RAMNLAL VITHALDAS & CO, MUMBAI V. .ITO 14(1)(1), MUMBAI

ITA 5450/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62570 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: NITESH S JOSH I
• Keywords: Unexplained cash credit; Depreciation; Cost of acquisition; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.5149//MUM/2009 (ASSESSMENT YEAR: 2006-07) ITA NO.5450/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S. RAMANLAL VITHALDAS AND CO., CORNER OF MIRCHI GALLY, SHAIKH MEMON STREET, MUMBAI -400 002 ..... APPELLANT VS ADDL. CIT RANGE 14(1), IIND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI -400 021 .... RESPONDENT PAN : AAAFR 1209 E APPELLANT BY: SHRI NITESH S. JOSHI RESPONDENT BY: SHRI D.S. SUNDER SINGH DATE OF HEARING: 23.04.2012 DATE OF PRONOUNCEMENT: 15.06.2012 O R D E R PER P.M. JAGTAP, AM: THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT (A) FOR A.Y. 2006- 07 AND 2007-08 INVOLVE SOME COMMON ISSUES AND THE SAME THEREFORE H AVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS SINGLE COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE SHALL TAKE-UP THE APPEAL OF THE ASSESSE E FOR THE A.Y. 2006-07 BEING ITA NO.5149/M/2009 WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT (A) DATED 10.08.2009 OUT OF INTEREST . ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 2 3. THE ISSUE RAISED IN GROUND NO.1 OF THIS APPEAL R ELATES TO THE DISALLOWANCE MADE BY THE A.O. & CONFIRMED BY THE LD . CIT (A) TO THE EXTENT IT WAS ALLEGEDLY ATTRIBUTABLE TO INTEREST-FR EE ADVANCES GIVEN BY THE ASSESSEE. 4. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING OF DRY FRUITS AN D SPICES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 30TH OCTOBER, 2006 DECLARING TOTAL INCOME OF ` 14,12,226/-. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD PAID INTEREST OF ` 59,12,431/- ON LOANS TAKEN AND AFTER ADJUSTING INTEREST OF ` 33,41,147/- RECEIVED, NET INTEREST OF ` 25,71,284/- WAS CLAIMED BY THE ASSESSEE. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED TH AT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS OF ` 60,15,413/- FOR NON-BUSINESS PURPOSE. THE EXPLANATION OFFERED BY THE ASSESSEE IN THIS REG ARD THAT THE SAID LOANS WERE GIVEN OUT OF INTEREST FREE FUNDS AVAILAB LE WITH IT AT RELEVANT TIME WAS NOT ACCEPTED BY THE A.O. FOR THE REASON TH AT THE ASSESSEE COULD NOT ESTABLISH THE CO-RELATION BETWEEN INTERES T FREE FUNDS AVAILABLE WITH IT AND INTEREST FREE ADVANCES GIVEN. INTEREST ATTRIBUTABLE TO THE INTEREST FREE ADVANCES GIVEN FOR THE NON-BUSINESS P URPOSE WORKED OUT AT ` 7,21,850/- BY APPLYING A RATE OF 12% PER ANNUM THE REFORE WAS DISALLOWED BY THE A.O. THE DISALLOWANCE SO MADE WA S CONFIRMED BY THE LD. CIT (A) FOR THE SAME REASONS AS GIVEN BY THE A. O. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD A COPY OF BALANCE-SHE ET OF THE ASSESSEE AS ON 31ST MARCH, 2006 AT PAGE NO.17 OF HIS PAPER B OOK AND PERUSAL OF THE SAME SHOWS THAT ALTHOUGH OWN FUNDS IN THE FORM OF PARTNERS CAPITAL TO THE EXTENT OF ` 4,27,17,913/- WERE AVAILABLE WITH THE ASSESSEE AT THE RELEVANT TIME, INTEREST THEREON AMOUNTING TO ` 45,20,113/- WAS PAID AND CLAIMED AS EXPENDITURE BY THE ASSESSEE. T HE REMAINING FUNDS AVAILABLE WITH THE ASSESSEE WERE IN THE FORM OF SEC URED AND UNSECURED LOANS AND IT IS NOT CLEAR FROM THE MATERIAL PLACED BEFORE US AS TO ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 3 WHETHER ANY SUCH LOAN FUNDS AVAILABLE WITH THE ASSE SSEE WERE INTEREST FREE SO AS TO SAY THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF SUCH INTEREST FREE FUNDS AS CLAIMED BY THE ASSESSEE BEFO RE THE AUTHORITIES BELOW AS WELL AS BEFORE US. WE, THEREFORE, CONSIDE R IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSU E TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY WHETHER SUFFICIENT INTER EST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE AT THE RELEVANT TIME TO GIVE INTEREST FREE ADVANCES AND TO DECIDE THIS ISSUE AFRESH ON THE BAS IS OF SUCH VERIFICATION. GROUND NO.1 & 2 ARE ACCORDINGLY TREA TED AS ALLOWED FOR THE STATISTICAL PURPOSE. 6. THE ISSUE RAISED IN GROUND NO.3 RELATES TO THE A DDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) BY ENHANC ING THE VALUE OF CLOSING STOCK BY INCLUDING INTEREST ELEMENT CALCULA TED @ 9% PER ANNUM. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE A.O. THAT THE ASSESSEE HAS MAINTAINED SUBSTANTIAL S TOCK OF THE VALUE OF 5 TO 6 CRORES AS AGAINST THE ANNUAL SALES OF ` 9.65 CRORES. IT WAS ALSO NOTED BY THE A.O. THAT THE ASSESSEE HAD TAKEN SUBST ANTIAL LOANS FROM THE BANK AGAINST HYPOTHECATION OF STOCKS ON WHICH I NTEREST @ 12% WAS PAID. ACCORDING TO THE A.O., SUCH INTEREST PAID BY THE ASSESSEE WAS EXPENDITURE INCURRED FOR MAINTAINING THE HIGH LEVEL OF INVENTORY AND THE SAME BEING DIRECTLY ATTRIBUTABLE TO THE ACQUISITION AND HOLDING OF STOCK, THE SAME SHOULD HAVE BEEN INCLUDED IN THE VALUE OF CLOSING STOCK. ACCORDINGLY, SUCH INTEREST ATTRIBUTABLE TO THE VALU E OF CLOSING STOCK WAS ADDED BY HIM WHILE VALUING THE CLOSING STOCK AND AD DITION TO THAT EXTENT WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. ON A PPEAL, THE LD. CIT (A) CONFIRMED THE SAID ADDITION ON THE SAME BASIS A S ADOPTED BY THE A.O. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS R IGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, INTEREST PAYMENT IS A PERIODIC COST AND SAME HAS TO BE CLAIMED AS EXPENDITURE OF THE PERIOD TO WHICH IT RELATES. ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 4 MOREOVER, THE VALUATION OF STOCK WAS BEING DONE CON SISTENTLY BY THE ASSESSEE AT COST OR MARKET PRICES WHICHEVER IS LOWE R AND SUCH COST WAS WORKED OUT BY REDUCING GROSS PROFIT @ 20% FROM THE SALES VALUE. WHILE DETERMINING THE COST OF GOODS LYING IN THE CLOSING STOCK, THE EXPENDITURE INCURRED BY THE ASSESSEE TO THE SAME TO ITS LOCATIO N IS TO BE TAKEN INTO ACCOUNT AND INTEREST, IF ANY, PAID FOR MAINTAINING THE STOCK BEING NOT FORMING PART OF THE EXPENDITURE INCURRED FOR BRINGI NG THE GOODS TO THE LOCATION OF THE ASSESSEE BUT THE SAME BEING EXPENDI TURE FOR HOLDING THE STOCK, WE ARE OF THE VIEW THAT THE SAME CANNOT BE I NCLUDED IN THE COST OF ACQUISITION OF GOODS LYING IN THE CLOSING STOCK. I N THAT VIEW OF THE MATTER, WE HOLD THAT THE ADDITION MADE BY THE A.O. ON THIS ISSUE AND CONFIRMED BY THE LD. CIT (A) IS NOT SUSTAINABLE AND DELETING THE SAME, WE ALLOW GROUND NO.3 OF THE ASSESSEES APPEAL. 9. THE ISSUES RAISED IN GROUND NO.4, 5, 6 & 7 RELAT E TO THE DISALLOWANCES MADE BY THE A.O. OUT OF VARIOUS EXPEN SES CLAIMED BY THE ASSESSEE. 10. WHILE VERIFYING THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, A.O. FOUND THAT THE ASSESSEE HAS INCURRED SOME EXPE NSES IN CASH FOR WHICH SPECIFIC DETAILS WERE NOT FURNISHED. IN THE ABSENCE OF SUCH SPECIFIC DETAILS, THE A.O. HELD THAT PART OF EXPENS ES CLAIMED BY THE ASSESSEE WERE NOT INCURRED FOR THE PURPOSE OF BUSIN ESS AND DISALLOWANCE TO THE FOLLOWING EXTENT WAS MADE BY HI M OUT OF SUCH EXPENSES: (I) SALES PROMOTION EXPENSES 20% OF ` 4,1,96,000 I.E. ` 39,200/- (II) ADVT. EXPENSES 20% OF ` 4,09,617 I.E. ` 81,923/- (III)STAFF WELFARE EXPENSES 10% OF ` 42,836/- I.E. ` 4,284/- (IV) MISCELLANEOUS EXPENSES 20% OF ` 6,41,799/- I.E. ` 1,28,360/- ON APPEAL, THE LD. CIT (A) CONFIRMED THE ABOVE DISA LLOWANCES MADE BY THE A.O. OUT OF VARIOUS EXPENSES OBSERVING THAT THE RE WAS FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE RELEVANT DETAIL S TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR SAID EXPENSES. ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 5 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED RELEVANT MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE DETAILS OF RELEVANT EXPENSES PLACED AT PAGE NO. 33 & 34 OF THE PAPER BOOK. AS REGARDS EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF ADVERTISEMENT EXPENSES, THE DETAILS OF WHICH ARE GI VEN ON PAGE NO.33 OF THE ASSESSEES PAPER BOOK, IT IS OBSERVED THAT THE SAME REPRESENTED PAYMENTS MADE TO SPECIFIC PARTIES AND ORGANIZATIONS FROM WHICH EVEN TAX AT SOURCE WAS DEDUCTED IN MANY CASES. HAVING R EGARD TO THE DETAILS SO FURNISHED BY THE ASSESSEE, IT IS DIFFICULT TO AG REE WITH THE VIEW OF THE AUTHORITIES BELOW THAT THE EXPENDITURE CLAIMED BY T HE ASSESSEE ON ADVERTISEMENT INVOLVED ANY UNVERIFIABLE ELEMENT SO AS TO WARRANT ANY DISALLOWANCE. WE, THEREFORE, DELETE THE DISALLOWAN CE MADE BY THE A.O. OUT OF ADVERTISEMENT EXPENSES AND CONFIRMED BY THE LD. CIT (A) AND ALLOW GROUND NO.5 OF THE ASSESSEES APPEAL. 12. AS REGARDS SALES PROMOTION EXPENSES, A PERUSAL OF THE DETAILS OF THE SAID EXPENSES GIVEN AT PAGE NO.34 OF THE PAPER BOOK SHOWS THAT LUMP SUM AMOUNTS WERE CLAIMED BY THE ASSESSEE UNDER THE HEAD SALES PROMOTION EXPENSES SUCH AS RADHA KRISHNA FOODLAND ` 20,000/-, GODREJ NATURES BASKET ` 6,000/-, K.D. SUPER MARKET ` 3,000/-, SODEXO COUPON AND TICKET RESTAURANT PASS CHARGES ` 74,390/-, NATIONAL SPORTS CLUB OF INDIA ` 37,500/-. FURTHER BREAK UP OR DETAILS OF SUCH AMO UNTS CLAIMED IN LUMP-SUM, HOWEVER, WERE NOT FURNISHED AN D IN THE ABSENCE OF SUCH DETAILS, WE AGREE WITH THE AUTHORITIES BELO W THAT EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD SALES PROMO TION EXPENSES WERE NOT FULLY VERIFIABLE AND DISALLOWANCE MADE THE REOF AT 20% BEING BEEN FAIR AND REASONABLE WAS FULLY SUSTAINABLE. AC CORDINGLY, WE CONFIRM THE DISALLOWANCE MADE OUT OF SALES PROMOTION EXPENS ES AND DISMISS GROUND NO.4 OF THE ASSESSEES APPEAL. 13. AS REGARDS THE DISALLOWANCE OF 10% OUT OF STAFF WELFARE EXPENSES AND 20% OUT OF MISCELLANEOUS EXPENSES, IT IS OBSERV ED THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS WHATSOEVER OF THE EXP ENSES CLAIMED UNDER THE HEAD MISCELLANEOUS AND STAFF WELFARE EXPENSE S AND IN THE ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 6 ABSENCE OF SUCH DETAILS, WE ARE OF THE VIEW THAT TH E DISALLOWANCE OF 20% OUT OF MISCELLANEOUS EXPENSES AND 10% OUT OF STAFF WELFARE EXPENSES MADE BY THE A.O. WAS QUITE FAIR AND REASONABLE AND THE LD. CIT (A) WAS FULLY JUSTIFIED IN CONFIRMING THE SAME. GROUND NO. 6 & 7 OF THE ASSESSEES APPEAL ARE ACCORDINGLY DISMISSED. 14. THE NEXT ISSUE RAISED IN GROUND NO.8 RELATES TO THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) O N ACCOUNT OF DOMAIN REGISTRATION CHARGES TREATING THE SAME AS CA PITAL EXPENDITURE. 15. THE EXPENDITURE OF ` 34,887/- INCURRED BY THE ASSESSEE ON WEBSITE DOMAIN REGISTRATION WAS DISALLOWED BY THE A .O. TREATING THE SAME AS CAPITAL EXPENDITURE. ON APPEAL, THE LD. CI T (A) CONFIRMED THE SAID DISALLOWANCE BUT ALLOWED DEPRECIATION @ 60% ON THE WEBSITE DOMAIN REGISTRATION CHARGES TREATED AS CAPITAL EXPE NDITURE. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED RELEVANT MATERIAL ON RECORD. IT IS OB SERVED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IND IAN VISIT.COM (P) LTD. 176 TAXMAN 164 WHEREIN A SIMILAR EXPENDITURE INCURR ED BY THE ASSESSEE ON WEBSITE DOMAIN REGISTRATION CHARGES WAS ALLOWED AS REVENUE EXPENDITURE. RESPECTFULLY FOLLOWING THE SA ID DECISION OF THE HONBLE DELHI HIGH COURT, WE DELETE THE DISALLOWANC E MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) ON THIS ISSUE AND ALLOW GROUND NO.8 OF THE ASSESSEES APPEAL. 17. GROUND NO.9 INVOLVES THE ISSUE OF ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) ON ACCOUNT OF UNEXPLAI NED CASH CREDIT U/S.68 AS WELL AS DISALLOWANCE OF INTEREST PAID ON THE LOANS WHICH WERE TREATED AS UNEXPLAINED CASH CREDITS. 18. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS CALLED UPON BY THE A.O. TO FILE THE CONFIRMATIONS I N RESPECT OF LOANS OF ` ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 7 47,90,724/- TAKEN FROM 15 DIFFERENT PARTIES IN ORDE R TO ESTABLISH THEIR IDENTITY AND CAPACITY TO GIVE THE LOANS AS WELL AS TO ESTABLISH THE GENUINENESS OF THE LOAN TRANSACTIONS. AS NOTED BY THE A.O. IN THE ASSESSMENT ORDER, THE ASSESSEE, HOWEVER, DID NOT FI LE CONFIRMATIONS OF SIX LOAN CREDITORS WHILE CONFIRMATIONS FILED BY THE ASSESSEE OF REMAINING NINE LOAN CREDITORS DID NOT CONTAIN THE RELEVANT IN FORMATION SUCH AS, PERMANENT ACCOUNT NUMBER, ADDRESS ETC. AS FURTHER NOTED BY THE A.O., EVEN THE DOCUMENTARY EVIDENCE IN THE FORM OF BANK P ASS BOOK OR STATEMENT ALSO COULD NOT BE FILED BY THE ASSESSEE T O ESTABLISH THE CAPACITY OF THE CONCERNED LOAN CREDITORS AS WELL AS THE GENUINENESS OF RELEVANT LOAN TRANSACTIONS. THE LOAN AMOUNTS AGGRE GATING TO ` 47,90,724/- THEREFORE WERE TREATED BY THE A.O. AS U NEXPLAINED CASH CREDITS AND SAME WAS ADDED BY HIM TO THE TOTAL INCO ME OF THE ASSESSEE U/S.68. INTEREST PAID ON THE SAID LOANS AMOUNTING TO ` 3,17,738/- WAS ALSO DISALLOWED BY THE A.O. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY THE A.O. U/S.68 TO THE SUBSTANTIAL EXTENT OBSERVING THAT THE ASSESSEE COULD NOT PROVE ON EVIDENCE THE I DENTITY AND CAPACITY OF THE CONCERNED CREDITORS AS WELL AS THE GENUINENE SS OF THE RELEVANT LOAN TRANSACTIONS. HE HELD THAT THE ONUS TO EXPLAI N THE RELEVANT CASH CREDITS IN TERMS OF SEC.68 THUS WAS NOT SATISFACTOR ILY DISCHARGED BY THE ASSESSEE AND THE ADDITION MADE BY THE A.O. BY INVOK ING SEC.68 WAS FULLY JUSTIFIED. HE, HOWEVER, FOUND MERIT IN THE C LAIM OF THE ASSESSEE THAT ONE AMOUNT OF ` 1 LAKH TAKEN BY THE A.O. AS LOAN RECEIVED BY THE ASSESSEE WAS ACTUALLY LOAN GIVEN BY THE ASSESSEE AN D ACCORDINGLY THE ADDITION OF THE SAID AMOUNT MADE BY THE A.O. U/S.68 ALONG WITH DISALLOWANCE OF INTEREST ATTRIBUTABLE TO THE SAME A MOUNTING TO ` 16,633/- WAS DELETED BY THE LD. CIT (A). 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTH OUGH THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT CONFI RMATIONS OF ALL THE 15 LOAN CREDITORS WERE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE A.O., IT IS OBSER VED THAT A SPECIFIC FINDING HAS BEEN GIVEN BY THE A.O. IN THE ASSESSMEN T ORDER THAT ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 8 CONFIRMATIONS OF SIX LOAN CREDITORS NAMELY GAMANLAL V. MEHTA, K.N. DARYANANI, MONISH K. CHHABARIA, SRICHAND A. GULANI, UGAM LODHA & VIMLA S. GULANI WERE NOT FILED BY THE ASSESSEE. SI NCE THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US IS CONTRARY TO THE FINDING CATEGORICALLY RECORDED BY THE A.O. IN THE A SSESSMENT ORDER, HE WAS DIRECTED BY US TO FILE AN AFFIDAVIT AFFIRMING O N OATH THAT CONFIRMATIONS OF THE SAID SIX CREDITORS WERE FILED BY THE ASSESSEE BEFORE THE A.O. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS. HE, HOWEVER, HAS FAILED TO FILE SUCH AN AFFIDAVIT. AS REGARDS CONFIRMATIONS OF THE REMAINING NINE CREDITORS FILED BY THE ASSESSEE, A PERUSAL OF THE COPIES OF THE SAID CONFIRMATIONS PLACED IN THE ASSE SSEES PAPER BOOK SHOWS THAT THE RELEVANT INFORMATION SUCH AS, PERMAN ENT ACCOUNT NUMBERS, ASSESSMENT DETAILS, THE OCCUPATION AND SOU RCE OF INCOME OF THE CONCERNED LOAN CREDITORS WAS NOT CONTAINED IN T HE SAID CONFIRMATIONS. IN SOME OF THE CONFIRMATIONS, IT IS MENTIONED THAT THE CONCERNED LOAN CREDITORS ARE NOT ASSESSABLE TO INCO ME-TAX. IN SUCH A SITUATION, THE ONUS IN OUR OPINION WAS ON THE ASSES SEE TO ESTABLISH THE CAPACITY OF THE CONCERNED CREDITORS BY FILING THE R ELEVANT DOCUMENTARY EVIDENCE SHOWING THEIR SOURCE OF INCOME, AVAILABILI TY OF FUNDS AT THE RELEVANT TIME ETC. AND SINCE THE ASSESSEE HAS FAILE D TO DO SO, WE ARE OF THE VIEW THAT THE PRIMARY ONUS THAT LAY ON THE ASSE SSEE TO ESTABLISH THE CAPACITY OF THE CONCERNED CREDITORS TO GIVE THE LOA NS AS ALSO THE GENUINENESS OF THE RELEVANT TRANSACTIONS HAS NOT BE EN DISCHARGED SATISFACTORILY IN TERMS OF SEC.68. WE, THEREFORE, CONFIRM THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT (A) U /S.68 AS ALSO THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST PAID ON SU CH LOANS, WHICH ARE TREATED AS UNEXPLAINED CASH CREDITS. GROUND NO.9 O F THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 20. NOW, WE TAKE UP APPEAL OF THE ASSESSEE FOR THE A.Y. 2007-08 BEING ITA NO.5450/M/2010 WHICH IS DIRECTED AGAINST THE OR DER OF THE LD. CIT (A) 25, MUMBAI DATED 24.05.2010. ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 9 21. AS REGARDS THE ISSUE INVOLVED IN GROUND NO.1.1 & 1.2 OF THIS APPEAL RELATING TO DISALLOWANCE OUT OF INTEREST MAD E BY THE A.O. AND CONFIRMED BY THE LD. CIT (A), IT IS OBSERVED THAT T HE SAME IS SIMILAR TO THE ISSUE INVOLVED IN GROUND NO.1 & 2 IN ITA 5149/M /2009 FOR A.Y. 2006-07 WHICH HAS ALREADY BEEN DEALT WITH AND DECID ED BY US IN PARA NO.5 OF THIS ORDER. FOLLOWING THE CONCLUSION DRAWN IN A.Y. 2006-07 WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR DECI DING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN IN A.Y. 2006-07. GROUND NO.1.1 AND 1.2 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTI CAL PURPOSE. 22. AS REGARDS THE ISSUE INVOLVED IN GROUND NO.2 RE LATING TO THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) ENHANCING THE VALUE OF CLOSING STOCK BY INCLUDING INTEREST EL EMENT @ 9% PER ANNUM, IT IS OBSERVED THAT THE SAME IS SIMILAR TO T HE ISSUE INVOLVED IN GROUND NO.3 IN ITA 5149/M/2009 FOR A.Y. 2006-07 WHI CH HAS ALREADY BEEN DECIDED BY US IN PARA 8 OF THIS ORDER. FOLLOW ING THE CONCLUSION DRAWN IN A.Y. 2006-07, WE ALLOW GROUND NO.2 OF THE ASSESSEES APPEAL. 23. AS REGARDS THE ISSUE INVOLVED IN GROUND NO.3 OF THIS APPEAL RELATING TO DISALLOWANCE MADE BY THE A.O. OUT OF AD VERTISEMENT EXPENSES, IT IS OBSERVED THAT THE SAME IS SIMILAR T O THE ISSUE INVOLVED IN GROUND NO.5 IN ITA NO.5149/M/2009 FOR A.Y. 2006-07 WHICH HAS ALREADY BEEN DECIDED BY US IN PARA 11 OF THIS ORDER . FOLLOWING THE CONCLUSION DRAWN IN A.Y. 2006-07, WE ALLOW GROUND N O.3 OF THE ASSESSEES APPEAL. 24. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JUNE 2012. SD/- ( AMIT SHUKLA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 15TH JUNE 2012 ITA NO.5149/MUM/2009 ITA NO.5450/MUM/2010 M/S. RAMANLAL VITHALDAS AND CO. 10 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XIV, MUMBAI. 4) THE CIT-14, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN