DCIT, Ludhiana V. M/s Malbros International Pvt. Ltd., Ferozepur

ITA 663/CHANDI/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9885 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 24-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AVANTA KUMAR
• Keywords: Rejection of books of accounts; Additional evidence
• Section: 142(1); 153A; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.662/CHD/2015 (ASSESSMENT YEAR : 2008-09) THE D.C.I.T. , VS. M/S MALBROS INTERNATIONAL PVT. LTD. CC-II, LUDHIANA. VILLAGE MANSURWAL, ZIRA, DISTRICT FEROZEPUR. PAN: AADCM7203R AND C.O.NO.29/CHANDI/2015 IN ITA NO.662/CHD/2015 (ASSESSMENT YEAR : 2008-09) M/S MALBROS INTERNATIONAL PVT. LTD. VS. THE D.C.I.T. , VILLAGE MANSURWAL, ZIRA, CC-II, LUDHIANA. DISTRICT FEROZEPUR. PAN: AADCM7203R ITA NO.663/CHD/2015 (ASSESSMENT YEAR : 2009-10) THE D.C.I.T. , VS. M/S MALBROS INTERNATIONAL PVT. LTD. CC-II, LUDHIANA. VILLAGE MANSURWAL, ZIRA, DISTRICT FEROZEPUR. PAN: AADCM7203R ITA NO.664/CHD/2015 (ASSESSMENT YEAR : 2010-11) THE D.C.I.T. , VS. M/S MALBROS INTERNATIONAL PVT. LTD. CC-II, LUDHIANA. VILLAGE MANSURWAL, ZIRA, DISTRICT FEROZEPUR. PAN: AADCM7203R 2 ITA NO.665/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T. , VS. M/S MALBROS INTERNATIONAL PVT. LTD. CC-II, LUDHIANA. VILLAGE MANSURWAL, ZIRA, DISTRICT FEROZEPUR. PAN: AADCM7203R AND C.O.NO.30/CHANDI/2015 IN ITA NO.665/CHD/2015 (ASSESSMENT YEAR : 2011-12) M/S MALBROS INTERNATIONAL PVT. LTD. VS. THE D.C.I.T. , VILLAGE MANSURWAL, ZIRA, CC-II, LUDHIANA. DISTRICT FEROZEPUR. PAN: AADCM7203R (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI SUDHIR SEHGAL & AVANTA KUMAR DEPARTMENT BY : SHRI SUSHIL KUMAR, DR DATE OF HEARING : 24.05.2016 DATE OF PRONOUNCEMENT : 16.06.2016 O R D E R PER RANO JAIN, A.M . : THESE FOUR APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA, ALL DATED 30.3.2015 FOR ASSESSMENT YEARS 2008-09, 2009- 10, 2010-11 AND 2011-12 RESPECTIVELY. THE ASSESSEE HAS FILED 3 CROSS OBJECTIONS AGAINST THE ITA NO.662/CHD/2015 AN D ITA NO.665/CHD/2015. WE WILL FIRST TAKE UP THE APP EAL OF THE REVENUE IN ITA NO.663/CHD/2015. ITA NO.663/CHD/2015 (ASSESSMENT YEAR 2009-10) : 2. THE GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER : (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DECISION OF CIT(A), TO DELETE THE ADDIT ION OF RS. 1,60,05,502/- MADE ON ACCOUNT OF LOW G.P. RATE, IS CORRECT. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEES GP RATE FOR THE CURRENT YEAR IS AT 20.03% AS AGAINST 27.41% FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSI NG OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE REASON S FOR DROP IN GP RATE AND FURTHER OBSERVED THAT NO EXPLAN ATION ON THE ISSUE WAS GIVEN, WHICH FORCED THE ASSESSING OFFICER TO FRAME ASSESSMENT UNDER SECTION 144 OF THE ACT BY ADOPTING THE GP RATE AT 23.72% BEING THE AVERAGE GP OF TWO YEARS. IN THIS WAY, AN ADDITION OF RS.1,60,05, 502/- WAS MADE. 4. BEFORE THE CIT (APPEALS), THE ASSESSEE MADE DETAILED SUBMISSIONS AND STATED THAT IT IS MAINTAIN ING REGULAR BOOKS OF ACCOUNT IN WHICH ALL PURCHASES, SA LES AND CLOSING STOCK HAD BEEN DULY ENTERED. THE EXPEN SES ARE DULY VOUCHED AND VERIFIABLE. THE BOOKS ARE AUD ITED BY 4 THE CHARTERED ACCOUNTANT AND THE PRODUCTION OF FINI SHED GOODS IS STRICTLY UNDER THE CONTROL OF STATE EXCISE & TAXATION AUTHORITIES AS PER NORMS FIXED AND SIMILAR LY ALL THE SALES ARE UNDER THE DIRECT CHECK OF THE EXCISE & TAXATION DEPARTMENT. IT WAS SUBMITTED THAT NO COMPARISON OF GROSS PROFIT OF VARIOUS YEARS CAN BE MADE TO MAKE ADDITION SINCE THE PROFITABILITY OF ANY CONCER N DEPENDS UPON NUMBER OF FACTORS AND PROFITABILITY CA NNOT REMAIN STATIC FOR ALL THE YEARS. IT WAS ALSO STRES SED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFEC T, DISCREPANCY OR IRREGULARITY IN THE BOOKS OF ACCOUNT AS WELL AS IN THE RUNNING OF BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT OR RESULTS THEREOF AND MERELY MADE THE ADDITION ON THE BASIS OF CONSIDERING THE GP RATE AS AVERAGE OF THE TWO YE ARS. THE APPREHENSION OF THE ASSESSEE WAS THAT THE ASSES SING OFFICER HAS MADE THE ADDITION ON ESTIMATE IN A MANN ER PROVIDED UNDER SECTION 144 OF THE ACT JUST TO COPE UP THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEA RCH. RELIANCE WAS PLACE ON A NUMBER OF JUDGMENTS WHICH H AVE BEEN QUOTED BY THE CIT (APPEALS) IN HIS ORDER AT PA GE 6 ONWARDS. 5. THE CIT (APPEALS) SENT THE MATTER TO THE ASSESSING OFFICER IN REMAND PROCEEDINGS AND REMAND REPORT DATED 25.3.2015 WAS FILED BY THE ASSESSING O FFICER. THE ASSESSING OFFICER STATED IN HIS REMAND REPORT T HAT SINCE THE ASSESSEE DID NOT PRODUCE ANY PROPER REPLY OR 5 EVIDENCE REGARDING LOWER PROFITS, NOR HE PRODUCED T HE EVIDENCE WHICH WAS CLAIMED AS EXPENSES AND OTHER MATERIAL TO JUSTIFY THE TRADING RESULTS. THE ADDIT ION WAS MADE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. THE CIT (APPEALS) OBSERVED IN HIS ORDER THAT THOUGH THE ASSESSING OFFICER HAS ALWAYS MAINTAINED THAT THERE HAD BEEN NON-COMPLIANCE WITH THE ASSESSEE BY NON- FILING OF REPLIES TO THE QUESTIONNAIRE ISSUED AND I N THE CIRCUMSTANCES, THEREFORE, HE WAS LEFT WITH NO OPTIO N BUT TO FRAME ASSESSMENT AS PER MATERIAL AVAILABLE ON RECO RD. HOWEVER, THE CIT (APPEALS) NOTICED THAT THE ASSESSI NG OFFICER IN HIS ORDER AT PAGE-2 HIMSELF HAS STATED T HAT THE NOTICES WERE ISSUED TO THE ASSESSEE AND PROCEEDINGS WERE ATTENDED BY THE AUTHORIZED REPRESENTATIVE OF THE AS SESSEE FROM TIME TO TIME AND CASE WAS DISCUSSED WITH HIM I N REFERENCE TO EVERY ASPECT INCLUDING THE DISCREPANCI ES WHICH CROPPED UP IN THE COURSE OF SUCH DISCUSSIONS. THIS PARAGRAPH OF THE ASSESSING OFFICERS ORDER HAS BEEN REPRODUCED BY THE CIT (APPEALS) IN HIS ORDER AT PAR A 2.3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND REMAND REPORT OF THE ASSESSING OFFICER, THE CIT (AP PEALS) ALLOWED THIS GROUND IN FAVOUR OF THE ASSESSEE. 7. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. DURING THE C OURSE OF HEARING BEFORE US SUBMITTED THAT THE ASSESSEE HA S NOT COOPERATED WITH THE ASSESSMENT PROCEEDINGS WHICH FA CT HAS BEEN MENTIONED BY THE ASSESSING OFFICER IN PARA 6 NOS.2.1, 4.1 AND 5.1 OF HIS ORDER. IN THE ABSENCE OF ANY EXPLANATION SUBMITTED BY THE ASSESSEE THE ASSESSING OFFICER WAS FORCED TO COMPLETE THE ASSESSMENT ON TH E BASIS OF WHATEVER MATERIAL WAS AVAILABLE ON RECORD. EVEN IN THE REMAND PROCEEDINGS, HE STATED THAT THE ASSES SING OFFICER HAS MENTIONED IN HIS REMAND REPORT THAT NO EVIDENCE IN THE FORM OF CHART, ETC WAS FURNISHED BY THE ASSESSEE. THE CIT (APPEALS) IGNORING THESE CRUCIAL FACTS WENT AHEAD AND ADMITTED SUCH EVIDENCE WITHOUT INVOK ING RULE 46A OF INCOME TAX RULES AND DELETED THE ADDITI ON. IN THIS REGARD, IT WAS ALSO SUBMITTED THAT VARIOUS COURTS HAVE LAID DOWN PRINCIPLE THAT THE CIT (APPEALS) IS REQUIRED TO ADMIT ANY EVIDENCE STRICTLY IN ACCORDANCE WITH GUIDELINES AS PROVIDED IN RULE 46A OF THE INCOME TA X RULES. THE CIT (APPEALS) HAS NO DISCRETION IN THI S REGARD. RELIANCE WAS PLACED ON THE JUDGMENT OF DEL HI HIGH COURT IN THE CASE OF CIT VS. MANISH BUILD WEL L PVT. LTD., 16 TAXMANN.COM 27 AND JODHPUR BENCH OF I.T.A. T. IN THE CASE OF ACIT VS. MOHAR SINGH, 16 TAXMANN.CO M 37(I.T.A.T. JODHPUR). 8. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REP LY DREW OUR ATTENTION TO PAGE-2 PARA 2.2 OF THE ASSESS MENT ORDER IN ORDER TO SHOW THAT THE ASSESSING OFFICER H IMSELF HAS STATED IN VERY CLEAR TERMS THAT THE CASE WAS PR OPERLY REPRESENTED AND EVERY ASPECT WAS DISCUSSED WITH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. FURTHER , IT WAS ALSO STATED THAT NO ADDITIONAL EVIDENCES WERE PRODU CED 7 BEFORE THE CIT (APPEALS). IN ANY CASE, THE CIT (AP PEALS) PREFERRED TO SEND THE SUBMISSIONS OF THE ASSESSEE B EFORE THE ASSESSING OFFICER IN REMAND PROCEEDINGS AND A REMAND REPORT HAS DULY BEEN FILED BY THE ASSESSING OFFICER. IN SUCH A CASE, IT CANNOT BE SAID THAT TH ERE IS ANY VIOLATION OF RULE 46A OF THE INCOME TAX RULES. THE CIT (APPEALS) HAS GIVEN A PLAUSIBLE REASON FOR DELE TING THE ADDITION. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FROM THE PERUSAL OF THE ORDER OF THE ASSESSING OFFI CER, WE SEE THAT THE ASSESSING OFFICER WITHOUT REJECTING TH E BOOKS OF ACCOUNT OF THE ASSESSEE HAS ESTIMATED THE GP RAT E BEING THE AVERAGE OF GP RATES OF THE TWO YEARS OF THE ASS ESSEE. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFI CER HAS NOT POINTED OUT ANY DISCREPANCY WITH REGARD TO SALE S MADE BY THE ASSESSEE, PURCHASES AND VARIOUS EXPENSES SH OWN BY IT IN ITS TRADING ACCOUNT, THESE ARE THE COMPONE NTS WHICH AFFECT THE PROFITABILITY OF ANY CONCERN. IF THE ASSESSING OFFICER COULD NOT FIND ANYTHING WRONG WIT H ANY OF THESE COMPONENTS OF THE TRADING ACCOUNT OF THE ASSE SSEE, HOW CAN WE JUST BRUSH ASIDE THE GP RATE SHOWN BY TH E ASSESSEE AND ONLY ON THE BASIS OF THE FACT THAT THE GP RATE HAD DECLINED IN COMPARISON TO EARLIER YEAR, GP ADDI TION BE MADE. THE FINDINGS OF THE CIT (APPEALS) IN THIS RE GARD ARE 8 CONTAINED AT PAGE 9, PARA 2.4 OF HIS ORDER, WHICH R EAD AS UNDER : 2.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE BASIS OF ADDITION MADE BY THE A.O., THE ARGUMENTS OF THE AR DURING THE COURSE OF ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS . IT IS SEEN THAT THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAS GIVEN DETAILED REASONS FOR FALL IN P ROFITS IN COMPARISON TO LAST YEAR WHICH ARE QUITE LOGICAL AND BAS ED UPON THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THE A.O. WHILE ESTIMATING THE G.P. RATE FOR TH E CURRENT YEAR HAS OVER LOOKED AN IMPORTANT STATUTORY REQUIREM ENT OF REJECTING THE BOOKS OF ACCOUNTS. IT IS SEEN THAT NO D EFECT IN THE MAINTENANCE OF BOOKS OF ACCOUNTS WHAT SO EVER HA S BEEN POINTED OUT SO AS TO PROCEED TO THE NEXT STEP OF ES TIMATING A FAIR AND REASONABLE G.P. IT IS A CASE WHERE SEARCH HAS TAKEN PLACE AND NO INCRIMINATING DOCUMENTS HAVE BEEN HIGHLIGH TED TO SHOW THAT THE APPELLANT HAD MADE ANY SPECIFIC MANIPULATION IN ITS BOOKS OF ACCOUNTS TO WARRANT THE IMPLIED REJECTION OF BOOKS OF ACCOUNTS. IT IS NOT OPEN TO TH E A.O. TO SUBSTITUTE ITS OWN VIEW OF G.P. AS AGAINST THE PROF IT WORKED OUT ON THE BASIS OF BOOKS OF ACCOUNTS REGULARLY MAINT AINED BY THE ASSESSEE. IT IS ON THIS ACCOUNT ONLY THAT THE LEGISLATURE HAS PROVIDED FOR REJECTION OF BOOKS OF ACCOUNTS BASED UP ON ANY MATERIAL DEFECT IN THE MAINTENANCE THEREOF WHICH SHOU LD BE BROUGHT ON RECORD AND CONFRONTED TO THE ASSESSEE. I T IS SEEN THAT NONE OF THIS HAS BEEN DONE BY THE A.O. AND EST IMATION OF HIS OWN HAS BEEN SUBSTITUTED TO PLUG LEAKAGE OF REVE NUE. THE ADDITION MADE, THEREFORE, IS DIRECTED TO BE DELETED A S I AGREE WITH THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIE D UPON BY THE A.R. IN ITS WRITTEN SUBMISSIONS FILED DURING THE APPELLATE PROCEEDINGS. 10. ON PERUSAL OF THE SAME, WE DO NOT FIND ANY INFIRMITY AS WE ARE ALSO OF THE VIEW THAT WITHOUT P OINTING OUT ANY DISCREPANCY IN THE WAY THE BOOKS HAVE BEEN KEPT 9 BY THE ASSESSEE, SPECIALLY IN VIEW OF THE FACT THAT IT IS SEARCH CASE AND NO INCRIMINATING DOCUMENT HIGHLIGHT ING ANY SUCH DISCREPANCY HAS BEEN FOUND DURING THE COUR SE OF SEARCH. 11. NOW, WE WILL ADDRESS THE ISSUE OF ADDITIONAL EVIDENCE AND COMPLIANCE OF RULE 46A OF THE INCOME T AX RULES, AS RAISED BY THE LEARNED D.R. DURING THE COU RSE OF HEARING. THE CONTENTION OF THE LEARNED D.R. IS THA T THE PROCEDURE AS LAID DOWN UNDER RULE 46-A OF THE INCOM E TAX RULES, HAS NOT BEEN CARRIED OUT BY THE CIT (APPEALS ). FROM THE PERUSAL OF THE ORDERS OF THE ASSESSING OFF ICER AS WELL AS THE CIT (APPEALS), WE ARE UNABLE TO UNDERST AND AS TO WHAT ADDITIONAL EVIDENCES WERE FURNISHED BY THE ASSESSEE BEFORE THE CIT (APPEALS). SOME SUBMISSIONS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER CANNOT BE SAID TO BE ADDITIONAL EVIDENCES. THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES COMES INTO PLAY ONLY IF THE ASSESSEE CHOOSES TO FILE CERTAIN EVIDENCES FOR THE FIRST TIME BEFORE THE CIT (APPEALS), WHICH WERE NOT FILED BEFO RE THE ASSESSING OFFICER. FOR THIS, A PROPER APPLICATION GIVING THE REASON WHY THE ADDITIONAL EVIDENCES ARE BEING F ILED AT THIS STAGE IS TO BE FILED BEFORE THE CIT (APPEALS). IT IS THE PREROGATIVE OF THE CIT (APPEALS) TO ALLOW THE ADMIS SION OF ADDITIONAL EVIDENCE OR NOT. IN SUCH A SCENARIO, PR OVISIONS OF RULE 46A OF THE INCOME TAX RULES ARE TO BE COMPL IED WITH. IN THE PRESENT CASE, NO SUCH ADDITIONAL EVID ENCE HAS BEEN FILED BY THE ASSESSEE. FURTHER, WE SEE TH AT THE 10 ASSESSING OFFICER IN HIS ORDER AT PAGE-2, PARA 2.2 STATES AS UNDER : 2.2 IN RESPONSE TO THIS NOTICE U/S 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME ON 19.12.2012, DECLA RING INCOME AT (-) 11,08,381/-. INCIDENTALLY, THE RETURN ED INCOME IS THE SAME AS FILED BY THE ASSESSEE U/S 139 PRIOR T O THE DALE OF SEARCH. NOTICES U/S 143(2) & 142(1) AT THE ACT WERE ISSUED ALONG WITH QUESTIONNAIRE. IN RESPONSE TO THE SE NOTICES, SH. AVANTA JAIN, ADVOCATE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND THE CASE WAS DISCUS SED WITH HIM WITH REFERENCE TO EVERY ASPECT INCLUDI NG THE DISCREPANCIES WHICH CROPPED UP IN COURSE OF SUCH DISCUSSIONS. THUS, ALL AND ANY INFIRMITY IN THE SUB MISSION OF THE ASSESSEE WAS CONFRONTED TO THE ASSESSEE BY W AY OF DISCUSSION AND TREATED AS DULY ADDRESSED TO. THE ONES WHICH MERIT ADDITION TO THE DISCLOSED TOTAL INCOME OF THE ASSESSEE HAVE BEEN TAKEN UP FOR DETAILED DISCUSSION IN THE SUBSEQUENT PARAGRAPHS. 12. FROM THE BARE PERUSAL OF THE ABOVE, IT IS SEEN THAT THE ASSESSING OFFICER IN VERY CLEAR TERMS HAS STATED THAT THE CASE WAS ATTENDED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FROM TIME TO TIME AN D ALL ISSUES INCLUDING WHICH APPEARED DURING THE COURSE O F DISCUSSION, WERE DISCUSSED BY HIM. THE LAST SENTEN CE OF THE ABOVE PARAGRAPH WHICH SAYS THAT THE ISSUES WHIC H REQUIRE ADDITION TO THE DISCLOSED INCOME ARE DISCUS SED IN DETAIL IN SUBSEQUENT PARAGRAPHS, CANNOT BE INTERPRE TED AS IF THESE ISSUES ARE BEING DECIDED WITHOUT ANY DISCU SSION WITH THE REPRESENTATIVE OF THE ASSESSEE. IN VIEW O F THIS, WE DO NOT FIND WHY THE ASSESSING OFFICER HAS GIVEN CONTRARY FINDINGS WITH REGARD TO THE COOPERATION OF THE 11 ASSESSEE. WE ALSO OBSERVE THAT EVEN IF NO EVIDENCE S UNDER RULE 46A OF THE INCOME TAX RULES WERE FILED BEFORE THE CIT (APPEALS), THE CIT (APPEALS) IN HIS WISDOM PREFERRE D TO STILL SEND THE MATTER IN ISSUE TO THE ASSESSING OFF ICER. IN THIS WAY, PROPER OPPORTUNITY TO THE ASSESSING OFFIC ER WAS GIVEN BY THE CIT (APPEALS). IN SUCH A SCENARIO, WE DO NOT SEE THAT THERE IS ANY VIOLATION OF RULE 46A OF THE INCOME TAX RULES AND IT IS NOT A CASE OF GROSS NON-COOPERA TION ON THE PART OF THE ASSESSEE. 13. IN VIEW OF THE ABOVE, WE CONFIRM THE ACTION OF THE CIT (APPEALS) IN DELETING THE ABOVE ADDITION. THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 14. THE GROUND NO.2 RAISED BY THE REVENUE READS AS UNDER : (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DECISION OF CIT(A), TO DELETE THE ADDITI ON OF RS.38,73,744/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF INTEREST PAID TO BANK PROPORTIONAL TO THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE, IS CORRECT. 15. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS W RONGLY ADOPTED THE FIGURE OF LOANS AND ADVANCES IN PARA 5 OF HIS ORDER AS RS.3,22,81,197/-, WHICH IS THE FIGURE FOR LAST YEAR I.E. ASSESSMENT YEAR 2008-09. IT WAS ALSO STA TED THAT EVEN THE CIT (APPEALS) HAS OVER-SITED THE SAID MIST AKE AND ADJUDICATED THE ISSUE AS SUCH. 12 16. THE LEARNED D.R. AGREED WITH THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. 17. IN VIEW OF THIS, WE ARE INCLINED TO SEND THIS ISSUE BACK TO THE FILE OF THE CIT (APPEALS) TO RE-A DJUDICATE THE SAME AS PER LAW. NEEDLESS TO SAY THAT THE ASSE SSEE BE GIVEN A PROPER AND ADEQUATE OPPORTUNITY OF BEING HE ARD. 18. THE GROUND NOS. 3 AND 4 RAISED BY THE REVENUE ARE GENERAL AND NEED NO ADJUDICATION. 19. THE APPEAL OF THE REVENUE IS DISMISSED AS INDICATED ABOVE. ITA NO.662/CHD/2015 (ASSESSMENT YEAR 2008-09) : 20. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD DEBITED AN EXPENDITURE OF RS.75,44,563/- AS BANK IN TEREST BESIDES BANK CHARGES OF RS.10,39,974/- I.E. RS.85,84,537/- IN AGGREGATE. ON PERUSAL OF THE BAL ANCE SHEET, IT WAS NOTICED THAT THE ASSESSEE HAD ADVANCE D INTEREST FREE LOANS AND ADVANCES OF RS.4,11,48,575/ -, WHICH INCLUDED LOANS AND ADVANCES OF RS.3,22,81,197 /- GIVEN TO NEAR AND DEAR ONES OF THE DIRECTORS OF THE COMPANY. SINCE THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION IN THIS REGARD, THE INTEREST @ 12% ON T HE AMOUNT OF RS.3,22,81,197/- WAS DISALLOWED. 13 21. BEFORE THE CIT (APPEALS), DETAILED SUBMISSIONS WITH REGARD TO VARIOUS LOANS AND ADVANCES WERE MADE BY THE ASSESSEE CONTENDING THAT ALL THESE LOANS AND AD VANCES WERE MADE OUT OF BUSINESS EXPEDIENCY. THE SUBMISSI ONS OF THE ASSESSEE IN THIS REGARD ARE REPRODUCED AT PA GES 5 AND 6 OF THE CIT (APPEALS)S ORDER. FURTHER, IT WA S CONTENDED THAT THE CALCULATION OF DISALLOWANCE OF I NTEREST IS TOTALLY BASED ON SURMISES AND CONJECTURES WITHOU T CONFRONTING AND ALLOWING ANY OPPORTUNITY TO THE ASS ESSEE. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS OF VAR IOUS HIGH COURTS. IT WAS ALSO SUBMITTED THAT THE ASSESS EE HAS INVESTED ITS ENTIRE TERM LOAN FACILITY IN ACQUIRING AND MAKING ADDITIONS TO THE FIXED ASSETS ALONGWITH ITS UNSECURED LOANS, WHICH WERE UTILIZED FOR THE BUSINE SS PURPOSES DURING THE YEAR. AFTER CONSIDERING THE D ETAILED REPLY OF THE ASSESSEE, THE CIT (APPEALS) DELETED TH E ADDITION MADE ON ACCOUNT OF ALL LOANS AND ADVANCES EXCEPT THE LOAN GIVEN TO SHRI NIRMAL MALHOTRA TO THE TUNE OF RS.44 LACS. HE WAS OF THE VIEW THAT THIS LOAN DOES NOT SEEM TO BE ON ACCOUNT OF ANY BUSINESS EXPEDIENCY AS THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO SUPPORT THE THEORETICAL CLAIM OF THE SAID ADVANCE BEING FOR BUS INESS PURPOSE. 22. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. AT THE TIME OF ARGUMENTS MADE DETAILED SUBMISSIONS WITH REGARD TO THE 14 FACT THAT WHILE GIVING RELIEF TO THE ASSESSEE THE P ROVISIONS OF RULE 46A OF THE INCOME TAX RULES HAVE NOT BEEN COMPLIED WITH. 23. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE CIT (APPEALS) AND FURTHER STATED THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS TO THE EXTENT OF RS.22,58,87,586/- AT ITS DIS POSAL AND THE TOTAL INTEREST FREE ADVANCES GIVEN BY HIM D URING THE ASSESSMENT YEAR ARE RS.3,22,81,197/-. RELYING ON THE JUDGMENTS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS. CIT IN ITA NO.224 OF 2013. (O&M) DATED 24.7.2015 AND CIT VS. KAPSONS ASSOCIATES, ITA NO.354 OF 2013 (O&M) DATED 4.8.2015 , IT WAS ARGUED THAT THE ASSESSEE HAVING NEVER OWNED FUN DS TO MAKE THESE ADVANCES, NO DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT IS CALLED FOR. WITH REGARD T O THE SUBMISSIONS OF THE LEARNED D.R. THAT THE PROVISIONS OF RULE 46A OF THE ACT WAS NOT COMPLIED WITH, THE LEAR NED COUNSEL FOR THE ASSESSEE MADE SIMILAR SUBMISSIONS W HICH WERE MADE BY HIM IN ITA NO.663/CHD/2015. 24. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE FINDING OF THE CIT (APPEALS) IN RELATION TO THI S GROUND ARE AT PAGE 12, PARA 2.3, WHICH READ AS UNDER : 15 2.3 I HAVE EXAMINED THE VARIOUS ADVANCES SHOWN IN TH E BALANCE SHEET, THE ADVANCES GIVEN TO SH. NIRMAL MALH OTRA TO THE TUNE OF RS. 44 LACS ON 22.01.2008 DOES NOT SEEM T O BE ON ACCOUNT OF ANY BUSINESS EXIGENCIES AS THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE TO SUPPORT THE THEORETICAL CL AIM OF SAID ADVANCE BEING FOR BUSINESS PURPOSE. THEREFORE, THE CO NCLUSION OF THE A.O. WITH REGARD TO THIS ADVANCE BEING FOR NO N BUSINESS PURPOSE IS LOGICAL EVEN THOUGH THE MATTER HAS NOT B EEN HIGHLIGHTED SPECIFICALLY IN THE ASSESSMENT ORDER. T HE DISALLOWANCE @ 12JJO_JAER ANNUM FOR TWO MONTHS IS T HEREFORE, IN ORDER. THE ADVANCE IN RESPECT OF M/SMALHOTRA ENTE RPRISES PRIVATE LIMITED IS IN FACT NO ADVANCE DUE FROM THE SA ID ENTITY TILL JULY2007 AS THERE WAS HUGE CREDIT BALANCE FROM TH E FIRST DAY OF THE FINANCIAL YEAR TILL JULY 2007. THE ADVANCE HAS BEEN DUE FROM THEM ONLY FROM 8 TH MARCH 2008 WHICH MEANS THAT THERE IS NO CASE FOR DISALLOWANCE WITH RESPECT TO THIS ADVANCE. THE AMOUNT DUE FROM M/S OASIS DISTILLERIES PRI VATE LIMITED IS ON ACCOUNT OF BUSINESS DEALING AS EVIDENCE D BY THE COPY OF ACCOUNT AND THEREFORE, THE SAME IS CLEARLY ON ACCOUNT OF DIRECT BUSINESS CONNECTION AND CANNOT BE CLUBBED AS INTEREST FREE ADVANCE TO NEAR AND DEAR ONES. FURTHE R, THE ADVANCE IN RESPECT OF SH. GAURAV MALHOTRA, SH. ASHOK CHANANA, SH. GAUTAM MALHOTRA AND OTHERS ARE CLEARLY GIV EN ON THE LAST DATE OF THE FINANCIAL YEAR TO ENABLE THEM TO APPLY FOR LIQUOR VENDS IN THE ENSUING LIQUOR AUCTIONS. THEREFO RE, OUT OF THE ENTIRE LOANS AND ADVANCES ONLY AN AMOUNT OF R S. 44 LACS/ IS ATTRIBUTABLE TO NON BUSINESS ADVANCE DESERVIN G DISALLOWANCE OF INTEREST. THE DISALLOWANCE IS THEREFOR E, CONFIRMED ACCORDINGLY. THE REST OF THE ADDITION IS DI RECTED TO BE DELETED. 25. ON PERUSAL OF THE SAME, WE DO NOT FIND ANY INFIRMITY AS THE CIT (APPEALS) HAS PREFERRED TO DEA L EACH AND EVERY LOAN AND ADVANCE AS TO THE CONTENTION OF THE ASSESSING OFFICER WITH REGARD TO BUSINESS EXPEDIENC Y. 16 MOST OF THESE ADVANCES WERE GIVEN FOR APPLYING TEND ERS WHICH IN NO CASE CAN BE SAID TO BE ANY REASON APART FROM BUSINESS EXPEDIENCY. 26. WITH RESPECT TO THE SUBMISSIONS OF THE LEARNED D.R. FOR COMPLIANCE OF PROVISIONS OF RULE 46A OF TH E INCOME TAX RULES, OUR OBSERVATION IS SAME AS HAS BE EN GIVEN IN ITA NO.663/CHD/2015. 27. THE APPEAL OF THE REVENUE IS DISMISSED. C.O.29/CHD/2015(IN ITA NO.662/CHD/2015) : 28. IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAIS ED FOUR GROUNDS. THE LEARNED COUNSEL FOR THE ASSESSEE PREFERRED NOT TO PRESS GROUND NO.3, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 29. THE GROUND NO.4 IS GENERAL IN NATURE AND, HENC E THE SAME DOES NOT NEED ANY ADJUDICATION. 30. GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE RELATE TO DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT TO THE TUNE OF RS.88,000/-. 31. THE GROUND NO.1 RELATES TO CERTAIN DISCREPANCI ES IN THE AMOUNT OF DISALLOWANCE DELETED BY THE CIT (A PPEALS) AS TAKEN BY THE REVENUE IN THEIR GROUND OF APPEAL. IN VIEW OF THE FACT THAT WE HAVE DISMISSED THE G ROUND OF 17 APPEAL RAISED BY THE REVENUE, THIS GROUND BECOMES IRRELEVANT AND NEEDS NO ADJUDICATION. 32. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF INTEREST SUSTAINED BY T HE CIT (APPEALS) RELYING ON THE JUDGMENT OF PUNJAB & HARYA NA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. (SUPRA). THE PROPOSITION LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISE S PVT. LTD. (SUPRA) IS THAT IN CASE THE ASSESSEE POSSESS O WNED FUNDS IN EXCESS OF THE LOANS AND ADVANCES, A PRESUM PTION CAN BE RAISED THAT THESE ADVANCES HAVE BEEN MADE OU T OF THESE OWNED FUNDS AND NOT OUT OF BORROWED FUNDS. N O DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT CA N BE MADE. THE ONLY DISALLOWANCE UNDER SECTION 36(1)(II I) OF THE ACT SUSTAINED BY THE CIT (APPEALS) PERTAINED TO LOANS AND ADVANCES IN RELATION TO SHRI NIRMAL MALHOTRA. FROM THE PERUSAL OF THE BALANCE SHEET ANNEXED WITH THE P APER BOOK FILED BY THE ASSESSEE, WE OBSERVE THAT THE ASS ESSEE HAS OWNED FUNDS, CONSISTING OF SHARE CAPITAL AND RE SERVES AND SURPLUS TO THE TUNE OF RS.8,65,66,998/-, WHICH ARE SUFFICIENT FOR PROVIDING SUCH LOANS. IN VIEW OF TH E PROPOSITION LAID BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. (SUPRA), WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 18 ITA NO.664/CHD/2015 (ASSESSMENT YEAR 2010-11) : 33. THE GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER : ( I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE DECISION OF CIT(A), TO DELETE THE ADDI TION OF RS. 3,03,24,085/- MADE ON ACCOUNT OF LOW G.P. RATE, IS CORRECT. 34. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS IN GROUND NO.(I) OF THIS APPEAL ARE SIMILAR TO THE FAC TS IN GROUND NO.(I) IN ITA NO.663/CHD/2015 AND THE FINDIN GS GIVEN IN ITA NO.663/CHD/2015 SHALL APPLY TO THIS CA SE ALSO WITH EQUAL FORCE. 35. THE GROUND NO.2 RAISED BY THE REVENUE IS AS UNDER : (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW, THE DECISION OF CIT(A), TO DELETE THE AD DITION OF RS. 1,34,07,078/- MADE ON ACCOUNT OF DISALLOWANCE O UT OF INTEREST PAID TO BANK PROPORTIONAL TO THE INTERE ST FREE ADVANCES GIVEN BY THE ASSESSEE, IS CORRECT. 36. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS IN GROUND NO.(II) OF THIS APPEAL ARE SIMILAR TO THE FA CTS IN GROUND NO.(II) IN ITA NO.663/CHD/2015 AND THE FINDI NGS GIVEN IN ITA NO.663/CHD/2015 SHALL APPLY TO THIS CA SE ALSO MUTATIS MUTANDIS. 19 ITA NO.665/CHD/2015 (ASSESSMENT YEAR 2011-12) : 37. THE GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER : (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DECISION OF CIT(A) TO DELETE TH E ADDITION OF RS. 4,08,14,285/- MADE ON ACCOUNT OF LO W G.P. RATE, IS CORRECT. 38. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS IN GROUND NO.(I) OF THIS APPEAL ARE SIMILAR TO THE FAC TS IN GROUND NO.(I) IN ITA NO.663/CHD/2015 AND THE FINDIN GS GIVEN IN ITA NO.663/CHD/2015 SHALL APPLY TO THIS CA SE ALSO WITH EQUAL FORCE. 39. THE GROUND NO.2 RAISED BY THE REVENUE IS AS UNDER : (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DECISION OF CIT(A), TO DELETE THE A DDITION OF RS.7.00 CRS. MADE U/S 69A ON ACCOUNT OF INCOME DISCLOSED DURING SEARCH, IS CORRECT. 40. THIS GROUND RELATES TO ADDITION OF RS.7 CRORES MADE UNDER SECTION 69A OF THE ACT. IN THIS REGARD, WE SEE THAT NO ADDITION OF THIS AMOUNT SURRENDERED AT THE TIME OF SEARCH WAS MADE BY THE ASSESSING OFFICER, SINCE THE ASSESSEE HAS DULY DISCLOSED THE SAME IN ITS RETURN OF INCOME. EVEN THE CIT (APPEALS) HAS NOT DELETED ANY SUCH INCOME. THEREFORE, THIS GROUND RAISED BY THE REVEN UE DOES NOT ARISE FROM THE ORDER OF THE LOWER AUTHORIT IES. IN 20 VIEW OF THIS, THE SAID GROUND IS DISMISSED. 41. THE GROUND NO.3 RAISED BY THE REVENUE IS AS UNDER : (III) WHETHER THE DECISION OF CIT(A) TO DELETE THE PROPORTIONAL DISALLOWANCE OF INTEREST ON ADVANCES/LOANS GIVEN TO NEARS AND IN INVESTMENTS, I S CORRECT. 42. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS IN GROUND NO.(III) OF THIS APPEAL ARE SIMILAR TO THE F ACTS IN GROUND NO.(I) IN ITA NO.662/CHD/2015 AND THE FINDIN GS GIVEN IN ITA NO.662/CHD/2015 SHALL APPLY TO THIS CA SE ALSO MUTATIS MUTANDIS. C.O.30/CHD/2015(IN ITA NO.665/CHD/2015) : 43. THE GROUND NOS.1 AND 2 RAISED BY THE REVENUE ARE AS UNDER : 1. THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST U/S 36 (1)(III) ON THE AMOU NT ADVANCED TO M/S DIAMOND RESORT PVT. LTD. TO THE TUNE OF RS. 26,40,000/-. 2. THAT THE CONFIRMATION OF INTEREST IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 44. THE GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE IN CROSS OBJECTION ARE SIMILAR TO THE GROUND NO.1 R AISED BY THE ASSESSEE IN C.O.NO.29/CHD/2015 AND THE FINDI NGS GIVEN IN C.O.NO.29/CHD/2015 SHALL APPLY TO THIS CAS E ALSO 21 MUTATIS MUTANDIS. 45. THE ASSESSEE HAS NOT PRESSED GROUND NO.3 RAISE D IN CROSS OBJECTION, THEREFORE, THE SAME IS DISMISSE D AS NOT PRESSED. 46. THE GROUND NO.4 IS GENERAL IN NATURE AND, HENC E THE SAME NEEDS NO ADJUDICATION. 47. IN THE RESULT, I) THE APPEAL OF THE REVENUE IN ITA NO.662/CHD/2015 IS DISMISSED. II) THE C.O.NO.29/CHD/2015 IN ITA NO.662/CHD/2015 FILED BY THE ASSESSEE IS PARTLY ALLOWED. III) THE APPEAL OF THE REVENUE IN ITA NO.663/CHD/20 15 IS DISMISSED/SET ASIDE ONE GROUND AS INDICATED ABOVE. IV) THE APPEAL OF THE REVENUE IN ITA NO.664/CHD/2015 IS DISMISSED. V) THE APPEAL OF THE REVENUE IN ITA NO.665/CHD/2015 IS DISMISSED. VI) THE C.O.NO.30/CHD/2015 IN ITA NO.665/CHD/2015 FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JUNE, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16 TH JUNE, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 22