ACIT 7(2), MUMBAI V. RUPEE FINANCE AND MANAGEMENT P.TLD, MUMBAI

ITA 5122/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0856 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJEEV M SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 RUPEE FINANCE & MANAGEMENT PVT LTD IN THE INCOME TAX APPELLATE TRIBUNNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A.NO.4255/MUM/2015 - AY 2009-10 I.T.A.NO.4835 /MUM/2015 - AY 2010-11 RUPEE FINANCE & MANAGEMENT PVT LTD, 135, CONTINENTAL BLDG DR ANNIE BESANT ROAD WORLI, MUMBAI-18 V/S DY.CIT, CIR 7(2), MUMBAI PAN : AABCR9194C APPELLANT RESPONDENT I.T.A.NO.5122/MUM/2015 (ASSESSMENT YEAR 2010-11) ACIT 7(2), MUMBAI V/S RUPEE FINANCE & MANAGEMENT PVT LTD, 135, CONTINENTAL BLDG DR ANNIE BESANT ROAD WORLI, MUMBAI-18 ASSESSEE BY SHRI SANJEEV M SHAH REVENUE BY SHRI PURUSHOTTAM KUMAR DATE OF HEARING 19.04.2017 DATE OF ORDER 26.04.2017 O R D E R PER ASHWANI TANEJA, AM:- 2 RUPEE FINANCE & MANAGEMENT PVT LTD THESE CROSS APPEALS PERTAIN TO SAME ASSESSEE INVOLV ING IDENTICAL ISSUES, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE SHALL TAKE UP APPEAL FILED BY THE ASSESSEE FOR AY 2009-10 IN ITA NO.4255/MUM/2013 ON THE FOLLOWING GROUNDS:- 1. DISALLOWANCE U/S 14A A) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING DISALLOWANCE OF RS. 249,01301/- U/S 14 A / RULE 8-D WITH REFERENCE TO GROSS INTEREST WITHOUT EXCLUDING INTEREST DIRECT LY ATTRIBUTABLE TO INTEREST INCOME. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST T HE PROVISIONS OF LAW. B) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING DISALLOWANCE OF EXPENSES TO THE EXTENT OF RS. 2,25, 540/- BEING TOTAL EXPENSES CLAIMED BY THE ASSESSEE FOR THE YEAR AS PER PROFIT & LOSS ACCOUNT WITHOUT PROVING NEXUS OF EXPENSES INCU RRED WITH INVESTMENTS AND/OR EXEMPT INCOME. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 2. DISALLOWANCE U/S 36(1)(III) A) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING DISALLOWANCE OF ENTIRE NET INTEREST OF RS. 2,13,47, 579/- U/S 36(1)(III) BEING DIFFERENCE BETWEEN INTEREST PAID A ND INTEREST RECEIVED FOR ADVANCING LOANS, CLAIMED AS BUSINESS L OSS BY THE ASSESSEE BEING NBFC ENGAGED IN FINANCE BUSINESS. TH E REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. B) THE LD. AO ERRED IN LAW AND FACTS IN CONSIDERING BA NK & OTHER FINANCIAL CHARGES OF RS. 389,941/- AS INTEREST FOR DISALLOWAN CE OF INTEREST U/S 36(1 )(III) OF THE ACT. THE REASONS GIVEN BY HIM FO R DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND AGAINST T HE PROVISIONS OF LAW. 3 RUPEE FINANCE & MANAGEMENT PVT LTD 3. THE ABOVE GROUNDS / SUB-GROUNDS ARE WITHO UT PREJUDICE TO EACH OTHER. 3. GROUND 1: IN THIS GROUND, THE ASSESSEE HAS AGITATED THE DISAL LOWANCE OF RS.2,49,01,301 MADE BY THE AO U/S 14A R.W.R. 8D. 4. THE BRIEF BACKGROUND IS THAT THE ASSESSEE IS A NON BANKING FINANCIAL COMPANY (I.E. NBFC). IN THE RETURN FILED FOR THE I MPUGNED ASSESSMENT YEAR, THE ASSESSEE SUO MOTO MADE DISALLOWANCE U/S 14A FOR AN AGGREGATE AMOUNT OF RS.2.51 CRORES COMPRISING OF RS.2.49 CRORES ON ACCO UNT OF INTEREST U/R 8D(2)(II) AND RS.2.25 LAKHS ON ACCOUNT OF ADMINISTRATIVE EXPE NSES U/R 8D(2)(III). HOWEVER, SUBSEQUENTLY IT WAS FOUND BY THE ASSESSEE THAT THE DISALLOWANCE HAS BEEN WRONGLY OFFERED BY IT IN THE RETURN OF INCOME. THEREFORE, THE ASSESSEE CONTESTED THE ISSUE BEFORE LD. CIT(A) AND SUBMITTED IN DETAIL THAT INCOME HAS BEEN WRONGLY RETURNED BY THE ASSESSEE AND, THEREFOR E, BEFORE LD. CIT(A) ASSESSEE RESILED FROM THE RETURN OF INCOME FILED BY IT. HOWEVER, LD.CIT (A) WAS NOT SATISFIED WITH THE SUBMISSION OF THE ASSESSEE O N THE GROUND THAT ASSESSEE HAD HIMSELF MADE THE DISALLOWANCE IN THE RETURN OF INCOME FILED BY IT, THEREFORE, NO RELIEF CAN BE GIVEN TO THE ASSESSEE. THUS, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO AND DISMISSED THE GROUN DS OF THE ASSESSEE IN THIS REGARD. 5. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSEL OF THE ASSESSEE MADE DETAILED SUBMISSIONS IN SUPPORT OF ITS CLAIM THAT T HE DISALLOWANCE HAS BEEN WRONGLY OFFERED BY THE ASSESSEE. THUS, THE INCOME AND TAX COMPUTED THEREON ARE NOT IN ACCORDANCE WITH LAW. HE PLACED RELIANCE ON MANY JUDGEMENTS IN SUPPORT OF HIS PROPOSITION THAT THE INCOME SHOULD B E COMPUTED STRICTLY IN ACCORDANCE WITH LAW IRRESPECTIVE OF THE TREATMENT G IVEN BY THE ASSESSEE. HE VEHEMENTLY RELIED UPON THE JUDGEMENTS OF THE HONBL E SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING COMPANY LTD V S CIT 82 ITR 363 (SC), CIT 4 RUPEE FINANCE & MANAGEMENT PVT LTD VS INDIA DISCOUNT CO LTD 75 ITR 191 (SC), CIT VS S HOORJI VALLABHDAS & CO 46 ITR 144 (SC) AND TAPARIA TOOLS LTD VS JCIT 372 ITR 605 (SC). 6. WITH REGARD TO THE ILLEGALITY IN THE DISALLOWANCE M ADE U/S 14A, IT WAS SUBMITTED AT LENGTH BY THE LD. COUNSEL THAT THE LAW IN THIS REGARD HAS EVOLVED SUBSEQUENT TO THE FILING OF RETURN AND THUS AS ON D ATE, THE DISALLOWANCE MADE IN THE HANDS OF THE ASSESSEE IS CONTRARY TO LAW AND CANNOT BE UPHELD. IT WAS SUBMITTED BY HIM THAT THE DISALLOWANCE MADE U/S 14A IS ILLEGAL FOR INTER-ALIA , FOLLOWING REASONS:- (I) THE INVESTMENT MADE FOR EARNING TAX FREE INCOME HAS BEEN MADE FOR STRATEGIC REASONS IN GROUP COMPANIES WHICH CANNOT B E CONSIDERED FOR MAKING DISALLOWANCE U/S 14A, AS PER THE LATEST POSI TION OF LAW, (II) THE DISALLOWANCE COULD NOT HAVE BEEN MADE MORE THAN THE AMOUNT OF DIVIDEND RECEIVED BY THE ASSESSEE, (III) THE DISALLOWANCE OF INTEREST CAN BE MADE ON T HE BASIS OF NET BASIS ONLY AND NOT ON GROSS BASIS AND (IV) NO PROPER SATISFACTION WAS RECORDED BY THE AO BEFORE MAKING THE DISALLOWANCE. 7. IN VIEW OF THE AFORESAID SUBMISSIONS, IT WAS REQUES TED BY THE LD. COUNSEL THAT THE ISSUE SHOULD BE SENT BACK TO THE FILE OF T HE AO FOR EXAMINING THIS ISSUE AFRESH AND MAKING THIS DISALLOWANCE STRICTLY IN ACC ORDANCE WITH LAW IRRESPECTIVE OF THE TREATMENT GIVEN BY THE ASSESSEE IN THE RETUR N OF INCOME. 8. PER CONTRA, THE LD. DR VEHEMENTLY OPPOSED THE SUBMI SSIONS OF THE ASSESSEE AND PLACED RELIANCE UPON THE JUDGMENT OF H ONBLE SUPREME COURT REPORTED IN THE CASE OF STATE OF KARNATAKA VS SELVI J. JAYALALITHA & OTHERS AND K ANBAZHAGAN 67 ITR 106 (SC) FOR THE PROPOSITION THAT ONCE ASSESSEE HAS HIMSELF MADE A DISALLOWANCE, THEN HE CANNOT SEEK RELIEF FOR THE SAME AT A SUBSEQUENT STAGE. IT WAS SUBMITTED BY HIM THAT CIT(A) HAS RIG HTLY CONFIRMED THE IMPUGNED 5 RUPEE FINANCE & MANAGEMENT PVT LTD DISALLOWANCE AND THE ORDERS PASSED BY THE LOWER AUT HORITIES SHOULD BE CONFIRMED. 9. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOWER AUT HORITIES AND SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US. IT I S WELL SETTLED AND HAS BEEN ECHOED SO AT NUMBER OF OCCASIONS BY HONBLE SUPREME COURT AND MANY OTHER COURTS OF OUR COUNTRY THAT OBJECTIVE OF THE INCOME- TAX PROCEEDINGS IS TO DETERMINE THE TAXABLE INCOME OF THE ASSESSEE AND TA X PAYABLE THEREON, FAIRLY AND AS PER LAW ONLY. IT IS ALSO NOTED THAT ARTICLE 265 OF CONSTITUTION OF INDIA ALSO PROVIDES IN EXPRESS TERMS THAT NO TAX CAN BE C OLLECTED WITHOUT AUTHORITY OF LAW. IT IS ALSO NOTED BY US THAT WAY BACK IN 1955, THE CENTRAL BOARD OF REVENUE (NOW CALLED AS CENTRAL BOARD OF DIRECT TAXES) HAD I SSUED A CIRCULAR WHEREIN GUIDANCE WAS GIVEN TO THE AOS THAT THEY SHOULD ASSE SS TAXABLE INCOME AND COMPUTE THE TAX LIABILITY OF THE TAXPAYERS IN ACCOR DANCE WITH LAW ONLY AND THEY SHOULD NOT TAKE UNDUE ADVANTAGE OF IGNORANCE OF THE ASSESSEE. IN CASE, ANY DEDUCTION IS OMITTED TO BE CLAIMED BY AN ASSESSEE A ND IF SAME IS ALLOWABLE TO THE ASSESSEE AS PER LAW, THEN THE AO SHOULD, IN ALL FAIRNESS, GIVE AN OPPORTUNITY TO THE ASSESSEE TO CLAIM IT IN ACCORDANCE WITH LAW. FURTHER, ON THIS ISSUE, OUR ATTENTION HAS RIGHTLY BEEN DRAWN UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO LTD (SUPRA) WHEREIN IT WAS OBSERVED BY HONBLE SUPREME COURT THAT WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW, WHICH THE ASSESSEE MAY TAKE AND NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACC OUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. SIMILARLY, IN THE CASE O F CIT VS INDIA DISCOUNT CO LTD (SUPRA), IT WAS INTER-ALIA OBSERVED BY HONBLE SUPREME COURT THAT IT IS WELL ESTABLISHED THAT A RECEIPT WHICH IN LAW CANNOT BE R EGARDED AS INCOME CANNOT BECOME SO MERELY BECAUSE THE ASSESSEE WRONGLY CREDI TED IT TO THE P & L 6 RUPEE FINANCE & MANAGEMENT PVT LTD ACCOUNT. SIMILAR VIEW HAS BEEN TAKEN IN OTHER JUDG EMENTS RELIED UPON BY THE LD. COUNSEL. THUS, IN OUR CONSIDERED VIEW, IF ASSE SSEE IS ABLE TO SHOW THAT INCOME HAS BEEN WRONGLY OFFERED BY HIM TO TAX IN HI S RETURN OF INCOME, THEN THE ASSESSEE HAS LEGAL RIGHT TO RESILE FROM HIS RET URN SO LONG AS ASSESSEE IS ABLE TO DEMONSTRATE THAT THE INCOME RETURNED BY HIM IS N OT IN ACCORDANCE WITH LAW AND REQUISITE FACTS IN THIS REGARD ARE PLACED ON RE CORDS. THIS VERY ISSUE WAS DECIDED BY HONBLE DELHI HIGH COURT ALSO IN THE CAS E OF BHARAT GENERAL INSURANCE CO. 81 ITR 303 (DEL) . THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE MUST BE GIVEN AN OPPORTUNITY IN THE INTEREST OF JUS TICE AND FAIR PLAY TO DEMONSTRATE AND ESTABLISH THAT DISALLOWANCE MADE U/ S 14A IS NOT IN ACCORDANCE WITH LAW. 10. LD. COUNSEL HAS RAISED VARIOUS ISSUES TO SHOW THAT DISALLOWANCE MADE U/S 14A IS CONTRARY TO LAW ON ACCOUNT OF MANY REASONS W HICH HAVE BEEN TABULATED ABOVE, IN OUR ORDER. WE ALSO FIND THAT THE LAW IN REGARD TO THE DISALLOWANCE U/S 14A HAS EVOLVED QUITE RECENTLY AND SUBSEQUENT TO PA SSING OF IMPUGNED ASSESSMENT ORDER. LD. DR WAS UNABLE TO PRIMA FACIE REBUT THE ISSUES RAISED BY THE LD. COUNSEL BEFORE US. UNDER THESE CIRCUMSTANC ES, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO WHERE THE ASSESSEE SHALL BE FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES WITH REGARD TO T HE DISALLOWANCE U/S 14A AND SHALL FILE REQUISITE EVIDENCES TO ESTABLISH ITS CLA IM, AS MAY BE REQUIRED BY THE AO FROM TIME TO TIME. THE AO SHALL DECIDE THIS ISS UE AFRESH AFTER CONSIDERING THE MATERIAL AND THE ARGUMENTS AS MAY BE BROUGHT ON RECORD BY THE ASSESSEE ON OBJECTIVE BASIS AND SHALL BE FREE TO DECIDE THIS ISSUE INDEPENDENT OF THE VOLUNTARY DISALLOWANCE MADE BY THE ASSESSEE IN THE RETURN OF INCOME. THE AO WOULD BE WELL WITHIN HIS POWERS TO ASSESS THE INCOM E BELOW THE AMOUNT OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME, IF THE FACTS OF THIS CASE AND LAW APPLICABLE THEREON SO DEMANDS. THUS, WITH THESE DI RECTIONS, THIS ISSUE IS SENT 7 RUPEE FINANCE & MANAGEMENT PVT LTD BACK TO THE FILE OF THE AO AND MAY BE TREATED AS AL LOWED, FOR STATISTICAL PURPOSES. 11. GROUND 2: THE ASSESSEE IS AGGRIEVED BY THE ACTION OF LOWER AU THORITIES IN MAKING DISALLOWANCE OF INTEREST U/S 36(1)(III) AMOU NTING TO RS.2,13,47,579/-. 12. THE BRIEF BACKGROUND OF THE CASE IS THAT ASSESSEE W AS ENGAGED DURING THE YEAR IN FINANCE BUSINESS BEING A NON BANKING FINANC IAL COMPANY. IT HAD TAKEN LOAN FROM VARIOUS PARTIES (LENDERS) AND GAVE IT TO CERTAIN OTHER PARTIES (I.E. BORROWERS). IT WAS NOTED BY THE AO THAT ASSESSEE H AD PAID INTEREST TO ITS LENDERS AMOUNTING TO RS.10,49,34,035 WHEREAS IT EAR NED INTEREST INCOME FROM ITS BORROWERS AMOUNTING TO RS.5,77,17,962. THUS, T HE ENTIRE ACTIVITY OF RAISING LOANS AND GIVING THEM TO OTHER PARTIES RESULTED IN NET INTEREST LOSS OF RS.4,721,16,073. UNDER THE AFORESAID CIRCUMSTANCES , AO WAS OF THE VIEW THAT NO PRUDENT BUSINESS MAN WOULD INCUR LOSS IN THIS MA NNER. ACCORDING TO HIM, NO PRUDENT PERSON WILL BORROW LOANS ON HIGHER RATE OF INTEREST AND GIVE IT ON LOWER RATE OF INTEREST. THEREFORE, PROPORTIONATE DISALLO WANCE WAS MADE OUT OF THE INTEREST EXPENSES. 13. DURING THE COURSE OF APPEAL BEFORE LD. CIT(A), IT W AS SUBMITTED THAT DUE TO DECLINE IN THE MARKET, THE RATE OF INTEREST WAS DECREASED BY THE BORROWERS BUT DUE TO SOME REASONS ASSESSEE COULD NOT NEGOTIAT E AND REDUCE THE RATE OF INTEREST FROM ITS LENDERS. DUE TO CERTAIN STRATEGI C REASONS, THE ASSESSEE HAD TO CONTINUE WITH THESE TRANSACTIONS AND, THEREFORE, LO SS WAS INCURRED IN THIS YEAR. IT WAS ALSO SUBMITTED THAT NOTHING IN-GENUINE HAS B EEN FOUND BY THE AO AND ALL THE TRANSACTIONS STOOD DULY CONFIRMED. UNDER THESE CIRCUMSTANCES, NO DISALLOWANCE COULD HAVE BEEN MADE ON NOTIONAL BASIS . HOWEVER, LD. CIT(A) WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, THEREFORE, HE ENDORSED THE VIEW OF THE AO AND CONFIRMED THE DISALLOWANCE. 8 RUPEE FINANCE & MANAGEMENT PVT LTD 14. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSEL OF THE ASSESSEE VEHEMENTLY CONTESTED THE DISALLOWANCE. IT WAS SUBM ITTED THAT NOTHING INGENUINE OR WRONG WAS FOUND IN THE TRANSACTIONS CA RRIED OUT BY THE ASSESSEE. NO EXAMINATION WAS DONE BY AO OF ANY BORROWER OR LE NDER BEFORE REJECTING THE TRANSACTIONS OF THE ASSESSEE. IT WAS THE ASSESSEE, WHO WAS BEST JUDGE OF HIS BUSINESS AND THE AO WAS NOBODY TO DICTATE HOW THE B USINESS WAS TO BE CARRIED OUT BY THE ASSESSEE. HE ALSO PLACED RELIANCE UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS 288 ITR 1 (SC) FOR THE PROPOSITION THAT ONCE THE AMOUNT BORROWED IS FOUND TO BE UTILIZED FO R THE PURPOSES OF THE BUSINESS OF THE ASSESSEE, THEN NO DISALLOWANCE OF I NTEREST CAN BE MADE BY THE AO. 15. PER CONTRA, LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT NO PRUDENT BUSINESSM AN WOULD CARRY ON THE BUSINESS IN THIS MANNER. RELIANCE WAS PLACED ON TH E JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF COIMBATORE SALEM T RANSPORT (P) LTD 61 ITR 480 (MAD) FOR THE PROPOSITION THAT TAXPAYERS ARE EX PECTED TO CARRY OUT THE BUSINESS IN A PRUDENT MANNER. 16. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES. IT IS NOTED BY US THAT ASSESSEE HAD TAKEN LOANS FROM WELL ESTABLISHED AND DULY IDENTIFIED FINANCIAL INSTITUTIONS. THE FACTUM OF B ORROWING OF AMOUNT AND PAYMENT OF INTEREST FROM THESE WELL ESTABLISHED COM PANIES HAS NEITHER BEEN DOUBTED NOR DENIED BY THE AO. SIMILARLY, THE ASSES SEE GAVE LOANS TO CORPORATE ENTITIES. THE FACTUM OF EARNING OF INTEREST INCOME FROM THESE COMPANIES WAS ALSO DULY VERIFIED BY THE AO AND NOTHING COULD BE B ROUGHT ON RECORD BY THE AO TO NEGATE OR EVEN DOUBT IF ANY AMOUNT OF INTEREST H IGHER THAN THE AMOUNT SHOWN BY THE ASSESSEE IN ITS ACCOUNTS WAS RECEIVED BY THE ASSESSEE. THUS, THE ENTIRE TRANSACTION OF TAKING OF LOAN & PAYMENT OF I NTEREST THEREON AND GIVING OF 9 RUPEE FINANCE & MANAGEMENT PVT LTD LOAN & EARNING OF INTEREST INCOME THERE FROM WAS DU LY ESTABLISHED AND SUBSTANTIATED. NOTHING INGENUINE HAS BEEN FOUND BY EITHER OF THE LOWER AUTHORITIES. THE ONLY GRIEVANCE OF THE LOWER AUTHO RITIES WAS THAT THERE WAS NO PRUDENCE IN CARRYING OUT THE ACTIVITY IN SUCH A MAN NER WHICH CULMINATED INTO INCURRING OF NET INTEREST LOSS. WE HAVE CAREFULLY CONSIDERED THE ACTION OF THE AO. IN OUR VIEW, THE DOUBT NOTED BY THE AO WITH RE SPECT TO INCURRING OF LOSS COULD HAVE AT THE BEST BE IT A TRIGGERING POINT FOR FURTHER INVESTIGATION BUT THAT ITSELF CANNOT BE A CONCLUSIVE GROUND TO MAKE DISALL OWANCE IN THE HANDS OF THE ASSESSEE. UNFORTUNATELY, THE AO FAILED IN CARRYING OUT ANY INVESTIGATION TO CONTRADICT THE TRANSACTION. IN FACT, IT ALSO APPEA RS TO US THAT AO DID MAKE SOME VERIFICATION BUT NOTHING INGENUINE OR WRONG WAS NOT ED BY HIM. RATHER, THE TRANSACTIONS WERE DULY SUBSTANTIATED. SIMILARLY, A T THE STAGE OF LD. CIT(A) ALSO NOTHING WRONG OR INGENUINE COULD BE BROUGHT ON RECO RD BY HIM. UNDER THESE CIRCUMSTANCES, WE FIND THAT DISALLOWANCE HAS BEEN M ADE MERELY ON THE BASIS OF WHIMS AND FANCIES, SURMISES & CONJECTURES AND DOUBT S & SUSPICION MADE BY THE LOWER AUTHORITIES. IT IS WELL SETTLED LAW THAT A REVENUE OFFICER CANNOT SIT IN THE ARMCHAIR OF A BUSINESSMAN AND DICTATE HOW A BUS INESS IS TO BE CARRIED OUT. THUS, TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE AO HAD NO MATERIAL IN HIS POSSESSION SO AS TO ENABLE HIM TO MAKE THE IMPUGNED DISALLOWANCE. THUS, THE DISALLOWANCE MADE BY HIM ON MERE SUSPICION IS NOT SUSTAINABLE IN LAW AND THEREFORE, IT IS DELETED. 17. AS A RESULT, THIS APPEAL IS PARTLY ALLOWED. 18. NOW WE SHALL TAKE UP APPEAL FILED BY THE ASSESSEE F OR AY 2010-11 IN ITA NO.4835/MUM/2014. THE ONLY GROUND RAISED IN THIS A PPEAL IS WITH REGARD TO THE DISALLOWANCE MADE U/S 14A. IT WAS JOINTLY STAT ED BY BOTH THE PARTIES THAT FACTS AND CIRCUMSTANCES IN THIS YEAR ARE IDENTICAL TO GROUND 1 OF APPEAL FOR AY 2009-10. THEREFORE, FOLLOWING OUR ORDER, THIS ISSU E IS SENT BACK TO THE FILE OF THE 10 RUPEE FINANCE & MANAGEMENT PVT LTD AO. THE AO SHALL FOLLOW THE DIRECTIONS GIVEN BY US IN GROUND 1 OF ASSESSEES APPEAL FOR AY 2009-10. THIS APPEAL MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 19. NOW WE SHALL TAKE UP APPEAL FILED BY THE REVENUE IN ITA NO.5122/MUM/2014 FOR AY 2010-11. 20. THE ONLY ISSUE AGITATED IN THIS APPEAL IS WITH REGA RD TO DELETION OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST U/S 36(1)(III) OF THE ACT. IT WAS JOINTLY STATED THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE IDENTICAL TO GROUND 2 OF APPEAL OF THE ASSESSEE FOR AY 2009-1 0. WE HAVE ALREADY DELETED THE SAID DISALLOWANCE IN OUR ORDER FOR AY 2009-10. THEREFORE, WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE IN THIS YEAR. THEREFORE, NO INTERFERENCE IS CALLED FOR IN HIS ORDER AND THE SAM E IS UPHELD. THUS, GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE DISMISSED. 21. AS A RESULT, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. 22. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR AY RS. 2009-10 AND 2010-11 ARE PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMI SSED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING IN THE PRESENCE OF REPRESENTATIVES OF BOTH THE PARTIES. SD/- SD/- (SAKTYIJIT DEY) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 26.04.2017 PK/- 11 RUPEE FINANCE & MANAGEMENT PVT LTD COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , D, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES