Shri Mudresh J.Purohit, v. The JCIT(OSD),Circle-7,, Ahmedabad

ITA 1860/AHD/2007 | 2003-2004
Pronouncement Date: 05-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 186020514 RSA 2007
Assessee PAN ABOPP5822G
Bench Ahmedabad
Appeal Number ITA 1860/AHD/2007
Duration Of Justice 2 year(s) 9 month(s) 1 day(s)
Appellant Shri Mudresh J.Purohit,
Respondent The JCIT(OSD),Circle-7,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 05-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 05-02-2010
Date Of Final Hearing 01-02-2010
Next Hearing Date 01-02-2010
Assessment Year 2003-2004
Appeal Filed On 04-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 01.02.2010 DRAFTED ON: 01.02.2 010 ITA NO.1860/AHD/2007 4502/AHD/2007 ASSESSMENT YEAR :2003-04 2004-05 SHRI MUDRESH J. PUROHIT C/O. SURYA OFFSET AMBLI VILLAGE TAL. DASKROI DIST. AHMEDABAD. VS. JCIT (OSD) CIRCLE-7 AHMEDABAD. PAN/GIR NO. : ABOPP5822G (APPELLANT) .. (RESPONDENT) ITA NO.128/AHD/2008 ASSESSMENT YEAR : 2004-05 JCIT (OSD) CIRCLE-7 AHMEDABAD. VS. SHRI MUDRESH J. PUROHIT C/O. SURYA OFFSET AMBLI VILLAGE TAL. DASKROI DIST. AHMEDABAD. PAN/GIR NO. : ABOPP5822G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI T.P. HEMANI. RESPONDENT BY: SHRI SANJAY RAI SR. DR. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THE APPEAL NOS.1860/AHD/2007 AND 4502/AHD/2007 FIL ED BY THE ASSESSEE AND CROSS APPEAL NO.128/AHD/2008 FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-XIII AHM EDABAD DATED 08.02.2007 LD. CIT(A)-XI AHMEDABAD DATED 18.10. 2007 AND FOR ASSESSMENT YEAR 2003-04 AND 2004-05. ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 2 - 2. GROUND NO1 OF THE APPEAL OF THE ASSESSEE IN ASSE SSMENT YEAR 2003-04 READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.5 26 500/- OUT O F INTEREST EXPENDITURE. 3 GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IN ASSE SSMENT YEAR 2004-05 READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF AO IN DISALLOWING RS.7 83 641/- OUT OF IN TEREST EXPENDITURE. 4 GROUND NO.1 OF THE REVENUES APPEAL IN ASSESSMENT YEAR 2004-05 READS AS UNDER:- THE LD. CIT(A)-XI AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF DISALLOWAN CE OF INTEREST FROM RS.16 32 540/- TO RS.7 83 641/-. 5 SINCE THE FACTS AND ISSUES INVOLVED IN THE ABOVE GROUNDS OF APPEAL ARE COMMON THEY ARE BEING CONSIDERED AND DE CIDED TOGETHER AS UNDER: 6 THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF LOANS AND ADVANCES TOTALING TO RS. 87 41 2747- WHICH ACCORDING TO HER ARE GIVEN ON PERSONAL ACCOU NT INCLUDING THE INVESTMENT OF RS. 54 96 915/- IN A RESIDENTIAL HOUS E KNOWN AS BASANT BAHAR HOUSE. ACCORDING TO THE ID. ASSESSING OFFICER ALL THESE LOANS AND ADVANCES HAVE BEEN GIVEN OUT OF INTEREST BEARIN G FUNDS OF THE APPELLANT AND THEREFORE SHE HELD THAT INTEREST PAY MENT RELATING TO THESE AMOUNTS NEEDS TO BE DISALLOWED.. ACCORDINGLY SHE HAS CALCULATED THE INTEREST CHARGEABLE ON THESE LOANS A T THE RATE OF 15% ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 3 - WHICH WORKS OUT TO RS. 13 11 191/- AND DISALLOWANCE OF THE SAME AMOUNT HAS BEEN 1.2 SHRI TUSHAR HEMANI ADVOCATE A PPEARED ON BEHALF OF THE APPELLANT AND SUBMITTED THAT IT IS WR ONG ON THE PART OF THE ASSESSING OFFICER TO ALLEGE THAT THE APPELLANT HAS DIVERTED INTEREST BEARING FUNDS FOR HIS PERSONAL USE OR ALTERNATIVELY FOR NON BUSINESS PURPOSES .ALL THESE LOANS AND ADVANCES WHICH HAVE B EEN TOTALLED UP TO RS. 87 41 274/- BY THE ASSESSING OFFICER ARE NOT ON ACCOUNT OF ANY PERSONAL NATURE. THE AUTHORISED REPRESENTATIVE TR IED TO EXPLAIN THAT THE DEPOSIT OF RS. 1 81 000/- GIVEN TO SOUTH GUJARA T UNIVERSITY REPRESENTED THE EARNEST MONEY DEPOSITED WITH THEM I N THE NORMAL COURSE OF BUSINESS OF THE APPELLANT. THE APPELL ANT HAS RECEIVED INTEREST OF RS. 453/- FROM SUCH EARNEST MONEY WHIC H HAS DULY BEEN ASSESSED BY THE ASSESSING OFFICER. THE AUTHORISE D REPRESENTATIVE FURTHER ADDED THAT RS. 3 49 739/- REPRESENTED T HE SECURITY DEPOSIT GIVEN TO GUJARAT ELECTRICITY BOARD FOR HAVING POW ER CONNECTION FOR THEIR PRINTING PRESS. IN SO FAR AS THE AMOUNT OF RS . 21 04 804/- ADDED ON ACCOUNT OF HEWLETT PACKARD INDIA LTD. IS CONCERN ED THE ID. AUTHORISED REPRESENTATIVE EXPLAINED THAT THIS MONE Y WAS GIVEN AS AN ADVANCE TO HEWLETT PACKARD TOWARDS THE PURCHASE OF MACHINERY NAMED HP LASER JET PRINTER 8150 N (20 NOS.) TO BE U SED FOR SECURITY PRINTING OF MARK SHEETS AND MICR CHEQUES. ACCORDING TO THE ID. AUTHORISED REPRESENTATIVE 20 NOS. OF HP LASER PRIN TERS WERE ACTUALLY PURCHASED BUT THE AMOUNT OF RS. 21 04 8047 - WAS NOT CAPITALIZED BUT WAS KEPT AS AN ADVANCE BECAUSE THES E MACHINES WERE FOUND TO BE NOT SATISFACTORILY WORKING ON TEST CHEC K. ACCORDING TO THE ID. AUTHORISED REPRESENTATIVE ALL THESE PRINTERS A RE LYING AT THEIR PRINTING PRESS PREMISES AND NO DEPRECIATION HAS BEE N CLAIMED THEREON BECAUSE THESE ARE NOT BEING PUT TO USE BY THE APPEL LANT. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT TH E AMOUNT OF RS. ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 4 - 3 01 000/- WAS GIVEN AS AN ADVANCE TO SMT. RAMAGAUR I GANATRA FOR PURCHASE OF OFFICE PREMISES IN JUNAGADH. THE APPELL ANT HAS MADE FULL PAYMENT TO THE VENDOR ALONGWITH INTEREST PAYMENT OF RS. 20 0007- FOR DELAY IN EXECUTING THE SALE DOCUMENTS. NO FINAL SAL E DOCUMENT HAS BEEN EXECUTED AND THEREFORE THIS AMOUNT HAS BEEN S HOWN TO BE OUTSTANDING AS AN ADVANCE IN HER ACCOUNT. IN SO FA R AS THE THREE ITEMS MENTIONED AT SR. NO. 3 4 AND 6 IN PARA 4 OF THE OR DER THE AUTHORISED REPRESENTATIVE CONCEDED THAT ALL THESE THREE ITEMS TOTALING TO RS. 58 03 855/- ARE ADMITTEDLY OF PERSONAL NATURE. THE AUTHORISED REPRESENTATIVE HOWEVER TRIED TO EXPLAIN THAT INVEST MENT OF RS. 58.04 LACS MADE IN THESE PERSONAL ASSETS HAS COME OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT AS UNDER: I) CAPITAL 31 52 860 II) UNSECURED LOAN FROM JITENDRA PUROHIT (FATHER) 12 055 III) RAJESH & SONAL PUROHIT (BROTHER) 15 23 232 IV) AMOUNT PAID TO TARAN COMPRINT (PROPRIETORSHIP OF WIFE) 66 07 725 TOTAL OF INTEREST FREE FUNDS 1 12 95 872 7 BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE APPELLANT WAS HAVING SUFFICIENT INTEREST FREE FUNDS AS ARE ME NTIONED ABOVE ON WHICH NO INTEREST WAS PAID. SINCE THE INVESTMENT IN PERSONAL ASSETS TOTALING TO RS. 58.04 LACS WAS LESS THAN THESE INTE REST FREE FUNDS WHICH ARE ALMOST DOUBLE OF THE INVESTMENT IN PERSONAL ASS ETS NO DISALLOWANCE OUT OF THE INTEREST PAYMENT WOULD BE M ADE. IT WAS FURTHER SUBMITTED THAT IN THE ABSENCE OF A NEXUS BETWEEN TH E INTEREST FREE ADVANCES WITH THAT OF INTEREST BEARING BORROWINGS 1 NO PART DISALLOWANCE OF INTEREST IS CALLED FOR IN THE LIGHT OF THE DECISION OF ITAT ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 5 - AHMEDABAD IN THE CASE OF TORRENT FINANCIERS VS. ACI T REPORTED IN 73 TTJ 624 . 8 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE HE LD AS UNDER:- 1 . 3 IN ORDER TO DECIDE THE ISSUE I HAVE CAREFULLY CONS IDERED THE VARIOUS ARGUMENTS OF THE AUTHORISED REPRESENTATIVE AND HAVE PERUSED THE ASSESSMENT ORDER. IN SO FAR AS THE EXPL ANATION GIVEN BY THE ID. AUTHORISED REPRESENTATIVE REGARDIN G THE DEPOSIT OF RS. 1 81 300/- GIVEN TO SOUTH GUJARAT UNIVERSITY AND THE DEPOSIT OF RS. 3 49 739/- GIVEN TO GUJARAT ELECTRI CITY BOARD IS CONCERNED THE SAME UNDOUBTEDLY RELATES TO THE BUSI NESS BEING CONDUCTED BY THE APPELLANT. THESE DEPOSITS ARE GIVE N AS SECURITIES IN THE NORMAL COURSE OF THE BUSINESS AND THEREFORE CANNOT BE TERMED PERSONAL DEPOSITS. IN SO FAR AS TH E PAYMENT OF RS. 21 04 804/-GIVEN TO HEWLETT PACKARD TOWARDS THE PURCHASE OF HP LASERJET PRINTER 81 SON (20 NOS.) IS CONCERNE D THE APPELLANT HAS KEPT THE MONEY AS AN ADVANCE AGAINST TINE SAID PARTY BECAUSE THE PRINTERS PURCHASED THEREFROM WERE FOUND TO BE UNSUITABLE TO THE BUSINESS REQUIREMENTS OF THE A PPELLANT. THE AMOUNT HAS NOT BEEN CAPITALIZED AND NO DEPRECIATION HAS BEEN CLAIMED THEREON. IN THIS BACKGROUND THE ADVANCE G IVEN TO A PARTY WITH A VIEW TO PURCHASE CERTAIN BUSINESS ASSE TS CANNOT BE HELD TO BE A PERSONAL ADVANCE. SIMILARLY THE ADVAN CE OF RS. 3 0L 000/- GIVEN TO SMT. RAMAGAURI GANATRA TOWARDS PURCHASE OF OFFICE ACCOMMODATION IN JUNAGADH CANNOT BE CATEG ORIZED AS PERSONAL IN NATURE. ALL THESE AMOUNTS ARE THEREFORE REQUIRED TO BE EXCLUDED FROM THE TOTAL AMOUNT OF RS. 87 41 274/ - AND BALANCE AMOUNT OF RS.58 03 855/- IS ADMITTEDLY GIVE N FOR PERSONAL USE OF THE PROPRIETOR. IN SO FAR AS THE EXPLANATION GIVEN BY THE ID. AUTHO RISED REPRESENTATIVE THAT THE APPELLANT WAS HAVING INTERE ST' FREE FUNDS OF RS. 1 12 95 872/- AS ARE MENTIONED IN PARA 1.2 ABOVE IS CONCERNED THE SAME IS FOUND TO BE PARTLY INCORRECT . THE APPELLANT HAS GOT CAPITAL OF RS. 31 52 860/- OUT OF WHICH THE AMOUNT OF RS. 22 56 600/- HAS BEEN CARRIED FORWARD FROM LAST YEAR AND THEREFORE THE SAME AMOUNT CANNOT BE SAID T O BE AVAILABLE FOR INVESTMENT IN THE CURRENT YEAR BECAUS E IT STOOD ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 6 - INVESTED PRIOR TO 31/3/2002. THE APPELLANT HAS INTRODUCED FRESH CAPITAL OF RS. 9 00 260/- DURING THE CURRENT PREVIOUS YEAR THE CREDIT OF WHICH AT BEST CAN BE CLAIMED. THE UNS ECURED LOAN OF RS. 12 055/- TAKEN FROM SHRI JITENDRA PUROHIT AL SO DOES NOT RELATE TO THE CURRENT YEAR. THE UNSECURED LOAN OF RS. 15 23 232/- TAKEN FROM SHRI RAJESH & SONAL PUROHIT INCLUDES RS. 1 29 101/- WHICH WAS TAKEN IN THE EARLIER YEAR AND THEREFORE CANNOT BE SAID TO BE AVAILABLE FOR MAKING FURTHER ADVANCE DURING THE CURRENT YEAR. IN SO FAR AS THE AMOUNT OF RS. 66 07 7257- SHOWN AS PAYABLE TO TARAN COMPRINT IS C ONCERNED IT IS NOT A JOAN FREE OF INTEREST BUT THIS AMOUNT I S PAYABLE BY THE APPELLANT AGAINST THE PURCHASE OF VARIOUS GOODS AND SERVICES. THIS BECOMES AIL THE MORE EVIDENT BECAUSE THIS AMOU NT OF RS. 66 07 724.93 PAISA IS INCLUDED BY THE APPELLANT H IMSELF IN THE LIST OF SUNDRY CREDITORS ON ACCOUNT OF GOODS/EXPENS ES TOTALING TO RS. 1 93 19 839.62 PAISA WHICH IS LYING AT PAGES 74 & 75 OF THE PAPER BOOK . IN THIS BACKGROUND OF THE MATTER THE APPELLANT IS LEFT WITH A MAXIMUM OF INTEREST FREE FUNDS OF RS. 2 2 94 391/- I.E. ( RS. 9 00 260/- + RS 13 94 131/-) AGAINST WHICH T HE INVESTMENT IN PERSONAL ASSETS COMES TO RS. 58.04 LACS ON WHICH NO INTEREST HAS BEEN CHARGED. THE DISALLOWANCE OF INTEREST AT T HE RATE OF 1 5% IS REQUIRED TO BE CALCULATED ON THE EXCESS AMOUNT O F RS. 35.10 LACS ( RS. 58.04 LACS MINUS RS. 22.94 LACS) W HICH COMES TO RS. 5 26 500/-. THE DISALLOWANCE OF INTEREST MAD E BY THE ASSESSING OFFICER IS THUS CONFIRMED TO THE EXTENT O F RS. 5 26 500/- AND THE APPELLANT GETS A RELIEF OF RS. 7 84 691/-. SIMILARLY IN ASSESSMENT YEAR 2004-05 THE ASSESSEE H AS DEBITED IN THE PROFIT AND LOSS ACCOUNT A SUM OF RS.15 57 836/- TO WARDS EXPENDITURE ON PAYMENT OF INTEREST WHICH IS AFTER NETTING THE INTEREST RECEIVED AMOUNTING TO RS.1 68 876/-. THE ASSESSEE HAS ACCOUN TED FOR RECEIPT OF INTEREST OF VARIOUS BANK ACCOUNTS AND F D WITH I O B AND OTHER FDS. THE ASSESSEE HAS CREDITED THE PROFIT AND LOSS ACCOUNT BY A SUM OF RS.60 694/- BEING INTEREST RECEIVED FROM THE EMP LOYEES. AS PER THE AUDITED BALANCE SHEET THE SECURED LOAN FROM THE BA NK AS ON 31-03- 2004 AMOUNTED TO RS.97 84 307/-. IN ADDITION THERE WERE UNSECURED LOANS AMOUNTING TO RS.1 88 62 381/-. AS SEEN FROM T HE SCHEDULE 8 OF ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 7 - THE BALANCE SHEET APART FROM THE EMPLOYEES THE ASSE SSEE HAS GIVEN LOANS AND ADVANCES TO THE FOLLOWING PARTIES:- (1) SOUTH GUJARAT UNIVERSITY RS. 4 55 000/- (2) DEPOSIT WITH G E B RS. 3 49 739/- (3) BASANT BIHAR HOUSE RS. 72 10 314/- (4) G F COUNTRY WIDE FINANCE LTD. RS. 1 03 336/- (5) HEWLETT PLAY CARD INDIA LTD. RS. 21 04 804/- (6) J B PATEL RS. 2 04 480/- (7) RAM GAURI H GANATRA RS. 3 01 000/- (8) GUJARAT UNIVERSITY RS. 1 55 000/- --------------------- TOTAL RS.1 08 83 673/- THE LEARNED ASSESSING OFFICER OBSERVED THAT AS DISC USSED IN ASSESSMENT YEAR 2003-04 SUM OF RS.72 10314/- HAS B EEN DIVERTED BY THE ASSESSEE TOWARDS INVESTMENT OF RESIDENTIAL B UNGALOW AT BASANT BIHAR. COST OF THE SAME AS PER LAST ASSESSMENT YEAR WAS OF RS.54 96 915/- AND THIS YEAR THE COST IS INCREASED TO RS.72 10 314/-. THUS THE ASSESSEE HAS MADE ADDITION OF RS.17 13 39 9/-. IT MEANS THAT THE ASSESSEE HAS UTILIZED THE INTEREST-BEARING BUSINESS FUNDS FOR RESIDENTIAL HOUSE OF THE ASSESSEE. TO THAT EXTENT E XPENDITURE ON PAYMENT OF INTEREST IS NOT ADMISSIBLE UNDER SECTION 36(1)(III). THE ASSESSEE WAS THEREFORE VIDE ORDER SHEET ENTRY DAT ED 19/11/2006 ASKED TO SHOW CAUSE WHY INTEREST ATTRIBUTABLE TO TH E INTEREST BEARING BORROWED FUND WHICH HAS BEEN DIVERTED TO MAKE INTER EST FREE LOANS AND ADVANCES TO THE EXTENT OF RS.1 08 83 673/- REFE RRED TO ABOVE SHOULD NOT BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III). ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 8 - THE ASSESSEE HAS FILED A WRITTEN SUBMISSION DATED 6 -12-2006 STATING THAT THE LOANS AND ADVANCES REFERRED TO ABOVE WERE MADE OUT OF INTEREST FREE FUNDS AVAILABLE FROM PROPRIETOR AND F AMILY MEMBERS. IT IS STATED BY THE ASSESSEE THAT CAPITAL OF RS.31.36 LAC S UNSECURED LOAN FROM FATHER AND 15.30 LACS FROM BROTHER WAS AVAILAB LE FOR MAKING THE ABOVE ADVANCES. FURTHER IT IS STATED THAT AN AMOUN T OF RS.101.69 LAKH WAS ALSO INTEREST FREE LOAN FROM TARAN COMPRINT OF WHICH HIS WIFE IS PROPRIETOR. IT IS ALSO SUBMITTED BY THE ASSESSEE TH AT THE ABOVE MENTIONED INTEREST FREE FUNDS FROM FAMILY MEMBERS C ANNOT BE WITHDRAWN / REPAID AS UNDERTAKING GIVEN TO BANK AS PER TERMS OF SANCTION OF TERM LOANS. THEREFORE THESE INTEREST F REE FUNDS ARE EXCLUSIVELY AVAILABLE TO FIRM. IT IS ALSO ARGUED TH AT INCLUSIVE OF ALL INTEREST FREE FUNDS MENTIONED ABOVE THE FUNDS ARE DOUBLE THE INVESTMENT IN THE PROPERTY. THEREFORE IT CAN BE SA ID THAT ALL INVESTMENT IN PROPERTY IS OUT OF INTEREST FREE FUNDS AVAILABLE WITH HIM. THE ASSESSEE HAS ALSO STATED THAT OUT OF THE BANK LOANS RS.58.06 LAKHS IS TAKEN AS TERM LOAN FOR PURCHASE OF VARIOUS MACHINER IES AND VEHICLES. THE REMAINING AMOUNT OF RS.39.77 IS IN THE NATURE O F CASH CREDIT AND OVERDRAFTS FROM BANK. THIS FACILITY IS BEING GIVEN BY THE BANK ON WORKING CAPITAL FOR INVESTMENT IN STOCK AND BOOK-DE BTS. THE ASSESSEES EXPLANATION HAS BEEN CAREFULLY CONSID ERED AND IS NOT FOUND TENABLE IN LAW AND FACTS OF THE CASE. THE CAP ITAL OF THE PROPRIETOR HAS ALREADY BEEN UTILIZED IN THE BUSINESS AND WAS N OT AVAILABLE FOR MAKING SUCH LOANS AND ADVANCES. THE AMOUNT OF RS.10 1.69 LACS REFERRED TO BY THE ASSESSEE AS PAYABLE TO TARAN COM PRINT IS NOT A LOAN RECEIVED FROM THE SAID PARTY BUT IS AMOUNT PAYABLE BY THE ASSESSEE FOR THE PURCHASE OF GOODS/SERVICES. THEREFORE THE SAME WAS NOT AVAILABLE FOR MAKING THE INTEREST FREE LOAN AND ADVANCES. IF THE ASSESSEES PLEA ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 9 - THAT IT HAD SUFFICIENT INTEREST FREE FUNDS AVAILABL E WITH HIM FOR MAKING THE INTEREST FREE LOANS AND ADVANCES AS DISCUSSED A BOVE WHAT WAS THE PURPOSE OF BORROWING FUNDS AND INCURRING EXPEND ITURE ON PAYMENT OF INTEREST. THE ASSESSEE HAS NOT ESTABLISHED ANY N EXUS DIRECT INDIRECT OR EVEN REMOTE WITH THE ALLEGED INTEREST F REE FUNDS AVAILABLE WITH HIM AND THE INTEREST FREE LOANS AND ADVANCES G IVEN BY IT. IN THE CIRCUMSTANCES THE ASSESSEES EXPLANATION IS REJECTED AS UNCONVINCING AND WITHOUT ANY MERIT. SINCE THE ASSESSEE HAS NOT C HARGED ANY INTEREST ON ANY OTHER PARTY THE INTEREST ON RS.1 0 8 83 673/- IS CHARGED @ 15% P.A. TREATING THE INTEREST BEARING LOAN IS UT ILIZED FOR INVESTMENT IN BASANT BAHAR BUNGALOWS. THE INTEREST AMOUNT WORK S OUT TO RS.16 32 540/- WHICH IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. A NOTICE U/S 274 R.W.S. 271(1)(C) OF THE IT ACT IS ISSUED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN APPEAL THE CIT(A) OBSERVED AS FOLLOWS:- 2.2.1 HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE I AM INCLINED TO ACCEPT THE SUBMISSIONS PUT FORTH BY THE AR OF THE APPELLANT. O N CAREFUL PERUSAL OF THE DETAILS PRODUCED BEFORE ME B Y THE AR OF THE APPELLANT IT IS SEEN THAT DURING THE RELEVANT ASSESSMENT YEAR THE APPELLANT WAS HAVING SUFFICIENT INTEREST FREE FUNDS AS MENTIONED ABOVE ON WHICH THE APPELLANT HAS NOT PAID ANY INTEREST. 2.2.2. IT IS TO BE MENTIONED THAT SINCE THE INVESTMENT IN PERSONAL ASSETS TOTALING TO RS.75.18 LACS WAS LESS THAN THE INTEREST FREE FUNDS WHICH AR E ALMOST DOUBLE OF THE INVESTMENT IN PERSONAL ASSETS THEREFORE NO DISALLOWANCE OUT OF THE INTEREST PAYM ENT IS WARRANTED. IT IS SEEN THAT WHILE MAKING THE HUGE ADDITION THE ASSESSING OFFICER HAS NOT PROVED THE ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 10 - NEXUS BETWEEN THE INTEREST FREE ADVANCE WITH THAT O F INTEREST BEARING BORROWINGS. THE RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT AHMEDABAD IN CASE OF TORRENT FINANCIERS VS. ACIT (73 TTJ 624). 2.2.3. HOWEVER ON CAREFUL PERUSAL OF THE SUBMISSIONS AND DETAILS PRODUCED BEFORE ME BY THE A . R. WITH REGARD TO THE DEPOSIT OF RS.4 55 000/-GIVEN TO SOUTH GUJARAT UNIVERSITY RS.1 55 000/- GIVEN TO GUJARAT UNIVERSITY AND THE DEPOSIT OF RS.3 49 739/- GIVEN TO GUJARAT ELECTRICITY BOARD IS CONCERNED IT APPEARS TO ME THAT THE SAME ARE RELATED TO BUSINESS PURPOSES OF THE APPELLANT. THEREFORE IT CAN BE SAI D THAT THE SAME ARE GIVEN AS SECURITIES IN THE NORMAL COURSE OF THE BUSINESS AND THEREFORE CANNOT BE TREATED AS PERSONAL DEPOSITS. SO FAR AS PAYMENT OF RS.21 04 804/- GIVEN TO HEWLETT PACKARD TOWARDS THE PURCHASE OF HP LASER JET PRINTER IS CONCERNED THE APPELLANT HAS KEPT THE MONEY AS AN ADVANCE AGAINST THE SAID PARTY BECAUSE THE PRINTERS PURCHASED FROM THEM WERE FOUND TO BE UNSUITABLE TO THE BUSINESS REQUIREMENT OF THE APPELLANT. THE AMOUNT HAS ALSO N OT BEEN CAPITALIZED AND NO DEPRECIATION THEREON HAS BE EN CLAIMED BY THE APPELLANT. IN THIS REGARD IT IS TO B E MENTIONED THAT THE ADVANCE GIVEN TO SAID PARTY WITH A VIEW TO PURCHASE CERTAIN BUSINESS ASSETS CANNOT BE HELD TO BE A PERSONAL ADVANCE. SIMILARLY THE ADVAN CE OF RS.3 01 000/- GIVEN TO SMT. RAMAGAURI GANATRA TOWARDS PURCHASE OF OFFICE ACCOMMODATION AT JUNAGADH CANNOT BE CATEGORIZED AS PERSONAL IN NATUR E. THEREFORE ALL THESE AMOUNTS ARE REQUIRED TO BE EXCLUDED FROM THE TOTAL AMOUNT OF RS.1 08 83 673/- AND BALANCE AMOUNT OF RS.75 18 130/- IS ADMITTEDLY GIVEN FOR PERSONAL USE OF THE PROPRIETOR. IN THESE CIRCUMSTANCES AS STATED BY THE A. R. OF THE APPELL ANT THAT THE APPELLANT WAS HAVING INTEREST FREE FUNDS O F RS.1 48 35 419/- IS CONCERNED THE SAME IS FOUND TO BE PARTLY INCORRECT. FURTHER THE APPELLANT HAS GOT CAPITAL OF RS.31 36 482/- FOR THE CURRENT YEAR WHER EAS ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 11 - LAST YEAR THE SAME WAS RS.31 36 482/- AND THEREFORE NOTHING CAN BE SAID TO BE AVAILABLE FOR INVESTMENT IN THE CURRENT YEAR BECAUSE IT STOOD INVESTED PRIOR TO 31.3.2003. THE UNSECURED LOAN TAKEN FROM SHRI JITENDRA PUROHIT IS ALSO DOES NOT RELATE TO THE CUR RENT YEAR. SIMILARLY THE UNSECURED LOANS TAKEN FROM SHRI RAJESH AND SONAL PUROHIT ARE ALSO DO NOT RELATE TO THE CURRENT YEAR AND THEREFORE CANNOT BE SAID TO BE AVAILABLE FOR MAKING FURTHER ADVANCE DURING THE YEA R UNDER CONSIDERATION. WITH REGARD TO THE AMOUNT OF RS.1 01 69 111/- SHOWN BY THE APPELLANT AS PAYABLE TO TARAN COMPRINT IS CONCERNED IT APPEARS TO ME THAT IT IS NOT A LOAN FREE INTEREST BUT THIS AMOUNT IS PAYA BLE BY THE APPELLANT AGAINST THE PURCHASE OF VARIOUS GOODS AND SERVICES AS THE SAME AMOUNT IS ALSO INCLUDED BY THE APPELLANT IN THE LIST OF SUNDRY CREDITORS ON ACCOUNT OF GOODS/EXPENSES IN HIS ANNUA L ACCOUNTS. 2.2.4. THEREFORE IN VIEW OF THE ABOVE DISCUSSION T HE DISALLOWANCE OF INTEREST CAN BE QUANTIFIED BY TAKIN G THE DISALLOWANCE OF INTEREST AS QUANTIFIED IN THE ASSESSMENT YEAR 2003-04 BY MY PREDECESSOR AS PER HIS ORDER NO. CIT(A)-XIII/JCIT(OSD)/CIR.7/23/06-07 DATED 08-02-2007 WHEREIN HE HAS DISALLOWED THE SUM OF RS.5 26 500/- @ 15% ON THE INCREMENTAL LOANS AND ADVANCES GRANTED DURING THE YEAR IT IS SEEN THAT F OR A. Y. 03-04 THE LOANS AND ADVANCES OF PERSONAL NATURE WAS AMOUNTING TO RS.58 03 855/- WHEREAS THE SAME HAS GONE UPTO RS.75 18 130/- RESULTING INTO AN INCREASE OF RS.17 14 275/- ON WHICH DISALLOWANCE OF INTEREST AT THE RATE OF 15% IS REQUIRED TO BE CALCU LATED WHICH COMES TO RS.2 57 141/- THEREFORE THE TOTAL INTEREST TO BE DISALLOWED FOR THE CURRENT YEARS COM ES TO RS.7 83 641/- (RS.5 26 500 AS PER LAST YEAR + RS.2 57 141 ON THE FRESH LOANS AND ADVANCES GIVEN I N THE CURRENT YEAR). ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 12 - 2/2/5 THEREFORE HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF ABOVE DISCUSSION THE DISALLOWANCE OF INTEREST MADE BY THE A. O. IS CONFIRMED TO THE EXTENT OF RS. 7 83 641/- AND THE APPELLANT GETS A RELIEF OF RS. 8 48 899/- THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9 BEING AGGRIEVED BY THE SAID ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THE REVENUE AND THE ASSESS EE BOTH ARE IN APPEAL BY TAKING THE ABOVE QUOTED GROUNDS OF APPEAL . 10 THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE REITERATED THE SUBMISSION MADE BEFORE THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) AND THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 11 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE FOR ASSESSMENT YEAR 2003-04 THE UNDI SPUTED FACTS OF THE CASE ARE THAT ASSESSEE HAS UTILISED RS.58 04 00 0/- FOR THE PURPOSES OF ACQUIRING OF PERSONAL ASSETS OR FOR ADV ANCING PERSONAL LOANS. ON THE ABOVE FACTS ASSESSEE CONTENDED THAT IT HAD INTEREST FREE FUNDS AVAILABLE WITH HIM OF RS.1 12 95 872/- COMPRI SING OF OWN CAPITAL OF RS.31 52 860/- UNSECURED LOAN FROM RELATIVES OF RS.15 23 232/- AND SUDRY CREDITOR OF RS.66 07 725/- FROM TARAN COMPRIN T A PROPRIETARY CONCERN OF THE WIFE OF THE ASSESSEE. THE ASSESSEE C ONTENDED BEFORE THE LOWER AUTHORITIES THAT IN VIEW OF THE ABOVE IN TEREST FREE ADVANCE AVAILABLE WITH HIM NO DISALLOWANCE OF INTEREST PAI D BY HIM ON BORROWED FUNDS UTILISED FOR THE PURPOSES OF BUSINES S IS WARRANTED. THE ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 13 - LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVE D THAT OUT OF OWN CAPITAL OF RS.31 52 860/- RS.22 56 600/- WAS T HE OPENING BALANCE WHICH WAS ALREADY INVESTED IN THE BUSINESS OF THE ASSESSEE AND THEREFORE WAS NOT AVAILABLE WITH THE ASSESSEE FOR MAKING PERSONAL USES. THEREFORE HE ALLOWED INTEREST FREE FUND OF RS.9 00 260/- OUT OF OWN CAPITAL OF RS.31 52 860/-. FURTHER IN RESPECT OF INTEREST FREE UNSECURED LOAN OF RS.15 23 232/- HE OBSERVED THAT RS.1 29 101/- WAS THE OPENING BALANCE AND THEREFORE NOT AVAILABLE WITH THE ASSESSEE FOR MAKING PERSONAL USE DURING TH E YEAR UNDER CONSIDERATION. HE THEREFORE CONCLUDED THAT ONLY RS .13 94 131/- AVAILABLE WITH THE ASSESSEE FOR UTILIZATION IN THE ABOVE PERSONAL ASSETS. IN RESPECT OF RS.66 07 724/- MONEY DUE FROM THE ASS ESSEE TO TARAN COMPRINT A PROPRIETARY CONCERN OF HIS WIFE THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT THE AMOUNT WAS APPEARING UNDER THE HEAD SUNDRY CREDITOR FOR GOODS/EXPENSES A ND WAS DUE IN RESPECT OF PURCHASES OF VARIOUS GOODS AND SERVICES. THE AMOUNT WAS NOT AN UNSECURED LOAN AND THEREFORE WAS NOT AVAILAB LE WITH THE ASSESSEE FOR MAKING UTILIZATION IN PERSONAL ASSETS. IN VIEW OF THE ABOVE OBSERVATION THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) ALLOWED THE ASSESSEE BENEFIT OF RS.22 56 600/- AS INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE FOR UTILIZATION IN ACQUIRING PERSONAL ASSETS OF RS.58 04 000/-. THEREF ORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTED THE DISALLOWANCE OF INTEREST ON THE BALANCE AMOUNT OF RS.35.10 LACS (RS .58.04 LACS MINUS RS.22.94 LACS). LEARNED AUTHORISED REPRESENTATIVE O F THE ASSESSEE CONTENDED THAT AS THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WAS TO THE TUNE OF RS.112.95 LACS THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN HOLDING TH AT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE OF RS.22 56 600/- ONLY AND THEREBY ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 14 - MAKING DISALLOWANCE OF INTEREST OF RS.35.10 LACS. T HE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATE D THE SAME SUBMISSION WHICH WERE MADE BEFORE THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS). WE FIND THAT THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) DISALLOWED THE CLAIM OF THE AS SESSEE OF RS.22 56 600/- OUT OF OWNED CAPITAL AND RS.1 29 101 /- OUT OF INTEREST- FREE UNSECURED LOANS FROM RELATIVES ON THE GROUND T HAT THE SAME APPEARING AS OPENING BALANCE IN THE CURRENT YEARS B OOKS OF ACCOUNT AND AS THEY WERE ALREADY INVESTED IN THE BUSINESS O F THE ASSESSEE IN THE EARLIER YEARS THE SAME WAS NOT AVAILABLE WITH THE ASSESSEE FOR UTILIZATION IN ACQUIRING PERSONAL ASSETS. IN OUR CO NSIDERED VIEW FROM THE FACT ASSESSEE HAD INVESTED THE ABOVE INTEREST-F REE FUND AVAILABLE WITH HIM OF RS.23.86 LACS IN ITS BUSINESS IN THE EA RLIER YEAR IT CANNOT BE CONCLUDED THAT THE ASSESSEE COULD NOT WITHDRAW T HIS FUND FROM THE BUSINESS IN SUCCEEDING YEAR FOR HIS PERSONAL UTILIZ ATION. THEREFORE IN OUR CONSIDERED VIEW THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) WAS NOT JUSTIFIED IN NOT ALLOWING THE BEN EFIT OF ABOVE INTEREST- FREE FUND AVAILABLE WITH THE ASSESSEE. IN RESPECT O F SUNDRY CREDITORS OF RS.66 07 725/- WE FIND THAT THE ASSESSEE HAS BROUGH T NO MATERIAL BEFORE US TO CONTROVERT THE FINDING OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THAT AS THESE WERE LIABILITIES AGAINST GOODS AND SERVICES AND THEREFORE NOT MONEY AVAILABLE WITH THE ASSESSEE FOR UTILIZING IN ACQUISITION OF PERSONAL ASSETS. WE FIN D THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THIS AMOUNT WAS CONVERTED INTO MONEY BY THE ASSESSEE AND SO CONVERT ED MONEY WAS AVAILABLE WITH THE ASSESSEE WHICH THE ASSESSEE IN P LACE OF PAYING TO THE TARAN COMPRINT A PROPRIETARY CONCERN OF ASSESSE ES S WIFE UTILIZED FOR ACQUIRING PERSONAL ASSETS. EVEN THE COPY OF LED GER ACCOUNT OF THE SAID TARAN COMPRINT WAS NOT FILED BEFORE US. IN ABS ENCE OF ANY SUCH ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 15 - MATERIAL WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN SO FAR AS I T HAS BEEN HELD THAT THE AFORESAID BALANCE OF RS.66 07 725/-APPEARI NG UNDER THE HEAD SUNDRY CREDITORS FOR GOODS AND EXPENSES CANNOT BE ORESUMED TO HAVE BEEN UTILIZED FOR ACQUIRING PERSONAL ASSETS BY THE ASSESSEE. ON THE ABOVE FACTS WE FIND THAT THE INTEREST-FREE FUN D AVAILABLE WITH THE ASSESSEE WAS RS.46.75 LACS COMPRISING OF OWN CAPITA L OF RS.31.52 LACS AND INTEREST-FREE UNSECURED LOANS FROM RELATIV ES OF RS.15.23 LACS AS AGAINST INVESTMENT IN PERSONAL ASSETS OF RS.58.0 4 LACS. WE FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME TAX VS. RELIANCE UTILITIES & POWER LTD. (2009) 221 CTR (BOM) 435 : (2009) 313 ITR 340 : (2009) 178 TAXMAN 135 : (2009) 18 DTR 1 HAS HELD AS FOLLOWS: THE VERY BASIS ON WHICH THE REVENUE HAD SOUGHT TO C ONTEND OR ARGUE THEIR CASE THAT THE SHAREHOLDERS FUNDS TO THE TUNE OF OVER RS. 172 CRORES WAS UTILISED FOR THE PURPOSE OF FIXE D ASSETS IN TERMS OF THE BALANCE SHEET AS ON 31ST MARCH 1999 IS FALLACIOUS. FIRSTLY THE BALANCE SHEET AS OF 31ST MARCH 1999 I S NOR RELEVANT. WHAT WOULD BE RELEVANT WOULD BE BALANCE SHEET AS ON 31ST MARCH 2000. APART FROM THAT THE COUNSEL HAS BEEN UNABLE TO POINT OUT FROM THE BALANCE SHEET THAT THE BALANCE S HEET AS ON 31ST MARCH 1999 SHOWED THAT THE SHAREHOLDERS FUNDS WERE UTILISED FOR THE PURPOSE OF FIXED ASSETS. THE P&L A /C AND THE BALANCE SHEET WOULD NOT SHOW WHETHER SHAREHOLDERS F UNDS HAVE BEEN UTILISED FOR INVESTMENTS. THE ARGUMENT HAS TO BE REJECTED ON THIS COUNT ALSO. APART FROM THAT BOTH IN THE ORD ER OF THE CIT(A) AS ALSO THE TRIBUNAL A CLEAR FINDING ISRECORDED TH AT THE ASSESSEE HAD INTEREST-FREE FUNDS OF ITS OWN WHICH H AD BEEN GENERATED IN THE COURSE OF THE YEAR COMMENCING FROM 1ST APRIL 1999. APART FROM THAT IN TERMS OF THE BALANCE SHEET THERE WAS A FURTHER AVAILABILITY OF RS. 398.19 CRORES INCLUDING RS. 180 CRORES OF SHARE CAPITAL. IN THIS CONTEXT THE FINDING OF F ACT RECORDED BY CIT(A) AND TRIBUNAL AS TO AVAILABILITY OF INTEREST- FREE FUNDS REALLY CANNOT BE FAULTED. IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESU MED THAT THE ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 16 - INVESTMENTS WERE FROM THE INTEREST-FREE FUNDS AVAIL ABLE. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED CONSIDERING TH E FINDING OF FACT BOTH BY THE CIT(A) AND TRIBUNALWOOLCOMBERS OF INDIA LTD. VS. CIT (1981) 23 CTR (CAL) 204 : (1982) 134 ITR 21 9 (CAL) AND EAST INDIA PHARMACEUTICAL WORKS LTD. VS. CIT (1997) 139 CTR (SC) 372 : (1997) 224 ITR 627 (SC) RELIED ON. WE THEREFORE ARE OF THE CONSIDERED VIEW THAT ON THE FACTS OF THE INSTSANT CASE INTEREST BEARING FUNDS OF RS.11.29 LA CS ONLY (RS.58.04 LACS RS.46.75 LACS.) CAN BE HELD TO HAVE BEEN UTI LIZED FOR THE ACQUISITION OF PERSONAL ASSETS BY THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION AND INTEREST PAID IN RESPECT OF THE S AME ONLY CAN BE DISALLOWED. WE ACCORDINGLY MODIFY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE LEARNED ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF I NTEREST AT THE RATE OF 15% ON RS.11.29 LACS ONLY AND RECOMPUTE THE INCOME OF THE ASSESSEE. THUS THIS GROUND OF APPEAL OF THE ASSESS EE FOR ASSESSMENT YEAR 2003-04 IS PARTLY ALLOWED. 12 IN THE ASSESSMENT YEAR 2004-05 THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) DIRECTED FOR DISALLOWANCE OF I NTEREST IN RESPECT OF AMOUNT ON WHICH INTEREST WAS DISALLOWED BY HIM FOR THE ASSESSMENT YEAR 2003-04 AND AN ADDITIONAL AMOUNT OF RS.17.14 L ACS. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT IN THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS FURTHER UT ILIZED RS.17.14 LACS IN ACQUIRING PERSONAL ASSETS AND THEREFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) DISALLOWED INT EREST ON AFORESAID INCREMENTAL AMOUNT OF RS.17.14 LACS ALONG WITH THE AMOUNT ON WHICH HE DIRECTED FOR DISALLOWANCE OF INTEREST I N THE ASSESSMENT YEAR 2003-04. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE COULD NOT POINT OUT ANY ERROR IN THE ABOVE ORDER OF THE ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 17 - LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND RE ITERATED THE SUBMISSIONS WHICH WERE MADE BEFORE THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS). WE FIND THAT THE ASSESSEE COU LD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT ANY FURTHER INTERES T FREE FUND WAS AVAILABLE WITH THE ASSESSEE WHICH WAS UTILIZED BY H IM FOR MAKING ADDITIONAL INVESTMENT OF RS.17.14 LACS IN THE PERSO NAL ASSETS. WE THUS DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS) TO THE EXTENT IT FURTHER DISAL LOWED INTEREST ON INCREMENTAL AMOUNT OF RS.17.14 LACS. HOWEVER AS IN THE PRECEDING YEAR WE HAVE FOUND THAT THE INTEREST WHICH IS TO BE DISALLOWED FOR THE ASSESSMENT YEAR 2003-04 IS IN RESPECT OF AMOUNT OF RS.11.29 LACS ONLY IN PLACE OF RS.35.10 LACS HELD BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) .FOLLOWING THE SAME WE MODIFY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) TO THE ABOVE EXTENT. THUS THE GROUND OF APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2004-05 IS PARTLY ALLOWED. 13 IN THE ASSESSMENT YEAR 2004-05THE REVENUE HAS ALSO FILED A CROSS APPEAL DISPUTING THE RELIEF OF RS.8 48 899/- ALLOWED BY THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) ON ACCOUNT OF INTEREST PAYMENT . AFTER HEARING THE RIVAL SUBMISSIONS WE FIND THAT THE LEA RNED ASSESSING OFFICER HAD DISALLOWED INTEREST ON LOANS AND ADVANCES AND INVESTMENT OF RS.1 08 83 673/-. THE LE ARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOUND THAT OUT OF RS.1 08 83.673/- ONLY RS.75 18 130/- WAS FOR PERSON AL PURPOSES AND REMAINING AMOUNT WERE BUSINESS ADVANCE S. FULL DETAILS OF BUSINESS ADVANCES HAVE BEEN DISCUSS ED IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 18 - (APPEALS). THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY ERROR IN THIS ORDER OF THE LEARNE D COMMISSIONER OF INCOME-TAX (APPEALS). THUS THE REL IEF ALLOWED TO THE ASSESSEE OF INTEREST ON BUSINESS ADV ANCES OF RS.8 48 899/- (RS.16 32 540 RS.7 83 641) IS TO BE CONFIRMED. FURTHER IN RESPECT OF PERSONAL ADVANCE OR ASSET OF RS.75 18 130/- THE LEARNED COMMISSIONER OF INCOM E-TAX (APPEALS) FOUND THAT RS.58 03 855/- WAS THE BROUGHT FORWARD BALANCE FROM THE ASSESSMENT YEAR 2003-04 AN D ONLY RS.17 14 275/- WAS THE FRESH ADVANCE MADE BY T HE ASSESSEE DURING THE YEAR UNDER APPEAL. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) SUSTAINED THE DISALLOWANCE OF INTEREST IN RESPECT OF FRESH ADVANC E OF RS.17 14 275/- AND IN RESPECT OF RS.58 03 855/- HE OBSERVING THAT IN THE ASSESSMENT YEAR 2003-04 IT WA S HELD BY HIS PREDECESSOR THAT RS.22 56 600/- WAS OUT OF I NTEREST FROM FRIENDS AVAILABLE WITH THE ASSESSEE AND THUS DISALLOWANCE OF INTEREST WAS WARRANTED ONLY IN RESP ECT OF RS.35.10 LACS. THE LEARNED COMMISSIONER OF INCOME-T AX (APPEALS) IN THE YEAR UNDER APPEAL FOLLOWED THE ABO VE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PASSED IN THE PRECEDING YEAR. WE FIND THAT THE LEAR NED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS). THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT POINT OUT THAT THE RELIEF GIVEN BY THE LE ARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN THE ASSESSM ENT YEAR 2003-04 WAS REVERSED BY ANY HIGHER AUTHORITY O N AN APPEAL FILED BY THE REVENUE. IN THE ABOVE FACTS AND ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 19 - CIRCUMSTANCES WE DO NOT FIND ANY MERIT IN THE GROU ND OF APPEAL OF THE REVENUE. THEREFORE THE SAME IS DISMI SSED. 13 GROUND NO.2 IN THE APPEAL READS AS UNDER: THE LD. CIT(A)HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE ACTION OF AO IN DISALLOWING RS.4 80 328/- OUT OF BU ILDING REPAIR EXPENDITURE. 14 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER: 2.1 THE APPELLANT HAS CLAIMED THE EXPENDITURE OF R S. 18 71 817/- ON ACCOUNT OF BUILDING REPAIRS OUT OF W HICH RS. 8 92 604/- IS DISALLOWED BY THE ASSESSING OFFICER H OLDING THE SAME TO BE OF CAPITAL IN NATURE. THE ASSESSING OFFI CER HAS GIVEN THE ILLUSTRATED EXAMPLES OF THE BILLS & VOUCHERS IN PARA 5 OF HER ORDER TO CONTEND THAT THE EXPENDITURE INCURRED HAS NOT BEEN OF NORMAL CURRENT REPAIRS. ACCORDING TO THE ID. ASSESS ING OFFICER THE EXPENDITURE IS FOUND TO BE RELATING TO CONSTRUC TION OF A NEW STRUCTURE TOILET ROOM AND ROOF ETC. AND THEREFORE THE SAME IS NOT OF REVENUE IN NATURE. THE ASSESSING OFFICER AFTER G IVING DETAILED REASONS HAS ADDED THE SUM OF RS. 8 82 604/- TO TH E RETURNED INCOME OF THE APPELLANT BUT HAS ALLOWED THE DEPRECI ATION THEREON AT THE RATE OF 10%. THE ID. AUTHORISED REPRESENTATIVE SUBMITTED BEFORE ME THAT THE DISALLOWANCE OF RS.8 82 604/- IS FACTUALLY INCORREC T BECAUSE THE EXPENDITURE OF RS.3 03 422/- OUT OF THE SAID EXPEND ITURE WAS ALREADY CAPITALIZED AND WAS NEVER CLAIMED AS A REVE NUE EXPENDITURE. AS REGARDS THE REMAINING EXPENDITURE IT WAS SUBMITTED THAT THE ENTIRE EXPENDITURE WAS INCURRED FOR CURRENT REPAIRS OF THE BUILDING AND WAS THEREFORE ALLOWABLE AS A REVENUE EXPENDITURE. THE ID. AUTHORISED REPRESENTATIVE FURT HER ELABORATED THAT THE EXPENDITURE OF RS.1 42 652/- WA S INCURRED FOR REPLACEMENT OF OLD DOORS WINDOWS AND STEEL GRI LL FOR HIGH INTERNAL SECURITY ARRANGEMENTS AS PER RBI RULES. AN OTHER AMOUNT OF RS.62 560/- WAS SPENT FOR POLISHING WORK OF FLOOR AND FURNITURE OF THE PRESS WHICH FREQUENTLY GETS DAMAGE D DUE TO MOVEMENTS OF MATERIAL AND FINISHED GOODS. THIS EXPE NDITURE IS ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 20 - IN THE NATURE OF ROUTINE MAINTENANCE EXPENSE. THE A UTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT AN AMOUNT OF RS.1 74 413/- WAS PAID TO M/S. AMBICA TRADING CO. F OR PURCHASE OF PLYWOOD LAMINATED SHEETS CHIL WOOD ETC. ALL TH ESE MATERIALS WERE PURCHASED FOR TEMPORARY ERECTIONS OF WOODEN PA LATES WHICH ARE USED FOR LOADING UNLOADING INTERNAL MOV EMENTS AND STORAGE OF MATERIALS AND FINISHED GOODS ETC.. ANOTH ER AMOUNT OF RS. 36 474/- IS STATEDLY PAID TO AMRUTBHAI B. NAYAK FOR CIVIL REPAIRING WORK. THE EXPENDITURE OF RS.1 63 263/- WA S INCURRED FOR RENOVATION OF TOILET BLOCKS IN THE EXISTING PRE MISES. THE AUTHORISED REPRESENTATIVE FINALLY SUBMITTED THAT AL L THESE EXPENSES ARE INCURRED EITHER FOR MAINTENANCE OR REP LACEMENT OF THE EXISTING ASSETS AND THEREFORE ARE IN THE NATUR E OF REVENUE EXPENDITURE. 2.3 AFTER HAVING GONE INTO THE DETAILS OF THE EXPEN SES THE DISALLOWANCE OF RS. 3 03 422/- CANNOT BE SUSTAINED BECAUSE THIS AMOUNT IS ALREADY DEBITED TO BASANT BAHAR BUNGLOW ACCOUNT AND IS ALREADY CAPITALIZED. SINCE THIS AMOUNT IS NO T CLAIMED AS EXPENDITURE THE ASSESSING OFFICER WAS NOT JUSTIFIE D TO DISALLOW THE SAME. IN SO FAR AS THE EXPENDITURE OF RS.62 5 60/- AND OF RS.36 474/- IS CONCERNED THE SAME IS ALSO INCURRED FOR NORMAL REPAIRING WORK AND THEREFORE ALLOWABLE AS A REVENUE EXPENDITURE. THE EXPENDITURE OF RS.1 42 652/- IS AD MITTEDLY SPENT FOR REPLACING THE OLD DOORS WINDOWS AND STEE L GRILLS FOR MAKING HIGH INTERNAL SECURITY ARRANGEMENTS AS PER R BI RULES. THE EXPENDITURE SO INCURRED HAS ENDURING AND LONG T ERM EFFECT AND HAS RIGHTLY BEEN TREATED AS CAPITAL IN NATURE B Y THE ASSESSING OFFICER. SIMILARLY THE EXPENDITURE OF R S.1 63 263/- WHICH IS INCURRED FOR BUILDING NEW TOILET BLOCKS IS ALSO CAPITAL IN NATURE. THE PAYMENT OF RS.1 74 413/- MADE TO M/S. A MBICA TRADING CO. PERTAINS TO THE PURCHASE OF WOOD AND PL Y WHICH IS UNDOUBTEDLY CAPITAL IN NATURE BECAUSE ALL THESE MAT ERIALS HAVE BEEN UTILIZED FOR CONSTRUCTING A NEW SHED. IN THIS BACKGROUND OF THE MATTER THE AMOUNT OF RS.4 80 328/- (RS. 1 42 6 52/- + RS. 1 63 263/- + RS. 1.74 413/-) IS HELD TO BE CAPITAL IN NATURE AND THE DISALLOWANCE TO THIS EXTENT NEEDS TO BE UPHELD. THE APPELLANT THUS GETS A RELIEF OF RS. 4 02 276/-. OF COURSE THE ASSESSING OFFICER SHALL ALLOW THE DEPRECIATION THER EON AT THE RATE OF 10%. ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 21 - 15 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS UPHELD THE DISALLOWANCE OF RS.4 80 328/- OUT OF THE BUILDING REPAIR EXPENSES ON THE GROUND THAT THEY WERE CAPITAL IN NA TURE AND FURTHER DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW DEP RECIATION THEREON AT THE RATE OF 10%. THE ABOVE AMOUNT OF RS.4 80 328 /- WAS COMPRISED OF RS.11 42 652/- INCURRED FOR REPLACEMENT OF OLD D OORS WINDOWS AND STEEL GRILLS FOR HIGH INTERNAL SECURITY ARRANGEMENT AS PER RBI RULES RS.1 63 263/- INCURRED FOR BUILDING NEW TOILET BLOC KS AND RS.1 74 413/- FOR PURCHASE OF WOOD AND PLY FOR CONSTRUCTION OF A NEW SHED. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE C ONTENDED BEFORE US THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PRINTING OF HIGH SECURITY ITEMS ON BEHALF OF THE VARIOUS GOVERNMENT DEPARTMENTS AND AGENCIES. AS PER THE DIRECTIONS OF THE RBI AND TO P ROVIDE SECURITY IT HAD TO REPLACE OLD DOORS WINDOWS AND STEEL GRILLS ETC. AND THE EXPENDITURE OF RS.1 42 652/- WAS INCURRED FOR THESE REPLACEMENTS. ACCORDING TO HIM NOW NEW ASSETS OF ENDURING NATURE WAS ACQUIRED BY INCURRING THE ABOVE EXPENDITURE AND THE EXPENDITURE WAS INCURRED OUT OF COMMERCIAL EXPEDIENCY AND THEREFORE SHOULD HAVE BEEN TREATED AS REVENUE EXPENDITURE. WE FIND THAT IT IS NOT IN DISP UTE THAT THE DOORS WINDOWS AND STEEL GRILLS FORMED PART OF THE EXISTIN G OLD BUILDING OF THE ASSESSEE AND NO NEW ASSETS WERE ACQUIRED BY THE ASS ESSEE BY INCURRING EXPENDITURE OF RS.1 42 652/-. WE FIND FOR CE IN THE ARGUMENT OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE THAT NO NEW ASSET WAS ACQUIRED BY THE ASSESSEE BY INCURRING THE SAID EXPENDITURE. THEREFORE IN OUR CONSIDERED VIEW THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN TREATING EXPENDITURE OF RS.1 42 652/- AS CAPITAL EXPENDITURE. IN RESPECT OF BALANCE AMOUNT OF ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 22 - RS.1 62 263/- INCURRED FOR CONSTRUCTING NEW TOILET BLOCKS AND RS.1 74 413/- INCURRED FOR CONSTRUCTING NEW SHED W E FIND THAT NO ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) COULD BE POINTED OUT BY THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE. THUS WE DO NOT FIND ANY GOOD REASON TO IN TERFERE WITH THAT PART OF THE ORDER OF THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS). WE THEREFORE MODIFY THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE LEARNED ASSESSING OFFICER TO TREAT RS.1 42 652/- AS REVENUE EXPENDITURE AND ACCORDINGLY ALSO TO RECOMPUTE THE DEPRECIATION ALLO WABLE TO THE ASSESSEE PER LAW. THUS THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 16 GROUND NO.3 IN THE APPEAL READS AS UNDER: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF AO IN ADDING RS.12.00 LACS U/S 69C BEING ALLEGED UNEXPLAINED INVESTMENT IN PURCHASING HIGH SPEED SCA NNER. 17 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS DEALT WITH THE ISSUE AS UNDER: 4.1 THE ASSESSING OFFICER HAS ADDED RS.12 LACS U/S. 69C OF THE ACT BEING THE UNEXPLAINED EXPENDITURE INCURRED FOR PURCHASING A HIGH SPEED SCANNER. THE APPELLANT HAS MADE ADDITION TO DEPRECIABLE ASSETS TO THE EXTENT OF RS.12 LACS WHIC H REPRESENTED THE COST OF A HIGH SPEED SCANNER WHICH IS STATEDLY RECEIVED AS A GIFT BY THE APPELLANT FROM HIS BROTHE R SHRI RAJESH JITENDRA PUROHIT WHO STAYS IN THE UNITED STATES OF AMERICA. THE ASSESSING OFFICER HAS NOT ACCEPTED THE TRANSACTION TO BE A GENUINE GIFT TRANSACTION PARTLY ON THE GROUND THAT PURCHASE INVOICE OF THE MACHINERY BEARING NO. 3451 DATED 7.6 .1999 ISSUED BY SATURN GRAPHICS INC. 50-07 65 TH PLACE WOOD SIDE N.Y. 113777 USA IS BILLED TO SHRI MUDRESH J. PUROH IT PROP OF SURYA OFFSET SECURITY PRINTERS INDIA WHO IS THE AP PELLANT IN MY PRESENT CASE AND PARTLY BECAUSE THE APPELLANT HAS F AILED TO FILE ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 23 - ANY DOCUMENTARY EVIDENCE TO PROVE THAT THE PURCHASE PRICE OF THE SCANNER AND CUSTOM CLEARANCE CHARGES WERE PAID BY HIS BROTHER. SINCE THE APPELLANT DID NOT FILE ANY POSIT IVE EVIDENCE TO PROVE THAT THE SCANNER WAS GIFTED TO HIM BY HIS BRO THER LEAST OF PROVING THAT HIS BROTHER WAS FINANCIALLY CAPABLE OF GIVING THE GIFT AMOUNT THE ASSESSING OFFICER HAS PROCEEDED TO REJE CT THE EXPLANATION AND HAS RATHER TREATED THE AMOUNT OF RS .12 LACS TO BE THE UNEXPLAINED EXPENDITURE INCURRED BY THE APPE LLANT FOR ACQUISITION OF A HIGH SPEED SCANNER. 4.2 THE AUTHORISED REPRESENTATIVE SUBMITTED BEFORE ME THAT THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF TH E GIFT TRANSACTION MERELY ON SURMISES AND CONJECTURES. THE APPELLANT HAS RECEIVED THE HIGH SPEED SCANNER AS A GIFT FRO M HIS BROTHER WHO CAME TO INDIA IN AUGUST 1999 AND AT THAT TIM E CARRIED THE SAID PRINTER WITH HIM. COPY OF PASSPORT OF SHRI RAJ ESH J. PUROHIT WAS PLACED ON RECORDS BEFORE THE ASSESSING OFFICER SO AS TO PROVE HIS ENTRY AND VISIT TO INDIA IN AUGUST 1999. IT WAS FURTHER SUBMITTED THAT THE BROTHER OF THE APPELLANT PURCHAS ED THIS MACHINE FROM USA DIRECTLY IN THE NAME OF THE APPELL ANT FOR THE PURPOSE OF GIVING THE SAME IN GIFT TO THE APPELLANT . SINCE THE BROTHER OF THE APPELLANT HAS BROUGHT THE SAID MACHI NE FROM USA BY MAKING PAYMENT IN US DOLLARS HE MUST HAVE PAID NECESSARY CUSTOM CHARGES ABOUT WHICH THE APPELLANT DOES NOT H AVE ANY DETAILS. THE ID. AUTHORISED REPRESENTATIVE FURTHER ADDED THAT EVEN IF THE CUSTOM DUTY IS NOT PAID HOW THE SAID F ACT CAN MAKE THE EXPLAINED GIFT OF A MACHINE TO BE AN UNEXPLAINE D EXPENDITURE IN THE HANDS OF THE APPELLANT. AS REGAR DS UTILIZATION OF THE MACHINE IN THE YEAR 2002-03 IT WAS SUBMITTE D THAT THE SAID MACHINE WAS PUT TO USE IN THE RELEVANT PREVIOU S YEAR AND ACCORDINGLY THE COST PRICE OF THE SAME WAS CAPITAL IZED WITH A VIEW TO CLAIM DEPRECIATION THEREON DURING THE CURRE NT PREVIOUS YEAR. 4.3 I HAVE CAREFULLY CONSIDERED THE VARIOUS ARGUMEN TS OF THE AUTHORISED REPRESENTATIVE ADVANCED IN THIS REGARD A ND HAVE PERUSED THE ASSESSMENT ORDER. IT IS ALLEGED BY THE APPELLANT THAT HIGH SPEED SCANNER COSTING RS. 12 LACS WAS RECEIVED BY HIM AS A GIFT FROM HIS BROTHER SHRI RAJESH PUROHIT WHO IS A RESIDENT OF US A. THE ONUS TO PROVE THAT INVESTMENT IN THE SCAN NER ALONGWITH THE CUSTOM DUTY PAYABLE THEREON WAS MADE BY HIS BROTHER SOLELY LIES ON THE APPELLANT. IT IS AN ADMI TTED FEET THAT THE PURCHASE INVOICE BEARING NO. 3451 DATED 7.6.1999 IS SUED BY ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 24 - SATURN GRAPHICS INC. 50-07 65 TH PLACE WOOD SIDE N.Y. 113777 USA IS BILLED TO THE APPELLANT SHRI MUDRESH J. PUROHIT PROP OF SURYA OFFSET SECURITY PRINTERS INDIA. SI NCE THE PURCHASE INVOICE IS BILLED IN THE NAME OF THE APPEL LANT THE PRESUMPTION IS THAT ONLY THE APPELLANT HAS MADE THE PAYMENT- TOWARDS THE PURCHASE PRICE OF THE PRINTER. OTHERWIS E HOW SHALL A FOREIGN SELLER PREPARE THE INVOICE IN HIS NAME IF T HE ACTUAL PURCHASER WAS HIS BROTHER AS IS ALLEGED BY HIM. THE APPELLANT BY MERELY STATING THAT HIS BROTHER MIGHT HAVE MADE PAY MENT IN US DOLLARS HAS IMPLIEDLY REFUSED TO SUPPLY ANY INFORM ATION WITH REGARD TO THE SOURCE OF MONEY HAVING BEEN SPENT FOR THE ACQUISITION OF THE HIGH SPEED SCANNER UNDER CONSIDE RATION. IN SO FAR AS THE ENTRY OF THE SCANNER INTO INDIA IS CONCE RNED THE APPELLANT HAS CONTENDED THAT HIS BROTHER BROUGHT THE MACHINE INTO INDIA IN AUGUST 1999. IN ORDER TO FURTHER PROV E THAT THE MACHINE WAS GIFTED TO THE APPELLANT BY HIS BROTHER IT WAS OBLIGATORY ON THE PART OF THE APPELLANT TO PLACE EV IDENCE THAT CUSTOM DUTY TO GET THE SCANNER CLEARED WAS PAID B Y HIS BROTHER AND ALL THE NECESSARY DOCUMENTS TO GET THE SCANNER CLEARED FROM THE CUSTOM AUTHORITIES WERE ALSO EXECUTED BY HIM. THE APPELLANT WAS ALSO DUTY BOUND TO PROVE THAT HIS BRO THER HAD EXPLAINED FUNDS TO DISCHARGE ALL THESE STATUTORY OB LIGATIONS. INSTEAD OF PROVIDING ALL THESE DETAILS THE APPELLA NT HAS RESPONDED EVASIVELY THAT CUSTOM DUTY MUST HAVE BEEN PAID BY HIS BROTHER ABOUT WHICH HE HAS NO KNOWLEDGE BECAUSE HE DID NOT THINK IT NECESSARY THAT THESE DOCUMENTS MUST BE PASSED ON TO HIM BY HIS BROTHER. THE OBLIGATION TO GET THE GOODS CLEARED FROM THE CUSTOMS IS ON THE PERSON IN WHOSE NAME THE GOODS ARE BOOKED BY THE FOREIGN SELLER WHICH IS THE APPEL LANT IN THE PRESENT CASE. INSTEAD OF GIVING POSITIVE EVIDENCE R EGARDING THE DETAILS OF PAYMENT OF CUSTOM DUTY AND OTHER ALLIED EXPENSES THE APPELLANT IS DELIBERATELY PASSING ON THE BUCK TO HI S BROTHER BY ALLEGING THAT CUSTOM DUTIES MUST HAVE BEEN PAID BY HIS BROTHER. HAD IT BEEN TRUE THAT HIS BROTHER HAS MADE THE PAYM ENT TO BUY THE SCANNER AND HAS ALSO PAID ALL OTHER INCIDENTA L EXPENSES INCLUDING THE CUSTOM DUTY THEREON NOTHING SHOULD PREVENT THE APPELLANT OR HIS BROTHER FROM SUPPLYING ALL THES E DETAILS TO THE REVENUE. IF THE TRANSACTION OF PURCHASE IS A GENUIN E GIFT TRANSACTION IT IS IN THE INTEREST OF THE APPELLAN T THAT HE SHOULD SUPPLY ALL THESE DETAILS VOLUNTARILY INSTEAD OF MAK ING LAME EXCUSES THAT HIS BROTHER HAS MADE PAYMENT IN US DOL LARS TO BUY THE SCANNER AND HE MUST HAVE PAID CUSTOM DUTY ETC. THIS BECOMES ALL THE MORE NECESSARY AT THIS STAGE BECAUS E THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF TH E ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 25 - TRANSACTION AND HAS CHARGED TAX ON RS. 12 LACS HO LDING THE SAME TO BE UNEXPLAINED EXPENDITURE INCURRED BY THE APPELLANT OUT OF UNKNOWN SOURCES. SINCE THE ADDITION IN AS SETS TO THE EXTENT OF RS.12 LACS IS. RECORDED IN THE BOOKS OF T HE APPELLANT IT IS HIS DUTY TO DISCHARGE THE ONUS NOT ONLY WITH RES PECT TO THE GENUINENESS OF THE TRANSACTION BUT ALSO IN RESPECT OF THE FUNDS HAVING GONE INTO ITS ACQUISITION. TILL DATE THE A PPELLANT HAS WITHHELD THE RELEVANT INFORMATION AND THIS RAISES A SERIOUS DOUBT IN MY MIND WHETHER OR NOT THE APPELLANT HAS SOMETHI NG TO HIDE IN THIS REGARD. THE ONLY MOTIVE TO WITHHOLD THE INF ORMATION FROM THE REVENUE SEEMS TO BE THAT IF THE INFORMATION COM ES ON RECORD IT WOULD BE USED AGAINST THE APPELLANT. THE DOUBT RAISED BY THE ID. ASSESSING OFFICER THAT IF THE SCANNER WA S GENUINELY GIFTED IN JUNE 1999 THEN WHY WAS IT NOT PUT TO USE IN SUCCEEDING THREE YEARS ALSO CASTS A SHADOW ON THE GENUINENESS OF THE TRANSACTION. IN THIS BACKGROUND WHERE THE APPELLANT COULD PROVIDE ALL THE NECESSARY EVIDENCE IN SUPPORT OF HI S CLAIM BEING IN POSSESSION OF ALL THE DOCUMENTS THE WITHHOLDING OF THESE DOCUMENTS ONLY CONFIRMS THAT APPARENT IS NOT REAL AND WHAT IS REAL IS DELIBERATELY NOT BEING MADE APPARENT. I HAV E THEREFORE NO HESITATION TO HOLD THAT IT IS NOT A GENUINE GIFT TR ANSACTION AND IT IS THE APPELLANT WHO ONLY HAS PURCHASED THE SCANNER UN DER CONSIDERATION. SINCE THE APPELLANT IS NOT INTERESTE D TO PROVE HIS CLAIM BY BRINGING ALL THE NECESSARY EVIDENCE THE F INDINGS OF THE LD ASSESSING OFFICER THAT THE SCANNER HAS BEEN PUR CHASED BY THE APPELLANT OUT OF HIS UNKNOWN SOURCES IS REQUIRE D TO BE UPHELD. ADDITION OF RS. 12 LACS IS CONFIRMED. 18 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE VEHEMENTLY ARGUED THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ABOVE ADDITION AS T HERE WAS NO MATERIAL ON RECORD TO SHOW THAT SCANNER IN QUESTION WAS ACQU IRED BY THE ASSESSEE BY MAKING PAYMENTS OUT OF OWN INCOME. WE F IND THAT THE LOWER AUTHORITIES CONSIDERED THE AFORESAID SCANNER AS INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT BRING ANY MATERIAL ON RECORD TO SUSTAIN HIS CLAIM THAT THE SAID SCANNE R WAS RECEIVED BY ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 26 - HIM AS GIFT. IT IS OBSERVED THAT THE ASSESSEE HAS A LSO NOT BROUGHT ANY MATERIAL BEFORE US TO SUPPORT HIS CLAIM OF GIFT. IN OUR CONSIDERED OPINION ON THE TRANSACTION THE ONUS TO PROVE THAT THE EQUIPMENT WAS RECEIVED AS GIFT WAS UPON THE ASSESSEE AND IT WAS N OT FOR THE REVENUE TO PROVE OTHERWISE. AS THE ASSESSEE WAS NOT ABLE TO DISCHARGE THE BURDEN WHICH WAS UPON HIM WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) W HICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 19 GROUND NOS.4 5 AND 6 OF THE APPEAL OF THE ASSE SSEE IN ASSESSMENT YEAR 2003-04 READS AS UNDER: 4 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOU S SUBMISSIONS EVIDENCES AND SUPPORTING PLACED ON REC ORD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND NOT PR OPERLY APPRECIATING VARIOUS FACTS AND LAW IN ITS PROPER PE RSPECTIVE. 5 LEVY OF INTEREST U/S 234A/B/C OF THE ACT IS NOT J USTIFIED. 6 THE LEARNED CIT(A)HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS UN DER SECTION 271(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SA TISFACTION CONTEMPLATED UNDER THE SAID SECTION. 20 GROUND NOS.2 3 AND 4 OF THE ASSESSEES APPEAL I N ASSESSMENT YEAR 2004-05 READS AS UNDER:- 2 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOU S SUBMISSIONS EVIDENCES AND SUPPORTING PLACED ON REC ORD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND NOT PR OPERLY APPRECIATING VARIOUS FACTS AND LAW IN ITS PROPER PE RSPECTIVE. 3 LEVY OF INTEREST U/S 234A/B/C OF THE ACT IS NOT J USTIFIED. 4 THE LEARNED CIT(A)HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS UN DER SECTION ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 27 - 271(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SA TISFACTION CONTEMPLATED UNDER THE SAID SECTION. 21 AT THE TIME OF HEARING THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THESE GROUNDS OF APPEAL AND HENCE THEY ARE DISMISSE D AS NOT PRESSED. 22 GROUND NO.2 IN REVENUES APPEAL FOR ASSESSMENT Y EAR 2004-05 READS AS UNDER: 2 THE CIT(A)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.1 20 077/- ON A CCOUNT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE. 23 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER:- 3 WITH REGARD TO THE DISALLOWANCE OF RS.1 20 077/- IN RESPECT OF FOREIGN TRAVEL EXPENDITURE IT IS SUBMIT TED BY THE AR THAT THE DISALLOWANCE IS MADE BY THE AO ON THE GRO UND THAT THE APPELLANT HAS GONE ABROAD TO INSPECT MACHINERY AND THEREFORE IT WAS A CAPITAL EXPENDITURE. IN THIS REGARD IT IS SU BMITTED BY THE AR OF THE APPELLANT THAT HE HAS GONE ABROAD TO TAKE PART IN THE CSI 30 TH ANNUAL SECURITY CONFERENCE & EXHIBITION AT USA. IT WAS NOT TO INSPECT ANY PARTICULAR MACHINE BUT THE TOUR WAS UNDERTAKEN TO FIND OUT THE LATEST DEVELOPMENT IN TH E SECURITY PRINTING AND RELATED TECHNICAL DEVELOPMENTS. IN SUP PORT OF THE APPELLANTS CONTENTION THE AR HAS FILED BEFORE ME T HE COPY OF THE DETAILS OF SEMINAR AND PLEADED THAT THE EXPENDI TURE INCURRED BY THE APPELLANT ARE IN NATURE OF BUSINESS EXPENSES AND ALLOWABLE AS DEDUCTION. 3.1 THE SUBMISSIONS OF THE AR OF THE APPELLANT HAVE BEEN PERUSED. THE DETAILS PRODUCED BEFORE ME BY THE AR A ND THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 3.2 HAVING VERIFIED THE FACTS AND CIRCUMSTANCES OF THE CASE I FIND THAT THE EXPENDITURE INCURRED IS FOR PURPOSE O F BUSINESS ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 28 - ONLY. HENCE THE SAME IS ALLOWED AS CLAIMED BY THE APPELLANT. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 24 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE JCOULD NOT POINT OUT ANY ERROR IN THE ABOVE ORDER OF THE LEARNED COMMISSIONE R OF INCOME-TAX (APPEALS). HENCE WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 25 GROUND NOS.3 AND 4 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 READS AS UNDER: 3 THE CIT(A)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.40 000/- ON ACC OUNT OF DISALLOWANCE OF BUILDING REPAIRS / MAINTENANCE EXPE NSES RELATING TO PURCHASE OF A PUMP. 4 THE CIT(A)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.37 912/- ON ACC OUNT OF DISALLOWANCE OF RCC ROAD CONSTRUCTION EXPENSES. 26 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) DECIDED THE ISSUES BY OBSERVING AS UNDER: 6 THE SIXTH AND SEVENTH GROUNDS OF APPEAL ARE DIRE CTED AGAINST THE DISALLOWANCE OF RS.40 000/- AND RS.37 9 12/- OUT OF BUILDING REPAIRS AND MAINTENANCE EXPENSES RESPECTIV ELY. WITH REGARD TO THE DISALLOWANCE OF RS.40 000/- IT IS SUB MITTED BY THE AR THAT THE SAME IS INCURRED BY THE APPELLANT ON AC COUNT OF REPLACEMENT OF PUMP WHICH IS NOT A NEW ASSET AND T HEREFORE ALLOWABLE AS REVENUE EXPENDITURE. WITH REGARD TO TH E DISALLOWANCE OF RS.37 912/- IT IS SUBMITTED BY THE AR THAT THE SAME IS INCURRED FOR ROAD. THE SAME IS INCURRED AS A ROUTINE ROAD MAINTENANCE ONLY AND NO FOR CONSTRUCTION OF A NEW ROAD. IT ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 29 - IS ARGUED BY THE AR THAT IN ANY CASE NEW ROAD CANNO T BE CONSTRUED BY THE SUM OF RS.37 912/-. IT IS SUBMITTE D BY THE AR THAT BOTH THESE EXPENDITURE ARE INCURRED BY THE APP ELLANT AS ROUTINE MAINTENANCE EXPENDITURE AND THEREFORE ALLOW ABLE AS DEDUCTION. 6.1 THE SUBMISSIONS OF THE AR OF THE APPELLANT HAVE BEEN PERUSED. THE OBSERVATIONS OF THE AO IN THE ASSESSME NT ORDER HAVE ALSO BEEN EXAMINED. 6.2 HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES O F THE CASE I AM OF THE VIEW THAT THE ABOVE EXPENDITURE I NCURRED BY THE APPELLANT ARE IN NATURE AND ROUTINE MAINTENANCE EXPENSES. THEREFORE THE SAME ARE ALLOWABLE AS DEDUCTION AS P ER THE PROVISIONS OF SECTION 37 OF THE IT ACT 1961. THERE FORE THE ABOVE BOTH GROUNDS OF APPEAL ARE ALLOWED. 27 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT P OINT OUT ANY ERROR IN THE ABOVE ORDER OF THE LEARNED COMMISSIONE R OF INCOME-TAX (APPEALS). HENCE WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 28 GROUND NOS.5 AND 6 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 ARE GENERAL IN NATURE AND R EQUIRE NO SEPARATE ADJUDICATION BY US. 29 THE NEXT GROUND OF APPEAL RELATES TO CHARGING OF IN TEREST U/S 234B 234C AND 234D OF THE ACT. SINCE CHARGI NG OF INTEREST IS MANDATORY IN THESE PROVISIONS THE ASSESSING OFFICE R IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT. ITA NO.1860/AHD/2007 ITA NO. 4502/AHD/2007 & ITA NO.128/AHD/2008 M/S. S HRI MUDRESH J. PUROHIT ASST.YEAR :2003-04 2004- 05 - 30 - 30 NEXT GROUND OF APPEAL IS AGAINST INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE I.T. ACT. AS THIS GROUND IS PREMATURE THE SAME IS THEREFORE DISMISSED BEING NOT MAINTAINA BLE . 31 IN THE RESULT THE APPEALS FILED BY THE ASSESS EE FOR ASSESSMENT YEARS 2003-04 AND 2004-05 ARE PARTLY ALLOWED AND THAT OF THE REVENUE FOR ASSESSMENT YEAR 2004- 05 IS DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 05/02/2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED 05 /02 /2010 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD