ACIT, Ludhiana V. M/s Upper India Steel Mfg. & Engg. Co. Ltd., Ludhiana

ITA 920/CHANDI/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57638 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Unexplained investment; Business expenditure; Income from undisclosed sources; Proportionate interest; Retrospective amendment
• Section: 143(3); 133A; 147; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.920/CHD/2009 ASSESSMENT YEAR: 2006-07 ACIT, C-1, V M/S UPPER INDIA STEEL LUDHIANA. MFG.&ENGG.CO.LTD., DHANDARI INDUSTRIAL AREA, FOCAL POINT, LUDHIANA. PAN: AAACU-2091E & CO NO. 59/CHD/2009 IN ITA 920/CHD/2009 M/S UPPER INDIA STEEL V ACIT, C-1, MFG.&ENGG.CO.LTD., LUDHIANA. DHANDARI INDUSTRIAL AREA, FOCAL POINT, LUDHIANA. & ITA NO. 1293/CHD/2010 A.Y. 2007-08 ACIT, C-1, V M/S UPPER INDIA STEEL LUDHIANA. MFG.& ENGG.CO.LTD., DHANDARI INDUSTRIAL AREA, FOCAL POINT, LUDHIANA. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT.JAISHREE SHARMA ASSESSEE BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 24.01.2012 DATE OF PRONOUNCEMENT : 8.2.2012 ORDER PER MEHAR SINGH, AM THESE TWO APPEALS FILED BY THE REVENUE, ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) LUDHIANA PASSED U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SH ORT 'THE ACT') DATED 08.06.2009 AND 20.08.2010, RELATIN G TO 2 ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY. THE CROSS OBJECTIONS FILED BY THE ASSESSEE, PERTAIN TO THE ASSESSMENT YEAR 2006-07. ITA NO. 920/CHD/2009 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.64,00,000/- MADE U/S 69 OF THE INCOME-TAX ACT,1961. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.3,96,725/- MADE BY THE AO ON ACCOUNT OF UNACCOUNTED INTEREST INCOME. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.7,12,323/- MADE ON ACCOUNT OF CAPITALIZATION OF INTEREST ON CAPITAL WORK IN PROCESS IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III) AND EXPLANATION 8 TO SECTION 43(1) OFTHEIA,1961. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.72,219/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCOME-TAX ACT,1961. 5. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OF AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN GROUND NO.1, REVENUE CONTENDED THAT THE CIT(A ) ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF R S.64 LACS, MADE U/S 69 OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SURVEY CONDUCTED ON 22.2.2006 U/S 133A OF THE ACT, AT BUSINESS PREMISES, OF THE ASSESSEE. AT THE TIME OF INGRESS INTO THE OFFICE OF SHRI GURLAL SING H GREWAL, BY THE SURVEY TEAM, THE JOINT MANAGING DIRECTOR OF THE COMPANY, TORE A PIECE OF PAPER MARK ED 3 SIGMA. THIS DOCUMENT WAS IMPOUNDED, ON WHICH CERTAIN NAMES, AMOUNTS AND DATES WERE WRITTEN. AS PER AO, THIS DOCUMENT REVEALED THAT THE ASSESSEE HAD ADVANCED LOANS TO CERTAIN PARTIES AND WAS RECEIVING QUARTERLY INTEREST ON THESE AMOUNTS. THESE TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCO UNT AND JOINT MANAGING DIRECTOR OF THE APPELLANT COMPAN Y AGREED TO THE FACT THAT THE TRANSACTIONS WERE UNRECORDED. THE AO OBSERVED THAT IT WAS REASONABLY FAIR AND CORRECT TO PRESUME THAT THE IMPUGNED DOCUMENT BELONGED TO THE APPELLANT COMPANY. THE TO TAL OF THE AMOUNTS MENTIONED ON THE SAID DOCUMENT AMOUNTED TO RS.64 LACS. SUCH AMOUNT WAS TREATED AS UNEXPLAINED INVESTMENT, BEING NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND WAS ACCORDINGL Y, ADDED TO THE TOTAL INCOME OF THE APPELLANT. 5. THE LD. CIT(A), DELETED THE IMPUGNED ADDITION O F RS.64 LACS, MADE BY THE AO. LD. CIT(A), OBSERVED T HAT THE DOCUMENT IN QUESTION WAS FOUND DURING THE COURS E OF SURVEY, AT THE ASSESSEE'S PREMISES, FROM THE POSSESSION OF JOINT MANAGING DIRECTOR, SHRI GURLAL SINGH GREWAL, WHO MADE AN ATTEMPT TO DESTROY THE DOCUMENT BY TEARING IT OFF. LD. CIT(A) AGREED WITH THE OBSERVATION OF THE AO THAT THE IMPUGNED DOCUMENT MIGHT BE CONTAINING SOME TRANSACTIONS, HAVING TAX IMPLICATION. HOWEVER, LD. CIT(A), ON THE B ASIS OF THE SUBMISSIONS FILED BY THE ASSESSEE, FOUND THAT T HE IMPUGNED ADDITION WAS MADE ON THE BASIS OF 4 CONJECTURES AND SURMISES, AS DOCUMENT WAS FOUND FRO M THE POSSESSION OF SHRI GURLAL SINGH GREWAL AND IT BELONGED TO HIM, AS CONTENDED BY THE ASSESSEE IN TH E COURSE OF ASSESSMENT PROCEEDINGS. THE RELEVANT FINDINGS OF THE CIT(A), ARE REPRODUCED HEREUNDER : IN VIEW OF THE FACTS AND CIRCUMSTANCES AND JUST TH E DENIAL OF SHRI GURLAL SINGH GREWAL AND WITHOUT HIS SPECIFICALLY STATING THAT THE DOCUMENT IN QUESTION BELONGED TO THE APPELLANT, THE AO CANNOT BE SAID TO BE JUSTIFIED IN PRESUMING AS ABOVE. I AGREE THAT T HE PRESUMPTION RELATING TO SUCH DOCUMENT APPLIES TO THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY U/S 133A ALSO IN VIEW OF THE PROVISIONS OF SECTION 292C OF THE ACT. HOWEVER, IN THIS CASE, THE DOCUMENT HAS BEEN FOUND FROM THE POSSESSION OF SHRI GURLAL SINGH GREWAL. IN THE ABSENCE OF ANY OTHER MATERIAL, IT IS TO BE SEEN AS TO WHETHER THE SAME SHOULD BE TAKEN TO BE BELONGING TO THE APPELLANT OR SHRI GURLAL SINGH GREWAL IN HIS INDIVIDUAL CAPACITY. THEREFORE, THE PROVISIONS OF SECTION 292C DO NOT INDICATE IN ANY MANNER THAT UNDER THE GIVEN CIRCUMSTANCE IT HAS TO BE PRESUMED THAT THE DOCUMENT IN QUESTION BELONGED TO THE APPELLANT AND NOT TO SHRI GURLAL SINGH GREWAL FROM WHOSE POSSESSION IT WAS FOUND. IN CONCLUDING THAT THE SAID DOCUMENT BELONGED TO THE APPELLANT, THERE MUST HAVE BEEN SOME STATEMENT OF SHRI GURLAL SINGH GREWAL SPECIFICALLY AND CATEGORICALLY ADMITTING AND EXPLAINING THAT THE DOCUMENT CONTAINING THESE ENTRIES PERTAINED TO THE APPELLANT ONLY. ADMITTEDLY, SUCH STATEMENT IS NOT THERE IN THIS CASE. FURTHER, AS BROUGHT OUT IN THE WRITTEN SUBMISSIONS OF THE LD. COUNSEL, THE APPELLANT HAD ALREADY STATED BEFORE THE HON'BLE COMPANY LAW BOARD THAT SHRI GURLAL SINGH GREWAL 5 HAS BEEN MISUSING THE PREMISES OF THE COMPANY BY CONDUCTING DEALINGS OF HIS PERSONAL BUSINESS WHILE SITTING IN THE PREMISES OF M/S UPPER INDIA STEEL MFG. AND ENGG. CO. LTD. SHRI GURLAL SINGH GREWAL IS FURTHER SHOWN TO BE CARRYING ON HIS INDEPENDENT BUSINESS OF RUNNING RESTAURANTS. DURING THE COURSE OF SURVEY AT THE FACTORY PREMISES OF THE APPELLANT, CERTAIN PAPERS WITH REGARD TO CERTAIN AMOUNTS SPENT BY HIM ON THE CONSTRUCTION OF NEW HOUSE ARE ALSO SHOWN TO HAVE BEEN FOUND AND ON THE BASIS OF THESE NOTINGS, HE HAD OFFERED A SUM OF RS.4.5 LAC IN HIS RETURN FOR THE ASSESSMENT YEAR 2006-07. I THEREFORE, AGREE WITH THE LD. COUNSEL THAT WHEN SHR I GURLAL SINGH GREWAL IS CARRYING ON HIS INDEPENDENT BUSINESS AND FURTHER HE HAD ACCEPTED CERTAIN UNACCOUNTED INCOME AND THE PIECE OF PAPER IN QUESTION WAS FOUND FROM HIS PERSONAL POSSESSION, AND SHRI GURLAL SINGH GREWAL HAVING NOT SPECIFICALLY AND CATEGORICALLY STATED ANYWHERE THAT THE DOCUMENT PERTAINED TO THE APPELLANT, THE ADDITION MADE IN THE HANDS OF THE APPELLANT ON THE BASIS OF ENTRIES IN THE IMPUGNED DOCUMENT, CANNOT BE SAID TO BE JUSTIFIED. IT MAY BE MENTIONED HERE THAT AS POINTED OUT IN THE WRITTEN SUBMISSIONS OF THE LD. COUNSEL ALSO, THE AO WHO FRAMED THE ASSESSMENT OF THE COMPANY HAS ALSO INTIMATED THE AO OF SHRI GURLAL SINGH GREWAL WITH REGARD TO TAKING ACTION ON THE BASIS OF IMPUGNED DOCUMENT. IN VIEW OF THE ABOVE DISCUSSED FACTS AND CIRCUMSTANCES ON THE BASIS OF EVIDENCE WHATSOEVER AVAILABLE ADVERSE INFERENCE IF ANY, COULD ONLY BE CONSIDERED IN THE HANDS OF SHRI GURLAL SINGH GREWAL. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AS ABOVE, ADDITION MADE IN THE HANDS OF THE APPELLANT CANNOT BE SUSTAINED. THE ADDITION MADE BY THE AO OF RS.64/- IS THEREFORE, DELETED. 6 6. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' FILED ASSESSMENT ORDER PASSED BY PRIYANKA SING LA, ACIT-VI, LUDHIANA ON 31.12.2010 U/S 143(3) READ WIT H SECTION 147 OF THE ACT FOR THE ASSESSMENT YEAR 2006 -07 IN THE CASE OF SHRI GURLAL SINGH GREWAL, WHEREBY TH E ADDITION ON ACCOUNT OF UNSECURED INVESTMENT IN UNSECURED LOAN, AMOUNTING TO RS.64 LACS WAS MADE U/ S 69 OF THE ACT. THE RELEVANT PART OF THE SAID ASSESS MENT ORDER, AS CONTAINED IN PARA 5.1.5 & 5.1.6 IS REPRO DUCED HEREUNDER : 5.1.5 CONSIDERING THE ABOVE POINTS, THE FOLLOWING CONCLUSION MAY BE DRAWN : 1. AS PER 292C IT ACT,1961, THE LOOSE PAPER WHICH WAS FOUND FROM THE ASSESSEE IS ROOM AND WAS LATER TORN BY HIM BELONGS TO THE ASSESSEE. 2. THE ASSESSEE TRYING TO DESTROY THE EVIDENCE ONLY GOES ON TO ESTABLISH MENS REA ON THE PART OF THE ASSESSEE TO DESTROY EVIDENCE AGAINST HIM. 3. THE ASSESSEE'S REPLY DURING THE RECORDING OF STATEMENTS IS VAGUE AND NON COMMITTAL STATEMENT DOES NOT ESTABLISH ASSESSEE INNOCENCE WHATSOEVER. THIS FACT IS ALSO POINTED OUT BY THE LD CIT(A) IN THE ABOVE MENTIONED APPEAL WHERE HE STATE THAT SHRI GURLAL SINGH GREWAL HAVING NOT SPECIFICALLY AND CATEGORICALLY STATED ANYWHERE THAT THE DOCUMENT PERTAINED TO THE APPELLANT, THE ADDITION MADE IN THE HANDS OF THE APPELLANT ON THE BASIS OF ENTRIES IN THE IMPUGNED DOCUMENT, CANNOT BE SAID TO BE JUSTIFIED. 7 4. THE LD. CIT(A) IS ALSO OF THE OPINION THAT THE PAPER HAVING TRANSACTIONS WERE 64 LACS IS TO BE ASSESSED IN THE HAND OF THE DIRECTOR AND NOT IN THE HAND OF COMPANY. 5.1.6 HENCE, RS.64 LACS AS CONTAINED IN THE PAPER FOUND IN THE ROOM OF SHRI GURLAL SINGH GREWAL DIRECTOR M/S UPPER INDIA STEEL MANUFACTURING & ENGG. CO.LTD. IS HEREBY ADDED BACK TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LOANS U/S 69 OF THE IT ACT,1961. PENALTY PROCEEDINGS U/S 271(1)(C) ARE HEREBY INITIATED SEPARATELY FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF ITS INCOME . 7. LD. 'AR' VEHEMENTLY CONTENDED THAT IN VIEW OF TH E SCHEME OF INCOME TAX, NO INCOME CAN BE TAXED TWICE, AS HAS BEEN DONE BY THE REVENUE. FIRSTLY, TAXING THE SAME INCOME OF RS.64 LACS IN THE HANDS OF THE COMPANY, T HE PRESENT APPELLANT ASSESSEE AS ALSO IN THE HAND OF S HRI GURLAL SINGH GREWAL. WE FULLY AGREE WITH THE CONTENTION RAISED BY THE ASSESSEE IN THE MATTER OF TAXING SINGLE ITEM OF INCOME TAX TWICE, IS NOT TENA BLE UNDER THE SCHEME OF THE INCOME-TAX ACT. THEREFORE, HAVING REGARD TO THE FINDINGS OF THE LD. CIT(A) AND ABOVE DISCUSSION, THE IMPUGNED ADDITION IS DELETED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NO. 2 RAISED BY THE REVENUE IS CONSEQUENTIAL IN NATURE AS THE ADDITION OF RS.3,96,724/- HAS BEEN MADE BY THE AO ON ACCOUNT OF UNACCOUNTED INTEREST INCOME EARNED BY THE ASSESSEE ON THE ADDITION OF RS.64 LACS MADE BY THE AO WHICH WAS 8 SUBSEQUENTLY DELETED BY THE CIT(A). THE CIT(A) ALS O DELETED THE IMPUGNED ADDITION IN VIEW OF HIS FINDIN GS ON THE DELETION OF RS.64 LACS, MADE BY THE CIT(A). THE GROUND OF APPEAL, BEING CONSEQUENTIAL IN NATURE, WE ARE IN COMPLETE AGREEMENT WITH THE FINDINGS OF THE CIT( A), AND HENCE, THE SAME ARE UPHELD. THUS, THIS GROUND O F APPEAL OF THE REVENUE IS DISMISSED. 9. IN GROUND NO.3, REVENUE CONTENDED THAT CIT(A) ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.7,12,323/- MADE ON ACCOUNT OF CAPITALIZATION OF INTEREST ON CAPITAL WORK IN PROCESS IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III) AND EXPLANATION 8 TO SECTION 43(1) OF THE ACT. THE AO FOUND THAT AS PER AUDIT REPORT ANNEXED TO THE RETURN OF INCOME, CAPIT AL WORK IN PROGRESS AMOUNTING TO RS.5,84,18,030/- WAS OUTSTANDING AS ON 31.3.2006. THE ASSESSEE RAISED B OTH SECURED AND UNSECURED LOANS, WHICH AS ON 31.3.2006 AMOUNTED TO RS.9,51,81,376/- AND RS.6,67,50,000/- RESPECTIVELY. AN AMOUNT OF RS.1,53,81,376/- WAS CLAIMED IN THE PROFIT AND LOSS ACCOUNT AS INTEREST EXPENDITURE FOR THE YEAR UNDER REFERENCE. THE AO OBSERVED THAT CAPITAL WORK IN PROGRESS DURING THE Y EAR UNDER CONSIDERATION HAD NOT BEEN USED FOR THE PURPO SE OF BUSINESS AND HENCE, INTEREST EXPENSES, RELATABLE TO THE CREATION OF CAPITAL WORK IN PROCESS WERE TO BE CAPITALIZED. THE ASSESSEE COULD NOT SEGREGATE THE LOAN AMOUNT UTILIZED FOR CREATION OF CAPITAL WORK IN PRO CESS AND THE MANUFACTURING ACTIVITIES CARRIED OUT BY IT, THE 9 AO CALCULATED THE PROPORTIONATE INTEREST IN RESPECT OF CAPITAL WORK IN PROCESS AND DISALLOWED THE SAME. T HE AO FURTHER OBSERVED THAT EXPLANATION 8 TO SECTION 4 3(1) OF THE ACT WAS INSERTED WITH RETROSPECTIVE EFFECT F ROM 1.4.1974. HE ALSO REFERRED TO THE FACT THAT IN FIN ANCE ACT 2003, SECTION 36(1)(III) WAS AMENDED BY INSERTI NG A PROVISO TO EXISTING PROVISIONS W.E.F. 1.4.2004 I.E. RELEVANT FOR THE ASSESSMENT YEAR 2004-05. THE AO PLACED RELIANCE ON THE DECISION OF THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT V VARDHMAN POLYTEX LT D. FOR THE ASSESSMENT YEAR 1992-93 IN ITA NO. 1 OF 200 3. AS PER AO, IN THE CASE OF OSWAL SPINNING MILLS, THE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT INTER EST PAID ON ACQUISITION OF MACHINERY, CAN BE TREATED AS PART OF THE COST OF MACHINERY. LD. CIT(A) DELETED THE IMPUGNED ADDITION MADE BY THE AO. THE LD. CIT(A), O N THE BASIS OF SUBMISSION FILED BEFORE HIM, HELD THAT THE APPELLANT HAD NOT RAISED ANY LOAN FROM ANY BANK OR ANY FINANCIAL INSTITUTION AGAINST INSTALLATION OF MACHI NERY DURING THE YEAR UNDER CONSIDERATION. THIS CONTENTIO N WAS ALSO RAISED BEFORE THE AO. THE AO FAILED TO GIV E SPECIFIC FINDING ON THIS ASPECT AND, HENCE, LD. CIT (A) HELD THAT IT CANNOT BE PRESUMED THAT ANY INTEREST BEARING FUNDS, HAVE BEEN INVESTED, IN THE CAPITAL W ORK, IN PROCESS, SHOWN BY THE ASSESSEE. LD. CIT(A), FOU ND THE CASES RELIED UPON BY THE AO AS DISTINGUISHABLE, FACTUALLY AND MATERIALLY. WE DO NOT FIND ANY INFIR MITY IN THE FINDINGS OF THE LD. CIT(A) AND, HENCE, FINDI NGS OF 10 THE LD. CIT(A) ARE UPHELD AND GROUND OF APPEAL RAIS ED BY THE REVENUE IS DISMISSED. 10. IN GROUND NO.4, REVENUE CONTENDED THAT THE CIT( A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.72,000/-, MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. THE AO FOUND T HAT M/S UPPER INDIA SPECIAL CASTING LTD. AS AN ASSOCIAT E CONCERN OF THE ASSESSEE COMPANY. NO CONTRACT HAS B EEN ENTERED INTO BY THE APPELLANT WITH THIS COMPANY DUR ING THE PERIOD UNDER REFERENCE. HOWEVER, AS PER THE DE TAILS OF LOANS AND ADVANCES, AN ADVANCE OF RS.6,56,539/- WAS OUTSTANDING AGAINST THE ASSOCIATE CONCERN. ON THE OTHER HAND, ASSESSEE WAS PAYING INTEREST ON UNSECUR ED LOANS RAISED BY IT @ 11%. THEREFORE, AO MADE THE DISALLOWANCE OF RS.72,219/- FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H). 11. WE HAVE GONE THROUGH THE FINDINGS OF THE LD. CI T(A) CAREFULLY AND FOUND THAT THE DELETION MADE BY THE CIT(A) IS FOUNDED ON MISINTERPRETATION OF THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF ABHISHEK INDUSTRIES (SUPRA), HEAD-NOTES OF THE SAME ARE REPRODUCED HEREUNDER : BUSINESS EXPENDITURE-INTEREST ON BORROWED CAPITAL-CONDITION PRECEDENT FOR GRANT- BORROWED CAPITAL MUST BE USED FOR BUSINESS PURPOSES-LOANS ADVANCED INTEREST-FREE TO SISTER CONCERNS WHILE PAYMENT OUTSTANDING 11 ON BORROWINGS BY COMPANY-INFERENCE THAT ADVANCES WERE FROM BORROWED FUNDS AND FOR NON-BUSINESS PURPOSES-ONUS ON ASSESSEE TO SHOW BORROWINGS USED FOR BUSINESS PURPOSES-NOT ON REVENUE TO SHOW NEXUS BETWEEN BORROWINGS AND ADVANCES-THAT ADVANCES BY COMPANY WERE OUT OF ITS OWN FUNDS OF SHARE CAPITAL OR OUT OF MIXED FUNDS, NOT SUFFICIENT TODISCHARGE ONUS- INTEREST TO EXTENT RELATING TO SUMS ADVANCED INTEREST-FREE TO BE DISALLOWED- INCOME-TAX ACT,1961, S.36(1)(III). 12. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. 14. THE CROSS OBJECTIONS FILED BY THE ASSESSEE WAS NOT PRESSED BY THE LD. 'AR'. THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. ITA NO. 1293/CHD/2010(A.Y. 2007-08) 15. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.7,68,000/- MADE BY THE AO ON ACCOUNT OF UNACCOUNTED INTEREST INCOME. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.10,00,909/- MADE ON ACCOUNT OF CAPITALIZATION OF INTEREST ON CAPITAL WORK IN PROGRESS IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III) AND EXPLANATION 8 TO SECTION 43(1) OF THE INCOME-TAX ACT,1961. 12 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.16,510/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCOME-TAX ACT,1961 ON ADVANCES TO SISTER CONCERN I.E. M/S UPPER INDIA SPECIAL CASTING LTD. WITH WHOM NO TRANSACTION HAD TAKEN PLACE DURING THE YEAR AND IGNORING THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V ABHISHEK INDUSTRIES LTD. IN ITA NO.110 OF 2005. 4. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 16. IN GROUND NO.1, REVENUE CONTENDED THAT CIT(A) ERRED IN LAW IN DELETING ADDITION OF RS.7,68,000/- MADE BY AO ON ACCOUNT OF UNACCOUNTED INTEREST INCOME. TH E FINDINGS OF THE LD. CIT(A) ARE RECORDED IN PARA 3.2 OF THE ORDER DATED 20.08.2010 FOR THE ASSESSMENT YEAR 2007-08, RELEVANT PART OF THE SAME ARE REPRODUCED HEREUNDER : 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR. FIRST ADDITION OF RS.7,68,000/- HAS BEEN MADE ON ACCOUNT OF UNACCOUNTED INTEREST INCOME EARNED OUT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE AND FOR THAT, THE AO HAS RELIED UPON THE FINDING OF THE AO AS GIVEN IN ASSESSMENT YEAR 2006-07. ABOVE FINDINGS HAVE BEEN DISCUSSED FROM PAGES 2 TO 5 AND IT HAS BEEN STATED THAT LAST YEAR, THE AMOUNT OF RS.3,96,725/- WAS DISALLOWED AS INTEREST INCOME EARNED OUT OF THE BOOKS OF ACCOUNT IN RESPECT OF CERTAIN NOTINGS ON ONE PIECE OF PAPER FOUND DURING THE COURSE OF SURVEY CONDUCTED ON 22.2.2006. 13 17. A PERUSAL OF THE FINDINGS OF THE LD. CIT(A), AS REPRODUCED ABOVE, CLEARLY REVEALS THAT THE IMPUGNED ADDITION IS CONSEQUENTIAL IN NATURE AND HENCE, IN V IEW OF THE FINDINGS RECORDED BY THE LD. CIT(A) AND DECI SION OF THE ITAT IN ASSESSEE'S OWN CASE FOR ASSESSMENT Y EAR 2006-07, THE GROUND OF APPEAL IS DISMISSED. 18. IN GROUND NO.2, REVENUE CONTENDED THAT LD. CIT( A) ERRED IN DELETING ADDITION OF RS.10,00,909/- MADE O N ACCOUNT OF CAPITALIZATION OF INTEREST ON CAPITAL WO RK IN PROGRESS, IN VIEW OF THE PROVISIONS OF SECTION 36(1 )(III) AND EXPLANATION 8 TO SECTION 43(1) OF THE INCOME-TA X ACT. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY T HE BENCH IN ASSESSEE'S APPEAL FOR THE ASSESSMENT YEAR 2006-07, AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. FINDINGS OF THE LD. CIT(A) IN RESPECT OF SUCH ISSUE, AS CONTAINED IN PARA 3.11 OF THE ORDER PASSE D BY HIM FOR THE ASSESSMENT YEAR 2007-08, ARE REPRODUCED HEREUNDER : 3.11 I HAVE GONE THROUGH THE ORDER OF THE AO, SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND ALSO EARLIER ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2006-07 IN APPEAL NO. 130-IT- CIT(A)-I/LDH/08-09, WHEREIN SIMILAR ADDITION WAS MADE AND MY PREDECESSOR HAD DELETED THE ADDITION AS PER FINDING GIVEN IN PARA 15 & 16 OF THE ORDER OF THE CIT(A). SINCE THE ISSUE IS IDENTICAL FOLLOWING AND AGREEING WITH THE FINDINGS OF MY LD. PREDECESSOR IN APPEAL NO.130-IT/CIT(A)- I/LDH/08-09 DATED 8.6.2009 IN APPELLANTS OWN 14 CASE FOR THE ASSESSMENT YEAR 2006-07, ADDITION OF RS.10,00,909/- IS DELETED. 19. AS SIMILAR ISSUE HAS BEEN ADJUDICATED IN ASSESS EE'S OWN APPEAL BY THE BENCH IN EARLIER ASSESSMENT YEAR I.E. 2006-07, IN FAVOUR OF THE ASSESSEE, THE ISSUE IN QUESTION IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 20. IN GROUND NO.3, REVENUE CONTENDED THAT CIT(A) ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.16,510/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT ON ADVANCE TO SI STER CONCERN NAMELY, M/S UPPER INDIA SPECIAL CASTING LTD ., WITH WHOM TRANSACTION HAD TAKEN PLACE DURING THE YE AR, IGNORING THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT V ABHISHEK INDUSTRIES LTD. THE FIN DINGS OF THE LD. CIT(A), AS CONTAINED IN PARA 3.7 OF HIS ORDER FOR THE ASSESSMENT YEAR 2007-08 ARE REPRODUCED HEREUNDER : 3.7 I HAVE CONSIDERED THE SUBMISSION OF THE AR. THE FINDING ON THIS GROUND OF APPEAL HAS BEEN GIVEN BY MY PREDECESSOR AT PAGE 17 OF THE ORDER IN WHICH, IT HAS BEEN HELD THAT THE AMOUNT DUE FROM SISTER CONCERN WAS RECOVERABLE IN THE NORMAL COURSE OF BUSINESS AND WAS NOT AN ADVANCE AND AFTER CONSIDERING THE VARIOUS SUBMISSIONS, THE SAID DISALLOWANCE OF INTEREST WAS DELETED IN PRECEDING YEAR. AFTER HAVING GONE THROUGH THE ORDER OF THE CIT(A) AND SINCE THE FACTS AND CIRCUMSTANCES ARE THE SAME AND THE AO HAS ALSO BASED HIS ADDITION ONLY ON THE BASIS OF FACTS AS 15 PER ORDER FOR ASSESSMENT YEAR 2006-07 FOLLOWING THE ORDER OF MY PREDECESSOR, THE ADDITION OF RS.16,510/- IS DELETED. 21. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY THE BENCH IN FAVOUR OF REVENUE AND THE FINDINGS OF THE LD. CIT(A) WERE REVERSED WHILE DECIDING THE APPEAL OF T HE ASSESSEE, FOR THE ASSESSMENT YEAR 2006-07, AS DISCUSSED ABOVE. THE FACTS AND ISSUES INVOLVED IN THIS GROUND OF APPEAL, ARE SIMILAR AND HENCE, IN VIEW OF SUCH FINDINGS OF THE BENCH, THE ISSUE IS DECIDED IN FAVO UR OF THE REVENUE AND AGAINST ASSESSEE. THE ISSUE IS DEC IDED IN FAVOUR OF THE REVENUE. 22. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. 23. RESULTANTLY, APPEALS OF THE REVENUE IN ITA NOS. 920/CHD/2009 AND ITA NO.1293/CHD/2010 ARE PARTLY ALLOWED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH FEB.,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 8 TH FEB.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), CIT,DR ASSISTANT REGISTRAR ITAT, CHANDIGARH