The ACIT, Circle6,, Ahmedabad v. M/s. CMC Machinery, Ahmedabad

ITA 2640/AHD/2008 | 2005-2006
Pronouncement Date: 09-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 264020514 RSA 2008
Assessee PAN AABFC1709R
Bench Ahmedabad
Appeal Number ITA 2640/AHD/2008
Duration Of Justice 3 year(s) 1 month(s) 17 day(s)
Appellant The ACIT, Circle6,, Ahmedabad
Respondent M/s. CMC Machinery, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 09-09-2011
Date Of Final Hearing 12-08-2011
Next Hearing Date 12-08-2011
Assessment Year 2005-2006
Appeal Filed On 22-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER I.T.A. NO.2640/AHD/2008 (ASSESSMENT YEAR : 2005-06) THE ACIT CIRCLE-6 AHMEDABAD VS. M/S.CMC MACHINERY PLOT 3604 & 3605 PHASE-IV GIDC VATVA AHMEDABAD PAN/GIR NO. : AABFC 1709 R ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.K. GUPTA CIT-D.R. RESPONDENT BY : SHRI MUKESH M.PATEL DATE OF HEARING : 12/08/2011 DATE OF PRONOUNCEMENT : 09/09/201 1 O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XI AHMEDABA D DATED 08/05/2008. 2. GROUND NO.1 READS AS UNDER: 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.2 42 33 149/- MADE BY A PPLYING SECTION 40A(2)(B) OF THE I.T.ACT. ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 2 - 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 DATED 28/ 12/2007 WERE THAT THE ASSESSEE-FIRM IS IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICAL MACHINERY. IT WAS NOTED BY THE ASSESSING OFFICER THAT CERTAI N PURCHASES WERE MADE FROM THREE SISTER-CONCERNS; NAMELY (I) C ADMACH MACHINERY COMPANY PVT.LTD.[CADMACH] (II) KEVIN PROCESS TECHN OLOGIES PVT.LTD. [KEVIN] AND (III) KEMBERT MACHINERY COMPANY PVT.LTD . [KEMBERT]. 2.2. THE ASSESSING OFFICER MADE CERTAIN ENQUIRIES A ND ON THAT BASIS HE HAD NOTED THAT EXCESSIVE PAYMENT WAS MADE BY THE AS SESSEE TO ITS SISTER- CONCERN IN COMPARISON TO THE SIMILAR PRODUCT PURCHA SED BY THE ASSESSEE FROM OTHER PARTIES. THEREAFTER THE ASSESSING OFFI CER HAD DISCUSSED THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T.ACT AND INFERRED THAT THE EXPENDITURE WAS INCURRED TO SISTER-CONCERNS WAS EX CESSIVE THAN THE FAIR MARKET VALUE OF THE GOODS. AN ADDITION OF RS.15 28 864/- WAS MADE BY REFERRING THE FOLLOWING DECISIONS:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. CIT VS. SHATRUNJAY DIAMONDS 261 ITR 258 (BOM.) 2. SMT VASANTIBAI & SHAH VS. CIT 213 ITR 805 (BOM) 3. SUMATI DAYAL 214 801 (SC) 4. MR.DURGAPRASAD KAUL 82 ITR 540 (SC) 5. CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 3 - 3. IN RESPECT OF THREE SISTER-CONCERNS THE ASSESS ING OFFICER HAS HELD THAT AT LEAST A MARGIN OF 33.3% ONLY COULD BE GRANT ED AND REST WAS HELD AS EXCESSIVE PAYMENT AS PER THE FOLLOWING CALCULATION: I. EXCESSIVE PAYMENT FOUND IN THE CASE OF CADMACH MACHINERY PVT.LTD. AS PER CHART (IN ONE TRANSACTION ) 1 40 120 II. EXCESSIVE PAYMENT FOUND IN THE CASE OF KEVIN PROCESS TECHNOLOGIES PVT.LTD. AS PER CHART (IN 3 TRANSACTIONS) 16 08 844 III. EXCESSIVE PAYMENT FOUND IN THE CASE OF KEMBERT MACHINERY CO. AS PER CHART (IN 16 TRANSACTIONS) 5 40 159 TOTAL 22 89 193 LESS : 33.3% (1/3) MARGIN IN THE FORM OF REDUCTION GIVEN FOR THE REASONS DISCUSSED HEREIN ABOVE 7 62 964 BALANCE AS CONSIDERED EXCESSIVE PAYMENT 15 26 159 3.1. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT TOTAL PURCHASES MADE FROM THE SISTER-CONCERNS WERE TO THE EXTENT OF RS.9 89 40 649/-. OUT OF THE SAID TOTAL AMOUNT OF PURCHASES HE WAS O F THE VIEW THAT PURCHASES TO THE EXTENT OF RS.62 32 260/- WERE COMP ARABLE AND THE BALANCE WERE UNREASONABLE. HE HAS PRODUCED AN ANOT HER CHART AS FOLLOWS:- NAME OF THE CONCERN TOTAL PURCHASES PURCHASES COVERED U/S. 40A(2)(B) BALANCE CADMACH MACHINERY CO.LTD. LTD. 65509317 162610 65346707 KEVIN PROCESS 24788142 3272844 21515298 ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 4 - TECH.PVT LTD. KEMBERT MACHINERY CO. 8643190 1333296 7309854 TOTAL 98940649 6232260 92708389 3.2. THEREAFTER HE HAS DISCUSSED THAT THE TRANSACT ION WITH THE SAID THREE PARTIES WAS UNREASONABLE TO THE EXTENT OF 24.49% AND THE SAME WAS DISALLOWED VIDE FOLLOWING OBSERVATION:- CONSIDERING THE ABOVE FACTS RS.9 89 40 649/- WHERE IN NO COMPARABLE CASES HAS FOUND ARE ALSO CONSIDERED AS U NREASONABLE AND UNFAIR COVERED U/S.40A(2)(B) OF THE ACT TO CERT AIN EXTENT PER SE. HOWEVER IN VIEW OF THE FACT THAT THE RATIO OF EXCESSIVE PAYMENT FOUND IN THE COMPARABLE CASES AT 24.49% THUS WHILE FOLLOWING THE SAME PRECEDENT AND IN ALL FAIRNESS THE SAME RATIO IS ALSO HELD AS APPLICABLE WHILE CALCULATING THE EXCESSIVE PART OF SUCH NON- COMPARABLE PURCHASES ALSO. ACCORDINGLY THE CALCULA TION OF EXCESSIVE AND UNREASONABLE PAYMENT ON THE OTHER PUR CHASES IS WORKED OUT AS UNDER: I) TOTAL PURCHASES FROM ITS SISTER CONCERN RS.9 89 40 649/- II) PURCHASES WHICH ARE FOUND COMPARABLE AND DEALT WITH SEPARATELY RS.62 3 2 260/- III)THE OTHER PURCHASES FROM SISTER CONCERN RS.9 27 08 389/- AS HELD ABOVE THE ESTIMATED PART OF PAYMENT TOWARD S UNCOMPARABLE PURCHASES WOULD BE 24.49% AND ACCORDIN GLY AN ADDITION OF RS.2 27 04 285/- (BEING 24.49% OF RS.9 27 08 389/-) HAS BEEN MADE U/S.40A(20(B) OF THE ACT WHILE CONSID ERING THE SAME AS EXCESSIVE AND UNFAIR PAYMENT MADE TOWARDS I TS SISTER CONCERN OUT OF THE OTHER PURCHASES MADE BY THE ASSE SSEE. [ ADDITION : RS.2 27 04 285/- ] ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 5 - 3.3. IN ALL A TOTAL ADDITION BY INVOKING THE PROVI SIONS OF SECTION 40A(2)(B) OF THE I.T.ACT OF RS.2 42 32 149/- WAS MA DE AND THE SAME WAS CHALLENGED. 4. WHEN THE MATTER WAS CARRIED BEFORE THE LD.CIT(A) HE HAD MADE A DETAILED DISCUSSION AND PRIMARILY ON THE GROUND THA T THE ASSESSING OFFICERS JUDGEMENT WAS MADE ON A PRESUMPTION HENC E HELD THAT NOT SUSTAINABLE IN THE EYES OF LAW. THE LEARNED CIT(AP PEALS) WAS OF THE VIEW THAT MACHINES PURCHASED FOR THE PURPOSE OF EXP ORT WERE OF SUPERIOR QUALITY THEREFORE HIGHER PRICE WAS FIXED. EVEN A FTER PAYING THE HIGHER PRICE TO THE SISTER-CONCERNS THE LEARNED CIT(APPE ALS) HAS NOTED THAT THE ASSESSEE HAS DISCLOSED BETTER RESULTS. IN RESPECT OF THE FIRST ADDITION THE LEARNED CIT(APPEALS) HAS HELD AS UNDER:- 6.1.13 IT IS TO BE MENTIONED THAT THE ABOVE POIN TS WHICH ARE DULY VERIFIABLE FROM THE DOCUMENTARY EVIDENCES FURN ISHED ALONGWITH THE DETAILED SUBMISSIONS MADE BY THE APPE LLANT BEFORE ME WHICH ARE BOTH IN LOGICAL AND CONVINCING. KEEP ING IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED HEREINABOVE. THEREFORE HAVING CONSIDERED THE FACT S AND CIRCUMSTANCES OF THE CASE I AM OF THE VIEW THAT TH E ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.15 28 864/- MADE BY HIM ON THIS COUNT. THE A.O. IS THEREFORE DIRECTED TO DELETE THE ADDITION OF RS.15 28 864/- MADE UNDER SE C. 40A(2)(B). THIS THIS GROUND OF APPEAL IS ALLOWED. 4.1. IN RESPECT OF THE SECOND ADDITION WHICH WAS A LSO MADE BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) THE L D.CIT(A) HAS HELD AS UNDER:- ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 6 - 7.1. HAVING CONSIDERED THE SUBMISSIONS MADE BY TH E A.R. OF THE APPELLANT I AM OF THE OPINION THAT THE A.O . WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 40A(2)(B) OF THE I.T. ACT 1961. IT IS SEEN THAT THE OBSERVATIONS MADE BY THE A.O. I S ONLY ON A PURELY PRESUMPTIVE BASIS. IN THIS CONTEXT THE FOL LOWING MATERIAL ASPECTS NEED TO BE APPRECIATED: (I) AS POINTED OUT BY THE APPELLANT THE A.O. APPEARS T O HAVE THOROUGHLY SCRUTINIZED ALL THE PURCHASES FROM THE RECORDS OF THE THREE SISTER CONCERNS AND APART FROM THE INSTANCES AS SPECIFICALLY IDENTIFIED BY HI M AS REFERRED IN GROUND NO.1 ABOVE HE HAD NOT BEEN ABLE TO LAY HIS HANDS ON ANY OTHER SPECIFIC INSTANCES OF PURCHASES BY THE APPELLANT ON THE BASIS OF WHICH IT COULD BE ALLEGED THAT THE APPELLANT HAD MADE ANY EXCESSIVE PAYMENTS. (II) FURTHER IT MAY BE SEEN THAT THE APPELLANT IS ALSO JUSTIFIED IN POINTING OUT THAT THE SEC. 40A(2)(B) O F THE I.T. ACT CAN BE INVOKED ONLY WHEN THERE IS A CLEAR SATISFACTION ON THE PART OF THE ASSESSING OFFICER T HAT THE EXPENDITURE INCURRED IS EXCESSIVE OR UNREASONAB LE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS AND IT CANNOT BE INVOKED ON THE BASIS OF ANY SURMIS E GUESS OR SUSPICION AGAINST THE ASSESSEE. THE A.O. OUGHT TO HAVE BEEN COGNIZANCE OF THE RELIANCE PLACE D BY THE APPELLANT DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS ON THE CBDT CIRCULAR EXPLAINING THE CLEAR INTENT OF THE PROVISIONS OF SEC. 40A(2)(B). (III) IT MAY BE ALSO SEEN THAT THE APPELLANT HAS QUITE MEANINGFULLY POINTED OUT THAT THE COMPARABLE G.P. AND N.P. EARNED BY THE APPELLANT WAS SUBSTANTIALLY HIGHER THAN THAT EARNED BY ITS THREE SISTER CONCERN S. IF AT ALL ANY EXCESSIVE OR UNREASONABLE PAYMENTS F OR PURCHASES HAD BEEN MADE BY THE APPELLANT TO ITS THR EE SISTER CONCERNS AS ALLEGED BY THE A.O. THE G.P. A ND N.P. OF THE APPELLANT WOULD NOT HAVE BEEN HIGHER TH AN ITS THREE SISTER CONCERNS. (IV) AS IT COULD BE SEEN FROM THE CASE LAW RELIED UPON B Y THE A.O. TO JUSTIFY THE ABOVE REFERRED NOTIONAL ADDITIONAL OF RS.2.27 CRORES APPEARS TO BE NOT ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 7 - RELEVANT AND CANNOT BE APPLIED ON THE FACTS OF THE APPELLANTS CASE. (V) THE VARIOUS JUDICIAL PRONOUNCEMENTS (SUPRA) AND THE CBDT CIRCULAR RELIED UPON BY THE APPELLANT WHICH HAVE CLEARLY HELD THAT THE REASONABLENESS OF ANY EXPENDITURE IS TO BE SEEN FROM THE VIEW POINT OF TH E BUSINESSMAN AND NOT FROM THE VIEW POINT OF THE REVENUE AUTHORITIES ARE SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. 7.1.2. THEREFORE HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE AND TH E RATIO LAID DOWN IN THE JUDICIAL PRONOUNCEMENTS REFERRED AS AB OVE AND FOR THE REASONS GIVEN FOR FIRST GROUND OF APPEAL I AM O F THE CONSIDERED OPINION THAT THE ADDITION OF RS.2 27 04 285/- MADE U/S.40A(2)(B) IS NOT JUSTIFIED. HENCE THE ADDITION MADE BY THE A.O . AT RS.2 27 04 285/- IS DELETED. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. NOW THE MATTER IS FURTHER CARRIED B Y THE REVENUE BY FILING THIS APPEAL. 5. FROM THE SIDE OF THE REVENUE LEARNED DEPARTMENT AL REPRESENTATIVE MR. S.K. GUPTA APPEARED AND SUPPOR TED THE ORDER OF THE ASSESSING OFFICER. HIS MAIN PLANK OF ARGUMENT WAS THAT THE ASSESSEE HAS SIPHONED THE PROFIT BY PAYING HIGHER PURCHASE PRICE OF THE MACHINERIES PURCHASED FROM THE SAID THREE SISTER-CONCERNS. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ARGUED THAT THE ONU S WAS ON THE ASSESSEE TO PLACE ON RECORD THAT THE PAYMENTS MADE TO SISTER-CONCERNS WAS FAIR AND REASONABLE. BY PLACING RELIANCE ON T HE CASE LAWS AS CITED IN THE ASSESSMENT ORDER HE HAS PLEADED TO CONFIRM THE ADDITION. 5.1 FROM THE SIDE OF THE RESPONDENT-ASSESSEE THE LEARNED AUTHORISED REPRESENTATIVE MR. MUKESH M.PATEL APPEARED AND AT T HE OUTSET INFORMED THAT THE ENTIRE ADDITION WAS MERELY ON PRESUMPTION. THE ASSESSING OFFICER HAD NO COMPARABLE CASE IN HIS POSSESSION TO ESTABLISH THAT THE ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 8 - PAYMENTS WERE EXCESSIVE. THE LEARNED AUTHORISED RE PRESENTATIVE HAS ALSO INFORMED THAT FOR A.Y. 2006-07 AND FOR A.Y. 20 07-08 ASSESSMENTS OF THE ASSESSEE-FIRM WERE MADE U/S.143(3) RESPECTIVELY VIDE ORDERS DATED 26.12.2008 AND 21.12.2009 BUT NO SUCH PROVISIONS WE RE INVOKED OR PAYMENTS MADE TOWARDS PURCHASES OF MACHINERY FROM T HOSE SISTER- CONCERNS WERE DISALLOWED. 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 40A( 2)(B) OF THE I.T.ACT CAN ONLY BE INVOKED WHEN THE ASSESSING OFFICER HAS IN HIS POSSESSION SOME COMPARABLE INSTANCES OR A COGENT EVIDENCE TO DEMONSTRATE THAT THE EXPENDITURE TO CONNECTED PERSONS OR SISTER-CONCERNS WERE EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SAID PRODUCT. BUT THIS ASPECT IS ALSO NECESSARY TO CONSIDER THAT WHETHER SUCH AN EXPENDITURE WAS A LEGITIMATE NEED OF THE BUSINESS O F THE ASSESSEE. WE HAVE EXAMINED THE PARTY-WISE PURCHASE MADE BY THE ASSESSEE. ABOUT CADMACH FACTS HAVE REVEALED THAT THE ASSESSING OFFICER HAD TOOK UP FOR VERIFICATION ONLY ONE INSTANCE OF HIGH SPEED ROTARY TABLET MACHINE. THE PURCHASE PRICE WAS COMPARED WITH THE PURCHASE PRICE OF M/S.TORRENT PHARMACEUTICALS PVT.LTD. IT WAS EXPLAINED THAT M/ S.TORRENT HAD PURCHASED THE SAID SPEED ROTARY MACHINE FOR THEIR O WN PURPOSES. AS AGAINST THAT THE MACHINE PURCHASED BY THE ASSESSEE WAS WITH CERTAIN SPECIFICATIONS WHICH WERE TO BE EXPORTED OUT OF COU NTRY. ON THE BASIS OF THE SAID DIFFERENCE THE MAIN ARGUMENT BEFORE US IS THAT UNCOMPARABLES WERE COMPARED. FURTHER IN THE CASE OF KEVIN AND KEMBERT IT WAS INFORMED THAT THE ASSESSING OFFICER HAS COMPARED TH E PURCHASE PRICES ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 9 - WHICH WERE FOR DOMESTIC PHARMACEUTICAL COMPANIES. AS AGAINST THAT THE ASSESSEE PURCHASED THE MACHINERIES WHICH WERE MEANT FOR EXPORT. ON ONE HAND THE ASSESSEE HAS PAID HIGHER PURCHASE PRI CE BUT ON THE OTHER HAND THE ASSESSEE HAS ALSO REALIZED MORE SALE PRIC E. SO THE VEHEMENT CONTENTION IS THAT THE PURCHASE PRICE OF MACHINERY FOR DOMESTIC USE WAS COMPARED WITH THE PURCHASE PRICE OF THE MACHINERY M EANT FOR EXPORT. AGAIN UNCOMPARABLES WERE COMPARED MR. PATEL ARGUE D. IT HAS ALSO BEEN EXPLAINED THAT THE PROFIT MARGIN OF THE SISTER -CONCERNS WAS RANGING FROM 5.68% TO 14% HOWEVER THE ASSESSEES PROFIT MARGIN WAS 15%. IT HAS ALSO BEEN ARGUED THAT THE ASSESSING OFFICER HAS DETERMINED THE MARGIN MERELY ON SURMISES AND THERE WAS NO CORROBOR ATIVE EVIDENCE IN THE POSSESSION OF THE ASSESSING OFFICER TO ESTABLIS H THAT THE SAID MARGIN WAS ACCURATE. IT HAS ALSO BEEN DEMONSTRATED THROUG H A CHART THAT THE PROFIT MARGIN OF THE SISTER-CONCERNS WAS RANGING FR OM 5.68% TO 21.52% BUT THE ASSESSING OFFICER HAS MADE THE ADDITION BY ADOPTING 24.49% WHICH WAS BASELESS AND PREPOSTEROUS. IN THE CASE OF SMT. VASANTIBHAI SHAH VS. CIT 213 ITR 805 (BOM) IT WAS HELD THAT IF THE ADDITION IS PURELY ON SURMISE AND THE ASSESSING OFFICER HAS NO EVIDENCE IN SUPPORT OF THE ADDITION THEN MERELY ON HYPOTHESIS IT WAS W RONG TO HOLD THAT AN EXCESSIVE PRICE WAS PAID TOWARDS PURCHASES. LIKEWI SE IN THE CASE OF CIT VS. DURGAPRASAD MORE 82 ITR 540 (SC) THE HONBLE APEX COURT HAS HELD THAT MERELY ON SUPPOSITION THE ASSESSING OFFICER SHOULD NOT DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE. R ESPECTFULLY FOLLOWING THESE DECISIONS AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT NO MALA FIDE SHOULD H AVE BEEN ATTRIBUTED IN RESPECT OF THE PURCHASES MADE FROM THE SISTER-CONCE RNS. FACTS OF THE CASE HAVE REVEALED THAT WHEREVER THERE WAS A DIFFERENCE IN THE PURCHASE PRICE ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 10 - OF THOSE MACHINERIES IT WAS DUE TO REASON THAT THOS E MACHINERIES WERE MEANT FOR EXPORT PURPOSE HENCE THE COMPARABLE INS TANCES DRAWN BY THE ASSESSING OFFICER DID NOT STAND IN THE EYES OF LAW . WE THEREFORE HOLD THAT THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) WAS CORRECT HENCE HEREBY AFFIRMED. THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7. GROUND NO.2 READS AS UNDER: 2. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI AH MEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION MADE U/S.36(1)(III) OF THE I.T. ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS.3 59 460/- . 7.1. THE CASE OF THE ASSESSING OFFICER WAS THAT AN ADVANCE OF RS.29 55 000/- WAS MADE TO M/S. MARUTI ASSOCIATES B UT NO INTEREST WAS CHARGED. THE ASSESSING OFFICER HAS APPLIED 12% RAT E OF INTEREST AND DETERMINED THE ADDITION AT RS.3 59 460/-. 7.2. BEFORE LEARNED CIT(APPEALS) IT WAS ARGUED THA T THE SAID ADVANCE WAS TOWARDS THE PURCHASE OF LAND. PURCHASE OF LAN D WAS FOR COMMERCIAL EXPEDIENCY AND THE PAYMENT WAS MADE OUT OF THE BUSI NESS REQUIREMENT. CONSIDERING THOSE FACTS THE LEARNED CIT(APPEALS) H AS FOLLOWED THE DECISION OF S.A. BUILDERS VS. CIT(APPEALS) & ANOTHER 288 ITR 01 (SC) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7.3. THE LD.DR MR.S.K.GUPTA HAS SUPPORTED THE FINDI NGS OF THE ASSESSING OFFICER AND ARGUED THAT MERELY A STATEMEN T WAS MADE THAT THE AMOUNT WAS ADVANCED FOR THE PURPOSE OF PURCHASE OF LAND BUT NO CORROBORATIVE EVIDENCE WAS FILED BEFORE THE ASSESSI NG OFFICER. ON THE ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 11 - OTHER HAND THE LEARNED AUTHORISED REPRESENTATIVE M R. MUKESH M.PATEL HAS STATED WITH FULL SENSE OF RESPONSIBILITY THAT T HE TRANSACTION WAS RELATED TO THE BUSINESS REQUIREMENT OF THE ASSESSEE AND THE IMPUGNED CORROBORATIVE EVIDENCE CAN BE FURNISHED IF DEMANDED . 8. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AND CONSIDERING THE RELEVANT DETAILS PLACED ON RECORD WE ARE OF THE C ONSIDERED VIEW THAT PRESENTLY IN THE ABSENCE OF AN EVIDENCE DEMONSTRATI NG THAT THE ADVANCE TO M/S.MARUTI ASSOCIATES WAS IN RESPECT OF PURCHASE OF LAND WE DEEM IT PROPER TO RESTORE THIS GROUND BACK TO THE STAGE OF THE ASSESSING OFFICER SO THAT THE IMPUGNED EVIDENCE CAN BE FURNISHED. BE FORE US A LATEST DECISION OF HON'BLE DELHI HIGH COURT IS CITED VIZ. PUNJAB STAINLESS STEEL INDUSTRIES VS. CIT 196 TAXMAN 404 (DELHI) WHEREIN THE PROPOSITION WAS THAT IF THE INTEREST-FREE ADVANCE WAS MADE TO A SISTER-CONCERN FOR BUSINESS PURPOSES THEN NO DISALLOWANCE WAS WARRANT ED BY INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF THE I.T.ACT. WE THEREFORE DIRECT THE ASSESSING OFFICER TO RE-EXAMINE THIS ISSUE IN THE L IGHT OF THE EVIDENCE YET TO BE FILED AND ALSO IN THE LIGHT OF THE AFOREMENTI ONED PRECEDENT. WITH THESE OBSERVATIONS THIS GROUND OF THE REVENUE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 9. IN THE RESULT REVENUES APPEAL IS PARTLY ALL OWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 9/ 9 /2011. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 9 / 9 /2011 T.C. NAIR SR. PS ITA NO. 2640/AHD/2008 ACIT VS. M/S.CMC MACHINERY ASST.YEAR 2005-06 - 12 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XI AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION..12/08/2011 & 01/09/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12/08/.2011& 01/09/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 9/9/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9/9/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER