Avinash Nivrutti Bhosale, Pune v. Addl. CIT, Pune

ITA 1425/PUN/2008 | 2005-2006
Pronouncement Date: 24-09-2010 | Result: Dismissed

Appeal Details

RSA Number 142524514 RSA 2008
Assessee PAN ABTPB8151F
Bench Pune
Appeal Number ITA 1425/PUN/2008
Duration Of Justice 1 year(s) 10 month(s)
Appellant Avinash Nivrutti Bhosale, Pune
Respondent Addl. CIT, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 24-09-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 24-09-2010
Assessment Year 2005-2006
Appeal Filed On 24-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I C SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO 1425 /PN/08 (ASST. YEAR 2005-06) AVINASH NIVRUTTI BHOSALE 759/34 BHOSALE PAVILIAN BHANDARKAR ROAD D.G. PUNE-411004 PAN NO. ABTPB8151F .... APPELLANT VS. ADDL. CIT RANGE-3 PUNE . RESPONDENT ITA NO 1524/PN/08 (ASST. YEAR 2005-06) ACIT CIRCLE-3 PUNE .... APPELLANT VS. AVINASH NIVRUTTI BHOSALE 759/34 BHOSALE PAVILIAN BHANDARKAR ROAD D.G. PUNE-411004 PAN NO. ABTPB8151F . RESPONDENT ASSESSEE BY : SHRI S U PATHAK REVENUE BY : SHRI ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THESE ARE THE CROSS APPEALS FILED BY BOTH THE PARTIES AGAINST THE ORDER OF CIT(A)-II PUNE DATED 22-08-2008. ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 2 OF 18 ITA NO. 1425/PN/08:- 2. THE GROUNDS IN THE ASSESSEES APPEAL ARE AS UNDER:- 1. THE LEARNED CIT(A)-II ERRED IN ESTIMATING THE Q UANTUM OF DISALLOWANCE OF AVIATION EXPENSES AND DEPRECIATION WITH RESPECT TO BELL HELICOPTER TO THE EXTENT OF 20% INSTEAD OF 1/7 TH OF THE EXPENDITURE. THE A PLEADS THAT THE A.O BE DIRECTE D TO RESTRICT THE DISALLOWANCE AT 1/7 TH OF THE AMOUNT OF DEPRECIATION AND AVIATION EXPENSES AS HAS BEEN DONE IN THE PAST. 2. THE LEARNED CIT(A)-II ERRED IN ESTIMATING THE QU ANTUM OF DISALLOWANCE OF AVIATION EXPENSE AND DEPRECIATION W ITH RESPECT TO CESSNA AIRCRAFT OF 30% INSTEAD OF 1/7 TH OF THE EXPENDITURE. THE A PLEADS THAT THE ASSESSING OFFICER BE DIRECTED T O RESTRICT THE DISALLOWANCE AT 1/7 TH OF THE AMOUNT OF DEPRECIATION AND AVIATION EXPENSES AS HAS BEEN DONE IN THE PAST. 3. FURTHER DURING THE PROCEEDINGS BEFORE US THE ASSES SEE FILED AN ADDITIONAL GROUND WHICH IS REPRODUCED AS FOLLOWS:- WITHOUT PREJUDICE TO THE CLAIM OF THE ASSESSEE THAT THE INTEREST EXPENDITURE OF RS. 22 13 037/- IS RIGHTLY ALLOWED B Y THE LEARNED CIT(A) WHILE COMPUTING INCOME FROM OTHER SOURCES T HE ASSESSEE SUBMITS THAT ALTERNATIVELY THE SAID INTEREST EXPENDITURE IS ALLOWABLE AS A BUSINESS EXPENDITURE WHILE COMPUTING THE TOTAL INCOME. 4. THUS FROM THE GROUNDS AND THE ADDITIONAL GROUNDS IT IS EVIDENT THAT THE FOLLOWING ARE THE ISSUES FOR ADJUDICATION:- 1) FAIRNESS OF THE ESTIMATION OF THE AVIATION EXPEN SES AND DEPRECIATION RELATABLE TO BELL HELICOPTER @ 1/5 TH OF THE CLAIM INSTEAD OF 1/7 TH AS AGREED BY THE ASSESSEE. 2) FAIRNESS OF THE ESTIMATION OF QUANTUM OF DISALLO WANCE OF AVIATION EXPENSE AND DEPRECIATION RELATABLE TO CESSNA AIRCRA FT @ 30% OF THE CLAIM AS AGAINST 1/7 TH OF THE CLAIM OF EXPENDITURE AGREED TO BY THE ASSESSEE. 3) WHETHER THE CIT(A) SHOULD HAVE ALLOWED THE CLAIM OF INTEREST EXPENDITURE OF RS 22 13 037/- AS BUSINESS EXPENDIT URE TOO. 5. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE INDIVIDUAL AND HAS 1/5 TH SHARE IN THE ARKI AVIATION (AOP) WHICH OWN THE BELL HELICOPTOR. HE ALSO HAVE 25% SHARE IN THE JV (JOINT V ENTURE) WHICH OWNS CESSNA AIRCRAFT. ASSESSEE RUNS A PROPRIETOR CONCERNS NAMELY AMI T CONSTRUCTIONS AND SWAPNIL CONSTRUCTIONS ENGAGED IN THE BUSINESS OF GOV ERNMENT CONTRACTS. ASSESSEE HAS THE BUSINESS OF SHARE TRADING TOO. ASSES SEE FILED THE RETURN OF INCOME DECLARED IN THE TOTAL INCOME OF RS. 18 55 70 670/- AND THE SAME WAS SUBSEQUENTLY REVISED TO 19 30 59 360/-. THE ASSESSME NT WAS COMPLETED U/S. ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 3 OF 18 143(3) OF THE INCOME TAX ACT DETERMINING THE TOTAL I NCOME AT RS. 20 31 89 304/. A.O MADE VARIOUS ADDITIONS DURING THE ASSESSMENT. AGG RIEVED WITH ALL THE ADDITIONS THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE RELIEF GIV EN BY THE CIT(A) THE REVENUE FILED THE APPEAL VIDE ITA NO. 1524/PN/2008. FURTHER AGGRIEVED WITH THE DECISION OF THE CIT(A) IN SUSTAINING THE ADDITI ONS THE ASSESSEE FILED THE APPEAL WITH THE GROUNDS AND ADDITIONAL GROUNDS REPRODU CED ABOVE. NOW WE SHALL FIRST TAKE UP THE ASSESSEES APPEAL. THERE ARE THREE ISSUES IN THE APPEAL OF THE ASSESSEE AND FIRST TWO ISSUE RELATE TO REASONABLE NESS OF CLAIMS OF AVIATION EXPENDITURE AND DEPRECIATION OF BOTH BELL HELICOPTOR A ND CESSNA AIRCRAFT. 6. RELEVANT FACTS IN THIS REGARD ARE THAT DURING THE A SSESSMENT PROCEEDINGS THE AO ISSUED A LETTER DATED 31-07-2007 REQUESTING T HE ASSESSEE TO FURNISH VARIOUS DETAILS LIKE COPY OF RETURN OF AOP COPY OF PU RCHASE BILL SHARE OF THE ASSESSEE IN THE TOTAL COST OF AERO ENGINES. BUT THOS E WERE NOT SUBMITTED FOR 2 MONTHS. ASSESSEE FILED THE LOG BOOK PERTAINING TO B ELL HELICOPTOR. THE ORIGINAL LOG BOOKS FOR THE CESSNA AIRCRAFT WERE NOT PRODUCED. FROM TH E LOGBOOK OF BELL HELICOPTER PRODUCED AND VERIFIED BY THE ASSESSING OFFI CER IT WAS OBSERVED THAT THERE WERE PERSONAL VISITS TO PLACES LIKE SHIRDI LONA VALA TIRUPATI AMBY VALLEY ETC. IT WAS STATED BY THE ASSESSEE THAT 30% OF THE DISALLOWANCE ON DEPRECIATION AND AVIATION EXPENSES WERE ON THE HIGHER SIDE SINCE I N THE EARLIER YEARS THE ASSESSING OFFICER HAD ROUTINELY DISALLOWED 1/7 TH OF THE RUNNING AND MAINTENANCE EXPENSES IN THE TOTAL INCOME OF EACH MEMBER OF THE A OP WHICH WAS NOT DISPUTED. FURTHER IT WAS STATED THAT TRAVELING TO HIL L STATIONS OR TOURIST SPOTS WAS NOT ONLY FOR THE PURPOSE OF ENJOYMENT BUT IT WAS A LA NDING POINT FOR VISIT TO KOYNA SITE OF THE ASSESSEE. FURTHER THE VISIT TO LON AVALA AND AMBY VALLEY WAS FOR SCOUTING OF EMPLOYEES FOR HOTEL PROJECTS OF THE AS SESSEE. ON THE BASIS OF THE ABOVE IT WAS STATED THAT ALL SUCH TRIPS ARE NOT FOR T HE PERSONAL PURPOSES OF THE ASSESSEE. THE ASSESSING OFFICER APPLIED THE PROVISION S OF SECTION 38(2) OF THE ACT AND DISALLOWED THE DEPRECIATION AND AVIATION EXPENSE S @ 30% TOTALING RS. 28 19 032/-. THE CLAIMS AS PER ASSESSEE AND THE DISA LLOWANCES BY THE AO ARE TABULATED AS FOLLOWS. SR. NO. NAME OF THE AEROENGINE DEPRECIATION CLAIMED AVIATION EXP. CLAIMED DISALLOWANCE @ 30% 1. BELL HELICOPTER 16 81 010/- 19 39 836/- 10 86 254/- 2. CESSANA AIRCRAFT 49 23 970/- 8 51 955/- 17 32 778/- 66 04 980/- 27 91 791/- 28 19 032/- ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 4 OF 18 7. AGGRIEVED WITH THE ABOVE DISALLOWANCES THE ASSESS EE FILED THE APPEAL BEFORE THE CIT(A). DURING THE FIRST APPELLATE PROCEEDIN GS IT WAS SUBMITTED THAT THE ASSESSEE CLAIMED TOTAL EXPENDITURE OF RS. 66 04 980/- ON ACCOUNT OF DEPRECIATION IN RESPECT OF TWO AERO ENGINES. IT WAS FURTHER STATED THAT OUT OF THIS TOTAL EXPENDITURE OF RS. 66 04 980/- RS. 16 81 010/- WAS FOR BELL HELICOPTER AND THE BALANCE OF RS. 49 23 970/- WAS FOR CESSNA AIRCRAFT . IT WAS STATED THAT THE ASSESSING OFFICER SOUGHT TO DISALLOW AN AMOUNT OF RS. 28 19 032/- BEING 30% OF THE TOTAL EXPENDITURE OF R S 66 04 980/- AND 27 91 791/- CLAIMED ON ACCOUNTS OF DEPRECIATION AND AVIATION EXPENDITURE RESPECTIVELY ON ADHOC BASIS AND WITH ANY CREDIBLE BAS IS. IT IS OBVIOUS THAT THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE AT THE RATE OF 30% OF THE CLAIM IS ON HIGHER SIDE AND RESTRICTING THE DISALLOWANCE TO 1/7TH OF THE CLAIM AS DONE IN EARLIER ASST YEARS WOULD BE ALRIGHT. ON CONSIDERING THE ARGUMENTS AND WRITTEN SUBMISSION OF THE ASSESSEE THE CIT(A) DECIDED THE ISSUES AS UNDER. RELEVANT PARTS OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER. 5.3 I HAVE GONE THROUGH THE FACTS OF THE ISSUE. REGARDING THE BELL HELICOPTER THE ASSESSING OFFICER HAS NOT GIVEN ANY REASONS FOR R EJECTING THE EXPLANATION BY THE ASSESSEE THAT MAHABALESHWAR WAS A LA NDING POINT FOR VISIT TO THE KOYNA SITE OF THE ASSESSEE. FURTHER THE VISITS TO AMBY VALLEY AND LONAVALA WERE STATED TO HAVE BEEN UNDERTAKEN FOR SCOUTING OF EMPLOYEES FOR HOTEL PROJECTS OF THE ASSESSEE. THE ASSESSING OFFICER HELD T HAT THE TRIPS TO AMBY VALLEY AND LONAVALA TAKEN FOR THE HOTEL PROJECTS WERE NOT A LLOWABLE BECAUSE THE HOTEL PROJECTS WERE BEING UNDERTAKEN BY DIFFERENT COMPANIES AND NOT BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. THE APPELLANT HAS NOT CONTRADICTE D THIS FINDING OF THE ASSESSING OFFICER IN THE APPELLATE PROCEEDINGS. IT IS CORR ECT THAT THE ASSESSEE HAD NOT GONE TO SHIRDI OR PANDHARPUR ETC. FOR ANY BUSINES S PURPOSES BUT ON PURELY RELIGIOUS PERSONAL PURPOSES AND IN THE EARLIER YEARS 1/7 TH OF THE RUNNING AND MAINTENANCES EXPENSES WERE DISALLOWED ON ADHOC BASIS BY THE ASSESSING OFFICER WHICH WAS ACCEPTED BY THE ASSESSEE. THE ASSESSING OFF ICER HAS GIVEN REASONS FOR DISALLOWANCE OF EXPENDITURE BUT RESTORED TO ADHOC DISALLOW ANCE OF 30% AS THE DETAILS OF EXPENDITURE WAS NOT FORTHCOMING. IT IS NO ONE S CASE THAT IRRESPECTIVE OF THE AMOUNT SPENT ON PERSONAL PURPOSES THE ASSESSING OFFICER SHOULD STICK TO DISALLOWANCE OF 1/7 TH OF THE MAINTENANCE EXPENDITURE. IT IS TRITE LAW THAT FO R CLAIMING THE EXPENDITURE THE BURDEN OF PROOF IS ON THE ASSESSEE. IT IS ALSO SEEN THAT THE ASSESSEE WAS ASKED TO SUBMIT AND FURNISH DE TAILS VIDE LETTER DATED 31- 07-2007 AND AGAIN VIDE LETTER DATED 16-10-2007 AND 26- 11-2007 WHEN THE ORIGINAL LOGBOOKS OF THE BELL HELICOPTER WERE PRODU CED FROM WHERE THE ASSESSING OFFICER WAS ABLE TO KNOW THE PERSONAL NATURE OF THE EXPENDITURE INCURRED FOR VARIOUS TRIPS. IT WAS ONLY ON 18-12-2007 T HAT THE REPLY TO THE FINAL NOTICE WAS GIVEN TO THE ASSESSING OFFICER. IN VIEW OF TH E ABOVE FACTS AND TAKING INTO CONSIDERATION THE REPLY OF THE ASSESSEE IN MY CONS IDERED VIEW THE ENDS OF JUSTICE WOULD BE MET IF 1/5 TH OF THE AVIATION EXPENSES ARE DISALLOWED WITH RESPECT TO BELL HELICOPTER. 5.4 REGARDING THE CESSNA AIRCRAFT THE ASSESSING OFFICER LAMENTED THAT THE ASSESSEE WAS REQUESTED SEVERAL TIMES TO PRODUCE THE LO GBOOK OF CESSNA AIRCRAFT SO TO SEE THE USE FOR BUSINESS ACTIVITY BUT NO LOGBOO K WAS PRODUCED. THE FINAL NOTICE WAS ISSUE ON 17-12-2007 PROPOSING TO DISALLOW THE ENTIRE DEPRECIATION ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 5 OF 18 WHEN XEROX COPIES OF THE LOGBOOK WERE PRODUCED ON 19- 12-2007. THE ORIGINAL LOGBOOKS OF CESSNA AIRCRAFT WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THOSE LOGBOOKS WERE NOT PRODUCED IN THE APPELLA TE PROCEEDINGS ALSO. THE ASSESSING OFFICER ALSO BROUGHT ON RECORD THE FACT THAT THE USE OF BOTH THE AERO ENGINES FOR PERSONAL PURPOSES COULD NOT BE DENIED AS MANY A TIME VISITS HAD BEEN MADE TO PLACES LIKE GOA TIRUPATI ETC. FURTHER THE HOTELS RUN BY THE ASSESSEE WERE OWNED BY DIFFERENT COMPANIES AND NOT TH E ASSESSEE. THE OTHER JOINT OWNER NAMELY SERUM INSTITUTE OF INDIA MAINTAINED T HE DETAILS LIKE NAMES OF THE PASSENGERS TRAVELING ON THE CESSNA AIRCRAFT BUT NO SUCH DETAILS WERE MAINTAINED BY THE APPELLANT. THE ASSESSING OFFICER ALSO RIGHTLY REJE CTED THE CLAIM OF THE APPELLANT THAT THE AIRCRAFT WAS USED BY OTH ER MEMBERS OF THE AOP AS IRRELEVANT AS DISALLOWANCE WAS BEING MADE ONLY FROM THE AP PELLANTS SHARE OF EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT. I T IS AN ESTABLISHED PRINCIPLE OF LAW THAT THE APPELLANT HAS TO LEAD EVIDENCE IN SUPPOR T OF THE CLAIM OF AN EXPENDITURE AND THAT THE BURDEN OF PROOF IS CAST UPON THE APPELLANT TO SUBSTANTIATE SUCH CLAIM. THE PRIMARY CONDITION FOR ALLOWANC E OF DEDUCTION OF PARTICULAR EXPENDITURE IS THAT THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. IT HAS BEE N JUDICIALLY DECIDED THAT THE FIRST ADVERB WHOLLY IN THE PHRASE OF LAID OUT OR EXPE NDED WHOLLY AND EXCLUSIVELY IN SECTION 37(1) REFERS TO THE QUANTUM OF E XPENDITURE THE SUM OF MONEYS SPENT WHILE THE SECOND ADVERB EXCLUSIVELY HAS REFERENCE TO THE MOTIVE OR OBJECT BEHIND THE EXPENDITURE. UNLESS SUCH MOTIVE OR OBJECT IS EXCLUSIVELY I.E. SOLELY FOR THE PROMOTION OF THE BUSINESS THE EXPENDITUR E WILL NOT QUALIFY FOR DEDUCTION. IN SUPPORT OF THIS VIEW REFERENCE IS MADE T O THE CASE OF SIDDHO MAL & SONS VS. ITO REPORTED IN 122 ITR 839 (DEL.). IN THE C ASE OF MEATTLES LTD. VS. CIT REPORTED IN 68 ITR 79(DEL.) IT WAS POINTED OUT THAT IN ORDER TO ASCERTAIN WHETHER AN EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF ASSESSEES BUSINESS ONE MUST LOOK TO THE DIRECT PURPO SE FOR WHICH THE MONEY WAS LAID OUT OR EXPENDED AND NOT TO THE REMOTE RESULTS WHICH MAY FOLLOW FROM OR MOTIVATE THE EXPENDITURE. THE TRUE TEST OF AN EXPE NDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADE OR BUSINESS IS THAT IT IS INCURRED BY THE ASSESSEE AS INCIDENTAL TO HIS TRADE FOR THE PURPOSE OF KEEPING THE TRADE GOING AND OF MAKING IT PAY AND NOT IN ANY OTHER CAPACITY THAN THAT OF A TRADER. IT HAS TO BE EXAMINED WHETHER THE EXPENSE HAS BEEN INCURRED WITH THE SOLE OBJECT OF FURTHERING THE TRADE OR BUSINESS INTEREST OF THE ASSES SEE UNALLOYED OR UNMIXED WITH ANY OTHER CONSIDERATION. IF THE EXPENSE IS FOUND T O BEAR AN ELEMENT OTHER THAN THE TRADE OR BUSINESS INTEREST OF THE ASSESSEE THE EXPENDITURE IS NOT ALLOWABLE ONE. ON THE BASIS OF THE FACT THAT THE ASSESS EE WAS NOT MAINTAINING THE DETAILS OF PASSENGERS TRAVELING ON CESSNA AIRCRAFT THE PURPOSE OF VISIT AND THERE WAS UNDENIABLY VISITS TO HOLY PLACES LIKE TIRUPATI AND TOURIST PLACES LIKE GOA ETC. THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING 30% OF THE EXPENDITURE FOR NON-BUSINESS PURPOSES IS CONFIRMED . 5.5 FURTHER THE PROVISIONS OF SECTION 38(2) OF THE IN COME TAX ACT ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE AS BOTH THE AERO ENGINES WERE NOT EXCLUSIVELY USED FOR THE PURPOSES OF BUSINESS. IN S ECTION 38(2) THE WORDS USED ARE NOT EXCLUSIVELY USED FOR THE PURPOSES OF BU SINESS OR PROFESSION. IT SIGNIFIES THAT THE ASSET HAS BEEN USED FOR OTHER PURPO SES AND NOT EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESSION. THIS SECTION SP ECIFICALLY PROVIDES FOR PART DISALLOWANCE OF CERTAIN EXPENSES INCLUDING DEPRECIATION IN RE LATION TO BUSINESS ASSET. WHERE THE MOTOR CAR BELONGING TO THE ASSESSEE WERE USED PARTLY FOR NON- BUSINESS PURPOSES THE DEPRECIATION IS REQUIRED TO BE PAR TLY DISALLOWED IN THE CASE OF THE FIRM. REFER 167 ITR 147 BHILAI MOTOR (MP) K. L BHASIN AND CO. REPORTED IN 158 ITR 623 (PATNA). THE BOMBAY ITAT IN 18 TTJ 41 (AT) IN THE CASE OF MARSHALL PRODUCE BROKERS CO. LTD. HELD THAT USE OF VE HICLE OF THE FIRM BY PERSONS FOR THEIR PERSONAL PURPOSES CANNOT BE STATED TO BE US E OF VEHICLE FOR BUSINESS PURPOSES. WHERE 1/5 TH OF EXPENSES ON MOTOR CAR WERE DISALLOWED FOR PERSONAL USE DISALLOWANCE ON DEPRECIATION IN THE SAME PROPOSITION WAS JUSTIFIED (SENCO JEWELER HOUSE- 17 ITD 223 (CAL) (AT). ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 6 OF 18 ON THE BASIS OF THE ABOVE THE ASSESSING OFFICER IS DIRECTED TO DISALLOW 20% OF THE DEPRECIATION AND AVIATION EXPEN SES OF BELL HELICOPTER AND 30% OF THE DEPRECIATION AND AVIATION EXPENSE ON CESSNA AIRCRAFT. 8. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL WITH THE ABOVE MENTIONED GROUNDS. DURIN G THE PROCEEDINGS LD COUNSEL FOR THE ASSESSEE MADE VARIOUS SUBMISSIONS AND BRIEFLY THEY ARE: (A) THE DISALLOWANCES ON ACCOUNTS OF USE OF BOTH AVIATION V EHICLES MUST BE RESTRICTED TO 1/7 TH OF THE CLAIM; (B) THE INEQUAL TREATMENT IN ADOPTING THE DIFFERENT ADHOC PERCENTAGES IN RESPECT OF HELICOPTOR AND THE AIRCRAFT IS ARTIFICIAL AND NOT BASED ON ANY CREDIBLE EVIDENCE; (C) NO ADDITIONAL REASONS ARE G IVEN BY THE REVENUE FOR FINALLY ARRIVING AT THE 20% IN RESPECT OF HELICOPTOR OR 30% IN RESPECT OF AIRCRAFT IN THIS AY WHILE THE REVENUE RESTRICTED THE DISALLOWAN CE TO 1/7 TH ONLY IN THE EARLIER YEARS; (D) LD COUNSEL FILED COPIES OF THE ASSE SSMENT ORDERS FOR THE EARLIER AYS DEMONSTRATING THE DISALLOWANCE WAS RESTRICTED TO 1 /7 TH OF THE CLAIM ONLY; (E) ACCEPTING THAT THE CASE OF THE ASSESSEE ATTRACTS THE PROVISION OF SECTION 38(2) OF THE ACT THE COUNSEL MENTIONED THAT THE ESTIMATION ADOPTED BY THE AO AND CIT(A) ARE NEITHER FAIR NOR REASONABLE; AND (E) LD COUNS EL RELIED ON VARIOUS DECISIONS TO DEMONSTRATE THAT THE IN RESORTING TO THE ESTIMATIONS THE REVENUE CONSIDERED THE CASES OF DECISIONS WHERE THE DISALLOWA NCES ON ACCOUNT OF PERSONAL CAR WERE THE SUBJECT MATTER AND CASES INVOLVIN G PERSONAL USE OF CARS ARE NOT COMPARABLE WITH THAT OF THE AVIATION VEHICLE S WHICH INVOLVES STRICTER SCRUTINY AND AVIATION VEHICLE ARE NOT AVAILABLE FOR US E OF THE EMPLOYEES INDISCRIMINATELY AND THESE VEHICLES ARE SUBJECTED TO AVIATION RULES TOO. 9. ON THE OTHER HAND THE DR FOR THE REVENUE RELIED HEA VILY ON THE ORDER OF THE INCOME TAX AUTHORITIES. FURTHER HE ARGUED STATING THAT THE ONUS IS ON THE ASSESSEE IN THESE MATTERS RELATING THE MAKING OF CLAI MS OF DEDUCTION AND IN THIS CASE THE ASSESSEE FAILED MISERABLY TO DISCHARGE THE SAME. AS PER THE DR ASSESSEE NEITHER FILED THE LOGBOOK IN RESPECT OF THE AIRCRAFT NOR FILED THE LIST OF THE PASSENGERS TRAVELLED NOR THE DETAILS OF THE DESTI NATIONS COVERED BY THESE HELICOPTER OR AIRCRAFT AS THE CASE MAY BE NOR THE PURPO SES OF THE TRAVEL USING THE IMPUGNED HELICOPTER OR AIRCRAFT. IN SUCH CIRCUMSTANCES THE DECISIONS OF THE CIT(A) DO NOT NEED ANY MUTATION OR INTERFERENCE. ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 7 OF 18 10. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS AND THE PAPER BOOKS MADE AVAILABLE TO US. UNDISPUTED FACTS ARE THAT THE ASSESSEE USED BOTH BELL HELICOPTER AS WELL AS THE CESSNA AIRCRAFT FOR THE MIXED USE AND THEREFORE THERE IS NO DISPUTE ON THE INVOKING OF THE PROVISIONS OF SECT ION 38(2) OF THE ACT. FURTHER THERE IS NO DISPUTE THAT THE AO RESTRICTED THE DISALL OWANCE ART 1/7 TH OF THE CLAIM. THE SAME IS EVIDENCED BY FILING THE COPIES OF THE A SSESSMENT ORDERS FOR THE AYS 2002-03 TO AYS 2004-05. THEY ARE PLACED AT PAGES 128 TO 145 OF THE PAPER BOOK. FOR THE INSTANT YEAR THE AO ADOPTED 30% AS AGA INST 1/7 TH IN THE PAST AND THEREFORE THE ISSUE TRAVELLED TO THE TRIBUNAL FOR THE FI RST TIME FOR THE INSTANT AY. BEFORE IT IS ADEQUATELY MADE OUT THAT THE 1/7 TH IS REASONABLE. THEREFORE THE ISSUE IN DISPUTE IS WHETHER THE DISALLOWANCE ON ACCO UNTS OF AVIATION EXPENSES AND THE DEPRECIATION OF BOTH BELL HELICOPTOR AND THE CESSNA AIRCRAFT SHOULD BE RESTRICTED TO 1/7 TH OF THE CLAIM OR NOT. 11. IN THIS REGARD WE HAVE PERUSED THE PROVISIONS OF S ECTION 38(2) OF THE ACT WHICH READS AS UNDER. BUILDING ETC PARTLY USED FOR BUSINESS ETC OR NO T EXCLUSIVELY SO USED SECTION 38(1). (2) WHERE ANY BUILDING MACHINERY PLANT OR FURNITU RE IS NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THE DED UCTIONS UNDER SUB-CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30 CLAUSES (I ) AND (II) OF SECTION 31 AND CLAUSE (II) OF SUB-SECTION (1) OF SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE ASSESSING OFFICER MAY DETERMINE HAVING REGARD TO THE USER OF SUCH BUILDING MACHINERY PL ANT OR FURNITURE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. FROM THE ABOVE IT IS EVIDENT THAT THE RESTRICTION SHO ULD BE A FAIR PROPORTIONATE PART THEREOF WHICH THE ASSESSING OFFICER MAY DETERM INE HAVING REGARD TO THE USER OF SUCH .. MACHINERY PLANT OR .. FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. IF THE REQUIREMENT OF THE LAW THAT THE A.O IS UNDER OBLIGATION TO DETERMINE HAVING REGARD TO THE USER OF SUCH MACHINERY FO R DETERMINING THE SAME THERE IS NEED FOR RELIABLE DATA EITHER SUPPLIED B Y THE ASSESSEE OR GARNERED BY THE A.O. NEITHER IS AVAILABLE IN THIS CASE. 12. IN THIS REGARD WE HAVE PERUSED EXISTING JUDICIAL PRONOUNCEMENTS AND FOUND THAT THE SPECIAL BENCH DECISION IN THE CASE O F GULATHI SAREE CENTRE (71 ITD 73)(CHD)(SB) WAS IN FAVOUR OF 1/5 TH DISALLOWANCE IN RESPECT OF THE CAR AND COORDINATE BENCH DECISION IN THE CASE OF MAYUR KOTHARI (10 SOT 338)(MUM) IS IN FAVOUR OF 1/6 TH AGAIN IN THE CONTEXT OF A CAR AS DISCUSSED IN PARA 8 OF THE DECISION ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 8 OF 18 AND RELEVANT PARA 8 OF THE DECISION IN THE CASE OF MA YUR KOTHARI (SUPRA) READS AS UNDER:- WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH SIDES MATERIAL ON RECORD AND ORDERS OF AUTHORITIES BELOW. ADMITTEDLY THE ASSES SEE HAS NOT MAINTAINED THE LOG BOOK. THE POSSIBILITY OF PERSONAL USER OF THE CAR CANNOT BE RULED OUT. IN THE CASE OF GULATI SAREE CENTRE VS ASSTT CIT [1999] 71 ITD 7 3 (CHD)(SB) [ITAT CHANDIGARH BENCH] THE TRIBUNAL HELD THAT EVEN AFTE R THE INCORPORATION OF THE CONCEPT OF BLOCK ASSET THE PROVISIONS OF SECTION 3 8(2) WERE APPLICABLE AND THE ASSESSING OFFICER WAS EMPOWERED TO RESTRICT THE DEP RECIATION TO A FAIR PART THEREOF HAVING REGARD TO THE USER OF ASSET FOR THE PURPOSES OF BUSINESS. IN THIS VIEW OF THE MATTER WE HOLD THAT ORDER OF THE REVEN UE AUTHORITIES IS CORRECT IN LAW. AS FAR AS THE PROPORTION OF DISALLOWANCE FOR PERSON AL USE IS CONCERNED WE FIND THAT THE REVENUE AUTHORITIES HAVE MADE A REASONABLE PROPORTIONATE DISALLOWANCE AT THE RATE OF 1/6 TH OF THE TOTAL EXPENSES INCLUDING DEPRECIATION . ACCORDINGLY WE DECLINE TO INTERFERE IN THE MATTER. FURTHER IT HAS COME TO OUR NOTICE THAT THE PUNE BENCH HAS TAKEN DECISION IN THE CASE OF M/S KIRLOSKAR OIL ENGINES LTD VIDE ITA NO 103 9 AND 1040 FOR THE AY 1995-96 AND 1996-97 IN CONNECTION WITH THE DISALLOW ANCE OF AIRCRAFT EXPENDITURE AND HELD THAT THE DISALLOWANCES AT THE RATE OF 15% ( NEARLY 1/7 TH ) OF THE CLAIM IS FAIR AND REASONABLE. RELEVANT PARA 12 AND 13 OF THE SA ID DECISION IS AS FOLLOWS. 12. GROUND NO 4 IS DIRECTED AGAINST THE CIT(A)S ORD ER IN CONFIRMING AIRCRAFT EXPENSES AMOUNTING TO RS 10 28 179/-. 13. WE HAVE HEARD BOTH THE PARTIES. IN THE ASSESSME NT YEAR 90-91 THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE ORDER DT 20.7.2005 IN ITA NO. 916/PN/95. HOWEVER IN ASSESSMENT YEAR 92- 93 THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE MATTE R STANDS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSMENT ASSESSMENT YEAR 90-91 THOUGH ACTUALLY IN AY 90- 91 THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THER EFORE THERE WAS A MISTAKE IN THE TRIBUNALS ORDER IN ASSESSMENT YEAR 92-93. WHILE D ECIDING THIS ISSUE IN ASSESSMENT YEAR 93-94 IN ITA NO 429/PN/97 THIS POSITIO N HAS BEEN CLARIFIED AND THE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN THE LIGHT OF THE TRIBUNALS DECISION FOR ASSESSMENT YEAR 90-91. IN ASSESSMENT YEAR 94-95 VIDE ITA NO 606/PN/99 THE ISSUE WAS ALSO DECIDED AGAINST THE ASSESSEE. IN TH E COURSE OF HEARING OF THIS APPEAL THE ASSESSEE HAS RELIED ON THE TRIBUNALS DECISION IN AY 92-93 WHICH IN OUR CONSIDERED VIEW IS NOT ACTUALLY IN FAVOUR OF THE ASS ESSEE BUT IS AGAINST THE ASSESSEE. THE CASE OF OTHER ASSESSES WHO SHARED TH E AIRCRAFT EXPENSES IS ON DIFFERENT FOOTING INASMUCH AS IN THE PRESENT CASE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE AND ESTABLISH THAT THE AIRCRAFT WAS USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IN THIS VIEW OF THE MATTER THE ORDER OF THE CIT(A) IS UPHELD IN CONFIRMING THE DISALLOWANCE OF RS 10 28 179/- (I.E. 15% OF THE CLAIM ) ON ACCOUNT OF AIRCRAFT EXPENSES. (EMPHASIS SUPPLIED) 13. FROM THE ABOVE IT IS CLEAR THAT SPECIAL BENCH DE CISION IN THE CASE OF GULATHI SAREE CENTRE (SUPRA) OR THE DECISION IN THE CA SE OF MAYUR KOTHARI (SUPRA) ARE IN THE CONTEXT OF THE PERSONAL CARS; WHEREAS THE PU NE BENCH DECISION IN THE CASE OF M/S KIRLOSKAR OIL ENGINES LTD (SUPRA) RELATES T O THE AVIATION VEHICLES WHICH IS ALSO THE CASE OF THE ASSESSEE AN WHETHER IT IS THE CASE OF A HELICOPTER OR AIRCRAFT SHOULD NOT MAKE ANY DIFFERENCE. THUS THE DEC ISION IN THE CASE OF GULATHI ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 9 OF 18 SAREE CENTRE (SUPRA) OR THE DECISION IN THE CASE OF MAY UR KOTHARI (SUPRA) ARE DISTINGUISHABLE AS THE SUBJECT MATTER OF THESE APPEA LS ARE THE DISALLOWANCE OUT OF THE CLAIMS INVOLVING THE PERSONAL CARS . FURTHER WE MAY MENTIONED THAT THE REVENUE IS NO FAIR IN ADOPTING 20% (1/5 TH OF THE CLAIM) IN RESPECT OF THE BELL HELICOPTOR AND IN ADOPTING 30% (NEARLY 1/3 TH OF THE CLAIM) IN RESPECT OF THE CESSNA AIRCRAFT AND IN OUR OPINION IT CONSTITUTES AN ARTIFICIAL DIFFERENCE. IT IS ALSO RELEVANT TO MENTION THAT THE SECTION 38(2) REFERS TO THE EXPRESSION FAIR AND NEITHER OF THE IT AUTHORITIES IE AO OR CIT(A) HAVE UND ERTAKEN ANY EXERCISE TO ESTABLISH THE SAID FAIRNESS IN ADOPTING THE SAID PERC ENTAGES. IT IS TRUE THAT THE ONUS IS ON THE ASSESSEE TO SUBS TANTIATE THE CLAIM OF THE ASSESSEE. CONSIDERING THE PECULIAR CIRCUMSTANCES BE TTER KNOWN TO THE ASSESSEE THERE IS SURRENDER OF CLAIM TO THE EXTENT OF 1/7 TH OF THE TOTAL CLAIMS RS 93 96 771/- (IE RS 66 04 980/- ON ACCOUNT OF DEPRECIATION OF VEHICLES AND RS 27 91 791/- ON ACCOUNT OF AVIATION EXPENSES). AT THIS POINT OF TIME IN OUR OPINION THE ONUS HAS SHIFTED TO THE REVENUE TO DEMONSTRATE THAT THE SAID SURRENDER IS INCORRECT AN D ESTIMATIONS MADE BY THE AO ARE FAIR WITHIN THE MEANING OF SECTION 38(2) OF THE ACT. FAIRNESS IS AN IMPORTANT FACTOR IN MATTERS OF QUANTIFICATION OF THE DISALLOWANCES WHEN SECTION 38(2) OF THE ACT IS INVOKED. THE REVENUE HA S NOT DONE ANY PROBE INDEPENDENTLY TO DEMONSTRATE THAT ASSESSEES OFFER IS UNFAIR AND HIS ESTIMATIONS ARE FAIR. HENCE WE ARE OF THE OPINION THAT THE ESTIMATIONS MADE BY THE AO WHICH ARE CONFIRMED IN CASE OF THE CESSNA AIRCRAFT AND ALTERTED IN CASE OF BELL HELICOPTOR ARE HEREBY SET ASIDE. 14. IN VIEW OF THE EXISTENCE OF THE PUNE BENCH DECI SION WHICH IS BINDING WE ARE OF THE OPINION THAT THE OFFER OF THE ASSESSEE TO RESTRICT THE DISALLOWANCE TO 1/7 TH OF THE CLAIMS IN RESPECT OF BOTH BELL HELICOPTOR AND THE CESSNA AIRCRAFT IS REASONABLE AND FAIR. ACCORDINGLY THE AO IS DIRECTED. T HUS THE ORIGINAL GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . 15. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS R ELEVANT IN THE CONTEXT OF GROUND 3 RAISED IN THE APPEAL BY THE REVENUE VIDE ITA NO 1524/PN/2008. THIS GROUND IS ADJUDICATED WHILE DEALING WITH THE APPEAL OF THE REVENUE. ACCORDINGLY THE ADDITIONAL GROUND IS ALLOWED. ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 10 OF 18 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO 1524/PN/2008 17. THE GROUNDS IN THE REVENUES APPEAL ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER CIT(A) IS RIGHT IN DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF INCOME FROM HOUSE PROPERTY BY DETERMINING ANNUAL VALUE OF LET OUT PROPERTY AT RS. 6 00 000/- AGAINST RS. 1 50 000/- AS SHOWN BY ASSESS EE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER CIT(A)-II PUNE IS RIGHT IN ALLOWING THE EXPENDITURE MADE IN RESPECT O F INTEREST OF RS. 22 13 037/- PAID ON BORROWED FUNDS WHICH WERE UTILIZED T O ACQUIRE THE SHARES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER CIT(A) IS RIGHT IN RESTRICTING THE DISALLOWANCE MADE OUT OF THE DEPR ECIATION AND AVIATION EXPENSES ON BELL HELICOPTER TO 20% AGAINST 30% AS PER AS SESSING OFFICERS ORDER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER CIT(A) IS RIGHT IN DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED COMMISSION PAYMENT OF RS. 7 48 505/-. 18. GROUND 1 RELATES TO THE DETERMINATION OF THE ANNU AL LETTING VALUE (ALV) OF THE HOUSE PROPERTY OF THE ASSESSEE. AO DETERMINED THE ALV AT RS 6 LAKHS AGAINST THE ASSESSEES ALV OF RS 1.5 LAKHS. PARA 3.1 TO 3.5 OF THE IMPUGNED ORDER ARE RELEVANT FOR FACTS AS WELL FOR THE REASONING OF THE CIT (A) FOR DELETING THE ADDITION. IN FACT THE CIT(A) DID NOT APPROVE THE AO ATTEMPTS IN RESORTING TO THE ESTIMATIONS WHEN THE ALV IS TO BE CALCULATED WHERE T HE ASSESSEE FOLLOWED THE METHOD OF DETERMINING THE ALV OF THE WALKESWHARE PROPE RTY BASED ON THE ACTUAL RENTAL RECEIPTS. 19 . AGGRIEVED WITH THE SAME THE REVENUE IS BEFORE US. LD DR FOR REVENUE ARGUED THAT THE AO IS EMPOWERED TO DETERMINE THE ALV OF THE PROPERTY ON THE BASIS OF THE COMPARABLE CASES. IN THIS REGARD HE RELI ED ON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF MAKRUPA CHEMICALS (P ) LTD (108 ITD 95) WHERE THE ITAT HAS DISCUSSED THE SCOPE OF DIFFERENT DECISI ONS OF THE JUDGMENTS OF THE HIGH COURTS AS WELL AS THE SUPREME COURT AND THE TRIBUN AL IN PARA 14 OF THE SAID ORDER THAT THE MUNICIPAL RATABLE VALUE IS NOT BINDING ON THE AO IF THE AO CAN SHOW THAT THE RATABLE VALUE AND MUNICIPAL LAWS DOES NOT REPRESENT THE FAIR RENT. FURTHER HE RELIED ON THE ORDER OF THE AO. 20. ON THE OTHER HAND LD AR FOR ASSESSEE HEAVILY RELI ED ON THE ORDERS OF THE CIT (A) AND THE JURISDICTIONAL HIGH COURT JUDGMENTS I N THE CASE OF J K INVESTORS ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 11 OF 18 (BOM) LTD AND ABOVE CITED APEX COURT JUDGMENTS IE DE WAN DAULAT RAI KAPOOR (SUPRA). HE TOOK US THROUGH THE RELEVANT PARAS OF THE SAID JUDGMENTS. HE ARGUED THAT THE AO IS UNDER OBLIGATION TO GO BY THE RA TABLE VALUE OR STANDARD RENT AND THE AO MUST NOT INVOKE THE COMPARABLE CASE S. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE REVENUE AUTHORITIES AS WELL AS PAPER BOOK FILED BEFORE US AND COPIES OF THE DECISIONS FILED BEFORE US. UNDISPUTEDLY THIS IS TH E CASE WHERE THE PROPERTY IS LET TO THE SISTER CONCERN FOR RENT AND THEREFORE CLAUSE (B) OF SECTION 23(1) APPLY TO THE CASE. AO HAS NOT MADE OUT A CASE THAT THE CASE FALL IN THE EXEMPTED CASES OF MAHARASHTRA RENT CONTROL ACT 1999. THE PROVISIONS OF CLAUSE (B) OF SECTION 23 ARE AS UNDER:- 23(1) ANNUAL VALUE HOW DETERMINED SUBSECTION (1) FOR THE PURPOSE OF SECTION 22 THE AN NUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THERE OF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A) THE AMOUNT SO REC EIVED OR RECEIVABLE. CLAUSE (B) REFERS TO A PROPERTY WHICH ARE LET. ANNUAL VALUE OF A PROPERTY DETERMINED UNDER SECTION 23 SHALL BE ADOPTED FOR COMPU TING THE INCOME FROM PROPERTY IN TERMS OF SECTION 22. THE ANNUAL VALUE DET ERMINATION SHALL BE STRICTLY IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIO N 23 AS UPHELD BY THE CO- ORDINATE BENCH IN THE CASE OF DELITE ENTERPRISES (P) L TD V. ITO [2008] 22 SOT 245(MUM). ACCORDINGLY WHERE THE RENT CONTROL ACT IS APPLICABLE ONLY THE STANDARD RENT IS TO BE TAKEN AS THE ANNUAL LETTING VA LUE. IN THE ABSENCE OF STANDARD RENT THE MUNICIPAL RATABLE VALUE IS TO BE TAK EN. WHERE THE MUNICIPAL RATABLE VALUE OF RENT IS LESS THAN ACTUAL RENT THE AC TUAL RENT SHALL BE FAIR RENTAL VALUE FOR COMPUTING INCOME FROM HOUSE PROPERTY. HOWEVE R IT IS THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF MAKRUPA CHEMICA LS (P) LTD [2007] 108 ITD 95/12 SOT 68 (MUM) THAT THE STANDARD RENT IS THE UPPER LIMIT FOR DETERMINING THE ANNUAL VALUE. THE ABOVE SYNOPSIS GO ES WELL WITH THE DECISIONS OF THE APEX COURT IN THE CASE OF DEWAN DAULAT RAI K APOOR (SUPRA) AND ALSO APEX COURT JUDGMENT IN THE CASE OF DR BALBIR SINGH AND OTHE RS (SUPRA) FOR THE PROPOSITION THAT THE RATABLE VALUE DETERMINED BY THE M UNICIPAL AUTHORITY IS BINDING UNLESS THE STANDARD RENT IS HIGHER. ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 12 OF 18 11. IN THE LIGHT OF THE ABOVE LEGAL POSITION WE HAV E EXAMINED THE FACTS OF THE INSTANT CASE. THE ASSESSEE HAS LET OUT SPAC E TO THE SISTER CONCERN WHICH IS UNDISPUTED FACT AND IS RECEIVING RS 10 000 /- PER MONTH FROM EACH SISTER CONCERN. THEREFORE THE ASSESSEES PROPERTY IS COVERED BY PROVISIONS OF CLAUSE (B) OF SECTION 23(1). THIS IS A FACT THAT ASSESSEES ACTUALLY RENT RECEIVED OR RECEIVABLE IN RESPECT OF THE SAID PROPERTY IS NOT IN EXCESS OF THE ALV COMPUTED UNDER CLAUSE (A) OF SECT ION 23(1). IN THE LIGHT OF THESE FACTS AOS DECISION TO INVOKE A COM PARABLE CASE TO THE PROPERTY COVERED UNDER CLAUSE (B) IS NOT IN TUNE WI TH THE ABOVE REFERRED LEGAL POSITION. FURTHER IT IS NOT ALSO THE CASE O F THE AO THAT ASSESSEE IS COVERED BY THE EXEMPTIONS PROVIDED IN THE MAHARASHT RA RENT CONTROL ACT AND THEREFORE ALV OF THE PROPERTY SHALL BE DETERM INED ON THE BASIS OF THE COMPARABLE CASES. IN ANY CASE THE STANDARD RENT IS UPPER LIMIT FOR DETERMINATION THE ALV AS HELD IN THE CASE OF MAKRUPA CHEMICALS PVT LTD (SUPRA). THEREFORE WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. 22. THUS IT IS NOT THE CASE OF THE REVENUE THAT THE ALV DETERMINED BY THE ASSESSEE IS LESS THAN THE STANDARD RENT. CONSIDERING T HE ABOVE FACTUAL AND LEGAL POSITION IN FORCE WE ARE OF THE OPINION THAT THE ORD ER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE FOR THE ABOVE REASONS. ACCORDINGLY GROUND 1 OF THE REVENUE IS DISMISSED . 23. GROUND 2 RELATES TO CLAIM OF INTEREST EXPENDITURE OF RS. 22 13 037/- PAID TO THE PNB BANK AND NETTED AGAINST THE INTEREST INCO ME OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES. RELEVANT FACTS ARE THAT THE ASSESSEE OFFERED INCOME FROM OTHER SOURCES AT RS. 2 62 66 595/-BRING INTEREST FRO M FIXED DEPOSITS WITH BANKS INTEREST ON BONDS AND DEPOSITS WITH OTHER CON CERNS. THIS IS NET INCOME AFTER SUBSTRACTING THE INTEREST EXPENDITURE OF RS. 37 6 2 811/-. IT INCLUDES THE INTEREST EXPENDITURE OF RS. 22 13 037/- INCIDENTAL TO THE LOAN TAKEN FROM BNP PARIBUS BANK. THE IMPUGNED LOAN WAS UTILIZED FOR MAKI NG THE INVESTMENTS IN IPOS AS UNDER. (I) 09-08-04 AMOUNT WITHDRAWN FOR INVESTMENT IN TCS SHARES RS. 8 09 99 500/- (II) 09-11-04 AMOUNT WITHDRAWN FOR INVESTMENT IN SPANCO SHARES RS. 5 00 00 000/- THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 2 2 13 037/- OUT OF INTEREST RS. 37 62 811/- RELYING UPON VARIOUS DECISIONS AND HE LD THAT SUCH EXPENDITURE OF INTEREST CANNOT BE ALLOWED AS DEDUCTION AGAINST THE ASSESSEES BUSINESS INCOME ALSO AS THEY RELATE TO THE CAPITAL ASSETS. FURTHER TH E AO MENTIONED THAT THE TCS SHARES WERE SOLD BY THE ASSESSEE ON 17-02-2005 T REATING THEM AS HIS ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 13 OF 18 PERSONAL ASSETS AND CORRESPONDING LONG TERM CAPITAL G AIN OR LOSS HAS BEEN OFFERED BY THE ASSESSEE. AS FAR AS SPANCO SHARES ARE CO NCERNED THE SHARE APPLICATION AMOUNT WAS RECEIVED BACK BY THE ASSESSEE ON 06-12-2004 AND ACCORDINGLY NO INCOME WAS EARNED BY THE ASSESSEE ON THIS TRANSACTION. THUS THE AO IS OF THE OPINION THAT THE INTEREST DEDUCTION CANNOT BE ALLOWED TO THE ASSESSEE EITHER U/S. 57(III) OR U/S 36(1)(III) OF TH E INCOME TAX ACT 1961. HE ACCORDINGLY MADE THE ADDITION OF RS. 22 13 037/-. AGGRIEVED WITH THE SAME THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). ASS ESSEE MADE VARIOUS SUBMISSIONS BEFORE HIM. ON CONSIDERING THE SUBMISSION S THE CIT(A) GAVE RELIEF TO THE ASSSESSEE AND RELEVANT DISCUSSION IS GIVEN IN PA RA 4.2 & 4.3 OF THE IMPUGNED ORDER AND THE SAME ARE AS FOLLOWS. 4.2 I HAVE GONE THROUGH THE FACTS OF THE ISSUE. IT IS NOT IN DISPUTE THAT OUT OF THE TOTAL AMOUNT OF LOAN OBTAINED RS. 13 0 9 99 500/- IS UTILIZED FOR PURCHASE OF SHARES OF TCS (RS. 8 09 99 500) AND FOR PURCHASE OF SHARES OF SPANCO (RS. 5 00 00 000/-). THE ASSESSING OFFICER I N THE LAST LINES OF PARA 5.3 OBSERVED THAT IN THE CASE OF THE ASSESSEE THE RE IS A DIRECT NEXUS BETWEEN THE FUNDS BORROWED FROM BNP PARIBUS BANK AN D THE INVESTMENT MADE IN SHARES IT WAS HELD THAT DECISION IN THE CASE OF SHREE DIGVIJAY CEMENT CO. LTD. VS. CIT (SUPRA) WAS APPLICABLE. IN THAT CASE THE INVESTMENT IN SHARES MADE OUT OF BORROWED FUNDS WAS NOT PROVED AS NO NEW BORROWINGS WERE MADE. THE TCS SHARES WERE SOLD BY THE ASSESSEE ON 17-02-2005 AND LONG TERM CAPITAL GAIN HAS BEEN O FFERED FOR TAXATION. IN CASE OF SPANCO SHARES THE SHARE APPLICATION AMOUNT WAS RECEIVED BACK BY THE ASSESSEE ON 06-12-2004 AND ACCORDING TO THE ASSESSING OFFICER NO INCOME WAS EARNED BY THE ASSESSEE ON THE SE TRANSACTIONS. 4.3 IRRESPECTIVE OF THE FACT WHETHER ANY INCOME WAS EARNED BY THE APPELLANT FROM THE INVESTMENT IN SHARES INTEREST P AID ON MONEY BORROWED FOR INVESTMENT IN SHARES IS DEDUCTIBLE U/S. 57(III) OF THE ACT FOR SECTION 57(III) REQUIRES THAT THE EXPENDITURE MUST BE LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR MAKING AND EARNING INCOME AND NOT THAT SUCH INCOME MUST HAVE BEEN EARNED . RELIANCE IS PLACED IN THIS REGARD ON THE DECISION IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY REPORTED IN 115 ITR 519 (SC). THE CONTENTION OF THE ASSESSING OFFIC ER THAT THE DEDUCTION IS PERMISSIBLE U/S. 57(III) ONLY IF THERE WAS SOME INCOME EARNED UNDER THE HEAD INCOME FROM OTHER SOURCES GOES GOES DIRECTLY AGAINST THE DECISION OF THE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA). THE RELIANCE OF THE ASSESSING OFFICER ON THE DECISION R EFERRED BY HER INFACT GOES AGAINST THE FACTUAL POSITION NARRATED BY THE A SSESSING OFFICE IN THE ASSESSMENT ORDER FOR THE DECISION IN THE CASE OF CI T VS. MANGALAM CEMENTS LTD. (SUPRA) THERE WAS NO NEXUS BETWEEN TH E RECEIPT OF INTEREST ON SHORT TERM DEPOSITS AND PAYMENT OF INTEREST ON LOAN BORROWED. IN THE CASE OF BAI BHURIBEN LALUBHAI VS. CIT (SUPRA) AGAIN THE OBSERVATION WAS THAT THERE WAS NO DIRECT OR INDIRECT NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME EARNED ON THE FIXED DEPOSIT S THE DECISION IN THE CASE OF CIT VS. SUJANI TEXTILES PVT. LTD. (SUPRA) T HE DIRECTOR WAS ADVANCING MONEY WITHOUT CHARGING INTEREST AND THERE WAS NO IN VESTMENT IN SHARES ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 14 OF 18 AS IN THE CASE OF THE ASSESSEE AND THEREFORE ALL T HE CASES RELIED UPON BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO THE FAC TS OF THE CASE. FURTHER THE CONTENTION OF THE ASSESSING OFFICER THAT THE EX PENDITURE ON INTEREST WAS NOT ALLOWABLE AGAINST BUSINESS INCOME IS NOT RE QUIRED TO BE ADJUDICATED FOR IT WAS NOT IN DISPUTE THAT THOSE SH ARES PURCHASED WERE ADMITTEDLY NOT THE ASSESSEES BUSINESS ASSETS. AT T HE SAME TIME IT CANNOT BE STATED THAT THE ASSESSEE WAS NOT IN THE B USINESS OF SALE AND PURCHASE OF SHARES FOR THE ASSESSEE HAS SHOWN A PROFIT OF RS. 26 689/- FROM SHARE TRADING BUSINESS DURING THE YEA R UNDER CONSIDERATION EVEN WHEN THE SHARES WERE SOLD OUT OF OPENING BALAN CE DURING THE YEAR. IN VIEW OF THE ABOVE THE ADDITION OF RS. 22 13 037/ - BEING DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS IS HELD TO BE ALLOW ABLE U/S. 57(III) OF THE ACT. GROUND OF APPEAL NO. 2 IS ALLOWED. 24. FROM THE ABOVE EXTRACT THE CIT(A) IS OF THE OPIN ION THAT SINCE THE ASSESSEE EARNED INTEREST INCOME FROM THE FDS AND OTH ERS WITH THE BANK AND ALSO INCURRED THE INTEREST EXPENDITURE THEREFORE THE SE T OFF IS ALLOWABLE U/S 56(III) OF THE ACT. ALTERNATIVELY CIT(A) IS THE VIE W THAT THE ASSESSEE SINCE ENGAGED IN THE BUSINESS OF TRADING OF THE SHARE THE CLAIM IS ALLOWABLE AS BUSINESS EXPENDITURE TOO. IN CONNECTION WITH THE I NTEREST EXPENDITURE CLAIM RELATABLE TO THE INVESTMENT OF THE LOAN IN THE IPO O F THE SPANCO SHARES UNSUCCESSFULLY THE CIT(A) IS OF THE VIEW THAT THE EARNING OF INCOME DOES NOT MEAN THE DIVIDEND INCOME SHOULD HAVE BEEN ACTUALLY EARNED IN THE YEAR UNDER CONSIDERATION. FINALLY AS PER THE CIT(A) THE ADDIT ION OF RS. 22 13 037/- BEING DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS IS HEL D TO BE ALLOWABLE U/S. 57(III) OF THE ACT. 25. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A) THE REVENUE FILED THE PRESENT APPEAL WITH GROUND 2. DURING THE PROCEEDINGS T HE LD DR MENTIONED THAT THE IMPUGNED INTEREST CLAIM OF RS. 22 13 037/- HAS TWO SEGMENT IE (I) THE INTEREST RELATABLE TO THE INVESTMENT IN TCS SHARES AND (II) THE INTEREST RELATABLE TO THE INVESTMENT IN THE IPO OF THE SPANCO SHARES. AS P ER THE DR THE REVENUE HAS STRONG OBJECTION TO THE DECISION OF THE CIT(A) I N TREATING THE INTEREST PAYMENT RELATABLE TO THE BORROWED FUNDS INVESTED IN S PANCO SHARES UNSUCCESSFULLY AS ALLOWABLE U/S. 57(III) OF THE ACT AS THIS IS THE CASE OF INVESTMENT WHICH NEVER RESULTED IN EARNING OF THE SHARE S FORGET ABOUT THE EARNING OF DIVIDEND INCOME. AS PER THE DR THIS PART O F THE REASONING GIVEN BY THE CIT(A) MUST BE DISMISSED. REGARDING THE OTHER REAS ONING ABOUT THE ALLOWABILITY OF THE IMPUGNED INTEREST CLAIM AS BUSIN ESS EXPENDITURE U/S 36(III) OF THE ACT THE DR MENTIONED THAT WHEN THE ASSESSEE I NVESTED IN SPANCO SHARES ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 15 OF 18 THE ASSESSEE NEVER INTENDED BUSINESS PURPOSES AND THE REFORE THE CLAIM IS NOT ALLOWABLE U/S 36(III) OF THE ACT. REGARDING THE INT EREST EXPENDITURE RELATABLE TO THE LOAN INVESTED IN THE TCS SHARES THE DR IS OF TH E OPINION THE SAME IS RELATABLE TO THE ACQUISITION OF THE SHARE AND THEREFORE RELATABLE TO THE EARNING OF THE CAPITAL GAINS/LOSS AND NOT THE BUSINESS PROFITS. 26. ON THE OTHER HAND LD COUNSEL FOR THE ASSESSEE MA DE VARIOUS ARGUMENTS AND THEY ARE: (A) THE ASSESSEE TOOK THE LOAN FOR INVE STMENT IN SHARES AND ACCORDINGLY THE ASSESSEE MADE INVESTMENT IN BOTH TC S SHARES AND SPANCO SHARES TOO. BUT THE ALLOTMENT OF SPANCO SHARES NEVER MATERIALIZED. HOWEVER THE ASSESSEE HAD TO MAKE THE PAYMENT OF INTEREST TO THE BANK AND IT IS THE EXPENDITURE INCIDENTAL TO THE BUSINESS OF THE SHARE T RADING AND RELIED ON THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN THIS REGA RD. THE ALLOTMENT OF SHARES AGAINST THE INVESTMENT IN THE IPO OF SPANCO SHARES I S NOT THE HANDS OF THE ASSESSEE; (B) ASSESSEE IS ENGAGED IN THE BUSINESS O F SHARE TRADING AND THE SAME IS EVIDENCED BY THE FACT OF PROFIT OF RS. 26 689/- FROM SHARE TRADING BUSINESS DURING THE YEAR UNDER CONSIDERATION; (C) AS PER THE COUN SEL THE SUM OF RS. 22 13 037/- BEING DISALLOWANCE OF INTEREST PAID ON B ORROWED FUNDS IS ACTUALLY AND UNDISPUTEDLY INCURRED AND HE IS ENTITLED TO DEDU CTION OUT OF HIS TOTAL INCOME; (D) THE COUNSEL RELIED UPON VARIOUS CITATIONS IN ORDER TO DEMONSTRATE THAT THE IMPUGNED INTEREST EXPENDITURE IS ALLOWABLE U/S 36(III ) OF THE ACT. 27. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. BOTH PARTIES AGREED THAT THERE IS NO ISSUE SO FAR AS THE ALL OWABILITY OF THE INTEREST EXPENDITURE RELATABLE TO THE INVESTMENT IN TCS SHARES UNDER SOME HEAD OF INCOME AS THE ASSESSEE ALREADY OFFERED THE RELEVANT CAPITAL GAIN/LOSS DURING THE YEAR. ON CONSIDERING THE FACTS THAT THE ASSESSEE IS I N FACT ENTITLED TO THE DEDUCTION IN RESPECT OF THE RELATABLE INTEREST ON THE LOAN INVESTED IN THE ACQUISITION OF THE TCS SHARES THE CLAIM IS ALLOWABL E EITHER U/S 36(III) OR SECTION 48 OF THE ACT AND CERTAINLY NOT UNDER THE PROVISIONS OF SECTION 57(III) OF THE ACT FOR THE REASON THAT THE IMPUGNED INTEREST EXPENDITURE IS NOT EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNIN G SUCH INCOME IE INTEREST INCOME AGAINST WHICH THE SAID INTEREST EXPENDITURE IS ALLOWED BY THE CIT(A) TO BE SET OFF. THE EXPRESSION SUCH INCOME IN THE PROVISI ONS OF SECTION 57(III) RELATES TO INCOMES CHARGEABLE TO TAX U/S 56 OF THE ACT. THE SAME REASONING APPLIES TO THE INTEREST EXPENDITURE RELATABLE TO THE LOAN INVESTE D IN THE INVESTMENT SPANCO ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 16 OF 18 SHARES TOO AND THE ASSESSEE IS NOT ELIGIBLE FOR SET O FF AGAINST THE OTHER INTEREST INCOME RECEIPTS CHARGEABLE TO TAX U/S 56 OF THE ACT A S THE ASSESSEE HAS NO CHANCE OF SUCH INCOME OUT OF THE SPANCO SHARES AS HE NEVER GOT ALLOTMENT OF SUCH SHARES. THEREFORE WE DO NOT AGREE WITH THE CIT(A ) IN CONCLUDING THAT THE ADDITION OF RS. 22 13 037/- BEING DISALLOWANCE OF I NTEREST PAID ON BORROWED FUNDS IS HELD TO BE ALLOWABLE U/S. 57(III) OF THE A CT. 28. NOW WE PROCEED TO EXAMINE IF THE ASSESSEE IS EN TITLED TO DEDUCTION EITHER U/S 36(III) OF THE ACT OR NOT. IN THIS REGARD WE HAVE CONSIDERED THE FOLLOWING UNDISPUTED FACTS IE (I) VERY EXISTENCE OF BUSINESS OF TRADING IN SHARES (II) EARNING OF PROFIT TO THE TUNE OF RS. 26 689/- FROM SHA RE TRADING ACTIVITY DURING THE YEAR (III) UNDISPUTED FACT OF ACTUAL INCURRING O F EXPENDITURE IN THE FORM OF INTEREST PAYMENT TO THE BANK INCIDENTAL TO THE PROCES S OF ACQUISITION OF THE SHARES. IN OUR OPINION THE ASSESSEE ENTITLED TO THE DEDUCTION UNDER THE PROVISIONS OF SECTION 36(III) OF THE ACT. THEREFORE WE APPROVE THIS PART OF THE REASONING GIVEN BY THE CIT(A) IN GRANTING RELIEF TO T HE ASSESSEE. BUT THE FACT IS THAT THAT THE ASSESSEE OFFERED THE GAINS/LOSS ON ACC OUNT OF TCS SHARES UNDER CAPITAL GAINS HEAD OF INCOME. TO BRING HARMONY IN OU R OPINION IT IS APPROPRIATE THAT THE ASSESSEE IS ENTITLED TO RELEVANT INTEREST SE GMENT RELATABLE TO TCS SHARES UNDER THE HEAD CAPITAL GAINS HEAD OF INCOME. AO MAY UNDERTAKE APPROPRIATE ACTION IN THIS REGARD IF THERE ARE ANY TAX IMPLICATION S IN THEIR FAVOUR. OTHERWISE IN THE ABSENCE OF ANY TAX IMPLICATIONS THERE IS NO NEED FOR DISTURBING THE COMPUTATION OF INCOME AS IT MERELY AN ACADEMIC EXERCI SE TO NO GAINS OR LOSS TO EITHER SIDE OF THE DISPUTE. REGARDING THE RELEVANT INT EREST SEGMENT RELATABLE TO SPANCO SHARES IN THE ABSENCE OF ANY SUCCESSFUL ACQU ISITION OF SHARES AND NO CONSEQUENTIAL INCOME CHARGEABLE TO TAX U/S 48 OR 56 O F THE ACT WE ARE OF THE OPINION THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 36(III) OF THE ACT. ACCORDINGLY THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED AND CONSEQUENTLY THE GROUND RAISED BY THE REVENUE IS DISMISSED . 29. GROUND 3 RELATES TO THE DECISION OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE MADE OUT OF THE DEPRECIATION AND AVIATI ON EXPENSES ON BELL HELICOPTER TO 20% AGAINST 30% AS PER ASSESSING OFFICE RS ORDER. THIS ISSUE IS ALREADY ADDRESSED BY US WHILE ADJUDICATING THE GROUND 1 OF THE APPEAL OF THE ASSESSEE RELATING TO BELL HELICOPTOR. FINALLY RELYIN G ON THE DECISIONS OF A COORDINATE BENCH IN THE CASE OF KIRLOSKAR OIL ENGINES LTD (SUPRA) AND OTHER ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 17 OF 18 DECISION MENTIONED IN PARAS ABOVE WE HAVE TAKEN THE VIEW THAT THE ASSESSEE OFFER FOR DISALLOWANCE AT THE RATE OF 1/7 TH OF THE CLAIM IS FAIR WITH IN THE MEANING OF THE PROVISIONS OF SECTION 38(2) OF THE ACT. CONSE QUENTLY WE ARE OF THE OPINION THE GRAND 3 OF THE REVENUES APPEAL IS TO B E DISMISSED . 30. GROUND 4 RELATES TO THE DELETION OF ADDITION OF RS 7 48 505/ - U/S 69C OF THE ACT . IT WORKS OUT TO 10% OF THE RS 74 85 057/- THE SALE VALUE OF PENNY SHARES. ASSESSEE OFFERED THE RELEVANT INVESTMENT AS IN COME OF THE ASSESSEE. WHILE MAKING THE ASSESSMENT THE AO DISALLOWED THE S AID 10% TOWARDS THE RELATABLE OR INCIDENT COST OF THE ALLEGED INVESTMENT. BUT THE FACT AO IS NOT IN POSSESSION OF ANY DIRECT EVIDENCE TO SUPPORT THE IMPU GNED ADDITION. CIT(A) DELETED THE SAME AS PER THE DISCUSSION GIVEN IN PARA 7.2 OF THE IMPUGNED ORDER. DURING THE PROCEEDINGS LD COUNSEL FOR THE ASSESSEE BRO UGHT TO OUR NOTICE THE DECISION OF THE TRIBUNAL OF THE PUNE BENCH FOR THE PRO POSITION THAT THE ADDITION IS NOT SUSTAINABLE IN THE ABSENCE OF ANY EVIDENCES TO SUPPORT THE PAYMENT OF UNACCOUNTED COMMISSION IN CONNECTION WITH THE INVES TMENT IN THE PENNY STOCK. ON THE OTHER HAND LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 31. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE PAPER BOOK FILED BEFORE US. IT IS A FACT THAT THE ASS ESSEE SURRENDERED THE UNACCOUNTED INVESTMENT IN THE PENNY STOCKS. AT THE SAME TIME IT IS ALSO A FACT THAT THERE IS NO DIRECT EVIDENCE TO DEMONSTRATE THE PA YMENT OF THE ALLEGED COMMISSION TO THE BROKER FOR ARRANGING THE TRANSACTIONS O F BOGUS PURCHASE AND SALE BILL AND OTHER INCIDENTAL SERVICES. IN SUCH CASE S THE POSSIBILITY OF PAYMENT IS AS EQUAL AS POSSIBILITY OF NON PAYMENT. IT IS NOT N ECESSARY THAT IN EACH AND EVERY CASE OF THE IMPUGNED TRANSACTIONS COMMISSION PAYMEN T IS NECESSARILY INVOLVED. WITH THIS BACK GROUND WE HAVE PERUSED THE CONTENTS OF PARA 7.2 OF THE IMPUGNED ORDER WHICH READ AS FOLLOWS. 7.2 I HAVE GONE THROUGH THE FACTS OF THE ISSUE. I RRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS NOT GIVEN ANY REPLY TO THE AD DITION MADE BY THE ASSESSING OFFICER THE ASSESSING OFFICER HAS NOT BR OUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAD INFACT PAID U NACCOUNTED COMMISSION @ 10% TO HIS BROKER FOR MANIPULATING THE TRANSACTIONS OF PURCHASE AND SALE OF FAST TRACK SHARES. THE ASSESSI NG OFFICER HAS NOT PRODUCED THE DETAILS OF ANY ENQUIRIES CONDUCTED BY THE INVESTIGATION DIRECTORATE IN THE CASE OF THE ASSESSEE FOR PENNY S HARES IRREGULARLY. NO PROOF THAT THE BROKER WAS PAID 10% COMMISSION BY TH E ASSESSEE WAS BROUGHT ON RECORD. NO DOCUMENTS OR STATEMENT OF THE ASSESSEE OR ITA NO. 1425 & 1524/PN/08 A.Y 2005-06 PAGE 18 OF 18 THE BROKER OR ANY MATERIAL ON WHICH THE ASSESSING OFFICER HAS RELIED HAS BEEN BROUGHT ON RECORD BEFORE MAKING THE ADDITI ON @ 10% OF THE SALE CONSIDERATION. AS THE ADDITION HAS BEEN MADE ENTIRELY ON CONJECTURES AND SURMISES THE ADDITION OF RS. 7 48 500/- IS DIRE CTED TO BE DELETED. 32. THEREFORE IT IS THE CASE OF ADDITION BASED ON TH E SURMISES WHICH IS NOT SUSTAINABLE IN LAW. ACCORDINGLY THE WE FIND NO REASO N TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY GROUND 4 OF THE REVENUES A PPEAL IS DISMISSED . 33. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON 24 TH SEPTEMBER 2010. SD/- SD/- (SHRI I. C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 24 TH SEPTEMBER 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ADDL. CIT RANGE-3 PUNE 3. CIT(A)-II PUNE 4. CIT-III PUNE 5. D.R. ITAT BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE