ACIT, New Delhi v. M/s. R. K. Global (Finance) Pvt. Ltd., New Delhi

ITA 3452/DEL/2010 | 2003-2004
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 345220114 RSA 2010
Assessee PAN AAACR4440A
Bench Delhi
Appeal Number ITA 3452/DEL/2010
Duration Of Justice 1 year(s) 2 month(s) 1 day(s)
Appellant ACIT, New Delhi
Respondent M/s. R. K. Global (Finance) Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 16-09-2011
Date Of Final Hearing 18-08-2011
Next Hearing Date 18-08-2011
Assessment Year 2003-2004
Appeal Filed On 15-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NOS. 3450 TO 3453/DEL/2010 ASSESSMENT YEARS: 2001-02 TO 2004-05 ACIT VS. R.K. GLOBAL (FINANCE) PVT. LTD. CENTRAL CIRCLE-8 5 2 ND FLOOR SAGAR APARTMENTS ROOM NO. 356 6-TILAK MARG NEW DELHI. ARA CENTRE JHANDEWALAN AAACR4440A EXTN. NEW DELHI. (APPELLANT) (RESPONDENT) & ITA NO. 3454/DEL/2010 ASSESSMENT YEAR: 2007-08 ACIT VS. R.K. GLOBAL (FINANCE) PVT. LTD. CENTRAL CIRCLE-8 5 2 ND FLOOR SAGAR APARTMENTS ROOM NO. 356 6-TILAK MARG NEW DELHI. ARA CENTRE JHANDEWALAN AAACR4440A EXTN. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDESH GARG CIT(DR) RESPONDENT BY : SH. SANTOSH PATHAK CA ORDER PER C.L. SETHI J.M. ALL THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST FIVE SEPARATE ORDERS DATED 14.5.2010 PASSE D BY LD. ITA NOS. 3450 TO 3454/D/2010 2 CIT(A) IN THE MATTER OF AN ASSESSMENT MADE BY THE A O U/S 143(3)/153A OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE A.Y. 2001-02 2002-03 2003-04 2004-05 AND ASSESSM ENT ORDER MADE U/S 143(3) BY THE AO FOR THE A.Y. 2007-0 8 RESPECTIVELY. 2. ITA NO. 3450/DEL/2010 A.Y. 2001-02 IN THE A.Y. 2001-02 THE REVENUE HAS DISPUTED THE L D. CIT(A)S ORDER IN DELETING THE ADDITION OF RS. 9 25 160/- MADE BY THE AO ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON ADVANCES MADE BY THE ASSESSEE. 3. A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT W AS CONDUCTED AT THE BUSINESS/RESIDENTIAL PREMISES OF T HE ASSESSEE ON 24.1.2007. THE PRESENT ASSESSEE BELON GS TO M2K GROUP OF CASES. THE GROUP OF CASES OF M2K WERE CENTRALIZED WITH THE PRESENT AO I.E. ACIT CENTRAL CIRCLE 8 NEW DELHI. NOTICE U/S 153A WAS ISSUED TO THE ASSES SEE ON 25.10.2007. THE ASSESSEE FILED ITS RETURN OF INCOM E ON 15.7.2008 DECLARING TOTAL INCOME AT RS. NIL. CERTA IN QUESTIONNAIRES WERE ISSUED TO THE ASSESSE ON 10.11. 2008 AND 24.11.2008 ALONG WITH NOTICES U/S 143(2) AND 142(1) OF THE ACT ITA NOS. 3450 TO 3454/D/2010 3 BY THE AO. IN RESPONSE TO THE ABOVE NOTICES ISSUED THE ASSESSEES AUTHORIZED REPRESENTATIVE ATTENDED ASSES SMENT PROCEEDINGS FROM TIME TO TIME AND FILED VARIOUS DET AILS AND INFORMATION. 4. DURING THE YEAR THE ASSESSEE HAS DECLARED BUSI NESS INCOME OF RS. 34 883/- WHICH WERE SET OFF AGAINST B ROUGHT FORWARD LOSSES. IT WAS NOTICED BY THE AO THAT DURI NG THE YEAR THE ASSESSEE HAD SHOWN LOANS AND ADVANCES GIVEN TO THE TUNE OF RS. 86 23 472/- IN THE BALANCE SHEET. FROM THE LOANS AND ADVANCES GIVEN INTEREST INCOME OF RS. 5 06 365 /- WERE SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUN T. IT WAS NOTICED BY THE AO THAT NO INTEREST INCOME WERE SHOW N FROM ALL THE PARTIES TO WHOM LOANS AND ADVANCES WERE GIVEN E XCEPT THE FOLLOWING THREE PARTIES: (I) RAMESH KR. BHAGCHA NDKA RS. 4 45 905/- (II) GOPAL SARAF {@ 15%} RS. 2 09 452/- (III) SHASHI SINGH {@ 15%} RS. 5 94 753/-. IN RESPECT OF FOLLOWING PARTIES NO INTEREST INCOME ON LOANS AND ADVANCES W ERE SHOWN BY THE ASSESSEE: (I) BISWAJEET CREATION RS. 1 95 000/- (SINCE 8.1.2001) (II) DINESH KR. SINGHANIA & CO. R S. 50 00 000/- (SINCE 7.12.2000) (III) H.M. CREATIONS RS. 3 00 000/- (SINCE 1.4.2000) (IV) BINOD KR. BHAGCHA NDKA HUF ITA NOS. 3450 TO 3454/D/2010 4 RS. 8 23 942/- (SQUARED UP ON 31.3.01- OUTSTANDING FROM 1.4.00). 5. IT WAS NOTICED BY THE AO THAT ASSESSEE IS A COMP ANY CARRYING ON THE BUSINESS OF THE NBFC ACTIVITIES. T HE AO THEREFORE ISSUED A SHOW CAUSE NOTICE TO THE ASSESS EE AS TO WHY INTEREST INCOME ON LOANS AND ADVANCES GIVEN SHO ULD NOT BE ADDED TO THE ASSESSEES TOTAL INCOME AS THE ASSE SSEE BEING AN NBFC COMPANY IS SUPPOSED TO HAVE CHARGED INTEREST ON LOANS AND ADVANCES GIVEN IN THE ORDINAR Y COURSE OF BUSINESS ACTIVITIES. AFTER CONSIDERING THE ASSESSE ES EXPLANATION THE AO WORKED OUT AN INTEREST INCOME O F RS. 9 25 162/- RECEIVABLE ON THE LOANS AND ADVANCES GIV EN TO FOLLOWING PARTIES: - S.NO NAME OF THE COMPANY/ PERSON TO WHOM LOANS/ADVANCES GIVEN AMOUNT PERIOD INTEREST EARNED @ 15% 1. BISWAJEET CREATION 1 95 000/- 82 DAYS 6 571/- 2. DINESH KUMAR SINGHANIA & CO. 50 00 000/- 113 DAYS 7 50 000/- 3. H.M. CREATIONS 3 00 000/- 365 DAYS 45 000/- 4. BINOD KR. BHAGCHANDKA HUF 8 23 942/- 365 DAYS 1 23 591/- ITA NOS. 3450 TO 3454/D/2010 5 TOTAL 9 25 162/ - 6. THE AFORESAID AMOUNT OF RS. 9 25 162/- WAS THUS ADDED TO THE ASSESSEES TOTAL INCOME ON ACCOUNT OF INTER EST INCOME ACCRUED ON THE LOANS AND ADVANCES GIVEN BY THE ASSE SSEE. 7. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A). 8. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT BES IDES ENGAGED IN THE BUSINESS OF NBFC THE ASSESSEE WAS A LSO ENGAGED IN THE BUSINESS OF TRADING MAINLY IN THE G ARLIC BEETULNUTS AUDIO CASSETTES FAX MACHINES ETC. AND IN PROVIDING CONSULTANCY SERVICES ON LICENSES. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT ASSESSEE WAS ALSO AC TING AS C&F AGENT FOR PEKON ELECTRONICS LTD. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD SHOWN INTEREST ON L OANS AND ADVANCES GIVEN IN THE COURSE OF CARRYING ON NBFC AC TIVITIES BUT NO INTEREST WAS CHARGED ON ADVANCES WHICH WAS GIVEN AS TRADE ADVANCES FOR VARIOUS BUSINESS ACTIVITIES OTHE R THAN NBFC IN AS MUCH AS THERE WAS NO STIPULATION TO CHAR GE INTEREST ON THE LOANS AND ADVANCES SO GIVEN AS TRAD E ADVANCES. ITA NOS. 3450 TO 3454/D/2010 6 9. THE DETAILS OF THE ADVANCES GIVEN TO VARIOUS PAR TIES ON WHICH INTEREST WAS NOT CHARGED WERE GIVEN AS UNDER: - A) BISWAJEET CREATION : THIS MONEY WAS ADVANCED IN THIS YEAR TO AN ENTITY OWNED BY FILMSTAR MR. BISWAJEET. THIS MONEY WAS ADVANCED FOR MAKING A FILM SERIAL ON GREAT PATRIOT SUBHASH CHAND BOSE. THIS ACT COULD NOT BE MATERIALIZE SO THEY REFUNDED PART OF THE MONEY AND BALANCE IS STILL UNPAID WHICH BISWAJEET CREATION CLAIMED TO AS SPENT ON THE ACTIVITY. B) DINESH KUMAR SINGHANIA & COMPANY : THEY WERE A SHARE BROKER FIRM. THIS MONEY WAS ADVANCED FOR TRADING INTO SHARES ON 7 TH DECEMBER 2000. THIS IS A SHARE BROKING FIRM. DINESH KUMAR SINGHANIA WAS A BIG SHARE BROKER FIRM BUT HE CAUGHT A BIG SHARE SCAM AND OUR MONEY GOT STRUCK INTO IT. C) H.M. CREATION : THIS MONEY WAS ADVANCED PRIOR TO 1994 TO AN ENTITY OWNED BY FILM ACTRESS HEMA MALINI FOR MAKING AN AUDIO ALBUM. THIS VENTURE COULD NOT WORK AND IS NOT REFUNDED BY THE PARTY- NOT TILL DATE. D) BINOD KUMAR BHAGCHANDKA (HUF) : THIS AMOUNT IS SHOWN UNDER THE HEAD ITA NOS. 3450 TO 3454/D/2010 7 LOAN. INITIALLY MONEY WAS GIVEN IN 1994 AS ADVANCE FOR TRADING IN COMMODITIES. SUBSEQUENTLY IT WAS TRANSFERRED INTO LOAN ACCOUNT. BINOD KUMAR WAS NOT IN A POSITION TO REPAY THE PRINCIPLE. THERE WAS NO ISSUE OF INTEREST. AS THIS WAS NOT A LOAN FOR INTEREST SO THERE WAS NO ISSUE OF MAKING PROVISION. 10. THE ASSESSEE ALSO POINTED OUT THAT ADVANCES TO M/S H.M. CREATIONS AND BINOD KUMAR BHAGCHANDKA (HUF) WE RE GIVEN PRIOR TO THE DATE WHEN THE ASSESSEE COMPANY G OT REGISTERED AS NBFC. THE OTHER TWO ADVANCES IN THE NAME OF DINESH KUMAR SINGHANIA & CO. AND BISWAJEET CREATION S THOUGH GIVEN AFTER THE COMPANY WAS REGISTERED AS NB FC BUT WERE GIVEN ON ACCOUNT OF TRADING ACTIVITIES AS PER DETAILS GIVEN. 11. AFTER CONSIDERING THE AOS ORDER AND ASSESSEES SUBMISSION THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AND HOLDING AS UNDER: - 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUBMISSIONS OF THE APPELLANT HAVE ALSO BEEN GONE THROUGH VERY CAREFULLY. THE AO HAS ITA NOS. 3450 TO 3454/D/2010 8 ADDED RS. 9 25 162/- TO THE TOTAL INCOME OF THE APPELLANT BY CALCULATING INTEREST @ 15% ON THE LOANS AND ADVANCES FROM WHICH THE APPELLANT HAS NOT SHOWN ANY INTEREST INCOME. THE REASON GIVEN BY AO TO MAKE THIS ADDITION IS THAT THE APPELLANT ITSELF HAS ADMITTED THAT IT IS A NON BUSINESS FINANCE COMPANY AND THEREFORE ON EVERY ADVANCE IT IS SUPPOSED TO EARN INTEREST. ON THE OTHER HAND THE APPELLANT HAS SUBMITTED THAT IT IS TRUE THAT IT IS AN NBFC BUT APART FROM NBFC IT IS ALSO DEALING IN VARIOUS OTHER ACTIVITIES AND THE ADVANCES SO GIVEN ARE NOT PART OF NBFC BUT ARE TRADING ADVANCES OR ADVANCES FOR SOME OTHER BUSINESS PURPOSES. IT HAS ALSO BEEN ABLE TO ESTABLISH THAT TWO OF THE ADVANCES NAMELY ADVANCES IN THE NAME OF H.M. CREATIONS AND BINOD KUMAR BHAGCHANDKA HUF WERE GIVEN WHEN THE APPELLANT COMPANY WAS NOT EVEN REGISTERED AS NBFC. THE OTHER TWO ADVANCES NAMELY TO DINESH KUMAR SINGHANIA AND COMPANY AND BISWAJEET CREATION THOUGH WERE GIVEN AFTER THE APPELLANT COMPANY GOT ITA NOS. 3450 TO 3454/D/2010 9 REGISTERED AS NBFC YET THE ADVANCES WERE NOT RELATED TO NBFC ACTIVITIES BUT RELATED TO OTHER BUSINESS IN WHICH THE APPELLANT IS ENGAGED. FROM THE EVIDENCES PRODUCED THE CONTENTION OF THE APPELLANT IS FOUND CORRECT THAT ALL THESE FOUR ADVANCES ARE NOT IN ANY WAY CONNECTED WITH NBFC ACTIVITY OF THE APPELLANT AND IT IS ALSO ESTABLISHED THAT APPELLANT IS MAINLY ENGAGED IN OTHER ACTIVITIES AND THE NBFC ACTIVITY IS NOT A MAJOR ACTIVITY. THUS ON THIS GROUND THE ACTION OF AO OF CHARGING INTEREST @ 15% AND TREATING THE SAME AS INCOME OF THE APPELLANT CANNOT BE UPHELD. 2.3.1 IT IS ALSO WORTH MENTIONING THAT THIS IS A SEARCH RELATED ASSESSMENT AND NO EVIDENCE WHATSOEVER HAS BEEN FOUND DURING THE COURSE OF SEARCH THAT APPELLANT HAD ACTUALLY EARNED INTEREST FROM THESE ADVANCES. THE AO HAS NOT MENTIONED ANY MATERIAL OR ANY STATEMENT ETC. RECORDED DURING THE COURSE OF SEARCH TO SUGGEST EVEN THAT FROM THESE ADVANCES THE APPELLANT HAS EARNED INCOME BUT NOT OFFERED IN ITS PROFIT AND LOSS ACCOUNT. THUS IN ABSENCE OF ANY EVIDENCE IT CANNOT ITA NOS. 3450 TO 3454/D/2010 10 BE PRESUMED THAT APPELLANT HAS CHARGED INTEREST AND AT THE SAME TIME THERE IS NO PROVISION IN THE ACT TO COMPUTE INTEREST ON DEEMING BASIS EXCEPT IN THE CASE OF MONEY ADVANCED AS PART OF NBFC ACTIVITY. 2.3.2. FURTHER THERE MAY BE A CASE OF INTEREST DISALLOWANCE IF ASSESSEE HAS CLAIMED SOME INTEREST EXPENDITURE ON THE LOAN BORROWED WHEN THERE ARE INTEREST FREE ADVANCES AND LINKED TO SUCH BORROWINGS. BUT IN THE INSTANT CASE THERE IS NO CLAIM OF ANY INTEREST PAYMENT BY THE APPELLANT. THUS ON THAT GROUND ALSO THERE CANNOT BE ANY DISALLOWANCE. 2.3.3. EVEN OTHERWISE IT IS ALSO SEEN THAT THE ORDER WAS PASSED IN THIS CASE ORIGINALLY U/S 143(3) AND IN THAT ORDER ALSO NO ADDITION WAS MADE BY THE AO FOR INTEREST INCOME EARNED ON SUCH ADVANCES AND DURING THE COURSE OF SEARCH NO EVIDENCE CONTRARY HAS BEEN FOUND. 2.3.4. THUS FROM ANY ANGLE THERE IS NO CASE OF ANY ADDITION OF INTEREST INCOME ON THE AMOUNTS SO ADVANCED BY THE APPELLANT COMPANY. THUS IN MY OPINION THERE IS NO JUSTIFICATION OF ITA NOS. 3450 TO 3454/D/2010 11 ADDITION OF INTEREST OF RS. 9 25 162/- IN THE CASE OF APPELLANT FOR THIS YEAR. THE GROUND NO. 1 IN ALL ITS FOUR PARTS IS THEREFORE DECIDED IN FAVOUR OF THE APPELLANT AND THE ADDITION OF RS. 9 25 162/- IS DIRECTED TO BE DELETED. 12. HENCE THE REVENUE IS IN APPEAL BEFORE US. 13. THE LD. DR HAS MERELY RELIED UPON THE AOS ORDE R AND REITERATED THE BASIS GIVEN BY THE AO IN MAKING THE ADDITION. 14. THE LD. COUNSEL FOR THE ASSESSEE REITERATED ALL THOSE CONTENTIONS AND SUBMISSIONS SUBMITTED BEFORE THE LD . CIT(A) AND ALSO DRAWN OUR ATTENTION TO THE VARIOUS DETAILS AND PAPERS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 16. THE REVENUE HAS TAKEN A PLEA THAT CIT HAS NOT G IVEN ANY OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A OF THE ACT. ITA NOS. 3450 TO 3454/D/2010 12 17. ON BEING ASKED TO PRODUCE EVIDENCE REGARDING TH E NATURE OF LOANS AND ADVANCES GIVEN TO THE DINESH KU MAR SINGHANIA & CO. THE ASSESSEE FURNISHED CORRESPONDE NCES WITH THE SAID PARTY BEFORE THE LD. CIT(A). IT IS THUS NOT A CASE WHERE THE ASSESSEE HAS FURNISHED CORRESPONDENCES WI TH M/S DINESH KUMAR SINGHANIA & COMPANY ON ITS OWN BUT IT IS A CASE WHERE THE SAME WERE ASKED FOR BY THE LD. CIT(A ). THEREFORE RULE 46A DOES NOT APPLY TO THE DETAILS A SKED FOR BY THE LD. CIT(A) TO DECIDE THE MATTER PROPERLY. ALL OTHER DETAILS CONSIDERED BY THE LD. CIT(A) WERE FILED BEFORE THE AO. HENCE THE OBJECTION RAISED BY THE REVENUE IS NOT JUSTIFIE D. 18. IN THE DETAILS OF LOANS AND ADVANCES AMOUNTING TO RS. 86 23 475/- THE ASSESSEE HAS SHOWN THE LOAN OF RS. 16 28 147/- AND ADVANCES OF RS. 69 95 328/-. AGAIN ST THE ADVANCES IT IS STATED BY THE ASSESSEE THAT THESE A RE RECOVERABLE IN CASH OR IN KIND FOR VALUE TO BE RECE IVED. THE ASSESSEE HAS ALSO GIVEN THE DETAILS TO SHOW THAT TH E ADVANCES WERE NOT GIVEN IN THE ORDINARY COURSE OF BUSINESS O F NBFC BUT WERE GIVEN IN THE ORDINARY COURSE OF ASSESSEES OTH ER BUSINESS ACTIVITIES. THE AO HAS NOT BEEN ABLE TO P OINT OUT ANY ITA NOS. 3450 TO 3454/D/2010 13 MATERIAL OR EVIDENCE TO SHOW AND ESTABLISH THAT THE RE WAS A STIPULATION ABOUT INTEREST TO BE RECEIVED BY THE AS SESSEE ON ADVANCES GIVEN. THE AO HAS ALSO NOT MADE ANY ENQUI RY FROM THE RESPECTIVE PARTIES TO ASCERTAIN AS TO WHETHER A NY INTEREST WAS PAYABLE BY THEM TO THE ASSESSEE ON THE ADVANCES GIVEN BY THE ASSESSEE TO THEM. 19. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE FURNISHED ALL THE DETAILS ABOUT THE ASSESSEES BUSI NESS CARRIED OUT DURING THE YEAR VIDE ASSESSEES REPLY GIVEN IN REPLY TO THE AOS QUESTIONNAIRE DATED 12.11.2008. THE PRESENT ASSESSMENT IS MADE U/S 153A OF THE ACT AFTER A REGU LAR ASSESSMENT WAS ORIGINALLY MADE U/S 143(3) OF THE AC T ON 25.3.2003. IN THE REGULAR ASSESSMENT MADE BY THE A O NO ADDITION ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED O N ACCOUNT OF ADVANCES GIVEN BY THE ASSESSEE WERE MADE. IN THE P RESENT ASSESSMENT THE AO HAS NOT POINTED OUT ANY MATERIAL WHATSOEVER ON THE BASIS OF WHICH IT COULD BE SAID T HAT INTEREST HAD ACCRUED TO THE ASSESSEE ON THE ADVANCES GIVEN B Y HIM TO THE PARTIES IN QUESTION. THE LD. CIT(A) HAS EXAMIN ED THE NATURE OF THE ADVANCES GIVEN BY THE ASSESSEE TO VAR IOUS PARTIES AND ON EXAMINATION HE FOUND THAT THE ADVA NCES IN ITA NOS. 3450 TO 3454/D/2010 14 QUESTIONS WERE NOT IN ANY WAY CONNECTED WITH ASSESS EES NBFC ACTIVITY. IT IS ALSO PERTINENT TO NOTE THAT A SSESSEE HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF INTEREST EX PENSES PAID ON ANY AMOUNT BORROWED FOR THE PURPOSE OF ASSE SSEES BUSINESS AND THEREFORE THE QUESTION OF DISALLOWAN CE OF ANY INTEREST PAID ON THE LOAN BORROWED DOES NOT ARISE. SINCE THERE BEING NO AGREEMENT TO RECEIVE ANY INTEREST ON THE A DVANCES GIVEN BY THE ASSESSEE IN THE COURSE OF ASSESSEES B USINESS ACTIVITIES OTHER THAN NBFC ACTIVITY THE QUESTION O F CHARGING INTEREST @ 15% ON DEEMING BASIS CANNOT ARISE. IT I S NOT THE CASE OF THE AO THAT ALL THE PARTIES IN QUESTION HAS PAID INTEREST TO THE ASSESSEE BUT THE ASSESSEE HAS FAILED TO DISC LOSE THE SAME IN ITS ACCOUNTS. 20. FOR THE REASONS GIVEN ABOVE WE ARE IN AGREEMEN T WITH LD. CIT(A) IN DELETING THE ADDITION OF RS. 9 25 162 /- MADE BY THE AO ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO THE ABOVE MEN TIONED FOUR PARTIES. WE THEREFORE UPHELD THE ORDER OF L D. CIT(A) AND REJECT THIS GROUND RAISED BY THE REVENUE. ITA NOS. 3450 TO 3454/D/2010 15 21. THE DEPARTMENT HAS ALSO TAKEN A GROUND THAT LD. CIT(A) HAS ERRED IN ALLOWING SET OFF OF UNABSORBED DEPRECI ATION OF RS. 8991/- AND BUSINESS LOSS OF RS. 3 35 578/- AS A CON SEQUENCE OF HIS DECISION OF DELETING THE ADDITION OF NOTIONA L INTEREST OF RS. 9 25 160/-. 22. THIS ASPECT OF THE MATTER HAS BEEN DECIDED BY T HE LD. CIT(A) BY OBSERVING AS UNDER: - 3.1 IN VIEW OF THE DECISION GIVEN IN GROUND NO. 1 THE INCOME WILL BE REDUCED TO NIL WHICH IS SAME AS RETURNED INCOME. THEREFORE THERE IS NO CASE OF GIVING ANY SET OFF OF UNABSORBED DEPRECIATION OR BUSINESS LOSS ETC. IN VIEW OF THE DECISION GIVEN FOR GROUND NO. 1 THIS GROUND BECOMES INFRUCTUOUS AND THEREFORE DISMISSED. 23. ON PERUSAL OF THE LD. CIT(A)S ORDER WE FIND T HAT NO SUCH SET OFF OF UNABSORBED DEPRECIATION OF BUSINESS LOSS HAS BEEN ALLOWED BY THE CIT(A) IN AS MUCH AS THERE WAS NO PO SITIVE INCOME ASSESSABLE IN THE PRESENT ASSESSMENT YEAR AF TER THE ADDITION OF RS. 9 25 162/- MADE BY THE AO STOOD DEL ETED. WE THEREFORE HOLD THAT THE GROUND RAISED BY THE REVEN UE IS MISCONCEIVED AND IS THUS REJECTED. ITA NOS. 3450 TO 3454/D/2010 16 24. ITA NO. 3451/DEL/2010 : - IN THIS APPEAL PERTAINING TO THE A.Y. 2002-03 THE EFFECTIVE GROUNDS TAKEN BY THE REVENUE ARE AS UNDER: - 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THIS CASE THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 10 23 129/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST ON BUSINESS ADVANCES. 2. WHILE DELETING THE ADDITION THE LD. CIT(A) HAS NOT GIVEN OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A. 25. IN THIS ASSESSMENT YEAR ALSO THE AO MADE AN AD DITION OF RS. 10 23 129/- ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON THE FOLLOWING LOANS AND ADVANCES GIVEN BY THE ASSES SEE: S.NO. NAME OF THE COMPANY/PERSON TO WHOM LOANS/ADVANCES GIVEN AMOUNT PERIOD INTEREST EARNED @ 15% RS. 1. BISWAJEET CREATION 2 40 000/- 363 DAYS 35 802/- 2. DINESH KUMAR SINGHANIA & CO. 50 00 000/- 365 DAYS 7 50 000/- 3. H.M. CREATIONS 3 00 000/ - 365 DAYS 45 000/ - 4. TYCOONS OVERSEAS 30 00 000/- 11 00 000/- 90 DAYS 180 DAYS 1 10 958/- 81 369/- TOTAL 10 23 129/ - 26. ON AN APPEAL LD. CIT(A) DELETED THE ADDITION A FTER FOLLOWING HIS ORDER FOR THE A.Y. 2002-03 IN SO FAR AS FIRST THREE ITA NOS. 3450 TO 3454/D/2010 17 AMOUNTS OF ADVANCES GIVEN BY THE ASSESSEE ARE CONCE RNED. THE ADDITION ON ACCOUNT OF INTEREST ALLEGEDLY ACCRU ED ON ADVANCES GIVEN TO M/S TYCOON OVERSEAS HAS BEEN DELE TED BY THE LD. CIT(A) AFTER OBSERVING THAT ADVANCE GIVEN T O M/S TYCOON OVERSEAS WAS NOT GIVEN AS A PART OF NBFC ACT IVITY BUT WAS GIVEN FOR A POSSIBLE JOINT VENTURE WITH THE SAI D PARTY. THE LD. CIT(A) HAS ALSO DELETED THE ADDITION FOR THE RE ASON THAT THERE WAS NO MATERIAL TO ESTABLISH THAT ASSESSEE HA D CHARGED INTEREST ON THE ADVANCES SO GIVEN. THE LD. CIT(A) ALSO OBSERVED THAT ASSESSEE HAS NOT CLAIMED ANY INTEREST EXPENDITURE ON ANY LOAN BORROWED FOR THE PURPOSE OF BUSINESS AND THEREFORE QUESTION OF DISALLOWANCE OF INTERES T PAID COULD NOT ARISE. 27. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFU LLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 28. IN SO FAR AS ADVANCES GIVEN TO (I) BISWAJET CRE ATION (II) DINESH KUMAR SINGHANIA & COMPANY AND (III) H.M. CRE ATIONS ARE CONCERNED THE CASE IS IDENTICAL TO THE A.Y. 20 01-02 WHERE IDENTICAL ADDITION OF INTEREST ALLEGEDLY ACCR UED ON ADVANCES GIVEN TO AFORESAID THREE PARTIES WERE DELE TED BY THE ITA NOS. 3450 TO 3454/D/2010 18 CIT(A) AND THE ORDER OF LD. CIT(A) HAS BEEN UPHELD BY US VIDE THIS COMMON ORDER. WITH REGARD TO THE ADVANCES GIV EN TO M/S TYCOON OVERSEAS WE FIND THAT THE SAID AMOUNT WAS G IVEN FOR POSSIBLE JOINT VENTURE AGREED TO BE STARTED WITH TH E SAID FIRM BUT THE SAME COULD NOT BE MATERIALIZED. OUT OF THE AMOUNT OF RS. 31 LAKH GIVEN IN THE MONTH OF AUGUST 2001 SUM OF RS. 20 LAKH WERE REFUNDED BY THE SAID PARTY IN THE MONTH O F OCTOBER 2001 AND THE BALANCED SUM OF RS. 11 LAKH WERE AGREE D TO BE REFUNDED AT A LATER DATE. THE AO HAS NOT BEEN ABLE TO POINT OUT ANY MATERIAL TO SHOW AND ESTABLISH THAT ASSESSE E HAD TO RECEIVE INTEREST ON THE AFORESAID ADVANCE GIVEN TO M/S TYCOON OVERSEAS AND THUS INTEREST HAD ACCRUED TO THE ASSE SSEE DURING THE YEAR UNDER CONSIDERATION. THE AO HAS ME RELY MADE THE ADDITION ON SURMISES BY HOLDING THAT ASSES SEE BEING AN NBFC COMPANY IS DEEMED TO HAVE EARNED INT EREST INCOME FROM THE LOANS AND ADVANCES GIVEN IN THE ORD INARY COURSE OF BUSINESS WITHOUT EXAMINING AND VERIFYING THE NATURE OF LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO M/S TYCOON OVERSEAS. IN THE CONFIRMATION OF ACCOUNT GIVEN BY M/S TYCOON OVERSEAS NO INTEREST PAYABLE BY THE TYCOON OVERSEA S TO THE ASSESSEE COMPANY IS MENTIONED WHICH GOES TO PROVE THAT THERE WAS NO AGREEMENT TO PAY ANY INTEREST ON THE A DVANCES ITA NOS. 3450 TO 3454/D/2010 19 GIVEN. IN THE COURSE OF APPELLATE PROCEEDINGS THE LD. CIT(A) ASKED THE ASSESSEE TO PRODUCE EVIDENCES REGARDING T HE LOANS/ADVANCES GIVEN TO M/S TYCOON OVERSEAS AS A BU SINESS ADVANCE AND NOT RELATED TO NBFC ACTIVITY AND IN RE PLY THERETO THE ASSESSEE FURNISHED A COPY OF LETTER DATED 1.10. 2001 FROM THE SAID PARTY NAMELY M/S TYCOON OVERSEAS STATIN G AS UNDER: SH. SUSHIL KUMAR DHANCHOLIA DIRECTOR OF THE COMPANY VISITED OUT KOLKATA OFFICE ON 25 TH SEP. 2001 AND DISCUSSION WAS HELD ON A POSSIBLE JOINT VENTURE (JV) OPPORTUNITY AT NEW DELHI. WE HAD SHORTED OUT VARIOUS ISSUES RELATING TO THE JV BUT I WAS NOT IN AGREEMENT OF FOLLOWING TWO ISSUES: - 1. RENT PAYABLE ON OFFICE PREMISES. 2. CREDIT TERM FOR TWO MONTHS. WE HAVE CONVEYED HIM THAT WE SHALL REVERT BACK AFTER DISCUSSING THE JV WITH OUR MARKETING TEAM. AFTER A THROUGH DISCUSSION WE CAME TO A CONCLUSION THAT WE ARE NOT COMFORTABLE WITH THE ABOVE MENTIONED CONDITIONS HENCE WE REGRET TO INFORM YOU THAT WE WILL NOT BE IN A POSITION TO GO AHEAD WITH THE JOINT VENTURE. IN THE LIGHT OF THE ABOVE MENTIONED DEVELOPMENT WE ARE REFUNDING YOU RS. 20 LACS WITH DETAIL AS MENTIONED UNDER: - DATE CH.NO. AMOUNT ITA NOS. 3450 TO 3454/D/2010 20 1/10/2001 737083 RS. 10 00 000/- 5/10/2001 737084 RS. 10 00 000/- BALANCE SUM OF RS. 11 LACS OUT OF TOTAL SUM OF RS. 31 LACS WILL BE REFUNDED AT A LATER DATE. 29. AFTER CONSIDERING ALL THESE DETAILS THE LD. CI T(A) DELETED THE ADDITION IN SO FAR AS INTEREST ON ADVANCES GIVE N TO M/S TYCOON OVERSEAS IS CONCERNED. 30. AFTER CONSIDERING THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE AND THE REASONS GIVEN BY THE LD. CIT(A) IN DELETING THE ADDITION WE FIND THAT THE LD. CIT(A) HAS RIGHT LY DELETED THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST AMOUNTING TO RS. 10 23 129/- MADE BY THE AO ON BEING INTEREST ACCRUE D ON ADVANCES GIVEN TO AFORESAID FOUR PARTIES. WE THER EFORE UPHELD THE ORDER OF LD. CIT(A) IN DELETING THE ADDI TION OF RS. 10 23 129/- MADE BY THE AO. 31. THE DEPARTMENTAL ALSO TAKEN A GROUND THAT LD. C IT(A) HAS NOT GIVEN AN OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A WHILE DELETING THE ADDITION. ITA NOS. 3450 TO 3454/D/2010 21 32. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 33. IN THIS CASE ON BEING ASKED BY THE LD. CIT(A) TO PRODUCE EVIDENCES REGARDING THE NATURE OF LOANS AND ADVANCE S GIVEN TO M/S TYCOON OVERSEAS THE ASSESSEE FURNISHED A CO PY OF LETTER DATED 11.10.2001 FROM M/S TYCOON OVERSEAS. IT IS THUS NOT A CASE WHERE ADDITIONAL EVIDENCES WERE FURNISHE D BY THE ASSESSEE OF ITS OWN BEFORE THE LD. CIT(A) BUT IT I S A CASE WHERE THE LD. CIT(A) DIRECTED THE ASSESSEE TO PRODU CE OR FURNISH DETAILS ABOUT THE NATURE OF LOAN GIVEN TO M /S TYCOON OVERSEAS AND HENCE QUESTION OF APPLYING RULE 46A TO THE PRESENT CASE DOES NOT ARISE. 34. ITA NO. 3452/D/10 : IN THIS APPEAL PERTAINING TO THE A.Y. 2003-04 THE E FFECTIVE GROUNDS TAKEN BY THE REVENUE ARE AS UNDER: - 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THIS CASE THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 12 47 303/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST ON BUSINESS ADVANCES. ITA NOS. 3450 TO 3454/D/2010 22 2. WHILE DELETING THE ADDITION LD. CIT(A) HAS NOT GIVEN OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A. 3. THE ORDER OF CIT(A) IS ERRONEOUS AND OF TENABLE IN LAW AND ON FACTS. 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 35. IN THIS APPEAL PERTAINING TO THE A.Y. 2003-04 THE AO MADE THE ADDITION OF RS. 11 66 243/- ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON THE VARIOUS ADVANCES/LOANS GIV EN TO FOLLOWING PERSONS BY GIVING A REASON THAT THE ASSES SEE BEING A NBFC COMPANY IS DEEMED TO HAVE EARNED INTEREST F ROM THE LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINE SS BUT ASSESSEE HAS NOT DISCLOSED THE SAME IN THE REGULAR RETURN OF INCOME: - S.NO. NAME OF THE COMPANY/PERSON TO WHOM LOANS/ADVANCES GIVEN AMOUNT PERIOD INTEREST EARNED @ 15% 1. BISWAJEET CREATION 2 40 000/- 363 DAYS 35 802/- 2. DINESH KUMAR SINGHANIA & CO. 50 00 000/- 365 DAYS 7 50 000/- 3. H.M. CREATIONS 3 00 000/- 365 DAYS 45 000 /- 4. TYCOON OVERSEAS 11 00 000/- 365 DAYS 1 65 000/ - 5. BINOD KR. BHAGCHANDKA 8 23 942/- 365 DAYS 1 23 591/- 6. GOBIND PRASAD BHALOTIA 5 00 000/- 228 DAYS 46 850/- ITA NOS. 3450 TO 3454/D/2010 23 TOTAL 11 66 243/ - 36. ON AN APPEAL LD. CIT(A) DELETED THE ADDITION B Y GIVING THE REASON THAT THE FIRST FIVE ADVANCES LISTED ABOV E ARE THE SAME AS WERE IN THE IMMEDIATE PREVIOUS YEARS PERTAI NING TO THE A.Y. 2001-02 & 2002-03 AND AS SUCH FOR THE RE ASONS GIVEN BY HIM IN EARLIER YEARS THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED WAS UNJUSTIFI ED. WITH REGARD TO THE NEW ADVANCE GIVEN TO GOBIND PRASAD BH ALOTIA IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THIS ADVANCE WAS GIVEN FOR THE PURPOSE OF TRADING IN IRO N SCRAP AND THIS ADVANCE WAS SUBSEQUENTLY REFUNDED BY THE P ARTY. IT WAS FURTHER SUBMITTED THAT THERE WAS NO STIPULATION OR AGREEMENT TO CHARGE ANY INTEREST ON THE SAID AMOUNT . IN THE COURSE OF APPELLATE PROCEEDINGS THE LD. CIT(A) ASK ED THE ASSESSEE TO PRODUCE EVIDENCE REGARDING THE NATURE O F LOAN/ADVANCES GIVEN TO GOBIND PRASAD BHALOTIA IN RE PLY TO WHICH THE ASSESSEE FURNISHED A COPY OF LETTER DATED 15.3.2006 FROM GOBIND PRASAD BHALOTIA STATING AS UNDER: - WE REGRET THAT INSPITE OF VARIOUS LOTS OF IRON SCRAP OFFERED TO YOU AT VARIOUS PLANT. YOU HAVE NOT COME FORWARD TO ACCEPT ANY OF THESE OFFERS. OUR OFFERS WERE ALWAYS CONSIDERED BY ITA NOS. 3450 TO 3454/D/2010 24 YOU AS ON HIGHER SIDE. SINCE THING ARE NOT MATERIALIZING INSPITE OF OUR BEST EFFORTS. WE ARE RETURNING HEREWITH YOUR MONEY BY CHEQUE NO. 454853 OF RS. 5 00 000/-. HOPE TO ASSOCIATE WITH YOU IN ANY NEW VENTURE. 37. IN THE LIGHT OF HIS VIEW TAKEN IN EARLIER YEAR AND IN THE LIGHT OF THE FACT THAT THE ADVANCE GIVEN TO GOBIND PRASAD BHALOTIA WAS A BUSINESS ADVANCE ON WHICH NO INTERES T WAS AGREED TO BE PAID TO THE ASSESSEE THE LD. CIT(A) D ELETED THE ADDITION. THE LD. CIT(A) ALSO OBSERVED THAT AO POI NTED OUT NO MATERIAL OR EVIDENCE TO SUGGEST THAT THE ASSESSEE H AD ACTUALLY EARNED INTEREST ON THESE ADVANCES. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDU CTION ON ACCOUNT OF INTEREST EXPENSES PAID ON THE LOAN BORRO WED AND AS SUCH QUESTION OF DISALLOWANCE OF INTEREST PAID D OES NOT ARISE. 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 39. AFTER CONSIDERING THE REASONS GIVEN BY THE LD. CIT(A) IN DELETING THE ADDITION WE FIND THAT THE LD. CIT(A) HAS DELETED ITA NOS. 3450 TO 3454/D/2010 25 THE ADDITION RIGHTLY IN AS MUCH AS THERE WAS NO AGR EEMENT TO RECEIVE INTEREST FROM THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO VARIOUS PERSONS IN THE COURSE OF BUSINE SS ACTIVITIES OTHER THAN THE NBFC ACTIVITY. THE ISSUE INVOLVED IN THIS YEAR IS QUITE IDENTICAL AND SIMILAR TO THAT IN VOLVED IN EARLIER ASSESSMENT YEARS. IN THE LIGHT OF THE REASONS GIVE N IN THE A.Y. 2001-02 & 2002-03 AND IN THE LIGHT OF THE FAC T THAT THE ADVANCE GIVEN TO GOBIND PRASAD BHALOTIA WAS AS BUSI NESS ADVANCE FOR TRADING IN IRON SCRAP AND THERE BEING NO AGREEMENT TO RECEIVE ANY INTEREST THERE UPON WE AR E INCLINED TO UPHOLD THE ORDER OF LD. CIT(A) IN DELETING THE A DDITION ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON VARIOUS AD VANCES GIVEN BY THE ASSESSEE. 40. IN THIS ASSESSMENT YEAR THE AO ALSO MADE THE AD DITION OF RS. 81 060/- BEING DIFFERENT OF INTEREST RATE CH ARGED FROM SHRI RAMESH KUMAR BHAGCHANDKA. IT HAS BEEN OBSERVE D BY THE AO THAT ASSESSEE CHARGED INTEREST @ 15% FROM GO PAL SARAF & SHASHI SINGH WHEREAS INTEREST CHARGED FROM SH. RAMESH KUMAR BHAGCHANDKA ONE OF THE DIRECTOR OF TH E ASSESSEE COMPANY WAS ONLY 12%. THE AO THEREFORE ITA NOS. 3450 TO 3454/D/2010 26 BROUGHT THE DIFFERENCE OF 3% AS INCOME IN THE HANDS OF THE ASSESSEE. 41. ON AN APPEAL THE LD. CIT(A) DELETED THE ADDITI ON BY OBSERVING THAT THE LOAN GIVEN TO OTHER PERSONS @ 15 % WAS GIVEN IN EARLIER YEARS THOUGH THE LOAN TO SH. RAMES H KUMAR BHAGCHANDKA WAS GIVEN IN THE CURRENT YEAR WHEN RATE OF INTEREST HAD FALLEN. 42. AFTER CONSIDERING THE FACTS OF THE CASE AND THE REASONS GIVEN BY LD. CIT(A) WE DO NOT FIND ANY IRREGULARIT Y IN THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS. 81 060/- ON ACCOUNT OF DIFFERENCE OF INTEREST RATE. THE ORDER OF LD. CIT( A) ON THIS POINT IS ALSO UPHELD. 43. COMING TO THE APPLICATION OF RULE 46A WE FIND THAT ASSESSEE PRODUCED A LETTER DATED 15.3.2006 FROM GOB IND PRASAD BHALOTIA AFTER THE SAME WAS ASKED TO PRODUCE BY THE LD. CIT(A). THE ASSESSEE HAS NOT ITSELF PRODUCED A NY ADDITIONAL EVIDENCES BEFORE THE LD. CIT(A). THEREF ORE THE QUESTION OF APPLYING RULE 46A TO THE AFORESAID DOCU MENT DOES NOT ARISE. WE THUS REJECT THIS GROUND RAISED BY T HE REVENUE. ITA NOS. 3450 TO 3454/D/2010 27 44. ITA NO. 3453/D/10 : IN THIS APPEAL PERTAINING TO THE A.Y. 2004-05 THE EFFECTIVE GROUNDS TAKEN BY THE REVENUE ARE AS UNDER: - 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THIS CASE THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 12 47 303/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST ON BUSINESS ADVANCES. 2. WHILE DELETING THE ADDITION LD. CIT(A) HAS NOT GIVEN OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A. 45. IN THIS APPEAL PERTAINING TO THE A.Y. 2004-05 THE AO MADE THE ADDITION OF RS. 10 29 591/- ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON THE VARIOUS ADVANCES/LOANS GIV EN TO FOLLOWING PERSONS BY GIVING A REASON THAT THE ASSES SEE BEING A NBFC COMPANY IS DEEMED TO HAVE EARNED INTEREST F ROM THE LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINE SS BUT ASSESSEE HAS NOT DISCLOSED THE SAME IN THE REGULAR RETURN OF INCOME: - S.NO. NAME OF THE COMPANY/PERSON TO WHOM LOANS/ADVANCES GIVEN AMOUNT PERIOD INTEREST EARNED @ 15% 1. BISWAJEET CREATION 2 40 000/- 365 DAYS 36 000/- ITA NOS. 3450 TO 3454/D/2010 28 2. DINESH KUMAR SINGHANIA & CO. 50 00 000/- 365 DAYS 7 50 000/- 3. H.M. CREATIONS 3 00 000/- 365 DAYS 45 000 /- 4. GOBIND PRASAD BHALOTIA 5 00 000/- 365 DAYS 75 000/- 5. BINOD KR. BHAGCHANDKA 8 23 942/- 365 DAYS 1 23 591/- TOTAL 10 29 591/ - 46. THE AO ALSO MADE AN ADDITION OF RS. 1 25 028/- BEING DIFFERENCE OF INTEREST RATE OF 3% IN THE CASE OF SH . RAMESH KUMAR BHAGCHANDKA VIZ-A-VIZ THE INTEREST RECEIVED F ROM OTHER PARTIES. 47. ON AN APPEAL THE LD. CIT(A) DELETED THE ADDITI ON FOR THE SIMILAR REASONS AS GIVEN BY HIM IN HIS ORDER FOR TH E A.Y. 2003- 04 AND HAS ALSO IN THE A.Y. 2001-02 & 2002-03. 48. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 49. IN THIS CASE ALL THE ADVANCES IN RESPECT OF WH ICH THE AO HAS MADE ADDITION ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED THEREUPON HAVE ALREADY BEEN CONSIDERED IN EARLIER ASSESSMENT YEARS. ITA NOS. 3450 TO 3454/D/2010 29 50. THE QUESTION OF DIFFERENCE OF CHARGING OF INTER EST OF 3% HAS ALSO BEEN CONSIDERED IN THE A.Y. 2003-04. THER EFORE FOLLOWING OUR THIS COMMON ORDER PERTAINING TO THE A .Y. 2001- 02 TO 2003-04 WE UPHOLD THE ORDER OF CIT(A) IN DEL ETING THE ADDITION AND APPEAL FILED BY THE REVENUE FOR THIS A SSESSMENT YEAR IS REJECTED. 51. ITA NO. 3454/D/10 : THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE A.Y. 2007-08 ARE AS UNDER: - 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THIS CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 6 24 626/- MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST ON BUSINESS ADVANCES. 2. WHILE DELETING THE ADDITION LD. CIT(A) HAS NOT GIVEN OPPORTUNITY OF BEING HEARD TO THE AO UNDER RULE 46A. 52. IN THIS YEAR THE ASSESSING OFFICER MADE THE AD DITION OF RS. 4 37 053/- ON ACCOUNT OF INTEREST ALLEGEDLY ACC RUED ON VARIOUS ADVANCES GIVEN BY THE ASSESSEE. THE AO ALS O MADE AN ADDITION OF RS. 3 33 792/- ON ACCOUNT OF DIFFERE NCE OF RATE ITA NOS. 3450 TO 3454/D/2010 30 OF INTEREST CHARGED IN THE CASE OF SH. SHASHI SINGH SANT LAL (HUF) & SH. RAMESH KUMAR BHAGCHANDKA. 53. THE ADDITION OF RS. 4 37 043/- HAS BEEN MADE BY THE AO FOR THE REASON THAT ASSESSEE BEING A NBFC COMPANY IS DEEMED TO HAVE EARNED INTEREST INCOME FROM THE FOLL OWING LOANS AND ADVANCES ALLEGED TO BE GIVEN IN THE ORDIN ARY COURSE OF BUSINESS OF NBFC: - S.NO. NAME OF THE COMPANY/PERSON TO WHOM LOANS/ADVANCES GIVEN AMOUNT PERIOD INTEREST EARNED @ 15% RS. 1. BISWAJEET CREATION 2 40 000/- 365 DAYS 36 000/- 2. H.M. CREATIONS 3 00 000/- 365 DAYS 45 000/- 3. BINOD KR. BHAGCHANDKA (HUF) 8 23 942/- 365 DAYS 1 23 591/- 4. TUK TUK GARMENTS PVT. LTD. 12 20 000/- 365 DAYS 75 000/- 5. NUFAB INDIA LTD. 8 00 000/- 326 DAYS 1 07 178/ - 6. LADIA CREDIT PVT. LTD. 5 00 000/- 190 DAYS 39 041/- 7. PRAKASH AGGARWAL 80 000/- 77 DAYS 2 531/- 8. SABYASACHI DUTTA 1 00 000/- 212 DAYS 8 7 12/- TOTAL 4 37 053/ - 54. THE AO ALSO MADE THE ADDITION OF RS. 3 33 792/- ON ACCOUNT OF DIFFERENCE BY OBSERVING AS UNDER: - THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED INTEREST @ 12% FROMSH. SHASHI SINGH SANT LAL (HUF) AND SH. RAMESH KR. ITA NOS. 3450 TO 3454/D/2010 31 BHAGCHANDKA (AS PER CHART ABOVE) WHEREAS HAS SHOWN INTEREST RECEIPT @ 15% IN THE EARLIER YEARS. HENCE THE DIFFERENCE OF INTEREST CHARGEABLE @ 15% (INSTEAD OF 12%) IS ADDED BACK TO THE INCOME OF THE ASSESSEE AS UNDER: SHASHI SINGH 3% ON 2 26 406/- 792/- SANT LAL (HUF) 3% ON 20 00 000/- 60 000/- RAMESH KR. BHAGCHANDKA 3% ON 91 00 000/- 2 73 000 /- 3 33 792 /- 55. ON AN APPEAL LD. CIT(A) DELETED THE ADDITION I N PART BY GIVING THE FOLLOWING REASONS: - I) OUT OF THE EIGHT ADVANCES FIRST FOUR ADVANCES WERE SAME AND IDENTICAL WHICH WEE IN THE IMMEDIATE PREVIOUS YEARS. THEREFORE IN THE LIGHT OF HIS ORDER FOR THE A.Y. 2001-02 TO 2006- 07 HE DELETED THE ADDITION ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON ADVANCES GIVEN TO THE FIRST FOUR PARTIES. II) WITH REGARD TO ADVANCES MENTIONED AS SL. NO. 5 & 6 IN THE NAME OF NUFAB INDIA LTD. & LADIA CREDIT PVT. LTD. THE LD. CIT(A) FOUND THAT THESE ADVANCES WERE GIVEN DURING THE COURSE OF BUSINESS ACTIVITY AS NBFC. THEREFORE THE ACTION OF THE AO IN CHARGING INTEREST ON THESE ADVANCES WAS JUSTIFIED. III) WITH REGARD TO THE ADVANCES GIVEN TO PARTY NO. 7 & 8 IT WAS FOUND BY THE LD. CIT(A) THAT THESE ITA NOS. 3450 TO 3454/D/2010 32 ADVANCES WERE NOT CONNECTED WITH THE NBFC ACTIVITY OF THE ASSESSEE. THE LD. CIT(A) THEREFORE HOLD THAT INTEREST CHARGED BY THE AO ON THESE ADVANCES WAS NOT JUSTIFIED. IV) WITH REGARD TO ADDITION OF DIFFERENCE OF 3% OF INTEREST IN THE CASE OF SH. RAMESH KUMAR BHAGCHANDKA SANT LAL (HUF) AND SHASHI SINGH HE FOLLOWED HIS DECISION GIVEN IN THE A.Y. 2004-05 2005-06 & 2006-07 WHERE IDENTICAL FACTS WERE INVOLVED. 56. TO SUM UP THE LD. CIT(A) HOLD THAT ACTION OF T HE AO IN MAKING ADDITION OF RS. 1 46 219/- BEING INTEREST CH ARGED ON ADVANCES GIVEN TO NUFAB INDIA LTD. & LADIA CREDIT P VT. LTD. WAS JUSTIFIED. REGARDING OTHER ADVANCES AND DIFFER ENCE OF INTEREST HE DELETED THE ADDITION. 57. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 58. THE ISSUE INVOLVED IN THIS ASSESSMENT YEAR IS I DENTICAL TO THE ISSUES INVOLVED IN EARLIER YEARS. THE LD. CIT( A) HAS DECIDED THE ISSUE AFTER FOLLOWING HIS DECISION OF E ARLIER YEARS. HOWEVER HE FOUND THAT THE ADVANCES IN THE NAME OF NUFAB INDIA LTD. & LADIA CREDIT PVT. LTD. WAS GIVEN IN TH E COURSE OF ITA NOS. 3450 TO 3454/D/2010 33 NBFC ACTIVITY AND THE LD. CIT(A) THEREFORE UPHELD THE ADDITION. HERE WE ARE CONCERNED WITH THE ADDITION DELETED BY THE LD. CIT(A) IN RESPECT OF THE PARTIES WHERE ADV ANCES WERE NOT GIVEN IN THE COURSE OF NBFC ACTIVITY. WE ARE A LSO CONCERNED ABOUT THE ADDITION ON ACCOUNT OF DIFFEREN CE OF INTEREST RATE IN THE CASE OF THREE PERSONS. THESE ISSUES HAVE BEEN DECIDED BY US BY THIS COMMON ORDER IN EARLIER YEARS. RESPECTFULLY FOLLOWING OUR REASONING GIVEN IN EARLI ER YEAR WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A ) IN DELETING THE ADDITION OF RS. 6 24 626/- OUT OF TOTAL ADDITIO N OF RS. 7 70 845/- MADE BY THE AO. THE ORDER OF LD. CIT(A) IS THUS UPHELD ON THE ISSUES INVOLVED IN THIS APPEAL. 59. IN THE RESULT ALL THE FIVE APPEALS FILED BY TH E REVENUE ARE DISMISSED. 60. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 16 TH SEPTEMBER 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16.9.11 *KAVITA COPY FORWARDED TO: - ITA NOS. 3450 TO 3454/D/2010 34 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR