ANIL KUMAR PANDEY,KANPUR V. DY. COMMISSIONER OF INCOME TAX, KANPUR

ITSSA 333/LKW/2017

AI Insights

The case involves multiple appeals by Anil Kumar Pandey against the orders of the CIT(A) confirming various additions made by the Assessing Officer under sections 153A and 143(3) of the Income Tax Act, 1961, for the assessment years 2002-03 to 2006-07. The main issues revolved around alleged undisclosed payments to sundry creditors, bogus liabilities, and income from house property. The Tribunal found that the assessee was not given adequate opportunity for cross-examination of witnesses whose statements were used against him, which was a violation of the principles of natural justice. The Tribunal also noted discrepancies in the handling of evidence and the application of legal provisions, leading to a partial allowance of the appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361108 (ITAT-LUCKNOW)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2002-2003
• Other Referred Cases: Central Bureau of Investigation vs. V.C. Shukla, Kishinchand Chellaram vs. CIT, Prakash Chand Nahta vs. Union of India, Nathu Ram Premchand vs. CIT, M/S Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata, CIT, Central, Kanpur vs. Raj Kumar Arora, E.N. Gopal Kumara vs. CIT, CIT vs. St. Francis Clay Decor Tiles, ITO vs. M/s Kamlesh Hori
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANU CHAURASIA
• Keywords: Revised return; Unexplained expenditure; Depreciation; Principle of natural justice; Search and seizure; Opportunity of cross examination; Bogus
• Section: 143(3); 32; 153A; 131; 133(6)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’BENCH, LUCKNOW BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER I.T.(SS)A No.333, 334, 335, 336 & 337/LKW/2017 A.Ys.: 2002-03 to 2006-07 Anil Kumar Pandey, 133/88, M-Block, Kidwai Nagar, Kanpur vs. Dy. Commissioner of Income Tax, Central Circle-V, Kanpur PAN:AENPP2061D (Appellant) (Respondent) Assessee by: None Revenue by: Sh. Manu Chaurasia, CIT DR Date of hearing: 23.04.2025 Date of pronouncement: 22.05.2025 O R D E R PER BENCH: [ These five appeals have been filed against the separate orders of the ld. CIT(A)-4, Kanpur under section 250 of the Income Tax Act, 1961, dated 31.03.2017 in which the appeals of the assessee filed against the orders of the ld. AO under section 153A r.w.s. 143(3) in the assessment years 2002-03 to 2006-07 have been partly allowed. There are many common issues involved in these appeals and therefore, the appeals which were heard together are being disposed of by way of a consolidated order. Assessment Year 2002-03, being the first assessment year is taken as the lead case and our findings on the issues recording therein will apply mutatis mutandis to the other appeals before us. For the remaining issues, we propose to dispose them as they arise in each assessment year. The grounds of appeal preferred by the assessee against the orders of the ld. CIT(A) in ITA No.333/LKW/2017 for A.Y. 2002-03 are as under:- ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 2 “1. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 14,97,000/- MADE AS UNDISCLOSED PAYMENT. TO THE SUNDRY CREDITOR, EVEN THOUGH THE APPELLANT HAS NO WAY CONNECTED TOWARDS MAKING OF SUCH PAYMENTS. 2. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,38,121/- MADE AS BOGUS LIABILITY SHOWN IN THE NAME OF BOGUS& FICTITIOUS SUNDRY CREDITOR, EVEN THOUGH THE APPELLANT HAS PROVIDED THE ADDRESS OF THAT SUNDRY CREDITOR AS AVAILABLE WITH HIM AND AS PER RECORD. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO UNDERSTAND THAT THE ONUS WAS ON THE SUNDRY CREDITOR TO EXPLAIN THE GENUINENESS OF CREDIT ENTRIES APPEARING IN HIS BOOKS OF ACCOUNT ONCE THE APPELLANT DENIED SUCH PAYMENTS ALLEGED TO HAVE MADE BY HIM. 4. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT GIVING DUE CONSIDERATION OF THE PRINCIPLE OF NATURAL JUSTICE AS OPPORTUNITY OF CROSS EXAMIANTION TO THE WITNESS ON WHOSE DEPOSITION THE ADDITION MADE HAS NOT BEEN PROVIDED TO THE APPELLANT. 5. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ORDER DATED 31.03.2017 PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE ADDITIONS ARE ARBITRARY, UNJUSTIFIED AND BAD IN LAW, AND THEREFORE DESERVE TO BE CANCELLED. 6. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE APPELLANT RESERVES THE RIGHT TO AMEND, TO INTRODUCE OTHER GROUNDS OF APPEAL AND A NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOUR.” 2. The facts of the case are that the assessee is an individual engaged in trading of Kirana items / Goods under the name and style of M/s Shivam Trader, a proprietorship concern. A search and seizure action under section 132(1) of the Income Tax Act, 1961 were carried out on the premises of the assessee on 19.04.2006 by the Income tax authorities. A return of income for the A.Y. 2002-03 had earlier been filed under section 139(1) of the Act on 30.10.2002 declaring a total income of Rs. 1,84,585/-. In response to the notice under section 153A of the Act, the assessee filed a letter stating that the return that was filed on 30.10.2002 may be treated as the return filed in response to notice under section 153A of the Act. ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 3 Thereafter the case was taken up for scrutiny and several disallowances were made. Among them were two disallowances that are contested before us in appeal. i. An addition of Rs. 14,97,000/- made as undisclosed payment to creditor namely M/s Halagappa Arecanut Traders. ii. An addition of Rs. 2,38,121/- made on account of fictitious and bogus traders. 2.1 With regard to the addition of Rs.14,97,000/- made as undisclosed payments to sundry creditors, Income tax authorities during post search enquiries noticed that the assessee had purchased Arecanut and other items from different parties, which were based at Shimoga, Hasan and Sagar districts of Karnataka. During post search enquiries, the copies of accounts were obtained from the suppliers of Arecanut and it was observed that in many cases, the assessee was claiming to not have paid for the purchases and in some cases, the amounts were shown as payable as per balance- sheet of the assessee under the head sundry creditors. However, it was noticed, that as per the copies of accounts filed by suppliers, the payments were already made. In order to examine the matter further, the ld. AO issued notices under section 133(6) of the I.T. Act to these suppliers calling for the details / nature of transaction made with the assessee and the copy of the account of the assessee in their books of accounts from assessment year 2001-02 to 2007-08. The parties responded to notices under section 133(6) of the Act and on perusal of the replies in comparison with the accounts of the assessee, it was found that there was a difference between the balance sheet of the assessee and M/s Halagappa Arecanut Traders of Rs.14,93,000/- and between the balance-sheet of the assessee and M/s Om Prakash Arun Kumar of 523/9 Katra, Khadi Baoli, New Delhi of Rs. 4,096/-. To make further verification, the ld. AO issued commissions under section 131(1)(d) to the jurisdictional ld. Assessing Officers to the creditors / parties and also deputed his Inspector to go to Shimoga and coordinate with the ld. AO there. Consequently, DCIT, Davangere and Shimoga issued summons under section 131 of the Income Tax Act to the parties / creditors ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 4 and recorded their sub statements on oath. They also obtained the copies of the accounts of the assessee in the books of the creditors / parties and from those statement, the ld. AO deduced that the said parties had confirmed receiving the amounts from the assessee. A commission was also issued to ITO-Ward 1, Hassan and ITO, Ward 1, Chikmagalur in the cases of Shri Dulraj Prop. Tulsi Trading Co., Sakleshpur, in the case of M/s Parwati Traders, Birur and to ACIT, Circle Davangere in the case of M/s Tirupathi Enterprises, Bhimsamundra. In response to these summons, the aforesaid ld. AOs recorded statements on oath of parties and sent the same along-with documents submitted by the parties to the ld. AO. Ongoing through the statements recorded on oath and after considering the documents provided by them to the ld. AOs who had recorded the statements on oath under section 131(1) of the Income Tax Act, 1961, the ld. AO recorded his satisfaction that there was a difference of Rs.14,97,800/- between the amounts stated to be received by M/s Halagappa Arecanut Traders, Shimoga and that stated by the assessee. The ld. AO confronted the assessee with this information and the statements and asked him to explain as to why the differences in balance of creditors should not be considered as unexplained expenditure and added back to his total income. In response, the assessee filed a detailed reply before the ld. AO questioning the accuracy of what was recorded by those persons in their books of accounts and also denying having made any payment over and above payments made for purchase of goods which had been duly accounted for in its books of accounts. The assessee, therefore, argued that no cognizance of such books should be taken by the Department and that the aforesaid parties who had given statements against the assessee and furnished documentary evidences against the assessee may be produced for cross examination by the Department before any adverse inference was drawn by the Department. The ld. AO considered the reply of the assessee. He stated that in order to examine the genuineness of the assessee’s business transactions, notices under section 133(6) of the Act had been sent to parties who had supplied copies of the accounts of the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 5 assessee in their books for the relevant assessment years. On comparative analysis of copies of accounts of the assessee in the books of accounts of that party and the parties accounts in the books of the assessee, differences in balances had been found and therefore, commissions had been issued to record the statement of those parties and furnish documents. In these cases, the parties confirmed having supplied Arecanuts to M/s Shivam Traders, Kanpur and confirmed receiving certain amounts of payment from the assessee in different dates in the form of different demand drafts and in cash. All the transactions entered into with the assessee, had been entered by those party into their books of accounts. The DDs and cash received by those parties had been deposited in their bank accounts and taken into account while drawing up their accounts. Thus, the assessee had not been able to controvert any of the statements. The onus was on the assessee to prove that the payment was not made to the parties which the parties had recorded in their books of accounts. However, despite specific queries, the assessee had not been able to furnish any evidence on the basis of which it could be established that the DDs which were accounted for by the parties were not issued by the assessee. Therefore, the contention of the assessee that parties have accounted for payments in their books which the assessee has never made was not acceptable. Therefore, the ld. AO rejected the contention of the assessee that such books of accounts and depositions of parties should not be taken as evidence in support of its case by the Department and the Departmental authorities should make independent enquiries, was rejected by the ld. AO. The ld. AO pointed out that the drafts received by M/s Halagappa Arecanut Traders on 29.08.2001 had been found to have been prepared from the bank account of the assessee but these had not been recorded in the books of accounts therefore, in view of these enquiries, the ld. AO were satisfied that the assessee had concealed its income and furnished inaccurate particulars of income and therefore, he made an addition of Rs. 14,97,000/- on this account and also initiated penalty proceedings under section 271(1)(c). The ld. AO also issued notices under section 133(6) to ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 6 various creditors of the assessee. In one case, namely M/s Mataji Traders, Kishanganj Bihar, he noticed that the notice had returned back undelivered with postal remarks, “incomplete address”. Therefore, after giving the assessee an opportunity to explain why the balance of the said creditor not be regarded as unconfirmed and therefore, unexplained, he made the addition of Rs.2,38,121/- in this regard. The ld. AO also made some other additions but since these are not the subject matter of appeal before us, we do not deem it necessary to discuss the same. 3. Aggrieved with the said additions, the assessee went in appeal before the ld. AO. On the issues under appeal to us, it was submitted that there were various inconsistencies in the accounts and statements of the said parties which were being made the basis of additions against the assessee. It was submitted that the said parties had accounted for those payments in their books of accounts which the assessee had had never made. A search had been conducted on the assessee group and as a result thereof, all bank accounts, be it disclosed or undisclosed, came to light in front of the Department and there was no such bank account found by the search party from where the said draft payments accounted for by the said party could be corroborated with. It was, therefore, submitted that the said party had accounted for transactions which did not relate to the assessee but were only concerned with that party. With regard to certain other transactions, it was submitted that the said parties had accounted for transactions in different accounting years instead of related years, mixed up consignment sale transactions with own trading transactions and did not account for consignment sale in some cases. It was submitted that in view of the above, no sanctity could be attached to such copies of account furnished by the party and deposition made. It categorically denied and rebutted having made any payment outside its books for purchase of goods and therefore submitted that no cognizance of such books or deposition of parties should be taken. The assessee further pointed out that it had requested the learned Assessing Officer to allow cross ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 7 examination of the aforesaid parties by the assessee before any adverse inference could be drawn by the Department. It was further submitted that in cases of inter- state purchases of goods, the Sales Tax Department of the importing state issued Form No. 31, comprising of three parts which had to be stamped by the Sales Tax authorities at the border of the importing state to evidence the entry of goods. The said forms were reconciled at the time of assessment of purchases and sales done by the Sales Tax authorities by passing of an assessment order. It was further submitted that in the assessee’s case, the sales tax assessment had been done for the year under consideration and no adverse finding had been found recorded therein. Copies of these assessment orders were submitted. It was therefore submitted that purchases and sales of the assessee stood duly authenticated by a third agency and that too a government body and therefore, the ld. AO was not justified in suspecting the transactions recorded by the assessee and placing reliance on transactions recorded by a third party. The assessee drew reference to the drafts dated 29.01.2001 and pointed out that no enquiries had been made from the bank as to who had purchased the said drafts. In the absence of any findings from the bank, the learned AO was not vested with any power to unreasonably conclude that payments recorded by M/s Halagappa Arecanut Traders had been made by M/s Shivam Traders and that the books of accounts of the assessee were unreliable. It placed reliance on the decision of the order of Hon’ble Supreme Court in the case of Central Bureau of Investigation vs. V.C. Shukla (1998) 3 SCC 410, wherein it had been held that entries in books of accounts alone were not sufficient evidence to charge a person with liability and corroborative evidence was required. It was submitted that in the present case, there was no corroborative evidence. It was further submitted that it was for the party in whose books the said amounts was credited to prove that they had been received from M/s Shivam Traders. It was further submitted that the concerned parties had not submitted their bank statements. Therefore, it was submitted that it was that party which should have been asked to explain the source of payments recorded in ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 8 its books, and not the assessee which had denied making such payments. The assessee also submitted that the search and seizure proceedings had not revealed any incriminating document which could remotely go to suggest that the assessee was having undisclosed bank accounts or duplicate set of books. Therefore, the assessee could not be penalized on the basis of an incomplete enquiry. It was again argued that the assessee had repeatedly requested that the said parties who had filed their accounts and given depositions against the assessee be produced before the assessee for cross examination but that had been declined by the learned AO on some pretext or the other. The assessee referred to the decisions of the Hon’ble Supreme Court in the case of Prakash Chand Nahta vs. Union of India 247 ITR 274 (SC) which had held that cross examination of the witness was a must before the Department could rely upon the statement of witnesses for making an addition. An attention was further invited to the decision of the Hon’ble Allahabad High Court in the case of Nathu Ram Premchand 49 ITR 561 (All) which held that it was the duty of the ld. AO to enforce the attendance of a witness, if the witness was material, in exercise of his powers under Order XVI Rule 10 of CPC. It was submitted that the statement of witnesses on which the ld. AO had relied, were recorded behind the back of the appellant. The ld. AO was duty bound to give an opportunity of cross examination to the appellant before the statements could be used against it. In the absence of this, there could not be any conclusion that the alleged payments were made by the assessee because until such opportunity was given it could not be ascertained as to whether those persons had some axe of their own to grind or not. Reliance was further placed on the decision of the Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC). It was submitted that the ld. AO had been heavily influenced by the report of the Investigation Wing which was neither sacrosanct nor binding on the AO because he performed a judicial function under the Act. Furthermore, it was submitted that during the course of search operations, the books of accounts and other documents had been recovered from the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 9 assessee and applying the provisions of section 132(4A), it should have been presumed that the contents of the said books and other documents were true. It was, therefore, submitted before the ld. CIT(A) that since no cogent material had been brought on record by the ld. AO to show that transactions as appearing in the books were not genuine, therefore holding that receipts recorded by the parties as income of the assessee was based on incorrect appreciation of laws, was not justified and needed to be overruled. 4. The ld. CIT(A) after considering the arguments observed that the ld. AO had made the addition after making enquiries under section 133(6) from the creditors of the assessee and after enquiring, the ld. AO had found several discrepancies in the accounts as furnished by the assessee and as gathered by him during enquiry proceedings. These had been confronted to the assessee for a reply. The reply of the assessee had been considered and only thereafter had the addition of Rs.14,97,000/- be made. With regard to the issue of cross examination, the ld. CIT(A) held that the concept of cross examination emanates from the evidence act and it proposes an examination in chief. Since, in this case, there was no examination in chief by the ld. AO, no question of cross examination arises. Moreover, since the material gathered under section 133(6) had been confronted to the assessee, it fulfilled the requirements of natural justice and therefore, there was no merit in the arguments of the assessee. Addressing the complaint that no incriminating material had been found during the course of search which could lead to an addition under section 153A, the ld. CIT(A) relied upon the judgment of the Hon’ble Allahabad High Court in the case of CIT, Central, Kanpur vs. Raj Kumar Arora in ITA No. 56 of 2011 dated 11.07.2014 and the decision of the Hon’ble High Court of Kerela in the cases of E.N. Gopal Kumara vs. CIT 75 taxman.com 215 (Kerela) and CIT vs. St. Francis Clay Decor Tiles 70 taxman.com 234 (Kerela) to reject this argument of the assessee. He also rejected the arguments of the assessee saying that if there were creditors in the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 10 books of accounts, it was the responsibility of the assessee to prove the identity of the assessee, genuineness and creditworthiness of the creditors and the credit entries in the books. He held that the assessee had not discharged his responsibilities successfully while the ld. AO had made addition on the basis of discrepancies that had been noticed. Therefore, he rejected the plea of the assessee and confirmed the addition of Rs. 14,97,000/- made by the ld. AO in this regard. On the issue of addition of Rs. 2,38,121/- on account of bogus creditors, the assessee argued before the ld. CIT(A) that it had received the goods from M/s Mataji Traders for consignment sales in the year under consideration and the said receipt of goods was supported by challan and Form 31 of Sales Tax Act and other documentary evidence which were enclosed in the paper book submitted. It was submitted that the assessee had provided the address available with it to the ld. AO, which was depicted on the bills, forms and other documents obtained by the assessee in the due course of its business dealings with the party. It was submitted that on the challan, the address of the party and its sales tax numbers were available, thus the existence of the party could not be doubted. If the party was not found available at the given address after a gap of several years, how could it adversely affect the case of the assessee. It further submitted that the fact that the assessee had received the goods on consignment for sale were proved from the challan of the party, Mandi Samiti receipt, Form No. XXVIII / permit for inter-state sale issued by Sales Tax Authority of Kishanganj, Bihar which had been produced before the ld. AO and not controverted by him. The payments had been made to the parties through banking channels which were duly reflected in the banks statements of the assessee as well as the books of the assessee and the cash payments had been acknowledged by the representative of the party. The turnover of the assessee had been accepted by the Trade Tax Authorities therefore, the assessee had discharged its onus and there was no occasion to make any addition in this regard. Drawing reference to the decision of the Hon’ble ITAT in the case of Sh. Sagar Bose (1995) 132 taxation 154 (Cal) (AT), the assessee pointed out that in that case ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 11 the Tribunal had quashed the additions made solely on account of the fact that the summons sent were received back. The ld. CIT(A), after considering the arguments of the assessee pointed out that the assessee had stated that it had only sold the goods on commission basis and if that was the case then he ought not to have shown liability in the name of the creditor. He held that it was the responsibility of the assessee to establish the identity, genuineness and creditworthiness of such creditor and because the notice under section 133(6) sent to the address provided by the assessee, had returned back unserved, therefore, the identity of their creditor were unproved and the addition of Rs. 2,38,121/- was accordingly deleted. 5. The assessee is aggrieved at the confirmation of these additions by the ld. CIT(A) and has accordingly filed this appeal. Numerous opportunities were given to the assessee to represent his case before the Tribunal. It is seen from the perusal of the order-sheets that the case was fixed for hearing on many occasions and on 11 occasions, the assessee filed a submission requesting for further time in order to present its case. However, even after so many opportunities when the case was finally called out for hearing, there was no one present on behalf of the assessee and no communication from his side. We observed that the assessee has made a detailed statement of facts along with his appeal memo and therefore, in the absence of any attempt to represent his case before us, we do not feel it necessary to grant further opportunities to the assessee to argue his case but rather would consider and decide the case on the basis of the grounds of appeal and the statement of facts submitted before us. 6. In the statements of facts, it has been submitted that the assessee had shown liability of Rs.88,93,923/- under the head ‘sundry creditors’ in the balance sheet of M/s Shivam Traders as on 31.03.2002 which is inclusive of Rs. 17,28,000/- shown in the name of M/s Halagappa Arecanut Traders, Shimoga. During the post search enquiries, the investigation wing had started enquiries to ascertain the genuineness ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 12 of liabilities shown under the heads ‘sundry creditors’ by sending notices to some of them. In this regard, copies of accounts of the assessee as appearing in the books of accounts of the suppliers were obtained, which were then compared with the books of accounts of the assessee. On perusal, the Income Tax authorities observed that suppliers had credited payments on account of the assessee, which were not found in the books of the assessee. It was submitted that the said supplier had shown sales against the assessee, which the assessee had not made. Furthermore, it had shown payments made by the assessee which the assessee denied. The statement of Sh. H. Mariyappa, partner of M/s Halagappa Arecanut Traders, Shimoga had been recorded after issuing a commission under section 131(1)(d). Relying upon this statement recorded by the officers to whom commission was issued, the ld. AO made a disallowance of Rs.14,97,000/- on this account, rejecting the request of the assessee to cross examine the said party. While doing so, the ld. AO failed to note that in the case of inter-state purchases of goods, the Sales Tax Department issued Form No. 31, which had to be stamped by Sales Tax authorities at the time of entry of goods into the State and which had to be reconciled at the time of sales tax assessment. No adverse findings had been made against the assessee that the assessee had imported and sold more goods than what it claimed to. It was also submitted that it was for M/s Halagappa Arecanut Traders, Shimoga to substantiate the fact that payments received by them and not confirmed by the assessee, were in fact given by the assessee and explained in its books of accounts but in this case, the matter had been turned upside down. Furthermore, despite request the assessee had not been allowed to cross examine Sh. H. Mariyappa, partner whose statement was recorded behind the back of the assessee and this rendered the said evidence gathered by the ld. AO as inadmissible for use against the assessee. It was submitted that the assessee had no control over the books of the said creditor. They were not found in possession of assessee and no enquiries had been conducted with the banks to determine who had purchased the drafts that had been credited in the name of the assessee in the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 13 books of the said party. No incriminating material had been found during the search in this regard. The books of the assessee were also audited under section 44AB and no such discrepancy had been pointed out by the Auditors also. With regard to the addition, on account of unconfirmed liability of M/s Mataji Traders, Teghariya Kishanganj, Bihar, it was submitted that the goods received from M/s Mataji Traders were supported by challan and Form No. 31 of the Sales Tax Act and other documentary evidences. Payment had been made to the party through banking channels, reflected in the bank statement of the assessee and its books of accounts and the cash payments had been duly acknowledged by the representative of the party. Merely, because the notice had returned unserved from the address of the party that was available with the assessee, was not a ground to make an addition in the hands of the assessee. Accordingly, it was prayed that both these additions were bad in law and may be quashed. 7. On the other hand, the ld. CIT (DR), Sh. Manu Chaurasia took us through the orders of the ld. AO to show that the Assessee was making payments to those parties outside his books. Ld. CIT (DR) pointed out that there were a number of parties who had been queried and in each case it had been discovered that payments made by the assessee had been recorded in their books. Ld. CIT (DR) submitted that commission under section 131(1)(d) had been issued to officer in Karnataka for examination of these parties and in each case the parties had confirmed having sold goods to the assessee and that payments had been received by them from him. Ld. CIT (DR) submitted that had the assessee not purchased the goods and made payments, there was no reason for those parties to record these transactions in his name in their books of account. Since, there were different parties, often at different places, all the entries in all their books could not be doubted. They indicated a pattern of out of book purchases and therefore, the overall circumstances pointed to undisclosed expenditure. It was further submitted that the ld. CIT(A) had already pointed out, ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 14 that the assessee had been given sufficient opportunity to rebut the evidences so collected, but had failed to do so. Therefore, he prayed that the addition may be confirmed. 8. We have duly considered the facts and circumstances of the case. We observed that a search and seizure operation was conducted by the assessee on 19.04.2006. In this operation, the residential and business premises of the assessee were covered. However the assessment orders do not mention that any incriminating material relating to purchases made outside regular books of accounts were uncovered during the course of this search. We further observed that in the post search enquiries, the investigation wing carried out investigations with relation to the creditors shown by the assessee and in doing these investigations, they observed a mis-match between the amounts claimed to have been received by the arecanut supplier from the assessee and the amount stated to be given by the assessee to the arecanut supplier out of its books of accounts. We further observed that subsequent to this discrepancy, statements of the partner of the arecanut supplier was recorded and necessary documents collected from them, which were then confronted to the assessee. The ld. AO records that the assessee did not have a satisfactory explanation for this discrepancy and on this account, he has made an addition of Rs. 14,97,000/- as unexplained expenditure made by the assessee. However, we note that in the case of Central Bureau of Investigation vs. Vidyacharan Shukla (1998) 3 SCC 410, the Hon’ble Supreme Court has held that entries in the books of accounts shall not alone be sufficient evidence to charge a person with a liability and independent evidence as to the trustworthiness of those entries are necessary to fasten liability. In the instant case, we observe that the Department has not gathered the corroboratory evidences to establish that what was recorded in the arecanut traders’ books and submitted by them in their statements, were in fact the true state of affairs. Once the assessee had denied the fact of having made the payments that were recorded in the books of the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 15 arecanut traders with reference to the fact that in the inter-state commerce, purchases were required to be backed up with Form 31 issued by the Sales Tax Department and in the instant case, the Sales Tax assessment did not reveal any such inter-state purchases and furthermore that no enquiries had been made from the banks to show that the demand drafts that had been credited to the accounts of the Arecanut Traders had been purchased by the assessee, the burden was upon the Revenue to show that what was being stated by the assessee was, in fact, not true. However, the Department does not seem to have made any enquiries with either the Banks or the Sales Tax authorities to disprove the assessee’s rebuttal of the evidences gathered by it. Furthermore, we observe that the assessee was proceeded against on the basis of materials and statements gathered behind and recorded behind the back of the assessee. The assessee had requested for cross examination of the witness. However, the ld. AO had side stepped the question of cross examination on the grounds that the evidence against the assessee was overwhelming and the ld. CIT(A) has taken an argument that since there was no examination in chief, there could not be a cross examination We observe from the orders of the ld. AO that the ld. AO has duly recorded the fact that commissions under section 131(1)(d) were issued, that statements were recorded and materials were collected and that these statements and materials were used by him in proceeding against the assessee. We, therefore, fail to understand how the ld. CIT(A) could hold that the said suppliers of Arecanut had not been examined on oath, as an excuse to deny the cross examination. We observe that the Hon’ble Supreme Court in the case of M/S Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata in (2015) 62 taxman.com 3 (SC) held that not allowing the assessee to cross examine the witness, though the statement of those witnesses were made the base of the impugned order, was a serious flaw which makes the order a nullity inasmuch as it amounted the violations of the principles of natural justice because of which the assessee was adversely affected. The Hon’ble Court observed that, in that case, the order of the Commissioner ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 16 was based upon statements given by some witnesses and when the assessee disputed the correctness of those statements and wanted that cross examine them, the adjudicating authority did not grant this opportunity to the assessee. The Hon’ble Supreme Court held that once that assessee had contested the truthfulness of the statement of witnesses and wanted to disprove that testimony for which purposes it wanted to avail the opportunity of cross examination, it was not for the adjudicating authority to pre-suppose as to what could be the subject matter of cross examination. Accordingly, in view of this decision of the Hon’ble Supreme Court and various other decisions that preceded it, it is quite clear that evidence collected behind the back of the assessee cannot be used against it to make an addition, as it amounts to a gross violation of the principles of natural justice. Furthermore, in the present case, we also observe that the evidence collected from the parties is not corroborated by enquiries with the Banks or with the Sales Tax authorities to establish the liability of the assessee with regard to the payments credited in the books of the Arecanut traders. In the circumstances, the addition made on this count is unsustainable. However, having taken due note of the submission of the learned CIT(DR) of the suspicious circumstances that surround these transactions, after considering the facts and circumstances of the case, we deem it appropriate in the interest of justice to restore the matter back to the file of the ld. AO, so as to allow the assessee the opportunity of cross examining the witnesses whose statements are being used against him. Accordingly, ground nos. 1, 3, 4 and 5 are allowed for statistical purposes. With regard to the addition of Rs. 2,38,121/- made on account of bogus liability presuming the same to be on account of a fictitious sundry creditor, we observe that the ld. AO has not effectively rebutted the contentions of the assessee that the goods were sold on consignment basis after obtaining Form No. 31 from the Sales Tax Department and that payments to the concerned party had been made through banking channels / acknowledged by the party when received in cash. We observe that the mere fact that a notice under section 133(6) returned back unserved, from the address ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 17 provided by the assessee, could not be a reason to assume that the transaction was bogus. It was well within the power of the Department to make further enquiries with regard to the sundry creditor. Addition purely on account of the return of notice is unsustainable and is accordingly deleted. Accordingly, ground no. 2 of the assessee’s appeal is allowed. Ground no. 6 is general in nature and does not require a decision. 9. In the result, the appeal of the assessee is partly allowed. ITA No.334/LKW/2017 (A.Y. 2003-04) “1. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 19,15,950/- MADE AS UNDISCLOSED PAYMENTS TO THE SUNDRY CREDITORS, EVEN THOUGH THE APPELLANT HAS NO WAY CONNECTED TOWARDS MAKING OF SUCH + PAYMENTS. 2. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 4,15,661/- MADE AS BOGUS LIABILITY SHOWN IN THE NAME OF BOGUS & FICTITIOUS SUNDRY CREDITOR, EVEN THOUGH THE APPELLANT HAS PROVIDED THE ADDRESS OF THAT SUNDRY CREDITOR AS AVAILABLE D. C-29/8-2-33/100 WITH HIM AND AS PER RECORD. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO UNDERSTAND THAT THE ONUS WAS ON THE SUNDRY CREDITOR TO EXPLAIN THE GENUINENESS OF CREDIT ENTRIES APPEARING IN HIS BOOKS OF ACCOUNT ONCE THE APPELLANT DENIED SUCH PAYMENTS ALLEGED TO HAVE MADE BY HIM. 4 BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT GIVING DUE CONSIDERATION OF THE PRINCIPLE OF NATURAL JUSTICE AS OPPORTUNITY OF CROSS EXAMIANTION TO THE WITNESS ON WHOSE DEPOSITION THE ADDITION MADE HAS NOT BEEN PROVIDED TO THE APPELLANT. 5. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 71,500/- MADE AS LOW DRAWINGS, IGNORING THE FACT THAT THE APPELLANT WAS RESIDING WITH JOINT FAMILY AND THERE WAS SUFFICIENT WITHDRAWAL FOR HOUSEHOLD PURPOSES, AND THE ADDITION MADE IS NOT BASED ON ANY EVIDENCE BUT ONLY ON ESTIMATION. 6. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ORDER DATED 31.03.2017 PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE ADDITIONS ARE ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 18 ARBITRARY, UNJUSTIFIED AND BAD IN LAW, AND THEREFORE DESERVE TO BE CANCELLED. 7. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE APPELLANT RESERVES THE RIGHT TO AMEND, TO INTRODUCE OTHER GROUNDS OF APPEAL AND NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOUR.” 10. The facts of the case in ITA No.334/LKW/2017 for the assessment year 2003-04, are virtually identical to that in ITA No. 333/LKW/2017. In this year, the enquiries were conducted with three parties namely M/s Tirupati Enterprieses, Bhimsamudra, Karnataka, M/s Halagappa Arecanuts Traders, Shimoga & M/s Veerbhaddeshwar, Shimoga. Discrepancies to the extent of Rs.19,15,950/- were observed between the amounts reflected in the books of these Arecanuts traders and the amounts reflected in the books of the assessee. Commissions under section 131(1)(d) were issued to DCIT, Devangere and Shimoga for recording the statements of the concerned parties and the gist of the statements recorded under section 131(1) of the Income Tax Act, 1961 have been reflected in the assessment orders. The assessee offered similar arguments to what it had offered in assessment year 2002-03 and the ld. AO rejected these arguments and made an addition of Rs.19,15,950/- in this regard. Similarly, with regard to M/s Mataji Traders, on account of the fact that the notice to the said party returned unserved with the postal remark “incomplete address”, an addition of Rs.6,53,781/- was made by the ld. AO. In addition to these, the ld. AO also observed that the assessee was only showing a sum of Rs.36,500/- as drawings for personal expenses on account of the fact that he was residing in a Hindu Joint Family and all the expenses were met from the collective drawings of the family. The ld. AO referred to a loose paper found and seized at the residential premises of the assessee marked as LP-9 page 71, which was a rough note of expenditure incurred on electricity, house tax and other household expenses of the family over a period of three years. He observed that a sum of Rs. 10,500/- had been shown as house tax, water tax and generator expenses while a sum of Rs. 5167/- ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 19 have been shown for two months as electricity expenses. Thereafter, the ld. AO computed the total expenditure on the said amount at Rs.5,930/-, (being the assessee share) and since the assessee had only shown withdrawals of Rs.67,300/-, in the assessment year 2002-03, he estimated the expenditure of the assessee at Rs. 1,08,000/-per annum and added back Rs. 71,500/- to the income of the assessee. Once again, the assessee went in appeal before the ld. CIT(A) and raised the same issues before him and once again the ld. CIT(A) side stepped the question of cross examination on the grounds that since there has not been any examination in chief, there could not be any cross examination and that the material under section 133(6) had been confronted to the appellant and therefore, the requirements of natural justice were fulfilled. Therefore, on the basis of the enquiries conducted with the Arecanuts Traders in Karnataka, he confirmed the addition of Rs.19,15,950/- made by the ld. AO. With regard to the addition of Rs.6,53,781/-, on account of bogus and fictitious creditors made because of return of the undelivered notice, the ld. CIT(A) granted partial relief to the assessee. He allowed opening balance of Rs. 2,38,121/-, which had already been added back in assessment year 2002-03 to be deducted from the total amount and confirmed the addition of Rs. 4,15,661/- in this regard. With regard to the addition on account on low drawings, the ld. CIT(A) held that no evidence had been furnished by the assessee that the expenses were commonly paid by all family members of the joint family and therefore, he confirmed the addition of Rs.71,500/-. 11. In considering these grounds, we observe that the issue of undisclosed payments to sundry creditors and the issue of alleged bogus liability in the name of so called fictitious sundry creditors, have already been addressed by us in ITA No.333/LKW/2017. Therefore, on account of the detailed reasons recorded on virtually identical facts in ITA No. ITA No.333/LKW/2017, we restore the matter of undisclosed payments back to the file of the ld. AO for affording the assessee an ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 20 opportunity to cross examine the persons from whom evidence had been collected and used against the assessee. Ground nos. 1, 2 and 4 are allowed for statistical purposes. Similarly, as we have already noted that the mere return of a notice is no grounds to hold that the liability is bogus or that the sundry creditor is fictitious, we allow ground no. 2 of the assessee’s appeal and delete the addition of Rs. 4,15,661/- in this regard. With regard to the addition made on account of low drawings, we observe that the addition is made purely on the basis of surmises and conjectures. No evidence has been brought on record to indicate that the assessee incurred any expenditure more than what he stated and nothing has been brought on record to indicate the falsity of his statement that as he lives in a joint family and that all the family members jointly contributed to the expenses of the family. Moreover, the decision to estimate the withdrawals at a particular figure is not seen to be grounded in any scientific basis. Accordingly, the addition is not sustainable and is deleted. Ground no. 5 is accordingly allowed. Ground no. 6 relates to the order of the ld. CIT(A) and in view of our findings as above is also allowed. Ground no. 7 is general in nature and does not require any decision. 12. In the result, appeal in ITA No. 334/LKW/2017 is partly allowed. ITA No.335/LKW/2017 (A.Y. 2004-05) “1. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 11,38,300/- MADE AS UNDISCLOSED PAYMENTS TO THE SUNDRY CREDITORS, EVEN THOUGH THE APPELLANT HAS NO WAY CONNECTED TOWARDS MAKING OF SUCH PAYMENTS. 2. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,86,000/- MADE AS BOGUS LIABILITY SHOWN IN THE NAME OF BOGUS & FICTITIOUS SUNDRY CREDITOR,.. EVEN THOUGH THE APPELLANT HAS PROVIDED THE ADDRESS OF THAT SUNDRY CREDITOR AS AVAILABLE WITH HIM AND AS PER RECORD. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO UNDERSTAND THAT THE ONUS WAS ON THE SUNDRY CREDITOR TO EXPLAIN THE GENUINENESS OF CREDIT ENTRIES APPEARING ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 21 IN HIS BOOKS OF ACCOUNT ONCE THE APPELLANT DENIED SUCH PAYMENTS ALLEGED TO HAVE MADE BY HIM. 4. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT GIVING DUE CONSIDERATION OF THE PRINCIPLE OF NATURAL JUSTICE AS OPPORTUNITY OF CROSS EXAMIANTION TO THE WITNESS ON WHOSE DEPOSITION THE ADDITION MADE HAS NOT BEEN PROVIDED TO THE APPELLANT. 5. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 81,000/- MADE AS LOW DRAWINGS, IGNORING THE FACT THAT THE APPELLANT WAS RESIDING WITH JOINT FAMILY AND THERE WAS SUFFICIENT WITHDRAWAL FOR HOUSEHOLD PURPOSES, AND THE ADDITION MADE IS NOT BASED ON ANY EVIDENCE BUT ONLY ON ESTIMATION. 6. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 78,645/- MADE AS NON- ALLOWABLE INTEREST PAYMENT ON LOAN TAKEN FOR PURCHASING OF CAR AND IGNORING THE FACT THAT THE CAR WAS USED FOR THE PURPOSE OF BUSINESS OF APPELLANT DURING THE RELEVANT YEAR. 7. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 1,65,200/- MADE BY ADOPTING THE GROSS PROFIT RATE @4.13% ON ALLEGED UNDISCLOSED SALES OF Rs. 40,00,000/-, IGNORING THE FACTS THAT THERE WAS NO UNDISCLOSED SALES BUT THE ASSESSING OFFICER ADOPTED THE ABOVE FIGURES ON THE BASIS OF AN ORDER PASSED BY THE AUTHORITY OF OTHER DEPARTMENT AND WHICH HAS NOT BEEN ATTAINED ITS FINALITY BEING APPEAL PENDING. 8. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 1,65,200/- MADE BY ADOPTING THE GROSS PROFIT RATE @ 4.13% ON ALLEGED UNDISCLOSED SALES OF Rs. 40,00,000/-, IGNORING THE FACT THAT THE SAME IS ON THE HIGHER SIDE AND IS MADE WITHOUT ANY REASONABLE BASIS. 9. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RESTORING THE ISSUE OF DEPRECIATION AMOUNTING TO Rs. 1,15,600/- CLAIMED ON CAR BY THE APPELLANT TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION & RECOMPUTATION, IGNORING THE FACTS THAT THE APPELLANT IS ENTITLED TO CLAIM DEPRECIATION ON GIVEN FACTS AND THERE IS NO NEED TO RESTORE THE ISSUE. 10. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ORDER DATED 31.03.2017 PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE ADDITIONS ARE ARBITRARY, UNJUSTIFIED AND BAD IN LAW, AND THEREFORE, DESERVE TO BE CANCELLED. ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 22 11. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE APPELLANT RESERVES THE RIGHT TO AMEND, TO INTRODUCE OTHER GROUNDS OF APPEAL AND NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOUR 13. The ld. AO made an additions of Rs.11,38,000/- on account of undisclosed payments to sundry creditors and Rs.7,01,661/- on account of bogus liability to M/s Mataji Traders, Teghadia, Kishanganj, Bihar. He also made an addition of Rs. 81,000/- on account of low drawings and further to the above, he observed that the assessee had purchased a Tata Qualis car for Rs.5,78,000/- and claimed depreciation thereon at Rs.1,15,600/-. He saw from the file of the assessment year 2001-02 that the car had not been shown in the books of accounts in the assessment year 2001-02 when it had been purchased. The advance to Sunny Motors of Rs. 50,000/- had been shown as sundry debtors and the interest had not been claimed on in its profits and loss account in the earlier years. Furthermore, no depreciation had been claimed in earlier years. Looking through all these things, the ld. AO held that vehicle was not used for business purposes and therefore, he disallowed both the depreciation of Rs.1,15,600/- claimed by the assessee and also the interest paid on loan of Rs.78,645/- observing that it was for three years and not admissible on mercantile basis for booking in one year. However, he held that since the use of the vehicle had been held to be not for the business purposes, the entire amount of interest was liable to be disallowed. He, therefore, made an addition of Rs.78,645/- on this account. 14. The assessee, aggrieved by the said additions went in appeal before the ld. CIT(A) and once again reiterated arguments on the same lines with regard to the alleged out of books payments to parties in Karnataka and the alleged ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 23 bogus liability on account of the Mataji Traders. Once again, the ld. CIT(A) rejected the plea of the assessee for cross examination of the three parties whose statements had been considered for making the addition of Rs.11,38,300/- namely Sh. H. Mariyappa, partner of M/s Halagappa Arecanut Traders, Shimoga, Sh. H.C. Shadaksharappa, partner of M/s Hunasaghatta Arecanut Traders, Shimoga and Sh. K.M. Jai Prakash, partner of M/s Parvati Traders, Birur whose statements had been recorded by the DCIT, Shimoga (in the first two cases) and ITO, Ward-1, Chikamaglure (in the case of Parvati Traders). As the issue involved is identical, the addition of Rs.11,38,300/- made on this account is held to be untenable in view of our findings in ITA No.333/LKW/2017 and restored to the file of the ld. AO for affording the assessee an opportunity to cross examine the witnesses whose statements and accounts are being relied upon by the Department. Ground nos. 1, 3 and 4 are accordingly allowed for statistical purposes. On the issue of addition on account of bogus liability to M/s Mataji Traders, the ld. CIT(A) sustained an addition of Rs. 2,86,000/-, after allowing credit for the balances pertaining to previous years which had been confirmed by him in the previous year’s appeals. We have already considered the matter in ITA No.333/LKW/2017 and since we have observed that the liability could not be held to be bogus, only on account of return of a letter citing incomplete address, the addition made in this regard is deleted and ground no. 3 of the assessee’s appeals are allowed. Similarly, with regard to the addition of Rs. 81,000/- made on account of low drawings, the ld. CIT(A) confirmed the additions made by the ld. AO on the grounds that no evidence had been furnished by the assessee that the expenses had been borne by the family members of the assessee. We observed that these findings of the ld. CIT(A) is in fact at variance with the findings of the ld. AO ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 24 who has not disputed the fact of family members contributing to the expenses of the family. As already pointed out in ITA No.334/LKW/2017, since the estimate of expenditure is made without scientific basis, it is based on surmises and conjectures and therefore, to project from an estimated expenditure of Rs.10,051/- on electricity, house tax, water tax and generator, that the assessee’s total drawings would be Rs.114,000/- without making any enquiries as to the actual expenditure likely to be incurred by the assessee, does not lend itself to confirmation of the estimated addition. Accordingly, we delete this addition of Rs.81,000/- and ground no. 5 of the asessee’s appeal is allowed. Ground No. 6 relates to the addition of Rs.78,645/- made as non- allowable interest on the grounds that the Toyota Qualis car had not been used for business purposes. The ld. CIT(A) has in fact accepted the arguments made by the assessee but observed that the interest of Rs.78,645/- was the interest for three years. Accordingly, he has confirmed disallowance of two years of expenses and allowed the assessee to claim deduction for interest pertaining to this assessment year. Thus, the ground of appeal taken by the assessee is defective in the quantum stated to be disallowed by the ld. CIT(A). Having considered the order of the ld. CIT(A), we see no reason to interfere with it and therefore, we confirm the addition to the extent of two years of interests and dismiss ground no. 6. Ground no. 9 is against the decision of the ld. CIT(A) to restore the matter of depreciation claim of Rs. 1,15,600/- to the file of the ld. AO for verifying whether the asset in question i.e. the car was disclosed or not in previous years. The assessee has claimed that it has furnished documentary evidences such as the purchase bill of the car which is in the name of M/s Shivam Traders and the statement of M/s Sundaram Finance Limited in the name of M/s Shivam Traders proving that the car had been purchased for the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 25 purpose of business and used for the business purposes. The ld. AO has not gathered any evidence which shows that the car was used for personal purposes. It was submitted that the vehicle was purchased in the assessment year 2001-02 for a sale consideration of Rs.5,78,000/- and sold in assessment year 2005-06 for Rs.2,70,000/-. For purchasing the car, a loan of Rs.4,50,000/- was taken from M/s Sundaram Finance and the initial payment and down payment of Rs.50,000/- and Rs. 78,000/- had been made to M/s Sunny Motors Private Limited from the assessee’s own sources. However, due to poor / wrong accounting of transactions by the accountant, all the payments made to M/s Sundaram Finance Limited and M/s Sunny Motors Limited was debited to their accounts. Subsequently, the mistake was rectified and correct accounting entries were made and therefore, the claim of depreciation was also made during the year under consideration. It was submitted that the assessee had been claiming motor car expenses for running the car on day to day basis and as per explanation 5 to section 32 of the Act, it was mandatory for the ld. AO to allow the claim of depreciation on a year to year basis whether or not the assessee had claimed the depreciation. After considering these arguments, we cannot find fault with the decision of the ld. CIT(A) to restore the matter back to the ld. AO for re-calculation of depreciation because as per explanation 5 section 32, the same has to be allowed whether claimed or not. However, his claim to verify whether the asset was disclosed or not, goes against his own findings on the issue of interest payment to M/s Sundaram Finance and also against the documentary evidence placed by the assessee and the motor car expenses claimed by it in his accounts. Accordingly, the fact of the car not being used for business purposes not being established by any proper evidence, the directions of the ld. CIT(A) are modified to the extent that the restoration to the ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 26 file of the ld. AO would only be for the purposes re-calculating the admissible depreciation in the light of the WDV as emerging over the years. Ground Nos. 7 and 8 relate to the addition of Rs. 1,65,200/- made by the ld. AO by adopting a gross profit rate of 4.13% on alleged undisclosed sales of Rs.40,00,000/- based upon the order passed by the officer of another Department. The facts of the matter are that the Deputy Commissioner (Assessment)-6, Trade Tax, Kanpur vide his order dated 20.01.2006 assessed the suppressed sales of the assessee for the relevant financial year of Rs. 40,00,000/- in the case of the assessee. The assessee went in appeal before the ld. JC(Appeals)-II, Trade Tax, Kanpur and the appeal of the assessee was dismissed vide order dated 27.01.2007. Since, the above quantum of sales was not found recorded and out of books transactions had been detected by the Trade Tax authorities and reliability, correctness and completeness of the books had not been found to be satisfactory, hence the same were rejected and the gross profit rate applied by the assessee was also applied to the undisclosed sales. Accordingly, an addition of Rs. 1,65,200/- was made in this regard and a further addition of Rs. 11,16,000/- was made with regard to the stock and trade / turnover ratio of the assessee. The ld. CIT(A) upon examining the matter confirmed the addition on account of suppressed gross profit on undisclosed sales. However, he deleted the addition made on account of stock and trade turnover ratio as the ld. AO had not provided any reasonable basis for the same. Before us, the assessee submitted (in the statement of facts) that it had purchased 304 bags of dry ginger from M/s Gajanand and Co. who had duly issued purchase bills, bilties and other documentary evidences to be transported to the assessee by truck through M/s Verma Transport, Kanpur. However, at the time of physical verification of the stock by the Trade Tax authorities at Naraina border station, ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 27 Trade Tax Check post, it was found that instead of 304 bags of dry ginger, the truck was loaded with 190 bags of dry ginger and 114 bags of black pepper costing Rs.10,91,660/- and that stock was not accompanied by any purchase bill which had any mention of the purchase / transportation of black pepper. Thus, the stock was confiscated by the Trade Tax authorities and released only after deposit of penalty. Thus, the Trade Tax Authorities based upon this seizure, further estimated the unaccounted sales of the assessee at Rs. 40,00,000/- and levied tax thereon. The assessee was in appeal and the matter was still subjudice and the order could not be passed on the basis of findings of another Department. Therefore, it prayed that the additions may kindly be deleted. 15. We have duly considered the facts and circumstances of the case. While the appeal proceedings may not have become final at the stage of hearings before the ld. CIT(A), it is quite clear that the assessee was transporting contraband stock of black pepper in the truck. Therefore, the Trade Tax Authorities had levied a penalty upon it and this leads to a belief that the assessee was making sales outside its books. However, we observe that the addition made by the Trade Tax Authorities was estimated and the assessee is in appeal against such estimation. Therefore, in the interest of justice, we deem it appropriate to restore the matter back to the file of the ld. AO so that the final position in the matter may be ascertained from the Trade Tax Authorities and the additional gross profit be computed on the amount of undisclosed sales which are actually confirmed in appeal. Ground nos. 7 and 8 are accordingly, allowed for statistical purposes. Ground no. 10 stems from our decision in ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 28 ground nos. 1 to 9 and is partly allowed. Ground no. 11 is general in nature and does not require a decision. 13. In the result, ITA No.335/LKW/2017 is partly allowed. ITA No.336/LKW/2017 (A.Y. 2005-06) “1. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 20,58,200/- MADE AS UNDISCLOSED PAYMENTS TO THE SUNDRY CREDITORS, EVEN THOUGH THE APPELLANT HAS NO WAY CONNECTED TOWARDS MAKING OF SUCH PAYMENTS. 2. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 1,69,490/- MADE AS BOGUS LIABILITY SHOWN IN THE NAME OF BOGUS & FICTITIOUS SUNDRY CREDITOR, EVEN THOUGH THE APPELLANT HAS PROVIDED THE ADDRESS OF THAT SUNDRY CREDITOR AS AVAILABLE WITH HIM AND AS PER RECORD. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO UNDERSTAND THAT THE ONUS WAS ON THE SUNDRY CREDITOR TO EXPLAIN THE GENUINENESS OF CREDIT ENTRIES APPEARING IN HIS BOOKS OF ACCOUNT ONCE THE APPELLANT DENIED SUCH PAYMENTS ALLEGED TO HAVE MADE BY HIM. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT GIVING DUE CONSIDERATION OF THE PRINCIPLE OF NATURAL JUSTICE AS OPPORTUNITY OF CROSS EXAMIANTION TO THE WITNESS ON WHOSE DEPOSITION THE ADDITION MADE HAS NOT BEEN PROVIDED TO THE APPELLANT. 5. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 81,500/- MADE AS LOW DRAWINGS, IGNORING THE FACT THAT THE APPELLANT WAS RESIDING WITH JOINT FAMILY AND THERE WAS SUFFICIENT WITHDRAWAL FOR HOUSEHOLD PURPOSES, AND THE ADDITION MADE IS NOT BASED ON ANY EVIDENCE BUT ONLY ON ESTIMATION. 6. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ORDER DATED 31.03.2017 PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE ADDITIONS ARE ARBITRARY, UNJUSTIFIED AND BAD IN LAW, AND THEREFORE DESERVE TO BE CANCELLED. 7. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE APPELLANT RESERVES THE RIGHT TO AMEND, TO INTRODUCE OTHER GROUNDS OF APPEAL AND NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOUR.” ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 29 16. This appeal arises out additions made by the ld. AO of Rs.20,58,200/- on account of undisclosed payments to sundry creditors, addition of Rs. 1,69,490/- on account of failure of sundry creditors, namely M/s Pashupati Organics Limited, to respond to the notice under section 133(6) and an addition of Rs. 81,500/- made in the hands of the assessee on account of low drawings. In this assessment year, the ld. AO noticed a difference of Rs. 13,88,300/- between the sums stated to be received by M/s Malik Arjuna Supadi Traders, Shimoga and that stated to be paid by the assessee. He also observed a difference of Rs. 6,69,900/- between the accounts of M/s Veerbhaddeshwar Arecanut Traders, Shimoga and the accounts of the assessee. Commissions under section 131(1)(d) were issued for recording the statements of Sh. M.R. Prabhu partner of M/s Veerbhaddeshwar Arecanut Traders, Shimoga and Sh. P.S. Lingaraju, proprietor of M/s Malik Arjuna Supadi Traders and the statements were recorded under section 131(1) by the DCIT, Shimoga. The gist of the statements is reproduced in the order of the ld. AO. Once again, the assessee asked for cross examination of the said parties but these were denied by the ld. AO on the grounds that the material evidence showed that the payments had been made by the assessee this had not been rebutted by the assessee. The ld. CIT(A) also did not consider the arguments of the assessee that the said addition was bad in law on account of the fact that the cross examination had not been allowed, citing his familiar stance that since there was no examination in chief, there could not be any cross examination. We find that the issue is covered by our decision in ITA No.333/LKW/2017 and therefore following our said order, the matter is restored to the file of the ld. AO for permitting such cross examination before drawing any adverse inference on account of statements made and evidences collected behind the back of the assessee. Ground nos. 1, 3 and 4 are accordingly allowed for statistical purposes. Ground no. 2 relates to the addition of Rs. 1,69,490/- made as bogus liability in view of the fact that the notice to the concerned party namely M/s Pashupati Organics Limited, Meghanagar, Madhya Pradesh had returned back with the remarks, “incomplete address”. On ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 30 account of the failure of the assessee to satisfactorily explain to the ld. AO as to why the said creditor should not be regarded as bogus, the disallowance of Rs. 1,69,490/-, which stood in the name of the said creditor, was made. Before the ld. CIT(A), the assessee submitted that a similar notice under section 133(6) of the Act had been sent by the same Assessing Officer in the case of M/s Parvati International, which was a proprietorship concern of the assessee’s nephew Sh. Anurag Pandey and that had been duly replied to by M/s Pashupati Organics Limited, Meghanagar, Madhya Pradesh and that reply was on record. Therefore, the fact regarding the existence of party and its and dealings with the assessee group were very much in the knowledge of the ld. AO. The assessee was not able to understand how the notice sent by the ld. AO at same address had returned back undelivered and had made enquiries with the party. In response, the party had sent a reply dated 8.12.2008 to the ld. AO and sent a copy of the same to the assessee, which was submitted in the paper book therefore, it was submitted that the very fact that the said party had replied to the notice sent in another of the concern of the said group testified to the genuineness of the party and the party could not be held to be ingenuine on this count. It was further argued that the Department had all the powers to enforce the attendance of the said party and therefore, the addition made in this regard by treating M/s Pashupati Organics Limited as a non-existent party and the liability as bogus was uncalled for. The ld. CIT(A) remanded the matter back to the ld. AO for a report and in response, the ld. AO submitted that neither was the unserved notice sent under section 133(6) or the reply of the assessee company, available on record. Therefore, the ld. AO had issued another notice to the assessee company on 8.02.2017 and in response, it had been submitted that the company was not required to maintain records for more than eight years and therefore, it was not in a position to reply to a matter that was so old. It was further submitted that the said party had not dealt with Sh. Anil Kumar Pandey proprietor M/s Shivam Traders since 2008. The ld. CIT(A) after considering the remand report, confirmed the addition in the hands of the assessee. Before us, it has ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 31 been submitted that the assessee had submitted purchase bills, challan, Form No. 31 of Sales Tax Act and the addresses that were available to it before the ld. AO. The bills furnished by the assessee to the ld. AO also bore its complete address and sales tax number. Furthermore, M/s Pashupati Organics Limited had confirmed the business transactions with M/s Shivam Traders made during the F.Ys. 2004-05 and 2005-06 vide its reply dated 8.12.2008 sent in response to notice issued under section 133(6). Since it has discharged all its onus, the assessee should not be penalized on this account. 17. We have duly considered the matter. It is quite clear that when the same party was another notice by the same AO in another case at the very same address and has replied to the said notice, the fact of the notice returning back unserved in the assessee’s case, from the same address cannot convert that assessee into a non- existent entity and nor can it convert the liability into a bogus liability. Moreover, in the instant case, the said company has subsequently sent a letter to the ld. AO on 8.12.2008, with a copy marked to the assessee confirming the transactions. The records of the Department appear to be incomplete, in that neither is the undelivered 133(6) notice available on the file nor is the letter filed by the assessee. In view of the fact that the ld. AO has not brought on any evidence to dispute the fact of purchase of goods from this party, which have been evidenced by the bills, Form 31 and challans, the treating of the liability as bogus appears to be without sufficient evidence. Accordingly, the addition made in this regard is deleted and ground no. 2 of the assessee’s appeal is allowed. 18. Ground no. 5 of the appeal relates to the disallowance on account of low withdrawals. Once again, it is noticed that the estimate arrived at by the ld. AO is not on the basis of any examination into the expenses incurred by the assessee. Before the ld. CIT(A), the assessee had submitted that the fact that the expenses on electricity, water, house tax and generator were met from the collective drawings of ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 32 the family members stands substantiated from page 71 of LP-9. The assessee had also submitted a chart depicting the total drawings of the assessee and the entire family members constituting the joint family. It was submitted that the assessee stayed in his parental house, no rent is paid and the entire addition had been made on surmises and conjectures since the assessee enjoyed a high status therefore, it was held that the withdrawals were insufficient. But financial status of the assessee could not be a basis for estimating household expenditure and for making consequent addition as held in ITO vs. M/s Kamlesh Hori (2006) 8 MTC 502 (All-Trib). The ld. AO had failed to bring on record any cogent material to support his estimation and therefore, assessment was made on mere conjecture, surmise and suspicion. The ld. CIT(A) rejected the contentions of the assessee on the ground that no evidence had been furnished before him that all the expenses were borne by all the family members. In appeal before us, it has been submitted that no evidence had been found during the course of search and seizure to show that the assessee was spending more than what he had claimed to spent which would cast doubt on his drawings. Thus, the estimation made by the ld. AO was without any basis and purely on guess and surmises. We have duly considered the above. It is a fact that the ld. AO has not made any enquiry into the expenditures incurred by the assessee which would justify the addition made on account of low drawings, because before drawings can be held to be low, it must be shown that the assessee had actually incurred expenditure in excess of those drawings. In the absence of any such evidence, the addition made is not sustainable. The ld. CIT(A) has in fact rejected the arguments holding that the assessee had not submitted evidences to show that the expenses were jointly incurred by all the family members. However, as the assessee has pointed out the seized document LP-9, page 71itself shows that the expenses were shared by the family members. Accordingly, the addition appears to be unsustainable and is accordingly deleted. Ground no. 5 is accordingly allowed. Ground no. 6 arising out of ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 33 decisions in ground nos. 1 to 5 is also allowed. Ground no. 7 being general in nature does not require a decision. 19. In the result, the appeal of the assessee in ITA No.336/LKW/2017 is partly allowed. ITA No.337/LKW/2017 (A.Y. 2006-07) “1. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 22,74,760/- MADE AS UNDISCLOSED PAYMENT TO THE SUNDRY CREDITOR, EVEN THOUGH THE APPELLANT HAS NO WAY CONNECTED TOWARDS MAKING OF SUCH PAYMENTS. 2. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO UNDERSTAND THAT THE ONUS WAS ON THE SUNDRY CREDITOR TO EXPLAIN THE GENUINENESS OF CREDIT ENTRIES APPEARING IN HIS BOOKS OF ACCOUNT ONCE THE APPELLANT DENIED SUCH PAYMENTS ALLEGED TO HAVE MADE BY HIM. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT GIVING DUE CONSIDERATION OF THE PRINCIPLE OF NATURAL JUSTICE AS OPPORTUNITY OF CROSS EXAMIΑNTION TO THE WITNESS ON WHOSE DEPOSITION THE ADDITION MADE HAS NOT BEEN PROVIDED TO THE APPELLANT. 4. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 58,625/- AS RENT RECEIVED & AN INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IGNORING THE FACT THAT THE APPELLANT HAS NOT RECEIVED SUCH RENT DURING THE RELEVANT C- 29/5-3-31/2126 TENANTS & NOT SELF-OCCUPIED YEAR. 5. BECAUSE THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW INN CONFIRMING THE ADDITION OF RS. 57,000/- MADE AS LOW DRAWINGS, RECE IGNORING THE FACT THAT THE APPELLANT WAS RESIDING WITH JOINT FAMILY AND THERE WAS SUFFICIENT WITHDRAWAL FOR HOUSEHOLD PURPOSES AND THE ADDITION MADE IS NOT BASED ON ANY EVIDENCE BUT ONLY ON ESTIMATION. 6. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ORDER DATED 31.03.2017 PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE ADDITIONS ARE ARBITRARY, UNJUSTIFIED AND BAD IN LAW, AND THEREFORE DESERVE TO BE CANCELLED. 7. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE APPELLANT RESERVES THE RIGHT TO AMEND, TO INTRODUCE OTHER GROUNDS OF APPEAL AND NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOUR.” ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 34 20. This appeal arises out of additions made of Rs. 22,74,760/- on account of undisclosed payments to sundry creditors, an addition of Rs. 58,625/- on account of rent received under the head, “income from house property” and an addition of Rs. 57,000/- made on account of low drawings. The ld. AO observed that in the said assessment year, there was a difference of Rs.22,74,760/- between the accounts of the assessee in the books of the M/s Hunasaghatta Arecanut Traders, APMC Yard, Shimoga, Karnataka and the accounts of the said party in the books of the assessee. A commission under section 131(d) of the Income Tax Act was issued to the DCIT, Shimoga for recording the statement of Sh. H.C. Shadaksharappa, partner of M/s Hunasaghatta Arecanut Traders, Shimoga and the gist of the statement was reproduced in the assessment order. The request of the assessee to cross examine he said witness was rejected by the ld. AO on the grounds that the onus was upon the assessee to rebut the fact of the transactions, the details of which had emerged from the books of the Arecanut Traders and since the assessee had failed to rebut the same, no further enquiry was required in the matter. Once again, the assessee went in appeal before the ld. CIT(A) and placed the same set of arguments before him. Once again, the ld. CIT(A) rejected these arguments pointing out that since examination in chief had not taken place, cross examination was not required and therefore, additions could not be vitiated on that count. The issue is identical to that which has already been decided by us in ITA No. 333/LKW/2017 and therefore, following our order in the said matter, we restore the issue back to the file of the ld. AO for providing the assessee with an opportunity to cross examine the witnesses whose statements and accounts are proposed to be used against the assessee. Accordingly, ground nos. 1, 2 and 3 are allowed for statistical purposes. Similarly, we find that in ground no. 5, the ld. AO has made an addition on account of low withdrawals. As this addition is not backed up by any analysis into the expenditure pattern of the assessee’s family which would demonstrate that the assessee was ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 35 spending any more than what he claimed to have spent, it is held that such an estimated addition made on the basis of presumptions and conjectures is unsustainable and therefore, the addition made in this regard of Rs. 57,000/- is accordingly deleted. Ground no. 5 is accordingly allowed. Besides these two additions, another issue in this year is an addition of Rs. 58,625/- on account of rent received by the assessee which has been added back to his accounts. It was observed by the ld. AO that the assessee had purchased a property at Kidwai Nagar, Kanpur for which he had taken loan from ICICI Bank and shown a loss from this house property amounting to Rs. 80,340/-. The assessee was required to explain the income from house property and explain how this property was a, “self-occupied property”. The ld. AO noted that the assessee was not residing in this property but residing in his paternal house at 133/88 M Block, Kanpur. The Inspector was deputed to enquire about the above property and he submitted his report on 22.12.2008. From the report, the ld. AO observed that this was not a residential property but was the nature of the market and in which many shops were running. He also found out that these shops have been let out to various parties whose details were reproduced in the assessment order. The ld. AO computed the total income that was earned by the assessee from these various shops and worked out that the assessee was earning an income of Rs. 1,50,000/- during the course of the year. However, since the possession of the property was only in the hands of the assessee for seven months, therefore, he computed the rent for seven months at Rs. 58,625/- and made an addition on this account. 21. Aggrieved with addition, the assessee went before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the assessee had purchased a property on 5.09.2005, the said property was already occupied by a number of tenants who were carrying out various businesses of their own in the said premises. Most of the payments of the premises were under litigation with the erstwhile owners of the premises and as ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 36 such court cases were pending. After the purchase of the premises, the assessee became a party to the litigations. As the matter was sub-judice, some of the tenants were depositing their normal monthly rental in the Court, as evident from the invoices enclosed in the paper book. The assessee did not receive any rent from the demised premises during the year under consideration and consequently the same was not offered to tax. The ld. AO had not appreciated the intention of the appellant in stating the property to be a, “self-occupied” property in that while it was in his possession, it had been shown to be partly let out, in his revised return of income with which nil receipts therefrom. Referring to the ITIs report, it was submitted that the ld. AO withheld some vital contents of the enquiry report with regard to the receipt of rent. All the tenants examined therein had categorically denied having made any payment to the assessee, but the ld. AO had maintained a stoic silence on this issue in his order. It was further submitted that various shops were closed. In the circumstances, how could the ITI have come to know the rent of the same. It was, therefore, submitted that the ld. AO had not given any reasoning for his estimations and calculations and without judicially verifying the facts of the case, had alleged that the assessee had not shown this income. Furthermore, it was submitted that the ld. AO had not confronted the assessee on this basis. Finally, the assessee relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Shoorji Vallabhdas and Co., 46 ITR 144 to state that income tax was not leviable on hypothetical income. If the income did not result at all, there cannot be a tax even if a book keeping entry is made about a hypothetical income which did not materialize. Furthermore, it had been submitted that the assessee purchased a dilapidated property and the same had not been purchased with a view of earning rent but to demolish the same and build a residential cum commercial complex. The assessee was in the process of getting the property vacated by arriving at amicable agreement with erstwhile tenants. He had not received a single payment as rent during the year under consideration and as the amounts was being deposited in the Court therefore, the amounts so collected could ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 37 not be treated as income of the assessee vide CIT vs. Jahanganj Cold Storage 1989 178 ITR 490 (All). Even otherwise, rent in arrears could have been taxed in the year received upon realization under section 25B of the Act. Thus, the addition deserve to be deleted. The ld. CIT(A) did not accept the arguments of the assessee. He held that from the details given in the assessment order, it could be seen that the assessee was getting rent from 26 tenants and the Inspector had verified this, therefore, he confirmed the addition. Before us, in the statement of facts, it was submitted that the property was under litigation; the rents were being deposited in the Court; some of the rooms of the property were in occupation of the family members of the assessee; the joint family of the assessee could have more than one self-occupied property and the assessee had not received any rent from these occupant parties during the year under consideration. However, the ld. AO had ignored the replies given by the assessee and treated the property in the nature of the market and added Rs.58,625/- as rent received under head, “income from house property” and the ld. CIT(A) was wrong in upholding his findings. 22. We have duly considered the above arguments. It is quite clear that the addition cannot be made on a partial reading of the report in which the tenants have denied paying any rent to the assessee. It is further observed that the property was under litigation and the rents were being deposited in the court as a result of which the assessee was not receiving any rent whatsoever. In the circumstances, it cannot be said that the rent had accrued to the assessee till such time as the disputes were resolved. We observed that the assessee was living in a joint family property and as per the provisions of the Income Tax Act was permitted to have one property considered as a self-occupied property for the purposes of computation of income from house property. Be that as it may , we hold that there is no basis of making a presumptive addition in the hands of the assessee when the assessee has not received any rent thereon and especially when there are provisions within the Act ITA Nos.333 to 337/LKW/2017 A.Y. 2002-03 to 2006-07 Anil Kumar Pandey 38 under section 25B for arrears of rent and unrealized rent that are received subsequently to be taxed in the financial year in which such rent is received or realized. Therefore, there was no occasion to make the addition on presumptive basis and we, therefore, delete the addition in this regard. Accordingly, ground no. 4 is also deleted. Ground no. 6 arises out of our decision in ground nos. 1 to 5 and is accordingly allowed. Ground no. 7 is general in nature and does not require a decision. Accordingly, the appeal is partly allowed. 23. In the result, all the appeals of the Assessee in ITA Nos. 333 to 337/LKW/2017 are partly allowed as above. Order pronounced on 22.05.2025 in open Court. Sd/- Sd/- [KUL BHARAT] [NIKHIL CHOUDHARY] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 22/05/2025 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. "