Shri Ramavtar Hukumchand Mittal, Ahmedabad V. The Income tax Officer,Ward-2(3), Ahmedabad

ITA 60/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6148 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI
• Assessee Lawyers: S N DIVATIA
• Keywords: Additional evidence; Bad and doubtful debts; Corroborative evidences; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING : 01/07/2011 DRAFTED ON: 04/ 07/2011 ITA NO.60/AHD/2011 ASSESSMENT YEAR : 2007-08 RAMAVTAR HUKUMCHAND MITTAL PROP.MITTAL TRADING CORPN E-2, MADHAVPURA MKT. SHAHIBAUG, AHMEDABAD VS. THE ITO WARD-2(3) AHMEDABAD PAN/GIR NO. : AAWPM 1923 G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S. N. DIVATIA (ADV) RESPONDENT BY: SHRI G.S. SOURYAVANSHI, SR.D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XVI , AHMEDABAD DATED 08/11/2010. THE GROUNDS RAISED ARE HEREBY DEC IDED AS FOLLOWS. 2. GROUND NOS.1.1 & 1.2 ARE GENERAL IN NATURE NE ED NO LEGAL ADJUDICATION, HENCE DISMISSED. 3. GROUND NOS.2.1, 2.2. & 2.3 ARE AS FOLLOWS: 2.1. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCES OF CLAIM OF BAD DEBTS OF RS.17,59,670. ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 2 - 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD DISALL OWANCE OF BAD DEBTS. 2.3. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACT THAT THE APPELLANT HAD NOT FILED ANY EVIDENCE TO SH OW THAT THE DEBT WAS, IN FACT, PART OF SALES IN EARLIER YEA RS AND OFFERED TO TAX. 3.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING AS SESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT, 1961 DATED 29/12/ 2009 WERE THAT THE ASSESSEE AS AN INDIVIDUAL IS IN THE BUSINESS OF TRA DING OF GRAINS. IT WAS NOTICED BY THE AO THAT AS PER PROFIT & LOSS ACC OUNT, THE ASSESSEE HAS DEBITED BAD DEBTS OF RS.17,59,670/-. IN COMPLIANCE OF SHOW-CAUSE NOTICE, IT WAS INFORMED THAT THERE WAS A DEBTOR NAM ELY, RAJHANS FOOD LTD. THE SAID AMOUNT WAS STATED TO BE OUTSTANDING S INCE LONG. INITIALLY,IT WAS INFORMED THAT LEGAL PROCEEDING FOR THE RECOVER Y OF THE DEBT WAS NOT INITIATED. THE SAID DENIAL OF INITIATION OF ANY LEG AL PROCEEDINGS AGAINST THE SAID PARTY WAS STATED TO BE UNAMBIGUOUS. IT WAS AL SO INFORMED TO THE AO THAT IT WAS SUFFICIENT TO WRITE-OFF THE AMOUNT IN THE BOOKS . FOR THE SAKE OF COMPLETENESS, SUBMISSIONS OF THE ASSESSEE AS REC ORDED IN THE ASSESSMENT ORDER, ARE REPRODUCED BELOW:- 1. THE BAD DEBTS CLAIMED OF RS.17,59,670/- IS IN THE CASE OF RAJHANS FOOD LIMITED WHICH WAS DEBTOR PARTY. THE A MOUNT WAS OUTSTANDING SINCE LONG. THE SALES WERE MADE TO THE PARTY IN THOSE YEARS (I.E. BEFORE 8 TO 9 YEARS) FOR WHICH ASSESSEE IS NOT REQUIRED TO MAINTAIN THE BOOKS / RE CORDS ETC. ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 3 - 2. THE BAD DEBT IS CLAIMED AFTER TAKING INTO ACCO UNT IN COMPUTING THE TOTAL INCOME. I.E. SALES INCOME AND T HUS THE CONDITIONS ARE SATISFIED. 3. LEGAL PROCEEDINGS ON THE DEBTOR FOR RECOVERY OF DEB T NOT INITIATED. 4. MERELY WRITING OFF OF THE AMOUNT IS SUFFICIENT T O ESTABLISH THE CLAIM. 3.2. THE AO HAS DISMISSED THE EXPLANATION OF THE AS SESSEE BY ASSIGNING FOLLOWING REASONS:- 1. THE ASSESSEE STATED THAT RAJHANS FOOD LIMITED WAS A DEBTOR PARTY & IS NOT SURE WHEN THE SALES WERE MADE TO RAJHANS. THUS, IT IS NOT ESTABLISHED THAT THE SALES, IF AT ALL MADE TO THE PARTY, HAD BEEN ACCOUNTED FOR IN THE BU SINESS RECEIPTS OF EARLIER YEARS. NO COPY OF BILLS OR ANY OTHER EVIDENCES TO SUPPORT THE SALES FURNISHED. 2. THE ASSESSEE CLAIMS THAT HE IS NOT REQUIRED TO K EEP RECORD FOR MORE THAN 6 YEARS. WHEN A CLAIM IS MADE FOR DE DUCTION FROM THE TOTAL INCOME, THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS O F THE CLAIM WITH SUPPORTING EVIDENCES. IN THE ABSENCE OF ANY SUPPORTING EVIDENCE, IT CANNOT B E VERIFIED THAT THERE WAS IN FACT A SALE OF GOODS BY THE ASSES SEE ABOUT 8 TO 9 YEARS BACK AND THE PAYMENT WAS NOT RECEIVED TI LL 31/03/2007. 3. THE ASSESSEE HAS NOT PROVED BEYOND DOUBT THAT TH E DEBT WRITTEN OFF IS ACTUALLY A BAD DEBT, IN THE ABSENC E OF ANY SUPPORTING EVIDENCES. 4. THE AMOUNT OF DEBT INVOLVED IS RS.17,59,670/- AN D IT IS STRANGE THAT NO LEGAL PROCEEDINGS HAVE BEEN INITIAT ED FOR RECOVERY OF THE DEMAND FOR A NUMBER OF YEARS AND SI MPLY WRITTEN OF DEBT AS IRRECOVERABLE IN THIS YEAR. ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 4 - 3.3. AFTER ASSIGNING THOSE REASONS, IT WAS HELD BY THE AO THAT EVEN THE GENUINENESS OF BAD DEBT WAS NOT ESTABLISHED, THEREF ORE DISALLOWED THE SAME. THE MATTER WAS CARRIED BEFORE THE FIRST APPE LLATE AUTHORITY. 4. BEFORE LD.CIT(A), THE ASSESSEE HAS PLACED RELIAN CE ON TRF LTD.VS. CIT REPORTED AT [2010]323 ITR 397 (SC) AND ARGUED THAT THE ASSESSEE WAS NOT REQUIRED TO KEEP THE BOOKS OF ACCOUNT PRIOR TO SIX YEARS, HENCE WAS UNABLE TO FURNISH THE COPIES OF THE SALES BILLS . AS PER ASSESSEE, IT COULD ALSO NOT BE PROVED FROM THE RECORD THAT THE S AID AMOUNT WAS PART OF THE INCOME OF EARLIER YEAR. HOWEVER, IT WAS ARGUED THAT THE SAID DEBT WAS APPEARING IN THE PAST YEARS IN THE BOOKS OF ACCOUNT UNDER THE HEAD SUNDRY DEBTORS, THEREFORE IT WAS CLEAR THAT THE B AD DEBT WAS PART OF THE SALES IN THE EARLIER YEARS. THE ASSESSEE HAS FURN ISHED SOME CHEQUE NUMBERS WHICH WERE ALLEGEDLY REMAINED UN-ENCASHED. THE LD.CIT(A) WAS NOT CONVINCED AND HELD THAT NEITHER DURING THE ASSESSMENT PROCEEDING NOR BEFORE HIM ANY EVIDENCE WAS FILED TO SHOW THAT THE DEBT WAS, IN FACT, PART OF THE SALES IN ANY OF THE EARLI ER YEARS. IN RESPECT OF THE CHEQUES, LD.CIT(A) HAS OPINED THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE CHEQUES WERE ISSUED BY THAT VERY PARTY AND ACTU ALLY IN RESPECT OF THE SAID DEBT. THOSE CHEQUES HAVE IN FACT NOT PROVED THAT THE SAME WERE IN RESPECT OF THE SALE PROCEEDS ACTUALLY RECORDED IN T HE BOOKS. THE ACTION OF THE AO WAS AFFIRMED BY ASSIGNING FOLLOWING REASO NS:- 2.1.3. I HAVE CONSIDERED THE SUBMISSION MADE BY TH E APPELLANT AND OBSERVATION OF THE AO. NEITHER DURIN G THE ASSESSMENT PROCEEDINGS NOR DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED ANY EVIDENCE TO SHOW THAT THE DEBT WAS IN FACT ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 5 - PART OF SALES IN ANY EARLIER YEARS AND IT WAS OFFERED FOR INCOME IN THE PARTICULAR YEAR. ALL THAT THE APPELLANT HAS FI LED IN A SELF SERVING STATEMENT MENTIONING SOME BILL NUMBERS AND CHEQUES. THE CHEQUES ARE ISSUED BY SOME PARTY, WHICH IS NOT KNOW N. THEY SIMPLY SAY THAT A PARTICULAR AMOUNT IS TO BE PAID T O MITTAL TRADING CORPORATION. THESE DO NOT PROVE THAT THE CHEQUES W ERE IN RESPECT OF SALE PROCEEDS AND THE DETAILS SUBMITTED IS TOTAL LY UNSUPPORTED BY COPIES OF BILLS OR THE LEDGER ACCOUNT SHOWING SA LES. FURTHER, UNLESS THE SALES ARE SHOWN TO BE PART OF TOTAL SALE S IN A PARTICULAR YEARS AND P&L ACCOUNT IT CANNOT BE ACCEPTED THAT TH IS AMOUNT WAS SHOWN AS INCOME IN THE EARLIER EYAR. THE DECISION OF HONORABLE SUPREME COURT IN THE CASE OF TRF LTD. SUPRA DOES NO T COME TO THE HELP OF THE ASSESSEE BECAUSE THIS DECISION ALSO MEN TIONS THAT ALTHOUGH THE ASSESSEE IS NOT REQUIRED TO PROVE THAT THE DEBT HAS BECOME BAD, BUT IT IS DEFINITELY REQUIRED TO PROVE THAT THE DEBT WAS PART OF INCOME IN THE EARLIER YEAR AND IT HAS WRITT EN OFF DURING THE YEAR. IN VIEW OF THIS REASON, THE ASSESSEE IS NOT FULFILLING THE CONDITIONS REQUIRED FOR CLAIM OF BAD DEBT AND THERE FORE THE DISALLOWANCE MADE BY THE AO IS CORRECT AND THIS PAR T OF THE GROUNDS OF APPEAL IS DISMISSED. 5. IN THE LIGHT OF THE ABOVE DISCUSSED FACTUAL BACK GROUND, THE ASSESSEE HAS NOW PLACED A PETITION TO ADMIT AN ADDITIONAL EVIDENCE. THE ADDITIONAL EVIDENCE IS A COMPLAINT MADE U/S.138 OF NEGOTIABLE INSTRUMENT ACT, CRIMINAL COMPLAINT NO.365/1998 DATE D 21/02/98. THE LD.AR MR.S.N. DIVATIA HAS VEHEMENTLY PLEADED TO ADM IT THE SAID ADDITIONAL EVIDENCE. ON THE OTHER HAND, FROM T HE SIDE OF THE REVENUE LD.DR MR.G.S. SOURYAVANSHI HAS OBJECTED THE ADMISSI ON OF ADDITIONAL EVIDENCE. 6. ON THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE , WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. IN THIS REGARD, I T IS WORTH TO REPRODUCE THE PROCEDURE OF PRODUCTION AND ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 6 - TRIBUNAL AS PRESCRIBED UNDER THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963, RULE-29, REPRODUCED BELOW:- PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE TRIBU NAL 29. THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLE D TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFO RE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED O R ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTA NTIAL CAUSE, OR, IF THE INCOME-TAX AUTHORITIES HAVE DECIDED THE CASE WI THOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EV IDENCE EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRIBUNAL, FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. 6.1. THE LAW IN RESPECT OF ADMISSION OF ADDITIONAL EVIDENCE IS WELL- SETTLED THAT THE ADMISSION OF ADDITIONAL EVIDENCE A T THE APPELLATE STAGE IS NOT REFERABLE TO ANY RIGHT OF THE PARTY TO PRODUCE THE EVIDENCE, BUT IS DEPENDANT SOLELY ON THE REQUIREMENT OF THE COURT; A ND THAT THE COURT HAS TO DECIDE WHETHER IT REQUIRES SUCH EVIDENCE FOR PRO NOUNCING ITS JUDGEMENT OR DEMANDS AN EVIDENCE FOR ANY OTHER SUBS TANTIAL CAUSE. THOUGH THE DISCRETION IS AVAILABLE TO THE TRIBUNAL, BUT THIS DISCRETION TO ADMIT ADDITIONAL EVIDENCE, SHOULD BE JUDICIALLY EXE RCISED. AS FAR AS THE CIRCUMSTANCES OF THIS CASE ARE CONCERNED, THE SAID CRIMINAL COMPLAINT WAS DATED 21/02/1998. WHICH MEANS THAT DURING THE COUR SE OF HEARING BEFORE A.O., WHICH WAS STARTED IN THE YEAR 2009 AND COMPLE TED VIDE ORDER U/S.143(3) DATED 29/12/2009, THE SAID EVIDENCE WAS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSEE. THE AO HAS GIVEN REAS ONABLE OPPORTUNITY BY ISSUING A SHOW-CAUSE NOTICE BUT THAT ALLEGED COM PLAINT WAS NOT ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 7 - PRODUCED. RATHER AS PER ASSESSEES OWN REPLY, AS R EPRODUCED HEREINABOVE, IT IS EVIDENT THAT THE ASSESSEE HAS CATEGORICALLY MENTIONED THAT NO LEGAL PROCEEDING WAS INITIATED AGAINST THE SAID DEBTOR FOR THE RECOVERY OF THE IMPUGNED DEBT. THE TOTALITY OF THE CIRCUMSTANCES, THUS, DEMANDS NOT TO ADMIT THIS ADDITIONAL EVIDENCE. PET ITION SEEKING ADMISSION OF ADDITIONAL EVIDENCE IS HEREBY REJECTED. 7. WE ARE NOT EVEN CONVINCED BY THE PLEADINGS OF LE ARNED AUTHORISED REPRESENTATIVE ABOUT THE CLAIM OF BAD DE BT IN VIEW OF THE REASONS FOLLOW HEREINBELOW. IN OUR CONSIDERED VIEW , THE ASSESSEE HAS NOT ESTABLISHED THAT THE DEBT IN QUESTION HAD EVER BEEN DECLARED AS PART OF THE INCOME IN THE PAST. FACTS HAVE REVEALED THAT THE A SSESSEE HAS NOT ESTABLISHED THAT THE IMPUGNED CHEQUES WERE EVER REL ATED TO THE SALES RECORDED IN THE BOOKS OF ACCOUNT IN THE PAST. AN UN DISPUTED FACT WAS THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE SAID OUTS TANDING AMOUNT, IF ANY APPEARING IN THE BOOKS OF ACCOUNT, WAS ACTUALLY IN CONNECTION OF THAT PARTICULAR DEBTOR. WORSE PART WAS THAT EVEN THE BOO KS OF ACCOUNT OF THE PAST YEARS COULD NOT BE PRODUCED ON THE PRETEXT THA T THE ASSESSEE WAS NOT EXPECTED TO KEEP THE BOOKS OF ACCOUNT BEYOND SIX YE ARS. HOWEVER, THE RELATED PROVISION, I.E. RULE 6F(5) OF INCOME TAX RU LES PRESCRIBES THE SAID CONDITION IN RESPECT OF PERSONS CARRYING ON CERTAIN PROFESSIONS. HOWEVER, THE ASSESSEE DOES NOT FALL IN THAT CATEGOR Y OF PROFESSIONS. MEANING THEREBY THE ALLEGED CLAIM REMAINED UNSUBSTA NTIATED AND UNCORROBORATED. WE HAVE CAREFULLY PERUSED THE CITED DECISION OF TRF LTD. 323 ITR 397 (SC) , WHICH PRESCRIBES THAT WHEN A BAD DEBT OCCURS THEN THE CONNECTED BAD DEBT ACCOUNT IS DEBITED AND THE CUSTO MERS ACCOUNT IS ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 8 - CREDITED. THE HONBLE HELD THAT IN THAT MANNER BY P ASSING SUCH ENTRY THE ASSESSEE CLOSES THE ACCOUNT OF THE CUSTOMER. WHICH MEANS THAT THE ASSESSEE HAS TO PLACE ON RECORD THE NAME OF THE PAR TY IN HIS BOOKS OF ACCOUNT AND TO PLACE ON RECORD THAT, IN FACT, THE I MPUGNED DEBT WAS AS PER HIS BOOKS OF ACCOUNT WHICH HAS FACTUALLY BEEN WRITT EN OFF BY PASSING THE CORRESPONDING ENTRY TO WRITE OFF THE DEBTORS ACCO UNTS IN THE PREVIOUS YEAR. THAT THE FACTS OF THE PRESENT CASE ARE NOT PARI MATERIA WITH THE CITED DECISION OF THE HONBLE APEX COURT, HENCE, DO NOT RENDER ANY HELP TO THE ASSESSEE. IN THE PRESENT APPEAL THE APPELLA NT HAD FAILED ON ALL COUNTS. THE REQUIREMENT OF LAW AS ENUNCIATED BY THE HONBLE APEX COURT WAS NOT FULFILLED. THAT, EVEN THE GENUINENESS OF THE CLAIM HAVE BECOM E DOUBTFUL BECAUSE AT THE INITIAL STAGE OF ASSESSMENT THE ASSE SSEE HAS ADMITTEDLY DENIED THE EXISTENCE OF ANY LEGAL PROCEEDINGS AGAIN ST THE SAID IMPUGNED DEBTOR. IT ALSO REMAINED UN-SUBSTANTIATED THAT THE SAID COMPLAINT HAD ANY LINK WITH ACCOUNTS OF THE ASSESSEE. TOTALITY OF TH E CIRCUMSTANCES THUS DEMANDS TO REJECT THE CLAIM AND UPHOLD THE FINDINGS OF THE AUTHORITIES BELOW. THESE GROUND ARE DISMISSED. 8 . GROUND NOS.3.1, 3.2 & 3.3 ARE AS FOLLOWS:- 3.1. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON F ACTS IN CONFIRMING THE DISALLOWANCES OF INTEREST EXP. OF RS .82,657. 3.2. THAT IN THE FACTS AND CIRCUMSTANCES OF CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD DISALL OWANCE OF INTEREST OF RS.82,657. 3.3. THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLO WANCE ON THE GROUND OF FAILURE TO PROVE COMMERCIAL EXPEDI ENCY ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 9 - BECAUSE THE APPELLANT HAD RAISED THE CONTENTION REL ATING TO THE FREE FUNDS WHICH HAS NOT BEEN DEALT WITH AND DI SPOSED OF BY HIM. 8.1. THE ASSESSEE HAS CLAIMED INTEREST OF RS.2,92,3 22/-. IN RESPECT OF AN ADVANCE TO M/S.GOPAL TRADING COMPANY OF RS.2 LAC S AND AN ANOTHER ADVANCE TO SUMITRA SANJEEV AGARWAL OF RS.4,88,806/- , THE ASSESSING OFFICER HAS HELD THAT HAD THE INTEREST @ 12% BE CHA RGED, THEN THE AMOUNT OF HUGE INTEREST AS CLAIMED COULD HAVE BEEN REDUCED . THE ASSESSING OFFICER, THEREFORE, CALCULATED THE DISALLOWANCE OF RS.8,02,657/- AND TAXED ACCORDINGLY. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(APPEALS). 9. THE LEARNED CIT(APPEALS) HAS EXAMINED THE FACTS IN DETAIL AND HELD AS UNDER; RELEVANT PORTION REPRODUCED BELOW:- 2.3.3. I HAVE CONSIDERED THE SUBMISSION MADE BY TH E APPELLANT AND OBSERVATION OF THE AO. DESPITE BEING ASKED TO DURING THE APPELLATE PROCEEDING AS TO WHAT WAS THE BUSINESS EXPEDIENCY IN GIVING THESE LOANS WITHOUT CHARGING I NTEREST . THE ASSESSEE SIMPLY STATED THAT THESE WERE FRIENDLY LOA NS AND HENCE NO INTEREST WAS CHARGED. THIS CLEARLY SHOWS THAT THE LOANS HAVE NOT BEEN GIVEN FOR ANY BUSINESS PURPOSE. IT IS SEEN F ROM THE BALANCE SHEET THAT DURING THE YEAR THE ASSESSEE HAS PAID UP SHARE CAPITAL OF RS.14.23 LAKH AND THE RESERVES AND SURPLUSES ARE NI L. ON THE OTHER HAND, THE ASSESSEE HAS SECURED LOANS OF RS.23 .00 LAKH, UNSECURED LOANS OF RS.36.65 LAKH. IN THE LAST YEAR ALSO THE PAID UP SHARE CAPITAL WAS ONLY RS.13.45 LAKH. THE RESERVES AD SURPLUSES WERE NIL. THE SECURED LOAN WAS RS.12.23 LAKH AND U NSECURED LOAN WAS RS.48.71 LAKH. FROM THE ABOVE IT CAN BE SEEN T HAT THE APPELLANT DOES NOT HAVE ANY INTEREST FREE FUNDS AVA ILABLE WITH IT . WHEN THE ASSESSEE HAS TAKEN SO MUCH SECURED LOAN AN D UNSECURED LOAN WHICH IS MANY TIMES MORE THAN THE SHARE CAPITA L. NEITHER DURING THE APPELLATE PROCEEDIN G NOR DURING THE ASSESSMENT PROCEEDING THE APPELLANT HAS BEEN ABLE TO SHOW ANY REASON AS TO WHY INTEREST FREE LOAN HAD TO BE GIVEN TO ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 10 - THE PARTIES. NO BUSINESS EXPEDIENCY HAS BEEN SHOWN BY THE APPELLANT EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE APPELLATE PROCEEDINGS.. 2.3.4. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THER E IS NO COMMERCIAL EXPEDIENCY FOR GIVING LOAN TO THESE PART IES. HENCE THE LOAN TAKEN ON INTEREST TO THE EXTENT OF INTEREST FR EE LOAN GIVEN IS NOT FOR THE PURPOSE OF BUSINESS. THE APPELLANT HAS NOT BEEN ABLE TO PROVE ANY NEXUS OF GIVING INTEREST FREE LOAN OUT OF INTEREST FREE FUNDS. THE APPELLANT HAS TAKEN INTEREST-BEARING LOANS AN D INSTEAD OF DISCHARGING THE INTEREST BURDEN OUT OF THE MONEY AVAILABLE WITH IT, THE ASSESSEE IS GIVING INTEREST FREE LOAN TO IT S RELATIVES. CLEARLY, THE LOANS GIVEN ARE NOT FOR THE PURPOSE OF BUSINESS AND HENCE TO THAT EXTENT LOANS TAKEN ON INTEREST TO THE EXTENT A RE NOT FOR THE PURPOSE OF BUSINESS. IT IS SEEN FROM THE BALANCE S HEET THAT DURING THE YEAR THE ASSESSEE HAS PAID UP SHARE CAPITAL OF RS.14.23 LAKH BUT THE RESERVES AND SURPLUSES OF NIL. ON THE OTHE R HAND, THE ASSESSEE HAS SECURED LOANS OF RS.23.00 LAKH, UNSECU RED LOANS OF RS.36.65 LAKH. IN THE LAST YEAR ALSO THE PAID UP S HARE CAPITAL WAS ONLY RS.13.45 LAKH. THE RESERVES AND SURPLUSES WER E NIL. THE SECURED LOAN WAS RS.12.23 LAKH AND UNSECURED LOAN W AS RS.48.71 LAKH. FROM THE ABOVE IT CAN BE SEEN THAT THE APPEL LANT DOES NOT HAVE ANY INTEREST FREE FUNDS AVAILABLE WITH IT. WH EN THE ASSESSEE HAS TAKEN SO MUCH SECURED LOAN AND UNSECURED LOAN W HICH IS MANY TIMES MORE THAN THE SHARE CAPITAL. HENCE THE DISAL LOWANCE MADE BY THE AO IS CONFIRMED AND THIS PART OF THE GROUND S OF APPEAL IS DISMISSED. 10. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT NEITHER THE ASSESSEE HAS ESTABLISHED THE COMME RCIAL EXPEDIENCY NOR HE HAS ESTABLISHED HAVING ANY NEXUS WITH NON -INTE REST BEARING FUNDS ADVANCED TO THESE TWO PARTIES. RATHER LD. CIT(A) HA S GIVEN A FACTUAL FINDING THAT THE ASSESSEE DID NOT HAVE NON- INTERES T BEARING FUNDS AVAILABLE TO ADVANCE TO RELATIVES. FURTHER THE FAC TS HAVE REVEALED THAT IN RESPECT OF ONE PARTY IN THE SUCCEEDING YEAR, THE AS SESSEE HAS ACTUALLY ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 11 - CHARGED THE INTEREST. THE LEARNED CIT(APPEALS) HAS ELABORATELY DISCUSSED FEW CASE LAWS CONNECTED WITH THIS ISSUE A ND THEREAFTER HELD THAT, ONE, THE APPELLANT HAS NOT ESTABLISHED THE AV AILABILITY OF INTEREST-FREE FUNDS WHICH COULD HAVE BEEN ADVANCED WITHOUT CHARGI NG OF INTEREST AND, SECOND, ALSO FAILED TO ESTABLISH THE COMMERCIAL EXP EDIENCY. TOTALITY OF THE CIRCUMSTANCES, THUS DEMANDS TO REJECT THESE GROUNDS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 8 TH JULY, 2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 08 / 07 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(APPEALS)-XVI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO .60/AHD/2011 RAMAVTAR HUKUMCHAND MITTAL VS. ITO ASST.YEAR - 2007-08 - 12 - 1. DATE OF DICTATION.. 01/07/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/07/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S8.7.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8.7.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER