Ram Jagannath Singare, Jalna V. Income-tax Officer,

ITA 790/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8548 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-06-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 21-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Agreed addition; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO. 790/PUN/2016 / ASSESSMENT YEAR : 2011-12 RAM JAGANNATH SINGARE, PROP. GANESH REFINERY AND BALAJI OIL MILL, PLOT NO. A-9/6/2, ADD. MIDC, JALNA 431 203 PAN : AUWPS7900H ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD-1, JALNA. / RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI PANKAJ GARG / DATE OF HEARING : 02.01.2019 / DATE OF PRONOUNCEMENT : 03.01.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM TH E ORDER OF LD. CIT(APPEALS)-1, AURANGABAD DATED 08.02.2016 FOR ASSESSME NT YEAR 2011-12 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. THE HON'BLE COMMISSIONER (APPEAL) HAS ERRED IN C ONFIRMATION ALLEGED BOGUS PURCHASES RS.17,41,834/-. APPELLANT PRAYS TO CANCEL THE SAME. 2) HON'BLE COMMISSIONER (APPEAL) HAS ERRED IN DISAL LOWANCE COMMISSION OF RS.15,12,700/-. THE APPELLANT PRAYS TO CANCEL WHOLE ADDITION OF RS.15,12,700/- 2 ITA NO.790 /PUN/2016 A.Y.2011-12 THE APPELLANT PRAYS FOR DELETION OF WHOLE DISALLOWA NCE /ADDITION OF EXPENSES MADE BY ASSESSING OFFICER WHICH IS ENHANCE D BY THE HON'BLE COMMISSIONER (APPEALS). PARTICULARS TOTAL DR. DISALLOWED BY AO DISALLOWED BY CIT(A) COMMISSION 15,12,700/- 3,78,175/- 15,12,700/- FREIGHT ON COTTON SEEDS 4,63,860/- 92,772/- 4,63,860/- HAMALI 3,43,460/- 68,692/- 3,43,460/- LABOUR EXP. 4,82,820/- 96,564/- 4,82,820/- FIRE WOOD 3,30,625/- 66125/- 330625/- URD BARDAN 1161122/- 2,32,424/- 11,61,122/- 5,56,377/- 42,94,587/- 3) COMMISSIONER (APPEALS) HAS ERRED IN CONFIRMING D ISALLOWANCE OF INTEREST OF RS.13,98,527/- ALLEGED AS INTEREST ON INTEREST F REE ADVANCES TO SISTER CONCERNS-WHEN APPELLANT HAS CAPITAL ACCOUNT AND INT EREST FREE LOANS ACCEPTED FROM SISTER CONCERNS. APPELLANT PRAY TO AL LOW THE SAME. 4) APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF. 5) APPELLANT PRAYS FOR CANCELLATION OF INTEREST CHA RGED U/S.234B. 6) APPELLANT PRAYS FOR ADD, AMEND, ALTER, MODIFY AN D/OR WITHDRAW THE GROUNDS AS OCCASION MAY DEMAND. 2. AT THE TIME OF HEARING, LD. AR OF THE ASSESSEE FILED WRIT TEN SUBMISSIONS BEFORE THE BENCH AND PRAYED THAT THE INSTANT CASE MAY BE DECIDED ON THE BASIS OF THE WRITTEN SUBMISSIONS. HOWEVER, WE ASKED THE LD. AR OF THE ASSESSEE TO PLACE ARGUMENT WHICH HE REFUSED TO DO SO AND INSISTED TH AT THE WRITTEN SUBMISSIONS MAY KINDLY BE CONSIDERED WHILE DECIDING THE APP EAL OF THE ASSESSEE. ACCORDINGLY, WE HAVE TAKEN WRITTEN SUBMISSIONS ON RECORD WHILE DECIDING THE GROUNDS OF APPEAL. 3. WITH REGARD TO THE FIRST GROUND OF APPEAL, THE FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXTRACTION OF OIL FROM COTTON SEED AND REFINING THE WASH OIL. THE ASSESSEE IS RUNNING TWO PROPRIETARY CONCERN S UNDER THE NAME AND STYLE AS SHREE GANESH REFINERY , JALNA AND M/S. BALAJI OIL MILLS, JALNA WHICH IS MAINLY ENGAGED IN MANUFACTURING OF ALL TYPES OF OIL AND OIL CAKES. THE TOTAL TURNOVER OF THE ASSESSEE, DURING THE YEAR OF ACCOU NT EXCEEDS RS.60 LAKHS. 3 ITA NO.790 /PUN/2016 A.Y.2011-12 THEREFORE, AS PER PROVISIONS OF SECTION 44AB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), ASSESSEE HAS GOT AUDITED HIS BOOKS OF ACCOUNTS AND FILED ALONG WITH THE RETURN OF INCOME AUDITE D STATEMENT OF ACCOUNTS AND AUDIT REPORT IN FORM NO.3CB AND 3CD. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS R EQUESTED TO THE ASSESSEE TO FURNISH DAY TO DAY PURCHASE, SALE AND CLOSING STOCK IN TERMS OF QUALITY, QUANTITY RATE NARRATING THE NAME AND ADDRESSED OF THE PARTIES WITH WHOM TRANSACTIONS WERE MADE. ACCORDINGLY, THE ASSESSEE HAD FURNISHED THE SAID DETAILS. THE AFORESAID DETAILS WERE VERIFIED WITH REFERENCE TO THE BOOKS OF ACCOUNTS AND PURCHASE AND SALES BILLS OF THE ASSESSEE. ON VERIFICATION OF THE SAME, IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN PURCH ASE OF COTTON SEED OIL CAKE TO THE EXTENT OF 800 QUINTALS AT THE RATE OF RS.110 0/- AND RS.1105/- PER QUINTALS FROM M/S. SAI OIL INDUSTRIES, JALNA WHICH IS A SISTER C ONCERN OF THE ASSESSEE TOTALING TO RS.11,02,000/-. SIMILARLY, THE ASSESSEE HAS ALSO SHOWN TO HAVE PURCHASED SUNFLOWER OIL FROM SAI OIL INDUSTRIES JALNA FO R RS.6,39,837/-. THE TOTAL PURCHASES SHOWN IN RESPECT OF COTTON SEEDS O IL, CAKE AND SUNFLOWER OIL FROM THE SISTER CONCERNS DURING THE YEAR UNDER CONSID ERATION AT RS.17,41,834/-. THE ASSESSEE WAS ASKED TO FURNISH THE PUR CHASE BILLS AS VERIFICATION OF THE ASSESSEES PURCHASE. IN RESPONSE, IT WA S STATED THAT ABSOLUTELY NO BILLS FOR SUCH PURCHASES ARE AVAILABLE WITH TH E ASSESSEE. THE ASSESSING OFFICER ON VERIFICATION FOUND THAT THE ASSESSEE WA S PURCHASING THE GOODS FROM THE SISTER CONCERN ON A HIGHER RATE AND SELLIN G THE SAME ON LOWER RATES. ON FURTHER VERIFICATION OF THE BANK ACCOUNTS, IT WAS OBSERVED THAT THE ASSESSEE HAS MADE SUBSTANTIAL CASH DEPOSITS IN TO THE B ANK ACCOUNT OUT OF THE CORRESPONDING CASH SALES FOR WHICH NO CORRESPONDING PURC HASE ARE AVAILABLE WITH THE ASSESSEE ALONG WITH ANY EVIDENCES. THE ASSESSIN G OFFICER CONCLUDED THAT THE AFORESAID PURCHASES ARE TOTALLY BOGUS, THEREFOR E, IN ABSENCE OF ANY IOTA 4 ITA NO.790 /PUN/2016 A.Y.2011-12 OF EVIDENCES IN THE FORM OF PURCHASE BILL, BOOKS OF ACCOUNT S OF SISTER CONCERN INCLUDING CORRESPONDING PURCHASE SALE DETAILS ETC. AND THER EFORE, AN AMOUNT OF RS.17,41,834/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. DURING FIRST APPELLATE PROCEEDINGS, THE CIT(APPEALS) ANA LYZED THE FACTS AND CIRCUMSTANCES AS APPEARING IN HIS ORDER AND CONFIRME D THE ENTIRE AMOUNT OF RS.17,41,834/- UNDER DIFFERENT HEADS VIZ. (I) UNEXPLAINED CAS H DEPOSIT U/S.68 OF THE ACT AND (II) BOGUS LOSS U/S.37 OF THE ACT. 6. THE ASSESSEE IN HIS WRITTEN SUBMISSION HAS STATED THA T THE SUPPLIER IS LOCAL SUPPLIER HAVING REGISTERED UNDER THE MVAT. THE ASSES SEE HAS PRODUCED BEFORE THE ASSESSING OFFICER AND CIT(A), PURCHASE BILLS, EXTRAC T OF ACCOUNT, QUANTITY STATEMENT AND NEXUS WITH SALE BILLS ETC. IT IS T HE CONTENTION OF THE ASSESSEE IN THE WRITTEN SUBMISSIONS THAT THE ASSESSING O FFICER DISALLOWED FOR THE REASON THAT NO DELIVERY CHALLAN AND TRANSPORT REC EIPT WERE GIVEN. THE ASSESSING OFFICER DOUBTED SALES AS IF CASH SALES FOR LESS THA N PURCHASE PRICE FOR NOT PRODUCING THE PROOF OF PAYMENT TO SUPPLIER. 7. WE HAVE PERUSED THE CASE RECORD AND WRITTEN SUBMIS SIONS FILED BY THE ASSESSEE. TAKING INTO CONSIDERATION OF ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AND PROPER TO UPHOLD THE DISALLOWANCE @20% ON THE SAID PURCHASES AND ASSESSING OFFICER IS DIRECTED TO PROVIDE APPEAL EFFECT AC CORDINGLY. HENCE, GROUND NO.1 OF THE APPEAL IS PARTLY ALLOWED. 8. WITH REGARD TO THE SECOND GROUND, IT IS THE DISALLOWANC E OF COMMISSION PAYMENT OF RS.15,12,700/-. THE FACTS WITH REGARD TO THE ISS UE IS THAT THE ASSESSEE SHOWN TO HAVE PAID DALALI TO SHRI SHYAM SHINGARE AND SHRI MONOHAR SINGARE AT RS.7,10,400/- AND RS.8,02,300/- TOTALING TO RS.15 ,12,700/- RESPECTIVELY ON 31.03.2011 BY PASSING JOURNAL ENTRY IN TH E BOOKS OF ACCOUNTS. 5 ITA NO.790 /PUN/2016 A.Y.2011-12 BUT NO DETAILS AND THE BASIS OF SUCH DALALI IS MAINTAINED OR PRODUCED FOR VERIFICATION. THEREFORE, THE ASSESSING OFFICER ASKED THE ASSES SEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED. IT WAS CONTENT ED THAT ACTUALLY THESE PERSONS ARE DOING THE BUSINESS OF DALALI AND SELLING THE GOO DS INTO THE MARKET AS IT WAS DIFFICULT TO THE ASSESSEE TO HANDLE ENTIRE BUSINE SS. THE RESPECTIVE PERSONS HAD SHOWN THE INCOME IN THEIR RETURNS AND PAID THE TAXES. THE CONTENTIONS PUT FORTH BY THE ASSESSEE DID NOT ACCEPT AND 25% OF THE TOTAL DALALI PAID IS TREATED AS EXCESSIVE AND THE ADDED TO THE TOTAL INCOME OF THE A SSESSEE. 9. DURING FIRST APPELLATE PROCEEDINGS, THE LD. CIT(A) ON THE ISSUE HAS OBSERVED THAT THE COMMISSION WAS CLAIMED BY WAY OF JOURN AL ENTRY AT THE END OF THE YEAR. THE LD. CIT(A) WAS OF THE VIEW THAT IF THE AGEN T HAD REALLY ACTED ON BEHALF OF THE APPELLANT THEN DALALI WOULD HAVE BEEN PAID MO NTHLY OR ON APPROPRIATE INTERVALS. THE AMOUNT OF COMMISSION REMAINED PAYABLE AS ON 31.03.2011. IT WAS IN THE NATURE OF AN AFTERTHOUGHT AS T DS HAS BEEN DEDUCTED AND PAID ON 14.11.2011 AFTER THE CLOSE OF THE YEAR. SHRI MANOHAR JAGANNATH SINGARE HAD FILED HIS RETURN BELATEDLY ON 30.03.2012 TO INCO RPORATE SUCH INCOME AFTER CLAIMING VARIOUS EXPENSES. IN THESE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) DISALLOWED THE ENTIRE AMOUNT OF RS.15,12,700/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 10. WE HAVE PERUSED THE CASE RECORD AND THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. WE FIND, IT IS NOT DISPUTED BY THE REVENUE THAT BROKER OR SO CALLED DALAL, THEY HAVE SHOWN INCOME IN THEIR RETURN AND THAT T HE ASSESSEE HAS ALSO DEDUCTED TDS ON SUCH PAYMENTS. TAKING INTO CONSIDERATION OF ENTIRE FACTS AND CIRCUMSTANCES, THE TOTAL DISALLOWANCE OF RS.15,12,700/- IS UNJ USTIFIED AND THEREFORE, WE RESTRICT THE DISALLOWANCE @20% OF THE TOTAL EXPENSES. HENCE, GROUND NO.2 OF THE APPEAL IS PARTLY ALLOWED . 6 ITA NO.790 /PUN/2016 A.Y.2011-12 11. THAT WITH REGARD TO THE THIRD GROUND OF APPEAL, THE VIEW TAKEN BY THE LD. CIT(A) IS AS UNDER: 13. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT. THE AO NOTICED THAT THE ASSESSEE HAS TAKEN SUBSTANTIAL INTEREST BE ARING FUNDS FROM THE BANKS AND DEBITED INTEREST OF RS.24,88,205/- TO THE PROFIT AND LOSS ACCOUNT. THUS, ON ONE HAND, INTEREST WAS PAID ON THE LOANS T AKEN FROM THE BANKS AND ON THE OTHER HAND, NO INTEREST WAS CHARGED ON LOANS GIVEN TO THE SISTER CONCERNS NAMELY, J.J. OIL INDUSTRIES PVT. LTD. MONA OIL MILLS, NILESH OILS INDUSTRIES & SHREE BALAJI UDYOG. ON FURTHER VERIFICATION OF RECO RDS, IT WAS NOTICED THAT THE ASSESSEE HAD TAKEN PETTY AMOUNTS F ROM THE SISTER CONCERNS OCCASIONALLY BUT GIVEN SUBSTANTIAL AMOUNTS TO OTHER SISTER CONCERNS. THOUGH THEY WERE CATEGORIZED AS SUNDRY DEBTORS BUT IN FACT THEY WERE NOT THE TRADE DEBTORS. ACCORDINGLY THE AR OF THE ASSESSEE WAS CON FRONTED WITH THESE FACTS AND REQUESTED TO EXPLAIN AS TO WHY INTEREST SHOULD NOT BE DISALLOWED TREATING THE ADVANCES FOR NON-BUSINESS PURPOSES. ACCORDINGLY , THE AR OF THE ASSESSEE HAD FURNISHED THESE DETAILS BY CALCULATING THE AMOU NT OF INTEREST ON PRODUCT BASIS WHICH WORKED OUT TO RS.13,98,527/- AND ALSO A GREED FOR THE SAID DISALLOWANCE. HOWEVER THE AFORESAID ISSUE WAS CONTE STED IN THE APPEAL BY THE APPELLANT. IT WAS ALLEGED THAT THE AR OF THE AP PELLANT HAD NOT AGREED FOR THE ADDITION. ACCORDINGLY THE UNDERSIGNED EXAMINED THE ASSESSMENT RECORDS AND IT CAME TO LIGHT THAT THE AR OF THE APPELLANT HAD AGREED FOR THE ALLEGED ADDITION VIDE ENTRY NO.IV IN THE ORDER SHEET ON 10. 03.2014. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS NOW ARG UED THAT HE HAD ALSO RECEIVED INTEREST FREE ADVANCES FROM SISTER CONCERN S NAMELY SANJAY COTTON SEEDS INDUSTRIES, SHANTI UDYOG, SHREE BALAJI UDYOG, MONA OIL INDUSTRIES, ANAND OIL, NILESH OIL INDUSTRIES & TIRUPATI OIL MILLS. DURING THE REMAND PROCEEDINGS, THE APPELLANT FURNISHED LEDGER EXTRACT S OF THE SISTER CONCERNS RELATING TO PURCHASE/SALE TRANSACTIONS, LEDGER EXTR ACTS OF THE SISTER CONCERNS RELATING TO ADVANCES, COPY OF BANK ACCOUNT IN THE C ASE OF M/S SHREE GANESH REFINERY, JALNA, COPY OF BANK ACCOUNT IN THE CASE O F M/S. BALAJI OIL MILLS, IALNA AND COPIES OF SHEETS RELATING TO WORKING OF INTERES T IN THE CASE OF SISTER CONCERNS. ON VERIFICATION OF THESE DETAILS, IT WAS NOTICED THAT TWO SEPARATE LEDGERS OF SISTER CONCERNS APPEARED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE; ONE RELATING TO PURCHASE AND SALE TRANSACTIONS AND OTHER RELATING TO THE ADVANCES. HOWEVER THE ASSESSEE HAD PUT THEM UNDER T HE HEAD SUNDRY DEBTORS INSTEAD OF LOANS & ADVANCES WITH AN INTENTION TO AVOID THE DISALLOWANCES OF INTEREST ON SUCH ADVANCES. THE NAT URE AND CHARACTER OF TRANSACTIONS APPEARING IN THE BOOKS OF ACCOUNTS REL ATING TO TRANSACTIONS WITH SISTER CONCERNS WERE SOMEWHAT DIFFERENT THAN THOSE SHOWN IN THE FINANCIAL STATEMENTS. ON FURTHER VERIFICATION OF THE LEDGER A CCOUNTS IN RESPECT OF OTHER SISTER CONCERNS VIZ. SANJAY COTTON INDUSTRIES, IALN A, SHANTI UDYOG, JALNA AND TIRUPATI UDYOG, JALNA WITH REFERENCE TO THE BANK ACCOUNTS, IT WAS NOTICED THAT, THE FUNDS OF THESE CONCERNS WERE UTILIZED EXC LUSIVELY BY THE ASSESSEE FOR THE PURPOSE OF CLEARING THE LIABILITY ON ACCOUNT OF CREDITORS AND NOT UTILIZED FOR ADVANCING THE LOANS TO SISTER CONCERNS AS CLAIMED B Y THE ASSESSEE. THEREFORE, THE INTEREST BEARING FUNDS HAD NEVER BEEN UTILIZED FOR ADVANCING THE LOANS TO THE SISTER CONCERNS AS ALLEGED BY THE APPELLANT. FU RTHER MERELY HAVING INTEREST FREE FUNDS WAS NOT SUFFICIENT WHEN THE NEXUS BETWEE N UTILIZATION OF FUNDS IN A PARTICULAR INVESTMENT OR CLEARING A PARTICULAR LIAB ILITY COULD BE PROVED AS DONE BY THE AO. ON THE OTHER HAND, THE ASSESSEE HAS FAIL ED TO ESTABLISH THE NEXUS BETWEEN THE UTILIZATION OF NON-INTEREST BEARING FUN DS FROM ONE SISTER CONCERN TO OTHER SISTER CONCERNS IN THE FORM OF NON-INTEREST B EARING ADVANCES. IN THIS CONNECTION, I HAVE ALSO EXAMINED THE LEDGER EXTRACT OF M/S SANJAY COTTONSEED INDUSTRIES FOR FY 2010-11. THE COUNSEL OF THE APPEL LANT HAS STATED THAT THIS SISTER CONCERN HAD GIVEN INTEREST FREE FUNDS OF RS. 81,92,469/-TO THE ASSESSEE. 7 ITA NO.790 /PUN/2016 A.Y.2011-12 HOWEVER IF OPENING BALANCE OF RS.29,46,957/- AND PU RCHASES OF RS.43,71,690/- ARE EXCLUDED, THEN AMOUNT ADVANCED B Y M/S SANJAY COTTONSEED INDUSTRIES TO THE APPELLANT STOOD AT RS. 1,24,06,822/-. AS AGAINST THAT, THE APPELLANT HAD RETURNED AMOUNT OF RS.1,15, 33,000/- IN THE YEAR ITSELF. IN SUCH AN EVENTUALITY, THE STAND OF THE APPELLANT THAT INTEREST BEARING FUNDS WERE AVAILABLE WITH HIM, DOES NOT APPEAR TO BE CORR ECT & ACCEPTABLE. I HAVE ALSO EXAMINED THE LEDGER EXTRACT OF M/S SHANTI UDYO G FOR FY 2010-11. THE COUNSEL OF THE APPELLANT HAS STATED THAT THIS SISTE R CONCERN HAD GIVEN INTEREST FREE FUNDS OF RS.18,88,234/-TO THE ASSESSEE. HOWEVE R IF OPENING BALANCE OF RS.10,93,234/- AND PURCHASES OF RS.7,95,000/- ARE E XCLUDED, THEN NO AMOUNT WAS ADVANCED BY M/S SHANTI UDYOG TO THE APPE LLANT IN THE YEAR UNDER REFERENCE. THE PURCHASES WERE ON CREDIT AND A MOUNT OF RS.10,93,234/- WAS CARRIED FORWARD FROM EARLIER YEARS. IN SUCH AN EVENTUALITY, THE STAND OF THE APPELLANT THAT INTEREST BEARING FUNDS WERE AVAI LABLE WITH HIM, DOES NOT APPEAR TO BE CORRECT & ACCEPTABLE. I HAVE ALSO EXAM INED THE LEDGER EXTRACT OF M/S TIRUPATI OIL MILLS FOR FY 2010-11. THE COUNSEL OF THE APPELLANT HAS STATED THAT THIS SISTER CONCERN HAD GIVEN INTEREST FREE FU NDS OF RS.9,20,000/- TO THE ASSESSEE. HOWEVER IF PURCHASES OF RS.3,00,000/- ON CREDIT ARE EXCLUDED, THEN AMOUNT ADVANCED BY M/S TIRUPATI OIL MILLS TO THE AP PELLANT STOOD AT RS.39,55,000/-. AS AGAINST THAT, THE APPELLANT HAD RETURNED AMOUNT OF RS.33,35,000/- IN THE YEAR ITSELF. IN SUCH AN EVENT UALITY, THE INTEREST BEARING FUNDS TO THE EXTENT OF RS.6,20,000/- WERE ONLY AVAI LABLE WITH HIM. HOWEVER THE AO HAS FOUND OUT THAT THESE LOANS WERE UTILIZED IN CLEARING LIABILITIES AND NOT FOR ADVANCING LOANS TO OTHER SISTER CONCERNS. F URTHER, THE SANCTION OF LOAN BY THE BANKS TO THE ASSESSEE WAS ON HYPOTHECATION O F STOCK AND DEBTORS, BUT THE SAME HAD NOT BEEN USED FOR PROCURING STOCK OR R UNNING HIS BUSINESS, THEREFORE, THE INTEREST BEARING FUNDS HAD NEVER BEE N USED FOR THE PURPOSE OF BUSINESS. MOREOVER IT IS DIFFICULT TO VERIFY THE CO NTENTIONS OF THE APPELLANT THAT CERTAIN TRANSACTIONS WITH THESE CONCERNS WERE IN TH E NATURE OF LOANS. DUE TO INTERMINGLING OF THE TRANSACTIONS OF PURCHASES AND ADVANCES, IT IS DIFFICULT TO SEGREGATE THEM. THE ASSESSEE HAS HIMSELF CONCEDED V IDE LATTER DATED 08.02.2016 THAT SINCE FUNDS WERE INTERMIXED, NO DIR ECT NEXUS COULD BE PROVED BY HIM. THE AO HAS CONSIDERED THE TOTAL INTEREST OF RS.24,88,205/- CLAIMED IN BOTH THE PROPRIETARY CONCERNS FOR THE PURPOSE OF DI SALLOWANCE AND NOT THE INTEREST OF RS.10,41,818/- CLAIMED IN M/S.BALAJI OI L MILLS. MOREOVER SUCH TYPE OF TRANSACTIONS IN THE NATURE OF PURCHASE/SALES AND LOANS WITH THESE SISTER CONCERNS ARE NOTICED IN BOTH THE PROPRIETARY CONCER NS. ACCORDINGLY I AM CONSTRAINED TO HOLD THAT THE APPELLANT HAS FAILED T O SHOW THAT THE OFFER OF AGREED ADDITION WAS MADE BY HIS AR UNDER MISTAKEN B ELIEF OF LAW AND FACT. IN THESE FACTS AND CIRCUMSTANCES, THE ADDITION OF RS.1 3,98,527/- MADE BY THE AO IS SUSTAINED. THESE GROUNDS OF APPEAL ARE DISMIS SED. 12. THE SUBMISSION OF THE ASSESSEE ON THIS ISSUE IS THAT THE FIGURE OF RS.13,98,572/- WAS WORKED OUT BY AR AS ASKED BY THE A SSESSING OFFICER ON INTEREST FREE ADVANCES. THE LD. AR SUBMITTED THAT ASSESSE E HAS INTEREST FREE FUNDS FROM OTHER SISTER CONCERNS TO BE CONSIDERED. BUT THIS WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE ALSO CONTENDED TH AT HE HAS SUBMITTED WORKING OF INTEREST ON INTEREST FREE ADVANCES RECEIVED AN D INTEREST ON INTEREST FREE ADVANCES. THE ASSESSEE FURTHER RELIED ON THE DECISIO N OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER PVT. L TD , REPORTED IN 313 8 ITA NO.790 /PUN/2016 A.Y.2011-12 ITR 340 AND IN THE CASE OF HDFC BANK LTD. REPORTED IN 3 83 ITR 529 WHEREIN IT HAS BEEN HELD THAT IF THERE IS INTEREST FREE FUNDS ARE MO RE THAN INTEREST FREE ADVANCES, NO ADDITION CAN BE MADE. 13. WE HAVE PERUSED THE CASE RECORD AND THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. WE FIND THAT THE CIT(APPEALS) STATED THAT NEXU S OF INTEREST FREE FUNDS IS NOT ESTABLISHED AND FUNDS ARE INTER MIXED. THE ASSESS EE STATED IN THE WRITTEN SUBMISSION THAT WORKING OF INTEREST ON INTEREST FRE E FUNDS RECEIVED AND INTEREST ON INTEREST FREE FUNDS ADVANCES HAVE BEEN SUBM ITTED BEFORE THE LD.CIT(APPEALS). PLACING RELIANCE ON THE DECISIONS OF HON'BLE J URISDICTIONAL HIGH COURT MENTIONED AFORESAID, THE CONTENTION OF THE ASSE SSEE IS THAT IT HAS GOT MORE INTEREST FREE FUNDS WHICH ARE MORE THAN THE INT EREST FREE ADVANCES MADE. TAKING INTO CONSIDERATION OF ENTIRETY OF FACTS AND CIR CUMSTANCES AND TO MEET THE ENDS OF JUSTICE, WE CONFIRM 20% OF THE SAID DISA LLOWANCE. HENCE, GROUND NO. 3 OF THE APPEAL IS PARTLY ALLOWED . 14. GROUNDS OF APPEAL NO. 4 TO 6 ARE GENERAL IN NATURE A ND HENCE, REQUIRE NO ADJUDICATION. 15. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 3 RD DAY OF JANUARY, 2019. SD/- SD/- R.S. SYAL PARTHA SARAT HI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 3 RD JANUARY, 2019. SB 9 ITA NO.790 /PUN/2016 A.Y.2011-12 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-1, AURANGABAD. 4. THE PR. CIT-1, AURANGABAD. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 10 ITA NO.790 /PUN/2016 A.Y.2011-12 DATE 1 DRAFT DICTATED ON 02.01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 03 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER