Shri Hemant Kumar Agrawal, V. The ACIT, 5(1),

ITA 757/IND/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2432 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2009
• Assessment Year: misc
• Appeal Filed On: 13-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE; R P MANDOVRA CAS
• Keywords: Unexplained cash credit; Business income; Depreciation; Income from undisclosed sources; Additional evidence
• Section: 80HHC; 133A; 80IB; 201; 80HH

Judgement Text

PAGE 1 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO.756/IND/2006 A.Y. : 2003-04 M/S. VIKAS COTTON FIBERS, C/O K. R. MANDOVRA & CO., 2, WHITE CHURCH COLONY, INDORE. VS ACIT, 5(1), INDORE. APPELLANT RESPONDENT PAN NO. : N.A. I.T.A.NO.757/IND/2006 A.Y. : 2003-04 SHRI HEMANT KUMAR AGRAWAL, C/O K. R. MANDOVRA & CO., 2, WHITE CHURCH COLONY, INDORE VS. ACIT, 5(1), INDORE. APPELLANT RESPONDENT PAN NO. : N.A. I.T.A.NO.759/IND/2006 A.Y. : 2003-04 SHRI GIRISHKUMAR TAYAL, C/O K. R. MANDOVRA & CO., 2, WHITE CHURCH COLONY, INDORE VS, ACIT, 5(1), INDORE. APPELLANT RESPONDENT PAGE 2 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. PAN NO. : N.A. I.T.A.NO.761/IND/2006 A.Y. : 2003-04 SHRI PRADEEP KUMAR TAYAL, C/O K. R. MANDOVRA & CO., 2, WHITE CHURCH COLONY, INDORE. ACIT, 5(1), INDORE. APPELLANT RESPONDENT APPELLANTS BY : SHRI S.S.DESHPANDE AND SHRI R.P.MANDOVRA, CAS RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 08/12/2009 O R D E R PER V.K. GUPTA, A.M. THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I. T.A.NO. 757/IND/2006. 4. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING DEDUCTION PAGE 3 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. U/S 80IB IN RESPECT OF INTEREST INCOME AND INCOME SURRENDERED DURING THE COURSE OF SURVEY. 5. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80-IB AT RS. 4,31,200/-. THE A.O. FOUND THAT THERE WAS A SURVEY ACTION U/S 133A ON 3.1.2003, WHEREIN UNACCOUNTED EXCESS STOCK OF KAPAS VALUED AT RS. 14,81,350/- WAS SURRENDERED BY THE ASSESSEE. TH E ASSESSEE, HOWEVER, CLAIMED DEDUCTION THEREON U/S 80IB SUBSEQUENTLY. TH E ASSESSEE, RELYING ON THE DECISION OF THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF CHHABRA GINNING UDYOG, CONTENDED THAT IT WAS ELIGIB LE FOR DEDUCTION U/S 80IB ON SUCH SURRENDERED INCOME. THE A.O., HOWEVER, HELD THAT IN THAT CASE, THE ASSESSEE WAS NOT ENGAGED IN TRADING OF RA W COTTON, WHEREAS IN THE PRESENT CASE, THE ASSESSEES PERSONAL SET OF PR OFIT AND LOSS ACCOUNT REVEALED THAT IT WAS ALSO ENGAGED IN THE SALE OF CO TTON AND COTTON SEED, INCOME FROM ARAT COMMISSION AND LEASE RENT. HENCE, INSPITE OF THE FACT THAT INCOME FROM NON INDUSTRIAL ACTIVITY SHOWN WAS SMALL, THE ASSESSEES INVOLVEMENT IN UNACCOUNTED TRADING ACTIVITIES COULD NOT BE DENIED. HE, ACCORDINGLY, HELD THAT FACTS OF THAT CASE WAS ENTIR ELY DIFFERENT AND ,THEREFORE, THE SAME WAS NOT OF ANY HELP PARTICULAR LY WHEN DURING THE COURSE OF SURVEY, THE ASSESSEE HAD HIMSELF ADMITTED THAT EXCESS STOCK OF KAPAS WAS OUT OF HIS UNACCOUNTED INCOME AND FOR THI S REASON ALSO, THE ASSESSEES ENGAGEMENT IN UNACCOUNTED TRADING OF RA W KAPAS/GOODS COULD PAGE 4 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. NOT BE DENIED. THE A.O. FURTHER HELD THAT THE CHARA CTER OF MONEY INVESTED IN THE PURCHASE OF COTTON COULD NOT BE CONCLUSIVELY TAKEN UP AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING, HENCE, ON THIS AMOUNT, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. THEREAFTER , THE A.O. ALSO HELD THAT INTEREST INCOME OF RS. 2,13,098/- WAS ALSO NOT ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE ACT. 6. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS SUBMITTED THA T EXCEPT INDUSTRIAL UNDERTAKING OWNED BY THE ASSESSEE, THERE WAS NO OTH ER BUSINESS ACTIVITY OF THE ASSESSEE AND THIS FACT WAS EVIDENT FROM RECO RDS/RETURNS AVAILABLE WITH THE DEPARTMENT. THE ASSESSEE ALSO MADE VARIOUS OTHER CONTENTIONS TO ASSAIL THE ORDER OF THE A.O., WHICH INCLUDED THAT T HERE WAS NO IOTA OF EVIDENCE WITH THE A.O. REGARDING JOB WORK ACTIVITIE S CARRIED ON BY THE ASSESSEE WITHOUT RECORDING THE SAME IN THE BOOKS OF ACCOUNT. THE ASSESSEE ALSO ARGUED THAT SCOPE OF SECTION 80IB WAS BROADER THAN SECTION 80HH, HENCE, THE DECISION OF THE TRIBUNAL IN THE CA SE OF SECTION 80-HH WAS NOT APPLICABLE. 7. AS REGARDS INTEREST INCOME, THE ASSESSEE CONTENDED THAT IT WAS EARNED IN THE COURSE OF BUSINESS ACTIVITIES, HENCE IT WAS IN THE NATURE OF BUSINESS INCOME. THE LD. CIT(A), HOWEVER, CONFIRMED THE ACTION OF THE A.O. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER :- PAGE 5 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. I HAVE CONSIDERED THE SUBMISSIONS MADE. THE A.O. HAS DISCUSSED IN DETAIL THAT THERE WAS A SURVEY IN WHICH THE EXCESS STOCK OF RAW COTTON WAS FOUND OF RS. 14.81 LACS. THE ASSESSEE ITSELF DECLARED THE INCOME IN RESPECT OF THE SURRENDERED STOCK IN ITS PROFIT AND LOSS ACCOUNT AS MISC. INCOME. THE ASSESSEE IS ALSO DOING BUSINESS OF ADAPT AND ADAPT INCOME WAS SHOWN ON SALE OF COTTON AND COTTON SEED. THERE WAS SUBSTANTIAL ACTIVITY RELATING TO ADAPT/TRADING THE TURNOVER BEING RS. 62.02 LACS. THE UNACCOUNTED STOCK WAS IN RESPECT OF RAW COTTON AND NOT PROCESSED COTTON. THE A.O. HAS ALSO DISTINGUISHED THE JUDGEMENT OF I.T.A.T.,INDORE BENCH IN THE CASE OF CHHABRA GINNING AS IN THAT CASE THE ASSESSEE WAS NOT ENGAGED IN TRADING OF RAW COTTON. THE APPELLANT AS STATED THAT IT HAS MISTAKENLY SHOWN SURRENDERED INCOME AS A MISC. INCOME AND THERE WAS SAME MISTAKE ON THE PART OF THE AUDITOR. SUCH CONTENTION REGARDING MISTAKE BY AUDITOR CANNOT BE ACCEPTED. THAT THE APPELLANT HAS TRADED IN RAW COTTON ON ADAPT BASIS CANNOT BE DENIED, THOUGH THE APPELLANT HAS NOT DONE ANY JOB WORK. THE APEX COURT DECISION IN THE CASE OF CIT VS. STERLING FOOD IS SQUARELY APPLICABLE TO THE FAC TS OF THIS CASE. THE DEDUCTION U/S 80IB IN RESPECT OF SURRENDERED INCOME IS ONLY ADMISSIBLE UNLESS IT IS PROVED THAT THE INCOME WAS DERIVING FROM THE INDUSTRIAL UNDERTAKING THROUGH USE OF PLANT AND MACHINERY. IN THIS INSTANT CASE THE EXCESS STOCK WA S PAGE 6 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. FOUND WAS OF RAW COTTON AND THERE IS NO EVIDENCE TO SHOW THAT THE SURRENDERED AMOUNT IN RESPECT OF THE RAW COTTON AND THE MONEY INVESTED IN ITS PURCHASE WAS DERIVED FROM THE INDUSTRIAL UNDERTAKING. I ALSO DO NOT ACCEPT THE APPELLANT CONTENTION THAT INTEREST INCOME RECEIVED IN FDRS AND DEPOSITS WITH THE OTHER CONCERNS CAN QUALIFY U/S 80IB OF THE ACT. THE A.O. HAS CITED SEVERAL COURT DECISION WHICH SUPPORT THE VIEW THAT DEDUCTION U/S 80IB IS NOT ADMISSIBLE IN RESPECT OF INCOME FROM OTHER SOURCES ALSO NETTING IS NOT PERMISSIBLE BETWEEN INTEREST RECEIPT AND INTEREST PAID UNLESS A DIRECT NEXUS IS ESTABLISHED BETWEEN THE TWO. WHEREAS INTEREST EARNED IS IN RESPECT OF SURPLUS FUNDS IN FDRS AND THEREFORE CANNOT BE TREATED AS BUSINESS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. INTEREST PAID IS IN RESPECT OF BUSINESS ACTIVITY, A ND CANNOT BE SETTLED WITH INTEREST RECEIVED ON FDRS. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 8. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE FACTS AND CONTENDED THAT AS FAR AS INTEREST INCOME WAS CONCER NED, HE WAS PRESSING ONLY FOR NETTING OF INTEREST AS INTEREST BEARING BO RROWED FUNDS WERE UTILIZED FOR GIVING INTEREST EARNING LOANS AND, THE REFORE, THERE WAS A DIRECT NEXUS BETWEEN THE TWO. HE, HOWEVER, SUBMITTED THAT HE WAS NOT PRESSING FOR NETTING OF INTEREST OF RS. 110/- EARNED ON FDR. HE, IN REGARD TO NETTING PAGE 7 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. OF INTEREST, PLACED STRONG RELIANCE ON THE ORDER OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRIRAM HONDA POWER EQ UIP AS REPORTED IN 289 ITR 475, APART FROM SEVERAL OTHER DECISIONS OF THE VARIOUS BENCHES OF TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE, THE REAFTER, CONTENDED THAT THE ASSESSEE WAS FILING AN AFFIDAVIT BEFORE THE TRI BUNAL, AND DREW OUR ATTENTION TO PAGE 28 TO 30 OF THE PAPER BOOK, WHERE IN THE ASSESSEE HAD STATED THAT EXCESS STOCK OF KAPAS WAS PURCHASED OUT OF THE INCOME OF INDUSTRIAL UNDERTAKING NOT RECORDED IN THE BOOKS OF ACCOUNT. AT THIS STAGE, A QUERY WAS RAISED TO SUBMIT THE COPY OF STATEMENT GIVEN BY THE ASSESSEE DURING THE COURSE OF SURVEY SO AS TO VERIFY THE VER ACITY OF THE FACTS NARRATED IN SUCH AFFIDAVIT TO WHICH THE ASSESSEES COUNSEL EXPRESSED ITS INABILITY. IN THESE CIRCUMSTANCES, WE ARE OF THE VI EW THAT ADDITIONAL EVIDENCE IN THE FORM OF SUCH AFFIDAVIT CANNOT BE EN TERTAINED, BECAUSE THE ASSESSEE HAS FAILED TO FURNISH ALL THE INFORMATION/ EVIDENCES TO DRAW SUPPORT FROM SUCH AFFIDAVIT. THEREAFTER, THE LEARNE D COUNSEL DREW OUR ATTENTION TO PAGE 2 OF THE PAPER BOOK CONTAINING CO PY OF PROFIT AND LOSS ACCOUNT OF M/S. OM COTTON UDYOG, SENDHWA, INDUSTRIA L UNDERTAKING OWNED BY THE ASSESSEE TO SHOW THAT ASSESSEES INCOM E COMPRISED ONLY OF INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE LEA RNED COUNSEL FURTHER CONTENDED THAT THE TRIBUNAL IN THE CASE OF SHRI AMA R KUMAR AGRAWAL VS. ACIT, IN 758/IND/2006 ORDER DATED 31 ST DECEMBER, 2008, HAD TAKEN A PAGE 8 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. VIEW THAT INCOME SURRENDERED BY WAY OF EXCESS STOCK COULD NOT BE CONSIDERED AS INCOME DERIVED FROM INDUSTRIAL UNDERT AKING AND IN THIS PROCESS THE TRIBUNAL HAD APPLIED THE RATIO OF THE D ECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF NOTINAL LEGGUARD WORKS VS. CIT, AND OTHERS REPORTED IN 288 ITR 18, WHICH WAS A CASE RELATING TO CONSIDERATION OF SURRENDERED INCOME FOR COMPUTING D EDUCTION U/S 80HHC AND NOT U/S 80-IB. THE LEARNED COUNSEL FURTHER CONT ENDED THAT THERE WERE SEVERAL DECISIONS OF THE TRIBUNAL, WHEREIN A VIEW I N FAVOUR OF THE ASSESSEE HAD BEEN TAKEN UNDER THE SAME SET OF FACTS AND THESE DECISIONS HAD NOT BEEN CONSIDERED IN THE AFORESAID DECISION O F THE TRIBUNAL, HENCE, SUCH DECISION WAS NOT BINDING. THE LEARNED COUNSEL CITED FOLLOWING JUDICIAL DECISIONS IN SUPPORT OF HIS SUCH CONTENTIO N :- 1. ACIT VS. CHHABRA GINNING UDYOG, (2000) 28 ITC 338 ORDER DATED 9 TH FEBRUARY, 1999. 2. MANNALAL AGRAWAL VS. ACIT, (1998) 26 ITC 146 ORDER DATED 15 TH OCTOBER, 1997. 3. BHARAT BEEJ BHANDAR VS. ITO, (2004) 32 ITC 562 ORDE R DATED 13 TH JULY, 2004. 4. SEVAKRAM GHANSYAMDAS VS. DY. CIT, (2005) 33 ITC 165/ 5. ROYALE SUNRISE VS. ITO, (2006) 99 TTC (BANG) 1305 O RDER DATED 6 TH JANUARY, 2006. PAGE 9 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. 6. ITO VS. JAMUNADAS MOOLJIBHAI, (2006) 99 TTJ (RAJ) 197 ORDER DATED 27 TH JANUARY, 2005. 10. THE LEARNED COUNSEL, THEREAFTER, ALSO PLACED RELIAN CE ON THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MARGRETTE HOPE TEA COMPANY LIMITED AS REPORTED IN 201 ITR 747 , WHEREIN THE HON'BLE COURT HAD HELD THAT UNEXPLAINED CASH CREDIT WAS TO BE TREATED AS INCOME OF THE ASSESSEE COMPANY FROM ITS TEA BUSINES S AND NOT AS INCOME FROM UNDISCLOSED SOURCES, WHEN THE ASSESSEES MAIN ACTIVITIES WAS OF THE CULTIVATION, MANUFACTURE AND SALE OF TEA. 11. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, CONTENDED THAT APART FROM THE DECISION OF THE TRIBU NAL IN THE CASE OF SHRI AMAR KUMAR AGARWAL (SUPRA), THE TRIBUNAL IN THE CAS E OF DY. CIT VS. SHRI BHUPENDRA SINGH DHARAM IN I.T.A.NO. 364/IND/20 06 ORDER DATED 31 ST DECEMBER, 2008, HAD ALSO TAKEN A SIMILAR VIEW. SHE ALSO CONTENDED THAT IN THE CASE OF JT. CIT VS. M/S. DESIGN AUTO SY STEM LIMITED IN I.T.A.NO. 897/IND/1999, ORDER DATED 30.5.2006, A SI MILAR VIEW HAD BEEN TAKEN. HENCE, THE ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY COULD NOT BE CONSIDERED AS INC OME DERIVED FROM THE INDUSTRIAL UNDERTAKING. SHE FURTHER PLACED RELIANCE ON THE ORDERS OF REVENUE AUTHORITIES IN THIS REGARD. AS REGARD TO NE TTING OF INTEREST, SHE PAGE 10 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. PLACED RELIANCE ON THE DECISION OF HON'BLE M.P. HIG H COURT IN THE CASE OF PARAS OIL EXTRACTION LIMITED, (1998) 230 ITR 266. O N A QUERY FROM THE BENCH REGARDING NON-CONSIDERATION OF THE EARLIER DE CISION OF THE TRIBUNAL, WHICH WAS IN FAVOUR OF THE ASSESSEE, IN THE DECISIO N CITED BY THE REVENUE, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THESE DECISIONS WERE SUBSEQUENT TO THOSE DECISIONS, HENCE , SUCH LATER DECISIONS WERE TO BE FOLLOWED. AS REGARDS THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. DESIGN AUTO SYSTEM LIMITED (SUPRA), HER ATTENT ION WAS DRAWN TO THE FACT THAT IN THAT CASE, THE ISSUE INVOLVED WAS THAT WHETHER SURRENDERED AMOUNT HAD TO BE INCLUDED IN THE GROSS TOTAL INCOME OR NOT FOR COMPUTING DEDUCTION U/S 80HH & 80-I AND NOT COMPUTING THE QUA NTUM OF ELIGIBLE PROFIT U/S 80HH/80I, HENCE, THIS DECISION WAS ON DI FFERENT ASPECTS. IN REPLY, SHE PREFERRED TO RELY ON THIS ORDER OF THE T RIBUNAL TO SUPPORT HER CASE. 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS. 14,81,350/- ON ACCOUNT OF EXCESS STOCK OF KAPAS FOU ND DURING THE COURSE OF SURVEY. THIS AMOUNT HAS BEEN CREDITED IN THE PRO FIT AND LOSS ACCOUNT OF INDUSTRIAL UNDERTAKING PREPARED BY THE ASSESSEE. TH E ASSESSEE HAS ALSO CLAIMED DEDUCTION ON THIS AMOUNT U/S 80-IB OF THE A CT. BOTH THE REVENUE PAGE 11 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. AUTHORITIES HAVE REJECTED THIS CLAIM OF THE ASSESSE E FOR THE REASON THAT THE ASSESSEE COULD NOT BE SAID TO BE SOLELY ENGAGED IN THE BUSINESS OF RUNNING OF INDUSTRIAL UNDERTAKING ONLY. THOUGH THE LEARNED COUNSEL HAS PLEADED TO BE ENGAGED ONLY IN THIS ACTIVITY, HOWEVER, WE FI ND THAT THE ASSESSEE IS ALSO DERIVING INCOME FROM ARAT BUSINESS, WHEREIN TR ADING TURNOVER OF SAME COMMODITY, EXCESS STOCK OF WHICH WAS FOUND DUR ING THE COURSE OF SURVEY IS TO THE TUNE OF RS. 62.02 LAKHS. THE ASSES SEE, THUS, CANNOT BE SAID TO BE ENGAGED ONLY RUNNING OF AN INDUSTRIAL UNDERTA KING. WE ARE OF THE VIEW THAT THE PROFITS OF INDUSTRIAL UNDERTAKING ARE ELIGIBLE FOR INCENTIVE DEDUCTION UNDER CHAPTER VIA, HENCE, THERE HAS TO BE A NORMAL TENDENCY TO INCREASE PROFIT THEREOF AND NOT OF ENTERING INTO TH E MODUS OPERANDI OF EARNING INCOME FROM SUCH UNDERTAKING OUTSIDE THE BO OKS AS STATED BY THE ASSESSEE NOW. FURTHER, THE FACT THAT EXCESS STOCK O F KAPAS WAS FOUND ALONGWITH CERTAIN AMOUNT OF CASH ALSO LEADS TO AN A DVERSE INFERENCE AGAINST THE ASSESSEE. THE ASSESSEE HAS NOT EVEN BRO UGHT THE MANUFACTURING ACCOUNT ON RECORD. THE PERSONAL BALAN CE SHEET/PLACED AT PAGE 4 OF THE PAPER BOOK SHOW THAT THE ASSESSEE IS ALSO EARNING LEASE INCOME. THUS, IN THE BACKGROUND OF THESE FACTS, IT CANNOT, CONCLUSIVELY, BE SAID THAT THE SOURCE OF INVESTMENT IN SUCH EXCESS S TOCK IS UNACCOUNTED INCOME OF INDUSTRIAL UNDERTAKING ONLY. ACCORDINGLY, THE DECISIONS CITED BY THE ASSESSEE ARE ALSO NOT OF ANY HELP, BECAUSE I N SOME OF THOSE CASES, IT PAGE 12 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. WAS A FACTUAL FINDING THAT THE ASSESSEE WAS NOT ENG AGED IN THE TRADING OF RAW COTTON AND IN SOME CASES, THE ISSUE INVOLVED WA S REGARDING CONSIDERATION OF SUCH INCOME FOR ALLOWING PARTNERS REMUNERATION. IN THIS REGARD, WE ARE FURTHER OF THE VIEW THAT UNACCOUNTED INCOME CAN BE EARNED BY THE ASSESSEE ON ITS OWN AND MERE PRESENTATION OF THE SAME IN THE PROFIT AND LOSS ACCOUNT OF INDUSTRIAL UNDERTAKING WOULD NO T MAKE SUCH INCOME AS THAT OF SUCH INDUSTRIAL UNDERTAKING. FURTHER, UN DER THE PROVISIONS OF INCOME-TAX ACT, 1961, THE ASSESSEE AND INDUSTRIAL U NDERTAKING ARE TO BE TREATED INDEPENDENTLY. SINCE WE HAVE DECIDED THIS I SSUE ON THESE FACTS, HENCE, WE NEED NOT CONSIDER IT NECESSARY TO DELIBER ATE ON THE VARIOUS OTHER JUDICIAL DECISIONS CITED BY BOTH THE SIDES. A CCORDINGLY, THIS PART OF GROUND OF THE ASSESSEE IS DISMISSED. 14. AS REGARD TO NETTING OF INTEREST IS CONCERNED, IT I S NOW A SETTLED JUDICIAL PROPOSITION THAT ONLY NET INTEREST INCOME HAS TO BE EXCLUDED FROM THE PROFITS OF AN ELIGIBLE INDUSTRIAL UNDERTAKING. THE LD. DEPARTMENTAL REPRESENTATIVE, THOUGH, HAS TRIED TO STATE THAT THE RE WAS NO DIRECT NEXUS AS OBSERVED BY THE CIT(A). HOWEVER, FROM THE PERUSAL O F THE APPELLATE ORDER, IN OUR VIEW, NO SUCH FINDING EMERGES. EVEN T HE A.O. HAS NOT DEALT WITH THIS ASPECT. FURTHER, THE DECISION RELIED ON B Y THE LD. DEPARTMENTAL REPRESENTATIVE IN THE CASE IS ALSO ON A DIFFERENT A SPECT AND NOT ON THE ASPECT OF NETTING, HENCE, NOT RELEVANT. SINCE THE A SPECT OF NEXUS HAS NOT PAGE 13 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. BEEN EXAMINED AT ANY STAGE, HENCE, WE RESTORE THIS ISSUE TO THE FILE OF A.O. TO EXAMINE THE SAME AND IF THE NEXUS BETWEEN THE INTEREST PAID AND INTEREST EARNED IS ESTABLISHED BY THE ASSESSEE, THE N, TO EXCLUDE ONLY NET INTEREST FROM THE ELIGIBLE PROFITS OF THE INDUSTRIA L UNDERTAKING. THUS, THIS PART OF THIS GROUND IS ACCEPTED SUBJECT TO CONCESSI ON GIVEN BY THE ASSESSEE IN RESPECT OF INTEREST EARNED ON FDR. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED IN TERMS INDICATED ABOVE. 16. NOW, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I.T. A.NO. 756/IND/2009, WHEREIN THE ISSUE OF NETTING OF INTER EST RECEIVED AND PAYMENT IS INVOLVED. 17. BOTH THE PARTIES HAVE REITERATED THE SUBMISSIONS MA DE IN REGARD TO THIS ISSUE IN ASSESSEES APPEAL IN I.T.A.NO. 757 /IND/2006. HENCE, FOLLOWING THE SAME REASONS, WE RESTORE THIS ISSUE T O THE FILE OF A.O. TO BE DECIDED ON SIMILAR LINES. THUS, THIS GROUND OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED FOR STATISTICAL PURPOSES. 19. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A.NO . 759/IND/2006. PAGE 14 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. 20. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF LD. CIT(A) IN PARTLY CONFIRMING THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS. 21. THE FACTS, IN BRIEF, ARE THAT THE A.O. FOUND THAT T HE ASSESSEE HAD WITHDRAWN A SUM OF RS. 15,000/- ONLY TOWARDS HOUSE HOLD EXPENSES. HENCE, HAVING REGARD TO A JOINT FAMILY COMPRISING O F MORE THAN 35 MEMBERS AND ASSESSEES FAMILY OF FOUR PERSONS, HE H ELD THAT AN EXPENDITURE OF RS. 10,000/- PER MONTH WAS REASONABL E. HENCE, HE MADE AN ADDITION OF RS. 1,05,000/-. ON APPEAL BY THE ASS ESSEE, THE LD. CIT(A) ALSO CONFIRMED THE DECISION OF THE A.O. AND ALSO HE LD THAT THE DECISION OF THE INDORE BENCH OF THE TRIBUNAL AS REPORTED IN 6 I TJ 283, WAS NOT APPLICABLE AS IN THAT CASE, VARIOUS ADULT MEMBERS O F THE JOINT FAMILY WERE EARNING INCOME INDEPENDENTLY. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 22. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T JOINT FAMILY WITHDRAWALS WERE TO THE TUNE OF RS. 86,000/- AND NOT RS. 15,000/- AND HAVING REGARD TO THE FACT THAT TWO CHILDREN WER E STUDYING IN GOVERNMENT SCHOOL AND IT WAS A CASE OF FAMILY RESID ING JOINTLY, THIS WITHDRAWAL COULD NOT BE CONSIDERED AS INSUFFICIENT. HE FURTHER CONTENDED THAT IN THE CASE OF ONE OF THE CONNECTED ASSESSEE, NAMELY, SHRI SUNIL KUMAR TAYAL VS. ACIT, IN I.T.A.NO. 760/IND/2006 ORD ER DATED PAGE 15 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. 31.12.2008, THE TRIBUNAL HAD HELD THAT THE WITHDRAW ALS OF RS. 61,000/- WERE SUFFICIENT TO MAINTAIN THE FAMILY AS THE ASSES SEE WAS RESIDING IN ANCESTRAL HOUSE IN A REMOTE AREA. 23. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. AND CONTEN DED THAT HAVING REGARD TO THE STATUS OF THE FAMILY, THE VIEW TAKEN BY THE REVENUE AUTHORITIES WAS VERY REASONABLE. 24. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 25. WE FIND THAT IN THE CASE OF CONNECTED ASSESSEES IN THE SIMILAR SET OF FACTS, THE HOUSE HOLD WITHDRAWALS OF RS. 61,000/ - HAVE BEEN FOUND TO BE SUFFICIENT TO MAINTAIN THE FAMILY WHEREAS IN THE PRESENT CASE, THE ASSESSEES FAMILY WITHDRAWALS AT RS. 86,000/-. THER EFORE, RESPECTFULLY FOLLOWING THE RATIO OF THIS DECISION, WE HOLD THAT THERE IS NO CASE FOR MAKING ANY ADDITION ON ACCOUNT OF LOW HOUSE HOLD WI THDRAWALS. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ACCEPTE D. 26. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCES OUT OF C AR EXPENSES @ 25 %. 27. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED VEHICLE RUNNING EXPENSES AT RS. 2,46,453/-. THE A.O. DISALLOWED 50 % THEREOF FOR THE REASON THAT THE EXPENDITURE WAS NOT COMPLETELY VERI FIABLE AND FOR NON- PAGE 16 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. BUSINESS PURPOSES. THE LD. CIT(A) RESTRICTED THIS T O 25 %. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 28. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT A REASONABLE VIEW IN THE MATTER COULD BE TAKEN AND DI SALLOWANCE @ 20% WAS SUFFICIENT. 29. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, SUBMITTED THAT THE ASSESSEE WAS RESIDING AT FAR OFF PLACE FROM INDORE AND MUST BE COMING TO INDORE FOR VARIOUS PERSONAL PURPO SES AND, THEREFORE, DISALLOWANCE SUSTAINED BY THE CIT(A) WAS JUSTIFIED. 30. HAVING CONSIDERED THE SUBMISSIONS OF BOTH THE SIDE S, WE ARE OF THE VIEW THAT THE DISALLOWANCE @ 20 % OF TOTAL VEHI CLE RUNNING EXPENSES WOULD MEET THE ENDS OF JUSTICE IN THE BACKGROUND OF THE FACTS OF THIS CASE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 31. IN GROUND NO.3, THE ISSUE INVOLVED IS REGARDING NET TING OF INTEREST FOR COMPUTING DEDUCTION U/S 80-IB, WHICH I S IDENTICAL TO THE ISSUE RAISED IN GROUND NO.1 OF THE ASSESSEES APPEAL IN I .T.A.NO. 757/IND/2006, HENCE, RESTORED TO THE FILE OF A.O. TO BE DISPOSED OF IN SIMILAR MANNER. 32. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED IN TERMS INDICATED ABOVE. 33. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A.NO . 761/IND/2006. PAGE 17 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. 34. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 33,673 /- MADE BY THE ASSESSING OFFICER U/S 40A(2)(B) OF THE INCOME-TAX A CT, 1961. 35. THE FACTS, IN BRIEF, ARE THAT THE A.O. FOUND THAT T HE ASSESSEE HAD PAID INTEREST TO RELATED PARTIES ON A HIGHER RATE A S COMPARED TO OTHER UNRELATED PARTIES. THE RATE OF INTEREST TO SPECIFIE D PERSONS RANGE BETWEEN 12 TO 18 % WHEREAS IN THE CASE OF UNRELATED PARTIES , IT WAS 9 % EVEN. THE BANK RATE WAS 13.75 %. THE A.O., ACCORDINGLY, ADOPT ED A RATE OF 13.5 % IN CASE OF THREE PERSONS TO WHOM INTEREST HAD BEEN PAID @ EITHER 15 % OR 18 % AND MADE THE IMPUGNED DISALLOWANCE. ON APPEAL, THE LD. CIT(A) ALSO CONFIRMED THE SAME. STILL AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US. 36. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. THE LD. DEPART MENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE OR DER OF LD. CIT(A). 37. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 38. IT IS NOTED THAT THE ASSESSEE HAD PAID INTEREST TO RELATED AND UNRELATED PARTIES AT DIFFERENT RATES. HOWEVER, THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL TO JUSTIFY SUCH DIFFERENCE. H ENCE, WE HOLD THAT THE PAGE 18 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. ORDER OF THE LD. CIT(A) IS CORRECT IN LAW. ACCORDIN GLY, WE DISMISS THIS GROUND OF THE ASSESSEE. 39. BOTH THE PARTIES AGREED THAT THE ISSUE RAISED IN GR OUND NO.2 WAS IDENTICAL TO ISSUE RAISED IN GROUND NO.1 OF I.T.A.N O. 759/IND/2006. THE LEARNED COUNSEL ALSO SUBMITTED THAT THE WITHDRAWALS IN THIS CASE IS RS. 57,000/- AND THE CHILDREN WERE OF YOUNGER AGE. THUS , FOLLOWING THE REASONS GIVEN BY US THEREIN, WE ALLOW THIS GROUND O F THE ASSESSEE. 40. THE ISSUE RAISED IN GROUND NO.3 IS REGARDING DISALL OWANCE OUT OF VEHICLE EXPENSES AND DEPRECIATION. 41. THE A.O. HAS MADE A DISALLOWANCE @ 20%, WHICH HAS A LSO BEEN CONFIRMED BY THE LD. CIT(A). THE LEARNED COUNSEL S UBMITTED THAT 1/8 TH OF THE EXPENSES WAS DISALLOWED BY THE ASSESSEE SUO MOTU, HENCE, FURTHER DISALLOWANCES WERE NOT JUSTIFIED. 42. WE ARE, HOWEVER, OF THE VIEW THAT THE RATE OF 20 % IN THE BACKGROUND OF THIS CASE IS JUSTIFIED. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED. 43. THE ISSUE RAISED IN GROUND NO. 4 IS REGARDING NETTI NG OF INTEREST FOR COMPUTING DEDUCTION U/S 80IB. 44. THE LEARNED COUNSEL SUBMITTED THAT THIS WAS AN IDEN TICAL ISSUE. THE LD. DEPARTMENTAL REPRESENTATIVE, HOWEVER, SUBMI TTED THAT IN THE PAGE 19 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. PRESENT CASE, THE LD. CIT(A) HELD THAT THERE WAS NO NEXUS BETWEEN THE INTEREST PAID AND INTEREST RECEIVED. HENCE, NO NETT ING WAS ALLOWABLE. 45. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 46. IT IS NOTED THAT THE ASPECT OF NEXUS BETWEEN THE IN TEREST RECEIVED AND INTEREST PAID HAS NOT BEEN EXAMINED BY THE ASSE SSING OFFICER AT ALL AS EVIDENT FROM THE ASSESSMENT ORDER. THE LD. CIT(A) H AS ALSO NOT EXAMINED THIS ISSUE IN DETAIL. THUS, IN OUR VIEW, T HE INTERESTS OF JUSTICE WOULD BE SERVED, IF THIS ISSUE IS ALSO RESTORED TO THE FILE OF A.O. FOR DECISION THEREON AFRESH AS PER LAW AND HAVING REGAR D TO OUR DIRECTIONS GIVEN IN I.T.A.NO. 757/IND/2006. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 47. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 48. TO SUM UP, ALL THE APPEALS ARE PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 15 TH DECEMBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :15 TH DECEMBER, 2009. PAGE 20 OF 20 I.T.A.NO. 756/IND/2006 VIKAS COTTON FIBERS, SENDHWA AND OTHERS. CPU* 814D15