M/S. EARNEST BUSINESS SERVICES PVT. LTD, MUMBAI V. THE ITO 3(1)(3),

ITA 6992/MUM/2007

• Counselvise Citation: 699219914 RSA 2007
• Duration Of Justice: 7 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 28-01-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 23-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K BEERLA
• Assessee Lawyers: PRAKASH JOTWANI
• Keywords: Depreciation; Business expenditure; Additional evidence; Difference of opinion; Change of opinion
• Section: 32; 147; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER . / ITA NO. 6992/MUM/2007 / ASSESSMENT YEAR 2000-01 . / ITA NO. 6993/MUM/2007 / ASSESSMENT YEAR 2003-04 EARNEST BUSINESS SERVICES PVT. LTD. 194, EARNEST HOUSE, 17 TH FLOOR, NCPA ROAD, NARIMAN POINT, MUMBAI. / VS. INCOME TAX OFFICER 3(1)(3), MUMBAI. ./ ./ PAN/GIR NO. : AAACE 2844B ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI P.K.BEERLA # $ % / DATE OF HEARING : 15/06/2015 # $ % / DATE OF PRONOUNCEMENT : 15/06/2015 / O R D E R PER I.P.BANSAL, JM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND THEY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DA TED 27/08/2007 FOR ASSESSMENT YEARS 2000-01 AND 2003-04. GROUNDS OF APPEAL IN BOTH THE APPEALS READ AS UNDER: . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 2 GROUNDS OF APPEAL IN ITA NO.6992/MUM/2007,A.Y. 2000 -01: GROUND NO.I: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -XXVIII, MUMBAI, [LITHE CIT(A)'] ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER ('A.O.') IN REOPENING THE ASSESSMENT U/S 147 OF THE ACT. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE APPELLANT HAD FULLY DISCLOSED THE RELEVANT FACTS WITH THE RETURN OF INC OME A MERE CHANGE OF OPINION CANNOT BE A VALID GROUND FOR REOPENING. 3. THE APPELLANT, THEREFORE, PRAYS THAT THE REOPENI NG OF ASSESSMENT U/S. 147 OF THE ACT BE ANNULLED AS BEING AB-INITIO AND/OR OTHER WISE VOID AND BAD-IN- LAW. WITHOUT PREJUDICE, IT BE HELD THAT THE REOPENING SH OULD BE CONFINED TO ITEMS STATED IN REASONS FOR REOPENING AND THE A.O. IS NOT AUTHOR ISED TO MAKE FISHING AND ROVING ENQUIRIES. GROUND II: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. BY DISALLOWING THE DEPRECIATION OF RS.10,19,976/- CLAIMED BY THE APPELLANT UNDER SECTION 32 (1) OF TH E INCOME TAX ACT 1961 (LITHE ACT') ON THE ALLEGED GROUND THAT THE ASSETS ARE NOT OWNED BY THE APPELLANT AND NO DOCUMENTS ARE PRODUCED TO SUBSTANTIATE THAT THE ASS ETS WERE READY TO USE. 2. THE APPELLANT, PRAYS THAT THE AFORESAID DISALLOW ANCE OF DEPRECIATION BE DELETED. GROUND III: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE A.O. IN DISALLOWING INTEREST AMOUNTING TO RS. 37,87,704/- ON THE ALLEGE D GROUND THAT IT IS NOT EXPENDED FOR THE PURPOSE OF APPELLANT'S BUSINESS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: A. THE EXPENDITURE WAS INCURRED FULLY FOR THE PURPO SE OF BUSINESS AND THE CONDITIONS OF SECTION 36(1)(III) WERE COMPLIED WITH ; B. IF INTEREST FREE ADVANCES ARE GIVEN DUE TO COMM ERCIAL EXPEDIENCY, NO DISALLOWANCE U/S 36(1)(III) IS WARRANTED. 3. THE APPELLANT, THEREFORE PRAYS THAT IT BE HELD THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND HENCE THE A.O BE DIRECTED TO DELETE THE DISALLOWANCE OF THE SAID INTEREST. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 3 GROUND IV: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. OF DISALLOWING 10% OF PROFESSIONAL, BROKERAGE AND COMMISSION EXPENDITU RE ON ESTIMATE BASIS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CARRYING ON A BUSINESS. 3. THE APPELLANT PRAYS THAT THE SAID EXPENDITURE B E TREATED AS BUSINESS EXPENSES AND HENCE PRAYS THAT THE SAME SHOULD BE AL LOWED. GROUND V: THE APPELLANT CRAVES LEAVE TO ADD TO, AME ND AND/OR ALTER THE ABOVE GROUNDS OF APPEAL. GROUNDS OF APPEAL IN ITA NO.6993/MUM/2007,A.Y. 2003 -04: GROUND I: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. BY DISALLOWING THE DEPRECIATION OF RS.9,17,978/- CLAIMED BY THE APPELLANT UNDER SECTION 32 (1) OF TH E INCOME TAX ACT 1961 (THE ACT') ON THE ALLEGED GROUND THAT THE ASSETS ARE NOT OWNED BY THE APPELLANT AND NO DOCUMENTS ARE PRODUCED TO SUBSTANTIATE THAT THE ASS ETS WERE READY TO USE. 2. THE APPELLANT, PRAYS THAT THE AFORESAID DISALLOW ANCE OF DEPRECIATION BE DELETED. GROUND II: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE A.O. IN DISALLOWING INTEREST AMOUNTING TO RS. 17,00,670/- ON THE ALLEG ED GROUND THAT IT IS NOT EXPENDED FOR THE PURPOSE OF APPELLANT'S BUSINESS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: A. THE EXPENDITURE WAS INCURRED FULLY FOR THE PURPO SE OF BUSINESS AND THE CONDITIONS OF SECTION 36(1)(III) WERE COMPLIED WITH ; B. IF INTEREST FREE ADVANCES ARE GIVEN DUE TO COMM ERCIAL EXPEDIENCY, NO DISALLOWANCE U/S 36(1)(III) IS WARRANTED. 3. THE APPELLANT, THEREFORE PRAYS THAT IT BE HELD THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND HENCE THE A.O BE DIRECTED TO DELETE THE DISALLOWANCE OF THE SAID INTEREST. GROUND III: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O OF DISALLOWING 10% OF PROFESSIONAL, BROKERAGE AND COMMISSION EXPENDIT URE ON ESTIMATE BASIS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CARRYING ON A BUSINESS. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 4 2. GROUND NO.1 FOR ASSESSMENT YEAR 2000-01 WAS NOT PR ESSED, HENCE, DISMISSED BEING NOT PRESSED. 3. GROUND NO.2 FOR ASSESSMENT YEAR 2000-01 IS COMMON WITH GROUND NO.1 OF THE APPEAL FOR A.Y 2003-04. SIMILARLY GROUND NO.2 OF A SSESSMENT YEAR 2003-04 AND GROUND NO.4 FOR ASSESSMENT YEAR 2000-01 ARE COMMON WITH GROUND NO.3 OF 2003- 04. 4. THESE APPEALS WERE ARGUED TOGETHER BY BOTH THE PAR TIES AND HENCE, FOR THE SAKE OF CONVENIENCE THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 5. APROPOS GROUND NO. 2 FOR ASSESSMENT YEAR 2000-01 A ND GROUND NO.1 FOR ASSESSMENT YEAR 2003-04, THE FACTS ARE THAT ON THE LAND AND BUILDING, AS ON 1/4/1999, THE WDV OF WHICH WAS A SUM OF RS.1,01,9 9,757/-, THE ASSESSEE CLAIMED DEPRECATION OF RS.10,19,976/- AND RS.9,17,9 78/- IN RESPECT OF A.Y 2000-01 AND 2003-04. SUCH DEPRECIATION WAS DISALLO WED ON THE GROUND THAT NEITHER THE ASSESSEE WAS OWNER OF THE SAID PROPERTY NOR IT WAS USED FOR THE PURPOSE OF BUSINESS. IT IS ON THE BASIS OF THESE REASONS, DEPRECIATION CLAIMED BY THE ASSESSEE HAS BEEN DENIED BY AO AND CONFIRMED BY LD. CIT(A). IN RESPECT OF A.Y 2001-02, SUCH ISSUE HAD TRAVELLED BEFORE THE TRIBUNAL, WHEREIN THE VIEW TAKEN BY THE INCOME TAX AUTHORITIES IN RESPECT OF A.Y 2001-02 WAS CONFIRMED VIDE ORDER DATED 8/2/2008 IN ITA NO.4077/MUM/2005 W ITH THE FOLLOWING OBSERVATIONS: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. SECTION 32 OF THE ACT PROVIDES THAT DEPRECIATION SHALL BE ALLOWED TO THE ASSESSEE ON ASSETS WHICH ARE OWNED WHOLLY OR PARTLY BY THE ASSESSEE AN D ARE USED FOR THE PURPOSE OF BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSE E. THE CRITERIA FOR ALLOWING DEPRECIATION ON ANY ASSET OWNED BY THE ASSESSEE IS ITS USE FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE CLAIM OF THE ASSESSEE V IS--VIS THE DEPRECIATION ON ANY ASSET IS TO BE ALLOWED, IN CASE THE SAME IS USE D BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS DURING THE YEAR OF ITS CLAI M. THE ASSESSEE IN THE PRESENT CASE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO SHOW THAT THE PROPERTY HAS ACTUALLY BEEN USED FOR THE PURPOSE OF BUSINESS DURI NG THE YEAR UNDER CONSIDERATION. THE PROPERTY OWNED BY THE ASSESSEE WAS READY FOR USE, BUT THE SAME HAS NOT BEEN PROVED TO HAVE BEEN USED FOR THE PURPOSE OF BUSINESS BY ANY EVIDENCE WHATSOEVER. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CLAIM OF THE . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 5 ASSESSEE AND NO DEPRECIATION IS ALLOWABLE ON THE S AID ASSET. WE CONFIRM THE ORDER OF CIT(A) IN DISALLOWING THE DEPRECIATION ON BUILDING NOT USED BY THE ASSESSEE FOR ITS BUSINESS AND DISMISS THE GROUND O F APPEAL RAISED BY THE ASSESSEE. COPY OF THE AFOREMENTIONED ORDER HAS BEEN PLACED ON OUR RECORD AND HAS ALSO BEEN GIVEN TO LD. DR. 6. ON THESE FACTS, IT IS THE CASE OF THE ASSESSEE T HAT FOR THE REASONS THAT ASSESSEE HAS BEEN CONTESTING THE VALIDITY OF ASSESS MENT WHICH IS FRAMED UNDER SECTION 147 OF THE ACT AND DURING THE PROCESS ASSES SEE COULD NOT ADDUCE VARIOUS EVIDENCES, ACCORDING TO WHICH ASSESSEE COUL D PROVE THE OWNERSHIP AS WELL AS USER OF THE IMPUGNED PROPERTY TO MAKE ENTI TLE THE ASSESSEE TO CLAIM THE DEPRECIATION. THE ASSESSEE HAS ALSO FILED AN AFFID AVIT OF MR. A.J.EARNEST, BEING DIRECTOR OF THE ASSESSEE COMPANY TO CLAIM THA T THE ASSESSEE HAS CONTEMPORARY EVIDENCE TO PROVE THE FACTUM OF OWNER SHIP AS WELL USER OF THE IMPUGNED PROPERTY FOR THE PURPOSE OF BUSINESS. IT IS THEREFORE, PRAYED IN THE AFFIDAVIT THAT THE ADDITIONAL EVIDENCES MAY BE ADMI TTED AND IF REQUIRED THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO EXAMINE SUCH CLAIM OF THE ASSESSEE ON MERITS IN VIEW OF THE ADDI TIONAL EVIDENCE SUBMITTED WITH THE AFFIDAVIT. THE CONTENTS OF AFFIDAVIT FOR THE SAKE OF CONVENIENCE ARE REPRODUCED BELOW. AFFIDAVIT I, MR.A. EARNEST, DIRECTOR OF EARNEST BUSINESS SERV ICES LTD. (HEREINAFTER REFERRED TO AS THE COMPANY), INDIAN INHABITANT RESIDING AT 194, NCPA MARG MUMBAI; DO HEREBY STATE AS SOLEMN AFFIRMATION AS UNDER: FACTS PERTAINING TO A.Y 2000-01: (I) THE COMPANY HAD FILED RETURN OF INCOME FOR AY 2000-01 ON 30/11/2000, DECLARING A TOTAL LOSS OF RS.82,04,330/-. (II) THE SAME WAS PROCESSED U/S. 143(1) OF THE I. T ACT, 1961 ON 27/08/2002. (III) THE CASE WAS REOPENED VI]. 147. INSPITE OF R AISING STRONG OBJECTIONS AGAINST THE RE- ASSESSMENT PROCEEDINGS, THE LEARNED AO, DISALLOWED THE DEPRECIATION AND INTEREST CLAIMED IN THE PROFIT & LOSS ACCOUNT. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 6 (IV) THE LEARNED CIT(A) HAS ALSO CONFIRMED THE ACT ION OF THE AO, IN RESPECT OF THE REOPENING AND THE DISALLOWANCES DONE BY THE LATTER. 2. FACTS PERTAINING TO AY 2003-04 : (I) THE COMPANY HAD FILED RETURN OF INCOME FOR AY 2003-04 ON 01/12/2003, DECLARING TOTAL LOSS OF RS. 40,340/- AND U/S. 115JB LOSS OF RS. 51,96,89 7/-. (II) THE SAME WAS PROCESSED U/S. 143(1) OF THE I.TA X ACT, 1961 ON 20/04/2004. (III) THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT , WHEREIN THE AO HAS MADE ADDITIONS ON ACCOUNT DEPRECIATION AND INTEREST. (IV) THE ADDITION MADE BY THE AO HAS BEEN CONFIRMED BY THE LD. CIT(A). 3. THE LEARNED AO AND CIT(A) IN BOTH THE ABOVE MENT IONED YEAR I.E. A.Y 2000-01 AND 2003-04), HAS DISALLOWED THE CLAIM OF DEPRECIATION AND INTERE ST ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH (1) ITS OWNERSHIP OF THE LAND AND BUILDIN G AND (2) HOW IT IS WAS USED FOR PURPOSE OF BUSINESS. 4. ACCORDINGLY APPEALS (FOR BOTH YEARS) HAVE BEEN FILED, IN THE PRESCRIBED MANNER, BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL BEFORE THIS H ON'BLE BENCH 'J', BEING ITA NO. 6992/M/2007 AND 6993/M/2007, RESPECTIVELY. 5. IN ORDER TO SUBSTANTIATE THE ARGUMENTS IN RESPE CT OF THE GROUNDS OF APPEAL FILED BEFORE THE HON'BLE ITAT, I AM DESIROUS OF FILING A PAPER BOOK WHICH CONTAINS ALL ADDITIONAL EVIDENCES, THE DETAILS OF WHICH ARE AS FOLLOWS :- PAGE NOS. PARTICULARS EXPLANATION 1-29 SALE DEED DATED JUNE, 1997 PROVES THAT THE COMPANY WAS THE OWNER OF FACTORY BUILDING AND LAND IN KARJAT/RAIGAD(THE SAID PREMISES), WHICH THEREFORE SUBSTANTIATES THE CLAIM OF DEPRECIATION. 30-41 STATEMENT OF ACCOUNTS OF ACCOUNTS FOR A.Y 1998-99, 1999-2000, 2000-01 & 2002-03. ALREADY AVAILABLE WITH THE DEPARTMENT. 42-44 POLICE COMPLAINT A POLICE COMPLAINT WAS FILED AGAINST ONE OF THE SECURITY GUARDS FOR THEFT OF THOSE ITEMS LYING IN T HE FACTORY/WAREHOUSE. THIS ESTABLISHES THE FACT THAT THE SAID PREMISES WERE UTILIZED FOR THE PURPOSES OF STORING THE BUSINESS ASSETS. 45-47 DELIVERY CHALLANS THE SAID PREMISES WERE UTILI ZED FOR THE PURPOSES OF STORAGE OF PURCHASED FURNITURE, FIXTURES AND OTHER APPLIANCES, WHICH ARE USED FOR THE PURPOSE OF BUSINESS. THUS IT IS SUBMITTED THAT THE SAID PREMISES WERE UTILIZED FOR THE PURPOSE OF BUSINESS. 48. FREIGHT BILLS THE FURNITURE FIXTURES AND OTHER APPLIANCES WERE TRANSPORTED FROM KARJAT TO BOMBAY, WHERE THEY WERE UTILIZED IN THE BUSINESS CENTRES, THUS IT IS SUBMITTED THAT THE SAID PREMISES WERE UTILIZED FOR THE PURPOSE OF BUSINESS. 61-66 COMPARATIVE FUND FLOW STATEMENT TECHNICALLY THEY ARE NOT ADDITIONAL EVIDENCE, BUT A RE PREPARED TO SUBSTANTIATE THE GROUND. 67-68 STATEMENT SHOWING INTEREST FREE ADVANCES TECHNICALLY THEY ARE NOT ADDITIONAL EVDEICNE, BUT A RE PREPARED TO SUBSTANTIATE THE GROUND. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 7 6. ALL THE DOCUMENTS MENTIONED ABOVE HAVE NOT BEEN FILED BEFORE THE ASSESSING OFFICER AND THE LEARNED CIT(A), SINCE WE WERE UNDER A BONAF IDE BELIEF THAT THE RE-OPENING OF THE ASSESSMENT WAS BAD IN LAW AND THE PROCEEDINGS WOULD EVENTUALLY BE QUASHED. 7. THE SAID EVIDENCE WOULD NOW ASSIST IN ADJUDICATI NG THE GROUND II AND III, FILED BEFORE YOUR HONOURS. WE THEREFORE REQUEST YOU TO KINDLY A DMIT THE ADDITIONAL EVIDENCES FILED. I HEREBY STATE THAT WHATEVER IS STATED ABOVE IS TRU E AND CORRECT THE BEST OF MY KNOWLEDGE AND BELIEF. 7. IT IS IN THE AFORESAID CIRCUMSTANCES BOTH THE PA RTIES WERE HEARD. IT WAS PLEADED BY LD. AR THAT IN THE INTEREST OF JUSTICE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR CONSIDERATION OF THE AFO REMENTIONED ADDITIONAL EVIDENCE. IT WAS SUBMITTED THAT EARLIER ORDER OF T HE TRIBUNAL MAY NOT BE CONSIDERED AS IMPEDIMENT AS ASSESSEE COULD NOT ADD UCE RELEVANT EVIDENCE IN RESPECT OF ASSESSMENT YEAR 2001-02. 8. ON THE OTHER HAND, RELYING UPON THE ORDER PASSED BY AO AND LD. CIT(A), IT WAS SUBMITTED BY LD. DR THAT THE ORDER PASSED B Y LD. CIT(A) SHOULD BE CONFIRMED. HOWEVER, HE DID NOT OBJECT TO THE SUBMI SSIONS OF LD. AR REGARDING RESTORATION OF ISSUE TO THE FILE OF AO IN THE LIGHT OF AFOREMENTIONED ADDITIONAL EVIDENCE. 9. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. FOR WHATEVER REASONS THE ASSESSEE MAY NOT HAVE PRODUCED AFOREMENTIONED ADDITIONAL EVIDENCE BUT KEEPING IN VIEW THE INTEREST OF JUSTICE, SINCE THIS APPEAL IS PENDING FOR LONG TIME, WE CONS IDER IT JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECT ION TO RE-ADJUDICATE THE SAME IN THE LIGHT OF AFOREMENTIONED ADDITIONAL EVIDENCE AFT ER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. THEREFORE, GRO UND NO.2 FOR ASSESSMENT 2000-01 AND GROUND NO.1 FOR ASSESSMENT YEAR 2003-0 4 ARE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFOR ESAID. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 8 10. APROPOS GROUND NO.3 FOR ASSESSMENT YEAR 2000-01 AND GROUND NO.2 FOR ASSESSMENT YEAR 2003-04, THE FACTS ARE THAT FROM T HE BALANCE SHEET AS ON 31/3/2000 THE AO NOTICED THAT ASSESSEE IS HAVING OW N FUNDS OF RS.4.81 CRORES AND LOAN FUNDS OF RS.5.22 CRORES. THE TOTAL FUNDS DEPLOYED WERE A SUM OF RS.10.03 CRORES AND OUT OF THESE FUNDS DEPLOYED IN THE LOANS AND ADVANCES ARE RS.22.84 CRORES WHICH ACCORDING TO AO IS SUFFICIE NT TO INFER THAT SUCH LOANS AND ADVANCES COULD NOT BE GIVEN OUT OF SHARE CAPITA L AND RESERVES AND SURPLUS WHICH IS TOO LITTLE AND OBVIOUSLY THE LOANS AND ADV ANCES ARE GIVEN OUT OF BORROWED FUNDS AND, THEREFORE, THERE WAS CLEAR NEXU S BETWEEN THE LOANS AND ADVANCES AND BORROWED FUNDS. THE ASSESSEE HAD PAI D TOTAL INTEREST OF RS.39.44 LACS AND THUS, ASSESSEE WAS REQUIRED TO EX PLAIN AS TO WHY SUCH INTEREST SHOULD NOT BE DISALLOWED. IN RESPONSE IT WAS SUBMITTED THAT ASSESSEE WAS HAVING INTEREST FREE FUNDS OF RS.16.00 CRORES I N THE SHAPE OF CURRENT LIABILITIES FOR OTHER UNSECURED LOANS WHICH WERE D EPLOYED ALONGWITH OWN FUNDS OF RS.4.81 CRORES AND THUS, IT WAS CLAIMED THAT NON -INTEREST BEARING BORROWED FUNDS WERE UTILIZED BY THE ASSESSEE FOR GIVING LOAN S AND ADVANCES AND IT WAS CLAIMED THAT, THEREFORE, INTEREST PAID OF RS.37.87 LACS SHOULD BE ALLOWED UNDER SECTION 36(1)(III) OF THE ACT. THE AO DID NOT ACCE PT SUCH SUBMISSIONS OF THE ASSESSEE AND DISALLOWED THE AMOUNT OF RS.37.87 LACS IN RESPECT OF ASSESSMENT YEAR 2000-01 AND SIMILAR DISALLOWANCE OF RS.17.00 L ACS WAS MADE FOR A.Y. 2003-04 WHICH IS SUBJECT MATTER OF THESE GROUNDS. THE DISALLOWANCE HAS BEEN UPHELD BY LD. CIT(A). 11. DURING THE COURSE OF HEARING IT WAS THE CASE OF THE ASSESSEE THAT DISALLOWANCE HAS WRONGLY BEEN SUSTAINED BY LD. CIT( A) AND IT WAS PRESUMED THAT ASSESSEE COULD NOT UTILIZE OWN FUNDS IN GIVING LOANS AND ADVANCES WHICH PROPOSITION IS CONTRARY TO THE RECENT DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD., 89 CCH 185, WHE REIN IT HAS BEEN HELD THAT WHERE ASSESSEES CAPITAL, PROFIT RESERVES, SU RPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN INVESTMENT IN TAX FREE SE CURITIES, IT WOULD HAVE TO BE . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 9 PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND NO DISALLOWA NCE WAS WARRANTED UNDER SECTION 14A. HE SUBMITTED THAT SUCH PROPOSITION WA S ALSO ACCEPTED IN THE DECISION OF HONBLE BOMBAY HIGH COURT DECISION IN T HE CASE CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM). THUS, I T WAS SUBMITTED BY LD. AR THAT POSITION OF LAW, AS HAS BEEN EXPLAINED IN AF OREMENTIONED TWO DECISIONS HAS WRONGLY BEEN APPRECIATED BY AO AS WELL AS LD. C IT(A) AND THE MATTER REQUIRES TO BE DECIDED IN THE LIGHT OF AFOREMENTION ED TWO DECISIONS OF HONBLE BOMBAY HIGH COURT FOR WHICH THE MATTER MAY BE RESTO RED BACK TO THE FILE OF AO. 12. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. AFTER CAREFUL CONSIDERATION, LOOKING I NTO THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE POSITION OF LAW ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE BY AO AND CONFIRMED BY LD. CIT(A) IS NOT IN ACCORDANCE WITH THE AFOREMENTIONED TWO DECISIONS OF HONBLE BOMBAY HIGH COURT. THEREFORE, IN THE INTEREST OF JUSTICE, WE CONSIDER IT APPROPR IATE TO RESTORE THIS MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO READJUDICATE THIS ISSUE IN THE LIGHT OF AFOREMENTIONED TWO DECISIONS OF HONBLE BOMBAY HIGH COURT AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCORDINGLY. FOR STATISTICAL PURPOSES THESE GROUNDS ARE CONSIDERED T O BE ALLOWED IN THE MANNER AFORESAID. 14. APROPOS GROUND NO.4 FOR ASSESSMENT YEAR 2000-01 AND GROUND NO.3 FOR ASSESSMENT YEAR 2003-04; THESE GROUNDS RELATE TO ADHOC DISALLOWANCES MADE BY THE AO BEING 10% OF THE EXPENSES CLAIMED UNDER T HE HEAD PROFESSIONAL, BROKERAGE AND COMMISSION AND SUCH DISALLOWANCE HAS BEEN CONFIRMED BY LD. . / ITA NO. 6992&6993/MUM/2007 / ASSESSMENT YEAR 2000-01 10 CIT(A). IT WAS SUBMITTED BY LD. AR THAT THE DISALL OWANCE HAS BEEN MADE ON ADHOC BASIS ON THE GROUND THAT THE ASSESSEE DID NOT FILE THE DETAILS. IT WAS SUBMITTED THAT SINCE OTHER MATTERS ARE GOING BACK T O THE FILE OF AO THIS ISSUE MAY ALSO BE RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO READJUDICATE THE DISALLOWANCE AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. THE DISALLOWANCE AGITATED IN THE IMPUGNED GROUND IS A SUM OF RS.2,77,536/- AND RS.1,71,410/- FOR A.Y 2000-01 AND 2003-04 RESPECTIV ELY. 15. WE HAVE HEARD BOTH THE PARTIES, ACCEPTING THE R EQUEST OF LD. AR, THIS ISSUE IS ALSO RESTORED BACK TO THE FILE OF AO FOR R EADJUDICATION AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE D IRECT ACCORDINGLY. THESE GROUNDS ARE ALSO ALLOWED FOR STATISTICAL PURPOSES I N THE MANNER AFORESAID. 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/2015 # + , - 15/06/2015 # SD/- SD/- ( . . / B.R.BASKARAN ) . . /I.P.BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; , DATED 15/06/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. /$ ( ) / THE CIT(A)- 4. /$ / CIT 5. 01 $23 , % 23 , / DR, ITAT, MUMBAI 6. 4 / GUARD FILE. / BY ORDER, 0$ $ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS