ITO, New Delhi V. Shri Nanak Ram Jaisinghani, New Delhi

ITA 5806/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7458 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Business income; Additional evidence; Reasonable cause; Notional interest
• Section: 43B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NOS.5806 & 5807/DEL/2012 (ASSESSMENT YEAR 2007-08 & 2008-09) ITO, WARD 13(1), VS. NANAK RAM JAISINGHANI, NEW DELHI B-14, VASANTS MARG, VASANT VIHAR, NEW DELHI. GIR / PAN : AAFPJ7461F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. DAM KANUNJNA, SR. DR RESPONDENT BY : SHRI RAJ KUMAR, GUPTA, CA DATE OF HEARING: 01.06.2016 DATE OF PRONOUNCEMENT: 10.06.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEALS FILED BY THE REVENUE ARISE FRO M THE ORDER DATED 23.08.2012 PASSED BY LD. CIT(A) XVI , NEW DELHI FOR THE ASSESSMENT YEARS 2007-08 & 2008-09 ON THE FOLLOWING GROUNDS OF APPEALS: A. ASSESSMENT YEAR : 2007-08: 1. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.86,06,481/- MADE U/S 43B(E) BY 2 I.T.A.NOS.5806, 5807/DEL/2012 ACCEPTING ADDITIONAL EVIDENCE WITHOUT PROVIDING AN OPPORTUNITY TO THE A.O. TO EXAMINE THE SAME. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.47,62,462/- MADE ON ACCOUNT OF INTEREST INCOME ON INTEREST FREE LOANS GIVEN BY M/S J'S INN, PROPRIETORSHIP FIRM OF THE ASSESSEE, ARE MUCH HIGHER THAN THE INTEREST FREE LOANS TAKEN BY IT. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER: 2. GROUND NO.1: 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNN ING A GUEST HOUSE UNDER THE NAME OF M/S. JS INN. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST OCT., 2007 DECLARING LOSS OF RS.6,23,57,553/-. THE CASE WAS PROCESSED U/S 143(1) OF THE ACT AND SUBSEQUENTLY, I T WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2)/142(1) W ERE ISSUED. LD. ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.7,15,52,676/- U/S 43B(E) IN RESPECT OF INTEREST PAID ON TERM LOAN TO PUNJAB & SINDH BANK. IT WAS SUBMITTED BY THE ASSESSEE THAT THE INTEREST ON TERM LOAN HAS BEEN DEBITED TO P & L ACCOUNT ON ACTUAL BA SIS THOUGH THE AMOUNT OF RS.7,15,52,676/- IS CLAIMED ON THE PAYMENT BASIS AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. THE ASSESSEE HAS SUBMITTED THE BANK CERTIFI CATE / BANK STATEMENT CALLED FOR BY THE LD. A.O. LD. A.O . ALLOWED THE OUTSTANDING INTEREST FOR THE YEAR UNDER CONSIDERATION AMOUNTING TO RS.6,29,46,195/- AND DISALLOWED A SUM OF RS.86,06,481/- U/S 43B(E) OF TH E ACT. 3 I.T.A.NOS.5806, 5807/DEL/2012 2.2 LD. A.O. FURTHER OBSERVED THAT THE ASSESSEE HA D ADVANCED INTEREST FREE LOANS TO AN EXTENT OF RS.29,47,500/-. LD. A.O. DISALLOWED THE SAME BY HO LDING THAT THE ASSESSEE HAD TAKEN SECURED LOANS FROM PUNJ AB & SINDH BANK, ON WHICH INTEREST @ 14.25% WAS BEING PA ID. THE A.O., THEREFORE, ADDED NOTIONAL INTEREST IN THE HANDS OF ASSESSEE. 2.3 AGGRIEVED BY ORDER OF THE LD. A.O., THE ASSESSE E PREFERRED APPEAL BEFORE LD. CIT(A). 2.4 LD. CIT(A) AFTER EXAMINING ALL THE RELEVANT FAC TS AND MATERIAL ON RECORD, DELETED THE ADDITION MADE BY TH E LD. A.O. U/S 43B(E) AND THE NOTIONAL INTEREST OF RS.47,62,462/-. AGGRIEVED BY THE ORDER OF LD. CIT( A), THE REVENUE IS IN APPEAL BEFORE US NOW. 2.5 LD. D.R. SUBMITTED THAT THE BANK CERTIFICATE IS SUED BY THE BANK ARE HAND WRITTEN AND THIS CANNOT BE REL IED UPON. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS N OT SUBSTANTIATED ITS CLAIM BY PROPER EVIDENCE. THE AS SESSEE HAS ALSO FAILED TO FURNISH THE DETAILS OF ASSESSMEN T YEAR WISE FROM ASSESSMENT YEAR 2000-01 TO 2008-09 IN RES PECT OF AMOUNT OF INTEREST CHARGED BY THE BANK DATE- WISE/QUARTER WISE VIS- A VIS AMOUNT OF INTEREST ACCOUNTED FOR BY ASSESSEE IN ITS BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE DETAILS CALLED FOR BY ASSESSING OFFICER HAS NOT BEEN FILED BY THE ASSESSEE TO THE SATISFACT ION AND THEREFORE, THE CLAIM OF THE ASSESSEE SHOULD NOT BE ALLOWED. 4 I.T.A.NOS.5806, 5807/DEL/2012 2.6 ON THE CONTRARY, THE LD. A.R. STRONGLY OBJECTED INTO THE FINDINGS OF THE LD. A.O. IN CALCULATING THE DIS ALLOWANCE OF RS.86,06,481/-. LD. A.R. SUBMITTED THAT THE ASS ESSEE HAD TAKEN TERM LOAN FROM PUNJAB & SINDH BANK IN THE YEAR 1999 FOR RS.5 CRORES @ 14.25% P.A. HE SUBMITT ED THAT THE ASSESSEE HAD BEEN VERY IRREGULAR IN MAKING PAYMENT OF INTEREST. HOWEVER, THE ASSESSEE WAS DEB ITING THE INTEREST IN ITS P & L ACCOUNT EVERY YEAR UP TO 31.03.2004. LD. A.R. SUBMITTED THAT THE CLAIM OF DEDUCTION U/S 43B(E), MADE BY ASSESSEE WAS LIMITED TO THE EXTENT, THE INTEREST WAS ACTUALLY PAID DURING T HE YEAR AND THE BALANCE INTEREST THAT REMAINED UNPAID, WAS DISALLOWED. THE DETAILS OF INTEREST DEBITED, CLAIM ED AS DEDUCTION AND SELF DISALLOWANCE IS PLACE IN THE PAP ER BOOK BY WAY OF A CHART PLACED AT PAGE 29. LD. A.R. HAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISPUT ED THE FOLLOWING PAYMENTS OF INTEREST: DEBITED IN BOOKS ON 01.04.2006 RELATING TO ASSESSMENT YEAR 2005-06 & 2006-07 RS.3,29,46, 581/- DEBITED IN THE BOOKS OF F.Y.2006-07 RELATING TO ASSESSMENT YEAR 2007-08 RS.2,28, 23,024/- RS.5,57,69,605/- DISALLOWANCE IN ASSESSMENT YEAR 2004-05 RS. 72,00,000/- RS.6,29,69,605/- TOTAL PAYMENT MADE (01.04.2006 TO 15.06.2007) RS.12,64,00,000/- LESS: LITIGATION CHARGES RECOVERED BY THE BANK FROM APPELLANT RS.5,36,264/- INTEREST RELATING TO PERIOD 01.04.2007 TO 15.06.2007) (I.E. A.Y. 08-09 THEREFORE NOT RELATING UP TO A.Y.2007.08 RS.43,11,060/- REPAYMENT OF PRINCIPAL LOAN AMOUNT RS.5,00,00,000 /- RS.5,48,47,324/- 5 I.T.A.NOS.5806, 5807/DEL/2012 NET INTEREST PAYMENT RS.7,15,52,676/- 2.7 HE THUS, SUBMITTED THAT, THE CLAIM OF ASSESSEE SHOULD BE ALLOWED AND THE ORDER PASSED BY LD. CIT( A) SHOULD BE UPHELD. 2.8 WE HAVE PERUSED THE ORDERS PASSED BY AUTHORITIE S BELOW AND THE ARGUMENTS ADVANCED BY BOTH THE PARTIE S. THE FACTS AS NARRATED IN THE ORDER OF LD. CIT(A) HA VE NOT BEEN DISPUTED BY THE REVENUE. IT IS AN ADMITTED PO SITION THAT THE ASSESSEE HAS DISALLOWED THE INTEREST THAT HAS NOT BEEN PAID DURING THE YEAR IN ITS COMPUTATION OF INC OME. THE ASSESSING OFFICER WHILE REJECTING THE CLAIM OF ASSESSEE RELATING TO EARLIER YEAR, HAS PLACED RELIANCE UPON THE CHART FILED BY THE ASSESSEE, PLACED AT PAGE 28 OF THE PAP ER BOOK. AS PER THE A.O., THE SITUATION EMANATES AT PAGE 28 CAN NEVER ARISE SINCE THE DISALLOWANCE CANNOT BE MADE M ORE THAN THE EXPENSES CLAIMED. IN THIS REGARD, THE LD. A.R. SUBMITTED THAT THERE WAS CONSEQUENTIAL ERROR IN THE FIGURES WHICH IS ASCERTAINED FORM THE DOCUMENTS. T HE INTEREST OF RS.14,55,944 OUT OF WHICH RS.3,00,000/- WERE PAID AND BALANCE RS.11,55,949/- WAS ADDED U/S 43B(E ), IS APPARENT FROM THE COMPUTATION FOR THE ASSESSMENT YEAR 2003-04 WHICH IS PLACED AT PAGE 32-33 OF THE PAPER BOOK. 2.9 THE CRUX OF ABOVE IS THAT THE ASSESSEE HAS UNDISPUTEDLY PAID A SUM OF RS.12.64 CRORES TO THE B ANK. AS PER LD. A.R., RS.12.64 CRORES CONSTITUTES THE IN TEREST PAYMENT TO THE EXTENT OF RS.7,15,52,676/- FOR THE I NTEREST RELATING UP TO 31.03.2007, WHICH HAS BEEN PAID DURI NG THE 6 I.T.A.NOS.5806, 5807/DEL/2012 RELEVANT FINANCIAL YEAR. THE ACCOUNT WITH THE BA NK WAS FINALLY SETTLED BY MAKING COMPLETE PAYMENT OF INTER EST, PRINCIPAL AND REIMBURSEMENT TO THE BANK FOR LITIGAT ION CHARGES ON 15.06.2007 I.E. MUCH PRIOR TO THE DATE O F FILING OF RETURN FOR THE YEAR UNDER CONSIDERATION, WHICH I S 31.10.2007. THE WORKING OF INTEREST PAYMENT AS CLA IMED BY THE ASSESSEE IS AS UNDER: TOTAL PAYMENT MADE (01.04.2006 TO 15.06.2007) RS.12,64,00,000/- LESS: LITIGATION CHARGES RECOVERED BY THE BANK FROM ASSESSEE RS.5,36,264/- INTEREST RELATING TO PERIOD 01.04.2007 TO 15.06.2007 (I.E. ASSESSMENT YEAR 2008-09. THEREFORE NOT RELATING UPTO ASSESSMENT YEAR 2007-08) RS.43,11,060/- REPAYMENT OF PRINCIPAL LOAN RS.5,00,00,000/- RS.5,48,47,324/- NET INTEREST PAYMENT RS.7,15,52,676/- 2.10 IT IS FURTHER OBSERVED THAT THE ASSESSEE HAS SUBMITTED ALL THE NECESSARY SUPPORTING DOCUMENTS LI KE BANK CERTIFICATE / BANK STATEMENT AS CALLED FOR BY THE ASSESSING OFFICER. MERELY BECAUSE THESE DOCUMENTS / EVIDENCES WERE HAND WRITTEN, CANNOT BE A REASON TO REJECT, WHICH CAN PROVE THE CLAIM RAISED BY THE ASSESSEE. FOR ALLOWING THE CLAIM OF ASSESSEE U/S 43B(E), THE REQU IREMENT UNDER LAW IS THAT THE ASSESSEE SHOULD HAVE MADE ACT UAL PAYMENT OF INTEREST DURING THE YEAR UNDER CONSIDERA TION. THE ASSESSEE HAS FIELD THE DETAILS OF PAYMENTS MADE TO THE BANK DURING THE YEAR AS WELL AS BANK CERTIFICATE SH OWS THE PAYMENTS RECEIVED BY THE BANK WHICH ARE AS UNDER: 7 I.T.A.NOS.5806, 5807/DEL/2012 FROM 01.04.2006 TO 31.03.2007 RS.1,03,00,000/- FROM 01.04.2007 TO 16.06.2007 RS.11,61,00,000/- TOTAL RS.12,64,00,000/- NOW, THE CONSTITUENTS OF PAYMENT OF RS.12,64,00,000 /- ARE AS UNDER: REPAYMENT OF PRINCIPAL RS.5,00,00,000/- LITIGATION CHARGES RECOVERED BY BANK RS.5,36,26 4/- INTEREST RELATING TO THE PERIOD 01.04.2007 TO 15.06.2007 RS.43,11,060/- RS.5,48,47,324/- BALANCE AMOUNT OF INTEREST RS.7,15,52,676/- TOTAL RS.12,64,00,000/- 2.11 WE THEREFORE, DO NOT FIND ANY INFIRMITY WITH T HE FINDINGS OF LD. CIT(A) AND ARE NOT INCLINED TO INTE RFERE WITH THE SAME. ACCORDINGLY, THIS GROUND OF APPEAL RAISE D BY THE REVENUE STANDS DISMISSED. 3. GROUND NO.2: DURING THE YEAR UNDER CONSIDERATION, LD. A.O. OBSERVED THAT THE ASSESSEE HAS ADVANCED INTEREST FR EE LOAN OF RS.3,34,20,787/- FROM THE FOLLOWING ACCOUNTS: FROM BANK OF JS INN (SOLE PROPRIETARY FIRM) RS.98,87,500/- FROM NANAK RAJ JAIN RS.2,35,33,287/- TOTAL RS.3,34,20,787/- 3.1 THE ASSESSING OFFICER HELD THAT THE ASSESSEE HA S TAKEN SECURED LOAN FROM PUNJAB & SINDH BANK ON WHIC H INTERESTS @ 14.25% WAS BEING PAID. THE ASSESSING O FFICER CALCULATED THE RATE OF INTEREST PAID BY THE ASSESSE E TO THE BANK ON THE INTEREST FREE LOAN ADVANCED BY THE ASSE SSEE. HE THUS MADE ADDITION OFRS.47,62,462/- AS NOTIONAL INTEREST. 3.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE PREFERRED THE APPEAL BEFORE LD. CIT(A). 8 I.T.A.NOS.5806, 5807/DEL/2012 3.3 LD. CIT(A) AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE, DELETED THE ADDITION ON THE BASIS THAT SUCH INTEREST HAS ALWAYS BEEN ALLOWED IN THE PAST A ND ACCEPTING THAT THE SAME HAS BEEN USED FOR THE PURPO SE OF BUSINESS. 3.4 AGGRIEVED BY ORDER OF LD. CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. 3.5 LD. D.R. SUBMITTED THAT WHEN THE ASSESSEE HAD SURPLUS FUNDS, THERE WAS NO NEED FOR AN ADDITIONAL TERM LOAN TAKEN BY THE ASSESSEE. HE ARGUED THAT THE ASSE SSEE HAS TAKEN SECURED LOAN FROM PUNJAB & SINDH BANK AND HAS ADVANCED INTEREST FREE LOAN TO VARIOUS PARTIES AS LISTED IN THE ASSESSMENT ORDER. HE SUBMITTED THAT AS THE BANK WAS CHARGING INTEREST @ 14.25%, THE ASSESSING OFFIC ER HAS RIGHTLY APPLIED THE SAME TO THE INTEREST FREE ADVAN CES. HE THUS SUBMITTED FOR THE ADDITION BEING CONFIRMED. 3.6 LD. A.R. SUBMITTED THAT HE INFERENCE DRAWN BY T HE ASSESSING OFFICER IS NOT SUSTAINABLE AS THE TERM LO AN OF RS. 5 CRORES WAS TAKEN BY THE ASSESSEE FROM PUNJAB & SINDH BANK IN THE YEAR 1999, WHICH WAS USED EXCLUSI VELY FOR THE PURPOSE OF BUSINESS AND THE INTEREST THEREO N WAS ALWAYS ALLOWED BY THE ASSESSING OFFICER DURING ASSESSMENT YEAR 2006-07. HE SUBMITTED THAT THIS TE RM LOAN WAS NOT UTILIZED FOR ANY OTHER PURPOSE. HE FU RTHER SUBMITTED THAT THE ASSESSEE HAS NOT TAKEN ANY INTER EST BEARING LOAN THEREAFTER. HE ARGUED THAT THE ASSESS EE WAS HAVING INTEREST FREE LOAN AND ADVANCES AS WELL AS H E HAD 9 I.T.A.NOS.5806, 5807/DEL/2012 GIVEN INTEREST FREE LOANS AND ADVANCES, DETAILS OF WHICH ARE AS UNDER: IN JS INN IN NANAK RAM TOTAL PG.NO. INTT. FREE ADVANCES TAKEN DURING THE YEAR 3480000 1526000 5006000 26 & 27 INTT. FREE ADVANCES GIVEN DURING THE YEAR 3850000 (902500) 2947500 24 & 25 3.7 HE SUBMITTED THAT THE INTEREST FREE FUNDS AVAIL ABLE WITH THE ASSESSEE ARE MORE THAN THE INTEREST FREE A DVANCES GIVEN. HE RELIED UPON VARIOUS JUDICIAL PRONOUNCEME NTS BEFORE LD. CIT(A) WHEREIN IT HAS BEEN HELD THAT IF INTEREST FREE FUNDS AVAILABLE ARE MORE THAN INTEREST FREE AD VANCES GIVEN, NO DISALLOWANCE OF INTEREST CAN BE MADE. LD . A.R. CONTENDED THAT THE NOTIONAL INTEREST CHARGED BY THE ASSESSING OFFICER DOES NOT HAVE ANY BASIS, AS SUCH KIND OF ADDITION HAS NEVER BEEN MADE BY ASSESSING OFFICER I N THE HANDS OF ASSESSEE IN THE PRECEDING YEARS. 3.8 WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW AND THE ARGUMENTS ADVANCED BY BOT H THE PARTIES. IT IS AN UNDISPUTED FACT THAT THE IN TEREST HAD BEEN ALLOWED IN THE PAST ON THE TERM LOAN, ACCEPTIN G THE SAME AS BEING USED FOR BUSINESS PURPOSES. FURTHER, IS ALSO NOT DISPUTED THAT THE ASSESSEE HAS NOT TAKEN A NY FURTHER LOAN FROM THE BANK. IN SUCH A SCENARIO, TH ERE CANNOT BE AN ASSUMPTION THAT, NON-INTEREST BEARING FUNDS HAVE BEEN DIVERTED AS INTEREST FREE LOANS AND ADVAN CES. ON PERUSAL OF VARIOUS DOCUMENTS, RELIED UPON BY THE 10 I.T.A.NOS.5806, 5807/DEL/2012 ASSESSEE IN THE PAPER BOOK, THERE IS ACTUALLY NO NE XUS OF INTEREST BEARING FUNDS BEING UTILIZED FOR GIVING IN TEREST FREE LOANS AND ADVANCES. FOR DISALLOWING ANY CLAIM OF I NTEREST, IT IS NECESSARY THAT THE NEXUS BETWEEN INTEREST BEA RING FUNDS BEING UTILIZED FOR INTEREST FREE LOAN AND ADV ANCES STANDS ESTABLISHED. I IS OBSERVED THAT A LARGE NUM BER OF INTEREST FREE LOANS HAVE BEEN GIVEN BASED ON OPENIN G BALANCE FROM THE CHART REPRODUCED HEREINABOVE. NO ADDITION / DISALLOWANCE ON ACCOUNT OF THESE OPENING BALANCES HAVE BEEN MADE IN THE EARLIER ASSESSMENT Y EARS. THERE BEING NO CHANGE IN THE BOOKS OF ACCOUNTS SO F AR AS THESE OPENING BALANCES ARE CONCERNED IN RESPECT OF THE YEARS UNDER CONSIDERATION, NO INTEREST CAN BE CALCU LATED ON SUCH OPENING BALANCES FOR THE YEARS UNDER CONSIDERATION. IT IS ALSO OBSERVED THAT THE INTERE ST FREE LOANS TAKEN DURING THE YEAR AMOUNTING TO RS.50.06 L ACS WHILE THE INTEREST FREE ADVANCES GIVEN DURING THE Y EAR ARE RS.29.47 LACS. THIS ITSELF SHOWS THAT INTEREST FRE E LOANS GIVEN DURING THE YEAR ARE LESS THAN INTEREST FREE L OANS RECEIVED DURING THE YEAR. HENCE, NO INTEREST CAN B E CALCULATED FOR THE INTEREST FREE LOANS GIVEN DURING THE YEAR. THUS, IN OUR CONSIDERED OPINION, ON THE BASIS OF AB OVE DISCUSSION, WE DELETE THE ADDITION MADE BY THE ASSE SSING OFFICER. THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED. ACCORDINGLY, THE APPEAL FILED BY THE RE VENUE FOR THE ASSESSMENT YEAR 2007-08 STANDS DISMISSED. 11 I.T.A.NOS.5806, 5807/DEL/2012 B. ASSESSMENT YEAR 2008-09: 1. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ENTIRE DISALLOWANCE OF RS.6,11,973/- OUT OF ELECTRI CITY EXPENSES, WHEREAS AS PER HER OWN WORKING THE ELECTRICITY EXPENSES PERTAINING TO THE RELEVANT YEA R WERE RS.12,12,532/- AND NOT RS.12,59,233/- AS CLAIMED BY THE ASSESSEE. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,99,08,000/- MADE ON ACCOUNT OF INTEREST INCOME ON INTEREST FREE LOANS GIVEN BY THE ASSESSEE, WITHOUT APPRECIATING THE FACT THAT AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE THE INTEREST FREE LOANS GIVEN BY HIM DURING THE YEAR WERE MUCH HIGHER THAN THE INTEREST FREE LOANS TAKEN BY HIM DURING TH E YEAR. 4. GROUND NO.1: GROUND NO.1 IS AGAINST DELETION OF ADDITION ON ACCOUNT OF ELECTRICITY EXPENSES AMOUNTING TO RS.6,11,973/-. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CL AIMED ELECTRICITY EXPENSES OF RS.12,59,233/-. HOWEVER, I N THE COMPUTATION OF INCOME, THE ASSESSEE ITSELF DISALLOW ED 10% OF THE SAME FOR PERSONAL USE. HENCE, ASSESSEE CLAI MED DEDUCTION ONLY FOR RS.11,33,310/-. THE LD. A.O. N OTED THAT IN THE P & L ACCOUNT FOR THE ASSESSMENT YEAR 2 007- 08, THESE EXPENSES WERE RS.8,92,958/- VIS--VIS RS.12,59,233/- FOR THE YEAR UNDER CONSIDERATION. H E THUS OBSERVED THAT THERE WAS A STEEP INCREASE IN THE ELE CTRICITY EXPENSES ALTHOUGH THERE WAS DECLINE IN THE BUSINESS 12 I.T.A.NOS.5806, 5807/DEL/2012 RECEIPT FOR GUESTS HOUSE NAMELY JS INN. THE LD. A.O. CALLED FOR THE DETAILS OF BILLS. HE NOTED FROM THE BILLS THAT FOR THE MONTH OF JANUARY 2008, RS.19,75,734/- WAS SHOWN AS MISCELLANEOUS DEBIT / CREDIT AMOUNT, WHICH THE LD. A.O. CONSIDERED TO BE OF PENAL NATURE. HE THUS DISALLOWED AN AMOUNT OF RS.6,11,973/-. 4.1 AGGRIEVED BY THE ORDER OF THE LD. A.O., THE ASS ESSEE PREFERRED APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT (A), THE ASSESSEE SUBMITTED DOCUMENTS BY WAY OF ADDITIONAL EVIDENCE WHICH WERE LEGIBLE COPIES OF ELECTRICITY B ILLS. LD. CIT(A) REFERRED THE SAME TO THE ASSESSING OFFICER F OR HIS REPORT. THE LD. A.O. IN REMAND REPORT HAS ALSO STA TED THAT THE ARREAR AMOUNT AND THE PREVIOUS YEAR'S SURCHARGE SHOULD NOT BE ALLOWED AS THESE ARE IN THE NATURE OF PRIOR PERIOD EXPENSES. IN RESPECT OF ADDITIONAL EVIDENCE BEING BSES RAJDHANI POWER LTD'S LETTER DATED 22.01.2008, THE AO HAS STATED THAT IT IS ON ACCOUNT OF ELECTRICITY CHARGES FOR THE PERIOD FROM 31.08.2005 TO 01.12.2007. THERE FORE, IT ALSO CONTAINS THE PERIOD PRIOR TO F. Y. 2007 - 0 8 I.E. A.Y. 2008 - 09 WHICH IS UNDER CONSIDERATION AND THE EXPE NSES RELATING TO THE PERIOD A.Y. 2008 - 09 CANNOT BE ALL OWED BEING IN THE NATURE OF PRIOR PERIOD EXPENSES. 4.2 FROM THE REMAND REPORT, IT CAN BE ASCERTAINED T HAT THE EXPENSES ON ELECTRICITY BILLS AMOUNTING TO RS.12,59,233/- FOR THE YEAR UNDER CONSIDERATION WAS NOT DISPUTED, WHICH IS EVIDENT FROM THE ELECTRICITY BIL LS. LD. 13 I.T.A.NOS.5806, 5807/DEL/2012 CIT(A) THUS ALLOWED THE CLAIM OF THE ASSESSEE AFTER RELYING UPON VARIOUS DETAILS FILED BY THE ASSESSEE. 4.3 AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S IN APPEAL BEFORE US NOW. 4.4 LD. D.R. SUBMITTED THAT THE ISSUE NEEDS TO BE S ENT BACK TO THE ASSESSING OFFICER FOR VERIFICATION WHET HER THE ASSESSEE HAS CLAIMED ANY BILLS RELATING TO THE PRIO R PERIOD IN THE YEAR UNDER CONSIDERATION. 4.6 ON THE CONTRARY, LD. A.R. RELIED UPON THE FINDI NGS OF LD. CIT(A). 4.7 WE HAVE PERUSED THE DETAILS AND THE ARGUMENTS ADVANCED BY BOTH THE PARTIES. IT IS OBSERVED THAT LD. CIT(A) HAS DEALT WITH THE ISSUE AS UNDER: 3.5 THE APPELLANT FURNISHED SUBMISSIONS DATED 07.08.2012 IN REPLY TO AO'S REMAND REPORT DATED 11.07.2012. THESE SUBMISSIONS HAVE ALREADY BEEN ABSTRACTED ABOVE. IN BRIEF, IN REPLY TO REMAND REPO RT IT HAS BEEN STATED THAT THE PAYMENT OF ELECTRICITY BIL LS OF RS. 12,59,233/- DURING THE YEAR IS NOT IN DISPUTE SINCE, IT IS EVIDENT FROM THE ELECTRICITY RECEIPTED BILLS. IT HAS BEEN SUBMITTED THAT THE QUERY OF THE AO WAS TO FILE THE PHOTOCOPIES OF ELECTRICITY BILLS IN SUPPOR T OF CLAIM OF RS. 12,59,233/-. ACCORDINGLY, THE APPELLAN T FURNISHED COPIES OF SUCH BILLS ON WHICH PAYMENT OF RS.12,59,233/- WAS ACKNOWLEDGED. THESE BILLS WERE 8 IN NUMBER AS IS MENTIONED IN THE CHART IN ASSTT. ORDER. THEREAFTER, THE AO MADE HIS WORKING ON THE BASIS OF THESE 8 BILLS ONLY WITHOUT CONFRONTING ANY ISSUE RELATING TO ELECTRICITY EXPENSES CLAIMED MADE BY THE APPELLANT. THE APPELLANT WAS THUS NEVER ASKED T O FURNISH BILLS FOR ALL MONTHS. INCIDENTALLY, THE REM AINING BILLS WHICH WERE FOR THE MONTHS OF SEPTEMBER 2007, OCTOBER 2007 AND DECEMBER 2007 WERE ALSO NOT AVAILABLE AND WERE NOT PROPERLY MAINTAINED SINCE, 14 I.T.A.NOS.5806, 5807/DEL/2012 THESE BILLS WERE NOT ACKNOWLEDGING ANY PAYMENT AND IT IS A COMMON KNOWLEDGE THAT WHATEVER ARREAR REMAINS, THE SAME STANDS INCLUDED IN THE SUBSEQUENT BILLS. THUS, IT IS ONLY ON RECEIPT OF THE ASSTT. OR DER THAT IT WAS NOTICED THAT THE AO HAD ALLOWED ONLY THE CURRENT CHARGES AS PER 8 BILLS FILED. THEREFORE, TO CALCULATE THE CURRENT CHARGES FOR WHOLE YEAR, THE N EED AROSE FOR TRACING AND FILING THE BILLS FOR BALANCE 3 MONTHS, WHICH COULD BE TRACED OUT AND HAS BEEN FILE D DURING APPEAL AS ADDITIONAL EVIDENCES. HENCE, IT HA S BEEN PLEADED THAT THERE HAS BEEN A REASONABLE CAUSE FOR NOT FILING THESE BILLS DURING ASSTT., WHICH SHO ULD NOW BE ADMITTED. THE LD. AR ALSO SUBMITTED THAT ALTHOUGH IN REMAND REPORT THE AO HAS NOT GIVEN ANY REASON FOR NOT ADMITTING THE ADDITIONAL EVIDENCE BE ING RAJDHANI BSES LTD'S LETTER DATED 22.01.2008, HOWEVER, IT HAS BEEN PLEADED THAT THIS DOCUMENT ALS O NEEDS TO BE ADMITTED. IN THIS REGARD, IT HAS BEEN SUBMITTED THAT DURING ASSTT., THE AO NEVER PUT ANY QUERY FOR DISALLOWING ARREARS ETC. AND THERE WAS NO OCCASION TO FILE THIS LETTER. NOW, ON RECEIPT OF AS STT. ORDER, IT HAS BEEN NOTICED THAT THE ARREARS ARE NOT BEING ALLOWED, HENCE, FOR EXPLAINING THE NATURE OF THESE ARREARS, THE NEED AROSE TO FURNISH THESE DOCUMENTS. IN VIEW OF THIS, IT HAS BEEN PLEADED THA T ALL THE FOUR ADDITIONAL EVIDENCES SHOULD BE ADMITTE D, ALSO BECAUSE THESE ARE IN THE NATURE OF STATUTORY DOCUMENTS BEING ISSUED BY BSES RAJDHANI LTD. 3.6 I HAVE CAREFULLY CONSIDERED THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCES. THE ASSESSING OFFICER, DURING ASSTT. ASKED THE APPELLANT TO FILE THE ELECTRICITY BILLS IN SUPPORT OF ELECTRICITY PAYMENT S OF RS.12,59,233/-. THE APPELLANT FILED ALL THE BILLS W HICH SHOWED THIS PAYMENT. IN ASSTT. ORDER, THE AO MADE DISALLOWANCE ALSO FOR THE REASON THAT THE ARREARS E TC. CANNOT BE ALLOWED. NO QUERY REGARDING ARREARS HAS BEEN RAISED DURING ASSTT. PROCEEDINGS. HENCE, THESE 3 BILLS WERE NOT FILED BY THE APPELLANT. THE APPELLAN T ALSO SUBMITTED THAT THESE WERE ALSO NOT MAINTAINED AND AVAILABLE AT THAT TIME AS THERE WAS REALLY NO 15 I.T.A.NOS.5806, 5807/DEL/2012 NECESSITY TO KEEP THEM SAFE SINCE THE ARREARS ARE AUTOMATICALLY INCLUDED IN SUBSEQUENT BILLS. UNDER THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THESE 3 BILLS SHOULD BE ADMITTED AS ADDITIONAL EVIDENCES. NOW, REGARDING ADDITIONAL EVIDENCE NAMELY RAJDHANI BSES LTD.'S LETTER DATED. 22.01.2008, I FIND MYSELF IN AGREEMENT WITH THE CONTENTION OF THE LD. AR THAT SINCE, NO QUERY WAS RAISED REGARDING ALLOWABILITY OF ARREARS / NATURE O F ARREARS, THEREFORE, THERE WAS NO OCCASION / NEED TO FILE THE SAID LETTER DURING ASSTT. IN ANY CASE, ALL THE 4 DOCUMENTS ARE IN THE NATURE OF STATUTORY DOCUMENTS BEING ISSUED BY RAJDHANI BSES. HENCE, FOR ABOVE MENTIONED REASONS I AM INCLINED TO ADMIT THE SAME. 3.7 THE SUBMISSIONS OF THE LD. AR ON THIS ISSUE HAV E ALREADY BEEN ABSTRACTED ABOVE. THE FACTS, SUBMISSIONS AND OTHER MATERIAL HAVE BEEN CAREFULLY CONSIDERED BY ME. IN THIS CASE, THE APPELLANT HAS B EEN CLAIMING ELECTRICITY EXPENSES ON PAYMENT BASIS. THE PREMISES NAMELY B - 14, VASANT VIHAR, NEW DELHI IS BEING PARTLY USED FOR NON - BUSINESS AND MAINLY USE D FOR BUSINESS PURPOSES. THE TOTAL PAYMENT OF ELECTRI CITY EXPENSES WERE OF RS.12,59,233/-. THE APPELLANT SELF DISALLOWED 10% FOR NON - BUSINESS PURPOSES, THEREFO RE CLAIMED ONLY BALANCE AS BUSINESS EXPENSE AMOUNTING TO RS. 11,33,310/-. THE AO ASKED THE APPELLANT TO F ILE EVIDENCE FOR PAYMENT OF RS.12,59,233/-. THE APPELLANT FILED 8 BILLS SHOWING RECEIPTED PAYMENTS FOR RS. 12,59,233/-. THE AO HOWEVER, NOTICED THAT THESE BILLS CONTAIN CURRENT ENERGY CHARGES AS WELL AS ARREARS. THE AO ALSO NOTICED THAT IN THE BILL FOR JANUARY 2008, RS.19,75,734/- WAS ALSO SHOWN AS MISC. DR. 1 CR. AMOUNT WHICH THE AO THOUGHT MAY BE OF SOME PENAL NATURE. THE AO ALSO NOTICED THAT THER E IS DECLINE IN BUSINESS RECEIPTS WHILE THE CLAIM OF ELECTRICITY - EXPENSES HAS INCREASED FROM RS.8,92,958/- FROM LAST YEAR TO RS. 12,59,233/- DURING THE YEAR UNDER CONSIDERATION. HENCE, THE AO ALLOWED ONLY THE CURRENT YEAR CHARGES OF RS. 5,21,331/- AND DISALLOWED THE BALANCE. 16 I.T.A.NOS.5806, 5807/DEL/2012 THE AO HAS ALLOWED ONLY CURRENT YEAR CHARGES. ON EXAMINING THE ADDITIONAL EVIDENCE I.E. BILLS FOR SEPTEMBER 2007, OCTOBER 2007 AND DECEMBER 2007, THE TOTAL OF CURRENT YEAR CHARGES FOR THESE 3 MONTH S CALCULATES AT RS.1,05,798/- AS PER THE DETAILS GIVE N IN APPELLANT'S SUBMISSIONS ABSTRACTED ABOVE. HENCE, EVEN ON ALLOWING, ONLY CURRENT YEAR CHARGES, THE CORRECT AMOUNT CALCULATES AT RS.6,27,129/-. NOW, TH E BILL RECEIVED FOR JANUARY 2008 SHOWS AN AMOUNT OF RS. 19,75,734/- AS MISC. DR. / CR. THE AO HAS STATE D IN THE ASSTT. ORDER IT MAY BE OF SOME PENAL NATURE. THE APPELLANT HAS FILED BSES RAJDHANI LETTER DATED 22.01.2008 ALONG WITH AN ANNEXURE. THIS LETTER IS DATED 22.01.2008 RECEIVED DURING THE YEAR AND THE DEMAND OF RS. 19,75,734/- HAS BEEN CREATED FOR THE FIRST TIME DURING THIS YEAR. THIS LETTER AND ANNEXU RE EXPLAINS THE NATURE OF THIS DEMAND. IT RELATES TO T HE PERIOD FROM 31.08.2005 TO 01.12.2007. IT MENTIONS A S UNDER:- 'IT IS BRINGING TO YOUR ATTENTION THAT MULTIPLYING FACTOR OF THE NEW METER IS 40/ 1 WHILE IT WAS BILLED ON THE BASIS OF 20/1. HENCE WE HAVE DEBITED AN AMOUNT OF RS.1975733.68/- ON ACCOUNT OF UNDER BILLED UNITS OF 386376 IN YOUR JAN-2008 BILL. YOU ARE REQUESTED TO MAKE THE PAYMENT WITHIN DUE DATE WHICH IS ALREADY EXTENDED TILL 11.02.2008. CALCULATION SHEET OF SUCH AMOUNT OF RS. 1975733.68 IS ENCLOSED FOR YOUR REFERENCE & RECORD. ' FROM THIS LETTER, IT IS CLEAR THAT BSES HAS BEEN APPLYING MULTIPLYING FACTOR AS 20/ 1. HOWEVER, IT APPLIED FACTOR OF 40 / 1 FOR THE BILLS RAISED DURIN G 31.08.2005 TO 01.12.2007 FOR THE FIRST TIME ALONGWI TH JANUARY 2008 BILL AND CREATED A DEMAND OF RS.19,75,734/-. THUS, THE DEMAND HAS BEEN CREATED FOR THE FIRST TIME DURING THIS YEAR. PRIOR TO THIS, THERE WAS NO SUCH DEMAND CREATED. HENCE' THIS LIABILITY I S NOT OF PRIOR PERIOD SINCE, CREATED FOR THE FIRST TI ME DURING THE YEAR UNDER CONSIDERATION. THERE WAS NO 17 I.T.A.NOS.5806, 5807/DEL/2012 LIABILITY ON THE APPELLANT FOR THIS LIABILITY PRIOR TO RECEIPT OF BILL WHICH WAS RECEIVED DURING THE YEAR. HENCE, IT IS NOT IN THE NATURE OF SOME PENALTY. ACCORDINGLY, I HOLD THAT IT IS A LIABILITY WHICH PE RTAINS TO THE YEAR UNDER CONSIDERATION AND NOT A PENALTY A ND ACCORDINGLY, FULLY ALLOWABLE SUBJECT TO AND TO THE EXTENT OF PAYMENTS MADE. IT IS ALSO NOT IN DISPUTE THAT IN THE CASE OF THE APPELLANT THE ELECTRICITY EXPENS ES HAVE ALWAYS BEEN ALLOWED ON PAYMENT BASIS. HENCE, THE DISALLOWANCE ON ACCOUNT OF ELECTRICITY IS UNWARRANTED. THERE IS ONE MORE ANGLE OF THIS ISSUE AS ARGUED BY THE LD. AR. THIS LIABILITY OF RS.19,75,73 4/- RELATES TO THE PERIOD FROM 31.08.2005 TO 01.12.2007 I.E. 27 MONTHS. THESE 27 MONTHS INCLUDE 8 MONTHS OF THE YEAR UNDER CONSIDERATION COMMENCING FROM 01.04.2007 TO 01.12.2007. NOW, IF THE PROPORTIONATE LIABILITY FOR 8 MONTHS STANDS CALCULATED, IT WILL CALCULATE AT RS.5,85,403/-. THIS AMOUNT, IF TAKEN A S CURRENT YEAR'S LIABILITY, THEN THE TOTAL CURRENT YE AR'S CLAIM SHALL CALCULATE AT RS.12, 12,532/- (521331 + 105798 + 585403). AGAINST THIS THE APPELLANT HAS CLAIMED EXPENSES OF RS.12,59,233/-. THEREFORE, EVEN IF THE ALLOWANCE IS CALCULATED ON CURRENT YEAR'S LI ABILITY BASIS, THE GROSS CLAIM WILL CALCULATE AT RS.12,12,5 32/. THE OBSERVATION OF THE AO THAT THE ELECTRICITY EXPE NSE HAS INCREASED DISPROPORTIONATELY IF COMPARED WITH EARLIER YEARS, IS OF NO RELEVANCE UNDER THE FACTS O F THE CASE, SINCE, IN THIS CASE, ELECTRICITY EXPENSES ARE BEING CLAIMED AS A DEDUCTION IN THE YEAR OF PAYMENT. THEREFORE, THERE IS NO LOGIC IN COMPARING THE ELECT RICITY CLAIM MADE DURING THE YEAR WITH BUSINESS RECEIPTS. IT IS TO BE REMEMBERED THAT THE TOTAL PAYMENT MADE DURING THE YEAR OF RS. 12,59,233/- IS NOT IN DISPUT E AT ALL. IN VIEW OF ABOVE DISCUSSION, WE DELETE THE DISALLOWANCE OF RS. 6,11,973/-. 18 I.T.A.NOS.5806, 5807/DEL/2012 4.8 WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LD. CIT(A). ACCORDINGLY, WE DECLINE TO INTERFERE WITH IT. WE THUS DISMISS THIS GROUND OF REVENUES APPEAL. 5. GROUND NO.2: GROUND NO.2 FOR THE ASSESSMENT YEAR 2008-09 IS IDENTICAL TO THE GROUND NO.2 FOR THE ASSESSMENT YEA R 2007-08. TO AVOID REPETITION, WE RELY UPON THE DISCUSSION AND FINDINGS GIVEN THEREIN. ACCORDINGLY , GROUND NO.2 IN REVENUES APPEAL FOR THE ASSESSMENT YEAR 2008-09 STANDS DISMISSED. 6. ACCORDINGLY, APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2008-09 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2016. SD./- SD./- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 10.06.2016 SP. COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER: AR (ITAT, NEW DELHI) 19 I.T.A.NOS.5806, 5807/DEL/2012 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7/6/16 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 10/6/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 10/6 SR. PS/PS 7 FILE SENT TO BENCH CLERK 15/6 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER