M/S SUMERU ENTERPROSES, Jaipur V. INCOME TAX OFFICER, WARD-6-4, Jaipur

ITA 888/JPR/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7740 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 21-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT A
• Assessee Lawyers: MANISH AGRARWAL
• Keywords: Depreciation; Business expenditure; Principle of natural justice; Rule of consistency; Additional evidence; Bad and doubtful debts
• Section: 143(3); 37(1); 143(1); 195; 113; 43; 13; 22

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 886 TO 888/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 TO 2014-15 M/S SUMERU ENTERPRISES H-1-29, OLD TOURIST HOTEL BUILDING, SUBHASH MARG, C-SCHEME, JAIPUR. CUKE VS. THE ITO, WARD-6(4), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFS 3266 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGRARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI B.K. GUPTA (CIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 19/10/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 20/01/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE THREE APPEALS FILED BY THE ASSESSEE AGAI NST THE ORDERS OF THE LD. CIT(A), AJMER DATED 25.02.2019 FOR THE A SSESSMENT YEARS 2012-13 TO 2014-15 RESPECTIVELY. SINCE COMMON ISSU ES ARE INVOLVED, ALL THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2. IN ITA NO. 886/JP/2019 FOR A.Y 2012-13, THE ASS ESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOW ANCE OF THE EXPENDITURE OF RS. 4,77,36,535/- CLAIMED ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS, ARBITRARILY BY SOLELY RELYI NG UPON OBSERVATIONS OF LD. AO, THUS THE DISALLOWANCE SO MA DE DESERVES TO BE DELETED. 1.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLD ING THE OBSERVATION OF LD. AO THAT THE INTEREST PAID IS NOT A BUSINESS EXPENDITURE BY IGNORING THE FACT THAT ASSESSEE HAS PROVED DIRECT NEXUS BETWEEN THE BORROWED FUNDS AND ITS UTILIZATIO N IN BUSINESS OF ASSESSEE THUS THE OBSERVATIONS DESERVES TO BE IG NORED AND EXCLUDED. 1.2 THAT THE LD. CIT(A) HAS FURTHER ERRED IN MISINT ERPRETING THE PROVISIONS OF SECTION 37(1) AND THEREBY CONSIDERING THE INTEREST PAID ON FRESH LOAN TAKEN TO REPAY THE OLD LOAN AS N OT FOR BUSINESS PURPOSE, THUS THE SAID OBSERVATION BEING BASED ON N O LOGIC DESERVES TO BE IGNORED. 1.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS GROSSLY ERRED IN NOT FOLLOWING THE ORDER OF THE HON'BLE ITAT, JAIPUR BENCH, JAIPUR WHEREIN ADDITION OF SIMILAR NATURE AND IN IDENTICAL CIRCUMSTANCES WERE DELETED, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY ADDITION CON FIRMED BY LD. CIT(A) DESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOW ANCE OF AN EXPENDITURE OF RS. 25,282/-, CLAIMED ON ACCOUNT OF DEPRECIATION CHARGED DURING THE RELEVANT YEAR, ARBITRARILY. APPE LLANT PRAYS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 3 DEPRECIATION IS A STATUTORY ALLOWANCE AND DESERVES TO BE ALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOW ANCE OF THE EXPENDITURE OF RS. 11,59,34,654/- CLAIMED BY ASSESS EE U/S 36(1)(VII) ON ACCOUNT OF EXCEPTIONAL ITEMS DURING T HE RELEVANT YEAR BY IGNORING THE SUBMISSIONS MADE AND EVIDENCES ADDUCED, THUS DISALLOWANCE SO MADE DESERVES TO BE DELETED. 3.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORI NG THE FACT THESE EXCEPTIONAL CHARGES STOOD DECLARED IN THE RET URN INCOME OF THE ASSESSEE FILED IN THE PRECEDING ASSESSMENT YEAR S AND HAVE ALREADY SUFFERED TAX IN PRECEDING ASSESSMENT YEARS AND IF THE SAME IS NOT ALLOWED IT WOULD TANTAMOUNT TO DOUBLE T AXATION, THUS THE DISALLOWANCE SO MADE DESERVES TO BE DELETED. 3.2 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT ASSESSEE HAS DULY COMPLIED WITH ALL THE CONDITIONS AS ENUMERATED IN SECTION 36(1)(VII) THUS THE RESULTANT ADDITION D ESERVES TO BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. CIT(A) HAS GROSSLY ERRED IN NOT ALLOWING SET OFF OF THE BR OUGHT FORWARD UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATIO N ARBITRARILY WITHOUT ANY COGENT REASONS, THUS THE SAME DESERVES TO BE ALLOWED. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE HAS FILED ITS RETURN OF INCOME ON 31.07.2012 DECLARING A LOSS OF RS.16,48,87,898/-. THE MATTER WAS TAKEN UP FOR SCRUTINY ASSESSMENT WHE REBY THE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 4 ASSESSING OFFICER ASSESSED THE LOSS AT RS.11,89,097 /- VIDE ORDER PASSED U/S 143(3) DATED 28.03.2015 BY MAKING DISALLOWANCES OF INTEREST PAID ON BORROWED FUNDS OF RS.4,77,36,535/-, DEPRECIATION OF RS.25,282/- AND DISALLOWANCE OF RS.11,59,34,654/- BEING EXCEPTIONA L ITEMS CLAIMED IN PROFIT & LOSS ACCOUNT. ON APPEAL, THE FINDINGS OF T HE AO HAVE BEEN CONFIRMED BY THE LD CIT(A) AND AGGRIEVED BY THE ORD ER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. REGARDING GROUND NOS. 1 TO 1.3, THE LD. AR SUBMI TTED THAT IN THESE GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGE D THE ACTION OF THE LD. CIT(A) OF UPHOLDING THE DISALLOWANCE OF RS.4,77 ,36,535/- MADE IN RESPECT OF INTEREST EXPENDITURE CLAIMED BY THE ASSE SSEE BY MISINTERPRETING THE PROVISIONS OF SECTION 37(1) OF THE ACT AND BY SOLELY RELYING ON THE OBSERVATIONS OF THE AO. AT THE OUTSE T, IT WAS SUBMITTED THAT THE ISSUE UNDER CONSIDERATION HAS BEEN ADJUDIC ATED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09, 2009-10 AND 2011-12 VIDE COMMON ORDER DATED 22.08.2016 IN ITA NOS. 446/JP/20 12, 764/JP/2013 & 158/JP/2015. ALSO IN EARLIER YEARS, I.E. AY 2004- 05 TO 2007-08 DISALLOWANCE OF SIMILAR NATURE WAS MADE, WHICH HAS BEEN DELETED BY THE TRIBUNAL. FOR AY 2004-05, I.E. FIRST YEAR OF DISALL OWANCE, THE TRIBUNAL HAS DELETED THE DISALLOWANCE VIDE ITS ORDER DATED 1 0.12.2010 IN ITA NO. 282/JP/2010 BY OBSERVING AS UNDER: 7. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PE RUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FIN DING OF LD. CIT(A). THE LD. CIT(A) HAS ASCERTAINED THE FACTUAL ASPECT THAT THIS IS NOT A CLOSURE OF BUSINESS BUT TEMPORARY DIS CONTINUANCE OF ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 5 BUSINESS. WE FURTHER NOTED THAT IN EARLIER YEARS TH E INTEREST EXPENDITURE CLAIMED BY ASSESSEE WERE ALLOWED BY THE DEPARTMENT ITSELF. HOWEVER, IN THE YEAR UNDER CONSIDERATION TH E SAME WAS NOT ALLOWED FOR THE REASON THAT DURING THE YEAR UNDER C ONSIDERATION FRESH LOANS HAVE BEEN TAKEN BY THE ASSESSEE FOR REP AYMENT OF OLD LOANS TAKEN FOR THE PURPOSE OF BUSINESS. FRESH LOAN S TAKEN DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF REP AYING THE LOANS TAKEN IN PAST FOR THE PURPOSE OF BUSINESS, IN OUR CONSIDERED VIEW DOES NOT CHANGE THE CHARACTER OF THE LOAN TAKE N DURING THE YEAR UNDER CONSIDERATION. THE LOAN TAKEN FOR THE YE AR UNDER CONSIDERATION HAS TO BE TREATED AS TAKEN FOR BUSINE SS PURPOSES FOR THE SIMPLE REASON THAT THIS LOAN WAS SUBSTITUTED WI TH THE LOANS TAKEN IN PAST AFTER REPAYING THE OLD LOANS. THERE I S A DIRECT NEXUS BETWEEN THE FRESH LOANS AND OLD LOANS BECAUSE THE F RESH LOANS HAVE BEEN UTILIZED FOR THE PURPOSE OF REPAYING THE OLD LOAN. NOW FRESH LOANS PARTAKES THE CHARACTER OF LOANS TAKEN F OR BUSINESS PURPOSES. INTEREST PAID ON OLD LOANS WAS HELD AS AL LOWABLE, THEREFORE, INTEREST PAID ON FRESH LOANS HAS TO BE A LLOWED AS THE CHARACTER OF LOAN REMAINS THE SAME BUT ONLY CHANGE OF THE NAME OF THE PERSON / INSTITUTION FROM WHOM THE FRESH LOA NS ARE TAKEN. THEREFORE, THE DECISION OF HONBLE ALLAHABAD HIGH C OURT CONSIDERED BY LD. CIT(A) IN CASE OF RAJ KUMAR SINGH & CO. (SUPRA) IS DIRECTLY ON THE ISSUE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT(A). ACCORDING LY, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) IN RESPECT TO BOTH T HE DISALLOWANCES DELETED BY HIM. ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 6 5. FURTHER, THE TRIBUNAL HAS ALSO DISMISSED THE APP EALS OF THE DEPARTMENT FOR THE ASSESSMENT YEAR 2005-06 & 2007-0 8 VIDE ORDER DATED 13.01.2011 PASSED IN ITA NO.416 & 417/JP/2010 BY OBSERVING THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL FOR THE ASSESSMENT YEAR 2004-2005 AND CONFIRMED THE ORDER O F LD. CIT(A) DELETING THE DISALLOWANCES. IT WAS ACCORDINGLY SUBM ITTED THAT THE DISALLOWANCE OF RS.4,77,36,535/- ON ACCOUNT OF INTE REST EXPENDITURE CLAIMED BY THE ASSESSE MAY BE DELETED. 6. PER CONTRA, THE LD. CIT/DR RELIED ON THE FINDING OF THE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE FIND INGS OF THE LD. CIT(A) WHICH ARE CONTAINED AT PARA 4.3 WHICH READ A S UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STAT EMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAR EFULLY. IT IS SEEN THAT THE AO HAS DISCUSSED IN DETAIL AT PARA 4 (PAGE NO. 5 TO 8), AS TO WHY THE INTEREST OF RS. 4,77,36,535/- DEBITED BY THE APPELLANT IN THE BOOKS OF ACCOUNTS WAS NOT HAVING ANY NEXUS WITH THE BUSINESS OF THE APPELLANT. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS FAILED TO SHOW THAT THE INTEREST OF RS. 4,77,36,535/- DEBITED BY THE APPELL ANT WAS INCURRED IN INVESTMENT OF THE BUSINESS CARRIED ON B Y THE APPELLANT. THEREFORE, IN VIEW OF THE FACTS DISCUSSE D BY THE AO IN THE ASSESSMENT ORDER IN DETAIL, I AM OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY DISALLOWED THE INTEREST OF RS. 4,77,36,535/-. ACCORDINGLY, THE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 7 DISALLOWANCE OF RS. 4,77,36,535/- MADE BY THE AO IS HEREBY CONFIRMED. 7. FURTHER, OUR REFERENCE WAS DRAWN TO THE FINDINGS OF THE AO WHICH READ AS UNDER: DISALLOWANCE ON A/C OF FINANCIAL CHARGES & DEPREC IATION : 1.1 THE ASSESSEE IS A PARTNERSHIP FIRM CAME INTO EX ISTENCE IN TERMS OF PARTNERSHIP DEED DATED 31.01.1987 AND CONS TRUCTED A COMMERCIAL COMPLEX NAMELY LAXMI COMPLEX AT SUBHASH MARG, M.I.ROAD, JAIPUR. DURING THE COURSE OF CONSTRUCTION OF THE COMPLEX A DISPUTE AROSE BETWEEN THE PARTNERS AND THEREFORE, ONE OF THE PARTNER SMT. SUDHA YADAV FILED A SUIT IN THE YEAR 1 995 FOR RENDITION OF ACCOUNTS AND DISSOLUTION OF THE FIRM A ND ACCORDINGLY, THE HON'BLE RAJASTHAN HIGH COURT HAD GRANTED THE ST AY IN THE MONTH OF MARCH, 1996, ON FURTHER SALE OF THE OFFICE S/ SHOPS CONSTRUCTED IN THE COMMERCIAL . COMPLEX, THEREFORE, AFTER MARCH, 1996 NEITHER ANY SALE WAS TAKEN PLACE NOR ANY CONST RUCTION ACTIVITY WAS CARRIED OUT AND THE PORTION LEFT UNDEV ELOPED AS ON THE DATE OF STAY REMAINED IN ITS ORIGINAL POSITION. 1.2 DURING THE YEAR UNDER CONSIDERATION, TWO PARTNE RS NAMELY SMT. SUDHA YADAV AND SHRI PRASHANT KUMAR YADAV RETI RED AND REMAINING PARTNERS I.E. SMT. KALPANA KOTHARI AND M/ S.PADMINI ENTERPRISES PVT. LTD., HAS DECIDED TO CONTINUE THE FIRM IN PARTNERSHIP AND GIVE EFFECT THESE CHANGES DEED OF R ETIREMENT AND RECONSTITUTION OF PARTNERHIP IS ENTERED INTO BETWEE N THE PARTIES ON 17.02.2012. ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 8 1.3 DURING THE YEAR UNDER CONSIDERATION THE LONG PE NDING LITIGATION BETWEEN PARTNERS SETTLED THROUGH A SETTLEMENT AGREE MENT DATED 17.02.2012 AND HON'BLE ARBITRATOR JUSTICE N.M. KASL IWAL HAS ACCORDINGLY PASSED AN ARBITRATION AWARD DATED 20.03 .2012, ACCORDING TO WHICH TWO PARTNERS SMT. SUDHA YADAV AN D SHRI PRASHANT KUMAR YADAV RETIRED FROM THE FIRM. AS PER SETTLEMENT AGREEMENT BOTH THE PARTNERS SMT. SUDHA YADAV AND SH RI PRASHANT YADAV RECEIVED BUILT UP AREA 5686 SQ.FT. AND 11,837 SQ.FT RESPECTIVELY OUT OF TOTAL BUILT UP AREA. FURTHER, T HE CONTINUING PARTNERS ALSO MADE PAYMENT OF RS.61,50,000/- TO EAC H OF THEM. 2. THE ASSESSEE FIRM CONSTRUCTED A COMMERCIAL COMPL EX NAME 'LAXMI COMPLEX' IN F.Y. 1995-96 RELEVANT TO A.Y. 19 96-97 THEREAFTER DUE TO DISPUTE AMONGST THE PARTNERS/OWNE RS OF LAND SOME SHOPS OFFICES WERE SOLD BUT TITLE COULD NOT BE TRANSFERRED THROUGH REGISTERED DEED. SIMULTANEOUSLY, ADVANCES W ERE TAKEN AGAINST SOME OFFICE/SHOPS BUT SALE TRANSACTIONS COU LD NOT BE FINALIZED. THERE WERE SOME CREDITORS ALSO. SINCE, T HEN THE ASSESEE WORKING OUT INTEREST ON BALANCE AMOUNT RECEIVABLE F ROM THE PERSON TO WHOM POSSESION HAVE BEEN TRANSFERRED IN L IEU OF PART SALE CONSIDERATION AND INTEREST IS WORKED OUT ON TH E ON THE OUTSTANDING LIABILITIES (LOAN TAKEN). DURING THE YE AR INTEREST PAID ON LOANS INCLUDING FINANCIAL BROKERAGE AND BANK COM MISSION IS RS.4,77,36,535/-. 3. AS PER POINT NO.28(B) OF FORM NO.3CD REFLECTING FINISHED AND WORK IN PROGRESS THE OPENING STOCK IN RESPECT OF 'C OMMERCIAL COMPLEX WAS SHOWN AT 21,503 SQ. FEET AND CLOSING ST OCK WAS ALSO ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 9 SHOWN AT AN EVEN FIGURE. THIS REFLECTED THAT NO CON STRUCTION WORK WAS CARRIED OUT IN COMMERCIAL COMPLEX PROJECT DURIN G THE YEAR UNDER CONSIDERATION. THERE BEING NO BUSINESS ACTIVI TY IN THE A.Y. 2011-12 IN THE ASSESSEE FIRM IN SO FAR AS REAL ESTA TES WAS CONCERN NEITHER ANY SHOPS NOR OFFICES WERE CONSTRUCTED NOR SOLD. THE ASSESSEE WAS ASKED TO FURNISH AN EXPLANATION AS TO WHY INTEREST EXPENSES AND DEPRECIATION THEREOF SHOULD NOT BE DIS ALLOWED. THE REPLY OF THE ASSESSEE JUSTIFYING HIS CLAIM SUBMITTE D VIDE LETTER DATED 24.10.2014 JUSTIFICATION OF PAYMENT MADE TO PERSON SPECIFIED U /S.40A(2)(B) : DURING THE YEAR UNDER CONSIDERATION ASSESSEE FIRM H AS MADE INTEREST PAYMENT RS.71,47,640/- TO THE RELATIVES WH ICH ARE COVERED U/ S.40A(2)(B) DETAILS OF THE SAME ARE AS U NDER : S. N NAME OF PERSON AMOUNT PAID RATE OF INTEREST 1. SMT. AM ARAO DEVI SETHI 10,29,292.00 13.20% 2. SHRI NIHAR KOTHARI 6,05, 552.00 13.20% 3. SHRI SANCHAI SETHI 8,18,169.00 13.20% 4. SMT. SANGEETA SETHI 10,93,075.00 13.20% 5. SH. SOHAN LAL SETHI 19,18,610.00 13.20% 6. SH. SIDHARTH KOTHARI 10, 91, 101.00 13.20% 7. SH . GULAB KOTHARI 5,91,841.00 13.20% TOTAL 71,47,640.00 DURING THE YEAR UNDER CONSIDERATION ASSESSEE FIRM H AS PAID INTEREST TO VARIOUS PARTIES RANGING BETWEEN 13 TO 1 5 PERCENT WHICH DEPENDS UPON THE INTEREST RATE PREVAILING IN THE MARKET. ON THE PERUSAL OF THE AFORESAID CHART, IT IS CRYSTA L CLEAR THAT HE ASSESSEE FIRM HAS MADE INTEREST PAYMENT TO THE RELA TED PARTIES @ ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 10 13.20% WHICH IS WITHIN THE RANGE OF PREVALENT MARKE T RATE AT WHICH INTEREST WAS PAID TO UNRELATED PARTIES. FURTH ER ALL THE AFORESAID SUM AS PAID BY THE ASSESSEE FIRM HAS BEEN DULY SHOWN BY THE RELEVANT PERSONS IN THEIR RETURN OF INCOME F ILED FOR THE A.Y. 2012-13. IT IS THUS REQUESTED THAT THE AMOUNT SO PA ID DESERVES TO BE ALLOWED BEING QUITE REASONABLE LOOKING TO THE MARKET. ' REPLY OF THE ASSESSEE HAS BEEN EXAMINED BUT NOT FOU ND ACCEPTABLE DUE TO THE FOLLOWING REASONS: (I) LD. A/R HAS CONTENDED THAT THE INTEREST EXPENDI TURE IS ADMISSIBLE U/S.36(1)((III) AND 37(1). IN THIS REGAR D IT IS STATED THAT SECTION 36(1)(III) CATEGORICALLY SPELLS THAT ONLY T HAT INTEREST PAID IS AN ALLOWABLE EXPENDIURE IF IT IS IN RESPECT OF CAPI TAL BORROWED FOR THE PURPOSE OF BUSINESS. (II) THE ABOVE EXPENDITURE CANNOT BE CONSTRUED AS F OR THE PURPOSE OF BUSINESS OR PROFESSION BECAUSE THERE IS Y NO NEXUS AT ALL BETWEEN THE INCOME EARNED AND THE EXPENDITURE I NCURRED AND THIS THE PRECISE REASON THAT DISALLOWANCE IS PROPOS ED U/S.37(1). IN VIEW OF THE ABOVE ALSO SEC. 36(1)(III) IS ANY WAYS NOT APPLICABLE BECAUSE OF INTRODUCTION OF THE PROVISO TO SEC. 36(1 )(III). (III) WITH REGARD TO INTEREST EXPENDITURE, THE ASSE SSEE COULD NOT FURNISH ANY DOCUMENT/EVIDENCE SO AS TO CLAIM THAT T HERE IS NEXUS BETWEEN THE INTEREST INCOME AND INTEREST EXPENDITUR E. IN FACT, INTEREST INCOME WAS EARNED BY THE ASSESSEE FROM SUN DRY DEBTORS WHO HAD NOT MADE COMPLETE PAYMENTS FOR PURCHASE OF SAID SHOPS AND OFFICES. SO, AS PER THE AGREEMENT, THE BUYERS W ERE SUPPOSED ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 11 TO PAY CERTAIN AMOUNT OF INTEREST AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT. SO, INTEREST INCOME WAS CONSEQUEN TIAL TO THE AGREEMENT BETWEEN THE ASSESSEE AND THE BUYERS. (IV) AS REGARDS THE INTEREST PAYMENT, IT DESERVES A MENTION HERE THAT THE ASSESSEE HAD TAKEN LOANS FROM VARIOUS PART IES IN THE F.Y. 1995-96 FOR TIRE PURPOSE OF BUSINESS OF REAL ESTAT E I.E. FOR CONSTRUCTING SHOPS AND OFFICES IN A COMMERCIAL COMP LEX. EVERY YEAR THE ASSESSEE TAKE UP FRESH LOANS BUT NOT FOR T HE PURPOSE OF BUSINESS OF REAL ESTATE AND SALE OF SHOPS AND OFFIC ES, BUT TO REPAY THE OLD LOANS. THESE LOANS ARE TAKEN UP JUST TO REPAY THE OLD LOANS. SO, , THE EXPENDITURE HAS BEEN INCURRED NOT FOR THE PURP OSE OF BUSINESS. SEC. 37(1) CATEGORICALLY STATES THAT O NLY THAT EXPENDITURE SHOULD BE ALLOWED WHICH HAS BEEN INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ANY DI STANT OR REMOTE CONNECTION BETWEEN THE TWO IS NOT SUFFICIENT. IN TH IS CASE, IT IS VERY CLEAR THAT NEXUS OF INTEREST PAID IS WITH STOC K IN TRADE AND NOT WITH SUNDRY DEBTORS. THEREFORE, IT IS NOT TO BE ALL OWED AGAINST INTEREST INCOME. (V) IT HAS BEEN HELD IN VARIOUS JUDICIAL PRONOUNCEM ENTS THAT THE EXPENDITURE SHOULD BE FOR THE PURPOSE OF BUSINESS A ND CONNECTION BETWEEN EXPENDITURE AND OBJECT MUST BE REAL AND NOT REMOTE OR ILLUSORY AS HELD IN THE CASES OF CIT VS. VAZIR SULA TON TOBACCO CO. LTD ( 1978) 114 ITR 605 (COL.)- CO. (VI) THE UNDERSIGNED WISHES TO PLACE RELIANCE ON TH E DECISION OF (A) HON'BLE KERALA HIGH COURT IN THE CASE OF T.M. C HACKO AND PARTNERS VS. CIT (1978) 195 ITR 905 ( KER.) BUSINES S EXPENDITURE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 12 CONDITION PRECEDENT BUSINESS MUST BE IN EXISTENCE- ASSESSEE CARRYING ON BUSINESS FORM 1971-72 TO 1978-79 DUE TO A LEGAL BAR- INTEREST ON KIST ARREARS NOT DEDUCTIBLE IN ASSESSME NT YEAR 1976-77 INCOME TAX ACT, 1961. THE AUTHORITIES AS WELL AS THE TRIBUNAL CAME TO THE CONCLUSION THAT, ON ACCOUNT OF THE PROHIBITION IN LAW, THE ASS ESSEE COULD NOT CARRY ON THE ABKARI BUSINESS AND DURING THE PREVIOU S YEAR THE ASSESSEE OBTAINED REMUNERATION AS AN EMPLOYEE FROM M/S CT. THEREAFTER, IT WAS NOT OPEN TO THE TRIBUNAL TO COME TO THE CONCLUSION THAT THE ASSESSEE ' MUST BE CONSIDERED T O HAVE CARRIED ON ITS BUSINESS IN A PASSIVE SENSE DURING T HE PREVIOUS YEAR' FOR THE ASSESSMENT YEAR. THEREFORE, THE TRIBU NAL ERRED IN LAW IN HOLDING THAT DURING THE PREVIOUS YEAR THE AB SENCE OF ACTIVE TRADE AMOUNTED TO LULL IN THE BUSINESS ACTIVITY & N OT A DISCONTINUANCE IN THE BUSINESS SECTION. THE FACTS OF THE INSTANT CASE ARE VERY SIMILAR TO T HOSE CITED IN THE ABOVE CASE. IN BOTH THE CASES THERE WAS A LEGAL BAR ON THE OPERATION OF BUSINESS. AS DISCUSSED ABOVE HON'BLE K ERALA HIGH COURT HELD THAT THE EXPENDITURE INCURRED DURING THE PERIOD OF LEGAL BAR SHOULD BE DISALLOWED HOLDING THAT THERE WAS NO BUSINESS AND BAR SHOULD BE DISALLOWED HOLDING THAT THERE WAS NO BUSINESS AND SO NO EXPENDITURE SHALL BE ALLOWED. (B) HAJI AZIZ AND ABDUL SHAKOOR BROS. VS. CIT (41) ITR 350 (SC)-- IT IS HELD THAT - ' EXPENSES WHICH ARE PERMITTED AS DEDUCTIONS ARE SUCH AS ARE MADE FOR THE PURPOSE OF CARRYING ON THE BUSINESS, I.E., TO ENABLE A PERSON TO CARRY ON AND EARN PROFIT IN T HE BUSINESS. IT IS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 13 NOT ENOUGH THAT THE DISBURSEMENTS ARE MADE IN THE C OURSE OF OR ARISE OUT OF OR ARE CONCERNED WITH OR MADE OUT OF T HE PROFITS OF THE BUSINESS BUT THEY MUST ALSO BE FOR THE PURPOSE OF E ARNING THE PROFITS OF THE BUSINESS. THEY CANNOT BE DEDUCTED IF THEY FALL ON THE ASSESSEE IN SOME CHARACTER OTHER THAN THAT OF A TRA DER.' (C) CIT VS. SHAHIBAG ENTREPRENEURS (P) LTD. ( 1995 ) 215 ITR 810 GUJ.)- PURPOSE MUST BE TO KEEP THE TRADE GOING - TH E TRUE TEST OF AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FO T HE PURPOSES OF TRADE OR BUSINESS IS THAT IT IS INCURRED BY THE ASS ESSEE AS INCIDENTAL TO HIS TRADE FOR THE PURPOSE OF KEEPING THE TRADE GOING AND OF MAKING IT PAY AND NOT IN ANY OTHER CAPACITY THAT OF A TRADER. DEDUCTION IS LIMITED TO INTEREST ON THE PAR T OF CAPITAL WHICH IS USED FOR THE PURPOSE OF BUSINESS- INTEREST PAID ON BORROWED CAPITAL WILL BE ALLOWED AS DEDUCTION ONLY IF THE CAPITAL WAS BORROWED AND USED FOR THE PURPOSE OF BUSINESS A ND THAT IF IT IS USED FOR A PURPOSE OTHER THAN THAT OF BUSINESS, THEN INTEREST TO THE EXTENT TO WHICH THE CAPITAL WAS SO USED, WIL L NOT BE ALLWOED P.R.M.S. RAMANATHAN CHETTIAR VS.CIT(1969) 7 2ITR 534 (MAD.) /M.S.P. RAJAV CIT (1976)105 ITR 295 (MAD.) IT IS A SETTLED STATE OF AFFAIRS THAT EXPENDITURE S HOULD BE INCURRED FOR THE PURPOSE OF BUSINESS WHICH IS CARRIED ON IN THE ACCOUNTING YEAR AND THE PROFITS OF WHICH ARE UNDER ASSESSMENT. DECUTION CAN BE PERMITTED IN RESPECT OF ONLY THOSE EXPENSES AND LOSSES WHICH ARE INCURRED IN THE RELEVANT ACCOUNTING YEAR. THOUG H THE ASSESSEE HAS BEEN STATING THAT THERE IS NO DISCONTINUANCE OF THE BUSINESS BUT THERE IS ONLY A STAY OF THE COURT, YET IT IS WO RTH CONSIDERING ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 14 THAT THE PERIOD OF STAY HAS BEEN SUBSTANTIAL AND TH ERE IS NO CHANCE OF ITS VACATION CONSIDERING THE FACT THAT TH ERE IS DISPUTE BETWEEN THE PARTNERS OF THE CONCERN. ACCORD INGLY, DEDUCTION CANNOT BE ALLOWED FOR PAYMENT OF INTEREST ON LOANS TAKEN FOR PAYING OFF EARLIER LOANS & NOT FOR THE PU RPOSE OF THE BUSINESS OF THE ASSESSEE. VIII. IT IS IMPORTANT TO MENTION THAT ASSESSEE HAS TAKEN ADVANCE OF RS.16,12,270/- IN F.Y. 1995-96 SINCE THEN COST O F SHOP/OFFICES HAS INCREASED MANY TIMES. NOW IN THE PERSPECTIVE OF INCREASE IN COST OF PROJECT MANY TIMES (AS CLAIMED BY ASSESSEE DUE TO OUTSTANDING LIABILITY OF LOANS) CORRESPONDING INTER EST ON AMOUNT OF ADVANCE IS NOT TAKEN TO EVALUATE THE SALE PRICE OF SHOPS/OFFICE AT THE MARKET RATE WHENEVER THE DISPUTE IS RESOLVED . BUT ASSESSEE HAS NOT MADE ANY SUCH ENTRIES. IT DOES NOT REFLECT THE CORRECT CORRESPONDING VALUE OF STOCK AGAINST WHICH ADVANCES HAVE BEEN TAKEN. IT ALSO DOES NOT GIVE THE TRUE VAL UE OF WORK IN PROGRESS. 5. FROM THE ABOVE FACTS IT IS CONCLUDED THAT THE PA YMENT OF INTEREST HAS NO NEXUS WITH THE BUSINESS PURPOSES OF THE ASSESSEE. THEREFORE, IT IS NOT ADMISSIBLE AGAINST I NTEREST DECLARED ON ACCRUAL BASIS ON AMOUNT OF OUTSTANDING DEBTORS. THOUGH THE ISSUE HAS BEEN DECIDED BY THE HON'BLE ITAT, JAIPUR BENCH, JAIPUR FOR A.Y. 2004-05, 2005-06 AND 2007-08 BUT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HON'BLE ITAT AND FURTHER APPEAL BEFORE THE HON'BLE HIGH COURT IS STILL PENDING. THIS ISSUE HAS NOT ATTAINED FINALITY ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 15 YET. THUS, PAYMENT OF INTEREST OF INTEREST OF RS.4,77,36 ,535/- AND DEPRECIATION OF RS.25,282/- TOTALING TO RS.4,77 ,64,147/- ARE NOT CONSIDERED AS BUSINESS EXPENDITURE AND HEREBY A DDED TO THE INCOME OF THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 446/JP/2012, 764/JP2013 & 158/JP/2015 PE RTAINING TO ASSESSMENT YEARS 2008-09, 2009-10 & 2011 -12 IN PARA 5.2 OF ITS ORDER HAS DECIDED THE ISSUE AND RELEVANT FINDINGS R EAD AS UNDER :- 5.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE WRITTEN SUBMISSION THE ASSESSEE HAS S UBMITTED AS UNDER :- AT THE OUTSET, IT IS SUBMITTED THAT THE DISALLOWA NCE OF IDENTICAL NATURE BY MAKING SIMILAR ALLEGATION UNDER SIMILAR C IRCUMSTANCE WERE ALSO MADE IN CASE OF THE ASSESSEE FOR ASSESSME NT YEARS 2004-05 WHICH STOOD DELETED BY THE LD. CIT (A) AND SUCH ORDERS WERE UPHOLD BY THIS HONBLE TRIBUNAL BY DISMISSING THE APPEAL OF THE DEPARTMENT VIDE ORDER DATED 10-12-2010 IN ITA NO.282/JP/2010 (APB 39-41). THE RELEVANT OBSERVATIO N OF HONBLE BENCH IN ORDER FOR A.Y.2004-05 AT PAGE 5 IN PARA 7 ARE REPRODUCED HEREIN BELOW FOR READY REFERENCE (APB 41 ). 7. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PE RUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT(A). THE LD. CIT(A) HAS ASCERTAINED THE FACT UAL ASPECT THAT THIS IS NOT A CLOSURE OF BUSINESS BUT T EMPORARY DISCONTINUANCE OF BUSINESS. WE FURTHER NOTED THAT I N EARLIER YEARS THE INTEREST EXPENDITURE CLAIMED BY ASSESSEE WERE ALLOWED BY THE DEPARTMENT ITSELF. HOWEVER, IN THE Y EAR UNDER CONSIDERATION THE SAME WAS NOT ALLOWED FOR TH E ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 16 REASON THAT DURING THE YEAR UNDER CONSIDERATION FRE SH LOANS HAVE BEEN TAKEN BY THE ASSESSEE FOR REPAYMENT OF OL D LOANS TAKEN FOR THE PURPOSE OF BUSINESS. FRESH LOAN S TAKEN DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF REPAYING THE LOANS TAKEN IN PAST FOR THE PURPOSE OF BUSINESS, IN CONSIDERED VIEW DOES NOT CHANGE THE CH ARACTER OF THE LOAN TAKEN DURING THE YEAR UNDER CONSIDERATI ON. THE LOAN TAKEN FOR THE YEAR UNDER CONSIDERATION HAS TO BE TREATED AS TAKEN FOR BUSINESS PURPOSES FOR THE SIMP LE REASON THAT THIS LOAN WAS SUBSTITUTED WITH THE LOAN S TAKEN IN PAST AFTER REPAYING THE OLD LOANS. THERE IS A DI RECT NEXUS BETWEEN THE FRESH LOANS AND OLD LOANS BECAUSE THE F RESH LOANS HAVE BEEN UTILIZED FOR THE PURPOSE OF REPAYIN G THE OLD LOAN. NOW FRESH LOANS PARTAKES THE CHARACTER OF LOA NS TAKEN FOR BUSINESS PURPOSES. INTEREST PAID ON OLD LOANS W AS HELD AS ALLOWABLE, THEREFORE, INTEREST PAID ON FRESH LOA NS HAS TO BE ALLOWED AS THE CHARACTER OF LOAN REMAINS THE SAM E BUT ONLY CHANGE OF THE NAME OF THE PERSON / INSTITUTION FROM WHOM THE FRESH LOANS ARE TAKEN. THEREFORE, THE DECI SION OF HONBLE ALLAHABAD HIGH COURT CONSIDERED BY LD. CIT( A) IN CASE OF RAJ KUMAR SINGH & CO. (SUPRA) IS DIRECTLY O N THE ISSUE. THEREFORE, WE SEE NO REASON TO INTERFERE WIT H THE FINDING OF LD. CIT(A). ACCORDINGLY, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) IN RESPECT TO BOTH THE DISALLOWAN CES DELETED BY HIM. FURTHER THIS HONBLE TRIBUNAL HAS ALSO DISMISSED TH E APPEALS OF THE DEPARTMENT FOR THE ASSESSMENT YEAR 2005-06 & 20 07-08 VIDE ORDER DATED 13.01.2011 PASSED IN ITA NOS. 416 & 417 /JP/2010 (APB 42-45) BY OBSERVING THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE ITAT FOR THE ASSESSMENT YEA R 2004-05 AND CONFIRMED THE ORDER OF LD. CIT(A), DELETING THE DISALLOWANCES. IN THE YEAR UNDER APPEAL LD. CIT(A) CONFIRMED THE DISALLOWANCE BY ALLEGING THAT THERE WERE CERTAIN FA CTS WHICH WERE NOT BROUGHT ON RECORD IN PRECEDING ASSESSMENT YEARS THEREFORE, ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 17 THE JUDICIAL PROPRIETARY COULD NOT BE FOLLOWED. SUC H CONCLUSION OF LD. CIT(A) IS BASED ON MIS-APPRECIATION OF THE FACT S SOLELY RELYING UPON THE REMAND REPORT GIVEN BY THE AO (APB 8-11) W HEREIN THE LD. AO HAD EXCEEDED HIS JURISDICTION AND TRIED TO C OMMENT UPON THE MATTERS WHICH HAVE ALREADY BEEN SETTLED BY THE HONBLE ITAT IN THE CASE OF THE APPELLANT COMPANY ITSELF SPECIAL LY WITH REFERENCE TO THE COST OF WORK IN PROGRESS CARRIED O VER FROM A.Y. 1995-96 WHICH ORDER TRAVELED UP TO THE HONBLE ITAT AND THE CLOSING WORK IN PROGRESS AS CLAIMED BY THE APPELLAN T WAS CONFIRMED BY THE HONBLE BENCH HOWEVER MERELY FOR A TYPOGRAPHICAL ERROR SUCH COST WHICH HAS BEEN MADE B ASIS FOR DISBELIEVING THE SUBMISSIONS MADE. SUCH AN ERROR WA S CONSIDERED AND DECIDED IN FAVOUR OF APPELLANT BY THE HONBLE I TAT IN RESPECT TO THE ASSESSEES APPEAL FOR A.Y. 1996-97 IN ITA NO . 392/JP/2003 DATED 07.11.2006 WHILE DISPOSING GROUND OF APPEAL N O.4 AND RELEVANT OBSERVATIONS ARE AT PAGE 16 & 17 AT PARA 4 .7 OF THE ORDER. IN THE AFORESAID CONTEXT, IT IS SUBMITTED THAT THE LD. AO HAD DISALLOWED THE INTEREST EXPENSES OF RS. 2,51,64,779 /- PAID ON BORROWED FUNDS, ON THE GROUND THAT NO BUSINESS ACTI VITY WAS CARRIED ON DURING THE ASSESSMENT YEAR UNDER APPEAL AND THERE IS NO DIRECT NEXUS OF INTEREST EXPENSES WITH THE BUSIN ESS OF THE APPELLANT WHICH FINDING IS BASED TOTALLY ON ASSUMPT IONS AND PRESUMPTIONS. FACTS OF THE CASE ARE THAT APPELLANT HAD TAKEN UNSE CURED LOANS FROM VARIOUS PARTIES IN F.Y. 1995-96 FOR ITS REAL E STATE BUSINESS I.E. FOR CONSTRUCTION OF COMMERCIAL COMPLEX HAVING SHOPS AND OFFICES. UPTO A.Y. 2000-01, THE INTEREST PAID ON SU CH BORROWED FUNDS WAS ADDED TO THE COST OF WORK IN PROGRESS, HO WEVER, FROM A.Y. 2001-02 AND ONWARDS IT WAS DECIDED TO CLAIM TH E SAME SEPARATELY IN THE PROFIT & LOSS ACCOUNT AS NORMAL B USINESS EXPENDITURE AND THE RETURNS FILED BY CLAIMING SUCH EXPENSES WERE NEVER DOUBTED AND PROCESSED U/S 143(1) BY THE DEPAR TMENT. FOR THE FIRST TIME IN A.Y. 2004-05, THE DEPARTMENT HAS CHANGED ITS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 18 STAND BY ALLEGING THAT THE ASSESSEE HAS TAKEN FRESH LOANS THEREFORE, THEY LOOSE THEIR CHARACTER OF BUSINESS E XPEDIENCY AND ACCORDINGLY DISALLOWANCE OF INTEREST WAS MADE. WHIL E DOING SO, THE FACT THAT IN THE A.Y. 2004-05 FRESH LOANS HAVE BEEN TAKEN BY THE ASSESSEE FIRM FOR THE PURPOSE OF REPAYMENT OF O LD LOANS AND THE INTEREST PAYMENT WAS MADE DURING THE YEAR ON TH E SAID LOANS WHICH WERE OBTAINED AND UTILIZED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT AND ARE ADMISS IBLE EXPENDITURE U/S 36(1)(III) OR 37(1) OF THE INCOME T AX ACT, 1961 WAS IGNORED BY THE DEPARTMENT. THERE IS DIRECT NEXU S AND LIVE LINK BETWEEN THE INTEREST EXPENDITURE AND THE BUSINESS O F THE APPELLANT BUT THE LD. AO ALLEGED THAT THERE IS NO S UCH DIRECT NEXUS BY STATING THAT FRESH LOANS RAISED ARE NOT FO R THE PURPOSE OF BUSINESS BUT TO PAY OFF THE OLD LOANS AND SINCE THE OLD LOANS WERE EXCLUSIVELY USED FOR THE PURPOSE OF BUSINESS ONLY T HUS THE EXPENDITURE IN SHAPE OF INTEREST ON SUCH LOANS IS A N ALLOWABLE EXPENDITURE U/S 36(1)(III) OR 37(1) OF THE INCOME T AX ACT, 1961. RELIANCE IS PLACED ON THE CASE OF KALPANA TRADING C ORPORATION VS. ITO, 156 TAXMAN 78, ITAT, MUMBAI BENCH, MUMBAI. BAS ED ON THESE FACTS, THE LD. CIT(A) AS WELL AS THE HONBLE BENCH HAD ALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE ON ACC OUNT OF INTEREST PAID ON SUCH BORROWED FUNDS. IN THE YEAR UNDER APPEAL WHILE DISALLOWING THE EXPE NDITURE, THE OBSERVATIONS OF LD. ASSESSING OFFICER HIMSELF ARE S ELF CONTRADICTORY AS: IN PAGE 3 POINT 2 (FIRST PARA) OF ASSESSMENT ORDER THE LD. AO OBSERVED THAT: SECTION 36(1)(III) CATEGORICALLY SPELLS THAT ONLY THAT INTEREST PAID IS AN ALLOWABLE EXPENDITURE IF IT IS IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSI NESS IN PAGE 3 POINT 4 (FOURTH PARA) OF ASSESSMENT ORDER HE FURTHER OBSERVED THAT: ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 19 AS REGARDS THE INTEREST PAYMENT, IT DESERVES A MEN TION HERE THAT THE ASSESSEE HAD TAKEN LOANS FROM VARIOUS PARTIES I N THE F.Y. 1995-96 FOR THE PURPOSE OF BUSINESS OF REAL ESTATE I.E. FOR CONSTRUCTING SHOPS AND OFFICES IN A COMMERCIAL COMP LEX. IN THE INSTANT YEAR I.E. A.Y. 2007-08 FRESH LOANS HAVE BEE N TAKEN BY ASSESSEE NOT FOR THE PURPOSE OF BUSINESS OF REAL ES TATE AND SALE OF SHOPS AND OFFICES, BUT TO REPAY OLD LOANS.. FROM THE PERUSAL OF THE AFORESAID OBSERVATION OF LD . AO, THE FACT THAT THE LOANS TAKEN DURING THE YEAR UNDER APPEAL W ERE IN FACT FOR THE REPAYMENT OF OLD LOANS TAKEN FOR BUSINESS PURPO SES IS NOT IN DISPUTE RATHER THE AO HIMSELF HAS ACCEPTED THE SAME AS STATED ABOVE. FURTHER WHILE MAKING DISALLOWANCE OF THE EXPENDITUR E CLAIMED U/S 36(1)(III) ON ACCOUNT OF INTEREST ON BORROWED FUNDS BY THE APPELLANT, THE LD. AO ALLEGED THAT THE BUSINESS OF THE ASSESSEE COMPANY WAS DISCONTINUED WHICH WAS FURTHER MENTIONE D IN THE REMAND REPORT WHICH HAD BEEN RELIED UPON BY THE LD. CIT(A) WHO AT PARA 3.2 IN PAGE 9 OF THE APPELLATE ORDER HAS OB SERVED THAT ANY TEMPORARY SUSPENSION IN THE BUSINESS CANNOT LAST FO R 15 YEARS. WHILE OBSERVING SO THE LD. AO AS WELL AS LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE BUSINESS OF THE APPELL ANT WAS IN TEMPORARY SUSPENSION DUE TO THE STAY ORDER ON ITS R EAL ESTATE ACTIVITY BY THE HONBLE RAJASTHAN HIGH COURT VIDE I TS ORDER DATED 26.03.1996 AS SUCH THE APPELLANT WAS FOLLOWING THE DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT DURING THE SU SPENSION OF ITS REAL ESTATE ACTIVITY. IN THIS REGARD, IT IS FURTHER SUBMITTED THAT THERE WAS NO TOTAL DISCONTINUANCE OF BUSINESS OF THE APPELLANT AS PRES UMED BY THE AO AND LD. CIT(A). THE APPELLANT HAD EARNED INCOME FROM COMPLEX MAINTENANCE CHARGES AND INTEREST INCOME F ROM SUNDRY DEBTORS. ON THE BASIS OF SAME AND UNCHANGED FIGURE OF OPENING AND CLOSING STOCK, THE LD. AO CONCLUDED THAT DURING THE YEAR ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 20 UNDER CONSIDERATION THERE WAS NO BUSINESS ACTIVITY CARRIED OUT AND ACCORDINGLY HELD THAT THE INTEREST CLAIMED U/S 36(1)(III) WAS NOT ADMISSIBLE. FURTHER THE LD. AO ALLEGED THAT THE NEXUS OF PAYMENT WITH STOCK IN TRADE AND NOT WITH SUNDRY DEB TORS. THE ALLEGATION OF THE LD. AO WITH REGARD TO NEXUS ARE I NCORRECT AS THE NEXUS OF PAYMENT OF INTEREST IS FULLY JUSTIFIED WHI CH IS ON ACCOUNT OF BORROWED LOANS WHICH WERE UTILIZED FOR PURPOSE O F REAL ESTATE BUSINESS. IT IS PERTINENT TO NOTE HERE THAT THE BUS INESS OF CONSTRUCTION HAD REMAINED IN ABEYANCE DUE TO ORDERS OF STAY PASSED BY HONBLE RAJASTHAN HIGH COURT DATED 24-03- 1996 DUE TO ONGOING DISPUTE BETWEEN PARTNERS OF THE ASSESSEE FI RM. THUS CONSTRUCTION ACTIVITY WAS PUT AT HALT WHICH WAS BEY OND THE CONTROL OF THE ASSESSEE AND ALSO FURTHER CONSIDERING THE MA RKET CONDITIONS IT WAS A PRUDENT BUSINESS DECISION THAT THERE SHOULD BE A LIMBO IN CONSTRUCTION OPERATIONS THOUGH THE REST OF THE ACTIVITIES RELATED TO THE BUSINESS CONTINUED IN ITS ROUTINE MA NNER DURING THE ENTIRE YEAR UNDER CONSIDERATION, WHICH IS A PART AN D PARCEL OF THE MAIN BUSINESS ACTIVITY FROM WHICH THE TOTAL RECEIPT S IS DULY FORMING PART OF THE INCOME DECLARED. IN THIS REGARD , KIND ATTENTION OF HONBLE BENCH IS INVITED TO PROFIT & LOSS A/C FO R THE YEAR ENDED 31-03-2008 (APB 70), ON PERUSAL OF WHICH, IT IS EVI DENT THAT APART FROM INTEREST EXPENSES (INCLUDING FINANCE COST) DIS ALLOWED BY LD. AO, ADMINISTRATIVE & OTHER EXPENSES TO THE TUNE OF RS.13,03,479/- (APB 74) HAVE ALSO BEEN DEBITED TO P & L A/C, WHICH INTER ALIA INCLUDE COMPLEX MAINTENANCE EXPENS ES RS.7,71,290/-, SALARY RS.1,43,567/- AND ELECTRIC CH ARGES OF RS.2,92,211/-. IT IS PERTINENT TO NOTE HERE THAT NE ITHER LD. AO NOR LD. CIT (A) HAS RAISED ANY OBJECTION IN RESPECT OF ALLOWABILITY OF THESE EXPENSES. IN OTHER WORDS, BY ALLOWING THESE E XPENSES, LOWER AUTHORITIES HAVE CONCEDED THE FACT THAT BUSIN ESS OF THE ASSESSEE WAS VERY MUCH IN EXISTENCE AND IT WAS MERE LY TEMPORARY SUSPENSION OF REAL ESTATE BUSINESS ACTIVI TIES. BASIC DIFFERENCE BETWEEN DISCONTINUATION OF BUSINESS AND TEMPORARY SUSPENSION IS THAT IN THE FORMER SITUATION ASSETS A RE SOLD TO PAY OFF THE LIABILITIES, AS BUSINESS ACTIVITIES ARE NOT RESUMED EVER, ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 21 WHEREAS IN THE LATTER, ASSETS HAVE TO BE MAINTAINED AND LIABILITIES HAVE TO BE DISCHARGED SEPARATELY, FOR WHICH FUNDS A RE REQUIRED, FOR WHICH CERTAIN MINIMUM EXPENSES, MOSTLY IN THE N ATURE OF ADMINISTRATIVE EXPENSES HAVE TO BE INCURRED. IN THE INSTANT CASE ALSO, BUSINESS OF THE ASSESSEE REMAINED SUSPENDED D UE TO STAY ORDER OF COURT AND FUNDS WERE BORROWED TO DISCHARGE LOANS ALREADY TAKEN FOR THE PURPOSE OF BUSINESS, WHICH WE RE NOT DOUBTED. FURTHER, AS STATED ABOVE THERE WAS NO OBJE CTION WITH RESPECT TO ADMINISTRATIVE EXPENSES, WHICH MEANS THA T LD. AO HAS IMPLIEDLY ACCEPTED THAT THE BUSINESS WAS VERY MUCH IN EXISTENCE AND IN THIS SCENARIO, THERE WAS NO REASON, FOR WHIC H INTEREST EXPENSES SHOULD BE DISALLOWED. APART FROM THIS, LOGICALLY, THE LD. AO HAS ACCEPTED THAT THE LOANS OLD OR NEW HAVE BEEN TAKEN FOR THE PURPOSE OF BUSIN ESS. THIS FACT HAS NEITHER BEEN DENIED NOR CONTRADICTED ANYWHERE I N THE ASSESSMENT ORDER. SINCE THIS IS AN ESTABLISHED FACT THAT THE REAL ESTATE BUSINESS IS ALWAYS CARRIED OUT ON THE BASIS OF LOANS FROM VARIOUS AGENCIES AND THEIR UTILIZATION IS EXCLUSIVE LY TO EXPAND THE BUSINESS WITHOUT IN ANY WAY LEADING TO THE FACT THA T ANY STOPPAGE OR A LULL PERIOD WOULD HAMPER THE CONSTRUCTION WORK . EVEN IF, FOR ARGUMENT SAKE, THE FINDINGS OF THE LD. AO ARE CONSI DERED THAT THERE WAS NO BUSINESS DUE TO STAY ORDER OF THE COUR T, THUS IT CANNOT BE SAID THAT THE REPAIR WORKS, CONSTRUCTION OF PASSAGE AND OTHER ALLIED AND FACILITY ITEMS DID NOT CONTINUE DU RING THIS PERIOD ALSO AS THE STAY ORDER WAS PURELY FOR CONSTRUCTING NEW UNITS AND EXTENSION OF THE EXISTING UNITS. THE LD. CIT(A) AT PAGE 7 OF ITS IMPUGNED ORDER FIRSTLY TRIED TO DISBELIEVE THE VALU E OF CLOSING WORK IN PROGRESS CLAIMED BY THE APPELLANT IN A.Y. 1996-9 7 WHICH AS SUBMITTED ABOVE IS DUE TO TYPOGRAPHICAL ERROR AND D ESERVES TO BE IGNORED. FURTHER LD. CIT(A) HAS ALSO DOUBTED THE TO TAL AREA AVAILABLE WITH THE APPELLANT AS WORK IN PROGRESS BY ALLEGING THAT THE ASSESSEE RECEIVED ADVANCES FOR 8549 SQ. FT. ARE A BY WRONGLY APPRECIATING THE FACT THAT THE AMOUNT WAS RECEIVED AGAINST THE BOOKING OF SUCH AREA HOWEVER DUE TO STAY BY THE HIG H COURT ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 22 NEITHER THE SALES WERE MADE NOR THE POSSESSION WERE HANDED OVER. THE LD. CIT(A) FURTHER ALLEGED THE INTEREST I NCOME DECLARED BY THE ASSESSEE REGULARLY IN ITS PROFIT & LOSS ACCO UNT AS A MAKE BELIEVE STORY SINCE THE ASSESSEE HAS RECEIVED LOANS FROM THE SAME PERSONS WHO ARE THE DEBTORS AND THE INTEREST RECEIV ABLE WAS NEVER RECEIVED BUT A DEBIT ENTRY TO THIS EFFECT WAS MADE IN THE DEBTORS ACCOUNT BY GROSSLY IGNORING THE FACT THAT T HE SAME WAS ACCEPTED BY THE DEPARTMENT SINCE BEGINNING AND EVEN IN THE YEAR UNDER APPEAL WHERE THE ASSESSMENTS WERE ALSO COMPLE TED U/S 143(3). IT IS FURTHER SUBMITTED THAT AN APPLICATION UNDER RULE 29 (FOR FILING OF ADDITIONAL EVIDENCES) THE INCOME TAX RULES HAS BEEN FILED BEFORE HONBLE JAIPUR BENCH ON 27- 05-2015 S TATING THAT THE SUIT FILED BY SMT. SUDHA YADAV, ERSTWHILE PARTNER O F THE ASSESSEE FIRM, IN THE DISTRICT COURT WAS DISMISSED AND DIREC TION WAS GIVEN TO RESOLVE THE DISPUTE THROUGH ARBITRATION (APB 96- 104). THE SAID ORDER OF DISTRICT COURT WAS CHALLENGED IN APPEAL BE FORE THE HONBLE RAJASTHAN HIGH COURT WHEREIN, VIDE ORDER DA TED 18.07.2005 PASSED IN S.B. CIVIL FIRST APPEAL NO. 76 /2003 THE HONBLE COURT REFERRED THE MATTER TO ARBITRATION AP POINTING MR. JUSTICE N.M. KASLIWAL, FORMER JUDGE SUPREME COURT O F INDIA AS THE SOLE ARBITRATOR TO DECIDE THE DISPUTE, WHO VIDE PAS SED AN INTERIM AWARD ON 01.05.2007 WHICH WAS CHALLENGED BEFORE THE DISTRICT COURT AND THE HIGH COURT. HOWEVER, BEFORE CONCLUSION OF THE SAID PROCEEDINGS, THE PARTIES REACHED AN AMICABLE SETTLEMENT VIDE SETTLEMENT DEED DATED 17.02.2012 (APB 125) AND WITH EFFECT OF WHICH, THE ONGOING DISPUTE CAME TO AN END. SUBSEQUENTLY, THE SOLE ARBI TRATOR PASSED AN AWARD IN ACCORDANCE WITH THE TERMS OF THE SETTLE MENT DEED AND THE PROCEEDINGS PENDING BEFORE THE DISTRICT COU RT AS WELL AS THE HIGH COURT WERE SOUGHT TO BE WITHDRAWN WHICH WE RE ALLOWED SO BY THE RESPECTIVE COURTS. THUS, AFTER HAVING REACHED SETTLEMENT AS STATED ABO VE, THE STAY ORDER STOOD VACATED AUTOMATICALLY AND THE BUSINESS OF ASSESSEE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 23 FIRM RESUMED AFTER EXECUTING A DEED OF RETIREMENT & RECONSTITUTION OF PARTNERSHIP DATED 17.02.2012 (APB 105-114) IN TERMS OF THE SETTLEMENT DEED AND ARBITRATION AWARD AS MENTIONED ABOVE. IN VIEW OF ABOVE, IT IS PROVED THAT BUSINESS OF THE ASSESSEE WAS NOT DISCONTINUED RATHER TEMPORARILY STAYED UNDER TH E ORDER OF THE HONBLE COURT WHICH HAS BEEN REVIVED NOW BY VACATIO N OF STAY WITH EFFECT FROM SETTLEMENT REACHED BETWEEN PARTIES . IT IS FURTHER SUBMITTED THAT THE SUSPENSION OR DISC ONTINUATION OF ONE OF THE ACTIVITIES OF BUSINESS OUT OF SEVERAL SU CH ACTIVITIES DOES NOT DISENTITLE THE TAXPAYER FROM DEDUCTION OF INTER EST OR OTHER EXPENDITURE INCIDENTAL TO THE BUSINESS. ALL THE BUS INESS ACTIVITIES TAKEN TOGETHER CONSTITUTES THE BUSINESS UNDERTAKING AS ONE AND SO LONG THE SAME REMAINS UNDER THE COMMON MANAGEMEN T WITH COMMON RESOURCE EMPLOYMENT AND COMMON ESTABLISHMENT AND CONTROL IT CANNOT BE SAID THAT THE BUSINESS ACTIVIT Y IS SEPARATE AND DISTINCT. THE APPELLANT CONTINUED ITS BUSINESS IN T HE RELEVANT ASSESSMENT YEAR AND THE BUSINESS WAS NEITHER CLOSED NOR DISCONTINUED NOR IT HAD EVER CEASED TO BE FUNCTIONA L DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. IT IS FURTHER SUBMITTED THAT U/S 36(1)(III) OF THE INCOME TAX ACT, 1961 IT IS CATEGORICALLY SPELLED OUT THAT THE INTER EST PAID IS AN ALLOWABLE EXPENDITURE IF IT IS PAID IN RESPECT OF C APITAL BORROWED FOR THE PURPOSE OF BUSINESS. FROM THE PERUSAL OF SE CTION 36(1)(III) IT IS SUBMITTED THAT THE INTEREST PAID ON BORROWED CAPITAL AND USED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT ONLY A ND NOT FOR PERSONAL OR OTHER PURPOSES, IS FULLY ALLOWABLE EXPE NDITURE. WHERE THE ASSESSEE COMPANY HAD NO INTENTION TO CLOS E DOWN ITS BUSINESS ACTIVITY AND ALSO KEPT ITS BUSINESS ASSETS READY FOR USE ITS CLAIM OF BUSINESS EXPENDITURE INCURRED ON MINIM UM ELECTRICITY CHARGES AND OTHER OFFICE ESTABLISHMENT EXPENSES ALO NGWITH DEPRECIATION COULD NOT BE DISALLOWED BECAUSE OF TEM PORARY ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 24 SUSPENSION OF MANUFACTURING ACTIVITY. IT HAS BEEN S O HELD IN THE CASE OF SHINGAR LAMPS LTD. VS. ADDL. CIT (2006) 150 TAXMAN 17 (ASR.) (MAG.). THUS ALTHOUGH THERE WAS A STAY BY CO URT ON THE APPELLANT DO DEAL WITH CERTAIN SPECIFIC PROPERTIES BUT THERE WAS NO SUSPENSION, CESSATION, CLOSING DOWN AND DISCONTINUO US OF BUSINESS ACTIVITY OF THE APPELLANT. IN VIEW OF ABOVE SUBMISSIONS, FACTS AND CIRCUMSTANC ES IT IS HUMBLY PRAYED THAT SINCE THE ISSUE UNDER THE YEAR C ONSIDERATION IS SQUARELY COVERED BY THE DECISION OF HONBLE ITAT PASSED IN EARLIER YEARS THUS THE DISALLOWANCE OF RS. 2,51,64, 779/- DESERVES TO BE DELETED. RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS: COMMISSIONER OF INCOME TAX VS. RAJ KUMAR SINGH AND CO. (NO. 2) 295 ITR 81 (ALL) KNP SECURITIES (P) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX 33 DTR 210 (MUMBAI) (TRIB) DY. CIT VS. SARABAI PITAMAL PHARMACEUTICALS LTD. 8 SOT 815 (MUM.) CIT VS. GOM INDUSTRIES LTD. & 299 ITR 42 (MP) DCIT VS. CORE HEALTH CARE LTD. REPORTED IN 215 CTR 1 (SC) WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 392/JP/2003 PERTAINING TO ASSESSMENT YEAR 1996-97 D ECIDED THE ISSUE OF WORK-IN-PROGRESS IN FAVOUR OF THE ASSESSEE . FURTHER, THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 282/JP/2010 PERTAINING TO ASSESSMENT YEAR 2004- 05, IN PARA 7 OF ITS ORDER HAS DECIDED THE ISSUE WHICH IS ALSO SUBJECT MATTER OF THIS APPEAL, AS UNDER :- 7. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PE RUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FIN DING OF LD. CIT (A). THE LD. CIT (A) HAS ASCERTAINED THE FACTUAL AS PECT THAT THIS IS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 25 NOT A CLOSURE OF BUSINESS BUT TEMPORARY DISCONTINUA NCE OF BUSINESS. WE FURTHER NOTED THAT IN EARLIER YEAR THE INTEREST EXPENDITURE CLAIMED BY ASSESSEE WERE ALLOWED BY THE DEPARTMENT ITSELF. HOWEVER, IN THE YEAR UNDER CONSIDERATION TH E SAME WAS NOT ALLOWED FOR THE REASON THAT DURING THE YEAR UNDER C ONSIDERATION FRESH LOANS HAVE BEEN TAKEN BY THE ASSESSEE FOR REP AYMENT OF OLD LOANS TAKEN FOR THE PURPOSE OF BUSINESS. FRESH LOAN S TAKEN DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF REP AYING THE LOANS TAKEN IN PAST FOR THE PURPOSE OF BUSINESS, IN OUR CONSIDERED VIEW DOES NOT CHANGE THE CHARACTER OF THE LOAN TAKE N DURING THE YEAR UNDER CONSIDERATION. THE LOAN TAKEN FOR THE YE AR UNDER CONSIDERATION HAS TO BE TREATED AS TAKEN FOR BUSINE SS PURPOSES FOR THE SIMPLE REASON THAT THIS LOAN WAS SUBSTITUTED WI TH THE LOANS TAKEN IN PAST AFTER REPAYING THE OLD LOANS. THERE I S A DIRECT NEXUS BETWEEN THE FRESH LOANS AND OLD LOANS BECAUSE THE F RESH LOANS HAVE BEEN UTILIZED FOR THE PURPOSE OF REPAYING THE OLD LOAN. NOW FRESH LOANS PARTAKES THE CHARACTER OF LOANS TAKEN F OR BUSINESS PURPOSES. INTEREST PAID ON OLD LOANS WAS HELD AS AL LOWABLE, THEREFORE, INTEREST PAID ON FRESH LOANS HAS TO BE A LLOWED AS THE CHARACTER OF LOAN REMAINS THE SAME BUT ONLY CHANGE OF THE NAME OF THE PERSON/INSTITUTION FROM WHOM THE FRESH LOANS ARE TAKEN. THEREFORE, THE DECISION OF HONBLE ALLAHABAD HIGH C OURT CONSIDERED BY LD. CIT (A) IN CASE OF RAJ KUMAR SING H & CO. (SUPRA) IS DIRECTLY ON THE ISSUE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDIN GLY, WE CONFIRM THE FINDINGS OF THE LD. CIT (A) IN RESPECT TO BOTH THE DISALLOWANCES DELETED BY HIM. FURTHER, THE TRIBUNAL IN ITA NO. 416 & 417/JP/2010 PERTAINING TO ASSESSMENT YEARS 2005-06 AND 2007-08 CONFIRMED THE DELETION OF ADDITION BY LD. CIT (A) BY HOLDING AS UNDER :- 7. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PE RUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FIN DING OF LD. CIT ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 26 (A). THE LD. CIT (A) HAS ASCERTAINED THE FACTUAL AS PECT THAT THIS IS NOT A CLOSURE OF BUSINESS BUT TEMPORARY DISCONTINUA NCE OF BUSINESS. WE FURTHER NOTED THAT IN EARLIER YEAR THE INTEREST EXPENDITURE CLAIMED BY ASSESSEE WERE ALLOWED BY THE DEPARTMENT ITSELF. HOWEVER, IN THE YEAR UNDER CONSIDERATION TH E SAME WAS NOT ALLOWED FOR THE REASON THAT DURING THE YEAR UNDER C ONSIDERATION FRESH LOANS HAVE BEEN TAKEN BY THE ASSESSEE FOR REP AYMENT OF OLD LOANS TAKEN FOR THE PURPOSE OF BUSINESS. FRESH LOAN S TAKEN DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF REP AYING THE LOANS TAKEN IN PAST FOR THE PURPOSE OF BUSINESS, IN OUR CONSIDERED VIEW DOES NOT CHANGE THE CHARACTER OF THE LOAN TAKE N DURING THE YEAR UNDER CONSIDERATION. THE LOAN TAKEN FOR THE YE AR UNDER CONSIDERATION HAS TO BE TREATED AS TAKEN FOR BUSINE SS PURPOSES FOR THE SIMPLE REASON THAT THIS LOAN WAS SUBSTITUTED WI TH THE LOANS TAKEN IN PAST AFTER REPAYING THE OLD LOANS. THERE I S A DIRECT NEXUS BETWEEN THE FRESH LOANS AND OLD LOANS BECAUSE THE F RESH LOANS HAVE BEEN UTILIZED FOR THE PURPOSE OF REPAYING THE OLD LOAN. NOW FRESH LOANS PARTAKES THE CHARACTER OF LOANS TAKEN F OR BUSINESS PURPOSES. INTEREST PAID ON OLD LOANS WAS HELD AS AL LOWABLE, THEREFORE, INTEREST PAID ON FRESH LOANS HAS TO BE A LLOWED AS THE CHARACTER OF LOAN REMAINS THE SAME BUT ONLY CHANGE OF THE NAME OF THE PERSON/INSTITUTION FROM WHOM THE FRESH LOANS ARE TAKEN. THEREFORE, THE DECISION OF HONBLE ALLAHABAD HIGH C OURT CONSIDERED BY LD. CIT (A) IN CASE OF RAJ KUMAR SING H & CO. (SUPRA) IS DIRECTLY ON THE ISSUE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDIN GLY, WE CONFIRM THE FINDINGS OF THE LD. CIT (A) IN RESPECT TO BOTH THE DISALLOWANCES DELETED BY HIM. THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL AS WERE BEFORE THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS. THE R EVENUE HAS NOT PLACED ANY CONTRARY MATERIAL ON RECORD SUGGESTING T HAT THERE IS CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE. THER EFORE, WE ARE UNABLE TO SUSTAIN THE FINDING OF LD. CIT (A). RESPE CTFULLY, FOLLOWING THE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN EARLIER ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 27 ASSESSMENT YEARS, WE DIRECT THE AO TO DELETE THE DI SALLOWANCE OF INTEREST EXPENDITURE. THUS THE APPEAL OF THE ASSESS EE IS ALLOWED. 9. THE AO IN THE ASSESSMENT ORDER HAS ALSO STATED T HAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL FOR A.Y. 2004-05, 2005-06 AND 2007- 08 AND THE REASON WHY THE SAME IS NOT FOLLOWED IS T HAT THE DEPARTMENT IS IN FURTHER APPEAL BEFORE THE HON'BLE HIGH COURT AND THE MATTER HAS NOT ATTAINED FINALITY. THERE IS THUS NO DISPUTE THA T THE MATTER IS SQUARELY COVERED BY EARLIER DECISIONS OF THE TRIBUN AL AND THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE GROUNDS OF APPEAL ARE THUS ALLOWED. 10. REGARDING GROUND NO. 2, THE LD. AR SUBMITTED TH AT THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) OF UPHO LDING THE DISALLOWANCE OF RS.25,282/- MADE THE AO CLAIMED ON ACCOUNT OF DEPRECIATION CHARGED FOR THE YEAR UNDER APPEAL. IN THIS REGARD, IT WAS SUBMITTED THAT DISALLOWANCE OF DEPRECIATION HAS BEE N MADE WITHOUT PROVIDING ANY COGENT REASON FOR MAKING SUCH DISALLO WANCE BY THE LD. AO. FURTHER, SUCH DISALLOWANCE HAS BEEN UPHELD BY T HE LD. CIT(A) BY OBSERVING THE FOLLOWING VIDE PARA 5.3 ON PAGE NO. 1 0 OF THE APPELLATE ORDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMEN T OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER I AM OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE A O IS QUITE REASONABLE AND FAIR. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 28 11. ON PERUSAL OF THE OBSERVATION OF THE LD. CIT(A) , IT IS CLEARLY EVIDENT THAT SUCH OBSERVATION HAS BEEN MADE BY THE LD. CIT(A) WITHOUT REFERRING TO THE SUBMISSIONS MADE BY THE ASSESSEE A ND THE DOCUMENTS PLACED ON RECORD. THE DISALLOWANCE HAS BEEN MECHANI CALLY UPHELD WITHOUT CONSIDERING THE ISSUE ON MERITS. MOREOVER, THE SUSTENANCE OF DISALLOWANCE BY THE LD. CIT(A) ON THE BASIS OF OBSE RVATION OF THE AO WHERE THE AO HAD HIMSELF FAILED TO BRING ANY COGENT REASON ON RECORD FOR DISALLOWING THE STATUTORY CLAIM OF DEPRECIATION AVAILABLE TO THE ASSESSEE, IS AGAINST THE PRINCIPLES OF LAW AND THAT OF NATURAL JUSTICE. 12. IT WAS FURTHER SUBMITTED THAT CLAIM OF DEPRECIA TION BEING STATUTORY CLAIM DESERVES TO BE ALLOWED SO FAR AS AS SETS HAVE BEEN USED FOR THE PURPOSES OF BUSINESS. IN THE INSTANT, NO AD VERSE REMARKS HAVE BEEN MADE BY EITHER AO IN ASSESSMENT ORDER OR BY TH E LD. CIT(A) IN THE APPELLATE ORDER. UNDER THE CIRCUMSTANCES IT WAS SUB MITTED THAT EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF D EPRECIATION MAY BE ALLOWED 13. PER CONTRA, THE LD. CIT/DR RELIED ON THE FINDIN G OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO FINDING OF THE AO FOR DISALLOWANCE OF DEPRECIATION AND SIMILARLY, THE ORDER OF THE LD CIT (A) DOESNT BRING OUT THE REASONING FOR SUSTENANCE OF CLAIM OF DEPRECIATI ON. THERE IS NO DISPUTE THAT THERE ARE ASSETS WHICH WERE ACQUIRED I N THE EARLIER YEARS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 29 AND FORMS PART OF THE OPENING BLOCK OF ASSETS AND T HERE ARE FRESH ASSETS IN THE NATURE OF AIR CONDITIONER AND OPEN WELL (PUM P) TO THE TUNE OF RS 62,455 WHICH HAVE BEEN ACQUIRED BY THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION AND USED FOR THE PURPOSES OF BU SINESS. THEREFORE, IN ABSENCE OF ANY ADVERSE FINDING BY THE AO, THE DI SALLOWANCE OF CLAIM OF DEPRECIATION IS HEREBY SET-ASIDE AND THE GROUND OF APPEAL SO TAKEN BY THE ASSESSEE IS ALLOWED. 15. REGARDING GROUND NOS. 3. TO 3.2, THE LD. AR SUB MITTED THAT THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) OF ARBITRARILY UPHOLDING THE DISALLOWANCE OF RS.11,59, 34,654/- MADE BY THE LD. AO ON ACCOUNT OF EXPENDITURE IN NATURE OF EXCEP TIONAL ITEMS CLAIMED U/S 36(1)(VII) OF THE ACT BY IGNORING THE SUBMISSIO NS MADE BY THE ASSESSEE AND THE MATERIALS PLACED ON RECORD. 16. IT WAS SUBMITTED THAT DURING THE YEAR UNDER CON SIDERATION, ASSESSEE DEBITED A TOTAL SUM OF RS.11,59,34,654/- T O PROFIT & LOSS A/C AS EXCEPTIONAL ITEMS, WHICH CONSISTED OF FOLLOWING I TEMS: S.NO. PARTICULARS AMOUNT 1 INTEREST RECOVERABLE FROM DEBTORS REVERSED 11,16,01,886.00 2 COMPLEX MA INTENANCE CHARGES REVERSED 35,74,268.00 3 ELECTRIC INSTALLATION CHARGES 7,58,500.00 TOTAL 11,59,34,654.00 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ISSUED SHOW CAUSE NOTICE DATED 12.02.2015 DIRECTING ASSESSEE TO FURNISH DETAILS OF ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 30 EXPENSES TO THE TUNE OF RS.11,59,34,654/- CLAIMED I N PROFIT & LOSS ACCOUNT, WHICH WERE CLAIMED AS EXCEPTIONAL ITEMS. IN RESPONSE TO SHOW CAUSE NOTICE, DETAILED SUBMISSION WERE MADE BY THE ASSESSEE VIDE LETTER DATED 17.03.2015, WHEREBY IT WAS EXPLAINED T HAT DURING THE YEAR UNDER CONSIDERATION CERTAIN FLATS PREVIOUSLY ALLOTT ED WERE CANCELLED. AS THE FLATS WERE ALLOTTED LONG BACK AND ONLY PART PAY MENT OF SALE CONSIDERATION WAS MADE BY THEM, ASSESSEE WAS CHARGI NG INTEREST ON OUTSTANDING BALANCE RECEIVABLE FROM SUCH DEBTORS (A LLOTTEES) ON YEAR TO YEAR BASIS AND ACCRUING COMPLEX MAINTENANCE CHARGES AND ELECTRIC INSTALLATION CHARGES AS WELL, WHICH WAS OFFERED FOR TAXATION IN RETURN OF INCOME. DURING THE YEAR UNDER CONSIDERATION, ALLOTM ENT OF SOME OF THE FLATS WAS CANCELLED, PURSUANT TO WHICH INTEREST ALR EADY CHARGED ON SUCH DEBTORS AND OFFERED FOR TAXATION ON YEARLY BASIS WA S REVERSED, ALONGWITH COMPLEX MAINTENANCE CHARGES AND ELECTRIC INSTALLATI ON CHARGES. HOWEVER, AO, DISREGARDED SUBMISSION OF ASSESSEE AND DISALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF OBSERVATIONS THAT ARE SUMMARIZED AS UNDER:- (1) THAT THE GENUINENESS OF THE EXPENSE CLAIMED AS BAD DEBTS COULD NOT BE VERIFIED IN ABSENCE OF COMPLETE DETAILS OF P ARTIES/ PERSONS IN WHOSE CASE THE BAD DEBTS OF RS.11,59,34,654/- WERE CLAIMED BY THE ASSESSEE; (2) THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE A MOUNT CLAIMED AS BAD DEBTS WAS TAKEN INTO CONSIDERATION IN COMPUT ING THE INCOME OF PREVIOUS YEARS AND THAT THE ASSESSEE FAILED TO F ORM A FIRM OPINION THAT THE DEBTS HAD IN FACT BECOME BAD; (3) THAT THERE WAS NO DOCUMENTARY PROOF THAT THE ASSESS EE HAD PROCEEDED AGAINST SUCH DEBTORS; ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 31 (4) THAT THE AUDITOR IN THE AUDIT REPORT HAD ONLY CATEG ORIZED THE AMOUNT OF RS.11,59,34,654/- AS EXCEPTIONAL AND NOT CONSIDE RED THE SAME AS BAD DEBTS. THE ABOVE OBSERVATIONS OF THE AO WERE AFFIRMED BY T HE LD. CIT(A) WITHOUT INDEPENDENT APPLICATION OF MIND ON THE FACT S OF THE CASE. 18. IT WAS SUBMITTED THAT IN RESPECT OF THE EXPENSE S SO CLAIMED BY THE ASSESSEE AS EXCEPTIONAL ITEMS, THE ATTENTION IS INVITED TO THE FACTS OF THE CASE THAT HAVE ALSO BEEN STATED IN THE FOREGOIN G PARAS OF THIS WRITTEN SUBMISSION, THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE LONG PENDING LITIGATION BETWEEN PARTNERS STOOD SETTLED THROUGH A SETTLEMENT AGREEMENT DATED 17.02.2012, ACCORDING TO WHICH OUTGOING PARTNERS I.E. SMT. SUDHA YADAV AND SHRI PRASHANT KU MAR YADAV WOULD BE GIVEN CERTAIN BUILT UP AREA 5686 FT. AND 11,837 FT. RESPECTIVELY ON THE CORRESPONDING MARKET VALUE. ASSESSEE REQUESTED THE SUNDRY DEBTORS TO REPAY THE OUTSTANDING DUE INCLUDING INTE REST ACCRUED AND DEBITED TO THEIR ACCOUNTING YEAR TO YEAR BASIS AND GET THE DOCUMENTS REGISTERED. HOWEVER, THEY REFUSED TO MAKE THE PAYME NT OF OUTSTANDING DUES AND UNDER THESE CIRCUMSTANCES, ONLY OPTION LEF T WITH APPELLANT WAS TO CANCEL THEIR ALLOTMENT AND FORFEIT THE FLATS ALR EADY SOLD TO THEM. ACCORDINGLY ASSESSEE CANCELLED THE EARLIER ALLOTMEN TS AND WRITTEN OFF THE OUTSTANDING AMOUNTS AND CLAIMED THE SAME IN PROFIT & LOSS ACCOUNT AS EXCEPTIONAL ITEMS. SINCE, ASSESSEE HAD CANCELLED THE ALLOTMENTS AGAINST WHICH INTEREST WAS CHARGED, INCOME ALREADY BOOKED IN RESPECT OF SUCH ALLOTTEES GOT IRRECOVERABLE AND ASSESSEE WA S LEFT WITH NO OTHER OPTION BUT TO WRITE IT OFF. ACCORDINGLY, AMOUNT SO CHARGED IN THEIR ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 32 RESPECTIVE LEDGER ON ACCOUNT OF INTEREST, COMPLEX M AINTENANCE CHARGES, AND ELECTRIC INSTALLATION CHARGES ARE REVERSED AND CREDITED TO THEIR RESPECTIVE ACCOUNT IN THE YEAR UNDER CONSIDERATION. 19. IT WAS FURTHER SUBMITTED THAT IN RESPECT OF THE OBSERVATIONS OF THE AO, IT IS SUBMITTED THAT THE DETAILS IN FORM OF JOU RNAL VOUCHER (REFLECTING THE REVERSAL OF INTEREST, ELECTRIC AND COMPLEX MAIN TENANCE CHARGES) IN RESPECT OF THE PARTIES FROM WHOM THE AMOUNT OF RS.1 1,59,34,654/- HAS BEEN CLAIMED TO BE IRRECOVERABLE (STATING THE FACT THAT THE SAME HAVE ALREADY BEEN OFFERED TO TAX IN EARLIER YEARS) WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN ABSENCE OF ANY FURTHER QUERY/ REQUIREMENT BEING RAISED BY THE AO IN RESPECT OF TH E YEAR-WISE DETAILS OF PARTIES WHOSE FLATS WERE CANCELLED AS STATED ABO VE, THE SAME WERE NOT SUBMITTED DURING THE COURSE OF ASSESSMENT PROCE EDINGS. HOWEVER, DURING THE COURSE OF FIRST APPEAL PROCEEDINGS, THE CHART SHOWING THE YEAR-WISE DETAILS OF INCOME CREDITED TO THE P/L A/C IN RESPECT OF ALL SUCH PARTIES (ALLOTMENTS TO WHOM HAD BEEN CANCELLED AND SUMS DUE FROM THEM WERE CONSIDERED IRRECOVERABLE) WAS FILED BEFOR E THE LD. CIT(A), WHO CONVENIENTLY IGNORED THE ADDITIONAL DETAILS FIL ED BEFORE HIM AND SUSTAINED THE DISALLOWANCE SOLELY ON THE BASIS OF O BSERVATION OF THE AO THAT WERE BASED ON INCOMPLETE FACTS. 20. IT WAS SUBMITTED THAT AO HIMSELF WHILE DECIDING ON THE ISSUE OF ALLOWABILITY OF INTEREST EXPENSES (CHALLENGED IN GR OUND NO. 1) HAS OBSERVED THAT ASSESSEE WAS CHARGING INTEREST ON OUT STANDING DEBTORS, WHEREAS WHILE DECIDING THE ISSUE OF ALLOWABILITY OF IRRECOVERABLE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 33 OUTSTANDING BALANCE OF DEBTORS HAS CONVENIENTLY IGN ORED SUCH FACT. SUCH SELF CONTRADICTORY OBSERVATIONS OF AO ARE REPRODUCE D HEREUNDER: PAGE 4 .. .. (III)WITH REGARDS TO INTEREST EXPENDITURE, THE ASSE SSEE COULD NOT FURNISH ANY DOCUMENT/EVIDENCE SO AS TO CLAIM THAT THERE IS NEXUS BETWEEN THE INTEREST INCOME AND INTEREST EXPENDITURE. IN FACT, INTEREST INCOME WAS EARNED BY THE ASSESSEE FROM SUNDRY DEBTORS WHO HAD NOT MADE COMPLETE PAYMENTS FOR PURCHASE OF SAID SHOPS AND OF FICES. SO, AS PER THE AGREEMENT, THE BUYERS WERE SUPPOSED TO PAY CERT AIN AMOUNT OF INTEREST AS PER THE TERMS AND CONDITIONS OF THE AGR EEMENT. SO, INTEREST INCOME WAS CONSEQUENTIAL TO THE AGREEMENT BETWEEN T HE ASSESSEE AND THE BUYERS. PAGE 12 .. . (2) THE ASSESSEE HAS ALSO FAILED TO PRODUCE DETAILS WITH REGARD TO ACCRUED INTEREST DECLARED AND CHARGED TO INCOME TAX IN THE EARLIER YEARS. (5)THERE IS NOTHING ON RECORD TO SHOW THAT AMOUNT W RITTEN OFF WAS TAKEN INTO ACCOUNT IN COMPUTING INCOME OF THE ASSES SEE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 34 IN VIEW OF ABOVE, IT IS EVIDENT THAT WHEN LD. AO AD MITS THAT ASSESSEE WAS CHARGING INTEREST IN RESPECT OF OUTSTANDING DEB TORS. IN FACT, INCOME FOR EARLIER ASSESSMENT YEARS HAS BEEN ASSESSED BY L D. AO U/S 143(3), AFTER DULY INCLUDING SUCH INTEREST INCOME OFFERED B Y ASSESSEE. DETAILS OF SUCH INTEREST INCOME OFFERED ARE FURNISHED AS UNDER : A.Y. TOTAL INCOME DECLARED IN RETURN INTEREST INCOME INCLUDED IN TOTAL INCOME APB DISALLOWANCE MADE BY AO ASSESSED INCOME APB DEPRECIATION INTEREST 2004-05 (76,57,476) 61,95,251/- 90 & 93 9,011/- 1,39,87,305/- 63,38,840/- 6 2005-06 (69,29,882) 72,84,362/- 97 & 102 26,887/- 1,43,33,911/- 74,30,916/- 14 2006-07 (72,95,095) 83,55,823/- 106 &109 11,247/- 1,53,94,387/- 68,90,955/- 18 2007-08 (1,10,85,390) 96,08,164/- 113 &117 6,000/- 2,06,57,878/- 95,72,490/- 22 2008-09 (1,36,88,648) 1,09,52,068/- 121&126 9,738/- 2,51,64,779/- 1,14,76,130/- 27 2009-10 (1,66,00,101) 1,25,77,776/- 129&133 13,479/- 2,92,49,133/- 1,26,75,990/- 32 2011-12 (2,31,28,905) 1,66,22,102/- 148&155 20,740/- 3,95,30,668/- 1,64,22,500/- 35 FROM PERUSAL OF ABOVE, IT IS EVIDENT THAT INTEREST INCOME AS DECLARED BY ASSESSEE HAS NOT BEEN DISTURBED BY LD.AO IN ANY OF THE PRECEDING ASSESSMENT YEARS AND ONLY INTEREST EXPENSES HAVE BE EN DISALLOWED. FURTHERMORE, HAD ASSESSEE NOT CHARGED INTEREST ON D EBTORS, TOTAL INCOME DECLARED WOULD HAVE BEEN LOWER TO THIS EXTEN T. IN THIS SCENARIO, WHEN INTEREST INCOME ON OUTSTANDING DEBTORS HAS ALR EADY BEEN TAXED BY LD. AO, SAME DESERVES TO BE ALLOWED IN THE CAPTIONE D ASSESSMENT YEAR ON BEING IRRECOVERABLE. ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 35 21. FURTHER, IN RESPECT OF THE OBSERVATION OF LD.AO THAT THE AUDITOR HAD MERELY CLASSIFIED THE EXPENSE AS AN EXCEPTIONAL ITEM IN THE AUDIT REPORT AND NOT EXPLICITLY CONSIDERED THE SAME AS BA D DEBTS IT IS SUBMITTED THAT SUCH NOMENCLATURE WAS USED BY AUDITO R FOR THE PRESENTATION OF FINANCIAL STATEMENTS. SINCE, THE QU ANTUM OF BAD DEBT IS QUITE HIGH, HAD THE SAME BEEN MERGED WITH OTHER EXP ENSES OF ROUTINE NATURE, THE SAME WOULD HAVE RESULTED INTO REDUCTION IN PROFITS FROM ORDINARY ACTIVITIES SUBSTANTIALLY, WHICH IS NOT TRU E IN THE PRESENT CASE. FURTHER, THE NOMENCLATURE OF EXPENSE DOES NOT DECID E THE ALLOWABILITY OR OTHERWISE OF A PARTICULAR EXPENSES, RATHER IT IS THE SUBSTANCE OF THE TRANSACTION THAT MATTERS. 22. IN THIS REGARD, THE ATTENTION IS INVITED TO THE PROVISIONS OF SECTION 36(1)((VII) WHICH IS REPRODUCED AS UNDER FOR READY REFERENCE: 36. (1)THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWIN G CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ), THE AMOUNT OF [ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN O FF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR]: [PROVIDED THAT IN THE CASE OF [AN ASSESSEE] TO WHIC H CLAUSE (VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO AN Y SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHIC H SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROV ISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE.] ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 36 [EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE AC COUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AN D DOUBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE;] FURTHER, SECTION 36 (2) READS AS UNDER: (2) IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THEREOF, THE FOLLOWING PROVISIONS SHALL APPLY- (I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING TH E INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE A MOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN E ARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDI NARY COURSE OF THE BUSINESS OF BANKING OR MONEY-LENDING WHICH I S CARRIED ON BY THE ASSESSEE;] (II) IF THE AMOUNT ULTIMATELY RECOVERED ON ANY SUC H DEBT OR PART OF DEBT IS LESS THAN THE DIFFERENCE BETWEEN THE DEBT O R PART AND THE AMOUNT SO DEDUCTED, THE DEFICIENCY SHALL BE DED UCTIBLE IN THE PREVIOUS YEAR IN WHICH THE ULTIMATE RECOVERY IS MADE; (III) ANY SUCH DEBT OR PART OF DEBT MAY BE DEDUCTED IF IT HAS ALREADY BEEN WRITTEN OFF AS IRRECOVERABLE 5A IN THE ACCOUNTS OF AN EARLIER PREVIOUS YEAR 6 [(BEING A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF AP RIL, ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 37 1988, OR ANY EARLIER ASSESSMENT YEAR)], BUT THE 7 [ASSESSING] OFFICER HAD NOT ALLOWED IT TO BE DEDUCTED ON THE GR OUND THAT IT HAD NOT BEEN ESTABLISHED TO HAVE BECOME A BAD DEBT IN THAT YEAR; (IV) WHERE ANY SUCH DEBT OR PART OF DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE PREVIOUS YEAR 8 [(BEING A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSME NT YEAR)] AND THE 7 [ASSESSING] OFFICER IS SATISFIED THAT SUCH DEBT OR PART BECAME A BAD DEBT IN ANY EARLIER PREVIOUS YEAR NOT FALLING BEYOND A PERIOD OF FOUR PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH DEBT OR PART IS WRI TTEN OFF, THE PROVISIONS OF SUB-SECTION (6) OF SECTION 155 SHALL APPLY; (V) WHERE SUCH DEBT OR PART OF DEBT RELATES TO A DVANCES MADE BY AN ASSESSEE TO WHICH CLAUSE (VIIA) OF SUB-SECTIO N (1) APPLIES, NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS THE ASSESSEE HAS DEBITED THE AMOUNT OF SUCH DEBT OR PAR T OF DEBT IN THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE.] 23. ON PERUSAL OF THE PROVISIONS REPRODUCED ABOVE, IT IS EVIDENT THAT THE DEDUCTION U/S 36(1)(VII) IS AVAILABLE ON FULFIL LMENT OF THE CONDITIONS PRESCRIBED UNDER SUB SECTION (2) TO SECTION 36 WHIC H ARE: (I) AMOUNT IS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCO UNTS AND ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 38 (II) SUCH AMOUNT WAS OFFERED FOR TAXATION IN CURRENT OR ANY EARLIER YEARS. 24. IN THE ASSESSEES CASE, THE INTEREST, COMPLEX M AINTENANCE CHARGES AND ELECTRIC INSTALLATION CHARGES WERE OFFE RED FOR TAXATION IN ALL THE PRECEDING ASSESSMENT YEARS AND STOOD DECLARED I N THE RETURNS OF INCOME OF THE ASSESSEE FILED IN ALL THE PRECEDING A SSESSMENT YEARS AND ALSO ASSESSED IN THE ASSESSMENT COMPLETED U/S 143(3 ) ON SUBSTANTIVE BASIS AS INCOME OF THE ASSESSEE FIRM. NOW SINCE ASS ESSEE HAS LOST ALL RIGHTS OF RECOVERY IN RESPECT OF SUCH DEBTS DUE TO CANCELLATION, SUCH INCOME OFFERED IN EARLIER YEARS IS CLAIMED IN THE P ROFIT & LOSS AS EXCEPTIONAL ITEMS. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAS DULY FULFILLED BOTH THE CONDITIONS PRESCRIBED IN THE STA TUE FOR ALLOW ABILITY OF THE EXPENSE. UNDER THE CIRCUMSTANCES THE EXPENSE SO CLAIMED BY THE ASSESSEE DESERVES TO BE ALLOWED. 25. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOW ING JUDICIAL PRONOUNCEMENTS: 1) 323 ITR 397 (SC) T.R.F. LTD. VS COMMISSIONER OF INCOME TAX: BAD DEBT- LAW AFTER APRIL 1,1989- ASSESSEE ONLY TO ESTABLISH THAT DEBT WAS WRITTEN OFF- NOT NECESSARY TO ESTABLISH THAT DE BT IN FACT HAD BECOME IRRECOVERABLE TO ESTABLISH THAT DEBT IN FACT HAD BE COME IRRECOVERABLE- INCOME TAX ACT,1961, S.36(1)(VII). 2) 53 DTR 120 CIT &ANR. VS. KRONE COMMUNICATION LTD . (KAR): ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 39 BUSINESS EXPENDITURE BAD DEBT DEBT WRITTEN OFF IN THE BOOKS ASSESSEE HAVING WRITTEN OFF CERTAIN DEBT, IT IS ENT ITLED TO DEDUCTION THEREOF AS A BAD DEBT THERE IS NO FURTHER REQUIRE MENT TO PROVE THAT THE DEBT WAS A TRADE DEBT OR THAT IT IS IN FACT IRR ECOVERABLE. 26. IN VIEW OF ABOVE JUDGMENT OF THE HONBLE APEX C OURT, CBDT PASSED CIRCULAR NO.12/2016 DATED 30.05.2016 WHICH C ATEGORICALLY HOLDS THAT- 3. THE LEGISLATIVE INTENTION BEHIND THE AMENDMENT WAS TO ELIMINATE LITIGATION ON THE ISSUE OF THE ALLOWABILI TY OF THE BAD DEBT BY DOING AWAY WITH THE REQUIREMENT FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, HAS IN FACT, BECOME IRRECOVERABLE. H OWEVER, DESPITE THE AMENDMENT, DISPUTES ON THE ISSUE OF ALL OWABILITY CONTINUE, MOSTLY FOR THE REASON THAT THE DEBT HAS N OT BEEN ESTABLISHED TO BE IRRECOVERABLE. THE HONBLE SUPREM E COURT IN THE CASE OF TRF LTD. IN CA NOS. 5292 TO 5294 OF 2003 VI DE JUDGMENT DATED 9.2.2010 (AVAILABLE IN NJRS 2010-LL-0209-8), HAS STATED THAT THE POSITION OF LAW IS WELL SETTLED. AFTER 1. 4.1989, FOR ALLOWING DEDUCTION FOR THE AMOUNT OF ANY BAD DEBT O R PART THEREOF UNDER SECTION 36(1) (VII) OF THE ACT, IT IS NOT NEC ESSARY FOR ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT HAS BE COME IRRECOVERABLE; IT IS ENOUGH IF BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF ASSESSEE. 5. IN VIEW OF THE ABOVE, CLAIM FOR ANY DEBT OR PAR T THEREOF IN ANY PREVIOUS YEAR, SHALL BE ADMISSIBLE UNDER SECTIO N 36(1)(VII) OF THE ACT, IF IT IS WRITTEN OFF AS IRRECOVERABLE IN T HE BOOKS OF ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 40 ACCOUNTS OF THE ASSESSEE FOR THAT PREVIOUS YEAR AND IT FULFILLS THE CONDITIONS STIPULATED IN SUB SECTION (2) OF SUB-SEC TION 36(2) OF THE ACT. 6. ACCORDINGLY, NO APPEALS MAY HENCEFORTH BE FILED ON THIS GROUND AND APPEALS ALREADY FILED, IF ANY, ON THIS ISSUE BE FORE VARIOUS COURTS/TRIBUNALS MAY BE WITHDRAWN/NOT PRESSED UPON. 27. THE ASSESSEE FURTHER SUBMITS THAT THE OBSERVATI ON OF THE AO THAT ASSESSEE HAD FAILED TO FORM A FIRM OPINION UPON WHE THER THE DEBTS HAD BECOME BAD IT IS SUBMITTED THAT THE SUBMISSIONS MAD E BY ASSESSEE ARE VERY CLEAR ABOUT ITS CLAIM OF BAD DEBTS AND SUCH OB SERVATIONS OF AO ARE COMPLETELY BASELESS. IT IS ALSO SUBMITTED THAT THE ASSESSEE HAD SUBMITTED ALL PRIMARY DETAILS CALLED FOR BY THE AO DURING THE ASSESSMENT PROCEEDINGS THEREBY DISCHARGING ITS ONUS. IN ABSENC E OF ANY SPECIFIC QUERY BEING RAISED BY THE AO, SUBMISSION OF DETAILS SOUGHT FOR BY HIM WAS NOT POSSIBLE BY THE ASSESSEE AT ANY STRETCH OF IMAGINATION. 28. FURTHER, THE AO HAS PLACED RELIANCE ON FEW JUDG MENTS, WHICH WERE PASSED BEFORE APEX COURT JUDGMENT CITED ABOVE AND CONSEQUENTLY HAVE NO RELEVANCE NOW MORE PARTICULARLY WHEN THE IN COME TAX ACT SPECIFICALLY PROVIDES ALLOWABILITY OF BAD DEBTS U/S 36(2) ON FULFILLING CERTAIN CONDITIONS. 29. IT WAS FURTHER SUBMITTED THAT THE FACTS AND THE CIRCUMSTANCES NARRATED IN THE FOREGOING PARAS OF THIS WRITTEN SUB MISSION CLEARLY DEPICT THE WRONG APPROACH FOLLOWED BY THE LD. CIT(A) WHILE DISPOSING OFF THE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 41 APPEAL OF THE ASSESSEE WITHOUT CONSIDERING THE SUBM ISSIONS AND THE MATERIAL PLACED BEFORE HIM. THE APPELLANT THEREFORE , SUBMIT THAT IN LIGHT OF THE FACT THAT THE ASSESSEE HAS FULFILLED THE CON DITIONS LAID DOWN BY THE STATUTE FOR CLAIMING THE AFORESAID EXPENSE THE CLAI M OF RS.11,59,34,654/- MAY BE ALLOWED. 30. PER CONTRA, THE LD. CIT/DR RELIED ON THE FINDIN G OF THE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE FIND INGS OF THE LD. CIT(A) WHICH ARE CONTAINED AT PARA 6.3 WHICH READ A S UNDER:- 6.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAR EFULLY. IT IS SEEN THAT THE AO HAS DISCUSSED IN DETAIL AT PARA 4 OF THE ASSESSMENT ORDER HAS GIVEN THE DETAILS REASON W HY THE DEDUCTION OF RS. 11,59,34,645/- CLAIMED BY THE APPELLANT U/S 36(1)(VII) IS NOT ADMISSIBLE. IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER, I AM FULLY IN AGREEMENT WITH THE FINDING OF THE AO THAT THE AMOUNT OF RS. 11,59,34,654/- WAS NOT ADMISSIBLE AS DEDUCTION U/S 36(1)(VII). ACCORDINGLY, THE DISALLOW ANCE OF RS. 11,59,34,654/- MADE BY THE AO IS HEREBY CONFIRM ED. 31. FURTHER, OUR REFERENCE WAS DRAWN TO THE FINDING S OF THE AO WHICH READ AS UNDER: 4.5 THE WRITTEN SUBMISSION FILED BY THE A/R OF THE ASSESSEE HAS BEEN CONSIDERED CAREFULLY, HOWEVER, THE SAME HAS NO T BEEN FOUND CONVINCING. AS PER PROVISIONS OF SECTION 36(1 )(VII) THE AMOUNT OF DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 42 IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE CAN B E CONSIDERED AS EXPENDITURE OF THE RELEVANT YEAR. HOWEVER, IN TH E CASE OF THE ASSESSEE THE AMOUNT OF RS.11,59,34,654/- CANNOT BE CONSIDERED AS WRITTEN OFF AS IRRECOVERABLE DUE TO THE FOLLOWIN G REASONS: (1) THE ASSESSEE HAS FAILED TO FURNISH DETAILS OF T HE PARTIES IN WHOSE CASES THE AMOUNT OF RS.11,59,34,654/- HAS BEE N CONSIDERED AS BAD DEBTS. (2) THE ASSESSEE HAS ALSO FAILED TO PRODUCE DETAILS WITH REGARD TO ACCRUED INTEREST DECLARED AND CHARGED TO INCOME-TAX IN THE EARLIER YEARS. (3) IN ABSENCE OF COMPLETE DETAILS OF THE PARTIES/P ERSONS IN WHOSE CASES, A HUGE AMOUNT OF RS.11,59,34,654/- HAS BEEN SHOWN AS BAD DEBTS, IT IS NOT POSSIBLE TO VERIFY IT S GENUINENESS. (4) THE AUDITOR. IN HIS AUDIT REPORT HAS CATEGORIZE D THE AMOUNT OF RS.11,59,34,654/- AS 'EXCEPTIONAL ITEMS' AND HAS NOT CONSIDERED IT AS BAD DEBTS. (5) THERE IS NOTHING ON RECORD TO SHOW THAT AMOUNT WRITTEN OFF WAS TAKEN INTO ACCOUNT IN COMPUTING INCOME OF THE A SSESSEE. (6) THE ASSESSEE FAILED TO FILE ANY DOCUMENTARY EVI DENCE WHICH PROVE, THAT THE ASSESSEE PROCEEDED FURTHER AGAINST SUCH DEBTORS. (7) IN FACT, THE ASSESSEE HAS FAILED TO FORM ITS FI RM OPINION THAT THE DEBT HAS BECOME BAD DEBTS. (8) IT IS ALSO OF RELEVANT TO MENTION HERE THAT UND ER SECTION 101, 102, AND 106, OF THE EVIDENCE ACT, THE ONUS LIES UP ON THE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 43 ASSESSEE TO PROVE ALL THE EXPENSES TO THE SATISFACT ION OF THE ASSESSING OFFICER, WHICH WAS NOT DISCHARGED BY THE ASSESSEE AS IT FAILED TO PRODUCE THE LIST OF PARTIES FROM WHOM ACC RUED INTEREST HAS BEEN SHOWN AS BAD DEBT. IN THIS REGARD RELIANCE IS ALSO PLACED ON THE FOLL OWING JUDICIAL PRONOUNCEMENTS: 1. CIT VS. COATES OF INDIA LTD., (CAL.) 232 ITR 324 2. INDUSTRIAL CABLES (I) LTD., VS. ACIT (ITAT, CHD) 97 ITD 267 3. INDIAN EXPRESS (MADURAI) (P) LTD., VS. DCIT (ITAT,M AD) 68 ITD 374 4. RALLIS INDIA LTD., VS. CIT (CAL) 246 ITR 170 5. CITY FINANCIAL RETAIL SERVICES INDIA LTD., VS. ACIT 2008- TIOL-05-ITAT-MAD IN VIEW OF THE ABOVE DISCUSSION, THE AMOUNT OF RS.11,59,34,654/ -SHOWN UNDER THE HEAD 'EXCEPTIONAL ITEMS' AND AS CLAIMED BY THE ASSESSEE U/S.36(1)(VII) OF TH E I.T. ACT, 1961 ARE DISALLOWED AND ADDED BACK TO THE TOTAL INC OME OF THE ASSESSEE. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. IT IS THE CASE OF THE ASSESSE E THAT IT HAD CANCELLED THE ALLOTMENT OF CERTAIN FLATS IN ITS COMMERCIAL CO MPLEX AS THE ALLOTTEES/DEBTORS REFUSED TO PAY THE OUTSTANDING AM OUNT TOWARDS THE INTEREST, COMPLEX MAINTENANCE CHARGES AND ELECTRIC INSTALLATION CHARGES AND THE SAME WERE REVERSED AND WRITTEN OFF IN RESPE CTIVE LEDGER ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 44 ACCOUNTS OF THE PARTIES AND CLAIMED IN ITS PROFIT/L OSS ACCOUNT FOR THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR. IT HAS BEEN FURTHER SUBMITTED THAT SUCH INTEREST, COMPLEX MAINT ENANCE CHARGES AND ELECTRIC INSTALLATION CHARGES WERE DULY OFFERED TO TAX IN PREVIOUS ASSESSMENT YEARS AND THE RETURN FOR THOSE YEARS HAV E BEEN ASSESSED U/S 143(3) WHEREIN SUCH CHARGES HAVE BEEN BROUGHT T O TAX AND ACCEPTED BY THE ASSESSING OFFICER. WE FIND FORCE I N THE CONTENTIONS SO ADVANCED ON BEHALF OF THE ASSESSEE AND AGREE WITH T HE SAME. IT IS A SETTLED LEGAL POSITION AS LAID DOWN BY THE HONBLE SUPREME COURT IN CASE OF TRF LTD (SUPRA) AND ALSO ACCEPTED BY THE CBDT AS COMMUNICATED VIDE CIRCULAR NO. 12/2016 DATED 30.05.2016 THAT CLA IM FOR ANY DEBT OR PART THEREOF IN ANY PREVIOUS YEAR, SHALL BE ADMISSI BLE UNDER SECTION 36(1)(VII) OF THE ACT, IF IT IS WRITTEN OFF AS IRRE COVERABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THAT PREVIOUS YEAR AND IT FULFILLS THE CONDITIONS STIPULATED IN SUB SECTION (2) OF SECTION 36 OF THE ACT I.E, SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN E ARLIER PREVIOUS YEAR. 33. IT HAS BEEN FURTHER SUBMITTED BY THE LD AR THAT SUCH CONTENTIONS OF THE ASSESSEE ARE DULY SUPPORTED BY THE JOURNAL E NTRIES IN RESPECTIVE LEDGER ACCOUNT OF THE PARTIES REFLECTING THE REVERS AL OF THESE OUTSTANDING CHARGES DURING THE PREVIOUS YEAR RELEVANT TO IMPUGN ED ASSESSMENT YEAR, AND SUCH CHARGES HAVE BEEN DULY OFFERED IN TH E EARLIER YEARS AND ALL THESE DETAILS IN TERMS OF JOURNAL VOUCHERS, LED GERS AND ENTRIES IN THE BOOKS OF ACCOUNTS, COPIES OF RETURNS OF INCOME FOR PAST ASSESSMENT YEARS WERE DULY SUBMITTED BEFORE THE AO AS WELL AS THE LD CIT(A). THE ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 45 AO HAS HOWEVER DISPUTED THE SAME HOLDING THAT THE C LAIM OF THE ASSESSEE COULDNT BE EXAMINED IN ABSENCE OF COMPLET E DETAILS. TO OUR MIND, ALL THE AO HAS TO EXAMINE IS WHETHER THE AMOU NT OF AFORESAID CHARGES SO RECOVERABLE HAVE BEEN ACTUALLY REVERSED IN RESPECTIVE LEDGER ACCOUNTS OF INDIVIDUAL ALLOTTEES/DEBTORS AND WRITTE N OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE PREVIOUS YEAR R ELEVANT TO IMPUGNED ASSESSMENT YEAR OR NOT. FURTHER, THE AO HAS TO EXA MINE WHETHER SUCH CHARGES WHICH HAVE NOT BEEN CLAIMED AS IRRECOVERABL E AND WRITTEN OFF WERE FORMING PART OF INCOME AND OFFERED TO TAX IN T HE PREVIOUS ASSESSMENT YEARS OR NOT. GIVEN THAT THESE DETAILS H AVE BEEN CLAIMED TO BE ON RECORD AND IN ABSENCE OF FINDINGS OF THE AO, WE ARE CONSTRAINED TO REMAND THE MATTER TO THE FILE OF THE AO. THEREF ORE, FOR THE LIMITED PURPOSES OF VERIFYING THESE TWO ASPECTS, THE MATTER IS SET-ASIDE TO THE FILE OF THE AO AND WHERE THE SAME IS FOUND TO BE IN ORDER, THE AO IS DIRECTED TO ALLOW THE NECESSARY RELIEF TO THE ASSES SEE. IN THE RESULT, THE GROUND OF APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 34. IN ITA NOS. 887 & 888/JP/2019 PERTAINING TO A.Y 2012-13 & 2013-14, BOTH THE PARTIES FAIRLY SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE EXACTLY IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITA NO. 886/JP/2019, T HEREFORE, OUR FINDINGS AND DIRECTIONS CONTAINED THEREIN SHALL APP LY MUTATIS MUTANDIS TO THESE APPEALS. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESS EE ARE DISPOSED OFF IN LIGHT OF AFORESAID DIRECTIONS. ITA NO. 886 TO 888/JP/2019 M/S SUMERU ENTERPRISES VS. ITO 46 ORDER PRONOUNCED IN THE OPEN COURT ON 20/01/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/01/2021. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SUMERU ENTERPRISES, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-6(4), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 886 TO 888/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR