DCIT, Jaipur V. M/S VINOD GARG MAKRANA, Jaipur

ITA 767/JPR/2011

• Counselvise Citation: 76723114 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEEPH LD
• Assessee Lawyers: G G MUNDRA
• Keywords: Unexplained cash credit; Business expenditure; Income from undisclosed sources; Commercial expediency
• Section: 131; 68; 37

Judgement Text

ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 767/JP/2011 ASSESSMENT YEAR: 2008-09 PAN : AAGFV 1422 R THE DCIT VS. M/S. VINOD GARG MAKRANA CIRCLE- 2 5-A, DUNLOD HOUSE, HAWA SARAK JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. NEENA JEEPH, LD SR. DR ASSESSEE BY : SHRI G.G. MUNDRA DATE OF HEARING: 30-09-2014 DATE OF PRONOUNCEMENT: 31 -10-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT- I, JAIPUR DATED 14-06-2011 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN:- (I) DELETING THE ADDITION OF RS. 20,6,262/- MADE BY THE AO ON ACCOUNT OF INTEREST EXPENSES U/S 36(1)(III) OF THE I.T. ACT , 1961 WHEREIN INTEREST BEARING FUNDS WERE DIVE RTED TO INTEREST FREE LOANS/ ADVANCES TO SISTER CONCERNS/ P ARTNERS FOR NON-BUSINESS PURPOSES. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 2 (II) DELETING THE ADDITION OF RS. 5,00,000/- MADE B Y THE AO U/S 68 OF THE I.T. ACT , 1961 AS IT COULD NOT PR OVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION . 2.1 APROPOS FIRST GROUND OF THE REVENUE PERTAINS TO DELETION OF ADDITION OF RS. 20,66,262/- MADE BY THE AO U/S 36(1)(III) OF THE ACT, ON THE ALLEGATION THAT INTEREST BEARING FUNDS WERE DIVERTED TO INTERE ST FREE LOANS/ ADVANCES TO SISTER CONCERNS / PARTNERS FOR NON-BUSINESS PURPOSE S. 2.2 BRIEF FACTS OF THE CASE ARE: ASSESSEE IS A FIRM , DURING THE YEAR UNDER CONSIDERATION IT WAS ENGAGED IN COLLECTION OF ROYAL TY ON MINING OF MARBLE STONES AT MAKRANA FOR AND ON BEHALF OF MINING DEPAR TMENT, GOVT. OF RAJASTHAN. THE ASSESSEE PAYS FIXED GUARANTEE AMOUNT OF ROYALTY TO GOVERNMENT AND RECOVERS AS PER RULES OF GOVERNMENT THE ROYALTY AT MINING CHECK POSTS FROM MINE OWNER/DEALERS EXCAVATING MARB LE STONE FROM MINES WHICH ARE REMOVED FROM MINE SITES TO OTHER PLACES. THE DIFFERENCE IN RECOVERED AMOUNT OF ROYALTY AND GUARANTEED AMOUNT P AID TO GOVERNMENT BELONGS TO ASSESSEE. THE ASSESSEE FIRM INCURS VARIO US ADMINISTRATIVE, FINANCE AND OTHER EXPENDITURES IN THE COURSE OF ITS BUSINES S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO WAS OF THE VIEW THAT THERE WAS NO NEED FOR THE ASSESSEE TO BORROW INTEREST FREE FUNDS. TO EXPL AIN IN THIS BEHALF ASSESSEE DEMONSTRATED THAT CONSOLIDATED CASH IN HAND APPEARI NG IN THE BOOKS WAS NOT OF ONE PLACED BUT TO AGGREGATE TO ALL CHECK POST / SITES ON EACH DAY. THE ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 3 SAME CANNOT BE COLLECTED AT ONE PLACE IN A DAY. THE INTEREST FREE LOANS AND ADVANCES WERE ALREADY UTILIZED AND DID NOT CONSTITU TE CASH OR BANK BALANCE. THE FUNDS ARE ALSO REQUIRED FOR MEETING DAY TO DAY EXPENSES AND UNFORESEEN PAYMENTS. THE WORKING AS MADE BY THE A.O. IS UN-PRA CTICABLE FROM BUSINESS POINT OF VIEW. THE CONCLUSION DRAWN BY THE A.O. WAS NOT CORRECT AND AS PER SETTLED PROPOSITION OF LAW IT WAS FOR ASSESSEE TO D ECIDE SUCH MATTER AS PER BUSINESS ACUMEN ASSESSING OFFICER IS NOT SUPPOSED T O DICTATE HOW THE BUSINESS SHOULD HAVE BEEN CARRIED BY ASSESSEE. THE CHART FILED WITH AO DEMONSTRATED THAT DEBITS WERE NOT FROM BANK OVERDRA FTS BUT WERE EITHER OUT OF INTEREST FREE LOANS OR FROM OWN FUND NOT BORROWE D FROM BANK. THE OVERALL BALANCE IN PARTNERS CAPITAL A/C WAS IN CRED IT AT EVERY TIME AS GIVEN IN THE CHART. THUS A.O.S FINDINGS ARE NOT CORRECT DISALLOWANCE HAS BEEN MADE WITHOUT VERIFYING THE NEXUS BETWEEN BANK LOAN AND ADVANCES. THUS DEBITS WERE NOT FROM BANK OVERDRAFTS (EXCEPT A SUM OF RS. 1,25,00,000/- PAID ON 30-11-07 TO SHRI GIRDHARI SINGH TONK ( F OR SALES TAX WHICH IS AN CONCERN OF PARTNER OF THE FIRM AND WAS FOR BUSINESS CONSIDERATION AND FOR PURPOSES OF HIS BUSINESS). FROM THE DETAILS FILED BEFORE THE AO, IT IS CLEAR THAT BANK LOANS DURING THE YEAR WAS REDUCED AND THU S THERE IS NO FRESH BORROWINGS; THIS FACT MAKES THE AOS FINDING ERRONE OUS THAT IN THE YEAR BANK LOANS HAVE BEEN UTILIZED FOR INTEREST FREE ADV ANCES TO PARTNERS/OTHERS. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 4 THE INTEREST FREE ADVANCES RECEIVED DURING THE YEAR FROM SISTER CONCERNS/ASSOCIATES ARE MUCH MORE THAN INTEREST FRE E ADVANCES GIVEN TO THEM. THE DEBIT BALANCE IN SOME PARTNERS ACCOUNT HA S INCREASED HOWEVER AGGREGATE CAPITAL OF ALL PARTNERS REMAINS AS CREDIT BALANCE. IN VIEW OF THESE FACTS, FINDINGS OF THE. A.O. ARE CONTRARY TO FACTS ON RECORD. IN EARLIER YEARS I.E. A.Y. 2006-07 & 2007-08 SIMILAR CLAIM OF INTERE ST PAID WAS ALLOWED IN REGULAR ASSESSMENTS, THEREFORE, THERE IS NO CHANGE IN THE FACTS OF THIS YEAR VIS A VIS EARLIER YEAR. IT IS HELD BY ITAT, JAIPUR BEN CH, JAIPUR, CHANDIGARH BENCH TM (2004) 89 ITD 65 THAT WHERE NO SUCH DISALL OWANCES WERE MADE OUT OF INTEREST EXPENDITURE IN EARLIER YEARS DISALL OWANCES OUT OF INTEREST EXPENDITURE CANNOT BE SUSTAINED IN SUBSEQUENT YEARS . THE SAME LEGAL VIEW HAS BEEN UPHELD IN CASE OF CIT VS. SRIDEV ENTERPRISES (1991) 59 TAXMAN 439. IT WAS R HELD THAT IF NO ADDITION HAS BEEN MADE IN EARLIER YEARS, THEN THE OPENING BALANCE SHOULD NOT BE CONSIDERED IN THE YEA R IN QUESTION. THE INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE AS ON 3 1-3-07 AMOUNTS TO RS. 4,38,27,143/- (RS. 31,00,000 + 4,16,19,566 9,42,4 23), AGAINST WHICH INTEREST FREE LOAN & ADVANCES GIVEN TO SISTER CONCE RN/ASSOCIATES WERE RS. 1,50,35,760/- AND AS ON 31-3-08, INTEREST FREE FUN DS ARE RS. 4,86,16,065/- (RS. 3,62,81,202 + 4,10,95,590 2,87,60,727) AGAIN ST WHICH INTEREST FREE LOAN & ADVANCES GIVEN TO SISTER CONCERN ASSOCIATE W ERE RS. 3,51,14,583/-. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 5 THUS IT IS EVIDENT THAT ASSESSEE FIRM ALWAYS HAD MO RE INTEREST FREE CAPITAL / ADVANCES THAN INTEREST FREE LOANS/ADVANCES GIVEN. I N CIT VS. RADICO KHAITAN LIMITED (2005) 274 ITR 354 (ALL.) IT WAS HELD THAT WHERE THERE ARE SUFFICIENT FUNDS OTHER THAN BORROWED MONEY AVAILABLE WITH ASSE SSEE IN THE FORM OF CAPITAL AND INTEREST FREE ADVANCES FOR DIVERTING SU MS TO SISTER CONCERNS/ASSOCIATES IT COULD NOT BE HELD THAT THE L OANS ADVANCED TO THE SISTER CONCERNS CAME OUT OF THE BORROWED MONEY. THE CONCER NS / PERSONS FROM WHICH INTEREST FREE LOANS RECEIVED AND CONCERNS/PER SONS TO WHOM ALLEGED INTEREST FREE LOANS ARE GIVEN ARE INTER SE GROUP/ASSOCIATE/SISTER CONCERNS AND, THEREFORE NEITHER INTEREST WAS PAID NOR WAS CHARGED . M/S GIRDHARI SINGH TONK SALES TAX AND GIRDHARI SINGH J.V. SIKAR ARE CO NCERNS OF GIRDHARI SINGH PARTNER OF THE FIRM AND HAVING SALE TAX COL LECTION CONTRACTS AT CHECK POSTS ON BEHALF OF GOVT. M/S AMBIKA PETROLEUM IS CO NCERN IN WHICH PARTNERS OF FIRM HAVE BUSINESS INTEREST. M/S RAMSWA ROOP CHOTIA MAKRANA IS ALSO A FIRM HAVING ROYALTY COLLECTION CONTRACTOR OF MAKRANA MINES AND THUS ASSOCIATE BUSINESS FIRM. SHRI SHAILENDRA SINGH IS P ARTNER OF M/S TIRUPATI ENTERPRISES, WHO IS A PARTNER OF THE FIRM REPRESENT ED BY SHRI SHAILENDRA SINGH. THE ADVANCE TO SHRI DILIP SINGH IS OUT OF IN TEREST FREE LOAN GIVEN FROM THE INTEREST FREE LOAN RECEIVED BY THE FIRM. T HESE ADVANCES HAVE BEEN GIVEN TO THOSE CONCERNS FOR MEETING URGENT BUSINESS EXPENSES LIKE ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 6 INSTALLMENTS OF GOVT. DUES ETC. THUS THE ADVANCES H AVE BEEN UTILIZED FOR BUSINESS PURPOSES ONLY BY THOSE FIRMS. THE A.O. IS, THEREFORE, WRONGLY HELD THAT THESE ADVANCES ARE FOR NON BUSINESS PURPOSES. RELIANCE IS PLACED IN THE CASE OF S.A. BUILDERS VS. CIT (2007) 288 ITR 1 (SC) WHEREIN THE HON'BLE SUPREME COURT HELD AS UNDER:- THE DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLICABLE TO SECTION 36 (1) (III) BECAUSE IN SECTI ON 37 ALSO THE EXPRESSION USED IS FOR THE PURPOSE OF BUSINESS. I T HAS BEEN CONSISTENTLY HELD IN DECISIONS RELATING TO SECTION 37 THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS INCLUDES EX PENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. THE EXPRESSION COMMERCIAL EXPEDIENCY IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LE GAL OBLIGATION, YET IT IS ALLOWABLE AS A BUSINESS EXPEN DITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. T HE RATIO OF THE SUPREME COURT DECISION, IN MADHAV PRASAD JAT IA V. CIT AIR 1979 SC 1291 IS THAT THE BORROWED FUND ADVANCED TO A THIRD PARTY SHOULD BE FOR COMMERCIAL EXPEDIENCY, IF INTEREST THEREON IS SOUGHT TO BE ALLOWED UNDER SECTION 36(I) (III). THE HON'BLE COURT HELD THAT IF MONEY IS ADVANCED T O SISTER CONCERN FOR COMMERCIAL EXPEDIENCY OR DUE TO DEEP INTEREST IN SI STER CONCERN AND MONEY ADVANCED IS USED FOR BUSINESS PURPOSES BY SISTER CO NCERN THE INTEREST PAID BY CONCERN WHO ADVANCED LOAN IS ALLOWABLE DEDUCTION . THUS IN THIS CASE THE HON'BLE SUPREME COURT HELD THAT ADVANCES TO SISTER CONCERNS ON COMMERCIAL EXPEDIENCY FOR BUSINESS PURPOSES EVEN OU T OF BORROWINGS, THE ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 7 INTEREST PAID ON BORROWING IS ALLOWABLE. IN ANY CAS E, BEFORE DISALLOWING INTEREST EXPENDITURE ON BORROWED MONEY ALLEGED TO H AVE BEEN ADVANCED TO SISTER CONCERNS, WHAT IS REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER IS THE EXTENT/QUANTUM OF BENEFIT DERIVED FROM BORROWED FUNDS ADVANCED TO SISTER CONCERNS AS HELD IN CIT VS. MOTOR GENERAL FI NANCE LTD. [2005] 272 ITR 550 (DELHI). MOREOVER, CONFIRMING RATIONALE OF THE OBSERVATION BY APEX COURT (SUPRA) IT IS EVIDENT THAT ONCE ESTABLISHED ABOUT NEXUS BE TWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WH ICH NEED NOT NECESSARILY BE ASSESSEES BUSINESS), EXPENSES SHOULD NOT BE DIS ALLOWED IN CONSIDERING DEDUCTIBILITY OF GENUINE EXPENSES DURING THE COURSE OF CARRYING OUT ITS BUSINESS. THUS INTEREST FREE ADVANCES MADE TO SISTE R CONCERNS ARE MUCH LESS TO THE CAPITAL OF ASSESSEE AND INTEREST FREE LOANS RECEIVED AND SO IT CANNOT BE SAID THAT LOAN ADVANCED TO THE SISTER CONCERN IS FI NANCED OUT OF BORROWINGS. RELIANCE IS PLACED ON JUDGEMENT IN CASE OF CIT VS. RADICO KHAITAN LTD. [2005] 274 ITR 354 (ALLAHABAD). IT CANNOT BE HELD T HAT FUNDS TO THE EXTENT DIVERTED TO SISTER CONCERNS OR OTHER PERSONS FREE O F INTEREST ARE REQUIRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS AND LO AN TO THAT EXTENT IS NECESSARY TO BE RAISED. . IN ALL SUCH CASES WHERE MIXED FUNDS ARE USED FOR BOTH BUSINESS AND OTHER THAN BUSINESS PURPOSES, THE RE IS NO PRESUMPTION THAT MONEYS USED FOR OTHER PURPOSES CAME OUT OF BOR ROWED FUNDS. RELIANCE ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 8 IS PLACED ON THE JUDGEMENT OF BOMBAY HIGH COURT IN CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 178 TAXMAN 1 35 (BOM. ) . RELYING ON THE SAID JUDGEMENT THE MUMBAI BENCH OF ITAT IN C ASE OF ALIMONA INVESTMENT & MARKETING LTD . HELD THAT IF BOTH INTEREST FREE AND INTEREST BEARING FUNDS ARE AVAILABLE WITH ASSESSEE THEN THE PRESUMPTION WOULD BE THAT INTEREST FREE INVESTMENT IS OUT OF INTEREST FR EE FUNDS OR CAPITAL. THE A.O. WAS THUS WRONG IN DISALLOWING THE CLAIM OF INT EREST EXPENSES AMOUNTING TO RS. 20,66,262/-. 2.3 THE LD. CIT (A) AFTER EXAMINING ELABORATELY THE FACTS OF THE CASE AND LAW ON CONSIDERATION OF FACTS, CIRCUMSTANCES AND JU DICIAL PRECEDENTS RIGHTLY DELETED THE SAID DISALLOWANCE. THE ORDER OF LD. CIT (A) SUFFERS FROM NO INFIRMITY AND DESERVES TO BE CONFIRMED. 3.1 APROPOS SECOND REVENUE GROUND IT RELATES TO DE LETION OF ADDITION OF RS. 5.00 LACS U/S 68 FOR ALLEGED UNEXPLAINED CASH C REDIT. 3.2 BRIEF FACTS ARE: ASSESSEE QUA THESE LOANS FILED COMPLETE CONFIRMATION GIVING HIS PAN. THE A.O. ISSUED SUMMON U/S 131 THE SAME WAS SERVED ON PARTY WHO RESPONDED BUT NOT COMPLIED THE REQUIREMEN TS MADE IN THE SUMMONS. ASSESSEE ON ITS PART, DISCHARGED ITS ONUS AS IDENTITY OF PAYEE, GENUINENESS OF THE TRANSACTIONS CHEQUE AND CREDITWO RTHINESS IS NOT IN DOUBT. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 9 THE NON-PRODUCTION OF CREDITORS BEFORE A.O. IS BEYO ND THE CONTROL OF ASSESSE. THE A.O. ALSO DID NOT BRING PROCESS OF SU MMON TO A LOGICAL CONCLUSION AS HELD BY HONBLE SUPREME COURT IN ORIS SA CORPORATION PVT LTD. 159 ITR 78. THUS AO FAILED TO EXERCISE POWERS VESTED IN HIM TO ENFORCE ATTENDANCE OR PENALIZE THE DELINQUENTS. WH EN ASESSEE HAS ADDUCED SUFFICIENT EVIDENCE TO DISCHARGE ITS ONUS, NONAPPEA RANCE OF CANNOT BE A REASON TO DISCARD THE UNREFUTABLE EVIDENCE. I T ACT DO NOT PRESCRIBE ANY MANDATORY CONDITION FOR PHYSICAL ATTENDANCE OF CRED ITOR U/S 68. THE DISCHARGE OF PRIMARY ONUS IS TO BE ASCERTAINED ON T HE BASIS EVIDENCE PRODUCED BY ASESSEE. IN CASE OF ARAVALI TRADING CO. VS. I.T.O. (2008) 220 CTR (RAJ.) 622, HON'BLE RAJASTHAN HIGH COURT HELD THAT: NEITHER THE PROVISIONS OF S. 68 NOR ON GENERAL PRINCIPLE, IT CAN BE SAID THAT ONCE THE EXISTENCE O F PERSONS IN WHOSE NAME CREDITS ARE FOUND IN THE BOOKS OF THE AS SESSEE IS PROVED AND SUCH PERSONS OWN SUCH CREDITS WITH THE A SSESSEE STILL THE ASSESSEE IS TO FURTHER PROVE THE SOURCE F ROM WHICH THE CREDITORS COULD HAVE ACQUIRED MONEY TO BE DEPOSITED WITH HIM. THE FACT THAT THE DEPOSITORS EXPLANATION ABOUT THE SOURCES WHERE FROM THEY ACQUIRED THE MONEY IS NOT ACCEPTABL E TO THE AO, IT CANNOT BE PRESUMED THAT THE DEPOSITS MADE BY THE SUCH CREDITORS IS THE MONEY OF THE ASSESSEE HIMSELF. THE RE IS NO WARRANT FOR SUCH PRESUMPTION. IN SUCH EVENT IF THE CREDITORS EXPLANATION IS FOUND TO BE NOT ACCEPTABLE ABOUT SUC H DEPOSITS, THE INVESTMENT OWNED BY SUCH PERSONS MAY BE SUBJECT ED TO THE PROCEEDINGS FOR INCLUSION OF SUCH INVESTMENT AS THE IR INCOME FROM UNDISCLOSED SOURCES OR IF THEY HAVE BEEN FOUND BENAMI, THE REAL OWNER CAN BE BROUGHT TO THE TAX NET. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 10 IN VIEW OF THESE FACTS AND POSITION OF LAW THE ADDI TION OF RS. 5,00,000/- U/S 68 OF I. T. ACT, 61 MADE BY THE A.O. WAS WRONG AND BAD IN LAW. THE LD. CIT (A) AFTER EXAMINING ALL THE FACTS OF THE CASE A ND POSITION OF LAW HAD RIGHTLY DELETED THE ADDITION. THE ORDER OF LD CIT ( A) IS THUS CORRECT IN LAW WHICH DESERVES TO BE CONFIRMED. 3.3 THE LD. DR SUPPORTED THE ORDER OF AO. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, LD. CIT(A) DELETED BOTH THE AD DITIONS BY FOLLOWING OBSERVATIONS:- 5. I HAVE CAREFULLY PERUSED THE ORDER OF THE AO A ND THE SUBMISSIONS OF THE AR. I HAVE PERUSED THE CHAR T OF ALL THE TRANSACTIONS OF DEBITS IN PARTNERS ACCOUNT AND FIN D THAT THE SUBMISSION OF THE AR THAT THE DEBITS WERE NOT FROM THE BANK OVERDRAFTS BUT OUT OF THE INTEREST FREE LOANS OR FR OM OWN FUNDS NOT BORROWED FROM BANKS IS CORRECT. THE AR TO THIS EXTENT HAS BEEN ABLE TO ESTABLISH THAT THERE WAS NOT NEXUS BET WEEN BANK LOANS AND ADVANCES. 5.1 SIMILARLY, ON VERIFICATION OF THE CHART OF TRANSACTIONS OF DEBITS IN THE CASE OF SISTER CONCER NS ASSOCIATE PERSONS IT IS SEEN THAT DEBITS WERE NOT FROM THE BA NK OVERDRAFTS EXCEPT FOR RS.1.25 CRORES PAID ON 30.11.2007 TO GIR DHARI SINGH. THUS, ONCE AGAIN THERE WAS NO NEXUS BETWEEN BANK LOANS AND ADVANCES MADE BY THE FIRM TO SISTER CONCE RNS AND ASSOCIATE PERSONS. 5.2 FURTHERMORE, AS PER THE CHART GIVEN IT IS SEEN THAT THE INTEREST FREE ADVANCES RECEIVED FROM SISTER CON CERNS ARE MORE THAN INTEREST FREE ADVANCES GIVEN TO THEM. I A LSO FIND MERIT IN THE SUBMISSION OF THE LD. AR THAT ALL THES E CONCERNS ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 11 TO WHOM LOANS WERE ADVANCED OR FROM WHOM LOANS WERE RECEIVED WERE INTER CONNECTED AND THE PARTNERS OF F IRMS HAD BUSINESS INTEREST IN THEM. THE REGULAR EXCHANGE OF MONEY APPEARS TO HAVE BEEN MADE FOR COMMERCIAL EXPEDIENCY AND THEREFORE, WAS FOR BUSINESS PURPOSE. THEREFORE, THE MATTER IS COVERED BY THE DECISION OF THE HON'BLE APEX COURT I N THE CASE OF S.A. BUILDERS VS. CIT (2007), 288 ITR 1 (SC) IN FAVOUR OF THE ASSESSEE . 5.3 IN VIEW OF THE ABOVE FINDINGS, I DO NOT UPHOLD THE IMPUGNED DISALLOWANCE OF INTEREST EXPENSES OF RS. 2 0,66,262/- MADE BY THE AO U/S 36(1)(III) AND THE AMOUNT IS DIR ECTED TO BE DELETED. FIRST GROUND OF APPEAL IS DECIDED IN FAVOU R OF THE APPELLANT. 6. SECOND GROUND OF APPEAL STATES THAT ON THE FCTS AND CIRCUMSTANCES OF THE CASE THE LD. ASSESSING OFF ICER IS WRONG AND HAS ERRED IN LAW IN MAKING ADDITION OF RS . 5,00,000/- TO THE INCOME OF THE APPELLANT U/S 68 OF THE I.T. ACT ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS IN THE NAME OF SHRI SHIV PAL SINGH. 6.1 DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICE D THAT THE ASSESSEE RECEIVED RS.5 LACS AS LOAN FROM S HRI SHIV PAL SINGH ON 18.10.2007. SUMMONS WERE ISSUED AND SERVED ON SHIV PAL SINGH U/S 131 OF THE I.T. ACT. IN RESPONSE , SHRI SHIV PAL SINGH FILLED A LETTER THAT HE WOULD BE OUT OF J AIPUR ON THE SAID DATE. THEREAFTER, THE AO ASKED THE ASSESSEE FI RM TO PRODUCE SHIV PAL SINGH ALONGWITH DOCUMENTS/DETAILS AS REQUIRED TO HAVE BEEN FURNISHED AS PER SUMMONS BY S HIV PAL SINGH. THE ASSESSEE WAS UNABLE TO DO SO AND THE AO ADDED THE AMOUNT OF RS.5 LACS U/S 68 TO THE INCOME OF THE ASS ESSEE. 6.2 THE AR OF THE ASSESSEE FILED A COPY OF THE CONFIRMATION OF ACCOUNTS OF SHIV PAL SINGH IN THE B OOKS OF THE ASSESSEE ALONG WITH HIS I.T. PAN NUMBER. HE ALSO SU BMITTED THAT IDENTITY OF THE CREDITOR HAD BEEN ESTABLISHED SINCE THE SUMMONS WERE SERVED ON HIM AND HE HAD RESPONDED TO THE SAID SUMMONS VIDE HIS LETTER. THE TRANSACTION WAS M ADE BY CHEQUE AND SHRI SHIV PAL SINGH ALSO HAS A PAN. THE NON ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 12 PRODUCTION OF CREDITOR IS BEYOND THE CONTROL OF THE ASSESSEE. HE ALSO RELIED ON THE FINDING OF THE HON'BLE RAJAS THAN HIGH COURT IN THE CASE OF ARAVALI TRADING CO. V/S ITO (2 008) 220 CTR (RAJ). 6.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AN D THE SUBMISSIONS OF THE AR. I CONCUR WITH THE SUBMI SSIONS OF THE AR THAT THE ASSESSEE WAS ABLE TO PROVE THE IDE NTITY OF THE CREDITOR MORE SO BECAUSE THE SUMMONS WERE ISSUED AN D SERVED ON HIM. HE RESPONDED TO THE SUMMONS VIDE A LETTER. THE ONUS WAS ON THE DEPARTMENT TO FURTHER CONDUCT ENQUIRIES TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS DISCHARGED ITS ONUS AND THE AO MAY CONSIDER TAKING FURTHER ACTION IN THE CA SE OF THE CREDITOR IN THE CASE AS PER THE FINDINGS OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF ARAVALI TRADING CO. V/S I TO (2008) 220 (RAJ.). 6.4 THEREFORE, THE ADDITION U/S 68 OF RS.5 LACS MAD E TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF U NEXPLAINED LOAN IS DIRECTED TO BE DELETED. SECOND GROUND OF AP PEAL IS DECIDED IN FAVOUR OF THE APPELLANT. 4.1. APROPOS THE FIRST ISSUE I.E. INTEREST FREE ADV ANCES GIVEN TO SISTER CONCERNS, LD CIT(A ) AFTER DUE VERIFICATION OF FACT S, FIGURES AND CHART CAME TO FINDING OF FACTS THAT:- I. ADVANCES WERE OUT OF OWN FUNDS OF THE ASSESSEE AN D THERE IS NO NEXUS BETWEEN BANK BORROWINGS AND THESE ADVANCES. II. THE BANK BORROWING TO THE EXTENT OF RS. 1.25 CRORES WERE ADVANCED TO SHRI GIRDHARI SINGH WHICH WAS ALSO FOR BUSINESS NECESSITY. THUS HONBLE SUPREME COURT JUDGMENT IN T HE CASE OF S A BUILDERS WAS SQUARELY APPLICABLE. ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 13 III. FROM PERUSAL OF FACTS IT WAS CLEAR THAT IN FACT BEN EFITS OF GIVE AND TAKE OF FUNDS BETWEEN ASSESSEE AND SISTERS CON CERNS WAS AVAILED MORE BY THE ASSESSEE AS COMPARED TO SISTER CONCERNS. THUS IN REAL TERMS IT WAS A REVERSE CASE AS AT THE END OF YEAR MORE BENEFITS ACCRUED TO THE ASSESSEE AND NOT THE S ISTER CONCERNS. IV. BESIDES ALL THE SISTER CONCERNS WERE COMMERCIALLY INTERCONNECTED WITH THE ASSESSEE AND S A BUILDERS JUDGMENT APPLIES SQUARELY. 4.2 THE LD. DR COULD NOT ADVANCE FACTUAL ARGUMENTS AS TO HOW THESE CLEAR FACTUAL FINDINGS GIVEN BY LD. CIT(A) CAN BE ASSAILED. IN VIEW THEREOF WE HAVE NO HESITATION TO HOLD THAT THE RELIEF HAS B EEN AWARDED BY LD CIT(A) AFTER DUE VERIFICATION OF RECORD, FACTS, CIRCUMSTAN CES AND JUDICIAL PRECEDENTS. IN OUR CONSIDERED VIEW THEY ARE CORRECT FINDINGS AN D NO INTERFERENCE IS CALLED FOR. THUS WE UPHOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS DISMISSED. 5.1 APROPOS SECOND ISSUE LD. CIT(A) AWARDED THE REL IEF BY OBSERVING THAT: I. THOUGH SHRI SHIV PAL SINGH DID NOT APPEAR IN RESPON SE TO SUMMONS A LETTER WAS FILED BY HIM EXPRESSING HIS BE ING OUT OF JAIPUR. THUS THE HIS IDENTITY IS ESTABLISHED, THERE IS NO UPFRONT DENIAL ON HIS PART. II. ASSESSEE PRODUCED RELEVANT EVIDENCE TO ESTABLISH TH E INGREDIENTS OF DISCHARGE OF PRIMARY ONUS IN TERMS O F SEC. 68. ACCORDING TO LD. CIT(A) FOUND IT TO BE PROPER DISCH ARGE OF ITA NO. 767/JP/2011 DCIT , CIRCLE- 2, JAIPUR VS. SHRI VINOD GARG MAKRANA, JAIP UR 14 ONUS. WHILE DOING SO RELIANCE HAS BEEN PLACED ON JU RISDICTIONAL HIGH COURT IN ARAVALI TRADING CO. III. NON-ATTENDANCE OF WITNESS WHO IS ACKNOWLEDGED TO BE EXISTING CANNOT MILITATE AGAINST ASSESSEE. BESIDES THERE WAS SUFFICIENT EVIDENCE TO ESTABLISH DISCHARGE OF ONUS. 5.2 THE LD. DR WAS ASKED AS TO HOW THESE FINDINGS O F CIT(A) ARE INFIRM OR INCONSISTENCE. NO SATISFACTORY PLEADINGS COULD B E ADVANCED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT ORDER OF LD. CIT(A) IS PROPER AND PASSED ON REASONABLE CONSIDERATION OF FACTS AND LAW. WE UPHOLD THE SAME AND DISMISS THE REVENUE GROUND. 6.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31- 10-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 31 ST OCT. 2014 *MISHRA COPY FORWARDED TO:- 1.THE DCIT, CIRCLE- 2, JAIPUR 2. M/S. VINOD GARG MAKRANA, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 767/JP/2011) AR ITAT, JAIPUR