SANJAY S CHHAJED, MUMBAI V. ITO WD 20(3)(3), MUMBAI

ITA 4895/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55718 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 24-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business income; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 4894 & 4913/MUM/2010 (ASSESSMENT YEARS: 2006-07 & 2004-05) MR. SUDHIR S. CHHAJED INCOME TAX OFFICER - 20(3)(3) 2003-04, BEVERLY HILLS PIRAMAL CHAMBERS, LALBAUG LOKHANDWALA COMPLEX VS. MUMBAI 400012 MUMBAI 400053 PAN - AABPC 5235 F APPELLANT RESPONDENT ITA NO. 4895, 4896 & 4897/MUM/2010 (ASSESSMENT YEARS: 2004-05, 2005-06 & 2006-07) MR. SANJAY S. CHHAJED INCOME TAX OFFICER - 20(3)(3) 2003-04, BEVERLY HILLS PIRAMAL CHAMBERS, LALBAUG LOKHANDWALA COMPLEX VS. MUMBAI 400012 MUMBAI 400053 PAN - AACPC 0472 G APPELLANT RESPONDENT ITA NO. 4914 & 4915/MUM/2010 (ASSESSMENT YEAR: 2004-05 & 2006-07) MR. SANDEEP S. CHHAJED INCOME TAX OFFICER - 20(3)( 3) 2003-04, BEVERLY HILLS PIRAMAL CHAMBERS, LALBAUG LOKHANDWALA COMPLEX VS. MUMBAI 400012 MUMBAI 400053 PAN - AAAPC 5830 G APPELLANT RESPONDENT APPELLANT BY: SHRI K. GOPAL & SHRI JITENDRA SINGH RESPONDENT BY: SHRI V.V. SHASTRI DATE OF HEARING: 24.10.2011 DATE OF PRONOUNCEMENT: 31.10.2011 ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 2 ITA NO. 4892 & 4893/MUM/2010 (ASSESSMENT YEARS: 2006-07 & 2005-06) MR. SANCHALAL C. CHHAJED INCOME TAX OFFICER - 20(3) (3) 2003-04, BEVERLY HILLS PIRAMAL CHAMBERS, LALBAUG LOKHANDWALA COMPLEX VS. MUMBAI 400012 MUMBAI 400053 PAN - AHYPC 7987 P APPELLANT RESPONDENT APPELLANT BY: SHRI JITENDRA SINGH RESPONDENT BY: SHRI P.C. MAURYA DATE OF HEARING: 25.10.2011 DATE OF PRONOUNCEMENT: 31.10.2011 O R D E R PER BENCH ALL THESE APPEALS PERTAIN TO A GROUP OF FAMILY MEMB ERS ON SIMILAR ADDITIONS MADE BY THE A.O. UNDER SECTION 36(1)(III) . THE ASSESSEES ARE PARTNERS IN FAMILY CONCERN (FIRMS) AND ALSO HAVE IN COMES FROM ADVANCING FUNDS, CONSULTANCY APART FROM INCOME FROM PROPRIETA RY CONCERN OR FIRM. ASSESSING OFFICER DECIDED ISSUE AFTER DISCUSSING VA RIOUS CASE LAW MAKING DISALLOWANCE ON THE SAME MANNER IN ALL CASES. THE L D.CIT(A) ALSO PASSED SIMILAR ORDERS IN THESE CASES. THEREFORE, THESE ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. ASSESSEES IN THESE AP PEALS RAISED VARIOUS GROUNDS ON DISALLOWANCE OF INTEREST PERTAINING TO V ARIOUS ASSESSMENT YEARS UNDER SECTION 36(1)(III). THE GROUNDS ARE IN FACT S UBMISSIONS WITH REFERENCE TO THE FACTS. 2. FOR THE SAKE OF CLARITY GROUNDS IN THE CASE OF MR. SUDHIR S. CHHAJED IN ITA NO. 4913/MUM/2010 FOR A.Y. 2004-05 IS EXTRACTED AS UNDER: - 1. DISALLOWANCE OF INTEREST RS.2,13,429/- U/S.36 (I ) (III). A. THE LD, CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF INTEREST CALCULATED ON PROPORTIONATE BASIS (PROPORTIONATE IN VESTMENT TOWARDS NON-BUSINESS ASSETS & LOAN & ADVANCES GIVEN ) IGNORING THE SUBMISSIONS GIVEN DURING THE APPELLATE PROCEEDI NGS EXPLAINING IN DETAIL THAT BORROWINGS HAVE BEEN USED FOR ADVANC ING LOANS AND INVESTMENT IN PARTNERSHIP FIRM AS CAPITAL. HE FAILE D TO OBSERVE THAT ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 3 WITHDRAWALS FROM PARTNERSHIP FIRM DURING THE YEAR U NDER APPEAL WERE USED MAINLY TO REPAY LOANS OR INTEREST. B. THE LD, CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT HAD EARNED BUSINESS INCOME FROM THE PARTNERSHIP FIRM TOTALLING TO RS.483,813/- (SHARE IN PROFIT RS.278,378/-+ REMUNER ATION RS.180,000/- & INTEREST ON CAPITAL RS.25,435/-) C. THE LD CIT (A) FAILED TO APPRECIATE THAT APPELL ANT HAD EARNED RS.299,759/- AS INTEREST ON LOANS GIVEN. D. THE LD CIT(A) IGNORED THAT THE LD. A.O ONLY MAD E ASSUMPTION THAT BORROWED FUNDS HAVE BEEN USED FOR NON-BUSINESS ASSE TS WITHOUT POINTING OUT ANY BASIS. THEREFORE, APPELLANT PRAYS THAT ENTIRE DISALLOWANCE OF RS.2,13, 4289/- BE DELETED. 3. IN THIS CASE, ASSESSEE IS AN INDIVIDUAL HAVING INC OME FROM PARTNERSHIP AND ALSO CONSULTANCY. FOR A.Y. 2004-05 HE FILED RETURN OF INCOME DECLARING INCOME AT ` 3,19,254/-. THE A.O. NOTICED THAT ASSESSEE HAS ACCEPTED UNSECURED LOANS OF ` 49,58,507/- ON WHICH ASSESSEE HAD INCURRED AN AMOUNT OF ` 6,56,976/- AS INTEREST. THE A.O. NOTICED THAT ASSES SEE HAS NOT PROVED THE NEXUS BETWEEN THE SOURCE OF FUNDS AN D ITS UTILIZATION IN BUSINESS. ASSESSEE SUBMITTED THAT IT WAS IN THE BUS INESS OF ADVANCING LOANS AND ADVANCES AND RECEIVED INTEREST OF ` 2,99,759/-. FURTHER ASSESSEE IS ALSO PARTNER IN A FIRM M/S. PACKFINE INDUSTRIES IN WHICH AN AMOUNT OF ` 16,62,347/- WAS INVESTED AND RECEIVED AN AMOUNT OF ` 24,435/- AS INTEREST, ` 1,80,000/- AS REMUNERATION AND ` 6,27,239/- AS COMMISSION. IT WAS FURTHER SUBMITTED THAT THE ENTIRE BORROWED FUNDS WERE USED FOR THE PURPOSE OF CARRYING OUT THE BUSINESS, NOT ONLY THE PARTNERSHIP FIRM BUT ALSO IN THE CONSULTANCY AND ADVANCE BUSINESS. THEREFORE, ASSESS EE CLAIMED ENTIRE INTEREST AS EXCLUSIVELY AND WHOLLY ALLOWABLE UNDER SECTION 36(1)(III). THE A.O., RELYING ON VARIOUS CASE LAWS AS DISCUSSED FRO M PARA 5.3 TO PARA 5.10, ARRIVED AT THE CONCLUSION THAT PROPORTIONATE DISALL OWANCE HAS TO BE MADE. ACCORDINGLY IN PARA 5.11 HE ARRIVED AT THE DISALLOW ANCE WORKING OUT AS UNDER: - 5.11 IN THE PRESENT CASE, IT IS NOTICED THAT THE P ERCENTAGE OF BORROWED FUNDS TO THE TOTAL FUNDS IS 75.48% (THE TO TAL FUNDS ARE RS.6569287/- AND BORROWED FUNDS ARE RS.4958507/-). THE AVERAGE RATE OF INTEREST IS 13.25% (THE BORROWED FUNDS IS ` 4958507/- AND INTEREST COST DEBITED TO P & L ACCOUNT IS ` 656976/-). HENCE, AN AMOUNT OF RS.213429/- (BEING 13.25% OF RS.1610780/- , WHICH IS ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 4 75.48% OF THE AMOUNT UTILIZED FOR OTHER INVESTMENTS AND OTHER PURPOSES OTHER THAN INVESTMENTS IN FIRM) IS HEREBY DISALLOWED U/S 36(1)(III) AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLANATION 1 THERETO ARE INITIATED SEPARATELY FOR FILING OF INACCURATE PARTI CULARS OF INCOME. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HA D ITS OWN FUNDS AS WELL AS INTEREST FREE LOANS AND FILED PAPER BOOK EX PLAINING THE FRESH BORROWING DURING THE YEAR AND ITS INVESTMENT/UTILIZ ATION FOR THE PURPOSE OF BUSINESS. IT WAS ASSESSEES SUBMISSION THAT ALL THE INVESTMENTS SHOWN IN THE BALANCE SHEET CONSIDERED BY THE A.O. AS FOR NON -BUSINESS PURPOSE WERE ASSETS PURCHASED EARLIER. IT WAS SUBMITTED BEFORE T HE CIT(A) VIDE PARA 3.0(B) THAT THE FLAT AT RESIDENCY WAS PURCHASED FOR ` 2,74,150/- IN 1987, THE LAND AT IGATPURI WAS PURCHASED FOR ` 1,35,000/- IN 1995, OFFICE AT CHANDRAGUPTA FOR ` 4,30,318/- IN 1992 AND SHARES FOR ` 6,75,939/- PRIOR TO 1993 AND OTHER OLD INVESTMENTS OF ` 3,24,938/- TOTALLING TO ` 18,40,345/-. IT WAS SUBMITTED THAT THESE INVESTMENTS ARE VERY OLD AND NO INVESTME NTS WERE MADE DURING THE YEAR OUT OF THE BORROWED FUNDS. IT WAS FURTHER SUBMITTED THAT OUT OF THE BORROWALS MADE DURING THE YEAR MOST OF THE AMOUNT W AS ADVANCED TO THE PARTNERSHIP FIRM AND BALANCE AS LOANS ON WHICH INTE REST WAS CHARGED. THESE DETAILS WERE FILED BEFORE THE CIT(A). HOWEVER, IN THE COMMON ORDER PASSED FOR ASSESSMENT YEARS 2004-05 & 2006-07, THE CIT(A) CONFIRMED THE ADDITIONS SO MADE HOLDING THAT THERE IS MIXTURE OF OWN FUNDS AND BORROWED FUNDS AND ASSESSEE COULD NOT ESTABLISH THAT THE BOR ROWED FUNDS WERE UTILIZED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 5. THE LEARNED COUNSEL DRAWING OUR ATTENTION TO THE BA LANCE SHEET AND STATEMENTS SHOWING UTILISATION OF BORROWED FUNDS SU BMITTED THAT THE FUNDS BORROWED WERE UTILISED FOR INVESTING IN THE FIRM OR REPAYMENT OF LOANS WHICH WAS TAKEN EARLIER OR MAKING FRESH ADVANCES AND SUBM ITTED THAT ASSESSEE HAS EARNED INTEREST ON THE LOANS TO THE TUNE OF ` 2,99,759/- AND ALSO PAID INTEREST TO AN EXTENT OF ` 6,56,976/- AND THE ASSESSING OFFICERS COMPUTATIONS WERE NOT CORRECT IN THE SENSE THAT HE HAS TAKEN OLD INVESTMENTS ALSO IN ARRIVING AT THE PROPORTIONATE D ISALLOWANCE. IT WAS SUBMITTED THAT A.O. ARBITRARILY WORKED OUT BY TAKIN G THE PERCENTAGE OF BORROWED CAPITAL AS ON 31.03.2004 WHICH INCLUDE INV ESTMENTS MADE EARLIER ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 5 OUT OF OWN CAPITAL. SECONDLY, WITHOUT EXAMINING THE NATURE OF BORROWED FUNDS AND ITS UTILIZATION ARRIVED ON PRESUMPTIONS T O DISALLOW THE INTEREST ON PROPORTIONATE BASIS. HE REFERRED TO THE STATEMENTS FILED BEFORE THE CIT(A) TO SUBMIT THAT THE FACTUAL ASPECT OF BORROWALS AND ITS UTILISATION WERE NOT EXAMINED, THEREFORE, THE DISALLOWANCE UNDER SECTION 36(1)(III) WAS NOT CORRECTLY MADE. 6. ON AN ENQUIRY WHETHER ASSESSEE COULD ESTABLISH THE BORROWALS DURING THE YEAR AND ITS UTILISATION, THE LEARNED COUNSEL S UBMITTED THAT THE A.O. HAS NOT GIVEN PROPER OPPORTUNITY TO EXAMINE AND BEFORE THE CIT(A) THESE DETAILS WERE FILED BUT UNFORTUNATELY THE CIT(A) DID NOT EXA MINE IN ITS CORRECT PERSPECTIVE AND HE THEN REFERRED TO ANNEXURE -1 PLA CED BEFORE THE CIT(A) IN PAGE NO. 18 IN THE PAPER BOOK TO SUBMIT THAT MOST O F THE AMOUNTS BORROWED DURING THE YEAR WERE INVESTED IN THE FIRM OR UTILIS ED IN REPAYING THE LOANS AND REFERRED TO THE STATEMENT OF BORROWALS AND ADVA NCES PLACED IN PAGE 20 TO SUBMIT THAT THERE IS NO DIVERSION OF BORROWED FU NDS. IT WAS SUBMITTED THAT FRESH BORROWING DURING F.Y. 2003-04 WERE ONLY TO THE TUNE OF ` 16,33,924/- OUT OF WHICH AN AMOUNT OF ` 7,84,243/- WAS REPAID ALSO WITH INTEREST IN SOME CASES. IT WAS ALSO SUBMITTED THAT DURING THE YEAR ASSESSEE HAS ADVANCED AMOUNTS TO THE TUNE OF ` 52,860/- AND RECEIVED BACK AMOUNT OF ` 23,34,689/- WITH INTEREST OF ` 2,99,754/-. WITHOUT EXAMINING THE FUND FLOW AND CASH FLOW A.O. TOOK THE CLOSING BALANCE FO R ARRIVING AT THE DISALLOWANCE. HE HAS NO OBJECTION IF THE MATTER WAS REFERRED TO THE A.O. FOR EXAMINATION OF FACTS. 7. THE LEARNED D.R., HOWEVER, SUBMITTED THAT ASSESSEE COULD NOT ESTABLISH UTILIZATION OF FUNDS FOR THE PURPOSE OF B USINESS AND, THEREFORE, THE A.O. AND THE CIT(A) WERE CORRECT IN DISALLOWING ON PROPORTIONATE BASIS. HE REFERRED TO THE FINDINGS OF THE CIT(A) IN PARA 2.2. OF THE ORDER AND ALSO PARA 2.3 TO SUBMIT THAT THE CIT(A) HAS EXAMINED THE ISSU E CORRECTLY ON FACTS AND CONFIRMED THE DISALLOWANCE. THEREFORE, THERE IS NO NEED TO DIFFER FROM THE FINDINGS OF THE A.O. AND THE CIT(A). 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON THE BASIS OF RIVAL CONTENTIONS. WE ARE OF THE OPINION THAT THE A .O. HAS WRONGLY ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 6 CONSIDERED THE AMOUNTS AS ON 31.03.2004 FOR MAKING THE DISALLOWANCE ON THE BASIS OF THE STATEMENT OF AFFAIRS WITHOUT EXAMI NING THE FUND FLOW OR THE PAYMENT OF INTEREST. IN FACT THE A.O. DID NOT EVEN CONSIDER THE AMOUNT OF INTEREST RECEIVED DURING THE YEAR AND THE INTEREST PAID ON THESE AMOUNTS. IT WAS THE CONTENTION THAT ASSESSEE HAS ALSO BORROWED INTEREST FREE FUNDS FOR CERTAIN ADVANCES. THIS ASPECT HAS NOT BEEN EXAMINED AT ALL. MOREOVER, AS SEEN FROM THE STATEMENT OF AFFAIRS ASSESSEE HAS INV ESTMENTS IN FLATS, OFFICE PREMISES, SHARES, ETC. TOTALLING TO ` 18,40,345/- , WHICH WAS STATED TO HAVE BEEN MADE IN EARLIER YEARS AND NOT IN THIS YEAR. TH EREFORE, ARRIVING AT THE PROPORTIONATE UTILIZATION FOR NON-BUSINESS PURPOSES IN THE BASIS OF THE WHOLE INVESTMENT IS NOT CORRECT. THE A.O. SHOULD HAVE EXA MINED THE BORROWALS DURING THE YEAR AND ITS UTILIZATION DURING THE YEAR TO KNOW WHETHER BORROWED AMOUNTS HAVE BEEN USED IN THE BUSINESS OR NOT SO AS TO ALLOW INTEREST U/S 36(1)(III). ACCOUNT COPIES OF THE FIR M WERE NOT PLACED ON RECORD TO EXAMINE WHETHER THE INVESTMENT SO CLAIMED WERE F ROM OWN FUNDS OR BORROWED FUNDS. AS SEEN FROM THE BALANCE SHEET PLAC ED AT PAGE 4 OF THE PAPER BOOK ASSESSEE HAS ADVANCED FUNDS TO THE FIRM AND WITHDREW FROM THAT FIRM AND THERE ARE NET WITHDRAWALS OF ` 21,47,308/- DURING THE YEAR. CONSIDERING THE OPENING BALANCE OF ` 16,62,327/- AND ADDITION OF INTEREST, REMUNERATION AND PROFIT DURING THE YEAR, THE NET B ALANCE IN THE PARTNERSHIP WERE SHOWN A NEGATIVE BALANCE OF ` 1,168/-. EVEN LOANS WHICH WERE SHOWN AT ` 49,58,509/- WERE ALL NOT BORROWED DURING THE YEAR A ND ALL OF THEM ARE NOT INTEREST BEARING. IT WAS INFORMED THAT NO ADDIT ION OR DISALLOWANCE WAS MADE BEFORE AY 2003-04 AND THE ASSESSING OFFICERS W ERE ALLOWING THE AMOUNTS AS CLAIMED. HAVING REGARD TO THESE, WE ARE OF THE OPINION THAT THE A.O. HAS NOT MADE OUT A PROPER CASE FOR DISALLOWANC E UNDER SECTION 36(1)(III) BY EXAMINING THE FUNDS BORROWED ON WHICH INTEREST W AS PAID AND ITS UTILIZATION IN THE BUSINESS ON WHICH INTEREST WAS C LAIMED. ASSESSEE ALSO HAS NOT FILED ANY FUND FLOW STATEMENT TO SUPPORT THE CO NTENTIONS THAT BORROWED FUNDS WERE UTILISED FOR THE PURPOSE OF BUSINESS. UN LESS THIS ASPECT IS FACTUALLY EXAMINED, DISALLOWANCE UNDER SECTION 36(1 )(III) CANNOT BE CONSIDERED ON LEGAL PRINCIPLES ALONE. MOREOVER THE A.O. ALSO HAS NOT CONSIDERED THE INTEREST RECEIVED FROM SOME OF THE A DVANCES IN CALCULATING ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 7 THE PROPORTIONATE DISALLOWANCE. THEREFORE, WITHOUT DECIDING THE ISSUE ON LEGAL PRINCIPLES ALONE, WE REMAND THE MATTER BACK T O THE FILE OF THE A.O. BY SETTING ASIDE THE ORDERS TO EXAMINE ASSESSEES CONT ENTIONS AND TO OBTAIN A FUND FLOW STATEMENT AND SEE WHETHER THE BORROWED FU NDS WERE DIVERTED FOR NON-BUSINESS PURPOSES. ONLY IN THE EVENT BORROWED F UNDS ARE DIVERTED FOR NON-BUSINESS PURPOSES, THE INTEREST CLAIM TO THAT E XTENT CAN BE DISALLOWED UNDER SECTION 36(1)(III). WITH THIS DIRECTION, THE MATTER IN THIS APPEAL IS RESTORED TO THE FILE OF THE A.O. FOR FRESH EXAMINAT ION. GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 4894/MUM/2010 9. IN THIS CASE ASSESSEE BORROWED FUNDS TO AN EXTENT O F RS.73,75,086/-ON WHICH CLAIMED AN AMOUNT OF RS.3,79,850/- AS INTERES T CLAIM. AN AMOUNT OF RS.2,45,722 PAID AS INTEREST WAS NOT CLAIMED. BUT S TILL AO CONSIDERED TOTAL AMOUNT OF BORROWALS IN DISALLOWING INTEREST ON PROP ORTIONATE BASIS. HE ALSO DID NOT CONSIDER THE INVESTMENTS MADE IN EARLIER YE ARS. FOR THE REASONS STATED IN AY 2004-05, SINCE FACTS ARE SIMILAR TO AY 2004-05, THE APPEAL IN ITA 4894/ MUM/2010 IS ALSO SET SIDE TO THE FILE OF AO TO EXAMINE THE BORROWALS AND ITS UTILISATION KEEPING IN MIND THE S UBMISSIONS MADE BEFORE CIT(A) AND DECIDE THE ISSUE OF DISALLOWANCE U/S 36 (1)(III) IN THIS YEAR AS WELL. THE DECISION TAKEN IN AY 2004-05 MAY HAVE A BEARING ON OLD BORROWINGS. AO IS DIRECTED TO EXAMINE THE FUND FLOW AND DECIDE THE ISSUE ON FACTS. NEEDLESS TO STATE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNIT Y TO MAKE SUBMISSIONS ON FACTS AND LAW. GROUNDS ARE CONSIDERED ALLOWED FO R STATISTICAL PURPOSES. 10. APPEALS IN ITA NO. 4913/MUM/2010 AND ITA NO. 4894/M UM/2010 ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 4914 & 5915/MUM/2010 A.Y. 2004-05 & 2006- 07 11. IN THESE YEARS, ASSESSEE MR. SANDEEP S. CHHAJED FI LED RETURNS OF INCOME DECLARING INCOME DECLARING TOTAL INCOME OF ` 1,20,377/- AND ` 2,24,710/- RESPECTIVELY. ASSESSEE IS PARTNER IN TWO FIRMS DIGITAL ARTS AND INNOVATIVES. THE A.O. NOTICED THAT ASSESSEE HAS AC CEPTED UNSECURED LOANS OF ` 53,51,784/- ON WHICH ASSESSEE HAS INCURRED AN AMOUN T OF ` 5,65,569/- ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 8 AS INTEREST IN 2004-05 AND SHOWN UNSECURED LOANS OF ` 72,58,231/- ON WHICH INTEREST OF ` 3,92,232/- WAS INCURRED IN A.Y. 2006-07. THE A.O. NOTICED THAT ASSESSEE HAS NOT PROVED THE NEXUS BETW EEN THE SOURCE OF FUNDS AND ITS UTILIZATION IN BUSINESS. ASSESSEE SUBMITTED THAT IT WAS IN THE BUSINESS OF ADVANCING LOANS AND ADVANCES AND RECEIV ED INTEREST OF ` 2,83,318/- IN AY 2006-07. FURTHER ASSESSEE IS ALSO PARTNER IN A FIRMS IN WHICH AND AMOUNT OF ` 64,29,573/- WAS INVESTED AND RECEIVED INTEREST. IT WAS FURTHER SUBMITTED THAT THE ENTIRE BORROWED FUND S WAS USED FOR THE PURPOSE OF CARRYING OUT THE BUSINESS, NOT ONLY THE PARTNERSHIP FIRM BUT ALSO AS ADVANCES IN BUSINESS. THEREFORE, ASSESSEE CLAIME D ENTIRE INTEREST AS EXCLUSIVELY AND WHOLLY ALLOWABLE UNDER SECTION 36(1 )(III). THE A.O., RELYING ON VARIOUS CASE LAWS AS DISCUSSED IN THE ORDER ANALYSE D THE CASE LAW TO ARRIVE AT THE CONCLUSION THAT PROPORTIONATE DISALLOWANCE H AS TO BE MADE. ACCORDINGLY IN PARA 5.11 IN AY 2004-05 HE ARRIVED A T THE DISALLOWANCE WORKING OUT AS UNDER: - 5.11 IN THE PRESENT CASE, IT IS NOTICED THAT THE P ERCENTAGE OF BORROWED FUNDS TO THE TOTAL FUNDS IS 65.09% (THE TO TAL FUNDS ARE RS.8222551/- AND BORROWED FUNDS ARE RS.5351784/-). THE AVERAGE RATE OF INTEREST IS 10.57% (THE BORROWED FUNDS IS ` 5351784/- AND INTEREST COST DEBITED TO P & L ACCOUNT IS ` 656976/-). HENCE, AN AMOUNT OF RS.303440/- (BEING 13.25%( SIC ) OF RS.2870767/-, WHICH IS 65.09% OF THE AMOUNT UTILIZED FOR OTHER INVESTMENTS AND OTHER PURPOSES OTHER THAN INVESTMENTS IN FIRM) IS HEREBY DISALLOWED U/S 36(1)(III) AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLANATION 1 THERETO ARE INITIATED SEPARATELY FOR FILING OF INACCURATE PARTI CULARS OF INCOME. 12. SIMILAR ORDER WAS PASSED IN AY 2006-07. BEFORE THE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAD ITS OWN FUNDS AS WELL A S INTEREST FREE LOANS AND FILED PAPER BOOK EXPLAINING THE FRESH BORROWING DUR ING THE YEAR AND ITS INVESTMENT/UTILIZATION FOR THE PURPOSE OF BUSINESS. IT WAS ASSESSEES SUBMISSION THAT ALL THE INVESTMENTS SHOWN IN THE BA LANCE SHEET CONSIDERED BY THE A.O. AS FOR NON-BUSINESS PURPOSE WERE ASSETS PURCHASED BEFORE THE ASSESSMENT. IT WAS SUBMITTED BEFORE THE CIT(A) VIDE PARA 2.7(B) IN AY 2004- 05 THAT ASSETS TOTALLING TO ` 18,40,345/- WERE OLD AND PURCHASED MUCH EARLIER. IT WAS SUBMITTED THAT THESE INVESTMENTS AR E VERY OLD AND NO INVESTMENTS WERE MADE DURING THE YEAR OUT OF THE BO RROWED FUNDS. IT WAS ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 9 FURTHER SUBMITTED THAT OUT OF THE BORROWALS MADE DU RING THE YEAR MOST OF THE AMOUNT WAS ADVANCED TO THE PARTNERSHIP FIRMS AN D ALSO LOANS OF WHICH INTEREST WERE CHARGED. THESE DETAILS WERE FILED BEF ORE THE CIT(A). HOWEVER, IN THE COMMON ORDER PASSED FOR ASSESSMENT YEARS 2004-0 5 & 2006-07 THE CIT(A) CONFIRMED THE ADDITIONS SO MADE HOLDING THAT THERE IS MIXTURE OF OWN FUNDS AND BORROWED FUNDS AND ASSESSEE COULD NOT EST ABLISH THAT THE BORROWED FUNDS ARE UTILIZED EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. 13. THE SUBMISSIONS MADE BEFORE US ARE SAME AS CONSIDER ED IN THE CASE OF MR.SUDHIR S CHHAJED ABOVE. AS IN THAT CASE THE A SSESSING OFFICER HAS NOT CONSIDERED THE FUND FLOW AND HAS NOT EXAMINED THE S UBMISSIONS MADE. THE CIT(A) ALSO REJECTED THE CONTENTIONS. THE AO INDEED WORKED OUT THE DISALLOWANCE MORE THAN CLAIMED BUT RESTRICTED TO AM OUNT CLAIMED IN AY 2006-07, IGNORING THE INTEREST EARNED IN THAT YEAR OF RS.2,83,318/-. FOR THE DETAILED REASONS DISCUSSED IN THE CASE OF MR. SUDHI R S CHHAJED ABOVE WHICH EQUALLY APPLY TO THE ASSESSEE, WE SET ASIDE THE ORD ERS IN BOTH THE YEARS AND RESTORE THE ISSUE OF DISALLOWANCE TO AO TO EXAMINE THE FACTS AND NEXUS WITH BORROWED FUNDS AND INVESTMENTS AND CONSIDER THE DIS ALLOWANCE IF ANY, AFTER DETERMINING THE DIVERSION OF BORROWED FUNDS ON WHIC H INTEREST WAS CLAIMED AS DEDUCTION AFRESH. THE GROUNDS ARE ACCORDINGLY AL LOWED. APPEALS IN ITA NO. 4914/MUM/2010 AND ITA NO. 4915/MUM/2010 ARE ALL OWED FOR STATISTICAL PURPOSES. ITA NO. 4895, 4986 & 4987/MUM/2010 A.Y. 2004-05 T O 2006-07 14. IN THESE YEARS ASSESSEE M/S. SANJAY S CHHAJED FILE D RETURNS OF INCOME DECLARING INCOME DECLARING TOTAL INCOME OF ` 1,56,240/-,1,68,100/- AND ` 2,23,090/- RESPECTIVELY. THE A.O. NOTICED THAT ASSE SSEE HAS ACCEPTED UNSECURED LOANS OF `4 3,71,875/- IN AY 2004-05 ON WHICH ASSESSEE HAS INCURRED AN AMOUNT OF ` 5,23,152/- AS INTEREST IN AY 2004-05. SIMILARLY INTEREST OF RS.5,25,432/- IN AY 2005-06 AND RS. 4,0 6,455/- IN AY 2006-07 WAS CLAIMED. THE A.O. NOTICED THAT ASSESSEE HAS NOT PROVED THE NEXUS BETWEEN THE SOURCE OF FUNDS AND ITS UTILIZATION IN BUSINESS. ASSESSEE SUBMITTED THAT IT WAS IN THE BUSINESS OF ADVANCING LOANS AND ADVANCES AND RECEIVED INTEREST ALSO. FURTHER ASSESSEE IS ALSO PA RTNER IN A FIRM M/S. PACK- ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 10 IN-INDIA IN WHICH FUNDS WERE INVESTED AND RECEIVED ` 4,32,710/- AS INTEREST, ` 50,000/- AS REMUNERATION AND SHARE OF PROFIT. IT WA S FURTHER SUBMITTED THAT THE ENTIRE BORROWED FUNDS WERE USED FOR THE PURPOSE OF CARRYING OUT THE BUSINESS, NOT ONLY THE PARTNERSHIP FIRM BUT ALSO IN EARNING INTERESTS. THEREFORE, ASSESSEE CLAIMED ENTIRE INTEREST AS EXCL USIVELY AND WHOLLY ALLOWABLE UNDER SECTION 36(1)(III). THE A.O., RELYI NG ON VARIOUS CASE LAWS AS DISCUSSED FROM PARA 5.3 TO PARA 5.10, ANALYSED THE CASE LAWS TO ARRIVE AT THE CONCLUSION THAT PROPORTIONATE DISALLOWANCE HAS TO B E MADE. ACCORDINGLY IN AY 2004-05 HE ARRIVED AT THE DISALLOWANCE WORKING O UT AS UNDER: - 5.11 IN THE PRESENT CASE, IT IS NOTICED THAT THE P ERCENTAGE OF BORROWED FUNDS TO THE TOTAL FUNDS IS 42.89% (THE TO TAL FUNDS ARE RS.16280780/- AND BORROWED FUNDS ARE RS.6983448/-). THE AVERAGE RATE OF INTEREST IS 8.14% (THE INTEREST BEARING BOR ROWED FUNDS IS ` 4991448/- AND INTEREST COST DEBITED TO P & L ACCOUN T IS ` 406455/-). HENCE, AN AMOUNT OF RS.356042/- (BEING 8.14% OF RS. 4373982/-, WHICH IS 42.89% OF THE AMOUNT UTILIZED FOR OTHER IN VESTMENTS AND OTHER PURPOSES OTHER THAN INVESTMENTS IN PROPRIETAR Y BUSINESS OF RS. 10198139/-) IS HEREBY DISALLOWED U/S 36(1)(III) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDIN GS U/S. 271(1)(C) READ WITH EXPLANATION 1 THERETO ARE INITIATED SEPAR ATELY FOR FILING OF INACCURATE PARTICULARS OF INCOME. 15. SIMILAR ORDERS WERE PASSED IN AY 2005-06 AND AY 200 6-07.BEFORE THE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAD ITS OWN F UNDS AS WELL AS INTEREST FREE LOANS AND FILED PAPER BOOK EXPLAINING THE FRES H BORROWING DURING THE YEAR AND ITS INVESTMENT/UTILIZATION FOR THE PURPOSE OF BUSINESS. IT WAS ASSESSEES SUBMISSION THAT ALL THE INVESTMENTS SHOW N IN THE BALANCE SHEET CONSIDERED BY THE A.O. AS FOR NON-BUSINESS PURPOSE WERE ASSETS PURCHASED BEFORE THE ASSESSMENT. IT WAS SUBMITTED THAT THESE INVESTMENTS ARE VERY OLD AND NO INVESTMENTS WERE MADE DURING THE YEAR OUT OF THE BORROWED FUNDS. IT WAS FURTHER SUBMITTED THAT OUT OF THE BORROWALS MAD E DURING THE YEAR MOST OF THE AMOUNT WAS ADVANCED TO THE PROPRIETARY CONC ERN AND ALSO LOANS OF WHICH INTEREST WERE CHARGED. THESE DETAILS WERE FIL ED BEFORE THE CIT(A). HOWEVER, IN THE COMMON ORDER PASSED FOR ASSESSMENT YEARS 2004-05 TO 2006-07 THE CIT(A) CONFIRMED THE ADDITIONS SO MADE HOLDING THAT THERE IS MIXTURE OF OWN FUNDS AND BORROWED FUNDS AND ASSESSE E COULD NOT ESTABLISH THAT THE BORROWED FUNDS ARE UTILIZED EXCLUSIVELY FO R THE PURPOSE OF BUSINESS. ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 11 16. THE SUBMISSIONS MADE BEFORE US ARE SAME AS CONSIDE RED IN THE CASE OF MR.SUDHIR S CHHAJED ABOVE. AS IN THAT CASE THE A SSESSING OFFICER HAS NOT CONSIDERED THE FUND FLOW AND HAS NOT EXAMINED THE S UBMISSIONS MADE. THE CIT(A) ALSO REJECTED THE CONTENTIONS. FOR THE DETAI LED REASONS DISCUSSED IN THE CASE OF MR. SUDHIR S CHHAJED ABOVE WHICH EQUALL Y APPLY TO THE ASSESSEE, WE SET ASIDE THE ORDERS IN ALL THE YEARS AND RESTORE THE ISSUE OF DISALLOWANCE TO AO TO EXAMINE THE FACTS AND NEXUS W ITH BORROWED FUNDS AND INVESTMENTS AND CONSIDER THE DISALLOWANCE IF ANY, A FTER DETERMINING THE DIVERSION OF BORROWED FUNDS ON WHICH INTEREST WAS C LAIMED AS DEDUCTION AFRESH. AS SEEN FROM THE FACTS WE ARE OF THE OPINIO N THAT THE A.O. HAS NOT MADE OUT A PROPER CASE FOR DISALLOWANCE UNDER SECTI ON 36(1)(III) BY EXAMINING THE FUNDS BORROWED OF WHICH INTEREST WAS PAID AND ITS UTILIZATION IN THE BUSINESS OF WHICH INTEREST WAS CLAIMED OF RE CEIVED. ASSESSEE ALSO HAS NOT FILED ANY FUND FLOW STATEMENT TO SUPPORT THE CO NTENTIONS THAT BORROWED FUNDS WERE UTILISED FOR THE PURPOSE OF BUSINESS. UN LESS THIS ASPECT IS FACTUALLY EXAMINED DISALLOWANCE UNDER SECTION 36(1) (III) CANNOT BE CONSIDERED. MOREOVER THE A.O. ALSO HAS NOT CONSIDER ED THE INTEREST RECEIVED FROM SOME OF THE ADVANCES IN CALCULATING THE PROPOR TIONATE DISALLOWANCE. THEREFORE, WITHOUT DECIDING THE ISSUE ON LEGAL PRIN CIPLES ALONE, WE REMAND THE MATTER BACK TO THE FILE OF THE A.O. BY SETTING ASIDE THE ORDERS IN THESE YEARS AND DIRECT AO TO EXAMINE ASSESSEES CONTENTIO NS AND OBTAIN A FUND FLOW STATEMENT AND SEE WHETHER THE BORROWED FUNDS A RE DIVERTED FOR NON- BUSINESS PURPOSES. ONLY IN THE EVENT THE BORROWED F UNDS ARE DIVERTED FOR NON-BUSINESS PURPOSES THE INTEREST CLAIM TO THAT EX TENT CAN BE DISALLOWED UNDER SECTION 36(1)(III). WITH THIS DIRECTION THE M ATTER IN THESE APPEALS ARE RESTORED TO THE FILE OF THE A.O. FOR FRESH EXAMINAT ION. GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. APPEALS IN ITA NO . 4895/MUM/2010, ITA NO. 4896/MUM/2010 AND ITA NO.4897/MUM/2010 ARE ALLO WED FOR STATISTICAL PURPOSES. ITA NO. 4892 & 4893/MUM/2010 A.Y. 2006-07 & 2005- 06 17. IN THESE YEARS ASSESSEE LATE MR. SANCHALAL C. CHHA JED FILED RETURNS OF INCOME DECLARING INCOME DECLARING TOTAL INCOME OF ` 1,96,309/- AND ` 5,380/- ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 12 RESPECTIVELY. THE A.O. NOTICED THAT ASSESSEE HAS AC CEPTED UNSECURED LOANS OF ` 56,88,359/- IN AY 2005-06 ON WHICH ASSESSEE HAS INC URRED AN AMOUNT OF ` 5,73,477/- AS INTEREST IN AY 2005-06 AND SHOWN UNSE CURED LOANS OF ` 42,86,693/- ON WHICH INTEREST OF ` 4,30,176/- WAS INCURRED IN A.Y. 2006- 07. THE A.O. NOTICED THAT ASSESSEE HAS NOT PROVED T HE NEXUS BETWEEN THE SOURCE OF FUNDS AND ITS UTILIZATION IN BUSINESS. AS SESSEE SUBMITTED THAT IT WAS IN THE BUSINESS OF ADVANCING LOANS AND ADVANCES AND RECEIVED INTEREST. FURTHER ASSESSEE IS ALSO PARTNER IN A FIRM M/S. PAC OPACK(INDIA) IN WHICH AMOUNTS WERE INVESTED AND RECEIVED INTEREST, SHARE OF PROFIT. IT WAS FURTHER SUBMITTED THAT THE ENTIRE BORROWED FUNDS IS USED FO R THE PURPOSE OF CARRYING OUT THE BUSINESS, NOT ONLY THE PARTNERSHIP FIRM BUT ALSO IN THE CONSULTANCY AND ADVANCE BUSINESS. THEREFORE, ASSESSEE CLAIMED E NTIRE INTEREST AS EXCLUSIVELY AND WHOLLY ALLOWABLE UNDER SECTION 36(1 )(III). THE A.O., RELYING ON VARIOUS CASE LAWS AS DISCUSSED FROM PARA 5.3 TO PAR A 5.10, ANALYSED THE CASE LAWS TO ARRIVE AT THE CONCLUSION THAT PROPORTI ONATE DISALLOWANCE HAS TO BE MADE. ACCORDINGLY IN PARA 5.11 IN AY 2005-06 HE ARRIVED AT THE DISALLOWANCE WORKING OUT AS UNDER: - 5.11 IN THE PRESENT CASE, IT IS NOTICED THAT THE P ERCENTAGE OF BORROWED FUNDS TO THE TOTAL FUNDS IS 78.85% (THE TO TAL FUNDS ARE RS.72,14,165/- AND BORROWED FUNDS ARE RS.56,88,359/ -). THE AVERAGE RATE OF INTEREST IS 16.29% (THE BORROWED FU NDS IS ` 35,18,304/- AND INTEREST COST DEBITED TO P & L ACCO UNT IS ` 5,73,477/-). HENCE, AN AMOUNT OF RS.4,72,002/- (BEI NG 16.29% OF RS.28,97,496/-, WHICH IS 78.85% OF THE AMOUNT UTILI ZED FOR OTHER INVESTMENTS AND OTHER PURPOSES OTHER THAN INVESTMEN TS IN PROPRIETARY BUSINESS OF RS.36,74,694/-) IS HEREBY D ISALLOWED U/S 36(1)(III) AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLANATION 1 THERETO ARE INITIATED SEPARATELY FOR FILING OF INACCURATE PARTI CULARS OF INCOME. 18. SIMILAR ORDER WAS PASSED IN AY 2006-07. BEFORE THE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAD ITS OWN FUNDS AS WELL A S INTEREST FREE LOANS AND FILED PAPER BOOK EXPLAINING THE FRESH BORROWING DUR ING THE YEAR AND ITS INVESTMENT/UTILIZATION FOR THE PURPOSE OF BUSINESS. IT WAS ASSESSEES SUBMISSION THAT ALL THE INVESTMENTS SHOWN IN THE BA LANCE SHEET CONSIDERED BY THE A.O. AS FOR NON-BUSINESS PURPOSE WERE ASSETS PURCHASED BEFORE THE ASSESSMENT. IT WAS SUBMITTED THAT THESE INVESTMENTS ARE VERY OLD AND NO ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 13 INVESTMENTS WERE MADE DURING THE YEAR OUT OF THE BO RROWED FUNDS. IT WAS FURTHER SUBMITTED THAT OUT OF THE BORROWALS MADE DU RING THE YEAR MOST OF THE AMOUNT WAS ADVANCED FOR THE PURPOSES OF BUSINES S. THESE DETAILS WERE FILED BEFORE THE CIT(A). HOWEVER, IN THE COMMON ORD ER PASSED FOR ASSESSMENT YEARS 2005-06 & 2006-07 THE CIT(A) CONFIRMED THE AD DITIONS SO MADE HOLDING THAT THERE IS MIXTURE OF OWN FUNDS AND BORR OWED FUNDS AND ASSESSEE COULD NOT ESTABLISH THAT THE BORROWED FUNDS ARE UTI LIZED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 19. AT THE OUTSET, IT WAS NOTICED THAT ASSESSEE MR SANC HALAL CHHAJED EXPIRED ON 19.03.2009. THE CIT(A) PASSED HIS ORDERS ON 02.03.2010 IE. AFTER THE DEATH OF ASSESSEE WITHOUT BRINGING LEGAL HEIRS ON RECORD. DURING THE PRESENT APPEALS THE ASSESSEE FILED REVISED FORM 36 DULY VERIFIED BY LEGAL HEIR MR SANDEEP S CHHAJED. LEGAL HEIR IS TO BE BROUGHT ON RECORD BY THE AO. FOR THIS REASON, WE ARE OF THE OPINION THAT ORDERS OF C IT(A) REQUIRE TO BE SET ASIDE. 20. HOWEVER EVEN ON MERITS THE ISSUE REQUIRE RE- EXAMIN ATION BY AO. THE SUBMISSIONS MADE BEFORE US ARE SAME IN THE CASE OF MR.SUDHIR S CHHAJED ABOVE. AS IN THAT CASE THE ASSESSING OFFICER HAS NO T CONSIDERED THE FUND FLOW AND HAS NOT EXAMINED THE SUBMISSIONS MADE. THE CIT( A) ALSO REJECTED THE CONTENTIONS. FOR THE DETAILED REASONS DISCUSSED IN THE CASE OF MR. SUDHIR S CHHAJED ABOVE WHICH EQUALLY APPLY TO THE ASSESSEE, WE SET ASIDE THE ORDERS IN BOTH THE YEARS AND RESTORE THE ISSUE OF DISALLOW ANCE TO AO TO EXAMINE THE FACTS AND NEXUS WITH BORROWED FUNDS AND INVESTMENTS AND CONSIDER THE DISALLOWANCE IF ANY, AFTER DETERMINING THE DIVERSIO N OF BORROWED FUNDS ON WHICH INTEREST WAS CLAIMED AS DEDUCTION AFRESH. AS SEEN FROM THE FACTS WE ARE OF THE OPINION THAT THE A.O. HAS NOT MADE OUT A PROPER CASE FOR DISALLOWANCE UNDER SECTION 36(1)(III) BY EXAMINING THE FUNDS BORROWED OF WHICH INTEREST WAS PAID AND ITS UTILIZATION IN THE BUSINESS OF WHICH INTEREST WAS CLAIMED OF RECEIVED. ASSESSEE ALSO HAS NOT FILE D ANY FUND FLOW STATEMENT TO SUPPORT THE CONTENTIONS THAT BORROWED FUNDS WERE UTILISED FOR THE PURPOSE OF BUSINESS. UNLESS THIS ASPECT IS FACTUALLY EXAMIN ED DISALLOWANCE UNDER SECTION 36(1)(III) CANNOT BE CONSIDERED. MOREOVER T HE A.O. ALSO HAS NOT ITA NO. 4892+8/MUM/2010 M/S CHHAJEDS 14 CONSIDERED THE INTEREST RECEIVED FROM SOME OF THE A DVANCES IN CALCULATING THE PROPORTIONATE DISALLOWANCE. THEREFORE, WITHOUT DECIDING THE ISSUE ON LEGAL PRINCIPLES ALONE, WE REMAND THE MATTER BACK T O THE FILE OF THE A.O. BY SETTING ASIDE THE ORDERS IN THESE YEARS AND DIRECT AO TO EXAMINE ASSESSEES CONTENTIONS AND OBTAIN A FUND FLOW STATEMENT AND SE E WHETHER THE BORROWED FUNDS ARE DIVERTED FOR NON-BUSINESS PURPOSES. ONLY IN THE EVENT THE BORROWED FUNDS ARE DIVERTED FOR NON-BUSINESS PURPOS ES THE INTEREST CLAIM TO THAT EXTENT CAN BE DISALLOWED UNDER SECTION 36(1)(I II). WITH THIS DIRECTION THE MATTER IN THESE APPEALS ARE RESTORED TO THE FILE OF THE A.O. FOR FRESH EXAMINATION. GROUNDS ARE CONSIDERED ALLOWED FOR STA TISTICAL PURPOSES. APPEALS IN ITA NO. 4892/MUM/2010 AND ITA NO. 4893/M UM/2010 ARE ALLOWED FOR STATISTICAL PURPOSES. 21. ACCORDINGLY, ALL THE ORDERS OF AO IN THESE YEARS IN RESPECTIVE ASSESSEES CASES ARE SET ASIDE TO DO IT AFRESH ACCORDING TO TH E FACTS AND LAW. ASSESSEES SHOULD BE GIVEN PROPER OPPORTUNITY BY THE AO. IN TH E RESULT, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2011. SD/- SD/- (VIJAY PAL RAO) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST OCTOBER 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE CIT XX, MUMBAI CITY 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.