Shri Sanjay Namdeo Bharati, Nashik V. ITO, Ward 3(4), Malegaon

ITA 710/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2462 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-10-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 19-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ K JAIN
• Keywords: Unexplained expenditure; Capital asset
• Section: 68; 143(3); 234B

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.710/PN/2013 ASSESSMENT YEAR : 2001-02 SHRI SANJAY NAMDEO BHARATI, GAT NO.771, SATANA PIMPALDAR ROAD, MALEGAON, NASHIK 423 301. PAN : AEGPB3719M . APPELLANT VS. THE INCOME TAX OFFICER, WARD 3(4), MALEGAON. . RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI DHEERAJ K. JAIN / DATE OF HEARING : 08.03.2016 / DATE OF PRONOUNCEMENT: 31.03.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-II, NASHIK DATED 24.01.2013 RELATING TO ASSE SSMENT YEAR 2001-02 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE VARIOUS DISALL OWANCES OF EXPENSES VIZ INFLATED PURCHASES OF RS. 8,50,861/- INFLATED EXPENSES OF RS . 6,50,000/- AND CLOSING STOCK VALUATION OF RS. 2,30,000/- TOTALLING RS. 17,30,861 /- TO AD-HOC RS. 5,00,000/- ESPECIALLY WHEN A. O. IN THE REMAND REPORT SUBMITTE D TO CIT(A) STATED THAT ASSESSEE'S SUBMISSIONS/CONTENTIONS ARE FOUND CORREC T. THEN CONSIDERING THE OBSERVATIONS OF LD. CIT(A) IN PARA 9 OF THE ORDER N O DISALLOWANCE WAS CALLED FOR. THE SUSTAINED AD-HOC ADDITION OF RS. 5,00,000/- BE QUASHED. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 2,66,982/- MADE BY THE A. O. UNDER S. 36(1)(III) OF THE ACT. THE APPELLANT HAVIN G SUBSTANTIAL INTEREST-FREE FUNDS 2 ITA NO.710/PN/2013 AND THERE HAVING NO EVIDENCE THAT THE BORROWED FUND S WERE UTILIZED FOR NON- BUSINESS PURPOSES DURING THE YEAR UNDER APPEAL THEN DISALLOWANCE WAS NOT CALLED FOR. THE SUSTAINED ADDITION BE DELETED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 75,000/- MADE BY THE A. O. UNDER S. 68 OF THE ACT. THE ASSESSEE HAVING PROVED BEYOND DOUBT THE FINANCIAL CAPACITY OF THE LENDER I.E. HIS BROTHER SHRI SUNIL BHARATI AND HIS SOURCE FOR SUCH ADVANCEMENT AND GENUINITY OF THE TRANSACTION ALSO W AS PROVED THEN NO ADDITION WAS CALLED FOR UNDER S. 68 OF THE ACT. THE ASSESSEE HAD DISCHARGED THE LIABILITY THAT LAY UPON HIM. THE ADDITION BE DELETED. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS OBLIGED TO CARRY OUT THE DIRECTIONS GIVEN BY THE HO N'BLE ITAT IN ITS APPEAL NO. ITA/448/PN/2005 DECIDED ON 30-06-2011 IN THE CASE O F THE ASSESSEE. THE LD. CIT(A) FAILED TO CONSIDER IN ITS PROPER PERSPECTIVE THE DI RECTIONS OF THE HON'BLE TRIBUNAL AND REMAND REPORT OF THE A. O. SUBMITTED T O HIM IN THIS SECOND ROUND OF APPEAL. NO ADDITION, THEREFORE, IS JUSTIFIED. THE A DDITIONS BE DELETED. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEVY OF INTEREST U/S 234A, 234B AND 234C IS NOT JUSTIFIED AND IN THE CIR CUMSTANCES IT BE DELETED. 6) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE. THE LD. DEPARTMENTAL REPRESE NTATIVE, SHRI DHEERAJ KUMAR JAIN APPEARED ON BEHALF OF THE RESPONDENT/REV ENUE. INITIALLY, THE NOTICE WAS ISSUED FIXING THE CAPTIONED APPEAL FOR H EARING ON 09.04.2014, ON WHICH DATE, ADJOURNMENT WAS SOUGHT BY THE LD. AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE VIDE HIS APPLICATION DATED NIL AND THE APPEAL WAS ADJOURNED TO 08.07.2014. AFTER THAT THE LD. AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE WAS SOUGHT ADJOURNMENT SO MANY TIMES AND THE TRIBUNAL A DJOURNED THE CAPTIONED APPEAL FROM TIME TO TIME. FINALLY, THE APPEAL WAS RE-FIXED FOR HEARING ON 08.03.2016. HOWEVER, ON 08.03.2016, NEITHER ASSESS EE ATTENDED NOR THERE WAS ANY REQUEST FOR ADJOURNMENT. IN THESE CIRCUMSTANCE S, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING HIS A PPEAL. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE IN PERSON OR THROUGH AUT HORIZED REPRESENTATIVE INSPITE OF SERVICE OF NOTICE, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE ASSESSEE AFTER HEARING THE RESPONDENT/REVENUE O N MERITS IN TERMS OF RULE 24 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 19 63. 4. IN THIS APPEAL, THE FIRST GROUND RELATES TO SUST ENANCE OF AD-HOC DISALLOWANCE OF RS.5,00,000/- IN AGGREGATE OUT OF A LLEGED INFLATED PURCHASES OF 3 ITA NO.710/PN/2013 BIRDS OF RS.8,50,861/-, INFLATED AND UNPROVED EXPEN SES OF RS.6,50,000/- AND ALLEGED UNDERVALUATION OF CLOSING STOCK OF RS.2,30, 000/-. 5. THE FACTS OF THE CASE, IN BRIEF, AS CULLED OUT F ROM THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF POULTRY FARMING. THE AS SESSEE HAS FILED A RETURN OF INCOME ON 08.11.2001 DECLARING TOTAL INCOME OF RS.8 4,502/-. THE DETAILS OF ADDITION BY THE ASSESSING OFFICER CONCERNING THE GR OUND NO.1 ARE TABULATED AS UNDER :- PARTICULARS OF ADDITION AS PER ASSESSMENT ORDER AMO UNT (RS.) 1) DIFFERENCE BETWEEN INVENTORY AND TRADING ACCOUNT FI GURE OF PURCHASE OF BIRDS TREATED AS INFLATED PURCHASES. 8,50,861 2) UNDER VALUATION OF CLOSING STOCK CONSIDERING PURCHA SES IN FEBRUARY AND MARCH, 2001. 2,30,000 3) EXCESSIVE AND UNPROVED EXPENSES ALLEGING THAT BOOKS OF ACCOUNTS ARE NOT PROPERLY MAINTAINED AND LABOUR EXP ENSES ARE NOT FULLY VOUCHED AND LABOUR EXPENSES ARE DEBIT ED IN DIRECT EXPENSES AS WELL AS IN INDIRECT EXPENSES DEB ITED TO P&L A/C. 6,50,000 6. THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISS IONS AND THE REMAND REPORT RECEIVED FROM THE ASSESSING OFFICER AS NARRA TED IN PARAS 5 AND 6 OF THE CIT(A) ORDER RESTRICTED THE DISALLOWANCE AT AN ESTI MATED AMOUNT OF RS.5,00,000/-. 7. WE HAVE EXAMINED THE ISSUE IN THE LIGHT OF OBSER VATIONS MADE BY THE CIT(A). IT IS CONTENDED BY THE ASSESSEE BEFORE THE CIT(A) THAT IT HAS MAINTAINED BOOKS OF ACCOUNT AND HAS AUDITED THE SAM E. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED COM PUTER GENERATED STOCK SUMMARY WHICH REFLECTED DIFFERENT FIGURES SUCH AS PURCHASES OF BIRDS AT RS.19.79 LAKHS AS AGAINST APPEARING IN THE FINANCI AL STATEMENTS AT RS.28.30 LAKHS, CONSUMPTION OF BIRD FEED AND MEDICINES AT RS .58.02 LAKHS AS AGAINST APPEARING IN THE FINANCIAL STATEMENTS AT RS.75.32 L AKHS. THE ASSESSING OFFICER WORKED OUT THE ADDITIONS AFTER CONSIDERING THE STO CK SUMMARY STATEMENTS AND IGNORING THE AUDITED FINANCIAL STATEMENT. THE AS SESSEE CLAIMED THAT PROPER AND FULL DATA ENTRY IN THE STOCK RECORD WERE NOT MA DE RESULTING IN THE IMPUGNED VARIANCES IN THE COMPUTERIZED SUMMARY STATEMENT R ELIED UPON BY THE 4 ITA NO.710/PN/2013 ASSESSING OFFICER. THE ASSESSEE FURTHER CLAIMED BE FORE THE CIT(A) THAT BOOKS OF ACCOUNT ARE FULLY SUPPORTED BY PURCHASE BILLS, V OUCHERS, BANK STATEMENT, ETC. AND THE SAME ARE AUDITED AND HENCE THE ASSESSING OF FICER SHOULD HAVE CONSIDERED BOOK RESULTS AND NOT STOCK SUMMARY STATE MENT WHICH IS APPARENTLY INCORRECT. IT WAS ALSO SUBMITTED THAT THE ASSESSIN G OFFICER HAS ERRED IN CONSIDERING THE BIRDS STOCK TRANSFERRED FROM ONE DE PARTMENT TO OTHER AS SEPARATE TRANSACTIONS/ SALES. THE ASSESSEE ALSO CA NVASSED BEFORE THE CIT(A) THAT THE CLOSING STOCK IN THE FINANCIAL STATEMENT W AS TAKEN BASED ON PHYSICAL COUNTING AT THE YEAR END. IN THE REMAND REPORT, TH E ASSESSING OFFICER AGREED WITH THE CONTENTION OF THE ASSESSEE THAT CERTAIN SP ECIFIC ITEMS OF PURCHASES WERE NOT ENTERED IN THE COMPUTERIZED STOCK SUMMARY. HOWEVER, THE ASSESSING OFFICER CONTENDED THAT CLOSING STOCK WILL BE AFFECT ED BASED ON THESE ENTRIES. THE ASSESSEE EMPHASIZED THAT THE BIRDS WERE ACCOUNT ED AS ON 31.03.2001 PHYSICALLY AND THE SAME HAS BEEN CONSIDERED AS CLOS ING STOCK. THE MORTALITY LOSS IN THE POULTRY BUSINESS HAS NOT BEEN DEBITED S EPARATELY IN THE BOOKS OF ACCOUNT BUT GOT FACTORED AND TAKEN INTO ACCOUNT WHI LE ARRIVING AT THE CLOSING STOCK BASED ON PHYSICAL STOCK TAKING. THE CIT(A) A FTER TAKING INTO ACCOUNT THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE R EMAND REPORT RESTRICTED THE CUMULATIVE DISALLOWANCE AT RS.5,00,000/-. THE RELE VANT FINDINGS OF THE CIT(A) ARE REPRODUCED HEREUNDER :- 9. IN THE REMAND REPORT DATED 23/11/2004 THE A.O. HAS, AFTER DUE VERIFICATION HAS ACCEPTED THE ABOVE CONTENTIONS OF THE APPELLANT AND CLEARLY STATED THAT THE ASSESSEE'S SUBMISSION/CONTENTIONS A RE FOUND TO BE CORRECT. THE A.O. HAS OBSERVED THAT THERE IS DIFFERENCE OF RS.8, 571/- ONLY ON ACCOUNT OF BROILER CHICKS AND THE CONTENTIONS OF THE APPELLANT SHALL HAVE EFFECT IN THE QUANTITY OF CLOSING STOCK. IN THIS REGARD THE APPEL LANT HAS CLAIMED THAT HE HAS ACTUALLY COUNTED THE CLOSING STOCK OF BIRDS ETC. AT THE YEAR END AND HENCE THE ADDITION MADE BY THE A.O. ON THIS COUNT IS NOT JUST IFIED. IN SUPPORT OF THIS CONTENTION THE APPELLANT HAS POINTED OUT THAT HE HA S NOT CLAIMED MORTALITY OF BIRDS IN THE PROFIT AND LOSS ACCOUNT AND HAS NOT CL AIMED ANY EXPENDITURE IN THIS REGARD AS HE HAS CONSIDERED ACTUAL CLOSING STOCK. T HE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT AS NO SUCH EXPENDI TURE IS SEPARATELY DEBITED IN THE PROFIT AND LOSS ACCOUNT AND IN THE BUSINESS OF POULTRY THE MORTALITY RATE OF CHICKS IS SUBSTANTIAL. THE HON'BLE ITAI HAS ALSO NO TED THE FACT THAT THE SUBMISSION OF THE APPELLANT AND THE REPORT OF THE A .O. IN THE APPELLATE PROCEEDINGS HAVE NOT BEEN CONSIDERED BY MY PREDECES SOR AND HENCE SET ASIDE THE ORDER OF MY PREDECESSOR WITH THE DIRECTION TO P ASS SPEAKING ORDER AFTER CONSIDERING AND DISCUSSING SUBMISSION OF THE ASSESS EE AND REPORT OF THE AO ON THE SAID SUBMISSION. WHILE IT IS TRUE THAT CIT(A)-I I, NASHIK DID NOT CONSIDER THE REMAND REPORT OF THE AO WHILE DECIDING THE APPEAL, IT IS AN UNDISPUTED FACT FROM THE REPORTS OF THE A.O. AND ADDL. CIT THAT THE APPELLANT HAS NOT PROPERLY 5 ITA NO.710/PN/2013 MAINTAINED STOCK RECORD OF CHICKS, BIRDS AND MEDICI NES. INITIALLY SOME OF THE PURCHASES BILLS WERE MISSING. WHILE THE SUMMARY INW ARD SHOWED PURCHASE OF 193547 CHICKS VALUING RS.19,79,496/-, THE LEDGER SH OWED PURCHASES OF RS.28,30,397/-. HENCE THERE WAS A DIFFERENCE OF RS. 8,50,861/-. AS REGARDS ADDITION OF RS.6,50,000/- ON AD-HOC BASIS ON ACCOUN T OF UNEXPLAINED EXPENDITURE, I FIND THAT WHILE APPELLANT'S CALCULATION OF PURCHA SE PRICE OF BROILERS AND LAYERS IS ON THE BASIS OF 193547 CHICKS REFLECTED IN SUMMA RY SHEET (WHICH WAS SUBSEQUENT FOUND TO BE ERRONEOUS), THE ADDL. CIT HA S MADE THE ADHOC ADDITION WITHOUT BRINGING ANY CONCRETE ON RECORD. S IMILARLY, AS REGARDS ADDITION OF RS.2,30,000/- ON ACCOUNT OF UND ER VALUATION OF CLOSING STOCK, WHILE THE APPELLANT CLAIMS TO HAVE TAKEN PHY SICAL INVENTORY OF STOCK AS ON 31/03/2001, THE ADDL. CIT HAS BASED HER VIEW ON THE BASIS OF PURCHASES MADE IN FEBRUARY AND MARCH 2001. ADDL.CIT HAS NOT C ONSIDERED THE FACT OF MORTALITY OR THE BIRDS WHICH IS NOT UNCOMMON IN POU LTRY BUSINESS. HOWEVER, THE APPELLANT HAS ALSO NOT KEPT PROPER RECORDS OF M ORTALITY TO SUBSTANTIATE ITS CLAIM OF CLOSING STOCK. ALL THESE ISSUES CLEARLY ES TABLISH THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT, THROUGH AUDITED, WERE NO T RELIABLE AS FAR AS TRUE AND CORRECT GROSS PROFIT FOR A.Y. 2000-2001 WAS CONCERN ED. IN VIEW OF THE ABOVE AND CONSIDERING THE TOTALITY OF THE FACTS AND TO ME ET THE ENDS OF JUSTICE THE GROSS PROFIT SHOWN BY THE APPELLANT IS TO BE INCREA SED BY RS.5 LAC ON ESTIMATED BASIS. THE GROSS PROFIT HAS BEEN ACCORDINGLY WORKED OUT AT RS.33,80,572/- AS AGAINST DECLARED BY THE APPELLANT AT RS.28,80,572/- RESULTING INTO G.P. ADDITION OF RS.5,00,000/-. IN VIEW OF THE ABOVE FACTS AND DISCU SSION, THE ADDITIONS OF RS.17,30,861/- MADE BY THE A.O. ON ACCOUNT OF ALLEG ED INFLATED PURCHASES RS.8,50,861/-, INFLATED EXPENSES RS.6,50,000/- AND UNDER VALUED CLOSING STOCK RS.2,30,000/- IS RESTRICTED TO RS.5,00,000/-. 'THE APPELLANT GETS RELIEF OF RS.12,30,861/-. THE A.O. IS DIRECTED ACCORDINGLY. 8. ON PERUSAL OF THE FINDINGS OF THE CIT(A), WE FIN D THAT THE CIT(A) FOUND THAT PROPER RECORDS OF MORTALITY HAS NOT BEEN MAINT AINED TO SUBSTANTIATE ITS CLAIM OF CLOSING STOCK. THE CIT(A) ALSO FOUND THAT THE CONCRETE EVIDENCE HAS NOT BEEN FURNISHED TO DISALLOW THE AD-HOC ADDITION OF RS.6,50,000/- TOWARDS UNEXPLAINED EXPENSES. SIMILARLY, THE BASIS FOR ADD ITION OF RS.2,30,000/- ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK IS FEBRU ARY AND MARCH PURCHASES WHICH INVARIABLY PERTAINS TO CHICKS LESS THAN 45 DA YS OLD REMAINING UNSOLD. THE ASSESSEE HAS NOT OFFERED ANY SPECIFIC EXPLANATI ON ON THIS ASPECT EXCEPT MORTALITY FACTOR. WE FIND THAT THE CIT(A) HAS GIVE N PARTIAL RELIEF AFTER EXAMINING THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE AND RESTRICTED THE DISALLOWANCE TO RS.5,00,000/- RESULTING IN GP A DDITION OF RS.5,00,000/-. WE FIND NO INFIRMITY IN THE PROCESS OF REASONING IN ARRIVING AT THE AFORESAID FINDINGS OF THE CIT(A). THEREFORE, WE ARE NOT INCL INED TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, GR OUND NO.1 IS DISMISSED. 6 ITA NO.710/PN/2013 9. GROUND NO.2 RELATES TO ADDITION OF RS.2,66,982/- MADE BY THE ASSESSING OFFICER UNDER SECTION 36(1)(III) OF THE ACT. 10. THE RELEVANT FACTS CONCERNING THE ISSUE ARE THA T THE ASSESSEE TRANSFERRED A SHED VALUING RS.17,53,740/- TO HIS BROTHERS ACCOUN T AT THE END OF THE YEAR AND SHOWN THE AMOUNT AS A DEBTOR WITHOUT CHARGING ANY I NTEREST. THE ASSESSEE CONTENDED THAT SUBSTANTIAL INTEREST FREE LOAN AVAIL ABLE AT THE DISPOSAL OF THE ASSESSEE INCLUDING CREDIT BALANCE OF CAPITAL ACCOUN T OF RS.10,68,253/- FOR MAKING INVESTMENT IN SHED. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT SHED/BUILDING WAS CONSTRUCTED FOR EXPANSION OF HIS OWN BUSINESS AND NOT FOR HIS BROTHER. BUT DUE TO UNFAVOURABLE CIRCUMSTANCES AND MARKET CONDITIONS, IT WAS DECIDED AT THE END OF THE YEAR THAT THE SAID BU ILDING/ SHED CONSTRUCTION IS TO BE SOLD OUT OR TO BE LET OUT. THERE WAS NO PROPER PROPOSAL FROM ANY OUTSIDE PARTY DUE TO THE OWNERSHIP OF THE LAND BELONGING TO THE ASSESSEE ON WHICH THE SHED WAS CONSTRUCTED. THE LAND WAS MORTGAGED WITH THE FINANCING BANK. ULTIMATELY, THERE WAS NO OPTION WITH THE ASSESSEE B UT TO TRANSFER THE SAME TO HIS BROTHER OTHERWISE THE ASSESSEE HAD TO INCUR MAI NTENANCE EXPENSES AND OTHER ADDITIONAL EXPENSES. HENCE, THE SHED WAS TRANSFERR ED TO HIS BROTHER MR. SUNIL BHARTI ON THE LAST DAY OF THE YEAR I.E. 31.03.2001. AS INTENTION OF THE ASSESSEE FOR CONSTRUCTION OF THE SHED WAS TOWARDS EXTENSION OF EXISTING BUSINESS AND WITH A VIEW TO EARN MORE PROFIT AND NOT TO CONSTRUC T THE SAME FOR HIS BROTHER, INTEREST SHOULD NOT BE DISALLOWED. IT IS ANOTHER T HING THAT THE DESIRED OUTCOME OF THE ASSESSEES EFFORT WAS NOT FRUCTIFIED INTO EX PANSION OF HIS OWN BUSINESS AND IT WAS SITUATIONAL COMPULSION ON THE ASSESSEE T O TRANSFER THE SHED TO HIS BROTHER AS A BEST ALTERNATIVE AVAILABLE AT THE RELE VANT POINT OF TIME. THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROU ND THAT THE ASSESSEE DID NOT USE POULTRY SHED FOR HIS OWN BUSINESS AND THE CAPIT AL AVAILABLE AT THE DISPOSAL OF THE ASSESSEE IS ONLY 10.68 LAKHS AS AGAINST THE VALUE OF SHED TO RS.17.53 LAKHS. HE THEREFORE HELD THAT LOANS TAKEN FROM THE BANK HAS BEEN UTILIZED TOWARDS CONSTRUCTION OF SHED AND THEREFORE PROPORTI ONATE DISALLOWANCE OF INTEREST INCURRED DURING THE YEAR IS JUSTIFIED. 7 ITA NO.710/PN/2013 11. WE DO NOT FIND ANY MERIT IN SUCH VIEW. THE CON TENTION OF THE ASSESSEE THAT THE SHED WAS CONSTRUCTED WITH A VIEW TO EXPAND EXISTING BUSINESS REMAINS UNCONTROVERTED. SECTION 36(1)(III) OF THE ACT AS R ELEVANT FOR ASSESSMENT YEAR 2001-02 PROVIDES THAT THE AMOUNT OF INTEREST PAID I N RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE INTEREST PAID FOR LOAN UTILIZED WHETHER IN CAPITAL FIELD OR IN REVENUE FIE LD IS IRRELEVANT CONSIDERATION. HOWEVER, A PROVISO TO SECTION 36(1)(III) OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 2003 W.E.F. 01.04.2004 WHEREBY ANY AMO UNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF ASSE TS FOR EXPANSION OF EXISTING BUSINESS OR PROFESSION UPTO THE DATE ON WHICH SUCH CAPITAL ASSET IS FIRST PUT TO USE SHALL NOT BE ALLOWED AS DEDUCTION. THE ASSESSE E HAS INCURRED THE EXPENDITURE RELEVANT TO ASSESSMENT YEAR 2001-02 WHE N SUCH PROVISO WAS NOT PRESENT IN THE STATUTE. THEREFORE, WE FIND NO JUST IFICATION IN THE ACTION OF THE REVENUE IN RESORTING TO THE DISALLOWANCE OF INTERES T EXPENSES. NO DISALLOWANCE IS THUS CALLED FOR UNDER SECTION 36(1)(III) OF THE ACT. IN THE RESULT, GROUND NO.2 OF APPEAL OF THE ASSESSEE IS ALLOWED. 12. GROUND NO.3 CONCERNS THE ADDITION OF RS.75,000/ - ON ACCOUNT OF UNEXPLAINED LOAN FROM BROTHER SHRI SUNIL BHARATI. THE ASSESSING OFFICER ALLEGED THAT NO PROOF WAS GIVEN REGARDING THE SOURC E OF FUNDS WITH THE BROTHER I.E. THE LENDER SHRI SUNIL BHARATI. THE ASSESSEE S UBMITTED BEFORE THE CIT(A) THAT THE AFORESAID AMOUNT WAS RECEIVED TOWARDS THE RUNNING BUSINESS TRANSACTIONS AS THE ASSESSEE HAS TRANSFERRED THE SH ED TO HIS BROTHER. THESE TRANSACTIONS ARE CO-RELATED TO EACH OTHER. THE ASS ESSEE ALSO REITERATED BEFORE THE CIT(A) THAT HIS BROTHER IS HAVING AGRICULTURAL INCOME ALSO AND THE AMOUNT HAS BEEN RECEIVED OUT OF HIS OWN SOURCE OF INCOME. TO SUPPORT HIS CONTENTION OF AGRICULTURAL INCOME, THE ASSESSEE FILED 7/12 EXT RACTS PERTAINING TO THE AGRICULTURAL LAND AND POINTED OUT THAT CASH CROPS S UCH AS POMEGRANATES AND SOYABIN ARE GROWN. THUS, THE SOURCE IS PROVED FROM 7/12 EXTRACTS AND ALSO CONFIRMATION LETTER WAS DULY PRODUCED BEFORE THE AS SESSING OFFICER. THE CIT(A) REJECTED THE AFORESAID CONTENTIONS OF THE AS SESSEE ON THE GROUND THAT NO PROPER EVIDENCE OF AVAILABILITY OF 75,000/- WITH SH RI SUNIL BHARATI HAS BEEN BROUGHT ON RECORD. HE ALLEGED THAT NO RECORDS OF S ALE PROCEEDS OF CROP HAS 8 ITA NO.710/PN/2013 BEEN FURNISHED IN SUPPORT OF SOURCE OF RS.75,000/-. WE DO NOT FIND ANY SUBSTANCE IN THE PREMISE TAKEN BY THE CIT(A) IN SUS TAINING THE ADDITION. THE ASSESSEE HAS FURNISHED THE CONFIRMATION LETTER AS W ELL AS 7/12 EXTRACTS CONCERNING THE AGRICULTURAL LAND SHOWING THE AGRICU LTURAL ACTIVITY. THIS, IN OUR VIEW, IS PLAUSIBLE AND REASONABLE EVIDENCE TO SUPPO RT THE SOURCE IN THE HANDS OF THE LENDER. IT IS COMMON KNOWLEDGE THAT THE AGRICU LTURAL PRODUCE ARE SOLD IN CASH. THE IMPUGNED LOAN IS VERY SMALL HAVING REGARD TO THE AGRICULTURAL LAND AVAILABLE FOR CULTIVATION. IN VIEW OF THESE FACTS AND CONSIDERING THE TOTALITY OF CIRCUMSTANCES OF THE CASE, THE BONAFIDES OF LOAN OF RS.75,000/- RECEIVED FROM AGRICULTURIST BROTHER DESERVES TO BE ACCEPTED. ACC ORDINGLY, GROUND NO.3 OF APPEAL OF THE ASSESSEE IS ALLOWED. 13. GROUND NOS.4, 5 & 6 ARE GENERAL IN NATURE AND T HUS DOES NOT CALL FOR ANY ADJUDICATION. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 31 ST MARCH, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, NASHIK; 4) THE CIT-II, NASHIK; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE