THE ITO, Ward -5(2), Ahmedabad V. PRATHANA CONSTRUCTION PVT. LTD., Ahmedabad

ITA 1343/AHD/2003

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2410 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-10-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 07-04-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Corroborative evidences; Block assessment; Revenue expenditure; Capital expenditure
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI MAHAVIR SINGH, J.M. AND HON'BL E SHRI D.C. AGRAWAL, A.M.) I.T.A. NO. 1343/AHD./2003 ASSESSMENT YEAR : 1995-1996 INCOME TAX OFFICER, WARD-5(2), -VS.- PRARTH ANA CONSTRUCTION P. LTD. AHMEDABAD AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. MADHUSUDAN , SR. D.R. RESPONDENT BY : SHRI MEHUL K. PATEL O R D E R PER SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 17.01.2003 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD F OR THE ASSESSMENT YEAR 1995-96 ON THE FOLLOWING GROUNDS :- (1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,01,200/- MADE BY THE ASSESSING OFFICER BEING THE INTEREST ON THE INTEREST FREE ADVANCES. (2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI FURTHER ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE TO 50% OUT OF THE TOTAL AMOUNT OF RS.6,36,118/- UNDER THE HEAD FOREIGN TRAVEL EXPENSES. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A.) ERRED IN DELETING THE ADDITION OF RS.23,47,691/- MADE BY THE A.O. INVOKIN G PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. (4) THE LD. CIT(A.) ERRED IN LAW AND ON FACTS IN NOT AP PRECIATING THE FACT THAT THE SO CALLED REPAIRS HAVE BEEN MADE TO THE PROPERTY OF TH E DIRECTOR. (5) THE LD. CIT(A.) ERRED IN LAW AND ON FACTS IN DELETI NG THE ADDITION OF RS.16,00,000/- MADE BY THE A.O. UNDER THE PROVISIONS OF SEC. 69A O F THE I.T. ACT. (6) THE LD. CIT(A.) ERRED IN LAW AND ON FACTS IN NOT CO NSIDERING THE FACTUAL ASPECT OF THE CASE THAT THE ASSESSEE SENT RS.16,00,000/- TO BOMBA Y THROUGH L.T. SHROFF, WHO WAS A CARRIER OF THE SAID AMOUNT. (7) THE LD. CIT(A.) ERRED IN LAW AND ON FACTS IN DELETI NG THE ADDITION OF RS.1,75,000/- MADE BY THE A.O. BEING UNACCOUNTED RECEIPT. 2 ITA NO. 1343-AHD-2003 (8) THE LD. CIT(A.) GRIEVOUSLY ERRED IN NOT CONSIDERING THE SKY REACH TOWER APARTMENT HAD GIVEN CASH AMOUNT OF RS.1,75,000/- ON 23.6.1994 WHICH THE ASSESSEE DID NOT ACCOUNT IN ITS REGULAR BOOKS OF ACCOUNTS. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF REAL ESTATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST-FREE ADVANCES TO SHRI N.P. MODI, PRARTHANA HOTELS PVT. LTD. AND RAVI KIRANA ENERGY P. LTD. IT WAS CLAIMED BEFORE THE ASSESSING OFFICER TH AT THE MONEY WAS PAID TO SHRI N.P. MODI FOR PURCHASE OF LAND FOR FUTURE PROJECTS OF MULTIPLEX T HEATRE. WHEN INQUIRIES WERE CARRIED OUT AS TO THE DETAILS OF THESE ADVANCES, IT SEEMS THAT NO REP LY WAS FILED BY THE ASSESSEE-COMPANY. THE ASSESSING OFFICER CALCULATED INTEREST @ 18% AT RS.7 8,750/- ON THE ADVANCES LYING WITH THE PARTY. IN RESPECT OF PRARTHANA HOTELS PVT. LTD., A LOAN OF RS.3,61,150/- WAS GIVEN WITHOUT INTEREST ON WHICH ASSESSING OFFICER WORKED OUT INTEREST AT RS.4 ,453/- AND DISALLOWED THE SAME OUT OF INTEREST PAID BY THE ASSESSEE-COMPANY. IN RESPECT O F RAVI KIRANA ENERGY P. LTD. THE ASSESSING OFFICER CALCULATED INTEREST OF RS.18,000/- ON THE S UM OF RS.1,00,000/- AS OUTSTANDING AGAINST THE PARTY SINCE 1992. THUS TOTAL DISALLOWANCE OF INTERE ST WAS WORKED OUT AT RS.1,01,200/-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT CONTRADICTED THE FACTS SU BMITTED BY THE ASSESSEE EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REPORT. FURTHER N O NEXUS HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER BETWEEN MONEY ADVANCED AND LOAN TAKEN BY TH E ASSESSEE-COMPANY. 3. WE HAVE HEARD THE PARTIES. IT IS SUBMITTED BY TH E LD. A.R. THAT ADVANCE GIVEN TO SHRI N.P. MODI WAS FOR THE PURCHASE OF LAND AND BECAUSE OF DI SPUTE IN PRICES, THE AGREEMENT COULD NOT BE MADE. NO DISALLOWANCE OF INTEREST HAS BEEN MADE IN RESPECT OF THESE ADVANCES IN SUBSEQUENT ASSESSMENT YEARS. IN ANY CASE, THE ADVANCE WAS FOR BUSINESS PURPOSES FOR ESTABLISHING A MULTIPLEX AND FOR THAT PURPOSE A LAND WAS TO BE PUR CHASED. RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS REPORTED IN 288 ITR 1, NO DISALLOWANCE OF ANY INTEREST IS CALLED FOR, IF ADVANCES ARE GIVEN F OR COMMERCIAL PURPOSES. 4. IN RESPECT OF ADVANCES GIVEN TO PRARTHANA HOTELS P. LTD., IT WAS SUBMITTED THAT THE PROFITS OF THE ASSESSEE COMPANY ARE SUFFICIENT TO COVER SUC H ADVANCES. THE ASSESSEE-COMPANY HAD FILED 3 ITA NO. 1343-AHD-2003 RETURN OF INCOME AT RS.1,01,01,157/-, WHERE PROFIT DECLARES ARE SUFFICIENT TO COVER THE INTEREST- FREE ADVANCES, THEN IT CANNOT BE PRESUMED THAT SUCH INTEREST-FREE ADVANCES WERE GIVEN OUT OF BORROWED FUNDS. SIMILARLY ADVANCE GIVEN TO RAVI KIR ANA PVT. LTD. WERE OUTSTANDING SINCE 1992 AND NO DISALLOWANCE OF INTEREST HAS BEEN MADE IN AN Y OF THE INTERVENING PERIOD. FURTHER, THE ASSESSING OFFICER HAS NOT PROVED ANY NEXUS BETWEEN THE MONEY ADVANCED AND LOAN TAKEN. FOR THE ABOVE PROPOSITION, SUPPORT IS DERIVED FROM THE FOLLOWING JUDGMENTS :- (I) CIT VS.- SRIDEV ENTERPRISES 192 ITR 165(SC); (II) S.A. BUILDERS LTD. 288 ITR 1 (SC); (III) MUNJAL SALES VS.- CIT 298 ITR 298 (SC); (IV) CIT VS.- PREM HEAVY ENGINEERING WORKS P. LT D. 285 ITR 554 (ALL. (V) CHHOTALAL AJITSINGH & CO. VS.- ITO 94 TTJ (J D.) 911; (VI) ESCORTS LTD. VS.- ACIT (ITAT DELHI G BENC H) 102 TTJ 522; (VII) TORRENT FINANCIAL VS.- ACIT 73 TTJ 264 (IT AT AHD.); (VIII) ESSAR STEEL LTD. VS.- DCIT 97 TTJ 985 (AH D THIRD MEMBER)/97 ITD 125 (IX) ASHOK BROTHERS VS.- ITO 76 TTJ 427 (HYD.). IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND DISMISS THE GROUND FILED BY THE R EVENUE. 5. SECOND GROUND OF APPEAL RELATES TO RESTRICTING D ISALLOWANCE OF 50% OUT OF TOTAL AMOUNT OF RS.6,36,118/- UNDER THE HEAD FOREIGN TRAVEL EXPENS ES. THE TWO DIRECTORS OF THE ASSESSEE- COMPANY HAD UNDERTAKEN FOREIGN TOUR TO EGYPT, ROME, GREECE, ETHENS, ETC. ALONGWITH THEIR WIVES FOR STUDYING DESIGNS OF BUILDINGS TO BE CONSTRUCTED IN PRARTHANA UPVAN AND PRARTHANA VIHAR. OUT OF TOTAL CLAIM IN RESPECT OF FOREIGN TRAVELING EXPE NDITURE OF RS.11,04,405/-, THE ASSESSEE-COMPANY HAS SUO MOTO TREATED A SUM OF RS.4,68,287/- AS PERS ONAL EXPENDITURE OF THE DIRECTORS. OUT OF THE BALANCE CLAIM OF RS.6,36,118/-, THE ASSESSING OFFIC ER HAD DISALLOWED THE ENTIRE EXPENDITURE STATING THAT EXPENDITURE SHOULD HAVE BEEN DEBITED I N THE ACCOUNT OF PRARTHANA UPVAN OR PRARTHANA VIHAR AND CANNOT BE DEBITED IN THE ACCOUNTS OF THE ASSESSEE-COMPANY. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE OTHER H AND ALLOWED THE EXPENSES TO THE EXTENT OF 50% OF THE BALANCE ON THE GROUND THAT THE VISITS TO FOREIGN COUNTRIES WERE MADE FOR STUDYING DESIGNS OF BUILDINGS TO BE CONSTRUCTED IN PRATHANA UPVAN AND PRARTHANA VIHAR. THUS IT WAS AN EXTENSION BUSINESS OF ASSESSEE-COMPANY AND WAS FOR THE BUSINESS PURPOSE. THE LEARNED 4 ITA NO. 1343-AHD-2003 COMMISSIONER OF INCOME TAX (APPEALS) DISALLOWED 50% OF EXPENDITURE ON THE GROUND THAT TRAVEL OF WIVES OF THE DIRECTORS CANNOT BE SAID TO BE FOR THE BUSINESS OF THE ASSESSEE-COMPANY. THE LD. A.R. SUBMITTED THAT THE ASSESSING OFFICER SHOULD HA VE DISALLOWED ONLY ACTUAL EXPENDITURE INCURRED ON WIVES AND NOT MERELY 50%. IN FACT, ACTU AL EXPENDITURE INCURRED ON WIVES OF THE DIRECTORS WAS RS.1,93,882/- AND OTHER WAS COMMON EX PENDITURE FOR THE DIRECTORS, WHICH WAS FOR THE BUSINESS PURPOSE AND COULD NOT BE DISALLOWED. 6. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT T HE EXPENDITURE COULD NOT BE SAID TO HAVE BEEN INCURRED FOR THE BUSINESS OF THE ASSESSEE-COMP ANY AND, THEREFORE, ENTIRE EXPENDITURE SHOULD HAVE BEEN DISALLOWED. 7. SINCE THE ASSESSEE IS NOT IN APPEAL BEFORE US, T HE CONTENTION OF THE ASSESSEE TO RESTRICT THE DISALLOWANCE TO RS.1,93,882/- CANNOT BE ACCEPTED. H OWEVER, WE UPHOLD THE FINDING OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT 50% OF TH E EXPENDITURE INCURRED ON WIVES OF THE DIRECTORS IS TO BE ALLOWED AS NO BUSINESS PURPOSE I S PROVED IN RESPECT OF THEM. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THIS GROUND OF REVENUE. 8. THE NEXT GROUND IS REGARDING DELETION OF ADDITIO N OF RS.23,47,691/- MADE UNDER SECTION 40A(2)(B). THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE-COMPANY HAS TAKEN A BUILDING ON RENT FROM ITS DIRECTOR NIMISHBHAI SHAH. THE BUILDIN G WAS RESIDENTIAL BUNGLOW AND IT WAS CONVERTED INTO OFFICE BY INCURRING REPAIRING EXPEND ITURE OF RS.24,67,691/-. THE ASSESSING OFFICER CONSIDERED THAT PAYMENT FOR REPAIRS IS IN F ACT INDIRECT BENEFIT GIVEN TO THE DIRECTOR AND, THEREFORE, DISALLOWABLE UNDER SECTION 40A(2)(B) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE EXPENDITURE ON THE GROUND THAT PAYMENT IS NOT MADE TO ANY PERSON SPECIFIED IN SECTION 40A(2)(B) OF THE ACT BU T WAS MADE TO THE DIRECTORS, WHO REPAIRED THE BUNGLOW. FURTHER EXPENDITURE HAS BEEN INCURRED ON T HE BUILDING FOR MAKING IT COMPATIBLE FOR BUSINESS PURPOSES AND ALSO NO RENT IS PAID TO THE D IRECTORS IN LIEU OF ASSESSEE-COMPANY OCCUPYING OF THAT BUNGLOW. 5 ITA NO. 1343-AHD-2003 9. WE HAVE HEARD THE PARTIES. IN OUR VIEW, THE DECI SION OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS REASONABLE. THE DISALLOWANCE UNDER SECTION 40A(2)(B) CAN BE MADE ONLY WHEN PAYMENT IS MADE TO THE SPECIFIED PERSONS. IN THE PR ESENT CASE, PAYMENT HAS BEEN MADE TO CONTRACTORS WHO REPAIRED THE BUILDING AND THEREFORE , THEY ARE BEYOND THE SCOPE OF SECTION 40A(2)(B) OF THE ACT. UNLESS THE CONDITIONS LAID DO WN IN SECTION 40A(2)(B) ARE SPECIFIED, SUCH DISALLOWANCE CANNOT BE MADE. FIRSTLY, THERE IS NO P AYMENT TO THE DIRECTORS DIRECTLY, SECONDLY, THE ASSESSING OFFICER HAS NOT COMPARED THE EXPENDITURE WITH MARKET RATE OF THE SERVICES FOR WHICH PAYMENT IS MADE AND, THEREFORE, HE CANNOT COME TO A CONCLUSION THAT PAYMENT OR THE BENEFIT GIVEN TO THE DIRECTOR IS EXCESSIVE. THIRDLY, GENUIN ENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED AND IT HAS NOT BEEN HELD AS CAPITAL EXPENDITURE. IN ANY CASE, REPAIRS TO A BUILDING ARE REVENUE EXPENDITURE IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- MADRAS AUTO SERVICES PVT. LTD. 233 ITR 468. IN VIEW OF THIS, WE UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). RESULTANTLY, THIS GROUND OF REVENUES APPEAL IS REJECTED. 10. 4 TH GROUND OF APPEAL IS IN SUPPORT OF GROUND NO. 3. EV EN WHERE INDIRECT BENEFIT APPEARS TO HAVE BEEN PROVIDED TO THE INTERESTED PERSONS COVERE D UNDER SECTION 40A)(2)(B), IT HAS TO BE SHOWN THAT SUCH PAYMENT IS EXCESSIVE AS COMPARED TO MARKET VALUE OF SUCH SERVICES. THE ASSESSING OFFICER HAS NOT WORKED OUT WHAT COULD BE THE MARKET RENT OF THE BUNGLOW, WHICH IS NOT KNOWN. ABOUT CHARGING OF RENT BY THE DIRECTORS THE LD. A.R. SUBMITTED THAT IF THE RENT OF RS.200/- PER SQ.YD. PER MONTH IS CONSIDERED, THE SAME WOULD AMOUNT TO RS.21,60,000/- PER ANNUM. EVEN THOUGH THESE FIGURES ARE NOT ACCEPTABLE AS THERE IS NO MATERIAL IN ITS SUPPORT STILL THE FACT CANNOT BE IGNORED THAT BUILDING WAS GIVEN BY THE DIRECTORS TO THE COMPANY FREE OF RENT. IN ABSENCE OF ANY CHALLENGE TO THE GENUINENESS OF THE EXPENDITURE INCURRED ON REPAIRS AND IN ABSENCE OF ANY MATERIAL TO SHOW THAT EXPENDITURE INCURRED BY THE C OMPANY ON REPAIRS IS EXCESSIVE THEREBY CONFERRING SOME BENEFITS TO THE DIRECTORS THE CONTE NTION OF THE REVENUE CANNOT BE ACCEPTED. RESULTANTLY, GROUND NO. 4 IS ALSO REJECTED. 11. GROUND NO. 5 RELATES TO DELETING THE ADDITION O F RS.16,00,000/- MADE UNDER SECTION 69A. THE FACTS RELATING TO THIS ISSUE ARE THAT DD ENFORC EMENT, MUMBAI HAD SEIZED ONE DIARY FROM MUMBAI OFFICE OF L.T. SHROFF GROUP ON 23.5.1995 IN WHICH CASH RECEIPTS FROM VARIOUS PARTIES INCLUDING NAME OF THE COMPANY WERE RECORDED. A SUM OF RS.16,00,000/- WAS PARTLY RECORDED AS 6 ITA NO. 1343-AHD-2003 DEPOSITED IN THE NAME OF THE ASSESSEE-COMPANY. THE ASSESSING OFFICER ACCORDINGLY TREATED THIS SUM AS UNACCOUNTED CASH DEPOSIED WITHIN THE MEANING OF SECTION 69A OF THE INCOME TAX ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION ON THE GROUND THA T CROSS EXAMINATION OF ONE SHRI KALPESH THHAKKAR, WHOSE STATEMENT WAS RECORDED ON THE BASIS OF WHICH ADDITION WAS MADE WAS NOT GRANTED TO THE ASSESSEE-COMPANY. FOLLOWING THE DECI SION OF ITAT, C BENCH, AHMEDABAD IN APPEAL NO. IT(SS) 58/AHD/1998, THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) DELETED THE ADDITION ON THE GROUND THAT NO OPPORTUNITY TO C ROSS EXAMINE TO SHRI THAKKAR WAS ALLOWED. THE LD. A.R. SUBMITTED THAT SIMILAR ADDITIONS WERE MADE IN THE BLOCK ASSESSMENT ON THE BASIS OF STATEMENT OF SHRI THAKKAR. THE TRIBUNAL IN IT(SS)A. NO. 58/AHD/1998 REPORTED IN [2001] 70 TTJ AHMEDABAD 122 IN THE CASE OF THE ASSESSEE-COMPA NY DELETED THE ADDITION ON THE GROUND THAT OPPORTUNITY OF CROSS EXAMINATION WAS NOT ALLOWED, W HICH IS REPRODUCED HEREUNDER :- AFTER CAREFUL CONSIDERATION OF THE MATTER, WE ARE INCLINED TO DELETE THE ADDITION OF RS.28 LAKHS MADE BY THE AO THE LEGAL C ONTENTIONS RAISED BY THE LD. COUNSEL REGARDING THE ACTION OF THE AO IN R OPING IN THE SO-CALLED CASH PAYMENT MADE TO SHN RAMANBHAJ FOR ACQUIRING DE VELOPMENT RIGHTS HAVE SUBSTANTIAL MERIT IN VIEW OF THE DECISION OF G UJARAT HIGH COURT IN THE CASE N.R. PAPER & BOARD LTD VS. DY CTT (1998) 146 CTR (GUJ.) 612 : (1998) 234 ITR 733 (GUJ.). IN THE INSTANT CAS E, NO SEARCH OPERATIONS HAVE BEEN CARRIED OUT BY THE REVENUE AUT HORITIES ON THE PREMISES OF SHRI RAMANBHAI OR SHRI SUBHASH PANDEY A MD NO DOCUMENTS AND RECORDS EVIDENCING PAYMENT OF ON MONEY BY THE O N THE HASUNAGAR CO-OPERATIVE SOCIETY LAND HAS BEEN SEIZED. THEREFO RE, PROVISIONS OF S. 158BC, APPLICABLE FOR SEARCH CASES WOULD NOT COME I NTO PLAY IN SO FAR AS THE IMPUGNED ADDITION OF RS, 28 LAKHS IS CONCERN ED. ON LEGAL GROUND ALONE THE ADDITION IS LIABLE TO BE DELETED. ON FACT UAL MERITS WE FIND THAT STATEMENTS OF SHRI RAMANBHAI AND SHRI SUBHASH PANDE Y AT THE BACK OF THE ASSESSEE CANNOT BE RELIED UPON FOR FASTENING TA X AGAINST THE ASSESSEE PARTICULARLY WHEN THE ASSESSEE HAS NOT BEEN OPPORTU NITY OF CROSS- EXAMINATION AND NO SUPPORTING EVIDENCE HAS BEEN ON RECORD BY THE AO THE ADDITION OF RS 28 LAKHS IS, THEREFORE, DELETED . 12. THE LD. D.R. SUBMITTED THAT RECEIPTS OF PAYMENT MADE BY THE ASSESSEE WERE FOUND AT THE PREMISES OF L.T. SHROFF GROUP DURING THE COURSE OF THE SEARCH AT THE PREMISES ON 23.05.1995, THEREFORE, THE ADDITION IS NOT MADE IN VACCUM. 7 ITA NO. 1343-AHD-2003 13. THE LD. A.R., ON THE OTHER HAND, SUBMITTED THAT FIRSTLY ADDITION COULD NOT HAVE BEEN MADE IN THE REGULAR ASSESSMENT BUT COULD HAVE BEEN MADE UNDER SECTION 158BD IN THE CASE OF THE ASSESSEE SINCE DOCUMENTS ARE RECOVERED DURING THE C OURSE OF SEARCH AT THE PREMISES OF L.T. SHROFF GROUP. FURTHER, THERE IS NO CLEARITY OF THE NAMES LINKING THE ASSESSEE WITH THE RECEIPTS FOUND. IN THIS EVENT, THE LD. A.R. REFERRED TO THE FOLLOWING REPLY GIVEN BY HIM TO THE ASSESSING OFFICER :- YOUR ASSESSEE HAS NOT ENTERED INTO ANY TRANSACTION WITH L.T. SHROFF GROUP OF COMPANIES. THE XEROX COPIES SUPPLIED TO US SPEAKS A BOUT RESEMBLING NAME THAT DOES NOT PROVE THAT THOSE TRANSACTIONS RELATES TO U S. WE WERE INFORMED IN AROUND AUGUST 97 BY LEARNED DC RANGE 6, AHMEDABAD THAT A R ETURN OF INCOME IN THE NAME OF PRARTHANA CONSTRUCTION, A PARTNERSHIP FIRM WAS FILED IN BARODA. ON VERIFICATION, IT TURNED OUT TO BE A TOTALLY SEPARAT E ASSESSEE. MOREOVER, WE DO NOT HAVE EITHER EMPLOYEES, DIRECTORS OR PARTNERS OF THE NAME MENTIONED IN THE XEROX COPY SUPPLIED BY YOU. WE CAN ALSO PROVE THIS BY PRO VIDING OUR SALARY REGISTER. 14. AFTER CONSIDERING THE SUBMISSIONS, WE FIND NO C ASE FOR SUSTAINING THE ADDITION. FIRSTLY, IF A DOCUMENT IS RECOVERED DURING THE COURSE OF SEARCH , THEN ASSESSMENT COULD ONLY BE MADE UNDER SECTION 158BD NOT IN REGULAR ASSESSMENT. SECONDLY, THERE IS NO PROPER MENTION OF NAMES IN THE RECEIPTS SO AS TO FASTEN LIABILITY ON THE ASSESSEE. THIRDLY NO CROSS EXAMINATION OF THE PERSON, WHO CLAIMED THAT PAYMENT HAS BEEN MADE BY THE ASSESSEE- COMPANY, HAS BEEN ALLOWED TO THE ASSESSEE. ON THE ISSUE OF CROSS EXAMINATION NOT ALLOWED TO TH E ASSESSING OFFICER WE REFER TO FOLLOWING JUDGMENTS :- 1. CIT V. RATANLAL SUREKHA [1991] 190 ITR 367 (CAL) : LEVY OF PENALTY WILL BE BAD, IF ASSESSEE IS NOT ALLOWED TO CROSS EXAMINE TH E WITNESS IN FAVOUR OF DEPARTMENT. WHEN ASSESSEE EXPRESSES DESIRE TO CROSS EXAMINE A WITNESS WHO HAS DEPOSED AGAINST HIM, IF REASONABLE OPPORTUNITY IS N OT GRANTED, FOR CROSS EXAMINATION THE ORDER OF PENALTY IS UNJUSTIFIED. 2. BANGODAYA COTTON MILLS LTD V CIT (2009) 224 CTR 62 (CAL) . MERELY ON THE BASIS OF SOME LETTERS SEIZED FROM A THIRD PARTY IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE AND WITHOUT ISSUING SUMMONS TO THE CONCERN ED PERSONS OR MAKING AVAILABLE FOR CROSS EXAMINATION, THE ORDER PASSED B Y THE TRIBUNAL UPHOLDING THE ADDITION IS SET A SIDE. 3. ITO V NOVA PROMOTERS &FINLEASE (P) LTD (2010) 44 D TR (DEL) (TRIB) 9. 8 ITA NO. 1343-AHD-2003 ASSESSEE COMPANY HAVING RECEIVED SHARE APPLICATION MONEY THROUGH ACCOUNT PAYEE CHEQUES AND FILED CERTIFICATE OF INCORPORATIO N OF THE COMPANIES WHICH HAD APPLIED FOR SHARES, BANK STATEMENTS AND AFFIDAVITS CONFIRMING PAYMENT OF MONEY AS SHARE APPLICATION MONEY, EXISTENCE OF THE APPLIC ATIONS IS PROVED AND THEREFORE, NO ADDITION UNDER SECTION 68 COULD BE MADE BY SIMPL Y RELYING ON THE STATEMENTS OF TWO PERSONS WHO WERE NOT EVEN ALLOWED TO BE CROSS EXAMINED BY THE ASSESSEE. 4. ITO V BIBI RANI BANSAL (SMT.) (2010) 43 DTR 279 (AGRA) (TM) (TRIB) ASSESSSEE HAVING SUBMITTED COPIES OF CONTRACT NOTES , BILLS, SHARE CERTIFICATES ALONG WITH DETAILS OF DEMAND DRAFT ISSUED FROM THE ACCOUN T OF THE BROKER TO SUBSTANTIATE THE SALE OF SHARES MADE BY HER, AND THE AO HAVING F AILED TO ESTABLISH THAT THE ASSESSEE HAD INTRODUCED HER OWN UNACCOUNTED MONEY I N THE SHAPE OF SALE PROCEEDS OF SHARES, THE TRANSACTION OF SALE OF SHAR ES CANNOT BE TREATED AS NON GENUINE FOR THE REASON THAT THE BROKER MADE CONTRAD ICTORY STATEMENTS AND THE ASSESSEE WAS NOT ALLOWED CROSS EXAMINATION AND THER EFORE THE SALE CONSIDERATION DECLARED BY THE ASSESSEE IS ASSESSABLE AS CAPITAL G AIN AND NOT AS INCOME FROM UNDISCLOSED SOURCES. 5. CIT V ASHWANI GUPTA ( 2010 ) 322 ITR 396 ( DELHI ) WHERE ORAL EVIDENCE OF ANY PARTY IS SOUGHT TO BE US ED AGAINST AN ASSESSEE, IT IS NECESSARY THAT INFORMATION RELATING TO SUCH STATEME NT OR THE COPY OF DEPOSITION SHOULD BE FURNISHED TO THE ASSESS WITH OPPORTUNITY TO CROSS EXAMINATION THE DEPONENT ,IF REQUIRED BY THE ASSESSEE .IF IT IS NOT DONE ,IT IS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, HENCE ORDER WILL BE BAD IN LAW. WHEN WE APPLY PRINCIPLES LAID DOWN IN THESE CASES O N THE FACTS OF THE PRESENT CASE, WE NOTICE THAT ADDITION HAS BEEN MADE PRIMARILY ON THE BASIS OF STATEMENT OF SHRI KALPESH L. THAKKER. SUCH ADDITION CANNOT BE SUSTAINED WITHOUT AFFORDING OPPO RTUNITY OF CROSS EXAMINATION. AS A RESULT, THIS ADDITION IS RIGHTLY DELETED BY THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS). 15. GROUND NO. 6 IS IN SUPPORT OF GROUND NO. 1 AND, THEREFORE, DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. IT IS REJECTED ALONGWITH GROUND NO. 5 . 16. GROUND NO. 7 AND GROUND NO. 8 RELATE TO DELETIN G ADDITION OF RS.1,75,000/- AS UNACCOUNTED RECEIPTS. THE FACTS OF THE ISSUE ARE TH AT THE ASSESSING OFFICER FOUND THAT THE BOOKS OF SKY REACH TOWER APARTMENT OWNERS ASSOCIATION HAD SHOWN CREDIT ENTRY OF RS.1,75,000/- IN THE NAME OF THE ASSESSEE-COMPANY BUT THE SAME WAS N OT ACCOUNTED BY THE ASSESSEE-COMPANY IN 9 ITA NO. 1343-AHD-2003 ITS BOOKS. IT WAS TREATED AS UNACCOUNTED DEPOSIT AN D TAXED ACCORDINGLY BY THE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DE LETED THE ADDITION ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD AND ALSO DID NOT MENTION IN THE REMAND REPORT AGAINST THE CONTENTION OF THE ASSESSEE THAT ONLY GENERAL ENTRIES WERE PASSED IN THE ASSESSEES BOOKS AS ON 31.03.1995. BEFORE US, THE L D. D.R. SUBMITTED THAT THIS IS A PAYMENT MADE BY THE ASSESSEE-COMPANY, WHICH WAS NOT EXPLAINED, T HEREFORE, THE ADDITION OUGHT TO HAVE BEEN MADE. 17. ON THE OTHER HAND, THE LD. A.R. CLARIFIED THAT IT IS NOT IN FACT ANY PAYMENT MADE BY THE ASSESSEE-COMPANY BUT IT WAS IN FACT RECEIPT OF MONE Y OF ASSESSEE-COMPANY FROM SKY REACH TOWER APARTMENT OWNERS ASSOCIATION, WHICH WAS DEBIT ED IN JUNE, 1994 IN THE BOOKS OF THAT COMPANY BUT WAS RECORDED SUBSEQUENTLY ON 31.1.1995 IN THE BOOKS OF ASSESSEE-COMPANY. SINCE IT WAS NOT A PAYMENT, QUESTION OF INVOKING PROVISIO NS OF SECTION 69 OR 69A WOULD NOT ARISE, THEREFORE, NO ADDITION IS CALLED FOR. SINCE THE FAC TS STATED BY THE LD. A.R. ARE CORRECT, WE DO NOT CONSIDER NECESSARY TO REVERSE THE FINDING GIVEN BY HIM. ACCORDINGLY, HIS ORDER IS CONFIRMED. 18. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 07.01.20 11 SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAW AL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIST RAR, ITAT, AHMEDABAD LAHA/SR.P.S.