VIRESH D SHETH, MUMBAI V. ITO 21(2)(3), MUMBAI

ITA 1287/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84276 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Additional evidence; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 1287/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) VIRESH D. SHETH 228/9, PAREKH BUILDING, SION (E), MUMBAI-400 022 / VS. ITO-21(2)(3), PRATYAKSHA KAR BHAVAN, BANDRA KURLA ROAD, BANDRA (E), MUMBAI ! ./' ./PAN/GIR NO. AAUPS 0516 R ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI B. V. JHAVERI $%!# & ' / RESPONDENT BY : SHRI JITENDRA KUMAR ( )*+ & ,- / DATE OF HEARING : 25.09.2014 ./0 & ,- / DATE OF PRONOUNCEMENT : 28.11.2014 1 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI (CIT(A) FOR SH ORT) DATED 10.12.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER DATED 29.12.2008. 2. THE APPEAL CONCERNS TWO ADDITIONS U/S. 41(1) OF THE ACT, SINCE CONFIRMED BY THE FIRST APPELLATE AUTHORITY. THE ASSESSEE HAS MADE A PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE QUA BOTH THE IMPUGNED ADDITIONS UNDER RULE 29 OF THE AP PELLATE TRIBUNAL RULES, 1963 (THE RULES HEREINAFTER). WE SHALL ACC ORDINGLY DISCUSS BOTH THE FACTS AS WELL 2 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO AS THE ADDITIONAL EVIDENCE/S IN RELATION THERETO, S EPARATELY FOR BOTH THE CREDITS, AS UNDER, HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL O N RECORD: 3.1 M/S. CHANDRALOK FABRICS (RS.1,08,553/-): THE CREDIT OUTSTANDS ADMITTEDLY FROM A DATE PRIOR T O 31.03.2000 IN RESPECT OF WORK OF DYING AND PRINTING. THE REASON FOR NON-PAYMENT, AS EXPLAINED BY THE ASSESSEE, IS NOT FOR CARRYING OUT THE WORK PROPERLY, I.E., DEFECTIVE WORK. NOTICE U/S.133(6) TO THE PARTY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AT THE ADDRESS SUPPLIED BY THE ASSESSEE, TOWARD VERIFYING THE SAID BALANCE AS ON 31.03.2006, I.E., EVEN AFTER OVER SIX YEARS, CAME BACK UNSERVED, WITH THE POSTAL REMARK LEFT. THE A SSESSEE WAS UNABLE TO SUPPLY THE WHEREABOUTS OR THE CORRECT ADDRESS OF THE PARTY, WI TH WHICH IT HAD ADMITTEDLY NO CONTACT; THERE BEING NO TRANSACTION WITH IT SINCE. THE ASSES SEE WAS PROVIDED OPPORTUNITY IN THE APPELLATE PROCEEDINGS BY REMANDING THE MATTER BACK TO THE ASSESSING OFFICER (A.O.), WHEREAT AGAIN THE ASSESSEE WAS UNABLE TO, DESPITE A BUNDANT OPPORTUNITY, AS MUCH AS SECURE A CONFIRMATION FROM THE SAID PARTY (REFER RE MAND REPORT DATED 13.10.2010/PB PGS.24-25). THOUGH ANOTHER ADDRESS OF THE CREDITOR WAS SUPPLIED, THE A.O.S COMMUNICATION THEREAT ALSO REMAINED UNRESPONDED, SO THAT IT WAS DOUBTFUL IF THE NEW ADDRESS WAS THE CORRECT ADDRESS. THERE BEING NO CLA IM BY THE SAID PARTY, EVEN AS 10 YEARS HAD LAPSED SINCE, THE SAME GAVE RISE TO THE UNMISTA KABLE INFERENCE OF THE LIABILITY HAVING CEASED TO EXIST. THE ADDITION, MADE U/S.41(1), WAS ACCORDINGLY CONFIRMED AS INCOME, EITHER U/S.41(1) OR S. 28(IV), RELYING ON THE DECIS IONS IN THE CASE OF CIT VS. AGARPARA CO. LTD. [1986] 158 ITR 78 (CAL); CIT VS. HIDES & LEATHER PRODUCTS (P.) LTD. [1975] 101 ITR 61 (GUJ); AND CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. [1996] 222 ITR 344 (SC). THE ASSESSEE BEFORE US HAS (VIDE LETTER DATED 24.02 .2014) STATED THAT THE PAYMENT (OF RS.1,08,553/-) TO THE SAID PARTY HAS SINCE BEEN MAD E ON 06.02.2014 BY CROSS PAYEE CHEQUE, DISCHARGING THE LIABILITY. THE SAME WOULD I TSELF, IT IS ARGUED, PROVE THE EXISTENCE OF THE LIABILITY AS ON 31.03.2006, THE RELEVANT YEA R-END. A COPY OF THE CREDITORS ACCOUNT IN ITS OWN BOOKS (AT PG.27), REFLECTING THE SAID PA YMENT, IS ADVERTED TO IN SUPPORT. THE SAME IS PRAYED FOR ADMISSION UNDER RULE 29 OF THE R ULES. 3 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO WE ARE WHOLLY UNMOVED BY THE ASSESSEES CASE, INCLU DING THE ADDITIONAL EVIDENCE SOUGHT TO BE ADMITTED. TO BEGIN WITH, THE AMOUNT IS ADMITTEDLY DISPUTED, WHICH IS THE REASON FOR IT OUTSTANDING - FOR YEARS TOGETH ER. NOT ONLY DOES IT CONTINUE YEAR AFTER YEAR, THERE IS NO ATTEMPT BY EITHER THE ASSESSEE TO PAY OR BY THE CREDITOR TO CLAIM IT; THE ASSESSEE BEING NEITHER IN CONTACT WITH NOR AWARE OF THE CREDITORS WHEREABOUTS. THERE IS ALSO NO ATTEMPT AT DISPUTE RESOLUTION; THE AMOUNT B EING UNPAID DUE TO THE STATED REASON OF THE WORK HAVING NOT BEEN CARRIED OUT PROPERLY, WITH THE ASSESSEES ADDRESS, WHICH REMAINED UNCHANGED, BEING ONLY KNOWN TO THE CREDIT OR. WHY, THEREFORE, UNDER THE CIRCUMSTANCES, ONE MAY ASK, THE IMPUGNED CREDIT BE CONSIDERED AS NO LONGER REPRESENTING A LIABILITY. THE SAME CANNOT SURELY BE CONSIDERED A S SO MERELY BECAUSE THE ASSESSEE DOES NOT WRITE BACK THE SAME IN ITS ACCOUNTS, WHICH CANN OT BE CONSIDERED AS SACROSANCT. IN THE ABSENCE OF THE ASSESSEE FURNISHING ANY DETAILS IN I TS RESPECT, OR LEADING ANY EVIDENCE TO THE CONTRARY, THE ENTIRE UNPAID AMOUNT IS TO BE THEREFORE CONSIDERED AS THE LOSS ARISING TO THE ASSESSEE THUS, I.E., ON ACCOUNT OF DEFECTIVE WO RK AND, ACCORDINGLY, SOUGHT TO BE COMPENSATED TO IT BY PAYING THE CREDITOR LESS BY TH AT AMOUNT, SO THAT IT WAS NOT PAID. IN ANY CASE, THE ENTIRE OF IT IS TO BE CONSIDERED AS D ISPUTED BY THE ASSESSEE, WHO HAS THROUGHOUT FAILED TO SHOW IN ANY MANNER THAT THE LI ABILITY TO ANY EXTENT QUA THE SAID AMOUNT EXISTS, OR OF ANY ATTEMPT BY THE PARTY TOWAR D DISPUTE RESOLUTION. THE ASSESSEES ACCOUNTS REFLECTING IT AS A LIABILITY, IT IS ONLY H E ON WHOM EVEN OTHERWISE, BEING IN THE KNOW OF THE FACTS, THE ONUS TO PROVE THE TRUTH OF I TS ACCOUNTS LIES. THIS IS PARTICULARLY SO WHEN THE SURROUNDING AND CIRCUMSTANCIAL FACTS, AS I N THE INSTANT CASE, UNEQUIVOCALLY SUGGEST OTHERWISE. EVEN THE ATTEMPTS BY THE REVENUE TO VERIFY THE MATTER DID NOT MEET WITH ANY SUCCESS. EVEN ASSUMING THE CREDITORS SECO ND ADDRESS FURNISHED BY THE ASSESSEE AS CORRECT, WHY DID NOT THE CREDITOR WITH WHOM TH E ASSESSEE HAD ESTABLISHED CONTACT, RESPOND? THE POSITION CONTINUES FOR OVER TEN YEARS (OF THE BOOKING OF LIABILITY). THE ONLY IRRESISTIBLE CONCLUSION IS THAT THE SAME DOES NOT R EPRESENT A LIABILITY OR, IN ANY CASE, THE ASSESSEE HAD FAILED TO PROVE IT AS SO, DESPITE GRAN T OF ABUNDANT OPPORTUNITY. WE, ACCORDINGLY, FIND NO MERIT IN ITS CASE. RELIANCE ON CIT VS. SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 (SC) WOULD BE TO NO CONSEQUENCE. VIDE THE SAME THE HONB LE APEX 4 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO COURT HAD CLARIFIED THAT A UNILATERAL ENTRY OF WRIT E BACK IN THE ASSESSEES ACCOUNTS WOULD NOT BE DETERMINATIVE OF THE MATTER. THE SAME ONLY U NDERSCORES OUR UNDERSTANDING OF THE EXISTENCE OF A LIABILITY (OR ITS CESSATION) AS BEIN G A MATTER OF FACT, WHICH WOULD BE REQUIRED TO BE PROVED BASED ON ALL AVAILABLE FACTS AND MATERIAL ON RECORD AND, FURTHER THAT ACCOUNTS CANNOT BE CONSIDERED AS DETERMINATIVE OF T HE MATTER. REFERENCE IN THE MATTER MAY BE MADE TO THE DECISIONS, INTER ALIA , IN KESORAM INDUSTRIES & COTTON MILLS LTD . V . CIT [1992] 196 ITR 845 (CAL); KALYANI MAAN SINGH VS. ITO (IN ITA NO. 6500/MUM/2011 DATED 14.11.2013); AND ITO VS. SAJJANKUMAR DIDWANI (IN ITA NOS. 7716 & 7793/MUM/2012 DATED 28.05.2014). IN FACT, TH E LAW STANDS SINCE AMENDED, SO THAT IT IS NOT PERMISSIBLE FOR AN ASSESSEE TO PL EAD ITS CASE DE HORS OR IN DISREGARD OF ITS ACCOUNTS AND, THEREFORE, EVEN A UNILATERAL ENTRY OF WRITE OFF IN ITS BOOKS OF ACCOUNT WOULD BE TAKEN COGNIZANCE OF (REFER: EXPLANATION 1 BELOW SECTION 41(1)). WE, IN VIEW OF THE FOREGOING, FIND NO MERIT IN TH E ASSESSEES CLAIM. THERE IS ACCORDINGLY NO QUESTION OF ADMISSION OF ADDITIONAL EVIDENCE UNDER R.29 OF THE RULES. AS IT APPEARS, THE ASSESSEE IN HIS BID TO EXHIBIT ITS CO NTENTION AS TO THE EXISTENCE OF THE IMPUGNED LIABILITY AS CORRECT, PURSUED THE CREDIT OR TO MAKE THE PAYMENT IN VIEW OF ITS APPEAL BEFORE THE TRIBUNAL, OUTSTANDING SINCE 11.02 .2011. THE CLAIM OF PAYMENT, WHICH CANNOT BE REGARDED AS GENUINE MERELY BECAUSE THE TR ANSACTION IS PER CHEQUE, CONTRADICTS THE ASSESSEES OWN CLAIM OF THE AMOUNT BEING DISPUT ED ON ACCOUNT OF DEFECTIVE/IMPROPER WORK. HOW, THEN, AND WHAT THEREFORE FORMS THE BASIS , ONE MAY ASK, FOR IT MAKE THE PAYMENT FOR THE WHOLE AMOUNT, FOR WHICH, RATHER THA N THE CREDITOR, IT IS THE ASSESSEE WHO SEEKS THE LATTER WHOM IT HAD DECLINED THE PAYMENT FOR DEFICIENCY IN WORK FOR OVER 14 YEARS, WHICH CAN ONLY BE REGARDED AS INCREDULOUS. T HERE IS NO EXPLANATION AS TO THE BASIS OR THE CIRCUMSTANCES UNDER WHICH THE PAYMENT STANDS MADE, AND FOR THE ENTIRE DISPUTED SUM. THE CLAIM IS COMPLETELY INCONSISTENT WITH THE ADMITTED AND EXHIBITED FACTS AND CIRCUMSTANCES OF THE CASE. WE REGARD IT AS MAKE-BEL IEVE, SO THAT NO EVEN USEFUL PURPOSE WOULD BE SERVED IN ADMITTING FRESH EVIDENCE FOR ADJ UDICATING THIS MATTER, I.E., U/R. 29. WE, ACCORDINGLY, DENY THE ASSESSEES APPLICATION FOR AD MISSION OF ADDITIONAL EVIDENCE U/R. 29. WE DECIDE ACCORDINGLY. 5 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO 3.2 DOMBIVALI ACID AND CHEMICALS (DAC) (RS.8,58,833 /-): WHILE THE ASSESSEES BOOKS REVEALED A CREDIT BALANC E IN THE ACCOUNT OF THE SAID PARTY, A TRADE CREDITOR, IN THE STATED SUM, CONSTAN T SINCE 31.03.2001, THE LATTERS ACCOUNTS REVEALED THE FOLLOWING BALANCES, FURNISHED IN RESPO NSE TO NOTICE U/S.133(6): ASSESSMENT YEAR AMOUNT (RS.) 2000-01 5,83,324 2001-02 12,14,849 2002-03 10,31,525 2003-04 10,31,525 2004-05 NIL IN EXPLANATION FOR THE DIFFERENCE, THE ASSESSEE EXP LAINED THE SAID PARTY TO HAVE BEEN PAID AND, THUS, IT TO HAVE RECEIVED RS.9,67,52 1/- FROM SHRI BHAVESH D. SHETH (BS), THE ASSESSEES BROTHER, ON ITS BEHALF, DURING THE P ERIOD 15.01.2001 TO 27.11.2011. A LETTER DATED 20.12.2008 FROM THE SAID PARTY, ADDRESSED TO SHREE SHANTI SILK MILLS (SSSM FOR SHORT), THE ASSESSEES PROPRIETARY CONCERN, WAS PRO DUCED IN SUPPORT. FURTHER, AS PER THE INFORMATION FURNISHED BY THE SAID PARTY U/S. 133(6) , ITS ACCOUNTS BORE A DEBIT AND CREDIT BALANCE AS ON 31.03.2004, I.E., AS DUE FROM AND TO THE ASSESSEES TWO PROPRIETARY CONCERNS, SSSM AND SUJATA SILK MILLS (SSM FOR SHO RT), AT RS.10,29,869/- AND RS.10,31,525/- RESPECTIVELY, WHICH WERE SET OFF, WI TH THE NET BALANCE OF RS.1,656/- WRITTEN BACK AS REBATE. THERE WAS NO TRANSACTION P OST 31.03.2004. COPIES OF THE BALANCE- SHEET OF BS (FROM 31.03.2002 TO 31.03.2008), REFLEC TING THE SAID PAYMENTS (AGGREGATING TO RS.9.68 LACS) TO DAC AS LOAN AND ADVANCE, WERE ALSO SUBMITTED, BESIDES A CONFIRMATION FROM HIM TO THE EFFECT THAT THE SAID P AYMENTS BY HIM TO DAC WERE MADE FOR AND ON BEHALF OF THE ASSESSEE TO HELP THE LATTER (T HE ASSESSEE) IN FINANCIAL CRISIS. IN THE VIEW OF THE REVENUE, HOWEVER, THERE WAS NOTHING TO LINK THE PAYMENTS BY BS TO DAC WITH THE OUTSTANDING OF THE LATTER AS BEING REFLECTED I N THE ASSESSEES ACCOUNTS. WHY, IN CASE THE PAYMENT WAS MADE FOR AND ON BEHALF OF THE ASSESSEE, DID THE ASSESSEES ACCOUNTS NOT REFLECT THE SAME, CREDITING BS IN ITS ACCOUNTS ? ALSO, BS DID NOT DEBIT THE SAID PAYMENTS IN HIS ACCOUNTS TO THE ACCOUNT OF THE ASSE SSEE, ON WHOSE BEHALF THE SAME ARE STATED TO HAVE BEEN MADE, BUT TO DAC, SO THAT THESE WERE INDEPENDENT TRANSACTIONS. EVEN 6 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO AS STATED BY THE LD. CIT(A), CORRECT ENTRIES HAD NO T BEEN PASSED BY EITHER THE ASSESSEE OR HIS BROTHER IN THEIR BOOKS OF ACCOUNT EVEN TO DATE . HOW COULD THE SAID PAYMENTS BY BS BE THEN LINKED WITH THE ASSESSEES LIABILITY TO DAC? T HE ASSESSEE HAS SINCE PASSED THE ENTRIES IN ITS ACCOUNTS, WHICH IS SOUGHT TO BE ADM ITTED AS ADDITIONAL EVIDENCE. OUR FIRST OBSERVATION IS THAT THE ENTRIES STATED TO BE PASSED BY THE ASSESSEE IN THE BOOKS OF HIS PROPRIETARY FIRM, SSM, IN WHICH ITS O THER PROPRIETARY CONCERN, SSSM, MERGED, WERE NOT PASSED, AS CLAIMED, ON 31.03.2010. THIS IS AS, IF SO, WHY WERE THE ACCOUNTS WERE NOT PRESENTED TO THE LD. CIT(A), WHO HAS FINALLY HEARD THE APPEAL ON 10.12.2010, WITH HE RATHER STATING OF NO CORRECTIVE ENTRIES HAVING BEEN PASSED EVEN BY THAT DATE. SO, HOWEVER, DAC HAS CREDITED THE PAYMEN TS BY BS IN ITS ACCOUNTS TO THE ACCOUNT OF SSSM (PB PG.12). AS SUCH, FOR THE REVENU E TO CONTEND THAT THERE WAS NO NEXUS BETWEEN THE PAYMENTS BY BS (I.E., AT RS.9.68 LACS, FROM JANUARY TO NOVEMBER, 2001) WITH THE ASSESSEES LIABILITY TO DAC, OUTSTAN DING IN ITS BOOKS AT RS.8.59 LACS SINCE 31.03.2002 (PB PGS. 6-8), IS WITHOUT BASIS. RATHER, THE DIFFERENCE BETWEEN THE TWO SETS OF ACCOUNTS; THE PAYMENT BEING AT A HIGHER SUM OF RS.9 .68 LACS, AS AGAINST THE ADMITTED LIABILITY OF RS.8.59 LACS, IS ALSO EXPLAINED PER TH E ACCOUNTS OF DAC (PB PG.12) TO BE ON ACCOUNT OF INTEREST ON THE OVERDUE PAYMENT (AT RS.1 .07 LACS), WITH THE BALANCE (RS.0.02 LACS) WRITTEN OFF TO THE REBATE ACCOUNT. THIS (I.E. , THE RECONCILIATION OF THE TWO AMOUNTS) IS SIGNIFICANT IN-AS-MUCH AS THE REVENUES CHARGE IS O F THERE BEING NO NEXUS BETWEEN THE TWO SUMS, I.E., THE LIABILITY TO DAC OUTSTANDING IN THE ASSESSEES BOOKS AND THE ADMITTED PAYMENTS THERETO BY BS. ALSO, WHY WOULD ANYONE PAY IN EXCESS OF WHAT ONE IS LIABLE FOR, PARTICULARLY CONSIDERING THAT HE IS FACING FINANCIA L CRISES ? THE NON PASSING OF THE JOURNAL ENTRIES OR, RATHER, CORRECTS ENTRIES, I.E., TO THE ACCOUNT OF THE RIGHT PERSON, FROM WHOM THE PAYMENT IS RECEIVABLE OR DUE TO, IN THEIR RESPECTIV E BOOKS OF ACCOUNT BY THE ASSESSEE AND BS, SHOULD THEREFORE NOT BE OF MUCH CONSEQUENCE. TH IS IS AS THE PAYEE (DAC) HIMSELF ADMITS (THROUGH ITS ACCOUNTS) TO PAYMENTS FROM BS BEING RECEIVED FROM AND ON BEHALF OF THE ASSESSEES FIRM, SSSM, WITH THE PAYER (BS) ALSO CONFIRMING THIS TO BE SO (PB PGS.19- 21). THEIR ACCOUNTS HAVE NOT BEEN IMPUGNED BY THE REVENU E IN ANY MANNER . 7 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO AGAIN, HOWEVER, THE COPIES OF ITS ACCOUNTS (IN THE FIRM, SSM, FOR FINANCIAL YEAR 2009-10), NOW SUBMITTED BEFORE US (PB PGS.30-31), P RAYING FOR THEIR ADMISSION AS ADDITIONAL EVIDENCE, EXHIBIT THE TRANSFER OF THE CREDIT OF DAC (RS.8.58 LACS), FIRSTLY, TO THE ACCOUNT OF BS (WHICH IS ONLY UNDERSTANDABLE IN- AS-MUCH AS HE HAS ADMITTEDLY MADE THE PAYMENTS TO DAC ON ASSESSEES BEHALF), AND THEN TO THE CAPITAL ACCOUNT OF THE ASSESSEE . THE LATTER ENTRY NEEDS TO BE EXPLAINED. WHY SHOULD A LIABILITY BE TRANSFERRED TO THE PROPRIETORS CAPITAL ACCOUNT , WHICH RATHER ESTABLISHES THE REVENUES CASE OF IT NOT BEING OR IN ANY CASE NO LONGER REPRESENTING A LIABI LITY? IN FACT, THE ASSESSEE HAD ALREADY ADVANCED RS.5 LACS TO BS AS ON 31.03.2008, SO THAT THE TRANSFER OF THE LIABILITY OF DAC IN ITS ACCOUNTS TO THE ACCOUNT OF THE PAYER (BS) WOUL D RESULT IN A NET SUM (LIABILITY) OF RS.4.67 LACS TO BS. WE, THEREFORE, THOUGH INCLINED TO CONSIDER THE ISSUE AS HAVING BEEN SUBSTANTIALLY EXPLAINED BY THE ASSESSEE, FIND THE J OURNAL ENTRIES PASSED BY THE ASSESSEE IN ITS BOOKS (SMM) ON 31.03.2010 AS, IN EFFECT, INCON GRUENT AND INCONSISTENT WITH ITS AVOWED CLAIM OF IT BEING LIABLE TO BS, I.E., IN SUB STITUTION OF THE CREDIT TO DAC, WHICH (SUBSTITUTION) THOUGH HAD REMAINED TO BE RECOGNIZED IN ITS ACCOUNTS. THE SAID TRANSFER TO ITS CAPITAL ACCOUNT CHANGES THE WHOLE COMPLEXION OF THE CASE, VINDICATING, AS IT WERE, THE REVENUES CHARGE OF THE IMPUGNED SUM AS NOT BEING, OR NO LONGER BEING, A LIABILITY OF THE ASSESSEE. THE NON-PASSING OF THE ENTRIES, REFLECTIN G THE CORRECT STATEMENT OF AFFAIRS, BOTH BY THE ASSESSEE AND BS IN THEIR ACCOUNTS, I.E., PRI OR TO 31/3/2010, ASSUMES SIGNIFICANCE IN CONTEXT THEREOF. THE SAID EVIDENCE IS CRUCIAL, AND IS ACCORDINGLY ADMITTED. THE MATTER IS CONSEQUENTLY RESTORED BACK TO THE FIL E OF THE A.O. TO ENABLE THE ASSESSEE TO EXPLAIN THE SAID ENTRY IN ITS ACCOUNTS . THIS IS RELEVANT AND IMPORTANT AS IT, AND ONLY IT, THAT WOULD GIVE THE ASSESSEE AN OPPORTUNIT Y TO EXPLAIN THE SAME, I.E., THE SAID TRANSFER OF RS.8.58 LACS TO ITS CAPITAL ACCOUNT, I NSTEAD OF CONTINUING TO OUTSTAND IN THE ACCOUNT OF BS, TO WHICH THE IMPUGNED AMOUNT WAS IN FACT FIRST CREDITED. AGAIN, WHAT HAS TRANSPIRED, EITHER BETWEEN 31.03.2002 TO 31.03.2010 , OR ON 31.03.2010 ITSELF, FOR THE ASSESSEE TO HAVE TRANSFERRED THE SAID LIABILITY TO ITS CAPITAL ACCOUNT ON 31.03.2010, WHICH ENTRY WE HAVE RATHER OBSERVED TO HAVE BEEN PASSED O NLY SUBSEQUENT TO 31.03.2010 INASMUCH AS THE SAME STOOD NOT DISCLOSED TO THE FIR ST APPELLATE AUTHORITY EVEN AS THE 8 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO ASSESSEES APPEAL BEFORE HIM WAS OUTSTANDING AT THE RELEVANT TIME. IN OUR VIEW, IT WOULD ALSO NEED TO BE EXPLAINED AS TO HOW AND WHY THE BAL ANCE AMOUNT OF RS.1.07 LACS PAID BY BS TO DAC AS AND BY WAY OF INTEREST HAD NOT BEEN AC COUNTED FOR OR OTHERWISE ADJUSTED BETWEEN THE ASSESSEE AND BS. THIS IS AS THE ASSESSE E SHALL, AFTER ALL, STAND TO BE LIABLE TO BS FOR RS.9.68 LACS, I.E., THE FULL AMOUNT PAID BY THE LATTER TO DAC, EVEN AS, AS IT APPEARS TO US, AND MOST SURPRISINGLY, HE EVEN APPROPRIATES THE PRINCIPAL AMOUNT FOR WHICH HE CLAIMS TO CONTINUE TO BE LIABLE FOR, ALBEIT TO BS, AS HE HAD PAID THE CREDITOR (DAC) ON ITS BEHALF. THE ASSESSEES ACCOUNTS FOR F.Y. 2009-10, A S WELL AS FOR THE SUBSEQUENT YEARS, WOULD ONLY HAVE CRYSTALLIZED AND, IN FACT, ALSO BEE N FURNISHED TO THE REVENUE SINCE. AGAIN, WHAT ADJUSTMENT ENTRIES, IF ANY, HAS BS, AN ASSESSEE WITH THE REVENUE, CORRESPONDINGLY PASSED IN HIS BOOKS OF ACCOUNTS. TH E ONUS TO ESTABLISH ITS CASE, THOUGH, WOULD BE ON THE ASSESSEE. WE MAY IN THIS REGARD CLA RIFY THAT THE ASSESSEE SHALL NEITHER BE ALLOWED TO RAISE ANY NEW PLEA, NOR ONE INCONSISTENT WITH ITS ACCOUNTS; WE HAVING EXPLAINED THAT TO BE THE PREMISE OF EXPLANATION 1 TO S. 41(1). THE JOURNAL ENTRIES, PURPORTEDLY PASSED ON 31/3/2010, ARE OSTENSIBLY COR RECTIVE ENTRIES, PASSED AFTER DUE DELIBERATION. THE PURPORT OF THE EXERCISE IS TO EST ABLISH THE EXISTENCE OR OTHERWISE OF THE ASSESSEES LIABILITY TO DAC AS ON 31/3/2006, OR, AS EXPLAINED, TO BS IN LIEU THEREOF; THE ASSESSEES ACCOUNTS BEING ADMITTEDLY DEFICIENT, WIT H EVEN THE CORRECTED ACCOUNTS BEING IN CONTRADICTION TO THE STATED POSITION. THE A.O. S HALL, MINDFUL OF OUR OBSERVATIONS, ADJUDICATE THE MATTER BY ISSUING DEFINITE FINDINGS OF THE FACT AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE. WE DECIDE ACCORDIN GLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. 20,3 )452, & 6& 789 : 1 * ; , & , < ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 28, 2014 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( =+ MUMBAI; >) DATED : 28.11.2014 9 ITA NO. 1287/MUM/2011 (A.Y. 2006-07) VIRESH D. SHETH VS. ITO *.). ./ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ?, ( ) / THE CIT(A) 4. ( ?, / CIT - CONCERNED 5. B*C $,)4 , - 40 , ( =+ / DR, ITAT, MUMBAI 6. D5 E+ / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ( =+ / ITAT, MUMBAI