Shri. NARENDRA KUMAR JAIN, Bangalore V. The Assistant Commissioner of Income Tax, Bangalore

ITA 1208/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51385 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO
• Assessee Lawyers: H N KHINCHA
• Keywords: Unexplained cash credit; Unexplained investment; Opportunity of being heard; Source of fund
• Section: 153A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER I.T.A. NOS.1207 TO 1209/BANG/2010 (ASSESSMENT YEARS : 2004-05, 2005-06 & 2007-08) SHRI NARENDRA KUMAR JAIN, NO.14/9, 2 ND FLOOR, R.D. LAYOUT, 7 TH CROSS, BANNERGHATTA ROAD, BANGALORE-560 030 PAN ADMPJ5903G VS. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : MR. H.N. KHINCHA. RESPONDENT BY : MR.G.V. GOPALA RAO. DATE OF HEARING : 01.12.2011. DATE OF PRONOUNCEMENT : O R D E R PER N.K. SAINI, A.M. : THESE THREE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS EACH DATED 06.09.2010 OF LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) VI, BANGALORE. SOME COMMON ISSUES ARE INVOLVED IN THESE APPEALS AND THE APPEAL S WERE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.1207/BANG/2010 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L : 2 ITA NOS.1207 TO 1209/BANG/10 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PAS SING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED CIT(A) HAS ERRED IN P ARTIALLY CONFIRMING THE SAME. THE ORDER PASSED IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 2. IN ANY CASE AND WITHOUT PREJUDICE, THE ASSESSI NG OFFICER HAS ERRED IN MAKING ADDITION OF RS. 9,36,507 (6,86,507 + 2,50,000) AS D ONE IN THE ORDER AND THE LEARNED CIT(A) HAS ERRED IN PARTIALLY CONFIRMING THE SAME. THE ADDITIONS AS MADE / CONFIRMED ARE OPPOSED TO LAW AND ARE AGAINST THE AV AILABLE FACTS. THE ADDITIONS HAVING BEEN MADE WITHOUT PROPERLY APPRECIATING THE EVIDENCE REQUIRES TO BE DELETED IN ENTIRETY IN AS MUCH THERE IS NEITHER ANY UNEXPLAINED CASH DEPOSIT IN BANK NOR IS THERE ANY UNEXPLAINED INVESTMENT. 3. IN ANY CASE AND WITHOUT FURTHER PREJUDICE, IT IS SUBMITTED THAT SUCH ADDITIONS AS MADE ARE NOT POSSIBLE TO BE MADE IN THE PROCEEDING UNDER SECTION 153A OF I.T. ACT, 1961. THE ADDITIONS BEING AGAINST LAW REQUIRED TO BE DELETED. 4. THE APPELLANT ALSO DENIES LIABILITY TO PAY I NTEREST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 5. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS T O BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE IMPUGNED ORDER BE QUASHED OR AT LEAST THE ADDITIONS OF RS. 9,25,000 AS CONFIRMED BY THE CIT(A ) BE DELETED AND THE INTEREST LEVIED BE ALSO DELETED. 3. THE GROUND NO.3 WAS NOT PRESSED AND THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 4. THE MAIN GRIEVANCE VIDE GROUNDS NOS.2 AND 5 OF T HIS APPEAL RELATES TO THE ADDITION SUSTAINED BY THE LEANED CIT(A) WITHOUT PROPERLY APP RECIATING THE EVIDENCE. 5. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS AN EMPLOYEE IN M/S.MARBLE CENTRE INTERNATIONAL (P) LTD GROUP AND FILED RETURN OF INC OME ON 28.6.2004 DECLARING INCOME OF RS.92,450. A SEARCH ACTION U/S.132 OF THE INCOME T AX ACT, 1961 (HEREIN AFTER REFERRED TO THE ACT) WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF T HE ASSESSEE ON 8.3.2007. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOU ND AND SEIZED AND ALSO CASH OF 3 ITA NOS.1207 TO 1209/BANG/10 RS.4,66,25,780 WAS FOUND OUT OF WHICH RS.4.60 CRORE S WAS SEIZED. AFTER THE SEARCH, A NOTICE U/S.153A WAS ISSUED TO THE ASSESSEE. IN RESPONSE T O THE SAID NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON28.8.2007 DECLARING THE SAME INCOME WHICH WAS DECLARED EARLIER I.E. RS.92,450. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. OBSERVED FROM THE STATEMENT OF AFFAIRS AS AT 31.3.2004, THAT THE ASSESSEE HAD SHOWN A SUM OF RS.10,25,407 IN THE NAME OF M/S. K.K. MARBLES AND GRANITES UNDER THE HEAD DEPOSITS AND A DVANCES. THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF FUNDS OF RS.4 CRORES. THE AS SESSING OFFICER MADE THE ADDITION OF THE AFORESAID AMOUNT BY OBSERVING THAT THE SAID INVESTM ENT WAS NOT SUSTAINABLE IN THE ABSENCE OF ANY DOCUMENTARY PROOF AND SOURCE OF FUNDS. THE A.O . ALSO NOTED THAT THE ASSESSEE HAD NOT RECEIVED ANY INCOME ON THE SAID DEPOSIT WITH M/S. K .K. MARBLE AND GRANITES. THE A.O. ALSO ADDED A SUM OF RS.2,50,000 AS INCOME FROM OTHER SOU RCES BY OBSERVING THAT THE ASSESSEES BANK ACCOUNT AT CANARA BANK, TOWN HALL BRANCH, BANG ALORE (A/C. NO.152841) CREDITED WITH RS. 2,00,000 ON 7.5.2003 AND RS. 50,000 ON 22.5.2003. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCES OF FU NDS FOR THESE CREDITS BUT HAD NOT FURNISHED ANY DETAILS IN SUPPORT OF THE CREDITS IN THE BANK E XCEPT FILING A CASH ON HAND BOOK. THE ASSESSING OFFICER WAS OF THE VIEW THAT IN THE ABSEN CE OF ANY SUPPORTING DETAILS, THIS ENTRY CANNOT BE TAKEN AS SUFFICIENT PROOF, HENCE, THE CAS H CREDITED TO THE BANK AMOUNTING TO RS. 2,50,000 WAS ASSESSED AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER ALSO OBSERVED THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE THE SOUR CES OF FUNDS FOR INVESTMENT IN M/S.K.K. MARBLE AND GRANITES WAS NOT ACCEPTABLE AND THAT THE ASSESSEE WAS NOT IN RECEIPT OF ANY INCOME 4 ITA NOS.1207 TO 1209/BANG/10 ON THIS DEPOSIT WITH M/S.K.K. MARBLES AND GRANITES. THE UNEXPLAINED INVESTMENT WAS WORKED OUT AS UNDER : INVESTMENT RS.10,25,407 LESS : INCOME EARNED 1,71,262 LESS : DRAWINGS 82,32 2 88,900 CASH CREDITED TO BANK 2,50,000 ASSESSED UNDER OTHER SOURCES . RS.3,38,90 0 UNEXPLAINED INVESTMENT : RS.6,86,507 ACCORDINGLY, THE TOTAL INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.10,28,957 (RS.92,450 + 6,86,507 + 2,50,000). 6. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL TO THE LEARNED CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT - 2. THE ASSESSING OFFICER HAS NOT PROPERLY P REPARED THE FUND FLOW STATEMENT. THE CORRECT FUND FLOW STATEMENT WOULD B E AS UNDER : OPENING CASH BALANCE (AS ON 1.4.2003) 2,145 OPENING BANK BALANCE (AS ON 1.4.2003) 15,477 17,622 ADD : SUNDRY ADVANCES RECEIVED BACK 1,15,000 F.D. IN CANARA BANK MATURED 2,80,000 INCREASE IN LIABILITY (2,00,000 +1,50,000 + 1,10,00 0 +1,00,000) 5,60,000 INCOME FOR THE YEAR 1,71,262 11,26,262 11,43,884 LESS : COMPUTED ADDED 25,380 INVESTMENT IN K K MARBLES & GRANITES 10,25,407 INVESTMENT IN VIJAY BANK SHARES 2,400 DRAWINGS & OUTGO FOR THE YEAR 82,362 11,35,549 8,335 5 ITA NOS.1207 TO 1209/BANG/10 CLOSING CASH BALANCE 936 CLOSING BANK BALANCE 7,399 8,335 THE ASSESSING OFFICER HAS NOT CONSIDERED THE EFFECT OF FULL BALANCE SHEET BUT HAS SELECTIVELY CHOSEN A FEW ITEMS ONLY FOR THE PUR POSE OF PREPARING THE FUND FLOW STATEMENT. THERE IS NO DISCREPANCY IN FUND FL OW AS SHOWN ABOVE. THEREFORE, THE ADDITIONS OF RS. 6,86,507 + RS. 2,50 ,000 MADE IN THE ORDER BEING ERRONEOUS ON FACTS REQUIRES TO BE DELETED. 3. THE FD OF RS. 2,80,000 WAS MATURED AND WAS CRE DITED TO CANARA BANK ACCOUNT NO.27359 WHICH WAS OPENED AND CLOSED DURING THE PREVIOUS YEAR ENDING. A COPY OF THIS BANK ACCOUNT ENCLOSED. 4. THE NEW LIABILITIES ARE DULY CONFIRMED. THR EE OF THE PERSONS GAYATHRI, KAMAL KUMAR AND MANOJ KUMAR HAD GIVEN MONEY ONLY TH ROUGH CHEQUES (BANK). THEIR ACCOUNT COPIES AND COPIES OF RELEVAN T ENTRIES IN BANK ACCOUNT ARE ENCLOSED. 5. THE OTHER AMOUNT DUE TO LIABILITY FOR MATERIA L (GRANITE) PURCHASED AND SUPPLIED TO K K MARBLES. THE APPELLANT HAD ARRANGE D FOR GRANITES TO M/S. K K MARBLES FOR WHICH HE HAD RECEIVED BROKERAGE. THE C HEQUES ISSUED TO ADINATH GRANITES AND MOTHIYA GRANITES WERE ONLY FOR PURCHAS E OF THESE MARBLES AND THESE CHEQUES HAVE BEEN DEBITED TO ACCOUNT OF K K M ARBLES ACCOUNT. HENCE THESE TWO ACCOUNTS MOTHIYA GRANITES AND ADINATH GRA NITES ARE NOT APPEARING IN BALANCE SHEET. 6. ACCOUNT COPY OF K K MARBLES & GRANITES IS ENCLOSED WHICH WILL FULLY CLARIFY THE ISSUES. 7. THE DEPOSIT OF RS. 2,50,000 (2,00,000 + 50, 000) IN BANK WAS MADE OUT OF RS. 1,15,000 BEING ADVANCE DUE AS PER BALANCE SHEET AS ON 31.3.2003 WHICH WAS RECEIVED BACK AND ALSO RS. 1,38,000 RECEIVED FR OM M/S. K K MARBLES. 8. THUS CONSIDERED ALL THE ENTRIES ARE EXPLA INED. THERE IS NO UNEXPLAINED INVESTMENT OR UNEXPLAINED DEPOSIT IN BANK. THE ADD ITIONS ARE HENCE TO BE DELETED. 6 ITA NOS.1207 TO 1209/BANG/10 7. THE LEARNED CIT(A) AFTER CONSIDERIN G THE SUBMISSIONS OF ASSESSEE OBSERVED THAT THE ASSESSEE MADE AN ATTEMPT TO EXPLAIN THE SOURCE OF I NVESTMENT IN M/S. K.K. MARBLE & GRANITES FROM THE SUNDRY ADVANCES RECEIVED BACK AT RS.1,15,0 00, RS.2,80,000 RECEIVED ON MATURITY OF FDRS KEPT WITH CANARA BANK, RS.5,60,000 FROM UNSECU RED LOAN TAKEN AND RS.1,71,262 FROM THE INCOME EARNED DURING THE ASSESSMENT YEAR AFTER REDU CING THE INVESTMENT MADE DURING THE YEAR IN PURCHASE OF COMPUTER OF RS.25,380, DEPOSIT IN VI JAYA BANK OF RS.2,400 AND WITHDRAWAL OF HOUSE EXPENSES AT RS.82,362. THE LEARNED CIT(A) FU RTHER OBSERVED THAT IF THE UNSECURED LOANS WERE GENUINE, WHAT PREVENTED THE ASSESSEE TO PRODUC E THE EVIDENCE TO PROVE THE SOURCE OF CREDIT, MODE OF RECEIPT AND DEPOSITS IN THE BANK AC COUNT PARTICULARLY IN VIEW OF THE PROVISIONS OF SECTION 269SS OF THE ACT ACCORDING TO WHICH NO LOAN OR DEPOSIT COULD BE ACCEPTED OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT. THE LD. CIT(A) ALSO OBSERVED THAT OUT OF THE FOUR CREDITORS, TWO CREDITORS SRI P. SRINIVAS AND S MT. GAYATHRI FROM WHOM THE UNSECURED LOANS TO THE EXTENT OF RS.1,10,000 AND RS.1,00,000 CLAIME D TO HAVE BEEN TAKEN WERE NOT ASSESSED TO TAX AND THAT THE ASSESSEE FAILED TO PROVE THE GENUI NENESS OF THE DEPOSIT OF SUCH CREDIT IN THE BANK ACCOUNT. THE LD. CIT(A) ALSO POINTED OUT THAT THE BANK ACCOUNT STATEMENTS REVEALED THAT THE AMOUNT OF RS.1,50,000 CLAIMED TO HAVE BEEN RECE IVED FROM MR. KAMAL KISHORE SHARMA ON 12.2.2004 HAS BEEN TRANSFERRED FROM THE SB ACCOUNT NO.154254 OF CANARA BANK, TOWN HALL BRANCH AND RS.2 LAKHS CLAIMED TO HAVE BEEN RECEIVED FROM MR. MANOJ KUMAR ON 16.2.2004 HAS BEEN TRANSFERRED FROM THE SB ACCOUNT NO.154206 OF C ANARA BANK, TOWN HALL BRANCH, HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE COPY OF THE BANK ACCOUNT TO PROVE THAT THE SOURCE WAS FROM THE CREDITORS AS CLAIMED. ACCORDING TO THE LEARNED CIT(A), WHEN THE ASSESSEE CLAIMED TO HAVE 7 ITA NOS.1207 TO 1209/BANG/10 RECEIVED A LOAN OR DEPOSIT, HE HAS TO PRODUCE THE E VIDENCES TO PROVE IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITORS AND GENUINENESS OF THE TR ANSACTIONS AND IF THE ASSESSEE FAILED TO PROVE THE BASIC REQUIREMENTS, THE SAME ARE ASSESSAB LE AS INCOME U/S. 68 OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS I) CIT VS. ;UNITED COMMERCIAL AND INDUSTRIAL CO. PVT. LTD. (183 ITR 595) (CAL) II) CIT VS. PRECISION FINANCE PVT. LTD. (208 ITR 465) ( CAL) III) SHRI NANAK CHAND LAXMANDAS VS. CIT (140 ITR 151) (ALL) IV) SHRI KALEKHAN MOHAMMED HANIEF VS. CIT (50 ITR 1) (S C) THE LEARNED CIT(A) SUSTAINED THE ADDITION OF RS.9,2 5,000 BY OBSERVING AT PAGES 7, 8 & 9 OF THE IMPUGNED ORDER AS UNDER : ACCORDING TO SUBMISSION OF THE APPELLANT, THE INV ESTMENT IN M/S. K.K. MARBLE HAS BEEN MADE OUT OF THE SUNDRY ADVANCES OF RS. 1,1 5,000 THE AMOUNT RECEIVED ON MATURITY FROM THE FIXED DEPOSITS AT RS. 2,80,000 , RS. 5,60,000 FROM UNSECURED LOAN AND RS. 1,71,262 FROM THE INCOME DUR ING THE YEAR WHICH IS NOT IN CONFORMITY WITH THE LEDGER ACCOUNT OF M/S. K.K. MARBLES PRODUCED BY THE APPELLANT DURING THE APPELLATE PROCEEDING WHICH IS REPRODUCED AS UNDER : DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 30.6.2003 TO CANARA BANK 27359 PAYMENT 3 2,52,000 11.7.2003 TO CANARA BANK CH.NO.707967 PAYMENT 5 45, 500 24.11.2003 TO CANARA BANK 52841 CH.NO.707973 CA 14231 PAYMENT 8 27,000 12.2.2004 TO CANARA BANK 52841 CH. NO.707973 K K MARBLES CA14231 PAYMENT 10 2,50,000 16.2.2004 TO CANARA BANK 52841 CH.NO.707974 K K MARBLES CA 1423 PAYMENT 12 2,00,000 31.3.2004 TO K K MARBLE GRANITE ACCOUNT TRANSFER JOURNAL 3 2,50,907 10,25,407 BY CLOSING BALANCE 10,25,407 10,25,407 10,25,407 8 ITA NOS.1207 TO 1209/BANG/10 ON VERIFICATION OF BANK ACCOUNT STATEMENT OF THE AP PELLANT WITH CANARA BANK THERE IS NO DISPUTE ABOUT THE PAYMENT OF RS. 2,52,0 00 ON 30.0.2003 WHICH IS OUT OF FDRS OF RS. 2,80,000, RS. 45,500 AND RS. 27,000 HAS ALSO BEEN PAID THROUGH CHEQUE, RS. 2,50,000 AS ON 12.2.2004 IS OUT OF THE UNEXPLAINED CREDITS OF RS. 1,00,000 IN THE NAME OF SMT. GAYATHRI AND RS. 1,50, 000 IN THE NAME OF SRI KAMAL KISHORE SHARMA INTRODUCED DURING THE YEAR, RS . 2,00,000 ON 16.2.2004 OUT OF THE ALLEGED CREDITS RECEIVED FROM SRI MANOJ KUMAR SHARMA, BUT THE AMOUNT OF RS. 2,50,907 SHOWN FROM JOURNAL ENTRY IS CONTRARY TO THE SUBMISSION MADE BY THE APPELLANT DISCUSSED ABOVE. THE APPELLA NT HAS SHOWN THIS JOURNAL ENTRY TO JUSTIFY THE UNEXPLAINED CASH OF RS. 2,00,0 00 AND RS. 50,000 RESPECTIVELY DEPOSITED IN THE BANK ACCOUNT ON 7.5.2003 AND 22.5. 2003 IN RESPECT OF WHICH IN PARAGRAPH 5 OF THE SUBMISSION, IT IS EXPLAINED THAT THE AMOUNT DUE TO LIABILITY FOR MATERIAL PURCHASED AND SUPPLIED TO K K MARBLES. THE APPELLANT HAD ARRANGED FOR GRANITE TO M/S. K K MARBLES FOR WHICH HE HAD RECEIVED THE BROKERAGE. THE CHEQUE ISSUED TO ADINATH GRANITE AN D MOTHIYA GRANITES WERE ONLY FOR PURCHASE OF THESE MARBLES AND THESE CHEQUE S HAVE BEEN DEBITED TO ACCOUNT OF K K MARBLES ACCOUNT. HENCE THESE TWO AC COUNTS MONTIYA GRANITES AND ADINATH GRANITES ARE NOT APPEARING IN THE BALAN CE SHEETS WHICH IS FOUND AFTER THOUGHT AS THE ASSESSING OFFICER SPECIFICALLY ASKED THE APPELLANT TO PRODUCE EVIDENCE IN RESPECT OF THE SOURCE OF DEPOSI T IN THE BANK ACCOUNT BUT THE APPELLANT FAILED TO SUBMIT ANY EXPLANATION BEFO RE THE ASSESSING OFFICER. EVEN DURING THE APPELLATE PROCEEDINGS EXCEPT TAKING THE ARGUMENT, APPELLANT FAILED TO PRODUCE ANY EVIDENCE TO SUPPORT HIS ARGUM ENT. IT IS FURTHER EVIDENT FROM THE BANK ACCOUNT STATEMENTS THAT AS SOON THE C ASH OF RS. 2,00,000 DEPOSITED ON 7.5.2003 AND RS. 50,000 ON 22.5.2003, THE CHEQUES EQUIVALENT TO RS. 2,50,000 WERE ISSUED TO M/S. ADINATH GRANITES P VT LTD AND MOTHIYA GRANITES PVT AND JOURNAL ENTRIES PASSED AFTERWARD T O EXPLAIN THE UNEXPLAINED CASH DEPOSITED IN THE BANK ACCOUNT. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE APPELLA NT FAILED TO PROVE THE GENUINENESS OF THE CREDITS OF RS. 5,60,000 INTRODUC ED IN THE BOOKS OF ACCOUNTS, HE ALSO FAILED TO EXPLAIN THE SOURCE OF THE CASH DE POSITS OF RS. 2,50,000 IN THE BANK ACCOUNT AND THE SOURCE OF RS. 1,15,000 CLAIMED TO HAVE BEEN RECEIVED FROM THE DEBTOR ACCORDINGLY, THE ADDITION MADE BY T HE ASSESSING OFFICER TO THE EXTENT OF RS. 9,25,000 IS UPHELD. 9 ITA NOS.1207 TO 1209/BANG/10 NOW THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND FURTHER SUBMITTED THAT THE ASSES SING OFFICER MADE ADDITION UNDER SECTION 69 OF THE ACT CONSIDERING THE INVESTMENT MADE BY THE A SSESSEE WHILE THE LEARNED CIT(A) SUSTAINED THE ADDITION UNDER SECTION 68 OF THE ACT EVEN FOR T HOSE ITEMS WHICH WERE CONSIDERED BY THE ASSESSING OFFICER TO BE GENUINE DURING THE COURSE O F ASSESSMENT PROCEEDINGS. THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN MAKING THE NEW ADDITION UNDER DIFFERENT SOURCES. IT WAS SUBMITTED THAT THE LEARNED CIT(A) DID NOT PROVIDE A NY OPPORTUNITY AND NO NOTICE FOR ENHANCEMENT OF INCOME UNDER SECTION 68 OF THE ACT W AS GIVEN TO THE ASSESSEE. IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT TH E LEARNED CIT(A) ALTOGETHER IGNORED THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTIO N 69 OF THE ACT EVEN WHEN THE ASSESSEE FULLY EXPLAINED THE SOURCE OF THE INVESTMENT. RELI ANCE WAS PLACED ON THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAI BA HADUR HARDUTROY MOTILAL CHAMARIA (1967) (66 ITR 443) (SC). 9. IN HIS RIVAL SUBMISSION, THE LEARNED DEPARTMENTA L REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A) AND FURTHER SUBM ITTED THAT THE LEARNED CIT(A) HAD NOT ENHANCED THE ADDITION BUT SUSTAINED THE ADDITION FO R WHICH THE ASSESSEE HAD NOT GIVEN PLAUSIBLE EXPLANATION AND PRODUCED THE DOCUMENTARY EVIDENCE. THEREFORE, THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE ADDITION. 10 ITA NOS.1207 TO 1209/BANG/10 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NO T IN DISPUTE THAT THE ASSESSING OFFICER MADE THE ADDITION BY CONSIDERING THE INVESTMENTS MADE BY THE ASSESSEE. THEREFORE, THE ADDITION WAS RELATING TO THE INVESTMENT BUT THE LEARNED CIT(A) S USTAINED THE ADDITION UNDER SECTION 68 OF THE ACT BY CONSIDERING THE LIABILITY RELATING TO LOAN A ND DEPOSITS, ETC AS NON-GENUINE. IN THE PRESENT CASE, THE ADDITION WAS MADE BY THE ASSESSING OFFICE R UNDER THE HEAD INVESTMENT BY CONSIDERING THE PROVISIONS OF SECTION 69 OF THE ACT WHILE THE LEARNED CIT(A) SUSTAINED THE ADDITION UNDER DIFFERENT SECTION I.E. UNDER SECTION 68 OF THE ACT AND EVEN MADE THE ADDITION FOR THOSE SUNDRY CREDITORS THE FACTS RELATING TO WHICH WERE DISCUSSED BY THE ASSESSING OFFICER IN PARAGRAPHS 6, 7 & 8 OF HIS ASSESSMENT ORDER DATED 3 1.12.2008 BUT NO SEPARATE ADDITION WAS MADE FOR THOSE CREDITORS BY THE ASSESSING OFFICER. THE LEARNED CIT(A) ISSUED NO NOTICE FOR ENHANCEMENT OF THE ADDITION UNDER SECTION 68 OF THE ACT TO THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAD MADE THE ADDITION BY CONS IDERING THE PROVISIONS OF SECTION 69 WHILE THE LEARNED CIT(A) SUSTAINED THE ADDITION BY CONSID ERING THE PROVISIONS OF SECTION 68 OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RA I BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPRA) HAS HELD AS UNDER : THE APPELLATE ASSISTANT COMMISSIONER HAS NO JURIS DICTION UNDER SECTION 31(3) OF THE INDIAN INCOME TAX ACT, 1922, TO ASSESS A SOURCE OF INCOME WHICH IS NOT DISCLOSED EITHER IN THE RETURNS FILED BY THE ASSESS EE OR IN THE ASSESSMENT ORDER. IT IS NOT THEREFORE OPEN TO THE APPELLATE ASSISTANT CO MMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE ASSESSEE O R THE ASSESSMENT ORDER OF THE INCOME TAX OFFICER, WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEMENT UNDER SECTION 31(3) IS RESTRIC TED TO THE SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT MATTER OF CONSIDERATION BY THE ITO FROM THE POINT OF VIEW OF TAXABILITY. IN THIS CONTEXT CONSIDERATION DOES NOT MEAN INCIDENTAL OR 11 ITA NOS.1207 TO 1209/BANG/10 COLLATERAL EXAMINATION OF ANY MATTER BY THE ITO I N THE PROCESS OF ASSESSMENT. THERE MUST BE SOMETHING IN THE ASSESSMENT ORDER TO SHOW THAT THE ITO APPLIED HIS MIND TO THE PARTICULAR SUBJECT MATTER OR THE PA RTICULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXABILITY OR TO ITS NON-TAXABILITY A ND NOT TO ANY INCIDENTAL CONNECTION. IN THE PRESENT CASE ALSO THE LEARNED CIT(A) FOUND T HAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE CREDITS, THE SOURCE OF THE CASH DEPOSITS IN BANK AND THE SOURCE OF THE AMOUNT RECEIVED FROM DEBTORS, IN OTHER WORDS, THE L EARNED CIT(A) CONSIDERED THE GENUINENESS OF CASH CREDITS UNDER SECTION 68 OF THE ACT WHICH W AS NOT THE CASE OF THE ASSESSING OFFICER. THEREFORE, THE LEARNED CIT(A) IN FACT ENHANCED THE ADDITION UNDER SECTION 68 OF THE ACT BUT DID NOT ISSUE ANY NOTICE FOR ENHANCEMENT. THEREFORE, H IS POWER OF ENHANCEMENT WAS RESTRICTED TO THE SOURCES OF INCOME WHICH HAD BEEN THE SUBJECT MA TTER OF CONSIDERATION BY THE ASSESSING OFFICER. AT THE SAME TIME, THE ASSESSEE DID NOT PR ODUCE THE RELEVANT DOCUMENTARY EVIDENCE BEFORE THE LEARNED CIT(A) TO PROVE THE GENUINENESS OF THOSE TRANSACTIONS WHICH WERE CONSIDERED BY HIM AND THE ASSESSING OFFICER ALSO IN THE ASSESSMENT ORDER HAD CLEARLY STATED IN PARA 9 THAT THE ASSESSEE HAD NOT PRODUCED CREDITORS FOR VERIFICATION BEFORE HIM, BUT NO ADDITION FOR THOSE CREDITORS WAS MADE. IN THE PRESENT CASE, IT IS NOT CLEAR AS TO WHETHER THE ASSESSING OFFICER WAS SATISFIED WITH THE EXPLANATION, IF ANY, GIVEN BY THE ASSESSEE AND IT IS ALSO NOT CLEAR AS TO WHETHER THE LEARNED CIT(A) WAS SATISFIED WITH EX PLANATION OFFERED BY THE ASSESSEE BEFORE HIM RELATING TO THE INVESTMENT WITH M/S. K.K. MARBL E & GRANITES. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS MENTIONED HEREIN ABOVE, A RE OF THE VIEW THAT THIS CASE REQUIRES FRESH ADJUDICATION AT THE LEVEL OF ASSESSING OFFICER. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND THE CASE IS REMANDED TO T HE FILE OF ASSESSING OFFICER FOR FRESH 12 ITA NOS.1207 TO 1209/BANG/10 ADJUDICATION, IN ACCORDANCE WITH LAW AFTER PROVIDIN G DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN ITA NOS.1208/BANG/10 & 1209/BANG/10, T HE FACTS ARE SIMILAR AS WERE IN ITA NO.1207/BANG/10 (SUPRA), THE ONLY DIFFERENCE IS IN AMOUNT INVOLVED, THEREFORE, OUR FINDINGS GIVEN IN RESPECT OF ITA NO.1207/BANG/10 IN THE FORM ER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR THESE TWO APPEALS FOR THE ASSESSMENT YEARS I.E . 2005-06 & 2007-08. 10. IN THE RESULT THE APPEALS ARE ALLOWED FOR STATI STICAL PURPOSE. ( ORDER PRONOUNCED IN THE OPEN COURT ON 16.12.2011.) SD/- SD/- (GEORGE GEORGE) (N.K. S AINI) JUDICIAL MEMB ER ACCOUNTANT MEMBER BANGALORE, DATED: 16.12.2011. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, -A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORD ER ASSTT. REGISTRAR, ITAT, BANGALORE