Madhuben N.Shah, Baroda V. The Income tax Officer,Ward-2(2), Baroda

ITA 1355/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1268 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R REWAR
• Assessee Lawyers: ANIL R SHAH
• Keywords: Unexplained cash credit; Unexplained expenditure; Share purchase agreement; Principle of natural justice; Maximum Marginal Rate; Additional evidence; Question of law
• Section: 69C; 143(3); 142(1); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM, & SHRI MANISH BORAD, AM. ITA NO.1355/AHD/2012 ASST. YEAR: 2007-08 AILESH NARENDRA SHAH, L/H OF SMT. MADHUBEN N. SHAH, NIRAV PATEL & CO., 201-203, SIDDHARTH COMPLEX, NR. HOTEL EXPRESS, RC DUTT ROAD, ALKAPURI, BARODA. VS. ITO, WARD -2(2), BARODA. APPELLANT RESPONDENT PAN AFSPS8605Q APPELLANT BY SHRI ANIL R. SHAH, AR RESPONDENT BY SHRI A. R. REWAR, SR.DR DATE OF HEARING: 30/5/2016 DATE OF PRONOUNCEMENT: 14/6/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A)-II, BARODA, DATED 03.04.2012 IN APPEAL NO.CA B/II-299/09-10 PASSED AGAINST ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2007-08 ON 30.12.2009 BY ITO, WD-2(2 ), BARODA. 2. BRIEFLY STATED FACTS OF THE CASE AS CULLED OUT F ROM THE RECORDS ARE THAT SMT. MADHUBEN N. SHAH FILED HER RETURN OF INCOME FOR ASST. YEAR 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME A T RS.4,54,980/-. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 2 THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE U/S 143(2) OF THE ACT WAS ISSUED ON 26.9.2008 FOLLOWED BY NOTI CE U/S 142(1) OF THE ACT ON 9.6.2009. VARIOUS INFORMATION WERE CALLE D FOR. NECESSARY DOCUMENTS INCLUDING BOOKS OF ACCOUNT, BILLS & VOUCH ERS AND FINANCIAL STATEMENT WERE PRODUCED. LD. ASSESSING OFFICER COMP LETED THE ASSESSMENT ON 30.12.2009 AFTER MAKING VARIOUS ADDIT IONS TOTALING RS.7,65,735/- AND ASSESSED THE INCOME AT RS.12,20,7 20/-. PART RELIEF WAS GIVEN BY LD. CIT(A) IN THE APPEAL FILED BY ASSE SSEE AGAINST THE ORDER U/S 143(3) OF LD. ASSESSING OFFICER. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL. PURSUANT THERETO, THE ASSESSEE EXPIRED ON 20 TH JULY, 2013. DUE TO THIS REASON NONE APPEARED ON FEW OCCASIONS ON THE D ATES FIXED FOR HEARING AND THE APPEAL WAS DISMISSED ON 13 TH AUGUST, 2015 FOR NON- PROSECUTION. THEREAFTER, MR. AILESH NARENDRA SHAH, SON AND LEGAL HEIR OF THE ASSESSEE MADHUBEN N. SHAH FILED MISCELLANEOU S APPLICATION FOR RESTORATION OF THE APPEAL AND THE SAME WAS ALLO WED ON 7.3.2016 AND THE APPEAL WAS RESTORED. 4. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED IN THE APPEAL BEFORE THE TRIBUNAL :- 1. HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIR MING THE DISALLOWANCE OF ACTUAL BANK INTEREST OF RS.1,32,497 /- BORNE BY THE ASSESSEE. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 3 2. HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIR MING THE ADDITION OF RS.1,99,500/- AS UNEXPLAINED CASH CREDI T WITHOUT APPRECIATING THAT ASSESSEE HAS ALREADY DISCHARGED P RELIMINARY BURDEN TO ESTABLISH IDENTITY AND CREDITWORTHINESS O F DEPOSITORS. 3. HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIR MING THE ADDITION OF ESTIMATED AGRICULTURAL EXPENDITURE OF R S.22,000/-. GROUND NO.1 HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMIN G THE DISALLOWANCE OF ACTUAL BANK INTEREST OF RS.1,32,497 /- BORNE BY THE ASSESSEE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT BANK INTEREST OF RS.2,49,136/ - WAS CLAIMED BY ASSESSEE IN HER SOLE PROPRIETARY CONCERN ON THE BUS INESS LOAN TAKEN. ON FURTHER ENQUIRY IT WAS REVEALED THAT THE LOAN WA S TAKEN BY THE ASSESSEE BY MORTGAGING IMMOVABLE PROPERTY OWNED BY SOLE PROPRIETARY CONCERN M/S PARAS SILK NSAREES BUT BA NK GAVE LOAN TO THE PARTNERSHIP FIRM M/S PARAS SAREE CENTRE OF WHIC H ASSESSEE IS ALSO A PARTNER AND THE REASON FOR THE LOAN BEING GI VEN TO M/S PARAS SAREE CENTRE WAS THAT THE BANK NEEDED THREE YEARS F INANCIAL DATA FOR GRANTING OF BUSINESS LOAN AND AS THE SOLE PROPRIETA RY CONCERN M/S PARAS SAREE CENTRA WAS JUST AN YEAR OLD, IN THE INT EREST OF BUSINESS, FINANCIAL STATEMENT OF PAST THREE YEARS OF THE PART NERSHIP FIRM M/S PARAS SAREE CENTRE WERE GIVEN TO THE BANK. FURTHER LD. ASSESSING OFFICER OBSERVED THAT OUT OF THE TOTAL LOAN OF RS.3 0,00,000/- ONLY RS.14,07,514/- WAS UTILIZED BY THE ASSESSEE IN HER BUSINESS AND THE BALANCE AMOUNT OF RS.15,92,486/- REMAINED UNUTILIZE D AND ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 4 ACCORDINGLY CALCULATED RS.1,32,497/- AS INTEREST DI SALLOWABLE U/S 36(1)(III) OF THE ACT FOR BEING NOT USED FOR BUSINE SS PURPOSES. 6. IN APPELLATE PROCEEDINGS BEFORE LD. CIT(A) THE A DDITION WAS CONFIRMED BY OBSERVING AS UNDER :- 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE ORDER OF THE ASSESSING OFFICER. IT IS SEEN THAT THE LOAN WAS SANCTIONED TO THE FIRM AND CREDITED IN ITS ACCOUNT. IT HAS NOT BEEN E STABLISHED BY THE ASSESSEE THAT THE ENTIRE LOAN WAS SANCTIONED TO THE ASSESSEE AND NOT TO THE FIRM. IT IS ALSO UNDISPUTED THAT ONLY A PART OF THE LOAN SANCTIONED WAS UTILIZED BY THE ASSESSEE IN HER BUSINESS. THAT BEING SO, THE CLAIM OF DEDUCTION FOR THE ENTIRE INTEREST EXPENSES, IS N OT VALID. THE ASSESSING OFFICER HAS CORRECTLY RESTRICTED THE ALLO WANCE OF INTEREST EXPENSES PROPORTIONAL TO THE ACTUAL UTILIZATION OF FUNDS. THE ACTION OF THE ASSESSING OFFICER IS THEREFORE, UPHELD. 7. NOW BEFORE US, LD. AR SUBMITTED THAT LD. ASSESSI NG OFFICER DISALLOWED INTEREST ON BANK LOAN WITHOUT APPRECIATI NG THE FACTS THAT THE LOAN WAS REQUIRED FOR BUSINESS PURPOSE RECEIVED FROM SHRI VARDHAMAN SAHKARI BANK LTD. AND ALSO SUBMITTED THE FOLLOWING :- A) ALL LOAN PAPERS WERE SIGNED AND UNDERTAKEN BY A SSESSEE, SMT. MADHUBEN N. SHAH, IN HER OWN CAPACITY. INHERE CAN NOT BE ANY PR ESUMPTION AS TO EXECUTION OF LOAN PAPERS ON BEHALF OF PARTNERSHIP FIRM IN WHICH SHE IS MERELY A NON-WORKING PARTNER. B) ASSESSEE IS A NON-WORKING PARTNER IN THE FIRM AND H ENCE, SHE HAD NO AUTHORITY TO APPLY OR UNDERTAKE LOAN ON BEHALF OF THE FIRM, C) ASSESSEE DID NOT HAVE ANY PERSONAL CREDIT WITH BANK. THEREFORE, APPLICATION OF LOAN WAS MADE ON THE BASIS OF CREDIT OF THE PART NERSHIP FIRM WHICH HAD A RUNNING ACCOUNT WITH THE BANK SINCE 1995. D) LOAN WAS SECURED BY MORTGAGING PROPRIETARY SHOP PRE MISES BLOCK NO. 119, DHWARKESH COMPLEX, R.C. DUTL ROAD, VADODARA, WHICH IS THE PLACE OF ASSESSEE'S ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 5 PROPRIETARY BUSINESS. COPIES OF SHARE CERTIFICATE A ND ALLOTMENT LETTER ISSUED BY DHWARKESH (MEMBERS) ASSOCIATION ARE ENCLOSED JOR YO UR PERUSAL (ANNECVRE-A & B). E) ASSESSEE EXECUTED POWER OF ATTORNEY AND EQUITABLE M ORTGAGE IN FAVOUR OF BANK IN HER OWN CAPACITY. COPIES OF POWER OF ATTORNEY AND EQUITABLE MORTGAGE ARE ENCLOSED FOR YOUR KIND CONSIDERATION. (ANNEXVRE) C & D). F) IN THE COURSE OF OBTAINING LOAN, THE BANK ASKED THE ASSESSEE TO PRODUCE FINANCIAL STATEMENTS OF PAST THREE YEARS TO ESTIMATE THE FUTU RE GENERATION OF INCOME TO ESTIMATE THE CAPACITY OF ASSESSEE TO REPAY LOAN. AS SESSEE DID NOT HAVE ANY PROPRIETARY BUSINESS IN HER NAME AT THAT TIME AND T HIS WAS THE FIRST YEAR OF BUSINESS, THEREFORE, WAS UNABLE TO SUBMIT THE PAST PERFORMANCE OF THE BUSINESS AS REQUIRED BY THE BANK. TO OVERCOME THE PRACTICAL DIF FICULTY, IT WAS SUGGESTED BY THE BANK MANAGER THAT IN SUCH SITUATION FINANCIAL STATE MENT OF THE FIRM FOR PAST THREE YEARS MAY BE SUBMITTED. HOWEVER, IN THAT CASE LOAN WOULD BE CREDITED IN THE NAME OF THE FIRM. AS ASSESSEE HAD NO OTHER OPTION FOR SE CURING THE LOAN, SUGGESTION OF THE BANK MANAGER WAS FOLLOWED. G) SINCE LOAN WAS MEAN! FOR ASSESSEE'S PROPRIETARY BUSINESS, THE FIRM TRANSFERRED THE ENTIRE OBLIGAFI0RR7RF:HQN TO THE ASSESSEE ALONG WIT H LIABILITY TO PAY INTEREST. ACCORDINGLY, ACTUAL PAYMENT OF INTEREST WAS CLAIMED BY THE ASSESSEE. H) IN ABOVE CIRCUMSTANCES, ASSESSEE WAS PRIMARILY R ESPONSIBLE TO REPAY LOAN_ AND IS ENTITLED TO CLAIM INTEREST ON ACTUAL BASIS AS ENTIR E LOAN WAS MEANT FOR ASSESSEE 'S BUSINESS PURPOSES. THE FIRM HAS, DUE TO VERY REASON HAS NOT CLAIMED THE HANK INTEREST AS EXPENDITURE IN ITS RETURN OF INCOME AS THE SAME WAS CLAIMED BY THE ASSESSEE. I) BESIDES, THE EFFECT OF CLAIM OF INTEREST IS REVE NUE NEUTRAL AS ASSESSEE IS PAYING TAX AT THE MAXIMUM MARGINAL RATE AND THE RATE OF TAX AP PLICABLE TO FIRM IS ALSO 30%. J) LD. ASSESSING OFFICER HAS ALLOWED INTEREST TO THE E XTENT OF THE UTILIZATION OF LOAN WITHOUT APPRECIATING THE FACT THAT BANK HAD GRANTED LOAN FACILITY AND NOT OVERDRAFT/CASH CREDIT FACILITY. IT NEEDS TO BE APPR ECIATED THAT IN CASE OF LOANS, BORROWERS ARE REQUIRED TO PAY INTEREST ON TOTAL BOR ROWED FUNDS AND NAY INTEREST PAID ON SUCH LOANS AMOUNTS TO ADMISSIBLE BUSINESS E XPENDITURE. IN VIEW OF ABOVE, THE CLAIM OF INTEREST ON BANK LOA N BY THE ASSESSEE IS JUSTIFIED. ' 8. LD. AR FURTHER SUBMITTED THAT FOR CLAIMING EXPEN DITURE U/S 36(1)(III) OF THE ACT THE REQUIREMENT IS THAT EXPEN DITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND THERE IS N O REQUIREMENT TO ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 6 RESTRICT THE CLAIM WHETHER THE EXPENDITURE IS GENUI NE AND MANY A TIMES IT HAPPENS THAT BORROWER IS PAYING MORE INTER EST ON BANK LOAN DUE TO CONDITION OF LOAN ATTACHED THERETO, NATURE O F LOAN AND CIRCUMSTANCES UNDER WHICH THE LOAN IS TAKEN. IN VIE W OF ABOVE, NO DISALLOWANCE ON THIS ACCOUNT IS JUSTIFIED. 9. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVE D WITH THE ACTION OF LD. CIT(A) FOR CONFIRMING THE DISALLOWANCE OF AC TUAL BANK INTEREST OF RS.1,32,497/-. WE OBSERVE THAT BANK LOAN FOR THE PU RPOSE OF BUSINESS WAS TAKEN BY ASSESSEE FOR HER SOLE PROPRIETORSHIP B USINESS IN THE NAME OF PARAS SILK NSAREES BY MORTGAGING THE IMMO VABLE PROPERTY OWNED BY ASSESSEE AT WHICH ASSESSEES PROPRIETARY B USINESS WAS BEING CARRIED ON. THIS BUSINESS LOAN WAS TAKEN FROM VARDHAMAN SAHAKARI BANK LTD. BUT DURING THE COURSE OF LOAN PR OCESSING, TO MEET OUT CERTAIN CONDITIONS PUT FORTH BY BANK ASSESSEE SUBMITTED 3 YEARS FINANCIAL DOCUMENTS OF THE PARTNERSHIP FIRM M/S PAR AS SAREE CENTRE BECAUSE PROPRIETARY CONCERN WAS JUST A YEAR OLD AND AFTER THE SANCTION OF LOAN BANK TRANSFERRED THE MONEY IN THE ACCOUNT OF M/S PARAS SAREE CENTRE. 11. WE FURTHER OBSERVE THAT THE SECURED LOAN FROM V ARDHAMAN SAHKARI BANK LTD. WAS SHOWN IN THE BALANCE SHEET OF PARAS SILK N SAREE THE SOLE PROPRIETARY CONCERN OF THE ASSESSEE AND THE CLOSING ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 7 BALANCE ON 31.3.2007 STOOD AT RS.27,05,153/- IN THE BALANCE SHEET AS ON 31.3.2007 APPEARING AT PAGE 97 OF THE PAPER BOOK AND THE SUM OF RS.30,00,000/- WAS ADJUSTED IN THE BUSINESS ACCOUNT OF M/S PARAS SAREE CENTRE AND CLOSING DEBIT BALANCE ON 31.3.2007 OF PARAS SAREE CENTRE IN THE BOOKS OF ACCOUNT OF PARAS SILK N SA REES WAS SHOWN AT RS.15,92,486/-. INTEREST EXPENDITURE ON THIS IMPUGN ED LOAN HAS BEEN CLAIMED BY ASSESSEE IN HER SOLE PROPRIETORSHIP CONC ERN AND NOT BY PARTNERSHIP FIRM M/S PARAS SAREE CENTRE. WE FURTHER OBSERVE THAT LD. ASSESSING OFFICER HAS ALLOWED PROPORTIONATE INTERES T AT RS.1,16,639/- ACCEPTING IT AS A BUSINESS LOAN OF THE PROPRIETARY CONCERN AND HAS ALSO NOT CONTROVERTED TO THE FACT THAT BOTH THE ASS ESSEE AND THE PARTNERSHIP FIRM ARE BEING ASSESSED TO TAX RATE AT MAXIMUM MARGINAL RATE I.E. 30% AND THERE WOULD HAVE BEEN NO EFFECT O N THE REVENUE IF THIS INTEREST HAS BEEN CLAIMED BY THE PARTNERSHIP F IRM M/S PARAS SAREE CENTRE OR THE SOLE PROPRIETARY CONCERN M/S PA RAS SILK NSAREES CENTRE. 12. WE FURTHER OBSERVE THAT THE ONLY REASON FOR WHI CH LD. ASSESSING OFFICER DISALLOWED THE INTEREST OF RS.1,32,497/- RE STED UPON THE OBSERVATION THAT THE LOAN AMOUNT OF RS.15,92,486/- REMAINED UNUTILIZED BUT LD. ASSESSING OFFICER HAS DULY ACCEP TED THE IMPUGNED TRANSACTION OF THE LOAN AMOUNT BEING SHOWN IN THE P ROPRIETARY CONCERN AND NOT IN THE PARTNERSHIP FIRM. TO THIS EX TENT THE REVENUE HAS NOT OBJECTED THAT THE LOAN WHICH WAS INITIALLY TRANSFERRED IN THE ACCOUNT OF PARAS SAREE CENTRE WAS SHOWN AS LOAN IN THE PROPRIETARY CONCERN. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 8 13. WE FURTHER OBSERVE THAT THE LOAN AMOUNT OF RS.3 0 LAKHS WAS NOT CASH CREDIT LIMIT WHICH IS NORMALLY USED AS AND WHE N NEED ARISES, BUT IT IS A MORTGAGE LOAN TAKEN FOR BUSINESS PURPOSE AN D THE COMPLETE LOAN AMOUNT IS TRANSFERRED TO THE BORROWERS ACCOUN T AND INTEREST IS CHARGED FROM THE DATE OF SANCTION OF LOAN. HERE WE WOULD LIKE TO MENTION THAT BUSINESS LOAN IS TAKEN BY ASSESSEE WIT H THE PLAN TO UTILIZE THE LOAN AMOUNT PRUDENTLY AND IN THE BEST I NTEREST OF BUSINESS AS WELL AS THE ASSESSEE. ONE CANNOT DENY THE SITUAT ION THAT THE ASSESSEE MAY NOT BE ABLE TO UTILIZE THE AMOUNT OF L OAN IMMEDIATELY AND MAY HAVE TO WAIT FOR A RIGHT TIME TO USE THE SA ME AS A SINGLE WRONG ACTION MAY LEAD HIM TO LOSE THE BORROWED MONE Y. IN VIEW OF OUR ABOVE DISCUSSION, WE ARE OF THE VIEW THAT LD. A SSESSING OFFICER ONCE SATISFIED WITH THE NATURE OF LOAN BEING OF BUS INESS IN NATURE THEN NO DISALLOWANCE WAS CALLED JUST FOR KEEPING THE FUN DS UNUTILIZED AT THE END OF THE YEAR BECAUSE THE BUSINESS MONEY KEEPS RO TATING AND ASSESSEE WAS AT LIBERTY TO WAIT FOR USING THE SAME AT APPROPRIATE POINT OF TIME FOR BUSINESS PURPOSES. THEREFORE, WE ALLOW THE GROUND OF ASSESSEE BY DELETING THE DISALLOWANCE OF RS.1,32 ,496/- ON ACCOUNT OF BANK INTEREST. 14. GROUND NO.2 HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMIN G THE ADDITION OF RS.1,99,500/- AS UNEXPLAINED CASH CREDI T WITHOUT APPRECIATING THAT ASSESSEE HAS ALREADY DISCHARGED P RELIMINARY BURDEN TO ESTABLISH IDENTITY AND CREDITWORTHINESS O F DEPOSITORS. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD SHOWN UNSECURED LOAN FROM ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 9 VARIOUS PARTIES AT RS.6,09,500/-. ASSESSEE WAS ASKE D TO FURNISH CONFIRMATIONS IN RESPECT OF UNSECURED LOAN INCLUDIN G SQUARED UP LOANS RECEIVED DURING THE YEAR AND ALSO TO FURNISH DOCUMENTARY EVIDENCES TO PROVE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF SUCH NEW LOANS. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, ASSESSEE SUBMITTED CONFIRMATIONS OF FOLLOW ING PARTIES :- 1 HARSHADBHAI J. SHAH 17500 2. INABEN VAIDHYA 18000 3. KANUBHAI SHAH 18000 4. MINESHBHAI SHAH 19000 5 NIRAV SHAH 17500 6. NIRUBEN SHAH 16000 7. PRADIPKUMAR VAIDYA 19000 8. RAHUL SHAH 19000 9. RAJESHBHAI SHAH 18500 10. SONAL SHAH 19000 11. VIPULBHAI SHAH - 18000 12. MIHIRABEN B. SHAH 400000 13. BIREN M. SHAH 10000 609500 OUT OF THE 13 PARTIES, ASSESSEE WAS ABLE TO PROVE T HE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF MIHIRABEN B. SH AH AND BIREN M. SHAH TO THE ASSESSING OFFICER BUT COULD NOT DO SO F OR THE REMAINING AS A RESULT OF WHICH ADDITION U/S 68 OF THE ACT FOR UNEXPLAINED CASH CREDIT WAS MADE BY LD. ASSESSING OFFICER AT RS.1,99 ,500/-. 16. IN APPEAL BEFORE LD. CIT(A) LD. AR SUBMITTED TH AT ASSESSEE HAS ACCEPTED SMALL DEPOSITS LESS THAN RS.20,000/- AND H AS GIVEN FULL NAMES, ADDRESSES, TELEPHONE NUMBERS, OCCUPATION AND CAPACITY OF THE DEPOSITORS AND IF THERE WAS ANY APPREHENSION TH EN ENQUIRY MIGHT HAVE BEEN MADE BY THE DEPARTMENT U/S 133 OF THE ACT BUT THE SAME ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 10 WAS NOT DONE AND, THEREFORE, ADDITION U/S 68 SHOULD BE DELETED. HOWEVER, LD. CIT(A) WAS NOT CONVINCED WITH THE REPL Y OF ASSESSEE AND CONFIRMED THE ADDITION MADE BY LD. ASSESSING OF FICER BY OBSERVING AS UNDER :- 8.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. IT IS SEEN THAT ASSESSEE HAS SHOWN LOANS OF LESS THAN RS.20,000/- FROM 11 PERSONS, ALL OF WHICH ARE IN CASH. NONE OF THESE PERSONS ARE ASSESSED TO TAX AND HAVE VERY MEAGRE INCOME. THE AS SESSEE HAS CLEARLY FAILED TO DISCHARGE THE ONUS CAST ON HER TO ESTABLISH THE IDE NTITY AND CREDIT WORTHINESS OF THE PAYERS AND THE GENUINENESS OF THE TRANSACTIONS. TO CLAIM THAT THE ASSESSING OFFICER SHOULD HAVE MADE ENQUIRIES AND RECORDED THE STATEME NT OF PAYERS IS NOT CORRECT. FIRST THE ASSESSEE SHOULD HAVE DISCHARGED THE INITIAL ONU S CAST UPON HER, ONLY THEN THE ONUS WOULD SHIFT ON THE REVENUE. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER IS CORRECT AND IS UPHELD. 17. NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 18. LD. AR SUBMITTED AS FOLLOWS :- 3. WITH REGARD TO GROUND NO.2 IN RESPECT OF ADDITIO N OF RS. 1,99,500 AS UNEXPLAINED CASH CREDIT IN RESPECT OF 11 PARTIES AP PEARING AT SR. NO. 1 TO 11 OF THE TABLE GIVEN IN PARA -9, PG. 9 OF THE ORDER (PG. 17, PB-2), THE LD. AO HIMSELF HAVE ACCEPTED THE FACT THAT, THE APPELLANT- FILED C ONFIRMATION LETTERS. IN THIS CONNECTION, IT IS PERTINENT TO NOTE THAT, THE LD. A O HAVE ACCEPTED THE CONFIRMATION OF MR. BIREN N. SHAH FOR RS.10,000 ACC EPTED BY THE ASSESSEE IN CASH BY STATING THAT, THE CREDITWORTHINESS OF SAID MR. BIREN N. SHAH (INCORRECTLY NAMED AS BIREN M. SHAH) HAS BEEN PROVED WHEREAS IN THE CASES OF ALL THE OTHER DEPOSITORS, IN SIMILAR CASES AND IDENTICAL FA CTS EVEN WHERE THE SOURCES/PAN/IDENTITY IS ESTABLISHED BY THEM THE LD . AO HAVE NOT ACCEPTED THE DEPOSITS FROM THEM AND HAVE MADE ADDITION THEREOF. I HOPE YOUR HONORS WILL APPRECIATE THAT, THE ASSESSEE HERSELF WAS A SENIOR CITIZEN , A WIDOW AND THIS BEING THE VERY FIRST YEAR OF HER BUSINESS, SHE WAS NOT WELL CONVERSANT WITH BANKING HABITS AND THE LAW. SIMILARLY, THE MANY OF THE PERSONS DEPOSITING THE AMOUNT WERE ALSO NOT WELL VERSED WITH THE BANKING H ABITS, AMOUNT OF THE DEPOSITS AND CONSIDERING THE TRUST WHICH THEY HAD IN THE ASS ESSEE, THEY DID NOT FIND IT NECESSARY TO DEPOSIT THE AMOUNTS BY CHEQUE. CONSIDE RING THE LEVEL OF THEIR INCOME, INDIVIDUALLY AS WELL AS OF THEIR FAMILIES, THOUGH THEY HAD DUE SOURCES FOR THEIR DEPOSITS WITH THE ASSESSEE, AS IT WAS NOT NEC ESSARY FOR MANY OF THEM TO FURNISH THEIR RETURN OF INCOME BEING BELOW TAXABLE, THEY DID NOT FILED, THE RETURNS OF INCOME, BUT EVEN THOUGH THEY ESTABLISHED THEIR I DENTITY, CREDITWORTHINESS AND ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 11 GENUINENESS OF TRANSACTION WITH THE ASSESSEE AS IS EVIDENT FROM THE CONFIRMATIONS AND DULY SWORN IN AFFIDAVITS SUBMITTE D BY THEM WITH BY ESTABLISHING THEIR DUE IDENTITY AND PHOTO GRAPHS AND PROOF OF TH EIR ADDRESSES WHEREVER REQUIRED BY THE NOTARY. 3.1 EVEN THE LD. CIT(A) HAVE ALSO NOTED THAT, THE A SSESSEE HAD FURNISHED CONFIRMATIONS ALONG WITH THEIR FULL NAME AND ADDRES SES, TELEPHONE NUMBERS, OCCUPATIONS AND CAPACITY OF THE DEPOSITORS AS HAVE BEEN NOTED BY THE HON'BLE CIT(A) IN HIS ORDER. BUT, INSPITE OF THIS, THE LD. AO TERMED THE SAME AS ROUTINE CONFIRMATIONS AND THEREBY HAVE IGNORED ENTIRELY THE SIGNIFICANCE AND EVIDENTIARY VALUE THEREOF BY STATING THAT, THE SAME ARE NOT ACC EPTABLE AND THERE UPON HE MADE ADDITION OF RS.1,99,500 BY TREATING THE SAME A S UNEXPLAINED CASH CREDITS. EVEN THE HON'BLE CIT (A), TOOK NOTE OF THE ABOVE IN HIS ORDER AS WELL AS HE TOOK NOTE OF DULY NOTARIZED AFFIDAVITS HAVING BEEN FURNI SHED BY THE APPELLANT FROM THE DEPOSITORS WHEREIN THEY HAVE ESTABLISHED THEIR IDEN TITY AND HAVE ESTABLISHED THE SAME EVEN BEFORE THE NOTARY AS WELL AND THEREIN THE Y HAVE EXPLAINED THEIR IDENTITY, GENUINENESS, CREDITWORTHINESS/ CAPACITY, OCCUPATION, INCOME AND SOURCES OF DEPOSITS ETC. AND HAVE CONFIRMED THE FAC T OF HAVING ADVANCED THE DEPOSITS WITH THE DATES AND AMOUNTS TO THE APPELLAN T BEFORE THE NOTARY ON OATH AS DETAILED ON PG.42,PB-II. EVEN THE HON'BLE CIT (A ) HAVE TAKEN NOTE OF THE REQUEST BY THE APPELLANT TO ISSUE LETTERS U/S.133/ SUMMONS U/S.131, BUT NOTHING WAS DONE BY ANY OF THE AUTHORITIES BELOW . BUT, INS PITE OF THIS, THE HON'BLE CIT (A) TOOK A VIEW THAT, SINCE THE APPELLANT HAD ACCEPTED CASH BELOW RS .20, 000 FROM EACH OF THE DEPOSITORS, WITHOUT ANY INQUIRY, BY MER ELY STATING THAT, THE IDENTITY OF THE DEPOSITORS WAS NOT PROVED. WHILE DOING SO THE A UTHORITIES BELOW ALSO DID NOT CONSIDERED THAT, THE LAW DOES NOT PROHIBIT TO EITHE R ADVANCE OR ACCEPT THE DEPOSITS OF SUCH SMALL AMOUNTS UP TO RS.20,000. THE AUTHORITIES BELOW DID NOT CONSIDERED THE FACTS BEFORE THEM AND WITHOUT OBSERV ING ANY RULES OF NATURAL JUSTICE, MERELY BY STATING THAT, THE APPELLANT DID NOT DISC HARGED HER ONUS AND THEREFORE, HE UPHELD THE ADDITION ON THIS COUNT OF RS. 1,99,500. EVEN THE LD. AO ACCEPTED THE BOOKS OF ACCOUNTS OF THE APPELLANT WHI CH WERE PRODUCED BEFORE HIM AND HAVE ACCEPTED THE SAME. THIS ASPECT IS ALSO NOT CONSIDERED BY THE HON'BLE CIT (A) WHILE UPHOLDING THE ADDITION. IN THIS CONNECTION, I RELY ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONE R OF INCOME-TAX VS ORISSA CORPORATION (P) LTD ON 19 MARCH, 1986 AI R 1849, 1986 SCR (1) 979, (PG.125-131, PB-II) WHEREIN IT HAS BEEN HELD B Y THE HON'BLE SUPREME COURT THAT, ' (II) THE CONCLUSION REACHED BY THE TRIBUNAL IN THE INSTANT CASE, THAT THE ASSES SEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM COULD NOT BE SAID TO BE UNREASONABLE, OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH IT COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 12 (III) THE ASSESSES HAD PROVIDED THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE T HAT THEY WERE INCOME-TAX ASSESSEES.THEIR INDEX NUMBERS WERE IN THE FILES OF THE DEPARTMENT. THE REVENUE APART FROM ISSUING NOTICE S UNDER 8. 131 OF THE ACT AT THE INSTANCE OF THE ASSESSEES, DI D NOT PURSUE THE MATTER FURTHER. IT DID NOT EXAMINE THE SOURCE OF INCOME OF THE ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. THE ASSESSEE , THEREFORE, COULD NOT DO ANY FURTHER.' (2) HON'BLE DELHI HIGH COURT IN THE CASE OF CI T VS. JANSAMPARK ADVERTISING & MARKETING (P) LTD. (DELHI HIGH COURT),(PG.132-145, PB-II) WHEREIN IT HAS BEEN HELD THAT, - 'ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT ARE NOT A GAME OF HIDE AND SEEK. IF A.O DOES NOT CONDUCT PROPER INQUIRY, THE O BLIGATION TO DO SO IS ON THE CIT(A) AND ALSO ITAT BY OBSERVING THAT THE A.O HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PROPER INQUIR Y TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AN D INDEED OF ITAT TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT.' (3) HON'BLE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI IN THE CASE OF SMT. AVAN GIDWANI VS. ACIT, CENTRAL CIRCLE 22, MUMB AI IN ITA NO. 5138/MUM/2015, (PG.146-149, PB-II) WHEREIN THE HON' BLE BENCH HAVE OBSERVED THAT, J 'WE NOTICE THAT THE ASSESSES COULD COLLECT VARIOUS EVIDENCES ONLY AFTER PASSING OF THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSEE, TH ESE ADDITIONAL EVIDENCES ARE VITAL DOCUMENTS WHICH ARE REQUIRED TO BE CONSIDERED IN ORDER TO ADJUDICATE THE ISSUE IN A JUDICIOUS MANNER. THE PRINCIPLE 'AUDI ALTERAM PARTEM', I.E. NO MAN SHOULD BE CONDEMNED UNHEARD IS THE BASIC CANON PRIN CIPLES OF NATURAL JUSTICE AND ACCORDINGLY WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSES THAT RULE 46A OF THE INCOME TAX RULES CANNOT BE OVER RIDE THE PRINCI PLES OF NATURAL JUSTICE. HENCE WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN REFUSING TO ADMIT THE VARIOUS ADDITIONAL EVIDENCES FURNISHED BY THE A SSESSEE. SINCE THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CONTRADICT THE FINDING S GIVEN BY THE AO BY NOT ADMITTING THE ADDITIONAL EVIDENCES, WE ARE OF THE V IEW THAT THE LD. CIT (A) SHOULD RE~ADJUDICATE ALL THE ISSUES AFRESH BY ADMITTING TH E ADDITIONAL EVIDENCES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT( A) AND RESTORE ALL THE ISSUES TO THE FILE OF THE LEARNED CIT(A) WITH THE DIRECTIO N TO ADMIT THE ADDITIONAL EVIDENCES THAT MAY BE FURNISHED BY THE ASSESSEE. AF TER ADMITTING THE SAME, THE LEARNED CIT(A) MAY CALL FOR THE REMAND REPORT FROM THE ASSESSING OFFICER, IF HE FOUND THE SAME NECESSARY. AFTER CONFRONTING WITH TH E REMAND REPORT, IF ANY, THAT ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 13 MAY BE FURNISHED BY THE AO WITH THE ASSESSEE, THE L EARNED CIT (A) MY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW.' I HOPE, YOUR HONORS WILL APPRECIATE THAT, IN MY CAS E ALSO I SUBMITTED BEFORE THE AUTHORITIES BELOW THE NAMES , ADDRESSES AND PROOF O F THEIR IDENTITY IN THE FORM OF DULY NOTARIZED AFFIDAVITS OF ALL THE DEPOSITORS WHO WERE AT THE TIME OF SUBMISSION THEREOF WERE IN INDIA WHEREAS IN CASE OF OTHERS I S UBMITTED THEIR DULY CONFIRMED ACCOUNTS WITH THEIR NAMES AND ADDRESSES AND ALSO TH E PAN WHEREVER THE SAME WAS AVAILABLE. IT MAY KINDLY ALSO BE APPRECIATED TH AT, THE DEPOSITORS ARE SMALL DEPOSITORS AND CONSIDERING THE DETAILS OF INCOME AN D SOURCES THEREOF MENTIONED BY THEM IN THE AFFIDAVITS, MANY OF THEM MAY NOT BE ASSESSED AT THAT TIME. BUT HOWEVER, SINCE THE IDENTITY OF THE DEPOSITORS HAVE BEEN ESTABLISHED IN TERMS OF THE ABOVE JUDGEMENT OF HON'BLE SUPREME COURT IN THE ABOVE CITED CASE NAMELY COMMISSIONER OF INCOME-TAX, ... VS ORISSA CORPORATI ON (P) LTD , I HUMBLY PRAY THE HON'BLE BENCH TO KINDLY CONSIDER THE ONUS OF ES TABLISHING THE IDENTITY OF THE DEPOSITORS HAVING BEING FULFILLED BY THE ASSESSEE. SIMILARLY, CONSIDERING THE FACTS STATED IN THE AFFIDAVITS AND CONFIRMATIONS AND OTHE R FACTS NARRATED HERE IN ABOVE , I PRAY TO THE HON'BLE MEMBERS TO KINDLY ACCEPT THE SOURCE OF DEPOSITS AND GENUINENESS THEREOF. IN VIEW OF THE ABOVE SUBMISSIONS, I HUMBLY PRAY TH E HONBLE BENCH TO ORDER TO DELETE THE ADDITIONS OF RS.1,99,5 00/- MADE BY THE LD. AO AS UNEXPLAINED CASH CREDITS. 19. LD. AR RELIED ON THE JUDGMENT OF HON'BLE SUPREM E COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS ORISSA CORPORATION (P) LTD ON 19 MARCH, 1986 AIR 1849, 1986 SCR (1) 97 9, (PG.125-131, PB-II) WHEREIN IT HAS BEEN HELD BY THE HON'BL E SUPREME COURT THAT, ' (II) THE CONCLUSION REACHED BY THE TRIBUNAL IN THE INSTANT CASE, THAT THE ASSES SEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM COULD NOT BE SAID TO BE UNREASONABLE, OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH IT COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. (III) THE ASSESSES HAD PROVIDED THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE T HAT THEY WERE INCOME-TAX ASSESSEES.THEIR INDEX NUMBERS WERE IN THE FILES OF THE DEPARTMENT. THE REVENUE APART FROM ISSUING NOTICE S UNDER 8. 131 OF THE ACT AT THE INSTANCE OF THE ASSESSEES, DI D NOT PURSUE THE MATTER FURTHER. IT DID NOT EXAMINE THE SOURCE OF INCOME OF THE ALLEGED CREDITORS ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 14 TO FIND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. THE ASSESSEE , THEREFORE, COULD NOT DO ANY FURTHER.' (2) LD. AR FURTHER RELIED ON JUDGMENT OF HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING & MARKETING (P) LTD.(DELHI HIGH COURT), (PG.132-145, PB-II) WHEREIN IT HAS BEEN HELD THAT, , - 'ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT ARE NOT A GAME OF HIDE AND SEEK. IF A.O DOES NOT CONDUCT PROPER INQUIRY, THE O BLIGATION TO DO SO IS ON THE CIT(A) AND ALSO ITAT BY OBSERVING THAT THE A.O HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PROPER INQUIR Y TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AN D INDEED OF ITAT TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT.' IN VIEW OF THE ABOVE SUBMISSIONS, I HUMBLY PRAY TH E HONBLE BENCH TO ORDER TO DELETE THE ADDITIONS OF RS.1,99,5 00/- MADE BY THE LD. AO AS UNEXPLAINED CASH CREDITS. 20. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ACTION OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.1,99,50 0/- AS UNEXPLAINED CASH CREDIT. WE OBSERVE THAT THE AMOUNT OF RS.1,99, 500/- INCLUDES UNSECURED LOAN EACH LESS THAN RS.20,000/- TAKEN IN CASH AND ASSESSEE WAS UNABLE TO PROVE THE CREDITWORTHINESS A ND GENUINENESS BEFORE LD. ASSESSING OFFICER. AS A RESULT, LD. CIT( A) CONFIRMED THE SAME. WE FURTHER OBSERVE THAT ASSESSEE HAS PLACED O N RECORD COPIES OF PAN AND OTHER IDENTITY PROOFS IN THE PAPER BOOK ALONG WITH CONFIRMATION COPIES TO PROVE THE IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE DEPOSITORS. WE FURTHER OBSE RVE THAT ASSESSEE ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 15 HAS REFERRED AND RELIED ON VARIOUS JUDGMENTS. HOWEV ER, IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING & MARKETING (P) LTD (SUPRA) THE ISSUE RELATING TO RAISING OF SHARE CAPITAL AND IS, THEREFORE NOT RELEVANT TO THE FACTS OF THE CASE BEFORE AS THE FACTS ARE DI FFERENT. HOWEVER, IN THE CASE OF CIT VS. ODISA CORPORATION (SUPRA) HON. SUPREME COURT HAS HELD AS UNDER:- ' (II) THE CONCLUSION REACHED BY THE TRIBUNAL IN THE INSTANT CASE, THAT THE ASSES SEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM COULD NOT BE SAID TO BE UNREASONABLE, OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH IT COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. (III) THE ASSESSES HAD PROVIDED THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE T HAT THEY WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILES OF THE DEPARTMENT. THE REVENUE APART FROM ISSUING NOTICE S UNDER 8. 131 OF THE ACT AT THE INSTANCE OF THE ASSESSEES, DID NOT PURSUE THE MATTER FURTHER. IT DID NOT EXAMINE THE SOURCE OF INCOME OF THE ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT M ADE TO PURSUE THE SO- CALLED ALLEGED CREDITORS. THE ASSESSEE , THEREFORE, COULD NOT DO ANY FURTHER.' 22. EXAMINING THE FACTS OF THE CASE OF ASSESSEE IN THE LIGHT OF DECISION OF HON. APEX COURT REFERRED ABOVE, WE OBSE RVE THAT HON. APEX COURT GAVE RELIEF TO THE ASSESSEE BECAUSE THE INDEX NUMBER I.E. PAN IN THE PRESENT TIME WERE BEING MADE AVAILABLE T O THE INCOME-TAX DEPARTMENT WITH THE HELP OF WHICH THE REVENUE COULD HAVE EXAMINED THE SOURCE OF INCOME OF THE ALLEGED CASH CREDITOR(S ). HOWEVER, IN THE CASE OF ASSESSEE, WE OBSERVE THAT NO PAN NUMBER HAS BEEN PROVIDED FOR THE FOLLOWING DEPOSITORS :- ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 16 1. KANUBHAI SHAH 18000 2 NIRAV SHAH 17500 3. RAHUL SHAH 19000 4. RAJESHBHAI SHAH 18500 5. SONAL SHAH 19000 TOTAL 92,000 WE FURTHER OBSERVE THAT ASSESSEE HAS SHOWN UNSECURE D LOAN FROM MR. RAHUL SHAH AND SONAL SHAH AT RS.19,000/- EACH T O HAVE BEEN RECEIVED IN CASH EVEN WHEN BOTH THE PARTIES ARE RES IDENT OF UNITED KINGDOM, HOLDING UK NATIONAL INSURANCE NO.SC821963D & SE205612A RESPECTIVELY AND ASSESSEE HAS BEEN UNABLE TO PROVE THAT HOW THE NRIS HAVE GIVEN CASH LOAN OF RS.19,000/- EA CH NOR BEING ABLE TO PROVE THAT THESE TWO LOAN CREDITORS CAME TO INDIA TO GIVE LOAN TO THE ASSESSEE. 23. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ASSESSEE HAS BEEN UNABLE TO PROVE THE CREDITWORTHINESS AND GENUI NENESS OF LOAN CREDITORS AT RS.92,000/- AS NO PAN HAS BEEN PROVID ED NOR ANY OTHER DOCUMENT EXCEPT CONFIRMATION. ACCORDINGLY ADDITION U/S 68 OF THE ACT IS SUSTAINED TO THE EXTENT OF RS.92,000/-. THIS GRO UND OF ASSESSEE IS PARTLY ALLOWED. 24. GROUND NO.3 HON. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMIN G THE ADDITION OF ESTIMATED AGRICULTURAL EXPENDITURE OF R S.22,000/-. 25. ON VERIFICATION OF DETAILS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERV ED THAT ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 17 ASSESSEE HAS EARNED AGRICULTURAL INCOME OF RS.55,00 0/- ON THE AGRICULTURAL LAND OF AROUND 40 BIGHAS OWNED BY ASSE SSEE. LD. ASSESSING OFFICER WAS OF THE VIEW THAT FOR EARNING AGRICULTURAL INCOME AT LEAST 40% EXPENSES MUST HAVE BEEN INCURRED BY TH E ASSESSEE AND IN THE ABSENCE OF THE SAME, HE ESTIMATED THE SAME A T RS.22,000/- AT 40% OF AGRICULTURAL INCOME OF RS.55,000/- AS SHOWN BY ASSESSEE AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 26. ASSESSEE COULD NOT GET ANY RELIEF FROM LD. CIT( A) ON THIS IMPUGNED ADDITION OF RS.22,000/- AND THE ADDITION W AS CONFIRMED. 27. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 28. LD. AR SUBMITTED THAT WITH REGARD TO GROUND NO. 3, IN RESPECT OF ADDITION OF AGRICULTURAL EXPENDITURE OF RS.22,000 A S AN UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT THE LD. AO HAVE STA TED IN PARA 11, PG. 10 OF THE ASSESSMENT ORDER (PG.18, PB-II) THAT, CONSIDERING THE AMOUNT OF AGRICULTURAL INCOME EARNED BY THE ASSESSE E DURING THE YEAR, THE ASSESSEE MUST HAVE INCURRED AT LEAST 40% EXPENSES TO EARN AGRICULTURAL RECEIPT OF RS.55,000 AND CONSIDER ING THIS, HE HAS MADE ADDITION OF RS.22,000 AS UNEXPLAINED EXPENDITU RE U/S. 69C OF THE ACT. WHILE DOING SO THE LD. AO IGNORED THE FACT THAT, THE ASSESSEE WAS HOLDING CULTIVATED AGRICULTURAL LAND OF MORE TH AN 40 VIGHAS AS APPEARING IN AN ABSTRACT OF 6,7/12 AND 8A (PG. PB-I I) FROM WHERE SHE COULD EARN EASILY NET INCOME OF MORE THAN RS.55,000 AS SHE HAS EARNED FROM THE CULTIVATOR TO WHOM SHE HAD GIVEN TH E LAND FOR THE PURPOSE. THE LD. AO ALSO DID NOT GIVE ANY BASIS FOR HIS ESTIMATE OF ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 18 40% EXPENSE. BEFORE THE HON'BLE CIT(A), THE APPELLA NT FURNISHED AFFIDAVIT OF MR. BHARATSINH ABHAYSINH CHAUHAN (PB.I I, PG.83) WHEREIN SAID BHARATSINH TO WHOM THE ASSESSEE HAD GIVEN THE LAND FOR AGRICULTURAL OPERATIONS, HAVE CATEGORICALLY STATED THAT, HE IS AN AGRICULTURIST BY PROFESSION FOR GROWING CROPS IN RE TURN OF NET AMOUNT FROM SALE OF AGRICULTURAL PRODUCE AFTER DEDUCTING H IS JUST SHARE OF REMUNERATION AND ACCORDING TO THE ARRANGEMENT HE WA S REQUIRED TO UNDERTAKE ALL RESPONSIBILITIES OF AGRICULTURAL ACTI VITIES INCLUDING MEETING AGRICULTURAL EXPENSES AND OUT OF NET AGRICU LTURAL PRODUCE HARVESTED HE RETAINED HIS REMUNERATION AND GAVE BAL ANCE OF RS.55,000 TO THE ASSESSEE DURING THE YEAR UNDER APP EAL AS THE ASSESSEE WAS IN HER SIXTIES AND SHE WAS NOT IN A PO SITION TO CARRY OUT AGRICULTURAL ACTIVITIES ON HER OWN. BUT HOWEVER, LD . CIT (A) IN PARA 9.2 AND 9.3, PG.13-14 OF HIS ORDER, (PB II PG. 33-3 4) DID NOT CONSIDERED THE SAME BY STATING THAT, THE SAME WAS N OT FURNISHED BEFORE THE AO AND THE SAME CANNOT BE ENTERTAINED AT THIS STAGE. IN THE MATTER, I RESPECTFULLY SUBMIT THAT, THE AFFIDAV IT SUBMITTED BEFORE THE AO SHOULD HAVE BEEN CONSIDERED IN THE INTEREST OF JUSTICE BY THE LD. CIT (A) AND BY IGNORING THE SAME HE HAS WITHOUT ANY COGNATE REASONS HAVE CONFIRMED THE SAME WHICH IS AGAINST TH E RULE OF NATURAL JUSTICE. APART FROM THIS, IN THE FIELD OF AGRICULTU RE OPERATIONS THIS SORT OF ARRANGEMENTS ARE NORMAL AND THE EVIDENCES IN THE FORM OF AFFIDAVIT SHOULD NOT HAVE BEEN IGNORED CASUALLY AND THAT TOO FOR THE ADDITION MADE WITHOUT ANY BASIS MERELY ON THE SUSPICION AND SURMISES AND IN VIEW OF THIS I RESPECTFULLY, SUBMIT TO ORDER TO DEL ETE THE ADDITION MADE OF RS.22,000 BY THE LD. AO. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 19 29. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 30. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.22,0 00/- AS UNEXPLAINED EXPENDITURE MADE BY LD. ASSESSING OFFICER WHO MADE ESTIMATED DISALLOWANCE OF 40% OF THE AGRICULTURAL INCOME SHOW N BY THE ASSESSEE. WE OBSERVE THAT THERE IS NO DISPUTE TO TH E FACT THAT ASSESSEE OWNED AGRICULTURAL LAND OF AROUND 40 BIGHA S WHICH HAS BEEN ACCEPTED BY LD. ASSESSING OFFICER AND ALSO THE SAME IS VERIFIABLE FROM ABSTRACT OF FORM NO.6, 7/12 AND 8/A APPEARING AT PAGE NO.123B/123F OF THE PAPER BOOK. THE DISPUTE AROSE O UT OF THE FOLLOWING TWO VIEWS :- 1) ASSESSEE HAS CLAIMED THAT DUE TO HER OLD AGE IT WAS HARD FOR HER TO MAKE AGRICULTURAL OPERATION AND THEREFORE, S HE ASKED MR. BHARATSINH ABHAYSINH CHAUHAN TO DO THE AGRICULTURAL ACTIVITIES OF GROWING CROPS AND AFTER DEDUCTING HIS SHARE OF R EMUNERATION FROM THE SALE OF AGRICULTURAL PRODUCE THE REMAINING NET INCOME AFTER MAKING INCIDENTAL EXPENSES SHOULD GIVE THE BA LANCE TO THE ASSESSEE AND IN THE YEAR UNDER APPEAL ASSESSEE RECE IVED THE NET AGRICULTURAL INCOME OF RS.55,000/-. 2) ON THE OTHER HAND LD. ASSESSING OFFICER DID NOT APPRECIATE THE FACT THAT THE AGRICULTURAL ACTIVITIES WERE CARRIED ON BY MR. BHARATSINH ABHAYSINH CHAUHAN AND JUST TREATED RS.55 ,000/- AS ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 20 GROSS AGRICULTURAL INCOME AND MADE DISALLOWANCE FOR UNEXPLAINED EXPENDITURE BY ESTIMATING 40% OF RS.55, 000/- AND THEREBY MADE ADDITION OF RS.22,000/-. 31. WE OBSERVE THAT THE FACT THAT THE LAND WAS CULT IVATED BY MR. BHARATSINH ABHAYSINH CHAUHAN DID NOT COME UP BEFORE LD. ASSESSING OFFICER BUT WAS PUT FORTH BEFORE LD. CIT(A) BUT THI S ADDITIONAL EVIDENCE WAS NOT ENTERTAINED BY LD. CIT(A). WE FURTHER OBSER VE THAT LD. AR REFERRED AND RELIED ON THE DECISION OF INCOME TAX A PPELLATE TRIBUNAL 'A' BENCH, MUMBAI IN THE CASE OF SMT. AVAN GIDWANI VS. ACIT, CENTRAL CIRCLE 22, MUMBAI IN ITA NO. 5138/MUM/2015, (PG.146-149, PB-II) WITH REGARD TO ADMISSION OF ADDITIONAL EVIDE NCES BEFORE LD. CIT(A) WHEREIN THE HON'BLE BENCH HAVE OBSERVED THAT - 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THE DETAILS AND EVIDENCES WHICH WERE RELIED ITA NO.5I38 /MUM/20I5 ASSESSMENT YEAR: 2007-08 UPON BY THE ASSESSING OFFICER WAS PROVIDED TO HIM O NLY AFTER PASSING OF ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE INFORMATION AVAILABLE WITH T HE AO WAS ONLY SHOWN TO THE ASSESSEE AT THE TIME OF RECORDING STATEMENTS FROM THE ASSESSEE, BUT THE COPY THEREOF WAS NOT GIVEN. THIS SHOWS THAT THE ASSESSEE WAS NOT GIVEN THE INCRIMINA TING DOCUMENTS AND HENCE, THE ASSESSEE WAS NOT IN A POSITION TO CONTROVERT THE SAME. IT WA S SUBMITTED THAT THE ASSESSEE WAS GIVEN THE COPIES OF INCRIMINATING DOCUMENTS THAT WERE RELIED UPON THE ASSESSING OFFICER AFTER CERTAIN COURT PROCEEDINGS, THAT TOO AFTER THE COMPLETION OF THE ASSESSMENT. THEREAFTER, THE ASSESSEE HAS COLLECTED VARIOUS DETAILS FROM VARIOUS SOURCES AND COMPILED THE SAME IN THE FORM OF ADDITIONAL EVIDENCES. ACCORDINGLY, THE ASSESSEE HAS MOVED A PETITION BEFORE THE LEARNED CIT(A) FOR ADMITTING THE SAME AS ADDITIONAL EVIDENC E. AS NOTICED EARLIER, THE OBJECTED TO THE ADMISSION OF THE SAME IN THE REMAND REPORT GIVEN BY HIM. THE LEARNED CIT(A) HAS ALSO EXPRESSED THE VIEW THAT THE ASSESSEE HAS FAILED TO SATISFY THE CONDITIONS PRESCRIBED UNDER RULE 46A OF INCOME TAX RULES. ACCORDINGLY HE HAS REFUSED TO ADMIT THE ADDITIONAL EVIDENCES. ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 21 8. FROM THE FACTS NARRATED ABOVE, WE NOTICE THAT TH E ASSESSEE COULD COLLECT VARIOUS EVIDENCES ONLY AFTER PASSING OF THE ASSESSMENT ORDER. ACCORDI NG TO THE ASSESSEE, THESE ADDITIONAL EVIDENCES ARE VITAL DOCUMENTS WHICH ARE REQUIRED TO BE CONSIDERED IN ORDER TO ADJUDICATE THE ISSUE IN A JUDICIOUS MANNER. THE PRINCIPLE 'AUDI AL TERAM PARTEM', I.E. NO MAN SHOULD BE CONDEMNED UNHEARD IS THE BASIC CANON PRINCIPLES OF NATURAL JUSTICE AND ACCORDINGLY WE FIND MERIT IN THE CONTENTIONS OF THE ITA NO.5L38/MUM/2OI 5 ASSESSMENT YEAR: 2007-08 ASSESSEE THAT RULE 46A OF THE INCOME TAX RULES CANNOT BE OVE R RIDE THE PRINCIPLES OF NATURAL JUSTICE. HENCE WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WA S NOT JUSTIFIED IN REFUSING TO ADMIT THE VARIOUS ADDITIONAL EVIDENCES FURNISHED BY THE ASSES SEE. SINCE THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CONTRADICT THE FINDINGS GIVEN BY THE AO BY NOT ADMITTING THE ADDITIONAL EVIDENCES, WE ARE OF THE VIEW THAT THE LD CIT(A) SH OULD RE-ADJUDICATE ALL THE ISSUES AFRESH BY ADMITTING THE ADDITIONAL EVIDENCES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE ALL THE ISSUES TO THE FILE OF THE LEARN ED CIT(A) WITH THE DIRECTION TO ADMIT THE ADDITIONAL EVIDENCES THAT MAY BE FURNISHED BY THE A SSESSEE. AFTER ADMITTING THE SAME, THE LEARNED CIT(A) MAY CALL FOR THE REMAND REPORT FROM THE ASSESSING OFFICER, IF HE FOUND THE SAME NECESSARY. AFTER CONFRONTING WITH THE REMAND R EPORT, IF ANY, THAT MAYBE FURNISHED BY THE AO WITH E ASSESSEE, THE LEARNED CIT(A) MY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 32. FROM GOING THROUGH THE ABOVE DECISION, WE OBSER VE THAT LD. CIT(A) SHOULD HAVE ENTERTAINED THE ADDITIONAL EVIDE NCES BY TAKING REMAND REPORT FROM THE ASSESSING OFFICER AS PER RUL E 46A OF THE IT RULES WHICH HAS NOT BEEN DONE IN THE GIVEN CASE. HO WEVER, LOOKING TO THE FACT THAT DISPUTED AMOUNT IS VERY MEAGRE AND REVENUE HAS NOT DISPUTED ABOUT THE OWNERSHIP OF AGRICULTURAL LAND B Y ASSESSEE, AND AFFIDAVIT IS PRODUCED BEFORE US IN RESPECT OF MR. B HARATSINH ABHAYSINH CHAUHAN TO THE EFFECT THAT THE AGRICULTURAL LAND WA S BEING CULTIVATED BY HIM AND HE HAS DEDUCTED ALL INCIDENTAL EXPENDITU RE INCLUDING HIS REMUNERATION FROM THE SALE OF AGRICULTURAL PRODUCE AND THE AMOUNT OF RS.55,000/- IS NOT THE GROSS AMOUNT BUT THE NET AMO UNT WHICH WAS ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 22 GIVEN TO THE ASSESSEE, WE TAKE COGNIZANCE OF THE SA ME AND WE ARE OF THE VIEW THAT NO ADDITION WAS CALLED FOR U/S 69 OF THE ACT TOWARDS UNEXPLAINED EXPENDITURE FOR RS.22,000/- BY ESTIMATI NG AT 40% OF AGRICULTURAL INCOME AS THE AMOUNT OF AGRICULTURAL I NCOME RECEIVED BY ASSESSEE AT RS.55,000/- WAS NET INCOME FROM AGRICUL TURE AFTER MEETING INCIDENTAL EXPENSES. THIS GROUND IS ALLOWED . 33. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 14/6/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1355/AHD/2012 ASST. YEAR 2007-08 23 1. DATE OF DICTATION: 9/06/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 10/06/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 14/6/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: