DCIT, CHENNAI V. Shri A.R.Jawaharlal Nahar, CHENNAI

ITA 1114/CHNY/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8343 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 19-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: SIDDHARTH MEHTA
• Keywords: Unexplained investment; Share purchase agreement; Deemed to accrue or arise in india
• Section: 69; 144

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL: B- BENCH: CHENNAI (BEFORE SHRI ABRAHAM P GEORGE & SH RI GEORGE MATHAN) ITA NO.1532/MDS/08 ASSESSMENT YEAR 1995-96 .SHRI A. JAWAHARLAL NAHAR, 189 V.M. ST. ROYAPETTAH, THE JCIT, CHENNAI-600014 VS. BUSINESS RANGE VIII, CHENNAI (GI/PAN 9595J) (APPLICANT) (RESPONDENT) AND ITA NO.1114/MDS/08 ASSESSMENT YEAR 1995-96 THE JCIT, BUSINESS RANGE VIII,CHENNAI VS. SHRI A. JAWAHARLAL NAHAR 189 V.M. ST. ROYAPETTAH, CHENNAI-14 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SIDDHARTH MEHTA DEPARTMENT BY: SHRI P.B.SEKARAN ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE RE SPECTIVELY, ARE AGAINST THE ORDER OF THE CIT(A)IX, CHENNAI DATED 26-2-2008 FOR THE ASST. YEAR 1995-96. 2. ASSESSEES APPEAL IS TAKEN UP FIRST. GROUND NO.1 IS GENERAL IN NATURE AND DOESNOT REQUIRE ANY ADJUDICATION. ITA NOS.1532/ & 1104/MDS/08 2 3. GROUND NOS. 2 AND 3 CONCERN THE SAME ISSUE WHICH IS ON A DISALLOWANCE OF CREDITORS AND INTEREST PAID TO THEM. ACCORDING TO T HE ASSESSEE, LD. CIT(A) WHILE CONFIRMING SUCH DISALLOWANCE, HAD RELIED ON HIS OWN ORDER FOR ASST. YEAR 1991-92, BUT THIS ISSUE WAS NOT INVOLVED IN THAT ORDER. FURTHER, ACCORDING TO THE ASSESSEE THE CREDITORS STOOD PROVED AND THE CLAIM WAS ALLOWED FO R ASST. YEARS 1992-93 TO 1994-95 AND ASST. YEAR 1996-97. 4. SHORT FACTS APROPOS ARE THAT THE ASSESSEE WHICH WAS ENGAGED IN THE BUSINESS OF HIRE PURCHASE FINANCE, WAS SUBJECTED TO A SEARCH, A ND IN THE SUBSEQUENT ASSESSMENT, TOTAL HIRE PURCHASE ADVANCE WORKED OUT AT RS.1,13,3 5,371/-. IN THIS ASSESSMENT COMPLETED UNDER SEC 144 OF THE ACT, A DEDUCTION OF 30% WAS ALLOWED AS EMBEDDED INTEREST IN SUCH HIRE PURCHASE ADVANCE AND BALANCE WAS TREATED AS INCOME SPREAD OVER FIVE ASSESSMENT YEARS STARTING FROM 1991-92-. CIT(A ) IN ASSESSEES APPEAL, DIRECTED REEXAMINATION OF THE ISSUE, WHEREUPON THE ASSESSEE FURNISHED TO THE AO, A DETAILED WORK OUT BASED ON THE LEDGER CARDS, WHICH WERE FOUN D AT THE TIME OF SEARCH. THE AO FOUND SUCH WORKING TO BE ACCEPTABLE AND RESULTANTL Y THE INVESTMENT IN HIRE PURCHASE WAS PROPOSED TO BE FIXED AT RS.7,55,846/-. PLEADING OF THE ASSESSEE WAS THAT HE HAD BORROWED AMOUNTS TO THE EXTENT OF RS.10,64,164/-, W HICH SATISFIED THE FUND REQUIREMENT FOR SUCH INVESTMENT. CONFIRMATION FROM LOAN CREDITORS WERE ALSO FILED. HOWEVER, THE AO DID NOT ACCEPT SUCH CONFIRMATION AN D BROUGHT TO TAX THE SUM OF RS.7,55,846/-. 5. IN HIS APPEAL BEFORE THE CIT(A), SUBMISSION OF T HE ASSESSEE WAS THAT THE WORKING SHEET PRODUCED BEFORE THE AO CLEARLY BROUGHT OUT TH E SOURCE OF INVESTMENT IN HIRE ITA NOS.1532/ & 1104/MDS/08 3 PURCHASE FINANCE. ACCORDING TO THE ASSESSEE, AO HAD ACCEPTED THE GROSS REVENUE RECEIPT, CAUTION DEPOSIT AND OPENING BALANCE OF CAP ITAL, BASED ON THE RETURNS OF PRECEDING YEARS, BUT THE LOAN CREDITORS WERE NOT CO NSIDERED.. IF THE LOAN CREDITORS WERE ALSO ACCEPTED, THERE WOULD NOT BE ANY SHORT FALL OF FUNDS. FURTHER, ACCORDING TO THE ASSESSEE, THE AO HAD DEPUTED AN INSPECTOR TO VERIF Y THE CREDITORS AND THE INSPECTORS REPORT ONLY MENTIONED THAT THE CREDITORS DID NOT HA VE EVIDENCE TO PROVE THEIR CREDITWORTHINESS. THUS, ACCORDING TO THE ASSESSEE T HE GENUINENESS OF THE TRANSACTION COULD NOT BE DOUBTED AND ASSESSEE HAD SUFFICIENTLY EXPLAINED THE LOANS. LD. CIT(A), HOWEVER, RELYING ON HIS PREDECESSORS ORDER FOR ASS T. YEAR 1991-92, REJECTED THE CONTENTIONS OF THE ASSESSEE. 6. NOW BEFORE US, THE LD. AR SUBMITTED THAT SIMILAR ISSUES HAD COME UP BEFORE THIS TRIBUNAL ON REVENUES APPEAL FOR ASST. YEARS 1991-9 2, 1992-93, 1993-94, 1994-95 AND 1996-97. ACCORDING TO HIM, THIS TRIBUNAL, AFTER CON SIDERING THE CONFIRMATION FROM THE CREDITORS AND THE REMAND REPORT OF THE AO, HAD HELD THAT THE CIT(A) HAD RIGHTLY DELETED THE ADDITION. FURTHER ACCORDING TO HIM, THE FACTS R EMAINED THE SAME FOR THE IMPUGNED ASST. YEAR ALSO AND, THEREFORE, THE ADDITION MADE H AD TO BE DELETED. PER CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE PERUSED THE RECORDS AND HEARD THE RIVAL CONTENTIONS. CASE OF THE ASSESSEE IS THAT SUM OF RS.7,55,846/- REPRESENTING HIS INVESTMENT IN HIRE PURCHASE FINANCE WAS EXPLAINED BY LOANS TO THE EXTENT OF RS. 10,64,164/- TAKEN BY HIM. FURTHER ACCORDING TO THE ASSESSEE, THOUGH THE AO HAD ACCEPT ED THE CAUTION DEPOSIT AND OPENING BALANCE OF CAPITAL, BASED ON PRECEDING YEAR S RETURNS, HE HAD IGNORED THE ITA NOS.1532/ & 1104/MDS/08 4 BALANCE IN THE LOAN CREDITORS ACCOUNTS, WHICH RESUL TED IN THE ALLEGED SHORT FALL OF FUNDS. NO DOUBT, IN THE PRECEDING ASST. YEARS NAMELY 1991- 92 TO 1994-95 AND FOR THE SUCCEEDING ASST. YEAR 1996-97 THIS TRIBUNAL HAD IN REVENUES APPEAL (ITA NOS.1869 TO 1873/MDS/2007) ON A SIMILAR ISSUE, HELD AS UNDER AT PARAGRAPHS 7 AND 8 OF ITS ORDER DATED 27-06-2008: 7 . IT APPEARS THAT DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE RELEVANT DETAILS AND EVIDENC E TO SUPPORT THIS CASE, WHICH WERE SENT BY THE CIT(A) TO THE AO FOR A REMAND REPO RT. DURING THE REMAND REPORT BEFORE THE AO, THE CONFIRMATIONS FROM THE CR EDITORS AND THEIR ADDRESSES WERE FURNISHED BY THE ASSESSEE. THE AO DEPUTED HIS INSPECTOR FOR MAKING LOCAL ENQUIRIES. IN THE REMAND REPORT THE AO OBSERVED THA T THE CREDITORS DID NOT LEAVE ANY EVIDENCE TO PROVE THAT THEY HAD ADVANCED THE LO ANS. THE CIT(A), AFTER EXAMINING THE DETAILS/DOCUMENTS FURNISHED BY THE AS SESSEE AND THE REMAND REPORT FILED BY THE AO DESALTED THE ADDITION. HE NO TED IN PARAGRAPH 10.2 OF HIS ORDER THAT THE AVAILABILITY OF FUNDS IN THE HANDS O F THE ASSESSEE HAD BEEN EXPLAINED, AND THAT CONFIRMATIONS HAD BEEN FILED IN RESPECT OF ALL THE LOANS. THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THA T THE CREDITORS DID NOT HAVE THE NECESSARY CREDIT WORTHINESS TO LEND THE MONEY. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE, WE SEE NO REASON TO INTERFERE WITH THE CONCLUSIONS REACHED BY THE CIT(A). THESE GROUNDS AR E ACCORDINGLY REJECTED. 8. THIS GROUND RELATES TO THE INTEREST ON THE AFORE SAID LOANS AND THEREFORE IT IS CONSEQUENTIAL IN NATURE. SINCE THE ORDER OF CIT(A) TREATING THE LOANS AS GENUINE HAS BEEN UPHELD BY US, HIS ORDER IN RESPECT OF THE INTEREST THEREON HAS ALSO TO BE UPHELD. THE GROUND NO.3 IS ALSO REJECTED. 8. BUT NEVERTHELESS, WE ARE UNABLE TO FIND FROM THE RE CORDS WHETHER THE SUM OF RS.7,55,846/- REPRESENTED OPENING BALANCE OF LOAN C REDITORS OR WERE LOANS RAISED DURING THE RELEVANT PREVIOUS YEAR. JUST BECAUSE THIS TRIB UNAL ACCEPTED THE CREDITORS FOR EARLIER YEARS, IT CANNOT BE CONCLUDED THAT THE CREDITORS FO R THE IMPUGNED YEAR ALSO STOOD PROVED. EVEN THE PERSONS FROM WHOM THE ALLEGED LOANS HAVE BEEN RAISED BY ASSESSEE ARE NOT ON RECORD. WE ARE, THEREFORE, OF THE VIEW T HAT THE MATTER NEEDS VERIFICATION AT THE END OF THE AO. THOUGH THE ASSESSEE HAD RELIED O N THE REPORT OF THE INSPECTOR WHO ITA NOS.1532/ & 1104/MDS/08 5 WAS DEPUTED BY THE AO TO VERIFY THE CREDITORS, FOR ARGUING THAT THE GENUINENESS OF THE TRANSACTION STOOD PROVED, THERE IS NOTHING IN THE R ECORD TO SHOW THAT THE CREDITORS VERIFIED BY THE INSPECTOR WERE THE SAME, FROM WHOM ASSESSEE HAD RAISED LOANS DURING THE RELEVANT PREVIOUS YEAR. THEREFORE, TO MEET THE ENDS OF JUSTICE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THIS ISSU E BACK TO THE AO FOR CONSIDERATION AFRESH. IF THE CREDITORS AND THEIR BALANCES ARE SAM E AS IN THE OTHER YEARS COVERED BY THE TRIBUNALS ORDER DATED 27-6-2008 (SUPRA), AND THE INVESTMENTS STOOD FULLY EXPLAINED BY IT, THE AO SHALL NOT MAKE ANY ADDITIO N IN THIS REGARD. HOWEVER, IF THE CREDITORS ARE DIFFERENT AND THE AMOUNTS HAVE BEEN R AISED AFRESH DURING THE RELEVANT PREVIOUS YEAR, AO SHALL DO NECESSARY VERIFICATION A ND PROCEED IN ACCORDANCE WITH LAW. INTEREST CLAIMED ON SUCH LOANS WOULD ALSO BE CONSID ERED BY THE AO FOR ALLOWANCE, IF THE LOANS ARE FOUND TO BE GENUINE AND ACCEPTABLE. GROUN DS 2 AND 3 OF THE ASSESSEE ARE THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 9. VIDE ITS GROUND NO.4, GRIEVANCE RAISED BY THE ASSESSEE IS THAT THE CIT(A) CONFIRMED AN ADDITION OF RS.13,23,000/- AS INVESTME NT IN SHARES, SHARE REFUND AND SHARE APPLICATION DESPITE THE FACT THAT TOTAL INVES TMENT AS PER SEIZED MATERIAL CAME TO RS.6,37,500/- ONLY. 10. SHORT FACTS APROPOS ARE THAT AO HAD MADE AN ADD ITION OF RS.6,85,500/- AS SHARE REFUND AMOUNT; AND RS.6,37,500/- AS INVESTMENT IN S HARES WHICH WERE NOT EXPLAINED BY THE ASSESSEE. BEFORE THE CIT(A) CASE OF THE ASSESSE E WAS THAT THE SUM OF RS.6,85,500/- WHICH WAS CONSIDERED AS UNEXPLAINED SHARE REFUND AM OUNT WAS ALREADY APPEARING IN THE BANK ACCOUNT AND THE BALANCES IN SUCH BANK ACC OUNT WERE CONSIDERED FOR ADDITION. ITA NOS.1532/ & 1104/MDS/08 6 VIS--VIS THE SUM OF RS. 6,37,500/- REPRESENTING AC TUAL SHARE CERTIFICATE FOUND, ASSESSEE HAD NO GRIEVANCE. HOWEVER, THE CIT(A) CONFIRMED THE ADDITION ON BOTH THESE COUNTS. 11. NOW BEFORE US, THE LD. AR SUBMITTED THAT VIS-- VIS THE SUM OF RS.6,37,500/- INCLUDED IN THE ADDITION OF RS.13,23,000/-, ASSESSE E HAD NO GRIEVANCE. HOWEVER, THE SUM OF RS.6,85,500/- CONSIDERED FOR ADDITION, ACCOR DING TO THE LD. AR, WAS ALREADY INCLUDED IN HIS BANK ACCOUNT AND BANK BALANCES THER EOF WAS CONSIDERED FOR ASSESSMENT. THEREFORE, ACCORDING TO HIM, THE RESULT WAS THAT TH ERE WAS A DOUBLE ADDITION OF RS.6,85,500/-. PER CONTRA, LD. DR STRONGLY SUPPORT ED ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE ISSUE IS LIMITED TO RS.6,85,500/- CONSIDERED BY THE AO AS UNEXPLAINED SHARE REFUND AMOUNT. ACCORDING TO THE ASSESSEE SUCH AMOUNT WAS ALREADY CREDITED IN HI S BANK ACCOUNTS, THE BALANCES OF WHICH WERE CONSIDERED FOR ADDITION AND SUCH ADDITIO NS WERE NEVER DISPUTED BY IT. WE ARE OF THE OPINION THAT IF THE SUM OF RS.6,85,500/- ,BEING SHARE REFUND AMOUNT, WHICH WERE CONSIDERED BY THE AO FOR ADDITION, APPEAR IN T HE BANK ACCOUNT OF THE ASSESSEE AND IF THE ENTRIES IN SUCH BANK ACCOUNT, INCLUDING THE SOURCE OF INVESTMENT RESULTING IN THE REFUNDS ARE PROPERLY EXPLAINED BY THE ASSESSEE, THEN, IT WOULD RESULT IN DOUBLE ADDITION, SINCE THE BALANCE OF SUCH BANK ACCOUNT HA VE ALREADY BEEN CONSIDERED. HOWEVER, IT NEEDS TO BE EMPHASIZED THAT ASSESSEE IS DUTY BOUND TO EXPLAIN THE SOURCE FROM WHICH HE HAD MADE THE INVESTMENT WHICH RESULTE D IN SUCH SHARE REFUND AND A MERE CREDIT IN THE BANK ACCOUNT WOULD NOT BE SUFFIC IENT. THE CREDIT OF THE REFUND IN THE BANK ACCOUNT WOULD ONLY GO TO SHOW THAT THE REFUND HAD COME TO THE ASSESSEE. BUT NEVERTHELESS, ASSESSEE WOULD ALWAYS BE DUTY BOUND T O EXPLAIN THE SOURCE OF INVESTMENT ITA NOS.1532/ & 1104/MDS/08 7 IN MAKING SUCH APPLICATION FOR SHARES, WHICH RESULT ED IN THE REFUND. NO DOUBT, IF ALL THE CREDITS IN THE BANK ACCOUNT WERE CONSIDERED AS UNEX PLAINED AND BROUGHT TO TAX, THEN THE SHARE REFUND, IF AGAIN CONSIDERED, WOULD RESULT IN DOUBLE ADDITION. HOWEVER, WE FIND THAT ONLY THE BALANCE IN THE BANK ACCOUNTS WERE CON SIDERED BY THE AO FOR ADDITION. WE, ARE, THEREFORE OF THE OPINION THAT THIS ISSUE ALSO NEEDS TO BE REVISITED BY THE AO. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES AND REMIT THIS ISSUE BACK TO THE AO TO VERIFY WHETHER THE REFUNDS WERE CREDITED TO T HE BANK ACCOUNT OF THE ASSESSEE AND IF SO CREDITED WHETHER THE ASSESSE HAD PROPERLY EXPLAINED THE SOURCE OF SUCH INVESTMENT FROM WHICH REFUND AROSE THE AO SHALL DEA L WITH IT IN ACCORDANCE WITH LAW. NO DOUBT, IF THE ASSESSEE IS NOT ABLE TO PROPERLY E XPLAIN THE SOURCE OF INVESTMENT, THE AMOUNTS WOULD BE TAXABLE, AND IT COULD NOT ABSOLVE ITSELF BY STATING THAT THE REFUNDS WERE CREDITED IN THE BANK ACCOUNT OR THAT THE BALAN CES IN THE BANK ACCOUNT WERE CONSIDERED FOR ADDITION SEPARATELY. IN THE RESULT G ROUND NO.4 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. NOW WE TAKE UP THE APPEAL OF THE REVENUE. GROUN D NOS.1 AND 4 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 14. VIDE GROUND NO.2 ITS GRIEVANCE IS THAT THE CIT( A) HAD HELD INCOME OF THE OTHER FAMILY MEMBERS OF THE ASSESSEE AS NOT CLUBBABLE UN DER SEC.64 OF THE ACT. 15. SHORT FACTS APROPOS ARE THAT THE AO IN THE ORIG INAL ASSESSMENT HAD TREATED THE WHOLE OF THE HIRE PURCHASE ADVANCE AMOUNT AS WORKE D OUT BASED ON RECORDS FOUND AT THE TIME OF SEARCH AS INCOME IN THE HANDS OF THE AS SESSEE AFTER ALLOWING 30% ITA NOS.1532/ & 1104/MDS/08 8 DEDUCTION. AASSESSEE TOOK THIS BEFORE THE CIT(A) C ONTENDING THAT SEPARATE LEDGERS WERE MAINTAINED IN THE NAME OF FAMILY MEMBERS AND T HEY WERE ALL ASSESSED TO TAX. IT WAS ALSO BROUGHT TO THE ATTENTION OF THE CIT(A) THA T IN THE CASE OF ONE SRI RAMESH NAHAR, AN ASSESSEE FALLING IN THE SAME GROUP, THE CIT(A) HAD, ON APPEAL, DIRECTED EXCLUSION OF THE ADVANCES RELATABLE TO THE FAMILY M EMBERS. THE CIT (A) THEREUPON REQUIRED THE AO TO DO A FRESH ASSESSMENT AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE. IN THE FRESH ASSESSMENT DONE, THE AO AGA IN DECLINED TO ACCEPT THE STAND OF THE ASSESSEE AND HELD THAT INCOME IN RESPECT OF ALL THE PERSONS HAD TO BE CONSIDERED IN THE ASSESSEES HANDS. ASSESSEE AGAIN MOVED IN APPEA L BEFORE THE CIT(A), WHO SOUGHT A REMAND REPORT FROM THE AO. AO IN THE REMAND GAVE TH E DETAILS OF THE ENTITIES WHOSE INCOME WAS SOUGHT TO BE CLUBBED WITH THAT OF THE AS SESSEE AND THIS RAN AS UNDER: NAME OF THE ASSESSEE STATUS GI NO. ASS ESSMENT A.R.JAWAHARLAL NAHAR HUF 5937-J I TO,C.W.V(5) A.R.JAWAHARLAL NAHAR INDL. 74212-A IT O,C.W.VII(4) AKKAL KANWAR WIFE 712-A AC , C.C VIII(INV) EKTA NAHAR DAUGHTER 74729-E IT O.C.W.VII(4) J.ARUNKUMAR NAHAR SON 741065-A -D O- J.TARUNKUMAR NAHAR SON 74798 -T -DO- THE CIT(A) AFTER CONSIDERING THE TRIBUNALS ORDER I N THE CASE OF RAMESH NAHAR, HELD THAT CLUBBING OF INCOME OF THE ABOVE PERSONS, COULD NOT BE DONE IN THE HANDS OF THE ASSESSEE. ITA NOS.1532/ & 1104/MDS/08 9 16. NOW BEFORE US, THE LD. DR RELIED ON THE ORDER O F THE AO AND SUBMITTED THAT ALL THE AMOUNTS HAD TO BE CONSIDERED IN THE ASSESSEES HANDS BASED ON THE ADMISSION MADE BY THE ASSESSEE. PER CONTRA, THE LD. AR SUBMI TTED THAT THE CIT(A) HAD TAKEN A CORRECT DECISION IN DIRECTING THE AO TO EXCLUDE THE INCOME OF THE ABOVE PERSONS WHO WERE ALL ASSESSEES, FROM THE INCOME OF THE ASSESSE E. .17. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THE AO HAD CONSIDERED THE INCOME AND INVESTMENT RELATING TO TH E RELATIVES OF THE ASSESSEE WHOSE NAMES WERE APPEARING IN THE LEDGER CARDS, AS THAT O F THE ASSESSEE. PLEADING OF THE ASSESSEE WAS THAT ALL SUCH PERSONS WERE INDIVIDUALL Y ASSESSED AND HENCE CLUBBING UNDER SEC.64 COULD NOT BE DONE. HOWEVER, AS PER THE AO FOR THE IMPUGNED ASSESSMENT YEARS RETURNS WERE FILED BY THE CONCERNED PERSONS O NLY AFTER SEARCH OPERATIONS AND THEREFORE SUCH RETURNS DID NOT HAVE ANY EVIDENTIAR Y VALUE. FURTHER ACCORDING TO HIM, THREE OF THE PERSONS WERE MINOR CHILDREN OF THE ASS ESSEE AND THEREFORE, THEIR INCOME COULD BE CONSIDERED ONLY IN ASSESSEES HANDS U/S 64 (1A) OF THE ACT. WE FIND THAT ALL THE PERSONS AS LISTED AT PARA-15 ABOVE WHOSE INCOME AN D INVESTMENTS WERE CONSIDERED AS THAT OF THE ASSESSEE, WERE HAVING INDIVIDUAL GIR NU MBERS AND THE AO HAD ALSO ACCEPTED THIS IN HIS REMAND REPORT. NO DOUBT, THE L EDGER CARDS FROM WHICH THE INVESTMENT AND INCOME WERE WORKED OUT AND INCLUDED WITH THE INCOME OF THE ASSESSEE SHOWED THE NAMES OF SUCH PERSONS. IF THAT BE SO, SU CH INCOME AND UNEXPLAINED INVESTMENT COULD ONLY BE CONSIDERED IN THE HANDS OF SUCH PERSONS. SINCE THESE PERSONS ARE SEPARATE ASSESSEES WITH SEPARATE GIR NUMBERS, T HEIR INCOME CANNOT BE INCLUDED WITH THAT OF THE ASSESSEE. TO THIS EXTENT WE ARE IN AGREEMENT WITH THE LD. CIT(A). ITA NOS.1532/ & 1104/MDS/08 10 HOWEVER, IF ANY OF THESE PERSONS ARE MINOR CHILDREN OF THE ASSESSEE, NO DOUBT, AS POINTED OUT BY THE AO SEC. 64(1A) OF THE ACT WOULD APPLY. THIS ASPECT IS NOT CLEAR FROM THE RECORDS THOUGH THE AO HAS MADE A MENTION THEREO F IN THE ASSESSMENT ORDER. IT IS ALSO NOT COMING OUT FROM THE ORDERS OF THE AUTHORIT IES BELOW, WHETHER SUCH INCOME AND INVESTMENTS WERE CONSIDERED IN THE INDIVIDUAL ASSES SMENTS OF THE RESPECTIVE PERSONS. THEREFORE, IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDERS OF THE LD.CIT(A) AND THE AO AND REMIT THE MATTER BACK TO THE AO FOR CONSIDERATI ON AFRESH. THE AO IS DIRECTED TO EXCLUDE THE INCOME OF PERSONS OTHER THAN THE MINOR CHILDREN OF THE ASSESSEE, AND HE HAS TO ENSURE THAT SUCH INCOME IS CONSIDERED IN THE HANDS OF THE RESPECTIVE PERSONS ASSESSMENTS. IN SO FAR AS INCLUSION OF THE INCOME O F THE MINOR CHILDREN ARE CONCERNED, THE AO IS DIRECTED TO WORK OUT THE AMOUNT RELATED T O SUCH MINOR CHILDREN AND INCLUDE IT IN THE ASSESSEES INCOME UNDER SEC.64(1A) OF THE AC T. NEEDLESS TO SAY ASSESSEE; HAS TO BE GIVEN AN OPPORTUNITY TO EXPLAIN ITS CASE. IN TH E RESULT, GROUND NO.2 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 18. VIDE ITS GROUND NO.3, REVENUE IS AGGRIEVED REGA RDING DELETION OF ADDITION MADE TOWARDS COST OF THREE AUTO RICKSHAWS. THE SEARCH PR OCEEDINGS BROUGHT OUT THREE INVOICES FOR PURCHASE OF THREE AUTOS FOR A TOTAL SU M OF RS.1,38,600/-. EXPLANATION OF THE ASSESSEE WAS THAT HE HAD NOT PURCHASED SUCH AUTOS. THE PURCHASERS NAME IN ONE CASE WAS GIVEN AS SRI GANESH AND IN THE OTHER TWO CASES ARE MS. REKHA. THE AO NOTED THAT BOTH THESE PERSONS WERE BENAMIS OF THE ASSESSEE AND ASSESSEE HAD NOT REBUTTED THE PRESUMPTION U/S 132(4A) OF THE ACT. HE, THEREFORE, TREATED THIS AMOUNT AS DEEMED INCOME OF THE ASSESSEE U/S 69 OF THE ACT. ITA NOS.1532/ & 1104/MDS/08 11 19. IN HIS APPEAL BEFORE THE CIT(A) CONTENTION OF T HE ASSESSEE WAS THAT THE INVOICES WERE ONLY PROFORMA INVOICES AND THERE WAS NO ACTUAL PURCHASE OF AUTOS. FINDING THIS TO BE CONVINCING, LD. CIT(A) DELETED THE ADDITION. 20. NOW BEFORE US THE LD. DR SUBMITTED THAT INVOICE S FOUND WERE IN THE NAME OF ASSESSEES EMPLOYEES. ACCORDING TO HIM, SINCE ALL R ECORDS WERE FOUND AT THE PREMISES OF THE ASSESSEE, THE PRESUMPTION WAS THAT IT BELONGED TO THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO REBUT THIS PRESUMPTION. PER CONTRA, THE LD. AR STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 21. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IT IS NOT DISPUTED THAT WHAT WERE FOUND WERE ONLY PROFORMA INVOICES. T HERE WAS NO FURTHER ENQUIRY DONE BY THE AO TO VERIFY WHETHER THERE WAS ANY ACTUAL PU RCHASE. BASED ON A PROFORMA INVOICES, ADDITION COULD NOT BE MADE. PROFORMA INV OICE WOULD SHOW ONLY A PROPOSAL OF TRANSACTION AND WHEN THE TRANSACTIONS ARE COMPLETED REGULAR INVOICE WOULD BE RAISED. NEITHER THE ACTUAL PURCHASE OF AUTO RICKSHAWS NOR A NY EVIDENCE IN THIS REGARD WAS BROUGHT ON RECORD BY THE AO. ASSESSEE HAD ALL ALONG CLAIMED THAT HE HAD NEVER PURCHASED AUTO RICKSHAWS AND EVEN THE PROFORMA INVO ICES WERE NOT IN HIS NAME. THERE WAS NO EXAMINATION DONE OF SRI GANESH OR MS. REKHA BY THE AO TO VERIFY WHETHER THE PURCHASES WERE DONE, AND IF DONE, WHETHER THESE WER E DONE BY THEM OR BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPIN ION THAT THE LD. CIT(A) RIGHTLY DELETED THE ADDITION. NO INTERFERENCE IS CALLED FOR . GROUND NO.3 OF THE REVENUE IS THEREFORE, DISMISSED. ITA NOS.1532/ & 1104/MDS/08 12 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES WHEREAS THAT OF THE REVENUE IS PARTLY ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06 -08-20 10. SD/- (GEORGE MATHAN) SD/- (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 6TH AUGUST, 2010 NBR CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT, 5)THE D.R 6)GUARD FILE.