Sh. Gaurav Malhotra, Faridkot v. DCIT, Ludhiana

CO 25/CHANDI/2015 | 2011-2012
Pronouncement Date: 26-10-2016 | Result: Allowed

Appeal Details

RSA Number 2521523 RSA 2015
Assessee PAN ABTPM2471M
Bench Chandigarh
Appeal Number CO 25/CHANDI/2015
Duration Of Justice 1 year(s) 2 month(s) 11 day(s)
Appellant Sh. Gaurav Malhotra, Faridkot
Respondent DCIT, Ludhiana
Appeal Type Cross Objection
Pronouncement Date 26-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 26-10-2016
Date Of Final Hearing 19-09-2016
Next Hearing Date 19-09-2016
Assessment Year 2011-2012
Appeal Filed On 14-08-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA ACCOUNTANT MEMBER ITA NO. 645/CHD/2015 ASSESSMENT YEAR: 2010-11 SHRI GAURAV MALHOTRA VS THE DCIT OLD CANTT. ROAD CENTRAL CIRCLE-II FARIDKOT. LUDHIANA. PAN: ABTPM2471M & ITA NO. 658/CHD/2015 ASSESSMENT YEAR: 2011-12 THE DCIT VS SHRI GAURAV MALHOTRA CENTRAL CIRCLE-II OLD CANTT. ROAD LUDHIANA. FARIDKOT. PAN: ABTPM2471M & C.O. 25/CHD/2015 IN ITA NO. 658/CHD/2015 ASSESSMENT YEAR: 2011-12 SHRI GAURAV MALHOTRA VS THE DCIT OLD CANTT. ROAD CENTRAL CIRCLE-II FARIDKOT. LUDHIANA. PAN: ABTPM2471M & ITA NO. 647 & 648/CHD/2015 A.Y. : 2010-11 & 2011-12 SMT. DIMPY MALHOTRA VS THE DCIT OLD CANTT. ROAD CENTRAL CIRCLE-II FARIDKOT. LUDHIANA. PAN: AIGPM9210L & 2 ITA NO. 654& 655/CHD/2015 A.Y.: 2010-11 & 2011-12 THE DCIT VS SHRI GAUTAM MALHOTRA CENTRAL CIRCLE-II S/O SHRI DEEP MALHOTRA LUDHIANA. OLD CANTT. ROAD FARIDKOT. PAN: AIGPM9197C & C.O. 24 & 23/CHD/2015 IN ITA NO. 654/CHD/2015 A.Y.: 2010-11 & 2011-12 SHRI GAUTAM MALHOTRA VS THE DCIT S/O SHRI DEEP MALHOTRA CENTRAL CIRCLE-II OLD CANTT. ROAD LUDHIANA. FARIDKOT. PAN: AIGPM9197C (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI SUDHIR SEHG AL & SHRI A.K.JAIN RESPONDENT BY : SHRI SUSHIL KUMAR DR DATE OF HEARING : 06.10.2016 DATE OF PRONOUNCEMENT : 26.10.2016 O R D E R PER BHAVNESH SAINI JM THIS ORDER SHALL DISPOSE OFF ALL THE ABOVE CROSS- APPEALS AND CROSS OBJECTIONS IN WHICH IDENTICAL ISS UE HAVE BEEN RAISED AND ALL ARE CONNECTED MATTERS. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AP PEALS ARE DECIDED AS UNDER. 3 ITA 645/2015 ( A.Y. 2010-11 ) 3. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(APPEALS)-5 LUDHIANA DATED 27.03.2015 FOR ASSESSMENT YEAR 2010-11 CHALLENGING THE ADDITION OF RS. 17 40 000/- ON ACCOUNT OF 'INCOME F ROM OTHER SOURCES' AS AGAINST CLAIM OF AGRICULTURE INCO ME. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSING OFFICER MADE ADDITION OF RS. 29 LACS BY TREATING TH E AGRICULTURE INCOME AS 'INCOME FROM OTHER SOURCES'. THE PERUSAL OF THE ASSESSMENT ORDER REVEALED THAT ASSES SING OFFICER HAS RAISED THE ISSUE OF THE ASSESSEE HAVING DISCLOSED AN INCOME OF RS. 29 LACS AS AGRICULTURE INCOME. THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE CLAIM OF AGRICULTURE INCOME ON THE BASIS OF DOCUMEN TARY EVIDENCES IN THE FORM OF FERD/JAMABANDI AND EVIDENC E OF SALE PROCEEDS. ACCORDING TO THE ASSESSING OFFIC ER DESPITE AFFORDING OPPORTUNITIES TO THE ASSESSEE NO EVIDENCE TO SUBSTANTIATE THE EARNING OF AGRICULTURE INCOME TO THE EXTENT DISCLOSED WAS FILED. THE ASSE SSING OFFICER THEREFORE TREATED ENTIRE AGRICULTURE INCO ME AS 'INCOME FROM OTHER SOURCES' AND MADE THE ADDITION O F RS. 29 LACS. 5. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(APPEA LS) AND ARGUMENTS OF THE ASSESSEE ARE REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAI NED 4 THAT ASSESSING OFFICER HAS WRONGLY MENTIONED THAT ASSESSEE WAS AFFORDED OPPORTUNITY TO FURNISH EXPLANATION WITH REFERENCE TO THE RECEIPT OF AGRICU LTURE INCOME. THE ASSESSEE FURNISHED REPLY REGARDING THE AGRICULTURE INCOME TO THE QUESTIONNAIRE HOWEVER N O FURTHER OPPORTUNITY WAS GRANTED TO ESTABLISH THE FA CT OF EARNING OF AGRICULTURE INCOME. THE DETAILS ALONGWI TH EVIDENCES OF HOLDING OF AGRICULTURAL LAND AND EARNI NG OF AGRICULTURE INCOME WERE FILED WITH THE REPLY. IT W AS FURTHER SUBMITTED THAT ACCOUNTS OF THE ASSESSEE ARE AUDITED BY THE CHARTERED ACCOUNTANT AND THE AGRICULTURE INCOME HAVE BEEN CREDITED TO THE CAPITA L ACCOUNT WHICH HAVE BEEN RECEIVED THROUGH BANKING CHANNELS. THE ASSESSING OFFICER IN HASTE AND IN ARBITRARY MANNER MADE THE ADDITION WITHOUT ANY BAS IS. THE ASSESSEE SUBMITTED THAT LANDS ARE CULTIVATED ON HISSEDARI AND ALL EXPENSES INCURRED FOR SOWING CULTIVATION AND OTHER ALLIED EXPENSES WERE BORNE BY THE LESSEE. THEREFORE AGRICULTURE INCOME SHOULD HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. 6. THE LD. CIT(APPEALS) CONSIDERED REPLY OF THE ASSESSEE REGARDING THE ISSUE NOT CONFRONTED TO THE ASSESSEE AND THAT NO FURTHER OPPORTUNITY HAVE BEEN GIVEN. THE ASSESSEE FILED NECESSARY EVIDENCES IN T HE FORM OF JAMABANDI AND GIRDAWARI TO EVIDENCE OWNERSH IP OF ALMOST 80 ACRES OF AGRICULTURAL LAND AND ITS CULTIVATION. THE AMOUNTS ON ACCOUNT OF SALE OF 5 AGRICULTURE PRODUCE WERE CREDITED IN THE BOOKS OF ACCOUNT THROUGH BANKING CHANNEL. THE LD. CIT(APPEA LS) IN VIEW OF ALL THESE EVIDENCES REFERRED THE MATTER TO THE ASSESSING OFFICER FOR HIS COMMENTS AND FILING OF TH E REMAND REPORT. THE ASSESSING OFFICER IN HIS REMAND REPORT ON PERUSAL OF THE RECORD SUBMITTED THAT THE QUERY REGARDING AGRICULTURE INCOME WAS NOT PUT TO T HE ASSESSEE. HOWEVER HE HAS SUBMITTED THAT ASSESSEE FILED ANY DOCUMENTARY EVIDENCES IN THIS REGARD THEREFORE SAME MAY BE CONSIDERED IF DEEMED FIT. 7. THE LD. CIT(APPEALS) CONSIDERING THE MATERIAL ON RECORD AND EVIDENCES FOUND ASSESSEE IS OWNER OF 116 ACRES OF LAND WHICH HAVE BEEN CULTIVATED AND ASSESS EE EARNED AGRICULTURE INCOME. HOWEVER IT WAS FUND TH AT ASSESSEE HAS EXAGGERATED THE AGRICULTURE INCOME. THEREFORE RS. 10 000/- PER ACRE WAS CONSIDERED REASONABLE AGRICULTURE INCOME AND ACCEPTED THE CLAI M OF EARNING OF AGRICULTURE INCOME AT RS. 11 60 000/- AN D MADE THE ADDITION OF RS. 17 40 000/- WHICH IS IN CHALLENGE BEFORE TRIBUNAL. FINDINGS OF LD. CIT(APP EALS) IN PARA 3.4 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE TH E BASIS OF ADDITION MADE BY THE A.O. THE ARGUMENTS OF THE AR DURING THE ASSESS MENT AS WELL AS APPELLATE PROCEEDINGS. THE EVIDENCE FILED BY THE APPELLANT DU RING THE APPELLATE PROCEEDINGS AND VERIFIED BY THE A.O. SHOWS THAT HE IS OWNER OF 116 ACRES OF LAND WHICH HAS BEEN CULTIVATED AS PER THE GIRDAVRI RECORD PRODUCED IT IS ALSO 6 SEEN THAT THE SALES AMOUNT HAD BEEN CREDITED IN THE BOOKS OF ACCOUNTS OF CHEQUE RECEIVED FROM THE BUYER. THE APPELLANT IN OR DER TO SUPPORT HER CLAIM HAS FILED CERTIFICATES FROM THE CERTIFYING THE TRAN SFER OF AMOUNT FROM THE BANK ACCOUNT OF M/S KESHAV TRADING CO.. IT IS SEEN THAT THE LAND OWNED BY THE APPELLANT IS LOCATED IN BIKANER (RAJASTHAN) AND THE PERUSAL OF REGISTERED DEED FOR PURCHASE THEREOF SHOWS THAT IT IS CAPABLE OF GI VING ONLY ONE CROP DEPENDENT UPON SEASONAL RAIN THE LIKELY INCOME FRO M THIS KIND OF AGRICULTURAL LAND HAS TO BE LIMITED ESPECIALLY WHEN COMPARED TO A FULLY FERTILIZED LAND WHICH IS GENERALLY AVAILABLE IN STA TES LIKE PUNJAB HARYANA. THE APPELLANT HAD SHOWN RS 29 00 000/- AS INCOME FROM AGRICULTURAL OPERATIONS WHEREAS THE SAID AMOUNT HAS BEEN RECEIVE D AS SALE PROCEEDS THE APPELLANT IN RESPONSE TO THIS SUBMITTED THAT THE LA ND HAD BEEN GIVEN ON HISSEDARI TO SOMEONE AND THE SALES PROCEEDS REPRESE NTED THE NET INCOME IN THIS REGARD. IT IS SEEN THAT THE CLAIM OF THE LAND BEING ON HISSEDARI HAS NOT BEEN SUBSTANTIATED AS A MATTER OF FACT AS NO DETAILS OF THE CULTIVATOR BY DONE THE ENTIRE OPERATION HAS BEEN GIVEN. THE ENTIRETY OF TH E CIRCUMSTANCES SHOW THAT THE CLAIM OF THE AGRICULTURAL INCOME AT RS. 29 00 000/- IS EXAGGERATED. IT IS QUITE APPARENT THAT THERE HAS BE EN CERTAIN AMOUNT OF AGRICULTURAL INCOME AS THE ASSESSEE OWNS AGRICULTUR AL LAND AND AS EVIDENCE OF HAVING CULTIVATED THE SAME AS PER THE REVENUE RE CORDS. BUT AN AGRICULTURAL OF THE KIND OWNED BY THE CANNOT LEAD TO INCOME OF THE LEVEL AS DECLARED A FULLY FERTILIZED LAND WITH IRRIGATION FACILITIES IS GENERALLY EXPECTED TO YIELD ABOUT RS 30 000/- OF RUPEES PER ACRE AS RENT TO T HE OWNER BUT THE LAND WITH THE POSSIBILITY OF ONLY ONE CROP DEPEND UPON SEASON AL RAIN IS NOT EXPECTED TO YIELD MORE THAN RS. 10 000/- AS INCOME. THEREFORE THE ASSESSEE'S CLAIM OF HAVING EARNED AGRICULTURAL INCOME CANNOT BE ACCEPTE D BEYOND 11 60 000/- OF RUPEES I.E. @ RS. 10 000/- PER ACRE THEREFORE THE REST OF THE AMOUNT I.E. RS. 17 40 000/- IS CONFIRMED AS BEING INCOME FROM OTHER SOURCES DECLARED IN GARB THE OF AGRICULTURAL INCOME. THE ADDITION MADE IS THEREFORE CONFIRMED TO THE EXTENT AS DETAILED ABOVE. 8. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT F IND ANY JUSTIFICATION TO SUSTAIN THE ADDITION. THE LD. COUNSEL FOR THE ASSESSEE FILED CHART OF EARNING OF AGRICULTURE INCOME. HE HAS SUBMITTED THAT IN 7 ASSESSMENT YEAR 2009-10 ASSESSING OFFICER MADE ADDITION OF RS. 21 LACS AND TREATED THE ENTIRE AGRICULTURE INCOME AS 'INCOME FROM OTHER SOURCES' B UT THE ASSESSMENT ORDER UNDER SECTION 153 HAVE BEEN QUASHED BECAUSE OF NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. HE HAS REFERRED TO TH E COPY OF THE BILL OF M/S KESHAV TRADING COMPANY TO SHOW T HAT ASSESSEE RECEIVED AGRICULTURE INCOME IN A SUM OF RS . 29 50 025/-. ON THE SAME PATTERN BILL DATED 30.03. 2011 IS FILED. IN ASSESSMENT YEAR 2012-13 ASSESSEE CLA IMED AGRICULTURE INCOME OF RS. 17 89 670/- WHICH HAVE BE EN ACCEPTED BY ASSESSING OFFICER IN SCRUTINY ASSESSMEN T UNDER SECTION 143(3) OF THE ACT DATED 16.03.2015 C OPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. SIMIL ARLY IN ASSESSMENT YEAR 2013-14 ASSESSEE DECLARED AGRICULTURE INCOME OF RS. 22 50 000/- WHICH HAVE BE EN ACCEPTED BY ASSESSING OFFICER IN SCRUTINY ASSESSMEN T UNDER SECTION 143(3) DATED 10.03.2016 COPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT M/S KESHAV TRADING COMPANY IS COMMISSION AGENT THEREFORE HIS EVIDENC E IS RELEVANT AND VITAL AND SHOULD HAVE BEEN ACCEPTED BY ASSESSING OFFICER. ON THE OTHER HAND LD. DR SUBMI TTED THAT NO EVIDENCE OF HISSEDARI HAVE BEEN FIELD THER EFORE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 9. ON CONSIDERATION OF THE ABOVE SUBMISSIONS AND MATERIAL ON RECORD IT IS CLEAR THAT AS PER REMAND REPORT 8 OF THE ASSESSING OFFICER NO QUERY REGARDING AGRICU LTURE INCOME WAS PUT TO THE ASSESSEE AT ASSESSMENT STAGE. THE ASSESSEE FILED EVIDENCE OF JAMABANDI AND GIRDAW ARI OF OWNERSHIP OF THE AGRICULTURAL LAND AND CULTIVATI ON WHICH HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFIC ER IN REMAND PROCEEDINGS. THE TOTAL AGRICULTURAL LAND AND CULTIVATION DONE BY ASSESSEE HAVE BEEN CONSIDERED FAVOURABLY BY THE LD. CIT(APPEALS). THE SALE IS AL SO EVIDENCED THROUGH COMMISSION AGENT M/S KESHAV TRADING COMPANY AND COPY OF THE BILL IS ALSO PRODUC ED ON RECORD. PAYMENTS HAVE BEEN ADMITTEDLY RECEIVED THROUGH BANKING CHANNEL. THEREFORE THERE IS NO BAS IS TO DISBELIEVE THE EARNING OF AGRICULTURE INCOME TO THE EXTENT DECLARED BY THE ASSESSEE. THE LD. CIT(APPEA LS) MERELY ON ASSUMPTION AND PRESUMPTION OF CERTAIN FAC TS OF EARNING OF AGRICULTURE INCOME IN DIFFERENT SEASO NS HAS ESTIMATED THE AGRICULTURE INCOME @ RS. 10 000/- PER ACRE. THE ASSESSEE MADE A CLAIM THAT ONLY NET AGRICULTURE INCOME WAS RECEIVED ON HISSEDARI WHICH HAVE BEEN SOLD THROUGH COMMISSION AGENT. THIS FACT IS SUPPORTED BY CERTIFICATE OF COMMISSION AGENT M/S KESHAV TRADING COMPANY. FURTHER THE HISTORY OF TH E ASSESSEE AS EXPLAINED BY ASSESSEE CLEARLY SHOWS THA T EVEN IN PRECEDING ASSESSMENT YEAR 2009-10 ASSESSEE DECLARED AGRICULTURE INCOME OF RS. 21 LACS WHICH HA VE BEEN ULTIMATELY ACCEPTED IN THE CASE OF THE ASSESSE E AND IN SUBSEQUENT ASSESSMENT YEARS 2012-13 AND 2013-14 9 ASSESSING OFFICER HIMSELF HAS ACCEPTED AGRICULTURE INCOME DECLARED BY ASSESSEE IN SCRUTINY ASSESSMENTS UNDER SECTION 143(3) OF THE ACT. THE AGRICULTURAL LAND OF THE ASSESSEE IS SAME IN PRECEDING AND SUBSEQUENT YEAR AND FACTS AND CIRCUMSTANCES AND EARNING OF AGRICULTURE INCOME THROUGH COMMISSION AGENT IS ALSO ON THE SAME FACTS. THEREFORE CONSIDERING THE FINDING S OF THE LD. CIT(APPEALS) ACCEPTING EARNING OF AGRICULTU RE INCOME BY ASSESSEE THROUGH COMMISSION AGENT AND HOLDING OF SUFFICIENT AGRICULTURAL LAND AND CULTIVA TION DONE BY ASSESSEE IN THE LIGHT OF HISTORY OF THE AS SESSEE IN PRECEDING AND SUBSEQUENT YEARS CLEARLY SUBSTANT IATE AND SUPPORT THE CLAIM OF THE ASSESSEE OF EARNING OF AGRICULTURE INCOME. THEREFORE THERE WAS NO BASIS FOR THE LD. CIT(APPEALS) TO RESTRICT THE SAME TO RS. 11 60 000/- ONLY. THE EVIDENCE OF HISSEDARI IS NOT NECESSARY BECAUSE LD. CIT(APPEALS) IN HIS FINDINGS NOTED THAT EVIDENCE FILED BY ASSESSEE AND VERIFIED BY A.O . SHOWS THAT AGRICULTURAL LAND IS CULTIVATED AS PER GIRDAVRI. 10. WE THEREFORE SET ASIDE THE ORDERS OF AUTHORIT IES BELOW AND ACCEPT THE CLAIM OF THE ASSESSEE OF EARNI NG OF AGRICULTURE INCOME IN A SUM OF RS. 29 LACS. THE EN TIRE ADDITION IS THEREFORE DELETED. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. 10 ITA 658/2015 & C.O. 25/2015 ( A.Y. 2011-12) 12. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF L D. CIT(APPEALS)-5 LUDHIANA DATED 27.03.2015 FOR ASSESSMENT YEAR 2011-12. 13. ON GROUND NO. 1 IN DEPARTMENTAL APPEAL THE REVENUE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN DELETING THE ADDITION OF RS. 67 48 672/- ON ACCOUNT OF NON-INCLUSION OF INTEREST ON INVESTMENT IN CAPITAL WITH M/S GAURAV WINES FARIDABAD. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS NOT FILED A NY COPY OF ACCOUNT AS APPEARING IN THE BOOKS OF ACCOUN T OF M/S GAURAV WINES FARIDABAD. HOWEVER AS PER COMPUTATION OF INCOME ASSESSEE HAS NOT SHOWN ANY INCOME BY WAY OF INTEREST EARNED FROM M/S GAURAV WINES FARIDABAD AS HAS BEEN SHOWN IN THE CASE OF O THER CONCERNS THOUGH THE ASSESSEE HAS CAPITAL BALANCE O F RS. 5.62 CRORE AS ON 31.03.2011. THE ASSESSING OFFICER CALCULATED INTEREST ON THE CLOSING BALANCE OF THE C APITAL AND MADE THE ABOVE ADDITION IN THE ABSENCE OF SUPPORTING DOCUMENTS BEING INTEREST IN HIS CAPACITY AS PARTNER IN M/S GAURAV WINES FARIDABAD 14. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT ASSESSEE WAS A PARTNER IN THE FIRM M/S GAURAV WINES FARIDABAD AND 11 HAVING 16.66% SHARE IN THE FIRM. HE HAS EARNED SHA RE OF PROFIT IN ASSESSMENT YEAR UNDER APPEAL WHICH HAV E BEEN REFLECTED IN THE CAPITAL ACCOUNT AND COMPUTATI ON OF INCOME AS EXEMPT INCOME. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED COPY OF THE ACC OUNT WITH THE FIRM AND ALSO FILED DETAILS. THE ASSESSIN G OFFICER HAS NOT AFFORDED PROPER OPPORTUNITY TO EXPL AIN THIS ISSUE AND MADE THE ADDITION WITHOUT ANY BASIS. THE ASSESSEE FILED COPY OF THE AUDITED ACCOUNTS OF THE FIRMS AND DETAILS OF THE PARTNERS ACCOUNT IN THE C ASE OF M/S GAURAV WINES FARIDABAD AND ASSESSMENT ORDER UNDER SECTION 143(3) OF THE FIRM TO SHOW THAT NO IN TEREST HAS BEEN PAID BY THE FIRM ON THE CAPITAL OF THE PAR TNERS THEREFORE ADDITION IS WHOLLY UNJUSTIFIED. THE ASS ESSING OFFICER FILED THE REMAND REPORT AND REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER. 15. THE LD. CIT(APPEALS) FOUND THAT NO INTEREST HAS BEEN PAID BY THE FIRM M/S GAURAV WINES FARIDABAD T O ITS CONSTITUENT PARTNERS IN RESPECT OF CAPITAL CONTRIBUTION MADE BY THEM. FURTHER THERE IS NO PROVISION IN THE INCOME TAX ACT TO CHARGE NOTIONAL INTEREST AND MADE THE ADDITION ADDITION WAS ACCORDINGLY DELETED. 16. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE IS ADMITTEDLY PARTNER IN M/S GAURAV WINES 12 FARIDABAD AND RECEIVED SHARE OF PROFIT AS PER HIS PRESCRIBED SHARE WHICH WAS DISCLOSED IN THE RETURN OF INCOME. NO INTEREST WAS PAID BY THE FIRM TO ANY OF THE PARTNERS. THE ASSESSEE FILED ASSESSMENT ORDER UNDE R SECTION 143(3) OF THE YEAR UNDER APPEAL OF M/S GAUR AV WINES FARIDABAD TO SHOW THAT NO INTEREST HAVE BEEN PAID BY THE FIRM TO THE PARTNERS. THEREFORE LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST AND WITHOUT ANY JUSTIFICATION. THIS GROUND OF APPEAL OF DEPARTMENTA L APPEAL IS ACCORDINGLY DISMISSED. 17. ON GROUND NO. 2 IN DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 66 57 08 1/- ON ACCOUNT OF LOW GP. 17(I) BRIEFLY FACTS OF THE CASE ARE THAT ASSESSIN G OFFICER MADE THE ABOVE ADDITION ON THE BASIS OF COMPARATIVE LY LOW GP RATE IN COMPARISON TO LAST YEAR. THE ASSESS ING OFFICER NOTED THAT IN EARLIER YEAR ASSESSEE HAS SH OWN BETTER GP RATE THEREFORE MAKING COMPARISON MADE THE ADDITION ADOPTING GP RATE OF 4.9% AS DECLARED BY ASSESSEE FOR ASSESSMENT YEAR 2010-11. ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS BRIEFLY EXPLAINED THAT ASSESSEE CARRIED ON BUSI NESS OF PURCHASE AND SALE OF LIQUOR ON ALLOTTED VENDS BY THE EXCISE & TAXATION DEPARTMENT. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT. ALL SALES AND 13 PURCHASES ARE DULY RECORDED AND BOOKS ARE AUDITED B Y CHARTERED ACCOUNTANT. ALL PURCHASES ARE MADE ON IS SUE OF PERMIT BY THE EXCISE & TAXATION DEPARTMENT. THE PROFIT RATE DEPENDS UPON YEAR TO YEAR CONSIDERING MARKET COMPETITION AND LOCATIONS OF THE ALLOTTED VE NDS. EACH YEAR IS INDEPENDENT YEAR AND PROFITABILITY IS TO BE DEPENDING UPON NUMBER OF FACTORS LIKE DEMAND AND SUPPLY PLACE TO PLACE AND COMPETITION IN MARKET AVAILABILITY OF FINANCE. THE ASSESSING OFFICER MAD E ADDITION WITHOUT ANY BASIS. NO DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNT. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN RESPECT OF ABOVE CONTENTIONS TO SAY THAT ADDITION IS WHOLLY UNJUSTIF IED. THE ASSESSING OFFICER IN REMAND REPORT REITERATED T HE FACTS STATED IN THE ASSESSMENT ORDER AND SUBMITTED THAT NO PLAUSIBLE REASONS FOR LOW PROFITABILITY HAVE BEE N EXPLAINED THEREFORE REQUESTED FOR CONFIRMATION OF THE ADDITION. 18. THE LD. CIT(APPEALS) CONSIDERING MATERIAL ON RE CORD HELD THAT BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED B Y THE ASSESSING OFFICER AND NO DEFECTS HAVE BEEN POINTED OUT IN THE MAINTENANCE OF THE SAME. EVEN DURING THE CO URSE OF SEARCH NO INCRIMINATING MATERIAL WAS FOUND FOR REJECTION OF THE BOOKS OF ACCOUNT. THE ADDITION WA S ACCORDINGLY DELETED. 14 19. AFTER CONSIDERING RIVAL SUBMISSIONS WE ARE O F THE VIEW ADDITION WAS CORRECTLY DELETED BY THE LD. CIT(APPEALS). THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY ORDER OF ITA T CHANDIGARH BENCH IN THE CASE OF DCIT VS DEEP MALHOT RA IN ITA 661/2015 WITH C.O. 28/2015 VIDE ORDER DATED 15.03.2016 IN WHICH IDENTICAL ADDITION HAS BEEN DEL ETED. HE HAS ALSO SUBMITTED THAT SAME ORDER HAVE BEEN FOLLOWED IN THE CASE OF OTHER GROUP CONCERNS OF DCI T VS M/S OASIS DISTILLERIES LTD. IN ITA 667/2015 FOR ASSESSMENT YEAR 2011-12 DATED 05.10.2016 COPY OF T HE ORDER IS PLACED ON RECORD. WE FIND THAT ISSUE IS IDENTICAL AS HAVE BEEN CONSIDERED IN THE CASE OF DC IT VS DEEP MALHOTRA (SUPRA) WHICH IS FOLLOWED IN THE CASE OF DCIT VS M/S OASIS DISTILLERIES LTD. (SUPRA). FINDI NGS IN THIS CASE IN PARAS 19 TO 24 ARE REPRODUCED AS UNDER : 19. ON GROUND NO. 1 REVENUE CHALLENGED DISALLOWANCE OF ADDITION OF RS. 2 78 69 179/- ON ACCOUNT OF LOW NET PROFIT. 19(I) THE ABOVE ADDITION HAS BEEN MADE BY ASSESSING OFFICER ON ACCOUNT OF LOW NET PROFIT. TH E ASSESSING OFFICER HIGHLIGHTED THAT ASSESSEES NET PROFIT RATE FOR THE CURRENT YEAR IS AT 3.98% AS AGAINST 2.18% FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSING OFFICER FURTHER COMMENTED THAT THE PROFIT RATE WAS PROGRESSIVE BUT IF THE DISCLOSED AMOUNT OF RS. 4 CRORES CREDITED IN THE PROFIT & LOSS ACCOUNT WAS TAKEN OUT OF CALCULATION THE NET PROFIT WOULD COME DOWN TO 15 .08%. THE ASSESSING OFFICER THEREFORE REQUIRED THE ASSESSEE TO EXPLAIN THE REASONS FOR THE SAME. IN THE ABSENCE OF ANY EXPLANATION FROM THE SIDE OF THE ASSESSEE THE ASSESSING OFFICER ADOPTED NET PROFIT RATE OF 2.18% LEADING TO THE ADDITION OF RS. 2.78 CR. 19(II) THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT THE ASSESSEE HAS CARRIED ON BUSINESS OF MANUFACTURING AND SALE OF LIQUOR AND MAINTAINED REGULAR BOOKS OF ACCOUNT. ALL THE PURCHASES AND SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. CLOSING STOCK HAS BEEN PROPERLY EVALUATED. ALL EXPENSES ARE PROPERLY VOUCHED AND VERIFIABLE. THE ACCOUNTS ARE AUDITED BY THE CHARTERED ACCOUNTANT AND THE PRODUCTION OF THE FINISHED GOODS IS STRICTL Y UNDER THE CONTROL OF STATE EXCISE & TAXATION AUTHORITIES AND UNDER THEIR CHECK TIME TO TIME. THE ASSESSING OFFICER APPLIED HIGHER PROFIT RATE WITHOUT GOING TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPLICATION OF NET PROFIT RATE OF EARLIER YEAR IS WITHOUT ANY BASIS. THE PROFIT IN ONE YEAR AND THE LOSS IN OTHER YEAR CANNOT BE RULED OUT. IN ORDER TO MAINTAIN THE SALE AND TO COMPETE THE MARKET ONE HAS TO CUT DOWN ITS PROFIT FOR REGULAR CIRCULATION OF FINANCE. SOME LEAKAGES IN THE TRADE OF THE ASSESSEE CANNOT BE RULED OUT WHICH ARE BEYOND THE CONTROL OF THE ASSESSEE BECAUSE IT HAS TO RELY UPON IT STAFF AND EMPLOYEES ENGAGED. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT DISCREPANCY OR IRREGULARITY IN THE BOOKS OF ACCOUNT AS WELL AS IN THE RUNNING OF THE BUSINESS. THUS BOOK VERSION OF THE ASSESSEE HAS BEEN ACCEPTED BY 16 THE ASSESSING OFFICER AND BOOK RESULTS HAVE NOT BEEN REJECTED. THERE IS NO SUPPRESSION OF SALE OR PURCHASE. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT NO ADDITION CAN BE MADE AGAINST THE ASSESSEE ON MERE SUSPICION. 20. THE LD. CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICER IN THE SAME REITERATED THE SAME FACTS AS HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER. 21. THE LD. CIT(APPEALS) AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT OF THE ASSESSING OFFICER NOTED THAT BEFORE ESTIMATING THE GP RATE FOR CURRENT YEAR ASSESSING OFFICER HAS OVER LOOKED AN IMPORTANT STATUTORY REQUIREMENT OF REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS SEEN THAT NO DEFECTS IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT WHAT-SO-EVER HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER SO AS TO PROCEED TO ESTIMATE A FAIR AND REASONABLE GP. IT IS STATED THAT IT IS A CASE OF SEARCH AND NO INCRIMINATING DOCUMENTS HAVE BEEN HIGHLIGHTED TO SHOW THAT ASSESSEE HAD MANIPULATED THE BOOKS OF ACCOUNT. THEREFORE IT WAS NOT OPEN TO THE ASSESSING OFFICER TO SUBSTITUTE HIS OWN VIEW FOR APPLYING HIGHER GP RATE. 22. THE LD. CIT(APPEALS) ACCEPTED THE JUDGEMENTS CITED BY ASSESSEE FOR THE PURPOSE OF DELETING THE ADDITION AND ACCORDINGLY DELETED THE ENTIRE ADDITION. 22(I) THE LD. CIT(APPEALS) THEREAFTER HAS CONSIDERED THE ISSUE OF SURRENDER MADE BY THE 17 ASSESSEE IN A SUM OF RS. 4 CRORES IN ORDER TO BUY PEACE OF MIND AND ADDITION UNDER SECTION 69A OF THE INCOME TAX ACT. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT IT IS CARRYING ON BUSINESS OF LIQUOR ONLY AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO PROVE ANY UNDISCLOSED INCOME OR ANY OTHER ITEM TO BE CONSIDERED AGAINST THE ASSESSEE THEREFORE RS. 4 CRORE WAS CORRECTLY SHOWN UNDER THE HEAD BUSINESS & PROFESSION. THE LD. CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT SURRENDER WAS MADE BY ASSESSEE WHICH WAS ATTRIBUTABLE TO THE ACT OF OMISSION AND COMMISSION FOR CARRYING OUT BUSINESS. THEREFORE SAME WAS PROPERLY CONSIDERED UNDER THE HEAD BUSINESS & PROFESSION. THE CONTENTION OF THE ASSESSEE WAS ACCEPTED THAT THE SURRENDER WAS ON ACCOUNT OF BUSINESS & PROFESSION. 23. THE LD. DR SUBMITTED THAT RULE 46A OF IT RULES HAVE BEEN VIOLATED IN THIS CASE BECAUSE ASSESSEE DID NOT FILE ANY SUBMISSION BEFORE ASSESSING OFFICER. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT ISSUE I S COVERED ON IDENTICAL FACTS BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF DCIT V DEEP MALHOTRA IN ITA 661/2015 WITH C.O. 28/2015 VIDE ORDER DATED 15.03.2016 IN WHICH PARA 6 TO 9 IT WAS HELD AS UNDER : 6. ON GROUND NO. (B) IN THE DEPARTMENT APPEAL REVEN UE CHALLENGED THE DELETION OF ADDITION OF RS. 1 29 01 720/- ON ACCOUNT OF GP RATE. 7. THE AO MADE ADDITION ON ACCOUNT OF COMPARATIVELY LO W GP RATE IN COMPARISON TO THE LAST YEAR. THE AO HAS 18 HIGHLIGHTED THAT THE ASSESSEE WAS ASKED TO FURNISH THE REASONS FOR DECLINE IN GROSS PROFIT. AO OPINED THAT SAME AR E GENERAL IN NATURE AND THE GENUINENESS OF THE SALE AS RECORD ED IN THE TRADING ACCOUNT WAS NOT ESTABLISHED THEREFORE IN T HE OPINION OF THE AO IT WAS FAIR AND REASONABLE TO ESTIMATE T HE PROFITS FROM BUSINESS BY ADOPTING THE G.P. RATIO OF 2.85% A S DECLARED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-1 1 AND MADE THE ABOVE ADDITION. 7.1 THE ASSESSEE CHALLENGED THE ADDITION B EFORE LD. CIT(A)AND IT WAS SUBMITTED THAT ASSESSEE HAS CARR IED ON BUSINESS OF PURCHASE AND SALE OF LIQUOR ON ALLOTTED VENDS BY THE EXCISE AND TAXATION DEPARTMENT FOR F.Y 2010-11. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT IN HIS REGULAR COURSE OF BUSINESS. ALL THE PURCHASES AND S ALES HAVE BEEN DULY RECORDED AND ACCOUNTS ARE AUDITED. ALL TH E PURCHASES WERE MADE ON ISSUE OF PERMIT BY THE EXCIS E AND TAXATION DEPARTMENT. THE SALE HAVE ALREADY BEEN DUL Y RECORDED IN THE BOOKS OF ACCOUNT. 7.2 THE AO HAS ARBITRARILY MADE THIS ADDITION ON ACCOUNT OF LOW GROSS PROFIT BY COMPARING IT WITH THE IMMEDIATE PRECEDING YEAR. THERE COULD NOT BE ANY COMPARISON O F BOOKS RESULTS OF LAST YEAR BECAUSE IT DEPENDS UPON THE PL ACE AREA & LOCATION OF THE ALLOTTED VENDS CHANGES EACH YEAR AN D OTHER BUSINESS FACTORS. IN THE YEAR UNDER APPEAL THE ASSE SSEE HAD CARRIED ON BUSINESS OF LIQUOR AT GURDASPUR PATHANK OT & BHOGPUR EXCISE CIRCLE HAVING TOTAL 18 RETAIL VENDS WHEREAS IN THE PRECEDING YEAR THE VENDS WERE IN THE FEROZEP UR FARIDKOT JALANDHAR EXCISE CIRCLE HAVING DIFFERENT NUMBER OF VENDS. EACH YEAR IS AN INDEPENDENT YEAR AND PROFITA BILITY IN THE TRADE DEPENDS UPON MANY FACTORS LIKE DEMAND AND SUPPLY PLACE COMPETITION IN THE MARKET AVAILABILITY OF F INANCES ETC. THERE WAS A CUT THROAT COMPETITION IN THE BUSINESS IN ORDER TO MAINTAIN SALE AND TO COMPETE IN THE MARKET ONE HAS TO LOWER DOWN HIS PROFITS FOR REGULAR CIRCULATION OF FINANCE S. THE ASSESSEE HAS TO RELY ON THE STAFF AND EMPLOYEES THE REFORE COMPARISON FROM THE EARLIER YEAR WAS FACTUALLY WRON G. THE 19 LICENSE FEE HAS ALSO INCREASED AS COMPARE TO THE LA ST YEAR AND ADDITIONAL LICENSE FEE WAS ALSO CHARGED WHICH WERE THE FACTOR FOR LOW GROSS PROFIT. THERE IS INCREASE IN THE EXPE NDITURE AS COMPARE TO EARLIER YEAR. ALL THE TRANSACTIONS ARE C ARRIED OUT THROUGH THE EXCISE DEPARTMENT THEREFORE WITHOUT AN Y EVIDENCE OF SUPPRESSION OF SALE THE ADDITION WAS W HOLLY UNJUSTIFIED. IT WAS ALSO SUBMITTED THAT ASSESSEE HA S SURRENDERED INCOME OF RS. 2.25 CRORES WHICH HAS BEE N DULY REFLECTED IN THE PROFIT AND LOSS ACCOUNT AND EVEN I F THERE WAS ANY DISCREPANCY THE SAME WOULD STAND COVERED BY THE INCOME SURRENDERED. THE SUBMISSIONS OF THE ASSESSEE WERE F ORWARDED TO THE AO FOR HIS COMMENTS IN WHICH THE AO REITERAT ED THE FACTS STATED IN THE ASSESSMENT ORDER. 8. LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND MATERIALS ON RECORD FOUND THAT THE ASSESSEE MA INTAINED BOOKS OF ACCOUNT WHICH HAVE BEEN AUDITED AND NO DEF ECT IN THE SAME HAVE BEEN POINTED OUT BY THE AO. NO EVID ENCE EITHER OF INFLATION OF PURCHASE OR SUPPRESSION OF S ALES WERE FOUND. THERE IS NO EVIDENCE OF INFLATION OF ANY EXP ENSES. THE CASE OF ASSESSEE HAD BEEN SUBJECTED TO SEARCH UNDER SECTION 132 OF THE ACT IN WHICH NO IN CRIMINATING DOCUMENTS HAVE BEEN HIGHLIGHTED TO SUPPORT THE ADDI TION THUS THE AO COULD NOT REJECT THE BOOKS RESULT AND WHOLE ADDITION IS UNJUSTIFIED. LD. CJT(A) ACCORDINGLY DELETED THE ADD ITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF BOO KS OF ACCOUNT BY THE ASSESSEE. THE ASSESSEE HAS SUFFICIEN T REASONS FOR FALL IN GROSS PROFIT I.E; CHANGE OF THE LOCATIO N OF THE VENDS ALLOTTED BY EXCISE DEPARTMENT IN THE YEAR UNDER CONSIDERATION AS WELL AS IN PRECEDING ASSESSMENT YE AR . THE ASSESSEE CLAIMED THAT SINCE LOCATION OF THE LIQUOR SHOP HAVE BEEN CHANGED YEAR TO YEAR AND THERE WAS INCREASE IN THE LICENSE FEE THEREFORE THERE CANNOT BE COMPARISON OF THE PROFIT FROM THE EARLIER YEARS. THE REASONS GIVEN BY THE AS SESSEE HAVE NOT BEEN REBUTTED BY THE AO IN HIS COMMENTS BE FORE THE 20 LD. CIT(A). NO INFLATION OF PURCHASES OR SUPPRESSIO N OF SALES WERE FOUND. AO HAS NOT POINTED OUT IF ANY EXPENSES HAVE BEEN INFLATED BY THE ASSESSEE. LD. COUNSEL FOR THE ASSES SEE REFER TO PAPER BOOK PAGE NO. 22 HIGHLIGHTED THE REASONS THA T THERE WAS INCREASE IN THE EXPENSES IN THE YEAR UNDER CONS IDERATION BY REFERRING TO THE CHART WHICH IS FILED AT PAGE 22 AND 23 OF THE PAPER BOOK. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA [2004]- 269 ITR 577 HAS HELD THAT MERE LOW GROSS PROFIT IS NOT A GROUND TO REJEC T THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE SUBMISSION OF THE A SSESSEE SINCE HAVE NOT BEEN REBUTTED BY AO AT THE APPELLATE STAGE AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTE NANCE OF THE BOOKS OF ACCOUNT THEREFORE WHOLE ADDITION WAS UNJUSTIFIED WHICH WAS CORRECTLY DELETED BY THE LD. CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 24. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF THE BOOKS OF ACCOUNT BY THE ASSESSEE. THE LD. CIT(APPEALS) WAS THEREFORE JUSTIFIED IN DELETING THE ADDITION ON THIS GROUND ITSELF. FURTHER IT IS A CASE OF SEARCH AND NO MATERIAL HAVE BEEN POINTED OUT AS TO WHAT WAS THE BASIS OF SUBSTITUTING THE PROFIT RATE SHOWN BY THE ASSESSEE WITH THE PROFIT RATE OF EARLIER YEARS. THE ASSESSEE EXPLAINED THE REASONS FOR FALL IN GP DUE T O LOCATION OF THE LIQUOR VEND. THE BUSINESS OF THE ASSESSEE IS CONTROLLED BY STATE EXCISE DEPARTMENT. THE LD. CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS OF TH E ASSESSEE BUT THE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN REBUTTED BY THE ASSESSING OFFICER IN HIS COMMENTS BEFORE LD. CIT(APPEALS). NO INFLATION OF PURCHASES OR SUPPRESSION OF SALES WERE FOUND. THE ASSESSING OFFICER HAS NOT POINTED OUT IF ANY 21 EXPENSES HAVE BEEN INFLATED BY THE ASSESSEE. THE ISSUE IS THEREFORE COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF DEEP MALHOTRA (SUPRA). THE LD. DR SUBMITTED THAT RULE 46A OF IT RULES HAVE BEEN VIOLATED IN THIS CASE. HOWEVER IN THIS CASE LD. CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER IN WHICH ASSESSIN G OFFICER DID NOT RAISE ANY OBJECTION TO THE SUBMISSIONS OF THE ASSESSEE AND MERELY REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER THEREFORE SUBMISSION OF LD. DR ARE REJECTED BY FOLLOWING DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KULDEEP INDUSTRIAL CORPORATION (SUPRA). 24(I) WE MAY ALSO NOTE HERE THAT THOUGH THE LD. CIT(APPEALS) ALSO DISCUSSED THE ISSUE OF SURRENDERED INCOME DISCLOSED BY THE ASSESSEE AS INCOME FROM BUSINESS & PROFESSION BUT REVENUE IN THE GROUNDS OF APPEAL HAVE NOT CHALLENGED THOSE FINDINGS OF THE LD. CIT(APPEALS). THE REVENUE HAS MERELY CHALLENGED THE ADDITION MADE ON ACCOUNT OF LOW NET PROFIT. THEREFORE FINDING OF FACT RECORDE D BY THE LD. CIT(APPEALS) THAT DISCLOSED INCOME WAS CORRECTLY CREDITED TO THE PROFIT & LOSS ACCOUNT HAS REACHED FINALITY AND NO FURTHER INTERFERENCE IS CAL LED FOR IN THE MATTER. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE SAME IS ACCORDINGLY DISMISSED. 19(I) NO DEFECTS HAVE BEEN POINTED OUT IN BOOKS O F ASSESSEE WHICH ARE ALSO AUDITED. BOOKS ARE NOT REJECTED. NO ADVERSE MATERIAL IS FOUND AGAINST ASS ESSEE. 22 20. SINCE ISSUE IS IDENTICAL AND COVERED BY ORDER O F ITAT CHANDIGARH BENCH IN THE CASE OF M/S OASIS DISTILLERIES LTD. (SUPRA) THEREFORE FOLLOWING THE SAME ORDER WE DISMISS DEPARTMENTAL APPEAL. 21. ON GROUND NO. 3 IN THE DEPARTMENTAL APPEAL REVENUE CHALLENGED DELETION OF ADDITION OF RS. 9 37 818/- ON ACCOUNT OF DISALLOWANCE OF INDIRECT EXPENSES. THE ASSESSING OFFICER NOTED THAT ASSESSE E HAS DECLARED ADDITIONAL INCOME OF RS. 80 LACS UNDER SECTION 132(4) OF THE ACT HOWEVER AS PER RETURN ASSESSEE HAS DECLARED AN INCOME OF RS. 50 51 345/-. APPARENTLY INCOME DECLARED IS LESS THAN ADDITIONAL INCOME DECLARED UNDER SECTION 132(4) OF THE ACT. I N THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS STAT ED THAT REASON FOR DECLINE IN INCOME RETURNED IS DUE T O LOSS INCURRED OUT OF BUSINESS INCOME IN PROPRIETORY CONC ERN AND IN SUPPORT OF HIS CLAIM HE HAS FURNISHED EXPLANATION AND ALSO ENCLOSED COMPARATIVE ANALYSIS OF PURCHASE AND SALES. THE ASSESSING OFFICER HOWEVER NOTED THAT AUDIT REPORT IS NOT SUBMITTED AND NOTED LESS INDIRECT EXPENSES IN THE IMMEDIATE PRECEDING YEAR A ND ACCORDING TO THE ASSESSING OFFICER THE ADMISSIBILI TY OF THE INDIRECT EXPENSES @ 2.47% WITH REFERENCE TO SAL ES AS DEBITED DURING THE IMMEDIATE PRECEDING YEAR COMES T O RS. 41 23 487/- A AGAINST DEBITING OF SUCH EXPENSES TO THE TUNE OF RS. 50 61 605/- IN ASSESSMENT YEAR IN APPEAL THUS THE EXCESS WAS WORKED OUT TO RS. 23 9 37 818/- (RS. 50 61 606 RS. 41 23 487/-) WHICH WAS DISALLOWED AS INDIRECT EXPENSES. 22. THE ASSESSEE CHALLENGED ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT COMPARISON O F THE INDIRECT EXPENSES WITH PRECEDING ASSESSMENT YEA R IS FACTUALLY WRONG. IT WAS SPECIFICALLY SUBMITTED THA T A SUM OF RS. 17 39 621/- HAS BEEN DEBITED AS BANK INTEREST IN THE PROFIT & LOSS ACCOUNT IN THE YEAR U NDER ASSESSMENT WHEREAS NO SUCH CLAIM OF INTEREST PAID HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEAR 2010-11. INTEREST PAYMENT TO BANK IS DEDUCTED FROM P&L ACCOU NT IN A.Y. 2010-11. IF SAME ANALOGY OF A.Y. 2010-11 IS ADOPTED RATIO OF EXPENDITURE WOULD BE LESSER. THER EFORE THIS FACT ITSELF SHOWS THAT ADDITION IS WHOLLY UNJU STIFIED. THE LD. CIT(APPEALS) NOTED THAT DISALLOWANCE HAS B EEN MADE MERELY ON THE BASIS OF STATISTICAL COMPARISON OF INDIRECT EXPENSES DEBITED BY THE ASSESSEE IN THE LA ST YEAR. THE ASSESSEE HAS CLAIMED THAT BANK INTEREST WAS CLAIMED IN THIS YEAR WHICH WAS NOT THERE IN THE PRECEDING ASSESSMENT YEAR. THEREFORE ADDITION WAS FOUND UNJUSTIFIED AND SAME WAS DELETED. 23. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF DEPARTMENTAL APPEAL. N O SPECIFIC REASONS HAVE BEEN GIVEN FOR DISALLOWING IN DIRECT EXPENSES. THE BOOKS OF ACCOUNT WERE ALSO NOT REJEC TED BY ASSESSING OFFICER AND NO REASONABLE BASIS HAVE B EEN 24 GIVEN FOR MAKING THIS ADDITION. THE ASSESSEE HAS M ADE SPECIFIC CLAIM OF INTEREST PAID IN ASSESSMENT YEAR UNDER APPEAL WHICH WAS NOT PAID IN EARLIER YEAR THEREFOR E EXPENSES QUA THE SALES COULD NOT BE COMPARED IN ASSESSMENT YEAR UNDER APPEAL WITH THAT OF THE PRECE DING ASSESSMENT YEAR. THE LD. CIT(APPEALS) WAS THEREFO RE JUSTIFIED IN DELETING THE ADDITION. THIS GROUND OF APPEAL OF REVENUE IS ACCORDINGLY DISMISSED. 24. ON GROUND NO.4 IN DEPARTMENTAL APPEAL REVENUE CHALLENGED DELETION OF ADDITION OF RS. 11 60 000/- ON ACCOUNT OF AGRICULTURE INCOME. THE ASSESSEE IN THE CROSS OBJECTION HAS CHALLENGED THE SUSTAINING OF ADDITION OF RS. 14 27 000/- ON ACCOUNT OF AGRICULTU RE INCOME. BRIEFLY THE FACTS OF THE CASE ARE THAT ASS ESSING OFFICER CONSIDERED THE ENTIRE AGRICULTURE INCOME DISCLOSED BY ASSESSEE IN A SUM OF RS. 25 87 000/- A S 'INCOME FROM OTHER SOURCES'. THE ASSESSEE CHALLENGE D ADDITION BEFORE LD. CIT(APPEALS). THE LD. CIT(APPE ALS) CONSIDERED THE AGRICULTURE INCOME @ RS. 10 000/- PE R ACRE AND ACCEPTED THE AGRICULTURE INCOME IN A SUM O F RS. 11 60 000/- AND CONFIRMED THE ADDITION OF RS. 14 27 000/-. 24(I) LD. REPRESENTATIVES OF BOTH THE PARTIES SUBM ITTED THAT ISSUE IS SAME A HAVE BEEN CONSIDERED IN CASE O F SAME ASSESSEE IN ITA 645/2015 FOR ASSESSMENT YEAR 2010-11. WE FIND THAT THE ISSUE IS IDENTICAL AS HA VE 25 BEEN CONSIDERED IN PRECEDING ASSESSMENT YEAR 2010-1 1 THEREFORE FOLLOWING REASONS FOR DECISION FOR ASSES SMENT YEAR 2010-11 WE SET ASIDE THE ORDERS OF AUTHORITIE S BELOW AND DELETE THE ENTIRE ADDITION. THE AGRICULT URE INCOME DECLARED BY ASSESSEE IS ACCEPTED. THUS THE GROUND NO. 4 OF DEPARTMENTAL APPEAL IS DISMISSED AN D CROSS OBJECTION OF THE ASSESSEE ON THIS ISSUE IS AL LOWED. 24(II) IN THE RESULT THIS GROUND OF DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 25. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSE D AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ITA 647/2015 & ITA 648/2015 ( A.Y. 2010-11 & 2011-12) 26. BOTH THE APPEALS BY ASSESSEE ARE DIRECTED AGAIN ST DIFFERENT ORDERS OF LD. CIT(APPEALS)-5 LUDHIANA DAT ED 27.03.2015 FOR ASSESSMENT YEAR 2010-11 AND 2011-12 CHALLENGING THE ADDITION OF RS. 17 30 000/- AND RS. 11 63 091/- IN BOTH ASSESSMENT YEARS RESPECTIVELY A S 'INCOME FROM OTHER SOURCES' AS AGAINST CLAIM OF AGRICULTURE INCOME. LD. REPRESENTATIVES OF BOTH TH E PARTIES SUBMITTED THAT THE ISSUE IS SAME AS HAVE BE EN CONSIDERED IN THE CASE OF SHRI GAURAV MALHOTRA (SUP RA). IN THIS CASE ALSO LD. CIT(APPEALS) ACCEPTED THE AGRICULTURE INCOME @ RS. 10 000/- PER ACRE AND MADE THE ABOVE ADDITIONS. LD. REPRESENTATIVES OF BOTH T HE 26 PARTIES THEREFORE SUBMITTED THAT SINCE ISSUE IS SA ME THEREFORE ORDER IN THE CASE OF SHRI GAURAV MALHOTR A (SUPRA) MAY BE FOLLOWED. 27. ON CONSIDERATION OF THE FACTS OF THE CASE IN TH E LIGHT OF SUBMISSIONS OF BOTH PARTIES WE FIND THAT ISSUE IS SAME AS HAVE BEEN CONSIDERED IN CASE OF SHRI GAU RAV MALHOTRA (SUPRA). FOLLOWING THE REASONS FOR DECISIO N IN THE CASE OF SHRI GAURAV MALHOTRA (SUPRA) WE SET AS IDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ENTI RE ADDITIONS ON ACCOUNT OF 'INCOME FROM OTHER SOURCES' AND ACCEPT THE AGRICULTURE INCOME DECLARED BY ASSESSEE. 28. IN THE RESULT BOTH APPEALS OF THE ASSESSEE ARE ALLOWED. ITA 654/2015 & C.O. 24/2015 ( A.Y. 2010-11) 29. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECT ION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-5 LUDHIANA DATED 27.03.2015 FOR ASSESSMENT YEAR 2010-11. 30. ON GROUND NO. 1 IN DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 37 98 94 4/- OUT OF RS. 62 23 331/- ON ACCOUNT OF DISALLOWANCE O F INTEREST. 30(I) THE ASSESSEE IN GROUND NOS. 4 AND 5 OF THE CROSS OBJECTION HAS CHALLENGED ORDER OF LD. CIT(APPEALS) IN 27 RESTRICTING THE DISALLOWANCE UNDER SECTION 36(1)(II I) OF THE ACT TO THE TUNE OF RS. 24 24 387/- OUT OF TOTAL DISALLOWANCE OF RS. 62 23 331/-. 30(II) BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 62 23 331/- ON ACCOUNT OF DISALLOWANCE OF INTEREST DEBITED TO PROF IT & LOSS ACCOUNT FOR NON BUSINESS USE. THE ASSESSMENT ORDER REVEALED THAT ASSESSING OFFICER HAS HIGHLIGHT ED THE ISSUE THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 62 23 331/- AS INTEREST EXPENSES IN THE PROFIT & LO SS ACCOUNT AND HAD ALSO GIVEN LOANS AND ADVANCES AMOUNTING TO RS. 6 42 09 496/- AND HAD SUNDRY DEBTO RS OF RS. 12 76 788/- ON WHICH NO INTEREST HAS BEEN CHARGED. THE ASSESSING OFFICER IN THE ABSENCE OF A NY PLAUSIBLE EXPLANATION DISALLOWED THE ENTIRE INTERE ST EXPENDITURE. 31. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND ARGUMENTS OF THE ASSESSEE HAVE BEE N REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSES SEE BRIEFLY EXPLAINED THAT ASSESSEE HAS RAISED LOANS FR OM THE BANKS AND OTHER FINANCIAL INSTITUTIONS AND PAID THE INTEREST. THE ASSESSEE HAS ALSO RAISED UNSECURED L OANS FOR CARRYING ON HIS BUSINESS. THERE ARE SOME SUNDR Y CREDITORS AS PER DETAILS FILED ON WHICH NO INTEREST HAS BEEN PAID. THE AMOUNT RAISED HAS BEEN UTILIZED FOR SMOOTH RUNNING AS WELL AS FOR BUSINESS AND COMMERCI AL 28 EXPEDIENCY. NO INTEREST HAS BEEN PAID ON INTEREST FREE ADVANCES. THE ASSESSEE HAS GIVEN LOANS AND ADVANCE S TO DIFFERENT PARTIES AT DIFFERENT TIMES WHICH IT TH OUGHT WAS FOR BUSINESS AND COMMERCIAL EXPEDIENCY FOR BETTERMENT OF THE BUSINESS. THE ASSESSING OFFICER H AS NOT PROPERLY ANALYZED THE FACTS. IT WAS SUBMITTED THAT THERE IS AN AMOUNT OF RS. 6.42 CR DEBITED AS PER ANNEXURE VIII UNDER THE HEAD LOANS & ADVANCES OF AUDITED BALANCE SHEET AND OUT OF THIS A SUM OF RS. 31 09 463/- RELATE TO TDS AND TCS AND OTHERS AND ADVANCES ARE MOSTLY FOR BUSINESS AND COMMERCIAL EXPEDIENCY. IT CAN FURTHER BE OBSERVED THAT THERE IS A DEBIT BALANCE OF RS. 65 55 156/- ( RS. 15 33 756/- + RS. 54 21 400/-) IN THE ACCOUNT OF M/S OASIS DISTILLERI ES LTD. AND CORRESPONDINGLY THERE IS A CREDIT BALANCE OF RS. 1 60 75 000/- IN THE ACCOUNT OF M/S OASIS DISTILLER IES UNDER THE HEAD UNSECURED LOANS. THE ASSESSEE HAS NEITHER PAID ANY INTEREST ON THE CREDIT BALANCE NOR CHARGED INTEREST ON DEBIT BALANCE. THE ASSESSEE IS A PARTNER IN FIRM M/S GAURAV WINES FARIDABAD AND A S UM OF RS. 1 94 30 566/- ( RS. 94 30 560/- UNDER THE HE AD INVESTMENT AND RS. 1 CRORE UNDER THE HEAD LOANS & ADVANCES) STOOD DEPOSITED WITH THE SAID FIRM AND HE HAS EARNED PROFIT AMOUNTING TO RS. 77 163/- WHICH STOOD DULY REFLECTED IN THE COMPUTATION OF INCOME. SIMILA RLY THE ASSESSEE WAS A PARTNER IN M/S GAUTAM MALHOTRA & CO. ( RS. 1 41 37 533/-) AND M/S GAUTAM WIRES 29 JALANDHAR ( RS. 2 41 722/- ) AND THE AMOUNTS STANDI NG DEBIT BALANCE RELATE TO HIS CAPITAL INVESTMENT AND THE ASSESSEE HAS EARNED INTEREST AND PROFIT AS PROVIDED IN THE PARTNERSHIP DEED. 31(I) FURTHER A SUM OF RS. 13 LACS AND RS. 18 50 000/- TOTALING TO RS. 31 50 000/- WAS DEPOSITED BY RAISIN G OF LOAN OF RS. 31 50 000/- FROM M/S MALBROS INTERNATIO NAL PVT. LTD. NEITHER ANY INTEREST HA BEEN RECEIVED NO R PAID ON THESE TRANSACTIONS. FURTHER A SUM OF RS. 9 57 862/- STANDING DEBIT BALANCE IN THE ACCOUNT OF ROMESH CHA ND KESHAV KUMAR UNDER THE HEAD SUNDRY DEBTORS RELATES TO AGRICULTURE PRODUCE SOLD THROUGH THE SAID CONCERN. THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE AMOU NT BORROWED ON INTEREST HAS BEEN ADVANCED AS INTEREST FREE IN THE YEAR UNDER ASSESSMENT. THEREFORE NO ADDITI ON SHOULD BE MADE WHEN THE ADVANCES WERE OPENING AND BROUGHT FORWARD BALANCES FROM THE EARLIER YEARS. R EST OF THE ADVANCES ALSO DO NOT HAVE ANY DIRECT NEXUS WITH INTEREST BEARING LOANS. THE REVENUE HAS NOWHERE ESTABLISHED THAT THE LOAN HAS BEEN GIVEN ONLY FOR PERSONAL PURPOSES. HOWEVER LOANS HAVE BEEN GIVEN ON ACCOUNT OF COMMERCIAL EXPEDIENCY THEREFORE NO DISALLOWANCE IS TO BE MADE. THE PRESUMPTION WOULD BE THAT INVESTMENTS WERE MADE FROM INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE. THE ASSESSEE HAS HUGE C REDIT BALANCES UNDER THE ACCOUNT OF UNSECURED LOANS AND CREDITORS ETC. TO WHOM NO INTEREST HAVE BEEN PAID. 30 FURTHER ASSESSEE HAS A CAPITAL BALANCE THEREFORE THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE ACCEPTED AND NO DISALLOWANCE SHOULD BE MADE. THE ASSESSEE RELIE D UPON SEVERAL JUDGEMENTS IN SUPPORT OF HIS CONTENTIO N. 32. THE LD. CIT(APPEALS) AFTER CONSIDERING SUBMISS IONS OF THE ASSESSEE AND MATERIAL ON RECORD ALLOWED PAR T RELIEF TO THE ASSESSEE. THE FINDINGS IN PARA 3.3 A RE REPRODUCED AS UNDER : 3.3 THE PERUSAL OF THE REPLY CLEARLY REVEAL THAT TH E INVESTMENT TO THE TUNE OF RS.2 37 32 432/- ARE IN THE FIRMS IN WHICH THE A PPELLANT IS PARTNER AND HAS RECEIVED EITHER SHARE OF PROFIT OR AN INTER EST ON SUCH INVESTMENTS. THEREFORE THERE IS NO CASE TO HOLD TH E VIEW THAT THE SAID ADVANCES WERE NOT FOR BUSINESS PURPOSE SO THERE IS NO CASE FOR DISALLOWANCE OF ANY INTEREST DEBITED IN PROFIT AND LOSS ACCOUNT ON ACCOUNT OF ALLEGED NON BUSINESS USES OF THE FUNDS. SIMILAR IS THE CASE WIT H RESPECT TO THE SUNDRY DEBTORS OUT OF WHICH THE MAJOR AMOUNT I.E. RS.27 18 000/- PERTAINS TO THE AMOUNT DUE ON ACCOUNT OF SALE OF AGRICULTURE PRODUC E. THE PERUSAL OF THE LOANS AND ADVANCES AMOUNTING TO RS. 6 42 09 496/-SH OWS THAT AMOUNTS OUTSTANDING TOWARDS M/S GAURAV WINES TO THE TUNE OF RS. 41 20 000/- M/S DEEP MALHOTRA TO THE TUNE OF RS. 35 LACS M/S DILAN O LUXURIOUS JEWELLERS PRIVATE LIMITED TO THE TUNE OF RS. 27 LACS AND M/S MALBRO ENTERPRISES TO TUNE OF RS. 98 83 231/- DO NOT HAVE ANY OSTENSIBLE BUSIN ESS PURPOSE. THE AMOUNTS HAVE BEEN OUTSTANDING FOR LONG WITHOUT THE APPELLANT BEING ABLE TO SHOW ANY BUSINESS PURPOSE OF THE SAME. THE RECOVERY ON THIS ACCOUNT COULD VERY WELL LEAD TO DEDUCTION OF INTEREST BEARI NG FUNDS AND THEREFORE COULD BE SAID TO BE RESPONSIBLE FOR EXCESSIVE BURDE N OF INTEREST IN PROFIT AND LOSS ACCOUNT. IN THIS WAY IT COULD BE CONSTRUED TH AT THERE HAS BEEN NON BUSINESS USE OF INTEREST BEARING FUNDS TO THE EXTEN T AS DETAILED ABOVE. THEREFORE THE INTEREST PERTAINING TO SUCH ADVANCES IS CONFIRMED. 33. THE LD. DR SUBMITTED THAT THERE IS NO COMMERCIA L EXPEDIENCY TO ADVANCE ANY LOAN THEREFORE LD. 31 CIT(APPEALS) SHOULD NOT HAVE DELETED THE ADDITION. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS REFERRED TO PB-36 TO SHOW INVESTMENT IN A SUM OF RS . 2 37 32 432/- IN THE FIRMS IN WHICH ASSESSEE WAS A PARTNER AND HAS RECEIVED EITHER SHARE OF PROFIT OR THE INTEREST ON SUCH INVESTMENTS. PB-36 IS UNSECURED L OANS AND ADVANCES IN A SUM OF RS. 6.42 CR. PB-30 IS AVAILABILITY OF THE UNSECURED LOANS IN A SUM OF RS. 2.18 CR. PB-29 IS BALANCE SHEET TO SHOW CAPITAL OF ASSE SSEE IN A SUN OF RS. 70.73 LACS SECURED LOANS IN A SUM OF RS. 6.95 CR AND UNSECURED LOANS OF RS. 2.18 CR. HE HAS THEREFORE SUBMITTED THAT SINCE ASSESSEE HAS SUFFIC IENT CAPITAL THEREFORE ADDITION NEED NOT TO BE MADE AN D RELIED UPON DECISION OF HON'BLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF BRIGHT ENTERPRISES 381 ITR 107 . 34. AFTER CONSIDERING RIVAL SUBMISSIONS WE ARE OF THE VIEW EVEN PART ADDITION SUSTAINED BY LD. CIT(APPEAL S) IS NOT JUSTIFIED. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES 381 ITR 107 HELD THA T WHEN ADVANCE TO SISTER CONCERN IN WHICH ASSESSEE H ELD 89% OF SHARES AND INVESTMENTS IN SUBSIDIARY COMPANY WAS FOR COMMERCIAL EXPEDIENCY NO DISALLOWANCE SHOU LD BE MADE UNDER SECTION 36(1)(III) OF THE ACT. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KAPSON ASSOCIATES 381 ITR 204 HELD THAT ASSESSEE HAVING SUFFICIENT INTEREST FREE ADVANCES TO COVER INTEREST FREE 32 ADVANCES NO DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT SHOULD BE MADE. HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD. 379 ITR 347 HELD THAT ASSESSEE HAVING CREDIT BALANCE IN THE BANK ACCOUNT AT THE TIME OF ADVANCES NO DISALLOWANCE OF INTEREST O N BORROWING SHOULD BE MADE. 34(I) THE ASSESSEE SPECIFICALLY SUBMITTED BEFORE LD. CIT(APPEALS) THAT INVESTMENTS TO THE TUNE OF RS. 2. 37 CR HAVE BEEN MADE IN THE FIRMS IN WHICH ASSESSEE IS A PARTNER AND HAS RECEIVED EITHER SHARE OF PROFIT OR AN INTEREST ON SUCH INVESTMENTS. THE LD. CIT(APPEALS) WAS THEREFORE JUSTIFIED IN HOLDING SUCH ADVANCES FOR BUSINESS AND NO DISALLOWANCE OF ANY INTEREST COULD BE MADE ON SUCH INVESTMENTS. THE LD. CIT(APPEALS) THEREFORE RIGHTLY DELETED THE ADDITION TO THAT EXT ENT. SIMILAR CASE WAS FOUND IN RESPECT OF SUNDRY CREDITO RS OUT OF WHICH MAJOR AMOUNT I.E. RS. 27 18 000/- PERT AIN TO THE AMOUNT DUE ON ACCOUNT OF SALE OF AGRICULTURE PRODUCE. THEREFORE NO DISALLOWANCE OF INTEREST SH OULD BE MADE. THE LD. CIT(APPEALS) HOWEVER FOUND THAT IN THE CASE OF M/S GAURAV WINES FARIDABAD DEEP MALHOTRA DILANO LUXURIOUS JEWELLERS PVT. LTD. AND M/S MALBROS INTERNATIONAL PVT. LTD. DO NOT HAVE ANY BUSINESS PURPOSE. THE ASSESSEE HOWEVER EXPLAINED THAT IN THE CASE OF M/S GAURAV WINES FARIDABAD TH E INVESTMENTS AND ADVANCES HAVE BEEN GIVEN ON WHICH ASSESSEE HAS EARNED THE PROFIT. LOAN AND ADVANCES HAVE 33 ALSO SHOWN AN AMOUNT OF RS. 31 09 463/- WHICH RELAT ES TO TDS AND TCS. IN THE CASE OF M/S OASIS DISTILLER IES THERE IS A CREDIT BALANCE OF RS. 1.60 CR AND HAVE A LSO GIVEN ADVANCE ON WHICH ASSESSEE HAS NOT PAID ANY INTEREST ON THE CREDIT AS WELL AS DID NOT CHARGE AN Y INTEREST FROM THE DEBIT BALANCE. THEREFORE LD. CIT(APPEALS) CORRECTLY DELETED PART OF THE ADDITION ON WHICH REVENUE WAS IN APPEAL BECAUSE THESE ADVANCES HAVE BEEN GIVEN FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND FOR COMMERCIAL EXPEDIENCY. THE GROUND NO. 1 OF DEPARTMENTAL APPEAL IS THEREFORE DISMISS ED AND FOR REST OF THE ADDITIONS ON WHICH ASSESSEE IS IN THE CROSS OBJECTION IT IS CLEAR THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS I.E. CAPITAL UNSECU RED LOANS ETC. AND AS SUCH WHEN ASSESSEE WAS HAVING SUFFICIENT FUNDS TO GIVE INTEREST FREE ADVANCE TO O THERS NO ADDITION SHOULD BE MADE AGAINST ASSESSEE. WE THEREFORE SET ASIDE ORDERS OF AUTHORITIES BELOW TO THAT EXTENT AND DELETE THE ADDITION RESTRICTED BY LD. CIT(APPEALS) IN A SUM OF RS. 24 24 387/-. GROUND NO . 4 AND 5 OF CROSS OBJECTION OF THE ASSESSEE ARE ALLOWE D. 35. IN THE RESULT DEPARTMENTAL APPEAL ON THIS ISSU E IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 36. ON GROUND NO. 2 REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS. 1 85 22 715/- ON ACCOUNT OF LOW GP 34 RATE. THE ASSESSING OFFICER COMPARING THE PROFIT R ATE OF THE ASSESSEE FROM EARLIER YEAR MADE THIS ADDITION. THE ASSESSEE PLEADED BEFORE LD. CIT(APPEALS) THAT BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED AND NO SPECIFIC DEFE CT IN MAINTENANCE OF THE BOOKS OF ACCOUNT HAVE BEEN FOUND BY THE ASSESSING OFFICER. THE LD. CIT(APPEALS) THERE FORE DELETED THE ENTIRE ADDITION. 37. LD. REPRESENTATIVES OF BOTH THE PARTIES SUBMITT ED THAT THE ISSUE IS SAME AS HAVE BEEN DECIDED IN THE CASE OF SHRI GAURAV MALHOTRA IN ASSESSMENT YEAR 2011-12 IN ITA 658/2015. IN THIS ORDER DEPARTMENTAL APPEAL H AVE BEEN DISMISSED ON GROUND NO. 2. THEREFORE FOLLOWIN G THE ORDER IN THE CASE OF SHRI GAURAV MALHOTRA (SUPR A) WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE BEI NG ON IDENTICAL FACTS. 38. ON GROUND NO. 3 IN DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 10 80 00 0/- ON ACCOUNT OF AGRICULTURE INCOME. THE ASSESSEE IN THE CROSS OBJECTION ON GROUND NOS. 1 TO 3 CHALLENGED TH E ADDITION OF RS. 16 38 000/- ON ACCOUNT OF AGRICULTU RE INCOME. THE ASSESSING OFFICER TREATED THE ENTIRE AGRICULTURE INCOME AS 'INCOME FROM OTHER SOURCES'. THE LD. CIT(APPEALS) ESTIMATED THE AGRICULTURE INCOME @ RS. 10 000/- PER ACRE AND DELETED THE ADDITION OF RS. 10 80 000/- AND RESTRICTED THE ADDITION TO RS. 16 38 000/-. IT IS SUBMITTED THAT ISSUE IS SAME AS HAVE 35 BEEN CONSIDERED IN THE CASE OF SHRI GAURAV MALHOTRA IN ITA 645/2015 (SUPRA). FOLLOWING REASONS FOR DECISI ON IN THE CASE OF SHRI GAURAV MALHOTRA (SUPRA) WE SET AS IDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ENTI RE ADDITION ON ACCOUNT OF AGRICULTURE INCOME. THIS GR OUND OF APPEAL OF REVENUE IS DISMISSED AND GROUND NOS. 1 TO 3 OF THE CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED. 39. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ITA 655/2015 & C.O. 23/2015 ( A.Y. 2011-12) 40. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECT ION BY ASSESSEE ARE DIRECTED AGAINST ORDER OF LD. CIT(APPEALS)-5 LUDHIANA DATED 27.03.2015 FOR ASSESSMENT YEAR 2011-12. 41. ON GROUND NO. 1 OF THE DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 56 90 541/- OUT OF ADDITION OF RS. 71 73 290/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. THE ASSESSEE IN THE CROSS OBJECTION ON GROUND NOS. 4 AND 5 CHALLENGED THE ADDITION OF RS. 14 82 749/-. THE LD. CIT(APPEALS) O N THE SAME REASONING AS HAVE BEEN GIVEN IN ASSESSMENT YE AR 2010-11 IN THE CASE OF THE ASSESSEE FOUND THAT SUBSTANTIAL INVESTMENTS HAVE BEEN MADE BY THE ASSES SEE IN THE FIRMS IN WHICH ASSESSEE WAS A PARTNER ON WHI CH ASSESSEE EITHER RECEIVED SHARE OF PROFIT OR INTERES T ON 36 SUCH INVESTMENTS. THE LD. CIT(APPEALS) ALSO FOUND THAT THE SUBSTANTIAL AMOUNT PERTAIN TO SALE OF AGRICULTU RE PRODUCE THEREFORE ADDITION ON ACCOUNT OF DISALLOW ANCE OF INTEREST WAS DELETED. HOWEVER FOR THE REMAININ G AMOUNT ADDITION WAS CONFIRMED. 42. IT IS SUBMITTED BY BOTH THE PARTIES THAT ISSUE IS SAME AS HAVE BEEN CONSIDERED IN PRECEDING ASSESSMEN T YEAR 2010-11. THE LD. COUNSEL FOR THE ASSESSEE ALS O FILED CHART TO SHOW THAT THE ADVANCES HAVE EITHER B EEN GIVEN FOR BUSINESS PURPOSES OLD BALANCE AND NO FRE SH INVESTMENTS OR THAT ASSESSEE WAS A PARTNER IN THE CONCERN IN WHICH INVESTMENTS HAVE BEEN MADE ON WHIC H ASSESSEE EARNED PROFIT AND INTEREST. THE ASSESSEE ALSO FILED COPY OF THE BALANCE SHEET AT PAGE 18 OF THE P APER BOOK TO SHOW THAT ASSESSEE HAS CAPITAL OF RS. 1 40 43 016/- UNSECURED LOANS OF RS. 1 67 05 509/- AND SUNDRY CREDITORS IN A SUM OF RS. 6 50 47 430/- TOTALING TO RS. 9 57 95 956/-. IT THEREFORE APPE ARS THAT ISSUE IS SAME AS HAVE BEEN CONSIDERED IN PRECE DING ASSESSMENT YEAR 2010-11. SINCE ASSESSEE MADE INVESTMENTS IN THE FIRMS IN WHICH HE WAS A PARTNER AND EARNED PROFIT AND INTEREST ON SUCH INVESTMENTS AND THAT THE AMOUNT ALSO PERTAIN TO SALE OF AGRICULTURE PROD UCE THEREFORE LD. CIT(APPEALS) CORRECTLY DELETED THE ADDITION. HOWEVER ON OTHER ITEMS ON WHICH DISALLOWANCE OF INTEREST WAS CONFIRMED ASSESSEE IS ABLE TO EXPLAIN THAT HE HAS SUFFICIENT INTEREST FREE FUN DS 37 AVAILABLE TO GIVE ADVANCES AND MADE INVESTMENTS OUT OF INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE. 42(I) THE ISSUE IS SAME AS HAVE BEEN CONSIDERED IN ASSESSMENT YEAR 2010-11. WE THEREFORE SET ASIDE THE ORDERS OF AUTHORITIES BELOW BY FOLLOWING ORDER FOR ASSESSMENT YEAR 2010-11 AND DELETE THE ENTIRE ADDIT ION ON ACCOUNT OF DISALLOWANCE OF INTEREST UNDER SECTIO N 36(1)(III) OF THE ACT. DEPARTMENTAL APPEAL IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE ON THIS ISSUE I S ALLOWED. 43. ON GROUND NO. 2 REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS. 86 48 825/- ON ACCOUNT OF LOW GP RATE. THIS ISSUE IS SAME AS HAVE BEEN CONSIDERED I N ASSESSMENT YEAR 2010-11 IN THE CASE OF THE ASSESSEE . FOLLOWING THE REASONS FOR DECISION FOR ASSESSMENT Y EAR 2010-11 WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 44. ON GROUND NO. 3 OF DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 10 80 00 0/- ON ACCOUNT OF AGRICULTURE INCOME AND THE ASSESSEE I N THE CROSS OBJECTION ON GROUND NOS. 1 TO 3 CHALLENGE D THE ADDITION OF RS. 13 63 633/- OUT OF AGRICULTURE INCOME. THE ASSESSING OFFICER DISBELIEVED ENTIRE AGRICULTURE INCOME AND TREATED THE SAME AS 'INCOME FROM OTHER SOURCES'. THE LD. CIT(APPEALS) HO WEVER 38 ESTIMATED THE AGRICULTURE INCOME IN A SUM OF RS. 10 000/- PER ACRE AND DELETED THE ADDITION OF RS. 10 80 000/- AND CONFIRMED THE ADDITION OF RS. 13 63 533/-. THIS ISSUE IS SAME AS HAVE BEEN CONSIDERED IN THE CASE OF THE ASSESSEE IN ASSESSMEN T YEAR 2010-11. FOLLOWING THE REASONS FOR ASSESSMENT YEAR 2010-11 WE SET ASIDE THE ORDERS OF AUTHORITIE S BELOW AND DELETE THE ENTIRE ADDITION ON ACCOUNT OF AGRICULTURE INCOME. DEPARTMENTAL APPEAL STANDS DISMISSED HOWEVER CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 45. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 46. IN THE RESULT; 1. ASSESSEE'S APPEAL IN ITA 645/2015(SHRI GAURAV MALHOTRA ) IS ALLOWED. 2. DEPARTMENTAL APPEAL IN ITA 658/2015 (DCIT VS GAURAV MALHOTRA) STANDS DISMISSED HOWEVER CROSS OBJECTION OF THE ASSESSEE IN CO 25/2015 IS ALLOWED. 3. ASSESSEE'S APPEALS IN ITA 647/2015 ITA 648/2015 ( MRS. DIMPY MALHOTRA V DCIT ) ARE ALLOWED. 39 4. THE DEPARTMENTAL APPEALS IN ITA NOS. 654/2015 & ITA 655/2015 ( SHRI GAUTAM MALHOTRA) ARE DISMISSED HOWEVER CROSS OBJECTION OF THE ASSESSEE IN CO 24/2015 AND CO 23/2015 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH S AINI) ACCUNTANT MEMBER JUDICIAL MEMBE R DATED : 26 TH OCTOBER 2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT DR ASSISTANT REGISTRAR ITAT CHANDIGARH