Ita/101/2017 Of The Pr Commissioner Of Income Tax Central Ludhiana v. Kulwinder Singh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT)CHANDIGARH ITA No.101 of 2017 (Q&M)Date of decision: March 28, 2019 The Principal Commissioner of Income [Tax (Central), Ludhiana ....-- Appel Vs, Shri Kulwinder Singh, 425-Mota Singh Nagar, Jalandhar ... respondent CORAM: HON’ BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MRS. JUSTICE MANJARI NEHRU KAUL Present: Mr. Rajesh Katoch, Sr. Standing Counsel for the appellant-revenue. © Ms.Radhika Suri, Sr. Advocate with Mr. Manpreet Singh Kanda,Advocate for the respondent(s). Mr. J.S.Bhasin, Advocate for the respondent in ITA No.97 of 2018. Ajay Kumar Mittal*de 1].This order shall dispose of bunch of six appeals bearing ITANos. 101, 124, 125 of 2017, 92, 97 and 107 of 2018, as learned counsel forthe parties are agreed that the issues involved in all these appeals are similar.However, the facts are being extracted from ITA No.101 of 2017. ) -ITA No.101 of 2017 has been preferred by the appellant-revenueunder Section 260A of the Income Tax Act, 1961 (in short, “the Act’) againstthe order dated 1.8.2016, Annexure A.III, passed by the Income Tax.Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal’) inITA No.659(Asr)/2014 for the assessment year 2009-10, claiming followingsubstantial questions of law:- *'1) Whether the Hon’ble ITAT has erred both in law and on facts inupholding the decision of CIT(A) where the learned CIT(A) hasupholding the decision of CIT(A) where the learned CIT(A) has deleted the addition ofS|2,2/7,00,000/- made on account ofunaccounted and undisclosed investment under Section 69B ofthe Act, ignoring the fact that as per seized documents (copy ofagreement) seized from the residence of Shri Vinay Kumar,Accountant of M/s PISCO, the company from which theassessee has also purchased the land in the same area and in thesame period reveals that the rate of sale price was actuallyS|11.05 crores based on an agreement dated 10.5.2007 entered into’between Shri Ravneet Takhar son of Shri Ravinder Singh, MDof M/s PISCO as a first party and Shri Mohinder Singh son ofSri Gopal Singh and Shri Joginder Singh son of Shri Labh Singh’as second party? unaccounted and undisclosed investment under Section 69B ofthe Act, ignoring the fact that as per seized documents (copy ofagreement) seized from the residence of Shri Vinay Kumar,Accountant of M/s PISCO, the company from which theassessee has also purchased the land in the same area and in thesame period reveals that the rate of sale price was actuallyS|11.05 crores based on an agreement dated 10.5.2007 entered into’between Shri Ravneet Takhar son of Shri Ravinder Singh, MDof M/s PISCO as a first party and Shri Mohinder Singh son ofSri Gopal Singh and Shri Joginder Singh son of Shri Labh Singh’as second party? 11) Whether the Hon’ble ITAT has erred both in law and on facts 1nupholding the order of learned CIT(A) where the learned CIT(A)has restricted the addition of|zy14,00,000/- made on account ofdisallowance of interest under section 36(1)(111) of the Act toS|10,95,795/- without appreciating the fact that the assessee hasnot maintained any separate account for interest bearing/interestfree funds’upholding the order of learned CIT(A) where the learned CIT(A)has restricted the addition of|zy14,00,000/- made on account ofdisallowance of interest under section 36(1)(111) of the Act toS|10,95,795/- without appreciating the fact that the assessee hasnot maintained any separate account for interest bearing/interestfree funds’ In ITA Nos. 92, 97 and 107 of 2018, in addition to the above two questions,the following additional question was also claimed:- “Whether the impugned order dated 26.9.2017 passed by theITAT is sustainable in the eyes of law or maintainable in thefacts and circumstances of the case?’ITAT is sustainable in the eyes of law or maintainable in thefacts and circumstances of the case?’ In ITA Nos. 92, 97 and 107 of 2018, in addition to the above two questions,the following additional question was also claimed:- “Whether the impugned order dated 26.9.2017 passed by theITAT is sustainable in the eyes of law or maintainable in thefacts and circumstances of the case?’ITAT is sustainable in the eyes of law or maintainable in thefacts and circumstances of the case?’ 3.A few facts relevant for the decision of the controversy involvedas available on the record of ITA No.101 of 2017 may be noticed. Therespondent assessee 1s engaged in the business of sale/purchase of property.During the course of assessment proceedings under Section 153A read withSection 143(3) of the Act, it was noticed by the Assessing Officer that therespondent-assessee during the financial year 2008-09 relevant to theassessment year 2009-10 had purchased land measuring 2 kanals 10 marlas_GURBAX SINGH2019.05.07 11:36 from Punjab Iron and Steel Co. Limited (PISCO), GT Road, Jalandhar andthe same was shown to have been purchased forS|1 crore as per theregistered conveyance deed. During the course of search at the residentialpremises of Shri Vinay Kumar, Accountant of M/s PISCO, a photo copy ofduly stamped, witnessed and fully honoured agreement dated 10.5.2007 was.found and seized. The said agreement was between Ravneet Takhar son ofRavinder Singh, MD of M/s PISCO and Mohinder Singh Bajwa and JoginderSingh for sale of land measuring 24 kanals | marla situated at VillageBirring, Jalandhar at the rate ofZL11,05,00,000/- per acre. Since the landpurchased by the assessee was a part of the same land situated in VillageBirring, the Assessing Officer after allowing opportunity of hearing to theassessee and considering his submissions, arrived at a conclusion that theassessee had understated the investment in the purchase of the land and byadopting the same rate as shown in the above mentioned agreement dated10.5.2007, an addition of|S|2,2/7,00,000/- was made under section 69B of theAct on account of undisclosed investment in the purchase of the land videassessment order dated 24.3.2014, Annexure A.|. An addition ofzy14 lacswas made by the Assessing Officer on account of disallowance of interestexpenditure under Section 36(1)(au1) of the Act as the assessee had madeinterest free advances to his relatives. Aggrieved by the order, the assesseefiled appeal before the Commissioner of Income tax (Appeals) |CIT(A)]..Vide order dated 14.8.2014, Annexure A.Il, the CIT(A) restricted theaddition ofS|14 lacs relating to the interest disallowance tozy10,95,795/-.The addition ofzy2,2/7,00,000/- made by the Assessing Officer under section69B of the Act on account of undisclosed investment in the purchase of theland was deleted by the CIT(A) on the ground that action on the basis of such the parties to the agreement, as the evidence in the case of the income tax.proceedings did not have to be in the nature of evidence under Section 65 ofthe Evidence Act, 1872. Aggrieved thereby, the revenue filed appeal beforethe Tribunal. Vide order dated 1.8.2016, Annexure A.III, the Tribunal upheldthe order passed by the CIT(A) and dismissed the appeal. Hence the instantappeals by the appellant-revenue. 4. We have heard learned counsel for the parties. 5.We proceed to examine question No.(1) claimed in these appeals.Before adjudicating the controversy involved in these appeals on this issue, itwould be apposite to reproduce the relevant statutory provision 1.e. Sections69B of the Act which reads thus:- “Amount of investments, etc., not fully disclosed in books ofaccount. the parties to the agreement, as the evidence in the case of the income tax.proceedings did not have to be in the nature of evidence under Section 65 ofthe Evidence Act, 1872. Aggrieved thereby, the revenue filed appeal beforethe Tribunal. Vide order dated 1.8.2016, Annexure A.III, the Tribunal upheldthe order passed by the CIT(A) and dismissed the appeal. Hence the instantappeals by the appellant-revenue. 4. We have heard learned counsel for the parties. 5.We proceed to examine question No.(1) claimed in these appeals.Before adjudicating the controversy involved in these appeals on this issue, itwould be apposite to reproduce the relevant statutory provision 1.e. Sections69B of the Act which reads thus:- “Amount of investments, etc., not fully disclosed in books ofaccount. 69ORBWhere in any financial year the assessee has made|investments or 1s found to be the owner of any bullion,|jewellery or other valuable article, and the Assessing Officer|finds that the amount expended on making such investments or In acquiring such bullion, jewellery or other valuable article|exceeds the amount recorded in this behalf in the books ofaccount maintained by the assessee for any source of income,|and the assessee offers no explanation about such excess|amount or the explanation offered by him 1s not, 1n the opinionof the Assessing Officer, satisfactory, the excess amount may|be deemed to be the income of the assessee for such financial|year. 6.A plain reading of Section 69B of the Act shows that if in anyfinancial year, the Assessing Officer finds that the amount invested by theassessee exceeds the amount recorded in his books of account and no.satisfactory explanation is given, then the excess amount may be deemed to. 69B of the Act requires that the Assessing Officer has to first find that theassessee has expended an amount which he has not fully recorded in hisbooks of account. It is only then that the burden shifts to the assessee tofurnish a satisfactory explanation. If the explanation is not found to besatisfactory, the excess amount may be added to the income of the assessee. ‘|.Admittedly, in the present case, the assessee filed its return of incomefor the assessment year 1n question on 28.2.2013 declaring income of)v10,04,250/-.The assessee filed reply to the questionnaire alongwith therequired detail and documents. Assessment under Section 153A read withSection 143(3) of the Act was framed on 24.3.2014 atS|2,91,52,6/5/- asagainst the returned income ofS|10,04,250/-. Thus, the Assessing Officermade addition ofzy2,41,48,425/- on different counts. During the assessment|proceedings, it was noticed by the Assessing officer that the assessee hadpurchased certain land trom M/s PISCO which was shown to have beenpurchased forzy1 crore as per the registered conveyance deed. During thesearch at the residential premises of the Accountant of M/s PISCO, some.documents and agreement were found showing the rate of the land atS|11,05,00,000/- per acre. Since the land purchased by the assessee was part ofthe same land, the Assessing officer concluded that the assessee hadunderstated the investment in the purchase of the land. Addition ofzy2,2/7,00,000/- was made under Section 69B of the Act on account ofundisclosed investment in the purchase of the land. Further, addition ofS|14)lacs was made by the Assessing Officer on account of disallowance ofinterest expenditure under Section 36(1)(i11) of the Act as the assessee hadmade interest free advances to his relatives. On appeal by the assessee, theCIT(A) restricted the addition of=14 lacs toS|10,95,795/-. The addition of)zy been categorically recorded by the CIT(A) that the issue of allegedunderstatement of sale consideration 1n the registration deed has to be provedby the revenue and the same can be done by leading positive evidence eitherin the form of some documents found during the course of search orotherwise which could prove that consideration over and above theregistration deed had passed on from buyer to the seller. The evidence reliedupon by the Assessing Officer represented a photo copy of an agreement to.sell with regard to a deed between two other persons in respect of differentpiece of land and on a different date. Thus, the Assessing Officer coulddefinitely make a presumption on sale price being higher than what was.stated 1n the registration deed by the assessee. The said presumption had to besupported by some evidence of transfer of such consideration from the buyerto the seller. The registration between the assessee and the seller had been ata price which was at least as per circle rate approved by the revenueauthorities and hence could not be said to be below fair market price. Afterexamining the entire case law on the point, 1t was recorded that as per Section.69B of the Act, it is the burden of the Assessing Officer to first prove that.there was understatement of the consideration(investment) in the books ofaccount. Since the present case was proceeded on the assumption that therewas understatement of the investment without a finding that the assesseeinvested more than what was recorded in the books of account, the decision|of the Assessing Officer could not be approved. Section 69B of the Act was.thus wrongly invoked. The relevant findings recorded by CIT(A) read thus:- — “14. The issue of alleged understatement of sale consideration 1n theregistration deed has to be roved by the revenue and the samecan be done by leading positive evidence either in the form ofsome documents found during the course of search or otherwiseregistration deed has to be roved by the revenue and the samecan be done by leading positive evidence either in the form ofsome documents found during the course of search or otherwiseGURBAX SINGHwhich could prove that consideration over and above the2019.05.07 11:362019.05.07 11:36 “14. The issue of alleged understatement of sale consideration 1n theregistration deed has to be roved by the revenue and the samecan be done by leading positive evidence either in the form ofsome documents found during the course of search or otherwiseregistration deed has to be roved by the revenue and the samecan be done by leading positive evidence either in the form ofsome documents found during the course of search or otherwiseGURBAX SINGHwhich could prove that consideration over and above the2019.05.07 11:362019.05.07 11:36 registration deed had been passed on from buyer to seller. Theevidence relied upon by the Assessing Officer in the instant caserepresents a photo copy of an agreement to sell with regard to adeed between two other persons in respect of different piece ofland and on a different date. The Assessing Officer on the basis.of the said seized documents, which has been denied by all theconstituents mentioned therein could definitely make apresumption on sale price being higher than what was stated inthe registration deed by the appellant. However, the saidpresumption has to be backed up by some evidence of transfer ofsuch consideration from the buyer to seller. The appellantalongwith seller had been subjected to search operation withinthe meaning of section 132 of the IT Act 1961 but no suchevidence could be found to be existing. This means that thepresumption of the Assessing Officer eventually remains apresumption and therefore cannot be substituted in place ofevidence i.e. essential requirement to unsettle the saleconsideration as recorded in the registered documents. It 1s also”important to appreciate that the said registration between theappellant and seller has been at a price which 1s at least as percircle rate approved by the revenue authorities and hence cannotbe said to be below fair market price. The Hon’ble Apex Court1n the case of.KP Varghese vs. [TO131 ITR 597 (SC) had givenjudgment in the context of applicability of section 52(2) ofIncome Tax Act, 1961 which dealt with the possible understatement of sale consideration. The said section has beenomitted by Finance Act 1987 w.e.f 1.4.1988 and the onlypresumption as of now is 1n terms of applicability of section 50Cin the case of computation of capital gain in the case of theseller. The understatement that could be presumed in sucheventuality in the hands of the buyer cannot lead to an additionunder section 69 which clearly shows that it 1s the evidence ofpassing on of unaccounted sale consideration that has to bebrought on record. XXXXKXXKXXKXKKXKXKXKX 8. |On appeal by the revenue, it was categorically recorded by theTribunal that the agreement seized was only a photo copy of the originalwhich was not seized from the assessee. The seller, buyer and the witnessesrefused to identify the same. The assessee was neither a party nor witness tothe agreement. The assessee was not related to either party. The assesseepurchased the land directly from PISCO at the prevalent circle rate. In thepurchase deed of the assessee, the rate waszy4 crore per acre ==2.50 lacs per|marla as against that ofzy11.05 crore per acre as mentioned in the agreementseized. The land purchased by the assessee was different from that mentionedin the agreement seized. The burden was on the department to proveunderstatement of sale consideration which was not discharged. Thus, thepresumption of the Assessing Officer could not lead to a conclusion of underinvestment by the assessee, liable for addition. The relevant findings recordedby the Tribunal read thus:-| "8. From the rival contentions and the material on record, thefollowing facts emerge:-_following facts emerge:-_ 1)The agreement seized was only a photocopy of theoriginal.original. 11)It was seized not from the assessee but from the thirdpatty.patty. 111)The seller refused to identify the agreement. Iv)The buyer refused to identify the agreement. "8. From the rival contentions and the material on record, thefollowing facts emerge:-_following facts emerge:-_ 1)The agreement seized was only a photocopy of theoriginal.original. 11)It was seized not from the assessee but from the thirdpatty.patty. 111)The seller refused to identify the agreement. Iv)The buyer refused to identify the agreement. VvThe witnesses to the agreement refused to identify it.v1)The AQO did not make total addition on account oftotal value of the transactions in the cases of the otherbuyers or sellers, as mentioned in the agreement.v1)The AQO did not make total addition on account oftotal value of the transactions in the cases of the otherbuyers or sellers, as mentioned in the agreement. V11)The assessee was not a party to the agreement. V111)The assessee was not witness to the agreement. The assessee was not related to either any party orany witness to the agreement.any witness to the agreement. /"The assessee purchased his land directly fromPISCO.PISCO. The assessee purchased the land at the prevalentcircular rate.circular rate. X11)The assessee paid due stamp duty on the transaction. X111)The purchase deed of the assessee was registered with the Registrar at Jalandhar. X1V)In the assessee’s purchase deed, the rate mentioned was ofS|4 crore per acre =42.50 lakhs per marla, asagainst that ofZL11.05 crore per acre, as mentioned inagainst that ofZL11.05 crore per acre, as mentioned in the agreement seized. XV)Action on the basis of the agreement seized waswatranted in the cases of the parties thereto, due tothe presumption under section 132(4A) of the Act,which presumption noticeably is rebuttable.watranted in the cases of the parties thereto, due tothe presumption under section 132(4A) of the Act,which presumption noticeably is rebuttable. XV1)No such action can be taken in the case of a partywhose transaction was with regard to land contiguousor similarly situated to the land mentioned in theagreement seized.whose transaction was with regard to land contiguousor similarly situated to the land mentioned in theagreement seized. XV11)No action 1s called for in a case of transactionconsequential to the transaction mentioned in theagreement seized.consequential to the transaction mentioned in theagreement seized. XVI111There is no evidence of unaccounted investment bythe assessee.the assessee. The Assessing Officer himself clarified to theassessee that the sale consideration in the agreementseized was taken for the purpose of comparative rateonly. |assessee that the sale consideration in the agreementseized was taken for the purpose of comparative rateonly. | //"The land purchased by the assessee was differentfrom that mentioned in the agreement seized. |from that mentioned in the agreement seized. | It is the burden of the department to proveunderstatement of sale consideration.understatement of sale consideration. xxl1) This burden has not been discharged. xxil1) There 1s no positive evidence against the assessee. xx1v) Thus, the AO’s presumption did not materialize into|conclusive evidence against the assessee.conclusive evidence against the assessee. XxXV) Such a presumption cannot be accorded the status of|fool proof evidence against the assessee.|fool proof evidence against the assessee.| Xxv1) Such a presumption cannot lead to a conclusion of|underinvestment by the assessee, liable for addition.underinvestment by the assessee, liable for addition. 9) The learned CIT(A) has duly considered all the above saidfacts as well as the relevant case laws. There has been no.effective rebuttal to the well reasoned elaborate findingsrecorded by the learned CIT(A). facts as well as the relevant case laws. There has been no.effective rebuttal to the well reasoned elaborate findingsrecorded by the learned CIT(A). xx1v) Thus, the AO’s presumption did not materialize into|conclusive evidence against the assessee.conclusive evidence against the assessee. XxXV) Such a presumption cannot be accorded the status of|fool proof evidence against the assessee.|fool proof evidence against the assessee.| Xxv1) Such a presumption cannot lead to a conclusion of|underinvestment by the assessee, liable for addition.underinvestment by the assessee, liable for addition. 9) The learned CIT(A) has duly considered all the above saidfacts as well as the relevant case laws. There has been no.effective rebuttal to the well reasoned elaborate findingsrecorded by the learned CIT(A). facts as well as the relevant case laws. There has been no.effective rebuttal to the well reasoned elaborate findingsrecorded by the learned CIT(A). 10) In view of the above discussion, we are of the consideredview that the learned CIT(A) has passed a detailed, wellreasoned and well versed order which does not require anyinterference and accordingly, the same is upheld. GroundNo.1 is thus, rejected.”view that the learned CIT(A) has passed a detailed, wellreasoned and well versed order which does not require anyinterference and accordingly, the same is upheld. GroundNo.1 is thus, rejected.” Q_ Learned counsel for the respondent assessee relied upon certain judgments in support of her claim. In|Commissioner of Income Tax ys.Smt.Suraj Devi,(2010) 328 ITR 604 (Delhi), 1t was held by the Delhi High|Court that the primary burden of proof to prove understatement orconcealment of income 1s on the revenue and it 1s only when such burden 1sdischarged that 1t would be permissible to rely upon the valuation given bythe Valuation Officer. The relevant observations read thus:- “4. Itis settled law that the primary burden of proof to prove under-statement or concealment of Income 1s on the Revenue and it 1sonly when such burden is discharged that it would bepermissible to rely upon the valuation given by the DVO.(SeeK.P. Varghese Vs. [TO, 131 ITR 597, CIT Vs. ShakuntalaDevi, (2009) 316 ITR 46 and ITA No. 482/2010 decided by this’Court on 5th May, 2010)statement or concealment of Income 1s on the Revenue and it 1sonly when such burden is discharged that it would bepermissible to rely upon the valuation given by the DVO.(SeeK.P. Varghese Vs. [TO, 131 ITR 597, CIT Vs. ShakuntalaDevi, (2009) 316 ITR 46 and ITA No. 482/2010 decided by this’Court on 5th May, 2010) 5. In any event, the opinion of the DVO, per se, 1s not an|information and cannot be relied upon without the books ofaccount being rejected--which has not been done in the presentcase. The Supreme Court in its order dated 19th October, 2009in Civil Appeal No. 6973/2009 has held as under:- "Delay condoned. Leave granted. In the present case, we find that the Tribunal decided the|matter rightly in favour of the assessee inasmuch as the|Tribunal came to the conclusion that the Assessing|Authority (AO) could not have referred the matter to the|Departmental Valuation Officer (DVO) without books of|accounts being rejected. In the present case, a categorical|finding 1s recorded by the Tribunal that the books were|never rejected. This aspect has not been considered by the|High Court. In the circumstances, reliance placed on the|report of the DVO was misconceived.matter rightly in favour of the assessee inasmuch as the|Tribunal came to the conclusion that the Assessing|Authority (AO) could not have referred the matter to the|Departmental Valuation Officer (DVO) without books of|accounts being rejected. In the present case, a categorical|finding 1s recorded by the Tribunal that the books were|never rejected. This aspect has not been considered by the|High Court. In the circumstances, reliance placed on the|report of the DVO was misconceived. For the above reasons, the impugned judgment of the|High Court 1s set aside and the order passed by the|Tribunal stands restored to the file. Accordingly, assesee|succeeds.High Court 1s set aside and the order passed by the|Tribunal stands restored to the file. Accordingly, assesee|succeeds. Civil Appeal is allowed. No order as to costs." 6. Further the Supreme Court in its order dated 16th February, 2010in Civil Appeal No. 9468/2003 has held as under:-in Civil Appeal No. 9468/2003 has held as under:- "Having examined the record, we find that 1n this case, theDepartment sought reopening of the assessment based on the opinion given by the District Valuation Officer|(DVO). Opinion of the DVO per se 1s not an information|for the purposes of reopening assessment underSection,0)of the Income Tax Act, 1961. The AO has to apply)his mind to the information, 1f any, collected and must|form a belief thereon. In the circumstances, there is no)Department sought reopening of the assessment based on the opinion given by the District Valuation Officer|(DVO). Opinion of the DVO per se 1s not an information|for the purposes of reopening assessment underSection,0)of the Income Tax Act, 1961. The AO has to apply)his mind to the information, 1f any, collected and must|form a belief thereon. In the circumstances, there is no) merit in the Civil Appeal. The Department was not|entitled to reopen the assessment. Civil appeal 1s, accordingly, dismissed. No order as to|costs.”costs.” Similar was the position inK.P.Varghese vs. Income Tax Officer,Ernakulam and another,(1981) 131 ITR 597. | 10.)In view of the above facts proved on record, the Tribunal rightlyupheld the findings recorded by the CII(A) on question No.(1). Learnedcounsel for the appellant-revenue has not been able to point out any error orillegality therein. ll.Adverting to question (11), it would be apposite to reproduceSection 36(1 )(111) of the Act, which reads thus:- 36.(1) The deductions provided for in the following clauses shall be|allowed in respect of the matters dealt with therein, in|computing the income referred to 1n section 28—KXXKXXXXXallowed in respect of the matters dealt with therein, in|computing the income referred to 1n section 28—KXXKXXXXX !11]) the amount of the interest paid in respect of capitalborrowed for the purposes of the business or profession: ©Providedthat any amount of the interest paid, in|respect of capital borrowed for acquisition of an asset|(whether capitalised in the books of account or not); forany period beginning from the date on which the capitalwas borrowed for acquisition of the asset till the date onwhich such asset was first put to use, shall not be|allowed as deduction.borrowed for the purposes of the business or profession: ©Providedthat any amount of the interest paid, in|respect of capital borrowed for acquisition of an asset|(whether capitalised in the books of account or not); forany period beginning from the date on which the capitalwas borrowed for acquisition of the asset till the date onwhich such asset was first put to use, shall not be|allowed as deduction. Explanation:Recurring subscriptions paid periodically|by shareholders, or subscribers in Mutual Benefit|Societies which fulfil such conditions as may be.prescribed, shall be deemed to be capital borrowed|within the meaning of this clause;”’by shareholders, or subscribers in Mutual Benefit|Societies which fulfil such conditions as may be.prescribed, shall be deemed to be capital borrowed|within the meaning of this clause;”’ Explanation:Recurring subscriptions paid periodically|by shareholders, or subscribers in Mutual Benefit|Societies which fulfil such conditions as may be.prescribed, shall be deemed to be capital borrowed|within the meaning of this clause;”’by shareholders, or subscribers in Mutual Benefit|Societies which fulfil such conditions as may be.prescribed, shall be deemed to be capital borrowed|within the meaning of this clause;”’ 12 |A perusal of the above provision shows that the deductions inrespect of the amount of interest paid qua capital borrowed for the purposesof business or profession shall be allowed in computing the income referredto in Section 28 of the Act. A proviso has also been added to the effect thatany amount of interest paid in respect of capital borrowed for acquisition ofan asset for any period from the date on which the capital was borrowed foracquisition of the asset till the date on which such asset was first put to use,shall not be allowed as deduction. 13.)With regard to the second question qua deletion of addition ofzy14,00,000/- on account of disallowance of interest under Section 36(1)(iu1) ofthe Act, the Assessing Officer noticed that the assessee had made interest freeadvances and loans to his family members/sister concerns and at the same.time, debited bank interest to the tune of|zy2272 19 lacs. The assessee wasasked to explain as to how the interest bearing funds could be said to be usedfor the purpose of business especially in the face of interest free loans tofriends/sister concerns. No explanation was given by the assessee. TheAssessing Officer thus proceeded to disallow 12% on the entire amount ofadvances leading to disallowance ofzy14 lacs. The CIT(A) recorded that the|entire set of circumstances showed that the assessee had avoided to give datafrom the books of account to show the business use of interest bearing funds.Thus, the view of the Assessing Officer that the interest bearing funds hadbeen diverted to advance interest free loans, could not be said to be arbitrary. |Consequently, the CIT(A) restricted the disallowance to S|10,95,795/-. TheTribunal rightly upheld the findings recorded by the CIT(A) on this point.The relevant findings recorded by the Tribunal in this regard read thus:- “11. As regards Ground No.2, the Department has contended that thelearned CIT(A) has erred in deleting the addition ofZL14,00,000/- on account of disallowance of interest under section36(1)(i11) of the IT Act.learned CIT(A) has erred in deleting the addition ofZL14,00,000/- on account of disallowance of interest under section36(1)(i11) of the IT Act. 12. The learned DR relied on the order of the Assessing Officer. | 13. The learned counsel for the assessee, on the other hand, strongly|relied on the order of the learned CIT(A) and reiterated thesubmission made before him.relied on the order of the learned CIT(A) and reiterated thesubmission made before him. 14. We have heard the rival contentions and have carefully gone|through the material available on record, including the order ofthe learned CIT(A). The relevant findings given by the learnedCIT(A) qua this issue in his order in paras 25 to 29 of the orderare as follows:-through the material available on record, including the order ofthe learned CIT(A). The relevant findings given by the learnedCIT(A) qua this issue in his order in paras 25 to 29 of the orderare as follows:- 2). The ground of appeal at Sr.No.3 pertains to the claimof the appellant that the Assessing Officer haswrongly made disallowance ofS|14,00,000/- undersection 36(1)(i11). The Assessing Officer has broughton record that the assessee has made interest freeadvances and loans to his family members/sisterconcerns 1n the following manner:-of the appellant that the Assessing Officer haswrongly made disallowance ofS|14,00,000/- undersection 36(1)(i11). The Assessing Officer has broughton record that the assessee has made interest freeadvances and loans to his family members/sisterconcerns 1n the following manner:- KXKXXXKXXXXX 2). The ground of appeal at Sr.No.3 pertains to the claimof the appellant that the Assessing Officer haswrongly made disallowance ofS|14,00,000/- undersection 36(1)(i11). The Assessing Officer has broughton record that the assessee has made interest freeadvances and loans to his family members/sisterconcerns 1n the following manner:-of the appellant that the Assessing Officer haswrongly made disallowance ofS|14,00,000/- undersection 36(1)(i11). The Assessing Officer has broughton record that the assessee has made interest freeadvances and loans to his family members/sisterconcerns 1n the following manner:- KXKXXXKXXXXX At the same time had debited bank interest to the tuneof Rs.22.19 lacs. The Assessing Officer required theassessee to explain as to how the interest bearingfunds could be said to be used for the purpose ofbusiness especially in face of interest free loans tofriends/sister|CONnNCermhighlightedahove.No.explanation on the said issue before the AssessingOfficer as recorded in the assessment year at para5.2. The Assessing Officer therefore proceeded todisallow 122% on the entire amount of advancesleading to disallowance of Rs. 14 lacs. 26. During the course of appellate proceedings the AR ofthe appellant submitted his arguments on the issue as|under:-the appellant submitted his arguments on the issue as|under:- KXXXXKXXXXXXKXXX 29. I have considered the facts of the case, the basis of)addition made by the Assessing Officer and the)arguments of the AR on the issue. It 1s seen that theentire set of circumstances show that the appellanthas avoided to give data from the books of account to|show the business use of interest bearing funds. Inthe circumstances the view of the Assessing Officerthat the interest bearing funds have been diverted toadvance interest free loans cannot be said to be.arbitrary. In the circumstances the disallowance isrestricted to410,95,795/-, in view of the commentsof the undersigned in para 21 of this appellate order.”addition made by the Assessing Officer and the)arguments of the AR on the issue. It 1s seen that theentire set of circumstances show that the appellanthas avoided to give data from the books of account to|show the business use of interest bearing funds. Inthe circumstances the view of the Assessing Officerthat the interest bearing funds have been diverted toadvance interest free loans cannot be said to be.arbitrary. In the circumstances the disallowance isrestricted to410,95,795/-, in view of the commentsof the undersigned in para 21 of this appellate order.” 15. It is seen that the learned CIT(A) has duly taken into considerationand given credit to the assessee of interest payable at the rate of12% on credit balances of Himsons Exports|436000/-, JalandharConstruction Co. LimitedS|60,000/-, Jaswant Singh & Sons|y60,000/-, Rajindra Deposits & Advances LimitedS|66,960/- and.Harpreet SinghS|1,62,000/-. The learned CIT(A) has also takencognizance of the interest chargeable @ 12% on the debit balancesof advance for Satpal Coldzy12000/-, Dalbir Singh)y12000/-,Gurbachan Singhzy50,400/-, Harman Builders Pvt. Limited,|y8,96,835/-, Inderpal SinghS|24000/-, Jagjit Singh)zy36000/-,Narotam Singh|zy6000/-, Raminder KaurS|3,11,520/-, Ravinder|SinghS|12000/-, Satish Kumar|4Q6000/- and Venus Builders Pvt.Limitedzy24000/-. It 1s in this manner that the disallowance has|been restricted toS|10,95,795/- taking out the sum of interestpayable amounting tozy24,97,899/- representing the capital|brought in by Sh.Kulwinder Singh.and given credit to the assessee of interest payable at the rate of12% on credit balances of Himsons Exports|436000/-, JalandharConstruction Co. LimitedS|60,000/-, Jaswant Singh & Sons|y60,000/-, Rajindra Deposits & Advances LimitedS|66,960/- and.Harpreet SinghS|1,62,000/-. The learned CIT(A) has also takencognizance of the interest chargeable @ 12% on the debit balancesof advance for Satpal Coldzy12000/-, Dalbir Singh)y12000/-,Gurbachan Singhzy50,400/-, Harman Builders Pvt. Limited,|y8,96,835/-, Inderpal SinghS|24000/-, Jagjit Singh)zy36000/-,Narotam Singh|zy6000/-, Raminder KaurS|3,11,520/-, Ravinder|SinghS|12000/-, Satish Kumar|4Q6000/- and Venus Builders Pvt.Limitedzy24000/-. It 1s in this manner that the disallowance has|been restricted toS|10,95,795/- taking out the sum of interestpayable amounting tozy24,97,899/- representing the capital|brought in by Sh.Kulwinder Singh. 16. The learned CIT(A) has observed that as available from the|calculation chart given by the assessee, even the amount of capital.of Shri Kulwinder Singh brought into the business was taken to bea part of the calculation, treating this amount to be funds availablefree of interest and that the capital is meant to earn profits andseparate interest thereon to decide the issue of disallowance couldnot have been done. It was on this basis that the learned CIT(A)held that no interest was payable to the assessee on this amount ofzy24,97,899/-. |calculation chart given by the assessee, even the amount of capital.of Shri Kulwinder Singh brought into the business was taken to bea part of the calculation, treating this amount to be funds availablefree of interest and that the capital is meant to earn profits andseparate interest thereon to decide the issue of disallowance couldnot have been done. It was on this basis that the learned CIT(A)held that no interest was payable to the assessee on this amount ofzy24,97,899/-. | 17. We do not find any error in the order of the learned CITA). The|assessee has not challenged the same. Finding no error therewith,the same is hereby upheld. Accordingly ground No.2 1s upheld.”assessee has not challenged the same. Finding no error therewith,the same is hereby upheld. Accordingly ground No.2 1s upheld.” The findings recorded by the Tribunal on this issue have not been shown to—be illegal or erroneous by the learned counsel for the appellant-revenue. © 14.|The additional question claimed in ITA Nos.92, 97 and 107 of2018 qua maintainability of the impugned order passed by the Tribunal, 1sgeneral in nature and in view of our findings on questions Nos. (1) and (11),this question 1s also rejected. © 145. As a result, no substantial question of law arises. All the six appeals are hereby dismissed. March 28, 2019) Whether speaking/reasonedWhether reportable (Ajay Kumar Mittal) Judge| (Manjari Nehru Kaul) Judge| Yes Yes