Shri Bhupendra Dandwala, Ahmedabad V. The Income tax Officer, ward-7(3), Ahmedabad

ITA 568/AHD/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0189 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 22-02-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Gift; Business income; Depreciation; Salary income
• Section: 143(3); 234B; 133(6); 37(1); 143(1); 192

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 568/AHD./2005 ASSESSMENT YEAR : 2001-2002 SHRI BHUPESH DANDWALA, -VS.- INCOME TAX OFFICER, WARD-7(3), AHMEDABAD PROP. M/S. AMARNATH ENTERPRISE, AHMEDABAD (P.A. NO. AAHPD 9741 Q) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI TUSHAR P. HEMAN I RESPONDENT BY : SHRI M.C. PANDIT, SR. D.R. O R D E R PER T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDE R DT.20-12- 2004 OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS)-XIII, AHMEDABAD FOR THE ASSESSMENT YEAR 2001-2002. 2. GROUND NO. 1 IS AGAINST CONFIRMING THE ACTION OF A.O> IN DISALLOWING SALES PROMOTION/ COMMISSION EXPENSES OF RS.5,13,210/-. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE AS PROP RIETOR OF M/S. AMARNATH ENTERPRISES CARRIED ON THE BUSINESS OF PRINTING OF JOB WORK BASIS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICE THAT THE ASSESSEE HAS INCURRED SALES PR OMOTION EXPENSES OF RS.5,13,210/- AND PAYMENT HAS BEEN MADE @ 0.30% TO 3.5% OF TOTAL TURN OVER OF RS.1,35,05,555/- BY JOURNAL VOUCHER ENTRY DATED 31.03.2001 AND THERE WAS NO MEN TION OF TOTAL AMOUNT OF SALES TARGET ACHIEVED BY THE INDIVIDUAL PERSONS TO WHOM COMMISSI ON FOR SALES PROMOTION HAS BEEN PAID. THE A.O. ASKED THE ASSESSEE TO GIVE THE NATURE OF WORK DONE BY VARIOUS PERSONS AND DETAILS OF PLACES AND PERSONS VISITED BY THESE PERSONS ALONGWITH TOTA L CONTRACT OF WORK OBTAINED BY THEM. IN REPLY, VIDE LETTER DATED 23.12.2003, THE ASSESSEE STATED T HAT HE HAD ALREADY GIVEN CONFIRMATION AND PERMANENT ACCOUNT NUMBER OF THE PERSONS, WHO ARE EX ISTING INCOME-TAX ASSESSEES BUT THE 2 ASSESSEE DID NOT SUBMIT ANY DETAILS IN RESPECT OF K IND OF SERVICES RENDERS AND TOTAL SALES ACHIEVED BY EACH PERSON. 4. IN ORDER TO VERIFY THE NATURE OF SERVICE, THE A. O. CALLED FOR INFORMATION UNDER SECTION 133(6) OF THE ACT FROM EACH OF THE PARTIES TO WHOM THE COMMISSION IS PAID, DETAILS SUCH AS NATURE OF WORK DONE AND TOTAL AMOUNT, COPY OF AGREEMENT, T OTAL COMMISSION/ BROKERAGE RECEIVED WITH RATE AND MODE OF PAYMENT, I.E. RECEIVED BY CHEQUE O R CASH, COPY OF LEDGER ACCOUNT AND COPY OF RETURN WITH STATEMENT OF INCOME FOR ASSESSMENT YEAR 2001-02. IN RESPONSE TO THIS, ALL THE PARTIES GAVE ONLY COMMISSION AMOUNT AND STEREO-TYPED REPLY SAYING THAT THEY HAD SUBMITTED THE DETAILS OF THE SAID COMMISSION IN CONFIRMATION LETTER EARLI ER AND FILED COPY OF RETURN. FROM THE CONFIRMATION LETTER, THE A.O. NOTICED THAT THE CONF IRMATION LETTERS REFERRED BY THE PARTIES WERE NOTHING BUT COPIES OF THE LEDGER ACCOUNTS SIGNED BY THE ASSESSEE AND THE CONCERNED PARTY. SINCE MOST OF THE POINTS REMAINED UNANSWERED, THE A.O. IS SUED SUMMONS TO THE PARTIES AND RECORDED STATEMENT ON OATH FROM EACH OF THE PARTY. THE REPLY GIVEN BY EACH PARTY HAS BEEN DISCUSSED BY THE A.O. ON PAGES 3 & 4 OF THE ASSESSMENT ORDER. AL L THE PERSONS STATED THAT THERE WAS NO WRITTEN AGREEMENT. (I) SHRI HEMANTBHAI PATEL TO WHOM COMMISSION OF RS .2,36,344/- WAS PAID, STATED THAT HE DID NOT HAVE ANY RECORD OF WORK DONE FOR THE ASSESS EE. IT WAS ALSO STATED THAT HE DID NOT REMEMBER THE TOTAL WORTH OF SALES ORDER HE GOT FOR THE SAID FIRM BUT STATED THAT HE RECEIVED THE COMMISSION OF RS.2,36,000/- AND DID NOT REMEMBER TH E NAMES OF THE PARTIES TO WHOM HE CONTACTED AND GOT THE SALES ORDERS FOR THE FIRM. (II) SHRI CHIRAG PATEL TO WHOM COMMISSION OF RS.1, 18,173/- IS PAID, STATED THAT HE GOT ORDERS OF RS.20 LACS FROM WAGH BAKRI AND RS.50,000/ - FROM KALUPUR BANK THUS HE GOT ORDERS OF RS.32.50 LACS AND HE GAVE THE NAMES OF THE PERSONS WHOM HE CONTACTED IN THE SAID COMPANIES. (III) SHRI NIMIT DANDWALA STATED THAT HE DID NOT R EMEMBER THE TOTAL SALES AND PARTY-WISE SALES ACHIEVED BY HIM. HOWEVER, HE GAVE THE NAMES O F THE PERSONS WHOM HE HAD CONTACTED IN THE SAID ORGANIZATIONS AND HE WAS DOING FILED WORK RELA TED TO DESIGNING. 3 (IV) SHRI TEJAS DANDWALA TO WHOM THE COMMISSION OF RS.59,087/- IS PAID, STATED THAT HE USED TO VISIT VADILAL AND AMUL FOR PROOF CHECKING W ORK, BUT NO NEW ORDERS WERE RECEIVED FROM THESE TWO COMPANIES. 5. FROM THE STATEMENT OF THE AFORESAID FOUR PERSONS RECORDED, THE A.O. OBSERVED THAT THE REPLIES ARE EITHER VAGUE OR SELF CONTRADICTORY. FUR THER THE COMMISSION HAS BEEN PAID ON THE LAST WORKING DAY OF THE PREVIOUS YEAR BY JOURNAL ENTRY T O REDUCE THE PROFIT AND NO ACTUAL PAYMENT OF COMMISSION HAS BEEN MADE DURING THE YEAR. IN VIEW O F THIS, THE A.O. PROPOSED TO DISALLOW SALES PROMOTION EXPENSES OF RS.5,13,210/- (RS.4.72.694/- + SALARY OF RS.40,516/- PAID TO CHIRAG PATEL). IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE A.O., THE ASSESSEE SUBMITTED REPLY DATED 15.03.2004 SAYING THAT IT WAS NOT POSSIBLE TO REMEM BER THE TRANSACTIONS WHICH WERE TWO YEARS OLD AND THAT HEMANT PATEL WAS FILING RETURN OF INCO ME. THE A.O. OBSERVED THAT SHRI HEMANT PATEL FAILED TO GIVE PROPER ANSWERS AND IN THE ABSENCE OF ANY MATERIAL ON RECORD IN RESPECT OF NATURE OF WORK AND SALES TARGETS ACHIEVED, IT IS NOT PROVED T HAT ACTUAL SERVICES WERE RENDERED BY HIM. FURTHER, FROM THE COPY OF LEDGER ACCOUNT, IT WAS OB SERVED THAT COMMISSION WAS CREDITED ON 31.03.2001 AND FEW WITHDRAWALS AND PAYMENTS WERE MA DE FROM HIS OPENING BALANCE OF RS.1,63,625/-. AS REGARDS SHRI CHITRAG PATEL, SHRI NIMIT DANDWALA AND SHRI TEJAS DANDWALA, THE A.O. OBSERVED THAT PAYMENTS WERE CREDITED IN THE AC COUNTS ON 31.03.2001. THE A.O. ACCORDINGLY IN THE ABSENCE OF ANY EVIDENCE OF SERVICES RENDERED BY THE PERSONS, DISALLOWED THE ENTIRE AMOUNT OF RS.5,13,210/- TOWARDS SALES PROMOTION EXPENSES. 6. DISPUTING THE AFORESAID DISALLOWANCES BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE FILED DETAILED WRITTEN S UBMISSIONS, WHICH IS RE-PRODUCED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN PARA 2.1 ON PAGE 3. IT WAS ALSO SUBMITTED THAT TOTAL SALES PROMOTION EXPENSES OF RS.5,13,210/- AGA INST TOTAL SALES OF RS.1,35,40,555/- IN TERMS OF PERCENTAGE OF SALE, THE SALES PROMOTION EXPENSES WO RK OUT AT THE RATE OF 3.79%. SINCE LAST MANY YEARS, THE ASSESSEE HAS BEEN CONSISTENTLY PAYING TH ESE SALES PROMOTION EXPENSES IN ORDER TO SURVIVE AND FLOURISH. NO DISALLOWANCE HAS BEEN MADE IN THE PAST. IT WAS SUBMITTED THAT EACH PARTY APPEARED BEFORE THE A.O. AND CONFIRMED HAVING RECEI VED THE COMMISSION. THEREFORE, THERE IS NO REASON WHY THE SAID COMMISSION MAY BE DISALLOWED. T HE ASSESSEE FURTHER STATED THAT THE ADMITTED POSITION IN REGARD TO COMMISSION EXPENSES IS AS UND ER :- 4 (I) NAMES, ADDRESSES AND OTHER RELEVANT MATERIALS I N RESPECT OF THE RECIPIENT OF THE COMMISSION WERE PLACED ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDING AND LD. A.O. HAS NOT DOUBTED THE GENUINENESS OF THE PAYMENTS; (II) ALL THE FOUR PARTIES FILED THEIR CONFIRMATION AND ACCEPTED THAT THEY RECEIVED THE COMMISSION DURING THE YEAR UNDER CONSIDERATION; (III) ALL THE FOUR PARTIES ARE EXISTING INCOME TAX ASSESSEES AND THE COPIES OF THE LAST RETURNS FILED BY THEM HAVE ALSO BEEN PLACED ON RECORD; (IV) ALL OF THEM RESPONDED TO THE SUMMONS ISSUED BY THE A.O. AND REMAINED PRESENT BEFORE THE LD. A.O. FOR DEPOSING THEIR STAT EMENTS; (V) IN THE STATEMENT SO RECORDED, ALL OF THEM ACCEP TED HAVING RECEIVED THE COMMISSION; (VI) BEFORE THE LD. A.O., ALL OF THEM DESCRIBED THE JOB THEY CARRIED OUT, KINDS OF SERVICES PROVIDED BY THEM AND EXPERIENCE THEY HAVE IN THE FIELD ALONG WITH THE NAMES OF THE CLIENTS THEY INTERACTED WITH TOGETHER WITH THE KIND OF SERVICES THEY PROVIDED TO THE CLIENTS AS WELL AS THE APPELLANT. 7. WITH REGARD TO THE SPECIFIC CONTENTION RAISED BY THE A.O. IN THE ASSESSMENT ORDER, THE ASSESSEE FILED SUBMISSIONS IN RESPECT OF EACH OF TH E PERSON, WHICH IS RE-PRODUCED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN PARA 9 OF TH E ASSESSMENT ORDER. 8. AFTER CONSIDERING THE VARIOUS SUBMISSIONS AND EX AMINING DETAILS FURNISHED, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) STATED THE FOLL OWING FACTS, WHICH ARE EMERGING RELATING TO CLAIM OF COMMISSION :- I) COMMISSION PAYMENTS HAVE BEEN CREDITED TO THE PARTIES' ACCOUNTS BY JOURNAL VOUCHER ENTRIES MADE ON 31.3.2001. II) THERE IS NO MENTION OF TOTAL AMOUNT OF S ALES TARGET IN THE RECORDS OF THE APPELLANT TO BE ACHIEVED OR ACHIEVED BY INDIVIDUAL PERSONS. III) .THE INDIVIDUAL PERSONS COULD NOT STATE ABOUT THE KIND OF SERVICES RENDERED AND TOTAL SALES ACHIEVED BY EACH OF THEM. IV) THE APPELLANT IS NOT ENTITLED FOR DEDUCTION AS THE APPELLANT HAS NOT PROVED THAT SERVICES HAVE BEEN RENDERED BY THE SAID PERSONS IN PROCURING ORDERS OR FOR PROMOTION OF SALES. V) ALL THE PERSONS GAVE STEREO TYPED REPLY THAT THE Y HAVE SUBMITTED THE DETAILS OF THE SAID COMMISSION IN CONFIRMATION LETTER EARLIER AND THAT THEY HAVE FILED COPY OF RETURN AND THE CONFIRMATION LETTERS WHICH THE APPELLANT HAD SUBMIT TED ARC NOTHING BUT COPIES OF LEDGER 5 ACCOUNTS WHICH MEANS THAT THE APPELLANT HAS MANAGED TO GET CONFIRMATIONS FROM THE PARTIES. VI) ONE PARTY SHRI TEJAS DANDWULA EVEN STATED THAT NO NEW ORDERS WERE PROCURED HIM DURING THE YEAR IN APPEAL . VII) THERE WAS NO WRITTEN AGREEMENT OR CORRESPONDEN CE TELLING THE PERSONS TO PROCURE ORDERS AT A PARTICULAR RATE OF COMMISSION. ABSOLUTE LY THERE ARE NO CORRESPONDENCES WITH THE PARTIES .IF THE APPELLANT WANTED TO MONITOR THE ORDERS BOOKED BY THE SAID PARTIES THROUGH OUT THE YEAR THEN THE APPELLANT WOULD HAVE EVALUATED THEIR PERFORMANCES PERIODICALLY AND WRITTEN LETTERS TO THE PARTIES SAY ING WHETHER THEY HAVE ACHIEVED OR NOT ACHIEVED THE TARGET BUT THERE ARE NO SUCH CORRESPON DENCES . THE RATES OF COMMISSION HAVE NOT BEEN TOLD TO THEM DURING THE YEAR AND SUDD ENLY AT THE END OF THE YEAR THE APPELLANT HAS DEBITED THE COMMISSION PAYMENTS BY JO URNAL VOUCHER ENTRY. VIII) WHEN SHRI HEMANTBHAI PATEL WAS QUESTIONED BY THE ASSESSING OFFICER, HE REPLIED THAT THAT HE DID NOT REMEMBER ANY OF THE WORK DONE FOR THE APPELLANT AND HE DID NOT HAVE ANY RECORD OF WORK DONE FOR THE APPELLANT NOR THERE WAS WRITTEN AGREEMENT. MOREOVER, HE DID NOT REMEMBER THE TOTAL WORTH OF SALES ORDERS HE GOT FOR THE APPELLANT AND HE DID NOT REMEMBER THE NAMES OF THE PARTIES TO WHOM HE CONTAC TED AND FROM WHOM HE GOT ORDERS FOR THE APPELLANT. IX) IT MAY BE DIFFICULT TO KEEP IN MIND THE TWO YEA R OLD TRANSACTIONS BUT WHEN THE SUMMONS WERE ISSUED BY THE ASSESSING OFFICER THE PE RSONS COULD HAVE BROUGHT BEFORE THE ASSESSING OFFICER, THEIR DIARY OR REGISTER OR ANY O THER SORT OF PROOF TO SHOW THAT THEY HAD DONE SOME WORK FOR THE APPELLANT BUT NO SUCH DETAIL S WERE FURNISHED BY THE COMMISSION AGENTS TO SHOW THAT THEY HAVE DONE SOME WORK FOR RE CEIVING COMMISSION. X) IT WAS NOT THE FIRST YEAR OF BUSINESS WHICH WOUL D REQUIRE PAYMENT OF COMMISSION TO ESTABLISH THE APPELLANT IN THE MARKET. XI) TO SUSTAIN OLD CLIENTS IT IS NOT NECESSARY TO E NGAGE SOME COMMISSION AGENT WHEREAS THE APPELLANT HAS CLAIMED THAT COMMISSION HAS BEEN PAID TO SHRI TEJAS DANDWALA EVEN THOUGH NO NEW ORDERS WERE RECEIVED BY HIM.( XII) IT IS ALSO FOUND THAT THREE COMMISSION RECIPIENTS ARE EMPLOYEES OF THE APPELLANT AND IN AD DITION TO SALARY THEY HAVE BEEN PAID COMMISSION AND AMOUNT OF COMMISSION PAID IS MUCH HI GHER THAN THE SALARY PAID TO THEM E.G. SHRI CHIRAG PATEL HAS GOT SALARY OF RS. 39,600 /- WHEREAS HE HAS GOT COMMISSION OF RS. 1,58.689. A COPY OF RETURN OF THE SAID PARTY HA S BEEN SUBMITTED BEFORE THE ASSESSING OFFICER AND ALSO BEFORE ME FROM WHICH IT IS FOUND T HAT HE HAS RECEIVED COMMISSION OF RS. 58,689/- WHICH HAS BEEN SET OFF AGAINST THE LOSS CL AIMED UNDER THE HEAD 'BUSINESS' OF RS.62,467/-. SHRI NIMIT DANDWALA AND SHRI TEJAS DAN DWALA ARE SONS OF THE APPELLANT AND THEY HAVE BEEN PAID SALARY OF RS. 38,880/- AND RS. 39,600/-RESPECTIVELY WHEREAS COMMISSION OF RS. 59,087/- HAS BEEN PAID TO EACH OF THEM. WHEN NIMIT DANDWALA WAS QUESTIONED BY THE ASSESSING OFFICER HE REPLIED THAT HE WAS DOING FIELD WORK RELATED TO DESIGNING AND HE DID NOT DO ANY OTHER FIELD WORK BU T HE DID NOT REMEMBER THE PARTY WISE SALES AND THE TOTAL SALES ACHIEVED BY HIM . HE ALSO SLATED THAT ALL ORDERS WERE OLD AND HE USED TO REMAIN IN CONTACT WITH COMPANIES . NIMIT DA NDWALA AND TEJAS DANDWALA HAVE PAID INCOME TAX OF RS. 1,3867- AND RS.436/- RESPECT IVELY ON COMMISSION OF RS. 59,0877- EACH WHEREAS THE APPELLANT HAS SAVED INCOME TAX @ 3 0% ON COMMISSION CLAIMED OF 6 RS.L,18,174/-(RS.59,0877-+RS.59,0877-). THUS IT IS A CLEAR CASE OF REDUCING TAX LIABILITY AND IT IS A COLOURABLE DEVICE ADOPTED BY THE APPELL ANT . THE APPELLANT HAS FILED COPY OF RETURN OF INCOME OL SHRI HEMANL PALEL. ME HAS ALSO SHOWN COMMISSION RECEIVED OF KS. 2,36,3477-WHICH HAS BEEN SET OFF AGAINST LOSS UNDER THE HEAD 'BUSINESS' OF RS.89,5377- . THUS THE RECIPIENTS HAVE CLAIMED COMMISSION TO SET OFF AGAINST THEIR INDIVIDUAL LOSSES. XIII) ALONG WITH RETURN OF INCOME THE APPELLANT HAD ENCLOSED CERTIFICATES FOR PAYMENT OF COMMISSION STATING THAT THE PERSONS HAVE COMPLETED THE SALES TARGETS GIVEN TO THEM BY THE APPELLANT .BUT WHAT IS THE INDIVIDUAL SALES TARGET, THE APPELLANT WAS UNABLE TO SAY . XIV) TEJAS DANDWALA AND NIMIT DANDWALA ARE SONS OF THE APPELLANT AND CHIRAG PATEL IS SON OF HEMANT PATEL AND CHIRAG PATEL IS PROPRIETOR OF M/S.AMBALALGOVINDLAL & BROTHERS FROM WHOM THE APPELLANT HAD TAKEN LOAN OF RS.6,03,0 757-. THUS TWO OF THE PERSONS ARE SONS OF THE APPELLANT AND THE TWO OTHER PARTIES ARE FRIENDS OF THE APPELLANT WITH WHOM THE APPELLANT HAS BUSINESS TRANSACTIONS. IN VIEW OF THE ABOVE PECULIAR FACTS PREVAILING IN T HE CASE OF THE APPELLANT AND THE FACT THAT YEAR END ENTRIES HAVE BEEN MADE AND NO PAYMENTS HAV E BEEN MADE TO THE PARTIES DURING THE YEAR AND THE FACT THAT THE APPELLANT HAS NOT PR OVED THAT THE SERVICES HAVE BEEN RENDERED BY THE SAID PARTIES , I WOULD HOLD THAT CL AIM OF COMMISSION CANNOT BE ALLOWED .ACCORDINGLY, THE DISALLOWANCE OF COMMISSION MADE B Y THE ASSESSING OFFICER IS CONFIRMED. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ACC ORDINGLY CONFIRMED THE ACTION OF A.O. DISALLOWING THE SALES PROMOTION EXPENSES OF RS.5,13 ,210/-. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE I S IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E SHRI TUSHAR P. HEMANI APPEARED AND FILED A PAPER BOOK CONTAINING 96 PAGES, WHICH INTER ALIA INCLUDE COPIES OF RETURN FILED BY ALL THE FOUR PERSONS TO WHOM COMMISSION IS PAID AS WELL AS COPY OF THEIR STATEMENT OF INCOME. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ALL THE PERS ONS ADMITTED BEFORE THE A.O. THAT THEY HAVE RECEIVED THE COMMISSIONS, THEY HAVE RENDERED THE SE RVICES, COMMISSION WAS ALSO PAID IN PAST AND ALLOWED IN THE EARLIER ASSESSMENT YEAR. THEREFORE, THERE IS NO JUSTIFICATION WHATSOEVER IN CONFIRMING THE DISALLOWANCE OF COMMISSION IN THE AS SESSMENT YEAR UNDER APPEAL. ON A QUERY FROM THE BENCH TO INDICATE, BASIS OF COMMISSION, HO W THE COMMISSION WAS CALCULATED AT THE YEAR END PAYABLE TO VARIOUS PERSONS, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT COMMISSION HAS BEEN PAID ON TOTAL SALES OF RS.1,35,05,555/-. SHRI CHIRAG PATEL, SHRI TEJAS DANDWALA AND SHRI NIMIT DANDWALA ARE EMPLOYEES OF THE ASSESSEE TO WHO M THE COMMISSION IS ALSO PAID. SHRI CHIRAG PATEL IS SALES REPRESENTATIVE OF THE ASSESSEE AND S HRI HEMANT PATEL TO WHOM THE COMMISSION OF 7 RS.2,36,347/- IS PAID IS THE FATHER SHRI CHIRAG PAT EL. ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE, THE DETAILS OF THE COMMISSION PAID ARE AS UNDER :- NAME OF THE PARTY COMMISSION (RS.) SALARY (RS.) PERCENTAGE OF COMMISSION ON SALES OF RS.1,35,05,555/- HEMANT PATEL 2,36,347/- - 1.75% CHIRAG PATEL 1,18,173/- 40,576/- 0.87% TEJAS DANDWALA 59,087/- 39,600/- 0.44% NIMIT DANDWALA 59,087/- 38,880/- 0.44% TOTAL 4,72,694/- 1,18,996/- 3.50% 10. ALL THE FOUR PARTIES TO WHOM COMMISSION IS PAID , WERE SHOWN THE COMMISSION INCOME. CHIRAG PATEL IS SALES REPRESENTATIVE OF THE ASSESSE E, TO WHOM COMMISSION WAS ALSO PAID. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN T HE EARLIER YEAR, COMMISSION WAS ALLOWED, THEREFORE, IN THIS YEAR THE A.O. CANNOT DISALLOW TH E SAME ON DOUBT AND SUSPICION. BECAUSE ALL THE FOUR PERSONS TO WHOM THE COMMISSION IS PAID ADMITTE D THAT THEY HAVE RECEIVED THE COMMISSION AND THEY HAVE WORKED FOR THE ASSESSEE. HE ACCORDING LY SUBMITTED THAT DISALLOWANCE BE DELETED. 11. ON THE OTHER HAND, SHRI M.C. PANDIT APPEARED FO R THE REVENUE AND SUPPORTED THE ORDER OF AUTHORITIES BELOW. HE POINTED OUT THAT IN THE EARLI ER YEARS, NO DETAILED ENQUIRY WAS MADE BY A.O. THE TOTAL INCOME DECLARED BY THE ASSESSEE FIRM IS O NLY RS.3,20,720/- AND THE AMOUNT OF COMMISSION PAID IS RS.4,72,694/-. THERE IS NO WRITT EN AGREEMENT. THE COMMISSION IS PAID UNDER THE HEAD SALES PROMOTION EXPENSES. ALL THE PERSON S TO WHOM ALLEGED COMMISSION IS CREDITED AT THE END OF THE PREVIOUS YEAR HAS GIVEN STEREO-TYPED REPLY IN ONE LINE. THE MERE FACT THAT COMMISSION HAS BEEN ALLOWED IN EARLIER YEARS IS NO GROUND TO HOLD THAT THE A.O. IS PRECLUDED FROM MAKING ENQUIRY IN THE ASSESSMENT YEAR UNDER AP PEAL. THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE BECAUSE A.O. IS NOT A COURT AND HE IS NO T PRECLUDED FROM ARRIVING AT A CONCLUSION IN CONSISTENT WITH HIS CONCLUSION IN ANOTHER YEAR. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE FOLLOWING TWO DECISIONS :- (I) JOINT FAMILY OF UDAYAN CHINUBHAI VS.- CIT [1 967] 63 ITR 416 (SC); (II) DWARKADAS KESARDEO MORARKA VS.- CIT [1962] 44 ITR 529 (SC). 8 THE LD. D.R. FURTHER SUBMITTED THAT FROM THE PERUSA L OF THE RETURN OF INCOME OF ALL THE FOUR PERSONS, IT CAN BE SEEN THAT THEY HAVE SHOWN THE CO MMISSION INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THEY ARE CLAIMING EX PENSES INCURRED FOR EARNING THIS INCOME. THE ASSESSEE HAS PAID SALARY OF RS.40,516/- AND COMMISS ION OF RS.1,18,173/- TO SHRI CHIRAG PATEL. FROM THE COPY OF RETURN OF INCOME (PAGE 42 OF THE P APER BOOK), IT CAN BE SEEN THAT SHRI CHIRAG PATEL IS DOING BUSINESS ALSO IN WHICH HE HAS INCURR ED LOSS OF RS.62,467/-. SHRI HEMANT PATEL IS FATHER OF THE ASSESSEES ACCOUNTANT, WHO IS NOT AN EMPLOYEE OF THE ASSESSEE-COMPANY. IT IS CLAIMED THAT COMMISSION PAID TO HIM IS RS.2,36,347/ -. FROM THE PERUSAL OF HIS STATEMENT RECORDED, IT CAN BE SEEN THAT HE HAS GIVEN VAGUE RE PLY, WHEREAS SHRI TEJAS DANDWALA AND SHRI NIMIT DANDWALA TO WHOM THE ASSESSEE IS PAYING SALAR Y AS WELL AS COMMISSION, ARE IN A POSITION TO GIVE SOME REPLY BECAUSE THEY ARE ACTUALLY WORKIN G WITH THE ASSESSEE FOR WHICH SALARIES ARE PAID. HOWEVER, BOTH THE PERSONS HAVE DONE NO SALES PROMOTION WORK. THEREFORE, DISALLOWANCE WAS RIGHTLY MADE. THE LD. D.R. SUBMITTED THAT LOOKI NG TO THE PECULIAR FACTS, THE COMMISSION IN RESPECT OF ALL THE FOUR PERSONS IS RIGHTLY DISALLOW ED BECAUSE IN ABSENCE OF EVIDENCE OF SERVICE, EXPENSES ARE NOT ALLOWABLE UNDER SECTION 37(1) OF T HE INCOME TAX ACT, 1961. HE ACCORDINGLY SUBMITTED THAT DISALLOWANCE OF COMMISSION CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 12. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. DURIN G THE COURSE OF HEARING, WE HAVE ASKED THE ASSESSEE TO FURNISH DETAILS OF COMPARISON CHART OF SALES IN EARLIER ASSESSMENT YEARS SHOWING SALES IN EARLIER YEARS, SALES PROMOTION EXPENSES AND WHET HER THE ASSESSMENT WAS MADE UNDER SECTION 143(3) OR 143(1). IN REPLY, THE ASSESSEE HAS SUBMIT TED THE FOLLOWING DETAILS :_ ASSTT. YEAR SALES PROMOTION EXP. STATUS OF ASSESSME NT 1998-99 25,963 143(1)(A) 1999-2000 160986/- 143(1) 2000-01 240500/- 143(1) 2001-02 513210/- 143(3) 2002-03 392206/- 143(1) 2003-04 381856/- 143(1) 2004-05 440917/- 143(3) DT. 21.11.2006 9 2005-06 426815/- 143(1) 2006-07 499730/- 143(1) 2007-08 854933/- 13. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS N OT FURNISHED THE DETAILS OF SALES IN THE IMMEDIATELY PRECEDING THREE ASSESSMENT YEARS. THE A SSESSMENT FOR ALL THE THREE PRECEDING ASSESSMENT YEARS WERE COMPLETED UNDER SECTION 143(1 ), I.E. WITHOUT SCRUTINY. APART FROM THIS, SALES EXPENSES IN THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR WERE ONLY RS.2,40,500/-, WHICH IS MORE THAN DOUBLE IN THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER APPEAL. IT IS NOT KNOWN WHAT WAS THE FIGURE OF SALES IN THE IMMEDIATE LY PRECEDING YEAR BECAUSE THE ASSESSEE HAS NOT FURNISHED THE SAME BEFORE US. EVEN THE A.O. HAS NOT STATED THE SALES FIGURE OF EARLIER YEARS IN THE ASSESSMENT ORDER. HOWEVER, BEFORE THE A.O. THE ASSESSEE HAS FURNISHED COMPARATIVE FIGURE OF GROSS PROFIT AND NET PROFIT, WHICH ARE AS FOLLOW :- YEAR GROSS PROFIT NET PROFIT 2000-01 14.98% 2.07% 1999-2000 13.05% 3.01% 1998-1999 12.65% 2.58% 14. FROM THE ABOVE, IT IS CLEAR THAT THIS YEAR NET PROFIT IS 2.07% AS AGAINST 3.01% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSME NTS FOR ALL THE EARLIER ASSESSMENT YEARS WERE COMPLETED UNDER SECTION 143(1) OR UNDER SECTIO N 143(1)(A). IN THESE CIRCUMSTANCES, WE FOUND CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE LD. D.R. THAT PRINCIPLE OF RES JUDICATE ARE NOT APPLICABLE. NOW LET US EXAMINE THE COMMISSION PAID TO EACH OF THE PERSONS. SHRI TEJAS DANDWALA AND SHRI NIMIT DANDWALA ARE BROTHERS AND SONS OF TH E ASSESSEE. BOTH ARE GETTING SASLARIES, WHICH HAVE BEEN ALLOWED BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER. IN THE STATEMENT RECORDE, THEY HAVE CATEGORICALLY STATED THAT THEY HAVE WORKE D FOR THE ASSESSEE COMPANY. SINCE THE SALARY HAS BEEN ALLOWED, THEY ARE WORKING FOR THE ASSESSEE -COMPANY. WHEN COMMISSION IS PAID TO AN EMPLOYEE, SAME IS TAXABLE UNDER THE HEAD SALARY B ECAUSE SAME IS IN ADDITION TO SALARY. SHRI TEJAS DANDWALA HAS STATED THAT HE HAS WORKED WITH T HE ASSESSEE FROM 1999 TO 2001. SHRI TEJAS DANDWALA STATED THAT HE RECEIVED COMMISSION OF RS.5 9,000/- WHICH WAS AT 12.5% OF THE TOTAL 10 AMOUNT OF SALES PROMOTION. NO DETAILS OF SALES ON W HICH COMMISSION WAS WORKED OUT AT 12.5% WAS SUBMITTED EITHER BY THE ASSESSEE OR BY SHRI TEJ AS DANDWALA. SHRI NIMIT DANDWALA WHO IS ALSO SON OF THE ASSESSEE STATED THAT HE RECEIVED CO MMISSION OF RS.59,087/- BUT DOES NOT RECEMBER AS TO WHOM SALES WERE MADE. IN THESE CIRCUMSTANCES, IT IS DOUBTFUL WHETHER THEY WERE LOOKING AFTER THE SALES ALSO, BUT IT IS NOT IN DISPUTE THAT THEY WERE WORKING FOR THE ASSESSEE-COMPANY. SALARY INCLUDING COMMISSION, LOOKING TO THE EDUCATI ONAL QUALIFICATION, IN OUR OPINION IS NEITHER EXCESSIVE OR UNREASONABLE. THE ASSESSEE HAS PAID RS .59,087/- TO EACH OF HIS TWO SONS. SALARY WAS PAID TO THEM REGULARLY. FROM THE RETURN OF INCOME, IT CAN BE SEEN THAT BOTH ARE DERIVING INCOME FROM SALARY AND BOTH ARE FULL TIME EMPLOYEES OF THE ASSESSEE. SINCE BOTH HAS WORKED FOR THE ASSESSEE-COMPANY WHETHER IN SALES OR OTHER DEPARTME NT, AND REMUNERATION PAID TO THEM IS NEITHER EXCESSIVE OR UNREASONABLE, WE DELETE THE DISALLOWAN CE OF COMMISSION AMOUNTING TO RS.59,087/- EQUALLY TO BOTH OF THEM. 15. WE HAVE CAREFULLY GONE THROUGH THE STATEMENT OF SHRI HEMANT PATEL AS WELL AS HIS SON SHRI CHIRAG PATEL. SHRI CHIRAG PATEL IN THEIR STATE MENTS STATED THAT HE IS ALSO GETTING SALARY OF RS.2,750/- PER MONTH. OVER AND ABOVE, HE RECEIVED B ONUS AMOUNTING TO RS.660/-. HE IS B. COM. IN THE STATEMENT RECORDED, HE HAS STATED THAT HE IS GETTING COMMISSION AT THE RATE OF 25% OF TOTAL SALES PROMOTION EXPENSES. IN REPLY TO QUESTION NO. 7, HE HAS STATED THAT DURING THE YEAR HE RECEIVED ORDER WORTH RS.32,50,000/-. IN REPLY TO QU ESTION NO. 9, HE COULD NOT EXPLAIN HOW THE COMMISSION AMOUNT IS CALCULATED. IT IS ALSO NOT KNO WN WHY SALARY IS NOT PAID TO HIM EVERY MONTH. THE ASSESSING OFFICER IN THE ASSESSMENT ORDE R MENTIONED THAT SALARY HAS BEEN SHOWN UNDER THE HEAD SALES PROMOTION. IT IS AGAINST THE HUMAN PROBABILITIES THAT IS THE PERSON, WHO IS B.COM, IS NOT AWARE THE BASIS ON WHICH COMMISSION I S ACTUALLY PAID TO HIM. ACCORDING TO ASSESSEE, COMMISSION IS PAYABLE AT THE YEAR END AND IN THE ASSESSMENT YEAR UNDER APPEAL, IT IS PAID TO ALL THE PERSONS RANGING @ .30% TO 3.15% OF THE TOTAL SALES. THE BASIC INGREDIENT FOR ALLOWING THE CLAIM OF COMMISSION PAYMENT IS ABOUT T HE EVIDENCE OF SERVICES HAVING BEEN RENDERED. NEITHER THE ASSESSEE COULD PRODUCE ANY CO GENT MATERIAL TO INSPIRE CONFIDENCE WITH THESE TWO PERSONS, NAMELY SHRI HEMANT PATEL AND SHR I CHIRAG PATEL, HAD RENDERED SERVICES IN THE FORM OF PROCURING BUSINESS FROM THE PARTIES AS CLAI MED BY THE ASSESSEE, NOR THE TWO PERSONS NAMELY SHRI HEMANT PATEL AND SHRI CHIRAG PATEL COUL D PRODUCE ANY EVIDENCE TO SHOW THAT THEY HAD DEVOTED TIME FOR CONTACTING THE PARTIES OR DONE ANY WORK FOR WHICH THEY ARE ENTITLED TO 11 RECEIVE COMMISSION FROM THE ASSESSEE. FROM THE STAT EMENT OF SHRI HEMANT PATEL, WE NOTICE THAT HE IS A PROPRIETOR OF CHIRAG TEXTILE AND ATTENDING TO HIS BUSINESS FROM 11 A.M. TO 5 P.M., THEN HOW HE ABLE TO SPARE TIME FOR DOING BUSINESS FOR TH E ASSESSEE. FURTHER HE COULD NOT EXPLAIN AS TO WHAT WORK HE WAS DONE FOR THE ASSESSEE, BUT THERE W AS NO SATISFACTORY EXPLANATION. THERE WAS NO WRITTEN CONTRACT WITH THE ASSESSEE AND HE COULD NOT REMEMBER HOW THE COMMISSION IS CALCULATED, HE DID NOT MEMBER AS TO WHO HE HIMSELF CONTACTED FO R PROCURING BUSINESS FOR THE ASSESSEE, THERE WAS NO EVIDENCE AS TO HOW HE HAD GATHERED SPECIAL K NOWLEDGE ABOUT PRINTING WORK. CONTRARY TO THIS, WE NOTICE THAT SHRI HEMANT PATEL AND ASSESSEE ARE CLOSE TO EACH OTHER THEREBY REFLECTING A COLOURABLE DEVICE FOR HELPING THE ASSESSEE TO REDUC E HIS TAXABLE INCOME. SIMILARLY, FROM THE STATEMENT OF SHRI CHIRAG PATEL, WE NOTICE THAT HE A LSO DID NOT REMEMBER AS TO IN WHAT MANNER HE WILL GET COMMISSION OR HOW IT IS CALCULATED. THE CO NNIVANCE WITH THE ASSESSEE IS CLEAR FROM THE FACT THAT THE COMMISSION IS SHOWN TO HAVE BEEN PAID AT THE RATE OF 0.78% TO SHRI CHIRAG PATEL, WHEREAS TO SHRI HEMANT PATEL IT IS CLAIMED TO HAVE BEEN PAID AT 1.75%, WHEREAS THESE TWO PERSONS CLAIMED IN THEIR STATEMENTS THAT THEY ARE P AID COMMISSION @ 3% AND 12% RESPECTIVELY. BUT ONE SAYS THAT HE IS RECEIVING COMMISSION @ 3.5% , WHEREAS OTHER SAYS THAT HE IS RECEIVING COMMISSION % 12.5%. FURTHER, IT IS NOT BELIEVABLE T HAT BOTH FATHER AND SON TOGETHER WILL DO FOR PROCURING THE BUSINESS LEAVING THEIR OWN BUSINESS U NATTENDED. NO EVIDENCE FROM THE PARTIES TO WHOM WORK COULD HAVE BEEN CLAIMED, WAS SUBMITTED SO AS TO SHOW THE INVOLVEMENT OF THESE TWO PERSONS IN THE BUSINESS. ACCORDINGLY, WE HOLD THAT THE ASSESSEE HAS NOT BEEN SATISFACTORILY EXPLAINED THE FACTUM OF SERVICES HAVING BEEN RENDER ED BY THESE TWO PERSONS AND ACCORDINGLY, THE DISALLOWANCE OF COMMISSION IN RESPECT OF THESE TWO PERSONS IS ALLOWABLE. ACCORDING THE ASSESSEE, COMMISSION IS PAID @ 0.30% TO 3.5% OF AGG REGATED TURNOVER, I.E. RS.1,35,05,555/-, WHEREAS SHRI HEMANT PATEL IN THE STATEMENT RECORDED STATED THAT HE IS PAID THE COMMISSION @ 3% TO 5%. HIS SON SHRI CHIRAG PATEL IN HIS STATEMENT R ECORDED STATED THAT HE IS GETTING COMMISSION @ 12.5%. IN REPLY TO QUESTION NO. 11, SHRI CHIRAG P ATEL STATED THAT HE HAS RECEIVED COMMISSION @ 12.5% WHICH HAS BEEN TAKEN IN SALES PROMOTION ACC OUNT. HE HAS STATED IN REPLY TO QUESTION NO. 12, HE STATED THAT HE HAS RECEIVED COMMISSION OF RS .1,58,000/-, BUT HAS NOT WITHDRAWN ANY AMOUNT FROM IT. EVEN SALARY OF THE ENTIRE YEAR WAS CREDITED TO HIS ACCOUNT BY A GENERAL ENTRY MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER. IT I S NOT KNOWN WHY HIS SALARY IS ALSO SHOWN UNDER THE HEAD SALES PROMOTION/ COMMISSION. THE C OMMISSION IS PAID AT THE RATE OF 0.87% TO SHRI CHIRAG PATEL, WHEREAS TO HIS FATHER SHRI HEMAN T PATEL, IT IS PAID 1.75%. SHRI HEMANT PATEL TO 12 WHOM ABOUT 50% COMMISSION OF TOTAL SALES IS PAID AL SO DOES NOT KNOW THE BASIS, ON WHICH COMMISSION IS PAID. ACCORDING TO HIM, THE COMMISSIO N IS ABOUT 3 TO 5% OF THE WORK DONE. NO WORKING OF COMMISSION IS AVAILABLE WITH HIM. WE HAV E ALSO GONE THROUGH THE RETURN OF INCOME FILED BY THEM AND COMMISSION INCOME REFLECTED IN T HE RETURN OF INCOME. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE CONVINCED THAT THE ASSESSEE HAS NOT PROVED THE SERVICES RENDERED BY THESE TWO PERSONS. THE DISALLOWANCE OF COMMISSION IN RESPECT OF BOTH THE PERSONS IS UPHELD. 16. GROUND NO. 2 IS AGAINST CONFIRMING THE ACTION O F A.O. FOR DISALLOWING RS.37.224/- OUT OF INTEREST EXPENDITURE ON THE GROUND OF DIVERSION OF INTEREST BEARING FUNDS FOR ALLEGED NON-BEARING PURPOSES. 17. IN THE ASSESSMENT ORDER, THE A.O. OBSERVED THAT THE ASSESSEE HAS GIVEN INTEREST-FREE ADVANCES OF RS.2,17,020/- TO FIVE PERSONS AND NOT C HARGED ANY INTEREST ON THE SAID LOANS. THE ASSESSEE HAS PAID INTEREST OF RS.1,68,725/- TO THE DEPOSITORS AT THE RATE OF 18.25%. THUS ACCORDING TO A.O., THE BORROWED FUNDS WERE DIVERTED FOR NON-B USINESS PURPOSE. THE A.O. ACCORDINGLY DISALLOWED RS.37,224/- OUT OF INTEREST CALCULATING INTEREST @ 18.25% AS CHARGEABLE ON THE ABOVE LOANS. THE A.O. ALSO OBSERVED THAT IN THE CAPITAL A CCOUNT OF THE ASSESSEE, THE PROFIT OF RS.2,37,494/- WAS CREDITED ON 31.3.2001. THUS OPENI NG BALANCE IN THE CAPITAL ACCOUNT BEFORE ADDITION OF PROFIT WAS ONLY RS.71,893/-, WHEREAS TH E LOAN ADVANCED TO THE FIVE PARTIES WAS OF RS.2,17,020/-. HE ACCORDINGLY DISALLOWED THE INTERE ST TO THE TUNE OF RS.37,224/- TREATING THE SAME AS FOR NON-BUSINESS PURPOSE. 18. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), IT WAS CONTENDED THAT NO FRESH LOAN WAS GIVEN IN THIS YEAR. THE LOAN S WERE GIVEN IN EARLIER YEARS. NO INTEREST IS DISALLOWED ON THEM IN THE EARLIER YEARS, THEREFORE, IN THIS YEAR, THE DISALLOWANCE CANNOT BE MADE. RELIANCE IS PLACED ON THE JUDGMENT OF THE HON'BLE K ERALA HIGH COURT IN THE CASE OF SRIDEV ENTERPRISE VS.- CIT REPORTED IN 192 ITR 165 (KER.) . APART FROM THIS, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LOAN AMOUNT WAS RS.2,17 ,020/- WHEREAS CAPITAL OF THE ASSESSEE ITSELF WAS RS.3,09,387/-. THEREFORE, IN VIEW OF THE DECISI ON OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF TORRENT FINANCIERS REPORTED IN 73 TTJ 624, NO DI SALLOWANCE OF INTEREST CAN BE MADE IF ON AN OVERALL BASIS THE ASSESSEE HAS MORE INTEREST-FREE F UND THAN THE ADVANCES. THE LEARNED 13 COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTI ON OF A.O. HOLDING THAT ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE INTEREST-FRE E ADVANCES WERE GIVEN OUT OF THE SALES OR THE CAPITAL. 19. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 20. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE O RDERS OF AUTHORITIES BELOW. 21. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IN TH E EARLIER ASSESSMENT YEARS, IT WAS NOT EXAMINED WHETHER THE ASSESSEE HAS DIVERTED INTEREST-BEARING FUNDS FOR ALLEGED NON-INTEREST BEARING PURPOSES, BECAUSE THE ASSESSMENTS FOR ALL THE PRECE DING ASSESSMENT YEARS WERE COMPLETED WITHOUT SCRUTINIZING THE ACCOUNTS. THE OPENING BALA NCE IN CAPITAL ACCOUNT WAS RS.71,897/-. THERE IS NO INTEREST-BEARING FUNDS. IN THESE CIRCUMSTANCE S, THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF SRIDEV ENTERPRISE VS.- CIT [1 92 ITR 165 (KER.)] IS DISTINGUISHABLE BECAUSE FOR ALLOWANCE OF INTEREST UNDER SECTION 36(1)(III), THE MONEY BORROWED ON INTEREST SHOULD CONTINUE TO BE USED FOR BUSINESS PURPOSES TO THE EX TENT FOR UTILIZING FOR NON-BUSINESS PURPOSES, INTEREST CANNOT BE ALLOWED UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. IN VIEW OF THIS, IN OUR OPINION, THE DISALLOWANCE WAS RIGHTLY MADE A ND UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). WE, THEREFORE, DECLINE TO INTE RFERE. THIS GROUND OF APPEAL IS REJECTED. 22. GROUND NO. 3 IS AGAINST DISALLOWANCE OF RS.10,4 25/- OUT OF GIFT ARTICLE. 23. WE HAVE HEARD BOTH THE SIDES. NEITHER BEFORE US NOR BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE HAS FURNISHED THE REQUISITE DETAILS, I.E. TO WHOM THE ALLEGED GIFT ARTICLES WERE GIVEN. THEREFORE, DISALLOWANCE O F 50% OF THE EXPENDITURE IS FAIR AND REASONABLE. WE, THEREFORE, DECLINE TO INTERFERE. 24. GROUND NO. 4 IS AGAINST CONFIRMING THE ACTION O F A.O. IN DISALLOWING RS.25,015/- OUT OF DEPRECIATION OF MOTOR CAR. 14 25. IN ASSESSMENT ORDER, THE ASSESSING OFFICER DISA LLOWED 1/4 TH OF CAR DEPRECIATION. WE HAVE CAREFULLY GIVEN OUR CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS PERT INENT TO NOTE THAT ASSESSEE HAS DISALLOWED 1/4 TH HIMSELF OF PETROL EXPENSES. IN VIEW OF THIS, DISALL OWANCE WAS RIGHTLY MADE AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THIS G ROUND OF APPEAL IS DISMISSED. 26. THE LAST GROUND OF APPEAL IS AGAINST LEVY OF IN TEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT. THE ASSESSEE IS ENTITLED TO CONSEQUENTIAL RELIEF IN LEVY OF INTEREST UNDER THIS SECTION. THE A.O. IS DIRECTED ACCORDINGLY. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE COURT ON 30.10.2009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 10 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE, (2) THE DEPARTMENT 3) CIT(A) CONCERNED (4) CIT CONCERNED, (5) D.R., I TAT, AHMEDABAD. TRUE COPY BY ORDER LAHA/SR.P.S. DEPUTY REGISTRAR, ITAT, AHMEDA BAD