AMIIT TANDON, MUMBAI V. ADDL CIT 24(1), MUMBAI

ITA 5791/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6349 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: R C JAIN
• Keywords: Business income; Reasonable cause
• Section: 143(3); 2

Judgement Text

I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 AMIT TANDAN, .. APPELLANT 1404-D, ROYAL CLASSIC, NEW LINK ROAD, ANDHERI.UMBAI-400 053 PA NO.AAAPT 3177 F VS ADDL. CIT, RANGE 24(1) ,. RESPONDEN T C-13/506, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI-51 APPELLANT BY: SHRI R.C.JAIN RESPONDENT BY: SMT. ASHIMA GUPTA- DR. O R D E R PER PRAMOD KUMAR: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 28 TH AUGUST 2009 PASSED BY THE CIT(A)-XXIV, MUMBAI IN TH E MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2006-07. 2. IN THE FIRST GROUND, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE:- THE AUTHORITIES BELOW HAVE ERRED IN ADDING/SUSTAIN ING ADDITION OF NOTIONAL RENT AMOUNTING TO ` ` . 1,20,000/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT OFFERED ANY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT BALANCE SHEET OF THE ASSESSEE REFLECTED THAT THE AS SESSEE WAS IN POSSESSION OF TWO FLATS ONE AT ANDHERI AND OTHER AT MIRA ROAD. THE AO FURTHER NOTED THAT AS PER THE DEEMING I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 2 PROVISIONS OF SECTION 23 OF THE ACT, THE ASSESSEE HAS TO OFFER FOR TAXATION THE RENT ACTUALLY RECEIVED OR RECEIVABLE IN RESPECT OF ONE PROPERTY. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER ADOPTED THE GROSS MAINTAINABLE RATE OF ` 1,80,000/- AS REFLECTED IN THE ASSESSEES WEALTH TAX RETURN IN RESPECT OF HIS MIRA ROAD FLAT. ACCORDINGLY, THE AO PROCEEDED TO COMPUTE THE INCOME UNDER THE HEAD INCOME FROM HOUS E PROPERTY BY ADOPTING THE GROSS RENT OF ` . 1,80,000/- BASED ON THE WEALTH TAX RETURN OF THE ASSESSEE AND GRANTING DEDUCTION UNDER SECTION 24 @ 30%. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T (A). IT WAS CONTENDED BY THE ASSESSEE THAT THE ACTUAL RENT RECEIVED AMOUNTING TO ` ` . 60,000/- HAS ALREADY BEEN ACCOUNTED FOR AND DISCLOSED IN THE BOOKS OF ACCOUNT AND THAT THE AO S ADOPTING THE FIGURE AT ` 1,80,000/- ON THE BASIS OF WEALTH TAX RETURN IS NOT SUSTAINABLE I N LAW. WHILE THE CIT (A) DID AGREE WITH THE ASSESSEE THAT THE AMOUNT OF ` 60,000/- HAVING ALREADY BEEN DISCLOSED IN THE PRO FIT AND LOSS ACCOUNT, NO SEPARATE ADDITION IS WARRANTED IN RESP ECT OF THE SAME, THE CIT (A) DID NOT AGREE WITH THE ASSESSEES CONTENTION THAT THE GROSS MAINT AINABLE RATE BEING ADOPTED AT ` 1,80,000/- BY THE AO WAS INCORRECT. HE THUS, GRANT ED RELIEF ONLY TO THE EXTENT OF ` 60,000/- WHICH REFLECTED THE AMOUNT ALREADY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APP EAL BEFORE US. 4. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAVI NG PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IN APPEAL I.E. WHETHER OR NO T THE GROSS MAINTAINABLE RATE FOR THE PURPOSE OF ACTUAL VALUE CAN BE ADOPTED ON THE BASIS OF VALUATION FOR WEALTH TAX PURPOSES, IS NOW SETTLED IN FAVOUR OF THE ASSESSEE BY THE HONB LE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS M.K.SHIVRAJ SINGHJI, 192 ITR 120(GU J). IN THIS DECISION, THEIR LORDSHIPS HAVE, INTER ALIA, HELD THAT UNDER NO CIRCUMSTANCES, COUL D THE MARKET VALUE OF THE PROPERTY DISCLOSED IN THE WEALTH TAX RETURN OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER REFERENCE HAVE BEEN ADOPTED AS THE BASIS FOR WORKING OUT THE ANNUAL LETTING VALUE OF THE PROPERTY. NO CONTRARY DECISION HAS BEEN POINTED BY THE LEARNE D D.R. IT IS; THUS, CLEAR THAT THE VALUATION OF THE WEALTH TAX REPORT AS DISCLOSED IN THE WEALTH TAX RETURN, CANNOT, UNDER ANY CIRCUMSTANCES, BE SOUND BASIS FOR DETERMINING THE A NNUAL LETTING VALUE FOR THE PURPOSES OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM H OUSE PROPERTY. HOWEVER, THIS IS PRECISELY WHAT THE AO HAS DONE. IN THIS VIEW OF TH E MATTER, WE REVERSE THE ACTION OF THE AO AND THE ASSESSEE GETS RELIEF ACCORDINGLY. THIS G ROUND IS ALLOWED. 5. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE FOLLOWING GRIEVANCE:- I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 3 THE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING/SU STAINING DISALLOWANCE OF CLAIM OF THE APPELLANT TOWARDS SUB-BROKERAGE, AMOUNTING T O ` 39,56,290/-. 6. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE RELEVANT PREVIOUS YEAR, THE ASSE SSEE HAD DEBITED AN AMOUNT OF ` 39,56,290/- TOWARDS SUB-BROKERAGE BUT HAD NOT DEDUCTED AT SOURC E FROM THESE PAYMENTS. WHEN THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE T AX HAS NOT BEEN DEDUCTED FROM THESE PAYMENTS, IT WAS CONTENDED THAT THE PROVISIONS REQU IRING THE TAX DEDUCTION AT SOURCE WERE NOT APPLICABLE ON THE ASSESSEE INASMUCH AS THE ASSE SSEES BUSINESS WAS BEING RUN AS A PROPRIETARY CONCERN AND THE TURNOVER OF THE SAID CO NCERN WAS BELOW `.40 LAKHS. IT WAS ALSO POINTED OUT THAT THE TAX DEDUCTION AT SOURCE OBLIG ATION COME INTO PLAY ONLY IN THE EVENT OF TAX AUDIT THRESHOLD BEING CROSSED BY THE PROPRIETAR Y CONCERN. THE ASSESSEE INITIALLY TOOK THE STAND THAT THE THRESHOLD TAX AUDIT MUST APPLY T O EACH PROPRIETARY CONCERN AND NOT TO ALL THE PROPRIETARY CONCERN PUT TOGETHER IN INDIVIDUAL CASE. HOWEVER, THIS PLEA WAS NOT ACCEPTED AND PENALTY FOR NON GETTING THE TAX AUDIT DONE WAS IMPOSED ON THE ASSESSEE. THE STAND WAS FURTHER TAKEN THAT THE ASSESSEE HAD A REA SONABLE BELIEF FOR NON- DEDUCTING THE TAX AT SOURCE FROM THESE PAYMENTS AND THAT HE HAS ALREA DY BEEN PENALIZED BY IMPOSITION OF PENALTY OF NON-GETTING THE TAX AUDITED. IT IS NOT N ECESSARY TO GO INTO ALL THOSE ARGUMENTS BECAUSE THE ASSESSEE HAS FINALLY ACCEPTED THAT HE F AILED TO MAKE THE TAX DEDUCTION AT SOURCE THOUGH IT WAS ON ACCOUNT OF THE ADVICE OF THE PROFE SSIONAL TO THIS EFFECT THAT SINCE HIS TURNOVER IN THE ASSESSMENT YEAR 2005-06 WAS LESS TH AN ` 40 LAKHS, HE WAS NOT REQUIRED TO FURNISH THE AUDIT REPORT UNDER SECTION 44AB AND ALSO NOT REQUIRED TO DEDUCT TAX AT SOURCE. THE NON-DEDUCTIO N OF TAX AT SOURCE FROM THESE PAYMENTS IS THUS AN UNDISPUTED POSITION. THE ASSESSEES ARGUME NTS BEFORE THE CIT (A) WAS THAT HE HAS BEEN PUNISHED FOR NON GETTING THE ACCOUNTS AUDITED UNDER SECTION 44AB AND HE SHOULD NOT BE PUNISHED AGAIN BY DISALLOWANCE UNDER SECTION 40( A)(IA) IN RESPECT OF THE SAME AMOUNT. NONE OF THE AUTHORITIES BELOW WAS IMPRESSED WITH TH ESE LINES OF ARGUMENTS. THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT DEDUCTED T HE TAX AT SOURCE, IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA), THE AMOUNTS ON WHICH TAX OUGH T TO HAVE DEDUCTED BUT HAVE NOT DEDUCTED, CANNOT BE ALLOWED AS DEDUCTION IN COMPUTA TION OF BUSINESS INCOME. THE CIT (A) CONFIRMED THIS VIEW AND HELD THAT THE TAX DEDUCTIO N AT SOURCE REQUIREMENTS ARE MANDATORY AND DISALLOWANCE OF AMOUNTS PAID ON WHICH TAXES HAV E NOT BEEN DEDUCTED, IS INDEPENDENT OF ANY OTHER CONSEQUENCE THAT MAY FOLLOW IN THIS RE GARD. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER IN APPEAL BEFORE US. I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 4 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS OF THE CASE. THE MAIN THRUST OF LEARNED COUNSELS SUBMISSION BEFORE US, I S THAT THE ASSESSEE HAS ALREADY BEEN PUNISHED UNDER SECTION 271B IN NOT GETTING THE ACCO UNTS AUDITED. IT IS CONTENDED THAT THE BASIC REASON OF NOT DEDUCTING TAX AT SOURCE WAS ASS ESSEES BEHALF THAT THE TAX DEDUCTION AT SOURCE REQUIREMENT IN THE CASE OF INDIVIDUAL DO NOT COME INTO PLAY UNLESS THE ASSESSEE CROSSED THE THRESHOLD LIMIT FOR TAX AUDIT AND THE A SSESSEE WAS GENUINELY UNDER IMPRESSION THAT THESE THRESHOLD LIMIT APPLIES TO EACH PROPRIET ARY CONCERN. THUS THE LAPSE WAS IN THE UNDERSTANDING ABOUT THE PROVISIONS OF LAW RATHER TH AN IN DISCHARGING THE STATUTORY OBLIGATION. LEARNED COUNSEL SUBMITS THAT THE SEGRE GATION OF TURNOVER OF PROPRIETARY CONCERN OWNED BY THE INDIVIDUAL MAY BE TECHNICALLY CORRECT BUT THE ASSESSEE HAD A REASONABLE THOUGH INCORRECT BELIEF THAT THIS LIMIT APPLIES TO EACH OF THE CONCERNED INDIVIDUAL. HIS CONTENTION IS THAT IT IS THIS LAPS E WHICH HAS BEEN COMMITTED BY THE ASSESSEE AND THIS LAPSE HAS BEEN COMMITTED ABOUT THE WRONG P ROFESSIONAL ADVICE GIVEN TO THE ASSESSEE. THE FACT THAT THE ASSESSEE HAD NOT DEDUC TED TAX AT SOURCE WAS ONLY A COROLLARY TO THE AFORESAID STAND. HE SUBMITS THAT THE DISALLOWA NCE UNDER SECTION 40A(IA) SHOULD NOT BE INVOKED IN A SITUATION WHERE THE ASSESSEE HAS A REA SONABLE BELIEF FOR SUCH NON DEDUCTION OF TAX AT SOURCE. IT IS ALSO SUBMITTED THAT SUCH DISAL LOWANCE WILL BE HARSH ON THE ASSESSEE AND THE ASSESSEE WILL BE PUNISHED FOR THE SAME MISTAKE TWICE INASMUCH AS HE HAS BEEN PUNISHED PENALTY FOR NOT GETTING THE TAX AUDITED AFTER THE T URNOVER OF THE ASSESSEE CROSSED THE TAX PLUS THRESHOLD LIMIT. WE ARE URGED TO TAKE A LENIENT AN D COMPENSATE VIEW OF THE MATTER AND THUS DELETING THE IMPUGNED DISALLOWANCE UNDER SECTION 40 A(IA) OF THE ACT. 8. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, SUBMITS THAT THE PROVISIONS OF SECTION 40A(IA) ARE QUITE CLEAR AND A MBIGUOUS. IT IS POINTED OUT THAT WHEN TAXES HAVE NOT BEEN DEDUCTED AT SOURCE FROM A PARTI CULAR PAYMENT OR AFTER DEDUCTING SUCH TAX, THE SAME HAVE NOT BEEN DEPOSITED , SUCH AMOUNT S CANNOT BE ALLOWED AS DEDUCTION IN COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD PR OFITS AND GAINS OR PROFESSIONS. IT IS SUBMITTED THAT NO DISCRETION IS GRANTED TO THE AO U NDER THE SECTION AND IT IS NOT OPEN TO GO INTO THE QUESTION AS TO WHETHER OR NOT, NON-DEDUCTI ON OF TAX AT SOURCE WAS A REASONABLE GROUND. THAT ASPECT OF THE MATTER, ACCORDING TO TH E LEARNED D.R., COULD BE RELEVANT FOR THE PURPOSE OF EXAMINING WHETHER OR NOT IT IS A FIT CAS E FOR IMPOSITION OF PENALTY FOR NON- DEDUCTION OF TAX AT SOURCE BUT CERTAINLY OF NO RELE VANCE SO FAR AS THE DISALLOWANCE UNDER SECTION 40(A)(IA) IS CONCERNED. LEARNED D.R. RELIE S UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITS THAT THE STAND SO TAKEN BY THE AUTHORIT IES BELOW IS IN ACCORDANCE WITH THE SCHEME OF THE ACT AND DOES NOT CALL FOR ANY INTERFE RENCE. I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 5 9. IN A BRIEF REJOINDER, LEARNED COUNSEL ONCE GAIN URGES TO TAKE A REASONABLE AND LENIENT VIEW OF THE MATTER AND ENSURES THAT THE ASS ESSEE IS NOT PUNISHED DISPROPORTIONATELY FOR THE GENUINE MISTAKE COMMITTED BY HIM. 10. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE RECORDS OF THE CASE, WE ARE OF THE CONCERNED VIEW THAT, AS RIGHTLY CONTE NDED BY LEARNED DEPARTMENTAL REPRESENTATIVE, THE DISALLOWANCE UNDER SECTION 40A( IA) IS NOT DEPENDENT ON WHETHER OR NOT THE TAX DEDUCTION AT SOURCE LAPSE COMMITTED BY THE ASSESSEE IS ON ACCOUNT OF A REASONABLE CAUSE. THE PROVISIONS OF SECTION 40A(IA) ARE INDEE D QUITE CLEAR AND THERE IS NO AMBIGUITY. THE MANDATE OF LAW IS THAT WHEN THE ASSESSEE IS REQ UIRED TO DEDUCT TAX AT SOURCE FROM CERTAIN PAYMENTS BUT THE ASSESSEE FAILS TO DO SO, T HOSE PAYMENTS WILL NOT BE ALLOWED AS DEDUCTION IN COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION. THE FACT THAT THE ASSESSEE HAS COMMITTED THIS LAPSE DUE TO A REASONABLE CAUSE OR THE ASSESSEE HAS ALREADY BEEN PUNISHED FOR THE MISTAKE WHICH IS DUE TO HIS LAPSE , IS NOT RELEVANT. WE, THEREFORE, APPROVE AND UPHOLD THE ORDERS OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. THIS GROUND IS DISMISSED. 11. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: THE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING/SU STAINING DISALLOWANCE OF CLAIM OF THE APPELLANT TOWARDS INTEREST ON LOAN, AMOUNTING T O RS 2,04,295/-. 12. THIS ISSUE IN APPEAL LIES IN A VERY NARROW COMP ASS OF MATERIAL FACTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT A LOAN OF RS 18,74,266/- WAS ADVANCED TO THE FATHER OF THE ASSESSEE. IT WAS ALSO NOTED THAT A L OAN OF RS 1.67 CTRORES WAS TAKEN FROM PUNJAB NATIONAL BANK, AGAINST HYPOTHECATION OF MACH INERY IN EARLIER YEARS AND OUT OF THE SAID LOAN, THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO HIS FATHER. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE INTEREST PAID ON BORROWING TO THAT EXTENT SHOULD NOT BE DISALLOWED. IT WAS SUBMITTED BY THE ASSESSEE TH AT THE LOAN TO THE FATHER WAS ADVANCED FROM HIS OWN FUNDS AND INTEREST HAS NOT BEEN CHARGE D ON THE SAME. THE AO NOTED THAT IN THE ASSESSMENT YEARS 2003-04 AND 2004-05, PROPORTIO NATE DISALLOWANCE OF INTEREST HAS BEEN MADE AFTER VERIFYING THAT THE INTEREST BEARING FUNDS WERE USED FOR NON-BUSINESS PURPOSES AND THAT THIS DISALLOWANCE WAS ACCEPTED BY THE ASSESSEE. IT WAS IN THE BACKGROUND OF THESE DISCUSSIONS, THAT THE AO DISALLOWED THE PR OPORTIONATE INTEREST PAID TO PUNJAB NATIONAL BANK RELATABLE TO THE QUANTUM OF ADVANCE T O THE ASSESSEES FATHER. AGGRIEVED, THE I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 6 ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T (A). IT WAS CONTENDED THAT THERE WERE NO BORROWED FUNDS USED FOR ADVANCING THE INTEREST F REE LOAN AND THE LOAN WAS GIVEN OUT OF OWN CAPITAL. A REFERENCE WAS MADE TO THE HONBLE B OMBAY HIGH COURT JUDGEMENT IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD.,[2009] 313 ITR 340 (BOM). THE CIT (A), HOWEVER, WAS NOT IMPRESSED TO THE CLAIM OF THE A SSESSEE. HE NOTED THAT THE ASSESSEE HIMSELF HAS ACCEPTED THE DISALLOWANCE OF INTEREST ON THIS POINT BY NOT FILING APPEALS IN EARLIER YEARS WHEREAS IN THE CASE OF RELIAN CE UTILITIES AND POWER LTD REFERRED SUPRA, THE FUNDS WERE USED FOR INVESTMENT AND PRESUMPTION WAS IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS NOT SATISFIED AND IS IN FURT HER APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORDS OF THE CASE. WE FIND THAT THE SOLE BASIS ON WHICH THE DISALLOWANCE HAS B EEN CONFIRMED BY THE CIT (A) IS ON THE GROUND THAT THE ASSESSEE HAS ACCEPTED THE SIMIL AR DISALLOWANCE IN PAST YEARS. HOWEVER, IT IS WELL SETTLED LAW THAT THERE CAN NOT BE RES JUDICATA IN THE INCOME TAX PROCEEDINGS AND JUST BECAUSE THE ASSESSEE HAS ACCEPTED THE DISALLOWANCE IN ONE YEAR, HE CANNOT BE FORCED TO ACCEPT THE SAME IN SUBSEQ UENT YEAR. IN ANY EVENT, WHETHER THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS OR NOT, IS A FACTUAL MATTER AND THIS ASPECT HAS NOT BEEN EXAMINED BY THE AO ON MERITS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (SUPRA) HAS, INTER ALIA, HELD THAT IF THERE BE INTEREST FREE FUNDS AVAILABLE TO AN ASSESSE E SUFFICIENT TO MEETS ITS INVESTMENT AND AT THE SAME TIME, THE ASSESSEE HAS RAISED LO AN, IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM INTEREST FREE FUNDS AVAI LABLE. IN THIS VIEW OF THE MATTER WHAT IS RELEVANT IS THAT WHETHER OR NOT THE ASS ESSEE HAD ADEQUATE INTEREST FREE FUNDS AVAILABLE AS AT THE POINT OF TIME OF GRAN TING INTEREST FREE LOAN TO THE ASSESSEES FATHER. AS LONG AS THIS CONDITION IS SATISFIED, TH E AO IS REQUIRED TO PROCEED ON THE BASIS THAT THE INTEREST FREE ADVANCE WAS GIVEN O UT OF INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE AND AS SUCH, NO DISALLOWANCE FOR DIVERSION OF INTEREST FREE FUNDS IN THIS RESPECT CAN BE MADE. WE, THEREFORE, DE EM IT FIT AND PROPER TO REMIT THIS ISSUE TO THE FILE OF THE AO FOR ADJUDICATION DENOVO I N ACCORDANCE WITH LAW AND IN THE LIGHT OF OUR ABOVE OBSERVATIONS. WE DO SO. THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 7 14. IN THE RESULT, THE APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 26 TH NOVEMBER , 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-VXXIV, MUM BAI 4. COMMISSIONER OF INCOME TAX, 24, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D +, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.5791/ MUM/2009 ASSESSMENT YEAR: 2006-07 8