANSACTIONS BETWEEN BOTH THE PARTIES WERE AVAILABLE SINCE FINANCIAL YEAR 2005 - 06 ONWARDS . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED MONEY IN THE EARLIER YEARS AND THE OUTSTANDING BALANCE PAYABLE BY T HE ASSESSEE AS ON 31.3.2011 TO M/S PREMIER FINANCE & M/S. GANJAM TRADING CO. PVT. LTD. 7 TRADING CO LTD WAS RS.298.80 CRORES . HE SUBMITTED THAT T HE ASSESSEE RECEIVED FURTHER SUMS DURIN G THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS SQUARED OFF THE BALANCE BY ALLOTT ING CCPS TO M/S PREMIE R FINANCE & TRADING CO LTD. HE SUBMITTED THAT THE PARTIES HAVE DULY OBTAINED VALUATION REPORT AND THE CCPS WERE ISSUED ON THE BASIS OF VALUATION REPORT. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO SUSPECT THE QU A NTUM OF SHARE PREMIUM ALSO. ACCORDI NGLY HE SUBMITTED THAT, OUT OF RS.436 CRORES COLLECTED BY WAY OF CCPS, A SUM OF RS.298.80 CRORES WAS RECEIVED IN THE EARLIER YEARS AND HENCE THE SAID AMOUNT OF RS.298.80 CRORES WILL NOT BE HIT BY THE PROVISIONS OF SEC.68 DURING THE YEAR UNDER CONSIDERATION . 13. THE LD A.R SUBMITTED THAT THE AMENDMENT BROUGHT IN SEC. 68 OF THE ACT AND SEC. 2(24) R.W.S SEC.56(2)(VII) TAKES EFFECT FROM 1.4.2013. THEY HAVE BEEN HELD TO HAVE PROSPECTIVE OPERATION BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GAGANDEEP INFRAST RUCT U RE P LTD (SUPRA). ACCORDINGLY, THE LD A.R SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT AS WELL AS IN DELETING THE ALTERNATIVE ACTION OF AO IN ASSESSING THE SHARE PREMIUM U/S 68 OF THE ACT ALSO. 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE LD CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: - 4.4 DECISION - I HAVE CAREFULLY CONSIDERED THE AO'S ORDER AND HIS REMAND REP ORT AS ALSO THE AR'S SUBMISSION. LET ME FIRST EXAMINE THE AO'S CASE. THE AO NOTICED THAT THE APPELLANT HAD ISSUED RS 1.09 LAKH COMPULSORILY CONVERTIBLE PREFERENCE SHARES AT RS 40 , 000/ - EACH, RS 39,900 / - BEING THE SHARE PREMIUM AND THE BALANCE OF RS 100/ - BEING THE FACE VALUE THEREOF IN. IN THE ABSENCE OF ANY CONFIRMATION OR ANY OTHER DOCUMENTATION, THE AO HAD STRAIGHTWAY AD DED BACK THE ENTIRE RECEIPT OF RS 436 CRORES AS THE INCOME OF THE APPELLANT UNDER SECTION 68 OF THE ACT. THIS ENTIRE ADDITION FINDS MEN TION AT PARAGRAPH NOS. 5 TO 6 ON PAGE NOS. 3 TO 8 OF THE ORDER UNDER APPEAL. OUT OF THIS, I FIND THAT THE SUBSTANTIVE DISCUSSION ON THIS ISSUE IS LIMITED TO SUB - PARAGRAPH NOS. 5.2 AND 5.3 ON PAGE NO. 3 AND PARAGRAPH NO. 6 ON PAGE NOS. 7 AND 8. THE BULK OF DISCUSSIONS AS DONE BY THE AO IN HIS ORDER - AS SEEN AT PAGE NOS. 3 TO 7 - IS ABOUT VARIOUS CASE - LAWS. OUT OF THE 30 - ODD CASE - LAWS DISCUSSED BY THE AO, ONLY A FEW ARE SEEN TO BE RELEVANT. IN THE CASE OF SUMATI DAYAL V. C IT M/S. GANJAM TRADING CO. PVT. LTD. 8 ( 214 ITR 801), THE HON'BLE SUPREM E COURT HAD HELD THAT IF ANY SUM IS FOUND TO BE CREDITED IN THE BOOKS OF AN ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO TAX AS THE INCOME OF THE ASSE S SEE IF THE EXPLANATION OF THE ASSESSEE IS NOT FOUND TO BE SATISFACTORY BY THE AO. IN THE IN STANT CASE, AS DISCUSSED EARLIER IN THIS ORDER, THE ABSENCE OF ANY CONFIRMATION OF PREMIER HAD BEEN THE PRINCIPAL CAUSE FOR INVOKING OF PROVISIONS OF 68 OF THE ACT. THIS ABSENCE HAS BEEN RENDERED MOOT IN VIEW OF THE FILING OF THE CONFIRMATION AND ITS SUBSE QUENT REMAND AS ADDITIONAL EVIDENCE. IN THE CASE OF JALAN TIMBERS V. CIT (223 ITR 11), THE HON'BLE HIGH COURT OF GUWAHATI HAD ENUMERATED THREE ESSENTIAL CONDITIONS IN RESPECT OF LOANS TAKEN BY AN ASSESSEE. IT HAD THEN HELD THAT THE ASSESSEE MUST ESTABLISH THE IDENTITY OF THE PERSON GIVING THE LOAN, ITS CREDITWORTHINESS AS ALSO THE GENUINENESS OF THE TRANSACTION. IN THE INSTANT CASE, I FIND THE CONCLUSION OF THE AO RATHER SUMMARY, WHEN HE HAS STRAIGHTWAY GONE AHEAD AND ADDED BACK RS 436 CRORES. HIS SIMPLE PO INT WAS THAT THE APPELLANT HAD NOT SUBMITTED ANY CONFIRMATION AND HAD ACCORDINGLY FAILED TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER AS WELL AS ITS CREDITWORTHINESS AND ALSO THE GENUINENESS OF THE TRANSACTION. I FIND THAT THE AO HAD NOT EVEN ISSUED A SHOW CAUSE NOTICE BEFORE GOING AHEAD WITH SUCH A MASSIVE ADDITION. 4.4.1 LET ME NOW EXAMINE THE REMAND REPORT. THE DATE - LINE OF ALL THE HAPPENINGS IN THIS REGARD HAS ALREADY MENTIONED IN DETAIL EARLIER IN THIS ORDER. BRIEFLY, THE AR HAD FILED BEFORE ME THE CON FIRMATION OF THE SUBSCRIBER VIZ. PREMIER AND COPIES OF THE VALUATION REPORT OF THE SHARES OF THE APPELLANT, ITS RETURN IN FORM 2 FILED BEFORE RO C, THE AUDITED FINANCIAL STATEMENTS OF PREMIER, THE BANK STATEMENTS OF PREMIER AND ITS SCRUTINY ASSESSMENT ORDER OF THE RELEVANT ASSESSMENT YEAR. THE AO'S RESPONSE AS SEEN FROM HIS REMAND REPORT HAS ALSO BEEN DISCUSSED IN DETAIL EARLIER IN THIS ORDER. THE MOST REMARKABLE FEATURE OF THE SAID REPORT IS THAT THE AO HAS DULY NOTED ALL THE DETAILS FILED BUT HAS NOT COMME NTED ADVERSELY AGAINST ANY OF THEM. LET ME NOW BRIEFLY GO THROUGH THE REMANDED DOCUMENTS. THE VALUATION REPORT SUBMITTED BY THE APPELLANT HAS BEEN DATED 27 TH MARCH 2012, THE SHARES HAVING BEEN ALLOTTED ON 31 8T MARCH 2012. THE SAID REPORT HAS BEEN PREPARED BY M/S MANISH P. JAIN, CA. THE VALUER HAS FOLLOWED THE ANAV (I.E. ADJUSTED NET ASSET VALUE) METHOD AND HAS ESTIMATED THE FAIR VALUE OF THE EQUITY SHARES OF THE APPELLANT AT RS 39,323/ - PER SHARE. AS A MATTER OF FACT, THE APPELLANT HAD EVENTUALLY ISSUED ITS SHARES TO PREMIER AT A RATE OF RS 40,000 / - (INCLUSIVE OF SHARE PREMIUM) PER SHARE. IT WOULD HENCE BECOME CLEAR THAT THE APPELLANT HAD ISSUED THE SAID SHARES AT A COST HIGHER BY RS. 677 / - WHEN COMPARED TO THE VALUATION. WHEN ASKED ABOUT IT, THE AR MADE A TW O - FOLD ARGUMENT. FIRSTLY, HE POINTED OUT THAT THE ACTUAL ALLOTMENT HAD TAKEN PLACE AT AN AMOUNT HIGHER THAN THE VALUATION BUT ONLY TO THE EXTENT OF 2.2%. SECONDLY, HE POINTED OUT THAT THE VALUATION IS ONLY AN INDICATOR OF THE STATE OF AFFAIRS AS SEEN BY AN UNRELATED THIRD PARTY. ACCORDING TO THE APPELLANT AS ALSO THE SUBSCRIBER, THE SHARE PRICE WAS CLEARLY HIGHER - THOUGH ONLY MARGINALLY - M/S. GANJAM TRADING CO. PVT. LTD. 9 THAN THE VALUE PERCEIVED BY THE VALUER. HE FURTHER SUBMITTED THAT THERE IS NO LEGAL BAR IN MAKING AN ALLOTMENT AT A PRIC E MARGINALLY HIGHER THAN THE PRICE DETERMINED IN VALUATION. ON CAREFUL CONSIDERATION, I FIND MYSELF IN AGREEMENT WITH THE AR. WHILE THE ALLOTMENT HAS BEEN DONE AT A LEVEL MARGINALLY (I.E. BY 2.2%) HIGHER THAN THE VALUATION ITSELF, I WOULD CONCUR WITH THE A R WHEN HE STATES THAT THE VALUATION IS AN INDICATOR OF THE PERCEPTION OF THE VALUER. A DIFFERENCE OF 2% CAN BE EASILY EXPLAINED AS A PERCEPTIONAL DIFFERENCE WHICH CERTAINLY WOULD NOT REFLECT ADVERSELY ON THE ACT OF THE ALLOTMENT ITSELF AND THUS RENDER IT E NTIRELY QUESTIONABLE. 4.4.2 COMING TO THE CONFIRMATION, I FIND THAT PREMIER HAS ACTUALLY CONFIRMED ITS ACCOUNT IN THE BOOKS OF THE APPELLANT FOR THE RELEVANT PREVIOUS YEAR. AS EXPLAINED BY THE AR IN HIS REMAND REPORT, THE APPELLANT HAD RECEIVED LOANS FROM PREMIER IN THE PRECEDING PREVIOUS YEARS, THE OPENING BALANCE THEREOF BEING RS 298.8 CRORES AS ON 1 SI APRIL 2011. SUBSEQUENT LOAN ENTRIES ALONG WITH AN ENTRY OF ACCRUAL OF INTEREST LED TO THE AMOUNT PAYABLE AND DUE TO PREMIER OF RS 437.24 CRORES AS ON 31 ST MARCH 2012. AN AMOUNT OF RS 436 CRORES HAS BEEN ADJU STED OUT OF THIS AMOUNT DUE OF RS 437.24 CRORES, THE BALANCE OVER A CRORE OF RUPEES BEING REFLECTED AS THE CLOSI NG BALANCE. THIS ADJUSTMENT OF RS 436 CRORES IS SEEN TO HAVE BEEN DONE BY ISSUING RS 1. 09 LAKH COMPULSORILY CONVERTIBLE PREFERENCE SHARES WITH A FACE VALUE OF RS 100 / - AND A PREMIUM OF RS 39, 900/ - PER SHARE. ALL THESE TRANSACTIONS HAVE DULY BEEN CONFIRMED BY PREMIER, THE AO HAVING ALSO BEEN NOTED THEM IN HIS REMAND REPORT. THE COPY O F THE RETURN FILED BEFORE THE ROC IN F ORM 2 DEMONSTRATES THESE VERY DETAILS OF THE NUMBER OF SHARES SO ISSUED, THEIR FACE VALUE AND THE PREMIUM SO COLLECTED, THE AO ALSO HAVING CONFIRMED THE SAME IN HIS REMAND REPORT. THE AUDITED BALANCE SHEET OF PREMIER TOO CON FIRMS ITS INVESTMENT IN THE APPELLANT - COMPANY, THIS FACT HAVING BEEN CONFIRMED BY THE AO IN REMAND AS WELL. ONCE MORE, THE BANK STATEMENT OF PREMIER FOR THE RELEVANT PREVIOUS YEAR CONFIRMS THE FLOW OF MONEY AS ALREADY EXPLAINED EARLIER, THE SAID FACT HAVIN G BEEN DULY CONFIRMED BY THE AO IN REMAND AS WELL, LASTLY, A COPY OF THE SCRUTINY ASSESSMENT ORDER OF PREMIER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH HAS BEEN PASSED UNDER SECTION 143(3) OF THE ACT ON 19 TH MARCH 2015 HAS ALSO BEEN FILED. NO ADDIT ION ON ACCOUNT OF THE INVESTMENT DONE BY PREMIER IN THE APPELLANT - COMPANY IS SEEN TO HAVE BEEN MADE THEREIN IN THE HANDS OF PREMIER. 4.4.3 IN VIEW OF THE DISCUSSION IN THE PRECEDING SUB - PARAGRAPHS, IT WOULD BECOME CLEAR THAT THE APPELLANT HAD FURNISHED S UFFICIENT DOCUMENTATION (AT LEAST POST - ASSESSMENT, WHEN IT HAD BEEN SUBJECTED TO REMAND) TO DEMONSTRATE THAT THE SUBSCRIBER - INVESTOR VIZ. PREMIER HAD HAD ITS IDENTITY AND ITS CREDITWORTHINESS DULY ESTABLISHED. IT WOULD ALSO DEMONSTRATE THAT THE IMPUGNED TR ANSACTION WAS A GENUINE ONE. IT IS ALSO NOTEWORTHY THAT THE INVESTOR - COMPANY VIZ. PREMIER WAS ASSESSED IN THE VERY SAME CHARGE VIZ. THAT OF PRINCIPAL COMMISSIONER OF INCOME TAX - 7, MUMBAI, ITS AO BEING M/S. GANJAM TRADING CO. PVT. LTD. 10 THE DY. COMMISSIONER OF INCOME TAX CIRCLE 7(3)(2), MUMB AI. ON THE OTHER HAND, THE AO OF THE APPELLANT IS SEEN TO BE DY. COMMISSIONER OF INCOME TAX CIRCLE 7(1)(1), MUMBAI. IT IS FURTHER NOTEWORTHY THAT NO ADDITION HAS BEEN MADE IN THE HANDS OF THE INVESTOR VIZ. PREMIER, ALTHOUGH IT HAD BEEN SUBJECTED TO SCRUTIN Y ASSESSMENT PROCEEDINGS FOR THE RELEVANT ASSESSMENT YEAR. LASTLY, EVEN THE AO HAS NOT FOUND ANY FAULT WITH THE APPELLANT'S DOCUMENTATION EXAMINED BY HIM IN REMAND. AFTER CAREFULLY CONSIDERING ALL THESE ASPECTS, I AM OF THE VIEW THAT THERE IS NO CASE ON A FACTUAL BASIS FOR MAKING ANY ADDITION UNDER SECTION 68 OF THE ACT. 4.4.4 HAVING EXAMINED THE FACTUAL ASPECTS OF THIS CASE LET ME NOW MOVE ON TO THE LEGISLATIVE ASPECT OF THIS ADDITION VIZ. THE PROVISIONS OF 68 OF THE ACT. SECTION 68 OF THE ACT ENVISAGES T HE ADDITION OF A SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS IN THE EVENT OF AN UNSATISFACTORY EXPLANATION AS TO THE SOURCE AND THE NATURE THEREOF. AS DISCUSSED EARLIER, VARIOUS SUPERIOR JUDICIAL AUTHORITIES HAVE HELD THIS PROVISION TO BE APPLICABLE WHERE THE ASSESSEE HAD FAILED TO SATISFACTORILY EXPLAIN FULLY THE IDENTITY AND CREDITWORTHINESS OF THE LENDER /ADVANCER OF THAT AMOUNT AS ALSO THE GENUINENESS OF THE TRANSACTION. IN THE INSTANT CASE, AS HAS BEEN EXPLAINED IN DETAIL IN THE PRECEDING SUB - PARAGRAPHS , PREMIER IS A BODY CORPORATE WHOSE IDENTITY AND CREDITWORTHINESS HAVE BEEN CLEARLY ESTABLISHED WITH THE EXTENSIVE DOCUMENTATION IN TERMS OF ITS PAN, ITS FINANCIAL STATEMENTS, ITS RETURNS OF INCOME, ETC., ALL OF WHICH HAD BEEN EXAMINED BY THE AO DURING THE REMAND PROCEEDINGS. COMING TO THE GENUINENESS OF THE TRANSACTION, THE APPELLANT HAS BEEN ABLE TO DEMONSTRATE THE CLEAR AUDIT TRAIL BY FILING BANK STATEMENTS TO DEMONSTRATE THAT THERE WAS ACTUAL TRANSFER OF MONEY. ON THE OTHER HAND, IT HAS ALSO FILED A COP Y OF ITS RETURN IN FORM 2 FILED BEFORE THE ROC TO DEMONSTRATE THE CHANGES IN ITS SHARE HOLDING PATTERN. ACCORDINGLY EVEN THE GENUINENESS OF THE SAID TRANSACTIONS HAS BEEN ESTABLISHED. IN THESE CIRCUMSTANCES, AFTER CAREFUL CONSIDERATION, I FIND NO BASIS FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. 4.4.5 LET ME NOW TOUCH UPON THE INSERTION OF THE FIRST PROVISO TO SECTION 68 OF THE ACT, WHICH HAS BEEN BRIEFLY MENTIONED EARLIER IN THIS ORDER. THE SAID PROVISO - WHICH HAS BEEN INSERTED WITH EFFECT FROM 1 ST APRIL 2013 - LAYS DOWN CERTAIN CONDITIONS FOR TREATMENT OF SHARE PREMIUM AS AN UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HOWEVER, IT IS CLEAR THAT THIS AMENDMENT WOULD ONLY BE APPLICABLE FROM AY 2013 - 14 ONWARDS AND IS HENCE INAPPLICABLE TO T HE ASSESSMENT YEAR UNDER CONSIDERATION VIZ. AY 2012 - 13. THE HON'BLE BOMBAY HIGH COURT - IN ITS RECENT DECISION DATED 20 TH MARCH 2017 RENDERED IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE PVT. LTD. (ITA NO. 1613 OF 2014) - HAS HELD THE SAID AMENDMENT TO BE SUBSTANTIVE AND NEITHER CLARIFICATORY NOR DECLARATORY. IT HAS ACCORDINGLY HELD IT BE INAPPLICABLE TO AY 2012 - 13 ON A RETROSPECTIVE BASIS. A COPY OF THE SAID UNCITED DECISION HAS BEEN PLACED ON THE APPELLATE RECORD. RESPECTFULLY FOLLOWING THE SAID DECISION , IT IS HELD THAT THE PROVISION UNDER DISCUSSION HAS NO APPLICABILITY TO THE ASSESSMENT YEAR UNDER M/S. GANJAM TRADING CO. PVT. LTD. 11 CONSIDERATION VIZ. AY 2012 - 13. FROM THE DISCUSSION IN THIS SUB - PARAGRAPH AS WELL AS THE PRECEDING ONE IT WOULD BE APPARENT THAT THE ADDITION AS MADE BY THE A O WOULD NOT BE FEASIBLE IN VIEW OF THE EXTANT PROVISIONS IN THE ACT. LET ME NOW TURN TO THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS SUBJECT. 4.4.6 THE HON'BLE SUPREME COURT HAS HAD OCCASION TO GO INTO THIS MATTER. IN THE CASE OF CIT V. ALLAHABAD BANK LTD. (73 ITR 745) IT HAD BEEN HELD THAT THE SHARE PREMIUM ACCOUNT HAD TO BE INCLUDED IN THE PAID - UP CAPITAL ACCOUNT, THUS LEADING TO IT BEING TREATED ON A PAR WITH THE PAID - UP CAPITAL. IN THE CASE OF CIT V. STANDARD VACUUM OIL CO. (49 ITR 865), IT HAD HELD THA T PREMIUM REALIZED ON ISSUE OF SHARES IS NOT IN THE NATURE OF A REVENUE RECEIPT AND IS HENCE NOT CHARGEABLE TO TAX. THE HON'BLE BOMBAY HIGH COURT TOO HAD OCCASION TO GO INTO THIS MATTER IN ITS DECISION RENDERED IN THE CASE OF VODAFONE INDIA SERVICES (P) LT D. (SUPRA). IT HAD THEN UNEQUIVOCALLY HELD THAT THE AMOUNTS RECEIVED ON ISSUE OF SHARE CAPITAL - INCLUDING THE PREMIUM - ARE UNDOUBTEDLY ON THE CAPITAL ACCOUNT IN A RELATIVELY RECENT JUDGMENT, THE MUMBAI BENCH OF THE HON'BLE TRIBUNAL HAD OCCASION TO EXAMIN E THIS VERY ISSUE ONCE MORE IN THE CASE OF GREEN INFRA LTD. V. ITO (38 TAXMANN 253). IT HAD CITED THE JUDGMENTS OF THE HON'BLE SUPREME COURT DISCUSSED EARLIER IN THIS ORDER. IT HAD THEN EXAMINED THE FACTS OF THAT CASE AND STATED THAT A NON EST AND A ZERO B ALANCE COMPANY ASKING FOR PREMIUM OF RS 490/ - PER SHARE WITH A FACE VALUE OF RS 10 / - DEFIES COMMERCIAL PRUDENCE. NEVERTHELESS IT HAD CONCLUDED THAT IT WAS THE PREROGATIVE OF THE BOARD OF THE ASSESSEE - COMPANY TO DECIDE THE QUANTUM OF THE PREMIUM AND IT WAS THE WISDOM OF THE SHARE HOLDERS TO INVEST ON THOSE TERMS. THUS, THE REVENUE WAS BARRED FROM CHARGING THE SAID PREMIUM TO TAX IN THE ABSENCE OF ANY EXPLICIT LEGISLATIVE SANCTION. AS HAS ALREADY BEEN SEEN IN THE MATTER UNDER CONSIDERATION, THE APPELLANT - COMP ANY IS FAR FROM BEING A NON EST COMPANY OR A ZERO BALANCE ONE. IN THESE CIRCUMSTANCES, THERE WOULD BE ALL THE MORE REASON FOR NOT CHARGING TO TAX THE SHARE PREMIUM COLLECTED BY THE APPELLANT. THE ORDER OF THE HON'BLE TRIBUNAL IN THE CASE OF GREEN INFRA LTD . V. ITO HAD DULY TRAVELLED TO THE HON'BLE BOMBAY HIGH COURT WHICH HAS RECENTLY PRONOUNCED ITS DECISION (IN ITA NO. 1162 OF 2014 DATED 16 TH JANUARY 2017), A COPY OF THE SAID UNCITED DECISION HAVING BEEN PLACED ON THE APPELLATE RECORD. AFTER DULY CONSIDERIN G THE APPEAL OF THE REVENUE AGAINST THE ORDER OF THE HON'BLE TRIBUNAL, THE HON'BLE HIGH COURT HAS HELD THAT THE QUESTION AS FORMULATED IN THE APPEAL ON THE ISSUE OF NON - APPLICATION OF PROVISIONS OF SECTION 68 OF THE ACT DID NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. FURTHER, IN ITS DECISION RENDERED IN THE CASE OF CIT V. LOVELY EXPORTS (SUPRA), THE HON'BLE SUPREME COURT HAD OCCASION TO DECIDE THE QUESTION 'CAN THE AMOUNT OF SHARE PREMIUM BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOM E TAX ACT, 1961?' THE HON'BLE SUPREME COURT HAD THEN DISMISSED THE SPECIAL LEAVE PETITION OF THE REVENUE STATING THAT IT FOUND NO MERIT IN IT FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE FROM CERTAIN PERSONS M/S. GANJAM TRADING CO. PVT. LTD. 12 WHOSE NAMES HAD BEEN GIVEN TO THE AO, THEN THE DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR ASSESSMENTS IN ACCORDANCE WITH THE LAW. IN THE CASE UNDER CONSIDERATION, THE AO HAD IN FACT DULY SUBJECTED THE RETURN OF INCOME FILED BY THE INVESTOR VIZ. PREMIER FOR A Y 2012 - 13 TO SCRUTINY ASSESSMENT PROCEEDINGS BUT HAD NOT MADE ANY ADDITION ON THIS COUNT. HIS ORDER IN THAT CASE HAS ALREADY BEEN PLACED ON THE APPELLATE RECORD. OBVIOUSLY, IN THESE CIRCUMSTANCES, THE AO CANNOT MAKE ANY ADDITION ON THIS COUNT IN THE HANDS OF THE APPELLANT. IT WOULD NOW BECOME CLEAR THAT THE ADDITION AS MADE BY THE AO WOULD NOT LIE IN THIS CASE IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS SUBJECT AS DISCUSSED EARLIER IN THIS SUB - PARAGRAPH. 4.4. 7 AFTER TAKING INTO ACCOUNT ALL THE F ACTUAL AND LEGAL ASPECTS OF THIS CASE AS DISCUSSED IN THIS ORDER AND AFTER RESPECTFULLY FOLLOWING THE AFORE CITED SUPERIOR JUDICIAL AUTHORITIES, THE ADDITION OF RS 436,00,00, 000/ - AS MADE BY THE AO IN THIS CASE IS SET ASIDE. THE AO IS SO DIRECTED. WHILE TH IS ADDITION HAD BEEN MADE ON ACCOUNT OF BOTH THE FACE VALUE AS WELL AS THE SHARE PREMIUM, THE ADDITION OF RS 434.49 CRORES MADE ON ACCOUNT OF THE COMPONENT OF SHARE PREMIUM ALONE (AS SEEN AT PARAGRAPH NO. 6 OF THE ORDER UNDER APPEAL) IS SEEN TO HAVE BEEN M ADE ONLY ON AN ALTERNATE BASIS UNDER THE VERY SAME PROVISIONS OF SECTION 68 OF THE ACT. FOR REASONS ALREADY EXPLAINED IN DETAIL IN THE PRECEDING SUB - PARAGRAPHS, THE PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOKED IN THIS CASE AND SHARE PREMIUM (BEING AN AMOUNT COLLECTED ON THE CAPITAL ACCOUNT) CANNOT BE SUBJECTED TO TAX. IN VIEW OF THE DETAILED DISCUSSION ALREADY DONE ON THESE ISSUES, I FIND NO JUSTIFICATION FOR MAKING THIS ADDITION OF RS 434,49,58,000/ - UNDER SECTION 68 OF THE ACT ON AN ALTERNATE BAS IS ON ACCOUNT OF COLLECTION OF SHARE PREMIUM. THE SAID ADDITION TOO IS ACCORDINGLY D ELETED. GROUND NO. 2 IS ACCORDINGLY ALLOWED . 15. BEFORE US, THE LD CIT - DR CONTENDED THAT THE LD CIT(A) HIMSELF SHOULD HAVE CAUSED NECESSARY ENQUIRIES ON THE DOCUMENTS F URNISHED BY THE ASSESSEE. WE NOTICE FROM THE ORDER PASSED BY LD CIT(A) THAT THE FIRST APPELLATE AUTHORITY HAS, IN FACT, EXAMINED THE FINANCIAL TRANSACTIONS BETWEEN THE ASSESSEE AND M/S PREMIER FINANCE & TRADING COMPANY LTD . THE LD CIT(A) HAS ALSO NOTED T HE FACT THAT THE ASSESSEE HAS RECEIVED FUNDS FROM M/S PREMIER FINANCE & TRADING COMPANY LTD, OVER A PERIOD AND A SUM OF RS.298.80 CRORES WAS OUTSTANDING AS ON 1.4.2011, MEANING THEREBY, THE AO COULD NOT HAVE MADE ADDITION OF THE ABOVE SAID AMOUNT DURING TH E YEAR UNDER CONSIDERATION TO THE EXTENT OF RS,298.80 CRORES , AS THE SAME HAS BEEN RECEIVED IN THE EARLIER YEARS. THE LD A.R HAS SUBMITTED THAT M/S PREMIER FINANCE & TRADING CO LTD IS A M/S. GANJAM TRADING CO. PVT. LTD. 13 RELATED CONCERN AND THE DETAILS OF TRANSACTIONS HAVE BEEN DULY DISCLO SED IN THE ANNUAL REPORT OF THE ASSESSEE. M/S PREMIER FINANCE & TRADING CO LTD IS ALSO ASSESSED TO INCOME TAX AND IT HAS SINCE MERGED WITH M/S SPRIT TEXTILES P LTD, THROUGH THE ORDER PASSED BY HONBLE BOMBAY HIGH COURT . THE LD CIT(A), AFTER EXAMINING THE VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE, HAS COME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS PLACED UPON IT U/S 68 OF THE ACT. DURING THE COURSE OF HEARING, THE LD DR DID NOT FIND FAULT WITH THE FINDING SO GIVEN BY LD CIT(A). THE LD DR WAS MAINLY CONTENDING THAT THE LD CIT(A) SHOULD NOT HAVE ADMITTED THE ADDITIONAL EVIDENCES. IN ANY CASE, T HE MANNER OF EXAMINATION OF SHARE PREMIUM AMOUNT RECEIVED BY THE ASSESSEE HAS SINCE BEEN SETTLED BY THE DECISION S RENDERED BY HONBLE BO MBAY HIGH COURT IN THE CASE OF GREEN INFRA (SUPRA) AND M/S GAGANDEEP INFRASTRUCTURE (SUPRA) , I.E., IT IS REQUIRED TO BE TESTED IN TERMS OF SEC. 68 ONLY . THE BURDEN TO JUSTIFY THE SHARE PREMIUM HAS BEEN IMPOSED ON THE ASSESSEES ONLY FROM AY 2013 - 14 ONWARDS . HENCE THE ADDITION OF SHARE PREMIUM MADE BY AO ON ALTERNATIVE BASIS WILL ALSO FAIL. 16. THUS, W E NOTICE FROM THE CONTENTIONS OF LD CIT - DR THAT THE REVENUE WAS ALSO SATISFIED WITH THE FACT THAT THE ASSESSEE H AS PROVED THE THREE INGREDIENTS. AS NOTIC ED EARLIER, THE MAIN CONTENTION OF LD DR WAS THAT THE LD CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A, I.E., WITHOUT SATISFYING HIMSELF THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN PRESENTING THE EVIDENCES BEFORE THE AO. WE HAVE NOTICED THAT THE ASSESSEE HAS FURNISHED THE DETAILS THAT WERE CALLED FOR BY THE AO EXCEPT CONFIRMATION LETTER FROM M/S PREMIER FINANCE & TRADING CO LTD . THE ASSESSEE HAS ALSO ARGUED BEFORE THE AO THAT THE AMOUNT COLLECTED BY WAY OF SHARE CAPITAL/PREM IUM IS CAPITAL RECEIPT. THE LD A.R ALSO SUBMITTED THAT THE TIME AVAILABLE WITH THE ASSESSEE WAS SHORT AND THE ASSESSEE HAD ALSO FACED CERTAIN ADMINISTRATIVE PROBLEMS. FURTHER THE DETAILS WERE REQUIRED TO BE COLLECTED FROM THE OTHER PARTY AND IT IS NOT A C ASE WHERE THE ASSESSEE WAS HAVING THE DETAILS, BUT DID NOT FURNISH THEM TO THE AO. IN ANY CASE, THERE IS ONLY PARTIAL FAILURE ON THE PART OF THE ASSESSEE TO COLLECT AND FURNISH THE DETAILS BEFORE THE AO. ULTIMATELY, THE ASSESSEE WAS M/S. GANJAM TRADING CO. PVT. LTD. 14 REQUIRED TO PROVE THE THREE INGREDIENTS IN ORDER TO ESCAPE FROM THE DEEMING FICTION PROVIDED IN SEC.68 OF THE ACT. HENCE THE ASSESSEE HAS FURNISHED ALL THE NECESSARY DETAILS BEFORE LD CIT(A). THE INTEREST OF SUBSTANTIAL JUSTICE IS BASIC FOUNDATION OF THE JUDICIAL SYSTEM AND IT IS SO HELD BY THE CHANDIGARH BENCH OF TRIBUNAL IN THE CASE OF SHREE GANESH CONCAST GROUP OF INDUSTRIES (SUPRA). THE LD A.R ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. PRABHAVATI S SHAH (SUPRA). THE FOLL OWING OBSERVATIONS MADE BY HONBLE BOMBAY HIGH COURT IN THE ABOVE SAID CASE ARE RELEVANT HERE: - 4. WE HAVE HEARD MR. A. JASANI, LEARNED COUNSEL FOR THE ASSESSEE. THE MAIN CONTROVERSY IN THIS CASE IS ABOUT THE SCOPE AND AMBIT OF RULE 46A OF THE RULES. RULE 46A READS AS FOLLOWS : '46A. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE APPELLATE ASSISTANT COMMISSIONER. -- (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE APPELLATE ASSISTANT COMMISSIONER ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THA N THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE INCOME - TAX OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY : -- (A) WHERE THE INCOME - TAX OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED ; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE INCOME - TAX OFFICER ; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE INCOME - TAX OFFICER ANY EVIDE NCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL ; OR (D) WHERE THE INCOME - TAX OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUTGIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMI TTED UNDER SUB - RULE (1) UNLESS THE APPELLATE ASSISTANT COMMISSIONER RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3) THE APPELLATE ASSISTANT COMMISSIONER SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB - RULE (1) UNLESS THE INCOME - TAX OFFICE R HAS BEEN ALLOWED A REASONABLE OPPORTUNITY - M/S. GANJAM TRADING CO. PVT. LTD. 15 (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS - EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE INCOME - TAX OFFICER) UNDER CLAUSE (A) OF SUB - SECTION (1) OF SECTION 251 OR THE IMPOSITION O F PENALTY UNDER SECTION 271 .' 5. ON A PLAIN READING OF RULE 46A, IT IS CLEAR THAT THIS RULE IS INTENDED TO PUT FETTERS ON THE RIGHT OF THE APPELLANT TO PRODUCE BEFORE THE APPELLATE ASSISTANT COMMISSIONER ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDINGS BEFORE THE INCOME - TAX OFFICER, EXCEPT IN THE CIRCUMSTANCES SET OUT THEREIN. IT DOES NOT DEAL WITH THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER TO MAKE FURTHER ENQUIRY OR TO DIRECT THE INCOME - TAX OFFICER TO MAKE FURTHER ENQUIRY AND TO REPORT THE RESULT OF THE SAME TO HIM. THIS POSITION HAS BEEN MADE CLEAR BY SUB - RULE (4) WHICH SPECIFICALLY PROVIDES THAT THE RESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER TO CALL FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAMINATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL. UNDER SUB - SECTION ( 4) OF SECTION 250 OF THE ACT, THE APPELLATE ASSISTANT COMMISSIONER IS EMPOWERED TO MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT OR TO DIRECT THE INCOME - TAX OFFICER TO MAKE FURTHER INQUIRY AND TO REPORT THE RESULT OF THE SAME TO HIM. SUB - SECTION (5) OF SECTION 250 OF THE ACT EMPOWERS THE APPELLATE ASSISTANT COMMISSIONER TO ALLOW THE APPELLANT, AT THE HEARING OF THE APPEAL, TO GO INTO ANY GROUND OF APPEAL N OT SPECIFIED IN THE GROUNDS OF APPEAL, ON HIS BEING SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF APPEAL WAS NOT WILFUL. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER ARE MUCH WIDER THAN THE POWE RS OF AN ORDINARY COURT OF APPEAL. THE SCOPE OF HIS POWERS IS COTERMINOUS WITH THAT OF THE INCOME - TAX OFFICER. HE CAN DO WHAT THE INCOME - TAX OFFICER CAN DO. HE CAN ALSO DIRECT THE INCOME - TAX OFFICER TO DO WHAT HE FAILED TO DO. THE POWER CONFERRED ON THE AP PELLATE ASSISTANT COMMISSIONER UNDER SUB - SECTION (4) OF SECTION 250 BEING A QUASI - JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY. IF THE APPELLATE ASSI STANT COMMISSIONER FAILS TO EXERCISE HIS DISCRETION JUDICIALLY, AND ARBITRARILY REFUSES TO MAKE ENQUIRY IN A CASE WHERE THE FACTS AND CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OPEN FOR CORRECTION BY A HIGHER AUTHORITY. 6. ON A CONJOINT READING OF SECTION 250 OF THE ACT AND RULE 46A OF THE RULES, IT IS CLEAR THAT THE RESTRICTIONS PLACED ON THE APPELLANT TO PRODUCE EVIDENCE DO NOT AFFECT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER UNDER SUB - SECTIO N (4) OF SECTION 250 OF THE ACT. THE PURPOSE OF RULE 46A APPEARS TO BE TO ENSURE THAT EVIDENCE IS PRIMARILY LED BEFORE THE INCOME - TAX OFFICER. M/S. GANJAM TRADING CO. PVT. LTD. 16 7. WE ARE SUPPORTED IN OUR ABOVE CONCLUSION BY THE DECISION OF THE ORISSA HIGH COURT IN B. L. CHOUDHURY V. CIT [1976] 105 ITR 371 IN WHICH IT WAS HELD (PAGE 376) : 'WIDE PROVISION HAS THUS BEEN MADE CONFERRING JURISDICTION ON THE FIRST APPELLATE AUTHORITY TO MAK E SUCH INQUIRY AS HE DEEMS FIT. THE PROVISION SEEMS TO HAVE BEEN BASED ON THE FACT THAT BEFORE THE APPELLATE ASSISTANT COMMISSIONER THERE IS GENERALLY NO OPPOSITE PARTY. THE APPELLATE AUTHORITY HIMSELF IS THE DEPARTMENTAL AUTHORITY REPRESENTING THE REVENUE . THEREFORE, HE HAS BEEN INVESTED WITH THE POWER OF MAKING FURTHER INQUIRY. HE DOES NOT EXCEED HIS JURISDICTION IF HE ASKS OR ALLOWS THE ASSESSEE TO PRODUCE OR FILE ADDITIONAL PAPERS OR ADDITIONAL EVIDENCE IN THE MANNER HE THINKS FIT.' 8. IT WAS FURTHER HE LD THAT (PAGE 376) : 'IN FACT, RECEIVING NEW MATERIAL BY THE APPELLATE ASSISTANT COMMISSIONER CANNOT BE EQUATED WITH RECEIPT OF ADDITIONAL EVIDENCE AS CONTEMPLATED IN ORDER 41, RULE 27 OF THE CODE OF CIVIL PROCEDURE OR EVEN AT THE STAGE OF SECOND APPEAL BY THE TRIBUNAL.' 9. IN THE INSTANT CASE, THE INCOME - TAX OFFICER TREATED THE AMOUNT OF TWO LOANS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES BECAUSE THE SUMMONS ISSUED BY HIM COULD NOT BE SERVED ON THE CREDITORS. AT THE TIME OF HEARING OF THE APPEAL AGAINST THE ABOVE ORDER BEFORE THE APPELLATE ASSISTANT COMMISSIONER, THE ASSESSEE WANTED TO PROVE THE GENUINENESS OF THE LOAN OF RS. 40,000 FROM ONE OF THE BORROWERS, VIZ., CHAMPAKLAL DALPATRAI BY RELYING UPON THE FACT THAT THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE BY CHEQUE AND REPAID BY CHEQUE. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE WANTED TO PRODUCE PHOTOSTAT COPIES OF THE CHEQUES, A CERTIFICATE FROM THE BANK TO SHOW THAT A SUM OF RS. 40,000 WAS RECEIVED BY THE ASSESSEE FROM CHAMPAKLAL DALPATRAI BY CHEQUE AND A COPY OF THE ACCOUNT OF THE ASSESSEE WITH THE SAID BANK. PRIMA FACIE, THIS INFORMATION WAS NECESSARY TO DECIDE THE CONTROVERSY IN REGARD TO THE GENUINENESS OF THE LOAN OF RS. 40,000 TAKEN BY THE ASSESSEE FROM CHAMPAKLAL DALPATRAI. THE APPELL ATE ASSISTANT COMMISSIONER SHOULD HAVE CONSIDERED THIS EVIDENCE IN EXERCISE OF HIS POWERS UNDER SUB - SECTIONS (4) AND (5) OF SECTION 250 OF THE ACT WHICH HE FAILED TO DO. IN OUR OPINION, IT IS A FIT CASE WHERE THE APPELLATE ASSISTANT COMMISSIONER SHOULD HAVE EXERCISED THE POWERS CONFERRED UPON HIM UNDER SUB - SECTION (4) OF SECTION 250 OF THE ACT AND TAKEN ON RECORD THE XEROX COPIES OF THE CHEQUE, THE CERT IFICATE FROM THE BANK AND THE COPY OF THE ACCOUNT OF THE ASSESSEE WITH THE SAID BANK AND CONSIDERED THE SAME FOR DECIDING THE GENUINENESS OF THE LOAN OF RS. 40,000. 10. WE ARE ALSO OF THE OPINION THAT IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, EVEN UNDE R RULE 46A OF THE RULES THE ASSESSEE SHOULD HAVE BEEN ALLOWED TO PRODUCE THE ADDITIONAL EVIDENCE. THE APPELLATE ASSISTANT COMMISSIONER, IN OUR VIEW, WAS NOT CORRECT IN HOLDING THAT THE CASE OF THE ASSESSEE DID NOT FALL IN ANY OF THE FOUR EXCEPTIONS SET OUT IN SUB - RULE (1) OF RULE 46A. IN FACT, THE PRESENT CASE WOULD FALL UNDER CLAUSE (C) OF SUB - RULE (1) OF RULE 46A BECAUSE THE ASSESSEE HAD NO OCCASION TO COLLECT THIS EVIDENCE EARLIER. HE COULD HAVE REASONABLY EXPECTED M/S. GANJAM TRADING CO. PVT. LTD. 17 THAT THE CREDITORS WILL APPEAR BEFORE T HE INCOME - TAX OFFICER IN COMPLIANCE WITH THE SUMMONS ISSUED BY HIM. HE WAS NEVER INFORMED BY THE INCOME - TAX OFFICER THAT THE CREDITORS WERE NOT AVAILABLE OR UNIDENTIFIABLE. IF HE HAD BEEN INFORMED BY THE INCOME - TAX OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS THAT HE WAS NOT INCLINED TO ACCEPT THE LOANS AS GENUINE BECAUSE OF THE NONAVAILABILITY OF THE CREDITORS, HE COULD HAVE TRIED TO SATISFY HIM ABOUT THE GENUINENESS OF THE LOAN BY PRODUCING OTHER EVIDENCE. AT THE TIME OF HEARING OF THE APPEAL, THE APPE LLANT TRIED TO SATISFY THE APPELLATE ASSISTANT COMMISSIONER ABOUT THE GENUINENESS OF ONE OF THE LOANS BY PRODUCING MATERIAL WHICH HE COULD COLLECT IN THE MEANTIME. THIS CASE, THEREFORE, WILL FALL UNDER CLAUSE (C) OF SUB - RULE (1) OF RULE 46A OF THE RULES. I N ANY VIEW OF THE MATTER, WE ARE OF THE OPINION THAT IN THE INSTANT CASE, THE APPELLATE ASSISTANT COMMISSIONER SHOULD HAVE CONSIDERED THE EVIDENCE PRODUCED BY THE ASSESSEE IN REGARD TO THE LOAN OF RS. 40,000 FROM CHAMPAKLAL DALPATRAI. THE FACTS AVAILABLE I N THE CASE BEFORE HONBLE BOMBAY HIGH COURT IS IN A WAY IDENTICAL WITH THE FACTS OF HE PRESENT CASE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION TAKEN BY LD CIT(A) IN ADMITTING THE ADDITIONAL EVIDENCES. IN ANY CASE, THE LD CIT(A) HAS CONFRONTED TH EM TO THE AO, WHO HAS ALSO FURNISHED A REMAND REPORT THEREON , WHEREIN THE AO HAS ALSO NOT EXPRESSED ANY DOUBT ON THE THREE INGREDIENTS RELEVANT FOR SEC. 68 OF THE ACT . 17. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ORDER PASSED LD CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 18. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE. THE FIRST ISSUE RELATES TO THE LOSS FROM SHARE TRADING. THE AO TREATED THE LOSS FROM SHARE TRADING OF RS.20.09 CRORES AS SPECULA TION LOSS AND HE HAS ALSO ENHANCED THE SAME BY ADDING INTEREST COST OF RS.18.68 CRORES. THE LD CIT(A) ALSO CONFIRMED THE SAME BY FOLLOWING THE DECISION RENDERED BY THE CO - ORDINATE BENCHES OF TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.5368/MUM/2011 DATED 12 - 09 - 2014 RELATING TO AY 2004 - 05 AND ALSO THE DECISION RENDERED IN ITA NOS.5369 & 5370/MUM/2011 DATED 26 - 04 - 2013 RELATING TO AY 2006 - 07 AND 2007 - 08. 19. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE LD A.R, BY PLACING HIS RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HSBC SECURITIES & CAPITAL MARKETS INDIA (P) LTD (2012)(23 TAXMANN.COM 377), SUBMITTED THAT THE ASSESSEE WOULD FALL IN THE EXCEPTIONS M/S. GANJAM TRADING CO. PVT. LTD. 18 PROVIDED IN THE EXPLANATION TO SEC. 73 OF THE ACT. HE ALSO FU RNISHED WORKING SHEETS TO SUPPORT HIS CONTENTIONS. HE SUBMITTED THAT THE ABOVE SAID ORDER PASSED BY HONBLE BOMBAY HIGH COURT WAS NOT CONSIDERED BY THE TRIBUNAL IN THE EARLIER YEARS AND ACCORDINGLY CONTENDED THAT THEY CANNOT BE TAKEN AS BINDING PRECEDENT. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE AO HAS LIFTED THE CORPORATE VE IL AND HAS SHOWN THAT THE LOSS WA S MANAGED BY THE ASSESSEE . 20. WE NOTICE THAT T HE ASSESSEE IS PLACING RELIANCE ON THE ORDER PASSED BY HONBLE BOMBAY HIGH COURT AND A LSO SUPPORTED ITS CLAIM WITH WORKING S HEETS SUBMITTED BY IT . ON THE CONTRARY, THE LD D .R IS SUBMITTING THAT THE LOSS WA S MANAGED ONE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CONTENTIONS OF THE ASSESSEE AS WELL AS THE LD DR REQUIRE FACTUAL VERIFICATION. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH. 21. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.804.34 LA KHS U/S 36(1)(III) OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS GIVEN LOANS TO CERTAIN CONCERNS TO THE TUNE OF RS.5745.35 LAKHS EITHER AS INTEREST FREE LOANS OR CHARGED INTEREST AT CONCESSIONAL RATE. THE AO NOTICED THAT ASSESSEE WAS, HOWEVER, PAYING INTEREST ON LOAN TAKEN BY IT AT HIGHER RATE, I.E., @ 14%. SINCE THE ASSESSEE DID NOT FURNISH EXPLANATIONS IN THIS REGARD, THE AO DISALLOWED A PORTION OF INTEREST AMOUNTING TO RS.804.34 LAKHS U/S 36(1)(III) OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SA ME, AS THE ASSESSEE COULD NOT GIVE SATISFACTORY EXPLANATION BEFORE HIM ALSO. 22. WE HEARD THE PARTIES ON THIS ISSUE. THE LD A.R SUBMITTED THAT THE AO HAS COMPUTED INTEREST ON THE CLOSING BALANCE OF ADVANCES AND DISALLOWED THE SAME. HE SUBMITTED THAT THE INTEREST SHOULD HAVE BEEN COMPUTED ON TIME BASIS ON THE OUTSTANDING LOAN, I.E., ON DAILY BALANCE BASIS. HE ALSO SUBMITTED THAT THE AO DID NOT CONSIDER THE FACT OF AVAILABILITY OF OWN FUNDS AND M/S. GANJAM TRADING CO. PVT. LTD. 19 ACCORDINGLY CONTENDED THAT THE ADVANCES SO GIVEN, WHICH I S PROPORTIONATE TO OWN FUNDS SHOULD NOT HAVE BEEN DISALLOWED. ACCORDINGLY HE SUBMITTED THAT THE DISALLOWANCE SHOULD HAVE BEEN RESTRICTED TO THE PORTION ATTRIBUTABLE TO LOAN FUNDS ONLY. 23. WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE. SINCE THES E ASPECTS REQUIRE FACTUAL VERIFICATION, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR EXAMINING IT AFRESH. ACCORDINGLY, THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IS SET ASIDE. 24. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE DISALLOWANC E MADE U/S 14A OF THE ACT. AT THE TIME OF HEARING, THE LD A.R DID NOT PRESS THE SAME. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 25. THE LAST ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE ADDITIONAL NOTIONAL RENTAL INCOME. THE AO NOTICED THAT THE ASSESSEE OWNED TWO HOUSE PROPERTIES IDENTIFIED AS KUNWAR HOUSE AND NEW PRAKASH CINEMA. THE AO COMPUTED NOTIONAL RENT ON BOTH THE PROPERTIES AND THE LD CIT(A) ALSO CONFIRMED THE SAME. 26. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS BEEN USING P ROPERTY LOCATED AT KUNWAR HOU S E AS ITS GUEST HOUSE AND THE OTHER PROPERTY LOCATED AT NEW PRAKASH CINEMA IS THE REGISTERED OFFICE OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THESE FACTUAL ASPECTS, BUT THE LD CIT(A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE WITHOUT CONSIDERING THE EXPLANATIONS OF THE ASSESSEE. 27. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. SINCE THE EXPLANATIONS OF THE ASSESSEE HAVE NOT BEEN CONSIDERED BY THE TAX AUTHORITIES, IN THE INTEREST OF NATURAL JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR EXAMINING IT AFRESH. THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IS SET ASIDE. M/S. GANJAM TRADING CO. PVT. LTD. 20 28. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATI STICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 16 . 1 1 .201 8 . SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 1 1 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI