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TMI Blog2012 (8) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made by the AO of Rs. 78,37,586/- out of total addition of Rs. 81,80,651/- on account of interest payable. 2. On the facts and circumstances of the case the ld. CIT(A) erred in law and merit of the case in deleting the disallowance of interest amounting to Rs. 5,47,596/- made by the AO u/s 40A(2)(b) of the Income-tax Act, 1961. 3. he appellant craves to amend, modify, alter, add or forgo any ground of appeal at any time before or during the hearing of the appeal." I.T.A. No. 2936/D/2011-Assessee [AY 2007-08] "1. The assessee having furnished confirmations and related documents in respect of such persons and trade creditors from whom it has raised loans aggregating to Rs. 8,52,40,000/-, the CIT(A) erred in not accepting the total confirmations filed and further erred in disallowing confirmations aggregating to Rs. 17,00,000/- and the consequential interest of Rs. 18,559/- in respect thereof. 2. That the CIT(A) erred in rejecting confirmations aggregating to Rs. 17 lacs merely because the related parties failed to mention their respective PAN No. with complete disregard to the fact that the assessee could not be penalized for the default of such persons for their non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of unsecured loan account. In respect of unsecured loan from trade deposit and shareholders we enclose confirmation received." 2.1 On perusal of the details, the AO pointed out that a list showing opening and closing balance in respect of 44 parties was filed whereas confirmations from three parties namely The classic, K.B. Mathur and Meera Mathur were filed from whom no fresh unsecured loans were taken during the year; rather only interest was credited. No confirmation or other document in respect of remaining 41 parties was filed. Since the assessee did not establish genuineness of the credits, the AO again reminded the assessee vide order-sheet entry dated 23.11.2009 and the case was adjourned to 30th November, 2009. Despite seeking further adjournment, the assessee did not establish genuineness of the creditors even until 14th December, 2009 ,when the assessee merely stated as under:- "1. Detailed statement of unsecured loans is enclosed. As regards loans received from the following person their confirmations are enclosed: Mrs. Roma Khanna (Rs. 25,43,362), Mrs. Neera Sehgal (Rs. 20 lacs). The Classic (Rs. 4,71,677/-), Mr. K.B. Mathur (Rs. 9,43,680/-) and Mrs. Meera Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing terms: "5.2 At the appellate stage the appellant moved an application under Rule 46A and furnished the confirmation from 16 persons out of the 22 persons on account of whom addition were made as 'unexplained cash credit'. These 16 person are mentioned here under: S.No Name Nature Total Amt. Total interest Remarks 1 Sh.A.P. Sehgal Unsecured loan 20,000,000 22,04,110 Confirmation attached 2 Sh. Amit Mathur Unsecured loan 25,00,000 1,85,188 Confirmation attached 3 Anjum Unsecured loan 2,90,000 14,808 Confirmation attached 4 Anshul Kumar Unsecured loan 2,00,000 18,959 Confirmation attached 5 Arvind Kr. HUF Unsecured loan 5,60,000 71,978 Confirmation attached 6 Sh.Ashok Mathur Unsecured loan 1,00,00,000 12,11,301 Confirmation attached 7 BG&G's Trade deposit 3,00,000 9,173 Confirmation attached 8 Esha Mathur Unsecured loan 2,00,000 3,945 Confirmation attached 9 Hooda Enterprises Trade deposit 5,00,000 18,559 Confirmation attached 10 Jyoti Kumar Unsecured loan 12,40,000 1,10,446 Confirmation attached 11 Kanchana E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of assessment proceedings the genuineness of the same would have been verified is not acceptable for if the assessee could manage all the confirmations during the assessment proceedings there was no necessity of filing them as additional evidence under Rule 46A at the Appellate Stage. Since these confirmations are crucial to the adjudication of the appellant proceedings they are admitted on the ground that it took the appellant sometime to collect the confirmation. 5.5 Moreover, nothing prevented the Assessing Officer from carrying out the necessary verification since, the appellant had filed 16 confirmations. However, it is seen that two of the confirmation filed by the appellant do not mention the PAN No or the address. In the absence of the PAN No. and the address it is not possible to carry out the necessary verification. 5.6 It is seen that the appellant has not furnished the necessary details in the following confirmations. S.No Name of the assessee Deficiency Amount Interest 1 Hooda Enterprises No PAN & address 5,00,000 18.559 2 Malhotra Enterprises1 No address 12,00,000 - Total &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the confirmations filed before the ld. CIT(A). 5. On the other hand, the ld. AR on behalf of the assessee while carrying us through the impugned order and page 18 of the paper book, contended that the assessee filed confirmation of M/s Malhotra Enterprises, reflecting their PAN. Therefore, the ld. CIT(A) was not justified in upholding the addition in respect of amount received from Malhotra Enterprises. 6. We have heard both the parties and gone through the facts of the case as also the aforesaid decision relied upon by the ld. DR. Indisputably, the amount of Rs. 9,57,40,000/- was received from new creditors by way of unsecured loans/trade deposits and the assessee paid interest thereon of Rs. 81,80,651/-. There is no dispute before us in respect of addition of Rs. 1,22,00,000/- and disallowance of interest thereon. The only dispute raised by the Revenue before us is in respect of deletion of addition of Rs. 8,35,40,000/- and interest of Rs. 78,37,586/- thereon while the assessee is in appeal against upholding of addition of Rs. 17,00,000/- and interest of 18,559/-. Despite various notices issued u/s 142(1) of the Act by the AO, asking the assessee to establish the genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 596/56 Taxman 304 (Cal). Moreover, mere furnishing of the particulars or payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine as concluded in CIT v. Precision Finance Co. (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal.); Nizam Wool Agency v. CIT [1992] 193 ITR 318/[1991] 59 Taxman 187 and CIT v. United Commercial & Industrial Co. (P.) Ltd. [1991] 187 ITR 596/56 Taxman 304 (Cal.). Hon'ble Apex Court in CIT v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 (SC) observed that : "A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. Dispute Resolution Panel-II [2011] 196 Taxman 423 held that when a quasi judicial authority deals with a lis, it is obligatory on its part to ascribe cogent and germane reasons as the same is the heart and soul of the matter and further, the same also facilitates appreciation when the order is called in question before the superior forum. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. We may reiterate that a 'decision' does not merely mean the 'conclusion'. It embraces within its fold the reasons forming basis for the conclusion. [Mukhtiar Singh v. State of Punjab [1995] 1 SCC 760]. As is apparent, the impugned order of the ld. CIT(A) suffers from lack of reasoning and is not a speaking order. In view of the foregoing, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and resto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has not been able to establish as to what was the market rate of interest. It is further seen that the appellant has paid an interest of 14.5% to the bank, thus, there is no justification in making a disallowance of Rs. 5,47,596/- u/s 40A(2)(b) the addition of Rs. 5,47,596/- is hereby deleted." 10. Similarly in the AY 2008-09, the ld. CIT(A) deleted the disallowance, holding as under:- "4.3 The submission given by the appellant and the objections of the Assessing Officer have been considered. In order to make a disallowance u/s 40A(2)(b) it is necessary that the Assessing Officer should establish that the benefits given to the related parties are more than the fair market value. If the appellant is making payments to other persons @ 15% then there is no special favour which is being given to the related parties. Further, the Assessing Officer has not been able to establish as to what was the market rate of interest. It is further seen that the appellant has paid a interest of 14.5% to the bank and this being an unsecured loan will certainly command a higher rate of interest thus', there is no justification in making a disallowance of Rs. 10,64,4611- u/s 40A(2)(b). The ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods, services or facilities for which the payment is made; or (b) the legitimate needs of the business of the assessee; or (c) the benefits derived by or accruing to the assessee on receipt of such goods, services or facilities, then the Assessing Officer shall not allow as a deduction so much of the expenditure as is so considered by the Assessing Officer to be excessive or unreasonable. Therefore, it becomes apparent that the Assessing Officer is required to record a finding as to whether the expenditure is excessive or unreasonable in relation to any one of the three requirements prescribed, which are independent and alternative to each other. All the three requirements need not exist simultaneously. In a given case, if any one condition is shown to be satisfied the provision can be invoked and applied, if the facts so warrant. Thus, only so much of the expenses, if paid to a person referred to in clause (b), are allowable which are found to be not excessive and unreasonable and the excessive or unreasonable portion has to be disallowed. It is well settled that the provisions of section. 40A(2)(a) of the Act cannot have any application unless it is first concluded that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Scanners is allowable @ 60%. UPS is not an integral part of the computer system as observed by Hon'ble Tribunal in the case of Nestle India Ltd. v. DCIT (ITAT, Del) 111 TTJ 498. Therefore the appellant is entitled to depreciation on computer peripherals except UPS @ 60%.Thus, this ground is decided as above." 15. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied on the decision of Hon'ble Jurisdictional High Court in CIT v. BSES Yamuna Powers Ltd. [I.T. Appeal No.1267/Delhi/2010 dated 31-8-2010]. 16. We have heard both the parties and gone through the facts of the case. We find that the Hon'ble Delhi High Court in the case of BSES Rajdhani Powers Ltd. (supra), in their decision dated 31-8- 2010 while adjudicating a similar issue, held as under: "We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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