M/s. Killi Constructions, Trivandrum V. The ACIT, Trivandrum

CO 14/COCH/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3398 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-01-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Unexplained cash credit; Business income; Opportunity of cross examination; Third party statement; Reassessment proceedings
• Section: 133A; 68; 148; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., JM I.T.A. NO.369/COCH/2016 ASSESSMENT YEAR : 2005 - 06 M/S. KILLI CONSTRUCTIONS, TC 39/930(1), KILLI TOWER, CHALAI P.O. TRIVANDRUM-11. [PAN:AAIFK 7922P] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, TRIVANDRUM (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I.T.A. NOS.298 & 299/COCH/2016 ASSESSMENT YEAR : 2006 - 07 & 2007 - 08 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, TRIVANDRUM VS. M/S. KILLI CONSTRUCTIONS, TC 39/930(1), KILLI TOWER, CHALAI P.O. TRIVANDRUM-11. [PAN:AAIFK 7922P] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) C . O . NO . 14 / C OCH / 2017 (ARSG. OUT OF I.T.A. NO. 298/COCH/2016) ASSESSMENT YEAR : 2006 - 07 M/S. KILLI CONS TRUCTIONS, TC 39/930(1), KILLI TOWER, CHALAI P.O. TRIVANDRUM-11. [PAN:AAIFK 7922P] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TRIVANDRUM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 2 REVENUE BY SHRI A. DHANARAJ, SR. DR ASSES SEE BY SHRI T.M. SREEDHARAN, SR. ADV. DATE OF HEARING 17 /01/2018 DATE OF PRONOUNCEMENT 29 / 0 1/2018 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS BY THE REVENUE AND ONE APPEA L BY THE ASSESSEE AND CROSS OBJECTION BY THE ASSESSEE IN RESPECT OF THE A BOVE ASSESSMENT YEARS ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A), TRIVANDR UM. 2. FIRST WE SHALL TAKE UP THE APPEAL FILED BY TH E ASSESSEE IN I.T.A. NO. 369/COCH/2016. THE ASSESSEE HAS CONTESTED THE SUST ENANCE OF ADDITION OF RS. 15 LAKHS AVAILED FROM SHRI SUBAIR KHAN. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE BO RROWED DURING THE AY SUM OF RS.15 LAKHS FROM SHRI SUBAIR KHAN, NRI, BROTHER OF MR. NIZAR AHMED. IN THE ABSENCE OF PROPER EXPLANATION BY THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION U/S. 68 OF THE ACT. BEFORE THE CIT(A), T HE ASSESSEE EXPLAINED THAT SHIR SUBIR KHAN DIED IN THE YEAR 2009 AND AS SUCH IT WAS IMPOSSIBLE TO GET THE CONFIRMATION LETTER FROM HIM FOR THE CREDITS. IT W AS SUBMITTED THAT THE SAID AMOUNT WAS PAID BY SHRI SUBIR KHAN TOWARDS BOOKING 1000 SQ. FT. SPACE IN THE I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 3 BUILDING CALLED KILLI TOWERS UNDER CONSTRUCTION AT THAT TIME. IN SUPPORT OF THIS, THE ASSESSEE FILED A COPY OF DEED OF AGREEMEN T DATED 06.02.2007 BEFORE THE LOWER AUTHORITIES. THE CIT(A) AFTER CONSIDERIN G THE SAME OBSERVED THAT THE ASSESSEE HAD TAKEN TWO DIFFERENT STAND AND CONFIRME D THE ADDITION. THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED BELOW: 4.2 I CONSIDERED THE RIVAL CONTENTIONS BEARING IN MIND THE DOCUMENTS BROUGHT OUT BY THE APPELLANT. AFTER DUE CONSIDERAT ION, I DONT FIND ANY INIFIRMITY IN THE DECISION THE ASSESSING OFFICER H AS TAKEN TO BRING TO TAX THE ALLEGED LOAN AVAILED FROM MR. SUBIR KHAN AS UNE XPLAINED CREDIT UNDER SECTION 68 FOR THE FOLLOWING REASONS, 1. THE APPELLANT HAS TAKEN TWO DIFFERENT STANDS I.E . THE ONE DURING THE COURSE OF REASSESSMENT PROCEEDINGS STATING THAT IT WAS A LOAN AVAILED AND ANOTHER ONE DURING THE COURSE OF APPEAL HEARING STATING THE SAME AS PAID TOWARDS ALLOTMENT OF 1000 SQ. FT. SPACE IN THE KILLI TOWERS TO BE CONSTRUCTED. 2. THE CLAIM OF ADVANCE TAKEN TOWARDS ALLOTMENT OF 1000 SQ. FT. IN THE BUILDING TO BE CONSTRUCTED IS FACTUALLY INCORRE CT SINCE THE APPELLANT FIRM WAS NOT ENGAGED IN THE BUSINESS OF C IVIL CONSTRUCTION BUT WAS CONSTRUCTING ITS OWN BUILDING FOR ITS OWN BUSINESS PURPOSE. 3. THE SIGNATURE OF MR. SUBIR KHAN APPENDED IN THE DEED OF AGREEMENT DT. 06.02.2007 IS DIFFERENT FROM THAT OF THE SIGNATURE APPENDED IN THE CONFIRMATION LETTER 10.02.2004 FILE D NOW. 4. THE ALLEGED LOAN AMOUNT WAS REPORTEDLY RECEIVED IN CASH AND NO NRI LIKE MR. SUBIR KHAN CAN ADVANCE ANY LOAN WIT HOUT THROUGH A BANKING CHANNEL AND BY A CHEQUE. 5. NO ACCEPTABLE EVIDENCE WAS FORTHCOMING FROM M/S . AHMED KHAN AND COMPANY WHERE IN MR. SUBIR KHAN WAS ALLEGE DLY A PARTNER, AS THE SOURCE WAS MET OUT FROM HIS EARNING S FROM THE FIRM AS PLEADED DURING THE COURSE OF APPEAL PROCEED INGS. I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 4 6. BOTH THE DEED OF AGREEMENT AND CONFIRMATION LET TER ARE NOT VERIFIABLE AS MR. SUBIR KHAN IS NO MORE AND DIED IN AUGUST, 2009 ITSELF. 7. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CONCORDE CAPITAL MANAGEMENT COMPANY LIMITED (334 IT R 346) RELIED ON BY THE APPELLANT IS TOTALLY MISQUOTED SIN CE NO ADDITION WAS MADE BASED ON THIRD PARTY STATEMENT BUT ON THE BALANCE SHEET SIGNED BY THE MANAGING PARTNER. 4.3 IN VIEW OF THE ABOVE MENTIONED REASONS, THE A DDITION MADE ON ACCOUNT OF UNEXPLAINED CREDIT IS HEREBY CONFIRMED AND APPEAL ON THIS GROUND IS THEREFORE DISMISSED. 4. AGAINST THE DECISION OF THE CIT(A), THE ASSESS EE HAS FILED THIS APPEAL BEFORE US. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 5. BEFORE US, IT WAS SUBMITTED THAT THE AMOUN T OF RS.10 LAKHS WAS REPAID BY THE ASSESSEE TO SMT. NABEESA KHAN, WIFE OF SHRI SUB IR KHAN, VIDE CHEQUE NO. 005434 DATED 28/09/2007 AND CHEQUE NO. 005435 DATED 28/09/2007 FOR RS. 5 LAKHS. BOTH THE CHEQUES WERE DRAWN FROM CURRENT A/ C. 67002316028 WITH STATE BANK OF TRAVANCORE, NALANCHIRA BRANCH. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS FILED A CONFIRMATION LETTER DATED 27/04/2015 SIGNED BY HIS MOTHER SMT. NABEESATH BEEVI AND HIS BROTHER SHRI NIZAR AHEMMED. AS SUCH, IT WAS SUBMITTED THAT THERE CANNOT BE AN ADDITION. 6. THE LD. DR OBJECTED THAT THESE PAYMENT DETAILS WERE NOT FILED BEFORE THE LOWER AUTHORITIES AND AS SUCH, IT CANNOT BE CONSIDE RED. I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 5 7. ADMITTEDLY, IN OUR OPINION, THE DETAILS OF REPA YMENT OF LOAN WAS NOT FILED BEFORE THE LOWER AUTHORITIES AND THEY HAD NO OCCASI ON TO EXAMINE THE DETAILS. FURTHER, THE ASSESSEE HAS TAKEN TWO DIFFERENT STAND , ONE BEFORE THE CIT(A) AND ANOTHER BEFORE THE ASSESSING OFFICER. HENCE IT IS A PPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THE SAME AFRESH IN ACCORDANCE WITH LAW. ACCORDINGLY, WE REMIT THE ISS UE TO THE FILE OF THE ASSESSING OFFICER FOR HIS FRESH CONSIDERATION AND D ECIDE THE SAME AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 298 & 299/COCH/2016 : REVENUES APPEALS 8. THE ONLY ISSUE IN THESE APPEALS IS WITH REGA RD TO DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CAPITAL CONTRIBUTION BY THE PARTNERS. 9. THERE WAS A SEARCH OPERATION U/S. 132 OF TH E I.T. ACT ON 11/10/2007 IN THE PREMISES OF M/S. PARTHAS INFOPARK PVT.LTD., TRI VANDRUM AND CONNECTED CASES. SUBSEQUENTLY, THERE WAS A SURVEY U/S. 133A OF THE ACT ON 12/12/2007 AT THE OFFICE OF THE ASSESSEES AUDITOR SHRI S. JEYACH ANDRAN. IN THE COURSE OF SURVEY, THE DEPARTMENT FOUND THE BALANCE SHEET RELA TING TO THE ASSESSEE FOR THE ASSESSMENT YEARS ENDING 31.03.2006 AND 31.03.2007. IT WAS STATED BY THE ASSESSEES AUDITOR THAT SHRI MOHANAN NAIR HAD NOT H ANDED OVER THE BOOKS OF I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 6 ACCOUNTS LIKE CASH BOOK, LEDGER, HOWEVER, STATEMEN T OF BANK ACCOUNTS, VOUCHERS FOR EXPENSES AND SOME DETAILS OF PAYMENTS IN STATEMENT FORM HAVE BEEN HANDED OVER TO HIM TO PREPARE THE BOOKS OF ACC OUNTS. THE STATEMENT OF SHRI M.S. SREEJESH WORKING IN THE AUDITORS OFFICE WAS ALSO RECORDED. HE STATED THAT THE BOOKS OF ACCOUNTS WERE PREPARED ON THE BAS E OF NOTES GIVEN BY THE ASSESSEE HIMSELF. BASED ON THE BALANCE SHEETS AND INCOME AND EXPENDITURE ACCOUNTS, PRODUCED SUBSEQUENTLY BY THE MANAGING PAR TNER OF THE ASSESSEE-FIRM, THE ASSESSMENTS FOR THE AYS 2005-06 TO 2007-08 HAD BEEN RE-OPENED. WITH REFERENCE TO THE CAPITAL ACCOUNT, THERE WERE ADDITI ONS MADE BY THE PARTNERS. FOR THE ASSESSMENT YEAR 2006-07, THERE WAS A DIFFERENCE BETWEEN THE BALANCE SHEET FILED SUBSEQUENT TO THE SURVEY AND THE BALANC E SHEET FILED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME. AS PER THE BALANC E SHEET FILED BY THE MANAGING PARTNER SUBSEQUENT TO THE SURVEY FOR THE A SSESSMENT YEAR ENDING 31.03.2006, DETAILS OF ADDITIONS TO THE CAPITAL ACC OUNT IN THE PARTNERS ACCOUNTS ARE AS FOLLOWS: NAME OF THE PARTNER ADDITION DURING THE YEAR S MOHANAN NAIR RS.11,90,000/- ANNAMMAL RS.11,90,000/- L ROBINSON RS.11,90,000/- DAS(S A M THAMSEEM) RS.11,40,000/- SATHEENDRAN RS.11,40,000/ - TOTAL RS.58,50,00 0/- I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 7 10. SIMILARLY AS PER THE BALANCE SHEET FOR THE ASS ESSMENT YEAR ENDING 31.03.2007, THE DETAILS OF ADDITIONS TO THE CAPITAL ACCOUNT IN THE PARTNERS ACCOUNT ARE AS FOLLOWS: NAME OF THE PARTNER ADDITION DURING THE YEAR S MOHANAN NAIR RS.17,00,000/- ANNAMMAL RS. 3,10,000/- L ROBINSON RS. 6,60,000/- DAS(S A M THAMSEEM) RS. 3,16,000/ - TOTAL RS.29,86,00 0/- 11. THE ABOVE AMOUNT WAS BROUGHT TO TAX AS UNEXPLA INED CREDIT U/S. 68 OF THE ACT FOR THESE A.YS RESPECTIVELY. HOWEVER, THE CIT( A) DELETED THE SAME BY OBSERVING THAT THE BALANCE SHEET AND INCOME AND EXP ENDITURE FILED SUBSEQUENT TO THE SURVEY CANNOT BE RELIED UPON AND NO ADDITION COULD BE MADE ON ACCOUNT OF CAPITAL CONTRIBUTION BROUGHT IN BY THE PARTNERS. THE RELEVANT PORTION OF THE FINDING OF THE CIT(A) IS AS FOLLOWS: 4.4 I CAREFULLY EXAMINED THIS IMPORTANT ISSUE BAS ED ON THE RECORDS AVAILABLE WITH. THE ISSUE FOR CONSIDERATION IS WHET HER THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT FOUND IN THE APPELLANT 'S AUDITOR OFFICE CAN BE RELIED ON AND ADDITION OF RS.58,50,000/- ON ACCOUNT OF FRESH CAPITAL INFUSED INTO THE CAPITAL ACCOUNT OF SOME OF THE PARTNERS, C OULD BE MADE OR NOT. ANOTHER ISSUE FOR FURTHER CONSIDERATION IS WHETHER THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT ENCLOSED TO THE RETURN FI LED IN RESPONSE TO NOTICE ISSUED U/S 148 CAN BE RELIED ON AND THEN BASED ON W HICH ADDITION MADE ON ACCOUNT OF FRESH CAPITAL INFUSED IN BY THE PARTNERS COULD BE DELETED OR NOT. AFTER DUE CONSIDERATION, I AM OF THE OPINION THAT T HE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT FOUND IN THE APPELLANT 'S AUDITOR OFFICE CANNOT BE RELIED ON AND NO ADDITION ON ACCOUNT OF FRESH CA PITAL BROUGHT TO THE CAPITAL ACCOUNT OF THE PARTNERS CAN BE MADE FOR THE FOLLOWING REASONS,: I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 8 1. THE HON'BLE DELHI HIGH COURT DECISION RELIED ON BY THE APPELLANT DO NOT EMPOWER THE ASSESSING OFFICER TO MAKE THE ADDITION AND COMPLETE THE ASSESSMENT BASED ON THE STATEMENT GIVEN B Y THE THIRD PARTY (M.S.SREEJESH) AND ALSO THE DOCUMENT (BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT) WHICH WAS NOT FOUND EITHER IN THE PLACE WHERE SEARCH WAS CARRIED OUT OR AT THE APPELLANT'S PLACE. 2. THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOU NT IN THE INSTANT CASE OF THE APPELLANT NEITHER BEEN FOUND AT THE PLA CE WHERE THE SEARCH WAS CARRIED OUT NOR AT THE APPELLANT'S OFFICE. 3. THESE STATEMENT OF ACCOUNTS ARE INCOMPLETE/UNAUDITE D AND HAVING NO DETAILS ABOUT SUBSTANTIAL AMOUNT OF LOAN AVAILED FROM MR. SUBIR KHAN, MR. S. MOHANAN NAIR AND CERTAIN BANKS B UT WERE RIGHTLY SHOWN IN THE BALANCE SHEETS AND PROFIT & LOSS ACCOUNTS FILED IN RESPONSE TO NOTICE ISSUED U/S 148 FOR ALL THE ASSESSMENT YEA RS I.E. AY 2005-06 TO 2008-09. 4. THE STATEMENT OF MR.M.S.SREEJESH WHO WORKED IN T HE AUDITOR'S OFFICE CANNOT BE RELIED ON AS THE AUDITOR HIMSELF VIDE LET TER DT.19.01.2015 HAS CONTENDED THAT HE WAS NOT A COMPETENT PERSON TO PRE PARE, STATEMENT OF ACCOUNTS AND IT WAS PREPARED WITHOUT CONSULTING MR. S. MOHANAN NAIR, THE MANAGING PARTNER OF THE APPELLANT FIRM. 5. IN THE LETTER DT.27.09.2010, FILED BEFORE PASSIN G THE ASSESSMENT ORDER, THE APPELLANT HAS MADE OUT VERY CLEARLY THAT THERE WAS A TOTAL CAPITAL OF RS. 1,40,000/- CONTRIBUTED BY THE PARTNERS AND NOTH ING MORE WAS BROUGHT IN BY THEM. 6. THE ASSESSING OFFICER FOR THE AY 2005-06 SHOULD NOT-HAVE RELIED ON TWO DIFFERENT BALANCE SHEET, ONE TO MAKE ADDITIO N OF RS.47,500/- FOR THE FRESH CAPITAL BROUGHT IN BY THE PARTNERS AN D ANOTHER ONE FOR THE ADDITION OF RS.15,00,000/- TOWARDS UNEXPLAINED CREDITS U/S 68 AGAINST THE LOAN GIVEN BY MR. SUBIR KHAN. THIS FIRS T ADDITION WAS MADE BASED ON THE BALANCE SHEET FOUND AT THE AUDITO R'S OFFICE AND THE SECOND ONE WAS BASED ON THE AUDITED BALANCE SHE ET FILED ALONG WITH THE RETURN WHICH WAS FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148. 7. SIMILARLY, ASSESSMENT FOR THE AYS 2005-06, 2006- 07 AND 2007-08 WAS COMPLETED BASED ON THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT FOUND AT THE AUDITOR'S OFFICE A ND ASSESSMENT FOR I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 9 THE AY 2008-09 WAS COMPLETED BASED ON THE AUDITED B ALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED ALONG WITH THE RETU RN WHICH WAS FILED IN RESPONSE TO NOTICE ISSUED U/S 148. WITHOUT REJECTIN G THE BALANCE SHEET OF THE FIRST THREE YEARS FOUND AT THE AUDITOR 'S OFFICE, THE AUDITED BALANCE SHEET FILED ALONG WITH THE RETURN WHICH WA S FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 FOR THE FOURTH YEAR CA NNOT BE RELIED UPON AND ASSESSMENT BE COMPLETED. THE ASSESSING OFFICER HAS NOT DONE THIS WHILE COMPLETING THE ASSESSMENT FOR ALL THE FO UR YEARS. HENCE, NEED BE COMPENSATED AT LEAST NOW, 8. THE RETURN WHICH WAS FILED FOR THE AY 2008-09 WH ICH IN TURN WAS FILED ALONG WITH THE AUDITED BALANCE SHEET AND PROFIT & L OSS ACCOUNT, HAS NOT ONLY BEEN ACCEPTED BUT ALSO BEEN PROCESSED U/S 143( 1). THIS RETURN CANNOT BE ACCEPTED AND PROCESSED WITHOUT REJECTING THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT PERTAINS TO AYS 2005-06 T O 2007-08 FOUND AT THE AUDITOR'S OFFICE AND RELIED ON BY THE ASSESSING OFF ICER TO COMPLETE THE ASSESSMENT. HAVING ACCEPTED THE RETURN FILED FOR TH E AY 2008-09, THE ASSESSING OFFICER HAS NO OTHER OPTION BUT TO ACCEPT THE BALANCE SHEETS AND PROFIT & LOSS ACCOUNTS FILED FOR PREVIOUS THREE ASSESSMENT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR I.E. AY 2006- 07. AS PER THE BALANCE SHEET FILED FOR THE AY 2006-07, NONE OF THE PARTNER S HAVE INTRODUCED FRESH CAPITAL TO THEIR CAPITAL ACCOUNT. 9. WITHOUT CONSIDERING THE WORK-IN-PROGRESS AS SHO WN IN THE AUDITED BALANCE SHEET FILED ALONG WITH THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 FOR THE AYS 2005-06 TO 2007-08, THE WORK IN PROGRESS SHOWN IN THE RETURN FILED FOR THE AY 2008-09 CANNOT BE CONSIDERED AT ALL FOR ESTIMATING 8% OF BUSINESS INCOME. THE ASSESSING OFFICER JUST BY ACCEPTING THE RETURN FILED FOR THE AY 2008-09 INDIR ECTLY AGREED, TO THE FACT THAT IT IS THE AUDITED BALANCE SHEETS FILED SUBSEQU ENT TO ISSUING NOTICE U/S 148 SHOULD HAVE BEEN CONSIDERED FOR MAKING THE ADDI TION ON ACCOUNT OF UNEXPLAINED CREDIT. HAVING NO FRESH CAPITAL BROUGHT IN AND SHOWN IN THE BALANCE FILED IN SUBSEQUENT TO ISSUING NOTICE U/S 1 48, THE ADDITION MADE OF RS.58,50,000/ HAS NO BASIS WHATSOEVER. 10. WORK IN PROGRESS SHOWN IN THE BALANCE SH EET AND INCOME & EXPENDITURE ACCOUNT FOUND AT THE AUDITOR'S OFFICE I S DIFFERENT FROM THE WORK IN PROGRESS SHOWN IN THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED SUBSEQUENT TO ISSUING NOTICE U/S 148. HAVING ACCEPTED THE RETURN FILED FOR THE AY 2008-09, THE ASSESSING OFFI CER SHOULD NOT HAVE CONSIDERED THE WORK IN PROGRESS AS ON 31 .03.2006 OF RS.40,24,280/- INSTEAD, SHOULD HAVE CONSIDERED RS.2 1,35,506/- SHOWN IN THE AUDITED BALANCE SHEET. I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 10 11. ALL THE LIABILITIES EXCEPT THE ALLEGED LOAN BOR ROWED FROM MR. SUBIR KHAN, SHOWN IN THE AUDITED BALANCE SHEET FOR ALL THE FOUR YEARS ARE DULY SUPPORTED BY NECESSARY DOCUMENTS. PARTICULARLY, BAN K LOANS BOTH FROM KERALA STATE COOPERATIVE BANK AND STATE BANK OF TRA VANCORE AND ALSO THE AMOUNT ADVANCED BY MR.S. MOHANAN NAIR ARE DULY SUPP ORTED BY CONFIRMATION LETTERS AND INCOME TAX RETURNS FILED F OR THE RESPECTIVE ASSESSMENT YEAR. 12. THE COMMISSION INCOME OF RS,65,85,000/- SHOWN I N THE INCOME & EXPENDITURE ACCOUNT FOR THE AY 2007-08 INDICATES TH AT THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT FOUND AT THE AUDIT OR'S OFFICE ARE MEANT ONLY FOR SHOWING TO THE BANK AS THE FIRM IS EARNING SOME INCOME 1 BASED ON WHICH LOAN CAN BE GRANTED. THE SAID AMOUNT OF CO MMISSION HAS ACTUALLY BEEN OFFERED BY MR. S. MOHANAN NAIR ALREADY IN HIS INDIVIDUAL CAPACITY FOR THE AY 2007-08 AND FILED RETURN AS WELL. SHOWING TH E SAME AMOUNT HERE IN THE APPELLANT'S INCOME & EXPENDITURE ACC OUNT CANNOT BE FOR ANY OTHER PURPOSE OTHER THAN TO AVAIL LOAN FROM BANK A S CONTENDED BY THE APPELLANT. THIS IS BECAUSE DURING THE AY 2007-08 T HE APPELLANT HAD NOT AT ALL STARTED ANY COMMERCIAL ACTIVITY SO AS TO EARN I NCOME. HENCE, THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT BASE D ON WHICH THE SAID ADDITION WAS MADE, SHOULD NOT HAVE BEEN RELIED UPON , INSTEAD REJECTED. 13. NO OPPORTUNITY WAS GIVEN TO THE APPELLANT TO RE BUT THE STATEMENT OF MR. M.S.SREEJESH INSPITE OF FILING A LETTER DT.27.0 9.2010 EXPLAINING ALL THE ISSUES INCLUDING THE ISSUE OF CAPITAL NOT BEEN BROU GHT IN DURING THE YEAR UNDER CONSIDERATION. 4.5 IN VIEW OF AL THE ABOVE, I AM OF THE CONSIDERE D OPINION THAT THE ASSESSING OFFICER HAS NOT JUSTIFIED THE ADDITION OF RS.58,50,000/- MADE ON ACCOUNT OF CAPITAL BROUGHT IN BY SOME OF THE PARTNE RS AND ACCORDINGLY THE SAME IS DELETED. 12. SIMILARLY FOR THE ASSESSMENT YEAR 2007-08, TH E CIT(A) DELETED THE ADDITION. 13. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US FOR BOTH A.YS. AT THE TIME OF HEARING, THE LD. DR POINTED OUT THAT THESE ASSES SMENTS WERE MADE U/S. 144 OF THE ACT. THERE WAS NO CO-OPERATION BY THE ASSES SEE BEFORE THE ASSESSING OFFICER. HOWEVER, THE CIT(A) DELETED THE ADDITION W ITHOUT PROPERLY EXAMINING I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 11 THE BALANCE SHEETS. ACCORDING TO THE LD. DR, BALAN CE SHEET WAS DULY SIGNED BY THE MANAGING PARTNER, SHRI MOHANAN NAIR AND IT IS A VALID DOCUMENT TO FRAME THE ASSESSMENT ON THAT BASIS. THE ASSESSING OFFICE R COMPARED THE BALANCE SHEET FILED BY THE ASSESSEE ALONG WITH THE RETURN O F INCOME AND FILED AT THE TIME OF SURVEY AND FOUND THAT THERE WAS DIFFERENCE IN TH E CAPITAL ACCOUNT SHOWN IN THOSE BALANCE SHEETS. HENCE, THE ADDITION WAS MADE . HE PRAYED THAT THE ADDITION MAY BE SUSTAINED. 14. THE LD. AR SUBMITTED THAT THERE CANNOT BE ANY ADDITION ON ACCOUNT OF CAPITAL CONTRIBUTION BY THE PARTNERS AND THE PARTNE RS ARE IDENTIFIED. FURTHER IT WAS SUBMITTED THAT THE BALANCE SHEET FILED SUBSEQUE NT TO THE SURVEY WAS PREPARED FOR THE PURPOSE OF AVAILING FINANCIAL ASSI STANCE FROM BANKS AND IT CANNOT BE RELIED UPON. 15. THE LD. AR ALSO SUBMITTED IN THE C.O. NO. 14/ COCH/2017 THAT THE ENHANCEMENT OF ADDITION AMOUNTING TO RS.10.20 LAKHS WHICH IS OUTSTANDING IN THE NAME OF SHRI SUBIR KHAN WAS MADE BY CIT(A) WITH OUT GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE AND IT IS TO BE DELETED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IN OUR OPINION, THE BALANCE SHEET FILED SUBSEQUENT TO THE SURVEY NEEDS TO BE VERIFIED WHICH HAS NOT BEEN VERIFIED EITHER BY THE ASSESSING OFFICER OR BY THE I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 12 CIT(A). HENCE, IN THE INTEREST OF JUSTICE, WE REMI T THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AN D DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. SINCE WE HAVE REMITTED THE ISSUE RAISED IN THE REVENUES APPEALS TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATIO N, THE ISSUE RAISED IN THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR HIS FRESH CONSIDERATION AND IN ACCORDAN CE WITH LAW. HENCE THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. 17. IN THE RESULT, THE APPEALS FILED BY THE REVEN UE, THE APPEAL FILED BY THE ASSESSEE AND THE CROSS OBJECTION FILED BY THE ASSES SEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OP EN COURT ON 29 TH JANUARY, 2018. SD/- SD/- ( GEORGE GEORGE K.) (CHAN DRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 29 TH JANUARY, 2018 GJ COPY TO: 1. M/S. KILLI CONSTRUCTIONS, TC 39/930(1), KILLI TO WER, CHALAI P.O. TRIVANDRUM-11. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE-2, TRIVANDRUM. 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE, TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS),TRIVANDR UM I.T.A. NO.369/C/2016 & 298&299/C/2017 & C.O.NO.14/C/2017 13 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN