ACIT, New Delhi v. M/s KMG International Pvt. Ltd., New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SH. R. K. PANDA ACCOUNTANT MEMBER AND. SH. KULDIP SINGH JUDICIAL MEMBER ITA NO. 5591/DEL/2010 ASSESSMENT YEAR: 2007-08 KMG INTERNATIONAL LTD. 375 MAIN ROAD GAZIPUR NEW DELHI PAN NO. AACCK0590Q VS. ACIT CIRCLE 5 (1) NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 6064/DEL/2010 ASSESSMENT YEAR: 2007-08 ACIT CIRCLE 5 (1) NEW DELHI VS. KMG INTERNATIONAL LTD. 375 MAIN ROAD GAZIPUR NEW DELHI PAN NO. AACCK0590Q (APPELLANT) (RESPONDENT) REVENUE BY SH. VIJAY KUMAR CHADHA SR. DR ASSESSEE BY SH. BINOD KUMAR BINDAL ADVOCATE DATE OF HEARING: 11/09/2019 DATE OF PRONOUNCEMENT: 15/11/2019 ORDER PER R.K PANDA AM: THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AN D ARE DIRECTED AGAINST THE ORDER DATED 26.10.2010 OF THE CIT(A)-8 NEW DELHI PAGE | 2 RELATING TO A. Y. 2007-08. FOR THE SAKE OF CONVENIE NCE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING IN ELECT RICAL GOODS CHEMICALS ETC. IT FILED ITS RETURN OF INCOME ON 27 .10.2007 DECLARING TOTAL LOSS OF RS.27 00 990/-. THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE TAX AUDIT REPORT FILED BY THE ASSESSEE THAT IN THE SAID REPORT THE UNSECURED LOANS ACCEPTED OR REPAID BY THE ASSESSEE COMPANY WERE REPORTED AS NIL AS REQUIRED TO BE REPORTED IN PARA -24 (A) AND 24 (B) OF ANNEXURE TO THE TAX AUDIT REPORT IN FORM NO. 3 CD. SUBSEQUENTLY ON BEING ASKED BY THE AO TO FILE THE VARIOUS DETAILS THE AS SESSEE FILED THE SAME ACCORDING TO WHICH IT HAD RECEIVED LOANS FROM 6 PERSONS ONLY. HOWEVER FROM THE BANK STATEMENT IT WAS REVE ALED THAT BESIDES ABOVE SIX PARTIES THE ASSESSEE HAD ALSO AC CEPTED LOANS AND REPAID THE SAME DURING THE YEAR. IN SPITE OF SU FFICIENT OPPORTUNITIES GIVEN TO FILE CONFIRMATIONS/BANK ACCO UNTS COPY OF INCOME TAX RETURNS AND TO PRODUCE THEM WITH THEIR B OOKS OF ACCOUNTS THE ASSESSEE COULD NOT SUBMIT ANY OF THE DETAILS ASKED FOR NOR COULD PRODUCE THEM. THE AO THEREFORE HEL D THAT THE ASSESSEE HAD NEITHER INTENDED TO BRING THE SAID LOA NS ON RECORDS NOR THE ASSESSEE IS IN POSSESSION OF ANY OTHER DOCU MENT TO PROVE THE IDENTITY CREDIT WORTHINESS AND GENUINENESS OF THE LOANS. ALL THE SAID LOANS HAVE BEEN TAKEN ON 2 DAYS I.E. 19.06 .2008 AND 20.06.2006 AND HAVE BEEN SHOWN AS REPAID TO ALL SIM ULTANEOUSLY ON 19.09.2006. HE THEREFORE ADDED THE UNSECURED L OANS FROM PAGE | 3 THE FOLLOWING PARTIES TO THE INCOME OF THE ASSESSEE U/S 68 OF THE I.T. ACT BEING UNEXPLAINED CASH CREDIT: NAME OF PARTY AMOUNT VINITA SURANA RS. 4 00 000/- DHANI DEVI SURANA RS.6 00 000/- RADHEY SHYAM KHEMKA RS.1 60 000/- SHREE LAI VIJAY KUMAR BAGLA HUF RS.2 75 000/- BAGLA & CO RS.1 90 000/- RAJESH KUMAR KHEMKA RS.1 00 000/- BAGLA STORE RS.7 00 000/- HARSH SURANA RS.2 40 000/- LLONIKA SURANA RS.4 90 000/- TARUN JAIN RS.1 00 000/- TARUN JAIN RS.1 00 000/- SHIVANI JAIN RS.2 00 000/- SHIVANI JAIN 2 00 000/- TOTAL RS. 37 55 000/ - 3. THE AO FURTHER NOTED THAT THE ASSESSEE HAD ALSO TAK EN THE FOLLOWING UNSECURED LOANS DURING THE YEAR UNDER CON SIDERATION. (A) SHIV VANI OIL & GAS EXPLORATION SERVICES LTD. RS. 2 00 00 000/- (B) BASUDEV GARG DIRECTOR OF THE COMPANY Y RS. 6 25 0 00/- FC) KUNAL GARG MEMORIAL TRUST (IN WHICH BOTH DIRECTORS ARE TRUSTEES) RS. 22 50 000/- TOTAL 2 28 75 000/- THE ASSESSEE WAS ASKED TO SUBMIT DETAILS CONFIRMAT IONS COPIES OF BANK STATEMENTS AND COPIES OF INCOME TAX RETURNS AND ALSO PAGE | 4 REQUIRED TO PRODUCE THEM WITH THEIR BOOKS OF ACCOUN TS FOR VERIFICATION. HOWEVER DESPITE SEVERAL OPPORTUNITIE S ASSESSEE COULD ONLY FILE THEIR CONFIRMATION AND FAILED TO FI LE OTHER REQUIRED DETAILS AND ALSO FAILED TO PRODUCE THEM. THUS THE A SSESSEE FAILED TO PROVE CREDIT WORTHINESS AND GENUINENESS OF THE L OANS. THE AO THEREFORE ADDED THE UNSECURED LOANS OF RS. 2 28 75 000/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 BEING UNEXPLAI NED CASH CREDIT. 4. THE AO NOTED THAT THE ASSESSEE HAD RECEIVED AN AMO UNT OF RS.46 17 000/- AS ADVANCE ON 11.09.2006 FROM SNS TRADING DMCC DUBAI. HE NOTED THAT THE SAID PARTY IS A REL ATED CONCERN OF THE ASSESSEE COMPANY AS PER RELATED PARTY DISCL OSURE IN THE STATUTORY AUDIT REPORT. FROM THE COPY OF SALES CON TRACT DATED 04.09.2006 FILED HE NOTED THAT THE SAID AMOUNT IS EXPLAINED T O HAVE BEEN RECEIVED AS 50% ADVANCE FOR SUPPLY OF 100 MT SKIMMED MILK POWDER BY THE ASSESSEE AND THE DATE OF SHIPMENT HAS BEEN MENTIONED AS OCTOBER / NOVEMBER 2006. HOWE VER NO SUCH SALE WAS MADE TILL END OF THE YEAR AND THE BAL ANCE REMAINED AS OUTSTANDING. HE ASKED THE ASSESSEE TO FILE DETAI LS AND DOCUMENTARY EVIDENCE IN THIS REGARD. HOWEVER THE A SSESSEE FAILED TO MAKE COMPLIANCE. THE AO THEREFORE HELD THAT THE SAID CREDIT AMOUNT OF RS. 46 17 000/- REMAINED UNEXPLAIN ED BY THE ASSESSEE AND THEREFORE HE ADDED THE SAME TO THE I NCOME OF THE ASSESSEE U/S 68. 5. THE AO FURTHER NOTED THAT THE ASSESSEE HAS MADE A PAYMENT OF RS. 6 17 091/- ON ACCOUNT OF COMMISSION. HE ASKED PAGE | 5 THE ASSESSEE TO GIVE DETAILS AND THE BASIS OF COMMI SSION PAID AND ALSO TO PROVIDE CONFIRMATION OF THE SAME FROM THE R ECIPIENT. HOWEVER DESPITE SEVERAL OPPORTUNITIES ASSESSEE CO ULD NOT FILE ANY DETAILS OR CONFIRMATION. HE THEREFORE DISALLO WED THE COMMISSION PAID AMOUNTING TO RS. 6 17 091/- AND ADD ED TO THE INCOME OF THE ASSESSEE. 6. THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED A SU M OF RS.15 00 000/- FROM M/S. RISHI PROMOTERS (P) LTD AS ADVANCE AGAINST PROPERTY. THE ASSESSEE WAS ASKED TO GIVE DE TAILS/ NATURE AND DOCUMENTARY EVIDENCE OF THIS ADVANCE AND AS TO WHEN THIS ADVANCE WAS MATERIALIZED. HOWEVER DESPITE SEVERAL OPPORTUNITIES ASSESSEE FILED ONLY A COPY OF ACCOUN T IN ASSESSEES BOOKS WHICH SHOWS ONLY THE RECEIPT OF THIS AMOUNT O F RS. 15 00 000/-. IN ABSENCE OF ANY OTHER DETAILS OR CO NFIRMATION THE SAID AMOUNT OF RS.15 00 000/- REMAINS UNEXPLAINED A ND THEREFORE THE AO ADDED THE SAME TO THE INCOME OF T HE ASSESSEE. 7. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSE OF RS.7 26 519/- PAID TO TWO DIRECTORS AND A RELATIVE OF DIRECTORS ON LOANS RECEIVED FROM THEM. HE NOTICED THAT DURING THE YEAR THE ASSESSEE HAS GIVEN ADVANCES OF RS. 44 42 838/- TO M/S. KMG MACRO INVESTMENTS (P) LTD. AND RS. 79 88 0 00/- TO M/S. KMG MILK FOOD LIMITED AND HAS NOT CHARGED ANY INTEREST FROM THESE TWO PARTIES WHO ARE RELATED CONCERNS OF THE ASSESSEE AS PER THE STATUTORY AUDITORS REPORT. HE THEREFORE HELD THAT THE INTEREST PAID TO DIRECTORS & RELATIVE OF DIRECTORS ON LOANS IS NOT FOR THE PURPOSE OF THE BUSINESS AND DISALLOWED THE SAME. HE NOTED THAT THE CHARGEABLE INTEREST ON INTEREST FREE LOANS WOULD BE PAGE | 6 MUCH MORE THAN THE AMOUNT OF INTEREST DISALLOWED. H OWEVER HE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF INTERE ST CLAIMED. 8. THE AO NOTED THAT THE ASSESSEE HAS MADE INVESTME NT IN SHARES OF DIFFERENT COMPANIES. ALTHOUGH THE ASSESSE E HAS NOT RECEIVED ANY DIVIDEND INCOME DURING THE YEAR FROM T HE SAID COMPANY HOWEVER THE AO RELYING ON VARIOUS DECISIO NS DISALLOWED AN AMOUNT OF RS. 91 928/- U/S. 14 A OF THE IT ACT 1 961. HE ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSE SSEE AT RS.3 16 13 603/-. 9. IN APPEAL THE LD. CIT(A) DELETED AN AMOUNT OF RS.6 00 000/- OUT OF THE TOTAL ADDITION OF RS.37 55 000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT. SIMI LARLY HE DELETED THE ADDITION OF RS.2 28 75 000/- MADE BY TH E AO U/S. 68 OF THE IT ACT BEING THE UNEXPLAINED UNSECURED LOANS . HE ALSO DELETED THE AMOUNT OF RS.46 17 000/- MADE BY THE AO U/S. 68 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED ADVANCES RS.7 26 519/- MADE BY THE AO BEING THE INTEREST PAID TO THE DIREC TORS OF THE COMPANY AND DELETED THE ADDITION OF RS.19 928/-MADE BY THE AO U/S. 14 A OF THE IT ACT. HE HOWEVER SUSTAINED THE O THER ADDITIONS MADE BY THE AO. 9.1 AGGRIEVED WITH SUCH PART RELIEF GRANTED BY THE CIT(A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFOR E THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS :- ITA NO. 5591/DEL2010 (GROUNDS RAISED BY THE ASSESSEE) 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE DISALLOWANCE OF RS. 31 55 000/- U/S 68 FOR THE AMOU NTS RECEIVED AS LOANS FROM MRS. VINITA SURANA RS. 4 00 000/- MRS. DHANI DEVI SURANA PAGE | 7 RS.6 00 000/- MR. RADHEY SHYAM KHEMKA RS. 1 60 000 /- SHREE LAI VIJAY KUMAR BAGLA HUF RS. 2 75 000/- M/S BAGLA & C O. RS. 1 90 000/- MR. RAJESH KUMAR KHEMKA RS. 1 00 000/- M/S BAGLA STORE RS.7 00 000/- MR. HARISH SURANA RS. 2 40 000/- AND MS. MONIKA SURANA RS. 4 90 000/- IGNORING THE EVIDENCES PLACED ON RECORD TO DISCHARGE THE ONUS ON THE APPELLANT. HENCE THE SAID ADDITION MUST BE DELETED. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS THAT I N DIRECTING THE ASSESSING OFFICER TO DISALLOW INTEREST ON ABOVE MEN TIONED LOANS WITHOUT ISSUING DIE STATUTORY SHOW CAUSE OF ENHANCEMENT OF INCOME TO THE APPELLANT. THUS THE SAID DIRECTIONS GIVEN MUST BE R EVERSED. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE DISALLOWANCE OF RS. 6 17 091/- ON ACCOUNT OF PAYMEN T OF COMMISSION PAID IGNORING THE EVIDENCES PLACED ON RECORD. HENC E THE SAID ADDITION MUST BE DELETED. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS.1 50 000/- U/S. 68 FOR THE AMOUNT RECEIVED FROM M/S. RISHI PROMOTERS (P) LTD. AS ADVANCE AGAINST PROPERTY IGNORING THE E VIDENCES PLACED ON RECORD. HENCE THE SAID ADDITION MUST BE DELETED. 5. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE DISALLOWANCE U/S.14A OF THE ACT OF RS.20 645/- ON A CCOUNT OF INTEREST ESTABLISHMENT AND ADMINISTRATIVE EXPENSES IGNORING THE EVIDENCES PLACED ON RECORD. HENCE THE SAID ADDITION MUST BE DELETED. 6. THE APPELLANT CRAVES THE LEAVE TO ADD SUBSTITUTE MODIFY DELETE OR AMEND ALL OR ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. ITA NO. 6064/DEL/2010 (GROUNDS RAISED BY REVENUE) 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. PAGE | 8 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.31 55 000/- OUT OF TOTAL ADDITION OF RS.37 55 00 0/- MAD U/S OF THE ACT BEING THE UNEXPLAINED CASH CREDITS. 2.1THE LD CIT(A) IGNORED THE FACT THAT THE ASSESSEE DID NOT DISCHARGE ITS ONUS PROVING THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEANED CIT(APPEALS) HAS ERRED IN DELETING THE ADDIT ION OF RS.2 28 75 000/- MADE U/S 68 OF THE ACT BEING THE U NEXPLAINED UNSECURED LOANS. 3.1 THE ID. C!T(A) IGNORED THE FACT THAT THE ASSES SEE DID NOT DISCHARGE ITS ONUS PROVING THE CREDITWORTHINES / OF THE CREDI TORS AND GENUINENESS OF THE TRANSACTION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.46 17 000/- MADE U/S 68 OF THE ACT BEING THE UNE XPLAINED ADVANCES. 4.1 THE ID. CIT(A) IGNORED THE FACT THAT THE ASSE SSEE DID NOT DISCHARGE IT ONUS PROVING THE GENUINENESS OF THE ADVANCES RECEIV ED FROM OVERSEAS. 5. ON. THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.7 26 519/- BEING THE INTEREST PAID TO THE DIRECTORS OF THE COM PANY. 5.1 THE ID. CIT(A) IGNORED THE FACT THAT THE ASSESS EE PAID INTEREST ON BORROWED CAPITAL FROM ITS SISTER CONCERNS. 6. THE LD. CIT(A) IGNORED THE FACT THAT THE DISALLOWANCE WAS MADE BY AO IN ACCORDANCE WITH THE PROVISIONS. PAGE | 9 6.1 THE LD. CIT(A) IGNORED THE FACT THAT THE DISA LLOWANCE WAS MADE BY AO IN ACCORDANCE WITH THE PROVISION OF RULE 8D OF I T RULES. 7. THE LD. CIT(A) ERRED IN LAW BY ACCEPTING THE AD DITION EVIDENCE UNDER RULE 46A OF IT RULES DESPITE HAVING BEEN OPPOSED BY THE A.O AND THE FACT THAT THE ASSESSEE WAS PROVIDED DUE OPPORTUNITY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 8. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 10. GROUND OF APPEAL NO.1 AND 8 BY REVENUE AND GROU ND OF APPEAL NO. 6 BY THE ASSESSEE BEING GENERAL IN NATUR E ARE DISMISSED. 11. GROUND APPEAL NO. 2 AND 2.1 BY THE REVENUE AND GROUND APPEAL NO. 1 AND 2 BY THE ASSESSEE RELATE TO THE PA RT RELIEF GRANTED BY THE CIT(A) OUT OF THE TOTAL ADDITION OF RS.37 55 000/- MADE BY THE AO ON ACCOUNT OF UNSECURED LOAN FROM 13 PARTIES THE DETAILS OF WHICH ARE GIVEN AT PARA NO. 2.1 OF T HIS ORDER. 12. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. W E FIND THE AO MADE THE ADDITION OF RS.37 55 000/- ON THE GROUND T HAT THE ASSESSEE DID NOT FILE THE REQUISITE DETAILS IN RESP ECT OF ALL THE CREDITORS. THE ASSESSEE FILED LIST OF ONLY SIX CRED ITORS WHEREAS ACCORDING TO THE AO AS PER THE BANK STATEMENT THER E WERE MORE LOANS OBTAINED BY THE ASSESSEE DURING THE YEAR FROM DIFFERENT PERSONS WHICH WERE REPAID. WE FIND BEFORE CIT(A) TH E ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCES BASED ON WHICH T HE LD. CIT(A) PAGE | 10 CALLED FOR A REMAND REPORT FROM THE AO AND AFTER CO NSIDERING THE SAME DELETED THE ADDITION OF RS. 6 LACS BEING LOAN OBTAINED FROM SH. TARUN JAIN RS. 2 LACS AND MRS. SHIVANI JAIN RS. 4 LACS ON THE GROUND THAT THE ASSESSEE HAS SUBMITTED THE REQUISIT E INFORMATION WHICH WAS EXAMINED BY THE AO AND NO ADVERSE COMMENT REGARDING THEIR CREDITWORTHINESS WAS MADE BY THE AO IN THE REMAND REPORT. HE FURTHER NOTED THAT A PERUSAL OF T HE BANK ACCOUNTS OF THE ABOVE TWO PERSONS REVEALS THAT THER E IS NO CREDIT EITHER BY WAY OF CASH DEPOSIT OR TRANSFER IMMEDIATE LY BEFORE GIVING LOANS TO THE ASSESSEE COMPANY. FURTHER BOTH OF THEM HAVE SHOWN SUBSTANTIAL INCOME IN THEIR RETURNS OF INCOME FOR W HICH HE DELETED THE ADDITION OF RS.6 LACS PERTAINING TO MR. TARUN J AIN AND MRS. SHIVANI JAIN. SO FAR AS THE BALANCE AMOUNT OF RS.31 55 000/- IS CONCERNED HE SUSTAINED THE ADDITION ON THE GROUND T HAT THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO PROVE THAT TH E REMAINING CREDITORS HAD THE CAPACITY TO ADVANCE MONEY TO THE ASSESSEE COMPANY. FURTHER THE AO AFTER EXAMINATION OF THE B ALANCE SHEETS AND THE COMPUTATION OF THEIR TOTAL INCOME FOUND THA T THESE PARTIES ARE HAVING MEAGER INCOME. 13. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E CIT(A) ON THIS ISSUE. SO FAR AS THE DELETION OF RS. 6 LACS B EING LOAN OBTAINED FROM MR. TARUN JAIN AND MRS. SHIVANI JAIN ARE CONCE RNED WE FIND THE AO IN THE REMAND REPORT HAS NOT MADE ANY ADVERS E COMMENTS REGARDING THE CREDITWORTHINESS OF THE SAID PERSONS. FURTHER THEIR INCOME TAX RETURNS SHOW SUBSTANTIAL INCOME HAVE BEE N DECLARED BY THEM A FINDING GIVEN BY THE CT(A) AND NOT CONTR OVERTED BY THE LD. DR. WE FURTHER FIND THE LD. CIT(A) HAS ALSO GI VEN A FINDING PAGE | 11 THAT THEIR BANK ACCOUNTS DO NOT REVEAL ANY CREDIT E ITHER BY WAY OF CASH DEPOSIT OR TRANSFER IMMEDIATELY BEFORE GIVING LOANS TO THE ASSESSEE COMPANY. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 6 LACS M ADE BY THE AO. THE GROUNDS OF APPEAL NO. 2 AND 2.1 RAISED BY THE R EVENUE ARE ACCORDINGLY DISMISSED. 14. SO FAR AS THE GROUND RAISED BY THE ASSESSEE CHA LLENGING THE ADDITION OF RS.31 55 000/- IS CONCERNED WE FIND FRO M THE ORDER OF THE CIT(A) THAT THOUGH THE ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITORS BUT COULD NOT SUBSTANTIATE THE CREDITWORT HINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. HE HAS GIVEN A FINDING THAT IMMEDIATELY BEFORE ISSUING THE CHEQUES TO THE ASSESSEE THERE ARE CREDITS IN THE BANK ACCOUNTS OF THE CREDITORS AND NO SOURCE THEREOF HAS BEEN EXPLAINED. FURTHER HE HAS GIVEN A FINDING THAT THE PARTIES ARE HAVING MEAGER INCOME AND IN SOME CASES THE TAXABLE INCOME RANGES FROM RS.1 811/-TO R S.45 464/-. WE FURTHER FIND FROM THE REMAND REPORT OF THE AO WH EREIN HE HAS OBSERVED AS UNDER :- ASSESSEE WAS ALSO ASKED TO FILE COPY OF THEIR COMPL ETE RETURNS WITH COMPUTATION OF INCOME AUDIT REPORT AND BALANCE SHE ET HOWEVER NONE OF THESE REQUIRED DETAILS COULD BE FILED BY THE ASSESS EE. FROM THE PERUSAL OF ACKNOWLEDGEMENT OF RETURN FILED BY THE ASSESSEE OF THE FIRST 9 PARTIES IT IS SEEN THAT ALL THESE 9 PERSONS ARE RELATED PERSONS S HOWING THEIR ADDRESSES AT CHURU RAJASTHAN AND HAVE ALSO FILED THEIR INCOME T AX RETURNS WITH ITO WARD CHURU EVEN THOUGH ALL OF THEM HAVE THEIR BAN K ACCOUNTS IN BANK OF BARODA SADAR BRANCH DELHI FROM WHERE THEY HAVE ISSUED CHEQUES TO THE PAGE | 12 ASSESSEE. AS PER ACKNOWLEDGMENT OF RETURNS THESE 9 PERSONS HAVE RETURNED INCOME OF RS.49 383/- RS.1 52 215/- RS. 1 07 138 /- RS.98 464/- RS.1811/- RS.45 464/- RS. 1 14 506/- RS.5 88 216 /- (INCOME OF FATHER OF MINOR HARSH SURANA) AND RS.62 340/- RESPECTIVELY. T HUS IT IS SEEN THAT ALL THESE PERSONS HAVE PETTY INCOME EXCEPT ONE AND INCO ME BELOW TAXABLE LIMIT AND WITH THIS PETTY INCOME IT IS NOT EASY TO UNDERS TAND HOW THEY CAN MANAGE THEIR OWN LIFE AND LIFE OF THEIR FAMILY IN THIS PERIOD OF INFLATION AND HOW THEY CAN SAVE HEAVY AMOUNT OF LACS OF RUPEES TO DEPOSIT WITH THE ASSESSEE. THESE SQUARED UP DEPOSITS WERE FOUND CRED ITED IN THE BOOKS OF ASSESSEE AND IT IS THE DUTY OF THE ASSESSEE TO EXPL AIN THEIR GENUINENESS AND CREDIT WORTHINESS OF SUCH DEPOSITORS HOWEVER ASSES SEE HAS FAILED TO PRODUCE THEM FOR EXAMINATION AND ALSO FAILED TO PRO DUCE THE REQUIRED DETAILS TO VERIFY THEIR CREDITWORTHINESS AND GENUIN ENESS OF DEPOSITS IN THEIR NAMES IN SPITE OF SEVERAL OPPORTUNITIES GIVEN DURIN G THE ASSESSMENT TIME AND AGAIN DURING THE REMAND PROCEEDINGS. IN VIEW OF THESE FACTS THE ADDITIONS OR RS.31 55 000/- MADE IN RESPECT ABOVE 9 PARTIES NEEDS TO BE SUSTAINED. THE BALANCE FOUR DEPOSITS OF RS.2 LACS IN THE NAME OF TARUN JAIN AND RS.4 LACS IN THE NAME OF SHIVANI JAIN SEEMS AC CEPTABLE LOOKING TO THEIR CREDITWORTHINESS AS SEEN FROM THE DEPOSITS AND BALA NCES IN THEIR BANK ACCOUNTS. 15. SINCE THE PARTIES ARE ASSESSED IN CHURU RAJAS THAN SHOWING MEAGER INCOME AND HAVE ISSUED CHEQUES FROM BANK ACCOUNT MAINTAINED WITH DELHI HAVING ONE COMMON ADD RESS AND AMOUNTS WERE TRANSFERRED TO THOSE ACCOUNTS BEFORE I SSUING CHEQUES TO THE ASSESSEE THEREFORE THE SAME DO NOT INSPIRE CONFIDENCE REGARDING THE CREDITWORTHINESS OF THESE PERSONS AND GENUINENESS OF THE TRANSACTIONS. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION MADE BY THE AO TO THE EXTENT OF RS.31 55 000/- OUT OF RS .37 55 000/-. PAGE | 13 THE GROUND OF APPEAL NO.1 BY THE ASSESSEE IS ACCORD INGLY DISMISSED. 16. SO FAR AS THE GROUND OF APPEAL NO. 2 BY THE ASS ESSEE IS CONCERNED IT IS THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE LD. CIT(A) WITHOUT ISSUING ANY STATUTORY S HOW CAUSE NOTICE OF ENHANCEMENT TO THE ASSESSEE HAS DIRECTED THE AO TO DISALLOW THE INTEREST PAID ON THE LOANS / CREDITS C LAIMED IN THE NAMES OF THE ABOVE PERSONS. HOWEVER WE DO NOT FIN D ANY MERIT IN THE ARGUMENT OF THE ASSESSEE SINCE AFTER THE ORD ER OF THE CIT(A) THE TOTAL INCOME DOES NOT EXCEED THE ASSESSED INCOM E. SINCE HE HAS GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE THERE FORE THE TOTAL INCOME IS NOT ENHANCED AND THEREFORE GROUND RAISE D BY THE ASSESSEE ON THIS ISSUE IS DISMISSED. 17. SO FAR AS THE GROUND APPEAL NO.3 BY THE ASSESSE E IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND FOR WHICH THE LD. DR HAS NO OBJECTION. ACCOR DINGLY THE SAID GROUND IS DISMISSED AS NOT PRESSED. 18. SO FAR AS THE GROUND APPEAL NO. 4 BY THE ASSESS EE IS CONCERNED IT RELATES TO THE DISALLOWANCE OF RS. 15 LACS MADE BY THE AO U/S. 68 OF THE IT ACT BEING THE AMOUNT RECEI VED FROM M/S. RISHI PROMOTERS PRIVATE LIMITED WHICH HAS BEEN UPHE LD BY THE CIT(A). 19. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE RECORD. WE FIND THE AO MADE ADDITI ON OF RS. 15 LACS BEING THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S. RISHI PROMOTERS PRIVATE LIMITED AS ADVANCE AGAINST PROPER TY ON THE GROUND THAT DESPITE SEVERAL OPPORTUNITIES THE ASSES SEE DID NOT FILE PAGE | 14 THE REQUISITE DETAILS. WE FIND THE LD. CIT(A) SUSTA INED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER :- 9.5 I HAVE CAREFULLY EXAMINED THE CLAIM OF THE APPELLANT COMPANY WITH REFERENCE TO THE DOCUMENTS PLACED BEFORE ME. AS STATED EARLIER THE AMOUNT OF RS 151ACS IS CLAIMED TO HAVE BEEN RECEIVED BY THE APPELL ANT COMPANY AGAINST PROPOSED SALE OF A PROPERTY SITUATED AT G-17 JANGPURA EXTENSION NEW DELHI-110014. IN NORM AL COURSE IN MATTERS PERTAINING TO PURCHASE AND SALE O F IMMOVABLE PROPERTIES A FORMAL AGREEMENT TO SALE IS INVARIABLY EXECUTED. THIS IS NECESSARY BECAUSE THE VALUE OF IMMOVABLE PROPERTY KEEPS ON FLUCTUATING DEPENDING UPON THE MARKET CONDITIONS AND UNLESS THERE IS A FOR MAL AGREEMENT DULY NOTARIZED THERE ARE ALWAYS CHANCES OF ONE OF THE PARTIES GOING BACK ON THE PROMISED PURCHA SE/ SALE OF THE PROPERTY. THEREFORE IT IS ONLY EXPECTE D THAT IN THE PRESENT CASE ALSO THERE SHOULD HAVE BEEN FORMAL AGREEMENT LENDING SUPPORT/CREDIT TO THE CLAIM OF TH E APPELLANT FOR RECEIVING ADVANCE OF RS 151ACS AGAINS T THE PROPOSED SALE OF PROPERTY SITUATED AT G-17 JANGPURA EXTENSION NEW DELHI-110014. THOUGH THE APPELLANT COMPANY CLAIMS THAT DUE TO UNAVOIDABLE CIRCUMSTANCES THE PROPOSED SALE HAD TO BE CANCELLED NOTHING EXPLAINING SUCH CIRCUMSTANCES HAS BEEN BROU GHT ON RECORD. FURTHER NO COPY OF IT RETURN OR BALANCE SHEET HAS BEEN FILED BY RISHI PROMOTERS (P) LTD INDICATING/REFLECTING ADVANCE OF RS 151ACS TO THE APPELLANT COMPANY. IT IS A MATTER OF NORMAL ACCOUNT ANCY PAGE | 15 THAT ANY ADVANCE OF CAPITAL NATURE ARE ALWAYS CLASS IFIED SEPARATELY AND SHOWN IN THE NECESSARY SCHEDULES TO T HE BALANCE SHEET. THOUGH RISHI PROMOTERS (P) LTD HAVE F ILED A CONFIRMATION TO THE EFFECT THAT PROPOSED PURCHASE OF PROPERTY HAD TO BE CANCELLED FOR UNAVOIDABLE CIRCUMSTANCES NO DOCUMENTARY EVIDENCE HAS BEEN FILE D SUGGESTING THAT ANY DECISION WAS EVER TAKEN BY THE BOARD OF DIRECTORS TO PURCHASE A PROPERTY FROM THE APPELLANT COMPANY. THEREFORE IN THE ABSENCE OF REQUISITE/RELEVANT INFORMATION IT IS DIFFICULT TO AGREE WITH THE APPELLANT COMPANY THAT THE ADVANCE IN QUESTION W AS RECEIVED AGAINST THE SALE OF IMMOVABLE PROPERTY. IN THE COURSE OF APPELLATE PROCEEDINGS ALSO THE APPELLANT COMPANY HAS ONLY FILED SCHEDULE OF FIXED ASSETS AS APPEARING IN ITS BALANCE SHEET BUT NOTHING HAS BEE N ELABORATED ABOUT THE CIRCUMSTANCES LEADING TO CANCELLATION OF AGREEMENT TO SALE WITH RISHI PROMOT ERS (P) LTD. IT IS ALSO NOT KNOWN AS TO WHETHER ANYTHING WA S PAID TO COMPENSATE THE PARTY WHOSE INTEREST WAS ADVERSELY AFFECTED WITH CANCELLATION OF PROPOSED TRANSACTION OF SALE OF PROPERTY. THEREFORE IN THE ABSENCE OF REQUISITE PARTICULARS IT IS DIFFICULT TO GRANT RELIEF TO THE APPELLANT COMPANY AND THEREFORE THE ADDITION OF RS 1 5 LACS IS BEING SUSTAINED. 20. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E CIT(A) ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE HAS N OT SATISFIED THE CONDITIONS PRESCRIBED U/S. 68 OF THE IT ACT I.E. ID ENTITY AND CAPACITY OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS. PAGE | 16 IN THE INSTANT THE ASSESSEE HAS MERELY FILED THE PA N NUMBER OF M/S. RISHI PROMOTERS ALONGWITH THEIR CONFIRMATION A ND THE LEDGER ACCOUNT OF M/S. RISHI PROMOTERS PRIVATE LIMITED IN THE BOOKS OF THE ASSESSEE. ALTHOUGH THE ASSESSEE HAS FILED THE AUDITED ACCOUNTS OF M/S. RISHI PROMOTERS SHOWING ADVANCE AG AINST PROPERTY AT RS.6 14 25 000/- HOWEVER IT IS VERY D IFFICULT TO FIND OUT FROM THE SAME AS ANY ADVANCES GIVEN TO THE ASSE SSEE COMPANY ESPECIALLY WHEN SUCH ADVANCES WERE SHOWN AT RS.8 43 31 716/- IN THE PRECEDING YEAR AND THE ASSE SSEE HAS FAILED TO FILE ANY DOCUMENTARY EVIDENCES AS TO WHAT WERE THE UNAVOIDABLE CIRCUMSTANCES FOR WHICH THE PROPOSED SA LE HAD TO BE CANCELLED. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT BRING ANY OTHER MATERIAL BEFORE US OTHER THAN THE MATERIAL PL ACED BEFORE THE CIT(A) SO AS TO TAKE A CONTRARY VIEW OTHER THAN THE VIEW TAKEN BY THE CIT(A) ON THIS ISSUE. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND GROUND APPEAL NO.4 BY THE ASSESSEE IS DISMISSED. 21. SO FAR AS THE GROUND OF APPEAL NO. 5 BY THE ASS ESSEE AND GROUND APPEAL NO. 6 AND 6.1 BY THE REVENUE ARE CONC ERNED THESE RELATE TO THE PART RELIEF GRANTED BY THE CIT(A) OUT OF THE DISALLOWANCE OF RS.91 928/- MADE BY THE AO U/S. 14 A OF THE IT ACT. 21.1 AFTER HEARING BOTH THE SIDES WE FIND IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INC OME DURING THE YEAR. THEREFORE IN VIEW OF THE DECISION OF HON BLE DELHI HIGH PAGE | 17 COURT IN THE CASE OF CIT(A) VS. HOLECIM INDIA (PRIV ATE) LIMITED VIDE ITA NO.486/14 AND ITA NO. 299/14 ORDER DATED 05.09. 2014 AND THE DECISION IN THE CASE OF CHEMINVEST LIMITED VS. CIT REPORTED 370 ITR 33 THE ADDITION SUSTAINED BY THE CIT(A) IS NOT JUSTIFIED. IT HAS BEEN HELD IN THESE DECISIONS THAT NO DISALLOWAN CE U/S. 14 A CAN BE MADE WHERE THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME. THE GROUND NO. 5 BY THE ASSESSEE IS ACCORDI NGLY ALLOWED AND GROUND APPEAL NO. 6 AND 6.1 BY THE REVENUE ARE DISMISSED. 22. SO FAR AS GROUND NO. 3 TO 3.1 BY THE REVENUE AR E CONCERNED THE SAME RELATES TO THE ORDER OF THE CIT(A) IN DELE TING THE ADDITION OF RS.2 28 71 000/- MADE BY THE AO U/S. 68 OF THE I T ACT. 23. AFTER HEARING BOTH THE SIDES WE FIND THE AO MAD E THE ADDITION ON THE GROUND THAT THE ASSESSEE COMPANY FA ILED TO FURNISH THE NECESSARY CONFIRMATION COPY OF BANK AC COUNTS AND COPY OF IT RETURN ETC AND FAILED TO PRODUCE THE BOO KS OF ACCOUNTS OF THE CREDITORS. WE FIND BEFORE CIT(A) THE ASSESS EE FILED CERTAIN ADDITIONAL EVIDENCES BASED ON WHICH THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. WE FIND THE AO IN THE R EMAND REPORT HAS ACCEPTED THAT THE ASSESSEE FILED THE REQUISITE DETAILS AND PROVED THE CREDITWORTHINESS OF THE LOAN CREDITORS. THE RELEVANT OBSERVATION OF THE AO IN THE REMAND REPORT READS AS UNDER :- 2. ADDITION OF RS.2 28 75 000/- U/S. 68 FOR UNSECU RED LOANS FROM 3 PARTIES :- ASSESSEE HAS SHOWN THESE DEPOSITS FROM 3 PARTIES AS UNDER : (A) SHIV VANI OIL & GAS EXPLORATION SERVICES LTD. RS.2 00 000/- PAGE | 18 (B) BASUDEV GARG DIRECTOR OF THE COMPANY RS. 6 2 5 000/- (C) KUNAL GARG MEMORIAL TRUST (DIRECTORS OF CO. A RE TRUSTEES) RS.22 50 000/- THESE ADDITIONS WERE MADE AS ASSESSEE FAILED TO FIL E CONFIRMATIONS BANK STATEMENTS AND COPY OF IT RETURNS OF THE ABOVE THREE PARTIES D URING ASSESSMENT PROCEEDINGS. NOW ASSESSEE HAS FILED THEIR CONFIRMATIONS COPY O F BANK STATEMENTS AND COPY OF RETURNS WHICH REFLECTS THEIR CREDIT WORTHINESS AND DEPOSITS WITH THE ASSESSEE. 24. WE FIND BASED ON THE REMAND REPORT OF THE AO TH E LD. CIT(A) DELETED THE ADDITION HOLDING THAT THE ASSESS EE COMPANY HAS DULY DISCHARGED THE ONUS CAST ON IT. THE LD. D R COULD NOT CONTROVERT THE FACTUAL FINDINGS GIVEN BY THE CIT(A) WHILE DELETING THE ADDITION. WE THEREFORE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.2 28 75 0 00/- MADE BY THE AO U/S. 68 OF THE IT ACT. ACCORDINGLY THE GRO UNDS RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 25. GROUNDS APPEAL NO. 4 AND 4.1 BY THE REVENUE REL ATES TO ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 46 17 000/- MADE BY THE AO. 26. AFTER HEARING BOTH THE SIDES WE FIND THE AO MAD E THE ADDITION OF RS.46 17 000/- BEING THE ADVANCE RECEIV ED FROM SNS TRADING DMCC DUBAI ON THE GROUND THAT THE SAID PA RTIES ARE RELATED CONCERNS OF THE ASSESSEE AND ALTHOUGH THE A MOUNT WAS RECEIVED AS ADVANCE HOWEVER NO SUCH SALE WAS MADE TILL THE YEAR END AND THE ASSESSEE FAILED TO FILE REQUISITE DETAI LS. WE FIND THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UND ER :- 7.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E ON BEHALF OF THE APPELLANT COMPANY FINDINGS RECORDED BY THE PAGE | 19 LD.AO IN THE ASSESSMENT ORDER AND OBSERVATIONS MADE B Y HIM IN HIS REMAND REPORT. I HAVE ALSO GONE THROUGH T HE DOCUMENTS PLACED IN THE COURSE OF HEARING BEFORE ME. ON A CAREFUL CONSIDERATION I FIND THAT THERE IS NO DENIAL OF THE FACT THAT THE MONEY IN QUESTION HAS BEEN RECEIVED BY THE APPELLANT COMPANY THROUGH BANKING CHANNELS AND DUE DISCLOSURES IN THIS REGARD HAD BEEN MADE BY THE COMPA NY BEFORE THE CONCERNED AUTHORITIES NAMELY FOREIGN DEPARTMENT DIVISION OF CANARA BANK WHICH DEALS WITH T HE REMITTANCES OF FOREIGN CURRENCY FROM OVERSEAS. IN T HE LETTER DATED 08-09-06 ITSELF THE APPELLANT COMPANY HAS MAD E DISCLOSURE OF RECEIPT OF USD 100000 FROM SNC TRADING DMCC DUBAI. THEREFORE I AM IN AGREEMENT WITH THE ID. COUNSEL FOR THE APPELLANT THAT THERE WAS NOTHING DO UBTFUL OR DEBATABLE SO FAR AS THE RECEIPT OF THE MONEY FROM DUBAI IS CONCERNED AS DUE DISCLOSURES AND NECESSARY EVIDE NCES ARE ON RECORD. IN THE COURSE OF APPELLATE PROCEEDIN GS THE APPELLANT COMPANY HAS ALSO PRODUCED COPY OF FIRC ISS UED BY THE FOREIGN EXCHANGE DIVISION OF CANARA BANK WHE REIN THE PURPOSE FOR WHICH THE MONEY HAS BEEN RECEIVED BY THE APPELLANT COMPANY HAS BEEN CLEARLY STATED AS ADVANCE AGAINST SUPPLY OF GOODS. THEREFORE IN MY VIEW THE AO WAS NOT JUSTIFIED IN BRINGING TO TAX A SUM OF RS 4617000 ON ACCOUNT OF THE FACT THAT THE ASSESSEE COMPANY FAILE D TO SATISFY HIM WITH RESPECT TO THE CAPACITY IN WHICH M R. KS NEGI HAS SIGNED THE CONTRACT ON BEHALF OF THE APPEL LANT TO PRODUCE THE COPY OF BANK ACCOUNT OF SNS TRADING CO. AN D THAT WHETHER THE ASSESSEE COMPANY WAS DEALING IN SKIMMED MILK IN THE YEAR UNDER CONSIDERATION OR ANY OF THE PAGE | 20 PREVIOUS OR SUCCEEDING YEARS. IN MY VIEW WHILE THE SE ISSUES MAY POINT CERTAIN LAPSES IN PROCEDURE FOLLOWE D BY THE APPELLANT COMPANY WHILE ENTERING INTO AGREEMENT WITH ITS RELATED CONCERN NAMELY SNS TRADING DMCC DUBAI THIS ITSELF IS NOT SUFFICIENT TO HOLD THAT THE AMOUN T IN QUESTION WAS UNEXPLAINED FUNDS OF THE APPELLANT COMP ANY WHICH HAS BEEN ADJUSTED OR ARRANGED WITH THE HELP OF SISTER CONCERN OPERATING FROM DUBAI. IT HAS TO BE APPRECIATED THAT THE TRANSACTION IN QUESTION HAS BEE N MADE IN FOREIGN EXCHANGE MONEY HAS COME BY MEANS OF BAN KING CHANNELS AND BEFORE SAY THAT THE MONEY IN QUESTION REPRESENTED UNEXPLAINED FUNDS OF THE APPELLANT COMPANY IS WITHOUT ANY JUSTIFIABLE BASIS AND AT BEST CAN AMOUNT TO SUSPICION OR DOUBT ENTERTAINED BY THE LD.AO. HOWEVER IN THE ABSENCE OF ANY FURTHER MATERIAL/INVESTIGATION T O SUGGEST LAUNDERING OF UNACCOUNTED MONEY NO ADVERSE INFERENCE CAN LOGICALLY/LEGALLY BE DRAWN AGAINST THE APPELLANT COMPANY. THEREFORE THE ADDITION IN QUEST ION IS BEING DELETED. 27. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. WE FIND THE ASSESSEE DURING THE APPE AL PROCEEDINGS HAS PRODUCED THE COPY OF FIRC ISSUED BY THE FOREIGN EXCHANGE DIVISION OF CANARA BANK WHEREIN THE PURPOSE FOR WHI CH MONEY HAS BEEN RECEIVED BY THE ASSESSEE HAS BEEN CLEARLY STATED AS ADVANCE AGAINST SUPPLY OF GOODS. THE LD. CIT(A) HA S ALSO GIVEN THE FINDING THAT MONEY IN QUESTION HAS BEEN RECEIVE D BY THE ASSESSEE THROUGH BANKING CHANNELS AND DUE DISCLOSUR ES IN THIS REGARD HAD BEEN MADE BY THE COMPANY BEFORE THE CONC ERNED PAGE | 21 AUTHORITIES NAMELY THE FOREIGN DEPARTMENT DIVISION OF CANARA BANK WHICH DEALS WITH THE REMITTANCES OF FOREIGN CU RRENCY FROM OVERSEAS. MERELY BECAUSE SAID PARTIES ARE RELATED C ONCERN THE SAME IN OUR OPINION CANNOT BE A GROUND FOR MAKING T HE DISALLOWANCE. IN THIS VIEW OF THE MATTER AND IN VIE W OF THE DETAILED REASONINGS GIVEN BY THE CIT(A) ON THIS ISSUE WE DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY THE GROUNDS OF APPEAL RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 28. SO FAR AS THE GROUNDS OF APPEAL NO.5 AND 5.1 BY THE REVENUE ARE CONCERNED THE SAME RELATE TO THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.7 26 519/- MADE BY T HE AO BEING THE INTEREST PAID TO THE DIRECTORS OF THE COMPANY. 29. AFTER HEARING BOTH THE SIDES WE FIND THAT THE A SSESSEE HAD RECEIVED LOANS FROM DIRECTORS AND THEIR RELATIVES A ND HAD PAID INTEREST TO THE TUNE OF RS.7 26 519/-. ACCORDING T O THE AO SINCE THE ASSESSEE HAS NOT CHARGED ANY INTEREST FROM M/S. KMG MACRO INVESTMENTS PRIVATE LIMITED AND FROM M/S. KMG MILK FOOD LIMITED TO WHOM ADVANCES OF RS.44.43 LACS AND RS. 7 9.88 LACS RESPECTIVELY HAVE BEEN GIVEN AND THEY ARE ALSO RELA TED CONCERNS OF THE ASSESSEE THEREFORE THE INTEREST PAID TO THE D IRECTORS AND RELATIVES OF THE DIRECTORS ON LOANS IS NOT FOR THE PURPOSE OF BUSINESS. WE FIND THE LD. CIT(A) DELETED THE ADDIT ION BY OBSERVING AS UNDER :- 10.5 I HAVE CAREFULLY CONSIDERED THE FINDINGS RECOR DED BY THE LD. AO AND SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY. ON CONSIDERATION I FIND THAT T HE PAGE | 22 DISALLOWANCE IN QUESTION HAS BEEN MADE BY THE LD. A O MAINLY BECAUSE THE APPELLANT COMPANY HAS PROVIDED INTEREST FREE ADVANCES TO ITS SISTER CONCERNS NAMELY M/S KMG INVESTMENTS (P) LTD AND M/S KMG FOODS LTD. ACCORDI NG TO THE LD.AO THE APPELLANT COMPANY WOULD HAVE SAVED PAY MENT OF INTEREST TO THE DIRECTORS AND THEIR RELATIVES HAD IT NOT PROVIDED THE INTEREST FREE ADVANCES TO THE AFORESAID TWO SISTER CONCERNS. THEREFORE ACCORDING TO THE ID. AO THE LO ANS OBTAINED FROM THE DIRECTORS AND PAYMENT OF INTEREST THEREON W AS IN ORDER TO MAKE INTEREST FREE ADVANCES TO THE SISTER CONCER NS AND THEREFORE THE INTEREST WAS NOT PAID WHOLLY AND EXCL USIVELY FOR THE BUSINESS PURPOSES OF THE APPELLANT COMPANY. HOW EVER ON A CAREFUL CONSIDERATION I FIND THAT THE LD.AO HAS FAI LED TO EXAMINE THE BASIC ISSUE AS TO WHETHER THE LOANS RAI SED/FROM THE DIRECTORS AND THEIR RELATIVES HAD ANY NEXUS WITH THE PAYMENT OF INTEREST FREE ADVANCES TO THE SISTER CON CERNS. IN MY VIEW UNLESS THIS NEXUS WITH THE PAYMENT OF INTEREST FREE ADVANCES TO THE SISTER CONCERNS. IN MY VIEW UNLES S THIS NEXUS IS ESTABLISHED THERE IS NO BASIS EITHER TO HOLD THA T THE LOANS WERE NOT RAISED FOR THE BUSINESS PURPOSES OR TO DIS ALLOW THE INTEREST PAID TO THE DIRECTORS AND THEIR RELATIVES. A DMITTEDLY THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLI SH THE FACT THAT THE PAYMENT INTEREST OF RS.726519/- WAS PERTAI NING TO THE BORROWINGS WHICH WERE UTILIZED BY THE APPELLANT COMP ANY FOR MAKING INTEREST FREE ADVANCES TO THE SISTER CONCERN S. IN VIEW OF THE AFORESAID FACT SITUATION THE DISALLOWANCE OF RS 726519 IS BEING DELETED. PAGE | 23 30. HOWEVER A PERUSAL OF THE ORDER OF THE CIT(A) S HOWS THAT HE HAS NO WHERE EXAMINED THE AVAILABILITY OF THE OWN F UNDS WITH THE ASSESSEE FOR EXTENDING SUCH HUGE INTEREST FREE ADVA NCES WHEREAS ASSESSEE IS PAYING INTEREST TO THE DIRECTORS AND TH EIR RELATIVES ON ADVANCES RECEIVED FROM THEM. ALTHOUGH THE ASSESSEE HAS FILED VOLUMINOUS PAPER BOOK HOWEVER THE AUDITED ACCOUNT S OF THE ASSESSEE COMPANY HAVE NOT BEEN FILED. WE THEREFORE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILES OF THE AO WITH A DIRECTION TO FIND OUT THE OWN CAPITAL AND FREE RESERVES OF TH E ASSESSEE COMPANY. IN CASE THE OWN FUNDS AND FREE RESERVES O F THE ASSESSEE COMPANY ARE MORE THAN THE INTEREST FREE ADVANCES GI VEN TO THE SISTER CONCERNS NAMELY M/S. KMG INVESTMENT PRIVATE LIMITED AND M/S. KMG MILK FOODS PRIVATE LIMITED THE AO IS DIRE CTED TO DELETE THE DISALLOWANCE OF INTEREST. NEEDLESS TO SAY THE AO SHALL GIVE ONE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 31. SO FAR AS THE GROUND OF APPEAL NO.7 IS CONCERN ED IT IS THE GRIEVANCE OF THE REVENUE THAT THE LD. CIT(A) HAS AD MITTED THE ADDITIONAL EVIDENCE UNDER RULE 46 A OF THE IT ACT. 32. AFTER HEARING BOTH THE SIDES WE FIND IT IS THE GRIEVANCE OF THE REVENUE THAT THE LD. CIT(A) SHOULD NOT HAVE ACC EPTED THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE H IM DURING THE APPEAL HEARING. HOWEVER A PERUSAL OF THE ORDER OF THE CIT(A) SHOWS THAT HE HAS GIVEN JUSTIFIABLE REASONS AS TO W HY THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM SUB MITTING THE REQUISITE DETAILS/ DOCUMENTS. HE HAD GIVEN A CATEGO RICAL FINDING PAGE | 24 THAT THE AO HAS PASSED THE ORDER WITHOUT GIVING SUF FICIENT TIME TO COMPLY WITH THE VARIOUS REQUIREMENTS MADE BY HIM ON THE DATES OF HEARING IMMEDIATELY PRECEDING THE ASSESSMENT ORD ER. WE FIND THE LD. CIT(A) HAS FORWARDED ALL THOSE DETAILS TO T HE AO FOR HIS COMMENTS AND REMAND REPORT. THEREFORE THE REVENUE SHOULD NOT HAVE ANY GRIEVANCE ON THIS ISSUE. THE GROUND OF AP PEAL NO. 7 IS ACCORDINGLY DISMISSED. 33. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FIL ED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.11.2019. SD/- SD/- (KULDIP SINGH) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:- 15.11.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI PAGE | 25 DATE OF DICTATION 06.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.11.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 15.11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 15.11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 15.11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 15.11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15.1 1.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER