DCIT, New Delhi v. M/s Sports Station (India) Pvt. Ltd., New Delhi

ITA 3262/DEL/2011 | 2007-2008
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 326220114 RSA 2011
Assessee PAN AADCS6357C
Bench Delhi
Appeal Number ITA 3262/DEL/2011
Duration Of Justice 9 month(s) 13 day(s)
Appellant DCIT, New Delhi
Respondent M/s Sports Station (India) Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-03-2012
Date Of Final Hearing 14-03-2012
Next Hearing Date 14-03-2012
Assessment Year 2007-2008
Appeal Filed On 16-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SMT. DIVA SINGH JM & SHRI A.N. PAHUJA AM ITA NO.3262 & 3256/DEL/2011 ASSESSMENT YEARS: 2007-08 & 2008- 09 DCIT CIRCLE 9(1) ROOM NO.163 C.R. BUILDING IP ESTATE NEW DELHI V/S . M/S SPORTS STATION (INDIA) PVT. LTD. B-1/F-4 MOHAN CO-OPERATIVE INDUSTRIAL ESTATE MAIN MATHURA ROAD NEW DELHI [PAN : AADCS 6357 C] ITA NO.2936/DEL/2011 ASSESSMENT YEAR: 2007-08 M/S SPORTS STATION (INDIA) PVT. LTD. B-1/F-4 MOHAN CO-OP. INDL. AREA MAIN MATHURA RD. BADARPUR NEW DELHI V/S . DCIT CIRCLE 9(1) ROOM NO.163 C.R. BUILDING IP ESTATE NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI B.K.ANAND & DEEPAK KUKREJA ARS. REVENUE BY SHRI NIRANJAN KOULI DR DATE OF HEARING 15-03-2012 DATE OF PRONOUNCEMENT 30-03-2012 O R D E R A.N.PAHUJA:- THESE THREE APPEALS CROSS APPEALS FOR THE AY 2007 -08 FILED ON 3 RD JUNE 2011 BY THE ASSESSEE AND ON 16 TH JUNE 2011 BY THE REVENUE AGAINST AN ORDER DATED 28 TH FEBRUARY 2011 OF THE LD. CIT(A)-XII NEW DELHI AN D APPEAL FILED BY THE REVENUE FOR THE AY 2008-09 AGAINST AN ORDER DATED 9 TH MARCH 2011 OF THE LD. CIT(A)-XII NEW DELHI RAISE THE FOLLOWI NG GROUNDS:- I.T.A. NOS.2936 3262&3256/DEL./2011 2 I.T.A. NO.3262/D/2011-REVENUE[AY 2007-08] 1(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DELETI NG THE ADDITION OF ` `8 35 40 000/- OUT OF TOTAL ADDITION OF ` ` 9 57 40 000/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNEXPLAINED CASH CREDITS. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASH IN DELETING THE DISALLOWANCE MADE BY THE AO OF ` `78 37 586/- OUT OF TOTAL ADDITION OF ` `81 80 651/- ON ACCOUNT OF INTEREST PAYABLE. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO ` 5 47 596/- MADE BY THE AO U/S 40A(2)(B) OF THE INCOME-TAX ACT 1961. 3. HE APPELLANT CRAVES TO AMEND MODIFY ALTER ADD OR FORGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DU RING THE HEARING OF THE APPEAL. I.T.A. NO. 2936/D/2011-ASSESSEE[AY 2007-08] 1. THE ASSESSEE HAVING FURNISHED CONFIRMATIONS AND RELATED DOCUMENTS IN RESPECT OF SUCH PERSONS AND TRADE CRED ITORS FROM WHOM IT HAS RAISED LOANS AGGREGATING TO ` `8 52 40 000/- THE CIT(A) ERRED IN NOT ACCEPTING THE TOTAL CONFI RMATIONS FILED AND FURTHER ERRED IN DISALLOWING CONFIRMATION S AGGREGATING TO ` `17 00 000/- AND THE CONSEQUENTIAL INTEREST OF ` `18 559/- IN RESPECT THEREOF. 2.THAT THE CIT(A) ERRED IN REJECTING CONFIRMATIONS AGGREGATING TO ` `17 LACS MERELY BECAUSE THE RELATED PARTIES FAILED TO MENTION THEIR RESPECTIVE PAN NO. WITH COM PLETE DISREGARD TO THE FACT THAT THE ASSESSEE COULD NOT B E PENALIZED FOR THE DEFAULT OF SUCH PERSONS FOR THEIR NON COMPLIANCE OF PROVISION OF SUB-SECTION (5A) OF SECT ION 139A OF THE ACT IN RESPECT OF WHICH ASSESSING OFFICER CO ULD HAVE INITIATED ACTION U/S 272B OF THE ACT. 3.THAT THE ORDER OF THE AUTHORITIES BELOW BEING CON TRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL BE ALLOWED. I.T.A. NOS.2936 3262&3256/DEL./2011 3 I.T.A. NO. 3256/D/2011-REVENUE[AY 2008-09] 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DELETI NG THE ADDITION OF ` `10 64 461/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESSIVE INTEREST PAYMENT TO PERSONS CO VERED U/S 40A(2)(B) OF THE INCOME-TAX ACT. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DELETI NG ADDITION OF ` 1 27 558/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION ON COMPUTER ACCESSORIES. 3.THE APPELLANT CRAVES TO AMEND MODIFY ALTER ADD OR FORGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING T HE HEARING OF THIS APPEAL. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL OF THE REVENUE AND GROUND NOS. 1 & 2 IN THE APPEAL OF THE ASSESSEE FOR THE AY 2007-08 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLA RING LOSS OF ` `10 15 51 540/- FILED ON 14 TH NOVEMBER 2007 BY THE ASSESSEE ENGAGED IN THE BUS INESS OF TRADING IN FOOTWEAR APPAREL ACCESSORIES & EQUIPMENT AND SKIN CARE PRODUCTS AFTER BEING PROCESSED ON 14.08.2008 U/S 143(1) OF THE INCOME-TA X ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY W ITH THE SERVICE OF A NOTICE ISSUED U/S 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE RAISED SUBSTANTIAL UNSECURED LOANS DURING THE YEAR. ACCORDINGLY A NO TICE DATED 23 RD JANUARY 2009 U/S 142(1) OF THE ACT WAS SERVED UPON THE ASSESSEE BY THE AO SEEKING DETAILS OF ALL UNSECURED LOANS CONFIRMATIONS AND COPIES OF THE BANK ACCOUNT OF THE SAID CREDITORS. HOWEVER THE ASSESSEE DID NOT RESPOND T O THIS NOTICE. SUBSEQUENTLY ON 10 TH SEPTEMBER 2009 THE ASSESSEE WAS AGAIN REQUESTED TO FURNISH COMPLETE DETAILS EVIDENCE AND GENUINENESS OF TRANSACTIONS I N FRESH UNSECURED LOANS AND THE CASE WAS ADJOURNED TO 22 ND SEPTEMBER 2009. HOWEVER NONE APPEARED ON THE SAID DATE. LATER A LETTER DATED 07.10.2009 W AS FILED ON 23RD NOVEMBER 2009 WHEREIN THE ASSESSEE SUBMITTED AS UNDER:- I.T.A. NOS.2936 3262&3256/DEL./2011 4 AS REGARDS UNSECURED LOANS WE ENCLOSE STATEMENT OF UNSECURED LOAN ACCOUNT. IN RESPECT OF UNSECURED LOAN FROM TR ADE DEPOSIT AND SHAREHOLDERS WE ENCLOSE CONFIRMATION RECEIVED. 2.1 ON PERUSAL OF THE DETAILS THE AO POINTED OUT THAT A LIST SHOWING OPENING AND CLOSING BALANCE IN RESPECT OF 44 PARTIES WAS FI LED WHEREAS CONFIRMATIONS FROM THREE PARTIES NAMELY THE CLASSIC K.B. MATHUR AND MEERA MATHUR WERE FILED FROM WHOM NO FRESH UNSECURED LOANS WERE TAKEN DURING THE YEAR; RATHER ONLY INTEREST WAS CREDITED. NO CONFIRMATION OR OTHER DOCUMENT IN RESPECT OF REMAINING 41 PARTIES WAS FILED. SINCE THE ASSESSEE DID NOT ESTAB LISH GENUINENESS OF THE CREDITS THE AO AGAIN REMINDED THE ASSESSEE VIDE OR DER-SHEET ENTRY DATED 23.11.2009 AND THE CASE WAS ADJOURNED TO 30 TH NOVEMBER 2009. DESPITE SEEKING FURTHER ADJOURNMENT THE ASSESSEE DID NOT E STABLISH GENUINENESS OF THE CREDITORS EVEN UNTIL 14 TH DECEMBER 2009 WHEN THE ASSESSEE MERELY STATED AS UNDER:- 1. DETAILED STATEMENT OF UNSECURED LOANS IS ENCLOS ED. AS REGARDS LOANS RECEIVED FROM THE FOLLOWING PERSON TH EIR CONFIRMATIONS ARE ENCLOSED: MRS. ROMA KHANNA ( ` `25 43 362) MRS. NEERA SEHGAL (` ` 20 LACS). THE CLASSIC (` ` 4 71 677/-) MR. K.B. MATHUR (` ` 9 43 680/-) AND MRS. MEERA MATHUR (` ` 9 43 680/-) ARE ENCLOSED. THE OTHER CONFIRMATIONS ARE AWAITED AND WILL BE FILED IN DUE COURSE. 2.2 SINCE SUFFICIENT OPPORTUNITY HAD ALREADY BEEN ALLOWED AND THE ASSESSEE DID NOT ESTABLISH GENUINENESS OF THE CREDITS NOR EVEN S UBMITTED CONFIRMATIONS OF ALL THE UNSECURED CREDITORS THE AO ADDED AN AMOUNT OF ` ` 9 57 40 000/- IN RESPECT OF THE FOLLOWING FRESH CREDITORS:- S.NO. NAME PARTICULARS OF AMOUNT [IN ` ] TOTAL AMOUNT [IN ` ] AMOUNT OF INTEREST [IN ` ] 1 SH.A.P. SEHGAL 12.07.06 1 00 00 000 04.09.06 2 00 00 000 2204110 I.T.A. NOS.2936 3262&3256/DEL./2011 5 1 00 00 000 2 SH.AMIT MATHUR 03.10.06 25 00 000 25 00 000 1 85 188 3 ANJUM 29.11.06 2 90 000 2 90 000 14 808 4 ANSHUL KUMAR 01.10.06 2 00 000 2 00 000 18 959 5 ARVIND KR. HUF 1.10.06 5 06 000 5 60 000 71 978 6 SH. ASHOK MATHUR 10.06.06 1 00 00 000 1 00 00 000 12 11 301 7 B.G. & GS 27.09.06 3 00 000 3 00 000 9 173 8 ESHA MATHUR 12.02.07 2 00 000 2 00 000 3 945 9 HOODA ENTERPRISES 27.06.06 2 00 000 22.09.06 3 00 000 5 00 000 18 559 10 JYOTI KUMAR 14.08.06 12 40 000 12 40 000 1 10 446 11 KANCHANA ENTERPRISES 30.09.06 3 50 000 3 50 000 26 250 12 MALHOTRA ENTERPRISES 04.04.06 7 00 000 06.05.06 3 77 765 10.05.06 1 22 235 12 00 000 0 13 ORIENTAL ECCENTRICS P. LTD. 01.02.07 20 00 000 29.03.07 25 00 000 45 00 000 40 000 14 RAJESH SEHGAL 12.07.06 1 00 00 000 04.09.06 3 00 00 000 4 00 00 000 37 81 643 15 RIDHI ENTERPRISES 10.04.06. 5 00 000 19.07.06 9 00 000 1 11 498 I.T.A. NOS.2936 3262&3256/DEL./2011 6 1 25 000 21.09.06 1 25 000 20.11.06 1 25 000 28.02.07 1 25 000 16 ROMA KHANNA 13.02.07 25 00 000 25 00 000 48 287 17 S.K. TRADING 05.07.06 5 00 000 5 00 000 0 18 SEHGAL ENTERPRISES P. LTD. 30.11.06 50 00 000 04.01.07 25 00 000 75 00 000 2 25 342 19 SHREENAT FABRICS 30.03.07 4 00 000 4 00 000 0 20 STAR SHOPPERS 05.02.07 2 50 000 10.03.07 2 50 000 5 00 000 2 219 21 TAGS GLOBAL 08.01.07 5 00 000 5 00 000 6 740 22 AMIT KHANNA 05.09.06 10 00 000 10 00 000 90 205 9 57 40 000 81 80 651 2.3 BESIDES THE AO DISALLOWED INTEREST OF ` 81 80 651/- IN RELATION TO THE AFORESAID CREDITORS. 3. ON APPEAL THE LEARNED CIT(A) REDUCED THE ADDIT ION TO ` ` 17 LACS IN THE FOLLOWING TERMS:. 5.2 AT THE APPELLATE STAGE THE APPELLANT MOVED AN APPLICATION UNDER RULE 46A AND FURNISHED THE CONFIRMATION FROM 16 PERSONS OUT OF THE 22 PERSONS ON ACCOUNT OF WHOM ADDITION WERE MADE AS UNEXPLAINED CASH CREDIT. THESE 16 PERSON ARE MEN TIONED HERE UNDER: I.T.A. NOS.2936 3262&3256/DEL./2011 7 S.NO NAME NATURE TOTAL AMT. TOTAL INTEREST REMARKS 1 SH.A.P. SEHGAL UNSECURED LOAN 20 000 000 22 04 110 CONFIRMATION ATTACHED 2 SH. AMIT MATHUR UNSECURED LOAN 25 00 000 1 85 188 CONFIRMATION ATTACHED 3 ANJUM UNSECURED LOAN 2 90 000 14 808 CONFIRMATION ATTACHED 4 ANSHUL KUMAR UNSECURED LOAN 2 00 000 18 959 CONFIRMATION ATTACHED 5 ARVIND KR. HUF UNSECURED LOAN 5 60 000 71 978 CONFIRMATION ATTACHED 6 SH.ASHOK MATHUR UNSECURED LOAN 1 00 00 000 12 11 301 CONFIRMATION ATTACHED 7 BG&GS TRADE DEPOSIT 3 00 000 9 173 CONFIRMATION ATTACHED 8 ESHA MATHUR UNSECURED LOAN 2 00 000 3 945 CONFIRMATION ATTACHED 9 HOODA ENTERPRISES TRADE DEPOSIT 5 00 000 18 559 CONFIRMATION ATTACHED 10 JYOTI KUMAR UNSECURED LOAN 12 40 000 1 10 446 CONFIRMATION ATTACHED 11 KANCHANA ENTERPRISES TRADE DEPOSIT 3 50 000 26 250 CONFIRMATION ATTACHED 12 MALHOTRA ENTERPRISES TRADE DEPOSIT 12 00 000 - CONFIRMATION ATTACHED 13 ORIENTAL ECCENTRICS P. LTD. TRADE DEPOSIT 45 00 000 40 000 CONFIRMATION ATTACHED 14 RAJESH SEGHAL UNSECURED LOAN 4 00 00 000 37 81 643 CONFIRMATION ATTACHED 15 RIDHI ENTERPRISES TRADE DEPOSIT 9 00 000 1 11 498 CONFIRMATION ATTACHED 16 ROMA KHANNA UNSECURED LOAN 25 00 000 48 287 CONFIRMATION ATTACHED TOTAL 85240000 78 56 145 5.3 THESE WERE SENT TO THE ASSESSING OFFICER FOR INVEST IGATION AND FURTHER COMMENTS VIDE OFFICE LETTER DATED 13/01/2011. THE ASSESSING OFFICER IN REPLY TO THE REMAND REPORT VID E HER LETTER DATED 02/02/2011 HAS STATED AS FOLLOWS: 'IN THIS CASE THE ASSESSEE HAS FILED CONFIRMATION FROM 18 PARTIES IN RESPECT OF UNSECURED LOANS. I HAVE GONE THROUGH THE CONFIRMATION FILED BY THE ASSESSEE. THE CONFIRMATION FILED BY THE ASSESSE E ARE ONLY PHOTOCOPY OF STATEMENT OF ACCOUNT OF VARIOUS PERSONS FROM WHO M UNSECURED LOANS I.T.A. NOS.2936 3262&3256/DEL./2011 8 WERE TAKEN IN THE BOOKS OF THE ACCOUNTS OF THE ASSE SSEE. THESE PHOTOCOPIES OF CONFIRMATION ARE COUNTER SIGNED BY T HE PERSONS WHO HAVE PROVIDED UNSECURED LOANS. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS ON VARIOUS OCCASIONS THE ASSESSEE WAS ASKED TO FIL E THE CONFIRMATION OF THESE UNSECURED LOANS WHICH THE ASSESSEE HAS FAILE D TO DO. IF THE ASSESSEE HAS FILED THE CONFIRMATION DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE GENUINENESS OF THE SAME WOULD HAVE BEEN VERIFIED.AT THIS STAGE IT IS NOT POSSIBLE TO VERIFY THE GENUIN ENESS OF THE TRANSACTION OF UNSECURED LOANS THE CREDITWORTHINESS OF THE PER SON ETC BY PERUSING THE CONFIRMATION FILED. FURTHER AT THIS STAGE ALSO THE ASSESSEE HAS SUBMITTED THAT THEY HAVE SENT LETTER FOR CONFIRMATI ON AND THE SAME IS STILL AWAITED WHICH SHOWS THAT THE ASSESSEE IS NOT ABLE T O OBTAIN THE CONFIRMATION FROM THE PERSONS FROM WHOM UNSECURED L OANS WERE TAKEN. THIS SHOWS DOUBT IN THE GENUINENESS IN THE UNSECURE D LOANS. IN VIEW OF THIS THE ADDITION NEEDS TO BE SUSTAINED. IN RESPEC T OF OTHER ADDITIONS THE ASSESSING OFFICER GIVEN DETAILED FINDING IN THE ASS ESSMENT ORDER AND THEREFORE THE SAME ALSO NEEDS TO BE SUSTAINED' 5.4 THE SUBMISSION GIVEN BY THE ASSESSING OFFICER HAS BEEN PERUSED AND THE CONTENTION THAT HAD THE ASSESSEE FILED THE CONFIRMATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE GEN UINENESS OF THE SAME WOULD HAVE BEEN VERIFIED IS NOT ACCEPTABLE FOR IF THE ASSESSEE COULD MANAGE ALL THE CONFIRMATIONS DURING THE ASSESSMENT PROCEEDINGS THERE WAS NO NECESSITY OF FI LING THEM AS ADDITIONAL EVIDENCE UNDER RULE 46A AT THE APPELLATE STAGE. SINCE THESE CONFIRMATIONS ARE CRUCIAL TO THE ADJUDICATION OF THE APPELLANT PROCEEDINGS THEY ARE ADMITTED ON THE GROUND THAT IT TOOK THE APPELLANT SOMETIME TO COLLECT THE CONFIRMATION. 5.5 MOREOVER NOTHING PREVENTED THE ASSESSING OFFIC ER FROM CARRYING OUT THE NECESSARY VERIFICATION SINCE THE APPELLANT HAD FILED 16 CONFIRMATIONS. HOWEVER IT IS SEEN THAT TWO OF THE CONFIRMATION FILED BY THE APPELLANT DO NOT MENTION THE PAN NO OR THE A DDRESS. IN THE ABSENCE OF THE PAN NO. AND THE ADDRESS IT IS NOT PO SSIBLE TO CARRY OUT THE NECESSARY VERIFICATION. 5.6 IT IS SEEN THAT THE APPELLANT HAS NOT FURNISHED THE NECESSARY DETAILS IN THE FOLLOWING CONFIRMATIONS. S.NO NAME OF THE ASSESSEE DEFICIENCY AMOUNT INTEREST 1 HOODA ENTERPRISES NO PAN & ADDRESS 5 00 000 18.559 2 MALHOTRA NO 12 00 000 - I.T.A. NOS.2936 3262&3256/DEL./2011 9 ENTERPRISES ADDRESS TOTAL 17 00 000 18 559 5.7 THUS OUT OF THE TOTAL CONFIRMATION FILED BY TH E APPELLANT AMOUNTING TO RS. 8 52 40 000/- THE CONFIRMATIONS WHICH DO NOT MENTION THE PAN AND ADDRESS AMOUNTING TO RS.1 7 00 000/- IS BEING DISALLOWED. THUS THE VALID CONFIRMATION FILED BY THE APPELLANT COMES TO RS. 8 35 40 0001- (8 52 40 000-17 00 000) THE CONSEQUENTIAL INTEREST PAYABLE ON THIS COMES TO RS. 78 37 586/- (78 56 145 - 18 559). HENCE THE AMOUNT OF CREDIT BALANCE WHICH I S TREATED AS EXPLAINED COMES TO RS. 8 35 40 000/- AND THE AMOUNT OF INTEREST ON THIS WHICH COMES TO RS. 78 37 586/- IS REGARDED AS GENUINE . 5.8 THE ASSESSING OFFICER HAD MADE AN ADDITION OF R S. 9 57 40 000/- AS 'UNEXPLAINED CASH CREDIT' AND HE MADE A FURTHER DIS ALLOWANCE OF RS.81 80 651/- ON ACCOUNT OF INTEREST ON IT. AS THE ASSESSEE HAS GIVEN CONFIRMATIONS AMOUNTING TO RS. 8 35 40 000/- AN ADDITION OF RS. 1 22 00 000/- IS CONFIRMED ON ACCOUNT OF INCOMPLETE CONFIRMATION IN SOME CASES AND ABSENCE OF CONFIRMATION IN OTHER CASES. THE CONSEQUENTIAL DISALLOWANCE OF INTEREST ON THIS WORK S OUT TO BE RS. 3 43 065/- (81 80 651 - 78 37 586). THUS A DISALLOWANCE OF RS. 1 22 00 000/- ON ACCOUNT OF 'UNEXPLAINED CASH CREDIT' AND RS. 3 43 0651- ON ACCOUNT OF INTEREST PAYABLE ON IT IS CONFIRMED. 5.9 THUS OUT OF THE ABOVE CONFIRMATIONS FILED BY T HE APPELLANT WHICH CONTAIN BOTH THE DETAILS I.E. THE PAN AND THE ADDRE SS OF THE CREDITORS ARE ONLY ALLOWED AND THE ABOVE MENTIONED CREDITORS WHO HAVE FILED THE CONFIRMATION AT THE APPELLATE STAGE BUT HAVE NOT FILED THEIR PAN AND ADDRESS IS BEING DISALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A) DELETING THE ADDITION OF ` 8 35 40 000/- ON ACCOUNT OF UNSECURED CREDITS BESIDES INTEREST OF ` 78 37 586/- THEREON WHILE THE ASSESSEE IS IN APPEAL BEFORE US IN RESPECT OF CONFIRMATION OF A DDITION OF ` 17 00 000/- AND INTEREST OF ` 18 559/- THEREON. THE LD. DR WHILE CARRYING US THR OUGH THE IMPUGNED ORDER CONTENDED THAT THE ASSESSEE DID NOT ESTABLISH EITHER CREDITWORTHINESS OF THE AFORESAID CREDITORS OR GENUINENESS OF THE TRANSACTI ONS. EVEN THE LD. CIT(A) WHILE REDUCING THE ADDITION DID NOT RECORD ANY FINDINGS O N THE CREDITWORTHINESS OF THE I.T.A. NOS.2936 3262&3256/DEL./2011 10 CREDITORS AND GENUINENESS OF THE TRANSACTIONS. WHI LE REFERRING TO DECISION IN CIT VS. BIJU PATNAIK 160 ITR 674(SC) THE LD. DR ARGUE D THAT THE AO WAS NOT CONFRONTED WITH THE CONFIRMATIONS FILED BEFORE THE LD. CIT(A). 5. ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE WHILE CARRYING US THROUGH THE IMPUGNED ORDER AND PAGE 18 OF THE PAPER BOOK CONTENDED THAT THE ASSESSEE FILED CONFIRMATION OF M/S MALHOTRA ENTERPRISES REFLECTING THEIR PAN . THEREFORE THE LD. CIT(A) W AS NOT JUSTIFIED IN UPHOLDING THE ADDITION IN RESPECT OF AMOUNT RECEIVED FROM MALHOTR A ENTERPRISES . 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION RELIED UPON BY THE LD. DR. INDISPUTABLY THE AMOUNT OF ` 9 57 40 000/- WAS RECEIVED FROM NEW CREDITORS BY WA Y OF UNSECURED LOANS/TRADE DEPOSITS AND THE ASSESSEE PAID INTEREST THEREON OF ` 81 80 651/-. THERE IS NO DISPUTE BEFORE US IN RESPECT OF ADDITIO N OF ` 1 22 00 000/- AND DISALLOWANCE OF INTEREST THEREON. THE ONLY DISPUTE RAISED BY THE REVENUE BEFORE US IS IN RESPECT OF DELETION OF ADDITION OF ` 8 35 40 000/- AND INTEREST OF ` 78 37 586/- THEREON WHILE THE ASSESSEE IS IN APPEAL AGAINST UPHOLDING OF ADDITION OF ` 17 00 000/- AND INTEREST OF 18 559/-. DESPITE VA RIOUS NOTICES ISSUED U/S 142(1) OF THE ACT BY THE AO ASKING THE ASSESSE E TO ESTABLISH THE GENUINENESS OF FRESH CREDITORS THE ASSESSEE DID NO T FURNISH ALL THE CONFIRMATIONS OR ANY EVIDENCE IN SUPPORT OF GENUINENESS OF THE TR ANSACTIONS WITH THE AFORESAID UNSECURED CREDITORS. EVEN WHEN THE AO REPEATEDLY AS KED THE ASSESSEE TO SUBMIT CONFIRMATIONS OF THE VARIOUS PERSONS THE AS SESSEE DID NOT COMPLY. AS A RESULT ADDITION OF ` 9 57 40 000/- U/S 68 OF THE ACT WAS MADE BESIDES DISALLOWANCE OF INTEREST OF ` 81 80 651/-. ON APPEAL THE LD. CIT(A) DELETED THE ADDITION OF ` 8 35 40 000/- AND INTEREST OF ` 78 37 586/- ONLY ON THE BASIS OF CONFIRMATIONS FROM 14 PARTIES WITHOUT RECORDING AN Y FINDINGS ON THE CREDITWORTHINESS OF THESE FOURTEEN CREDITORS OR EVE N GENUINENESS OF THE TRANSACTIONS. THE LD. CIT(A) ALSO DID NOT RECORD AN Y FININGS IN RESPECT OF CREDITWORTHINESS OF THE TWO CREDITORS OF ` 17 LACS AND GENUINENESS OF THE TRANSACTIONS WITH THEM WHILE UPHOLDING THE SAID ADD ITION. THERE IS NOTHING TO I.T.A. NOS.2936 3262&3256/DEL./2011 11 SUGGEST THAT THE LD. CIT(A) UNDERTOOK ANY INDEPEND ENT ENQUIRIES RELATING TO THE SAID 16 CREDITORS IN ORDER TO ASCERTAIN THEIR CREDI TWORTHINESS. THE LD. CIT(A) DID NOT ELABORATE BY ANALYZING FACTS OF EACH OF THE CRE DITOR NOR REFERRED TO ANY MATERIAL AS TO HOW CREDITWORTHINESS OF THESE CREDIT ORS AND GENUINENESS OF THE TRANSACTIONS IS ESTABLISHED WHEN NEITHER SOURCES O F THEIR INCOME OR COPIES OF THEIR BANK ACCOUNTS WERE SUBMITTED BEFORE THE AO AN D NOR EVEN THESE CREDITORS WERE PRODUCED BEFORE THE AO. THIS APPROACH OF THE L D. CIT(A) IS NOT IN ACCORDANCE WITH LAW. IT IS WELL ESTABLISHED THAT ONUS IS ON THE ASSESSEE TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF THE CRED ITORS APART FROM GENUINENESS OF THE TRANSACTIONS. MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR IS NOT ENOUGH AS HELD IN SHANKAR INDUSTRIES VS. CIT (1978) 114 ITR 6 89 (CAL);C. KANT & CO. VS. CIT (1980) 126 ITR 63 (CAL);PRAKASH TEXTILE AGENCY VS. CIT (1980) 121 ITR 890 (CAL); ORIENTAL WIRE INDUSTRIES PVT. LTD. VS. CIT ( 1981) 131 ITR 685 (CAL);CIT VS UNITED COMMERCIAL & INDUSTRIAL CO. PVT. LTD. (1991) 187 ITR 596 599 (CAL.); AND CIT VS. KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820. EVEN MERE FILING OF CONFIRMATORY LETTERS DOES NOT DISCHARGE THE ONUS TH AT LIES ON THE ASSESSEE AS HELD IN BHARATI PVT. LTD. VS. CIT (1978 111 ITR 951 (CAL);CIT VS. W.J. WALKAR & CO. (1979) 117 ITR 690 694 (CAL)AND CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. (P) LTD. (1991) 187 ITR 596 599 (CAL).MOREOVER MERE FURNISHING OF THE PARTICULARS OR PAYMENT BY ACCOUNT PAYEE CHEQUE IS N OT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE AS CONCLUDED IN CIT VS. PRECISION FINANCE CO. PVT. LTD. (1994) 208 ITR 465 470 471 (CAL); NIZAM WOOL AGENCY VS.CIT (1992) 193 ITR 318 320 (ALL)AND CIT VS. UNI TED COMMERCIAL & INDUSTRIAL CO. (P) LTD. 187 ITR 596 (CAL.). HONBLE APEX COURT IN CIT VS. P. MOHANAKALA 291 ITR 278(SC) OBSERVED THAT A BARE READING OF SECTION 68 SUGGESTS THAT THER E HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HA S TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEES OFFER NO EXPLANATI ON ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS; OR THE EX PLANATION OFFERED BY THE ASSESSEES IN THE OPINION OF THE ASSESSING OFFICER I S NOT SATISFACTORY IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-T AX AS THE INCOME OF THE ASSESSEES OF THAT PREVIOUS YEAR. THE EXPRESSION 'TH E ASSESSEES OFFER NO EXPLANATION' MEANS WHERE THE ASSESSEES OFFER NO PRO PER REASONABLE AND I.T.A. NOS.2936 3262&3256/DEL./2011 12 ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CR EDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESS EES AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATE RIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. 6.1 HONBLE JURISDICTIONAL HIGH COURT IN INDUS VALLEY PROMOTERS LTD. VS. CIT 305 ITR 202(DEL.) HELD AS UNDER: IT IS WELL-SETTLED THAT THE ASSESSEE MUST DISCHARG E THE BURDEN OF PROVING THE IDENTITY OF THE CREDITORS AND ALSO TO GIVE THE SOUR CE OF THE DEPOSITS. IN OTHER WORDS THE CREDITWORTHINESS OF THE DEPOSITORS MUST BE ESTABLISHED TO THE SATISFACTION OF THE ASSESSING OFFICER. WHERE THERE IS AN UNEXPLAINED CASH CREDIT IT IS OPEN TO THE ASSESSING OFFICER TO HOLD THAT IT IS INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE ASSESSING OFFICER TO SHO W THAT INCOME IN QUESTION COMES FROM ANY PARTICULAR SOURCE. 6.2 IN THE INSTANT CASE THE ASSESSEE DID NOT C ARE TO SUBMIT EVEN CONFIRMATIONS OF THE SIXTEEN CREDITORS BEFORE THE AO AND THERE IS NO MATERIAL ON RECORD ESTABLISHING CREDITWORTHINESS OF THESE CREDITORS OR GENUINENESS OF TRANSACTIONS NOR THE LD. CIT(A) RECORDED ANY FINDINGS ON THESE A SPECTS. IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS AND CONSIDERING TH E FACTS AND CIRCUMSTANCES IN THE INSTANT CASE BEFORE US A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) WITHOUT EVEN AN ALYZING AS TO HOW THE CREDITWORTHINESS OF EACH OF THE SIXTEEN CREDITORS OR GENUINENESS OF THE TRANSACTIONS WITH THEM IS ESTABLISHED PARTICULARL Y WHEN DESPITE SUFFICIENT OPPORTUNITY ALLOWED BY THE AO THE ASSESSEE DID N OT EVEN CARE TO SUBMIT THEIR CONFIRMATIONS. THE IMPUGNED ORDER ON THE ISSUE INVO LVED IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATU RAL JUSTICE NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS RE ASONED ORDER WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHOR ITY TO THE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. HONBLE DELHI HIGH CO URT IN THEIR DECISION IN VODAFONE ESSAR LTD. VS. DRP 196 TAXMAN423(DELHI) HELD THAT W HEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND I.T.A. NOS.2936 3262&3256/DEL./2011 13 GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER I S CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. THE REQUIREMENT OF RECORDING OF REA SONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CO NCEPT OF FAIR PROCEDURE. THE REQUIREMENT OF RECORDING OF REASONS BY THE QUASI-JU DICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT INTRODUCES CLARITY CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MA Y REITERATE THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB (1995)1SCC 760(SC)]. AS IS APPARENT THE IMPUGNED ORDER OF THE LD. CIT(A) SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED IN THE GROUND NO. 1 IN THE APPEAL OF THE REVENUE AND GROUND NOS.1 & 2 IN THE APPEAL OF THE A SSESSEE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID O BSERVATIONS AND VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THOSE REFERRED TO ABOVE AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A) SHALL PAS S A SPEAKING ORDER BRINGING OUT CLEARLY AS TO HOW CREDITWORTHINESS OF EACH OF T HE SIXTEEN CREDITORS AND GENUINENESS OF THE TRANSACTIONS WITH THEM IS ESTAB LISHED. WITH THESE OBSERVATIONS GROUND NO. 1 IN THE APPEAL OF THE REV ENUE AND GROUND NOS.1 & 2 IN THE APPEAL OF THE ASSESSEE ARE DISPOSED OF. 7.. GROUND NO.2 IN THE APPEAL OF THE REVENUE FOR T HE AY 2007-08 AND GROUND NO.1 IN THEIR APPEAL FOR THE AY 2008-09 RELA TE TO DISALLOWANCE U/S 40A(2)(A) OF THE ACT. DURING THE COURSE OF ASSESSME NT PROCEEDINGS FOR THE AY 2007-08 THE AO NOTICED THAT THE ASSESSEE PAID INTE REST @15% PER ANNUM ON THE BORROWINGS FROM THE PERSONS COVERED U/S 40A(2)( B) OF THE ACT. TO A QUERY BY THE AO AS TO WHY THE INTEREST PAID @15% PAID BE N OT CONSIDERED AS EXCESSIVE I.T.A. NOS.2936 3262&3256/DEL./2011 14 AND UNREASONABLE THE ASSESSEE REPLIED THAT RATE OF INTEREST WAS REASONABLE SINCE THE CITI BANK AT THE RELEVANT TIME GRANTED WO RKING CAPITAL CARRYING INTEREST @14.5% PER ANNUM WHILE THE UNSECURED LOAN CARRIED HIGHER RISK ELEMENT. HOWEVER THE AO DID NOT ACCEPT THESE SUBMISSIONS O F THE ASSESSEE AND DISALLOWED AN AMOUNT OF ` 5 47 596/- IN TERMS OF PROVISION OF SECTION 40A(2)( A) OF THE ACT CONSIDERING INTEREST @12% AS REASONABLE IN THE AY 2007-08. 8. SIMILARLY IN THE AY 2008-09 THE AO DISALLO WED AN AMOUNT OF ` 10 64 461/- IN TERMS OF PROVISION OF SECTION 40A(2)(A) OF THE A CT CONSIDERING INTEREST @12% AS REASONABLE. 9. ON APPEAL THE LEARNED CIT(A) DELETED THE DISAL LOWANCE IN THE AY 2007-08 IN THE FOLLOWING TERMS:- 6.3 THE SUBMISSION GIVEN BY THE APPELLANT AND THE OBJECTIONS OF THE ASSESSING OFFICER HAVE BEEN CONSIDERED. IN ORD ER TO MAKE A DISALLOWANCE U/S 40A(2)(B) IT IS NECESSARY THAT THE ASSESSING OFFICER SHOULD ESTABLISH THAT THE BENEFITS GIVEN TO THE RELATED PARTIES ARE MORE THAN THE FAIR MARKET VALUE. IF THE APPELL ANT IS MAKING PAYMENTS TO OTHER PERSONS @15% THEN THERE IS NO SPE CIAL FAVOUR WHICH IS BEING GIVEN TO THE RELATED PARTIES. FURTH ER THE ASSESSING OFFICER HAS NOT BEEN ABLE TO ESTABLISH AS TO WHAT W AS THE MARKET RATE OF INTEREST. IT IS FURTHER SEEN THAT THE APPE LLANT HAS PAID AN INTEREST OF 14.5% TO THE BANK THUS THERE IS NO JU STIFICATION IN MAKING A DISALLOWANCE OF `5 47 596/- U/S 40A(2)(B). THE ADDITION OF `5 47 596/- IS HEREBY DELETED. 10. SIMILARLY IN THE AY 2008-09 THE LD. CIT(A) D ELETED THE DISALLOWANCE HOLDING AS UNDER:- 4.3 THE SUBMISSION GIVEN BY THE APPELLANT AND THE OBJECTIONS OF THE ASSESSING OFFICER HAVE BEEN CONSIDERED. IN ORDE R TO MAKE A DISALLOWANCE U/S 40A(2)(B) IT IS NECESSARY THAT THE ASSESSING OFFICER SHOULD ESTABLISH THAT THE BENEFITS GIVEN TO THE RELATED PARTIES ARE MORE THAN THE FAIR MARKET VALUE. IF THE APPELLA NT IS MAKING PAYMENTS TO OTHER PERSONS @ 15% THEN THERE IS NO SP ECIAL FAVOUR WHICH IS BEING GIVEN TO THE RELATED PARTIES. FURTHE R THE ASSESSING OFFICER HAS NOT BEEN ABLE TO ESTABLISH AS TO WHAT W AS THE MARKET RATE OF INTEREST. IT IS FURTHER SEEN THAT THE APPEL LANT HAS PAID A INTEREST OF 14.5% TO THE BANK AND THIS BEING AN UNS ECURED LOAN WILL I.T.A. NOS.2936 3262&3256/DEL./2011 15 CERTAINLY COMMAND A HIGHER RATE OF INTEREST THUS' THERE IS NO JUSTIFICATION IN MAKING A DISALLOWANCE OF RS.10 64 4611- U/S 40A(2)(B). THE ADDITION OF RS.10 64 4611- IS HEREBY DELETED. 11. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A) .THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF TH E LD. CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE T HROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE IMPUGNED ORDER WE FIND THAT THE AO DID NOT BRING ANY MATERIAL ON RECORD FOR HOLDING THAT THE PAYMENT OF INTEREST @15% PER ANNUM TO UNSECURED CREDITORS WAS EXCESSIVE AND HOW INTEREST @12% PA WAS REASONABLE OR REPRESENTED FAIR MARKET VALUE FOR THE SERVICES A ND FACILITIES.BEFORE PROCEEDING FURTHER WE MAY REFER TO THE PROVISIONS OF SECTIO N 40A(2) (A) OF THE ACT THE RELEVANT PORTION OF WHICH READS AS FOLLOWS : '40A(2)(A). WHERE THE ASSESSEE INCURS ANY EXPENDITU RE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REF ERRED TO IN CLAUSE (B) OF THIS SUB-SECTION AND THEASSESSING OFFICER IS OF THE OPI NION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MAD E OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEF IT DERIVED BY OR ACCRUING TO HIM THEREFROM SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' 12.1 A MERE GLANCE AT THE AFORESAID PROVISION R EVEALS THAT THE EXPENDITURE MENTIONED THEREIN IS IN RELATION TO ANY PERSON REFE RRED TO IN CLAUSE (B) OF THE SUB- SECTION AND THE EXPENDITURE HAS TO BE CONSIDERED IN RELATION TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHIC H THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESSEE THEREFROM. H ONBLE GUJRAT HIGH COURT OBSERVED IN CORONATION FLOUR MILLS VS. ACIT 188 TAX MAN 257 THAT IN RELATION TO THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40 A(2)(A) OF THE ACT A PLAIN READING OF THE PROVISION REVEALS THAT WHERE AN ASSE SSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS REQUIRED TO BE MADE OR HAS BEEN MADE TO ANY PERSON REFERRED TO IN CLAUSE ( B ) OF SECTION 40A(2) OF THE ACT AND THE ASSESSING I.T.A. NOS.2936 3262&3256/DEL./2011 16 OFFICER IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO ( A ) FAIR MARKET VALUE OF THE GOODS SERVICES OR FACIL ITIES FOR WHICH THE PAYMENT IS MADE; OR ( B ) THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE; OR ( C ) THE BENEFITS DERIVED BY OR ACCRUING TO THE ASSESS EE ON RECEIPT OF SUCH GOODS SERVICES OR FACILITIES THEN THE ASSESS ING OFFICER SHALL NOT ALLOW AS A DEDUCTION SO MUCH OF THE EXPENDITURE AS IS SO CONSI DERED BY THE ASSESSING OFFICER TO BE EXCESSIVE OR UNREASONABLE. THEREFORE IT BECOMES APPARENT THAT THE ASSESSING OFFICER IS REQUIRED TO RECORD A FINDING A S TO WHETHER THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE IN RELATION TO ANY ONE OF THE THREE REQUIREMENTS PRESCRIBED WHICH ARE INDEPENDENT AND ALTERNATIVE T O EACH OTHER. ALL THE THREE REQUIREMENTS NEED NOT EXIST SIMULTANEOUSLY. IN A GI VEN CASE IF ANY ONE CONDITION IS SHOWN TO BE SATISFIED THE PROVISION CAN BE INVOK ED AND APPLIED IF THE FACTS SO WARRANT. THUS ONLY SO MUCH OF THE EXPENSES IF PAI D TO A PERSON REFERRED TO IN CLAUSE (B) ARE ALLOWABLE WHICH ARE FOUND TO BE NOT EXCESSIVE AND UNREASONABLE AND THE EXCESSIVE OR UNREASONABLE PORTION HAS TO BE DISALLOWED. IT IS WELL SETTLED THAT THE PROVISIONS OF SECTION. 40A(2)(A ) OF THE ACT CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST CONCLUDED THAT THE E XPENDITURE WAS EXCESSIVE OR UNREASONABLE AS HELD IN THE CASE OF UPPER INDIA ST EEL MANUFACTURING AND ENGINEERING CO. PRIVATE LIMITED 117 ITR 569(SC). IN THE INSTANT CASE THERE IS NOTHING TO SUGGEST THAT THE AO FOUND THE PAYMENT OF INTEREST EXCESSIVE HAVING REGARD TO EITHER ( A ) FAIR MARKET VALUE OF THE SERVICES OR FACILITIES; OR ( B ) THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE; O R ( C ) THE BENEFITS DERIVED BY OR ACCRUING TO THE ASSESSEE ON RECEIPT OF SUCH SERVICE S OR FACILITIES. NOT A WHISPER HAS BEEN MADE BY THE AO IN RESPECT OF ANY OF THESE THREE INGREDIENTS IN HIS ASSESSMENT ORDERS. THERE IS NOTHING TO SUGGEST THA T THE AO EVER BROUGHT ANY MATERIAL ON RECORD ON THIS ASPECT BEFORE CONCLUD ING THAT INTEREST @15% WAS EXCESSIVE OR UNREASONABLE NOR EVEN CITED ANY COMPA RABLE INSTANCES IN RESPECT OF THE FAIR MARKET VALUE OF THE INTEREST ON UNSECUR ED LOANS. IN VIEW THE FOREGOING ESPECIALLY WHEN THERE IS NO MATERIAL ON RECORD TO HOLD THAT PAYMENT OF INTEREST @15%PA TO UNSECURED CREDITORS WAS EXCESSIV E WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A). THEREF ORE GROUND NO. 2 IN THE APPEAL I.T.A. NOS.2936 3262&3256/DEL./2011 17 OF THE REVENUE FOR THE AY 2007-08 & GROUND NO.1 IN THEIR APPEAL FOR THE AY 2008-09 ARE DISMISSED. 13. GROUND NO.2 IN THE APPEAL OF THE REVENUE FOR T HE AY 2008- 09 RELATES TO DISALLOWANCE OF DEPRECIATION OF ` `1 27 558/-ON COMPUTER ACCESSORIES LIKE PRINTER & SCANNER. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE CLAIM ED DEPRECIATION @60% ON PRINTER SCANNER AND UPS PURCHASED FOR 3 58 761/- . SINCE THESE EQUIPMENTS WERE NOT PART OF COMPUTER THE AO RESTRICTED THE DE PRECIATION @ 15% AND DISALLOWED THE EXCESSIVE CLAIM OF ` ` 1 27 558/-. 14. ON APPEAL THE CIT(A) ALLOWED THE CLAIM IN THE FOLLOWING TERMS:- 5.1 THE APPELLANT ON THE OTHER HAND HAS STATED TH AT PRINTER AND SCANNERS ARE INTEGRAL PART OF THE COMPUTER AND THER EFORE CLAIMED DEPRECIATION @ 60%. THE SUBMISSION GIVEN BY THE APP ELLANT HAS BEEN CONSIDERED PRINTER AND SCANNERS ARE INTEGRAL PART OF THE COMPUTERS AND THE APPELLANT IS ALLOWED TO CLAIM DEP RECIATION @ 60%. RELIANCE IS PLACED ON THE FOLLOWING TWO DECISI ONS. ITO VS SAMIRAN MAJUMDAR (208 ITR [AT] 74) (TKOL) AN D ACIT VS CONTAINER CORPORATION OF INDIA (ITA NO 2859 AND 36801DE1L07) 5.2 IT IS FURTHER SEEN THAT THE APPELLANT HAS PURC HASED UPS AND HAS CLAIMED DEPRECIATION @ 60% THOUGH DEPRECIATION ON PRINTERS AND SCANNERS IS ALLOWABLE @ 60%. UPS IS NOT AN INTEGRAL PART OF THE COMPUTER SYSTEM AS OBSERVED BY HON'BLE TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. VS DCIT (ITAT DEL) 111 TTJ 498. THEREFORE THE APPELLANT IS ENTITLED TO DEPRECIATION ON COMPUT ER PERIPHERALS EXCEPT UPS @ 60%.THUS THIS GROUND IS DECIDED AS ABOVE. 15. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON THE DECISION DATED 31 ST AUGUST 2010 OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. BSES Y AMUNA POWERS LTD. IN I.T.A. NO.1267/D/2010. I.T.A. NOS.2936 3262&3256/DEL./2011 18 16. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. BSES RAJDHANI POWERS LTD. IN I.T. APPEAL NO. 1267 (DELHI) OF 2010 IN THEIR DECISION DATED 31-8- 2010 WHILE ADJUDICATING A SIMILAR ISSUE HELD AS UN DER: 'WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS PRINTERS SCANNERS AND SER VER ETC. FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT THE COMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WITHOUT THE COMPUTER. CO NSEQUENTLY AS THEY ARE THE PART OF THE COMPUTER SYSTEM THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60 PER CENT.' 16.1 EARLIER KOLKATA BENCH IN THE CAS E OF INCOME TAX OFFICER VS. SAMIRAN MAJUMDAR (2006) 98 ITD 119 HELD THAT THE PRINTER AND SCANNER ARE INTEGRAL PART OF THE COMPUTER SYSTEM AND THEREFORE ENTITLED TO HIGHER RATE OF DEPRECIATION @ . 60 PER CENT . A SIMILAR VIEW WAS TAKEN BY THE DELHI BENCH IN THEI R DECISION IN THE CASE OF CONTAINER CORPORATION OF IN DIA LTD. VS. ACIT(2009) 30 SOT 284 (DELHI). IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY CONT RARY DECISION NOR ANY OTHER MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERE NT VIEW IN THE MATTER WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A). THEREFORE GROUND NO.2 IN THE APPEAL OF THE REVENUE FOR THE AY 2008-09 IS DISMISSED. 17. GROUND NO.3 IN THE APPEAL OF THE ASSESSEE BEIN G GENERAL IN NATURE DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDI TIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.3 IN THE TWO APPEALS OF THE REVENUE ACCORDINGLY ALL THESE GROUNDS ARE DISMI SSED. 18. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 19. IN THE RESULT APPEAL OF THE REVENUE FOR T HE AY 2007-08 IS PARTLY ALLOWED I.T.A. NOS.2936 3262&3256/DEL./2011 19 WHILE APPEAL OF THE ASSESSEE FOR THE AY 2007-08 IS ALLOWED BUT BOTH FOR STATISTICAL PURPOSES WHILE THE APPEAL OF THE REVENU E FOR THE AY 2008-09 IS DISMISSED. SD/- SD/- (DIVA SINGH) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) COPY OF THE ORDER FORWARDED TO :- 1. M/S SPORTS STATION INDIA) PVT. LTD. B-1/F-4 MO HAN CO-OP. INDL. AREA MAIN MATHURA RD. BADARPUR NEW DELHI. 2. DCIT CIRCLE 9(1) ROOM NO.163 C.R. BUILDING NEW DELHI 3. CIT CONCERNED 4. CIT(A)-XII NEW DELHI 5. DR ITAT G BENCH NEW DELHI 6. GUARD FILE. TRUE COPY BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI ORDER PRONOUNCED IN OPEN COURT