DCIT, Ludhiana V. Sh. Deep Malhotra, Faridkot

ITA 661/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8340 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Commercial expediency
• Section: 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 661/CHD/2015 ASSESSMENT YEAR: 2011-12 DCIT, CC-II , VS. SH. DEEP MALHOTRA, LUDHIANA OLD CANTT, ROAD FARIDKOT PAN NO. ADKPM8478M (APPELLANT) (RESPONDENT) C.O.NO. 28/CHD/2015 (IN ITA NO. 661/CHD/2015) ASSESSMENT YEAR: 2011-12 SH. DEEP MALHOTRA VS. DCIT, CC-II OLD CANTT, ROAD LUDHIANA FARIDKOT PAN NO. ADKPM8478M (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. MANOJ MISHRA, CIT DR ASSESSEE BY : SH. SUDHIR SEHGAL, ADVOCATE DATE OF HEARING : 10/03/2016 DATE OF PRONOUNCEMENT : 15/03/2016 ORDER PER BHAVNESH SAINI, J.M. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION (C.O.) BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT( A)-5, LUDHIANA DT. 26/03/2015 FOR ASSESSMENT YEAR 2011-12. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. ON GROUND NO. (A) OF THE DEPARTMENTAL APPEAL AND ASSESSEES GROUND NO. 1,2, & 3 CHALLENGED THE DELETION OF PART ADDITI ON AND SUSTAINING THE PART ADDITION OUT OF AGRICULTURAL INCOME. 2 4. BRIEF FACTS ARE THAT THE ASSESSEE DECLARED AGRIC ULTURE INCOME OF RS. 21,25,607/- WHICH WAS ADDED BY THE AO ON ACCOUNT OF INCOME FROM OTHER SOURCE. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) AND DETAILED SUBMISSIONS WERE MADE. LD. CIT(A) ACCEPTED THE EARN ING OF AGRICULTURAL INCOME @ RS. 10,000/- PER ACRE AND ALLOWED THE APPEAL OF T HE ASSESSEE DELETING THE ADDITION OF RS. 14,20,000/- AND REST OF THE AMOUNT OF RS. 7,05,607/- WAS CONFIRMED. THE REVENUE IS NOW CHALLENGING DELETION OF ADDITION OF RS.14,20,000/- AND ASSESSEE IN THE C.O. CHALLENGED THE PART ADDITI ON SUSTAINED BY THE LD. CIT(A) IN A SUM OF RS. 7,05,607/-. LD. REPRESENTATI VE OF BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS IDENTICAL AS HAVE BEEN ARGUED BY THEM IN CROSS OBJECTION NO. 26 & 27/CHD/2015 FOR ASSESSMENT YEAR 2009-10 & 201 0-11. IT IS THEREFORE SUBMITTED THAT THE ORDER IN THIS C.O. MAY BE FOLLOW ED IN THE PRESENT MATTER. 5. ON CONSIDERATION OF THE FACT OF THE CASE AND SUB MISSIONS OF THE PARTIES WE FIND THAT THE ISSUE IS SAME AS HAVE BEEN CONSIDERED IN PRECEDING ASSESSMENT YEAR 2009-10 AND 2010-11 IN C.O. NO 26 & 27/CHD/20 15, IN WHICH VIDE ORDER DT. 10/03/2016, WE HAVE ACCEPTED THE EARNING OF AGRICUL TURAL INCOME @ RS. 15,000/- PER ACRE AND ACCEPTED THE CLAIM OF ASSESSEE IN A SU M OF RS. 21,30,000/-. IN THE ASSESSMENT YEAR UNDER APPEAL, THE AO HAS MENTIONED THAT ASSESSEE HAS DECLARED AGRICULTURAL INCOME OF RS. 21,30,000/- BUT IN THE COMPUTATION IT WAS SHOWN AT RS. 21,25,607/-. THEREFORE FOLLOWING THE O RDERS FOR PRECEDING ASSESSMENT YEAR 2009-10 AND 2010-11(SUPRA), WE DELETE THE ENT IRE ADDITION SUSTAINED BY THE LD. CIT(A) IN THE SUM OF RS. 7,05,607/- THUS THE C. O. OF THE ASSESSEE IS ALLOWED AND DEPARTMENT APPEAL IS DISMISSED. 6. ON GROUND NO. (B), IN THE DEPARTMENT APPEAL, REV ENUE CHALLENGED THE DELETION OF ADDITION OF RS. 1,29,01,720/- ON ACCOUN T OF GP RATE. 7. THE AO MADE ADDITION ON ACCOUNT OF COMPARATIVELY LOW GP RATE IN COMPARISON TO THE LAST YEAR. THE AO HAS HIGHLIGHTED THAT THE ASSESSEE WAS ASKED 3 TO FURNISH THE REASONS FOR DECLINE IN GROSS PROFIT. AO OPINED THAT SAME ARE GENERAL IN NATURE AND THE GENUINENESS OF THE SALE A S RECORDED IN THE TRADING ACCOUNT WAS NOT ESTABLISHED THEREFORE, IN THE OPINI ON OF THE AO, IT WAS FAIR AND REASONABLE TO ESTIMATE THE PROFITS FROM BUSINESS BY ADOPTING THE G.P. RATIO OF 2.85% AS DECLARED BY THE ASSESSEE FOR ASSESSMENT YE AR 2010-11 AND MADE THE ABOVE ADDITION. 7.1 THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A)AND IT WAS SUBMITTED THAT ASSESSEE HAS CARRIED ON BUSINESS OF PURCHASE AND SALE OF LIQUOR ON ALLOTTED VENDS BY THE EXCISE AND TAXATION DEPART MENT FOR F.Y 2010-11. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT IN HIS REGULAR COURSE OF BUSINESS. ALL THE PURCHASES AND SALES HAVE BEEN DUL Y RECORDED AND ACCOUNTS ARE AUDITED. ALL THE PURCHASES WERE MADE ON ISSUE O F PERMIT BY THE EXCISE AND TAXATION DEPARTMENT. THE SALE HAVE ALREADY BEEN DUL Y RECORDED IN THE BOOKS OF ACCOUNT. 7.2 THE AO HAS ARBITRARILY MADE THIS ADDITION ON AC COUNT OF LOW GROSS PROFIT BY COMPARING IT WITH THE IMMEDIATE PRECEDING YEAR. THE RE COULD NOT BE ANY COMPARISON OF BOOKS RESULTS OF LAST YEAR BECAUSE IT DEPENDS UPON THE PLACE, AREA & LOCATION OF THE ALLOTTED VENDS CHANGES EACH YEAR AND OTHER BUSINESS FACTORS. IN THE YEAR UNDER APPEAL THE ASSESSEE HAD CARRIED ON BUSINESS OF LIQUOR AT GURDASPUR, PATHANKOT & BHOGPUR EXCISE CIRCLE HAV ING TOTAL 18 RETAIL VENDS WHEREAS IN THE PRECEDING YEAR THE VENDS WERE IN THE FEROZEPUR, FARIDKOT, JALANDHAR, EXCISE CIRCLE HAVING DIFFERENT NUMBER OF VENDS. EACH YEAR IS AN INDEPENDENT YEAR AND PROFITABILITY IN THE TRADE DEP ENDS UPON MANY FACTORS LIKE DEMAND AND SUPPLY, PLACE, COMPETITION IN THE MARKET , AVAILABILITY OF FINANCES ETC. THERE WAS A CUT THROAT COMPETITION IN THE BUSI NESS IN ORDER TO MAINTAIN SALE AND TO COMPETE IN THE MARKET ONE HAS TO LOWER DOWN HIS PROFITS FOR REGULAR CIRCULATION OF FINANCES. THE ASSESSEE HAS TO RELY O N THE STAFF AND EMPLOYEES 4 THEREFORE COMPARISON FROM THE EARLIER YEAR WAS FACT UALLY WRONG. THE LICENSE FEE HAS ALSO INCREASED AS COMPARE TO THE LAST YEAR AND ADDITIONAL LICENSE FEE WAS ALSO CHARGED WHICH WERE THE FACTOR FOR LOW GROSS PR OFIT. THERE IS INCREASE IN THE EXPENDITURE AS COMPARE TO EARLIER YEAR. ALL THE TRA NSACTIONS ARE CARRIED OUT THROUGH THE EXCISE DEPARTMENT THEREFORE, WITHOUT AN Y EVIDENCE OF SUPPRESSION OF SALE, THE ADDITION WAS WHOLLY UNJUSTIFIED. IT W AS ALSO SUBMITTED THAT ASSESSEE HAS SURRENDERED INCOME OF RS. 2.25 CRORES WHICH HAS BEEN DULY REFLECTED IN THE PROFIT AND LOSS ACCOUNT AND EVEN IF THERE WAS ANY D ISCREPANCY THE SAME WOULD STAND COVERED BY THE INCOME SURRENDERED. THE SUBMIS SIONS OF THE ASSESSEE WERE FORWARDED TO THE AO FOR HIS COMMENTS IN WHICH THE AO REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER. 8. LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND MATERIALS ON RECORD, FOUND THAT THE ASSESSEE MAINTAINED BOOKS OF ACCOUNT WHICH HAVE BEEN AUDITED AND NO DEFECT IN THE SAME HAVE BEEN POINTED OUT BY THE AO. NO EVIDENCE EITHER OF INFLATION OF PURCHASE OR SUPPRES SION OF SALES WERE FOUND. THERE IS NO EVIDENCE OF INFLATION OF ANY EXPENSES. THE CASE OF ASSESSEE HAD BEEN SUBJECTED TO SEARCH UNDER SECTION 132 OF THE A CT, IN WHICH NO INCRIMINATING DOCUMENTS HAVE BEEN HIGHLIGHTED TO SU PPORT THE ADDITION, THUS THE AO COULD NOT REJECT THE BOOKS RESULT AND WHOLE ADDITION IS UNJUSTIFIED. LD. CIT(A) ACCORDINGLY DELETED THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. NO SPECIFIC DEFECT S HAVE BEEN POINTED OUT IN MAINTENANCE OF BOOKS OF ACCOUNT BY THE ASSESSEE. TH E ASSESSEE HAS SUFFICIENT REASONS FOR FALL IN GROSS PROFIT I.E; CHANGE OF THE LOCATION OF THE VENDS ALLOTTED BY EXCISE DEPARTMENT IN THE YEAR UNDER CONSIDERATION A S WELL AS IN PRECEDING ASSESSMENT YEAR . THE ASSESSEE CLAIMED THAT SINCE L OCATION OF THE LIQUOR SHOP HAVE BEEN CHANGED YEAR TO YEAR AND THERE WAS INCREA SE IN THE LICENSE FEE 5 THEREFORE THERE CANNOT BE COMPARISON OF THE PROFIT FROM THE EARLIER YEARS. THE REASONS GIVEN BY THE ASSESSEE HAVE NOT BEEN REBUTTE D BY THE AO IN HIS COMMENTS BEFORE THE LD. CIT(A). NO INFLATION OF PUR CHASES OR SUPPRESSION OF SALES WERE FOUND. AO HAS NOT POINTED OUT IF ANY EXPENSES HAVE BEEN INFLATED BY THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE REFER TO PAP ER BOOK PAGE NO. 22, HIGHLIGHTED THE REASONS THAT THERE WAS INCREASE IN THE EXPENSES IN THE YEAR UNDER CONSIDERATION BY REFERRING TO THE CHART WHICH IS FILED AT PAGE 22 AND 23 OF THE PAPER BOOK. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA [2004] 269 ITR 577 HAS HELD THAT MERE LOW GR OSS PROFIT IS NOT A GROUND TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE SU BMISSION OF THE ASSESSEE SINCE HAVE NOT BEEN REBUTTED BY AO AT THE APPELLATE STAGE AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF THE BOOKS OF ACCOUNT, THEREFORE WHOLE ADDITION WAS UNJUSTIFIED WHICH WAS CORRECTLY DELETED BY THE LD. CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS ACC ORDINGLY DISMISSED. 10. ON GROUND NO. (C), REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS. 41,30,937/- ON ACCOUNT OF ADDITIONAL LICENSE FEE. 11. THE AO NOTED THAT ASSESSEE HAD DEBITED AN AMOUN T OF RS. 41,30,937/- AS ADDITIONAL LICENSE FEE WHICH IS CHARGED ON ACCOUNT OF NON OR LOW PAYMENT OF LICENSE FEE. THE AO CONSIDERED IT TO BE PENALTY IN NATURE AND DISALLOW THE SAME. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT A O HAS NEVER CONFRONTED THE ASSESSEE ON THIS ISSUE AND IT WAS SUBMITTED THAT AD DITIONAL LICENSE FEE HAS BEEN IMPOSED BY THE EXCISE AND TAXATION DEPARTMENT, GOVE RNMENT OF PUNJAB ON EVERY PURCHASE MADE UNDER THE ATTA DAAL SCHEME IN TRODUCED IN THE ASSESSMENT YEAR UNDER APPEAL. IT WAS WRONG TO SAY THAT ADDITIONAL FEE IS CHARGED ON ACCOUNT OF NON OR LATE PAYMENT OF LICENS E FEE. IT HAS TO BE PAID FOR EVERY PURCHASE AS THE PURCHASE PERMIT IS ISSUED ON PAYMENT OF ADDITIONAL 6 LICENSE FEE. SINCE EXPENSES WAS MADE DURING THE COU RSE OF THE BUSINESS THEREFORE IT SHOULD NOT BE DISALLOWED. 12. THE LD. CIT(A) CONSIDERING EXPLANATION OF THE A SSESSEE AND MATERIAL ON RECORD FOUND THAT ADDITIONAL LICENSE FEE IS NOT IN THE NATURE OF PENALTY AND THERE WAS NO OPPORTUNITY GIVEN BY THE AO TO EXPLAIN THIS ISSUE. THE ASSESSEE PRODUCE SUFFICIENT MATERIAL ON RECORD TO PROVE THAT ADDITIO NAL LICENSE FEE HAS BEEN IMPOSED BY THE EXCISE AND TAXATION DEPARTMENT, GOVE RNMENT OF PUNJAB ON EVERY PURCHASE UNDER ATTA DAAL SCHEME THEREFORE ADDITION WAS FOUND TO BE UNJUSTIFIED AND DELETED. 13. AFTER CONSIDERING THE RIVAL SUBMISSION WE DO NO T FIND ANY MERITS IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE REFER RED TO PAPER BOOK PAGE NO. 29 AND 30 WHICH IS THE CERTIFICATE BY EXCISE AN D TAXATION OFFICER (EXCISE) JALANDHAR AND GURDASPUR TO PROVE THAT ADDITIONAL LI CENSE FEE HAS BEEN PAID BY THE ASSESSEE AS DIRECTED BY THE EXCISE AND TAXATION DEPARTMENT. SINCE THE ADDITIONAL LICENSE FEE IS PAID AS PER DIRECTION OF THE STATE GOVERNMENT FOR RUNNING OF THE BUSINESS, THEREFORE, THE AMOUNT WAS SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND AS SUCH ALLOWABLE D EDUCTION. 14. THIS GROUND OF APPEAL OF THE REVENUE IS THEREFO RE DISMISSED. 15. ON GROUND NO. (D), THE REVENUE CHALLENGED THE D ELETION OF ADDITION OF RS. 30,00,000/- ON ACCOUNT OF DISALLOWANCE OF INTER EST. THE AO HAS HIGHLIGHTED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 51,97,67 0/- AS BANK INTEREST IN PROFIT AND LOSS ACCOUNT AND HAD ALSO MADE INVESTMENT IN PU RCHASE OF PROPERTY, SHARES ETC. WHICH WERE NOT CONNECTED WITH THE BUSIN ESS CARRIED ON BY HIM. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD MADE PAYMENT TO HIS NEAR AND DEAR ONES AS WELL AS SISTER CONCERNS ON WHICH NO INTERES T HAD BEEN CHARGED. THE ASSESSEE DID NOT OFFER ANY EXPLANATION ON THE PROPO SED DISALLOWANCE, AO ON ESTIMATE BASIS DISALLOWED RS. 30,00,000/-. THE ASSE SSEE CHALLENGED THE ADDITION 7 BEFORE LD. CIT(A) AND SUBMITTED THAT ASSESSEE HAS R AISED LOANS FROM PUNJAB & SIND BANK AND PAID INTEREST AMOUNTING TO RS. 51,97, 670/- IN THE YEAR UNDER CONSIDERATION. BESIDES IT, THE ASSESSEE HAS ALSO RA ISED UNSECURED LOANS. THERE ARE CREDITORS ETC. FOR SMOOTH RUNNING AS WELL AS FOR TH E BUSINESS AND COMMERCIAL EXPEDIENCY OF THE BUSINESS. NO INTEREST WAS PAID TO THEM. THE ASSESSEE HAS GIVEN LOANS AND ADVANCES TO DIFFERENT PARTIES AT DI FFERENT TIMES WHICH IT THOUGHT WAS FOR BUSINESS AND COMMERCIAL EXPEDIENCY AS REQUI RED FOR BETTERMENT OF THE BUSINESS. IT IS ALLEGED THAT ASSESSEE MADE INVESTME NT IN PURCHASE OF PROPERTY AND SHARES WHICH IS NOT CONNECTED WITH THE BUSINESS ACTIVITIES. AO HAS NEITHER GIVEN ANY DETAIL IN THIS REGARD NOR IT HAS EVER EST ABLISHED ANY DIRECT NEXUS OF THE AMOUNT UTILIZED AS ALLEGED OUT OF INTEREST BEARING LOANS. IT WAS FURTHER SUBMITTED THAT THERE IS AN AMOUNT OF RS. 8.41 CRORES DEBITED AS PER ANNEXURE-VI UNDER THE HEAD LOANS AND ADVANCES OF AUDITED BALANCE SHEET AN D OUT OF THIS A SUM OF RS. 1.06 CRORES RELATE TO PAYMENT OF SECURITY AND BALAN CE WITH REVENUE AUTHORITY AND FURTHER THE SUM OF RS. 4.33 CRORES ARE OLD ONES AS PER DETAILS SEPARATELY ANNEXED. ALL THESE ADVANCES ARE OPENING BROUGHT FOR WARD BALANCES. THE AO HAS NOT ESTABLISHED THAT THE AMOUNT BORROWED ON INT EREST HAS BEEN ADVANCED AS INTEREST FREE IN THE YEAR UNDER ASSESSMENT. NO A DDITION CAN BE MADE WHEN THE ADVANCES WERE OPENING BROUGHT FORWARD BALANCE F ROM THE LAST YEAR. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT O F ITS CONTENTION. THE REST OF ADVANCES ALSO DO NOT HAVE ANY DIRECT NEXUS WITH INT EREST BEARING LOANS. THE REVENUE HAS NOWHERE ESTABLISHED THAT THE LOAN HAS B EEN GIVEN ONLY FOR PERSONAL PURPOSE. HOWEVER THE LOAN HAS BEEN GIVEN O N ACCOUNT OF COMMERCIAL EXPEDIENCY. AO HAS WRONGLY DISALLOWED THE AMOUNT OF INTEREST. THERE WERE HUGE AMOUNT OF CREDIT BALANCE IN THE ACCOUNT OF UNS ECURED LOANS I.E; RS. 36,99,500/- AND CREDITORS RS. 5,95,89,498/-ETC. TO WHOM NO INTEREST HAS BEEN PAID BY THE ASSESSEE. FURTHERMORE THERE IS A CREDIT OF R S. 4.36 CRORES IN THE CAPITAL ACCOUNT OF THE ASSESSEE THEREFORE VIEW FAVOURING TO THE ASSESSEE SHOULD BE 8 ADOPTED. COMPLETE DETAILS WERE FILED BEFORE THE LD. CIT(A). IF THE ASSESSEE WOULD HAVE PAID INTEREST TO THE PARTIES AND WOULD H AVE CHARGED THE INTEREST, PAYABLE WOULD HAVE BEEN MUCH MORE THAN THE INTEREST RECEIVABLE. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT O F THE ABOVE CONTENTION WHICH ARE REPRODUCED IN THE APPELLATE ORDER. IT WAS THERE FORE SUBMITTED THAT ADDITION MAY BE DELETED. 16. THE AO IN HIS COMMENTS MERELY REITERATED THE FA CTS STATED IN THE ASSESSMENT ORDER AND HAD NOT REBUTTED THE CONTENTIO N OF THE ASSESSEE. 17. LD. CIT(A) CONSIDERING THE EXPLANATION OF THE A SSESSEE AND THAT THE SUBMISSION OF THE ASSESSEE HAD NOT BEEN REBUTTED BY THE AO, FOUND THAT AO MADE THE ADDITION PURELY ON ESTIMATE BASIS WITHOUT BRINGING ON RECORD AS TO HOW MUCH INTEREST FREE ADVANCES HAD BEEN GIVEN BY T HE ASSESSEE TO THE SISTER CONCERN AND HOW MUCH HAD BEEN THE INVESTMENT IN THE PROPERTY WHICH WERE NOT RELATED TO THE BUSINESS. THE LD. CIT(A)ALSO FOU ND THAT INTEREST FREE FUNDS ARE AVAILABLE TO THE ASSESSEE THEREFORE ADDITION WAS FO UND UNJUSTIFIED AND SAME WAS DELETED. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAPER BOOK PAGE NO. 31 AND 32 WHICH IS THE DETAILS OF CAPITAL OF THE ASSESSEE, UNSECURED L OANS, SUNDRY CREDITORS AND THE AMOUNT DUE TO THE ASSESSEE WHICH WERE AVAILABLE AND SUFFICIENT TO GIVE LOANS TO OTHERS. IT IS ALSO CLAIMED THAT ASSESSEE HAS NOT CH ARGED ANY INTEREST. FURTHER DETAILS ARE FILED AT PAPER BOOK PAGE NO 33 & 34 SHO WS SUFFICIENT FUNDS AVAILABLE TO THE ASSESSEE AND THAT THE LOANS AND ADVANCES WER E MOSTLY OLD BALANCE OF THE EARLIER YEARS. THE AO HAS ALSO NOT PROVED ANY N EXUS BETWEEN THE INTEREST FREE LOANS GIVEN BY THE ASSESSEE OUT OF THE BORROWE D FUNDS. HONBLE PUNJAB & HARYANA HIGH COURT IN THE RECENT CASE OF BRIGHT ENT ERPRISES PVT. LTD. VS. CIT [2016] 9 381 ITR 107 HELD THAT WHEN FUNDS / RESERVES OF THE ASSESSEE WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES MADE BY IT OF RS. 10.29 CRORES TO ITS SISTER CONCERN. WE ARE ENTIRELY IN AGREEMENT WITH THE JUDG MENT OF THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. RELIANCE UTIL ITIES AND POWER LTD.[2009] 313 ITR 340 THAT IF THERE ARE INTEREST FREE FUNDS AVA ILABLE A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INTEREST FREE F UNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE S UFFICIENT TO MEET THE INVESTMENTS. 19. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED A BOVE AND THE FINDINGS OF THE FACTS ARRIVED AT BY THE LD. CIT(A), WE DO NOT F IND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY D ISMISSED. 20. ON GROUND NO. (E), THE REVENUE CHALLENGED THE D ELETION OF ADDITION OF RS.10,00,000/- ON ACCOUNT OF EXCESSIVE FREIGHT CHAR GES. THE AO COMPARED THE FREIGHT CHARGES WITH THE PRECEDING ASSESSMENT YEAR AND FOUND THAT DISPROPORTIONATE INCREASE IN THE EXPENDITURE AND AC CORDINGLY MADE THE ADDITION. 21. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) TH AT THE LIQUOR WAS PURCHASED FROM WHOLESALE LICENSEES, DISTILLERIES W ITH THEIR DEPOTS / DUMPS WHICH ARE SITUATED AT FAR AND NEAR PLACES FROM THE PLACE OF BUSINESS. ASSESSEE HAS GIVEN REASONS FOR INCREASE IN THE EXPENDITURE D UE TO INCREASE IN THE PURCHASES THEREFORE, ADDITION WAS WHOLLY UNJUSTIFIE D WHICH HAVE BEEN CORRECTLY DELETED BY THE LD. CIT(A). THEREFORE, THIS GROUND O F APPEAL OF THE REVENUE IS DISMISSED. 22. ON GROUND NO. (F), THE REVENUE HAS CHALLENGED T HE DELETION OF ADDITION OF RS. 6,91,700/-, ON ACCOUNT OF UNEXPLAINED CASH F OUND DURING THE SEARCH. 10 23. THE AO MADE THE ABOVE ADDITION BECAUSE ASSESSEE COULD NOT EXPLAIN THE CASH FOUND AT HIS RESIDENCE AT THE TIME OF SEAR CH OPERATION. 24. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) TH AT SMT. NIRMAL MALHOTRA, MOTHER OF ASSESSEE HAD CARRIED ON HER PROPRIETORSHI P BUSINESS. M/S NIRMAL MALHOTRA, L-2, LICENSE AT DELHI AND OUT OF THE SALE PROCEED AND CASH IN HAND AVAILABLE, SOME AMOUNT WAS KEPT AT THE RESIDENCE FO R SAFETY PURPOSES. RS. 6.00 LACS OUT OF RS. 6,91,700/- FOUND AS CASH AT RESIDEN CE IN PUNJABI BAGH, NEW DELHI DURING THE COURSE OF SEARCH BELONGING TO HIS MOTHER AND BALANCE OF RS. 91,700/- WERE OUT OF THE SAVINGS OF OTHER FAMILY MEMBERS WHI CH ARE MOSTLY REASONABLE AND MAN OF STATUS. IT WAS FURTHER EXPLAIN THAT ASSE SSEE HAD ALREADY SURRENDERED RS. 2.25 CRORES THEREFORE THE SAME IS ALSO AVAILABL E TO EXPLAIN THIS ADDITION. LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE AMOUNT OF RS. 6.00 LACS BELONGS TO MOTHER OF THE ASSESSEE. 25. THE AO IN HIS COMMENT DID NOT OBJECT TO THE CON TENTION OF THE ASSESSEE. 26. LD. CIT(A) ALSO FOUND THE AVAILABILITY OF CASH WITH THE FAMILY MEMBERS OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT HAVE NOT BEE N CONSIDERED AND TAKEN INTO ACCOUNT BY THE AO. THE ADDITION WAS ACCORDINGL Y DELETED. 27. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERITS IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE EXPLA INED THE SOURCE OF THE CASH FOUND DURING THE COURSE OF SEARCH OPERATION. T HE AO HAS NOT REBUTTED THE CLAIM OF THE ASSESSEE IN HIS COMMENTS FILED AT THE APPELLATE STAGE. THEREFORE, LD. CIT(A) ON PROPER APPRECIATION OF FAC TS AND MATERIALS ON RECORD CORRECTLY DELETED THE ADDITION. 28. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 11 29. ON GROUND NO. (G), THE REVENUE CHALLENGED THE D ELETION OF ADDITION OF RS. 90,04,851/- ON ACCOUNT OF EXCESSIVE JEWELLERY F OUND. 30. THE AO MADE THE ABOVE ADDITION ON ACCOUNT OF EX CESSIVE JEWELLERY. DURING THE SEARCH OPERATION, AT THE PREMISES, JEWEL LERY WEIGHING 6711.900 GMS WAS FOUND IN THE NAMES OF FAMILY MEMBERS OF ASSESSE E WHICH IS NOTED IN PARA 12 OF THE ASSESSMENT ORDER WHICH WERE FOUND FROM THE R ESIDENTIAL PREMISES AND VARIOUS LOCKERS. THE AO FOUND THAT THE ASSESSEE FAI LED TO EXPLAIN THE SOURCE OF THE INVESTMENT IN THESE JEWELLERY. HOWEVER, ADULT F AMILY MEMBERS WAS ALLOWED EXEMPTION OF 500GMS OF JEWELLERY AND IN CASE OF MIN OR IT WAS ALLOWED AT 100 GMS OF JEWELLERY. THE AO THEREFORE ALLOWED EXEMPTIO N OF 2900 GMS OF JEWELLERY AS AGAINST THE POSSESSION OF 6711.900 GMS OF JEWELL ERY AND MADE THE ABOVE ADDITION. 31. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT DUR ING THE SEARCH 6711.900 GMS OF JEWELLERY VALUING AT RS. 1,58,55,503/- WAS FOUND AT RESIDENCE AND LOCKERS IN BANK OF THE ASSESSEE AND HIS FAMILY MEMBERS. THE AS SESSEE AND HIS FAMILY MEMBERS ARE REGULARLY ASSESSED TO WEALTH TAX AND TH EY HAVE FILED THEIR RETURNS OF WEALTH DECLARING THE QUANTITY AND VALUE OF THE J EWELLERY AS ON VALUATION DATE HELD BY THEM. THE CHART OF THE SAME WAS SUBMIT TED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT ASSESSEE AND HIS FAMILY M EMBERS HAVE DECLARED 8610.300 GMS OF JEWELLERY WHICH WAS MUCH MORE THAN FOUND AT THE TIME OF SEARCH, THEREFORE, WHOLE ADDITION IS UNJUSTIFIED. T HE CLAIM OF ASSESSEE WAS NOT REBUTTED BY THE AO IN HIS COMMENT BEFORE THE LD. CI T(A). 31.1 LD. CIT(A) FOUND THAT ASSESSEE AND HIS FAMILY MEMBERS ARE FILING WEALTH TAX RETURN (WTR) IN WHICH THE ENTIRE JEWELLERY HAVE BEEN SHOWN WHICH WAS MORE THAN THE JEWELLERY FOUND DURING THE COURSE OF SEARC H AND ACCORDINGLY DELETED THE ADDITION. 12 32. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERITS IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE PRODU CE COPIES OF THE WTR BEFORE AUTHORITIES BELOW AS WELL AS IN THE PAPER BO OK FILED BEFORE US TO PROVE THAT ASSESSEE AND HIS FAMILY MEMBERS POSSESSES MORE JEWELLERY AS AGAINST THE JEWELLERY FOUND DURING THE COURSE OF SEARCH. SINCE ASSESSEE HAD ALREADY DECLARED MORE JEWELLERY AS AGAINST THE JEWELLERY FO UND DURING THE COURSE OF SEARCH IN THEIR WTR, THEREFORE, THE SAME COULD NOT BE TREATED AS UN-EXPLAINED. THIS GROUND OF REVENUE HAS NO MERIT, THE SAME IS AC CORDINGLY DISMISSED. 32.1 NO OTHER POINT IS ARGUED OR PRESSED. 33. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :15 TH MARCH 2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR