The Asstt. Commissioner of Income-tax, Jalandhar V. Sahibzada Ajit Singh Educational Trust, Jalandhar

ITA 535/ASR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8762 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: DINESH SARNA
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Salary income; Document seized; Deemed to accrue or arise in india; Corroborative evidences; Assessment record; Documents seized
• Section: 69C; 133A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDH AR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NOS.535 & 536(ASR)/2014 ASSESSMENT YEARS: 2011-12 & 2012-13 ASST. CIT, CENTRAL CIRCLE-1, JALANDHAR. VS. SAHIBZADA AJIT SINGH EDUCATIONAL TRUST, (REGD.), 191-GUJRAL NAGAR, JALANDHAR. PAN: -AAFTS-5351M (APPELLANT) (RESPONDENT) APPELLANT BY: SH. BHAWANI SHANKAR (DR .) RESPONDENT BY: SH. DINESH SARNA (ADV.) DATE OF HEARING: 18.01.2017 DATE OF PRONOUNCEMENT:21.02.2017 ORDER PER T. S. KAPOOR (AM): THESE ARE TWO APPEALS FILED BY REVENUE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A), LUDHIANA, BOTH DATED 23.06.2014 FOR ASST. YEARS: 2011-12 & 2012-13 RESPECTIVELY. 2. THE REVENUE HAS TAKEN IDENTICAL GROUNDS IN THESE APPEALS AND THE ONLY DIFFERENCE IS WITH RESPECT TO DIFFERENCE IN AM OUNTS. FOR THE SAKE OF CONVENIENCE THE GROUNDS OF APPEAL IN ITA NO.535(ASR )/2014 FOR ASST. YEAR: 2011-12 ARE REPRODUCED HEREIN BELOW. ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 2 1.(I) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.10,50,00,000/- BY HOLDING IT AS RELA TABLE TO THE BUSINESS INCOME. 1.(II) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON F ACTS IN HOLDING THAT THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARMA (P) LTD. V/S CIT, ITA NO.106 OF 2011 IS DISTINGUISH ABLE ON FACTS AND HENCE NOT APPLICABLE IN THIS CASE. 1.(III) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARMA VS. CIT IS SQUARELY APPLICABLE IN TH IS CASE IN CONFORMITY WITH THE VIEWS OF THE AO MENTIONED IN THE ASST. ORD ER. 1.(IV) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE AMOUNT OF RS. 10.50 CRORE DECLARE D WAS DEEMED INCOME OF THE ASSESSEE AS DISCUSSED IN THE ASSESSMENT ORDER. 2.(I) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS. 33,74,000/- OUT OF TOTAL ADDITION O F RS. 36,74,000/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(L)(II I) OF THE I.T.ACT, HOLDING THAT THE ASSESSEE HAS NOT USED ANY INTEREST BEARING FUNDS FOR NON BUSINESS PURPOSES. 2.(II) THAT THE LD. C1T(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT IT WAS FOUND ON VERIFICATION OF THE ASSESSMENT RECORDS THAT THE ASSESSEE HAS MADE INTEREST FREE ADVANCE AND LOA NS TO THE NON BUSINESS RELATIVES AND PERSONS. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), BE SET-ASIDE AND THAT OF THE AO BE RESTO RED ON MERITS. 3. THE BRIEF FACTS OF THE CASES AS NOTED IN THE ASS ESSMENT ORDER ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT WAS CONDUCTED ON 3.08.2011 AND THEREFORE, THE ASSESSMEN TS OF THE ASSESEE WERE REOPENED U/S 153A. THE ASSESSEE HAD DECLARED A N AMOUNT OF RS.10.50 CRORES AND RS. 3.50 CRORES AS UNDISCLOSED INCOME RESPECTIVELY FOR ASST. YEAR 2011-12 AND FOR THE ASST.YEAR: 2012- 13. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, HOWE VER OBSERVED THAT ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 3 ASSESSEE HAD NOT SEPARATELY OFFERED THESE SURRENDER ED INCOME IN THE RETURNS OF INCOME AND THEREFORE, ASSESSEE WAS SHOW CAUSED AS UNDER: ..DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF RECORDS IT IS NOTICED THAT YOU HAVE MADE SURRENDERE D OF RS.10.50 CRORE. BUT ON VERIFICATION OF INCOME AND EXPENDITUR E ACCOUNTS IT IS FOUND THAT EVEN AFTER CREATING OF RS.10.50 CRORE AS SURRENDERED AMOUNT, NET PROFIT HAS BEEN DECLARED AT RS.4,30,98, 237/- AND DECLARED GROSS RECEIPTS HAVE BEEN SUBSTANTIALLY RED UCED FROM RS.4.23 CRORE TO RS.0.86 CRORE . THIS SHOWS THAT YOU HAVE SUBSTANTIALLY INFLATED YOUR EXPENSES TO AVOID THE T AX REQUIRED TO BE PAID ON SURRENDERED OF RS.10.50 CRORE. MOREOVER DUR ING THE COURSE OF SEARCH, SURRENDERED OF RS.10.50 CRORE HAS BEEN V OLUNTARILY ADMITTED IN THE STATEMENT RECORDED U/S 132(4) OF TH E I.T. ACT, WHICH REQUIRED TO BE OFFERED FOR TAX DIRECTLY AS INCOME F ROM OTHER SOURCES WITHOUT ADJUSTMENT OF EXPENSES OF YOUR REGULAR BUSI NESS AFFAIRS AGAINST THE SAID SURRENDERED OF RS.10.50 CRORE. ACC ORDINGLY AS SUCH THE SURRENDER AMOUNT OF RS.10.50 CRORE IS ACTU ALLY TO BE ADDED TO YOUR NET TOTAL INCOME OF THE YEAR AS INCOM E FROM OTHER SOURCES AND TAX IS REQUIRED TO BE PAID ON SURRENDER ED AMOUNT DIRECTLY IN ADDITION TO TAX ON REGULAR BUSINESS INC OME OF THE YEAR UNDER CONSIDERATION. 02. IN VIEW OF THE ABOVE, YOU ARE REQUESTED TO SHO W CAUSE AS TO WHY THE SURRENDERED AMOUNT OF RS.10.50 CRORE SHOULD NOT BE ADDED TO YOUR TOTAL INCOME AND TAX ACCORDINGLY. SIMILAR SHOW CAUSE WAS ISSUED FOR ASST. YEAR:2012-1 3 FOR SURRENDERED AMOUNT OF RS.3.50 CRORES. THE ASSESSEE IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE SUBMITTED AS UNDER: .IT IS FURTHER SUBMITTED THAT THIS SURRENDER OF R S.10,50,00,000/- WAS MADE ON THE BASIS OF PROFITS EARNED FROM DIFFER ENT SCHOOLS AND SOME DOCUMENTS SEIZED FROM THE PREMISES OF THE SCHO OLS COLLEGES, SHOWING THE PROFITS FROM DIFFERENT SCHOOLS AND INVE STMENT IN PURCHASE OF NEW ASSETS AND ADVANCES AGAINST PURCHAS E OF PROPERTIES FOR OPENING NEW BRANCHES OF THE TRUST AN D HAS BEEN SEPARATELY REFLECTED IN THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEETS OF THE ASESSEE. PHOTOCOPIES OF PROFIT AND LO SS ACCOUNT AND BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION HAVE BEEN FURNISHED FOR YOUR KIND PERUSAL VIDE OUR PREVIOUS REPLIES. ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 4 SIMILAR REPLY WAS FILED FOR ASST. YEAR: 2012-13. TH E ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED WITH THE EXPLANATIONS OF ASSESSEE AND HELD THE INCOME SURRENDERED DURING SURVEY AS UNDISCLOSED INC OME U/S 69A AND MADE THE ADDITION ACCORDINGLY BY HOLDING AS UNDER: SINCE THE ASSESSEE HAS DECLARED ITS UNACCOUNTED/UN DISCLOSED INCOME AND HAS REFLECTED IT IN P & L ACCOUNT, THE ASSESSEE IS CLAIMING THE SAID DECLARED INCOME AS ITS BUSINESS INCOME EARNED DURING THE COURSE OF ITS NORMAL BUSIN ESS ROUTINE. HOWEVER, THE ASSESSEE HAS NEVER EXPLAINED THAT HOW THE SAID INCOME WAS EA RNED. BY MERELY DISCLOSING/REFLECTING ANY INCOME IN THE P&L ACCOUNT THE ASSESSEE CANNOT BE CONSIDERED TO HAVE DISCHARGED ITS LIABILITY TO DISCLOSE THE MA NNER IN WHICH THE SAID INCOME WAS EARNED. IN THE CASE OF THE ASSESSEE COMPANY UNDER C ONSIDERATION, THE ASSESSEE HAS FAILED TO EXPLAIN AS TO HOW AND UNDER WHAT HEAD THE INCOME DECLARED AND REFLECTED BY IT IN THE PROFIT & LOSS ACCOUNT, WAS EARNED. THEREFORE, IT CA N CLEARLY BE SAID THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF UNDISCLOSED AND UNACCOUNTED INCOME ADMITTED DURING THE COURSE OF SEARCH U/S 132 (4) OF THE I.T. ACT, 1961. THEREFORE, IN MY VIEW, TIRE AMOUNT OF RS.10,50,00,000// SURRENDERED ON ACCOUNT OF UNDISCLOSED AND UNACCOUNTED INCOME, HAS TO BE ASSESSED U/S 69A OF THE INCOME-TAX ACT, 1 961. HERE RELIANCE IS PLACED UPON THE JUDGEMENT OF HONBLE PUNJAB & HARYANA HIGH COUR T IN THE EASE OF M/S KIM PHARMA (P) LTD. V/S CIT, 1TA NO.106 OF 2011. IN TH E SAID JUDGMENT THE HONBIE PUNJAB & HARYANA HIGH COURT HAS HELD THAT WHEN THE ASSESSE E FAILS TO DISCLOSE AS TO HOW A PARTICULAR INCOME HAS BEEN EARNED THAN THE SAID INC OME IS DEEMED TO BE INCOME UNDER TIRE SCHEME OF SECTION 69, 69A, 69B & 69C OF THE AC T. 3.4 IN VIEW OF THE ABOVE DISCUSSION, INCOME OF RS .10,50,00,000/- SURRENDERED BY THE ASSESSEE U/S 132(4) OF THE I.T.ACT IS ASSESSED AS U NDISCLOSED INCOME U/S 69A OF THE ACT. THIS ISSUE ATTRACTS PENALTY U/S 271AAA OF THE I.T. ACT, 1961 AS THE ASSESSEE FAILS TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED IN COME WAS DERIVED. 4. AGGRIEVED THE ASSESSEE FILED APPEALS BEFORE LD. CIT(A). THE LD. CIT(A) DELETED THE ABOVE ADDITIONS BY HOLDING SIMIL AR FINDINGS IN RESPECT OF THESE TWO YEARS. FOR THE SAKE OF CONVENIENCE, TH E FINDINGS FOR ASST. YEAR: 2010-11 ARE REPRODUCED BELOW. 7. IT IS SEEN THAT THE BIFURCATION OF THE DISCLOSE D AMOUNT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT IN THE FOLLOWING M ANNER:- STATEMENT OF ACCOUNT STATEMENT OF ACCOUNT STATEMENT OF ACCOUNT STATEMENT OF ACCOUNT PERIOD : 01/04/10 - 31/03/11 A/C : AMOUNT SURRENDERED ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 5 DATE B NARRATION DEBIT CREDIT BALANCE 30/06/2010 J A/O SURRENDERED FOR PURCHASES OF LAND 1,00,00,000.00 1,00,00,000.00 CR. ; 30/06/2010 J AMOUNT SURRENDERED FOR BUILDING 1,16,18,000.00 2,16,18,000.00 CR. 30/06/2010 J AMOUNT SURRENDERED FOR COMPUTERS 19,80,000.00 2,35,98,000.00 CR. 30/09/2010 J AMOUNT SURRENDERED FOR PURCHASE OF LAND 52,00,000.00 2,87,98,000.00 CR. 30/09/2010 J AMOUNT SURRENDERED FOR BUILDING 30,35,000.00 3,18,33,000.00 CR. 30/09/2010 J AMOUNT SURRENDERED FOR LAND 75,00,000.00 3,93,33,000.00 CR. 30/09/2010 J AMOUNT SURRENDERED FOR PURCHASE OF FURNITURE 14,70,400.00 4,08,03,400.00 CR. 30/09/2010 J AMOUNT SURRENDERED FOR COMPUTERS 20,25,000.00 4,28,28,400.00 CR. 30/09/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 38,600.00 4,28,67,000.00 CR. 30/10/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 1,00,00,000.00 5,28,67,000.00 CR. 31/10/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 21,25,000.00 5,49,92,000.00 CR. 30/11/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 75,00,000.00 6,24,92,000.00 CR. 31/12/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 45,00,000.00 6,69,92,000.00 CR. 31/12/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 75,00,000.00 7,44,92,000.00 CR. 31/12/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 50,00,000.00 7,94,92,000.00 CR. 31/12/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 50,00,000.00 8,44,92,000.00 CR. 31/12/2010 J AMOUNT SURRENDERED ON A/C BUILDING MATERIAL 1,00,00,000.00 9,44,92,000.00 CR. ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 6 31/01/2011 J AMOUNT SURRENDERED FOR PURCHASES OF LAND 50,00,000.00 9,94,92,000.00 CR. 31/01/2011 J AMOUNT SURRENDERED FOR PURCASE OFLAND 50,00,000.00 9,94,92,000.00 CR. 31/11/2010 J AMOUNT SURRENDERED FOR CONST OF BUILDING 26,42,000.00 10,21,34,000.00 CR. 31/01/2011 J AMOUNT SURRENDERED FOR PURCHASE OF COMPUTERS 16,40,000.00 10,37,74,000.00 CR. 31/01/2011 J AM OUNT SURRENDERED FOR PURCHASE OF FURNITURE 12,26,000.00 10,50,00,000.00 CR. 31/01/2011 J TOTALS 10,50,00,000.00 10,50,00,000.00 CR. 8. THE COMBINED READING OF THE SEIZED DOCUMENT AS W ELL AS THE CONSEQUENT DISCLOSURE BY THE APPELLANT UNDER SECTION 132(4) CLEARLY SHOWS THAT T HE INCOME SO DISCLOSED HAS BEEN EARNED FROM ACTIVITIES OF TRUST WHICH COULD NOT BE RECORDED IN THE BOOKS OF ACCOUNTS. THERE IS NO AMBIGUITY AS TO THE MANNER IN WHICH THE SAID INCOME HAS BEEN EAR NED AND ITS DIRECT CONNECTION WITH THE BUSINESS OF THE APPELLANT TRUST. THE ASSESSING OFFI CER'S ARGUMENTS THAT THIS DISCLOSURE SHOULD HAVE BEEN INCLUDED UNDER THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARMA V/S CIT VIDE ITA NO.106 OF 2011 IS ERRONEOUS AS THE HON'BLE COURT EVEN IN THE SAID CASE HAD EXAMINED TWO TYPES OF ITEMS DISCLOSED UNDER SEC TION 133A OF THE INCOME TAX ACT, 1961. THE ITEM IN THE FORM OF CASH FOR WHICH NO EXPLANATION R EGARDING ITS SOURCE COULD BE GIVEN BY ASSESSEE WAS DIRECTED TO BE TAXED UNDER THE HEAD 'INCOME FRO M OTHER SOURCES' AND THE DISCREPANCY LEADING TO DISCLOSURE ON ACCOUNT OF UNACCOUNTED STO CKS WAS DIRECTED TO BE TAXED UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION. THE BASIC PRE MISE LAID DOWN BY THE HON'BLE COURT IS THAT ANY ITEM OF DISCLOSURE THAT IS NOT RELATABLE TO BUS INESS OF THE ASSESSEE SHOULD BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND ANY ITEM WHICH HAS DIRECT CONNECTION WITH THE BUSINESS ACTIVITY SHOULD BE TAXED UNDER THE HEAD 'INCOME FRO M BUSINESS AND PROFESSION'. THE OBSERVATION OF THE HON'BLE JURISDICTIONAL HIGH COURT IS REPRODU CED AS UNDER:- 'THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C OF THE INCOME- TAX ACT, 1961, WOULD SHOW THAT IN CASES WHERE THE NATURE AND SOURCE OF INVEST MENTS MADE BY THE ASSESSEE OR THE NATURE AND SOURCE OF ACQUISITION OF MONEY, BULLION ETC., OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT EXPLAINED AT ALL O R NOT SATISFACTORILY EXPLAINED, THEN, THE VALUE OF SUCH INVESTMENTS AND MONEY OR THE VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INC OME OF SUCH ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SU CH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, B E KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. HOWEVER, WHEN THESE PROVISIONS APPLY BECAUSE NO SOURCES IS D ISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOME CAN BE CLASSIFIED UNDER ONE OF THE HEADS OF INCOME UNDER SECTION 14 OF THE ACT, IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDE R ANY OF THESE HEADS INCLUDING INCOME FROM 'OTHER SOURCES' WHICH HAVE TO BE SOURCES KNOWN OR E XPLAINED. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UND ER SECTION 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISIONS WHICH CO RRESPOND TO SUCH ANY ONE OF THOSE HEADS BY VIRTUE OF A SATISFACTORY EXPLANATION BEING GIVEN, T HEN THESE PROVISIONS OF SECTIONS 69,69A, 69B AND ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 7 69C WILL NOT APPLY, IN WHICH EVENT, THE PROVISIONS REGARDING DEDUCTIONS ETC. APPLICABLE TO THE RELEVANT HEAD OF INCOME UNDER WHICH SUCH INCOME FAL LS WILL AUTOMATICALLY BE ATTRACTED. THE OPENING WORDS OF SECTION 14 'SAVE AS OTHERWISE PROVIDED BY THIS ACT' CLEARLY LEAVE SCOPE FOR 'DEEMED INCOME' OF THE NATURE COVERED UND ER THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C BEING TREATED SEPARATELY, BECAUSE SUCH DEEMED I NCOME IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSI ON, OR CAPITAL GAINS, NOR AS IT INCOME FROM 'OTHER SOURCES' BECAUSE THE PROVISIONS OF SECTIONS 69,69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, BULLION ETC. AND UNEXPLAINED EXP ENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCES OF INVESTMENT, ACQUISITION OR EX PENDITURE, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EXPLAINED. THEREFORE, I N THESE CASES, THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD 'IN COME FROM OTHER SOURCES'. THEREFORE, THE CORRESPONDING DEDUCTIONS WHICH ARE APPLICABLE TO TH E INCOMES UNDER ANY OF THESE VARIOUS HEADS, WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69,69A, 69B AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISIONS.' THE PERUSAL OF THE SEIZED DOCUMENT AS WELL AS THE DISCLOSURE MADE BY THE ASSESSEE CLEARLY SHOWS THAT ALL ITEMS OF DISCLOSURE ARE DIRE CTLY WITH REFERENCE TO THE ASSETS OF THE APPELLANT AND THEREFORE CANNOT BE SAID TO BE INCOME FROM OTHE R SOURCES. THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARM A VS. CIT ITA NO. 106 OF 2011 IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE BUT NOT IN THE WAY AS DONE BY THE ASSESSING OFFICER. THE APPELLANT'S TOTAL INCOME AFTER THE INCLUSION OF DIS CLOSURE IN THE PROFIT & LOSS ACCOUNT HAS TO BE TAXED AS SUCH AND IF NO PART OF THE EXPENSES DEBITE D IN THE PROFIT & LOSS ACCOUNT HAVE BEEN FOUND TO BE EITHER BOGUS OR EXCESSIVE THE RESULTANT FIGUR E HAS TO BE ASSESSED AS TOTAL INCOME. THE ACTION OF THE ASSESSING OFFICER IN TAKING OUT ONLY THE DIS CLOSED INCOME AND PUTTING IT UNDER THE HEAD 'INCOME FROM OTHER SOURCES IS INCORRECT AS PER LAW . THE ADDITION MADE IS THEREFORE DIRECTED TO BE DELETED. 10. THE GROUND OF APPEAL AT SERIAL NO. 3 PERTAINS TO DISALLOWANCE OF RS.36,74,000/- WHICH HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND TH AT THE APPELLANT HAD ADVANCED AMOUNTS FREE OF INTEREST FOR NON BUSINESS PURPOSES. THE PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS HIGHLIGHTED CERTAIN INTEREST FREE ADVANCES AND LOANS MADE TO FAMILY MEMBERS AND SISTER CONCERNS. THE DETAILS IN THIS RE GARD IS AS UNDER:- S.NO. NAME OF THE ENTITIES ADVANCES AMO UNT (IN LACS) 1. SH. BITTU MAKKAR 15 2. SH. JAI PAL MIDHA 10 3. SMT. JASWINDER KAUR 4.87 4. M/S N.K FINVEST CO. 50.50 5. SH. NAROTTAM SINGH 5 6. SMT. PREET INDER KAUR 67.81 7. M/S SHIV RICE MILLS 20 8. SH. TARWINDER SINGH 96.90 9. M/S VENUS BUILDERS PVT. LTD. 36.05 TOTAL 306.13 ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 8 11. IT IS SEEN THAT THE ASSESSEE ON BEING CONFRONTE D WITH THE SAME DID WOT OFFER ANY EXPLANATION ON THE ISSUE LEADING THE ASSESSING OFFI CER TO CONCLUDE THAT THE SAID INTEREST FREE ADVANCES HAD BEEN FOR NON BUSINESS PURPOSES AND THE REFORE CORRESPONDING DISALLOWANCE OF INTEREST DEBITED IN PROFIT & LOSS ACCOUNT HAD BEEN MADE. 12. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT SUBMITTED HIS ARGUMENTS ON THE ISSUE AS UNDER:- 'SIR, IT IS SUBMITTED THAT DURING THE YEAR UNDER CO NSIDERATION ASSESSEE HAS MADE CERTAIN ADVANCES TO THE TRUSTEES, THEIR FAMILY MEMBERS AND SISTER CONCERN OWNED BY TRUSTEE AND ALSO TO THE OUTSIDER TO THE TUNE OF RS.3,06,13,000/- LISTED IN PARA 4.1 AT PAGE 4 OF THE ASSESSMENT ORDER AND ON THIS OUTSTANDING AMOUNT OF RS.3,06,13,000/- AS ON 31.03.2011 INTEREST @ 12% TO THE TUNE OF RS.36,74,000/- HAS BEEN DISALLOWED. SIR, AT PAR 4.2 OF THE ASSESSMENT ORDER IT IS ALLEG ED THAT NO EXPLANATION ON THE ABOVE ISSUE WAS RECEIVED BY THE LD. ASSESSING OFFICER FRO M THE ASSESSEE SIDE. IN THIS REGARD IT IS SUBMITTED THAT WE HAVE FILED A DETAILED REPLY WITH THE LD. ASSESSING OFFICER. WE REALLY DO NOT KNOW WHY THIS REPLY HAS NOT BEEN CONSIDERED WHILE D ISALLOWING THIS AMOUNT. COPY OF THE REPLY IS ATTACHED HEREWITH FOR YOUR KIND PERUSAL. SIR, THIS REPLY IS SELF EXPLANATORY AND IS AS PER B OOKS OF ACCOUNTS OF ASSESSEE WHICH HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE FRAM ING ASSESSMENT ORDER. THIS CLEARLY PROVES THAT ASSESSMENT WAS FRAMED WITHOUT APPLICATION OF MIND O N ACCOUNT OF FOLLOWING REASONS: A) THAT ADVANCES MADE TO THE OUTSIDER FOR PURCHASE OF PROPERTY HAVE CONSIDERED AS INTEREST FREE ADVANCES TO THE TRUSTEE/ RELATIVE/ SISTER CONCERN OF THE ASSESSEE. B) THAT INTEREST IS CALCULATED ON TOTAL OUTSTANDING AM OUNT AS ON 31.03.2011 AND NOT ON DAY TO DAY USE OF FUNDS. EVEN ADJUSTMENT ENT RIES MADE ON 31.03.2011 IN SOME CASES HAVE ATTRACTED FULL YEAR INTEREST DISALLOWANC E. C) THAT INTEREST FREE ADVANCES RECEIVED FROM TRUSTEE/R ELATIVES/ SISTER CONCERN HAVE NOT AT ALL BEEN CONSIDERED WHILE CALCULATING THE DI SALLOWANCE OF INTEREST. SIR, THEREFORE, IT IS REQUESTED THAT CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THIS CASE ADDITION MADE BY THE LD. ASSESSING OFFICER IGNORING THE FACTS OF THIS CASE MAY KINDLY BE DELETED.' 13. SINCE THE ASSESSING OFFICER HAD RECORDED IN TH E ASSESSMENT ORDER THAT THE APPELLANT HAD NOT OFFERED ANY EXPLANATION ON THE ISSUE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WAS REQUESTED TO ATTEND THE PROCEEDINGS ALONG WITH THE ASSESSMENT RECORD TO VERIFY THE FACTS OF THE CASE. IT WAS SEEN THAT THE ASSESSEE HAD SUBMITT ED THE DETAILED EXPLANATION ON THE ISSUE DURING ASSESSMENT PROCEEDINGS WHICH FORMS PART OF T HE ASSESSMENT RECORD AND FOR SOME REASON ESCAPED ATTENTION OF THE ASSESSING OFFICER. THE REP LY OF ASSESSEE AS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS IS REPRODUCED AS UNDER:- 'AS REGARDS DISALLOWANCE OF RS.36,74,000/- ON THE B ASIS OF ADVANCE AGAINST PROPERTY AND OCCURRENCE OF EXPENSES, IT IS SUBMITTED THAT SINCE ASSESSEE IS DOING A NOBLE CAUSE BY RUNNING A CHAIN OF SCHOOLS, IT NEEDS LAND AT DIFFERENT LOCATI ONS TO OPEN NEW BRANCHES AND FOR THIS PURPOSE IT HAS TO MAKE SOME ADVANCES AS TOKEN MONEY TO DIFFERE NT PERSONS. THIS BEING BUSINESS TRANSACTION CANNOT BE TREATED AN INTEREST FREE ADVANCE. ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 9 SIR, IF WE GO THROUGH OUR PREVIOUS DETAILED REPLIES IT HAS CLEARLY BEEN EXPLAINED THAT THIS AMOUNT HAS BEEN GIVEN AS ADVANCE FOR PURCHASE OF PR OPERTIES FROM DIFFERENT PERSONS AND OUT OF THIS AMOUNT SOME AMOUNT HAS ALSO BEEN RECEIVED BACK IN NEXT FINANCIAL YEARS BECAUSE THE DEAL COULD NOT BE MATERIALIZED DUE TO SOME FAULT IN DOCU MENTS. SIMILARLY AS REGARDS OCCURRENCE OF EXPENSES IT IS A GAIN SUBMITTED THAT ASSESSEE HAS INCURRED ALL THE EXPENSES OF ADVERTISEMENT, BANK IN TEREST, DEPRECIATION, DEVELOPMENT, HIRE PURCHASE, INSURANCE ETC. VERY GENUINELY AND INCREAS E IN THE EXPENSES LIKE ADVERTISEMENT AS COMPARED TO LAST YEAR IS DUE TO ADVERTISEMENT IN VA RIOUS NEWSPAPERS, ELECTRIC MEDIA, FM RADIO AND HORDING ETC. PHOTOCOPIES OF ALL THE VOUCHERS/BI LLS ALONGWITH FULL EXPLANATION HAVE ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS R EPLIES. IT IS FURTHER SUBMITTED THAT PAYMENT OF ALL BILLS HAVE BEEN MADE THROUGH CHEQUES AFTER DEDU CTION OF TDS AND FOLLOWING ALL THE PROVISIONS OF CHAPTER XVII OF THE ACT. THE SAME MAY BE VERIFIED FROM THE BOOKS OF ACCOUNTS. SIR, DETAILS WITH REGARD TO INTEREST FREE ADVANCES AND NATURE OF EACH ACCOUNT IS EXPLAINED HEREIN BELOW FOR YOUR KIND CONSIDERATION. I) ADVANCE TO SH. BITTU MAKKAR FOR RS. 15.00 LACS:- SIR, THIS AMOUNT HAS BEEN GIVEN AS ADVANCE AGAINST PROPERTY TO SH. BITTU MAKKAR. IT IS PERTINENT TO MENTION HERE THAT SH. BI TTU MAKKARIS NEITHER TRUSTEE NOR RELATIVE OR SISTER CONCERN OF THE ASSESSEE. SINCE, THIS IS ADVANCE AGAINST PROPERTY IN THE NORMAL COURSE OF BUSINESS, IT IS PRAYED THAT KINDLY NO ADVERSE INFERENCE MAY PLEASE BE WITHDRAWN. II. ADVANCE TO SH. JAI PAL MIDHA FOR RS.10.00 LACS:- SIR, THIS AMOUNT HAS BEEN GIVEN AS ADVANCE AGAINST PROPERTY TO SH. JAI PAL MIDHA. IT IS PERTINENT TO MENTION HERE THAT JAI PAL MIDHA IS NEITHER TRUSTEE NOR RELATIVE OR SISTER CONCERN OF THE ASSESSEE. SINCE, THIS IS ADVANCE AGA INST PROPERTY IN THE NORMAL COURCE OF BUSINESS, IT IS PRAYED THAT KINDLY NO ADVERSE INFER ENCE MAY PLEASE BE DRAWN. I) ADVANCE TO SMT. JASWINDER KAUR FOR RS.4.87 LACS SIR, COPY OF ACCOUNT OF SMT. JASWINDER KAUR HAS ALR EADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIES. SIR, THIS IS NO T INTEREST FREE ADVANCE RATHER ADVANCE AGAINST RENT FOR THE USE OF THE BUILDING BY THE ASS ESSEE. SINCE, THIS IS BUSINESS TRANSACTION IT IS PRAYED THAT NO INTEREST BE DISALLOWED IN THE INTEREST OF JUSTICE. II) ADVANCE TO M/S N.K FINVEST CO. PVT.LTD.FOR RS.50.50 LACS COPY OF ACCOUNT OF M/S N.K FINVEST CO. PVT. LTD. HA S ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIES. NO DOUBT, THIS IS AN ADVANCE WHICH IS INTEREST FREE BUT AGAINST THIS THERE IS FAMILY DEPOSIT OF RS .1,14,66,912/- RECEIVED INTEREST FREE BY ASSESSEE FROM ITS TRUSTEES/RELATIVES/SISTER CONCERN S AS UNDER:- JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 VENUS BUILDERS PVT. LTD. 22 , 00 , 000.00 TARWINDER SINGH 7,00,266.00 HENCE, IT IS PRAYED THAT KINDLY NO INTEREST BE DISA LLOWED IN THE INTEREST OF JUSTICE. V) ADVANCE TO SH. NAROTAM SINGH FOR RS.5 LACS COPY OF ACCOUNT OF SH. NAROTTAM SINGH HAS ALREADY B EEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIES. NO DOUBT, THIS IS AN ADVANCE WHICH IS INTEREST FREE BUT AGAINST THIS THERE IS A FAMILY DEPOSIT OF RS.1,14,66,912/- RECEI VED INTEREST FREE BY THE ASSESSEE FROM ITS TRUSTEES/RELATIVES/SISTER CONCERNS AS UNDER:- ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 10 JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 VENUS BUILDERS PVT. LTD. 22,00,000.00 TARWINDER SINGH 7,00,26 6.00 HENCE, IT IS PRAYED THAT KINDLY NO INTEREST BE DISA LLOWED IN THE INTEREST OF JUSTICE. VI) ADVANCE TO SMT. PREETINDER KAUR FOR RS.67.81 L ACS COPY OF ACCOUNT OF SMT. PREETINDER KAUR HAS ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIES WHICH CLEARLY REVEALS THAT BAL ANCE FOR FULL YEAR IS CREDIT RS.1,66,907.00 AND ON 31.03.2011 AN ADJUSTMENT ENTR Y HAS BEEN MADE WITH DEBIT BALANCE. VIRTUALLY, NO NEW ACTUAL FUNDS WERE GIVEN D URING THE YEAR UNDER CONSIDERATION. SIR, NO DOUBT, THIS IS AN ADVANCE WHICH IS INTEREST FREE BUT AGAINST THIS THERE IS A FAMILY DEPOSIT FAMILY DEPOSIT OF RS.1,14,66,912/- RECEIVED INTEREST FREE BY THE ASSESSEE FROM ITS TRUSTEES/RELATIVES/SISTER CONCERNS AS UNDER:- JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 BUILDERS PVT. LTD. 22 , 00 , 000.00 TARWINDER SINGH 7,00,266.00 HENCE, IT IS PRAYED THAT KINDLY NO INTEREST BE DISA LLOWED IN THE INTEREST OF JUSTICE. VII) ADVANCE TO M/S SHIVA RICE MILLS FOR RS.20.00 LACS. SIR, IF WE GO THROUGH THE STATEMENT OF ACCOUNT OF M /S SHIVA RICE MILLS, IT CLEARLY SHOWS THAT ON 31.03.2011 A CHEQUE AMOUNTING TO RS.20.00 L AC WAS GIVEN WHICH WAS NEVER HONOURED AND RECEIVED BACK JUST AFTER TWO DAYS I.E. ON 012.04.2011. SO, NO ACTUAL FUNDS WERE GIVEN DURING THE YEAR UNDER CONSIDERATION. STA TEMENT OF ACCOUNT OF M./S SHIVA RICE MILLS FROM THE BOOKS OF ACCOUNTS OF ASSESSEE FOR TH E A.Y. 2011-12 AND 2012-13 HAVE ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PR EVIOUS REPLIES. HENCE, IT IS PRAYED THAT KINDLY NO ADVERSE INFERENCE MAY PLEASE BE DRAWN. VIII) ADVANCE TO SH. TARWINDER SINGH FOR RS.96,90 LACS. COPY OF ACCOUNT OF SH. TARWINDER SINGH HAS ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIES WHICH CLEARLY REVEALS THAT CLO SING BALANCE OF THIS ACCOUNT FROM 10.05.210 TO 14.10.2010 IS CREDIT OF RS.35,25,408.0 0 WHICH PROVES THAT FUNDS OF RS.96.90 LACS HAVE NOT BEEN USED FOR FULL YEAR. SIR, NO DOUB T, THIS IS AN ADVANCE WHICH IS INTEREST FREE BUT AGAINST THIS THERE IS A FAMILY DEPOSIT FAM ILY DEPOSIT OF RS.1,14,66,912/- RECEIVED INTEREST FREE BY THE ASSESSEE FROM ITS TRUSTEES/REL ATIVES/SISTER CONCERNS AS UNDER:- JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 VENUS BUILDERS PVT. LTD. 22,00,000.00 TARWINDER SINGH 7,00,266.00 HENCE, IT IS PRAYED THAT KINDLY NO INTEREST BE DISA LLOWED IN THE INTEREST OF JUSTICE. ADVANCE TO M/S VENUS BUILDERS PVT. LTD. FOR RS.36.05 LACS. COPY OF ACCOUNT OF M/S VENUS BUILDERS PVT. LTD. HAS ALREADY BEEN FURNISHED TO YOUR GOODSELF VIDE OUR PREVIOUS REPLIED WHICH CLEARLY RE VEALS THAT CLOSING BALANCE OF THIS ACCOUNT FOR FULL YEAR IS CREDIT. ONLY ADJUSTMENT EN TRIES MADE ON 31.03.2011 MADE THIS ACCOUNT WITH DEBIT BALANCE. VIRTUALLY NO ACTUAL FUND S WERE GIVEN DURING THE YEAR UNDER CONSIDERATION. NO DOUBT, THIS IS AN ADVANCE WHICH I S INTEREST FREE BUT AGAINST THIS THERE IS A FAMILY DEPOSIT OF RS.1,14,66,912/- RECEIVED INTER EST FREE BY THE ASSESSEE FROM ITS TRUSTEES/RELATIVES/SISTER CONCERNS AS UNDER:- ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 11 JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 VENUS BUILDERS PVT. LTD. 22,00,000.00 TARWINDER SINGH 7,00,226.00 HENCE, IT IS PRAYED THAT KINDLY NO INTEREST BE DISA LLOWED IN THE INTEREST OF JUSTICE. 14. I HAVE CONSIDERED THE FACTS OF THE CASE, THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR O N THE ISSUE DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. IT IS SEEN THAT THE APPELLANT WITH REFERENCE TO ADVANCES GIVEN TO M/S N.K FINVEST CO., SH. NAROTTAM SINGH, SMT. PREETINDER KAUR, SH. TARWINDER SINGH, M/S VENU S BUILDERS PVT. LTD. HAS ADMITTED THAT THE SAID ADVANCES ARE FREE OF INTERES T BUT SIMILAR ADVANCES HAD BEEN RECEIVED FROM FRIENDS AND FAMILY MEMBERS ON WH ICH NO INTEREST HAD BEEN PAID. THE INTEREST FREE ADVANCES SO RECEIVED, AS CLAIMED BY THE APPELLANT ARE AS UNDER:- RS. JALANDHAR CONSTRUCTION CO. LTD. 85,66,646.00 VENUS BUILDERS PVT. LTD. 22,00,000.00 TARWINDER SINGH 7,00,266.00 15. THE PERUSAL OF THE REPLY OF THE APPELLANT SHOWS THAT THE TOTAL INTEREST FREE ADVANCES GIVEN TO FAMILY MEMBERS AND FRIENDS ARE AS UNDER:- SR. NO. NAME OF THE ENTITIES ADVANCES AMOUNT (IN LACS) 1. SH. BITTU MAKKAR 15 2. SH. JAI PAL MIDHA 10 3. SMT. JASWINDER KAUR 4.87 4. M/S N.K FINVEST CO. 50.50 5. SH. NAROTTAM SINGH 5 6. SMT. PREET INDER KAUR 67.81 7. M/S SHIV RICE MILLS 20 8. SH. TARWINDER SINGH 96.90 9. M/S VENUS BUILDERS PVT. LTD. 36.05 TOTAL 306.13 16. IT IS FURTHER SEEN THAT IF INTEREST IS CHARGED @ 12% ON DEBIT BALANCE AS WELL AS CONSIDERED PAYABLE @ 12% ON CREDIT BALANCE, THE FOLLOWING CALCULATION GETS WORKED OUT: PARTICULARS INTEREST CHARGEABLE @ 12% ON DEBIT BALANCES INTEREST PAYABLE @12% ON CREDIT BALANCES GURBACHAN SINGH 22,542.39 PREETINDER KAUR 17,744.53 JALANDHAR CONSTRUCTION CO. LTD. 34,195.51 ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 12 VENUS BUILDERS PVT. LTD. 234,010.69 TARWINDER SINGH HUF 723.29 TARWINDER SINGH 462,346.66 NAROTAM SINGH 4,931.51 N.K. FINVEST CO. PVT. LTD. 607,847.67 TOTAL 1,075,125.84 3,09,216.41 17. THE PERUSAL OF THE ABOVE CHART CLEARLY SHOWS T HAT THE APPELLANT IS AVAILING INTEREST FREE FUNDS ON WHICH INTEREST PAYA BLE WOULD HAVE AMOUNTED TO RS.3,09,216/- AS AGAINST RS. 10,75,125/- THAT COULD HAVE BEEN CHARGED WITH REFERENCE TO THE AMOUNTS ADVANCED. IT MEANS THAT TH E APPELLANT HAS NOT USED THE INTEREST BEARING FUNDS FOR NON BUSINESS PURPOSE FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE HAS ONLY GIVE N CALCULATION WITH RESPECT TO THE FUNDS GIVEN FREE OF INTEREST TO FAMILY MEMBERS AND GROUP CONCERN AS WELL AS RECEIVED FROM SUCH PERSONS WHO HAS MERELY CLAIMED T HE FOLLOWING ADVANCES TO BE IN THE NATURE OF BUSINESS ADVANCES WITHOUT SUBMI TTING SUPPORTING EVIDENCE TO SUBSTANTIATE THE CLAIM:- I) ADVANCE TO SH. BITTU MAKKAR FOR RS. 15.00 LACS. II) ADVANCE TO SH. JAI PAL MIDHA FOR RS.10.00 LACS. THEREFORE, THERE IS NOTHING ON RECORD TO SHOW THAT THE IMPUGNED ADVANCES TO PERSONS OTHER THAN CLOSE MEMBERS OF THE GROUP HAD ANY BUSINESS PURPOSE. THEREFORE, THE DISALLOWANCE MADE AT THE RA TE OF 12% ON SUCH ADVANCES IN RESPECT OF INTEREST DEBITED IN PROFIT AND LOSS A CCOUNT IS CONFIRMED. THE DISALLOWANCE FOR THIS YEAR TO THE TUNE OF RS.3,00,0 00/- IS THEREFORE CONFIRMED. REST OF THE ADDITION MADE IS DIRECTED TO BE DELETED . 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. DR HEAVILY PLACED HIS REL IANCE ON THE ORDER OF AUTHORITIES BELOW WHEREAS, THE LD. AR SUBMITTED THA T THE PROVISIONS OF SEC.69A WERE NOT APPLICABLE TO THE ASSESSEE AS THE ASSESSE HAD SURRENDERED THE ADDITIONAL INCOME AS BUSINESS INCOM E AND THE SAME WAS CREDITED IN P&L ACCOUNT. IT WAS SUBMITTED THAT ASSE SSING OFFICER HAD MADE ADDITION U/S 69 OF THE ACT STATING THAT ASSESS EE HAD FAILED TO EXPLAIN THE SOURCES OF UNDISCLOSED OR UNACCOUNTED I NCOME WHEREAS THE ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 13 FACTS/ REMAINS THAT THE ASSESSEE HAD SURRENDERED TH E INCOME OUT OF BUSINESS INCOME AS IS APPARENT FROM THE SEIZED DOCU MENTS, WHICH THE LD. CIT(A) HAD MADE PART OF HIS ORDER. IT WAS SUBMI TTED THAT AT PAGE 10 OF CIT(A) ORDER, THE LD. CIT(A) HAS MADE BIFURCATIO N OF RS.10.50 CRORES CONSISTING OF VARIOUS AMOUNTS WHICH WERE SURRENDERE D BY ASSESSEE FOR INVESTMENT IN BUILDING FOR PURCHASE OF LAND, COMPUT ERS ETC. IT WAS SUBMITTED THAT THE SAID INCOME WAS EARNED FROM THE BUSINESS OF THE ASSESSE COMPANY. IT WAS SUBMITTED THAT ASSESSING OF FICER HAD WRONGLY APPLIED THE RATIO OF KIM PHARMA PVT. LTD. DECIDED B Y HONBLE PUNJAB & HARYANA HIGH COURT. HE SUBMITTED THAT THE HONBLE P UNJAB & HARYANA HIGH COURT HAD HELD THAT CASH AMOUNT OF RS.5 LACS S URRENDERED DURING THE YEAR WHICH REMAINED UNEXPLAINED WAS TO BE TREA TED AS INCOME FROM OTHER SOURCES WHEREAS THE INCOME SURRENDERED ON ACC OUNT OF SUNDRY CREDITORS REPAIR TO BUILDING AND ADVANCES TO STAFF AMOUNTING TO RS.10 LACS WAS HELD TO THE INCOME FROM BUSINESS OR PROFES SION. THE LD. AR SUBMITTED THAT FOLLOWING THE RATIO OF KIM PHARMA PV T. LTD. THE AMRITSAR BENCH OF THAT TRIBUNAL IN THE CASE OF M/S. KHANNA P APERS MILLS IN ITA NO. 388 & 537(ASR)/ HAD DISMISSED THE APPEALS OF RE VENUE UNDER SIMILAR FACTS AND CIRCUMSTANCES. 7. AS REGARDS THE OTHER DELETION MADE BY LD. CIT(A) IT WAS SUBMITTED THAT THERE WERE SURPLUS OF NON INTEREST BEARING F UNDS AVAILABLE WITH THE ASSESSEE WHICH THE ASSESSING OFFICER HAD IGNORED. H E SUBMITTED THAT LD. CIT(A) AFTER CONSIDERING THE INTEREST FREE FUNDS AV AILABLE WITH THE ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 14 ASSESSEE HAD DELETED THE ADDITION. IT WAS SUBMITTED THAT LD. CIT(A) HAS ANALYZED EACH AND EVERY ADVANCE AND HAS THEREFORE, ALLOWED RELIEF CORRECTLY. IT WAS SUBMITTED THAT WHILE ALLOWING PAR T RELIEF THE LD. CIT(A) HAS IGNORED THE CORPUS FUND OF RS.8 CRORES AND IF H E HAD CONSIDERED THIS AMOUNT THE PARTIAL DISALLOWANCE SUSTAINED BY HIM WA S ALSO NOT WARRANTED. RELIANCE IN THIS RESPECT WAS PLACED ON T HE FOLLOWING CASE LAWS; (I) CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 221 CTR 435 (II) MBD PRINTOGRAPHICS (P) LTD. VS. DCIT ITA NO. 5 34 & 621/ASR/2014 (III) ACIT VS. KULWINDER SINGH ITA NO. 659 & 660/A SR/2014 (IV) ACIT VS. M/S HARMAN BUILDERS PVT. LTD. ITA NO . 666/ASR/2014 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE FIRST ISS UE INCOME SURRENDERED DURING THE YEAR WE FIND THAT THE SURRENDER WAS MADE AS CERTAIN DOCUMENTS WERE SEIZED FROM THE PREMISES OF THE SCHO OL, COLLEGES. THE SAID SEIZED DOCUMENTS REFLECTED INVESTMENTS MADE IN NEW ASSETS SUCH AS LAND, BUILDINGS, COMPUTERS ETC. THE LD CIT(A) IN HI S ORDER AT PAGE 7 TO 9 HAS NOTED DOWN THE VARIOUS ITEMS OF ADVANCES AND NE W ASSSETS. WE FIND THAT THE SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH RELATED TO PURCHASE OF COMPUTERS, BUILDING CONSTRUCTION, ADVAN CES AGAINST LAND FOR SCHOOL AND INVESTMENT WAS MADE OUT OF UNACCOUNTED S CHOOL FEES AND THEREFORE IT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES AS THE UNACCOUNTED INCOME WAS RELATABLE TO THE BUSINESS OF THE ASSESSEE. THE ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 15 HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF KIM PHARMA PRIVATE LTD. HAS LAID DOWN THE RATIO THAT WHERE T HE NATURE AND SOURCE OF INVESTMENT MADE BY THE ASSESSEE OR THE NATURE OF TH E SOURCE OF ACQUISITION OF MONEY, BULLION OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT EXPLAI NED AT ALL OR NOT SATISFACTORILY EXPLAINED, THEN, THE VALUE OF SUCH I NVESTMENTS AND MONEY OR THE VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INC OME FROM OTHER SOURCES ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATI SFACTORY EXPLANATION IS GIVEN ABOUT SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCO ME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. THESE PROVISIONS APPLY WHEN NO SOURCES IS DISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOM E CAN BE CLASSIFIED UNDER ONE OF THE HEADS OF INCOME UNDER SECTION 14 O F THE ACT IS WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UNDER SECTION 14, THEN THE PROVISIONS OF SECTIONS 6 9,69A, 69B AND 69C WILL APPLY. IN THE PRESENT CASES THE SURRENDERED IN COME RELATED TO THE BUSINESS OF ASSESSEE WHICH FACT WAS APPARENT FROM S EIZED DOCUMENTS OF WHICH LD. CIT(A) HAS RIGHTLY NOTED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE AND JUD ICIAL PRECEDENTS WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF CIT(A), THEREFORE, THE FIRST ISSUE IS DECIDED AGAINST THE REVENUE. ITA NOS.5 35 & 536(ASR)/2014 ASST. YEARS: 2011-12 & 2012-13 16 9. AS REGARDS THE SECOND ISSUE OF DISALLOWANCE U/S 36(I) III OF THE INCOME TAX WE FIND THAT ASSESSEE HAD SUFFICIENT INT EREST FREE FUNDS OUT OF WHICH INTEREST FREE ADVANCES WAS GIVEN. INFACT WHIL E ALLOWING PART RELIEF TO THE ASSESSEE THE LD. CIT(A) HAD NOT CONSIDERED THE CORPUS FUND OF RS. 8 CRORES AND HE CONSIDERED ONLY THE INTEREST FREE FUN DS. THE LD CIT(A) HAS ANALYZED EACH AND EVERY ADVANCES GIVEN BY ASSESSEE AND AFTER CONSIDERING THE CREDIT BALANCE IN THE FORM OF INTER EST FREE ADVANCES HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE. THE CASE LA WS RELIED UPON BY LD. AR ALSO SUPPORTS THE CASE OF ASSESSEE. THEREFORE, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) THEREFORE, THI S GROUND IS ALSO DECIDED AGAINST THE REVENUE. 10. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 .02. 2017. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:21.02.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER