Sh. Raghav Gupta, Patiala V. JCIT, Patiala

ITA 670/CHANDI/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5295 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 15-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 37; 40(a)(ia); 36 (1) (iii); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHES B, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 693/CHD/2014 ASSESSMENT YE AR : 2008-09 THE ACIT, VS SHRI RAGHAV GUPTA, CIRCLE, S/O M/S JAGTU MAL MURARI LAL, PATIALA. MALWA PICTURE PALAE COMPLEX, THE MALL, PATIALA. PAN : AEOPG8387C ITA NO. 670/CHD/2014 ASSESSMENT YEAR : 2008-09 SHRI RAGHAV GUPTA, VS THE JCIT, S/O M/S JAGTU MAL MURARI LAL, PATIALA RANGE, MALWA PICTURE PALAE COMPLEX, PATIALA. THE MALL, PATIALA. PAN : AEOPG8387C (A PPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI MANJIT SINGH, SR.DR ASSESSEE BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 20.11.2017 DATE OF PRONOUNCEMENT : 24.01.2018 ORDER PER DIVA SINGH, JM THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AND THE ASSESSEE ASSAILING THE CORRECTNESS OF THE ORDER DATED 1 6/05/2014 OF THE CIT(A) PATIALA PERTAINING TO 2008 09 ASSESSMENT YE AR. THE RESPECTIVE GROUNDS RAISED BY THE PARTIES READ AS UNDER: THE GROUNDS RAISED BY THE REVENUE READS AS UNDER: 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,71,33,389/- MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING-THE ADDITION OF RS. 1,71,33,389/- MADE B Y THE AO BY DISALLOWING TRAVELLING-EXPENSES CLAIMED IN RESPECT OF A NEW PRO POSED BUSINESS OF TRADING IN MINERALS WHICH WAS ENTIRELY DIFFERENT FROM THE EXISTING BUSI NESS OF THE ASSESSEE OF SALE AND PURCHASE OF SHARES AND DERIVATIVES, BY HOLDING THAT THE EXPENDITURE RELATED TO THE SAME BUSINESS OF THE ASSESSEE. 3. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 2 OF 10 SUSTAINING THE ADDITION OF RS.1,71,33,389/- MADE BY THE AO BY DISALLOWING TRAVELLING EXPENSES WHICH WERE CLEARLY OF CAPITAL N ATURE AS THE SAME WERE INCURRED FOR A NEW BUSINESS PROPOSED TO BE STARTED BY THE ASSESSEE AND NOT ACTUALLY COMMENCED. 4. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT SUSTAINING THE ADDITION OF RS.1,71,33,389/- MADE BY THE AO BY DISALLOWING TRAVELLING EXPENSES CLAIMED IN RESPECT OF BUSINESS WHICH DID NOT TAKE OFF AND NOTHING CAN BE INFERRED ABOUT THE MANAGEMENT, ORGAN IZATION, MANPOWER, ADMINISTRATION, SOURCE OF FINDING AND PLACE OF BUSI NESS I.E. REGARDING UNITY OF CONTROL AND INTERLACING OF BUSINESS. 2. THE ASSESSEE ON THE OTHER HAND HAS COME UP ON THE FOLLOWING GROUNDS IN THE PRESENT APPEAL: 1. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 8,22,825/- UNDER SECTION 40(A)(IA) ON ACCOUNT O F MANAGEMENT FEES. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 27,55,751/- UNDER SECTION 36(I)(III) ON ACCOUNT OF INTEREST. 3. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPE ALS THE APPELLANT DISPUTES THE QUANTUM OF DISALLOWANCES. 3. LD. SR. DR REFERRING TO THE DEPARTMENTAL GROUNDS DREW ATTENTION TO THE ASSESSMENT ORDER AND CARRY US THROUGH THE IMP UGNED ORDER SUBMITTED THAT THE RELIEF GRANTED BY THE CIT(A) ON FACTS WAS NOT JUSTIFIED. ATTENTION WAS INVITED TO THE SPECIFIC FINDINGS AND OBSERVATIONS OF THE AO MADE IN THE ASSESSMENT ORDER TO SHOW THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHARES AND D ERIVATIVES AND NOT IN METALS. ACCORDINGLY, HEAVY RELIANCE WAS BEING PLACED UPON THE FINDINGS OF THE AO BY THE REVENUE. 4. THE LD. AR ON THE OTHER HAND SUBMITTED THAT RIGHT FRO M THE ASSESSMENT STAGE, THE ASSESSEE HAS BEEN SUBMITTING THA T THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHARES AND DERIVATIVE AND SOUGHT TO START A NEW VENTURE. THE EXPENSES PERTAIN TO THIS BUS INESS VENTURE OF THE ASSESSEE WHICH WAS ATTEMPTED. THE EXPENSES ARE NE ITHER CAPITAL NOR PERSONAL IN NATURE AND THE FACT THAT THE ASSESSEE INCURRED THE EXPENDITURE FOR THIS VENTURE IS NOT DISPUTED BY THE REV ENUE. ACCORDINGLY, PLACING RELIANCE UPON THE IMPUGNED ORDER IT WA S HIS SUBMISSION THAT THERE IS NO MERIT IN THE DEPARTMENTAL APP EAL AS IT IS MERELY REHASHING THE ISSUE ON SAME FACTS WHICH HAVE ALR EADY BEEN CONSIDERED BY THE CIT(A). ACCORDINGLY IT WAS HIS PRAYER TH AT THE DEPARTMENTAL GROUNDS DESERVE TO BE DISMISSED. 5. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE RECORD SHOWS THAT THE ASSESSEE IS ENGAGED IN SALE AND PURCHASE OF SHARES AND DERIVATIVES. THE ASSES SEE HAS SHOWN ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 3 OF 10 INCOME ARISING FROM TRADING IN DERIVATIVES UNDER THE HEAD BUSINESS INCOME AND INCOME FROM SALE AND PURCHASE OF SHARES (STT PAID) UNDER THE HEAD CAPITAL GAINS. PARA-2 OF THE ASSESSMENT ORDER REFERRING TO THESE FACTS WAS SPECIFICALLY REFERRED TO BY T HE SR.DR IN THE COURSE OF HIS ARGUMENTS. THE RECORD SHOWS THAT THE ASS ESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS WAS REQUIRED TO J USTIFY THE EXPENDITURE OF RS. 1,71,33,389/- WHICH WAS CLAIMED AS TRAVE LLING EXPENSES. THE BREAK-UP OF THE SAID EXPENDITURE IS GIVEN IN PARA-2.1 PAGE 2 OF THE ASSESSMENT ORDER THE SAME IS REPRODUCED HEREUNDER FOR READY REFERENCE : I) FOREIGN EXCHANGE PURCHASE A/C RS. 24,78,600/- II) FOREIGN TRAVELLING EXPENSES RS. 1,46,54,789/ - 5.1 OUR ATTENTION HAS BEEN INVITED TO THE EXPLANATION OFFER ED BY THE ASSESSEE VIDE REPLY DATED 20/09/2010 WHICH HAS BEEN E XTRACTED AT PAGES 2 TO 49 OF THE ASSESSMENT ORDER. READING THERE FR OM THE LD. SR. DR HAS SPECIFICALLY INVITED ATTENTION TO THE FACT THAT THE ASSESSEE HAS CLAIMED THAT HE WAS TRYING TO EXPAND THE EXISTING BUSINES S. IT WAS HIS SUBMISSION THAT THIS VERY FACT DEMONSTRATES THAT THE EX PENDITURE DOES NOT PERTAIN TO HIS STATED BUSINESS AS THE EXISTING BUSINE SS AS PER RECORD OF THE ASSESSEE ADMITTEDLY WAS FROM SHARES AND DERIVATIVES. THUS, IT HAS BEEN SUBMITTED THAT THE ARGUMENTS AND EVID ENCES IN SUPPORT OF THE EXPENDITURE HAVING BEEN INCURRED WAS CON SIDERED AND HELD TO BE NOT ALLOWABLE. WE NOTE ON A READING FROM THE R ECORD THAT CONSISTENTLY THE ASSESSEE HAS MAINTAINED THAT THE EXPE NDITURE WAS INCURRED FOR MEETING WITH THE CONCERNED PARTIES TO EXPLOR E THE POSSIBILITY OF TRADING IN MINERALS SUCH AS COPPER ETC. AS PE R PAGE 6 OF THE ASSESSMENT ORDER AND THE SUBMISSIONS REPRODUCED IN THE ORDER WERE RELIED UPON TO SHOW THAT THE ASSESSEE HAD STATED THAT THE SERVICES OF TECHNICALLY QUALIFIED PEOPLE NAMELY; MR. NCS PAR THASARTHY AND MR. ROHIT GUJRAL HAD BEEN ENGAGED. THE FACTUM OF ENG AGING THE SERVICES OF QUALIFIED PEOPLE IS NOT DISPUTED. ON CONSIDERING TH E SUBMISSION AND THE RECORD, WE NOTE THAT THE CLAIM HAS BEEN DISALLOW ED ON AN INCORRECT APPRECIATION OF LAW HOLDING THAT IT WAS NOT THE STATED BUSINESS OF THE ASSESSEE. WE NOTE IT HAS BEEN EXPLAINED T HAT THE EXPENSES WERE ALSO INCURRED FOR SERVICES OF A LOCAL AGENT TO ACT ON ASSESSEES BEHALF AND ALSO TO MEET PEOPLE FOR THE BUSINES S NAMELY; M/S CONSULTORIA A SAC, PERU, ALSO WERE ENGAGED. IT HAS A LSO BEEN ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 4 OF 10 SUBMITTED BEFORE THE AO THAT PERU, INDIAN CHAMBER OF CO MMERCE ALSO HELPED THE ASSESSEE IN ESTABLISHING THE CONTACTS FOR THE SAID ACTIVITY FOR WHICH PURPOSES TRAVELLING HAD BEEN UNDERTAKEN. EVIDENC ES IN SUPPORT OF THE CLAIM HAVE BEEN PLACED ON RECORD WHICH HA VE NOT BEEN DOUBTED HOWEVER CLAIM IS HELD TO BE NOT ALLOWABLE ON THE REASONING THAT THIS WAS NOT THE ORIGINAL BUSINESS OF THE ASSESSEE. T HE FACT THAT A NEW VENTURE WAS ATTEMPTED ALSO HAS NOT BEEN DOUBTED. HOWEVER THE FACT THAT IT ULTIMATELY DID NOT SUCCEED HAS BEEN HELD AG AINST THE ASSESSEE. RELIANCE WAS PLACED UPON SECTION 37 (1) AND THE DEFINITION OF BUSINESS AS LAID DOWN IN SECTION 2 (13) OF THE ACT AND THE LEGAL POSITION AS CONSIDERED BY VARIOUS COURTS IN THEIR RESPECTIVE ORDE RS AND DECISIONS NAMELY PRODUCE EXCHANGE CORPORATION LTD. VS C IT (1970) 77 ITR 739 (S.C), B.R.LTD. V V.P.GUPTA, CIT (1978) 113 ITR 647 (S.C )., CIT V MODI INDUSTRIES LTD. (1993) 200 ITR 341 (DEL), CIT V A LEMBIC GLASS INDUSTRIES LTD. (1976) 103 ITR 715 (GUJ), CIT V PRITHIV I INSURANCE CO. LTD. (1967) 63 ITR 632 (S.C), CIT VS MONNEC T INDUSTRIES LTD. 221 CTR (DEL) 266, CIT V SHAH THEATRE P.LTD. (1988) 16 9 ITR 499 (RAJ), VEECUMSEES V CIT (1996) 220 ITR 185 (S.C), CIT VS RE LAXO FOOTWEARS LTD. (293 ITR 231 (DEL)]; ENPRO INDIA LTD. VS. DCIT (113 TAXMAN 132 DEL)]; JAY ENGINEERING WORKS LTD. V. CIT (311 ITR 405(DEL), CIT V. TATA CHEMICALS LTD [256 ITR 395 (B OM.), ADDL. CIT V. ANILINE DYE STUFFS & PHARMACEUTICALS PVT. LTD. [138ITR8 43(BOM) KESORAM INDUSTRIES AND COTTON MILLS LTD. VS. CIT 19 6 ITR 845 (CAL.); HINDUSTAN ALUMINIUM CORPORATION LTD. V CIT ( 159 ITR673 (CAL.)]; CIT V. RANE (MADRAS ) LTD. (215 CTR 250 (CHENN.)]; PREM SP INNING AND WEAVING MILLS CO. LTD. V.CIT (98 ITR 20(ALL.)]; CIT V. SHAH THEATRES P. LTD. [169 ITR 499 (RAJ)]; CIT V. MALWA VANASPATI & CHEMICALS CO. LTD. [149 CTR283(MP)]; CIT V. KERALA STATE I NDUSTRIAL DEVELOPMENT CORPORATION LTD. [182 ITR 62 (KER .)]; CCT V. SENAPATHY WHITELY LTD. [101 CTR 31 (KAR.)] ; CIT V. HINDUSTAN MACHINE TOOLS LTD. [175 ITR 212 (KAR.)] T HE ASSESSEE IT IS NOTED HAS RELIED UPON THE ABOVE DECISION BEFOR E AO IN SUPPORT OF ITS CLAIMS. WE NOTE THAT THE ASSESSEE HAS ALSO SUBMITTED THAT THE EXPENDITURE IS A REVENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE AS NO NEW ASSET OR COMMODITY CAME INTO EXISTENCE. IN SUPPORT OF THE SAID ARGUMENT RELIANCE HAS B EEN PLACED ON CIT VS ASHOK LEYLAND LTD. (1969) 72 ITR 137, 143 (MAD) A FFIRMED ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 5 OF 10 (1972) 86 ITR 549 (S.C), JAGAT BUS SERVICE V CIT (1950) 18 I TR 13, 23 (ALL), R.S.RADHA KISHAN KAPOOR V CIT (1963) 47 ITR 938 (ALL) AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORP. LTD. V CIT 22 5 ITR 792, 795-796 (S.C). ON A READING OF THE RATIO OF THE DECISION C ITED, WE NOTE THAT THERE CAN BE NO STRAIGHT JACKET FORMULA TO DECIDE WHETHER A PARTICULAR ITEM IS A CAPITAL EXPENDITURE OR A REVENUE EXPE NDITURE, THE ISSUE HAS TO BE CONSIDERED IN THE PECULIAR SET OF FACTS OF A STATED CASE. CONSIDERING THE JUDICIAL PRECEDENT AS SET OUT IN THE DECIS IONS CITED WE HOLD THAT THE EXPENDITURE INCURRED TOWARDS EXPLORING NEW BUSINESS OPPORTUNITIES AS EXTENSION OF EXISTING BUSINESS EVEN IF ULTIMA TELY IT DID NOT FRUCTIFY IN THE FACTS OF THE PRESENT CASE HAS CORREC TLY BEEN CLAIMED AND ALLOWED BY THE CIT(A) AS A REVENUE EXPENDITURE. WE FIN D THAT THE SAID CONCLUSION IS SUPPORTED BY THE DECISION OF THE DELHI HI GH COURT ITSELF IN THE CASE OF TRIVENI ENGINEERING WORKS LTD. (1998) 232 ITR 639 WHICH HAS BEEN RELIED UPON EVEN BEFORE THE AO AND HAS B EEN AFFIRMED IN INDORAMA SYNTHETICS INDIA LTD. V CIT 228 CTR 278. SU PPORT WAS ALSO DRAWN FROM THE DECISION OF THE CALCUTTA HIGH COURT IN HINDUSTAN ALUMINIUM CORPORATION LTD. V CIT 190 ITR 328. RELIANCE WAS FURTHER PLACED UPON CAMA HOTELS LTD. V IAC 38 TTJ (AHDE.) 21, ENPR O INDIA LTD. V DCIT 113 TAXMAN 132 (MAG), USHA ALLOYS AND STEEL LT D. V DCIT 55 ITD 418. THE EXPENDITURE WE NOTE CANNOT BE CALLED TO BE PERSONAL IN NATURE AS THE FOREIGN TRAVEL EXPENDITURE WAS INCURRED BY THE ASSESSEE AND THE ACCOMPANYING CONSULTANTS FOR EXPANSION OF NEW BUSINESS. IT IS NOT THE CASE OF THE AO OR OF THE DR TH AT IT WAS A PERSONAL EXPENDITURE. WE HAVE TAKEN OF THE FACT THAT TH E ASSESSEE WAS REQUIRED TO EXPLAIN BEFORE AO THE QUALIFICATIONS AND SERVICE S OF PEOPLE WHO IT WAS STATED HAVE RENDERED SERVICES. WE NOTE THAT THE ASSESSEES REPLY DATED 15/11/2010 EXTRACTED AT PAGES 44 TO 49 OF THE ASSESSMENT ORDER SHOWS THAT IT WAS SUBMITTED THAT THE EXPENSES P ERTAINED TO THE ASSESSEE AND HIS WIFE AND THEY HAVE BEEN CONSTANTLY EN GAGING AND FOLLOWING UP THE ACTIVITIES WITH THE TWO CONSULTANTS APPOINT ED NAMELY SHRI N.C.S.PARTHASARTHY AND SHRI ROHIT GUJRAL. REFERRING TO THE QUALIFICATION OF SHRI N.C.S. PARTHASARATHY WE NOTE IT HA S BEEN STATED BEFORE THE AO THAT THE ASSESSEE INTENDED TO TRADE IN MINERALS SUCH AS NATURAL GAS, PHOSPHATES, COPPER ET C AND SHRI N.C.S. PARTHASARATHY HAD THE REQUISITE EXPERIENCE AND TECH NICAL QUALIFICATIONS IN THE SAID AREA. ACCORDINGLY HIS SERVICES WERE ENG AGED BY THE ASSESSEE ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 6 OF 10 WITH A VIEW TO ACT AND HELP THE ASSESSEE IN CONDUCTING THE BUSINESS MORE EFFICIENTLY AND PROFITABILITY. A COPY OF HIS RES UME AS WELL AS HIS APPOINTMENT LETTER HAD BEEN PLACED ON RECORD. A PE RUSAL OF HIS RESUME IT IS NOTED SHOWS THAT SH. N.C.S. PARTHASARTHY WAS QUALIFIED CHEMICAL ENGINEER FROM THE BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE (BITS) PILANI, RAJASTHAN HAVING MORE THAN 24 YEARS EXPERIEN CE IN PROJECTS, TECHNICAL SERVICES AND PRODUCTION FUNCTIONAL ARE AS IN FERTILIZER , PETROLEUM REFINING AND CONSULTING AREAS. HIS ACTIVE PROFESSIONAL LIFE AS PER THE EXTRACT OF THE ORDER COVERED EMPLOYMENT IN VARIOUS COMPANIES OF NOT ONLY NATIONAL BUT ALSO INTERNAT IONAL REPUTE SUCH AS NAGARJUNA FERTILIZERS AND CHEMICALS, KAKINANDS (AP) INDIA , QATAR FERTILIZER COMPANY, QATAR, ARABIAN GULF, BHARAT PETR OLEUM CORPORATION, BOMBAY, INDIA AND COROMANDEL FERTILIZERS LIMITED, VISAKHAPATNAM, INDIA AND SUBSEQUENTLY AS AN INDEPENDEN T CONSULTANT SINCE DECEMBER 2006. WE NOTE THAT THERE IS N O REBUTTAL ON THESE ASSERTIONS BEFORE THE AO WHICH HAVE BEEN RELIED UP ON BY THE CIT(A) AND ALSO HAVE NOT BEEN REBUTTED BY THE REVENUE IN THE PRESENT PROCEEDINGS. WE FURTHER NOTE THAT IN JUSTIFICATION OF ENGAG ING THE SERVICES OF THE SAID CONSULTANT IT HAS ALSO BEEN ARGUED T HAT GIVEN THE EDUCATIONAL QUALIFICATION, EXPERIENCE AND TECHNICAL PERSPECTIVE OF MR. PARTHASARTHY HIS SERVICES WERE ENGAGED BY THE ASSESSE E TO HELP IN ARRIVING AT PROPER TECHNICAL EVALUATION OF THE ACTIVITY TO B E UNDERTAKEN OF WHICH SHRI C.S. PARTHASARTHY POSSESSED SUBSTANTIAL AN D OVER ARCHING DOMAIN KNOWLEDGE. RELIANCE HAS BEEN PLACED ON THE FOLLOWING FACTS DEMONSTRATING AND EVIDENCING THAT H IS SERVICES WERE ACTUALLY RENDERED NAMELY: APPOINTMENT LETTER DATED 07/04/2007 SETTING OUT THE TERMS OF ENGAGEMENT; THE EVIDENCE O F ENTIRE EXPENSES OF TRAVEL INCLUDING TRAVEL, STAY, MEDICAL, FOOD AND OTHER OUT OF POCKET EXPENSE WERE TO BE BORNE BY THE ASSESSEE AND A PAYMENT OF REMUNERATION WAS TO COMMENCE SUBSEQUENTLY ONLY WHEN ACTUAL TRADING COMMENCED. SINCE DURING THE YEAR UNDER CONS IDERATION NO ACTUAL TRANSACTIONS TOOK PLACE, NO AMOUNT WAS PAID TO HIM TOWARDS HIS REMUNERATION BUT ONLY THE ACTUAL COST INCURRED BY HIM WERE BORNE BY THE ASSESSEE. THESE FACTS HAVE BEEN RELIED UPON TO DEMONSTRATE THE EXPENSES INCURRED ON THE TRAVELING EXPENSES OF SHRI N.C.S. PARTHASARTHY WERE ACTUALLY INCURRED FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS. THE PAYMENTS T OWARDS ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 7 OF 10 EXPENSES OF SHRI. ROHIT GUJRAL IT HAS BEEN ARGUED T HAT TRAVELING EXPENSES ETC. WERE PAID AND KEEPING IN VIEW HIS QUA LIFICATION AND EXPERIENCE CARRY TO THE ISSUE OF RENDERING OF S ERVICES. SHRI ROHIT GUJRAL IT HAS BEEN SUBMITTED HELD AN MBA DEGR EE FROM THE INSTITUTE OF MANAGEMENT TECHNOLOGY, GHAZIABAD AND H AD SUBSTANTIAL EXPERIENCE IN THE MANAGERIAL AND FUNCTIONAL IS SUES RELATING TO THE BUSINESS. WE NOTE THAT IT HAS BEEN EXPLAINED THAT IN VIEW THEREOF HIS SERVICES WERE RETAINED AND UTILIZED B Y THE ASSESSEE TO HELP IN MAKING PROPER BUSINESS AND COMMERCIAL DECISI ONS SO AS TO COMPLIMENT THE TECHNICAL DOMAIN KNOWLEDGE OF SHRI N .C.S. PARTHASARTHY. THE SERVICES OF SHRI ROHIT GUJRAL IT WAS ELABORATED WERE ENGAGED ONLY AS A PART TIME CONSULTANT- CUM-REPRESE NTATIVE IN CONNECTION WITH TRADING BUSINESS OF MINERALS SUCH AS C OPPER WHICH THE ASSESSEE PLANNED TO IMPORT FROM ABROAD AND SELL IN INDIA. SHRI ROHIT GUJRAL WE NOTE WAS ENGAGED AS A PART TIME CON SULTANT AND WAS ENTRUSTED WITH HELPING THE ASSESSEE IN DEVELOPM ENT, FOLLOW-UP AND ARRIVING AT OPTIMAL BUSINESS SOLUTION FOR THE S AID ACTIVITY. IN TERMS OF THE PLANNING EXERCISE UNDERTAKEN BY THE ASSE SSEE. SHRI ROHIT GUJRAL AND SHRI N.C.S. PARTHASARTHY IT WAS STATED IT WAS VISUALIZED WOULD WORK AS A TEAM WHERE BY BOTH THE MANAGERIAL AN D NON- TECHNICAL AREAS AS WELL THE TECHNICAL AREAS AND ASP ECTS OF THE ENTIRE BUSINESS WOULD BE TAKEN CARE OF IN THEIR ENTIRET Y. A COPY OF THE RESUME OF SHRI ROHIT GUJRAL ALONGWITH HIS APPOINTMENT LETTER HAD BEEN PLACED ON RECORD BEFORE THE AO SO AS TO FORTIFY THE CLAIMS MADE. WE NOTE NONE OF THIS EVIDENCE IS REBUTTED. A PERUSAL O F HIS RESUME IT HAS BEEN ARGUED WOULD SHOW THAT GIVEN HIS QUALIFICATIONS AN D EXPERIENCE IN VARIOUS FUNCTION AREAS SUCH AS SALES & MARKETING, ST RATEGIC PLANNING, START UP OPERATIONS HIS SERVICES WERE REQUIR ED FOR OPTIMIZE RESULTS AND MAXIMIZE OF HIS BUSINESS EFFICIENCY. RE FERRING TO THE DECISIONS RELIED UPON BY THE ASSESSING OFFICER AT PAGE 50 O F HIS ORDER NAMELY PRODUCE EXCHANGE CORPORATION LTD VERSUS ACIT 77 ITR 739 IT HAS BEEN ARGUED THAT THE SAME WAS DISTINGUISHABLE AS IN THE FACTS OF THAT CASE BUSINESS WAS NOT IN EXISTENCE WHEREAS IN THE FACTS OF THE PRESENT CASE EXISTENCE OF BUSINESS IS NOT IN DOUBT AND IT IS ONLY THE FAILURE OF A NEW BUSINESS VENTURE THAT HAS BEEN UNDERTAK EN BY AN EXISTING BUSINESS ENTITY WHICH HAS BEEN QUESTIONED BY TH E TAX ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 8 OF 10 AUTHORITIES. IN VIEW OF THIS MATERIAL DISTINCTION ON FACTS WE N OTE THAT THE SAID DECISION IS NOT APPLICABLE. 5.2. WE FURTHER NOTE THAT THE FOLLOWING DECISIONS ON THE A BOVE FACTS CIT VS. TATA ROBINS FRASER LTD. 253 CTR (JHARKHAND) 22 7, INDO RAMA SYNTHETICS (I) LTD. VS. CIT, 228 CTR (DEL) 278, CIT VS . PRIYA VILLAGE ROADSHOWS LTD. 228 CTR (DEL) 271, AND CIT VS. HAVELLS INDIA LTD. 73 DTR (DEL) 57 FULLY SUPPORT THE VIEW TAKEN. ACCORDI NGLY BEING SATISFIED BY THE CONSISTENT EXPLANATION OFFERED BY THE ASS ESSEE ON THE FACTS AS THEY STAND THE CHALLENGE POSED BY THE REVENUE VIDE GROUND NO. 1 TO 4 IS REJECTED. 6. ACCORDINGLY THE DEPARTMENTAL APPEAL IN VIEW OF THE ABO VE REASONING ON FACTS AND LAW IS DISMISSED. 7. IN ASSESSEES APPEAL THE LD. AR ADDRESSING THE FIRS T ISSUE RAISED IN THE ASSESSEES APPEAL SUBMITTED THAT THE ARGUMENTS ADVANCED BEFORE THE ASSESSING OFFICER AND THE CIT-A ARE HEAVILY RE LIED UPON. IT WAS ALSO HIS SUBMISSION THAT M/S KOTAK MAHINDRA AND M/S RELIGARE INVESTMENT HAVE PAID TAXES ON THE RECEIPT OF THIS PAYMEN T ACCORDINGLY THE ISSUE MAY BE SENT BACK TO THE ASSESSING OFFICER FOR VERIFICATION. THE LD. SR. DR RELIED UPON THE ORDER HOWEVER HE HAD NO OBJE CTION IF THE ASSESSEE COULD DEMONSTRATE BEFORE THE AO ON FACTS THAT TAXES HAVE BEEN PAID BY THE RESPECTIVE PARTIES ON THE RECEIPT OF TH E SAID INCOME. ACCORDINGLY ACCEPTING THE COMMON PRAYER OF THE PARTIES, GROUND NO. 1 OF THE ASSESSEE IS REMANDED BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 8. ADDRESSING GROUND NO. 2 RAISED IN THE PRESENT APPEAL T HE LD. AR SUBMITTED THAT THE ISSUE RAISED HEREIN ALSO MAY BE REMA NDED TO THE ASSESSING OFFICER FOR VERIFICATION ON FACTS. THE ASSESSEE IN TH E FACTS OF THE SAID CASE IT WAS SUBMITTED HAS MADE A SUO MOTO DIS ALLOWANCE WHICH ON FACTS IS NOT DISPUTED. ACCORDINGLY IN TERMS OF TH E JUDICIAL PRECEDENT AS AVAILABLE ON THE SAID ISSUE, IT WAS HIS SUBMIS SION THAT THE AO MAY BE PERMITTED TO VERIFY THE FACTS AND GRANT NECESSARY RELIEF AS PER LAW. THE DETAILS OF THE INTEREST FREE ADVANCES AVA ILABLE WITH THE ASSESSEE ARE AS UNDER: (1) THE DETAILS OF THE INTEREST FREE ADVANCES/INVE STMENTS MADE BY THE ASSESSEE AS AT 31/03/2008 ARE AS UNDER: S.NO. NAME AMOUNT REMARKS 1 M/S GD GOENKA PVT. 5,00,00,000/- AMOUNT HAS BEEN ADVANCED ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 9 OF 10 LTD. TOWARDS SHARE APPLICATION MONEY 2 SMT. SUNAINA GUPTA 93,00,000/- AMOUNT ADVANCED TO SMT. SUNAINA GUPTA, MOTHER OF THE ASSESSEE 3 M/S INRUS IMPEX PVT. LTD. 2,42,000 AMOUNT PAID TO M/S INRUS IMPEX PVT. LTD. (OF WHICH ASSESSEE IS A SHAREHOLDER) TO MEET VARIOUS EXPENSES. 4 M/S CAPTAIN HYGIENE PRODUCTS PVT. LTD. 1,16,24,697/- AMOUNT PAID TO VARIOUS PARTIES ON BEHALF OF M/S CAPTAIN HYGIENE PRODUCTS PVT. LTD. (WHICH IS NOT CARRYING ON ANY BUSINESS ACTIVITIES AT PRESENT AND OF WHICH ASSESSEE IS A SHAREHOLDER) 5. M/S BAKEMANS INDUSTRIES PVT. LTD. 1,19,55,385/- AMOUNT PAID TO VARIOUS PARTIES ON BEHALF OF M/S BAKEMANS INDUSTRIES PVT. LTD. (WHICH IS NOT CARRYING ON ANY BUSINESS ACTIVITY THESE DAYS AND OF WHICH THE ASSESSEE IS A SHAREHOLDER. 6. M/S JAGTUMAL MURARI LAL 29,91,861/- OUTSTANDING BALANCE IN THE BOOKS OF M/S JAGTUMAL MURARI LAL WHEREIN HE IS A PARTNER. (2) IN THIS CONNECTION IT IS SUBMITTED AS UNDER: (A) THE AMOUNT OF 5 CRORES ADVANCED TO M/S GD GOENK A PVT. LTD. IS IN THE NATURE OF SHARE APPLICATION MONEY AND REPRESENTS AMOUNTS ADVA NCED IN THE ORDINARY COURSE OF BUSINESS. THE AMOUNTS ADVANCED TO M/S CAPTAIN HYGIE NE PRODUCTS PVT. LTD. AND M/S BAKEMANS INDUSTRIES PVT. LTD. REPRESENT AMOUNTS ADV ANCED AS A SHAREHOLDER TO HELP THE SAID COMPANIES TO TIDE OVER TEMPORARY BUSINESS DIFFICULTIES AND AS SUCH WAS MOTIVATED BY A DESIRE TO PROTECT HIS EXISTING INVES TMENTS AND TO ASSIST AND AID IN THE PROCESS OF THEIR REVIVAL. AS SUCH, OCCASIONED AS TH EY WERE BY A DESIRE TO ENHANCE THE LONG TERM PROSPECTS OF THE SAID COMPANIES, IT IS CL EAR THAT THEY HAVE ALSO BEEN MADE IN THE ORDINARY COURSE OF BUSINESS AND ARE NOT IN THE NATURE OF INTEREST FREE ADVANCES. 8.1 THE SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE IT WAS SUBMITTED WAS COMING OUT FROM THE ASSESSMENT ORDER ITSE LF HOWEVER THE ISSUE HAS BEEN DECIDED BY THE CIT-A RELYING UPON C ASE LAWS WITHOUT ADDRESSING THE FACTS ACCORDINGLY IT WAS HIS PRAYER THAT TH E SAID ISSUE MAY ALSO BE REMANDED TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME ADDRESSING THE FACTS OF THE SPECIFIC CASE . THE LD. SR. DR RELIED UPON THE IMPUGNED ORDER HOWEVER THE PRAYER F OR REMAND WAS NOT OBJECTED TO. 9. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. CONSIDERING THE FACTS AND THE SUBMISSIONS ADVANCE D ON BEHALF OF THE PARTIES BEFORE THE BENCH WHEREIN THE FACTS AS ARG UES ARE BORNE OUT FROM THE ASSESSMENT ORDER ITSELF WE ARE OF THE VIEW T HAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IT WOULD BE A PPROPRIATE TO SET ASIDE THE IMPUGNED ORDER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARD. ITA 693&670/CHD/2016. A.Y. 2008-09 PAGE 10 OF 10 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED A ND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY 2018. SD/- SD/- ( DR.B.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM/AMIT KUMAR COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.