M/s. Cear India Multitronics Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6763/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2216 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KR JIWANI
• Keywords: Business income; Depreciation; Business expenditure; Income from undisclosed sources; Corroborative evidences; Revenue expenditure
• Section: 14A; 194C; 68; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 6763/DEL/2014 : ASSTT. YE AR : 2008-09 C EAR INDIA MULTITRONICS PVT. LTD. K-15, SOUTH EXTENSION, PART-I NEW DELHI 110 049 PAN : AAACC0212B VS ITO WARD-3(2) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SACHIN JAIN, CA REVENUE BY : SH. VIJAY KR. JIWANI, S R. DR DATE OF HEARING : 24 /0 7 /2018 DATE OF PRONOUNCEMENT : 06 /0 9 /2018 ORDER PER BEENA A. PILLAI, JUDICAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 14/10/14 PASSED BY LD. CIT (A)-6, NEW DELHI FOR ASSE SSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING T HAT THE RENTAL INCOME RECEIVED FROM LETTING OUT OF FACTORY PREMISES SITUATED IN GOVERNMENT NOTIFIED INDUSTRIAL AREA OF THE APPELLANT IS SUBJECT TO ASSESSMENT AS PER THE PROVI SIONS OF SECTION 22 OF IT ACT 1961 UNDER THE HEAD INCOME FRO M HOUSE PROPERTY, WHEREAS THE INCOME OF THE APPELLANT IS SUBJECT TO TAX AS PER THE PROVISIONS OF SECTION 28 OF IT ACT ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 2 1961 UNDER THE HEAD INCOME FROM BUSINESS & PROFESSI ON AS APPELLANT IS ENGAGED IN THE BUSINESS OF LETTING OUT OF COMMERCIAL & INDUSTRIAL PREMISES. 2. THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING ADD ITION OF RS. 15,23,025/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY WHICH IS TAXABLE AT RS. 21,75,750/- AS PER PROVISIONS OF SECTION 28 OF IT ACT 1961 UNDER THE H EAD INCOME FROM BUSINESS & PROFESSION I.E. ON GROSS BAS IS WITHOUT 30% STANDARD DEDUCTION UNDER SECTION 24 OF IT ACT 1961 AS APPELLANT IS ENGAGED IN THE BUSINESS OF L ETTING OUT OF COMMERCIAL & INDUSTRIAL PREMISES, THE SAME M AY PLEASE BE TAXED UNDER APPROPRIATE HEAD OF INCOME. 3. THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING THAT THE JOB WORK RECEIPTS AMOUNTING TO RS. 2,50,000/- EARNE D BY THE APPELLANT ARE SUBJECT TO TAX U/S 68 OF IT ACT 1 961 AS APPELLANT IS A REGISTERED SSI UNIT IN GURGAON, HARY ANA AND ENGAGED IN THE BUSINESS OF MANUFACTURING & JOB WORK OF PLASTIC MOULDING COMPONENTS & ELECTRICAL ASSEMBL IES SINCE 1991, THE SAME MAY BE TAXED UNDER APPROPRIATE HEAD OF INCOME. 4. THE LEARNED ASSESSING OFFICER ERRED BY DISALLOWI NG WHOLE OF THE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE WITHOUT REJECTING THE BOOKS OF ACCOUNTS BU T THE LD. CIT(APPEALS) HAS ERRED IN PRESUMING THAT BOOKS OF ACCOUNTS HAD BEEN REJECTED BY THE CONCERNED ASSESSI NG OFFICER IN HIS ASSESSMENT ORDER AND ON THE BASIS OF HER PRESUMPTION RESTRICTED THE ALLOWABILITY OF BUSINESS EXPENSES TO THE EXTENT OF 50% WITHOUT ANY JUSTIFICA TION OR REASONABLE GROUNDS, THE DEDUCTION FOR REMAINING 50% OF BUSINESS EXPENDITURE MAY KINDLY BE ALLOWED TO THE APPELLANT. 5. THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF INTEREST PAID ON LOANS AMOUNTING TO RS. 3,46,693/- CLAIMED BY THE APPELLANT AS BUSINESS ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 3 EXPENDITURE ON THE GROUND THAT LOAN FUNDS WERE NOT UTILIZED FOR ENHANCING THE BUSINESS INTEREST, THE S AME MAY KINDLY BE ALLOWED TO THE APPELLANT. 6. THE LD. CIT(APPEALS) HAD ERRED IN CONFIRMING THE ADDITION OF RS. 7,862/- COMPUTED UNDER SECTION 14A OF IT ACT, 1961 READ WITH RULE 8D OF INCOME TAX RULES, 19 62, THE SAME MAY KINDLY BE DELETED. 7. THE LD. CIT(APPEALS) HAS ERRED IN NOT APPRECIATI NG THE EVIDENCES FURNISHED BY THE APPELLANT IN SUPPORT OF ITS CASE. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/08 DEC LARING NIL INCOME. SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143 (2) OF THE ACT WAS ISSUED. IN RESP ONSE TO STATUTORY NOTICES, REPRESENTATIVES OF ASSESSEE ATTE NDED FROM TIME TO TIME AND CASE WAS DISCUSSED WITH LD.A.O. LD.AO OBSER VED THAT ASSESSEE WAS INVOLVED IN THE BUSINESS OF MANUFACTURI NG OF PLASTIC MOULDING COMPONENTS SINCE MANY YEARS, ALONG WITH GI VING OWNED PREMISES ON RENT. DURING THE YEAR LD.AO OBSERVED TH AT ASSESSEE HAD EARNED INCOME FROM JOB WORK, DIVIDEND AND RENT. IT WAS OBSERVED BY LD.AO THAT GROSS RECEIPTS AMOUNTING TO RS.24,43,250/, WAS DECLARED UNDER THE HEAD INCOME FROM BUSINESS. LD.AO CALLED UPON ASSESSEE TO CLARIFY, AS TO WHY RENTAL INCOME HA S BEEN TREATED AS BUSINESS INCOME. IN REPLY TO SHOW CAUSE NOTICE, A SSESSEE SUBMITTED VIDE LETTER DATED 22/11/10, THAT RENTAL I NCOME WAS EARNED FROM FACTORY, WHICH WAS GIVEN ON RENT ON COMME RCIAL BASIS. IT WAS SUBMITTED BY ASSESSEE THAT AS PER MEMORANDUM OF ASSOCIATION OF ASSESSEE, MAIN OBJECTS CONSISTS OF R ENTING OF ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 4 PROPERTY. IT WAS SUBMITTED BY ASSESSEE THAT IN PREC EDING ASSESSMENT YEARS, RENTAL INCOME RECEIVED BY ASSESSE E WAS CONSISTENTLY ASSESSED UNDER THE HEAD INCOME FROM B USINESS. 3. AFTER CONSIDERING SUBMISSIONS ADVANCED BY ASSESS EE, LD.AO WAS OF THE OPINION THAT RENTAL INCOME FROM PROPERTY HAS TO BE TREATED AND TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. LD.AO THEREFORE REJECTED SUBMISSIONS OF ASSESSEE AN D CONSIDERED RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. 4. FURTHER LD.AO OBSERVED THAT ASSESSEE CLAIMED TO HAVE RECEIVED RECEIPTS ON ACCOUNT OF JOB WORK, WHICH WAS DECLARED AS INCOME FROM BUSINESS. ON A SHOW CAUSE NOTICE ISSUED BY LD.AO, AS SESSEE SUBMITTED THAT ENTIRE INCOME FROM JOB WORK WAS RECEI VED IN CASH. IT WAS SUBMITTED BY ASSESSEE THAT JOB WORK RECEIPT WERE B OOKED BY ASSESSEE IN 2 MONTHS AT RS.25,000/-AND RS.20,000/-F OR REMAINING 10 MONTHS TOTALING TO RS.2,50,000/-. LD.AO CONSIDER ED JOB WORK RECEIPTS IN CASH AS INCOME FROM UNDISCLOSED SOURCES , SINCE NONE OF THE 12 PARTIES REVEALED THEIR IDENTITY TO ASSESSEE FOR PURPOSES OF RAISING BILLS. LD.AO ALSO OBSERVED THAT ASSESSEE DI D NOT FURNISH ANY EVIDENCE TO ESTABLISH THAT JOB WORK ACTIVITY WAS ACTU ALLY CARRIED OUT. 5. LD.AO FURTHER OBSERVED THAT ASSESSEE PAID A SUM O F RS.3,46,693/- ON ACCOUNT OF INTEREST PAID ON LOANS. HE CALLED FOR VARIOUS DETAILS, AND ON EXAMINING THE SAME, LD.AO F OUND THAT SUCH PAYMENTS WERE MADE ON LOANS RAISED FROM EITHER DIRE CTORS OR SISTER CONCERNS. ASSESSEE WAS CALLED UPON TO EXPLAIN PURPOS E OF SUCH ADVANCES. IN RESPONSE TO NOTICE, ASSESSEE SUBMITTED THAT ADVANCE GIVEN TO REEMA GUPTA WAS TOWARDS PURCHASE OF LAND. FURTHER ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 5 ASSESSED SUBMITTED THAT TWO SEPARATE ADVANCES GIVEN TO VINEMADHAV COMMODITIES PVT. LTD., WAS TOWARDS SHARE A PPLICATION MONEY. LD.AO DURING ASSESSMENT PROCEEDINGS NOTED TH AT ALL THREE PARTIES WERE RELATED TO ASSESSEE. ASSESSEE SUBMITTE D THAT ADVANCE TO REEMA GUPTA AND ADVANCE TO VINEMADHAV COMMODITIE S PVT. LTD AMOUNTING TO RS.9,20,000/- STILL STANDS, AS ON DATE OF ASSESSMENT. LD.AO DISALLOWED INTEREST ON THE GROUND THAT ADVANC ES WERE NOT USED FOR PURPOSE FOR WHICH IT WAS TAKEN. LD.AO ALSO O BSERVED THAT ASSESSEE HAD BORROWED FUNDS ON WHICH INTEREST WAS PAY ABLE, WHICH WAS NOT UTILISED FOR ENHANCING ITS OWN BUSINESS BUT WA S GIVEN AWAY TO SISTER CONCERNS INTEREST-FREE. 6. ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE H AD EARNED DIVIDEND OF RS.17,500/- FROM ITS INVESTMENTS IN SHA RES. LD.AO COMPUTED DISALLOWANCE IN ACCORDANCE WITH RULE 8D AT RS.7,862/- BEING 0.5% OF AVERAGE INVESTMENT. 7. AGGRIEVED BY THE ADDITIONS MADE BY LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). LD.CIT (A) CONFIRMED THE ADDITIONS MADE BY LD. AO. 8 . AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 9. AT THE OUTSET LD.AR SUBMITTED THAT GROUND NO.6 IS IN RESPECT OF DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D OF THE ACT. HE SUBMITTED THAT ASSESSEE DOES NOT WISH TO PRESS THIS GROUND. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED AS NOT PRESSED. ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 6 10 . GROUND NO. 1-2 IS AGAINST TREATMENT OF RENTAL INCOME EARNED BY ASSESSEE AS INCOME FROM HOUSE PROPERTY VIS--VIS INCOME FROM BUSINESS AS ALLEGED BY ASSESSEE. 11. LD.AR SUBMITTED THAT ASSESSEE HAS BEEN CARRYING ON WITH ACTIVITIES OF JOB WORK OF PLASTIC MOULDINGS COMPONE NTS FROM FACTORY BUILDING CONSTRUCTED ON LAND ALLOTTED BY HARYANA GO VERNMENT, SITUATED IN A NOTIFIED INDUSTRIAL AREA. IT WAS SUBMI TTED THAT DURING THE YEAR, ASSESSEE ENGAGED SKILLED WORKERS, REQUIRE D MACHINERIES WITHIN THE AREA OF 5766 FT. IT WAS SUBMITTED THAT AS SESSEE OWNED FACTORY BUILDING HAVING TOTAL AREA OF 20,000 FT. LD .AR SUBMITTED THAT OUT OF TOTAL AREA, AREA OF FACTORY BUILDING ADMEASU RING 14,234 FT. WAS LET OUT TO M/S.ALP PLASTICS PVT. LTD., AND M/S.S TANDARD GOLD ELECTRICALS PVT. LTD. IT WAS FURTHER SUBMITTED THAT IN PRECEDING YEARS, FACTORY RENTAL INCOME HAS BEEN ASSESSED AS B USINESS INCOME, AND ALL EXPENSES INCURRED BY ASSESSEE WERE ALLOWED AS BUSINESS EXPENSES IN CONNECTION WITH RENTAL INCOME. LD.AR FUR THER SUBMITTED THAT AS PER MEMORANDUM OF ASSOCIATION, ON E OF THE MAIN ACTIVITY OF ASSESSEE WAS LETTING OUT OF OWNED COMMER CIAL PREMISES. LD.AR SUBMITTED THAT OUT OF TOTAL AREA OF 20,000 FT ., MORE THAN 75% WAS LET OUT TO TWO PARTIES ALONG WITH MACHINERY, SINC E ASSESSMENT YEAR 1992-93 ONWARDS TO VARIOUS PARTIES. 12. ON THE CONTRARY LD.DR RELYING UPON ORDER OF LD.CIT (A) SUBMITTED THAT ASSESSEE IS OWNER OF ENTIRE PROPERTY, WHICH IS BEING USED BY ASSESSEE ITSELF, AND THEREFORE ANY INCOME G ENERATED FROM SUCH PROPERTY USED BY ASSESSEE, WOULD CONSTITUTE IN COME FROM HOUSE PROPERTY AND COMPUTATION OF SUCH INCOME HAS TO BE AS PER ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 7 SECTION 22. LD.DR AT THIS JUNCTURE SUBMITTED THAT P RINCIPLE OF RES JUDICATA DO NOT APPLY TO TAXING LAWS. 13 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH TH E SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 14. ADMITTEDLY, ASSESSEE IN PRECEDING ASSESSMENT YEA RS OFFERED RENTAL INCOME UNDER HEAD INCOME FROM BUSINESS, WHI CH HAS BEEN ACCEPTED BY AUTHORITIES BELOW IN SCRUTINY ASSESSMEN TS. IT IS OBSERVED THAT ASSESSEE HAS PLACED IN PAPER BOOK BEF ORE US, ASSESSMENT ORDERS/1 ST APPELLATE ORDERS OF PRECEDING ASSESSMENT YEARS. WE HAVE ALSO PERUSED LEASE AGREEMENT PLACED AT PAGE 80-99 OF PAPER BOOK, EXECUTED BY ASSESSEE WITH M/S.ALP PLA STICS PVT. LTD., AND M/S.STANDARD GOLD ELECTRICALS PVT. LTD. T HE LEASE AGREEMENT VERY CLEARLY INDICATES THAT LESSEES HAVE BEEN GIVEN ON LEASE, PART OF FACTORY PREMISES IN THE REAR PORTI ON ON GROUND FLOOR FOR FIXED MONTHLY LEASE. FROM CORRESPONDENCE PLACE D AT PAGE 78-79 OF PAPER BOOK BETWEEN HARYANA STATE INDUSTRIAL AND I NFRASTRUCTURE DEVELOPMENT CORPORATION LTD. AND ASSESSEE, IT IS VE RY CLEAR THAT ASSESSEE LEASED COMMERCIAL PREMISES WITH THE KNOWLED GE OF STATE GOVERNMENT OF HARYANA FOR COMMERCIAL EXPLOITATION. ALSO FROM MEMORANDUM AND ARTICLES OF ASSOCIATION, PLACED AT P AGE 123 OF PAPER BOOK ARTICLE 125 OF MEMORANDUM OF ASSOCIATION , CLEARLY INDICATES THAT ASSESSEE IS ALLOWED TO CARRY ON BUSI NESS OF RENTING, LEASE, SUBLEASE BEING OF RESIDENTIAL AND COMMERCIAL OR INDUSTRIAL PREMISES ON BEHALF OF ASSESSEE ITSELF OR ON BEHALF OF CENTRAL OR STATE GOVERNMENT OR ANY LOCAL AUTHORITY IN INDIA. ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 8 15. FROM THESE EVIDENCES IT IS CLEAR THAT ASSESSEE HA S LET OUT ON RENTAL BASIS THE PORTION WHICH IS NOT OCCUPIED BY AS SESSEE FOR ITS BUSINESS PURPOSES. IT IS ALSO VERY CLEAR THAT ASSES SEE HAD RECEIVED LAND FROM STATE GOVERNMENT OF HARYANA FOR COMMERCIA L USE, WHICH HAS NOT BEEN DISPUTED BY AUTHORITIES BELOW. THOUGH WE AGREE WITH LD.DR THAT PRINCIPLE OF RES JUDICATA DO NOT APPLY, BUT CONSISTENCY SHOULD BE MAINTAINED AND TAXING AUTHORITIES SHOULD NOT DEVIATE FROM ITS EARLIER DECISION, UNLESS THERE IS JUSTIFI ABLE MATERIAL ON RECORD CALLING FOR SUCH DEVIATION. THUS IN OUR CONS IDERED VIEW ASSESSEE HAD GRANTED A PORTION OF THE BUILDING ON L EASE TO M/S.ALP PLASTICS PVT. LTD., AND M/S.STANDARD GOLD ELECTRICA LS PVT. LTD TO COMMERCIALLY EXPLOIT THE ASSET, WHICH HAS TO BE ASSE SSED AS BUSINESS INCOME. 16. ON THE BASIS OF THE ABOVE DISCUSSIONS WE ALLOW GROUND NO. 1 AND 2 RAISED BY ASSESSEE. 17 . GROUND NO. 3 & 4 ARE IN RESPECT OF RECEIPTS AMOUNTING TO RS.2,50,000/- EARNED BY ASSESSEE, WHICH HAS BEEN TAX ED UNDER SECTION 68 AS RECEIVED FROM UNDISCLOSED SOURCES. AS SESSEE HAS ALSO ALLEGED THAT LD.CIT (A) ERRED IN RESTRICTING ALLOWAB ILITY OF BUSINESS EXPENSES TO THE EXTENT OF 50%, WITHOUT ANY JUSTIFICA TION. 18. LD.AR SUBMITTED THAT ASSESSEE WAS CARRYING ON ITS BUSINESS ACTIVITY OF JOB WORK AND HAD EARNED INCOME OF RS.2, 50,000 DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT ASS ESSING OFFICER WRONGLY INVOKED PROVISIONS OF SECTION 68, AND HAS TR EATED RECEIPTS OF JOB WORK UNDER THE HEAD INCOME FROM OTHER SOURC ES, ON THE GROUND THAT MONEY HAS BEEN RECEIVED IN CASH, AND TH AT ASSESSEE ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 9 RECEIVED JOB WORK INCOME OF RS.25,000 FOR 2 MONTHS A ND RS.20,000 FOR REST OF 10 MONTHS. ASSESSING OFFICER OBSERVED T HAT ASSESSEE BOOKED JOB WORK INCOME AS SINGLE MONTHLY ENTRY IN I TS CASH BOOK AND INVOKED PROVISIONS OF SECTION 68 ON CONJECTURES . HE SUBMITTED THAT SECTION 68 WOULD NOT BE APPLICABLE, AS ASSESSE E HAD FURNISHED COMPLETE DETAILS OF JOB WORK INCOME EARNED ALONG WITH BILLS/VOUCHERS BEFORE THE LD.AO AT THE TIME OF ASSE SSMENT PROCEEDINGS. LD.AR SUBMITTED THAT DOING JOB WORK FO R 3 RD PARTIES WAS ONE OF THE CORE BUSINESS ACTIVITY OF ASSESSEE, WHICH CANNOT BE CONSIDERED AS INCOME FROM OTHER SOURCES. FURTHER IT WAS SUBMITTED THAT DURING PRECEDING ASSESSMENT YEARS, JOB WORK INCOME HAS BEEN ASSESSED AS BUSINESS INCOME AND ALL EXPENDITURE WAS INCURRED BY ASSESSEE WERE ALLOWED AS BUSINESS EX PENSES IN CONNECTION WITH BUSINESS INCOME. IT WAS SUBMITTED TH AT THESE EXPENSES ARE NOT IN THE NATURE OF CAPITAL EXPENSES OR PERSONAL EXPENSES, BUT HAS BEEN INCURRED BY FOR CARRYING OUT ASSESSES BUSINESS ON REGULAR BASIS. LD.AR SUBMITTED THAT LD.CIT(A) WRONGLY PRESUMED THAT ASSESSING OFFICER REJECTED BOOKS OF ACCOUNTS UNDER SECTION 14 5(3) OF THE ACT. HE SUBMITTED THAT EXPENDITURE DISALLOWED BY ASSESSI NG OFFICER HAS BEEN RESTRICTED BY LD.CIT (A) AT 50%, BY MERELY HOL DING IT TO BE EXCESSIVE. 19 . LD.DR SUBMITTED THAT ASSESSEE FAILED TO GIVE DETA ILS OF PARTIES, FOR WHOM JOB WORK WAS EXECUTED. HE SUBMITTED THAT BY PLACING BILLS AND VOUCHERS, DO NOT ESTABLISH GENUINENESS OF TRANS ACTION, AS PARTIES HAVE MADE PAYMENTS IN CASH TO ASSESSEE, WHIC H HAS BEEN ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 10 BOOKED BY ASSESSEE AS SINGLE ENTRY FOR YEAR UNDER C ONSIDERATION. LD.DR SUBMITTED THAT ONUS LIES UPON ASSESSEE TO EST ABLISH GENUINENESS OF TRANSACTION, BY FILING PARTICULARS O F PARTIES, FOR WHOM JOB WORK WAS EXECUTED. PLACING RELIANCE UPON ORDE RS OF LD.CIT(A), LD.DR SUBMITTED THAT ASSESSING OFFICER R IGHTLY INITIATED PROVISIONS OF SECTION 68 AS CREDIT ENTRIES IN BOOKS OF ACCOUNTS OF ASSESSEE REMAINED UNEXPLAINED. 20. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 21 . IT IS OBSERVED THAT ASSESSING OFFICER DISALLOWED AMOUNT RECEIVED BY ASSESSEE TOWARDS JOB WORK, SINCE THE PRIN CIPAL FAILED TO DEDUCT TDS FROM PAYMENTS MADE TO ASSESSEE, IN VIEW O F PROVISIONS OF SECTION 194C. ON ONE BREATH, IT IS OBSERVED THAT ASSESSING OFFICER IS HOLDING VIOLATION OF PROVISIONS OF SECTION 40 A (3) AND 194C IN THE HANDS OF ASSESSEE, AND ON THE OTHER HAND INVOKED PROVISIONS OF SECTION 68 ON SUCH RECEIPTS. LD.CIT (A) UPHELD ACTI ON OF LD.AO OF SECTION 68 IN RESPECT OF INCOME EARNED BY ASSESSEE BY WAY OF JOB WORK. 22 . IT IS FURTHER OBSERVED THAT LD.CIT (A) FOR DISALL OWING EXPENDITURE, HELD THAT ASSESSING OFFICER REJECTED BOOKS OF ACCOUNT. ON PERUSAL OF ASSESSMENT ORDER, WE FIND THAT ASSESSI NG OFFICER HAD NOT REJECTED BOOKS OF ACCOUNTS, BUT HAD DISALLOWED EXPENDITURE AS SUPPORTING EVIDENCES IN THE FORM OF VOUCHERS WERE N OT FOUND TO BE AUTHENTIC. LD.AO OBSERVED THAT NO BONA FIDE ACTIVIT Y WAS CARRIED OUT DURING THE YEAR BY ASSESSEE. ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 11 23. IT HAS BEEN SUBMITTED BY ASSESSEE THAT JOB WORK INC OME IS DISCLOSED IN BOOKS OF ACCOUNT AS INCOME FROM BUSIN ESS, CANNOT BE CHANGED TO INCOME FROM UNDISCLOSED SOURCES. IT HAS BEEN SUBMITTED THAT ASSESSEE IS CONTINUOUSLY ENGAGED IN DOING JOB WORK ACTIVITY SINCE PAST MANY ASSESSMENT YEARS, WHICH HAS NOT BEEN DISPUTED BY AUTHORITIES BELOW. 24. HE REFERRED TO PAPER BOOK WHEREIN PROFIT AND LOSS ACCOUNT OF PRECEDING ASSESSMENT YEARS HAVE BEEN ANNEXED, SHOWI NG INCOME RECEIVED BY JOB WORK. FURTHER IT IS OBSERVED THAT IN COME RECEIVED FROM JOB WORK HAS BEEN DECLARED BY ASSESSEE AS BUSI NESS INCOME, WHICH HAS BEEN ACCEPTED IN PRECEDING YEARS. ADMITTED LY FOR THE YEAR UNDER CONSIDERATION, AMOUNT CREDITED IN BOOKS OF A CCOUNTS ARE INCOME IN HANDS OF ASSESSEE, WHICH HAS BEEN DECLARED BY ASSESSEE UNDER THE HEAD, INCOME FROM BUSINESS. IN FACT, V IEW FORMED BY AUTHORITIES BELOW IS BASED ON PRESUMPTION THAT ASSE SSEE IS THE OWNER OF THE SAID AMOUNT CREDITED IN CASH. FURTHER A UTHORITIES BELOW REJECTED SUBMISSIONS OF ASSESSEE, WITHOUT MAKI NG ANY ENQUIRIES IN RELATION TO NATURE OF INCOME RECEIVED ON THE BASIS OF PRECEDING ASSESSMENT YEARS. WE THEREFORE ARE OF CON SIDERED OPINION THAT THE ADDITION MADE BY LD.AO WHICH IS SUSTAINED B Y LD. CIT (A) NEEDS PROPER VERIFICATION BY LD.AO. MERELY ON SURMI SES AND CONJUNCTURES NO ADDITION CAN BE MADE U/S68 OF THE A CT, WHEN ASSESSEE HIMSELF IS DECLARING THE MONIES RECEIVED I N CASH AS ITS BUSINESS INCOME. 25 . IT IS OBSERVED FROM LD.AOS ORDER THAT ASSESSIN G OFFICER HAS NOT REJECTED BOOKS OF ACCOUNTS, BUT HAS DISALLOWED E XPENSES SINCE ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 12 VOUCHERS DID NOT APPEAR TO BE AUTHENTIC. NO FURTHER ENQUIRIES WERE CONDUCTED BY LD.A.O. IN THIS REGARD FOR REJECTING ENTIRE EXPENSES CLAIMED BY ASSESSEE. LD.CIT (A) DID NOT DISPUTE BUS INESS ACTIVITY BUT RESTRICTED DISALLOWANCE TO 50% WITHOUT ANY BASIS. IT HAS BEEN SUBMITTED THAT VOUCHERS/BILLS WERE BASICALLY IN RES PECT OF FACTORY RENTING EXPENSES, REMUNERATION AND WAGES. IT IS FURT HER OBSERVED THAT ASSESSING OFFICER IN ASSESSMENT ORDER ALLOWED PROPORTIONATE DEPRECIATION, CONSIDERING IT TO BE FOR PURPOSES OF BUSINESS. WE HAVE PERUSED AUDITED ACCOUNTS PLACED AT PAGE 68-77 OF PA PER BOOK. IN PROFIT AND LOSS ACCOUNT AT PAGE 74, IT IS OBSERVED THAT EXPENDITURE DEBITED ARE BASICALLY, ADMINISTRATIVE EXPENSES, REM UNERATION EXPENSES, INSURANCE EXPENSES, INTEREST PAID ON LOAN S, DIRECTORS SITTING FEES, AUDIT FEES, DEPRECIATION, FACTORY RUN NING EXPENSES, OFFICE REPAIRS AND MAINTENANCE EXPENSES, LEGAL EXPE NSES, TELEPHONE EXPENSES, VEHICLE RUNNING AND MAINTENANCE EXPENSES, AND MISCELLANEOUS EXPENSES. IN OUR CONSIDERED OPINION T HERE ARE CERTAIN EXPENSES LIKE ADMINISTRATIVE EXPENSES, DIRECTORS SI TTING FEES, AUDIT FEES, DEPRECIATION, OFFICE REPAIRS AND MAINTENANCE EXPENSES, LEGAL EXPENSES, FACTORY RUNNING EXPENSES, TELEPHONE EXPEN SES AND MISCELLANEOUS EXPENSES WHICH CANNOT BE DISALLOWED AS THESE ARE NECESSARY TO BE INCURRED FOR THE PURPOSES OF BUSINE SS. AS WE HAVE IN THE PRECEDING PARAGRAPH ALREADY HELD THE RENT RE CEIVED FROM FACTORY PREMISES TO BE INCOME FROM BUSINESS, FACT ORY RUNNING EXPENSES AND OFFICE REPAIRS AND MAINTENANCE EXPENSE S ARE ELIGIBLE EXPENDITURE IN THE HANDS OF ASSESSEE. ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 13 26. WE ACCORDINGLY DIRECT LD.AO TO COMPUTE THE DISALLO WANCE OF EXPENSES IN RESPECT OF THE OTHER ITEMS. ACCORDINGLY WE SET ASIDE THE ENTIRE ISSUE BACK TO L D.AO FOR PROPER VERIFICATION OF NATURE OF INCOME IN THE HANDS OF AS SESSEE HAVING REGARDS TO THE EVIDENCES PLACED BEFORE HIM AS PER L AW. 27. IN THE RESULT GROUND NO.3 STANDS ALLOWED FOR STATISTICAL PURPOSES AND GROUND NO.4 IS SET ASIDE TO COMPUTE DI SALLOWANCE OF EXPENSES, IF ANY AS PER LAW, IN THE EVENT IT I S ESTABLISHED THAT NO JOB WORK ACTIVITY HAS BEEN CARRIED OUT BY A SSESSEE DURING THE YEAR. IT IS FURTHER DIRECTED THAT EXPEN SES RELATING TO RENTAL INCOME AND CERTAIN STATUTORY EXPENSES SHOULD NOT BE DISALLOWED. 28. GROUND NO. 5 HAS BEEN RAISED BY ASSESSEE IN RESPECT OF THE ADDITION AMOUNTING TO RS.3,46,693/- MADE ON ACCOUNT OF INTEREST PAID ON LOANS. 29. LD.AR SUBMITTED THAT ASSESSEE HAD TAKEN FOLLOWING LOANS FROM VARIOUS PARTIES TO WHOM INTEREST AMOUNTING TO RS.3,4 6,693/- WAS PAID. S. NO. NAME OPENING BALANCE FRESH ADVANCES CLOSING BALANCE 1. REEMA GUPTA 6,50,000/- 6,50,000/- 13,00,000/- 2. VENIMADHAV COMMODITIES PVT. LTD. 6,50,000/- 2,02,000/- 2,00,000/- 3. VENIMADHAV SECURITIES PVT. LTD. ---- 9,20,000/- 9,20,000/- IT HAS BEEN SUBMITTED BY LD.AR THAT INTEREST ON LO ANS HAS BEEN PAID AS PER AGREED TERMS. HE SUBMITTED THAT LOANS WERE TAKEN FOR ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 14 PURCHASE OF FIXED ASSETS. LD.AR SUBMITTED THAT ALL OWABILITY OF INTEREST ON BORROWED FUNDS AS REVENUE EXPENDITURE, I S NOT BASED ON UTILISATION OF FUNDS, AND IS AN ALLOWABLE EXPENDITU RE. 30 . ON THE CONTRARY, LD.DR PLACING RELIANCE UPON OBS ERVATIONS OF LD.CIT(A) SUBMITTED THAT ALL PARTIES FROM WHOM LOANS WERE TAKEN WERE RELATED WITH ASSESSEE AND NONE OF THE ADVANCES W ERE UTILISED FOR PURPOSES OF BUSINESS. IT WAS SUBMITTED THAT ASS ESSEE HAS NOT PRODUCED ANY EVIDENCE OF ANY LAND HAVING PURCHASED, NOR ANY SHARES BEING ALLOTTED. LD.DR SUBMITTED THAT ON ONE HAND, ASSESSEE BORROWED FUNDS AT A COST, AND ON THE OTHER HAND, SU CH FUNDS WERE GIVEN AWAY TO SISTER CONCERNS INTEREST FREE. 31 . WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 32. ON PERUSAL OF SUBMISSIONS ADVANCED BY ASSESSEE, P LACED IN THE PAPER BOOK, AS WELL AS SUBMISSIONS ADVANCED BEFORE A UTHORITIES BELOW, IT IS OBSERVED THAT ASSESSEE INVESTED IN SH ARES, WHICH WAS NOT OUT OF LOANS RECEIVED. IT HAS BEEN SUBMITTED TH AT LOANS WERE TAKEN FROM PARTIES FOR PURPOSES OF BUSINESS, HOWEVE R ASSESSEE HAS NOT ESTABLISHED UTILISATION OF LOAN, WHICH ENHANCED ASSESSEES BUSINESS. FOR PURPOSES OF ALLOWABILITY OF AN EXPEND ITURE UNDER SECTION 37 (1) OF THE ACT, BURDEN LIES UPON ASSESSE E TO ESTABLISH THAT LOANS HAVE BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR PURPOSES OF BUSINESS OR PROFESSION ONLY. IN THE FACTS OF PRESEN T CASE, ASSESSEE HAS NOT DEMONSTRATED IN ANY MANNER WHATSOEVER, REGAR DING ALLEGED PURCHASE OF LAND OUT OF LOANS TAKEN FROM RELATED PA RTIES, ON WHICH INTEREST OF RS.3,43,693/- HAS BEEN PAID. MERELY BY SUBMITTING THAT ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 15 AMOUNT HAS BEEN UTILISED FOR PURPOSES OF BUSINESS, DO NOT SUPPORT CLAIM OF ASSESSEE. WE THEREFORE DO NOT FIND ANY INF IRMITY IN DECISION OF LD. CIT (A) IN DISALLOWING INTEREST EXPENDITURE. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 33. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER, 2018. SD/- SD/- (R.K. PANDA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 06 /09/2018 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT // TRUE COPY // BY ORDER: ASSISTANT REGISTRAR ITAT DELHI BENCHES, NEW DELHI ITA NO.6763/DEL/2014 (CEAR INDIA MULTITRONICS PVT. LTD.) 16 S.NO. DETAILS DATE 1 DRAFT DICTATED ON DRAGON 29/08/2018 2 DRAFT PLACED BEFORE AUTHOR 31/08/2018 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 06/09/2018 6 KEPT FOR PRONOUNCEMENT 06/09/2018 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER