Shri Rajendra Kumar Agrawal, V. The DCIT, Khandwa

ITSSA 7/IND/2009

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8427 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Search and seizure; Loose papers; Opportunity of being heard; Additional evidence; Difference of opinion; Block assessment; Commercial expediency; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings
• Section: 80HHC; 153A; 234B; 80IB; 147; 148; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER IT(SS)A NO.60 TO 63/IND/09 A.YS.1999-00, 2002-03, 2003-04 & 2004-05 M/S NARENDRA INDUSTRIES BURHANPUR PAN AAAFN7193D :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT IT(SS)A NO. 248 TO 252/IND/08 & ITA NO. 461/IND/200 9 A.YS.2001-02 TO 2006-07 M/S SHRI MOHIT INDUSTRIES BURHANPUR PAN AAPFS 2656D :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT 2 ITA NO. 27/IND/2009 AND IT(SS) A NO.10/IND/09 A.YS.2001-02 AND 2002-03 M/S ADITYA INDUSTRIES BURHANPUR PAN AAGFA 1077M :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT IT(SS)A NO. 15 TO 17 & 64/IND/09 A.YS. 2001-02, 2004-05, 2005-06 & 2002-03 SMT. ABHA DEVI AGRAWAL BURHANPUR PAN ADAPA 0122A :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT IT(SS)A NO. 7/IND/09 A.Y. 2004-05 RAJENDRA KUMAR AGRAWAL BURHANPUR PAN ADAPA 0130A :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT 3 IT(SS)A NO. 9/IND/09 A.Y. 1999-2000 SMT. SHALINI DEVI AGRAWAL BURHANPUR PAN AEAPA 8963Q :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT IT(SS)A NO. 8/IND/2009 AND ITA NO. 123/IND/09 A.YS. 1999-00 & 2005-06 M/S SHRI VENKATESHWAR COTTON COMPANY BURHANPUR PAN AACFV 4501B :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT IT(SS)A NO. 244 AND 245/IND/08 A.YS. 1999-2000 AND 2005-06 M/S SANJAY TRADING COMPANY BURHANPUR PAN AALFS 8258F :: APPELLANT VS 4 DY. COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT APPELLANTS BY SHRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA RESPONDENT BY SHRI KESHAV SAXENA DATE OF HEARING 22.08.2012 DATE OF PRONOUNCEMENT 06.09.2012 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS GROUP OF 22 APPEALS IS BY DIFFERENT ASSESSEES FOR THE ASSESSMENT YEARS MENTIONED ABOVE CHALLENGING THE RE SPECTIVE IMPUGNED ORDERS OF THE LEARNED CIT(A), INDORE. THE ASSESSEES HAVE RAISED COMMON GROUNDS, THEREFORE, ALL THESE AP PEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA, LEARNED COUNSEL FOR THE ASSESSEES AND SHRI KESHAV SAXENA, LEARNED CIT DR. 3. THE FIRST COMMON GROUND RAISED IS THAT ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN ED CIT(A) ERRED IN MAINTAINING THE DISALLOWANCE ESPECIALLY WH EN NO 5 EVIDENCE WAS FOUND. THE LEARNED COUNSEL FOR THE ASS ESSEE CHALLENGED THE ADDITION MADE TO THE RESPECTIVE INCO ME OF THESE ASSESSEES IN ASSESSMENT PROCEEDINGS U/S 153A READ W ITH SECTION 143 OF THE ACT BY STATING THAT SINCE NO INCRIMINATI NG DOCUMENTS WERE FOUND AND SEIZED, THEREFORE, NO ADDITION IS WA RRANTED. IT WAS ALSO SUBMITTED THAT GENERAL ADDITIONS, BASED ON RETURNS FILED, AND FINAL ACCOUNTS ATTACHED TO SUCH RETURNS, WERE M ADE AND EVEN THE LEARNED FIRST APPELLATE AUTHORITY WRONGLY REJEC TED THE CLAIM OF THE ASSESSEE. IT WAS ALSO PLEADED THAT THE IMPUGNED DISALLOWANCES WERE MADE MERELY ON CHANGE OF OPINION ESPECIALLY WHEN ALL THE EXPENSES WERE PROPERLY ACCOUNTED FOR I N ITS BOOKS OF ACCOUNTS AND NO INCRIMINATING DOCUMENT WAS FOUND. THE LEARNED COUNSEL INVITED OUR ATTENTION TO CLAUSE (B) OF SUB-SECTION (1) OF SECTION 153A OF THE ACT AND TRIED TO EXPLAIN THE MEANING OF THE WORDS ASSESSED AND REASSESSED AS USED IN TH E SECTION. PLEA WAS ALSO RAISED THAT RETURN OF INCOME WAS FILE D BY THE ASSESSEE WHEREAS THE TIME OF ISSUANCE OF NOTICE U/S 143(2) HAD NOT EXPIRED. THE CRUX OF ARGUMENTS IS THAT NO PROC EEDING WAS PENDING ON THE DATE OF INITIATION OF SEARCH, THEREF ORE, THE ASSESSING OFFICER WAS DUTY BOUND TO REASSESS THE IN COME AS PER DECLARATION IN THE RETURN, CONSEQUENTLY, NO ADDITIO N REQUIRES TO 6 BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENT S FOUND AND SEIZED DURING THE COURSE OF SEARCH FOR WHICH THE LE ARNED COUNSEL PLACED RELIANCE ON THE DECISION IN THE CASE OF KAIL ASH AUTO FINANCE LIMITED VS. ACIT; 32 SOT 80 (LUCKNOW). THE LEARNED COUNSEL ALSO TRIED TO DISTINGUISH THE DECISION OF T HE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LIMITED V . DCIT; 20 ITJ 45 (MUM) (SB). 3.1 ON THE OTHER HAND, THE LEARNED CIT DR, SHRI KES HAV SAXENA, STRONGLY DEFENDED THE IMPUGNED ORDER BY SUB MITTING THAT THE ISSUE IN HAND IS SPECIFICALLY COVERED AGAI NST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH IN M/S ALL CA RGO GLOBAL LOGISTICS LIMITED (SUPRA) WHEREIN THE SPECIAL BENCH , AFTER PLACING RELIANCE UPON VARIOUS JUDICIAL PRONOUNCEMENTS, RIGH TLY REACHED A PARTICULAR CONCLUSION AND THERE IS A MATERIAL DIFFE RENCE IN THE PROVISION AFTER INSERTION OF SECTION 153A BROUGHT O UT AFTER THE AMENDMENT MADE BY THE FINANCE ACT 2008 WITH RETROS PECTIVE EFFECT FROM 1.6.2003. 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT A SEARCH ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT AT THE PREMISES OF M/S CHHAGANLAL KISHANLAL GROUP AND ITS MEMBERS ON 7 20.12.2004. THE ASSESSEES FILED THE RETURN IN RESP ONSE TO NOTICE U/S 153A OF THE ACT AND THE LEARNED ASSESSING OFFIC ER COMPLETED THE ASSESSMENT BY MAKING CERTAIN ADDITIONS. THE QU ESTION TO BE ADJUDICATED BY US PERTAINS TO SCOPE OF ASSESSMENT O R REASSESSMENT OF TOTAL INCOME U/S 153A(1)(B) AND ITS FIRST PROVISO. WITHOUT GOING INTO MUCH DELIBERATION, TO ANSWER THE QUESTION REGARDING SCOPE OF ASSESSMENT OR REASSESSMENT OF TO TAL INCOME, WE ARE OF THE VIEW THAT AS PER SECTION 132(1) OF TH E ACT, IF ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENTS RELEVANT TO TH E ASSESSMENT HAVE NOT BEEN PRODUCED DURING ORIGINAL ASSESSMENT A ND ARE FOUND DURING THE COURSE OF SEARCH, SUCH BOOKS OF AC COUNTS OR OTHER DOCUMENTS HAVE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME. SI MILAR POSITION WILL REMAIN IN A CASE WHERE UNDISCLOSED INCOME/UNDI SCLOSED PROPERTY IS FOUND AS A CONSEQUENCE OF SEARCH MEANIN G THEREBY THE HARMONIOUS INTERPRETATION WILL OOZE OUT AS FOLL OWS :- (I) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESS MENT U/S 153A MERGES INTO ONE AND ONLY ASSESSMENT FOR EA CH ASSESSMENT YEAR SHALL BE MADE SEPARATELY ON THE BAS IS OF 8 THE FINDING OF THE SEARCH AND ANY OTHER MATERIAL EX ISTING OR BROUGHT ON RECORD OF THE ASSESSING OFFICER. (II) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSE SSMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS NOT PRODUCED DURING THE COURSE OF ORIGINA L ASSESSMENT BUT FOUND DURING SEARCH AND UNDISCLOSED INCOME/UNDISCLOSED PROPERTY DISCOVERED DURING THE C OURSE OF SEARCH. THERE IS A MATERIAL DIFFERENCE BETWEEN PRE-AMENDED SECTION I.E.158BC/158BD AND SECTION 153A WHICH WAS BROUGHT INTO OPERATION BY THE FINANCE ACT, 2008 WITH RETROSPECTI VE EFFECT FROM 1.6.2003. SECTION 153B SPEAKS ABOUT TIME LIMIT FOR COMPLETION OF ASSESSMENT U/S 153A OF THE ACT. ASSESSMENT OR REAS SESSMENT U/S 153A COMES INTO OPERATION ONLY WHEN A SEARCH AC TION HAS BEEN INITIATED/CONDUCTED AFTER 31.5.2006. ON SATIS FACTION OF THE CONDITIONS LAID DOWN IN THE SECTION, THE AO IS UNDE R OBLIGATION TO ISSUE NOTICE TO THE PERSON/PERSONS REQUIRING HIM/TH EM TO FURNISH THE RETURN OF INCOME OF 6 YEARS IMMEDIATELY PRECEDING THE YEAR OF SEARCH BECAUSE THE WORD USED IS SHALL AND THUS THERE IS NO OPTION WITH THE AO. THIS MEANS THAT OUT OF 6 YEA RS, IF ANY ASSESSMENT OR REASSESSMENT IS PENDING ON THE DATE O F INITIATION 9 OF SEARCH, IT SHALL ABATE. IN OTHER WORDS, PENDING PROCEEDINGS WILL NOT BE PROCEEDED WITH THEREAFTER. THEREFORE, THE AS SESSMENT NOW HAS TO BE MADE UNDER THE FIRST PROVISO OF SECTION 1 53A(1)(B). IT ALSO MEANS THAT ONLY ONE ASSESSMENT WILL BE MADE UN DER THE AFORESAID PROVISION AS TWO PROCEEDINGS I.E. ASSESSM ENT OR REASSESSMENT PROCEEDINGS AND THE PROCEEDINGS UNDER THIS PROVISION WILL MERGE INTO ONE. IF THE ASSESSMENT MA DE UNDER SUB- SECTION (1) IS ANNULLED IN APPEAL OR OTHER LEGAL PR OCEEDINGS, THE ABATED ASSESSMENT OR REASSESSMENT SHALL REVIVE. TH IS MEANS THE ASSESSMENT OR REASSESSMENT, WHICH HAS ABATED, SHALL BE MADE FOR WHICH EXTENSION OF TIME HAS BEEN PROVIDED U/S 1 53B OF THE ACT. IT IS WORTH MENTIONING HERE THAT THE SPECIAL BENCH IN ALL CARGO GLOBAL LOGISTICS LIMITED (SUPRA) HAS DISCUSSE D VARIOUS DECISIONS FROM HONBLE APEX COURT/HONBLE HIGH COUR TS AND ALSO FROM THE TRIBUNAL AND THEN REACHED TO A PARTICULAR CONCLUSION. SOME OF THE IMPORTANT DECISIONS WHICH WERE CONSIDER ED BY THE SPECIAL BENCH ARE ENUMERATED HEREUNDER :- A. MANISH MAHESHWATI VS. ACIT; B. RAMBALLBH GUPTA VS. ACIT (2007) 8 ITJ 123 (MP) C. S.S.P.AVIATION LIMITED V. DCIT (2012) 207 TAXMAN 26 0 (DEL) D. ACIT VS. CHETANDAS LAXMANDAS(2010) 36 SOT 417(DEL) 10 E. LMJ INTERNATIONAL LTD.V.DCIT(2008) 119 TTJ 214 (CAL ) F. SARAYA IND. LTD. V.UOI (2008) 306 ITR189 (DEL) G. K.P. VERGHESE V,ITO; 131 ITR 397 (SC) H. CIT VS. J.H. GOTLA; 156 ITR 323 (SC) I. CIT VS. SUN ENGINNERS WORKS PVT.LTD.; 198 ITR 297 ( SC) J. CIT VS. SMT. SHAILA AGRAWAL (2012) 246 CTR 266 (ALL ) K. MEGHMANI ORGANICS LTD. VS.DCIT (2010 129 TTJ 255(AH D) L. M/S SHYAMLATA KOUSHIK VS.ACIT 306 ITR (AT) 117 (DEL ) M. HAREY HEART HOSPITAL (2010); 130 TTJ 700 (CHENNAI) AFTER CONSIDERING VARIOUS DECISIONS, THE HONBLE SP ECIAL BENCH WITH REGARD TO APPLICABILITY OF SECOND PROVISO TO S ECTION 153A(1) CLEARLY HELD THAT ONLY PENDING ASSESSMENTS SHALL AB ATE AND THOSE ASSESSMENTS WHICH HAVE BEEN COMPLETED SHALL NOT BE ABATED MEANING THEREBY THE SANCTITY OF COMPLETED ASSESSMEN T SHALL BE MAINTAINED WHEN SOMETHING IS FOUND IN SEARCH WHICH GOES AGAINST SUCH SANCTITY. IN VIEW OF THIS CLEAR POSIT ION, THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS JUSTIFIED . OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF CIT ANIL KUMAR BHATIA ORDER DATED 7 TH AUGUST, 2012 (ITA NO.1626, 1632, 1998, 2006, 2019 AND 2020 OF 20 10). IT IS WORTH MENTIONING HERE THAT THE ISSUE IS ALSO COVERE D AGAINST THE 11 ASSESSEE BY THE DECISION DATED 6 TH AUGUST, 2012 OF THE COORDINATE BENCH IN THE CASE OF ACIT VS. SUDHIR MAHESHWARI AND OTHERS; ITA NOS. 373/IND/20110, 8/IND/2012, IT(SS)A NO. 2/IND/2 012. WHEREIN BOTH OF US ARE SIGNATORY. IN VIEW OF THESE FACTS AND THE JUDICIAL PRONOUNCEMENTS, THE CASES RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS AND MAJORITY OF THEM HAVE EITHER BEEN DISCUSSED BY SPECIAL BENCH IN THE CASE OF AL CARGO (SUPRA) OR BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KU MAR BHATIA. OUR VIEW IS ALSO SUPPORTED BY THE DECISION OF ANDHR A PRADESH HIGH COURT IN THE CASE OF GOPALLAL BHADRUKA (ITA NO S. 367 TO 369, 379, 383, 386, 390, 395 AND 438 OF 2011 ORDER DATED 15TH DECEMBER, 2011). EVEN OTHERWISE, ON PERUSAL OF SEC TION 153A OF THE ACT, WE FIND THAT IT STARTS WITH A NON-OBSTANTE CLAUSE RELATING TO NORMAL ASSESSMENT PROCEDURE WHICH IS COVERED BY SECTIONS 139, 147, 148, 149, 151 AND 153 IN RESPECT OF SEARC H MADE AFTER 31.5.2003. PRIOR TO THE INTRODUCTION OF THESE SECT IONS, THERE WAS CHAPTER XIVB OF THE ACT, WHICH TOOK CARE OF THE ASS ESSMENT TO BE MADE IN CASES OF SEARCH AND SEIZURE WHICH WAS POPUL ARLY KNOWN AS BLOCK ASSESSMENT BECAUSE THE CHAPTER PROVIDED FOR A SINGLE ASSESSMENT TO BE MADE IN RESPECT OF PERIOD OF A BLO CK OF TEN ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR IN WHICH THE SEARCH 12 TOOK PLACE. AFTER THE INTRODUCTION OF GROUP OF SE CTIONS, NAMELY, 153A TO 153C IN THE ACT, THE SINGLE BLOCK ASSESSMEN T CONCEPT WAS GIVEN A GO BY. UNDER THE NEW SECTION 153A, IN A CASE WHERE SEARCH IS INITIATED U/S 132 OR REQUISITION OF BOOKS OF ACCOUNTS, DOCUMENTS OR ASSETS IS MADE U/S 132A AFTER 31.5.200 5, THE AO IS OBLIGED TO ISSUE NOTICES CALLING UPON THE SEARCHED PERSON TO FURNISH RETURN FOR THE SIX ASSESSMENT YEARS IMMEDIA TELY PRECEDING THE ASSESSMENT RELEVANT TO THE PREVIOUS Y EAR IN WHICH SEARCH WAS CONDUCTED OR REQUISITION WAS MADE. THE OTHER DIFFERENCE IS THAT THERE IS NO BROKEN PERIOD FROM T HE IST DAY OF APRIL OF THE FINANCIAL YEAR IN WHICH SEARCH TOOK PL ACE OR THE REQUISITION WAS MADE AND ENDING WITH THE DATE OF SEARCH/REQUISITION. U/S 153A AND THE NEW SCHEME THE AO IS REQUIRED TO EXERCISE THE NORMAL ASSESSMENT POWERS I N RESPECT OF THE PREVIOUS YEAR IN WHICH SEARCH TOOK PLACE. IN V IEW OF THIS CLEAR LEGAL POSITION, THIS GROUND OF THE ASSESSEE I S HAVING NO MERIT, THEREFORE, DISMISSED. THIS VIEW WILL COVER T HE IDENTICAL GROUND RAISED IN THE RESPECTIVE APPEALS. 4. THE NEXT COMMON ISSUE INVOLVED IN THESE APPEALS PERTAINS TO FIRE INSURANCE CLAIM RECEIVED BY THE ASSESSEE DU E TO FIRE CAUSED WHICH WAS CLAIMED AS DEDUCTION U/S 80IA/80IB OF THE 13 ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESS EE IS THAT THE INSURANCE CLAIM CANNOT BE EXCLUDED FROM THE ELIGIBL E INCOME WHILE ALLOWING DEDUCTION U/S 80IA/80IB WHEREAS THE LEARNED CIT DR DEFENDED THE IMPUGNED ORDER. THE FACTS, IN BRIEF (AS TEST CHECK), ARE THAT IN THE CASE OF NARENDRA INDUSTRIES (IT(SS) A NO.60/IND/2009) THE ASSESSEE CLAIMED DEDUCTION U/S 80IA AMOUNTING TO RS.62,70,248/- WHICH INCLUDES RECEIPT OF RS.34,62,710/- ON ACCOUNT OF FIRE CLAIM. THE STAND OF THE ASSESSING OFFICER IS THAT SUCH CLAIM DID NOT QUALIF Y FOR WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT. THIS STAND WAS AFFIRMED BY THE LEARNED CIT(A) AND IS UNDER CHALLENGE BEFORE THE TRIBUNAL. WE FIND THAT THE TRIBUNAL ON IDENTICAL ISSUE IN THE CASE OF M/S RAJESHWAR COTTON CORPORATION, BADWANI (ITA NO.213/I ND/2012) DECIDED ON 19 TH JULY, 2012, REMANDED THE ISSUE TO THE FILE OF THE LEARNED AO. THE RELEVANT PORTION OF THE SAME IS REP RODUCED HEREUNDER :- 3.2 WE HAVE PERUSED THE ORDERS FROM THE HONB LE APEX COURT. IN THE CASE OF STERLING FOODS (SUPRA) THE H ONBLE COURT HELD THAT PROFITS FROM SALE OF IMPORT ENTITLEMENTS ARE NOT PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING, THEREF ORE, NOT INCLUDIBLE IN INCOME FOR COMPUTING SPECIAL DEDUCTIO N WITHIN THE MEANING OF SECTION 80HH OF THE ACT WHEREAS IN T HE CASE OF PANDIAN CHEMICALS (SUPRA), THE DEPOSITS MADE WIT H ELECTRICITY BOARD FOR SUPPLY OF ELECTRICITY AND INT EREST FROM SUCH DEPOSITS WAS HELD TO BE INCOME NOT DERIVED FRO M BUSINESS OF THE ASSESSEE UNDERTAKING WITHIN THE MEA NING OF SECTION 80HH OF THE ACT WHEREAS IN THE PRESENT APPE AL, THE QUESTION BEFORE US PERTAINS TO ALLOWANCE OF DEDUCTI ON U/S 14 80IB OF THE ACT. IN THE PRESENT CASE, THE RAW COTT ON WAS DESTROYED BY FIRE AND AS A COMPENSATION, THE ASSESS EE RECEIVED RS.20,34,752/- ON ACCOUNT OF FIRE INSURANC E CLAIM WHICH AS PER THE LEARNED CIT WAS NOT DERIVED FROM I NDUSTRIAL ACTIVITY. HOWEVER, WE ARE OF THE VIEW THAT THE AMO UNT SO RECEIVED BY THE ASSESSEE COMPANY FROM THE INSURANCE COMPANY IS IN THE NATURE OF COMPENSATION FOR LOSS O F STOCK AND SUCH COMPENSATION CANNOT BE TREATED AS INCOME O F THE ASSESSEE SO AS TO DECLINE THE CLAIM OF DEDUCTION U/ S 80IB OF THE ACT AND SHOULD BE TAKEN INTO ACCOUNT IN DETERMI NING THE PROFIT AND GAINS OF THE ASSESSEE COMPANY. ON QUEST IONING FROM THE BENCH, IT WAS EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN COMPARISON TO COST OF RAW COTTON, THE INSURANCE CLAIM WAS LESS, THEREFORE, THERE IS STILL LOSS TO THE ASSESSEE. IN VIEW OF THESE FACTS, THE RATIO LAID DO WN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. SPORTKING INDIA LIMITED (2009) 183 TAXMAN 312 (DEL), THOUGH F OR THE PURPOSES OF SECTION 80IA OF THE ACT, SUPPORTS OUR V IEW, WHEREIN IDENTICAL VIEWS WERE EXPRESSED. WHILE COMIN G TO THIS CONCLUSION, THE HONBLE COURT DISSENTED FROM THE VI EW TAKEN BY THE MADRAS COURT IN PANDIAN CHEMICALS LIMITED; 2 70 ITR 448 (MAD) AND FOLLOWED THE DECISION FROM HONBLE AP EX COURT IN RAGHUVANSHI MILLS VS.CIT; 22 ITR 484 (PARA 9) AN D DISTINGUISHED ON FACTS THE DECISION IN VANIA SILK M ILLS PVT. LTD. VS. CIT; 191ITR 617 (SC) (PARA11). HOWEVER, FR OM THE ASSESSMENT ORDER, WE FIND THAT THERE IS NOT EVEN A WHISPER REGARDING FIRE INSURANCE CLAIM AND THE COST OF THE RAW COTTON, THEREFORE, IN PRINCIPLE, WE ALSO SET ASIDE THE MATT ER TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICA TION IN ACCORDANCE WITH THE DISCUSSION MADE HEREINABOVE. TH E LEARNED ASSESSING OFFICER IS ALSO DIRECTED TO VERIF Y THE FACTUAL FIGURE OF LOSS VIS-A-VIS THE AMOUNT OF COMPENSATION RECEIVED FROM THE INSURANCE COMPANY AGAINST LOSS OF STOCK. IF THE ASSESSING OFFICER FINDS THAT THE AMOUNT OF COMPENSA TION RECEIVED FROM THE INSURANCE COMPANY IS MORE THAN TH E AMOUNT OF ACTUAL LOSS, THE EXCESS AMOUNT IS NOT ELI GIBLE FOR DEDUCTION U/S 8IB OF THE ACT. WE DIRECT ACCORDINGLY . HOWEVER, DUE OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUBSTANTIATE ITS CLAIM BE PROV IDED TO THE ASSESSEE. BEFORE PARTING WITH THE MATTER, WE BRING ON RECORD THAT THE ASSESSING OFFICER SHOULD VERIFY THAT THE AMOUNT REC EIVED BY THE ASSESSEE ON ACCOUNT OF INSURANCE CLAIM, IF DOES NOT EXCEED THE AMOUNT OF LOSS DEBITED TO THE P&L ACCOUNT ON ACCOUN T OF LOSS OF 15 STOCK, NO INCOME IS ACTUALLY GENERATING THEREFORE T HERE IS NO REASON TO EXCLUDE THE AMOUNT OF INSURANCE CLAIM WHI LE COMPUTING THE DEDUCTION U/S 80IA. HOWEVER, IF THE A SSESSING OFFICER FINDS THAT THE AMOUNT OF CLAIM RECEIVED WAS IN EXCESS OF THE AMOUNT OF LOSS ON FIRE DEBITED TO THE RESPECTIV E P&L ACCOUNT, THE SAME IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA OF THE ACT. WE DIRECT ACCORDINGLY. THIS WILL COVER IDENTICAL GR OUNDS RAISED IN THE RESPECTIVE APPEALS. 5. THE NEXT COMMON GROUND PERTAINS TO EXCLUDING THE GROSS INTEREST RECEIVED FROM THE ELIGIBLE INCOME WHILE AL LOWING DEDUCTION U/S 80IA/80IB OF THE ACT. THE STAND OF TH E LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE SAID INTEREST IS REQUIRED TO BE DEDUCTED FROM THE INTEREST PAID. THE LEARNED CIT D R DEFENDED THE STAND OF THE LEARNED CIT(A). 5.1 THE FACTS, IN BRIEF, (AS TEST CHECK IN IT(SS) A NO. 61/IND/2009) ARE THAT THE ASSESSEE CLAIMED DEDUCTIO N OF RS.58,05,150/- U/S 80IA OF THE ACT. THE ASSESSEE W ORKED OUT THE DEDUCTION AFTER INCLUDING THE INCOME FROM INTEREST AMOUNTING TO RS.4,48,689/-. HOWEVER, THE LEARNED ASSESSING OFFIC ER EXCLUDED THE SAME WHILE WORKING OUT THE DEDUCTION U/S 80IA O N THE PLEA THAT THE SAME IS NOT DERIVED FROM AN INDUSTRIAL U NDERTAKING BY 16 FOLLOWING THE DECISION FROM HONBLE APEX COURT IN T HE CASE OF PANDIAN CHEMICALS; 262 ITR 278. THE LEARNED CIT(A) AFFIRMED THE STAND OF THE LEARNED ASSESSING OFFICER WHICH IS UND ER CHALLENGE BEFORE THE TRIBUNAL. WE NOTE THAT THE ASSESSEE REC EIVED INTEREST OF RS.52,055/- FROM FIXED DEPOSITS WITH AKOLA JANTA COMMERCIAL, RS.3,41,959/- AS INTEREST ON SHORT TERM ADVANCE AND RS.54,675/- AS INTEREST ON DELAYED PAYMENTS (TOTAL RS. 4,48,689 /-). THE WORD DERIVED FROM HAS BEEN DISCUSSED IN DETAIL BY THE HONBLE APEX COURT IN PANDIAN CHEMICALS LIMITED (SUPRA) BY HOLDI NG THAT IT MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES UNDERTAKING. 6. SO FAR AS NETTING OF INTEREST INCOME IS CONC ERNED, SINCE THE INTEREST WAS EARNED OUT OF SURPLUS FUNDS, THEREFORE , SUCH INTEREST INCOME NOT TO BE ALLOWED FOR NETTING OF INTEREST EX PENDITURE. COMMON ISSUE HAS BEEN TAKEN BY THE ASSESSEE WITH RE GARD TO ALLOWING CLAIM OF DEDUCTION U/S 80-IB IN RESPECT OF INTEREST INCOME. CONTENTION OF THE LEARNED AR WAS THAT ASSES SING OFFICER HAS EXCLUDED THE GROSS AMOUNT OF INTEREST FROM THE ELIGIBLE PROFIT OF INDUSTRIAL UNDERTAKING WHILE COMPUTING CLAIM OF DEDUCTION U/S 80IB. HE CONTENDED THAT ASSESSEE HAS BORROWED FUNDS ON INTEREST WHICH HAS BEEN UTILISED FOR EARNING INTEREST INCOME . AS PER THE 17 LEARNED AR, THE ASSESSING OFFICER HAS DEDUCTED GROS S AMOUNT OF INTEREST IN PLACE OF NET INTEREST INCOME EARNED BY THE ASSESSEE. HE SUBMITTED THAT INTEREST EXPENDITURE INCURRED ON BORROWED FUNDS IS REQUIRED TO BE REDUCED OUT OF INTEREST INC OME WHICH FALLS UNDER THE SAME HEAD OF INCOME I.E. INCOME FROM OTHE R SOURCES. SINCE THE NATURE OF INCOME AND EXPENDITURE WAS THE SAME I.E. FROM OTHER SOURCES, LEARNED A`R ARGUED THAT ONLY NE T INTEREST INCOME IS REQUIRED TO BE EXCLUDED FROM THE PROFIT O F INDUSTRIAL UNDERTAKING FOR CLAIMING DEDUCTION U/S 80IB. HE PLA CED ON RECORD ORDER OF COORDINATE ITAT BENCH IN THE CASE O F AMARKUMAR AGRAWAL ORDER DATED 11 TH MAY, 2010 WHEREIN UNDER SIMILAR FACTS MATTER WAS RESTORED BY THE TRIBUNAL TO THE ASSESSIN G OFFICER FOR NETTING OF INTEREST INCOME. PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER :- 14. AS REGARD THE ISSUE OF NETTING OF INTEREST RAISED IN GROUND NO. 1(F), WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN FOLLOWING CASES :- (I) ITA NO. 756/IND/2006 (II) ITA NO. 757/IND/2006 (III) ITA NO. 759/IND/2006 AND (IV) ITA NO. 761/IND/2006 AND THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER BY OBSERVING AS UNDER :- 14. AS REGARD TO NETTING OF INTEREST IS CONCERNED, IT IS NOW A SETTLED JUDICIAL PROPOSITION THAT ONLY NET INTEREST INCOME HAS TO BE EXCLUDED FROM THE PROFITS OF AN ELIGIBLE 18 INDUSTRIAL UNDERTAKING. THE LD. DEPARTMENTAL REPRESENTATIVE, THOUGH, HAS TRIED TO STATE THAT THERE WAS NO DIRECT NEXUS AS OBSERVED BY THE LD. CIT(A). HOWEVER FROM THE PERUSAL OF THE APPELLATE ORDER, IN OUR VIEW, NO SUCH FINDING EMERGES. EVEN THE ASSESSING OFFICER HAS SNOT DEALT WITH THIS ASPECT. FURTHER, TH E DECISION RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IN THE CASE IS ALSO ON A DIFFERENT ASPECT AND NOT ON THE ASPECT OF NETTING, HENCE, NOT RELEVANT. SINCE THE ASPECT OF NEXUS HAS NOT BEEN EXAMINED AT ANY STAGE, HENCE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE SAME AND IF THE NEXUS BETWEEN THE INTEREST PAID AND INTEREST EARNED IS ESTABLISHED BY THE ASSESSEE THEN TO EXCLUDE ONLY NET INTEREST FROM THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING. THUS, THIS PART OF THIS GROUND IS ACCEPTED. 15. SINCE THE FACTS ARE IDENTICAL, HENCE, THE ISSUE RAISED IN THIS APPEAL, IS ALSO RESTORED TO THE FILE OF ASSESSING OFFICER TO BE DISPOSED OF IN A SIMILAR MANNER. THUS, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. FOLLOWING DECISIONS WERE RELIED ON BY THE LEARNED A R : I. SHIVA SHANKAR GRANITES (P) LTD. V ITO; 75 TTJ 535(H YD) II. ACIT VS. GALLIUM EQUIPMENT P.LTD.; 75 TTJ 130 (DEL) III. RAJEEV ENTERPRISES VS. ASSESSING OFFICER; 261 ITR 3 4 (AT) (SB) IV. LALSONS ENTERPRISES VS DCIT; 82 TTJ 1048 (SB) V. MIRA INDUSTRIES; 87 ITD 475 (AHD) VI. KIRAN BHAI H. SHELOT; 235 ITR 635 (GUJ) VII. INDIA CEMENT LTD.; 60 ITR 52 (SC) VIII. PICRIC LTD.; 90 ITD 301 (DEL) IX. J.F. LABORATORIES LTD.; 96 ITD 448 (MUM) X. CIT VS. DALMIA PROMOTERS DEV.P.LTD.;281 ITR 346 (DE L) XI. ANDHRA FARM CHEMICAL CORP.; 171 ITR 660 (AP) XII. VINDHYA TELELINKS LTD.; 58 TTJ 450 (JAB. BENCH) XIII. NARSING OIL EXTRACTIONS & ALLIED PRODUCTS LTD.; 26 ITC 286 (JAB BENCH.) XIV. PRAMILA BAKORE; 281 ITR 461 (MP) 19 XV. PLETHICO PHARMACEUTICAL LTD.; 3 ITJ 187 (INDORE) XVI. DCIT VS. HEG LTD.; 3 ITJ 323/326 (INDORE) XVII. CIT VS. ASIAN STAR CO. LTD.; 326 ITR 56 (BOM) XVIII. CIT VS.SHRI RAM HONDA POWER EQUIPMENT; 289 ITR 475 (DEL) HE ALSO PLACED RELIANCE ON THE DECISION OF APEX COU RT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. 67 DTR 205 WHE REIN ISSUE REGARDING NETTING OF INTEREST WAS DISCUSSED IN GREA T DETAIL BY CONSIDERING DECISION OF DELHI HIGH COURT IN THE CAS E OF SHRI RAM HONDA POWER EQUIPMENTS AND OTHERS; 289 ITR 475. RELIANCE WAS ALSO PLACED ON THE DECISION OF JURISD ICTIONAL HIGH COURT IN THE CASE OF PRAKASH OIL LIMITED; 58 D TR 279 WHEREIN IT WAS HELD THAT INTEREST ON DELAYED PAYMEN T OF SALE AMOUNT IS ELIGIBLE FOR DEDUCTION U/S 80IA. DURING THE COURSE OF BUSINESS, THE ASSESSEE RECEIVED LIQUIDATED DAMAGES FOR NOT HONOURING THE CONTRACT FOR SALE OF PRODUCTS, SUCH I NCOME WAS ALSO HELD TO BE DIRECTLY DERIVED FROM INDUSTRIAL UN DERTAKING ELIGIBLE FOR DEDUCTION U/S 80IA. 6.1. ON THE OTHER HAND, LEARNED DR ARGUED THAT INTE REST INCOME EARNED BY THE ASSESSEE WAS INCOME FROM OTHER SOURCE S, THE SAME WAS NECESSARILY TO BE REDUCED FROM THE ELIGIBLE INC OME OF INDUSTRIAL UNDERTAKING FOR CLAIM OF DEDUCTION U/S 8 0IB. HE PLACED RELIANCE ON THE DECISION OF SUPREME COURT IN THE CASE OF 20 PANDIAN CHEMICALS; 262 ITR 278 AND TUTICORIN ALKALI ES; 227 ITR 173. 6.2. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND FROM RECORD THAT LOWER AUTHORITIES HAVE NOT DEALT WITH T HE ASPECT OF NEXUS OF INTEREST INCOME VIS-A-VIS INTEREST EXPENDI TURE. SINCE THE ASPECT OF NEXUS HAS NOT BEEN EXAMINED BY LOWER AUTH ORITIES, IN THE INTEREST OF JUSTICE WE RESTORE THIS ISSUE TO TH E FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH IN VIEW OF OU R ABOVE OBSERVATIONS. BEFORE PARTING WITH THE MATTER, IT IS PERTINENT TO MENTION THAT INTEREST INCOME EARNED OUT OF SURPLUS FUND IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB INSOFAR AS SUCH INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM INDUSTRI AL UNDERTAKING. WE DIRECT ACCORDINGLY. 7. SO FAR AS THE COMMON ISSUE OF PRIOR PERIOD EXPEN SES IS CONCERNED, AS TEST CHECK WE ARE TAKING IT(SS) A NO. 244/IND/2008. THE FACTS, IN BRIEF, ARE THAT THE AS SESSEE CLAIMED THAT ELECTRICITY BOARD RAISED A BILL OF RS. 1,20,04 0/- FOR THE F.Y. 1996-97 WHICH WAS OBJECTED BY THE ASSESSEE AND THE ELECTRICITY BOARD ADJUSTED THE AMOUNT OF RS. 71,000/-. THE STA ND OF THE ASSESSEE BEFORE THE LEARNED CIT(A) WAS THAT ULTIMAT ELY THE ELECTRICITY BOARD DISCONNECTED POWER CONNECTION IN THIS YEAR 21 ITSELF. THE AMOUNT OF RS. 71,000/- ADJUSTED BY THE ELECTRICITY BOARD WAS CLAIMED AS EXPENDITURE IN THE YEAR, UNDER CONSIDERATION, I.E. ASSESSMENT YEAR 1999-00. SINCE THE MERCANTILE SYSTEM OF ACCOUNTING WAS FOLLOWED BY THE ASSESSEE, THE INCOME AND EXPENSES IS TO BE RECORDED EXCEPT IN CASE THE LIABILITY IS CRYSTALLISED SUBSEQUENTLY AS A RESULT OF PENDING DISPUTE/ORDER OF COURT. FROM RECORD WE FIND THAT SI NCE THE ASSESEES CLAIM OF ELECTRICITY WAS CRYSTALLISED DUR ING THE YEAR, UNDER CONSIDERATION, AND ADJUSTED BY MPEB IN THE FI NANCIAL YEAR UNDER CONSIDERATION, THERE IS NO REASON TO DISALLOW THE SAME INSOFAR AS GENUINENESS OF THE EXPENSES WAS NOT DOUB TED. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION OF RS 70,000/- IN RESPECT OF ELECTRICITY BILL CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION. SIMILAR ISSUE HAS BEEN TAKEN BY THE ASSESSEE IN ITA NOS. 252 AND 64/IND/2009 AS THE FACTS AND CIRCU MSTANCES ARE SIMILAR, AS DISCUSSED ABOVE. WE, THEREFORE, DIR ECT THE ASSESSING OFFICER TO ALLOW CLAIM OF DEDUCTION OF EX PENSES CRYSTALLISED DURING THE YEAR UNDER CONSIDERATION IN TERMS OF OUR ABOVE DISCUSSION. 22 8. SO FAR AS ISSUE OF UNEXPLAINED EXPENSES ON THE B ASIS OF DUMP DOCUMENT IS CONCERNED, THE STAND OF THE ASSESS EE IS THAT THERE WAS ENOUGH EVIDENCE ON RECORD THAT THE AMOUNT S MENTIONED ON THE LOOSE PAPERS WAS ROUGH WORKING WHI CH PERTAINS TO ASSESSMENT YEAR 1997-98 WHICH IS OUT OF BLOCK PE RIOD, THEREFORE, SUCH LOOSE PAPERS CANNOT BE TAKEN INTO A CCOUNT. AS A TEST CHECK, THE FACTS, IN BRIEF (IN IT(SS) NO. 245/ IND/2008) ARE THAT THERE WERE CERTAIN FIGURES LIKE RS.1,22,000/- (STC), RS.59,000/- (SMG) AND RS.56,000/- (SD) WERE FOUND T O BE RECORDED ON CERTAIN LOOSE PAPERS. THE ASSESSEE FIL ED WRITTEN SUBMISSIONS BEFORE THE LEARNED CIT(A) WHEREIN CERTA IN CONTRADICTIONS WERE FOUND. THE CLAIM OF THE ASSESSE E IS THAT THE AMOUNT OF RS.1,22,000/- REPRESENTS DEMAND OF ELECTR ICITY BOARD AND RS. 59,000/- PAID TO ELECTRICITY BOARD TOWARDS GUARANTEE AND RS.56,000/- AS SECURITY DEPOSIT. THE ADDITION WAS CONFIRMED TO THE TUNE OF RS. 1,15,000/- AND THUS THE GROUND WAS PARTLY ALLOWED. BROADLY, WE ARE OF THE VIEW THAT IF ANY DO CUMENT IS RECOVERED FROM THE POSSESSION OF THE ASSESSEE, IT I S HIS DUTY TO EXPLAIN. IT IS NOT THE CASE THAT THE ADDITIONS WER E CONFIRMED AS IT IS RATHER WHERE A VALID EXPLANATION WAS ADDUCED, TH E SAME WAS ALLOWED, THEREFORE, IN THE ABSENCE OF PLAUSIBLE EXP LANATION, THE 23 STAND OF THE CIT(A) IS AFFIRMED. THIS WILL COVER TH E IDENTICAL GROUND IN OTHER APPEALS ALSO. 9. ANOTHER COMMON ISSUE IN THESE APPEALS PERTAINS T O DISALLOWANCE OF 5% OF PIPE SALE EXPENSES. AS A TES T CHECK, WE ARE NARRATING THE FACTS CONTAINED IN IT(SS) A NO. 248/I ND/2008. THE ASSESSEE WAS ENGAGED IN MANUFACTURING AND TRADING O F PVC PIPES AND FITTINGS. THE ASSESSMENT WAS FINALISED BY MAKIN G AD HOC DISALLOWANCE OUT OF PIPE MANUFACTURING EXPENSES AND PIPE SALE EXPENSES. IN ITS SUBMISSIONS, THE STAND OF THE ASS ESSEE WAS THAT THE ADDITIONS WERE MADE ON THE BASIS OF INFORMATION GATHERED/DOCUMENTS SEIZED DURING SEARCH. IN ITS PI PE MANUFACTURING EXPENSES, RS. 3,89,748/- WERE DEBITED IN PROFIT AND LOSS ACCOUNT WHEREAS AS PER THE REVENUE, SEVERA L SPARES WERE FOUND IN THE STORE FOR WHICH NO DAY TO DAY ACC OUNT/RECORD WAS MAINTAINED. SOME OF THE VOUCHERS WERE FOUND TO BE SELF DRAWN BY THE EMPLOYEES WHICH WERE NOT SUPPORTED BY BILLS. CONSIDERING THE SHORT COMINGS IN THE VOUCHERS, A DI SALLOWANCE OF 5% TO THE EXPENSES WAS MADE WHICH RESULTED INTO ADD ITION AS MENTIONED IN THE RESPECTIVE APPEALS. KEEPING IN VIE W THE TOTALITY OF FACTS, SINCE IT WAS AN AD HOC DISALLOWANCE AND A LSO THE FACT THAT CERTAIN SHORT COMINGS WERE FOUND, TO PUT AN EN D TO THE 24 LITIGATION UNDER THE FACTS, SUCH DISALLOWANCE IS RE DUCED TO 2% IN PLACE OF 5% SUSTAINED BY THE REVENUE. THIS GROUND I N THE RESPECTIVE APPEALS IS, THEREFORE, PARTLY ALLOWED. 10. ANOTHER COMMON GROUND RAISED IN THE APPEALS PER TAINS TO MAINTAINING EXCLUSION OF TRADING INCOME FROM ELIGIB LE INCOME WHILE ALLOWING DEDUCTION U/S 80IB OF THE ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT SUCH IN COME IS BUSINESS INCOME, THEREFORE, THE STAND OF THE REVENU E IN EXCLUDING SUCH INCOME IS UNJUSTIFIED, WHEREAS THE L EARNED CIT DR DEFENDED THE ADDITION. AS PER OUR CONSIDERED VI EW, TRADING INCOME IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB, SINCE SUCH INCOME CANNOT BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING. 11. ANOTHER COMMON GROUND RAISED IN THESE APPEAL S PERTAINS TO MAINTAINING THE DISALLOWANCE OUT OF INTEREST PAID B Y RESTRICTING THE SAME TO 15% AS AGAINST 18% ON THE LOANS ALLEGED LY TAKEN FOR BUSINESS PURPOSES. THE STAND OF THE ASSESSEE IS THA T THE INTEREST WAS PAID CONSIDERING THE MARKET CONDITIONS FOR BUSI NESS PURPOSES WHEREAS THE LEARNED CIT DR DEFENDED THE IM PUGNED ORDER. AS A TEST CHECK, WE ARE MENTIONING THE FACTS IN THE CASE OF SHRI MOHIT INDUSTRIES (IT(SS) A NO. 250/IND/2008). THE FACTS, IN BRIEF, ARE THAT IN ITS PROFIT AND LOSS ACCOUNT, THE ASSESSEE 25 REFLECTED PAYMENT OF INTEREST TO DIFFERENT LENDERS AT DIFFERENT RATES LIKE RATE OF 18% IN RESPECT OF FAMILY MEMBERS OF TH E PARTNERS WHEREAS INTEREST RATE OF 12% PAID TO ANOTHER LENDER AND IN SOME OF THE CASES IT IS 15%. THE STAND OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE RATE OF INTEREST DEP ENDS ON NEED, AVAILABILITY OF FUNDS AND OTHER ATTENDING CIRCUMSTA NCES. THE STAND OF THE REVENUE IS THAT THE ARRANGEMENT REGARD ING PAYMENT OF INTEREST TO FAMILY MEMBERS OF PARTNERS IS MERELY A CAMOUFLAGE TO REDUCE THE TAX LIABILITY AS THE SAME IS TOWARDS THE HIGHER SIDE AND SINCE THE FUNDS WERE AVAILABLE AT THE LOWER RAT ES, NO PRUDENT BUSINESSMAN WOULD INCUR LOSS. ANOTHER STAND TAKEN BY THE REVENUE IS THAT IT WAS NOT FOR COMMERCIAL EXPEDIENC Y AS THE SAME WAS NOT INCURRED EXCLUSIVELY FOR PURPOSES OF TRADE OR BUSINESS OF THE ASSESSEE, ACCORDINGLY, DISALLOWANCE WAS MADE U/ S 40A(2)(B) OF THE ACT. WITHOUT GOING INTO MUCH DELIBERATION, W E ARE OF THE VIEW THAT SECTION 40A(2)(A) CANNOT HAVE ANY APPLICA TION UNLESS IT IS FIRST HELD THAT THE EXPENDITURE WAS EXCESSIVE AN D UNREASONABLE AS WAS HELD BY HONBLE APEX COURT IN UPPER INDIA PU BLISHING HOUSE (P) LTD.; 117 ITR 569 (SC). SO FAR AS LEGITI MATE NEED OF COMMERCIAL EXPEDIENCY IS CONCERNED, IT HAS TO BE DE CIDED BY THE ASSESSEE BECAUSE ULTIMATELY THE ASSESSEE HAS TO RUN ITS BUSINESS 26 SMOOTHLY. WHATEVER IT MAY BE, THE REASONABLENESS OF THE PAYMENT AND ATTENDING CIRCUMSTANCES CANNOT BE IGNORED. WE A RE OF THE VIEW THAT FROM SISTER CONCERN, THE PAYMENT OF INTER EST CAN NEVER BE MORE THAN THE PREVALENT RATE, THEREFORE, WE FIND NO INFIRMITY IN THE STAND OF THE LEARNED CIT(A) AND AFFIRM THE SAME . 12. ANOTHER GROUND RAISED IN THE APPEAL IS THAT THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN REJECTING THE CONTENTI ON OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 153A ARE NO T LIKE SECTION 147 OF THE ACT. WE ARE OF THE VIEW THAT BOTH SECTIO NS ARE MATERIALLY DIFFERENT BECAUSE SO FAR AS SECTION 147 IS CONCERNED, WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT THEN HE CAN ASSESS/REASSESS SUCH ESCAPED INCOME WHICH COMES TO HIS NOTICE. SECTION 153A OF T HE ACT WAS INTRODUCED BY THE FINANCE ACT WITH RETROSPECTIVE EF FECT FROM 1.6.2003. A PERUSAL OF SECTION 153A SHOWS THAT IT STARTS WITH A NON-OBSTANTE CLAUSE RELATING TO NORMAL ASSESSMENT P ROCEDURE WHICH IS COVERED BY SECTION 139, 147 TO 149, 151 AN D 153 IN RESPECT OF SEARCHES MADE AFTER 31.5.2003. UNDER SEC TION 153A THE ASSESSING OFFICER IS TO ISSUE NOTICE TO THE ASS ESSEE TO FURNISH RETURN FOR EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT WITH 27 WHICH SUB-SECTION (1) OF SECTION 153A OF THE ACT AP PLIES. SECTION 148 HAS ALSO BEEN EXCLUDED IN A CASE COVERED BY SEC TION 153A OF THE ACT. WITH ALL THE STOPS HAVING BEEN PULLED OUT, THE ASSESSING OFFICER U/S 153A HAS BEEN ENTRUSTED WITH THE DUTY O F BRINGING TO TAX THE TOTAL INCOME OF AN ASSESSEE WHOSE CASE IS C OVERED BY SECTION 153A BY EVEN MAKING REASSESSMENT WITHOUT AN Y FETTERS, IF NEED BE. THEREFORE, IT CAN SAFELY BE CONCLUDED THA T SECTION 147 AND 153A ARE MATERIALLY DIFFERENT. 13. IN IT(SS) A NO. 15/IND/2009, THE ASSESSEE HAS A LSO RAISED A GROUND MAINTAINING THE ADDITION IN INCOME FROM AGRI CULTURE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT OUT OF THE DECLARED AGRICULTURAL INCOME OF RS. 1,25,000/- MAIN TAINING THE ADDITION OF RS. 1 LAC IS AGAINST THE FACT AS DURING THE RELEVANT PERIOD, BANANA CROP WAS GROWN WHICH IS COMPLETELY D IFFERENT FROM OTHER YEARS WHEREAS THE LEARNED CIT DR DEFENDED THE ADDITION. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE DECLARED AGRICULTURAL INCOME OF RS. 1,25,000/- AS AGAINST RS.25,000/- DUR ING (A.Y 2000-01), RS. 35,000/- (A.Y. 1999-00) AND RS. 25,00 0/- (A.Y. 1998-99). SINCE THERE WAS STEEP DISPROPORTIONATE I NCREASE IN AGRICULTURAL INCOME, ITS GENUINENESS WAS DOUBTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ACCEPTED AGRICULTURAL 28 INCOME OF RS.25,000/- AND ADDED RS.1 LAC OUT OF UND ISCLOSED SOURCES. WE ARE SUMMARISING HEREUNDER THE AGRICULT URAL INCOME DECLARED BY THE ASSESSEE FOR DIFFERENT ASSESSMENT Y EARS :- ASSESSMENT YEAR AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN RUPEES 1998-99 25000 1999-2000 35000 2000-01 25000 2001-02 125000 2002-03 50000 2003-04 40000 2004-05 20000 IF THE ABOVE CHART IS ANALYSED, ADMITTEDLY THERE IS DISPROPORTIONATE INCREASE OF AGRICULTURAL INCOME IN ASSESSMENT 2001-02 IN COMPARISON TO OTHER ASSESSMENT YEARS. EV EN OTHERWISE, IF ANY PERSON PLANTS BANANA PLANTS, IT I S NOT THE CASE THAT IN THE SAME YEAR, IT STARTS GIVING BANANA PROD UCE RATHER IT TAKES ALMOST TWO YEARS FOR A PLANT TO GROW AND THER EAFTER TO GIVE THE FRUITS. SOMETIMES IT TAKES MORE TIMES ALSO. THE RE IS A FINDING IN THE IMPUGNED ORDER THAT NO REVENUE RECORD WAS PR ODUCED BY THE ASSESSEE EVIDENCING GROWING OF BANANA CROP. EVE N AS PER THE COPY OF RECEIPT FROM MAA DURGESHWARI KELA GROUP, TH E BANANA 29 INCOME WAS SHOWN FROM APRIL, 2000 TO JANUARY, 2001. AS SUCH, THE CLAIM OF THE ASSESSEE SEEMS TO BE UNJUSTIFIED A ND EVEN IF THE ASSESSEE WAS EARNING SUCH A HUGE PROFIT IN COMPARIS ON TO OTHER ASSESSMENT YEARS, WE FAIL TO UNDERSTAND AS TO WHY T HE BANANA CROP WAS NOT CONTINUED. IT SEEMS TO BE A MAKE SHIFT ARRANGEMENT, THEREFORE, WE FIND NO JUSTIFICATION TO INTERFERE WI TH THE STAND OF THE LEARNED CIT(A) AND CONFIRM THE SAME. 14. ANOTHER COMMON GROUND RAISED IS THAT CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 234B(3) ARE NOT APPLICABLE IN RESPECT OF PROCEEDINGS FOR THE IMPUGN ED ASSESSMENT YEARS. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE STAND OF THE ASSESSEE IS THAT INTEREST U/S 234B SHO ULD HAVE BEEN CHARGED AS PER SUB-SECTION (3) OF THE SECTION ON TH E GROUND THAT DETAILED CALCULATION OF INTEREST WAS NOT PROVIDED T O THE ASSESSEE. WE FIND THAT THERE IS A FINDING IN THE IMPUGNED ORD ER THAT THE ASSESSEE ITSELF HAS NOT SPECIFIED THE DETAILS OF IN TEREST CHARGEABLE U/S 234B AS PER THE PROVISIONS OF THE ACT. WE FIND THAT SECTION 153A WAS INSERTED WITH EFFECT FROM 1.6.2003. SUB-S ECTION (3) TO SECTION 234B OF THE ACT WAS MODIFIED AND THE WORDS OR SECTION 153A WAS INTRODUCED BY THE FINANCE ACT. SIMILARLY, CHARGING OF INTEREST ON EXCESS REFUND AS A RESULT OF REGULAR AS SESSMENT WAS 30 INSERTED BY FINANCE ACT, 2003, THEREFORE, IN THE CA SES OF SECTION 153A, IT IS TO BE APPLIED WITH EFFECT FROM 1.6.2003 . THE ASSESSING OFFICER WAS DIRECTED BY THE CIT(A) TO CHARGE AS PER THE PROVISIONS OF THE ACT, THEREFORE, THE ASSESSEE SHOULD NOT FEEL AGGRIEVED BY THE DIRECTION BECAUSE THE ASSESSEE IS AT LIBERTY TO CAN VASS ITS CASE BEFORE THE ASSESSING OFFICER. CHARGING OF INTEREST U/S 234B IS MANDATORY AND CONSEQUENTIAL IN NATURE. 15 SO FAR AS THE GROUND REGARDING NON-ADMISSION OF ADDITIONAL EVIDENCE FOR CLAIM OF DEDUCTION U/S 80IB ON GROSS T OTAL INCOME AND NON-ADMISSION OF ADDITIONAL EVIDENCE REGARDING WRONG EXCLUSION OF INTEREST WHILE ALLOWING DEDUCTION U/S 80IB IS CONCERNED, SINCE IT IS A LEGAL ISSUE, IT SHOULD HAV E BEEN ALLOWED, THEREFORE, THE CIT(A) IS DIRECTED TO THE EXAMINE TH E CLAIM OF THE ASSESSEE AFTER PROVIDING DUE OPPORTUNITY AND DECIDE IN ACCORDANCE WITH LAW. 16. SO FAR AS THE ISSUES OF DISALLOWANCE OF INAUGUR ATION EXPENSES OF RS.28,400/- AND MAINTAINING THE DISALLO WANCE OF RS.1,32,000/- ON ACCOUNT OF RATE DIFFERENCE/SETTLEM ENT ARE CONCERNED, THE INAUGURATION EXPENSES WERE CLAIMED T O BE INCURRED DURING SETTING UP OF BUSINESS, THEREFORE, BEING WITHIN 31 THE REASONABLE LIMIT, THE INAUGURATION EXPENSES DES ERVE TO BE ALLOWED. 17. SO FAR AS THE EXPENDITURE OF RS.1,32,000/- IS CONCERNED, IT WAS INCURRED ON ACCOUNT OF NON-FINALI SATION OF PURCHASE DEAL AND WAS PAID AS COMPENSATION. THERE I S A FINDING THAT THIS ISSUE OF SETTLEMENT HAS ALREADY BEEN DECI DED IN CASES OF SISTER CONCERNS. THE STAND OF THE REVENUE IS THAT T HIS LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD TO BE SET OFF FROM THE PROFIT OF SPECULATION BUSINESS. WE ARE OF THE VIEW THAT SETT LEMENT EXPENSES WHICH WERE INCURRED AS BUSINESS EXPEDIENCY HAVE TO BE ALLOWED. EVEN OTHERWISE, THESE AMOUNTS WERE GIVEN T O THIRD PARTY, THEREFORE, IT HAS TO BE ALLOWED. NO PRUDENT BUSINES SMAN WILL THROW AWAY ITS INCOME TO A THIRD PARTY, THEREFORE, THIS GROUND IS ALSO ALLOWED. 18. SO FAR AS THE ISSUE OF DISALLOWANCE OF RS. 15,0 00/- OUT OF OFFICE EXPENSES AND AD HOC DISALLOWANCE OF RS. 30,0 00/- OUT OF CANTEEN EXPENSES ARE CONCERNED, THESE EXPENSES BEIN G OF MEAGRE NATURE AND ARE NECESSARY FOR RUNNING THE BUSINESS D ESERVES TO BE ALLOWED. HOWEVER, THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF THESE EXPENSES. AT THE SAME TIME, N O EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER FOR HIS SUSPICION, 32 TO PUT AN END TO THE LITIGATION, THESE DISALLOWANCE S ARE RESTRICTED TO 50% OF THE RESPECTIVE DISALLOWANCE IN THE RESPEC TIVE APPEALS, CONSEQUENTLY PARTLY ALLOWED. 19. SO FAR AS THE ISSUE OF ADDITION OF RS. 2 LACS IN (IT(SS) A NO. 7/IND/2009) FOR THE MARRIAGE EXPENSES OF MISS SHILP A AGRAWAL, DAUGHTER OF SHRI RAJENDRA KUMAR AGRAWAL, IS CONCERN ED, WE FIND THAT THE ASSESSING OFFICER HAS DISCUSSED THE ISSUE AT PAGES 1 AND 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FO UND THAT SINCE THE FUNCTIONS WERE ARRANGED AT HOTEL SAYAJI AND SOM E OF THE RELATIVES STAYED FOR 3 TO 4 DAYS, LARGE SCALE CATTE RING WITH WIDE VARIETIES WAS ARRANGED, PANCHNAMA WAS DRAWN WHICH R EFLECTS DETAILS OF MARRIAGE EXPENSES AND AT THE BOTTOM OF T HE PAPER SOME AMOUNT WAS MENTIONED AS RS. 23.42 LACS. IT WAS CLA IMED BY THE ASSESSEE THAT THESE ARE ROUGH ESTIMATES AND THE EXP ENDITURE TO THIS MAGNITUDE WAS NOT INCURRED. THE ASSESSING OFFI CER ESTIMATED THE MARRIAGE EXPENSES AT RS.25,00,000/- OUT OF WHIC H THE ASSESSEE PRODUCED DETAILS OF WITHDRAWALS AGGREGATIN G TO RS. 13 LACS. THE STATEMENT OF BROTHER OF THE ASSESSEE WAS RECORDED WHO ESTIMATED THE UNACCOUNTED EXPENDITURE TO THE TUNE O F RS.10 LACS. A CONSERVATIVE ESTIMATE TO THE TUNE OF RS. 25 LACS WAS MADE AND THUS ADDITION OF RS. 2 LACS WAS MADE ON ACCOUNT OF UNEXPLAINED 33 MARRIAGE EXPENSES. IF THE TOTALITY OF FACTS AND CI RCUMSTANCES NARRATED IN THE ASSESSMENT ORDER, IMPUGNED ORDER AN D THE ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSEL AR E KEPT IN JUXTAPOSITION AND ESPECIALLY THE FIGURES MENTIONED ON THE PAPERS FOUND, SUCH EXPENSES CANNOT GO BEYOND THE FIGURE OF RS.23 LACS, THEREFORE, THE CONSERVATIVE ESTIMATE CANNOT BE SUST AINED ESPECIALLY WHEN THE ROUGH ESTIMATE EVEN HAS BEEN RE LIED ON BY THE ASSESSING OFFICER. IT IS FURTHER SEEN THAT THE ASSESSEE AS WELL THE FAMILY MEMBERS WITHDREW THE AMOUNTS OF RS. 13 L ACS AND RS. 10 LACS WAS SURRENDERED BY HIS BROTHER, NARENDRA AG RAWAL, TOTALLING RS. 23 LACS, THEREFORE, THE EXTRA AD HOC ADDITION OF RS. 2 LACS CANNOT STAND ON ITS LEGS, THEREFORE, THE ADDIT ION IS DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 20 . COMMON GROUND HAS BEEN TAKEN BY THE ASSESSEE FOR ALLOWING CLAIM OF DEDUCTION U/S 80IB ON THE AMOUNT OF ELIGIBLE INCOME WITHOUT REDUCING THE SAME BY THE AMOUNT OF D EDUCTION ALLOWED U/S 80HHC OF THE ACT. WE HAVE CONSIDERED T HE RIVAL SUBMISSIONS, AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT AN AMENDMENT WAS BROUGHT U/S 80IA W.E.F. 1.4.1999 WITH THE INSERTION OF SUB-SECTION (9A), THE PROFIT OF BUSINESS WHILE ALLOWING DEDUCTION U/S 80HHC SHALL BE FURTHER REDUC ED BY 34 PROFITS ON WHICH DEDUCTION U/S 80IA HAS BEEN ALLOWE D. THE LANGUAGE OF SECTION 80IA(9) IS VERY CLEAR THAT WHER E DEDUCTION IS ALLOWED U/S 80IA IN RESPECT OF PROFITS FOR ANY ASSE SSMENT YEAR THE DEDUCTION TO THE EXTENT OF SUCH PROFIT SHALL NOT BE ALLOWED UNDER ANY PROVISION OF CHAPTER VIA WHICH INCLUDED DEDUCTI ON U/S80HHC OF THE ACT. SINCE THE ASSESSMENT YEAR UND ER CONSIDERATION FALLS AFTER THE AMENDMENT WAS BROUGHT IN WITH EFFECT FROM THE A.Y. 1999-00, THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S 80IB ON THE AMOUNT OF ELIGIBLE INCOME AFTER RED UCING THE SAME BY THE AMOUNT OF DEDUCTION ALLOWED U/S 80HHC. TWO SPECIAL BENCHES OF THE ITAT, ONE IN THE CASES OF RO GINI GARMENTS; 108 ITD 49 (SB) (MAD) AND ANOTHER IN CASE OF HINDUS TAN MINT & AGRO; 123 TTJ 577 HELD THAT DEDUCTION U/S 80HHC IS TO BE ALLOWED ONLY ON THE AMOUNT OF ELIGIBLE PROFIT AS RE DUCED BY THE AMOUNT OF DEDUCTION ALLOWED U/S 80IB. IT IS FURTHER MENTIONED THAT DECISION OF LARGER BENCH IN THE CASE OF HINDUS TAN MINT & AGRO HAS BEEN AFFIRMED BY HONBLE DELHI HIGH COURT IN THE CASE OF GREAT EASTERN EXPORTS; 332 ITR 14. IN VIEW OF T HESE FACTS AND JUDICIAL PRONOUNCEMENTS, WE DIRECT THE ASSESSING OF FICER TO FIRST ALLOW CLAIM OF DEDUCTION U/S 80IA/80IB ON THE ELIGI BLE INCOME OF INDUSTRIAL UNDERTAKING AND AFTER REDUCING THE SAME TO ALLOW 35 DEDUCTION U/S 80HHC ON THE BALANCE OF PROFIT OF ELI GIBLE UNDERTAKING. 21. THE GROUND TAKEN WITH REGARD TO DISALLOWANCE OF AMOUNT DEBITED TO P&L ACCOUNT ON ACCOUNT OF PF DAMAGES AND INTEREST, WE FIND THAT DEDUCTION WAS CLAIMED IN CONTRAVENTION TO PROVISIONS OF 36(VA). SINCE THE AMOUNT WAS PAID BE LATEDLY THE SAME IS NOT ALLOWABLE. ACCORDINGLY, WE CONFIRM THE ACTION OF CIT(A). 22. IN ITA NO. 123 A GROUND HAS BEEN TAKEN BY THE A SSESSEE WITH REGARD TO ADDITION OF RS. 2,11,650/- ON ACCOUN T OF ALLEGED UNEXPLAINED INVESTMENT IN STOCK. FROM RECORD WE FIN D THAT DURING THE COURSE OF SEARCH U/S 132 THE STOCK OF GO ODS WAS INVENTORIZED, WHICH WAS FOUND IN EXCESS AS COMPARED TO STOCK AS PER BOOKS OF ACCOUNTS, ACCORDINGLY, AN ADDITION OF RS. 1,82,950 WAS MADE BY THE ASSESSING OFFICER. BY THE IMPUGNED ORDER, CIT(A) NOT ONLY CONFIRMED THE DIFFERENCE IN STOCK B UT ALSO MADE AN ADDITION ON ACCOUNT OF GROSS PROFIT ON SUCH STOC K. THUS, THE ADDITION OF RS. 1,89,700/- MADE BY THE ASSESSING OF FICER WAS INCREASED BY CIT(A) TO RS. 2,11,650/- . WE DO NOT F IND MUCH SUBSTANCE IN THE ORDER OF CIT(A) FOR INCREASING THE AMOUNT OF DIFFERENCE IN STOCK BY THE AMOUNT OF GP WHICH WAS N EITHER 36 EARNED NOR RECEIVED BY THE ASSESSEE. ACCORDINGLY, W E CONFIRM THE ADDITION TO THE EXTENT OF RS. 1,89,700/- IN RESPECT OF DIFFERENCE IN STOCK FOUND DURING THE COURSE OF SEARCH. IN THE RES ULT, THIS GROUND IS ALLOWED IN PART. 23. SO FAR AS THE ISSUE OF INCOME FROM SETTLEMENT I S CONCERNED, WE FIND THAT ASSESSING OFFICER HAS EXCLUDED SUCH IN COME WHILE COMPUTING CLAIM OF DEDUCTION U/S 80IA BY TREATING T HE SAID INCOME AS SPECULATIVE INCOME. AS PER THE NATURE OF TRANSACTION ENTERED INTO BY THE ASSESSEE, WE FIND THAT THE ASSE SSEE ENTERED INTO AGREEMENT FOR SALE OF GOODS IN ADVANCE. THE AM OUNT OF COMPENSATION WAS RECEIVED FOR BREACH OF SETTLEMENT WHICH CANNOT BE SAID TO BE INCOME DERIVED FROM INDUSTRIAL UNDERT AKING. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DERS OF THE LOWER AUTHORITY FOR DECLINING THE CLAIM OF DEDUCTIO N IN RESPECT OF INCOME EARNED BY THE ASSESSEE OUT OF SETTLEMENT. S IMILAR GROUND WAS TAKEN BY THE ASSESSEE IN ITA NO. 16/IND/2009 WH EREIN THE ASSESSEE WAS IN RECEIPT OF RS. 24,606/-. IN VIEW OF OUR DISCUSSION IN ITA NO. 123/IND/2009 (SUPRA) WE CONFIRM THE ACTI ON OF LOWER AUTHORITIES IN DECLINING THE INCOME EARNED BY THE A SSESSEE OUT OF SETTLEMENT. 37 24. IN ITA NO. 17/IND/2009 THE ASSESSEE HAS TAKEN A GROUND REGARDING CONFIRMING THE OF ADDITION OF RS. 7,92,70 0/- ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SEARCH. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF SEARCH PHYSICAL INVENTORY OF STOCK WAS TAKEN WHEREIN COTTON SEED WA S FOUND IN EXCESS IN TERMS OF QUANTITY. THE DIFFERENCE IN PHYS ICAL STOCK VIS- A-VIS THE BOOKS OF ACCOUNT WAS ADDED BY THE ASSESSI NG OFFICER AS THE ASSESSEES INCOME NOT DISCLOSED. 24.1. THE CONTENTION OF THE LEARNED AR WAS THAT AT THE TIME OF SEARCH THE ASSESSEE HAS TAKEN STOCK BY TAKING PE RCENTAGE OF STOCK AT 5.84% WHEREAS AT THE END OF THE YEAR SHORT AGE CAME TO ONLY 1.62%. COPY OF STATEMENT PREPARED AT THE TIME OF SEARCH AND AUDITED FINAL ACCOUNTS WERE FILED BEFORE THE AU THORITIES TO JUSTIFY SHORTAGE. KEEPING IN VIEW THE NATURE OF AS SESSEES BUSINESS AND THE PRODUCT IN WHICH HE WAS DEALING I N, IT WILL BE APPROPRIATE TO ALLOW THE SAME AT 5% IN PLACE OF LOS S CONSIDERED AT 5.84% AT THE TIME OF SEARCH. WE DIRECT ACCORDINGLY. 25. IN IT(SS)A NO. 9/IND/2009 THE ASSESSEE HAS TAKE N A GROUND WITH REGARD TO ADDITION OF RS. 69,520/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GOLD ORNAMENTS. FROM RECO RD WE FIND THAT DURING THE COURSE OF SEARCH LOOSE PAPER NO. 22 OF LPS-1 WAS 38 FOUND AT THE RESIDENCE OF NARENDRA AGRAWAL. THE ASS ESSEE EXPLAINED THAT THESE PURCHASES WERE MADE BY HIS REL ATIVE SMT. SHALINI AGRAWAL FOR HER MARRIAGE AND THE SAME WAS G IFTED TO HER. THE BILL OF PURCHASE WAS GIVEN TO THE ASSESSEE. MAR RIAGE OF SHALINI AGRAWAL WAS IN JUNE, 1998 AND THE PURCHASES WERE ALSO MADE IN 1998. THE ASSESSING OFFICER WAS OF THE VIE W THAT NO PLAUSIBLE EXPLANATION WAS ADDUCED BY THE ASSESSEE E XPLAINING THE SOURCE OF THE SAID PURCHASES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES AND ESPECIALLY WHEN THE BIL LS OF PURCHASE WAS FURNISHED BY THE ASSESSEE, THE ADDITIO N OF RS. 69,520/- MADE TOWARDS ALLEGED UNEXPLAINED INVESTMEN T IN GOLD ORNAMENTS DESERVES TO BE DELETED. THIS GROUND OF TH E ASSESSEE IS ALLOWED. 26. ADDITION ON ACCOUNT OF LOOSE PAPERS FOUND DURIN G SEARCH HAS ALSO BEEN MADE TO THE TUNE OF RS. 14,848/- (IT( SS) A NO. 252/IND/2008. WE FIND THAT THE ASSESSING OFFICER O N THE BASIS OF ANNEXURE BS/2 (PANCHNAMA DATED 22.12.2004) MADE ADD ITION OF RS.14,878/- AS CERTAIN EXPENSES UNDER DIFFERENT HEA DS (RS. 8,128/- AND RS. 6,750/-) ON ACCOUNT OF EXPENSES MAD E ON LOOSE PAPERS ON THE PLEA THAT THE ASSESSEE COULD NOT PROD UCE VOUCHERS. THE PLEA OF THE ASSESSEE IS THAT NO ADDITION IS REQ UIRED TO BE 39 MADE ON THE ADDITION WHICH WAS MADE IN CASUAL MANNE R. THERE IS A FINDING IN THE IMPUGNED ORDER THAT THE ASSESSE E COULD NOT EXPLAIN THE ENTRIES MADE IN THESE PAPERS. HOWEVER, SINCE THE ASSESSEE DECLARED INCOME OF RS.41.94 LACS, THEREFOR E, THE SMALL ADDITION OF RS. 14,878/- DESERVES TO BE DELETED. TH IS GROUND OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6TH. .......... SEPTEMBER, 2012. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 6 TH SEPTEMBER, 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-232428.8 4.9 6.9