PER A. K. GARODIA, A.M. This is assessees appeal directed against the order passed by learned CIT(A)-II, Lucknow dated 31/01/2014 for the assessment year 2007-08.

2. Ground No. 1 is general in nature and therefore, does not require any separate adjudication.

3. Ground No. 2 is as under:

2. Because the learned first appellate authority ought not to have confirmed addition of Rs.15,23,787/- in respect of unsecured loans u/s 68 of the Income Tax Act, 1961.

4. It was submitted by Learned A. R. of the assessee that on page No. 89 of the paper book is confirmation from Shri Deoki Nandan Jhunjhunwala, father of Ms. Amita Jhunjhunwala for receipt of unsecured loan of Rs.2.40 lac along with the PAN of lender. He also submitted that list of unsecured loan of Rs.15,23,787/- for which the addition was made by the Assessing Officer has not been made available to the assessee. At this juncture, the Bench pointed out page No. 159 of the paper book where the assessee has provided the details of this amount of Rs.15,23,787/- and as per said detail, the amount of fresh loan received during the present year is Rs.35,14,887.63 and the addition was made by the Assessing Officer of a lesser amount of Rs.15,23,787/- only. In reply, it was submitted that the addition was made by the Assessing Officer of the amount of difference between the closing balance of unsecured loan and the opening balance of unsecured loan and since various amounts were received during the present year and repaid during the present year to the same person, it does not come out as to the addition was made in respect of which loan.

5. Learned D. R. of the Revenue supported the orders of the authorities below.

6. We have considered the rival submissions. We find that as per the assessment order, it is noted by the Assessing Officer in Para 2 of the assessment order that the assessee has shown loans from promoters at Rs.65,90,562/-, which was Rs.50,66,775/- in the last year. It is further noted by the Assessing Officer that the assessee was asked to furnish details of loans taken from promoters but no details have been filed and under these facts, the Assessing Officer made the addition of that amount which is the difference between the closing balance and opening balance of unsecured loans from promoters. Hence, it is seen that this addition was made by the Assessing Officer for the reason that no details were provided by the assessee in respect of fresh loans taken from the promoters in the present year. Before CIT(A) also, the assessee did not produce books of accounts and other relevant evidence which could prove the correctness and genuineness of the claim of cash credit. Before us also, the assessee has furnished only one confirmation of Shri Deoki Nandan Jhunjhunwala in respect of fresh loan of Rs.2.40 lac from Ms. Anita Jhunjhunwala but for this loan also, apart from furnishing confirmation, the assessee has furnished nothing else before us also about creditworthiness of this loan creditor. Hence, it is seen that for none of the loan creditors, the assessee has furnished any evidence regarding the creditworthiness of the loan creditor and except one loan creditor, no confirmation has been filed by the assessee. Under these facts, we find no infirmity in the order of learned CIT(A) on this issue. Accordingly, ground No. 2 is rejected.

7. Ground No. 3 is as under:

3. Because the learned first appellate authority ought not to have sustained addition of Rs.27,107/- in respect of interest on FDRs.

8. It was submitted by Learned A. R. of the assessee that as per Schedule-15 of the balance sheet, available on page No. 156 of the paper book, it can be seen that the assessee has shown accrued interest on FD with bank as income in the present year of Rs.1,87,983/-. He also submitted that as per Schedule-10, available on page No. 115 of the paper book, closing balance on FD with bank was Rs.2,15,496/-. He also submitted that in the assessment order, the Assessing Officer considered the amount of FD at Rs.31.51 lac as against actual of Rs.21.51 lac but in the remand proceedings, the Assessing Officer has accepted this mistake and therefore, CIT(A) has granted relief to that extent. He further submitted that the Assessing Officer has estimated the interest amount @10% of the closing balance of the FD but the assessee has accounted for the interest on actual basis and the difference is very small of Rs.27,107/- as against income already accounted for by the assessee of Rs.1,87,983/- and therefore, the addition upheld by CIT(A) should also be deleted.

9. Learned D. R. of the Revenue supported the order of learned CIT(A).

10. We have considered the rival submissions. We find that as per the assessment order, the assessee did not furnish the details of FDR being the date of FDR and the rate of interest and therefore, the Assessing Officer estimated the income from FDR @10% of the closing balance in FDR with bank. In the assessment order, the Assessing Officer wrongly proceeded with the amount of FDR at Rs.31.51 lac saying that this is the amount of FDR balance as on 31/03/2007 i.e. but this is the closing balance of the preceding year and at the end of the present year, the amount of FD balance is Rs.21,51,446/- and not Rs.31,51,446/-. Relief is already allowed by CIT(A) to this extent and he has allowed relief of Rs.1 lac being 10% of Rs.10 lac extra FDR considered by the Assessing Officer in the assessment order. Now on the actual amount of FDR of Rs.21,51,446/-, the estimate by Assessing Officer stands at Rs.2,15,000/- and since the assessee has already accounted for FDR interest as income to the extent of Rs.1,87,983/-, CIT(A) has confirmed the addition of Rs.27,107/- being the difference in 10% of closing FDR balance and FDR interest shown by the assessee as income. In our considered opinion, since the amount of FDR interest shown by the assessee as income is very much close to even the estimation by the Assessing Officer and CIT(A) in the absence of details and this is the claim of the assessee that interest income was accounted for by the assessee on actual basis, we hold that in the facts of the present case, the addition upheld by CIT(A) is not justified. We, therefore, delete the same. Ground No. 3 is allowed.

11. Ground No. 4 & 5 are as under:

4. Because the learned first appellate authority ought not to have sustained addition of Rs.1,72,444/- in respect of unpaid bonus.

5. Because the learned first appellate authority ought not to have confirmed addition of Rs.2,40,47,000/- under the head Gratuity.

12. These grounds were not pressed by Learned A. R. of the assessee and therefore, the same are dismissed as not pressed.

13. Ground No. 6 is as under:

6. Because the learned first appellate authority ought not to have confirmed addition of Rs.3,39,700/- being increase in Security Deposits under the head "Current Liabilities" over the last year.

14. It was submitted by Learned A. R. of the assessee that on page No. 161 of the paper book is the detail of the amount of Rs.3,39,700/- being the amount of increase in security deposit. He also submitted that the copy of written submissions filed before the CIT (A) is available on pages 13 to 18 of the paper book and in particular, our attention was drawn to page No. 15 where in it was explained that in normal course of business, security deposits are taken from scrap dealers and their repayments/adjustments are made. It was also explained that the major amount in this account is of M/s Shiva Steel and these are regular transactions with this party. It was also explained that the customer account of this party is separately maintained and the amount of security deposit taken in financial year 2006- 07 relevant to assessment year 2007-08 was adjusted in the customer account of this party on 16/04/2007 i.e. in the previous year relevant to assessment year 2008-09. He submitted that under these facts, the addition made by Assessing Officer and confirmed by CIT(A) is not justified.

15. Learned D. R. of the Revenue supported the orders of the authorities below.

16. We have considered the rival submissions. We find that as per the details available on page No. 161 of the paper book, fresh security deposit of Rs.5.52 lac was received during present year including Rs.5 lac from Shiva Steel and Rs.50,000/- from Madhyeshiya Traders and Rs.2,000/- from Anil Kumar Mishra. Copy of account of Shiva Steel is available on pages 167-170 of the paper book. On Page No. 167 of the paper book is its security deposit account for the current year showing credit balance of Rs.5 lac being the amount of security received in cash on 22/03/2007. On page No. 168 of the paper book is security deposit account of Shiva Steel for next financial year i.e. 2007-08 where opening cash balance is Rs.5 lac and there is journal entry on 16/04/2007 as per which, the said credit balance is transferred to Shiva Steel customer account. On pages 169 to 170 is the copy of ledger account of Shiva Steel, Lucknow customers with opening debit balance of Rs.1,25,939/- and there is no corresponding credit entry available in its customer account on account of transfer from Shiva Steel security deposit on 16/04/2007. Hence, it is noted that this contention that security deposit is transferred to the customer account is not being supported by the copy of ledger account of Shiva Steel, Lucknow customer. Regarding the second party i.e. Madhyeshiya Traders, the copy of ledger account of Madhyeshiya Traders of the customers is available on page No. 166 of the paper book and in this amount a credit of Rs.50,000/- is on 05/05/2007 on account of transfer from security deposit account. We also find that in the customer account also, there is opening balance of Rs.1 lac for this party. Under these facts, we are of the considered opinion that the addition made by the Assessing Officer in respect of this security deposit from Madhyeshiya Traders is not justified because the assessee could show that the security deposit of the present year was adjusted in the customer account of next year. Therefore, this addition of Rs.50,000/- is deleted. In respect of third party i.e. Anil Kumar Mishra, we feel that for this small amount of Rs.2,000/-, it cannot be said that the assessee could not establish the creditworthiness etc. of the person from whom this security deposit has been received and therefore, we delete this amount also. In this manner, the assessee gets part relief of Rs.52,000/- and balance addition is confirmed.

17. Ground No. 7 is as under:

7. Because the learned first appellate authority ought not to have confirmed addition of Rs.1,15,52,163/- being interest and finance charges.

18. It was submitted by Learned A. R. of the assessee that as per page No. 17 of the order of CIT(A), the disallowance was confirmed by him on the basis that the assessee could not produce books of accounts, bank statement and other relevant documents. In this regard, he submitted that on pages 85 to 88 of the paper book is copy of written submissions filed before the CIT(A) and in the same, complete details have been given by the assessee regarding the claim of interest and finance charges of Rs.1,15,52,163.35 which are including Rs.94,29,416/- being interest on PNB CC account, Rs.10,98,068.35 being interest of ICD with Fuel Corporation of India and Gateway Leasing Ltd., Rs.96,219/- being interest paid to PNB Padrauna, Rs.3,681/- being interest paid to LIC Padrauna, Rs.6,55,076/- being paid to bank for discounting of loan cheques and Rs.2,69,903/- being other interest paid on CST/PF/ESI/UPTT etc. Regarding the interest on PNB CC account, it was submitted that the evidence is the bank statement of PNB CC account. He also submitted that the disallowance was made u/s 43B but the assessee has furnished evidence that the interest was already paid and in support of this, ledger account of interest on PNB CC account is available on page 96 to 99 of the paper book and ledger account of interest on Gateway Leasing Ltd. ICD is available on page No. 100 of the paper book. The ledger account of other interest accounts are available on pages 101 to 103 of the paper book, and that of discounting charges are available on pages 104 to 113 of the paper book, ledger account of interest on CST is on page No. 114 of the paper book, interest on PF on page No. 115, interest on UPTT on page 116 and other interest on page No. 117 and interest on development tax is available on page No. 118 of the paper book. He submitted that out of all these expenses claimed by the assessee, some discounting charges were unpaid but section 43B is not applicable for unpaid discounting charges. He also submitted that out of interest to others also, Rs.1,18,588/- is outstanding but for this interest on ICD, section 43B is not applicable and therefore, no disallowance is called for u/s 43B out of these expenses.

19. Learned D. R. of the Revenue supported the orders of the authorities below.

20. We have considered the rival submissions. We find that as per Para 7 of the assessment order, it is stated by the Assessing Officer that under the head interest and financial charges, the assessee has claimed expenses of Rs.1,15,52,163/- and since the accounts of the assessee are not audited and it is not ascertainable whether these charges have been paid within the time allowable as per the provisions of section 43B of the Act and therefore, the same are disallowed. Before CIT(A), complete evidences were furnished by the assessee regarding this claim along with details and copy of bank statement etc. Copy of ledger account of this company is available in paper book filed before us and as per the same, we find that out of interest claimed by the assessee, there is no outstanding amount except interest on ICD Rs.1,18,588/- but for interest on ICD, section 43B is not applicable. Similarly, regarding discounting charges paid to various parties, there is some outstanding amount also. For instance Rs.33,534/- being discounting charges of Ketan Mehta available on page No. 105 of the paper book and Rs.20,726/- being discounting charges payable to Jitendra M. Shah HUF available on page No. 104 of the paper book but for discounting charges also, section 43B is not applicable and hence, this is noted that to all those claims regarding interest expenditure to which section 43B is applicable, there is no outstanding amount and for the remaining amount of interest and discounting charges, section 43B is not applicable and therefore, disallowance made by Assessing Officer is not justified. We, therefore, delete the same. Ground No. 7 is allowed.

21. Ground No. 8, 9 and 10 are in respect of some ad hoc disallowance and therefore, these are decided together. These grounds are as under:

8. Because the learned first appellate authority ought not to have confirmed disallowance of Rs.18,33,669/- being 25% of the expenses on repair & maintenance of plant & machinery, building and others.

9. Because the learned first appellate authority ought not to have confirmed addition of Rs.2,43,63,252/- being 40% of the expenses under the head "Salary, wages and Bonus".

10. Because the learned first appellate authority ought not to have confirmed addition of Rs.2,00,00,000/- out of various heads of expenses on the plea of preventing any possible leakage in the accounts of the assessee.

22. It was submitted by Learned A. R. of the assessee that the copy of written submissions filed before CIT(A) on 25/03/2013 is available on pages 13 to 18 of the paper book. It is submitted that the same arguments of the assessee should be considered for the purpose of deciding these grounds.

23. Learned D. R. of the Revenue supported the orders of the authorities below.

24. We have considered the rival submissions. Regarding ground No. 8 i.e. disallowance of Rs.18,33,669/- being 25% of the expenses on repair & maintenance of plant & machinery, building and others, we find that this disallowance was made by observing in Para 8 of the assessment order that regarding the expenses of repairs of Rs.73,34,678/-, no details have been filed and during the year, manufacturing and sales have decreased but the expenses on repairs to plant & machinery, building and others have increased a lot and since the same remained unverifiable, 25% of such expenses claimed by the assessee were disallowed. Before CIT(A), as per submission dated 25/03/2013 available on pages 13 to 18 of the paper book, it was submitted that the ledger account of expenses under this head is put up for verification and in the earlier years, there was no disallowance under this head. This is also submitted that the expenses are fully vouched. In spite of this submission of the assessee before CIT(A), there is no finding given by CIT(A) in his order that the ledger account of these expenses are not produced for verification and that the expenses are not vouched and he has simply confirmed the assessment order on this issue by stating that even during appellate proceedings, the assessee has not satisfactorily explained the genuineness of expenses incurred under this head. Regarding this objection of the Assessing Officer that the sales has gone down then how the repair expenses can go up, we are of the opinion that incurring of expenses for repairing of plant & machinery has no direct correlation with the increase or decrease in sales and therefore, merely on this basis that the turnover has gone down, the repairing expenses cannot be disallowed. Regarding this objection that the details and evidences are not produced, it has been submitted before CIT(A) as per written submissions dated 25/03/203 that the ledger accounts of expenses under this head are being produced and in the earlier year, there was no disallowance under this head and all the expenses are vouched but there is no finding given by CIT(A) that these assertions of the assessee in the written submissions are incorrect. Hence, ad hoc disallowance under this head is not justified. We, therefore, delete the same. Ground No. 8 is allowed.

25. Regarding ground No. 9 i.e. regarding addition of Rs.2,43,63,252/- being 40% of the expenses under the head salary, wages and bonus, we find that it is stated by the Assessing Officer in the assessment order that under the head salary, wages & bonus, the assessee has claimed Rs.609.08 lac, which is almost double as compared to preceding year but the purchase of raw material, manufacturing expenses, sales are decreased during the present year and since no details are filed, 40% disallowance is made. In this regard, it was submitted by the assessee before CIT(A) that the Assessing Officer has already disallowed an amount of Rs.240.47 lac on account of gratuity vide Para 5 of the assessment order. He has also submitted that the expenses under the head employees remuneration and benefits, salary, wages and bonus are inclusive of this amount and if it is excluded then the expenses under this head will be Rs.368.86 lac only, which is less than the last years expenses. Hence, no disallowance is called for. We find force in this contention of Learned A. R. of the assessee because we find that as per the audited accounts available on pages 19 to 40 of the paper book, the details of employees remuneration and benefits of the current years and preceding years are available on page 30 of the paper book and as per the same, in the present year, the amount claimed is Rs.448.55 lac as against the claim of Rs.439.38 lac in the preceding year. As per the Assessing Officer in the assessment order, the claim under this head was Rs.609.08 lac but this is the explanation of the assessee before CIT(A) that this amount included the amount of provision of gratuity which has been separately disallowed by Assessing Officer as per Para 5 of the assessment order and after excluding this amount, the claim under this head is almost equal to the claim under this head in the preceding year. There is no other reasoning given by the Assessing Officer for making these disallowances except stating that the claim in the present year is almost double. But when this is not factually correct after excluding the amount of gratuity of Rs.247.08 lac separately disallowed by the Assessing Officer, no disallowance is justified. We delete the same and allow ground No. 9.

26. Regarding ground No. 10 i.e. ad hoc disallowance of Rs.2 crore out of expenses claimed under various heads, such as power & fuel, effluent treatment expenses, misc. expenses, freight, transport & handling charges etc., we find that it was explained before CIT(A) that the total claim under these four heads in the present year is less than the preceding year. The said chart is on page No. 17 of the paper book , which is reproduced below: Head of account A.Y.07-08 A.Y.06-07 Power & fuel 48927370 58836956 Effluent Treatment expenses 1463528 2017361 Misc. expenses 9391691 8294137 Freight, transport & handling charges 1675472 1270913 Total 61458061 70419367

26.1 From the above chart of these expenses in the present year and preceding year, it is seen that these expenses have gone down to Rs.614.58 lac as against Rs.704.98 lac in the preceding year. Therefore, we feel that no disallowance under these heads is called for in the facts of the present case. We, therefore, delete the same. Ground No. 10 is allowed.

27. Ground No. 11, 12 and 13 are as under:

11. Because the learned first appellate authority ought not to have sustained /disallowances of Rs.20,81,631/- being the expenditure under the head "Contribution to Provident and Other Funds".

12. Because the learned first appellate authority ought not to have confirmed addition of Rs.1,21,52,262/-.

13. Because the learned first appellate authority ought not to have confirmed inclusion of Rs. Rs.49,30,942/- being Extraordinary income to the total income of the assessee.

28. Ground No. 11 & 12 were not pressed by Learned A. R. of the assessee and therefore, these grounds are rejected as not pressed. Regarding ground No. 13, it was submitted that this amount of extraordinary income was shown in the provisional account but not in the audited account available on pages 19 to 40 of the paper book and therefore, the addition made by the Assessing Officer and confirmed by CIT(A) is not justified.

29. Learned D. R. of the Revenue supported the order of learned CIT(A).

30. We have considered the rival submissions. We find that it is noted by CIT(A) on page No. 19 of his order that the Assessing Officer has contended in his remand report dated 16/05/2013 that the said extraordinary income of Rs.49,30,942/- has been included by the assessee itself in the computation of total income. It is noted that the Assessing Officer has also mentioned that no satisfactory reason or evidence for excluding the extraordinary income of Rs.49,30,942/- is furnished by the assessee. Before us also, it was not shown as to why this amount was included by the assessee in the computation of income filed along with the return of income and on what basis, it was excluded afterwards. Hence, on this issue, we find no reason to interfere with the order of CIT(A) because when an income is included by the assessee itself in the computation of income filed by the assessee along with the return of income, if the assessee pleads that such amount is not be included in the total income then supporting evidence has to be brought on record by the assessee in support of this contention but since the assessee has not done so, we decline to interfere in the order of CIT(A). Accordingly, ground No. 13 is rejected.

31. In the result, the appeal of the assessee stands partly allowed. (Order was pronounced in the open court on the date mentioned on the caption page) Sd/. Sd/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member Dated:29/02/2016 *Singh Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar