The ITO, S.K.Ward-4, Modasa V. Shri Jitendra Raychanddas Thakkar, Modasa

ITA 733/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9084 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 09-03-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Keywords: Opportunity of cross examination; Notional interest
• Section: 40(b); 64; 131; 68

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI N.S.SAINI ITA NO. 733/AHD/2005 (ASSESSMENT YEAR : 2001-02) INCOME TAX OFFICER, SABARKANTHA. VS. SHRI JITENDRA RAYCHANDDAS THAKKAR PROP. OF R.H.THAKKAR, COLLEGE ROAD, MODASA, DIST. S.K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT, SR. D.R. RESPONDENT BY : SHRI TUSHAR HEMANI, A.R. ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-IX, AHMEDABAD DATED 09.12.2004 RELATING TO A SSESSMENT YEAR 2001-02. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE ON ACCOUNT OF CASH CREDIT WORTHINESS U/S 68 AMOUNTING TO RS.4,95,000/-. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING IN P ETROL, DIESEL, KEROSENE AND HIRING OF VEHICLES. THE ASSESSING OFFICER OBSE RVED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN THE FOLLOWING CREDITS IN HIS ACCOUNT: 1. NARSINBHAI S. BHARVAD RS.55,000 2. SHANTABEN R. THAKKAR RS.40,000 2 3. RAJNIKANT J. SHROFF RS.4,00,000 RS.4,95,000 4. THE ASSESSING OFFICER MADE THE ADDITION OF RS.4,95,00 0/- U/S 68 OF THE ACT. AS REGARDS THE AMOUNT OF RS. 55,000/-, THE ASSESSI NG OFFICER STATED THAT THE NATURE AND SOURCE OF INVESTMENT IS NOT F OUND SATISFACTORY. AS REGARDS THE CASH CREDIT OF RS.40,000/-, THE ASSESSING OFF ICER STATED THAT THE ASSESSEE HAS FAILED TO PROVE IDENTITY OF THE DE POSITOR, CREDITWORTHINESS OF THE DEPOSITOR AND GENUINENESS OF THE TRANSACTIONS DESPITE OF OPPORTUNITIES GIVEN. HE, THEREFORE, ADDED T HE SUM OF RS.40,000/- U/S 68 OF THE ACT. SIMILARLY, THE ASSESSING OF FICER ADDED THE SUM OF RS.4 LACS STATING THAT THE ASSESSEE FAILED TO PROVE T HE IDENTITY OF THE DEPOSITOR, CREDITWORTHINESS OF THE DEPOSITOR AND GEN UINENESS OF THE TRANSACTIONS DESPITE OF OPPORTUNITIES GIVEN. 5. ON APPEAL, THE CIT(A) DELETED THE ADDITION OF RS. 4,95,000/- OBSERVING AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED ALL THE FACTS RELATED TO THIS ADDITION. THE FIRST CREDIT IS IN RESPECT OF SHRI NARS INBHAI BHARVAD. IT IS SEEN THAT HIS STATEMENT HAS BEEN RECORDED BY THE A.O B UT NEITHER THE COPY OF STATEMENT WAS GIVEN TO THE APPELLANT NOR ANY OPPORTUNITY OF CROSS EXAMINATION WAS GRANTED BEFORE MA KING THIS ADDITION. THUS THE ORDER SUFFERS FROM DENIAL OF NAT URAL JUSTICE. THAT APART FROM THE STATEMENT IT IS NOTICED THAT THE CREDIT OR WAS HAVING ANNUAL INCOME OF RS. 78,000/- AND EVEN AS PER THE A.O. THE ANNUAL SAVINGS WOULD BE RS,28,000/-. IN HIS STATEMENT THE CRE DITOR IN REPLY TO QN.NO. 3 HAS CLEARLY STATED THAT HE HAD NO BA NK ACCOUNT EITHER IN HIS NAME OF IN THE NAMES OF HIS FAMILY MEMBE RS. THUS, EVEN IF SAVINGS OF TWO YEARS IS TAKEN INTO ACCOUNT THE CR EDIT GETS EXPLAINED. APART FROM THIS, THE CREDITOR HAD STATED T HAT HE HAD SOLD CASTOR SEEDS. NATURALLY AT THE TIME OF STATEMENT IT THE CREDITOR HAD NO SALE BILL WITH HIM, NO ADVERSE INFERENCE COULD BE DR AWN. THUS THIS CREDIT IS FULLY EXPLAINED APART FROM THE FACT THIS ADDITION HAS BEEN MADE WITHOUT PROVIDING ANY PROPER OPPORTUNITY TO THE APPELLANT. 5.3.1 SO FAR AS THE CREDIT IN THE NAME OF SMT SHAN TABEN 3 THAKKAR, APPELLALNT'S MOTHER, IS CONCERNED, IT IS SEEN THAT SHE HAD RECEIVED CHEQUES OF RS. 20,000/- EACH ON 30.5.2000 AND 9 .3.2001 FROM HER BROTHERS AND THE SAME AMOUNT WAS ADVANCED TO THE APPELLANT. IN THE CIRCUMSTANCES, THE DETAILS SUBMITTED WE RE ALSO SENT TO THE A.O BY ME. IN VIEW OF THE ABOVE, BOTH ID ENTITY AND SOURCES OF FUNDS ARE FOUND TO BE EXPLAINED. 5,3.2 THE THIRD CREDIT IS IN THE NAME OF SHRI RAJNI KANT PARIKH, WHO WAS EARLIER RUNNING A PETROL PUMP AT AHMEDABAD A ND WHO IS NOW SETTLED IN U.S.A. HE HAD ADVANCED MONEY TO THE APP ELLANT EVEN IN EARLIER YEARS AS IS APPARENT FROM THE FACT THAT HIS A CCOUNT SHOWS AN OPENING BALANCE OF WELL OVER RS. 3 LACS. IN EARLIER YEARS, THE CREDITS WERE ACCEPTED WHICH GOES TO SHOW THAT THE A,O'S CL AIM IN HIS REPORT THAT IDENTITY OF CREDITOR IS NOT PROVED IS B ASELESS. APPELLANT HAD OBTAINED HIS CONFIRMATION AND COPY OF B ANK ACCOUNT MAINTAINED IN INDIA ALONG WITH CONFIRMATION FROM BAN K. THE ACCOUNT SHOWS THAT IT IS AN NRI ACCOUNT WITH MINAL R.GADHVI AS PO WER OF ATTORNEY HOLDER. THE ACCOUNT SHOWS THAT A CHEQUE WAS DEPO SITED IN THIS ACCOUNT ON 4.8,2000 AND THEREAFTER ANOTHER CHEQUE ON 24.8.00 AND OUT OF THIS ACCOUNT CHEQUE OF RS. 4,00,000/- WAS CLE ARED IN APPELLANT'S NAME. IF THE A.O. HAD ANY DOUBTS, THEN H E SHOULD HAVE MADE ENQUIRIES FROM THE POWER OF ATTORNEY HOLDER BE FORE SENDING HIS REPORT. BUT IN VIEW OF CREDITORS' CONFIRMATION SENT FROM USA ALONG WITH COPY OF BANK STATEMENT, I FIND NO REASON TO SUSTAIN THIS ADDITION. AS A RESULT, ADDITION OF RS. 4,95,000/- U/ S. 68 OF THE ACT IS DIRECTED TO BE DELETED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO GO NE THROUGH THE MATERIALS AVAILABLE ON RECORDS. IT IS WELL SETTLED L AW THAT IN ORDER TO DISCHARGE THE ONUS U/S 68 OF THE ACT, THE ASSESSEE MUST PRO VE THE FOLLOWING: I) THE IDENTITY OF THE CREDITOR, II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND III) THE GENUINENESS OF THE TRANSACTION. AFTER THE ASSESSEE HAS ADDUCED EVIDENCE PRIMA FACIE TO THE AFORESAID, THE ONUS SHIFTS TO THE REVENUE. IN THE INSTANT CASE, THE ASSESSE E HAS PROVED THE INGREDIENTS OF SEC. 68 OF THE ACT. THE FIRST CREDIT IS IN RESPECT OF SHRI NARINBHAI BHARVAD. IT IS OBSERVED THAT STATEMENT U/S 131 OF THE ACT WAS 4 RECORDED ON 15.3.2004. IN HIS STATEMENT SHRI NARSINBHAI BHARVAD IN REPLY TO QUESTION NO.8 HAS STATED THAT I HAD GIVEN RS.55,000 BY CHEQUE TO SHRI JITENDRA R. THAKKAR IN MARCH, 2001. SHRI NARSINBHAI B HARVAD FURTHER STATED THAT HE WAS HAVING ANNUAL INCOME OF RS.78,000/- AND EVEN AS PER THE ASSESSING OFFICER THE ANNUAL SAVINGS WOULD BE RS.28,00 0/-. IN OUR VIEW, THE CIT(A) HAS CORRECTLY OBSERVED THAT EVEN IF SAV INGS OF TWO YEARS ARE TAKEN INTO ACCOUNT, THE CREDIT GETS EXPLAINED. IN REPLY TO QUESTION NO.10, SHRI NARSINBHAI BHARVAD STATED THAT HE HAD SOLD CASTOR SEEDS. THERE IS NO DISPUTE REGARDING IDENTITY OF THE CREDITO R. IN OUR VIEW, THE CIT(A) HAS CORRECTLY OBSERVED THAT THE ASSESSEE HAS SUCCESSFULL Y PROVED THE IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR TO ADVANCE THE MONEY AND GENUINENESS OF THE TRANSACTION. IN THAT VIEW OF THE MATTER, THE ADDITION OF RS.55,000/- HAS RIGHTLY BEEN DELETED BY T HE CIT(A). 6.1 THE NEXT CREDITOR, NAMELY, SMT. SHANTABEN THAKKA R IS ASSESSEES MOTHER. THE CIT(A) HAS CATEGORICALLY STATED THAT SHE HA D RECEIVED CHEQUES OF RS. 20,000/- EACH ON 30.5.2000 AND 09.3.2001 FROM HER BROTHERS AND THE SAME AMOUNT WAS ADVANCED TO THE ASSESSEE. THE CIT(A) HAS ALSO CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICE R, HOWEVER, THE ASSESSING OFFICER DID NOT GIVE ANY COMMENTS FOR THE R EASONS BEST KNOWN TO HIM. IN OUR VIEW, THE ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITOR AND ALSO SOURCE OF DEPOSIT. FURTHERMORE, THE CRE DITOR HAD RECEIVED CHEQUES OF RS.20,000/- EACH ON 30.5.2000 AND 09 .3.2001 FROM HER BROTHERS AND THE SAME AMOUNT WAS ADVANCED TO THE ASSE SSEE. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE FACTS. ACCORDINGLY, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.40 ,000/-. 6.2 IN RESPECT OF LOAN OF RS. 4 LACS FROM RAJNIKANT J. SHROFF, HE WAS RUNNING PETROL PUMP AT SARKHEJ, AHMEDABAD SINCE NUMBE R OF YEARS IN THE NAME OF RAJ PETROLEUM AND THEREAFTER HE SOLD THAT PE TROL PUMP TO SHRI GAUTAMBHAI VYAS. HE WAS STAYING AT 17, GADHAVI SOCIETY, NAVRANGPURA, AHMEDABAD AND SOLD THAT RESIDENTIAL PROPERTY. THE ASSE SSEE FILED A 5 CERTIFICATE FROM SBI, UNIVERSITY CAMPUS AREA BRANCH REGA RDING CLEARING OF CHEQUE NO.547389 DATED 24.9.2000 OF RS. 4 LACS IN FAVOU R OF THE ASSESSEE FROM ACCOUNT OF RAJNIKANT J. SHROFF SPECIAL BENCH ACCOUNT NO.01190018909. THE ASSESSEE ALSO FILED A COPY OF BANK STA TEMENT OF SHRI RAJNIKANT J. SHROFF FROM SBI TO SHOW CREDIT AND DEBIT ENTRIES OF RS. 4 LACS. THE ASSESSEE ALSO FILED A CONFIRMATION LETTER DATED 2 5.10.2004 FROM RAJNIKANT J. SHROFF REGARDING GIVING OF CHEQUE OF RS. 4 LACS TO THE ASSESSEE ON 24.8.2000 FROM P.O.BOX 16, STRASBURG PA-1757 9, USA. IT IS ALSO APPARENT FROM THE RECORD THAT SHRI RAJNIKANT J. SHROFF HAD ADVANCED MONEY TO THE ASSESSEE EVEN IN EARLIER YEARS. IT IS ALSO NO TICED THAT HIS ACCOUNT SHOWED AN OPENING BALANCE OF WELL OVER RS.3 LACS A ND IT IS AN NRI ACCOUNT. IN OUR VIEW, THE CIT(A) HAS CORRECTLY OBSERVED T HAT IF THE ASSESSING OFFICER HAD ANY DOUBTS THEN HE SHOULD HAVE MADE ENQUIRIES FROM THE POWER OF ATTORNEY HOLDER SHRI MINAL R. GAD HVI BEFORE SENDING HIS REPORT. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTA NCES OF THE PRESENT CASE, WE HOLD THAT THE CIT(A) HAS ALSO CORRECTLY DELETED THE ADDITION OF RS.4 LACS. IN VIEW OF THE ABOVE, WE DISMISS GROUND NO.1 OF THE APPEAL. 7. GROUND NOS. 2 AND 3 OF THE APPEAL READ AS UNDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING ADDITION MADE ON ACCOUNT OF INTEREST PAYMENT COVERED U/ S 40A(2)(B) AMOUNTING TO RS.10,583/-. 3. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST PAYM ENT FOR NON-BUSINESS PURPOSE AMOUNTING TO RS.2,19,484/-. 8. THE RELEVANT FACTS NOTED BY THE ASSESSING OFFICER ARE A S UNDER: 4. THE ASSESSES HAS ENGAGED IN BUSINESS OF TRADING IN PETR OL, DIESEL, KEROSENE, HIRING OF VEHICLES.AND SPECULATION OF SHARES. 5. THE ASSESSEE HAS FURNISHED DETAIL OF INTEREST ACCOUNT A S PER ANN. D TO THE SUBMISSION MADE. THE SAME IS REPRODUCED AS UNDER: 6 RS. (CR.) PARTICULAR RATE OF INT. RS. (DR.) PARTICULAR RATE OF INT. 402802/- GAGAN DEEP A/C. 12% 101155/- RAJNIKANT K 18% 66806/- MEENAKSHI J THAKKAR 12% 21136/- SHANTABEN R 18% 337/- SAVING A/C INT. 16535/- THAKKAR HANSABEN 18% 358/- -DO- 4585/- GIRISHBHIA A 12% 399/- -DO- 84965/- J. R. THAKKAR (HUF) 18% 1873/- -DO-- 4665/- SWAPNILJ. THAKKAR 18% 63063/- RAGHUVIR TRAS. 18% 2306/- THAKKAR KANTILAL 18% 2306/- RAMJI KALUJI 18% 4534/- SHAKANJI KALUJI 18% 126640/- M/S. J.D. 15% 8925/- PARI J.T. 21% 21037/- DIVYANGGBHAI 15% 1150/- NARESHBHAI 15% 1150/- PATELN.R. 15% 945/- SANJAYBHAI 15% 11466/- NARUTTAMBHAI 15% 6. ON VERIFICATION OF ABOVE INTEREST ACCOUNT IT IS SEEN T HAT ASSESSEE HAS GIVEN INTEREST ON LOAN TAKEN AT VARIOUS RATE RANGING 7 FROM 12% TO 21%, HOWEVER, HAS RECEIVED INTEREST ONLY @ 12%. THE PAYMENT OF INTEREST INCLUDES TO THE PERSONS COVERED U/S 4 0A(2)(B). THE ASSESSEE WAS ASKED THE REASONS FOR DIFFERENCE IN PAYMENT OF INTEREST AND RECEIPT VIDE THIS OFFICE LETTER NO.MOD/JRT /2003-04 DATED 29-1-2004 AND HE WAS ALSO ASKED WHY THE AMOUNT OF RS. 21,7697- BEING AVERAGE DIFFERENCE OF PAYMENT OF INTE REST (12+18+15 +21 = 66 / 4 = 16.5) LESS INTEREST RECEIVED @ 12% 4.5 @ 4837637- MAY NOT BE ADDED IN TOTAL INCOME. AS ASSESSEE HAS NOT FURNISHED ANY EXPLANATION AND ALSO AS MORE INTEREST BEARING FUNDS HAVE BEEN GIVEN AT FESS IN TEREST WHICH INCLUDES TO THE PERSONS COVERED U/S 40A(2XB). THEREFORE T HE AMOUNT OF RS. 21,769/- IS ADDED IN TOTAL INCOME OF THE ASSESSEE. 6. ON VERIFICATION OF SCHEDULE-G OF BALANCE SHEET IT IS SEE N THAT THE ASSESSEE HAS GIVEN LOAN THAT IS OUTSTANDING AS UNDER: NAME AMOUNT PARTH PETROLIUM 632343/- GAGAMDEEP BUILDERS 3759489/- MINAXIBEN J THAKKAR 825475/- VYAPTI BUILDERS 201OOO/- TITHI FOOD 140000/- DASHARATHLAL K. PATEL 350000/- PARI J.T. SHROFF 7474/- HOWEVER, THE ASSESSEE HAS NOT CHARGED ANY INTEREST TO THE FOLLOWING PARTIES. NAME AMOUNT INT@16.5% PARTH PETROLIUM 6323437- 104336/- VYAPTI BUILDERS 201OOO/- 33165/- TITHI FOOD 140000/- 23100/- DASHARATHIAL K. PATEL 350000/- 57650/- PARI J. T. SHROFF 7474/- 12337- HOWEVER, THE ASSESSEE HAS NOT CHARGED ANY INTEREST TO THE FOLLOWING PARTIES: NAME AMOUNT INT. @ 16.5% PARTH PETROLIUM 632343/- 104336/- VYAPTI BUILDERS 201000/- 33165/- TITHI FOOD 140000/- 23100/- DASHARATHLAL K. PATEL 350000/- 57650/- PARI J. T. SHROFF 7474/- 1233/- 8 219484/- THE ASSESSEE WAS ASKED VIDE THIS OFFICE LETTER NO.MOD/JRT/2003-04 DATED 29-1-2004 WHY THE AMOUNT O F RS. 2,19,484/- BEING AVERAGE INTEREST @ 16.5% (AS CALCULATE D ABOVE) MAY NOT BE ADDED IN HIS TOTAL INCOME AS INTEREST BEARIN G FUNDS HAVE EN UTILIZED FOR NON-INTEREST BEARING FUNDS AND NON-B USINESS PURPOSE. IN RESPONSE TO THE ABOVE, THE ASSESSEE HAS FURNISHED LETT ER DATED 23-2-304 WHEREIN HE HAS STATED THAT AN AMOUNT O F RS. 4,05,4807- WAS GIVEN TO 'PARTH PETROLIUM DURING THE F.Y.96-97. THE ASSESSEE HAS FURNISHED COPY OF A/CS OF PARTH PETROLIUM AS APP EARING IN HIS BOOKS OF ACCOUNTS FOR F.Y. 96-97 TO 2001-02. AND HAS ATED THAT AS THE AMOUNT WAS NOT BEING RETURNED WE STOPPED T O CHARGE INTEREST TO THE LID PARTY. ON VERIFICATION , IT IS SEEN THAT NO INTEREST HAS BEEN CHARGE DURING THE F.Y. 5-97, 2000-01,2001-02 AND 2002- 03. HOWEVER, INTEREST HAS BEEN CHARGED DURING THE Y. 97 -98, 98-99 AND 99-2000. THE ASSESSEE'S EXPLANATION IS NOT FOUND SATISF ACTORY CAUSE OF THE FACT THAT NO INTEREST HAS BEEN CHARGED EVEN DURING THE FIRST YEAR. I.E. F.Y. J-97 DURING WHICH THE DEBT WAS BEYOND DOUBT. THE ASSESSEE SHOULD HAVE TAKEN OTHER COURSES AVAILAB LE TO HIM AS PER THE PROVISIONS OF THE I.T. ACT IF HE WAS OF THE OPINION AT THE AMOUNT WAS NOT BEING RETURNED BY THE CONCERNED PAR TY. THE ASSESSEE HAS NOT SAID ANYTHING ABOUT OTHER ABOVE REFERRED PARTY TO WHOM LOANS WAS GRANTED, THEREFORE THE INTEREST BEING F UND HAVE BEEN UTILIZED FOR NON-BUSINESS PURPOSE AND ACCORDINGLY, R S. 2,19,4847- AS COMPUTED ABOVE IS ADDED IN TOTAL INCOME O F THE ASSESSEE. 9. BEFORE THE CIT(A), THE ASSESSEE TOOK THE FOLLOWING L INE OF ARGUMENT: I) THAT THE ASSESSEE HAS PAID INTEREST OF RS.4,83,763/- AND RECEIVED INTEREST OF RS.4,72,577/- AND BALANCE/DIFFEREN CE OF RS.11,186/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOU NT BEING NET INTEREST. II) THAT THE ASSESSEE HAS PAID INTEREST @21% ONLY TO ONE PERSON I.E. PARI J.T.AND THE ASSESSEE HAS PAID INTEREST @1 5% TO 18% TO ALL OTHER PERSONS. ACCORDINGLY, AVERAGE TAKEN BY THE ASSESSING OFFICER @16.5% IS NOT JUSTIFIED. 9 III) THAT THE ASSESSEE RECEIVED INTEREST RS.4,02,802/- FROM GAGANDEEP BUILDERS @ 12% IN WHICH THE ASSESSEE IS A PARTNER. INTEREST @ 12% HAS BEEN PAID AS PER THE PROVI SIONS OF SEC. 40(B) OF THE ACT AND AS PER THE TERMS OF THE PARTNERSHIP DEED. IV) WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE HAD OWN CAP ITAL BALANCE OF RS.64.33 LACS ON 1.4.2000 AND RS.47.35 LACS ON 31.3.2001. V) THAT THE ASSESSING OFFICER HAS NOT DRAWN ANY NEXUS THAT M ORE INTEREST BEARING FUNDS HAVE BEEN GIVEN AT LESSER RATE. VI) THE ASSESSEE ALSO CITED THE FOLLOWING DECISIONS: 1. BANSIDHAR OMKARNATH VS. CIT (1965) 58 ITR 462 (ORISSA) 2. CIT VS. TARAI DEVELOPMENT CORPORATION LTD. (1994) 20 5 ITR 421 (ALL.) 3. CIT VS. TINBOX CO. (2003) 260 ITR 637 (DEL.) IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE ASSESSEE B EFORE THE CIT(A) THAT ADDITION OF RS.21,769/- MAY BE DELETED. 10. THE ASSESSEE HAS ALSO PUT FORTH THE FOLLOWING FACTS AND CONTENTIONS. I) THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.2,19,484/- BEING NOTIONAL INTEREST WHILE STATING TH AT INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR MAKING NON-INTEREST BEARING ADVANCES AND NON-BUINESS PURPOSES. II) THAT THE FUNDS WHICH WERE GIVEN TO VARIOUS PARTIES AS NAMED IN PARA 6 OF THE ASSESSMENT ORDER WERE FOR THE BUSINESS PURPOSE ADVANCES. THE NATURE OF ADVANCE HAS BEEN GIVEN BELOW: 10 NAME AMOUNT NATURE OF ADVANCE PAGE NO. OF PAPER BOOK PARTH PETROLEUM 6,32,343 BUSINESS ADVANCE INT. HAS BEEN CHARGED DURING F.Y. 97-98,98,99 & 99-00. THEREAFTER INT. NOT CHARGES BEING BUSINESS ADVANCE NOT RECEIVABLE/IRRECOVERABLE 43 TO 50 VYAPTI BUILDERS 2,01,000 ADVANCE MADE TOWARDS BOOKING OF FLAT 53, 54A, 54B, 54C & 55 TITHI FOOD CHEM P. LTD. 1,40,000 ADVANCE GIVEN FOR BUSINESS PURPOSE 56 TO 62 DASHRATH K. PATEL 3,50,000 FOR AGREEMENT FOR PURCHASE OF LAND FOR BUSINESS PURPOSE 63,63A, 63B, 64 TO 71 PARI J.T. SHROFF 7,474 INTEREST PAID OF RS.8925/- ON YEARLY TRANSACTIONS RS.7474/- DR. BALANCE ON 31.3.01 51& 52 III) THAT THE ASSESSEE HAD GIVEN VARAIOUS AMOUNTS TO ABOV E PARTIES NOT IN THE CURRENT YEAR BUT IN THE PRECEDING YEARS FOR EITHER AS BUSINESS ADVANCE OR FOR BUSINESS PURPOSES . IV) THAT THE ASSESSING OFFICER COULD NOT DISALLOW INTEREST AND COULD NOT MAKE ADDITION OF RS.2,19,484/- ON THE CONTEN TION THAT INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR NO N- BUSINESS PURPOSES. IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE ASSESSEE B EFORE THE CIT(A) THAT THE ADDITION OF RS.2,19,484/- MAY BE DEL ETED. 11. THE CIT(A) ALLOWED A RELIEF OF RS.10,583/- AND 2 ,19,484/- OBSERVING AS UNDER: `6.2 I HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS A F ACT THAT INTEREST HAS BEEN PAID TO RELATED PERSONS, GENERALLY A T RATES VARYING BETWEEN 15 TO 18%, WHILE INTEREST FROM FIRM AND MENA XI THAKKAR HAS BEEN RECEIVED AT 12%. HOWEVER, INTEREST FROM FIRM M /S 11 GAGANDEEP BUILDERS IS GOVERNED BY SECTION 40(B) OF THE ACT AS WELL. SO FAR AS THE OTHER ADDITION IS CONCERNED, IT IS NOTICED THAT, NO NEXUS WITH NON-INTEREST BEARING LOANS GIVEN BY THE A SSESSEE ANDINTEREST BEARING FUNDS HAS BEEN SHOWN BY THE A.O. I T IS ALSO SEEN THAT AMOUNTS WERE ADVANCED TO PARTH PETROLEUM IN EARLIER YEARS AND PAYMENT TO VYAPTI BUILDERS WAS MADE IN EARLI ER YEARS FOR ALLOTMENT OF FLAT. PAYMENT TO DASARATHBHAI PATEL WAS MADE FOR PURCHASE OF LAND. SIMILARLY ADVANCES WERE MADE TO TITHI FOOD IN THE EARLIER YEARS I.E., FROM 1998-99 ONWARDS. THUS MOST OF THE FUNDS WERE ADVANCED IN EARLIER YEARS AND TWO ADVANCES WERE FO R THE PURPOSES OF FLAT AND LAND. THUS THE FINDING OF THE AO IS NOT PROPER AND NO NEXUS HAS BEEN SHOWN BY HIM. APART FROM THIS, IT IS SEEN THAT APPELLANT'S OWN FUNDS TO THE EXTENT OF ABOUT 49 LAKHS WERE AVAILABLE. THUS ON ACCOUNT OF NON-CHARGING OF INTEREST ON CERTAIN ACCOUNTS, NO DISALLOWANCE COULD BE MADE. BESIDES, APPELLA NT HAS CLAIMED INTEREST PAYMENT OF RS. 4,83,763/- AND RECEIVED INTEREST OF RS. 4,72,577/-. NET AMOUNT OF RS. 11,186 ONLY HAS BEEN DEBITED TO P&L ACCOUNT AND AS SUCH EVEN IF ANY DISALLOWANCE WAS REQUI RED, IT SHOULD HAVE BEEN RESTRICTED TO 11,186/-. 6.3 THE ID. AH WAS ASKED THAT IT IS A FACT THAT RELA TED PERSONS HAVE BEEN GIVEN PREFERENTIAL TREATMENT IN RATE OF I NTEREST CHARGED, THOUGH WHILE PAYING INTEREST TO THEM A MUCH HIGHER RA TE HAS BEEN ADOPTED. THE ID AR STATED THAT RATE WAS CHARGED LESS BECA USE OF SPECIFIC REASONS, BUT IN MAT CASE HE STATED THAT THE DIFF ERENCE OF RS. 11.186/- MAY BE DISALLOWED. 6.4 IN VIEW OF THE ABOVE, THE DISALLOWANCE IS RESTRICTED TO RS.11,186/-. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO CA REFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. THERE IS N O DISPUTE THAT MOST OF THE FUNDS WERE ADVANCED IN EARLIER YEARS AND TWO AD VANCES WERE FOR THE PURPOSES OF FLAT AND LAND. IN OUR VIEW, THE CIT(A ) HAS CORRECTLY OBSERVED THAT THE FINDING OF THE ASSESSING OFFICER IS NOT PROPER AND NO NEXUS HAS BEEN SHOWN BY HIM. WE FIND THAT THE CIT(A) H AS CATEGORICALLY STATED THAT THE ASSESSING OFFICER COULD NOT DISALLOW INTER EST OR COULD NOT MAKE IMPUGNED ADDITION ON THE CONTENTION THAT INTERE ST BEARING FUNDS HAVE BEEN UTILIZED FOR NON-BUSINESS PURPOSES. FURTHERMOR E, ASSESSEES OWN FUNDS TO THE EXTENT OF ABOUT RS.49 LACS WERE AVAIL ABLE. WE FULLY 12 AGREE WITH THIS OBSERVATION OF THE CIT(A) THAT ON ACCO UNT OF NON-CHARGING OF INTEREST ON CERTAIN ACCOUNTS, NO DISALLOWANCE COULD BE M ADE. IT SEEMS THAT THE ASSESSING OFFICER HAS NOT CORRECTLY APPRECIATED TH E EXPLANATION OF THE ASSESSEE AND MADE THE IMPUGNED ADDITIONS. THERE IS N O MATERIAL ON RECORD TO PROVE THAT THE INTEREST BEARING FUNDS WERE D IVERTED FOR NON BUSINESS PURPOSE. ON THE CONTRARY, THE ASSESSEE HAS PUT ON R ECORD THAT INTEREST FREE ADVANCE/LOAN WERE GIVEN TO ABOVE REFERR ED PARTIES FOR BUSINESS PURPOSE AND THAT TOO FROM BUSINESS FUNDS DEPOSITED IN THE BANK ACCOUNT AND NOT FROM INTEREST BEARING FUNDS. THUS, CONSID ERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VI EW THAT THE CIT(A) HAS PASSED A WELL REASONED ORDER AFTER APPRECIAT ING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. WE, THEREFORE, DO NOT SEE ANY VALID GROUND IN INTERFERING WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DI SMISS GROUND NOS.2 AND 3 OF THE REVENUES APPEAL. 13. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.9 .2009. SD/- (N.S.SAINI) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:11.9.2009 PSP* 13 COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.