Abdul Shakoor Abbasali Chaudhari, Pune V. Deputy Commissioner of Income-tax,

ITA 844/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7368 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Income from undisclosed sources; Rule of consistency; Earning of tax free income; Procedural lapse; Block assessment; Penny stocks
• Section: 143(3); 153A; 14A; 145; 148; 132; 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NOS.844 AND 845/PUN/2014 [ [ / ASSESSMENT YEARS : 2005-06 AND 2009-10 A BDUL SHAKOOR ABBASALI CHAUDHARI, M/S. MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLY ROAD, NEAR RTO., PUNE 411 001. PAN : AALPC5160C. . / APPELLANT V/S DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), PUNE. . / RESPONDENT ASSESSEE BY : SHRI NILESH KHANDELWAL. REVENUE BY : SHRI ACHAL SHARMA, ADDL.CIT. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE TWO APPEALS FILED BY ASSESSEE ARE EMANATING OUT OF A CONSOLIDATED ORDER OF COMMISSIONER OF INCOME-TAX (A) CENTRAL, PUNE DT.15.01.2014 FOR A.YS. 2005-06 AND 2009-10, RESPECTIVELY. 2. WE FIRST PROCEED TO DISPOSE OF THE APPEAL IN ITA.NO 844/PUN/2014 FOR AY 2005-06. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER:- / DATE OF HEARING : 24.08.2017 / DATE OF PRONOUNCEMENT: 23.10.2017 2 ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE TRADING OF SCRAP STEEL. A SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED ON 24.10.2007 AT THE RESIDENTIAL PREMISES OF THE ASSESSEE WHICH WAS PART OF SEARCH ACTION CONDUCTED IN THE CASES OF HABIBULLAH CHAUDHARY, CHETAN MEHTA AND VISHAL MALHOTRA GROUP OF PUNE AND OTHERS CONSISTING OF THE VARIOUS BUSINESS ENTITIES. THEREAFTER NOTICE U/S 153A(A) OF THE ACT WAS ISSUED TO ASSESSEE ON 20.06.2008 REQUIRING HIM TO FURNISH RETURN OF INCOME AND IN RESPONSE TO WHICH ASSESSEE SUBMITTED RETURN OF INCOME ON 18.7.2008 FOR A.Y. 2005-06 DECLARING TOTAL INCOME AT RS.1,92,36,630/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 153A OF THE ACT VIDE ORDER DT.31.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,45,35,540/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT, THE ORDER PASSED BY THE AO AND CONFIRMED BY THE CIT(A) IS WITHOUT JURISDICTION. IT MAY FURTHER BE HELD THAT THE NOTICE U/S.143(2) HAS NOT BEEN SERVED ON THE APPELLANT WITHIN THE PRESCRIBED TIME LIMIT AND THE PROCEEDINGS COMPLETED BY THE AO IN PURSUANCE OF SUCH NOTICE IS VITIATED & NOT TENABLE IN LAW. THE ORDER PASSED BY THE AO AND CONFIRMED BY CIT(A) BE HELD AS NOT TENABLE IN LAW AND BE CANCELLED. 2. FURTHER ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT, IT BE HELD THAT THE ORDER PASSED BY LEARNED DY. CIT CIRCLE 2(3) PUNE BY TREATING THE INCOME OF RS.1,38,45,806/- CLAIMED AS SHORT TERM CAPITAL GAIN AS INCOME FROM OTHER SOURCES AND FURTHER CONFIRMED BY CIT(A) IS ERRONEOUS AND CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT ON FACTS PREVAILING IN THE CASE. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT. 4. FIRST GROUND IS WITH RESPECT TO CHALLENGING THE ASSESSMENT ORDER PASSED BY THE AO. 3 4.1 BEFORE US LD.A.R. SUBMITTED THAT ASSESSEE RAISED JURISDICTIONAL GROUND BEFORE CIT(A). HE SUBMITTED THAT BEFORE CIT(A) IT WAS CONTENDED THAT ORDER PASSED BY THE AO WAS WITHOUT JURISDICTION AS NOTICE U/S 143(2) OF THE ACT WAS NOT SERVED ON THE ASSESSEE WITHIN THE PRESCRIBED TIME LIMIT. IT WAS SUBMITTED THAT THE FIRST NOTICE U/S 143(2) OF THE ACT WAS SERVED ON ASSESSEE ON 12.12.2009 WHEREAS THE STATUTORY TIME LIMIT FOR SERVING NOTICE U/S 143(2) OF THE ACT WAS 30.09.2009. SINCE NOTICE WAS SERVED BEYOND THE TIME LIMIT PRESCRIBED, IT WAS URGED THAT THE ASSESSMENT ORDER FRAMED BY THE AO WAS INVALID. HE SUBMITTED THAT THE AFORESAID GROUND OF THE ASSESSEE WAS DISMISSED BY LD.CIT(A) BY HOLDING AS UNDER : 5.2 I HAVE GIVEN CAREFUL CONSIDERATION TO THE ISSUE RAISED BY THE APPELLANT UNDER THIS ADDITIONAL GROUND OF APPEAL. THE APPELLANT HAS RELIED ON THE DECISION OF THE HON. APEX COURT IN HOTEL BLUE MOON. HOWEVER, THAT JUDGMENT RELATES TO THE ERSTWHILE BLOCK ASSESSMENT PROCEEDINGS. THE HON. DELHI HIGH COURT IN ASHOK CHADDHA V. ITO 337 ITR 399 (DEL.) HAS DISTINGUISHED THE JUDGMENT IN HOTEL BLUE MOON AND HELD THAT UNDER THE NEW SEARCH PROVISIONS, ISSUE OF NOTICE UNDER SECTION OF 143(2) IS NOT MANDATORY UNDER SECTION 153A. ACCORDINGLY, THIS ADDITIONAL GROUND PREFERRED BY THE APPELLANT IS HEREBY CONSIDERED AND DISMISSED ON MERITS. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE CARRIED THE MATTER BEFORE US. 5. BEFORE US, LD.A.R. SUBMITTED THAT HE WOULD LIKE TO RELY ON THE DECISION OF THE AGRA TRIBUNAL IN THE CASE OF NANDINI VS. ITO REPORTED IN (2011) 9 TAXMANN.COM 227 AGRA. LD.D.R. ON THE OTHER HAND SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF ASHOK CHADDHA VS. ITO 337 ITR 399 (DEL) HAS NOTED THAT UNDER THE NEW SEARCH PROVISIONS, ISSUE OF NOTICE U/S 143(2) OF THE ACT IS 4 NOT MANDATORY. HE FURTHER RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TARSEM SINGLA VS DCIT (2017) 81 TAXMANN.COM 347 (P&H). HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT GROUND ASSESSEE HAS URGED THAT SINCE THE NOTICE U/S 143(2) WAS SERVED AFTER THE STIPULATED TIME LIMIT THE ASSESSMENT ORDER FRAMED BY THE AO WAS BAD IN LAW. ON THE ISSUE WHETHER THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT IS MANDATORY FOR FINALIZATION OF ASSESSMENT UNDER SECTION 153A , WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF ASHOK CHADDHA (SUPRA) HAS EXAMINED THE ISSUE AND AFTER CONSIDERING THE DECISION OF HONBLE APEX COURT IN THE CASE OF HOTEL BLUE MOON 321 ITR 362 (SC) OBSERVED AS UNDER : 9. THERE IS NO SPECIFIC PROVISION IN THE ACT REQUIRING THE ASSESSMENT MADE UNDER SECTION 153A TO BE AFTER ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. LEARNED COUNSEL FOR THE ASSESSEE PLACES HEAVY RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN HOTEL BLUE MOON V. DCIT, (SUPRA) WHEREIN IT WAS HELD THAT THE WHERE AN ASSESSMENT HAS TO BE COMPLETED U/S 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) MUST BE ISSUED AND OMISSION TO DO SO CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE. IT IS TO BE NOTED THAT THE ABOVE SAID JUDGMENT WAS IN THE CONTEXT OF SECTION 158BC. CLAUSE (B) OF SECTION 158BC EXPRESSLY PROVIDES THAT 'THE AO SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SUB SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY. THIS IS NOT THE POSITION UNDER SECTION 153A. THE LAW LAID DOWN IN HOTEL BLUE MOON, IS THUS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. IT IS ALSO TO BE NOTED THAT SECTION 153A PROVIDES FOR THE PROCEDURE FOR ASSESSMENT IN CASE OF SEARCH OR REQUISITION. SUB SECTION (1) STARTS WITH NON-OBSTANTE CLAUSE STATING THAT IT WAS NOTWITHSTANDING ANYTHING CONTAINED IN SECTIONS 147, 148 AND 149, ETC. CLAUSE(A) THEREOF PROVIDES FOR ISSUANCE OF NOTICE TO THE PERSON SEARCHED U/S 132 OR WHERE DOCUMENTS ETC ARE REQUISITIONED UNDER SECTION 132(A), TO FURNISH A RETURN OF INCOME. THIS CLAUSE NOWHERE PRESCRIBES FOR ISSUANCE OF NOTICE UNDER SECTION 143(2). LEARNED COUNSEL FOR THE ASSESSEE/ APPELLANT SOUGHT TO CONTEND THAT THE WORDS, 'SO FAR AS MAY BE APPLICABLE' MADE IT MANDATORY FOR 5 ISSUANCE OF NOTICE U/S 143(2) SINCE THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A WAS TO BE TREATED AS ONE UNDER SECTION 139. 13. THE WORDS 'SO FAR AS MAY BE' IN CLAUSE (A) OF SUB SECTION (1) OF SECTION 153A COULD NOT BE INTERPRETED THAT THE ISSUE OF NOTICE U/S 143(2) WAS MANDATORY IN CASE OF ASSESSMENT UNDER SECTION 153A. THE USE OF THE WORDS, 'SO FAR AS MAY BE' CANNOT BE STRETCHED TO THE EXTENT OF MANDATORY ISSUE OF NOTICE UNDER SECTION 143(2). AS IS NOTED, A SPECIFIC NOTICE WAS REQUIRED TO BE ISSUED UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 153A CALLING UPON THE PERSONS SEARCHED OR REQUISITIONED TO FILE RETURN. THAT BEING SO, NO FURTHER NOTICE U/S 143(2) COULD BE CONTEMPLATED FOR ASSESSMENT UNDER SECTION 153A. 14. NO SPECIFIC NOTICE WAS REQUIRED UNDER SECTION 143(2) OF THE ACT WHEN THE NOTICE IN THE PRESENT CASE AS REQUIRED UNDER SECTION 153 (A) (1) (A) OF THE ACT WAS ALREADY GIVEN. 7. WE FURTHER FIND THAT HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TARSEM SINGLA (SUPRA) ORDER DATED 18 TH FEB 2016 HAS HELD THAT THERE IS NO MANDATORY REQUIREMENT OF ISSUANCE OF NOTICE U/S 143(2) IN RESPECT TO PROCEEDINGS U/S 153A. 8. BEFORE US, LD AR HAS RELIED ON THE DECISION OF AGRA BENCH OF SMC IN THE CASE OF NARENDRA SINGH VS. ITO IN ITS FAVOUR AS AGAINST WHICH THE REVENUE HAS RELIED ON THE AFORESAID TWO DECISIONS OF HONBLE HIGH COURTS IN ITS SUPPORT. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TEJ INTERNATIONAL VS. DCIT (2000) 69 TTJ 650 (DEL) HAS OBSERVED THAT IN A HIERARCHICAL JUDICIAL SYSTEM THAT WE HAVE IN INDIA, THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE, AND, THEREFORE, ONCE AN AUTHORITY HIGHER THAN THIS TRIBUNAL HAS EXPRESSED ITS ESTEEMED VIEWS ON AN ISSUE, NORMALLY THE DECISION OF THE HIGHER JUDICIAL AUTHORITY IS TO BE FOLLOWED. IT FURTHER NOTED THAT THE FACT THAT THE JUDGMENT OF THE HIGHER JUDICIAL FORM IS A NON-JURISDICTIONAL HIGH COURT DOES NOT REALLY ALTER THE POSITION AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GODAVARI DEVI SARAF (1978) 113 ITR 589 (BOM). WE FIND THAT THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASHOK CHADDHA AND THE DECISION IN 6 THE CASE OF TARSEM SINGLA ARE LATER DECISION RENDERED ON 27.11.2011 AND 18 TH FEB 2016 RESPECTIVELY. WE ARE THEREFORE OF THE VIEW THAT THE LATER DECISION OF HIGHER SUPERIOR AUTHORITY NEEDS TO BE FOLLOWED. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND THUS, THE GROUND OF THE ASSESSEE IS DISMISSED. 9. 2 ND GROUND IS WITH RESPECT TO TREATING THE INCOME OF RS.1,38,45,806/- AS INCOME FROM OTHER SOURCES. 9.1 AO ON PERUSING THE RETURN OF INCOME NOTICED THAT THE ASSESSEE HAD DISCLOSED LONG TERM CAPITAL GAINS OF RS.1,38,45,806/- ON ACCOUNT OF SALE OF SHARES OF M/S. TANU HEALTHCARE LTD AND M/S. COMFORT FINVEST LTD. HE ALSO NOTICED THAT THE ASSESSEE HAD PURCHASED THESE SHARES AT A VERY NOMINAL RATE AND HAD SOLD IT AT A HIGHER PRICE TO CLAIM LONG TERM CAPITAL GAINS. AO NOTICED THAT THE SHARES OF M/S. TANU HEALTHCARE LTD AND M/S. COMFORT FINVEST LTD AND OTHER INVESTMENTS THOUGH LISTED ON BSE, WERE NOT TRADED FOR LONG TIME. AO NOTED THAT THE DISCRETE ENQUIRIES REVEALED THAT THE ADDRESS OF THE AFORESAID COMPANIES WAS A SMALL CYBER CAF AND IT WAS ONLY A MAILING ADDRESS. HE ALSO NOTICED THAT SRI G.K. AGARWAL WAS THE DIRECTOR OF TANU HEALTHCARE LIMITED AND KUSHAGRA SOFTWARE LIMITED AND THOSE COMPANIES HAD ADVANCED UNSECURED LOANS TO THE BUSINESS ENTITIES WHO WERE CONNECTED WITH ABDUL SHAKUL FAMILY. HE THEREFORE CONCLUDED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES ENTERED INTO BY THE ASSESSEE TO BE A SHAM TRANSACTION ENTERED INTO TO CHANNELIZE THE UNACCOUNTED INCOME. THE ASSESSEE WAS THEREFORE ASKED TO SHOW CAUSE AS TO WHY THE CAPITAL GAINS NOT BE TREATED AS INCOME FROM OTHER SOURCES. 7 AO HAS NOTED THAT ASSESSEE VIDE REPLY DT.24.02.2009 HAD SURRENDERED THE INCOME TO BUY PEACE. CONSIDERING THE SUBMISSION OF THE ASSESSEE, AO TREATED THE LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE AS INCOME FROM OTHER SOURCES. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 6.8 I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACTS BEFORE ME AND TO THE RIVAL VIEWS OF THE AO AND THE LD. AR OF THE APPELLANT WITH REGARD TO THE, IMPUGNED SHARE TRANSACTIONS. I FIND THAT THE AO HAS RAISED SEVERAL ISSUES IN HIS ORDER TO WHICH I DO NOT FIND AN EFFECTIVE RESPONSE IN THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. FIRSTLY, HE HAS GIVEN A SPECIFIC FINDING WITH REGARD TO THE MOVEMENT IN THE PRICES OF SHARES INCLUDING THE PERIODIC UPS AND DOWNS FOLLOWING A SEASONAL PATTERN, ABSENCE OF PHYSICAL EXISTENCE OF THE COMPANY (ONE OF THEM HAD GIVEN THE ADDRESS OF A CYBER CAFE AS ITS OFFICE ADDRESS) AND THE ABNORMAL PROFIT ARISING FROM DORMANT SHARES' RARELY TRADED IN AND PERTAINING TO COMPANIES WITH HARDLY ANY FUNDAMENTALS WORTH THE NAME. THE APPELLANT HAS NOT RESPONDED TO THESE PERTINENT POINTS AND HAS OBVIOUSLY SOUGHT REFUGE BEHIND THE CORPORATE IDENTITY OF THE COMPANIES BY STATING THAT THE COMPANIES WERE LISTED AT THE STOCK EXCHANGE AND TRANSACTIONS WERE THROUGH BANKS. MORE IMPORTANTLY, THERE IS NO EFFECTIVE RESPONSE FROM THE APPELLANT'S SIDE TO THE AO'S OBSERVATIONS WITH REGARD TO THE ROLE OF SHRI G.K. AGARWAL IN THE COMPANY WHOSE SHARES WERE TRADED IN AND ALSO IN GIVING LOANS TO VARIOUS BUSINESS ENTITIES OF THE APPELLANT GROUP. THE APPELLANT ON THE OTHER HAND, HAS RELIED ON THE FACT THAT THE JURISDICTIONAL BENCH OF THE TRIBUNAL HAS ALLOWED SOME OF THE CASES INVOLVING PENNY STOCKS IN FAVOUR OF THE APPELLANT. IN THIS REGARD THE DECISIONS IN ANIL NANDKISHORE GOYAL AND MOTI U. PANJABI HAVE BEEN CITED. IN THIS REGARD IT IS PERTINENT TO POINT OUT THAT THE AO IN HIS ORDER HAS MERELY REFERRED TO THE PENNY STOCK CASES TO BOLSTER HIS VIEW THAT THE STRATEGY OF CONVERTING UNACCOUNTED MONEY INTO LEGITIMATE MONEY BY SHOWING THE SAME AS LONG TERM CAPITAL GAIN FROM TRADING IN PENNY STOCK IS A KNOWN MODUS OPERANDI. HE HAS HIMSELF ACKNOWLEDGE THE DIFFERENCE BETWEEN THE PENNY STOCK CASES INVOLVING THE SHARES OF DATABASE FINANCE AND FASTRACK AND THE INSTANT CASE WHICH DID NOT INVOLVE SHARES OF THESE TWO COMPANIES. I FIND THAT THE AO HAS ONLY MADE A PASSING REFERENCE TO THE ABOVE MODUS OPERANDI AND HAS NOT RELIED ON THESE OBSERVATIONS ALONE WHILE COMING TO HIS CONCLUSIONS IN THE INSTANT CASE. MOREOVER, I ALSO FIND THAT THE CASES CITED BY THE APPELLANT ARE DISTINGUISHABLE ON FACTS FROM THE PRESENT CASE AND IN FACT THE SECOND CASE CITED I.E., MOTI U. PANJABI HAS NOT EVEN BEEN ALLOWED IN FAVOUR OF THE APPELLANT BUT MERELY SET ASIDE TO THE AO FOR VERIFICATION. 6.9 MOST IMPORTANTLY, UPON PERUSAL OF PARA 6.6 OF THE IMPUGNED ORDER I FIND THAT THE APPELLANT IN HIS SUBMISSION DATED 24/12/2009 HAD AGREED TO THE AO'S PROPOSAL TO TREAT THE INCOME IN QUESTION AS INCOME FROM OTHER SOURCES. THE RELEVANT PORTION OF THE APPELLANT'S REPLY IS EXTRACTED BELOW: PLEASE REFER TO OUR DISCUSSIONS HELD AND THE EXPLANATIONS DEMANDED BY YOU, I HAVE TO STATE AS UNDER. 8 THIS IS TO BRING TO YOUR KIND NOTICE THAT MY SHARES DEALINGS OF M/S. TANU HEALTHCARE LTD. MUMBAI, ARE GENUINE AND TRUE TRANSACTIONS. THIS IS SO BECAUSE THE COMPANY IS LISTED, I PURCHASED THE SHARES OF M/S. TANU HEALTHCARE LTD. THROUGH THE BROKERS BY PAYING ACCOUNT PAYEE CHEQUES. THE PURCHASES & @ SALES OF SHARES ARE MADE THROUGH MY DEMAT ACCOUNT. SALES ARE ALSO MADE THROUGH THE BROKERS FOR WHICH I HAVE RECEIVED THE CHEQUES. ALL THESE DETAILS I HAVE ALREADY SUBMITTED TO YOUR OFFICE ALONG WITH THE BROKER NOTES. BUT THERE IS CONSTANT PRESSURE FROM YOUR OFFICE TO SURRENDER THE INCOME EARNED FROM THE DEALINGS IN SHARES OF M/S. TANU HEALTHCARE LTD. AS SUCH TO BUY THE MENTAL PEACE AND TO CONCENTRATE ON MY BUSINESS AFFAIRS UNINTERRUPTEDLY I SUBMIT TO YOUR SUGGESTIONS. 6.10 HAVING THUS CATEGORICALLY AGREED TO THE PROPOSAL TO TREAT THE INCOME IN QUESTION AS INCOME FROM OTHER SOURCES, CLEARLY, THE APPELLANT PREVENTED THE AO FROM MAKING FURTHER POINTED INQUIRIES AND GATHERING FURTHER EVIDENCE TO SUBSTANTIATE HIS FINDINGS. THAT BEING THE CASE, THE APPELLANT CANNOT, IN MY VIEW, NOW BE ALLOWED TO GO BACK ON HIS OWN CONSENT AND CHALLENGE THE DECISION OF THE AO WHICH WAS BASED THEREUPON. ACCORDINGLY, FOR ALL THE REASONS MENTIONED ABOVE, I HEREBY DISMISS THIS GROUND OF APPEAL. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 10. BEFORE US LD. AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND CIT(A) AND SUBMITTED THAT THE AO HAS TREATED THE INCOME AS INCOME FROM OTHER SOURCES ONLY ON THE BASIS OF ASSUMPTION. HE HOWEVER FAIRLY SUBMITTED THAT IDENTICAL ISSUE AROSE IN THE CASE OF THE BROTHER OF THE ASSESSEE AND THE HONBLE TRIBUNAL HAD UPHELD THE ORDER OF AO. HE ALSO PLACED ON RECORD THE COPY OF TRIBUNAL ORDER IN ITA NO.669/PUN/2012 DT.04.03.2014 IN THE CASE OF HIS BROTHER, ZIKRAULLAH CHAUDHARY. LD DR SUBMITTED THAT ON IDENTICAL FACTS, THE ISSUE IN THE CASE OF THE BROTHER OF THE ASSESSEE HAS BEEN DECIDED AGAINST THE ASSESSEE. HE THUS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS THE TREATMENT 9 GIVEN TO INCOME EARNED ON SALE OF SHARES. ASSESSEE HAD TREATED THE INCOME EARNED AS LONG TERM CAPITAL GAINS WHEREAS THE AO TREATED IT AS INCOME FROM OTHER SOURCES FOR THE REASON THAT THE PROFIT ON SALE OF SHARES WAS NOT GENUINE TRANSACTION. WE FIND THAT IDENTICAL ISSUE AND ARISING OUT OF THE SAME SEARCH AROSE IN THE CASE OF ASSESSEES BROTHER ZIKRULLAH CHAUDHARY. THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO 669/PUN/2012 ORDER DATED 04.03.2014 BY RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SUMATI DAYAL VS. CIT (214 ITR 801) AND DURGA PRASAD MORE REPORTED IN 82 ITR 540 AT PARAS 6 TO 6.9 HAD UPHELD THE ORDER OF AO AND DECIDED THE ISSUE IN FAVOUR OF REVENUE. BEFORE US, LD AR HAS NOT PLACED ANY MATERIAL TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRESENT CASE AND THAT OF HIS BROTHER ZIKRULLAH CHAUDHARY. IN SUCH A SITUATION WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). WE THEREFORE FOLLOWING THE SAME REASONING OF THE TRIBUNAL AS IN THE CASE OF HIS BROTHER ZIKRULLAH CHAUDHARY AND FOR SIMILAR REASONS DISMISS THE GROUND OF ASSESSEE AND THUS THE GROUND OF ASSESSEE IS DISMISSED. 11.1 IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.844/PUN/2014 FOR A.Y. 2005-06 IS DISMISSED. 12. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.845/PUN/2014 FOR AY 2009-10. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER THE SCHEME AND PROVISIONS OF THE ACT, IT BE HELD THAT THE DISALLOWANCE MADE BY AO TOWARDS INTEREST OF RS.97,52,187/- (INTEREST ON UNSECURED LOANS RS.83,97,310/- + INTEREST ON SECURED LOANS RS.254,397/- + INTEREST ON CASH CREDIT RS.11,00,480/-) AND FURTHER CONFIRMED BY THE 1 ST APPELLATE AUTHORITY IS ERRONEOUS, UNJUSTIFIED, 10 UNWARRANTED. THE DISALLOWANCE MADE BE DELETED. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT. 2. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, AMEND, MODIFY, RECTIFY, DELETE, RAISE ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 13. THEREAFTER, ASSESSEE VIDE LETTER DATED 6 TH APRIL 2017 HAS RAISED ADDITIONAL GROUND WHICH READS AS UNDER: WITHOUT PREJUDICE TO GROUND NO.1 AND 2 OF THE GROUNDS OF APPEAL, ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER SCHEME AND PROVISIONS OF THE ACT IT BE HELD THAT DISALLOWANCE MADE BY AO IN TERMS OF PROVISIONS OF SEC.14A OF THE ACT IS WITHOUT RECORDING ANY SATISFACTION AS REQUIRED IN THE PROVISIONS OF THE ACT. IT BE HELD THAT THE ADDITION MADE IS IMPROPER, UNJUSTIFIED, ARBITRARY AND IMAGINARY. IT FURTHER BE HELD THAT NO ADDITION IS WARRANTED IN TERMS OF PROVISIONS OF SEC.14A OF THE ACT. THE ADDITION MADE BY THE AO BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. WITH RESPECT TO THE ADDITIONAL GROUND, LD AR SUBMITTED THAT THE GROUND HAD REMAINED TO BE RAISED WHILE FILING THE APPEAL AND THE GROUND RAISED IS A LEGAL GROUND AND ARISING OUT OF THE ORDER OF CIT(A). HE THEREFORE SUBMITTED THAT THE ADDITIONAL GROUND BE ADMITTED. LD DR DID NOT SERIOUSLY OBJECT TO THE ADMISSION OF THE ADDITIONAL GROUND. 14. ON THE ADMISSION OF ADDITIONAL GROUND AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE ADDITIONAL GROUND BE ADMITTED. WE ACCORDINGLY ADMIT THE SAME. 15. FIRST GROUND IS WITH RESPECT TO DISALLOWANCE OF INTEREST: ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, AO NOTICED THAT ASSESSEE HAD MADE INVESTMENT IN LAND TO THE TUNE OF RS 1.99 CRORE, INVESTMENT OF RS 5.73 CRORE IN THE FIRM, UNITED FARMING & 11 REAL ESTATE. HE ALSO NOTICED THAT ASSESSEE HAD SHOWN UNSECURED LOANS TO THE EXTENT OF RS 10.74 CRORE AND SECURED LOANS TO THE EXTENT OF RS 1.17 CRORES. AO THEREFORE CONCLUDED THAT THOUGH ASSESSEE WAS HAVING SUFFICIENT FUNDS AT HIS DISPOSAL IT HAD AT THE SAME TIME AVAILED LOAN AND HAD CLAIMED INTEREST PAID ON LOAN AS BUSINESS EXPENSE. THE AO THEREFORE ASKED THE ASSESSEE AS TO WHY INTEREST PAYMENT OF RS.97,52,187/- NOT BE DISALLOWED. THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. AO CONCLUDED THAT THE ASSESSEE HAD NOT BEEN ABLE TO CORRELATE THE NECESSITY OF LOAN FOR THE PURPOSE OF BUSINESS. HE ACCORDINGLY DISALLOWED THE INTEREST EXPENSE OF RS 97,52,187/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER: 10.7 I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACTS BEFORE ME AND TO THE ARGUMENTS AND CONTENTIONS PRESENTED ON BEHALF OF THE APPELLANT. THE INDISPUTABLE LEGAL POSITION I S THAT INTEREST ON BORRO W ED M O N E Y I S ALLOWED AS A DEDUCTION ONLY IF I T SATISFIES THE CONDIT I ON THAT IT WAS EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESS I ON. WHERE IT I S ESTABLISHED T HAT BORROWED FUNDS WERE DIVERTED FOR NON-BUSINESS PU RP OSES, THE SAME CAN BE DISALLOWED BY THE AO. F U RTHER, WHERE A PAR T OF T H E AMOUNT IS SO DIVERTED , A PROPORTIONATE AMOUNT CAN BE DISALLOWED. IN CIT V . M . S . V ENKATESWARAN AND K . SOMASUNDARAM AND BROS. V . CIT IT WAS HELD THAT WHERE THE DEPT . HAD ESTABLISHED THE FACT OF DIVERS I ON OF BORROWED FUNDS FOR NON-BUSINESS PURPOSES , THE PRESUMPTION THA T THE ASSESSEE HAS SUFFICIENT CAPITAL AND THE DIVERSION WAS OUT OF SUCH F U NDS CANNOT EXIST AND DISALLOWANCE WAS JUSTIFIED . IN ACIT V. PUNJAB STA I NLESS STEEL INDUSTRY ' , WHERE THE ASSESSEE CLAIMED THAT I T HAD GIVEN INTER E S T - F R E E AD V ANCES FROM ITS OWN FUNDS AND THEN BORROWED FROM BANKS FOR BUS I NES S PURPOSES , I T WAS HELD THAT SUCH BORROWING FROM BANKS COULD BE TREA T ED AS SUPPLEMENTING CASH DIVERTED BY THE APPELLANT WITHOUT ANY BENEF IT TO THE BUSINESS AND CLAIM OF INTEREST ON THE BORROWINGS COULD BE DISA L L OWED. IN THE PRESENT CASE , THE APPELLANT HAS UTILIZED INTEREST-BEARING FUNDS FOR ACQUIRING PERSONAL PROPERTIES/MA K ING PERSONAL INVESTMENT . AS SU C H , TH E PRI N CIPLE UNDERLYING THE ABOVE CASES, IN M Y VIEW, APPLIES EQUAL LY TO T HE PRESENT CASE . SUCH BEING THE LEGAL POSITION , THE AO WAS RIG HT I N MY VIEW TO ALLOW THE CLAIM OF INTEREST ON UNSECURED LOANS . I AM ALSO IN AG R EEMENT WITH THE FOLLOWING OBSERVATIONS IN CONTAINED IN PARA 4 . 3 OF HIS O RD ER: ' THE QUESTION REMAINS WHETHER IT BE CONSIDERED THAT THE LOAN REPAID IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. THE ESSENCE OF 'INTEREST' IS THAT IT IS A PAYMENT WHICH BECOMES DUE BECAUSE THE ASSESSEE HAS NOT HAD HIS MONEY WHEN IT 12 IS ACTUALLY REQUIRED FOR BUSINESS EITHER FOR CAPITAL OR REVENUE EXPENSES. IT MUST BE REGARDED AS AN OUTFLOW EITHER REPRESENTING THE PROFIT HE MIGHT HAVE MADE IF HE HAD USED HIS OWN MONEY, OR CONVERSELY, THE LOSS HE SUFFERED BECAUSE HE HAD NOT HAD THAT USE. THE GENERAL IDEA IS THAT HE IS ENTITLED TO COMPENSATION FOR THE DEPRIVATION. IT IS ONLY INTEREST IN THE ABOVE SENSE WHICH IS DEDUCTIBLE UNDER SECTION 36(1) (III).' 10.8 AS REGARDS THE APPELLANT'S CONTENTION THAT NO SUCH DISALLOWANCE WAS MADE IN THE EARLIER YEARS, AS POINTED OUT BY THE LD. AO IT IS WELL SETTLED THAT THE PRINCIPLES OF RES JUDICATA / ESTOPPEL DO NOT APPLY TO I-T PROCEEDINGS WHERE EACH YEAR'S ASSESSMENT PROCEEDING IS AN INDEPENDENT PROCEEDING. NO DOUBT, THE PRINCIPLE OF CONSISTENCY BROADLY APPLIES TO I-T PROCEEDINGS ALSO BUT IN THIS REGARD NO FACTS HAVE BEEN BROUGHT OUT BY THE APPELLANT TO INDICATE THAT THE FACTS FOR THE EARLIER YEARS WERE IDENTICAL TO THOSE IN THE PRESENT YEAR, TO WHAT EXTENT BORROWALS WERE MADE AND FROM WHAT SOURCES AND WHAT WERE THE CORRESPONDING INVESTMENTS IN NON-BUSINESS ASSETS DURING THOSE YEARS. THE NEXT CONTENTION OF THE APPELLANT IS THAT THE NET ADDITION TO UNSECURED LOANS WAS ONLY RS.95,45,399/-. THIS FIGURE, HOWEVER, HIDES THE FACT THAT THE ACTUAL BORROWALS DURING THE YEAR, ON WHICH INTEREST WAS INCURRED WAS TO THE TUNE OF RS.12.41 CRORE AND THE INTEREST WOULD HAVE BEEN SUBSTANTIALLY LESS IF THE APPELLANT HAD USED HIS OWN FUNDS FOR THE PURPOSES OF BUSINESS. IN VIEW OF THE DETAILED DISCUSSIONS ABOVE, THE CONTENTION OF THE APPELLANT WITH REGARD TO INTEREST ON UNSECURED LOANS IS HEREBY REJECTED. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 16. BEFORE US, LD.AR REITERATED THE SUBMISSIONS BEFORE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT SUBSTANTIAL AMOUNTS OF INVESTMENTS WERE MADE IN THE YEAR PRIOR TO PREVIOUS YEAR 2008-09. HE POINTED TO THE COMPARATIVE VALUE OF INVESTMENT AS AT THE YEAR END ON 31 ST MARCH 2008 AND 2009 PLACED AT PAGE 73 OF THE PAPER BOOK AND FROM THE TABLE POINTED THAT INVESTMENT IN PROPERTY WAS ONLY TO THE EXTENT OF RS.5 LAC AND THE INCREASE IN THE CAPITAL ACCOUNT IN THE PARTNERSHIP FIRM (UNITED FARMING AND REAL ESTATE) WAS ON ACCOUNT OF NET CREDIT OF PROFITS (PROFIT MINUS DRAWINGS) FROM THE FIRM. HE ALSO POINTED TO THE LEDGER EXTRACT OF THE CAPITAL ACCOUNT OF THE FIRM. HE THEREFORE SUBMITTED THAT NO DISALLOWANCE OF THE 13 INTEREST IS CALLED FOR. LD DR ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE DISALLOWANCE OF THE INTEREST. AO HAD DISALLOWED THE INTEREST FOR THE REASON THAT THE ASSESSEE HAD BORROWED MONEY DURING THE YEAR AND ON IT HAD PAID INTEREST AND AT THE SAME TIME THERE WAS INCREASE IN THE INVESTMENTS MADE BY THE ASSESSEE. BEFORE US, IT IS ASSESSEES SUBMISSION THAT THE SUBSTANTIAL INVESTMENT IN THE PROPERTY WAS MADE IN EARLIER YEARS AND DURING THE YEAR THERE WAS AN ADDITION OF ONLY RS.5 LACS AND WITH RESPECT TO THE INVESTMENT IN THE CAPITAL OF THE FIRM, THE INCREASE IN ON ACCOUNT OF THE NET CREDIT IN THE FIRM AND TO SUBSTANTIATE THE CONTENTION, ASSESSEE HAS ALSO PLACED ON RECORD THE COPY OF THE CAPITAL ACCOUNT OF THE ASSESSEE. THE AFORESAID CONTENTIONS OF THE ASSESSEE HAVE NOT FOUND TO BE FALSE. FURTHER, THE AO HAS PROCEEDED TO DISALLOW THE EXPENDITURE ON THE PRESUMPTION BASIS. IN SUCH A SITUATION WE ARE OF THE VIEW THAT NO DISALLOWANCE OF EXPENDITURE OF INTEREST IS CALLED FOR. WE THEREFORE DIRECT THE DELETION OF ADDITION. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 18. SECOND GROUND (ADDITIONAL GROUND) IS WITH RESPECT TO DISALLOWANCE U/S 14A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAINS ON SALE OF SHARES OF RS 46,17,600/-. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S 14A NOT BE MADE. AO NOTED THAT ASSESSEE DID NOT MAKE ANY SUBMISSION. AO ACCORDINGLY WORKED OUT THE DISALLOWANCE 14 U/S 14A AT RS 39,45,722/-. SINCE THE AO HAD DISALLOWED THE ENTIRE INTEREST, NO SEPARATE DISALLOWANCE U/S 14A WAS ADDED WHILE COMPUTING THE INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER: 12.1 THE ISSUE HAS BEEN DISCUSSED BY THE LD. AO IN PARA 05 OF HIS ORDER. THE AO NOTED FROM THE COMPUTATION OF INCOME THAT THE APPELLANT HAD CLAIMED LONG TERM CAPITAL GAIN ON SALE OF SHARES TO THE EXTENT OF RS.46,17,600/-. THE AO HAS RECORDED THAT ALTHOUGH THE APPELLANT WAS CALLED UPON TO EXPLAIN WHY A DISALLOWANCE UNDER SECTION 14A SHOULD NOT BE MADE, THE APPELLANT MADE NO SUBMISSIONS IN THIS REGARD BUT MERELY REPLIED 'NOT APPLICABLE'. THE AO THEREFORE HELD THAT A DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WAS WARRANTED. THE SAME WAS COMPUTED BY HIM IN A TABULAR FORM WHICH IS EXTRACTED BELOW :- 12.2 HAVING COMPUTED THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IN THE ABOVE MANNER, HOWEVER, THE AO DID NOT ACTUALLY MAKE ANY SEPARATE ADDITION AS HE OBSERVED THAT THE ENTIRE INTEREST HAD BEEN DISALLOWED. 12.3 .IN HIS WRITTEN SUBMISSIONS THE APPELLANT HAS CONTENDED THAT HE HAD SOLD SHARES OF SHREE NIDHI WHICH WERE APPEARING IN THE PERSONAL BOOKS OF THE APPELLANT WHICH WERE SEPARATE FROM THE BOOKS OF GOLDEN STEEL CORPORATION. THE INVESTMENT IN THE ABOVE SHARES WAS MADE OUT OF PERSONAL FUNDS OF THE APPELLANT AND THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO SUCH INCOME. HOWEVER, THE APPELLANT CONTENDS, THE AO PRESUMED THAT INVESTMENT IN SUCH SHARES WAS MADE OUT OF LOANS APPEARING IN THE BOOKS OF GOLDEN STEEL CORPORATION AND DISALLOWED INTEREST WHICH WAS DEBITED IN THE BOOKS OF THE SAID CONCERN. THUS, THE APPELLANT SUBMITS, THE VERY BASIS OF THE DISALLOWANCE WAS INCORRECT. 12.4 I HAVE GIVEN CAREFUL CONSIDERATION TO THE CONTENTIONS OF THE APPELLANT. AS ALREADY NOTED THE AO DID NOT MAKE ANY SEPARATE DISALLOWANCE UNDER SECTION 14A OBSERVING THAT THE ENTIRE INTEREST CLAIMED HAD ALREADY BEEN DISALLOWED AND THEREFORE, SEPARATE DISALLOWANCE OF INTEREST PROPORTIONATE TO THE EXEMPT INCOME DID NOT ARISE. FOR THE SAME REASON, AS I HAVE CONFIRMED THE INTEREST DISALLOWANCE, THIS ISSUE NEED NOT BE ADJUDICATED UPON. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 19. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT THE CAPITAL GAINS AROSE ON THE SALE OF SHARES WERE REFLECTED IN THE PERSONAL BOOKS OF THE ASSESSEE AND NO LOANS ARE REFLECTED IN HIS PERSONAL BOOKS AND THAT 15 HIS PERSONAL BOOKS WERE SEPARATE FROM THE BOOKS OF GOLDEN STEEL CORPORATION. HE FURTHER SUBMITTED THAT THE AO HAD WRONGLY PRESUMED THAT THE INVESTMENT IN SHARES WAS MADE OUT OF LOANS APPEARING IN THE BOOKS OF GOLDEN STEEL CORPORATION. HE FURTHER SUBMITTED THAT NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE TO EARN EXEMPT INCOME AND THEREFORE NO DISALLOWANCE U/S 14A IS CALLED FOR. TO SUPPORT HIS CONTENTIONS HE POINTED TO THE COPY OF THE BALANCE SHEET OF GOLDEN STEEL CORPORATION AND HIS INDIVIDUAL BALANCE SHEET. HE FURTHER SUBMITTED THAT AO HAS NOT RECORDED ANY SATISFACTION BEFORE INVOKING THE PROVISIONS OF S. 14A. HE THEREFORE PRAYED THAT THE NO DISALLOWANCE U/S 14A IS CALLED FOR. LD DR ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT. 21. AO HAS NOTED THAT ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS WHICH ARE EXEMPT FROM TAX AND THEREFORE PROVISIONS OF SEC.14A ARE APPLICABLE. HE HAD WORKED OUT THE DISALLOWANCE OF RS 39,45,722/- U/S 14A BY FOLLOWING THE METHOD PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES. THE DISALLOWANCE WORKED OUT BY THE AO COMPRISED OF RS.35,58,479/- ON ACCOUNT OF INTEREST UNDER RULE 8D(2)(II) AND RS.3,87,242/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) OF THE RULES. HE THEREAFTER NOTED THAT SINCE HE HAD DISALLOWED THE INTEREST OF RS.97,52,187/- BEING INTEREST BEING NOT FOR THE PURPOSE OF BUSINESS, NO SEPARATE DISALLOWANCE U/S 14A WAS MADE. CIT(A) DID NOT ADJUDICATE THE ISSUE AS HE HAD CONFIRMED THE DISALLOWANCE OF INTEREST OF RS.97.52 16 LACS. BEFORE US, IT IS ASSESSEES CONTENTION THAT THE SHARES THAT HAVE BEEN SOLD ARE REFLECTED IN THE PERSONAL BOOKS AND NOT IN THE BOOKS OF GOLDEN STEEL CORPORATION AND NO FUNDS HAVE BEEN BORROWED IN HIS PERSONAL ACCOUNT. THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN FOUND TO BE UNTRUE. WE FURTHER FIND THAT BEFORE PROCEEDING TO DISALLOW THE EXPENSES U/S 14A THE AO HAS NOT RECORDED ANY MANDATORY SATISFACTION. WE FIND THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PUNJAB TRACTORS LTD (2017) 393 ITR 223 (P&H) HAS HELD THAT IT IS MANDATORY FOR THE AO TO RECORD THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, NO DISALLOWANCE U/S 14A IS CALLED FOR. THUS THE GROUND OF ASSESSEE IS ALLOWED. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.845/PUN/2014 FOR A.Y. 2009-10 IS ALLOWED. 23 . TO SUM UP, APPEAL OF THE ASSESSEE IN ITA NO.844/PUN/2014 IS DISMISSED AND THE APPEAL OF ASSESSEE IN ITA NO.845/PUN/2014 IS ALLOWED. ORDER PRONOUNCED ON 23 RD OCTOBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 23 RD OCTOBER, 2017. YAMINI 17 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT(A)-CENTRAL, PUNE. 4. CIT(CENTRAL), PUNE. 5. , , / DR, ITAT, A PUNE; 6. [ / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE