ITO 9(1)(4), MUMBAI V. FINEX DISTRIBUTION, MUMBAI

ITA 1012/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75755 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-02-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K PANDA
• Keywords: Unexplained cash credit; Additional evidence; Onus to prove
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F B ENCH, MUMBAI . , !'# , $% &'() , $* +, $ # BEFORE SHRI D.MANMOHAN, VP AND SHRI N.K. BILLAIY A, AM ./ I.T.A. NO.254/MUM/2011 ( - - - - / ASSESSMENT YEAR :2002-03 M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W), MUMBAI-400 050 / VS. THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI ./ I.T.A. NO1012/MUM/2011 ( - - - - / ASSESSMENT YEAR :2002-03 THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI / VS. M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W), MUMBAI-400 050 ./ I.T.A. NO.1740/MUM/2010 ( - - - - / ASSESSMENT YEAR :2004-05 M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W),MUMBAI / VS. THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI ./ I.T.A. NO.2316/MUM/2010 ( - - - - / ASSESSMENT YEAR :2004-05 M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W), MUMBAI-400 050 / VS. THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI M/S. FINEX DISTRIBUTION 2 ./ I.T.A. NO.7490/MUM/2011 ( - - - - / ASSESSMENT YEAR :2002-03 M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W), MUMBAI-400 050 / VS. THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI ./ I.T.A. NO.2374/MUM/2010 ( - - - - / ASSESSMENT YEAR :2006-07 M/S. FINEX DISTRIBUTION PVT. LTD., 505, IMPERIAL PLAZA, CORNER OF 27 TH & 30 TH ROAD, BANDRA (W), MUMBAI-400 050 / VS. THE ITO 9(1)-4, AAYAKAR BHAVAN, MUMBAI ,. $* ./ /0 ./ PAN/GIR NO. : AAACF 5024C ( .1 / APPELLANT ) .. ( 23 .1 / RESPONDENT ) .1 4 $ / ASSESSEE BY: NONE 23.1 5 4 $ / REVENUE BY: SHRI B.P.K. PANDA 5 6* / DATE OF HEARING :20.02.2014 7- 5 6* / DATE OF PRONOUNCEMENT :28.02.2014 +$8 / O R D E R PER N.K. BILLAIYA, AM: ITA NO. 254/MUM/2011 AND ITA NO. 1012/M/11 ARE CRO SS APPEALS BY THE ASSESSEE AND THE REVENUE FOR ASSESSM ENT YEAR 2002-03. ITA NO. 1740/MUM/2010 AND ITA NO. 2316/M/10 ARE CR OSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 20 04-05. ITA NO. 2374/M/10 FOR A.Y. 2006-07 IS FILED BY THE ASSESSEE AND ITA NO. M/S. FINEX DISTRIBUTION 3 7490/M/11 FOR A.Y. 2002-03 IS AN APPEAL FILED BY T HE ASSESSEE AGAINST LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ALL THE SE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ALL THESE APPEALS WERE FIR ST POSTED FOR HEARING ON 6.1.2011. THE CASE WAS ADJOURNED FOR WANT OF T IME. THEREAFTER THESE APPEALS WERE POSTED FOR HEARING ON 28.3.2011, THE A SSESSEE TOOK ADJOURNMENT. THEREAFTER, WHENEVER THE APPEALS CAM E UP FOR HEARING, THE ASSESSEE SOUGHT ADJOURNMENT FOR ONE REASON OR THE O THER. ON THIS DATE OF HEARING, NONE APPEARED FOR THE ASSESSEE THEREFORE W E HAVE DECIDED TO PROCEED EX PARTE. ITA NO. 254/M/2011 A.Y. 2002-03 ASSESSEES APPE AL 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO T HE ADDITION OF RS. 21,49,000/- BEING LOAN RECEIVED FROM SHRI RAOUFF AN SARI AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND SECOND GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 2,640/- RECEIVED FROM MEHUR MOVIES U/S. 68 OF THE ACT. 3. THE ASSESSEE IS A TRADER IN PRECIOUS JEWELLERIES , EYE WEARS, PENS & WATCHES. DURING THE COURSE OF THE SCRUTINY ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHO WN LOANS FROM DIRECTORS AND OTHERS. THE ASSESSEE HAS TAKEN LOANS FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY LOAN TAKEN DURING THE YEAR (RS) UNSECURED LOANS M/S. FINEX DISTRIBUTION 4 1. MR. RAUFF ANSARI(NRI) 21,49,000/- 2. DEEPAK L. SHAH 2,17,049 3. DINA SUDHIR SHAH 15,00,000/- 4. MAGNUM EXPORTS 1,21,230/- 5. MEHUL MOVIES PVT.LTD 2,640/- 6. MUDRA EXPORTS 21,44,170/- 7. VALCAN EXPORTS 3,69,378/- 8. VALCAN HI TECH PROJECT P.LTD. 6,94,503/- 71,97,970/- 4. THE ASSESSEE WAS ASKED TO PROVIDE LOAN CONFIRMAT ION, NAME AND ADDRESS, PAN , MODE OF RECEIPT, DATE OF RECEIPT TO PROVE THE GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE PERSONS . INSPITE OF VARIOUS OPPORTUNITIES GIVEN TO THE ASSESSEE, THE AO OBSERVE D THAT THE ASSESSEE HAS FAILED TO FURNISH THE REQUIRED DETAILS NOR ANY BANK STATEMENT WAS FURNISHED SHOWING THE RESPECTIVE TRANSACTION OF LOA NS. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS FAILED TO PROVE T HE GENUINENESS OF THE LOAN TRANSACTION AND ACCORDINGLY MADE AN ADDITION O F RS. 71,97,970/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS EXPLAINED THAT THE TAX AUDIT REPORT OF THE ASSESSEE CONTAINED DETAILS OF LOANS/DEPOSITS WITH ADDRESS OF THE PARTIES AND PAN WHEREVER POSSIBLE. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE IS MANAGED BY DIRECTORS WHO ARE NRIS. THE ASSESSEE FILED LETTERS OF CONFIRMATION F ROM THE PARTIES CONCERNED DURING THE COURSE OF APPELLATE PROCEEDING S. THE LD. CIT(A) CONSIDERED THE SAME AS FRESH EVIDENCE AND TRANSMITT ED THE ADDITIONAL EVIDENCE TO THE AO AND CALLED FOR A REMAND REPORT. THE REMAND REPORT M/S. FINEX DISTRIBUTION 5 WAS FURNISHED BY THE AO. THE LD. CIT(A) ALSO CALLE D FOR THE COMMENTS OF THE ASSESSEE ON THE REMAND REPORT. AFTER CONSID ERING THE FACTS AND THE SUBMISSIONS AND THE REMAND REPORT, THE LD. CIT(A) P ROCEEDED TO CONSIDER EACH AND EVERY LOAN TRANSACTION. 6. SO FAR AS ADDITION OF RS. 21,49,000/- IN THE NA ME OF RAOUFF ANSARI IS CONCERNED, THE LD. CIT(A) OBSERVED THAT THE ASSE SSEE HAS SHOWN AN AMOUNT OF RS. 37,06,000/- IN CASH FROM THE SAID PAR TY. THE LD. CIT(A) FURTHER OBSERVED THAT THERE WAS CASH PAYMENT OF RS . 15,57,000/-. THE LD. CIT(A) WAS CONVINCED THAT THE ASSESSEE HAS FAIL ED TO DISCHARGE THE ONUS CAST UPON IT BY VIRTUE OF SEC. 68 AND CONFIRME D THE ADDITION OF RS. 21,49,000/- IN THE NAME OF SHRI RAOUFF ANSARI. 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE FACT THAT THE LOAN WAS TAKEN IS NOT IN DISPUTE. WE FIND THAT THE ASSESSEE HAS NEVER D ISCHARGED THE INITIAL ONUS CAST UPON IT BY SEC. 68 OF THE ACT FAILING WHI CH WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). THE ADDITION OF RS. 21,49,000/- IS CONFIRMED. 8. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 2,640/-. THE LD. CIT(A) HAS CONFIRMED THIS ADDITIO N FOR WANT OF VERIFIABLE DETAILS. AS NO DETAILS WERE PROVIDED, W E DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ADDITION OF RS. 2,640/- IS CONFIRMED. 9. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO TH E DISALLOWANCE OF RS. 67,101/- AS PRIOR PERIOD EXPENSES. M/S. FINEX DISTRIBUTION 6 10. THE AO HAS DISCUSSED THIS ISSUE AT PAGE-3 OF HI S ASSESSMENT ORDER WHEREIN THE AO HAS OBSERVED THAT THE ASSESSEE HAS F AILED TO DISCHARGE PRIMARY ONUS OF SUBSTANTIATING ITS CLAIM OF DEDUCTI ON BY PROVIDING THE DETAILS. THE AO DISALLOWED RS. 84,351/- AS PRIOR P ERIOD EXPENDITURE. 10. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA-6 ON P AGE-14 OF HIS ORDER. THE PRIOR PERIOD EXPENSES CLAIMED BY THE ASSESSEE R EAD AS UNDER: 1. LEAVE TRAVELLING EXPENSES RS. 17,250/- 2. REPAIRS & MAINTENANCE RS. 2,500/- 3. ADVERTISEMENT EXPENSES RS. 42,500/- 4. CLEARING & FORWARDING RS. 22,101/- TOTAL RS .81,851/- ========= THE LD. CIT(A) , AFTER CONSIDERING THE FACTS ALLOWE D LEAVE TRAVEL EXPENSES OF RS. 17,250/- AND CONFIRMED THE REMAININ G EXPENSES. 11. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE COULD NOT PROVE BEFORE TH E LD. CIT(A) THAT THE LIABILITY HAVE CRYSTALLIZED DURING THE YEAR UNDER C ONSIDERATION. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. 12. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF 5% OF EXPENSES ON ADHOC BASIS. M/S. FINEX DISTRIBUTION 7 13. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES: S. NO. PARTICULARS AMOUNT (RS) 1. OFFICE EXPENSES 2,24,372/- 2. TRAVELLING EXPENSES 1,16,439/- 3. MISCELLANEOUS EXPENSES 55,314/- 4. TELEPHONE EXPENSES 54,994/- 5. MOTOR CAR EXPENSES 6,713/- THE AO DISALLOWED 10% OF THESE EXPENSES CLAIMED. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 5% OF THE CLA IM. 14. CONSIDERING THE NATURE OF EXPENSES AND THE NON CO-OPERATION BY THE ASSESSEE IN NOT FILING THE DETAILS AND AS THE LD. C IT(A) HAS REDUCED THE DISALLOWANCES BY 50%, IN OUR CONSIDERED VIEW, THE F INDINGS OF THE LD. CIT(A) NEEDS NO INTERFERENCE. GROUND NO. 3 IS ACCO RDINGLY DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 1012/M/2011 A.Y. 2002-03 REVENUES APPEAL 16. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE D ELETION OF ADDITION MADE U/S. 68 OF THE ACT IN RESPECT OF UNEXPLAINED CASH CREDIT IN THE NAME OF M/S. MUDRA EXPORTS AMOUNTING TO RS. 21,44,170/- . 17. THE AO HAS MADE THE ADDITION U/S. 68 OF THE ACT , ON RECEIVING NO DETAILS FROM THE ASSESSEE WHICH COULD PROVE THE GEN UINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITO RS. WHEN THE MATTER WAS ARGUED BEFORE THE LD. CIT(A), THE LD. CIT(A) OB SERVED AT PARA-2 ON PAGE-13 THAT THE PARTY HAD APPEARED BEFORE THE AO I N RESPONSE TO SUMMONS ISSUED. CONFIRMATIONS WERE FURNISHED BY TH E PARTY AND ALSO FURNISHED ITS PAN TO AO. THE LD. CIT(A) FURTHER OB SERVED THAT THE LOAN M/S. FINEX DISTRIBUTION 8 OF RS. 19 LAKHS WAS RETURNED IN SUBSEQUENT YEAR AND THE SUM OF RS. 2,93,138/- REPRESENTS PROVISION FOR INTEREST ON THE OPENING BALANCE PLUS THE MONEY INTRODUCED DURING THE YEAR. ACCORDINGLY, THE LD. CIT(A) WAS CONVINCED THAT THE ASSESSEE HAS SUCCESSFULLY EXPLAI NED THE CREDIT IN THE NAME OF MUDRA EXPORTS AND DELETED THE ADDITION. 18. ON CAREFULLY CONSIDERING THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT IN SO FAR AS THIS CASH CREDIT WAS CONCERNED, T HE ASSESSEE HAS SUCCESSFULLY DISCHARGED THE INITIAL ONUS CAST UPON IT BY VIRTUE OF SEC. 68 OF THE ACT. THEREFORE, NO INTERFERENCE IS CALLED F OR. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 1740/MUM/2010 A.Y. 2004-05 ASSESSEES A PPEAL 20. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 39,60,000/- RECEIVED FROM THE MANAGING DIRECTOR OF THE COMPANY AS CASH CREDIT U/S. 68 OF THE ACT. 21. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE COMPANY HAS ACCEPTED LOAN FROM TH E FOLLOWING PARTIES DURING THE YEAR UNDER CONSIDERATION. 1. MR. RAUFF ANSARI (NRI) RS. 58,21,621/- 2. MR. ALI ANSARI (NRI) RS. 18,61,121/- 3. QASSAM ANSARI (NRI) RS. 18,61,121/ ------------------- 95,43,863/- ========== M/S. FINEX DISTRIBUTION 9 22. THE ASSESSEE WAS ASKED TO EXPLAIN THESE CASH CR EDITS IN THE LIGHT OF THE PROVISIONS OF SEC. 68 OF THE ACT. THE ASSESSE E FILED THREE FOREIGN CURRENCY REMITTANCE CERTIFICATE. THE ASSESSEE ALSO FILED THE CONFIRMATION OF BALANCE OF FINEX HOLDING INC WHICH IS THE HOLDIN G COMPANY WHICH CONFIRMED THE REMITTANCE TO THE ASSESSEE TO THE TUN E OF RS. 55,83,363/-. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS PRO VED THE LOANS PARTIALLY . AS THE TOTAL LOAN AMOUNT WAS RS. 95, 43,863/- AND THE ASSESSEE HAS FILED DETAILS TO THE EXTENT OF RS. 55,83,363/-. THE AO THEREFORE ADDED THE DIFFERENCE OF RS. 39,60,500/- U/S. 68 OF THE AC T. 23. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE AO HAS MISTOOK THE CURRENT ACCOUNT TRANSACTION WITH THE DIRECTORS. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS SHOWN THE AMOUNT FRO M DIRECTORS UNDER THE HEAD UNSECURED LOANS FROM THE DIRECTORS. THE REFORE, PROVISIONS OF SEC. 68 CLEARLY APPLY ON THE FACTS OF THE CASE. TH E LD. CIT(A) FURTHER OBSERVED THAT THE PRIMARY ONUS IS ON THE ASSESSEE A ND THIS ONUS STANDS UNDISCHARGED AND CONFIRMED THE ADDITION OF RS. 39,6 0,000/-. 24. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FI ND THAT THE AO HAS ADDED ONLY THAT PORTION OF THE LOAN CREDIT WHICH WA S NOT EXPLAINED BY THE ASSESSEE. THE LD. CIT(A) HAS CONFIRMED THE ADDITIO N FOR THE REASONS THAT THE ASSESSEE HAS NOT DISCHARGED THE PRIMARY ONUS CA ST ON IT U/S. 68 OF THE ACT. WE DO NOT FIND ANY REASON TO INTERFERE WITH T HE FINDINGS OF THE LD. CIT(A). ADDITION OF RS. 39,60,000/- IS ACCORDINGLY CONFIRMED. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 25. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS. 76,153/- AS PRIOR PERIOD EXPENSES. M/S. FINEX DISTRIBUTION 10 26. THE AO HAS DISCUSSED THIS ISSUE AT PARA-3 ON PA GE-4 OF HIS ORDER WHEREIN HE HAS OBSERVED THAT THE ASSESSEE HAS FAILE D TO DISCHARGE THE PRIMARY ONUS OF SUBSTANTIATING ITS CLAIM OF DEDUCT ION BY NOT PROVIDING THE DETAILS AND DISALLOWED THE ENTIRE SUM OF EXPENS E AT RS. 2,33,342/-. 27. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT THE PRIOR PERIOD EXPENSES COMPRISE OF OCTROI CHARGES OF RS. 1,57,189 /- AND ADVERTISEMENT OF RS. 76,153/-. IT WAS EXPLAINED BEFORE THE LD. C IT(A) THAT OCTROI CHARGES ARE FIRST PAID TO DOLPHIN LOGISTICS BY DEB ITING THE PARTYS ACCOUNT AND ONLY WHEN THE INVOICES ARE RECEIVED FR OM THE SAID PARTY, THE LIABILITY IS TAKEN AS CRYSTALLIZED AND THE EXPENSES ARE ACCORDINGLY DEBITED. THE LD. CIT(A) WAS CONVINCED THAT THE LIABILITY FOR OCTROI CHARGES DID CRYSTALLIZED DURING THE YEAR AND ALLOWED THE RELI EF TO THE EXTENT OF RS. 1,57,189/-. 28. IN SO FAR AS ADVERTISEMENT EXPENDITURE IS CONCE RNED, THE LD. CIT(A) OBSERVED THAT THE LIABILITY WAS CRYSTALLIZE D IN THE EARLIER YEAR THEREFORE CANNOT BE ALLOWED AS EXPENDITURE DURING T HE YEAR UNDER CONSIDERATION. 29. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. AS THE LD. CIT(A) HAS GIVEN A CLEAR FINDING REGARDING THE CRYSTALLIZATION OF LIABILITY IN RESPECT OF ADVERTISEMENT EXPENDITURE, NO INTERFERENCE IS CALLED FOR. THIS GROUND IS ACCORDINGLY DISMISSED. 30. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 2316/M/2010 A.Y. 2004-05 REVENUES A PPEAL M/S. FINEX DISTRIBUTION 11 31. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE L D. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 10,21,687/- MADE BY TH E AO U/S. 41(1) OF THE ACT. 32. THIS ISSUE FINDS PLACE AT PARA-2 ON PAGE-3 OF THE ASSESSMENT ORDER. ON GOING THROUGH THE BALANCE SHEET OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN PURCHASES AT RS. 1,92,95,72 3/- WHEREAS THE SUNDRY CREDITORS STOOD AT RS. 2,03,17,410/-. THE A SSESSEE WAS ASKED TO EXPLAIN THE OUTSTANDING LIABILITY. THE AO NOTICED THAT ALL THE PURCHASES OF THE ASSESSEE ARE IN THE FORM OF IMPORT FROM OTHE R COUNTRIES. THE COMPARISON OF THE CREDITORS AS ON 31.3.2003 AND 31 .3.2004 SHOW THAT THE CREDITORS ARE OUTSTANDING FOR MORE THAN ONE YEAR AM OUNTING TO RS. 10,21,687/-. THE AO WAS OF THE FIRM BELIEF THAT TH E ASSESSEE HAS NOT DISCHARGED ITS ONUS TO PROVE ITS CLAIM AND ACCORDIN GLY TREATED THE LIABILITY OF RS. 10,21,681/- AS INCOME OF THE ASSESSEE U/S. 4 1(1) OF THE ACT. 33. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA-4 ON PAGE 4 OF HIS ORDER . AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) WAS OF THE OPINION THAT MERELY BECAUSE THE C REDITORS WERE OUTSTANDING FOR MORE THAN ONE YEAR CANNOT LEAD THE AO TO PRESUME THAT THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY SO AS TO BRING IT WITHIN THE SCOPE AND AMBIT OF SEC. 41(1) OF THE ACT. TH E LD. CIT(A) WAS CONVINCED THAT THE AO HAS FAILED TO ESTABLISH THAT THE ASSESSEE HAS OBTAINED A BENEFIT IN RESPECT OF THE TRADING LIABI LITY BY WAY OF REMISSION OR CESSATION THEREOF AND ACCORDINGLY DELETED THE AD DITION OF RS. 10,21,687/-. M/S. FINEX DISTRIBUTION 12 34. AGGRIEVED BY THIS, REVENUE IS BEFORE US. THE L D. DR STRONGLY SUPPORTED THE FINDINGS OF THE AO. 35. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS AN UNDISPUTED FACT THAT THE AO HAS MADE THE ADDITIO N U/S. 41(1) OF THE ACT ONLY BECAUSE HE FOUND THAT THE LIABILITIES WERE OU TSTANDING FOR MORE THAN ONE YEAR. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THIS CANNOT BE ANY GROUND FOR MAKING THE ADDITION U/S. 4 1(1) OF THE ACT. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THE APPEAL FILED BY THE REVENUE IS ACCORD INGLY DISMISSED. ITA NO. 2374/M/2010 A.Y. 2006-07 ASSESSEES APP EAL 36. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF PROFESSIONAL /LEGAL CHARGES OF RS. 3,03,000/-. 37. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 3,24,000/- UNDER THE HEAD LEGAL/PROFESSIONAL CHARGES. ON FURTHER PROBE, THE AO FOUND THAT RS. 3,03,000/- WAS PAID TO K.G. SINGHANIA AND RS. 21,0 00/- TO SHRI J.K. MONGA. THE AO FOUND THAT THE ASSESSEE HAS PAID RS . 3,03,000/- SINGHANIA & CO., IN CONNECTION WITH MATTER DISPUTED IN THE COURT OF THE SMALL CAUSES AT BOMBAY WITH M/S. INDIAN HOTELS CO. LTD WHICH IS RELATED TO ITS GROUP CONCERN M/S. REGENT WATCH & JEWELLERY CO. PVT. LTD. THE AO WAS OF THE FIRM BELIEF THAT THIS PAYMENT OF PROF ESSIONAL CHARGES IS NOT RELATED TO THE ASSESSEE COMPANY AND ACCORDINGLY DIS ALLOWED THE SAME. 38. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE ASSESSEE AND ITS ASSOCIATED CONCERN HAVE COMMON OWNERSHIP , MANAGEME NT AND CONTROL. IT WAS FURTHER EXPLAINED THAT DURING THE YEAR THE E NTIRE SALES WERE MADE TO M/S. FINEX DISTRIBUTION 13 THE BOMBAY BRANCH OF THE ASSOCIATED CONCERN. THERE FORE, ALL LITIGATION COSTS WERE UNDERTAKEN TO BE BORNE BY THE ASSESSEE. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) AT PARA 2 .2 ON PAGE 2 OF HIS ORDER OBSERVED THAT THE ASSESSEE AND ITS ASSOCIATED CONCERNS ARE DIFFERENT ENTITIES CARRYING ON BUSINESS SEPARATELY. THE LD. CIT(A) WAS CONVINCED THAT THE SAID EXPENSES ARE NOT INCIDENTAL TO THE B USINESS OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE AO. 39. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. AS THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM O F EXPENSES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF T HE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 40. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF PRI OR PERIOD EXPENSES OF RS. 67,451/-. 41. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PAR A-1 ON PAGE-2 OF HIS ORDER WHEREIN THE AO OBSERVED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THESE EXPENSES PERTAINING TO THE PERIOD OTHER THAN UNDER CONSIDERATION AND SINCE LIABILITY CRYSTALLIZE D IN EARLIER PERIOD SUSTAINED THE ADDITION OF RS. 67,451/-, 42. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. AS THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE LIABILITY WAS CRYSTALLIZED IN EARLIER YEARS THEREFORE THE EXPENDI TURE CANNOT BE CONSIDERED DURING THE YEAR UNDER CONSIDERATION. W E DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. M/S. FINEX DISTRIBUTION 14 ITA NO. 7490/MUM/2011 A.Y. 2002-03 ASSESSEES A PPEAL 43. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF RS. 21,51,640/- AS UNEXPLAINED CASH CRE DIT U/S. 68 OF THE ACT. 44. A PERUSAL OF THE ORDER OF THE LOWER AUTHORITI ES SHOWS THAT THE UNEXPLAINED CASH CREDIT STOOD IN THE NAME OF THE FO LLOWING PERSONS: 1) MR. RAOUFF ANSARI- RS. 21.49,000/- 2) MEHUR MOVIES - RS. 2,640/- RS. 21,51,640/- ============ 45. WE HAVE CONFIRMED THE ADDITIONS IN RESPECT OF T HESE TWO PARTIES U/S. 68 OF THE ACT VIDE ITA NO. 254/M/2011 FOR A.Y. 2002-03. SINCE THE ASSESSEE HAS GROSSLY FAILED TO EXPLAIN THE GENUINEN ESS OF THE TRANSACTION, LEVY OF PENALTY IS JUSTIFIED AND SINCE A MINIMUM PE NALTY HAS BEEN LEVIED AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED, NO INTERFERENCE IS CALLED FOR. THE APPEAL FILED BY THE ASSESSEE IS AC CORDINGLY DISMISSED. 46. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AND THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.2.2014 . +$8 5 - * $ 9 :+ ; 28.2.2014 5 < SD/- SD/- (D.MANMOHAN ) (N.K. BILLAIYA) !'# / VICE PRESIDENT $* +, / ACCOUNTANT MEMBER MUMBAI; :+ DATED 28.2.2014 . . ./ RJ , SR. PS M/S. FINEX DISTRIBUTION 15 +$8 +$8 +$8 +$8 5 55 5 26& 26& 26& 26& =$&-6 =$&-6 =$&-6 =$&-6 / COPY OF THE ORDER FORWARDED TO : 1. .1 / THE APPELLANT 2. 23.1 / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5. &?< 26 , , / DR, ITAT, MUMBAI 6. < / GUARD FILE. +$8 +$8 +$8 +$8 / BY ORDER, 3&6 26 //TRUE COPY// ! !! ! / / / / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI