ACIT, UDAIPUR V. M/s. Mateshwari Indrani Contractor Pvt. Ltd., UDAIPUR

ITA 62/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4901 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: S C AJMERA
• Keywords: Unexplained cash credit; Business expenditure; Corroborative evidences
• Section: 143(3); 142(1); 68; 145; 6

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 62/JODH/2013 (A.Y. 2009-10) ACIT, CIRCLE-1, VS M/S. MATESHWARI INDRANI CONTRA CTOR UDAIPUR. PVT. LTD. 1-BEHIND DEBARI PETROL PUMP, NEAR AARA MACHINE, DEBARI, UDAIPUR. PAN NO. AAECM2334A (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.C. AJMERA. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 02/09/2013. DATE OF PRONOUNCEMENT : 27/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE FOR A.Y. 2009-10, AS DI RECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR, DATED 29/11/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE- COMPANY IS IN THE BUSINESS OF COLLECTION OF SALES T AX, ROYALTY AND MINING. FOR A.Y. 2009-10, IT FILED ITS RETURN OF IN COME (RETURN OF 2 INCOME [ROI]) ON 31/03/2010 DECLARING TOTAL INCOME OF RS. 19,62,570/. THE REGULAR ASSESSMENT WAS MADE U/S 143(3) OF THE I NCOME TAX ACT, 1961, THE ACT FOR SHORT, ON 26.12.2011, AT A TOTA L INCOME OF RS. 1,56,88,540/-. IN ARRIVING AT THE ABOVE INCOME THE A.O. HAS MADE THE FOLLOWING ADDITIONS:- TOTAL INCOME AS PER RETURN OF INCOME RS. 19,62,570/- ADDITION : 1. ADDITION ON ACCOUNT OF GPAS PER PARA 4 RS. 29,81,376/- 2. DISALLOWANCE U/S 40A(A)(IA) AS PER PARA 4 RS. 2,60,150/- 3. ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 AS PER PARA RS. 80,49,831 4. DISALLOWANCE OF INTEREST EXPENSES AS PER PARA 5 RS. 1,08,709/- 5. DISALLOWANCE OF INTEREST EXPENSES AS PER PARA - 6 RS. 7,06,539/- 6. DISALLOWANCE OF INTEREST EXPENSES AS PER PARA -7 RS.16,19,365/- TOTAL INCOME ASSESSED U/S 143(3) RS. 1,56,88,540/- 2.1 AGGRIEVED, THE ASSESSEE WENT BEFORE LD. CIT(A), WHO HAS GIVEN PART RELIEF TO THE ASSESSEE. AGAINST THE RELIEF GI VEN TO THE ASSESSEE, THE REVENUE HAS COME IN APPEAL BY RAISING THE FOLLO WING GROUNDS :- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE ID. CIT(A) HAS ERRED IN : 3 1.1 DELETING THE ADDITION OF RS.29,81,376/- MADE BY THE AO ON ACCOUNT OF FALL IN G.P. IGNORING THE FACT THAT T HE ASSESSEE CLAIMED EXPENSES ON THE BASES OF SELF MADE / INTERNAL VOUCHERS WHICH WERE NOT VERIFIABLE AND EXPLANATION OF FALL IN GP RATE WAS ALSO NOT PLAUSIB LE AND SPECIFIC. 2.1 DELETING THE ADDITION OF RS 80,49,831/ - MADE BY AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T ACT. 2.2 HOLDING THAT UNEXPLAINED CASH CREDIT CANNOT BE ADDED IN THE CASE OF ASSESSEE UNTIL THE AO BRING SOM E EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAS BROU GHT ITS UNEXPLAINED/ CONCEALED INCOME IN FORM OF CREDIT, WH ICH IS AGAINST THE ESTABLISHED AND SETTLED LAW. 2.3 IGNORING THE SETTLED LAW THAT IN CASE OF CRE DITOR TO BE GENUINE, THE ONUS LIES ON THE ASSESSEE TO PROVE ALL THE THREE INGREDIENTS NAMELY, IDENTITY OF CREDITOR, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AND ONUS IS NOT ON AO TO ESTABLISH THE REVERSE FACTS. 2.4 HOLDING THE CREDIT OF RS 71,14,831/- IN THE NAME OF ANCHAL ASSOCIATES PROP OF SHRI BHIM SINGH CHUNDAWAT TO BE GENUINE, IN SPITE OF THE FACT THAT APPELLANT HAS FA ILED TO PRODUCE SHRI BHIM SINGH CHUNDAWAT IN SPITE OF BEING ASKED BY THE AO AND SHRI BHIM SINGH CHUNDAWAT SHOWING 4 INCOME OF RS 5,64,844/- IN THE AY 2009-10 AND FURTH ER THAT NO RETURN OF INCOME FOR THE AY 2010-11 WAS FILED BY THIS CREDITOR IN SPITE OF NOTICE U/S 142(1) OF THE I.T A CT. 2.5 IGNORING THE AFORESAID FACTS RELATED TO CRED ITOR SHRI BHIM SINGH CHUNDAWAT AND THEREBY IGNORING THAT CREDITWORTHINESS OF SHRI BHIM SINGH CHUNDAWAT FOR C LAIMED LOAN OF RS 71.14 LACS IS NOT ALL ESTABLISHED. 2.6 IGNORING THAT CREDITWORTHINESS OF PERTH NETWORK (P) LTD IS ALSO NOT ESTABLISHED CONSIDERING T HE MEAGER INCOME OF RS 15,071/- FOR THE AY 2009-10 AND EXPLAN ATION OF LOAN TO CONTENDED TO BE TAKEN BY THE ABOVE SAID CREDITOR FOR GIVING LOAN O THE ASSESSEE BEING UNSUBSTANTIATE D. 3. DELETING THE DISALLOWANCE OF INTEREST ON LOAN FROM ANCHAL ASSOCIATES AMOUNTING OF RS 1,08,709/- MADE B Y THE AO IGNORING THE FACT THAT LOAN RECEIVED FROM ANCHAL ASSOCIATES HAS ALREADY BEEN TREATED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF ASSESSEE. 4. RESTRICTING THE ADDITION ON ACCOUNT OF INTERES T PAID ON UNSECURED LOANS OF RS 16,19,365/- TO RS 5,02,368/-. 2.2 WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. 5 2.3 THE FACTS APROPOS GROUND NO. 1.1 OF THIS APPEAL ARE THAT THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS. 1,69,06,626/ - ON TOTAL TURNOVER OF RS. 20,24,30,731/- AND A NET PROFIT OF RS. 16,62 ,022/-. THUS, THE ASSESSEE DISCLOSED G.P. RATE OF 8% AND N.P. RATE OF 1%. IN THE IMMEDIATELY PAST YEAR ON TOTAL TURNOVER OF RS. 11,3 0,58,110/- THE ASSESSEE HAD DECLARED G.P. RATE OF 9.38% AND N.P. R ATE OF 3.45%. THE A.O. WANTED TO KNOW THE REASON FOR THIS FALL IN THE G.P. RATES. THE ASSESSEE EXPLAINED THAT THE GROSS PROFIT DEPENDED O N THE NUMBER OF VEHICLES PASSING THROUGH THAT PARTICULAR NAKA (TO LL TAX BOOTH) AND SINCE THIS YEAR THE EXPENSES INCREASED, THERE IS A FALL. BUT, THE A.O. HAS NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED PR OPER BILL / VOUCHERS IN RESPECT OF CONVEYANCE EXPENSES, SALARY EXPENSES, NAKA EXPENSES AND TRAVELLING EXPENSES. THE EXPENSES OF RS. 14,15, 794/- CLAIMED UNDER THE HEAD CONTRACT EXPENSES WAS NOT FOUND VERI FIABLE FOR WANT OF PROPER BILLS, WHICH THE ASSESSEE SAID COULD BE VERI FIED FROM THE BANK ACCOUNTS. IN VIEW OF THE ABOVE POSITION, THE ASSESS EE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE BOOKS OF ACCOUNT SHOULD NO T BE REJECTED AND THE INCOME SHOULD NOT BE ESTIMATED PARTICULARLY WHE N THE ASSESSEE DID NOT MAINTAIN COMPLETE DETAILS OF SALARY AND NAKA EX PENSES CLAIMED AT RS. 70,26,923/- TRAVELLING EXPENSES OF RS. 2,45,224 /-, CONTRACT EXPENSES OF RS. 14,15,794/- AND CONVEYANCE EXPENSES OF RS. 6 6,58,233/-. THE ASSESSEE HAS ALSO NOT MAINTAINED AT TENDANCE REGISTER OF THE PERSONS TO WHOM SALARY AND NAKA EXPENSES HAS BEEN PAID AND MOST OF THE EXPENSES HAVE BEEN CLAIMED ON THE BASIS OF INTERNAL BILLS AND THAT TOO IN CASH. IN RESPONSE TO ABOVE, IT WAS SUBMITTED BEFORE THE A.O. THAT AS FAR AS THE CLAIM OF EXPENSES UNDER THE HEAD SALARY AND NAKA EXPENSES, THE ASSESSEE USED TO MAINTAIN PROPER DAY TO DAY ATTENDANCE REGISTER WHICH CONTAIN FULL DETAILS OF E ACH EMPLOYEE I.E. NAME, FATHER'S NAME, PERMANENT ADDRESSES ETC. THE S ALARY REGISTER HAS BEEN DULY SIGNED BY THE RESPECTIVE EMPLOYEES. NET S ALARY PAID TO EACH EMPLOYEES ALONGWITH THEIR DESIGNATION HAS ALSO BEEN MENTIONED THEREIN. AS REGARDS THE PAYMENT IN CASH, IT WAS SUB MITTED BEFORE THE A.O. THAT THIS HAS HAPPENED DUE TO THE FACT THAT CO MPANY'S NAKAS ARE SITUATED AT A VERY INTERIOR AND RURAL LOCATION. AS REGARDS THE TRAVELLING EXPENSES, IT WAS SUBMITTED THAT THE TRAVELLING EXPE NSES HAS BEEN PAID TO HIS OFFICE AND NAKA IN CHARGE THROUGH CASH AND A CCOUNT PAYEE CHEQUE FOR WHICH STATEMENT ALONGWITH BILL HAS BEEN SUBMITTED BEFORE THE ID. A.O. SIMILARLY, DETAILS IN THE FORM OF STAT EMENT AND DETAILS OF DRAFT GIVEN TO THE CONTRACT FOR THESE EXPENSES WERE FURNISHED TO THE A.O. FOR VERIFICATION. HOWEVER, THE A.O. DID NOT AC CEPT THE SUBMISSIONS OF THE ASSESSEE AS THE GENUINENESS AND CORRECTNESS OF THE EXPENSES CLAIMED UNDER THE ABOVE-MENTIONED HEADS WERE NOT VE RIFIABLE. 7 FURTHER, ACCORDING TO THE A.O. THE EXPLANATION GIVE N FOR FALL IN THE GROSS PROFIT IS VAGUE. THEREFORE, THE A.O. APPLIED A GROSS PROFIT RATE OF 9.38% AS DECLARED BY THE ASSESSEE ITSELF IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR ON DECLARED TURNOVER OF RS.20,24,30 ,731/-. THIS HAS RESULTED IN A TRADING ADDITION OF RS. 29,81,376 TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. 2.4 BEFORE LD. CIT(A), THE ASSESSEE, TO EXPLAIN FAL L IN THE G.P. RATE, MADE THE FOLLOWING SUBMISSIONS : ''THE ASSESSEE WAS CARRYING OUT THE BUSINESS OF COL LECTION OF ROYALTY/ SALES TAX ON MINING OF SAND/MARBLE/ SAN DSTONE AND OTHER MINERALS AS PER THE TERMS OF THE CONTRACT AWARDED BY THE GOVT. OF RAJASTHAN IN DIFFERENT AREA OF BHILWARA, DUNGARPUR, JALORE, BARMER, SOJAT AND UDAI PUR DISTRICTS. AS PER THE TERMS OF CONTRACT, WORK ORDER IS AWARDED OF A FIXED AMOUNT TO BE PAID TO THE GOVT. DEPARTMENT DEPENDING UPON THE ACCEPTANCE OF HIGHEST RATE OF TE NDER VALUE BY THE GOVT. CONTRACTORS. MANY OTHER GOVT. CONTRACTORS PARTICIPATE IN THE TENDERING PROCESS. I T IS A COMPETITIVE BUSINESS. GROSS PROFIT AS WELL AS NET P ROFIT RATIO CANNOT BE DECIDED IN ADVANCE. SIMILARLY, INDI RECT COST SUCH AS CONVEYANCE, SALARY, NAKA EXPENSES, TRAVELLI NG 8 EXPENSES ETC. ALSO DEPENDS THE AVAILABILITY OF TRAI NED TECHNICAL STAFF/ MANPOWER, READY TO WORK AT NAKA. T HE ASSESSEE IS BOUND TO DEPOSIT A FIXED CONTRACTUAL LI ABILITY WITH THE DEPARTMENT OF GOVT. OF RAJASTHAN DURING TH E CONTRACT PERIOD EVEN IF, ACTUAL REALIZATION BY THE ASSESSEE IS LESS THAN THE CONTRACTUAL AMOUNT. THE REALIZATIO N OF COLLECTION IS NOT IN THE HANDS/ CONTROL OF THE ASSE SSEE. THE REALIZATION DEPENDS ON THE QUANTUM OF MATERIAL I.E. SAND/ MARBLE/ SANDSTONE ETC. CARRIED FROM MINES IN THE TR UCKS/ TROLLEYS OR OTHER VEHICLES AND PASSING THROUGH TOLL NAKA. THIS KIND OF BUSINESS HAS NO CERTAINTY OF PROFIT, T HE COLLECTION OF ROYALTY MAY VARY FROM DAY TO DAY OR P ERIOD TO PERIOD DEPENDING UPON OVERALL GROWTH OF CONSTRUCTIO N/ DEVELOPMENTAL ACTIVITIES AS WELL AS SEASONS. IF THE RE IS GROWTH IN CONSTRUCTION ACTIVITIES IN THAT AREA OF C ONTRACT AWARDED, THERE MAY BE MORE COLLECTION/ REALIZATION THAN THE CONTRACTUAL LIABILITY. IF SITUATION ARE REVERSE , THEN REALIZATION MAY BE LESS THAN THE CONTRACTUAL LIABIL ITY. IN SUCH KIND OF BUSINESS, ASSESSEE MAY ALSO SUFFER LOSS, IF SITUATIONS ARE NOT FAVORABLE. IF THE GROWTH OF BUSI NESS IS HIGH, IN HIS AREA, THE ASSESSEE MAY EARN MORE PROFI T. SO, THE CONCEPT OF EARNING OF FIXED GROSS PROFIT IS NOT APPLICABLE IN SUCH KIND OF BUSINESS. THE LD. AO COULD NOT UNDERSTAND THE NATURE OF BUSIN ESS OF THE ASSESSEE AND APPLIED THE STEREO TYPED FORMULA O F GP 9 FROM PREVIOUS YEAR TO CURRENT YEAR AND MADE ADDITIO NS OF RS. 29,81,376 BEING DIFFERENCE OF GP RATIO. THE GP IN THE CURRENT AY WAS 7.91 % AS AGAINST THE GP OF PREVIOUS AY BEING 9.38%. THE ASSESSEE WANTS TO CONVEY THAT APPLYING GP FORMU LA FOR CALCULATING TAXABLE PROFIT IS NOT RELEVANT IN THE A SSESSEE'S CASE. ASSESSEE'S BOOKS OF ACCOUNTS WERE AUDITED AND VOUCH ED HON'BLE SIR, BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED BY AN INDEPENDENT CHARTERED ACCOUNTANT FIRM UNDER STATUTORY PROVISIONS. THE CASH BOOK, LEDGER, JOURNAL, VOUCHERS, BILLS, BANK STATEMENTS, EXPENSES HAVE BEEN DULY VERIFIED UP TO THE SATISFACTION OF THE AU DITOR. THE SAME BOOKS OF ACCOUNTS ALONG WITH BILLS/ VOUCHE R/ BANK STATEMENTS WERE SUBMITTED TO THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM TIME TO TIME. HOWEVER, THE LD. AO HAS VERIFIED BOOKS OF ACCOUNTS ON TEST CHECK BASIS, WHEREVER HE FELT NECESSARY. THE ACTUAL GP OF THE ASSESSEE WAS ARRIVED ON THE BA SIS OF AUDITED PROFIT & LOSS ACCOUNT (ANNEXURE-1): 10 FY TURNOVER (TOTAL COLLECTION BY THE ASSESSEE) DIRECT COST (INSTALLMENT PAID TO GOVT.) GROSS PROFIT GP RATIO 2008 - 09 20,24,30,731 18,64,24,105 16006626 7.91% 2007 - 08 11,30,58,110 10,24,42,434 10615676 9.38% ADDITION ON ACCOUNT OF DIFFERENCE IN GP AMT. IN RS. FY TURNOVER (TOTAL COLLECTION BY THE ASSESSEE) DIRECT COST (INSTALLMENT PAID TO GOVT.) GROSS PROFIT GP RATIO 2008 - 09 20,24,30,731 18,64,24,105 1,60,06,626 7.91 % ACTUAL 2008 - 09 20,24,30,731 18,64,24,105 1,89,88,002 9.38 % ESTIMATED BY LD. AO ADDITION ON ACCOUNT OF DIFFERENCE IN GP 29,81,376 DURING THE COURSE OF VERIFICATION OF VOUCHERS, LD. AO CITED CERTAIN EXAMPLES THAT SATISFACTORY EXPLANATION WAS NOT PRODUCED IN RESPECT OF FOLLOWING EXPENDITURES: S.NO. PARTICULARS AMOUNT (RS.) 1. CONTRACT EXPENSES 14,15,794 2. CONVEYANCE EXPENSES 6,58,233 3. SALARY & NAKA EXPENSES 70,26,929 4. TRAVELLING EXPENSES 2,45,224 11 THE ASSESSEE HAS PROVIDED ALL THE RELEVANT BOOKS AN D VOUCHERS, ATTENDANCE REGISTERS, ORIGINAL SALARY REG ISTER, EMPLOYEES NAME, ADDRESS & TELEPHONE NO., SIGNATURE ON SALARY REGISTER, VOUCHERS RELATING TO CONVEYANCE & TRAVELLING EXPENSES ETC. THE ASSESSEE HAS PRODUCED ALL THE VOUCHERS AND EVID ENCES OF PAYMENT OF BUSINESS EXPENDITURE, WHICH WERE DEBI TED IN THE PROFIT & LOSS A/C. THE PAYMENT OF EXPENDITURE W AS MADE IN CASH, AS THE NAKA ARE LOCATED IN REMOTE PLA CES. EXPENSES WERE REQUIRED TO BE INCURRED IN CASH OUT O F THE CASH COLLECTION ITSELF. THE COLLECTION OF REVENUE W AS TOTALLY IN CASH. SIMILARLY, PAYMENT OF SALARY, NAKA EXPENSE S, TRAVELLING, CONVEYANCE ETC. WERE ALSO INCURRED IN C ASH AS THE BANK FACILITIES WERE NOT AVAILABLE IN REMOTE AR EA. THE BASIC BOOKS OF ACCOUNTS SUCH AS CASH BOOK, LEDGER, PAYMENT VOUCHERS COLLECTION SLIPS ETC. WERE MAINTAI NED AT NAKA ITSELF. FINALLY, THEY ARE CONSOLIDATED AT HEAD OFFICE OF THE COMPANY PERIODICALLY. THE NATURE OF BUSINESS ITSELF DEMANDS THE INCURRENCE OF EXPENDITURE IN CASH. THEREFORE, ALL THE EXPENDITURE DEBITED IN P&L ACCOU NT WERE FULLY SUPPORTED BY EVIDENCE, BILLS, VOUCHERS A ND DULY RECORDED IN THE BOOKS OF ACCOUNTS, WHICH WERE FINAL LY SUBMITTED TO THE LD. AO AFTER AUDIT. 12 REASONS DESCRIBED BY LD. AO FOR LOW G.P. BEING INDI RECT EXPENSES HERE, THE ASSESSEE WOULD LIKE TO MENTION T HAT THAT ALL THE ABOVE EXPENSES DISCUSSED BY THE LD. AO ARE FORMING PART OF INDIRECT COST. WHEREAS, INDIRECT CO ST HAS NOT BEEN CONSIDERED FOR CALCULATION OF GP RATE. GRO SS PROFIT RATIO IS CALCULATED OUT OF TOTAL REVENUE COLLECTED BY THE ASSESSEE MINUS DIRECT EXPENSES I.E. INSTALLMENT PAY ABLE TO GOVT. DEPT. ALL THE ABOVE FOUR ELEMENTS OF EXPENSES PERTAINS TO INDIRECT COST AND NOT CONSIDERED FOR CALCULATION OF GP. THE A.O. HAS NOT CONSIDERED THE ABOVE FACTS AND WRO NGLY MADE THE ADDITION LINKING THE INDIRECT EXPENSES AS PART OF DIRECT EXPENSES AND WRONGLY ARRIVING AT THE CONCLUS ION IN FALL OF GP. 2.5 AFTER CONSIDERING THE ABOVE SUBMISSION THE LD. CIT(A) HAS GIVEN THE FOLLOWING FINDING TO JUSTIFY THE DECLARED G.P. RATE OF 8%. 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AND THE FINDINGS OF THE A.O. GIVEN IN THE ASSESSMEN T ORDER UNDER APPEAL. IT IS SEEN THAT THE ID. A.O. HAS MADE THE TRADING ADDITION BY APPLYING GROSS PROFIT RATE OF 9 .38% AS AGAINST THE DECLARED GROSS PROFIT RATE AT 8% AS THE APPELLANT COMPANY COULD NOT EXPLAIN THE REASONS FOR FALLS IN THE G.P. RATE BY POINTING OUT SOME MINOR AND GEN ERAL DEFECTS IN MAINTAINING THE BOOKS OF ACCOUNT I.E. MO ST OF 13 THE EXPENSES CLAIMED UNDER THE HEAD SALARY, TRAVELL ING CONVEYANCE, NAKA EXPENDITURE ARE BASED ON SELF MADE/INTERNAL VOUCHERS. IT IS A FACT ON RECORD THAT THE APPELLANT'S BUSINESS IS OF COLLECTION OF TOLL TAXES , SALES- TAXES ROYALTY IN RESPECT OF VARIOUS DISTRICTS FOR T HE GOVERNMENT ON CONTRACT AND NAKAS FOR COLLECTION OF SUCH TAXES IS SITUATED AT INTERIOR AREA OF THE DISTRICTS WHERE BANKING FACILITIES WERE NOT AVAILABLE. MOREOVER, TH E EMPLOYEES POSTED AT VARIOUS NAKAS ARE THE LOCAL PEO PLE WHO HAVE ALSO NOT HAVING ANY BANK ACCOUNT AND THEY WERE NOT READY TO ACCEPT THE CHEQUE FOR THEIR SALARY. SI MILAR IS THE POSITION IN RESPECT OF THE PAYMENTS-ON ACCOUNT OF CONVEYANCE. AS REGARDS THE TRAVELLING EXPENSES CLAI MED, IT MAY BE MENTIONED HERE THAT IT IS NECESSARY TO UNDER TAKE VARIOUS TOURS TO DIFFERENT DISTRICTS TO SUPERVISE T HE VARIOUS NAKAS IN ORDER TO ENSURE THE SMOOTH FUNCTIONING OF THE WORK IS GOING ON SMOOTHLY. ADMITTEDLY, THE ID. A.O. HAS NOT POINTED OUT ANY EXPENSE WHICH CAN BE TREATED TO BE EITHER ON HIGHER SIDE OR NOT RELATING TO THE BUSINESS AND THE APPELLANT HAD CLAIMED SUCH EXPENSES IN ORDER TO RED UCE THE TAX LIABILITY BY DECLARING A LOW GROSS. AS REGARDS THE GROSS PROFIT RATE DECLARED BY THE AP PELLANT AT 8% WHICH HAS BEEN CONSIDERED BY THE ID. A.O. AS LOW IN COMPARISON TO THE GROSS PROFIT AT 9.38% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR FOR WHICH THE APPELLANT COMPANY HAD GIVEN A PLAUSIBLE EXPLANATION BEFORE THE ID. A.O, IT MAY BE MENTIONED HERE THAT I N ANY 14 OF THE BUSINESS, IT IS NOT POSSIBLE TO MAINTAIN A F IXED GROSS PROFIT RATE CONSISTENTLY AS THE PROFIT DEPENDS UPON THE VARIOUS FACTORS PREVAILING IN EACH YEAR I.E. RISE I N DIESEL & PETROL PRICE, INCREASE IN THE LABOUR CHARGES AND CO ST OF MATERIAL ETC. THE DEFECTS NOTED BY THE A.O. ARE GEN ERAL. FURTHER, THERE IS SUBSTANTIAL INCREASE IN THE RECEI PT OF THE APPELLANT AS COMPARED TO IMMEDIATELY PRECEDING ASST T. YEAR. THERE IS NO DISPUTE THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT DURING THE REGULAR COUR SE OF BUSINESS HAVE BEEN AUDITED BY THE STATUTORY AUDITOR S AND THE AUDITORS HAVE NOT POINTED OUT ANY SPECIFIC MAJO R DEFECTS IN MAINTAINING THE BOOKS OF ACCOUNT AND IT IS ALSO NOT A CASE OF THE ID. AO. THAT DUE TO NON MAINTENAN CE OF BOOKS OF ACCOUNT PROPERLY, THE ACTUAL PROFIT EARNED BY THE APPELLANT CANNOT BE DEDUCED. IN VIEW OF ABOVE DISCUSSIONS, IT IS HELD THAT MEREL Y SOME OF THE EXPENSES HAVE BEEN CLAIMED ON THE BASIS OF SELF MADE/INTERNAL VOUCHERS, THE ID. A.O. CANNOT REJECT THE BOOKS OF ACCOUNT WHICH HAVE BEEN MAINTAINED IN THE REGULAR COURSE OF BUSINESS AND AUDITED BY THE STATU TORY AUDITORS. THEREFORE THE TRADING ADDITION MADE OF RS.29,81,376 IS LIABLE TO BE DELETED AND I ORDER ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED . 2.6 BEFORE US BOTH PARTIES HAVE MAINTAINED THERE EA RLIER STAND. AFTER GOING THROUGH THE RECORDS, WE HAVE FOUND THAT THE A .O. HAS NEITHER 15 REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHIC H ARE DULY AUDITED. MOREOVER, HE HAS NOT INVOKED THE PROVISION OF SECTI ON 145 OF THE ACT. THE ASSESSEE HAS EXPLAINED THE FALL IN G.P. RATE. W ITHOUT REJECTING THE BOOKS AND WITHOUT INVOKING THE PROVISION OF SECTION 145 OF THE ACT, NO TRADING ESTIMATION CAN BE DONE. THERE IS A SUBSTANT IAL INCREASE IN THE TURNOVER, WHICH IS JUST DOUBLE OF THE TURNOVER OF T HE PAST YEAR. THIS SUBSTANTIAL INCREASE IN THE TURNOVER MAY BE A REASO N FOR FALL IN THE G.P. RATE. HENCE, WE DONT FIND ANY REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) AND CONFIRM THE SAME AND DISMISS GROUND NO. (1) OF REVENUES APPEAL. 3 THE FACTS APROPOS GROUND NO. 2.1 TO 2.6, WHICH IS IN RELATION TO DELETION OF AN ADDITION OF RS. 80,49,831/- MADE BY THE A.O. U/S 68 OF THE ACT, ARE THAT ON GOING THROUGH THE AUDIT REPORT AND BALANCE SHEET THE A.O. NOTICED THAT THE ASSESSEE HAD RECEIVED LOA NS OF RS. 80,49,831/- FROM THE FOLLOWING PERSONS :- 1. AANCHAL ASSOCIATES RS. 71,14,831/- 2. PARTH NETWORK PVT. LTD RS. 04,65,000/- 3. VIJAY PRATAP SINGH RS. 04,70,000/- TOTAL RS. 80,49,831/- 16 WHEN CALLED TO PROVE THE ABOVE LOANS, THE ASSESSEE PRODUCED DIRECTORS OF COMPANIES AT SR. NO. 2 AND3, AS ABOVE, WHO HAVE ADMITTED THE RESPECTIVE LOANS AND HAVE ALSO EXPLAINED THE SOURCE S THEREOF. THE PROPRIETOR OF THE ENTITY AT SR. NO. (1) SHRI BHIM S INGH CHUNDAWAT, HOWEVER DID NOT APPEAR. HOWEVER, THE A.O. DID NOT A CCEPT THESE CASH CREDITORS TO BE GENUINE AND, THEREFORE, ADDED THEM ALL IN THE HANDS OF THE ASSESSEE-COMPANY. 3.1 BEFORE LD. CIT(A), THE ASSESSEE-COMPANY MADE A DETAILED WRITTEN SUBMISSION AND HE WAS SATISFIED THAT THE IDENTITY A ND CREDITWORTHINESS OF THE CASH CREDITORS AND THE GENUINITY OF THEIR TR ANSACTIONS OF GIVING LOAN TO THE ASSESSEE-COMPANY STAND EXPLAINED AND P ROVED AND HENCE HE HAS FOUND THEM GENUINE, SO HE HAS DELETED THE EN TIRE ADDITION. THE REVENUE FEELING AGGRIEVED HAS CAME IN APPEAL BEFORE THE APPELLATE TRIBUNAL. 3.2 AFTER HEARING BOTH SIDES, WE ARE ALSO GOING ALO NG WITH THE FINDING OF LD. CIT(A). THE FOLLOWING WRITTEN SUBMISSION OF THE ASSESSEE- COMPANY, GOES TO PROVE THE THREE REQUISITE CONDITIO NS OF SECTION 68 OF THE ACT. FOR READY REFERENCE WE ARE EXTRACTING THE WRITTEN SUBMISSION, VERBATIM, FROM THE ORDER OF LD. CIT(A) BECAUSE RELI ANCE HAS BEEN PLACED BY LD. AR ON THE SAME. THIS WRITTEN SUBMISSI ONS ARE AS UNDER :- 17 3.2. DURING THE COURSE OF APPELLATE PROCEEDINGS , THE APPELLANT HAS MADE THE FOLLOWING SUBMISSION AGAINST THE ADDITION MADE UNDER SECTION 68 OF THE IT ACT, 1961. ' ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT - RS. 80,49,831/-THE LD. AO HAS ERRED IN LAW AS WELL AS IN FACTS IN MAKING ADDITIONS AS UNEXPLAINED CASH CREDI T U/S 68 OF THE INCOME TAX ACT, 1961 IN RESPECT OF FOLLOWING LOANS RECEIVED DURING THE YEAR: A. ANCHAL ASSOCIATES RS.71,14,831/- B. PARTH NETWORK PVT. LTD. RS. 4,65,000/- C. VIJAY PRATAP SINGH RS. 4,70,000/- ANCHAL ASSOCIATES PAN AAWPC 7825 R (RS.71,14,831/-) THE ASSESSEE COMPANY HAS RECEIVED LOAN OF RS. 71,14 ,831/- FROM ANCHAL ASSOCIATES PROP. MR. BHIM SINGH CHUNDAW AT DURING THE SAID FINANCIAL YEAR ON VARIOUS DATES. TH E DETAILS ARE AS UNDER: DATE LOAN PARTY'S BANK A/C.NO. SOURCE PLUS REMARK AMOUNT INTEREST 4.17.2008 19,40,000 CH.NO.43090UBI FDR ANNEXURE - A/C. NO.3101010 RS.17,62,500 IX (TOTAL 4 10091154 MADE ON PAGE) 02.02.2006 & MATURED ON 17.04.2008 4.17.2008 56,000 CH.NO.43090UBI DR RS.4,40,750 ANNEXURE -X A/C. NO.3101010 MNADE ON (4 PAGE) 10091154 8.03.2006 AS ANNEXURE - MARGIN FOR BANK XI (4 PAGE) ' UARANTEE AND PREMATURED ON 7.04..2008. 18 2.FDR RS.1, 50,000 MADE ON 3.10.2007 AS MARGIN FOR BG & PREMATURE ON 17.4.2008 DATE LOAN AMOUNT PARTY'S BANK A/C. NO. SOURCE PLUS INTEREST REMARK 4.30.2008 250000 CH.NO.615003, SBBJ A/C NO.51 005050809 FDR RS.2,50,000 MADE ON 26.7.2006 FOR CHITTOR TENDER & PREMATURE ON 30.04.2008 ANNEXURE - XII (4 PAGE) 05.01.200 8 335000 CH.NO.334659,OBC A/C. NO. 122710 11000388 FDR RS.295000 & RS.41,400 (TOTAL RS.336400 MADE FOR GANGRAR TENDER ON 1.2.2008 AND PRE MATURED ON 30.04.2008 ANNEXURE XIII (4 PAGE) 31.1.2009 236679 AS PER ORDER NO. 93 DT.02.02.2009 OF MINING DEPARTMENT. FDR RS.2,18,000 MADE ON 16.11.2007 FROM BANK OF INDIA AS 100% MARGIN FOR BG & ADJUST WITH MINING DEPARTMENT VIDE DD NO.001277 DATED 23.1.2009 WITH INTEREST RS. 18679 ANNEXURE XIV (4 PAGE) 31.1.2009 781500 1407750 AS PER ORDER NO.93 DT.02,02,2009 OF MINING DEPARTMENT FDR RS.781500 & RS,1407750 (TOTAL RS.21 89250) MADE ON 30.03.2006 FROM OBC BANK AS 100% MARGIN FOR BG AND ADJUST WITH MINING DEPARTMENT VIDE DD NO.2971422 DATED 27.01.2009 OF RS.781500 AND DD NO.091423 DATED 23.01.2009 OF RS.1407750. ANNEXURE - XV (4 PAGE) 31.1.2009 1603902 AS PER ORDER NO.93 DATED 02.02.2009 OF MINING DEPARTMENT FDR RS.781500 & RS.1407750 (TOTALRS.2 189250) MADE ON 30.03.2006 FROM UBI * ADJUST WITH MINING DEPARTMENT VIDE DDI NO.05334 DATED 23.01.2009 OFRS.1407750 WITH INTEREST RS. 196 152 TOTAL RS.1 603902 ANNEXURE XVI (4 PAGE DURING THE COURSE OF ASSESSMENT PROCEEDING IN RESPO NSE TO AO'S NOTICE, THE ASSESSEE HAS PRODUCED A LIST OF TRANSACTIONS ALONG WITH SUPPORTING ANNEXURES VIDE L ETTER 19 DATED 08.12.2011. THE ASSESSEE EXPLAINED THE RECEIP T OF LOAN THROUGH ACCOUNT PAYEE CHEQUES WITH SOURCE AND SUPPORTING EVIDENCES ETC. THE LIST IS BEING REPRODU CED FOR YOUR KIND VERIFICATION AS PER ANNEXURE - 2. THE ANN EXURE AND THE SUPPORTING DOCUMENTS ATTACHED THEREWITH FUL LY EXPLAIN THE SOURCE AND SOURCE OF TRANSACTION ALONG WITH EVIDENCES. ALL THE TRANSACTIONS ARE GENUINE AND BON A FIDE FOR BUSINESS PURPOSE. THE LD. AO HAS NOT CONSIDERED THESE EVIDENCES. THE ASSESSEE HAS FULLY EXPLAINED THE IDE NTITY OF THE PERSON, GENUINENESS OF THE TRANSACTION, GENUINE SOURCE OF THE FUND AND CREDITWORTHINESS OF THE ANCHAL ASSO CIATES. FROM THE ANNEXURE - 2, IT IS PERTINENT TO NOTE THAT ALL THE PAYMENTS WERE RECEIVED BY THE ASSESSEE COMPANY FROM ANCHAL ASSOCIATES THROUGH A/C PAYEE CHEQUES. THE SO URCE OF ABOVE FUND WITH ANCHAL ASSOCIATES WAS BANK FDRS PREPARED IN THE PAST, WHICH WERE BEING UTILIZED FOR SECURING GOVT. CONTRACT BUSINESS. THESE FDRS WERE PREPARED IN PAST YEARS SINCE FY 2004-05 ONWARDS. TH E MATURITY PROCEEDS OF THESE FDRS WERE DEPOSITED IN B ANK A/C OF ANCHAL ASSOCIATES. THE PROCEEDS OF THESE FDR S WERE GIVEN AS LOAN THE ASSESSEE COMPANY. THE SOURCE IS G ENUINE AND BONA FIDE. SIMILARLY, CREDITWORTHINESS WAS SOUN D AS APPEARING FROM BANK DEPOSITS AND SECURING GOVT. BUS INESS BY ANCHAL ASSOCIATES. THE IDENTITY OF ANCHAL ASSOCI ATES CANNOT BE DISPUTED AS IT HAS BEEN ASSESSED UNDER IT ACT FOR LAST 8-10 YEARS. 20 THE ASSESSEE COULD NOT PRODUCE THE PROPRIETOR OF AN CHAL ASSOCIATES MR. BHIM SINGH CHUNDAWAT IN PERSON BEFOR E THE AO AS HE WAS SERIOUSLY SUFFERING FROM MENTAL DEPRES SION DISEASE AND WAS NOT IN A POSITION TO ATTEND THE OFF ICE OF THE AO AND GIVE THE STATEMENT DURING THE PERIOD OF ASSESSMENT. MEDICAL CERTIFICATES WERE PRODUCED TO T HE LD. AO. THIS KIND OF DISEASE TAKES ABOUT 1-2 YEARS TO G ET FULLY RECOVERED. HE CANNOT BEAR THE STRESS OF ANY KIND. HOWEVER, ANCHAL ASSOCIATES ACCOUNTANTS MR. RAJKUMA R BABEL ATTENDED THE HEARING FROM TIME TO TIME AND PRODUCED ALL THE RELEVANT BOOKS OF ACCOUNTS AND VOU CHERS OF ANCHAL ASSOCIATES TO THE LD. AO. THEREFORE, LD. AO CANNOT SAY THAT SATISFACTORY RECORDS AND EVIDENCES WERE NOT PRODUCED TO HIM. NECESSARY LEGAL COMPLIANCES HA VE BEEN DONE BEFORE THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDING ON BEHALF OF ANCHAL ASSOCIATE S . RELEVANT TO THE ASSESSEE'S CASE. THEY HAVE BEEN MER ELY MISINTERPRETED AND TRIED TO LINK WITH THE ASSESSEE' S CASE. ANY LOAN OR CREDITS RECEIVED IN THE BOOKS OF ACCOUN TS OF THE ASSESSEE CAN BE TREATED AS UNEXPLAINED CASH CREDITS ONLY WHEN THE ASSESSEE IS NOT ABLE TO SATISFY FOLLOWING THREE PARAMETERS: 21 A) IDENTITY OF PERSON THE ASSESSEE HAS PROVIDED THE IDENTITY OF THE PERSO N FOR EXAMINATION. SINCE, THE PERSON WAS SUFFERING FROM M ENTAL SICKNESS/ DEPRESSION DISEASE AND WAS NOT IN A POSIT ION TO PERSONALLY APPEAR BEFORE THE LD. AO AND OFFER PERSO NAL STATEMENT. HOWEVER, THE WRITTEN CONFIRMATION (ANNEX URE - 3) OF MR. BHIM SINGH CHUNDAWAT WAS PRODUCED BEFORE THE LD. AO. IN HIS ABSENCE, THE ACCOUNTANT OF ANCHAL ASSOCIATES, MR. RAJKUMAR BABEL HAS PROVIDED ALL THE RELEVANT INFORMATION/ CONFIRMATION ALONG WITH DETAI LS AND IDENTITY OF THE PERSON TO THE SATISFACTION OF LD. A O. B) CREDITWORTHINESS OF PERSON AUDITED BALANCE SHEET AS ON 31.03.2009 (ANNEXURE - 4) AND IT RETURNS FOR AY 2009-10 (ANNEXURE - 5) OF ANCHAL ASSOCIATES HAVE BEEN PRODUCED FOR ESTABLISHING THE CREDITWORTHINESS OF THE PERSON/ ANCHAL ASSOCIATES U P TO THE SATISFACTION OF LD. AO C) GENUINENESS OF THE TRANSACTION THE ASSESSEE HAS SUBMITTED BANK STATEMENT, WRITTEN CONFIRMATION, INCOME TAX RETURNS AND OTHER NECESSAR Y DOCUMENTS FOR GENUINENESS OF THE TRANSACTION. 22 HOWEVER, THE LD. AO HAS NOT CONSIDERED THE EVIDENCE S WITH REGARD TO SOURCE AND GENUINENESS OF THE FUND AND UNLAWFULLY MADE THE ADDITIONS BY TREATING THE LOAN AS UNEXPLAINED CASH CREDITS U/S 68. THOUGH, THE ASSESSEE HAS FULFILLED ALL THE 3 CONDIT IONS. HOWEVER, IT IS A SETTLED PRINCIPLE OF LAW THAT APPE LLANT IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE OR ORIGI N OF ORIGIN. OUR RELIANCE HAVE BEEN PLACED ON THE FOLLOW ING JUDICIAL DECISIONS FOR THIS PURPOSE. S. HASTIMAL VS CIT (1963) 49ITR 273 (MAD.) DAULAT RAM RAWATMULL (1973) 87 ITR 349 (SC) SAROGI CREDIT CORPORATION (1976) 103 ITR 344 SHRI SURINDRA SINGH (1993) 113 TAXATION 11 (JPAT) TOLARAM DAGA VS CIT (1966) 59 ITR 632 (ASSAM) CONCLUSION AS SUCH, THE ASSESSEE HAS OFFERED FULL EXPLANATION ABOUT THE NATURE AND SOURCE OF THE LOAN TO THE SATISFACTI ON OF THE AO. THE ASSESSEE HAS SUBMITTED THE IDENTITY, GENUIN ENESS AND CREDITWORTHINESS OF ANCHAL ASSOCIATES. THEREFOR E, NO SUCH ADDITION SHOULD HAVE BEEN MADE BY LD. AO U/S 6 8. RELIEF DEMANDED 23 THEREFORE, THE SAID ADDITION OF RS. 71,14,831/- IS AGAINST THE LAW AS WELL AS IN FACTS AND THE AO'S ORDER IN T HIS REGARD IS LIABLE TO BE QUASHED. A) PARTH NETWORK PVT. LTD. PAN AACCP6109L (RS. 4,65,000/-) A SUM OF RS. 4,65,000/- WAS APPEARING AS CLOSING BA LANCE ON 31.03.2009, WHICH WAS PAYABLE BY THE ASSESSEE CO MPANY TO PARTH NETWORK PVT. LTD. ON GOING THROUGH THE STATEMENT OF ACCOUNT OF PARTH NETWORK PVT. LTD., IN THE BOOKS OF THE ASSESSEE COM PANY, VARIOUS PAYMENTS WERE MADE BY THE ASSESSEE COMPANY (MICPL) THROUGH A/C PAYEE CHEQUES ON DIFFERENT DATE S TO PARTH NETWORK PVT. LTD. SIMILARLY, PARTH NETWORK PV T. LTD. HAS ALSO MADE PAYMENTS THROUGH A/C PAYEE CHEQUES TO THE ASSESSEE COMPANY (MICPL) ON DIFFERENT DATES DURING THE SAID PERIOD. FINALLY, AN AMOUNT OF PARTH NETWORK PV T. LTD. RS. 4.65 LACS WAS OUTSTANDING WITH THE ASSESSEE COM PANY (MICPL). THESE TRANSACTIONS PERTAIN TO NORMAL BUSINESS NATUR E. THE ASSESSEE COMPANY (MICPL) AS WELL AS PNW ARE CARRYIN G SIMILAR BUSINESS OF COLLECTION OF ROYALTY/ TOLL/ SA LES TAX/ ETC. AWARDED BY GOVT. OF RAJ. BOTH THE COMPANIES AP PEAR FOR THE TENDERING PROCESS IN GOVT. CONTRACTS AND WH ENEVER 24 THE CONTRACT IS AWARDED, THE MONEY IS TRANSFERRED B Y ONE COMPANY TO ANOTHER COMPANY. SO, ALL THESE TRANSACTI ONS ARE OF BUSINESS NATURE. THE BALANCE OUTSTANDING OF RS. 4.65 LACS IS A PART OF BUSINESS TRANSACTION. THE PNW RECEIVED RS. 9.95 LAC S FROM SHRI GOVIND SINGH SARANGDEVOT (WHO IS ALSO A GOVT. CONTRACTOR) VIDE A/C PAYEE CH. NO. 256662 ON DATED 23.03.2009 WHO IS ALSO MAINTAINING HIS A/C NO. 0061068387268 WITH SBBJ. FOLLOWING EVIDENCES AS PRO VIDED TO THE LD. AO ARE BEING REPRODUCED: I. STATEMENT OF MR. GAMER SINGH CHUNDAWAT, DIREC TOR, PARTH NETWORK PVT. LTD. ANNEXURE - 6. II. BANK STATEMENT (SBBJ) OF THE ASSESSEE COMPA NY (MICPL) AS PER ANNEXURE-7 III. BANK STATEMENT (SBBJ) OF PARTH NETWORK PVT. LTD. (ANNEXURE - 8) IV. AUDITED BALANCE SHEET AS ON 31.03.2009 OF P ARTH NETWORK PVT. LTD. (ANNEXURE - 9) V. IT RETURN OF PARTH NETWORK PVT. LTD. FOR AY 2009-10 (ANNEXURE -10) VI. BANK STATEMENT (SBBJ) OF SHRI GOVIND SINGH 25 SARANGDEVOT (ANNEXURE -11). VII. COPY OF ACCOUNT OF GOVIND SINGH SARANGDEVOT IN THE BOOKS OF PARTH NETWORK PVT. LTD. (ANNEXURE -12) VII I. CONFIRMATION BY PARTH NETWORK PVT. LTD. OF THE ACCO UNTS STATEMENT APPEARING IN THE BOOKS OF ASSESSEE COMPAN Y (MICPL) (ANNEXURE -13) IX. CONFIRMATION OF SHRI GOVIND SINGH SARANGDEVOT OF TRANSACTION WITH PARTH NETWORK PVT. LTD. (ANNEXURE -14) ALL THESE AFORESAID EVIDENCES AND EXPLANATIONS WERE PROVIDED TO THE LD. AO AT THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER, THE LD. AO HAS NOT CONSIDERED THE ABOVE EVIDENCES AND EXPLANATIONS AND CONSIDERED THE UNSECURED LOAN OF RS. 4.65 LACS FROM PNW AS UNEXPLA INED CASH CREDIT U/S 68. THE LD. AO HAS CITED CERTAIN CASE LAWS OF TRIBUNAL/ HIGH COURT, THE FACTS OF WHICH ARE NOT AT ALL RELEVANT T O THE ASSESSEE'S CASE. THEY HAVE BEEN MERELY MISINTERPRET ED AND TRIED TO LINK WITH THE ASSESSEE'S CASE. ANY LOAN OR CREDITS RECEIVED IN THE BOOKS OF ACCOUN TS OF THE ASSESSEE CAN BE TREATED AS UNEXPLAINED CASH CRE DITS ONLY WHEN THE ASSESSEE IS NOT ABLE TO SATISFY FOLLO WING THREE PARAMETERS: A) IDENTITY OF PERSON 26 THE ASSESSEE HAS PROVIDED THE IDENTITY OF THE PERSO N FOR EXAMINATION. MR. GAMER SINGH CHUNDAWAT, DIRECTOR OF PARTH NETWORK PVT. LTD. APPEARED PERSONALLY BEFORE THE LD. AO AND GIVEN A WRITTEN STATEMENT ON DATED 01.12 .2011 (ANNEXURE - 6) CONFIRMING THE DETAILS AND GENUINENE SS OF THE TRANSACTION AS WELL AS OUTSTANDING BALANCE AS O N 31.03.2009. B) CREDITWORTHINESS OF PERSON SOURCES OF FUNDS, DOCUMENTS AND EVIDENCES HAVE BEEN PRODUCED WITH REGARD TO THE CREDITWORTHINESS OF PER SON/ PARTH NETWORK PVT. LTD. UP TO THE SATISFACTION OF L D. AO (COPY OF BALANCE SHEET AS ON 31.03.2009 (ANNEXURE - 9) AND IT RETURN (ANNEXURE-10) C) GENUINENESS OF THE TRANSACTION THE ASSESSEE HAS SUBMITTED BANK STATEMENT (ANNEXURE 7.8&11) WRITTEN CONFIRMATION, INCOME TAX RETURNS AN D OTHER NECESSARY DOCUMENTS FOR GENUINENESS OF THE TRANSACTION. HOWEVER, THE LD. AO HAS NOT CONSIDERED THE EVIDENCES WITH REGARD TO SOURCE AND GENUINENESS OF THE FUND AND UNLAWFULLY MADE THE ADDITIONS BY TREATING THE LOAN AS UNEXPLAINED CASH CREDITS U/S 68. THOUGH, TH E ASSESSEE HAS FULFILLED ALL THE 3 CONDITIONS. HOWEVE R, IT IS A SETTLED PRINCIPLE OF LAW THAT APPELLANT IS NOT REQU IRED TO PROVE THE SOURCE OF SOURCE OR ORIGIN OF ORIGIN. OUR RELIANCE 27 HAVE BEEN PLACED ON FOLLOWING JUDICIAL DECISIONS FO R THIS PURPOSE. S. HASTIMAL VS CIT (1963) 491TR 273 (MAD.) DAULAT RAM RAWATMULL (1973) 87ITR 349 (SC) SAROGI CREDIT CORPORATION (1976) 103 ITR 344 SHRI SURINDRA SINGH (1993) 113 TAXATION 11 (JPAT) TOLARAM DAGA VS CIT (1966) 59 ITR 632 (ASSAM) CONCLUSION AS SUCH, THE ASSESSEE HAS OFFERED FULL EXPLANATION ABOUT THE NATURE AND SOURCE OF THE LOAN TO THE SATISFACTI ON OF THE AO. THE ASSESSEE HAS SUBMITTED THE IDENTITY GENUINE NESS AND CREDITWORTHINESS OF PARTH NETWORK PVT. LTD. THE REFORE, NO SUCH ADDITION SHOULD HAVE BEEN MADE BY LD. AO U/ S 68. RELIEF DEMANDED. THEREFORE, THE SAID ADDITION OF R S. 4,65,000/- IS AGAINST THE LAW AS WELL AS IN FACTS A ND THE AO'S ORDER IN THIS REGARD IS LIABLE TO BE QUASHED. B) VIJAY PRATAP SINGH PAN AIMPC0656L (RS. 4,70 ,000/) THE ASSESSEE COMPANY HAS RECEIVED LOAN OF RS. 4,70, 000 FROM VIJAY PRATAP SINGH VIDE ACCOUNT PAYEE CH. NO. 47044 OF UBI, UDAIPUR ON DATED 09.04.2008. COPY OF BANK STATEMENT OF VIJAY PRATAP SINGH ENCLOSED (ANNEXURE -15). MR. VIJAY PRATAP SINGH IS A GOVT. CONTRACTOR FOR CO LLECTION OF SALES TAX. DURING THE SAID FINANCIAL YEAR, HE RE CEIVED 28 FOLLOWING PAYMENTS FROM THE SALES TAX DEPT. AS COMM ISSION ON COLLECTION OF SALES TAX. COPY OF FORM 16A ENCLOS ED (ANNEXURE -16): ON DATED 08.04.2008 RS . 2,54,182 ON DATED 08.04.2008 RS . 2,16,191 TOTAL RS. 4,70,373 RS. 4,70,000/- WAS PAID FROM THE AFORESAID COLLECTI ON TO THE ASSESSEE COMPANY (MICPL) ON DATED 09.08.2008. THEREFORE, SOURCE WAS SATISFACTORILY EXPLAINED TO T HE LD. AO. THE ASSESSEE COMPANY HAS PRODUCED SHRI VIJAY PR ATAP SINGH IN PERSON BEFORE THE LD. AO FOR VERIFICATION/ EXAMINATION ON DATED 28.11.2011 (ANNEXURE - 17). IN THE WRITTEN STATEMENT, HE HAS CONFIRMED THAT HE WAS CAR RYING OUT BUSINESS OF COLLECTION OF ROYALTY AND SALES TAX OF GOVT. CONTRACTS. HE HAS FILED IT RETURN REGULARLY. HE HAS ALSO PRODUCED COPY OF IT RETURN AY 2009-10 (ANNEXURE - 1 8), AUDITED BALANCE SHEET AS ON 31.3.2009 (ANNEXURE - 1 9). IN HIS AUDITED BALANCE SHEET, RS. 4,70,000 WAS APPEARI NG AS LOAN GIVEN TO ASSESSEE COMPANY (MICPL). ALL THESE DOCUMENTS WERE PRODUCED TO THE LD. AO. HOWEVER, LD. AO HAS NOT CONSIDERED THE ABOVE EVIDEN CES AND PERSONAL APPEARANCE ETC. AND MADE ADDITION OF R S. 4,70,000/- TREATING AS UNEXPLAINED CASH CREDITS U/S 68. THE LD. AO HAS CITED CERTAIN CASE LAWS OF TRIBUNAL/ HIG H COURT, THE FACTS OF WHICH ARE NOT AT ALL RELEVANT TO THE A SSESSEE'S CASE. THEY HAVE BEEN MERELY MISINTERPRETED AND TRIE D TO 29 LINK WITH THE ASSESSEE'S CASE. ANY LOAN OR CREDITS RECEIVED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CAN BE TRE ATED AS UNEXPLAINED CASH CREDITS ONLY WHEN THE ASSESSEE IS NOT ABLE TO SATISFY FOLLOWING THREE PARAMETERS: A) IDENTITY OF PERSON THE ASSESSEE HAS PROVIDED THE IDENTITY OF THE PERSO N FOR EXAMINATION. MR. VIJAY PRATAP SINGH APPEARED PERSON ALLY BEFORE THE LD. AO AND GIVEN A WRITTEN STATEMENT ON DATED 28.11.2011 (ANNEXURE - 20) CONFIRMING THE DETAILS A ND GENUINENESS OF THE TRANSACTION AS WELL AS OUTSTANDI NG BALANCE AS ON 31.03.2009. B) CREDITWORTHINESS OF PERSON SOURCES OF FUNDS, DOCUMENTS AND EVIDENCES HAVE BEEN PRODUCED WITH REGARD TO THE CREDITWORTHINESS OF PER SON/ VIJAY PRATAP SINGH UP TO THE SATISFACTION OF LD. AO (COPY OF BALANCE SHEET AS ON 31.03.2009 (ANNEXURE - 19) AND IT RETURN (ANNEXURE -18), FORM 16A (ANNEXURE -16) C) GENUINENESS OF THE TRANSACTION THE ASSESSEE HAS SUBMITTED BANK STATEMENT (ANNEXURE 15) WRITTEN CONFIRMATION (ANNEXURE 20), INCOME TAX RETU RNS (ANNEXURE - 18), BALANCE SHEET (ANNEXURE -19) AND O THER NECESSARY DOCUMENTS FOR GENUINENESS OF THE TRANSACT ION. 30 HOWEVER, THE LD. AO HAS NOT CONSIDERED THE EVIDENCE S WITH REGARD TO SOURCE AND GENUINENESS OF THE FUND AND UNLAWFULLY MADE THE ADDITIONS BY TREATING THE LOAN AS UNEXPLAINED CASH CREDITS U/S 68. THOUGH, THE ASSESSEE HAS FULFILLED ALL THE 3 CONDIT IONS. HOWEVER, IT IS A SETTLED PRINCIPLE OF LAW THAT APPE LLANT IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE OR ORIGI N OF ORIGIN. OUR RELIANCE HAVE BEEN PLACED ON FOLLOWING JUDICIAL DECISIONS FOR THIS PURPOSE. S. HASTIMAL VS CIT(1963) 49ITR 273 (MAD.) DAULAT RAM RAWATMULL (1973) 87 ITR 349 (SC) SAROGI CREDIT CORPORATION (1976) 103 ITR 344 SHRI SURINDRA SINGH (1993) 113 TAXATION 11 (JPAT) TOLARAM DAGA VS CIT(1966) 59 ITR 632 (ASSAM) CONCLUSION AS SUCH, THE ASSESSEE HAS OFFERED FULL EXPLANATION ABOUT THE NATURE AND SOURCE OF THE LOAN TO THE SATISFACTI ON OF THE AO. THE ASSESSEE HAS SUBMITTED THE IDENTITY, GENUIN ENESS AND CREDITWORTHINESS OF SHRI VIJAY PRATAP SINGH. TH EREFORE, NO SUCH ADDITION SHOULD HAVE BEEN MADE BY LD. AO U/ S 68. RELIEF DEMANDED 31 THEREFORE, THE SAID ADDITION OF RS. 4,70,000/- IS A GAINST THE LAW AS WELL AS IN FACTS AND THE AO'S ORDER IN T HIS REGARD IS LIABLE TO BE QUASHED' . 3.3 FROM THE ABOVE SUBMISSIONS, THE OBJECTION OF L D. DR REGARDING NON PRODUCTION OF THE PROPRIETOR OF ANCHAL ASSOCIAT ES, GETS EXPLAINED. ALL THE LOAN GIVES ARE ASSESSED TO TAX. THE SOURCE OF THEIR DEPOSITS STANDS EXPLAINED AND PROVED ON RECORD. THERE IS NO DISPUTE REGARDING IDENTITY OF THE CREDITORS. THE LOAN TRANSACTIONS AR E THROUGH BANKING CHANNELS. SO, DEVIATING US FROM THE FINDING OF LD. CIT(A) WITH THE HELP OF SAME PROOF ON RECORD. RATHER THE PROOF AVAILABLE SPEAKS VOLUMES IN THE FAVOUR OF THE CLAIM OF THE ASSESSEE-COMPANY. HE NCE, WE CONFIRM HE IMPUGNED DELETION AND CANNOT ALLOW THESE GROUNDS . WE DISMISS GROUND NO. 2.1 TO 2.6 OF THIS APPEAL. 4. GROUND NO. (3) IS TAKEN IN RELATION TO DELETION OF AN ADDITION OF RS. 1,08,709/- MADE BY THE A.O. AFTER DISALLOWING I NTEREST ALLEGED TO HAVE BEEN PAID TO ANCHAL ASSOCIATES. THE FACTS OF T HIS GROUND ARE THAT THE ASSESSEE-COMPANY PAID A SUM OF RS. 1,08,709/- D URING THE CURRENT YEAR AS INTEREST ON LOANS TAKEN FROM ANCHAL ASSOCIA TES. THE ASSESSEE HAS DEDUCTED TDS OF RS. 11,197/- ON THIS PAYMENT. A SUM OF RS. 97,512/- WAS PAYABLE TO ANCHAL ASSOCIATES AFTER DED UCTION OF TDS, WHICH IS APPEARING IN THE BALANCE SHEET OF THE ASSE SSEE-COMPANY. THE 32 A.O. HAS DISALLOWED THIS INTEREST BECAUSE HE HAS TR EATED THE CASH CREDITOR ANCHAL ASSOCIATES AS UNEXPLAINED. THE LD. CIT(A) DELETED THIS ADDITION. 4.1 AFTER HEARING BOTH SIDES, WE HAVE TO CONFIRM TH IS DELETION BECAUSE WE HAVE ALSO ACCEPTED THE LOAN OF ANCHAL AS SOCIATES AS GENUINE. THEREFORE, THERE IS NO MERIT IN GROUND NO. (3), WHICH STANDS DISMISSED. 5 THE FACTS APROPOS GROUND NO. (4) OF THIS APPEAL A RE THAT DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A .O. THAT THAT THE ASSESSEE HAS CLAIMED INTEREST PAYMENTS ON UNSECURED LOAN WHICH WERE TREATED AS UNEXPLAINED AND ADDED TO THE TOTAL INCOM E OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS. THE A.O. THEREFORE ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INTEREST PAYMENTS CLAIM ED ON THE LOANS, WHICH WERE TREATED AS UNEXPLAINED IN THE FOLLOWING CASES SHOULD NOT BE DISALLOWED: A) ASAD KUNWAR RS.0,94,565 B) DEVGANGA CONTRACTOR PVT. LTD. RS.3,18,998 C) DHARMENDRA SINGH RS.1,61,034 D) FATEH SINGH RS. 1,36,620 E) GANESH LALRAWAT RS.1,08,002 F) GRAPHTECH EXIM PVT. LTD. RS.4,82,342 G) KISHORE KUMAR RS.0,62,122 H) MANJU DEVI PARTY RS.3,63,229 I) MODIRAM KURABAD RS.0,29,405 33 J) NARPAT SINGH SHUNDAWAT RS.0,32,409 K) PYAR KUNWAR RS.02,0,360 I) RAJENDRA SINGH RS.3,16,412 M)RAJ KUMAR RS.0,70,687 N) RAVINDRA SINGH RS.0,24,922 O) SAJJAN KUNWAR RS.0,47,250 P)UMAKUMARI RS.0,29,906 TOTAL RS.22,98,263 IN RESPONSE TO ABOVE SHOW CAUSE, IT WAS SUBMITTED B EFORE THE A.O. THAT THE ASSESSEE COMPANY HAS DEBITED RS. 22,98,263 ON A CCOUNT OF INTEREST PAYMENTS TO 16 PERSONS ON UNSECURED LOAN AS APPEARI NG IN THE BOOKS OF ACCOUNT. THESE AMOUNTS WERE RECEIVED BY THE ASSESSE E COMPANY IN THE PREVIOUS YEARS AND IS FROM EXPLAINED SOURCES. THE A SSESSEE COMPANY DEDUCTED TDS U/S 194A AND DEPOSITED THE TDS IN THE GOVERNMENT ACCOUNT. IN SUPPORT OF THIS, THE ASSESSEE COMPANY F ILED DEPOSITION SLIP. FURTHER, DURING THE ASSESSMENT YEAR 2008-09, ADDITI ON U/S.68 WAS MADE ONLY IN RESPECT OF THE FOLLOWING CREDITORS AND THE APPEALS AGAINST SUCH ADDITION IS PENDING BEFORE THE ID. CIT(A) AZAD KUNWAR RS.0 2,20,000 FATEH SINGH JHALA RS.15 ,18,000 GRAPHTECH EXIM PVT. LTD. RS.21 ,00, 000 RAJENDRA SINGH RS.3 5,00,000 IN ASSESSMENT YEAR 2007-08, SIMILAR ADDITIONS WERE MADE IN THE FOLLOWING CASES: 34 1. DHARMENDRA SINGH 2. RAVINDRA SINGH. THE ID. A.O. DID NOT ACCEPT THE SUBMISSIONS OF THE APPELLANT ON ACCOUNT OF THE FACT THAT THE ASSESSEE HAS ITSELF AD MITTED THAT ADDITIONS U/S.68 WERE MADE IN THE PREVIOUS ASSTT. YEARS IN TH E HANDS OF THE ASSESSEE IN RESPECT OF THE LOANS CLAIMED IN THE CAS E OF THE ABOVE CREDITORS. THEREFORE THE A.O. DISALLOWED THE INTERE ST CLAIMED ON SUCH UNEXPLAINED LOANS AMOUNTING TO RS. 12,15,895/- AS U NDER: AZAD KUNWAR RS.0 ,94,565 FATEH SINGH JHALA RS.1, 36,620 GRAPHTECH EXIM PVT. LTD. RS.4,82,3 42 RAJENDRA SINGH RS.3 ,16,412 DHARMENDRA SINGH RS.1,61 ,034 RAVINDRA SINGH RS. 0,24,922 TOTAL RS.12,15,895 SIMILARLY, THE A.O. ALSO DISALLOWED INTEREST PAYMEN TS OF RS.88,920 AND RS.3,14,550 CLAIMED TO HAVE BEEN MADE TO SHRI ABHAY SINGH SHAKTAWAT AND TO SHRI KESAR SINGH RANAWAT RESPECTIVELY ON ACC OUNT OF ASSESSEE'S FAILURE TO FILE ANY EXPLANATION TO THE SHOW CAUSE I SSUED BY THE A.O. WHERE THE ASSESSEE WAS REQUIRED TO JUSTIFY THE PAYM ENTS OF THE INTEREST WAS EXCLUSIVELY FOR THE BUSINESS PURPOSE. THUS, THE TOTAL DISALLOWANCE MADE UNDER THE HEAD INTEREST IS RS. 16 ,19,365/-. 35 6.2. DURING APPEAL, THE APPELLANT HAS MADE THE F OLLOWING SUBMISSION IN ITS DEFENSE. 'DISALLOWANCE ON INTEREST PAID ON U NSECURED LOAN (RS. 16,19,365/-). A) ON UNEXPLAINED CASH CREDIT U/S 68 IN EARLIER A YS - RS. 12.15.895/- (TOTAL 6 PERSONS IN AY 2007-08 & 2008-09) B) INTEREST PAID TO SUNDRY CREDITOR - RS. 4,03,47 0/- I. ABHAYSINGHSHAKTAWAT(FY2006-07) - RS. 88,92 0/- II. KESAR SINGH RANAWAT (FY 2006-07) - RS. 3,1 4,550/- TOTAL - RS. 4,03,470/- A) ON UNEXPLAINED CASH CREDIT U/S 68 IN EARLIER AYS - RS. 12.15.895/- (TOTAL 6 PERSONS IN AY 2007-08 & 2008-09) THE AO HAS DISALLOWED FOLLOWING INTEREST EXPENDITUR E DUE TO CONSIDERATION OF LOAN AS UNEXPLAINED CASH CREDIT U/ S 68 IN AY 2008-09 AND AY 2007-08: TREATED AS UNEXPLAINED CASH CREDIT IN AY 2008-09 S.NO. PARTICULAR AMOUNT DECISION BY (CIT APPEAL) APPEAL NO. 269 DATED 19.03.201 2 1. AZAD KUNWAR 94,565 DECIDED IN FAVOUR OF ASSESSEE (PAGE 13) 2. FATEH SINGH JHALA 1,36,620 DECIDED IN FAVOUR OF ASSESSEE (PAGE 18) 3. GRAPHTECH EXIM PVT. LTD. 4,82,342 DECIDED IN FAVOUR OF ASSESSEE (PAGE 32) 4. RAJENDRA SINGH 3,16,412 AGAINST ASSESSEE (PAGE 7) 36 IN AY 2007-08 5. DHARMENDRA SINGH 1,61,034 AGAINT THE ASSESSEE 6. RAVINDRA SINGH 24,922 AGAINST THE ASSESSEE TOTAL 12,15,895 THE LD. CIT (APPEALS) HAS DECIDED THE CASE IN FAVOU R OF THE ASSESSEE AND QUASHED THE ORDER OF LD. AO TREATING THE LOAN A S UNEXPLAINED CASH CREDITS AT ITEMS REFERRED IN PARA 1 TO 3 ABOVE AND INTEREST HAVE BEEN LAWFULLY CHARGED TO P&L ACCOUNTS AND ALSO TDS WAS D EDUCTED IN ACCORDANCE WITH LAW. THEREFORE, INTEREST OF RS. 7,1 3,527 (94,565+1,36,620+4,82,342) BEING A GENUINE AND LAWF UL EXPENDITURE SHOULD BE ALLOWED AS DEDUCTIBLE BUSINESS EXPENDITUR E IN THE APPEAL. THE ASSESSEE'S SUBMISSION IS THAT EVEN IF THE LD. C IT (APPEALS) HAS UPHELD THE DECISION OF LD. AO FOR TREATING THE LOAN S AS UNEXPLAINED CASH CREDITS U/S 68 IN THE CASE OF ITEM REFERRED AT PARA 4 (RAJENDRA SINGH) PARA 5 (DHARMENDRA SINGH) AND PARA 6 (RAVIND RA SINGH). STILL, THE INTEREST PAYMENT ON AFORESAID LOANS AMOUNTING TO RS . 5,02,368/- 37 (3,16,412+1,61,034+24,922) IS GENUINE AND LAWFUL BU SINESS EXPENDITURE AND TDS HAS ALSO BEEN DEDUCTED U/S 194 THEREFORE, I NTEREST REFERRED AT PARA 4 TO 6 SHOULD ALSO BE ALLOWED AS BUSINESS EXPE NDITURE B) INTEREST PAID TO SUNDRY CREDITOR - RS. 4,03,470/ - S. PARTICULARS APPEARING AMOUNT O/S INTEREST NO SINCE FY AS ON PAID , 31.03.2009 1. ABHAY SINGH SHAKTAWAT 2006 - 07 10,59,115 88,920 2. KESAR SINGH RANAWAT 2006 - 07 37,77,151 3,14,550 TOTAL 4,03,470 HON'BLE SIR, AFORESAID CREDITORS ARE APPEARING IN T HE BALANCE SHEET SINCE FY 2006-07. THE ASSESSEE COMPANY (MICPL) HAS BEEN PAYING INTEREST REGULARLY TO THESE CREDITORS EVERY YEAR AF TER DEDUCTION OF TDS AS PER PROVISION OF IT ACT. THE ASSESSEE COMPANY WA S UTILIZING MONEY OF ABOVE CREDITORS REGULARLY FOR ITS BUSINESS PURPO SE SINCE FY 2006-07. THE ASSESSEE COMPANY WAS REQUIRED TO PAY INTEREST T O THESE SUNDRY CREDITOR UNTIL THEY ARE FULLY PAID OFF. AS PER THE QUERY RAISED BY THE LD. AO, THE ASSESSEE COMPANY HAS WELL EXPLAINED DURING THE COURSE OF HEARING THAT THIS AM OUNT HAS BEEN APPEARING SINCE FY 2006-07 AND ALSO BEING UTILIZED FOR BUSINESS OF THE ASSESSEE COMPANY. REGULAR INTEREST HAS BEEN PAID IN THE PAST AND WAS 38 ALLOWED BY ASSESSING OFFICERS IN THE PAST. THE LD. AO WAS SATISFIED WITH THE CLARIFICATION GIVEN BY THE ASSESSEE. THEREFORE, NO FURTHER WRITTEN SUBMISSION WAS OFFERED BY THE ASSESSEE IN THIS REGA RD. NOW, SUDDENLY IT WAS APPEARING IN THE ASSESSMENT ORDER THAT NO WRITT EN JUSTIFICATION OF SPECIFIC QUERY FOR PAYMENT OF INTEREST FOR BUSINESS PURPOSE WAS SUBMITTED BY THE ASSESSEE AND THEREFORE, THE EXPEND ITURE WAS DISALLOWED. THE LD. AO HAS FULLY EXAMINED THE BALAN CE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2009 (ANNEXURE - 22). THE MONEY OF THE AFORESAID CREDITORS WAS UTILIZED FOR BUSINESS PURPO SE AS APPEARING IN ASSETS AND LIABILITIES SIDE OF THE COMPANY. THE QUE STION OF DISALLOWANCE OF INTEREST PAYMENT IN ROUTINE BUSINES S TRANSACTION SHOULD NOT ARISE UNLESS UNTIL THE BORROWED MONEY IS DIVERT ED FROM BUSINESS. THE AO WAS WRONG IN LAW AS WELL AS UNDERSTANDING TH E FACTS IN THIS REGARD. ASSESSEE'S SUBMISSION OF DOCUMENTS AND VERB AL CLARIFICATIONS WERE NOT TAKEN ON RECORD. ASSESSEE WAS UNDER BONA F IDE IMPRESSION THAT AO IS SATISFIED WITH REGARD TO INTEREST PAYMEN T ON PAST CREDITORS AS HAVE BEEN REGULARLY ALLOWED IN THE PAST. THE ABO VE SUNDRY CREDITORS WERE GENUINE AND BONA FIDE. THE GENUINENESS WAS NEV ER OBJECTED BY THE LD. AO IN CURRENT YEAR AS WELL AS IN THE PAST. JUSTIFICATION FOR UTILIZATION OF MONEY OF SUNDRY CREDITORS IS IMPLIED LY APPEARING IN THE BALANCE SHEET. THERE IS NO DIVERSION OF FUND. THERE FORE, INTEREST 39 PAYMENT OF RS. 4,30,470/- SHOULD HAVE BEEN ALLOWED BY LD. AO. THEREFORE, THE SAID ADDITION OF RS. 4,03,470/- IS A GAINST THE LAW AS WELL AS IN FACTS AND THE AO'S ORDER IN THIS REGARD IS LI ABLE TO BE QUASHED.' 5.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE THE LD. CIT(A) HAS GIVEN HIS FINDING AS UNDER: 6.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD.A.0. GIVEN IN THE ASSESSMENT ORDER. IT IS SEEN THAT THE A.O. HAS MADE THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 12,15,895/- PAID TO SIX CREDITORS AS THE LOANS CLAIMED IN THEIR NAME IN PREVIOUS ASSESSMENT YEARS WERE TREATED AS INCOME OF THE APPELLANT UNDER SECTION 68 OF THE ACT 1961. HOWEVER, AS PER THE APPELLATE ORDER FOR THE ASSESSMENT THE LEARNED CIT (A) VIDE ORDER IN APPEAL NO.269/IT/UDR/2010-11 DATED 19.03.2012, THE FOLLOWING CREDITORS WERE HELD TO BE GENUINE AND THEREFORE THE INTEREST PAID ON SUCH EXPLAINED CREDITS IS ALLOWABLE AS BUSINESS EXPENDITURE AND THEREFORE, THE DISALLOWANCE MADE TO THE EXTENT OF RS. 7,13,527/- IS DELETED AND THE BALANCE DISALLOWANCE OF INTEREST OF RS.5,02,368/- IS 40 CONFIRMED BEING INTEREST PAYMENTS ON UNEXPLAINED LOANS. SMT AZAD KUNWAT RS.0,94,565 FATEH SINGH JHALA RS.1,36,620 GRAPHTECH EXIM PVT. LTD. RS.4,82,342 TOTAL RS.7,1 3,527 AS REGARDS THE DISALLOWANCE OF INTEREST AMOUNTING T O RS.4,03,470/- PAID TO SUNDRY CREDITORS, IT MAY BE MENTIONED HERE THAT ADMITTEDLY, THE TWO SUNDRY CRED ITORS NAMELY SHRI ABHAY SINGH SHANKATWAT AND SHRI KESAR S INGH RANAWAT ARE OLD AND THEY HAVE BEEN TREATED AS GENUI NE IN THE YEAR IN WHICH THEY APPEARED IN THE BOOKS OF ACC OUNT OF THE APPELLANT. THEREFORE, APPARENTLY, THE DISALLOWA NCE OF INTEREST ON SUCH EXPLAINED SUNDRY CREDITS IS LIABLE TO BE DELETED. IN VIEW OF ABOVE DISCUSSION, THE DISALLOWA NCE OF INTEREST AMOUNTING TO RS. 4,03,470/- IS DELETED. TH IS GROUND OF APPEAL IS PARTLY ALLOWED. 5.2 AFTER HEARING BOTH SIDES, WE DONT FIND ANY INF IRMITY IN THE ORDER OF LD. CIT(A), WARRANTING OUR INTERFERE. THE INTERE ST PAID TO GENUINE CREDITORS HAVE TO BE ALLOWED. THE CREDITORS WHO ARE OLD AND HAVE BEEN TREATED AS GENUINE IN THE YEAR IN THE YEAR IN WHICH THEY APPEARED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-COMPANY, HAVE TO BE ALLOWED. THE INTEREST PAID TO THEM HAVE ALSO TO BE ALLOWED U NLESS THE FACTUM OF 41 LOAN ITSELF IS NOT FOUND TO BE CORRECT. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT I MPUGNED INTEREST PAID CANNOT BE DISALLOWED. ACCORDINGLY, WE DISMISS GROUND NO. (4) OF THE REVENUES APPEAL. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MARAT HA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH SEPTEMBER, 2013. VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR